API Head Hopeful Trump Redefines Energy Policy

With days until President-elect Donald Trump’s inauguration, many are anxious to see what a Trump presidency will mean for the country.

Jack Gerard, American Petroleum Institute (API) president, said he’s hopeful that the new president and Congress will choose collaboration with the energy industry in order to expand fossil fuel production and ease regulations, calling it a “once in a generation opportunity.”

“The American people have made it clear that they want change,” Gerard said at API’s annual State of American Energy report in Washington, D.C., on Jan. 4. “They want us to do things differently.”

During the event, Gerard outlined API’s goals for the New Year, including the trade association’s wish list in the early days of a Trump White House. Gerard cited the potential of opening up offshore drilling and revisiting pipeline decisions.

The top priority, though, is to tackle the scores of proposed or pending regulations impacting the oil and gas industry, he said without noting specifics.

The goal: to revise or remove regulations not focused on the consumer and hinder economic growth, worker safety and the environment, to instead “make way for smarter and forward-looking energy policies.”

“As we look the new Congress and the incoming Trump administration, we hope that they will take notice of the American energy sector’s record of success, commitment to safety and choose collaboration with industry and a market-based approach that is always focused on what’s best for consumers as their guiding policy principles,” he said.

U.S. energy policy is likely in for a dramatic shift under Trump, who embraced oil and coal production and reduced regulation during his campaign. He has said he intends to support new infrastructure and reverse decisions by President Barack Obama’s administration to halt or cancel pipelines such as the Keystone XL and Dakota Access, Moody’s Investors Service said in a Jan. 3 report.

“Mr. Trump also expressed a desire to pull out of the Paris Climate Agreement and rescind the Clean Power Plan enacted by the Obama administration in 2015,” said John Thieroff, a Moody’s senior analyst. “The nomination of people with ties to the oil and gas industry and some who are skeptical of climate change to key administration positions signals a commitment to policies that will prioritize increasing domestic fossil fuel production, with less emphasis on reducing greenhouse gas emissions.”

“While Trump’s interest in a coal renaissance might threaten growth in natural gas production, the abundance of cheap domestic natural gas and recent and ongoing natural gas-oriented investment in the U.S. power sector make meaningful new coal investment unlikely,” Theiroff said.

A U.S. withdrawal from the Paris accords or a demonstrable failure to work toward its commitments could lead to a carbon tax on U.S. exports or other retaliatory trade measures, he said.

“Mr. Trump’s nomination of Rex Tillerson, chief executive of ExxonMobil, who has been a longtime advocate for a carbon tax, as U.S. secretary of state signals an openness to at least some of the Paris agreement’s objectives,” he said.

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Gerard wants to see the new president unlock America’s offshore energy potential, parts of which were blocked by Obama during his presidency.

In December, Obama blocked new oil and gas drilling in parts of the U.S. Atlantic and Arctic oceans. Canadian Prime Minister Justin Trudeau also joined in the action.

Obama said in a statement on Dec. 20 that the joint actions “reflect the scientific assessment that, even with the high safety standards that both our countries have put in place, the risks of an oil spill in this region are significant and our ability to clean up from a spill in the region's harsh conditions is limited.”

In January 2015, Obama also designated 9.8 million acres of the Beaufort and Chukchi Seas waters off limits from future oil and gas leasing offshore Alaska. In 2014, he placed similar restrictions on the waters of Bristol Bay offshore the Arctic National Wildlife Refuge.

Federal policy keeps roughly 94% of federal offshore acreage off limits to energy production, which could hold more than 50 billion barrels of oil and 195 trillion cubic feet of natural gas, Gerard said. That’s up from API’s 2016 estimates that 87% was blocked from development.

As of March, the Bureau of Ocean Energy Management said about 26 million acres of the U.S. Outer Continental Shelf is leased and accounts for 5% of natural gas and 16% of oil production.

Oil and natural gas will supply more than 60% of U.S. energy needs by 2040, even factoring in projected growth of renewables, according to the Energy Information Administration.

“Just imagine what the industry could do to further benefit consumers, the economy and the environment if more of the energy were available for responsible and safe domestic production,” he said.

Opening more offshore areas to energy development could create more than 800,000 new jobs, grow the U.S. economy by up to $70 billion per year and raise more than $200 billion in cumulative revenue for the government treasury, he said.

Another regulatory issue Gerard addressed was energy infrastructure.

“Building pipelines—there’s a couple of quick decisions that could be made there to put thousands of people to work, to stimulate local economies at the heartland of America,” he said.

The constraint of private investment in energy infrastructure promotes the potentially increased energy costs for millions of Americans, he said.

Gerard also identified tax reform as another top priority for 2017.

“As the incoming administration and new Congress look to work together to reform the nation’s tax code, we’d hope that any changes will make America more globally competitive, are evenly applied and mindful of the important role the oil and natural gas industry plays in job creation and economic growth.”

Despite the downturn, the oil and gas industry contributes an average of about $70 million a day to the federal government in revenue from taxes, rents and royalties, according to API analysis.

Gerard said the industry understands the need for tax reform and many Americans agree, saying 80% of voters support increased production of oil and natural gas resources, based on results of an election night poll paid for by API.

The poll showed support from American voters crossed party lines with 71% of Democrats, 94% of Republicans and 76% of Independents strongly or somewhat in favor of production increases.

API’s election night polls also found:

• 72% of voters oppose higher taxes that could decrease investment in energy production and reduce energy development;
• 77% of voters oppose legislation that could increase the cost of domestic oil and natural gas operations and potentially drive up consumer costs;
• 77% of voters support the role natural gas is playing in reducing U.S. greenhouse gas emissions from electricity production; and
• 81% of voters support increase development of the country’s energy infrastructure.

“It is our hope that the incoming administration and incoming Congress will, like many pro-energy states, embrace our nation’s potential as a global leader and work with the industry to ensure that consumer demand is met and to help ensure that America’s 21st century renaissance will continue to deliver the economic opportunity and environmental benefits for many years to come,” Gerard said.

Emily Patsy can be reached at epatsy@hartenergy.com.