In October 2008, with the economy reeling from the onset of the Great Recession and oil prices having spiked to $147 per barrel ($211 in today’s money), Vice Presidential candidate Joe Biden was asked during a debate to contrast his party’s energy policy with that of the Republicans. Biden said that their “only answer is drill, drill, drill. Drill we must, but it will take 10 years for one drop of oil to come out of any of the wells that are going to be drilled.”
His vice presidential opponent Sarah Palin pounced; “The chant is ‘drill, baby, drill.’ And that’s what we hear all across this country… because people are so hungry for those domestic sources of energy to be tapped into.”
Biden and Obama won that election, though Biden woefully underestimated American ingenuity. During the Obama years drillers boosted natural gas production by 45% to 92 billion cubic feet per day (bcfd), while oil output more than doubled to 9 million barrels per day (bpd).
But the frackers were too successful, causing a global oil glut that drove prices down to $28/bbl in 2016 and bankrupted dozens of companies. The industry recovered during the first Trump term; with executives refocused on growing profits. Despite the industry’s antipathy for Joe Biden, U.S. oil output has climbed steadily during his presidency to a record 13 million bpd of oil and 125 bcfd of natural gas today.
And again the world is in an oil glut. Prices are currently hovering around $70/bbl and OPEC is holding back nearly 5 million barrels per day of untapped production capacity against the world’s daily 103 million barrels of consumption. Meanwhile Chinese oil companies are predicting peak oil demand as widespread electric vehicle usage in the nation is replacing gasoline guzzlers. “The fundamental outlook is bearish,” writes oil analyst Michael Hsueh at Deutsche Bank.
This is why the resurgence of Drill, Baby, Drill under the second Trump term will focus not on oil, but rather natural gas.
Biden has been a decidedly anti-gas president. The biggest affront: in 2022 he instituted a moratorium on new approvals of liquefied natural gas export projects. In recent years LNG exports from the U.S. have grown from nothing to 12 billion cubic feet per day, about 8% of total domestic supply. Despite the permit ban, projects already approved and under construction have continued apace, and are set to more than double U.S. exports.
According to Neil Beveridge, analyst with Bernstein Research, “The expected glut of LNG is still coming, but it has been delayed, with maximum supply now expected in 2026 or 2027” – just in time for Trump (who is widely expected to reverse Biden’s ban) to take credit. A large portion of U.S. LNG heads to Europe to replace sales of Russian pipeline gas halted by the war on Ukraine, and to Asia, where it lessens reliance on the burning of far dirtier and carbon-intensive coal for electricity.
Supplying LNG to the world is only half of the Drill, Baby, Drill equation. New demand for electricity in the United States is set to surge during the Trump years, particularly because of the rise in artificial intelligence. McKinsey, the consultancy, figures that the electricity needed to power A.I. data centers will grow from 25,000 megawatts today to 83,000 mw by 2030. This could cost upwards of $300 billion of capital investment in power plants, buildings, transmission lines and server farms. Data centers power demand would grow to some 12% of all U.S. electricity, up from 5% now.
Drilling for natural gas in the Marcellus shale of Pennsylvania.
AFP via Getty Images
Observing this coming need for power, Amazon, Google, Meta, OpenAI and others have invested billions into everything from solar and wind to advanced nuclear and geothermal. Investors in new publicly traded nuclear startup Oklo include Chris Wright, Trump’s incoming Secretary of Energy and Sam Altman of OpenAI. Oklo says it will work with developer Switch to roll out 12,000 megawatts of new nuclear by 2044. That’s a lot, but won’t come soon enough.
Until advanced nuclear is a real thing, gas has proven it is the only scalable bridge fuel capable of displacing coal. Over the past 20 years U.S. has reduced coal consumption 63% from peak down to 400 million tons per year, while natural gas use is up by more than half to 33 trillion cubic feet per year. As a direct result, U.S. carbon dioxide emissions are down 15% over this period, the most of any developed nation. (China, by the way, continues to use record amounts of coal, 5 billion tons last year.)
So the tech giants are turning to gas. One example: Meta recently announced plans to build a datacenter and 2,200 megawatt gas-fired plant in West Richland Parish, Louisiana, at a cost of $10 billion. Meta’s gas supplier is likely to be Occidental Petroleum, whose shares are down 20% this year to $48. Oxy is one of Berkshire Hathaway’s top holdings. Over the the summer it added several million more shares in the petroleum company at a price of nearly $60 per share.
