President Biden’s actions are definitely different from his words when he says that he is doing all in his power to reduce gasoline prices. He could easily bring the price of oil (and thus the price of gasoline) down by announcing favorable policies to encourage investment in U.S. oil production. That was the case in 2008 when President George W. Bush opened the Outer Continental Shelf to oil drilling, signaling he wanted more supply to be produced. Oil prices dropped by over $9 a barrel, which equates to more per gallon than Biden’s proposed gas tax holiday. But if Biden were to make such an announcement, he would have to do something to prove that he really means it because he continues to undermine U.S. oil production. His latest consideration is EPA implementing new requirements that would curb drilling across parts of the Permian Basin—the world’s biggest oil field that straddles Texas and New Mexico.
Biden’s Environmental Protection Agency (EPA) is considering labeling parts of the Permian Basin as violating federal air quality standards for ozone – a designation that would force regulators to develop state implementation plans to reduce ozone levels, which would result in new permitting requirements and scrutiny of drilling operations. If EPA determines that the region is in violation, state regulators would have three years to develop plans for lowering ozone levels, including stopping new production facilities and requiring existing sites to spend more to meet the new regulation.
Background
According to the conservation group, Wild Earth Guardians, ozone levels in the Permian basin have surpassed a federal standard—the Ozone National Ambient Air Quality Standards of 2015 (NAAQS). (EPA changed the existing standard under the Obama/Biden Administration in 2015.) In 2017, EPA designated certain counties in southeastern New Mexico and West Texas located in the area of the Permian Basin attainment, unclassifiable for the 2015 ozone NAAQS. In March 2021, however, Wild Earth Guardians petitioned EPA for the non-attainment designation and, about six months later, warned the agency it intended to sue to force action. This provides EPA and the Biden administration the justification for regulating or pursuing the “sue and settle” approach in which an agency capitulates to a lawsuit from a friendly outside group and expands its powers over economic activity with the argument that they were forced to do so by the litigant.
While Texas does not have monitors that take ozone readings in the wide-open spaces of the Permian, monitors in parts of New Mexico have recorded average ground-level ozone levels exceeding the new 2015 standard of 70 parts per billion.
The Permian Basin, which spans western Texas and eastern New Mexico, represents the most prolific hydrocarbon-producing region in the United States, accounting for about 30 percent of U.S. crude oil production and 14 percent of U.S. natural gas production in 2020. Technology innovations, such as longer lateral wells and multi-well pad drilling, helped reduce costs, decrease surface impacts and increase productivity in developing oil and natural gas resources in the Permian Basin. The Delaware Basin and Midland Basin are parts of the greater Permian Basin and contain multiple stacked reservoirs. As of June 2021, the Delaware Basin had 17,450 producing wells and the Midland Basin had 27,540 producing wells, which have been installed since January 2011. In June 2021, horizontal wells accounted for 84 percent of the producing wells in the Delaware Basin and 86 percent of the producing wells in the Midland Basin.
Contrary to Biden’s claim that the industry is not developing domestic leases, some oil and gas companies are planning to increase output in the Permian Basin by 25 percent this year. Exxon Mobil and Chevron are both increasing oil production in the Permian Basin in West Texas and New Mexico—plans that both oil companies made last year. Exxon plans to increase its production from the Permian by 100,000 barrels per day this year, on top of an increase last year to 460,000 barrels per day. Chevron plans to increase its production in the Permian by 60,000 barrels per day this year. But, Biden’s EPA could easily squelch these plans.
Conclusion
It is clear that Biden is in the pocket of environmental and conversation groups that want to do away with oil and natural gas production in the United States. He proceeds to do their wishes despite the impact on Americans who are struggling under very high energy prices and inflation. Recent examples of Biden’s negative actions include the curtailment of new leases for drilling; regulatory and legal obstacles for new pipeline development, including canceling the permit for the Keystone XL pipeline; increased mandates for ethanol blending; and environmental, social, and corporate governance (ESG) regulations designed to discourage new financing of fossil fuel projects. This new EPA rule will constrain energy development in the world’s largest oil producing region by creating uncertainty on permitting and inserting unnecessary regulatory barriers, which will negatively impact oil production needed to meet consumer demand. Rather than “work(ing) like the devil to bring gas prices down,” President Biden and his administration seem to be working with other opponents of American energy security to drive prices up. So far, they have been wildly successful.
