Lack of policies in support of oil & gas risk killing America’s golden goose while renewables face similar permitting issues

With the rising tide of climate change concerns, the opposition to fossil fuels is making strides while calls to step up renewables’ deployment are growing in size. This threatens to undermine America’s energy security by downgrading and throwing oil and gas out of the game too soon, as the situation in the renewables realm is not all it’s cracked up to be due to the permitting challenges.

The U.S. energy industry is facing similar challenges to the ones that are permeating the global energy stage. There are many issues facing the development of new and expansion of existing energy projects in the United States, however, one of the biggest ones for renewables, new low-carbon energies, and oil and gas is believed to be the permitting reform.

To tackle this, the Biden administration has been urged multiple times to address – what is perceived to be – the broken permitting process, which is halting U.S. energy development. Some find hope in the bipartisan agreement to raise the nation’s debt ceiling, as they deem it to be a step in the right direction to tackle the permitting reform challenge.

Others, such as certain environmental groups, view the deal to raise the debt ceiling in the U.S. as another mechanism for oil and gas players to exploit in a bid to get a green light for more fossil fuel projects in the future.

For these environmental activists, like Earthjustice, LNG projects – e.g. the Alaska LNG project, a $38.7 billion fossil-fuel infrastructure plan to export LNG –  are seen as carbon bombs while hydrogen projects are portrayed as a way for giant oil and gas corporations to delay the energy transition to a clean future.

Most countries, including the U.S., have set net-zero targets and are working towards decarbonising their energy production to usher in a low-carbon and green energy future with the help of renewables and other less emission-intensive sources.

To this end, multiple solutions have come to the fore and carbon capture and storage (CCS) is one of them, but people are divided on its usefulness. While for some it is a great way to achieve carbon neutrality, others, like Earthjustice, see it as a lifeline that the fossil fuels industry can grab in a bid to extend oil and gas reign on the energy throne.

Regardless of the energy project type, permitting and review delays are believed to be the main roadblocks in building the U.S. energy infrastructure. As proposals to expedite infrastructure projects are making the rounds in Congress, Wood Mackenzie recently pointed out that permitting reform could be part of the solution to the strains created by rapid growth in renewables, as this could help ease U.S. grid bottlenecks.

As offshore production amounts to roughly 15 per cent of its crude oil production and 100 per cent of federal waters are under the Department of the Interior’s control, the American Petroleum Institute (API), a trade association representing the oil and gas industry, claims that the U.S. needs policymakers to encourage and develop its federal offshore programme to meet rising demand.

“Mixed messages from the Biden administration have stifled our energy offshore production. While we have seen signals that the administration is willing to come to the table to help meet American energy needs, such as the approval of the Willow project, the administration has continued to flout its responsibilities on offshore production. It has been more than 300 days since the administration allowed the five-year offshore leasing programme to expire with no plan in place – the first significant lapse in programmes since the 1980s,” added API.

As DOI’s proposed five-year offshore leasing programme entailed an option to hold zero lease sales, the American Petroleum Institute found this counterproductive, as “producers need policy certainty.” In line with this, API claims that for producers working around the clock to provide the U.S. with the “reliable” energy it needs, “the mixed messages from the administration are frustrating, echoing a lack of clear and consistent direction required to plan large-scale energy projects.”

With this in mind, API urged the U.S. Interior Department to increase access to energy development by issuing “a robust, five-year offshore leasing programme” and holding quarterly onshore lease sales, with equitable terms. 

The American Petroleum Institute’s recent report underscores that the U.S. lacks not just the export infrastructure needed to help other countries with their energy woes and cement its “leadership in global markets,” but also the infrastructure needed to move energy from production areas to refineries and processing facilities and afterwards to domestic consumers.

This includes new natural gas and oil pipelines and investment in maintaining existing infrastructure. The report lists key action items like increasing U.S. production, strengthening infrastructure and developing lower-carbon technologies as ways to help solve today’s energy woes while creating a stronger future.

“We need a comprehensive strategy from this administration that includes a five-year programme for offshore leasing so that American producers can continue to meet rising demand amid rising demand and global uncertainty,” highlighted API.

While the Inflation Reduction Act, which brought a $370 billion provision for climate spending, turbocharged clean energy projects, Earthjustice believes that the IRA came with some unexpected setbacks written into the text of the law due to the influence of the fossil fuel industry, as it revived two offshore oil and gas lease sales in the Gulf of Mexico and a third in Alaska’s Cook Inlet.

At the end of December 2022, several environmental organisations, including Oceana, expressed their opposition to the Cook Inlet lease sale, reminding that Biden promised during his presidential campaign to end new leasing for offshore drilling while the International Energy Agency said that nations must stop developing new oil and gas fields if global warming is to stay within relatively safe limits. The activists are putting a lot of effort into making sure their voices are heard to put an end to the fossil fuels industry.

