More details, please: Kamala Harris, Tim Walz, and oil and gas policy

Industry awaits detail on where Kamala Harris stands on U.S. energy policy, and how she intends to finesse that stance to secure support in states where it is most needed to win the White House.

Her choice of Minnesota governor Tim Walz as running mate raises fascinating questions. As governor, Walz has enacted a number of pro-climate policies — including a law requiring Minnesota to generate all its electricity from wind, solar and other carbon-free sources by 2040.

Minnesota has negligible oil and gas production. Walz — unlike other candidates for running mate such as Pennsylvania governor Josh Shapiro — therefore may be less likely to bring a strong curbing influence on any potential pro-climate policy plans.

But Walz will be able to help Harris frame any such policies as having a positive impact on the labor market and the economy.

As one commentator noted recently, straight “climate policy” doesn’t work with U.S. voters. Instead, it needs to be construed as “jobs policy” or “industrial policy.”

Historically Harris has been further to the left on energy policy than the current Biden administration, which has overseen continued oil and gas production growth according to data from the Energy Institute (see chart above).

In her 2019 presidential bid, Harris outlined a plan to stop subsidies for oil and gas production, oppose new fossil fuel infrastructure and fracking projects, and halt drilling leases on federal lands. As California’s attorney general, she established a team to litigate companies over environmental and energy issues – including oil spills and gas price fixing.

Very recently, campaign officials said Harris will not seek to ban fracking should she become president. The need for Democrats to win in gas-producing swing states such as Pennsylvania may well result in further changes of tone and substance.

“What the Biden administration has found is that climate policy doesn’t work with U.S. voters, you have to construe it as jobs policy or industrial policy. It’s our expectation that Harris pivots towards that conversation,” said John Miller, managing director of investment bank TD Cowen, in a recent video interview with Yahoo Finance.

That was the approach taken in the Bipartisan Infrastructure Bill and the Inflation Reduction Act (IRA) – two programs with which Harris was closely associated. The Biden administration has taken a more interventionist line with its methane reduction rules, released in December.

For its part, the Trump campaign previously pledged to “end Biden’s delays in federal drilling permits and leases that are needed to unleash American oil and natural gas production.”

Trump also criticized Biden’s decision to temporarily pause federal approvals for U.S. LNG export projects that would seek to export to non-FTA countries while the Department of Energy (DOE) conducts an environmental and economic review. The Trump campaign has said it would end the pause immediately.

Additionally, Trump promised to revoke the IRA’s tax credit regime, although he conveyed similar rhetoric in his first term as president while keeping in place Barack Obama’s tax credit regime for wind and solar.

“You can find places in the energy transition that sit in the middle – things like nuclear, clean hydrogen and utility-scale solar – we think those are all places that will do well, no matter who sits in the White House,” added Miller.

In a panel discussion organized by the Aspen Institute last year, Walz called for climate policies to be presented in new ways to the electorate.

“How do we use these policies to make the case that this is economic growth, this is opportunities for all, this is our economic future in Minnesota?” he said. “We’re going to have to do better…on the smart politics of using these programs to create good paying jobs.”

LNG policy review

Upstream production and LNG exports have grown during Biden’s presidency, according to data from the EIA and the Energy Institute (see chart above).

Questions over drilling licenses on federal lands and LNG exports may not be addressed by Harris’s team until a more comprehensive campaign prospectus is fleshed out – if at all.

Biden administration officials have said they expect the LNG policy review to be completed by early 2025. Although any potential Harris administration will have the last say on whether the pause is lifted, the review is being conducted in partnership with national laboratories and put out for consultation, which means the evidence on which any decision is based will largely be in the public domain.

The Biden administration already faces an uphill battle on the LNG export pause. In early July, a federal district judge in Louisiana ordered the administration to lift the pause until the court can resolve a lawsuit by 16 Republican-led states who argued it was unlawful.

The court’s ruling does not, however, explicitly require the DOE to issue new LNG export licenses or set an explicit deadline for the agency to take decisive action on pending applications, and the DOE has not responded officially to the ruling.