Policy Predictions: How will Trump's 100-Day Plan Affect U.S. Energy Industry?

by LeClairRyan


The American landscape is littered with failed prognostications about what new Presidential administrations would or would not ‒ and could or could not ‒ accomplish. Every new President faces the challenge of transforming campaign promises into enforceable policy and law. President-elect Trump’s 100-day action plan is a healthy mix of gimme, doable and stretch goals.

Undaunted, LeClairRyan’s energy industry lawyers offer the following predictions based on 1) President-elect Trump’s published positions, and 2) our own experience representing energy companies during the administrations of the past five American presidents.

Trump Plan: “Make America energy independent, create millions of new jobs, and protect clean air and clean water. We will conserve our natural habitats, reserves and resources. We will unleash an energy revolution that will bring vast new wealth to our country.”

  • Thanks to fracking and horizontal drilling, America is essentially already more energy independent than it has been in a long time. The real dilemma that has emerged is price. The Trump administration may focus on import dependence and attempt to control imports or push exports of oil and natural gas as means to bring price stability to this sector, which would, in turn, create jobs.
  • Job creation implies new or expanded industry. This could arise from renewable energy development, but the emphasis in the rest of Trump’s plan suggests this refers mainly to traditional, fossil fuel production, including fracking of oil and gas and renewed and revalued coal.

Trump Plan: “Unleash America’s $50 trillion in untapped shale, oil, and natural gas reserves, plus hundreds of years in clean coal reserves.”

  • Shale oil and gas are already unleashed, but the federal government’s environmental pressures on it should be significantly reduced.
  • While the Obama administration’s anti-coal strategies burdened coal production and consumption, the coup de grâce was delivered by plentiful, low-priced gas.
  • The long planning horizon for the development of electric generation infrastructure makes generators cautious. Even a four-year guarantee of coal-friendly policies, with the possibility of a four-year extension, may not be enough incentive for multibillion-dollar investments in power stations that are built to operate for 40 years or more.

Trump Plan: “Open onshore and offshore leasing on federal lands, eliminate moratorium on coal leasing, and open shale energy deposits.”

  • Ostensibly, the Trump administration can be expected to end any remaining vestiges of a moratorium on offshore leasing and development.
  • The Interior Department’s plan to block oil and gas drilling off the Atlantic Coast is likely to be reversed.
  • Greater offshore access for oil and gas producers is anticipated, although it is not yet known whether the Trump administration will push the Republican Party’s platform proposal to allow production on the outer continental shelf.
  • Removal of the moratorium on new coal leases, which was meant to lead to an eventual cessation of coal production on federal lands, is likely and can be achieved without Congressional approval.
  • The greatest effect would be in Wyoming and Montana. The current moratorium on coal leasing has the greatest effect in the Powder River Basin in these states, rather than in Appalachia, where the federal government manages less land.
  • President-elect Trump will have the opportunity to nominate FERC commissioners who will be supportive of his energy goals and policies. These nominations are critical in helping accomplish his energy goals because a big portion of his proposed energy policies include FERC jurisdictional topics such as natural gas, wholesale electricity rates and transmission infrastructure.

Trump Plan: “Encourage the use of natural gas and other American energy resources that will both reduce emissions but also reduce the price of energy and increase our economic output.”

  • This is a tricky one. Except for the (now much less likely) possibility of new restrictions on extraction, the main impediments to greater production are low market prices and limited transportation capacity ‒ especially within the liquified natural gas infrastructure, which would allow U.S. gas to reach world markets.
  • Lower prices would likely inhibit investment in extraction.
  • All of this suggests that the Trump administration could turn toward natural gas exportation combined with petroleum import restrictions.

Trump Plan: “Rescind all job-destroying Obama executive actions.”

  • On his executive authority, President Trump can rein in federal environmental enforcement, including mandatory implementation of the Clean Power Plan.
  • Similarly, the President can use executive fiat to walk away from the Paris Accords that his predecessor embraced without legislative action. Repeal or modification of environmental statutes, on the other hand, would require legislative cooperation ‒ a real possibility, but not a certainty.
  • Most environmental statutes in the climate change area are state-based. DO NOT expect western states to abandon their anti-carbon, pro-renewable energy efforts. California will continue to despise coal and even turn away from natural gas in a quest to move toward more and more renewable energy. However, California probably expects to move toward more renewable energy with less or no federal subsidy. The same applies to Oregon and Washington.
  • Repeal of the Clean Power Plan will have little effect on the western states, but it could have a significant effect on the Midwest and South as far as coal is concerned. Such a repeal could also affect the mountain and desert states that still have and use coal, but in aging power plants. Repealing the Clean Power Plan, however, will require rulemaking proceedings that will take a few years and undoubtedly involve litigation. Expect the Clean Power Plan to go nowhere during that long period of uncertainty.

Conclusions and Final Predictions

  • Renewable energy subsidy and valuation will decline at the federal level.
  • Coal will return to growth mode, especially in the western region of the U.S. where extraction costs are less and supply is more plentiful, with a chance of new coal power plant construction.
  • Pipeline projects that increase the flexibility of the United States to profit from and/or rely on oil and gas will thrive. The Keystone Pipeline will be the first key beneficiary of this.
  • Natural gas will thrive as a fuel and may move toward being a significant exported fuel as liquified natural gas.
  • Western states will be challenged to move toward higher levels of renewable energy use without federal support.
  • Transmission line and other infrastructure investment may benefit significantly as being one of the few points of agreement across the aisle in Washington.

LeClairRyan will provide updates as President-elect Trump acts on the various parts of his 100-day action plan that will affect our nation’s energy industry.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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