On the Defensive a Year Ago, the American Petroleum Institute Is Back With Bravado

The oil and gas lobby, looking at resurgent production, has more than held its own in dealings with the Biden administration.

An oil pumpjack works on Jan. 19, 2016 in Sweetwater, Texas. Credit: Spencer Platt/Getty Images

An oil pumpjack works on Jan. 19, 2016 in Sweetwater, Texas. Credit: Spencer Platt/Getty Images

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What a difference a year makes. The chief of the nation’s top oil and gas lobby laid out the state of his industry on Wednesday in a presentation that reflected a remarkable turnaround for the sector.

A year ago, with President Joe Biden taking office and Democrats seizing control of Congress, the oil industry appeared to face an existential crisis. Policymakers were promising to transition the nation away from fossil fuels, and the American Petroleum Institute’s chief executive Mike Sommers said his industry was ready for a fight.

Today, it seems, those fights have largely gone his way, at least so far. While Sommers repeated his warnings from last year against restricting oil and gas development, his tone was less combative.

“In policy debates this year, it’s possible we’ll find more agreement than usual,” he said, “if only because American energy leadership itself solves so many problems our nation faces.” He added, “With supply-chain failures, and with inflation on the minds of many Americans, the last thing anyone wants to see is more upward pressure on costs that are felt by every family and business.”

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If such agreement on policy can be reached, though, it may instead come because Sommers’ industry has won many of the policy battles it set out for itself a year ago.

On the campaign trail, Biden promised to end new oil and gas drilling on public lands and spoke about eliminating billions of dollars in industry subsidies. He promised to move away from oil and towards electric vehicles.

But after a bruising year, the administration seems to have abandoned its effort to halt new leasing for oil and gas development, breaking a campaign promise. The president’s signature Build Back Better legislation, which includes sweeping climate provisions, has stalled in the Senate.

While Biden has said negotiations on the bill continue, key climate provisions that threatened the oil and gas industry, including a plan to shift power generation toward renewable sources, have been dropped or softened. Others, including expanded tax credits for electric vehicles, remain in doubt.

Some of the Biden administration’s biggest climate policy achievements are ones that the petroleum institute supported, including a proposed rule to cut methane emissions from oil and gas development. While the measure could provide substantial climate benefits, the rule would merely clean up the oil industry’s operations, rather than ramp them down.

Sommers spoke about his industry’s investments in carbon capture and storage technology, which he said will be “the way that we’re really going to address this challenge from an industry perspective,” and he welcomed the Biden administration’s focus on the technology. The bipartisan infrastructure bill that Biden pushed through Congress last year included more than $12 billion in funding for carbon capture and removal, and much of that money could flow to oil and gas companies.

The Build Back Better legislation also includes an expansion of a carbon capture tax credit that Sommers said his group supports, and which could provide tens of billions in benefits in coming decades if it is enacted.

Sommers said he does still see potential threats on the horizon. The climate legislation passed by the House of Representatives also includes a fee on methane emissions from the industry that Sommers said his group would try to block in coming months. And it includes an increase in the royalty rates that companies pay when extracting oil and gas from public lands, another move Sommers condemned.

While Sommers did not speak directly about electric vehicles, the petroleum institute released a report Wednesday that obliquely criticized the proposed increased tax incentives for electric vehicles, saying federal policies “should allow all vehicles and fuel technologies to freely compete on a level playing field to reduce transportation-sector emissions.”

Senator Joe Manchin, the West Virginia Democrat who has been the primary obstacle to enacting the Build Back Better bill, has reportedly opposed the legislation’s expanded electric vehicle tax credits.

The oil industry’s improving fortunes are not limited to Washington. A year ago, oil companies were coming off their worst financial performance in recent history, as pandemic lockdowns constrained oil consumption. Many analysts and some oil executives were saying the pandemic was reshuffling society enough to accelerate a peak in global oil demand. The United States, some projected, would never see production levels return to where they had been.

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Today, profits have returned, and production is resurgent. The U.S. Energy Information Administration said Tuesday that it expects domestic oil production to reach an all-time high next year, marginally surpassing 2019 levels.

The oil industry still faces the long-term structural headwinds from climate legislation and technological disruption that are driving the world toward cleaner sources of energy. European oil giants—most of which are members of the petroleum institute—have been increasing investments in renewable energy and electric vehicles, in contrast to their American counterparts.

Sommers devoted much of his talk to climate change and his industry’s efforts to cut emissions. He repeated his group’s position that the oil and gas industry has done as much as any to help cut U.S. emissions by providing cheap natural gas to replace coal for power generation. The line is partly true, though it ignores the corresponding growth in methane emissions and the need to transition off natural gas to achieve steeper emissions cuts.

In making the case for expanding investment and production of oil and gas, Sommers cited government estimates and projections by the International Energy Agency that oil and gas demand would remain strong through 2050. But he failed to mention that those same projections show that such a course would send global temperatures soaring past the goals of the Paris Agreement.

Sommers said he shared global leaders’ goals to cut emissions. But by making the case for continued expansion of his industry, he seemed to be betting those goals won’t be met.