Trump’s energy juggernaut faces a more daunting Year 2
President Donald Trump has resurrected the Keystone XL pipeline, renounced the Paris climate agreement, opened a long-disputed Alaska refuge to oil drilling and ordered his agencies to erase Obama-era regulations on the petroleum, coal and power industries — all in the name of asserting U.S. “energy dominance.”
But from here on, his victories will become harder to achieve.
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Reversing Barack Obama’s environmental and energy agenda is one of the Trump administration’s big first-year successes, alongside achievements like December’s $1.5 trillion tax overhaul. It has certainly been one of Trump’s most persistent strategies, as his agencies have moved to revoke Obama’s climate and water regulations, ease limits on fracking, wipe out drilling restrictions on almost the entire U.S. coastline and postpone energy-efficiency requirements.
Now, however, the courts will have their say in how far these rollbacks go, as much of Trump’s deregulatory agenda faces legal challenges from state attorneys general and environmental groups stretching from D.C. to California.
More seriously, the parts of Trump’s agenda that survive may not have the deep impact that he is promising — especially as the nation moves into the second decade of a boom that has already made the U.S. the world’s biggest oil and gas producer, and as market forces continue to take a bite out of coal.
“We already seem to have more oil than we can say grace over,” said John Northington, a former Clinton-era Interior Department official now working as an energy consultant. “I don’t think the new policies will have any impact on the market. A lot of the rulemaking they’ve proposed will be held up in courts or overturned.”
Even so, industry groups that chafed under Obama’s regulations say they’re pleased with what Trump has achieved so far.
"We were excited by what we saw in 2017," said Dan Naatz, senior vice president of government relations and political affairs at the Independent Petroleum Association of America. "The administration got off to a strong start in reshaping and rebalancing American energy development. It was a look at putting in thoughtful policies, in contrast to the challenges we faced in the Obama administration."
So far, Trump’s most concrete impact on energy policy came when he approved the Keystone XL pipeline and ordered a speedy environmental review of the Dakota Access Pipeline, both of which had languished under the Obama administration. The Dakota pipeline started transporting oil in June, less than half a year after Trump signed an executive order, but it’s not clear if the Keystone XL pipeline will ever be built, despite Trump’s comments suggesting it was already operating.
Keystone developer TransCanada said only last week that it believed it had secured adequate demand for the Canada-to-Texas oil pipeline — after garnering a significant commitment for oil shipments from customers including the Alberta government — but it hasn’t said for sure it will build the $8 billion project. The company is also still negotiating with Nebraska landowners on the route the state’s regulator approved. Meanwhile, environmental groups are challenging Trump’s approval process in court, saying the administration didn’t follow proper procedure.
Trump’s Interior Department also began the repeal process on Obama-era rules that had forced oil and gas companies to tamp down on methane emission and disclose the chemicals they use to frack wells on federal land. But those rollbacks, lauded by the industry, are also being contested in court.
"It was a concentrated attempt to reverse the gains we made in the past 40 years," Sierra Club Legislative Director Melinda Pierce said. "It takes so long to put a rule in place, and it takes the same administrative process to unwind, so it’s slow. So the immediate impact to public health and the environment are down the road and certain to be challenged in court."
Meanwhile, last year’s mammoth tax bill cleared the way for Interior to sell drilling leases in Alaska’s Arctic National Wildlife Refuge, fulfilling a decades-old goal of the oil and gas industry.
But the administration’s penchant to cut corners has imperiled what should have been another energy win: its proposal this month to open up nearly 100 percent of federal waters to new offshore drilling. Interior Secretary Ryan Zinke did a quick about-face when Florida’s elected officials objected to the possibility of oil drilling off its coast. Zinke’s Twitter announcement that he would remove the state from his plan galvanized lawmakers and governors from other coastal states who were already wary of how drilling rigs off their beaches may harm their tourism and fishing economies.
Governors from both political parties have pressed Zinke to rethink his offshore drilling move. And his reversal on Florida drilling, which came before Interior had gone through a public comment period, could put the whole draft proposal in court over alleged violations of the Administrative Procedure Act.
Meanwhile, even with oil prices on the rise, oil companies appeared to have little appetite to pour billions of dollars into new drilling projects either in Alaska or off the Atlantic and Pacific coasts when onshore fields opened up by fracking remain cheap.
“A lot of the stuff coming out of Interior is just PR,” said Pavel Molchanov, an energy analyst with financial services firm Raymond James in Houston. “It doesn’t mean anything to drilling. Drilling off the Atlantic and Pacific coasts, it’s pure fantasy to think we’ll see that.”
On coal, Trump’s promises to revive the industry have received praise from backers like Murray Energy founder Bob Murray, who had complained that the Obama EPA’s climate regulations for power plants unfairly targeted them. While EPA Administrator Scott Pruitt has begun to rescind that rule and the Interior Department has lifted a moratorium on coal leases on federal land, experts see little chance coal will reverse the sharp declines it has suffered in the past decade.
A last-ditch effort by the Energy Department to throw the coal industry a lifeline fell flat earlier this month when the Federal Energy Regulatory Commission — a panel dominated by Trump appointees — rejected Secretary Rick Perry’s plan to offer financial support to coal-fired power plants. The DOE plan had drawn sharp criticism after photos of Murray delivering a plan to protect coal emerged.
U.S. coal production did rise in 2017, boosted by exports of steel-making coal. But demand is expected to drop this year as natural gas continues to take its share of the electricity market.
“If natural gas prices drop, the pace of us coal decline will accelerate,” Rhodium Group energy analyst Trevor Houser said. “This mini-recovery in coal production in 2017, the bottom will fall out from that.”
January 23, 2018 at 05:58AM