Early flurry of Biden executive actions includes steps on climate, social cost of GHGs

President Joe Biden plans to sign an executive order detailing multiple steps meant to combat climate change with implications for the electric, gas and oil sectors, as part of a day one flurry of executive actions.

The announcements mark Biden's early efforts to reverse direction on regulation and accelerate a transformation of the energy sector to meet ambitious climate goals.

Near-term impacts of the executive orders are likely to be inconsequential to oil and gas supply, according to S&P Global Platts Analytics. However, stricter methane rules and the potential for a moratorium on drilling on federal lands will be areas to watch in the coming months, as producers work to regain footing with the recent crude rally after the COVID-19 slowdown, Platts Analytics said.

Biden's early shift in direction includes re-establishing a working group on the social cost of greenhouse gases and calling for an interim table of GHG values "to ensure that agencies account for the full costs of GHG emissions, including climate risk, environmental justice and intergenerational equity," according to a Biden transition team release Jan. 20.

Calculating the social costs could have bearing on energy project permitting done by the federal government and on the cost-benefit analysis used to validate federal climate regulations.

The climate order would also call on agencies to consider revising fuel economy standards and methane emissions standards, and appliance and building efficiency standards, likely changing direction on Trump administration regulatory rollbacks.

The order would direct all agencies to review changes to a long list of Trump-era regulations and executive actions, including revoking permits signed over the last four years "that do not serve the public interest." A wide swath of Trump administration rules affecting the energy sector are listed, including those at the Environmental Protection Agency, Interior Department, Energy Department and Transportation Department. An important US Army Corps of Engineers rule on nationwide permits affecting water crossing authorizations for pipelines is also included, as is the Trump administration rule reforming National Environmental Policy Act process.

As expected, there is a call to revoke the presidential permit granted for the Keystone XL Pipeline. And Biden is seeking a temporary moratorium on oil and gas leasing in the Arctic National Wildlife Refuge.

Notably absent, for the moment, was a moratorium on new drilling and leasing on federal lands. But a Trump rule that rolled back regulations on hydraulic fracturing on federal and tribal lands was among those on the chopping block. The Obama era rule was opposed as burdensome and unnecessary by oil and gas industry groups.

A Jan. 16 memo from new White House Chief of Staff Ron Klain also said initial executive actions would be spread out over 10 days, leaving room for more early actions. Additional executive actions on climate are slated to roll out between Jan. 25 and Feb. 1.

A new emphasis on racial equity could also affect energy project permitting. A separate executive order directs agencies to engage with communities who have been historically underrepresented.

Pendulum swing

ClearView Energy Partners in a note to clients said: "The federal energy policy 'pendulum' appears poised to swing swiftly back towards hands-on climate policy almost immediately."

Also as expected, Biden will sign an instrument to rejoin the Paris climate agreement that would be sent to the United Nations on Jan. 20, enabling the US to become a party 30 days later.

Taking immediate steps to rejoin the Paris Agreement sends a clear signal that the Biden administration seeks a global reengagement on climate policy. However, according to Platts Analytics, the exact impact on US GHG trajectories will also depend on whether the Biden administration chooses to revisit the reduction target that the US originally committed to under the Paris Agreement, of a 26-28% cut vs. 2005 levels by 2025, and more importantly, what domestic policies are put in place to achieve these targets.   

Platts Analytics does not currently expect that the US will meet its previous Paris Agreement targets, highlighting the importance of Biden's future domestic policies.

New regulations put forward by the Trump administration in its final days also will not move forward, under a regulatory freeze memo issued by the White House chief of staff. The memo gives the Biden administration an opportunity to review those measures, ensuring that any "midnight regulations" deemed to be detrimental do not take effect, while those found to be in the public interest are allowed to proceed, according to the Biden transition team release.

Early commentary from environmental and clean energy groups praised the actions as decisive and necessary to put the US back in a position of global leadership on climate change.

"It makes the United States once more part of the global climate solution -- not the problem," Natural Resources Defense Council President Mitchell Bernard said in a Jan. 20 statement. "It makes clear that the country is moving away from dirty fossil fuels and toward cleaner, smarter ways to power our future."

Early reactions

Competitive power suppliers reiterated their support for market-based solutions to reduce carbon emissions that keep costs and investment risk to consumers in check.

"Congressional legislation that utilizes well-designed market-based approaches to allow all resources to compete to reduce emissions at the least cost will be more efficient and provide greater long-term investment certainty to companies – as compared to executive orders or other tools that can be reversed by changing administrations and political preferences," Electric Power Supply Association President and CEO Todd Snitchler said in an email.

A comprehensive, economy-wide carbon price and a Clean Energy Standard or other fuel- and technology-neutral approaches were among his preferences for tools to reduce emissions.

Oil and gas trade groups had mixed reactions to the myriad of steps. The Association of Oil Pipe Lines asserted that the action on Keystone would block thousands of new jobs. The American Petroleum Institute slammed the Keystone decision and the ANWR moratorium, but said it backed the Paris Agreement ambitions, adding that natural gas use and LNG exports were essential to the goals.

The Natural Gas Supply Association said it hoped to work constructively with Biden's team on his energy and environmental agenda, stressing "a vital and unifying role" for gas.

And yet others, such as Tom Pyle, president of the American Energy Alliance, full on criticized the president's plans as harmful to affordable energy and workers in the energy industry.

Lawmakers' reactions were divided, showing early signs of possible legislative battles to come as Biden seeks to advance climate-focused nominees and push for aggressive policies.

Senator Edward Markey, Democrat-Massachusetts, praised rejoining of the Paris Agreement as "seizing the opportunity of a clean energy economy and safer future for all," while Senator John Barrasso, Republican-Wyoming, blasted the action as leading to "spiking electricity bills and higher prices at the pump."

Trevor Higgins, senior fellow on the climate team of the Center for American Progress, noted Biden has pledged to use "all of the levers in the federal government to accelerate the transitions that are already in motion." That said, "I don't think it's like he's going to come in and snap his fingers and suddenly something is fixed.

And Sara Chieffo, vice president of government affairs at the League of Conservation Voters, noted that carrying out agency-specific agendas will require the Biden administration to build back up the ranks of those agencies "that have been decimated under the Trump administration." As such, Biden's first 100 days may include a big focus on bolstering staffing as well as getting nominees through the Senate confirmation process.