Earlier in January, the oil industry in America hit a snag when a natural gas and oil lease sale in the Mexican Gulf was struck down by a judge, who cited future global warming emissions as the primary reason. This move reduced new offshore drilling opportunities for players in the market, such as Exxon and Chevron, while increasing concerns on climate change.
This setback was short lived, however, after President Joseph Biden signed a climate bill that guarantees new drilling opportunities in Alaska and the Mexican Gulf. The measure also bypasses his administration’s climate change concerns about emissions. This bill, which has been dubbed the Inflation Reduction Act, centers on clean-energy incentives that could significantly decrease overall emissions in the United States. It also protects gas and oil interests by mandating the lease of huge tracts of public lands.
In addition to this, the Inflation Reduction Act also locks fossil fuels and renewables together, which means that new gas and oil leases must first be offered before wind and solar on public lands can be given the green light. It does so by prohibiting federal lands and waters from being leased for renewable energy unless millions of acres of public land and in federal waters for oil and gas leasing are provided by the federal government.
Some climate experts and industry analysts expect that because of this, an increase in emissions from burning fuels and the production of natural gas and oil in America will occur. They also expect that as domestic demand decreases, more fossil fuels will be exported to foreign markets, where pollution from gas and oil activity affects many minority and poor communities.
Andrew Gillick from Enverus states that to the industry, this change showed that Democrats were willing to work with players in the industry. Enverus is an analytics firm that provides expansive analytics and insights on the oil, gas and renewable energy industries. The firm’s data is used by government and industry agencies.
Gillick added that the demand and supply for oil and gas would increase in the next decade, which would result in more emissions. In figures, analysts expect that these additional emissions will total about 100 million metric tons yearly, with most coming from fuels burned after export.
These stats are supported by an analysis conducted by the Department of Energy. In its report, the department stated that the bill’s leasing provisions could cause an increase in carbon pollution. It also highlighted that other provisions would help reduce about 30 tons of greenhouse gas for every one ton of pollution produced by fossil fuels.
It remains to be seen how entities such as Tulsa-based Alliance Resource Partners, L.P. (NASDAQ: ARLP) will leverage this industry-friendly law enacted to support mining in the country.
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