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The U.S. is not alone in facing backlash on oil and gas, as this opposition to fossil fuels is gaining momentum in other countries, like the UK, which is also caught between a rock and a hard place as it tries to navigate the road to net-zero while balancing the need to strengthen energy security with the shift towards more green and low-carbon energy.  

Many, including the Bureau of Ocean Energy Management (BOEM), believe that offshore renewable energy has the potential to be “the greatest ocean-based solution” to mitigate carbon emissions nationally. However, developers of renewable energy projects are facing a giant hurdle due to the lack of transmission capacity, as the frustrating wait to be connected to fragmented, congested grids takes its toll.

The Biden administration set an ambitious goal of deploying 30 GW of offshore wind by 2030, but to shift intermittent wind and solar power to areas where the sun does not shine or the wind does not blow a buildout of new infrastructure is needed. For this to happen, the U.S. needs to iron out its permitting reform to accelerate renewables’ deployment.

“Investments can spur innovation, drive economic growth, harness economies of scale, and ensure U.S. energy security. But the planning, development, and rapid deployment for commercial offshore energy must occur equitably,” outlines BOEM.

Furthermore, Wood Mackenzie’s analysis estimates that investments amounting to a whopping $10 trillion are needed for the U.S. to reach its net-zero by 2050 goal along with additional guidance from the Biden administration to see the IRA truly kick-start that investment.

The company further points out four things to watch to maximise the benefits of the Inflation Reduction Act, including carbon capture, utilisation and storage (CCUS) permitting processes, low-carbon hydrogen exports’ eligibility for 45v tax credits, the role of renewable energy credits (RECs) and time-matching for green hydrogen, and battery raw materials.

Despite the low-carbon trend gaining ground, the struggle to address the current energy challenges is making it difficult for countries to draw a clear line in the sand when it comes to the future of fossil fuels and their long-term role within the energy mix. As a result, the reign of oil and gas is far from over, but the shift to low-carbon is the energy industry’s paradigm, thus, the oil and gas sector will need to rise to the challenge to curb its carbon footprint.

During the New Mexico EnergyPlex Conference hosted by the Economic Development Corporation of Lea County, API’s Midwest and Mountain West Region Director emphasized the importance of American natural gas and oil to solving today’s energy challenges and the need for policies that strengthen the industry’s growing economic contributions in New Mexico and across the country.

Lynn Granger, API’s Midwest and Mountain West Region Director, remarked: “For energy powerhouses like the Permian, it’s been a rocky two years since President Biden took office. Over the course of President Biden’s first 19 months, the federal government issued the fewest leases for developing offshore and onshore projects since World War 2, back when our economy was a tiny fraction of what it is today.

“Instead, the focus of America’s long-term energy strategy should be increasing, not restricting, U.S. oil and natural gas development. American energy is produced under some of the strongest environmental standards in the world.”

Regarding the potential consequences if policymakers further inhibit American energy producers from responding to growing global demand for “affordable, reliable energy,” Granger underlines that there is a lot at stake in these regulatory and legislative fights “not just Washington politics, but for our future. So, when you hear policymakers – wherever they talk about enacting restrictions on our industry… these are the jobs, those are the people, and this is the scale of the impact that would be on the chopping block.”

Granger’s warnings come after API released a new analysis, prepared by PricewaterhouseCoopers (PwC), on the growing economic contributions of America’s natural gas and oil industry in all 50 states. This study showed the oil and gas industry supported 10.8 million jobs and contributed nearly $1.8 trillion to the U.S. economy in 2021. API claims that the report highlights the importance of policies promoting energy development, including “meaningful action” on permitting reform and issuance of offshore oil and gas leasing.

Based on this analysis, the natural gas and oil industry, directly and indirectly, supported 5.4 per cent of total U.S. employment in 2021; generated an additional 3.7 jobs elsewhere in the U.S. economy for each direct job in the natural gas and oil industry; produced $909 billion in labour income, or 6.4 per cent of the U.S. national labour income; and accounted for 7.6 per cent of the national total.

Mike Sommers, API President and CEO, commented: “Natural gas and oil deliver growing economic contributions to America that were nearly equivalent to Canada’s annual GDP last year. From Pennsylvania to California, America’s natural gas and oil workforce is the backbone of communities, supporting nearly 11 million careers throughout the energy supply chain.

“America’s economic outlook is brighter when we are leading the world in energy production and this analysis serves as a reminder that we need policies and regulations that encourage investment and enable development.”

The U.S. energy sectors – oil, gas, and renewables – are in need of encouraging policies and regulations to flourish and meet the increasing demand at home and abroad.

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