Running dry: Executive Orders slow oil, gas progress
Biden slows oil and gas
Oil and gas were first on the chopping block in the first few days of President Biden’s administration, securing angst among a sector of rural America already fraught with election tension.
Two of the 30 executive actions the President has taken in his first week in office are to pull the permit for the Keystone XL pipeline that would cross Montana, South Dakota and Nebraska, as well as put a moratorium on new oil and gas leases on federal lands. The actions solidify strong campaign promises that threatened the oil and gas industry with promises of “renewable and clean energy” solutions.
“We’re very disappointed in President Biden’s decision, but not shocked by it,” says Alan Olson, executive director of the Montana Petroleum Association. “It seems that the progressive left that has moved into the nation’s capital is hell bent on destroying the domestic oil and gas industry.”
Olson says last month was the first time in years that the U.S. didn’t import crude oil from Saudi Arabia or Venezuela. According to the Institute for Energy Research, in 2019 the U.S. was energy independent for the first time since 1957.
Keystone XL was expected to employ more than 11,000 Americans this year. In October they awarded more than $1.6 billion worth of contracts to six American union contractors to execute pipeline construction in 2021. One of the prime contractors was a Montana company, Barnard Pipeline out of Bozeman. They constructed the pipeline crossing on the Canadian border under the presidential permit issued by President Trump.
Some in the region were please with the executive order, including the Billings-based Western Organization of Resource Councils, who said the project was expected to increase emissions and only create 35 permanent jobs.
“For over a decade, our members, staff, and so many thousands of others across the country have worked to stop this dirty and dangerous tar sands pipeline from threatening our land, water, and communities. Dakota Rural Action (DRA), in South Dakota, and Northern Plains Resource Council, in Montana, have worked with indigenous leaders along the proposed route to ensure local communities have a voice in the decision,” said WORC in a news release.
“We applaud reports that President (elect) Biden will keep his promise to stop Keystone XL, putting the health of our climate above corporate balance sheets,” said Dena Hoff, a Glendive, MT farmer and member of Northern Plains Resource Council, in the news release. “Alongside farmers, ranchers, indigenous communities, and countless others, we have stood strong for over a decade. We have worked to protect not just our air, land, water, and climate, but also the democratic processes, tribal rights, and property rights that have been trampled throughout this fight.”
But when looking at the dollars and cents, another financial hit to the area economy is the lost tax revenue that counties in Montana, South Dakota and Nebraska – many of them rural – would have received from the pipeline. In Montana, it was estimated at $9 million a year among six counties, all in Eastern Montana with sparse population and low tax bases.
“It’s a pretty sad state of affairs when the government would rather hand out checks and extend unemployment rather than support private people and companies that put money into infrastructure and put people to work and create an economy,” says Olson.
Alissa Miller is the food and ag development assistant for the Eastern Plains Economic Development Corporation, which covers Eastern Montana. She is based out of Baker, Mont., and says the recent announcement of the Keystone halt has been a blow to the region.
“There’s really been a sense of declining morale – not loss of hope, but definitely people are sad and upset.” Between 50 and 100 workers were laid off in the area. Although none of them were residents, Miller says their economic boost to the area will be missed. A 105-acre mancamp near Baker was just completed last year – just short of having workers move in – in preparation for Keystone work. Its future is now unknown, along with that of many supporting businesses in the region. “This will definitely affect our local industries – oil and gas is one of the key drivers in bringing outside money to our region,” Miller says.
“We are watching and anticipating what our state legislature will do to counteract some rulings,” she says. “On the bright side, a lot of our states are rallying together to stand up against things like this.”
With a similar stroke of the pen, an executive order shifted authority-making for all new oil and gas leases from local BLM and other federal offices to just two personnel in the Department of the Interior, effectively halting any progress.
WORC applauded this action, as well.
“The federal oil and gas leasing system is fundamentally broken. The current system amounts to a giveaway of development rights to the lowest bidder. Often, those corporations sit on the leases, preventing any productive use of the land. Cash-strapped states and taxpayers suffer the cost of this broken system, while oil and gas companies pad their balance sheets to strengthen their appeal to shareholders, investors, and lenders,” said the organization in a news release.
