Danger Of An Anti-Fracking U.S. President
Results from the Democratic Party’s presidential caucus in Iowa may be muddled, but it is crystal clear that two of the front runners for the nomination, Senators Bernie Sanders and Elizabeth Warren, will do all in their power to shut down the U.S. shale industry if they become president.
On the bright side for the industry, the presidency may not provide these two candidates with as much power as they need to do so, while their anti-fracking positions could easily backfire come November 3, handing President Donald Trump a second term on a gold-plated platter.
“We’ve got to ask ourselves a simple question: What do you do with an industry that knowingly, for billions of dollars in short-term profits, is destroying this planet?” Sanders said during one of the many Democratic candidate debates. “I say that is criminal activity that cannot be allowed to continue.”
Sanders’s climate program states: “Any proposal to avert the climate crisis must include a full fracking ban on public and private lands.” On January 28, Sanders introduced a bill to the U.S. Senate aiming to end hydraulic fracturing nationwide by 2025.
In September, Elizabeth Warren tweeted that on her first day as president she would “sign an executive order that puts a total moratorium on all new fossil fuel leases for drilling offshore and on public lands” and would “ban fracking — everywhere.”
A successful fracking ban would have massive negative repercussions for the U.S. oil and gas industry — and hence, international oil and gas markets. “If three-quarters of the new wells drilled in the U.S. could no longer be brought onstream, the country’s oil and gas production would plummet,” Edinburgh-based consultancy Wood Mackenzie Ltd. wrote in a research note.
In 2016, when tight oil and shale gas production was significantly lower, the U.S. Energy Information Administration (EIA) warned that a full-fledged fracking ban would effectively halt more than two-thirds of U.S. oil and gas output.
But Warren’s potential executive order appears a non-starter, especially for fracking on private land, regulatory actions are likely to face legal challenges, as they did during the Obama administration, leaving acts of Congress the sole means to truly end the U.S. Shale Revolution.
"A President can't unilaterally ban fracking on private lands," says Christopher Guith, senior VP of the U.S. Chamber of Commerce's Global Energy Institute, whereas heavy-handed regulatory oversight could temporarily retard the industry — and severely slice into the bottom lines of midsize and smaller independents — as it takes time for producer states, businesses and local governments to successfully challenge them in court.
A prime example was President Barack Obama’s own efforts to increase regulations on fracking on federal lands, despite his administration on the whole being supportive of the practice. In 2015, the U.S. government, under the auspices of the Bureau of Land Management, finalized a series of hydraulic fracturing rules intended to protect water resources and force companies to disclose the chemicals used when fracking.
The states of Colorado and Wyoming challenged these new fracking rules in court, and in 2016 a federal court judge, Scott Skavdahl, found "that the Bureau of Land Management lacked Congressional authority to promulgate the regulations." The Energy Policy Act of 2005 specifically excludes hydraulic fracturing from provisions within the Safe Drinking Water Act — the so-called Halliburton loophole. The fracking rules were withdrawn by the Trump administration before higher courts could hear the case.
On the campaign trail, Sanders has suggested using rules and regulations, based on provisions within the Clean Water Act and Safe Drinking Water Act, to eliminate fracking, but they are likely to suffer a similar fate once challenged in federal court.
Thus, a future president will need a friendly Congress to pass legislation to implement an effective fracking ban on federal and private land. An important first step would be closing the Halliburton loophole, while multiple acts of Congress would be required as federal oversight of fracking is spread over several agencies, besides the Environmental Protection Agency (EPA).
And this would be easier said than done. Even if the Democrats were to maintain control of the House of Representatives and gain control of the Senate in November, amending any environmental statute is a massive and time-consuming undertaking. More importantly, Democratic lawmakers from oil and gas producing states such as Colorado and New Mexico may be unwilling to adhere to the party line for anti-fracking legislation given the negative impact on jobs, incomes and tax revenues.
On the other hand, if an anti-fracking president was willing to play dirty, taking a page from President Trump’s playbook, there are several actions his or her administration could take to retard the shale oil and gas industry, especially in the shorter term.
These include: a moratorium on new federal leases and drilling permits on federal lands until an in-depth greenhouse gas analysis has been undertaken; delay oil and gas pipeline construction, using current laws such as the National Environmental Policy Act and Endangered Species Act; and temporarily halt crude oil and LNG exports by declaring a national emergency.
Both Sanders and Warren have said they would be willing to stop U.S. oil and gas exports. The 2015 legislation lifting the U.S. crude oil export ban, for example, includes a provision allowing a president to reimpose restrictions for up to a year for the sake of national security.
This would have a devastating impact on the U.S. and Canadian oil industry as a whole, as it would mean not just lost export revenue, but the over three million bbls/d currently exported — based on EIA data — would be trapped in North America, causing continental crude prices to collapse.
Fortunately, an anti-fracking candidate is unlikely to beat President Trump in November’s election. Trump won the 2016 election by promising to bring jobs back to America, not destroying them, while an anti-fracking presidential candidate could easily cause a rift within the Democratic Party, costing them electoral college seats in some oil and gas producing states.
“Democrats will destroy the economy and kill millions of jobs in states across the country with their vendetta against coal, oil, and natural gas,” Trump campaign manager Brad Parscale said in a statement in August. “Their radical plan to eliminate those industries will devastate workers in Pennsylvania, Ohio, Michigan, New Mexico, Colorado, and elsewhere.”
At the same time, while a majority of Democratic Party supporters may support a fracking ban, a majority of American voters do not. A poll by YouGov Blue in September found 63 per cent of Democrats support “banning the practice of fracking in the United States” but only 46 per cent of Americans as a whole.
Finally, Trump achieved a 49 per cent approval rating in a Gallup poll released on February 4, the highest of his presidency, despite recently being impeached in the House and an ongoing impeachment trial in the Senate. He appears to have the Midas political touch.