President Biden made three important energy-related moves Thursday in the hopes of lowering gas prices and jumpstarting increased domestic energy production, according to CNN, Bloomberg Government (subscription) and Axios.
What’s happening: Invoking the Defense Production Act, President Biden yesterday issued a directive that adds critical minerals such as lithium, nickel, graphite and more “to the list of items covered by the 1950 Defense Production Act, a Korean War–era law that allows the president to use emergency authority to make large orders of a certain type of product or expand productive capacity and supply,” according to CNN.
- Noting that China has a hold on the world’s clean energy supply chain, “[a]dding the minerals to the Defense Production Act list would allow producers to get federal funding and assistance,” the CNN piece reads. “The Department of Defense would implement this authority, according to the White House, and the Departments of Energy and Interior will also be involved.”
- “This is a long-term shift,” Nikos Tsafos, an energy security expert at the Center for Strategic and International Studies, told CNN. “If you’re looking for relief at the pump or any immediate shift in prices, this is not the thing that does that. This is about thinking about 2030.”
In the short term: President Biden also announced plans to drain about one-third of the Strategic Petroleum Reserve, releasing an average of 1 million barrels a day for six months.
- According to Axios, “The maximum drawdown capability is 4.4 million barrels a day, and it takes 13 days for the oil to enter the market from the time of the presidential decision, according to the Energy Department.”
Will it work? “It will lower the oil price a little and encourage more demand,” Scott Sheffield, chief executive of Pioneer Natural Resources, a major Texas oil company, told The New York Times (subscription). “But it is still a Band-Aid on a significant shortfall of supply,” Sheffield said.
At the same time: President Biden said he wants to encourage increasing domestic oil and gas production, but he intends to accomplish it by urging Congress to impose fees on drillers with nonproducing wells as a means of forcing them to produce oil and gas on federal lands. However, it isn’t quite so easy:
- “The White House and Congress have limited options to impose fees on idled oil wells on federal land to boost production amid high oil prices, lawyers say—and some of those options will come with environmental and logistical problems,” according to Bloomberg Government.
- If there’s no pipeline to a shut-in well and it’s forced back into production, a company may choose to “flare” the well, or burn off the natural gas, creating air and climate pollution,’” attorney Angela Franklin, a partner at Holland & Hart LLP in Salt Lake City, told Bloomberg Government.
- And the White House has blocked oil and gas development on federal land because of its climate agenda, and “the president is trying to pass blame to the producers,” Western Energy Alliance President Kathleen Sgamma told the news outlet.
The NAM says: “Manufacturers are encouraged to see President Biden’s continued focus on taming inflation and addressing the energy concerns stoked by Vladimir Putin’s war on Ukraine and supply chain disruptions around the world,” said NAM President and CEO Jay Timmons in a statement.
- Timmons highlighted his meeting this week “with Commerce Secretary Raimondo, Australian Trade Minister Tehan and leading manufacturers to discuss strategies for supporting critical mineral supply chains.” And that manufacturers know there is not a quick fix—calling for more “bold, collaborative, long-term leadership to strengthen our energy security.”
- He explained that a temporary release from the reserve “doesn’t deliver the long-term energy security that America deserves—the confidence that comes from producing more energy from all sources here in the United States.”
- Timmons said manufacturers appreciate the rhetorical support for increasing domestic energy production, but the plan to fine drillers shows a fundamental misunderstanding of the energy exploration, extraction and production process. The fines, he said, “would instead undermine our ability to produce American energy.”