No, Joe Biden didn't just ban fracking

New York(CNN Business) President Joe Biden is cracking down on the oil-and-gas industry, but he is not taking the extreme steps the Trump campaign claimed he would last fall.

Last week, the Biden administration imposed a 60-day suspension of new oil and gas leasing and drilling permits on federal lands unless the Interior Department's leaders approved them.

Biden went a step further Wednesday, by ordering a moratorium on new oil and gas leases on federal land and water areas.

However, this is a far cry from the more dramatic step climate activists are calling for (and that the oil industry fears): a full-blown federal ban on fracking.

"Let me be clear, and I know this always comes up. We're not going to ban fracking," Biden told reporters Wednesday.

During the campaign, Biden explicitly opposed a nationwide ban on the controversial oil-and-gas technique, although the Trump campaign repeatedly suggested otherwise. And it's not even clear that a president has the legal power to ban fracking on private lands -- that would likely take an act of Congress.

Rather, Biden's moratorium on oil and gas leases applies only to federal land, which accounts for less than a quarter of total US oil production and much less for natural gas. And the freeze does not impact existing leases.

In other words, ExxonMobil and Chevron can continue to frack away.

"We do not think Biden has the authority to ban fracking and if he did, he wouldn't go that far," said Bob McNally, founder and president of consulting firm Rapidan Energy. "Biden remains a centrist with strong links to unions, who would oppose such a step."

Indeed, a total fracking ban would wipe out tens of thousands of jobs in Pennsylvania, Ohio and Texas — three states central to the balance of power in Washington.

Little threat to oil supplies, for now at least

Still, Biden's early steps represent a sharp break from the Trump administration's mission to maximize fossil fuels production -- despite the worsening climate crisis. Hours after being sworn in, Biden moved to rejoin the Paris Agreement on climate change, revoke a permit granted to the controversial Keystone XL Pipeline and place a temporary moratorium on oil and gas leasing in the Arctic.

"He is not kidding around when it comes to imposing tough new restrictions on the US petroleum sector," said McNally, a former Energy Department official under President George W. Bush.

Energy analysts dismissed the risk that these steps would cause a sudden spike in oil prices, which have sharply rebounded from their pandemic lows. That's because the world is still swimming in excess oil and many drilling companies stocked up on permits and leases in the event Trump lost the election.

"In the short-term, the market remains very well-supplied," said Ryan Fitzmaurice, energy strategist at Rabobank. "In terms of immediate impacts, it's more symbolic than a real threat to oil supplies."

Longer term, less production at home means the United States may have to buy more oil from the Middle East and elsewhere overseas.

"The highpoint for US oil production is likely in the rearview mirror," Fitzmaurice said.

Rapidan Energy projects the United States will produce about 1 million fewer barrels per day in 2023 than if Trump had won a second term.

Oil production on federal lands and offshore areas grew steadily during the Trump administration, hitting nearly 1 billion barrels in fiscal 2019, according to the Interior Department.

The oil industry is gearing up for a fight

The biggest impact of Biden's leasing freeze will be felt by New Mexico, where oil companies have rushed to drill wells on federal lands in the low-cost Permian Basin. The state is on track to become America's second-largest crude producing state this year, after Texas, according to Rystad Energy.

The oil industry is vowing a fierce response to Biden's leasing moratorium.

"We will do everything we can to fight this executive order," Mike Sommers, the CEO of the American Petroleum Institute, told CNN Business on Tuesday. "We will pursue every action at our disposal to push back, including legal options, if appropriate."

The API, the industry's most powerful lobbying group, said it relaunched an ad blitz this week that warns a ban on federal leasing will hurt state funding of schools.

Sommers said he worries the Biden administration will hurt oil development by slowing the issuance of permits on federal lands. He conceded, however, that fracking on private lands is not affected by Biden's order and nothing is stopping oil companies from bringing already-drilled wells into production through fracking.

"We're concerned about what this leads to next," Sommers said. "We're raising the alarm."

'They are living up to their promises'

While the oil industry frets, climate activists are celebrating -- and clamoring for more.

Wenonah Hauter, executive director of environmental group Food & Water Watch, said in a statement that Biden's freeze on federal lands is "good news, but only if it is followed by a strong plan to permanently ban all dirty energy extraction on public lands."

Tom Steyer, the billionaire who competed for the 2020 Democratic presidential nomination, gave the Biden administration an "A" for its early actions to address climate change.

"They are living up to their promises," Steyer told CNN Business. "We have a global crisis. There is a global response. America can lead in that response or we can trail in it."

Biden faces a challenge in responding to the climate crisis without wiping out jobs and derailing the recovery in the broader economy.

Republicans warned that Biden's Keystone XL and Paris Agreement decisions would wipe out thousands of US jobs.

"The clock is ticking on other jobs that will be lost in this industry as a consequence of these actions," Sommers, the API CEO, said.

Steyer, the billionaire climate activist, said Biden won't lose sight of the impact on workers in fossil fuel communities.

"The question about caring for specific workers in specific location is absolutely in Joe Biden's heart and soul," he said. "That is the thing that most essentially drives him."