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Environmental Law: United States energy policy changes dramatically under Biden administration

By: George S. Van Nest//February 25, 2021

Environmental Law: United States energy policy changes dramatically under Biden administration

By: George S. Van Nest//February 25, 2021

George S. Van Nest
George S. Van Nest

As we reported on in this column previously, national energy policies were key issues in the 2020 presidential election. After a tumultuous election and inauguration, newly elected President Biden wasted no time dramatically changing United States energy policy. Within hours of the oath of office, the new president signed an Executive Order declaring climate change as a crisis, initiated a number of climate-based actions and halted construction of the Keystone XL pipeline.

The “Executive Order on Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis” issued Jan. 20 is expansive and will have major impacts on U.S. 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.” The Order mandates a review of agency actions taken during the Trump administration and directs to the relevant agencies to consider suspending or rescinding myriad regulations, including reducing methane emissions in the oil and gas industry, fuel efficiency standards on cars and light trucks, appliance and building efficiency standards, air pollution standards for utilities.

The Order also mandates that agencies account for the “full cost of greenhouse gas emissions as accurately as possible, including by taking global damages into account.” Under the Order “[t]he “social cost of carbon” (SCC), “social cost of nitrous oxide” (SCN), and “social cost of methane” (SCM) “are estimates of the monetized damages associated with incremental increases in greenhouse gas emissions.”

In one of the most obvious and well-reported actions, the Executive Order revokes the March 2019 presidential permit granted to TransCanada Keystone Pipeline LP to construct the Keystone XL pipeline. The Order is 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.”

The administration’s Order to kill the pipeline project is projected to eliminate 11,000 United States jobs associated with the project, including an approximately 8,000 union jobs. The layoffs started immediately from Transcanada, the project developer, to myriad supply chain and labor positions. 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 U.S. 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. Gov. Kristie Noem suggested that her state’s communities have been devasted by the loss of jobs, business activity and economic impacts from termination of the project.

Although labor unions have generally supported President Biden and the climate change policies proposed, the members now find thousands of jobs lost and at risk under his policies and initial Executive Order. The pace of policy implementation is also concerning to union and blue collar employees. Prior to election, President Biden suggested that his goals were for a more gradual transition. His campaign website even stated that “the Green New Deal is a crucial framework for meeting the climate challenges we face.” Among other things, the Biden campaign plan was to “[e]nsure that the US achieves a 100% clean energy economy and reaches net-zero emissions no later than 2050.” However, upon inauguration his climate representatives, Gina McCarthy and John Kerry, have changed the timeline to make the U.S. net-zero by 2035.

The economic impact of such policies is staggering. It would require the U.S. to eliminate carbon from the power industry and then fossil fuels in vehicles through use of battery-powered vehicles. An analysis by Real Clear Investigations determined that this would entail shutting down 670 coal mines and 280 power plants. These facilities currently employ around 750,000 employees. Hence, in an unusual split, labor unions are pushing back against both the shutdown of the Keystone XL pipeline as well as the condensed schedule for net zero emissions by 2035 instead of 2050.

The Order also issues a moratorium on federal oil and gas leases in the Artic National Refuge. A study by the American Petroleum Institute indicates that a long-term ban on federal energy leases will have major impacts. Notably, a reduction of U.S. GDP of $700 billion by 2030, a loss of nearly 1 million jobs by 2022, and an increase of U.S. oil imports from foreign sources by 2 million barrels a day by 2030. Similarly, natural gas exports from the U.S. would decrease by up to 800 billion cubic feet per 2030. They projected increase of household energy costs of $19 billion by 2030.

Another stark question that has not been clearly asked or answered is where the alternative energy to fuel U.S. industry, consumers and transportation will come from? Will the U.S. replace Canadian oil slated to flow through the Keystone pipeline from Russia, Iran, or Saudi Arabia? If so, at what cost both from a price and reliability standpoint? Regardless of perspectives on President Trump’s energy policies, energy independence for the country and low-cost sources seems like a positive objective for U.S. independence, security and economic growth. Additionally, production of U.S. energy in the prior administration prevented U.S. businesses and consumers from being subject to price and political fluctuations from international sources.

The difference in policies is already apparent in fuel prices. In December 2020, the price of U.S. gasoline averaged $2.30 per gallon and global crude oil prices were below $50 per barrel during most of 2020. After one month under the Biden administration, crude oil prices have risen to $65 per barrel and average price of U.S. gasoline is $2.72 per gallon. Ironically, many economists are pointing out how Biden climate policies will aid Russia and other energy-rich countries but hurt the U.S. consumer.

Despite how one ranks climate issues, the dramatic changes in policies under the Biden administration, and breakneck pace, should cause consumers and businesses to closely monitor and comment on policy changes. While “saving the climate” may be a laudable goal, destroying U.S. businesses, jobs, communities, and consumers in the process appears to raise serious questions about the proper policy balance for the country.

George S. Van Nest is Partner in Underberg & Kessler LLP’s Litigation Practice Group and chair of the firm’s Environmental Practice Group. He focuses his practice in the areas of environmental law, development, construction, and commercial litigation.

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