The prospect of big Democratic gains in the US election has much of the oil and gas industry watching with some trepidation and wondering what a national shift in power might mean for business.
A week before the 3 November ballot, polls showed Democratic challenger Joe Biden with a significant national lead in his attempt to unseat President Donald Trump, with the party expected to increase its majority in the House of Representatives and perhaps wrest control of the Senate from Republicans.
“I think we’re in a situation where things are going to get worse for the oil and gas industry,” Mark Jones, political science professor and fellow at the Baker Institute at Rice University told Upstream. “And it’s just a question of, are they going to get a little worse or a lot worse?”
That does not mean a Biden administration would be a nightmare, Jones said, but instead could speed up an inevitable transition from fossil fuels towards renewable energy sources.
The presidential candidates could not have more different visions for the oil and gas industry.
In one corner, Trump promises to continue to promote oil and gas as key to his vision of US "energy dominance", and he will continue to pursue a deregulatory agenda if he is re-elected to a second term.
The last four years have seen a rollback in regulations including those involving carbon and methane emissions, an attempt to open up more federal acreage for drilling, a push for coal and the flexing of America’s shale muscle.
“President Trump is working to honour his commitment to build the world’s greatest infrastructure system for our nation, which will undoubtably improve the oil and gas industry, help protect jobs, and enhance working conditions,” a spokesperson for the Trump campaign told Upstream.
In the other corner stands Biden, who is aiming for a transition to net-zero emissions and a 100% clean energy economy no later than 2050 in a what his campaign frames as a jobs plan.
Biden’s goal of shepherding a US transition from fossil fuels to renewables — with measures including an end to oil and gas subsidies to provide funding to advance electric vehicle infrastructure — is ringing alarm bells in the industry.
His plan would also see an end to new oil and gas leasing on federal lands, effectively a back-door ban on fracking, but one that may have a limited effect.
“While this might seem like a step in limiting oil and gas activity, its impact on onshore production would be negligible. Most federal acreage in key unconventional oil producing regions such as the Permian and Bakken has already been leased,” Robert Clarke, vice president of upstream research for Wood Mackenzie said in a recent report.
Clarke added that any effort to limit production or permit extensions for federal leases would likely be met with a court challenge.
A research note from Redburn pointed out that onshore exposure to federal lands is currently concentrated in two New Mexico counties, Eddy and Lea, which make up part of the prolific Permian basin’s Delaware play.
“It is possible that restrictions in permitting in these areas may simply divert some capital onto neighbouring Texas counties although how this would play out in practice will vary by company,” Redburn said.
“With an M&A wave ongoing in the E&P space, a Biden/Harris win may add another strategic element for buyers to consider in the form of federal permitting exposure,” the equities research firm added.
Tellingly, Pioneer Natural Resources chief executive Scott Sheffield, commenting on his company's recent acquisition of Parsley Energy, emphasised to investors that it did not carry new exposure to federal lands.
Early in the campaign, Biden made ambiguous remarks over whether or not he would ban fracking.
He has since clarified that he would not do so, a stance that could play well with voters in states considered key to a Democratic victory such as Pennsylvania, which houses the largest natural gas-producing play in the nation.
The Biden campaign did not respond to Upstream’s request for comment.
At the moment, oil and gas players are trying to look on the bright side, mostly because that’s the only option they have, Jones said.
The industry has shown understandable caution about alienating an administration before it arrives, but does not want to spook its own investors and remains wary of a Biden administration.
If Biden wins, it will be with the help of progressives, who have a long energy policy wish list, at least some of which will be brought forward, Jones said.
While accepting that a Biden administration will see key Cabinet and agency positions filled with officials bringing a sharp contrast to Trump's picks, industry fingers are crossed that the policy swing is not extreme, given the current polarised political environment.
Jones said oil and gas players should be at least as worried about state reforms, such as Colorado's proposal to increase in setback distances for drilling and production sites.
“Oil and natural gas is a pretty easy target to go after,” he said. “It’s the coal of 2020.”