Complex Environment Demands a Pragmatic Approach to Energy Policy

As we move into spring, warming temperatures seems to be bringing a warming of disparate interests within the U.S. and globally about what it will take to address the goals of energy security and the energy transition. 

While this subtle change by no means signals an end—or even a pause—in the bipartisan rancor in Washington, D.C., it does seem to indicate that there may be opportunities for bipartisan compromise on comprehensive energy legislation in the future.

In the current divided Congress, the chance of major legislation passing remains relatively low. 

The House of Representatives passed a number of measures from committees such as energy and commerce, natural resources, and transportation and infrastructure addressing the concerns Republicans have around energy security, fossil fuels production and transportation and nuclear energy. For instance, the natural resources committee passed the Transparency, Accountability, Permitting and Production of American Resources (TAPP) Act. Among other things, it requires the administration to issue a five-year offshore oil and gas leasing plan, repeals recent increases in federal oil and gas royalties and fees and reforms the National Environmental Policy Act to streamline permitting.

The plan is to bundle several of these committee-passed provisions and bring them to the House floor for a vote, which would likely pass largely along party lines before referral for consideration in the U.S. Senate.

Of course, the Democrat-controlled Senate will not rubber stamp any largely partisan and fossil energy-focused bill that comes out of the Republican House. Yet, Sen. Joe Manchin (D-WV), who chairs the Senate Committee on Energy and Natural Resources and often casts the deciding vote in the upper chamber, has unfinished business with permitting legislation that he unsuccessfully tried to pass through the Senate last year in conjunction with the Inflation Reduction Act (IRA). In this highly partisan Congress, the question is whether a compromise package on permitting can be agreed on that satisfies the needs and wishes of members of both the House and Senate.

As a pro-oil and gas Democrat who focuses on energy security and climate policy, Sen. Manchin played a key role in pushing back on some of the administration’s anti-fossil energy policies. He recently reacted to a leaked U.S. Interior Department memo that demonstrated a climate-based bias against terms that would encourage participation in an Alaska offshore oil and gas lease sale, stating that he was “appalled by [the memo’s] contents” and the administration’s decision to put “their radical climate agenda ahead of the needs of the people of Alaska and the United States.” He showed equal disdain for the Biden administration’s decision to further delay the release of the Interior Department’s 2023-2028 Offshore Oil and Gas Leasing Plan, stating, “I will hold their feet to the fire on this.”

At the same time, administration officials struck a more conciliatory tone toward oil and gas at the CERAWeek by S&P Global conference in March. For example, U.S. Energy Secretary Jennifer Granholm acknowledged that “oil and gas is going to remain a part of our energy mix for years to come.” She also talked about cooperation with the industry to decarbonize, focusing on grants and tax credits emerging from the IRA for carbon capture and storage projects, hydrogen, geothermal, battery storage and energy efficiency. She and other administration officials additionally acknowledged the critical role that U.S. LNG exports are playing in helping Europe meet its energy needs in the absence of natural gas from Russia.

Indeed, the themes at CERAWeek focused on cooperation in the future to address decarbonization and climate goals while meeting energy security needs of the U.S., Europe and the world. Even the tension that has existed with European countries over what they conceive to be “unfair trade advantages” for U.S. companies stemming from the IRA seemed to have subsided. Rather than confrontation, European delegations seemed more concerned about how to ensure opportunities to partner with U.S. and other global companies that are seeking to benefit from an ongoing decarbonization boom.

Make no mistake, the challenges for the U.S. oil and gas industry remain significant: maintain or increase production to supply the world while decarbonizing and facing pressure by Wall Street to uphold capital discipline and favor returns over growth. That is a tall order, with a multitude of pressures coming from numerous directions. Amid these challenges, let’s hope policymakers at home and abroad respond with the pragmatic approach to energy policy required in order to successfully navigate through this complex environment.