Podcast - Election Roundup: How a Harris Administration Could Shape the Oil and Gas Landscape

Liz Craddock: Hello everyone. Thank you for joining us today for this podcast, which is a mini-series, of our Eyes on Washington podcast. We're doing this on the upcoming election. For those of you who don't know me, I'm Liz Craddock, I'm a partner here at Holland & Knight. I've been here for a couple of years but have worked in Washington, D.C., on Capitol Hill, and downtown for over two decades now. I work for Senator Mary Landrieu of Louisiana, handling all things energy policy related, including getting to serve as her staff director of the Senate Energy and Natural Resources Committee. So have a lot of background in oil and gas policy here in Washington, D.C. I'm joined by my colleague Jim Noe, who's also a partner here at Holland & Knight. Jim, we want to give a little intro about yourself.

Jim Noe: Sure, Liz. Thanks for that. So I'm a partner here in the Washington office of Holland & Knight. Prior to joining Holland & Knight, I spent about 20 years in the oil and gas industry, mostly with oil and gas companies focused on offshore waters and public lands, and also internationally. 

Liz Craddock: Great. Thanks, Jim. It's been fun getting to work with Jim over the years. We actually first met when I was working for the senator during Deepwater Horizon. So, a lot of oil and gas issues, between the two of us, over the years. So it's been fun.

Today we wanted to talk about the Democratic ticket, now that the Democratic National Convention is over and VP Harris is the official Democratic candidate for president. So, Jim and I wanted to provide a little intro about what the oil and gas industry might expect to see from a potential Harris Administration. So with that, Jim, what do we know about VP Harris and her positions as they relate to oil and gas?

Jim Noe: To show my Generation X bonafides, the first question we need to begin with what Vice President Harris may do in the White House with respect to oil and gas is to ask, will the real Kamala Harris please stand up on oil and gas issues? Because we've heard quite a number of different positions from Kamala Harris over the years, dating back to her time as a presidential candidate in the last cycle in 2019. Then a candidate Harris was really running to the left of her future boss, President Biden, on a number of climate issues, including oil and gas issues. She was, you know, famously a co-sponsor of the original Green New Deal. She was very aggressive in her role as the attorney general of the state of California and suing oil and gas companies on a host of issues, including on climate change, on environmental justice issues. You know, she is through her career, both in the state government of California and then in the Senate and then, you know, as a candidate for president in 2019, she supported a ban on fracking, which she's subsequently reversed course on. Which we'll talk about it in a moment. She's called for $1 trillion funding for climate, which is, you know, vastly larger than what the Biden Administration has pushed in its climate objectives. And, you know, she's stated things like wanting to ban new drilling on public lands in waters. And yet, you know, the candidate that we see today, and coming out of the DNC last week, is much more practical and moderate. She's reversed her stance on fracking. I mean, I think we would all admit that, you know, there are some political drivers to that, with Pennsylvania being, you know, an absolute must-win state for a Harris ticket. And, you know, Pennsylvania being a very large, natural gas producer. You know, we've seen her moderate her stance on that. So I think in many respects we're waiting for, you know, the real Kamala Harris with respect to oil and gas to stand up and make herself known. There's a lot of uncertainty that hopefully will be, become a little more clear in the, in the coming days as we see a presidential debate, as we see candidate Harris take more unscripted interviews, etc.

