George S. Van Nest
Biden Administration Policies & Regulations Dramatically Affecting US’ Energy Costs After First Year
As we have reported previously in this column, American energy policy and the focus on climate change have taken a profound turn under the Biden Administration. Within hours after taking the oath of office, the President signed an Executive Order declaring climate change a crisis, initiated several climate-based actions, and halted construction of the Keystone XL pipeline. In the subsequent months, national and international pipeline and energy developments have led to increased scrutiny of that decision. While the war in Ukraine is being blamed by the Biden Administration, petroleum and natural gas prices were increasing dramatically well before February 2022.
The “Executive Order on Protecting Public Health and the Environment and restoring Science to Tackle the Climate Crisis,” issued on January 20, 2021, was expansive and significantly impacted US environmental policy, businesses, and consumers. Among other things, the Executive Order stated that “[i]t is, therefore, the policy of my Administration to listen to the science; to improve public health and protect our environment; …to bolster resilience to the impacts of climate change.”
In one of the most visible actions, the Executive Order revoked the March 2019 Presidential permit granted to Trans Canada Keystone Pipeline LP to construct the Keystone XL pipeline. On June 9, 2021, TC Energy Corporation, the pipeline developer, issued a statement that it was terminating the project after the Biden Executive Order. The pipeline, which began permitting under the Obama administration and received presidential approval from the Trump Administration, was slated to transfer over 800,000 barrels of Canadian oil a day from Alberta, through Montana, South Dakota, and Nebraska to US refineries on the Gulf Coast.
The Order also placed a moratorium on federal oil and gas leases in the Arctic National Wildlife Refuge. A study by the American Petroleum Institute indicated that a long-term ban on federal energy leases will have major impacts. Notably, a reduction in US GDP of $700 billion by 2030, a loss of nearly 1 million jobs by 2022, and an increase of US oil imports from foreign sources by 2 million barrels a day by 2030. Similarly, natural gas exports from the US would decrease by up to 800 billion cubic feet by 2030. The projected increase in household energy costs of $19 billion by 2030.
The Securities Exchange Commission (SEC) has also issued a proposed rule that requires public companies to report on climate related risks and emissions. The rule is being opposed by numerous Republicans, as well as the American Securities Association and Senator Manchin, on the basis that it is overly complex and will merely add uncertainty and costs to corporations that are compelled to report on emissions.
President Biden’s actions have done virtually everything possible to limit the availability of domestic energy sources and increase the price of fuel. The Biden energy policies are being felt daily in fuel prices. In December 2020, the price of US gasoline averaged $2.30 per gallon and global crude oil prices were below $50 per barrel during most of 2020. According to AAA’s gas price index, the current national average fuel price is $4.08 per gallon (regular). In New York, the average cost of regular gas today is $4.20 per gallon. Likewise, the cost of diesel fuel for New York trucks and commercial transportation has increased from an average of $3.15 per gallon last year to $5.25 per gallon. In New York, gasoline has increased by approximately $1.31 per gallon and diesel by $2.10 per gallon in a year. Previously, the AAA index revealed that the highest recorded prices for regular gas ($4.30/gallon) and diesel ($5.13/gallon) both occurred in July and August 2008, under the Obama-Biden Administration. The Biden Administration has now topped those averages with the highest on record for unleaded hitting $4.46 per gallon and diesel hitting $5.35 per gallon in March 2022.
Recent comments from the Biden Administration and newfound concerns about sky-rocketing gas prices, compounded by record 8.5 % inflation, seem dubious and unlikely to improve supplies of fuel. Three recent actions appear to be aimed at press conferences rather than improving energy prices and availability.
The war in Ukraine has only added to escalating United States energy prices. The Biden Administration seems intent on taking rhetorical steps to blame Russia and energy companies rather than supporting and encouraging domestic energy production to prevent reliance on foreign sources, such as Russia and Iran, while reducing consumer energy prices. In March the Administration announced that it will be releasing one million gallons of petroleum per day from the United States Strategic Petroleum Reserve through the end of 2022. While it may briefly show awareness of consumer pain over fuel prices, critics have pointed out that it is a short-term step and petroleum reserves will need to be replaced at higher future prices.
Similarly, the announcement that the Environmental Protection Agency (EPA) will issue a waiver in June so that E15 gasoline may be used over the summer appears to be dubious if not counter-productive. E15 is a blend of fuel with 15% ethanol, as opposed to standard fuel with 10% ethanol. Ethanol is made from corn and soybeans. EPA has generally restricted E15 from being used during the summer months from June 1 through September 15 to limit air pollution. The proposal to issue a waiver for summer-time use is likely to have little impact on fuel prices. There are an estimated 150,000 gas stations in the country and E15 is only sold at approximately 2,300 stations, so it is not readily available. Contrary to the Biden Administration’s suggestion that the waiver will reduce fuel prices by up to 10 cents per gallon, that position ignores the cost to produce ethanol from corn and soybeans. Due to the heightened cost of diesel fuel, agricultural costs are skyrocketing, so the production costs are higher, and placing more demand on corn and soybeans will likely impact other products as these materials are produced for fuel. Hence, the cost of corn and soybeans, as standalone products, as well as in cereals, snacks, and livestock feed made from them are likely to increase.
Late last week the Biden Administration announced that it will resume leasing federal lands for oil and gas production. The announcement is a major policy shift. However, the actual leasing actions amount to little more than a press release. In particular, the Bureau of Land Management (BLM) leasing will only involve “approximately 193 parcels on roughly 144,000 acres, an 80% reduction from the acreage originally nominated for leasing.” The reduction in available acreage and increased lease rates to be imposed are significant limits on future energy production. Numerous green groups have been critical of the announcement, saying anything less than 100% renewable energy is unacceptable. Conversely, energy producers are highly skeptical. Notably, the Independent Petroleum Association of America said that “[t]his Administration has begged for more oil from foreign nations, blames American energy producers for price gouging and sitting on lease. Now, on a late holiday announcement, under pressure, it announces a lease sale with major royalty increases that will add uncertainty to drilling plans for years.” Further, “[t]o put it simply, America, under this administration, has no coherent energy policy.”
The cumulative effect of the Biden Administration’s anti-energy policies has had a dramatic impact on consumers and businesses. The climate driven policies are also driving up the cost of electricity, heating oil, and natural gas. The cost of electricity went up 8%, heating oil increased by 43%, and natural gas prices increased by 61%. Recent studies have projected that American families will be impacted by inflation from $3,500 to $5,000 annually, with a large portion of the increased costs coming from fuel and energy prices.
While the Biden Administration has blamed Russia’s invasion of Ukraine, as well as energy companies for high petroleum prices, the actions taken by the Administration since inauguration day in 2021 have done everything conceivable to increase the cost of fossil fuel use. Given the climate change activism underlying the Biden Administration’s view of governance, perhaps the high costs are viewed internally as useful if it forces American families and businesses to switch to electric vehicles and non-fossil fuel energy sources.
For additional information about the issues discussed above, or if you have any other Environmental Law concerns, please contact the Underberg & Kessler attorney who regularly handles your legal matters or George S. Van Nest, the author of this piece, here or at (716) 847-9105.