As we have reported on earlier this year, energy policy and climate change focus have taken a dramatic turn under the Biden Administration. Hours after the oath of office the President signed an Executive Order declaring climate change a crisis, initiated a number of climate-based actions and halted construction of the Keystone XL pipeline. Recent national and international pipeline and energy developments have led to increased scrutiny of that decision.
The “Executive Order on Protecting Public Health and the Environment and restoring Science to Tackle the Climate Crisis” issued January 20, 2021 was expansive and significantly impacts US environmental policy, business and consumers. Among other things, the Executive Order states 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. The Order was notable in the findings regarding the pipeline, specifically that “[t]he Keystone XL pipeline disserves the US national interest. The United States and the world face a climate crisis. That crisis must be met with action on a scale and at a speed commensurate with the need to avoid setting the world on a dangerous, potentially catastrophic, climate trajectory.” Further, that “[l]eaving the Keystone XL pipeline permit in place would not be consistent with my Administration’s economic and climate imperatives.” 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 Administration’s Order to kill the pipeline project eliminated 11,000 United States’ jobs associated with the project, including an approximately 8,000 union jobs. 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. Local, regional, and even national media have noted the ripple effect on local businesses, suppliers, restaurants and communities in an around the pipeline route. In South Dakota alone, a few pumping stations for the project were already built, the route was laid out and activities for construction were in progress.
The Order also placed a moratorium on federal oil and gas leases in the Artic National 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 of US GDP of $700 billion by 2030, a loss of nearly one 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 of household energy costs of $19 billion by 2030.
Since issuance of the Executive Order there have been three other significant pipeline matters affecting the US energy supply and global access to petroleum resources. On May 7, the Colonial Pipeline from Houston, Texas to New York which provides 3 million of barrels of fuel per day to the east coast was shut down after a ransomware attack. The Colonial Pipeline provides about 45% of the fuel to the east coast of the US. The shutdown lasted six days and caused gasoline shortages and lines across many areas of the east coast.
The Biden administration then lifted sanctions against the Nord Stream 2 natural gas pipeline between Russia and Germany. The pipeline is projected to allow Russia to generate an additional $3.3 billion to its annual GDP. Hence, rather than encouraging Germany to import US natural gas, Germany and other European nations will be reliant on Russia’s supply. The position is contrary to a bi-partisan set of sanctions passed by Congress which prohibited the Russia pipeline from being constructed.
A third pipeline issue also occurred this week, when the Army Corps of Engineers indicated it will prepare an environmental impact statement on the Enbridge Envoy pipeline tunnel proposal to span the Mackinac Straits between Lake Michigan and Lake Superior. The 645mile pipeline has been in existence for 65 years but has recently been ordered to shut down by Michigan Governor Whitmer. Although the Biden Administration’s jurisdiction is limited to the proposed tunnel crossing, it appears to be another instance where the federal government intends to create obstacles for fossil fuel supplies reaching the US. The pipeline owner has announced that the requirement of an environmental impact statement rather than environmental assessment will tack significantly more time onto the permit process that must be completed prior to the start of construction. The tunnel project will re-house a five mile section of the existing line that runs from Wisconsin to Ontario. Prior to the Corps’ announcement, Enbridge planned on starting construction this year.
With the loss of the Keystone XL supply, recent disruptions to U.S. fuel supplies via the Colonial Pipeline shutdown and challenges to other pipeline sources, there are significant questions as to what this will do to US energy supplies and independence that was growing under the Trump administration. Energy independence for the country and development of low cost sources under the past administration seems like a positive objective for US independence, security and economic growth. Additionally, growth of US energy production under the prior administration prevented US businesses and consumers from being subject to price and political fluctuations from international sources.
The difference in energy policies is being reflected 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 $3.06 per gallon. In New York, the average cost of Regular gas one year ago was $2.22 per gallon, today it is $3.13 per gallon. Likewise, the cost of diesel fuel in New York trucks and commercial transportation has increased from an average of $2.83 last year to $3.29 per gallon. Hence, gasoline has increased by approximately $.86 per gallon and diesel by $.46 per gallon in a year. Interestingly, the AAA index reveals 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.
Favoring international pipelines over importation of petroleum to the United States that would benefit US consumers, businesses, and families, and disrupting additional pipeline fuel sources, seems like a curious position at best. Simply pointing to global climate change to reduce national energy supplies while the price of gas, diesel fuel, food and goods increases dramatically does not seem to serve the interests of the country.