Trump’s mysterious pledge to lift an industry that’s already winning

Source: Mike Lee, E&E News reporter • Posted: Monday, November 21, 2016

When Donald Trump settles into the White House and contemplates how to follow through on his promise to unleash American oil and gas production, it might be more difficult than it sounded on the campaign trail.

In the past five years, U.S. oil and gas production rose to levels that hadn’t been seen since the 1970s. And while low oil prices have crimped the oil industry since 2014, it could be hard to boost production in the short term, analysts, state regulators and others said in interviews.

About two-thirds of the roughly 8.7 million barrels a day that the United States produces comes from five states — Texas, North Dakota, California, Alaska and Oklahoma, according to data from the U.S. Energy Information Administration. Republicans have controlled four of them since before the fracking boom started.

Likewise, according to EIA’s statistics, two-thirds of U.S. natural gas production comes from Texas, Pennsylvania, Oklahoma, Wyoming and Louisiana. Pennsylvania and Louisiana have had both Democratic and Republican governors in the last eight years; the other three have been reliably Republican.

Oil output tripled in Texas during the Obama years, more than doubled in Oklahoma and grew fourfold in North Dakota. Pennsylvania’s gas production grew almost eightfold. There may not be much more to unleash.

And while the states and the oil industry have said for years that Obama’s environmental regulations were threatening their output, the reality is, they were winning. Even before Trump promised to roll back Obama’s regulations, the states had already tied up most of them up in court.

“The truth of the matter is, the states worked together to block, at least temporarily, almost all of those rules,” said Lynn Helms, the top oil regulator in North Dakota, during a conference call with reporters.

‘Your treasure’

Trump’s clearest statement on energy policy came during a speech in Bismarck, N.D., in May at the Williston Basin Petroleum Conference (E&E Daily, May 27).

“The federal government should get out of the way,” he said.

Federal regulations, he asserted, “have denied millions of Americans access to the energy wealth sitting right underneath our feet.”

“This is your treasure. And you, the American people, are entitled to share in the riches,” Trump said.

In August, he followed up by saying he would “unleash an energy revolution,” in part by opening all federal land and waters to drilling, including the Arctic National Wildlife Refuge and the Atlantic and Pacific oceans (E&ENews PM, Aug. 8).

But it takes years, sometimes decades, for offshore oil projects to come online, said Robert Clarke and Clay Lightfoot, energy analysts at the consulting firm Wood MacKenzie. And some offshore areas, like the Gulf of Mexico near Florida, have remained closed to drilling even under previous Republican presidents out of respect for local environmental concerns.

“It can open up some opportunities,” Lightfoot said of Trump’s leasing proposal. “But that doesn’t necessarily translate into commercial activity.”

Trump has already indicated he will push for faster approval of major interstate pipeline projects, like the Dakota Access project and the Keystone XL. It remains to be seen if his campaign rhetoric turns into presidential action. Faster approval of pipelines could be a general positive for the industry, Lightfoot and Clarke said.

Remember states’ rights?

Trump’s administration won’t eliminate all regulations on the industry.

Colorado imposed its own rules limiting how much natural gas can be emitted from oil and gas well sites in 2013, years ahead of the Obama administration’s proposal for a national cap on emissions. Ohio and Wyoming adopted similar rules, and Pennsylvania is considering its own version (EnergyWire, Jan. 20).

In Pennsylvania, Democratic Gov. Tom Wolf’s administration doesn’t plan to change its approach to regulation, Neil Shader, a spokesman for the Department of Environmental Protection, wrote in an email.

“DEP will continue to formulate new policies that help protect the environment while encouraging safe development of these resources and eliminating waste,” Shader wrote. “If there are any changes at the federal level that would affect Pennsylvania environmental policies in the future, they will addressed at that time.”

In more extreme cases, the Maryland Legislature passed a moratorium on hydraulic fracturing for natural gas last year, and New York Democratic Gov. Andrew Cuomo’s administration unilaterally banned fracking in 2014 (EnergyWire, June 1, 2015; Greenwire, Dec. 17, 2014).

Even conservative states stepped in with regulatory action to solve specific local issues. Oklahoma has shut down dozens of disposal sites that handle oil and gas waste in response to a string of earthquakes that have plagued the state for several years. In North Dakota, the state Industrial Commission is considering tougher rules for pipelines to prevent the spills that have plagued the industry.

Still, Trump’s pro-energy stance could help the industry, said Ryan Sitton, one of three elected commissioners of the Texas Railroad Commission, which oversees energy regulation in Texas. Even the few Obama administration rules that have taken effect can have a cumulative impact on production, he said.

“Those things add up,” he said. “The true cost of good regulation should be zero.”