Liz Craddock: Yeah, I think you're right about that, Jim, though, you know, we don't know exactly what we think. You know, Harris will do what it relates to oil and gas, but we do think we have enough (Inaudible) sort of reading off of what the Biden Administration has done. So we do, I think, believe majority of it will be a continuation of Biden's policies. I think the only caveat that I have really for that is that, you know, in her acceptance speech, she really sort of honed in on being sort of a common sense candidate. I think as it relates to oil and gas policy in the United States, we all know that there's an energy transition that's happening in the country. But, obviously oil and natural gas still provide substantial amounts of supply to consumers, whether it's from, you know, automobiles to just power load for the electric sector. So, you know, she's truly going to be a common sense candidate. You know, maybe the energy transition that we're having here in the U.S., it can't exactly happen by year 2030 or 2040. It's probably a much longer transition as we pull away and bring more renewables on line. You're going to be a common sense candidate. I think you have to some degree, realize the importance that oil and natural gas has to our economy for affordability and reliability as far as energy sources for consumers. So, you know, I think that, it'll be interesting to see, if, should Harris get elected, will she just continue on the same track as the current Biden Administration? Will she be more aggressive, or will she pull perhaps a little bit away from Biden and realize that the energy transition that we're having in this country might take a little longer, and oil and natural gas will be a much larger player than, perhaps, progressives want to rely on in the future for this country. You know, with that, I think one of the top issues, especially for the progressives, is the LNG pause. You know, the Biden Administration put the pause in place on January 26, 2024. And that was expected to last likely through the election. Many saw it as a sort of political play to appease the progressive Democratic base, you know, allowing more liquefied natural gas to be exported for this country is seen by progressives as a way to continue a reliance on natural gas and, you know, trying to slow down any more LNG exports would be one way to sort of curb our future dependence, at least as seen by the progressive movement. So, you know, there's a court case, or a court decision, in the summer that ended the pause. I still think that we will see much daylight between now and then on when the Harris Administration, or potential Harris Administration, decides to, you know, move forward on what to do about LNG exports. So, you know, I definitely think that that is something that a Harris Administration could potentially either get more aggressive on and limit LNG exports moving forward or potentially just continue on the same track as the Biden Administration. Jim, do you have any thoughts on that?

Jim Noe: No, I think that's right. But, you know, going beyond the LNG permit, that takes a lot of headlines, you know, reading between the lines of other policy positions that a Harris Administration, you know, might take, include things like access to public lands and public waters. You know, I think we all acknowledge that there is a limited authority that any president has on restricting domestic oil and gas production on private lands. There's certainly a host of regulatory initiatives that a Harris Administration could do to thwart, you know, the robust drilling on private lands. But one thing is also clear, is that any president has the ability to modify and restrict access to drilling and mining on public lands out west and in offshore waters, principally in the Gulf of Mexico. We've seen, you know, the offshore five-year plan, which establishes over the next five years the number and frequency of offshore leases being scheduled for oil and gas purposes. Then, you know, a hot potato politically, you know, the Biden Administration restricted the number of new offshore lease sales to be the very minimum that is allowed by the Inflation Reduction Act, which imposed requirements to have at least one area-wide offshore oil and gas lease sale for every offshore wind lease sale. We could certainly see a continuation of that restriction where there's anemic offshore oil and gas sales. The offshore wind industry has been up and down over the last few years with, you know, initially a lot of commercial interest in, in wind projects, particularly along the Atlantic coast. But we've seen that moderate both just prices and commercially, those projects are becoming less economic for a host of reasons. And so the desire of a Harris Administration to have offshore wind sales and to hold their nose and have offshore oil and gas sales as required by the Inflation Reduction Act, you know, that calculus may change if there's less interest in offshore wind. So conceivably we could see, you know, even a reduction in the number of offshore oil and gas sales and also a restriction, a reduction in the number of acres that are made available on public lands for oil and gas activity, you know. And not everyone and not many people read, you know, the party platforms where they, if you read the Democrat platform that was, that was, put into place during the most recent convention, there's very aggressive language in that platform with respect to access, including banning — the word "banning" — all new oil and gas permitting on public lands and water. So, you know, it, we could certainly see a continuation of the Biden policies. And we could also see, you know, a more aggressive restriction on access to public lands and public waters, just as we might see a more progressive view on the LNG ban list. 

