President Donald Trump’s first State of the Union address spared only a few words for the oil and gas industry, but advocacy groups were clearly delighted with a year of deregulation efforts.
Trump briefly touted progress made in U.S. energy development in the Jan. 30 speech.
“We are now very proudly an exporter of energy to the world,” he said, an apparent reference to Energy Information Administration projections showing the U.S. became a net exporter of natural gas in 2017. Final data is expected to come out later this month.
Notably, Trump also declared an end to “the war on American energy, and we have ended the war on beautiful, clean coal.”
The war among energy production sectors, however, is clearly still waging. Industry groups congratulated the president but remain critical of tax benefits for renewable energy, which they contend are open-ended and need to be curtailed.
Oil and gas and energy associations also said the president and congressional leaders should push for pipeline projects, especially in New England. Staunch opposition from environmentalists and some Democrats has hindered infrastructure there—and it was brought to a standstill in 2017 by the slow-moving pace of Trump’s nominations to key agencies and commissions.
API president and CEO Jack Gerard said that promoting U.S. infrastructure is critical to delivering energy and will help the nation further realize the benefits of natural gas and oil.
Gerard cited a Jan. 17 study by ISO-New England, the region’s operator of the bulk power and the wholesale electricity marketplace that warned fuel shortages could require rolling blackouts in the next decade.
Gerard said fuel shortages are “chiefly because [the region] can’t get enough natural gas when there’s peak winter demand.”
More recently, a tanker offloaded Russian LNG near Boston on Jan. 29 despite the city’s close proximity to the Marcellus Shale, underscoring the pipeline constraints affecting New England.
“Private investment in U.S. energy infrastructure is a more than $1 trillion proposition and could support more than 1 million jobs per year through 2035,” Gerard said. “For a country that leads the world in natural gas and oil production, having an entire region at the mercy of cold weather is unacceptable. We desperately need to modernize this region’s infrastructure.”
FERC’s backlog greatly increased, however, in 2017 as Trump moved slowly to appoint key officials to the Federal Energy Regulatory Commission (FERC), which holds a key role in pipeline approvals. Several appointee-level positions also remain vacant within the U.S. Department of Energy (DOE).
Last year, FERC lacked a quorum of commissioners for about six months after a commissioner stepped down on Feb. 3, 2017. To the consternation of pipeline companies and producers, FERC was largely unable to take action on pipeline projects for at least the next six months.
Trump did not nominate replacements for the commission for three months, until May 10, 2017. A quorum was reestablished in August.
Four months into FERC’s paralysis, at least $50 billion worth of pipeline projects had been sidelined, according to the Benesch law firm. That included Marcellus pipelines valued at $12 billion.
At Privcap’s December energy conference in Houston, Brooksany Barrowes, a partner at Baker Botts LLP in Washington, D.C., said the administration stumbled out of the gate with FERC unable to make decisions for seven months.
“Even a year into this administration we have this climate where there’s a lot of talk about wanting to see infrastructure, wanting to see development freed up,” she said. “But we also have an administration that quite frankly is not quite sure how to do that.”
Now with FERC “kind of up and running,” its focus on development has yet to take shape.
“There’s a lot of talk and not a lot of results yet,” she said.
The DOE has also seen a number high-level presidential appointments lag, said Joseph S. Hezir, the department’s former CFO, an appointee of President Barack Obama. Hezir, who spoke at Privcap, said some of those unfilled positions will have a detriment on natural gas pipeline advocacy.
In January, several positions remained unfilled.
While the DOE has no direct regulatory role in pipelines, expansion of infrastructure is an area in which the department could play an important role “from a policy and public education standpoint on the need of additional natural gas pipeline infrastructure,” Hezir, the department’s former CFO, said.
“Right now it is being relatively quiet. There is a great deal of state, local and interest group opposition to … pipeline expansion, and I think that’s a constraint on not only natural gas use in the northeast but also has its ripple effects of softening the markets for the Marcellus region.”
While the Trump administration has mounted a sustained campaign to undo rules affecting the oil, gas and coal industries, some groups argue more can be done.
States and cities have also said pushed back against some federal actions. Some local and state leaders, for instance, said they would honor the Paris climate agreement despite Trump abandoning the accord in June.
The Environmental Protection Agency (EPA) has taken apart many regulations seen by oil and gas companies as overreaching. In his first year in office, Trump repealed the Clean Power Plan, modified Clean Air Act rules and a suspended and review of rules crafted in 2015 related to where the Clean Water Act applies.
In late December, the U.S. Department of The Interior also said it would rescind a 2015 federal rule on hydraulic fracturing that wasn’t implemented due to litigation.
Rob Henneke, general counsel for the Texas Public Policy Foundation said that by “ending the war on American Energy, the administration has restored the rule of law to agencies such as the EPA that will end energy poverty and ensure prosperity through access to reliable, affordable energy for all Americans.”
But Thomas J. Pyle, president of the nonprofit American Energy Alliance (AEA), congratulated Trump on putting families ahead of “keep it in the ground” special interests opposed to fossil fuels. Trump’s approval of the Keystone XL pipeline and a federal reversal on the Dakota Access pipeline were also victories, he said.
However, Pyle said the “war on American energy is far from vanquished.”
“A good place to start is by reviewing and re-writing IRS guidance for the Production Tax Credit (PTC),” he said. The PTC is a renewable electricity production tax credit available to wind facility construction projects through Dec. 31, 2019.
The AED says IRS guidance expands the subsidy “long after Congress’ intended” timetable.
However, it isn’t clear how much unwinding of regulations will aid the coal industry—a signature issue for the president.
A Reuters report found that U.S. coal mining jobs grew by 771 to 54,819 during Trump’s first year in office, led by West Virginia, Virginia, and Pennsylvania where coal companies have opened new mining areas for shipment overseas. Offsetting some of those gains were the loss of about 870 jobs in Texas and Ohio.
Barrowes said the rules might alter the trajectory of inexpensive, clean-burning natural gas and renewable energy “by a degree or two, but really not much.”
“I think there’s a long-term perspective that there’s a little bit of kicking against the wind,” she said. “It seems like because so much of the policies now are being set not by the federal rules but by the state renewable plans and by corporate responsibility concepts that cause the leading energy companies to really participate in aggressive ways in the renewables market.”
Darren Barbee can be reached at email@example.com.