“A pause in our broken leasing system will allow the administration to reform their ‘oil-and-gas giveaway’ program, protect public health and the environment, and end the corporate monopolization of these lands so ranchers, residents, recreationalists, and wildlife can safely live in the West,” said Western Colorado Alliance (an affiliate of WORC) member Cowdrey, Colorado, resident Barbara Vasquez in a WORC news release.
But oil representatives tell a different story. In a media briefing hosted Jan. 27 by the American Petroleum Institute, representatives of key oil-producing states, including New Mexico, Texas, Louisiana and Wyoming cited the devastation to their economies the loss of federal oil and gas leases will cause.
Jessica Sanders, the 2019 New Mexico Teacher of the Year and president of the New Mexico Science Teachers Association, shared that education in her state will take a devastating hit with the loss of federal oil and gas leases. The industry pays $1.37 billion toward education in New Mexico. “That money funds teacher jobs, curriculum and everything related to education in my state,” says Sanders. “Oil and gas matters to New Mexico, but it is essential to the education of New Mexico’s children.”
Jim Willox with the Wyoming County Commissioners Association says Wyoming will take a hard hit.
Wyoming is 50 percent owned by federal government on the surface, with 75 percent of subsurface minerals owned by the feds. Over 80 percent of Wyoming’s oil and gas producers are small businesses, which, along with other larger companies, provide over $1.6 billion in annual revenue, including $740 million for education, $30 million for higher education.
“This ban is a punch in the gut to our people and to our economy,” says Willox. He noted critical services funded by oil and gas development will be at risk, including rural hospitals, senior citizens centers, law enforcement, fire protection, road, bridge and infrastructure development, county fairs, libraries and museums, courthouse offices, and more.
“This is a job-killing, economically-punishing policy that will increase our dependence on foreign energy at a time when we should be building our internal resources. It will have a devastating impact across the Midwest,” says Willox.
The API estimates that nearly one million jobs will be lost by 2022. By 2030, U.S. oil imports from foreign sources will increase by 2 million barrels a day and the U.S. will spend $500 billion more on energy from foreign suppliers. The U.S. GDP is anticipated to decline by a cumulative $700 billion, and more than $9 billion in government revenue, including funding for state education and conservation programs, will be at risk.
“Today’s executive action to halt leasing is a step backward both for our nation’s economic recovery and environmental progress, threatening to cost thousands of jobs and much-needed revenue while increasing emissions by slowing the transition to cleaner fuels,” says API president and CEO Mike Sommers. “The administration is shifting America’s bright energy future into reverse and setting us on a path toward greater reliance on foreign energy produced with lower environmental standards.”
Montana receives approximately $29 million per year for their share of royalty and lease payments on current leases. “Over time these wells will dry up and go away, and there won’t be new ones to replace them and that money will go away if they can’t be replaced with new ones,” says Olson.
Western Energy Alliance, based in Denver, represents 200 member companies engaged in environmentally responsible exploration and production of oil and natural gas in the West. The association estimates that by the end of President Biden’s first term the ban on new leases on federal lands will cost $43.8 billion in GDP and over 72,000 jobs annually. States would lose $10.8 billion in tax revenues, workers would lose $19.6 billion in wages.
Western Energy Alliance president, Kathleen Sgamma, said in a press release that the temporary ban is a precursor to a longer-term ban, and they are prepared to challenge in court at the appropriate time. “Oil and natural gas development in most of the West is virtually impossible without touching some federal land and minerals, no matter how hard a company tries,” says Sgamma. “A ban on leasing and permitting is a death sentence to the industry in the West.”
Additionally, an unseen affect will be the loss of revenue to the Land and Water Conservation Fund, fully funded by Congress in 2020 with leadership from Montana Senator Steve Daines, to address the maintenance backlog in our national parks and forests and to add more land to the federal government’s holdings. This fund was originally established in 1964 and invests earnings from offshore oil and gas leasing into conservation areas, including national parks. Western Energy Alliance estimates over $5 billion in conservation funding will be halted.
The executive actions are immediate.
“I don’t think we can rely on handouts from politicians to put food on the table and keep a roof over our heads,” says Olson. “We need jobs and we need development. Government does not create jobs. The private sector creates jobs, not the government.”
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