Liz Craddock: Yeah, I think that's right. And in talking about the IRA, the offshore oil and gas industry and onshore oil and gas industry wouldn't likely have leases in future years without the IRA. So the mandate that Senator Manchin and, you know, the other colleagues who voted for the legislation put in that legislation to ensure that there'd be continued development on federal lands here in the U.S. is pretty crucial to giving the industry some certainty on having a minimum of lease sales in the future. You know, and it's interesting, we, you know, read some things over, over the past couple of weeks about, you know, what does the future oil and gas policy in the United States look like? And I can't remember who the article was by, but it essentially was talking about why presidents can't quit oil and gas in this country and why there hasn't been sort of a more robust sort of, you know, opportunity for Biden who is all in on, you know, moving to renewables and moving away from oil and gas to really make some progress on that front. And I think there are a couple of reasons for that. Right? You know, the first is we generate a ton of federal revenue from oil/gas development in this country. You know, it's anywhere from $5 to $10 billion on average a year comes to the federal treasury from oil and gas royalties, rental rates, bonuses, etc. So there is a substantial amount of money that is derived from this activity that goes to the federal government. And that's just in, you know, that form of revenue. You know, I'm not even scratching yet. The, you know, local taxes that are paid, the employment taxes that are paid, etc. So it is a pretty huge economic driver in this country. And if we didn't have domestic oil and gas production, it wouldn't just be a cost of the loss of those revenues lost and the loss of jobs and other, another thing. So, you know, I do think that it's hard as we transition away, potentially, from these resources to really ensure that, you know, nobody's left behind, if you will. In addition, you know, there's demand — and we've talked about this a lot just in our own, you know, interactions here in the office — that energy demand is continuing to rise. With every new gadget, you know, my teenagers put into the socket, whether it's their, you know, new phones or what have you, you know, that's an additional load that has to — in demand, though — that has to be met. So I do think that there are some considerations for the importance of ensuring that our country has enough energy production to meet all of our demands also in, you know, an affordable and reliable way. But I know we've talked a lot about the demand issues. What do you see sort of moving forward on that?

Jim Noe: Yeah, I think you're right to point out, in Vice President Harris's acceptance speech, you know, she talked a lot about being practical. And in, as you noted, you know, any practical person would recognize that oil and gas are going to be a key part of the energy mix for, you know, years, decades to come. You know, just about every day we read new demand forecasts and they all sort of scatter around, but they all coalesce on, you know, a conclusion that we'll, we'll need oil and gas for many decades to come. And in that demand overall, not just for oil and gas, but for all energy sources, is on the rise with things like, you know, artificial intelligence and, you know, and some of the power generation that's required to, you know, power all these new technologies and devices. So that certainly, you know, one potential bookmark of a potential Harris Administration. But again, the other, going back to the will the real, you know, Kamala Harris, please stand up. You know, we also have to look at what the Biden Administration has done and sort of look to continue some of those restrictions. And in addition to some of the issues that we talked about with LNG and restricting access potentially on public lands and offshore waters, I think we could see things, you know, other regulatory burdens put on the industry. You know, the Biden Administration hasn't come out and had a press conference and say, we're done with oil and gas in the U.S., and there's a lot of reasons for that, including some of the practical issues that that you've mentioned, Liz. But what we have seen is the Biden Administration chip away and make more burdensome, make more difficult, lengthen the permitting time, make more expensive some of the, the oil and gas activities. And that's through use of existing rules and laws and things like the Endangered Species [Act] will likely take, you know, a renewed front seat with respect to oil and gas activity. So I think, you know, for oil and gas on public lands in particular, you know, there's things like the sage grouse and other endangered species that could, you know, crop back into the conversation that could be limiting factors. We've seen it offshore with the, with the Rice as well in the Gulf of Mexico. You know, there's been litigation this summer about, about that issue. I think we could see renewed interest in environmental restrictions on oil and gas operations, particularly in public lands and waters, but potentially elsewhere, with respect to, you know, things like endangered species.

