Some Thoughts on Donald Trump’s Energy Policy

Well, it has been two weeks since Donald J. Trump’s upset victory in the Presidential election, and its time to think about what Donald Trump’s energy policy is going to be.  Energy policy has changed little in recent years, even as energy markets have changed dramatically.  The U.S. shale boom has flipped world oil and gas markets and the cost of wind and solar has dropped dramatically.  Congress has done next to nothing.  And President Obama has worked to tighten some pollution controls, while occasionally tinkering with trade policy.  President Hillary Clinton was widely expected to win and carry on with restrictions on greenhouse gas emissions and perhaps some subsidies for renewable power.  The Trump campaign was always light on specifics, but here is my best guess on what the future may hold.

Obama’s Regulatory Agenda Looks Doomed

President Obama’s first actions included pushing a stimulus bill and health care reform through Congress on near party-line votes.  Since then, Obama has rarely worked productively though Congress. Instead he used his “pen and phone” to put his agenda into place through executive actions.  Now, Trump says he will develop a list of executive actions he can take on day one to “restore our laws and bring back our jobs.”  On energy, he says he will “cancel job-killing restrictions on the production of American energy, including shale energy and clean coal.”  On regulations, he says for every “one new regulation, two old regulations must be eliminated.”

Many have snarked that there are not really any restrictions on clean coal, so its not exactly clear what he means.  The transition team has, however, be fairly clear that it will seek to shed anything that restrictions the production of coal, oil and natural gas.  Some items presumed on the chopping block include:

  • The Clean Power Plan regulations on greenhouse gas emissions from powerplants,
  • Drilling or coal mining restrictions on federal lands,
  • Mercury and Air Toxics Standards for coal powerplants,
  • Steam Protection Rules,
  • The Waters of the United States rule, which creates an expansive reach for the Clean Water Act,
  • Fracking restrictions and methane regulations, and
  • Fuel efficiency standards for vehicles,

On day one, Mr. Trump will be generally limited to reversing the President’s executive orders and guidance documents.  For example, Pres. Obama has required federal agencies to account for the impacts of greenhouse gas emissions in their environmental reviews.  It seems likely that type of action will be out the door.  Mr. Trump can also take steps to rearrange agency priorities, like rolling back NASA climate research.

Truly repealing federal rules adopted by Pres. Obama will take more time.  Reversing a federal rule generally requires the same process as enacting one.  That means giving the public notice and an opportunity to comment.  Several of Pres. Obama’s environmental regulations are being litigated, however, and Pres. Trump could simply decide to agree in litigation to rescind the rules and start from scratch.  The Republican Congress could also have a role.  Appropriations riders and the Congressional Review Act may create opportunities to strike down regulations on a simple majority basis, which will be necessary on most issues because Republicans will face a filibuster.

Yes, Donald Trump’s Energy Policy Could Boost Coal

Since the election, we have seen s steady stream of articles saying things like “Donald Trump Promises to Revive Coal Jobs But He Can’t,” “No, Trump Can’t Revive Coal,” “Donald Trump promises to revive the coal industry. He can’t,” and “The Coal Industry Isn’t Coming Back.”  The articles generally point out that coal employment peaked in the 1920s and have been dropping ever since, with that decline accelerated in recent years by cheap natural gas and renewables.  Surely, these articles say, Donald Trump’s Energy Policy cannot reverse these greater trends.  As one New York Times editorial claimed, “For Mr. Trump to improve coal’s fate would require enormous market intervention like direct mandates to consume coal or significant tax breaks to coal’s benefit.”

That is just not true.  The U.S. government’s Energy Information Administration has made clear that repealing the Clean Power Plan, just one of the many regulations Pres. Obama used to target coal, would drive up coal production in the United States.  Certainly returning coal to its former glory would require subsidies or some such nonsense that will never happen, but just scaling back regulations will boost coal to some degree.

EIA on CPP and Coal

Watch for a Nationalist Energy Trade Policy

Oil has been the world’s most important strategic commodity for nearly a hundred years.  America dominated the oil business early in the century and generally the government allowed private companies to run an open market.  The U.S. government restricted exports during the world wars, and in fact Japan launched its Pearl Harbor attack in part because America cut of sales to Japan.  In recent decades America has been an importer, desperately urging the Organization of the Petroleum Exporting Countries (OPEC) to allow free trade at market rates.  Today, America is again the world’s leading an oil and gas producer and exporter of both crude oil and natural gas.  EIA Crude Exports Chart

Those exports have been hampered to a great degree by a regulatory process that Pres. Obama has dragged out as long as possible.  The rationale for this seem to be a mix of caution, a desire to “keep it here” for domestic uses, and a desire to “keep it in the ground” for environmental reasons.  Environmental limits have also slowed production and by extension exports to some degree.

Mr. Trump has certainly been critical of international trade, and that has created some question of how he will treat the American abundance of natural gas and potential abundance of oil.  He could see it as a weapon to try and block exports to certain countries for one reason or another. Donald Trump’s Energy Policy seems to be headed the other direction, though, as the transition team says “America will unleash an energy revolution that will transform us into a net energy exporter, leading to the creation of millions of new jobs.”

So Many Pipelines, But Maybe Not for Free

Mr. Trump also seems to bring his “America First” attitude to pipelines.  He has proposed a “trillion-dollar” infrastructure plan, which the campaign said would cover “roads, bridges, tunnels, airports, railroads, ports and waterways, and pipelines.”  For pipelines, it seems he is saying that faster government permitting will boost private-sector investment.  Specifically, he proposed to “[a]pprove private sector energy infrastructure projects—including pipelines and coal export facilities—to better connect American coal and shale energy production with markets and consumers.”

This harkens back to one of the defining energy debates of the Obama era, the Keystone XL pipeline.  Mr. Trump made clear he would approve the pipeline because of the jobs it would create, but he also floated the idea that he “might want to make a better deal.”  He suggested he might want a 10 percent cut of the oil flowing through the pipe.  There is really no legal mechanism for such an idea, and it is at odds with U.S. trade policy.  That idea is something to keep an eye on, though.

Look Out for Dramatic Statutory Reform

Regulatory reform is expected to be a key part of Donald Trump’s Energy Policy.  The transition team has relied heavily on research from the Heritage Foundation on the cost of regulations, which show environmental regulations to be particularly costly.

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With unified Republican control of Congress and the White House in a period of relative calm, Congress may try to take on major environmental statutory reforms.  Many bedrock environmental statutes have remained largely unchanged for decades, including the National Environmental Policy Act, the Endangered Species Act, and the Clean Air Act.  These statutes have been shaped largely by executive action and litigation in recent years, and that has led to many agency activities that diverge pretty far from what Congress expected when passing the laws.  Expect Congress to take a hard look at making these statutes simpler and less costly.