By Michael Kehs, an executive vice president and the global energy practice leader at Hill+Knowlton Strategies. This is part of a series of analysis and commentary from Hill+Knowlton Strategies public affairs counselors and political experts around the globe regarding the U.S. election.
Energy policy was largely missing in action during the contentious battle that was the 2016 U.S. presidential campaign. Yet, no economic sector – with the possible exception of healthcare – is likely to undergo greater policy disruption in a Trump Administration than energy. And the tectonic shifts in the U.S. policy landscape are already beginning to reverberate around the globe.
In the few campaign speeches and policy papers that mentioned it, candidate Donald J. Trump articulated “An America First Energy Plan” designed to make America energy independent, “eliminate all needless and job-killing regulations now on the books” and “unleash an energy revolution that will bring vast new wealth” to the country. President-elect Donald J. Trump is wasting no time signaling his intent to put the polemics into action “on day one.”
So what can we expect when Mr. Trump takes office? While the specifics of future Trump Administration policies are far from clear, there are clues (and questions) to be drawn from his campaign:
Trump’s America First Energy Plan states his vision to “declare American energy dominance a strategic economic and foreign policy goal of the United States.” He essentially advocates an all-of-the-above domestic energy strategy to “become, and stay, totally independent of any need to import energy from the OPEC cartel or any nations hostile to [U.S.] interests.” Trump also encourages the use of natural gas and other American energy resources that will reduce emissions as well as the price of energy while increasing economic output. As for using energy as a strategic component of economic and foreign policy, one of the first targets could be Iran. Given Trump’s and the majority Republican Congress’ strong criticism of the Obama Administration’s nuclear deal with the OPEC nation, Trump may decide to “tear up” the agreement and re-impose economic sanctions – a move that (among other things) would impede Iran’s efforts to dramatically boost oil production in a global oil market mired in glut and low prices.
Flattening Regulatory Speedbumps
Trump’s plan promises to open an energy development autobahn in the U.S. catering to all makes and models. In a May speech to a gathering of primarily oil and gas industry executives in North Dakota, Trump said, “We’ll get the bureaucracy out of the way … so that we can pursue all forms of energy. This includes renewable energies and the technologies of the future. It does include nuclear and wind and solar, but not to the exclusion of other forms of energy, and other forms of energy that right now are working much better.” Trump has pledged not to pick winners or losers among energy technologies. Washington regulators were offered no such reprieve. “The regulation industry is one business I will absolutely put to an end, day one!” Trump declared in a separate speech to the Economic Club of New York. He proposed “a moratorium on new federal regulations not compelled by Congress or public safety.” Taken together, these policies will eliminate all barriers to responsible energy production, creating at least a half million jobs a year, $30 billion in higher wages, and cheaper energy, according to Trump’s energy policy roadmap.
Trump’s energy plan declares his intent to “unleash America’s $50 trillion in untapped shale, oil, and natural gas reserves, plus hundreds of years in clean coal reserves.” This will be accomplished by expanding onshore leasing of shale energy deposits on federal lands, revoking Obama Administration policies restricting new drilling zones in the Arctic and the Atlantic coast and eliminating the moratorium on coal leasing. Additionally, in a major energy policy speech in North Dakota in late May, Trump said he would “revoke policies that impose unwarranted restrictions on new drilling technologies.” This roll-back will most likely include new federal rules governing hydraulic fracturing and methane emissions from natural gas production, storage and distribution.
Trump has spoken little on renewable energy, but as a candidate focused on maximizing American’s energy might and the jobs associated with bolstering it, wind, solar and other renewable forms of electricity should expect the Trump Administration to be generally supportive. But he has characterized wind and solar energy production as “very, very expensive.” Trump also criticized wind turbines for killing birds. Still, he has repeatedly said he supports all forms of energy, which “includes renewable energies and the technologies of the future.” The question lies in whether wind and solar farms will be encouraged with tax credits and other incentives anticipated in Trump’s $1 trillion infrastructure transformation plan.
Trump campaigned in Iowa as a champion of America’s farmers and expressed support for fuel ethanol volume mandates set by Congress. There are concerns however that Trump is open to revising federal Renewable Fuels Standards, a prospect likely to increase if Trump appoints an oil industry executive such as Continental Resources chairman Harold Hamm as Secretary of Energy.
Pipelines and Infrastructure
Mr. Trump has decried the lost job opportunities associated with major energy projects that have been rejected by regulators or withdrawn by supporters since 2012. In a speech, Trump cited a report that $33 billion in projects have been derailed by regulations, grassroots opposition and low energy prices. One such project that will get a new lease on life is the Keystone XL pipeline. Trump has said that he will ask TransCanada to renew its permit application within his first 100 days in office, noting that building the pipeline would create thousands of jobs. Less clear is whether the invitation will come with a price: Trump has suggested that the U.S. should receive a share of the profits or ownership rights in the pipeline as compensation for using eminent domain to access land needed to complete the pipeline. Other pipeline developers and operators can expect federal encouragement on energy projects such as the Dakota Access Pipeline, LNG export facilities and coal export terminals. While faster permitting and more predictable regulatory approvals will be welcomed, such projects will still face headwinds from fierce market competition, uncertain commodity prices, activist opposition and litigation.
Power Plants and Air Pollution
In his North Dakota speech, Trump promised to rescind by executive order many of the Obama administration’s environmental goals, including the EPA’s Climate Action Plan that would close many of the country’s older coal plants. Also on the list for dismantling or a “do-over” is Obama’s litigation-challenged Clean Power Plan. The rule, which has triggered numerous lawsuits, requires states to develop strategies to slash carbon dioxide emissions from existing power plants 32 percent below 2005 levels by 2030. How the CPP is addressed will depend on court rulings and the Trump Administration’s legal strategy. As for nuclear power, Trump has said very little beyond that nuclear is a part of his “all forms of energy” plan.
Conservation and Environmental Safeguards
The Trump plan promises to protect clean air and clean water as well as conserve our natural habitats, reserves and resources. Details to be determined.
According to ClimateWire, Trump has dismissed climate science as a “hoax.” That view will likely guide his approach to the Paris climate accord that was signed by 195 nations in December of 2015 and came into effect days before Trump’s election. At his May speech in North Dakota, Trump said, “We’re going to cancel the Paris climate agreement and stop — unbelievable — and stop all payments of the United States tax dollars to U.N. global warming programs.” Trump claimed authority to walk away from the COP 21 agreement because, “President Obama entered the United States into the Paris climate accords unilaterally and without the permission of Congress.” While Trump cannot “cancel” the agreement, he could take Executive actions to withdraw from it or put the accord to a ratification vote in the Senate. A veteran casino operator, Trump can figure those odds.
As important as it is to study Trump’s words to speculate on the administration’s future, Christopher Guith, senior vice president for policy at the U.S. Chamber of Commerce’s Institute for 21st Century Energy, notes that it is more important to consider Ronald Reagan’s axiom that “personnel is policy.” In an interview with Rigzone the morning after the election, Guith said, “When we start to see names floated, that will have as much of an impact on regulations and indirectly the market, as perhaps the regulation itself.”
At 8:00 a.m. that same morning, just five hours after Trump delivered his acceptance speech in New York, the Trump transition team arrived at the Environmental Protection Agency in Washington, D.C. According to E&E News, well-known climate change skeptic Myron Ebell is leading the EPA transition team. This is no “dog whistle” signaling intent to alter President Obama’s prolific legacy of energy and climate regulations, executive orders and international agreements. It’s a bull horn.