President-elect Joe Biden’s promised end to oil and gas leasing of federal land would impose self-defeating costs to consumers and governments and abate climate change little, if at all. It would, however, illustrate the often-overlooked futility of green obstructionism. “To immediately make progress on his climate agenda,” Biden’s campaign website says, the President-Elect will take several “Day 1” steps that include “banning new oil and gas leasing on public lands and waters.”
Although experts still quarrel over the nature and extent of the climatological threat, Biden sides with those expressing most alarm—those who enjoy nearly exclusive attention from the popular press.
If implemented, this gift to climate activists would not meaningfully lower the consumption of fluid hydrocarbons or the associated emission of greenhouse gases. It would only reinstate U.S. dependence on other countries for oil and gas, strengthen those suppliers’ influence over energy prices—not to mention the effect it would have on American employment, incomes, and the revenue of state and federal governments.
Biden embraces the animating vision of climate campaigners: a new energy economy featuring electrified ground transportation and electricity from renewable energy sources such as sunlight and wind. The appeal is obvious: displacing now-dominant fossil fuels such as oil, natural gas, and coal, the combustion of which emits carbon dioxide, one of the radiative gases that contribute to observed warming of the atmosphere. Although experts still quarrel over the nature and extent of the climatological threat, Biden sides with those expressing most alarm—those who enjoy nearly exclusive attention from the popular press. Mitigation of climate change, therefore, will be a priority of the new administration.
But President-Elect Biden can pursue the heralded energy transition without foreclosing oil and gas leasing of federal land and the Outer Continental Shelf. Indeed, for the sake of the climate and national prosperity, he should.
THE OBSTRUCTIONIST WING’S DANGEROUS SHOVE
The obstructionist wing of climate activism wants to give the energy transition a dangerous extra shove. Most energy strategies related to climate aim to expand the supply and use of commercially challenged renewable energy with subsidies and consumption mandates, while discouraging consumption of commercially established hydrocarbon (fossil) energy with taxation and regulation. Since 1992, for example, producers of renewable energy have been eligible for a “temporary” production tax credit that Congress regularly extends and modifies. In 2019, the credit amount ranged from 1¢ per kilowatt-hour for wind projects with construction begun before 2019 to 2.5¢ per kilowatt-hour for wind farms begun before 2017 and for certain biomass and geothermal projects. The most visible mechanism for discouraging consumption of fossil energy is carbon pricing, implemented so far mainly through “cap-and-trade” schemes at the state level.
The obstructionist agenda assumes that discouraging the production of oil and gas in the United States also extinguishes demand to whatever extent U.S. supply can be constrained.
Obstructionism, however, tries to limit not only the consumption of hydrocarbon energy but also the production of it. The agenda is manifest in, for example, systemic opposition to oil and gas pipelines, climate warriors having learned that an effective way to block production is to deny fluid hydrocarbons access to markets. And it is explicit in its aim to curtail oil and gas leasing—an aim that is unfortunately endorsed by Biden. The obstructionist agenda assumes that discouraging the production of oil and gas in the United States also extinguishes demand to whatever extent U.S. supply can be constrained.
For two large reasons, this is fanciful.
First, oil and gas needed in the United States but not produced domestically must come from elsewhere. Saudi Arabia, several other members of the Organization of the Petroleum Exporting Countries, and others (prominent among them Russia) have spare capacity to produce oil. Their leaders would be more than happy to raise production in compensation for any forsworn output in the U.S.
Second, the growth of the electric-vehicle fleet and its reliance on renewable energy will expand the industrial consumption of oil and gas by requiring massive increases in energy-intensive mining and manufacturing. Renewable energy needs much more machinery and material than its conventional counterparts do. The physics of energy makes this so, and it’s an issue that deserves attention so far lacking in most discussions about energy and the environment.
Fossil and nuclear energy have an advantage that is perpetually difficult for renewable energy sources to overcome: With oil, gas, coal, and uranium, nature packs a lot of energy into relatively small spaces. By comparison, sunlight and wind are many times more diffuse in nature. They require much more work than hydrocarbon and nuclear energy do for collection, concentration, and storage. That work entails comparatively more equipment—much more: solar collectors, windmills, extended transmission and distribution systems, and so forth.
The equipment, in turn, requires metals and other materials. Wind turbines need aluminum, chromium, copper, iron, manganese, nickel, steel, and zink; offshore turbines also need lead and the rare earth element neodymium. These materials must be mined, processed, and transported. Requirements for metals for solar voltaic installations vary according to the technology employed, but are substantial in all cases. Requirements for batteries necessitated by the energy transition add cobalt and lithium to the list of metals in burgeoning demand.
What’s more, the equipment wears out. Wind turbines last roughly 20 years, solar panels about the same or slightly longer. Typical warranties generously cover batteries in electric vehicles for 10 years or 100,000 miles. All energy-transition equipment eventually will have to be uninstalled, disassembled, moved to (still largely indistinct) disposal areas, and replaced. New equipment will have to be manufactured, transported, and installed. Because of the recent and envisioned proliferation of solar arrays, wind farms, and batteries for generation systems and vehicles, these activities will be continuous.
Does anyone believe that sunlight and wind can, anytime soon, fuel all the mining and mechanical work associated with the electrification of transport and scale-up of electricity from solar and wind?
