Interior rule delays underscore Biden’s energy challenge

By Heather Richards, Kelsey Brugger | 04/26/2022 07:03 AM EDT

Pumpjacks on public lands in the San Joaquin Valley, California.

Pumpjacks on public lands in the San Joaquin Valley, Calif. John Ciccarelli /BLM/Flickr

The Biden administration is behind on the release of its highly anticipated oil and gas regulations for drilling on federal lands at a time when the politics of oil are increasingly tangled in partisan disagreements over climate and prices at the pump.

Among the most closely watched delayed proposals are new methane rules for oil and natural gas operations on public lands, which are critical given their direct impact on drilling and emissions. They were due out last month.
But the Interior Department also hasn’t moved on several other proposed rulemakings on energy issues anticipated for early this year, such as new offshore regulations for high-pressure drilling, as well as those dealing with offshore oil spills and renewable energy.

It’s not clear why the administration appears off target, but outside observers say the thorny politics of oil policy, the cumbersome reality of federal rulemaking and a mess of court battles the Biden administration is currently fighting over climate metrics and oil leasing could all play a role.

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The delays could hurt the Biden White House’s agenda if they linger too long, observers say. The methane rules, and other pending updates to federal energy policy, are the first steps for the Biden administration to creating its long-term legacy, potentially affecting the future of federal greenhouse gas emissions, drilling standards and environmental rules on public lands.

Officials also face an increasingly narrow window to put their policies on the books. With midterm elections later this year, it’s possible GOP victories could lead to congressional obstacles to President Joe Biden’s executive actions, said Mark Squillace, a federal energy law expert at the University of Colorado Law School and a former special assistant to the Interior Department solicitor during the Clinton administration.

“Of course, no one knows how the 2022 or 2024 elections are going to go yet, but [the administration] ought to be thinking about those things,” Squillace said.

The administration’s pace is also drawing scrutiny because planned reforms are stacking up even as the Office of Information and Regulatory Affairs’ regulatory agenda calls for Interior to move soon on additional high-profile updates to the federal oil program’s bonding rules, fees and royalty rates.

James Goodwin, a regulatory policy analyst at the Center for Progressive Reform, cautioned against reading too much into the rulemaking lag, noting that an administration’s regulatory plan — known as the Unified Agenda — sets loose guidelines rather than hard deadlines.

“It’s sort of like getting your house remodeled,” he said. “The contractor says it’s going to take 12 months, but it takes 18. That’s just the way it is.”

Nonetheless, the delay underscores the ongoing struggle the Biden administration has faced in carrying out headlining oil reforms since taking office.

It also likely highlights the political tensions around changing drilling practices on public lands and waters. That is particularly true now, as Biden urges oil and gas drillers to ramp up production to ease the rising price of gasoline.

“I do think that the price of gasoline right now is affecting the federal government’s oil and gas policy; I think they’re being cautious,” Squillace said.

Squillace said Interior’s recent announcement for its first onshore oil and gas leasing sale on federal lands was likely an attempt to show the public Biden was serious about driving down gas prices — despite leasing, or indeed a president’s overall approach to energy policy, having little impact on global oil markets.

An Interior spokesman declined to comment for this story, while the Office of Management and Budget did not respond to press inquiries.

In the past, Democratic administrations have been hesitant to issue strong regulatory actions in an election year. That was especially true during the Obama administration after the rise of the tea party wing of the Republican Party.

These days, amid ongoing negotiations with Sen. Joe Manchin — the West Virginia conservative Democrat who has blocked Biden’s climate and social spending proposals — the administration could be reluctant to charge ahead on strict energy regulations, observers noted.

Litigation and leasing reforms

The Biden administration early on targeted reforming federal land policies as part of its climate agenda, promising to slash greenhouse gas emissions and help pivot the country away from fossil fuel dependency by elevating renewable sources of energy.

But overhauling federal energy policy has also ensnared the administration in partisan fisticuffs.

For example, the decision early last year to freeze oil and gas leasing on federal lands while Interior mulled possible regulatory reforms inspired several lawsuits.

A federal judge forced the restart of leasing last year, leading to one lease sale in the Gulf of Mexico. In a twist, that sale, the only one so far conducted by the Biden administration, was overturned by another federal judge for failing to account for climate impacts.

A third court battle also played out over the administration’s social cost of carbon, temporarily holding up planned lease auctions and sparking additional complaints from industry and its political champions.
“Anything that involved the social cost of carbon they had to put their pens down,” Goodwin said.

But the hurdles of litigation have been, for the time being, set aside with the administration’s scheduled initial onshore oil sale, which includes a first crack at reforming the leasing process.

Scheduled in June, the auctions in Wyoming, New Mexico and other oil-producing states represent a relatively small bundle of acres compared with past auctions in keeping with Interior’s stated aim to curtail industry speculation on public lands.

