The oil and gas industry in the US braced for change as Democrat Joe Biden officially because president, replacing Donald Trump and with his eye on greener energy policies going forward.
Biden was on Wednesday sworn in as the 46th president of the US, shortly after Kamala Harris was sworn in as the vice president, the first woman to hold that role.
In his inaugural address, Biden emphasised themes of unity and recovery, adding that there will be “much to build, much to change” moving forward.
He will begin addressing many of those areas of change in his first 100 days.
Facing a slew of challenges, his ambitious agenda includes ramping up the federal response to the coronavirus pandemic and boosting the US economy through additional stimulus efforts.
“The Biden administration is not only seen as the beginning of more political stability in the US, but also as the catalyst for a generous relief package that will create more economic activity and more demand for oil as a result,” said Rystad Energy's head of oil markets, Bjornar Tonhaugen.
“More spending means more money changing hands, more transport and more products, and oil fuels that.”
However, striking a balance between meeting oil demand while also pushing forward his plan to address climate change will be no easy feat for an administration that has set forth a $2 trillion clean energy plan that includes a goal of 100% “clean” power by 2035 and a net-zero emissions target by the US by 2050.
In addition, Biden has vowed to recommit the US to the Paris Agreement on climate change on the first day of his presidency. His predecessor withdrew the country from the agreement late last year, arguing it was too costly to the US economy and would provide little tangible benefit.
Biden's executive action authorising the recommittal is one of 15 expected to be signed today, according to the Wall Street Journal.
Another is an order revoking the permit for the $9 billion Keystone XL oil pipeline. Biden was vice president in the Obama administration that rejected the project as contrary to its efforts to combat climate change.
The project, which would move oil from the province of Alberta to the US state of Nebraska, had been slowed by legal issues in the US.
Canada's ambassador to the US said she would continue to promote a project that she said fit with both countries' environmental plans.
"There is no better partner for the US on climate action than Canada as we work together for green transition," Kirsten Hillman said.
Additionally, an executive action placing a moratorium on oil and gas leasing activities in the Alaska National Wildlife Refuge (ANWR) will be signed, according to Reuters.
On Tuesday, the US Bureau of Land Management's Alaska office announced that it had issued nine of the 11 drilling leases that drew bids in the recent ANWR oil and gas lease sale, with work progressing to finalise the remaining two.
Drilling plans, however, will require permits from the Biden administration, which has pledged to ban drilling on federal lands.
Beyond Day One
For the Biden administration to deliver on its goals, the current political and the economic climate must be considered, according to Ed Crooks, vice chair, Americas, for Wood Mackenzie.
“The Democrats have a slender majority in the House and control of the Senate only on the vice president’s tie-breaking vote, meaning policy radicalism through the legislative route is very much going to be off the agenda. He is not going to be able to push through anything very dramatic,” Crooks told Upstream.
The path to success follows one of two routes: regulatory or through consensus building with bipartisan measures that can win broad support, he noted.
“The US economy is in a very fragile state, even with vaccines rolling out,” he said. “There will be lasting impact from the coronavirus pandemic. It is clearly important for the administration not to make matters immediately worse by shutting down big chunks of the oil and gas industry.
“Climate is a priority, but it is not the top priority. Those are tackling the pandemic and getting the economy going again,” he said.
“Policies that are win-wins, that advance the climate agenda while also creating jobs, are going to be the ones that are going to be the most appealing.”