California could replace its Russian crude imports twice over if Newsom took action, one industry expert told NR.
While elected Republicans continue to hammer the Biden administration for impairing domestic energy production, state-level regulations, laws, and attitudes have come under less scrutiny, even as they’ve played a demonstrable role in producing and compounding the problem at hand.
President Joe Biden promised during his campaign that he would allow “no more drilling on federal lands. No more drilling, including offshore. No ability for the oil industry to continue to drill, period, ends, number one.” And since taking office, his administration has implemented policies, oftentimes under the radar, that have made life more difficult for the domestic oil and gas industry and led to increased foreign — including Russian — imports.
In many ways, he’s been following in the footsteps of blue-state Democrats, whose policies began undermining domestic energy production long before Russian president Vladimir Putin decided to invade Ukraine, ramping up pressure on already strained global markets.
The Golden State stands out as perhaps the most glaring example of this phenomenon.
“California is committed to doing whatever is necessary to meet the existential threat of climate change,” said California governor Jerry Brown upon signing the 100 Percent Clean Energy Act in 2018. His successor, Gavin Newsom, has taken this commitment to new extremes.
According to Rock Zierman, president of the California Independent Petroleum Association, California could, with its own supply, replace the entirety of the Russian crude oil it imports “by double . . . if we just got back to where we were when Gavin Newsom started his deliberate effort to shut us down.”
Zierman says that through actions official and unofficial, the Newsom administration has made the state more reliant on foreign oil and contributed to rising prices in the energy sector. When Newsom took office in 2019, the average price per gallon in the state was $3.23; as of this February, it stood at $4.66. California has seen similar upticks in the amount of foreign oil it’s brought to its shores. In 2018, the state imported around 5 million barrels of Russian crude oil. By 2021, that number had more than tripled, per the American Fuel and Petrochemical Manufacturers. The Biden administration has since cut off Russian oil imports due to Vladimir Putin’s invasion of Ukraine, and it’s unclear how California will make up the resulting shortfall.
Tangible, stated policies, as well as behind-the-scenes maneuvering, are responsible for these developments. “It’s hard to isolate just one” as particularly damaging, Zierman told National Review, because different companies have different priorities and operations. Among them, though, are the state’s slow-footed permit process and Newsom’s propensity for making burdensome policy changes by executive fiat.
The California Geologic Energy Management Division (CalGEM) is presently sitting on permits for 1,000 new oil wells that have already undergone all of the necessary regulatory processes and been approved as per environmental and other standards, according to Zierman. All that’s required of the agency at this point is for them to send a letter to Native American tribes close to the projects and give them 60 days’ notice of the activity. By law, those notices of intent (NOIs) are supposed to be sent within ten days, and yet Newsom’s administration has sat on them for months.
“It seems ludicrous when oil is peaking and volatile and we’re trying to ban Russian imports,” said Zierman, who also noted that he knows of at least two companies that have laid off workers as a result of the delay.
“I’ve been at this for 20 years and I’ve worked with a lot of governors, and I’ve worked with a lot of regulators. I think it’s pretty clear that they’ve been told to slow-play everything,” he continued. “I don’t necessarily want to blame some faceless bureaucracy, because I don’t think that’s what the problem is in California, the problem is Gavin Newsom.”
Zierman says that on top of the 1,000 wells being held up just before the finish line, projects representing another 3,000 wells are tangled in the thorns of the state’s regulatory process, which has been made much more arduous by the Newsom administration.
In addition to initiating a phase-out of new fracking permits and placing a moratorium on the use of cyclic steam injection, Newsom is trying to enact a setback rule that would require new oil wells in the state to be at least 3,200 feet away from any area where citizens live or congregate and impose burdensome requirements on those already in existence.
Zierman estimates that if the wells currently being held up by the state government were up and running, California would produce between 100,000 and 200,000 barrels per day.
On the East Coast, too, state-level policies are frustrating those who believe in pursuing American energy independence.
Steve Plants, president of Plants and Goodwin and of the New York State Oil and Gas Producers Association, says that the rhetoric coming from Biden and New York governor Kathy Hochul has made “banks and investors and even proven operators who are operating on their own cash very reluctant” to move forward with capital-intensive projects.
