As the December 14 vote of the Electoral College approaches and the reality of a likely Biden/Harris presidential administration begins to take hold, the business world is assessing the landscape and starting to make plans for the next four years. For executives at these companies, that’s a complicated task.
“Anyone who tells you they really know what the prognosis is with real conviction, I’m not sure they’re being disingenuous, but I’m also not sure they really know,” Fred Schneiderman, President and CEO of FBS Properties, a company specializing in oil and gas property investing, told me when we talked recently. Much of the difficulty stems from uncertainty former Vice President Joe Biden and his running mate, Senator Kamala Harris, did and did not promise to do during the just completed campaign.
Does a President Biden really plan to issue an executive order banning hydraulic fracturing, or “fracking,” on federal lands as soon as he takes office? His various promises on this issue were all over the place throughout the primary and general election campaigns. If he does follow through, it’s difficult to predict exactly how such a ban would be structured. There is much optionality there given the broad discretion he and his Secretary of Interior would have in the application of any such ban. Such optionality is generally not a bad thing, but it does make planning much more difficult for impacted businesses.
Then there is the fact that control of the U.S. Senate remains up in the air pending the two special elections in Georgia. “January 5 is a major situation,” Schneiderman said, “because a senate takeover by the Democrats would give Biden the ability to take a much quicker pace related to his ‘Green New Deal’ objectives. So, the results of those runoff elections could have a great deal of impact in terms of timing.”
Obviously, if the Republicans win at least one of the runoff elections and hold the senate, the timetable for the enactment of any Green New Deal-related policies via legislation could be delayed. Then, just two years later, the mid-term elections, which historically have not gone well for incumbent presidents in their first term in office, will be held. Given the very small majority the Democrats will hold in the House of Representatives in January, it’s easy to imagine the GOP gaining control of both houses of congress in that election.
But that’s two years off, and energy companies have to plan for upcoming months.
Another area of great uncertainty Schneiderman raised in our discussion centers around the Biden promise to recommit the country to the Paris Climate Accords and to reverse Trump-era policies related to the Middle East.
“On the Paris Accords, I think the plan is that the U.S. is going to put in $100 billion per year,” Schneiderman said, “but at the same time China is still building coal and LNG facilities, and India is building more LNG and refining infrastructure. The point is, we all live on the same planet, we all have the same ozone layer. But we’re going to dismantle our own industries and take away our own jobs, while Russia, India and China are still going to produce. They’re still going to create pollutants and there are no real, tangible enforcement provisions in the Paris Accords to prevent that. It’s nothing more than a zero-sum game in which the production of the pollutants just get shifted to a different part of the world.
“I guess the argument is that we’ll create new jobs to build windmills and solar panels,” he continued, “but once the windmills and solar panels have been built, how many of those jobs are going to be left? With oil and gas, you’re consistently manufacturing pipe, consistently requiring services and consistently drilling more wells, day in and day out. It’s not that we don’t want clean air, and it’s not that we don’t want to achieve carbon neutrality, it’s that the U.S. is going to give up its economy, and what’s going to happen with China? If the agreement had teeth, and if Russia and China were going to adhere to the same requirements, it would be one thing. But the deal as agreed to does not seem equitable.
“Setting unrealistic goals is a fool’s errand. It’s a good sound bite; it sounds great politically; it’s what people want to hear. But it’s just not realistic in its current form.”
Then there is the Middle East, where the Trump presidency has made great strides in terms of constructing peace agreements between Israel and variety of Arab nations, including Morocco this week. Thanks in large part to the U.S. energy security and quasi-independence created by the shale oil boom, the Trump Administration has also been able to avoid entangling the U.S military in additional conflicts in the region while successfully winding down the array of entanglements he inherited.
“My biggest concern from day one has always been energy independence,” Schneiderman told me. “You remember all the “no blood for oil” protests during the George H.W. Bush Administration? Well, that’s what this is: No blood for oil. [America’s energy independence] gave Trump – and any American president – the ability to stand up in Riyadh in 2017 and hold his chin up. That’s something we hadn’t seen any other American president be able to do. Why? Because we don’t need their oil anymore.
“My biggest concern about where a new administration would go would be losing that ability,” he continued. “Regional stability in the Middle East saves American lives. I’m also concerned that a new administration will re-up the U.S. in the Iran Deal. How much more oil is going to come onto the market by virtue of ending the current embargo when that happens? That could also kill the price of oil and thousands of American jobs. It would also hamper our ability to be energy independent.
“All of these things are interrelated.”
That’s unquestionably true, but this is the direction the Biden/Harris ticket promised to take America during the general election campaign. While it is certainly true that politicians often make promises during the campaign that they don’t really intend to follow through on once elected, that seems unlikely in the case of Mr. Biden. After all, so much of the Trump energy agenda centered around reversing the policy actions of the Obama/Biden years, like the Paris Accords and the Iran Nuclear Agreement.
While a Republican Senate can block legislation proposed by the new administration, those policies, along with the fracking ban on federal lands, can all be imposed via presidential orders. But at least that seeming certainty allows Schneiderman and fellow business executives the ability to plan accordingly.