But, perhaps more importantly, the sale will include one of the most significant policy changes expected from this White House: Interior this month announced a 18.75 percent royalty rate on the leases up for sale, the first increase in onshore royalties in more than 100 years of the federal oil program.

A royalty increase has long been expected, but it was anticipated to be part of a larger rulemaking on the leasing program.

A notice of proposed rulemaking on leasing rules is scheduled in the Unified Agenda for next month. Put together by the Bureau of Land Management, it could codify higher royalties that by law have a 12.5 percent minimum but no maximum. The rulemaking also could increase the bonding amount that leaseholders must pay before they drill and update other fiscal aspects of the leasing program, according to a description in the Unified Agenda.

Other potential rulemakings in the weeks ahead would be equally resonant for federal drilling.

The methane regulations, a rewrite of controversial rules penned in 2016 that were struck down by a federal judge during the Trump administration, are expected to curtail practices like venting and flaring of natural gas on public lands in line with the White House’s focus on climate and environmental reform in the federal oil patch.

Offshore, the Bureau of Ocean Energy Management is scheduled to propose a comprehensive program to manage offshore industry risks, including financial assurances on offshore leases. Over the summer, the schedule anticipates a Bureau of Safety and Environmental Enforcement reform proposal for the Well Control Rule, a suite of offshore energy regulations penned by the Obama administration in the wake of the Deepwater Horizon oil explosion, created to reduce the risk of a well blowout. The regulations were later trimmed by the Trump administration. It is unclear what updates will come from this White House.

Later in the year, the Bureau of Safety and Environmental Enforcement is supposed to finalize revised offshore pipeline decommissioning standards, a nod to the increased political interest in ensuring offshore energy infrastructure isn’t abandoned.

The administration is poised in the coming weeks or months to release a spring regulatory agenda updating its plan for releasing environmental and energy rules to support the White House’s broader plans. That new forecast could shed light on both the progress and adjusted election-year ambition of Interior’s energy agenda.

Making regs ‘bulletproof’

While some regulatory delays are being noticed by experts, others caution that rulemaking is by nature onerous and complicated.

Overall, the Biden administration has produced about 5 percent fewer rules than the Obama administration in the first 12-15 months in office, according to Cary Coglianese, a University of Pennsylvania law professor whose name was floated as a potential White House regulatory administrator, a Senate-confirmed post that remains vacant.

Experts also caution that it is difficult to say whether the Biden administration’s pace is out of step with the norm because not all rules are created equal. Some regulations have a “major” economic impact while others are more routine.

The Biden administration appears to be more active than the Obama administration in moving forward with rules deemed economically significant, Coglianese said.

In 2009, for example, the Obama administration completed a regulatory review for 59 economically significant rules. In 2021, in contrast, the Biden review office completed 88.

Jon Goldstein, senior director for legislative and regulatory affairs for the Environmental Defense Fund, said the delay in the methane regulations originally anticipated in March wasn’t yet troubling.

He noted the administration’s success at moving forward with proposed methane regulations under EPA, which apply to oil and gas operations beyond the federal oil and gas fields. Those proposed regulations released late last year would greatly expand EPA’s previous methane oversight and apply to both new and existing drilling facilities.

But some are disappointed with the administration’s apparent hesitancy to move more swiftly.

Squillace of the University of Colorado said it’s been “frustrating” that the Biden administration doesn’t put more muscle into overhauling oil policy. Since releasing a report in late November critical of the oil and gas program’s policies and practices, the agency hasn’t done much outwardly to show it is working toward standardizing reforms to improve the program, he said.

Federal rulemaking can be grueling, Squillace admitted, but the administration should be attacking the coordinated oil and gas policy reforms with a task force — something outside the normal pace of writing regulations — to ensure that it gets done.

“I know that these things can get complicated and bogged down. But I’d like to see more leadership,” Squillace said. “They really do need to move on multiple fronts, it seems to me, and you don’t really see the kind of coordination that you’d like to see on these big issues.”

Opponents of potential Biden administration changes also have noticed the administration’s pace on oil and gas rulemaking.

“I’m not sure why the planned rules are taking the administration so long,” said Kathleen Sgamma, president of the Western Energy Alliance. “I’ve been amazed that the Interior Department has been so slow on the anti-oil-and-gas agenda since it’s such a high priority for this administration.”

But when it comes to regulatory delays at some agencies, Goodwin, with the Center for Progressive Reform, gave the administration some credit. He reasoned that Biden officials may not have realized how long it would take to undo Trump rollbacks.

“The Trump administration left behind such a big mess that cleaning that up and actually taking affirmative steps beyond that turned out to be a bigger job than the Biden administration maybe anticipated,” he said.

In addition, he suspected the Trump-fueled conservative judiciary has created a “chilling effect.”

“There is just this insane caution,” he added. “They will not let things come out of the agency unless they are bulletproof. Seems to be something that Democrats are afflicted with more than Republicans.”

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