Yes, hydrocarbon energy depends on equipment, too. Because of the gaping differences in energy density, however, production of a unit of energy from oil or gas involves far less solid material, machinery, and associated logistics than that of energy from renewable sources. As a 2017 World Bank study notes, “All literature examining material and metals implications for supplying clean technologies agree strongly that building these technologies will result in considerably more material-intensive demand than would traditional fossil fuel mechanisms.”
To note these practicalities of the energy transition is not to argue that the transition should not occur. It is simply to highlight realities that must be addressed by policy and commerce and to raise a question: Does anyone believe that sunlight and wind can, anytime soon, fuel all the mining and mechanical work associated with the electrification of transport and scale-up of electricity from solar and wind? The problem should be obvious.
The shift to electrified transportation and renewable energy already suppresses and eventually will eliminate growth in demand for fluid hydrocarbons, now 69% of total U.S. energy consumption. Yet, the transition will enlarge part of the industrial sectors of the markets for oil and gas. And that new increment of growth will, at least partly, offset the displacement of hydrocarbons by electricity in the transport sector and by renewable energy in power generation for some considerable time. Furthermore, cars and trucks driven by internal combustion engines will not suddenly disappear. These vehicles will dominate the fleet for many more years, notwithstanding rapid market penetration by electrified counterparts. They will still need gasoline and diesel fuel.
The energy transition’s huge appetite for materials encompasses not only the metals discussed above, but also plastics and composites. As much as 16% of the total mass of wind turbines, for example, is plastic or similar materials derived from liquid or gaseous hydrocarbons. Growth in the production of wind turbines will therefore lift demand in the already fast-growing petrochemical sector of the market for oil and gas.
At this stage, it’s impossible to know the extent to which fossil-energy needs of the energy transition will slow the transition itself. Too many unpredictable variables complicate the outlook, and large among them are the technologies that will become mainstays of renewable-energy supply and battery production. Inevitably, however, declines in fossil-energy use for transportation and power generation necessitate major increases for mining and manufacturing.
The energy transition thus means changing the market sectors in which oil and gas are used more than it means any imminent plunge in overall consumption of them. This will remain the case at least until a large majority of the global vehicle fleet is electrified, and most electricity comes from renewable energy.
THE U.S. AND WORLD STILL NEED OIL AND GAS
Even under a rapid energy transition program, the U.S. and the world in which it competes will continue to need large quantities of oil and gas during any realistic planning horizon. And the U.S. government will not restrain oil and gas demand by discouraging domestic production.
[T]he Executive Branch’s embrace of climate obstructionism, with its compulsion to block everything associated with fossil energy, would undermine climate politics.
For an incoming President under pressure from obstructionists, however, restricting oil and gas development by refusing to lease federal acreage must be politically seductive. It’s a quick way for Biden to show both a commitment to climate remediation and a departure from his predecessor’s defiant refusal to act. And it can give climate envoy John Kerry a bright flag to wave at an important conference the United Nations planned for next November in Glasgow.
The costs of such a leasing ban, however, would be immense. In its fiscal year 2019, the federal government received $4 billion from oil and gas rents, bonuses, and royalties onshore and $6.2 billion from those activities offshore. In the same year, the Department of the Interior made $2.2 billion in energy-revenue payments to states, led by New Mexico, with $1.2 billion, and Wyoming, with $640 million. Because most U.S. offshore production comes from federal acreage—the Outer Continental Shelf—a leasing ban would crimp growth of an industry that in 2019, according to the Bureau of Ocean Energy Management, provided 277,000 jobs and labor income of $18.8 billion while contributing $32.3 billion to the gross domestic product.
Refusal to lease more acreage would not cut U.S. oil and gas production immediately. Instead, it would thwart activities needed to establish new production able to offset depletion, or the natural output declines that beset all oil and gas fields. A leasing ban would hasten the arrival of a downturn in, and steepen the ensuing decline of, production from federal and tribal acreage, now 16% of total U.S. oil and 3% of total gas offshore, and 8% of total U.S. oil and 9% of gas onshore. The imposed erosion of U.S. production, rather than lowering consumption, would simply transfer the associated economic rewards to foreign exporters. It would be a sacrificial gesture.
More insidiously, the Executive Branch’s embrace of climate obstructionism, with its compulsion to block everything associated with fossil energy, would undermine climate politics. The energy transition, because it is fundamentally a move away from affordable energy toward costlier alternatives, will create economic pain through some combination of higher taxes (to pay for renewable-energy subsidies) and elevation of energy prices at the consumer level. While the immeasurable benefit of climate remediation exists in the misty future, tax hikes and energy-price jumps cause certain pain immediately. As a political formula, this is not auspicious. As has been clearly demonstrated in France, Australia, Ontario, and elsewhere, popular support for climate precaution dissipates when governments demand too much sacrifice, too soon.
A leasing ban by the U.S. government would magnify costs of the energy transition for no reason other than to show seriousness of official purpose. It would lower employment and tax receipts in oil and gas-producing states and banish much of the country’s sophisticated offshore industry to more welcoming regimes abroad. By eventually lowering U.S. oil and gas production without trimming consumption while boosting production elsewhere, it would tend to lift prices for all Americans—an effect exacerbated by obstructionist resistance to fossil-energy projects that remain economically and environmentally essential.
The transition to diminished-carbon energy is prudent and necessary. Rushing it for cosmetic reasons, however, is foolish.