Jan
02
2017

New Year Offers Restart for American Energy

There can be little doubt that 2017 will witness one of the most dramatic ground shifts in American policy in recent history. The election of Donald Trump, victories by Republicans in both the U.S. House and Senate, and geopolitical pressures that continue to mount are all conspiring to create a new political landscape in our nation. We know with certainty that this administration will be markedly different than the last one, but will it be like any other? Or will it be completely uncharted territory? And most important from our point of view, what will this new landscape mean for U.S. energy?

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For starters, the inauguration of President-Elect Donald Trump is likely to result in immediate shockwaves throughout the federal regulatory apparatus. Already, Trump’s appointment of Oklahoma Attorney General Scott Pruitt to the position of Administrator of the U.S. Environmental Protection Agency has given hope to many that the onslaught of regulations from the agency could grind to a halt, or at least slow to a manageable pace.

“Bureaucracy, by its nature, metastasizes, and the EPA has grown larger while its contribution to public health is getting smaller and smaller,” C. Boyden Gray explained recently in the Washington Examiner.

During his tenure as Oklahoma Attorney General, Pruitt has filed multiple lawsuits against EPA, alleging that the agency he will now lead has far exceeded its authority. He has been outspoken about the need to return sanity to EPA regulation and rein in the agency’s purview.

“The American people are tired of seeing billions of dollars drained from our economy due to unnecessary EPA regulations, and I intend to run this agency in a way that fosters both responsible protection of the environment and freedom for American businesses,” Pruitt stated in a recent written release.

Trump’s appointment of former Texas Governor and presidential hopeful Rick Perry also sends a clear signal about Trump’s intentions for the nation’s energy future. While his predecessor, Ernest Moniz, was considered a pro-energy bright spot in the Obama Administration, Perry’s energy bona fides are largely unquestioned. As Governor of Texas, Perry attempted to fast-track eleven coal-fired power units and was a champion of the oil and gas industry. He oversaw massive growth in the state’s wind power assets and was stridently pro-nuclear, even paving the way for Texas to store low-level nuclear waste.

In the eyes of most observers, these appointments, combined with Trump’s supply-side attitude toward American energy, portend an era that values enhanced American energy production and that has an eye toward keeping American energy prices competitive for manufacturing. Surely the process of Making America Great Again starts, in part, with keeping American energy abundant and inexpensive. It likely means preserving the nation’s natural gas boom, throwing the domestic coal industry a much-needed lifeline, nurturing a budding nuclear energy revival, and pursuing renewables in a sensible, cost-effective way.

Other executive developments will play a major role, as well. For example, President Obama recently issued an executive order that imposed a ban on drilling in the Arctic and Atlantic Oceans, effectively taking 3.8 million acres from Virginia to Maine and another 115 million acres off the coast of Alaska off the table for oil and gas production. And while many media sources reported the move as a “permanent ban” on production in those areas, the president’s fiat relies on a 63-year-old law that many believe is tenuous. A recent Wall Street Journal opinion piece argues, in fact, that Obama’s drilling ban might be much less permanent than advertised. The Congress, in fact, could unravel the ban if it chooses. As an alternative, President Trump could unlock these areas, as former presidents Clinton and Bush did with other regions. Clinton unlocked 300 million acres protected under the same law, while Bush unlocked 50 million acres himself.

Court decisions will also matter to the future of American energy. On February 16th, the DC Circuit Court will hear a challenge to EPA’s new ozone standard lodged by the U.S. Chamber of Commerce. In 2016, EPA changed its threshold for ground-level ozone from 75 parts per billion to 70 parts per billion. While the change might seem small, the U.S. Chamber has argued that the more stringent threshold would cost the U.S. economy $3.4 trillion between 2017 and 2040. The Chamber also has alleged that a tougher ozone rule would endanger transportation projects nationwide, costing nearly 3 million jobs through 2040.

Also on the table for revision is the EPA’s “endangerment finding”, which underpins the agency’s position on carbon dioxide regulation and guides its overall attitude toward climate action. The endangerment finding relies on a 2007 Supreme Court decision, Massachusetts v. EPA, that determined that the emission of carbon dioxide emission is causing global warming. By extension, the decision reasons, the EPA has a duty to regulate carbon dioxide as a way to protect public health. EPA’s attempt to regulate carbon dioxide, which it called the Clean Power Plan, was based entirely on the endangerment finding.

However, the court’s decision, at 5-4, was not a resounding mandate. A different court, or simply a different EPA, could take a different approach or make an alternative finding. As Sterling Burnett of The Heartland Institute recently argued, “Withdrawing the endangerment finding would end the legal justification for a range of burdensome climate regulations. In the process, it would also end radical environmental activists’ ability to use courts to impose climate policies on an unwilling public whose elected representatives have repeatedly rejected climate policies.”

Whether it is executive rule making, congressional action, or court decision, it seems clear that the groundswell of public opinion against the status quo will have implications in 2017 for American energy policy. Trump’s lack of specifics about energy policy leave a great deal of uncertainty about exactly what changes we might see, and when we might see them, but the smart money is on a trajectory that leads toward more American energy production, a renewed interest in traditional sources such as coal and nuclear power, and a focus on satisfying the energy needs of manufacturers. In our view, those are positive steps forward for an energy sector seeking stability and a good sign that reliability and affordability will be more than just talking points in the coming years.