Portfolio manager Chris Dowd at Third Avenue Management sees good times ahead for a cadre of other gas-focused exploration and production companies. These days he says his team is “licking its chops” on a micro-cap called SandRidge Energy. The Oklahoma City-based SandRidge (market cap: $406 million) emerged from bankruptcy a couple years ago and carries virtually no debt against a portfolio of some 450,000 acres of gas fields in the Mid-Continent area of Oklahoma and environs. Dowd loves that SandRidge has been keeping some of its wells “shut in” – holding on to gas in the ground rather than sell it at what has been historically low prices over the past year.
Dowd says SandRidge has the potential to boost output 20% in short order to respond to LNG and A.I. demand. The company also has $1.6 billion of past operating losses to shield future earnings from federal income taxes.
Biden’s permitorium “gummed up the inventory” of new wells needing to be drilled and fracked, says Dowd. “Once we get that flowing and don’t have the start-stop, we will have the machine really humming.” Coterra Energy is “another one that is a coiled spring,” says Dowd. “If we have ‘drill, baby, drill’ they can really lean in to adding production.” Coterra ($18 billion market cap) has been aggressive in buying back stock, but has a richer P/E of 15. Dowd prefers SandRidge.
Trump is likely to allow the leasing of more federal lands for gas drilling. Biden’s Dept of Interior in 2023 leased only 161,000 acres of federal land, versus an average of 1.2 million acres a year during the Obama and Trump years. The reason is the Bureau of Land Management’s new “conservation and landscape health rule,” which places ecosystem health concerns (i.e. the threatened greater sage grouse and dunes sage lizard) on equal footing with the economic benefits of resource extraction.
Of somewhat greater concern to the oil lobby is the Biden EPA’s newly finalized rules governing “fugitive emissions” of natural gas from fields and pipelines. Operators will have to pay $900 per ton of emissions, rising to $1,500 per ton in a few years. And they have to pay to install equipment to monitor those emissions and verify them using third parties. Many gas producers would welcome Trump efforts to soften or scrap the methane rules, which could cost billions of dollars a year in fines for the nation’s biggest emitters.
One of those, Houston-based Hilcorp Energy, owned by billionaire Jeffery Hildebrand, recently agreed to a consent decree and $9 million civil penalty with the EPA over natural gas emissions from its San Juan Basin fields in the Four Corners region. Hilcorp teamed with Carlyle Group in 2017 to buy the decades-old San Juan assets for $3 billion. The field emits a lot because it consists of 12,000 gas wells across 2 million acres and hundreds of miles of gas collecting pipelines. Hilcorp promised to cut 113,000 tons of emissions there over 3 years – like taking 24,000 cars off the road.
Some gas producers aren’t too concerned by such restrictions, because they have already been working not just to limit leaks, but to capture and permanently sequester carbon emissions. Chris Kalnin, CEO of BKV Energy, which raised $200 million in a 2024 IPO explains that his company has been injecting carbon dioxide underground at its shale fracking operations in north Texas. The work is monitored by gas detectors and third-party certified by American Carbon Registry, which mints non-fungible tokens representing the amounts of carbon sequestered by BKV and published them to the blockchain. This way BKV can sell its customers “decarbonized” gas, at a roughly $5 per thousand cubic feet premium. Alternatively, BKV can turn that gas into lower-carbon electricity at the 1,500 megawatt gas-fired power plant that BKV acquired in Temple, Texas. “We see multiple ways to win, aligned with megatrends,” says Kalnin.
“The greens are on one side and drill, baby, drill is on the other side, and the silent majority is stuck in between,” says Kalnin. BKV (market cap $1.9 billion, $250 million ebitda) initially built up a gas position in the Marcellus shale of Pennsylvania, then in recent years Kalnin took the unusual tack of buying up assets in the birthplace of shale gas fracking – the Barnett shale field outside Fort Worth, Texas, where wildcatting legend George Mitchell proved out the combo of directional drilling and hydraulic fracturing. In 2020 BKV bought Devon Energy’s fields there for $500 million. And in 2022 it acquired ExxonMobil’s Barnett for $750 million. Kalnin says Exxon hadn’t made any meaningful investments there for years. “The Barnett is alive and well,” he says. And there’s plenty of shale gas left to frack all across the country. “They left huge meat on the bone.”
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