“Governor Hochul has pushed the idea that, you know, they want to put a statewide ban on any new construction for having a natural-gas hookup to it,” observed Plants. “It’s absolutely ludicrous.”
In addition to permanently banning fracking in 2020, New York has made it extremely difficult to economically transport oil and natural gas into or across the state. “Any pipeline that has any capacity to it at all just gets rejected,” said Plants, who operates in both New York and Pennsylvania, which does allow fracking.
New York’s reluctance to greenlight pipelines has had downstream consequences for other northeastern states as well. As Forbes reported last month, New Englanders were paying — even before the war in Ukraine — $30.50 per metric million British thermal unit (MMBtu). That was close to six times the price Americans on the Gulf Coast of Texas and in Louisiana were paying at the time.
The absurd costs can — to a significant extent — be explained by the source of the region’s supply. Much of the region’s energy needs are fulfilled by foreign countries, including Russia, that send natural gas on massive tankers across the Atlantic.
“That just seems unthinkable when they were 400 miles away from the largest, perhaps the largest gas field in the United States in the Marcellus Shale,” observed Plants. “But if you look at a map, there’s no way to get to New England without going across New York, and the pipelines that were proposed to take this cheap gas and abundant gas to the New England states, was rejected by the Cuomo administration numerous times.”
Plants told National Review that economically, it would not make sense for producers in Pennsylvania and elsewhere to invest in alternative shipping methods. “You need to be able to do it at the economy of scale that not only one ship but multiple ships can operate,” he explained.
Dan Weaver, the president of the Pennsylvania Independent Oil & Gas Association (PIOGA), concurred. “Our biggest issue in Pennsylvania is the inability to get it out,” he told National Review.
Weaver made reference to the Jones Act — which was passed in the early 20th century and requires that ships transporting goods from one American port to another be built, owned, and operated by American citizens — as another impediment to getting domestic product from point A to point B.
He also said that regulatory uncertainty plays a huge role in stymieing production. “It’s delays in getting permits through in a timely manner . . . with any business, any type of uncertainty is not good for business,” he said, adding, “It’s the fact that there’s all these, all these little cuts that make it very difficult to operate.”
Weaver also explained that electoral politics will play a huge role in firms’ strategies and thus the domestic oil supply. “Even within our own state, this is a gubernatorial election year. So everybody’s paying very close attention to what happens next,” he said.
The Biden administration, he submitted, has not been forthright in its treatment of the industry. Earlier this month, White House press secretary Jen Psaki stated that “there are 9,000 approved oil leases that the oil companies are not tapping into currently.” Weaver said it’s not so simple.
“They may have 9,000 leases, but do they have all the permits in place that allow them to get access to those leases? They’re trying to blame the industry for stuff that they don’t have control over,” argued Weaver. “There’s still a lot of hurdles.”
Over the last several years, a number of other states with Democrats at their helm have passed laws setting goals for emissions decreases. Besides California’s 100 Percent Clean Energy Act — which requires the state’s electricity system to become carbon-free by 2045 — there’s Washington’s Clean Energy Transformation Act (utilities must be carbon neutral by 2030), New York’s Climate Leadership and Community Protection Act (net-zero emissions economy by 2050), and Hawaii’s House Bill 623 (100 percent renewable energy electricity grid by 2045).
Hawaii has, on average, relied upon Russia for about a third of its oil supply in recent years. House Bill 623 was passed in 2015. Washington imported more Russian oil in 2021 than it had in at least six years.
According to Plants, setting hard dates and goals like that only causes more hesitation on the part of producers. “If you look forward and kind of try to read the tea leaves, it doesn’t look good for the fossil-fuel industry in the state of New York,” he said. “The people in high places in New York have an utter disdain for fossil fuels.”
Weaver also took the administration to task for refusing to take obvious steps toward making the U.S. 100 percent energy independent while at the same time urging the Gulf states that make up the OPEC cartel to increase their production to bring down prices.
“It’s absurd,” he said.
“If I’m Joe Biden, why am I going to call [Nicolás] Maduro or the Saudi Prince? Why wouldn’t I call Gavin Newsom and say ‘Hey, first of all there’s a hundred permits you could just do right now.’ You could literally do them today. You just send a letter to the tribes and you’re done,” wondered an exasperated Zierman. “‘And hey, there’s 900 others . . Hey, could you maybe do your job?’”