Liz Craddock: Yeah. No, I think you're so right. And it's interesting because, you know, I think we've seen personally many regulations that have come out of, you know, whether it's Department of Interior or [U.S. Environmental Protection Agency] EPA or, you know, what's moving forward with the Rice as well, biological opinion. I mean, all of these have the potential to have serious hits to the oil and gas industry. Other than maybe what's happening with the Rice as well. Some of these regulations are so small that, you know, most, you know, most Americans have no idea that, you know, they're moving forward and, and their potential to restrict oil gas development here in the United States. So, you know, I think that the, you know, potential Harris Administration, she'll either continue to really lean into all of those regulations that the Biden Administration has put forth and has been moving forward on, or there could be a potential to maybe, you know, just let those regulations move forward, but maybe take a pause on anything new, you know, perhaps, you know, pipeline regulations offshore or something onshore that will continue to impact the industry. You know, one of those obviously, specifically for onshore is the methane fee, the waste fee from the IRA. You know, that's moving forward, obviously, that in combination with the methane regulation that is also coming forward from EPA, those are two huge pieces for the Biden Administration in curbing oil and gas production and emissions on federal lands. So, you know, I would, I would foresee that the Harris Administration, given how hard I think this Biden Administration has worked to try and get those rules out the door, as quickly as possible, that she would clearly continue with those and let those move forward. And we wouldn't see any pullback or restrictions on those. Obviously, the waste fee is derived from the IRA, and so that would require Congress to take action to try and, you know, peel that piece of the aisle right back. Congress is another big item that we, we really haven't discussed yet. You know, if Harris is elected, you know, what the Harris Administration is able to do could also depend on what her congressional counterparts look like. So, depending on who is in control of the House, who's in control of the Senate, you know, she could be either dealing with, you know, a Congress that's supportive and helpful and helping administration, you know, get these measures moved along. Or she could be dealing with the Congress that is very, you know, would like to see the IRA repealed. So I think that we could definitely see some movement on what a Harris Administration is able to do, depending on who's elected to Congress as well.

Jim Noe: Yeah, that, that's undoubtedly true, really for anyone who sits in the White House. But I think if we do see a Harris Administration, regardless of what happens in either chamber of, on Capitol Hill — you know, the Biden Administration has operated with, you know, a divided Congress for three and a half years. And yet we've seen the Biden Administration take many steps that, you know, that the oil and gas industry has opposed, a lot of these regulatory steps, which are not necessarily game changers reading the headlines, but make domestic oil and gas production more burdensome, more difficult, more expensive, more time consuming, etc. I think in any event we will likely see that continue under a Harris Administration. And I also think, you know, what we'll see between now and November is potentially more details on, you know, what a Kamala Harris Administration would look like. You know, we've seen very little said in the acceptance speech at the DNC about climate writ large, let alone oil and gas issues. We've seen reports of environmental groups being very supportive of the Harris Administration and perhaps privately speculating that a Harris Administration might be more anti-oil and gas and, and, and really develop some of the climate policies of the Biden Administration in a much more robust way. But frankly, we don't, we don't know a lot of that yet. And the environmental groups have, you know, have stated even publicly that their job is to get Harris elected, and sort of details to be, you know, to be determined. And so, you know, it'll be interesting to see over the coming months between now and the election whether Harris is, you know, put on the, put on the record as to, you know, what a Harris Administration would mean, in particular oil and gas. But I think, I think both of us would agree that it would likely be more of the same, and potentially, you know, more aggressive, on some of the climate policies that were started in the Biden Administration.

Liz Craddock: Yeah, I think that's right. I don't think we'll see too wide of a departure from a Harris Administration from what we've seen thus far in, in the Biden Administration. Well, Jim, we have covered a lot of ground today. We hope everyone has enjoyed listening to Jim and I sort of banter back and forth about what we think a potential Harris Administration will mean for the oil and gas industry. This is part of a mini-series that Holland & Knight is doing on the election. So hopefully you enjoyed this one. And, please tune in to future Holland & Knight podcasts. Thanks, everyone.