Donald Trump finally addresses American energy policy…and it’s not all bad

Donald Trump in Bismark, North Dakota.

Donald Trump in Bismark, North Dakota.

Expect more moderation once Trump sews up the nomination and begins the general election campaign

Donald Trump delivered the first energy policy speech since he began running for the Republican nomination. The biggest surprise is that there weren’t many surprises, but there are a few questions.

Keystone XL pipeline

Trump says he wants the 830,000 b/d pipeline built and promised he would invite Canadian pipeline company TransCanada to resubmit the application President Barack Obama formally rejected last fall despite the State Department’s sign off on environmental impacts.

“I want it built, but I want a piece of the profits,” Trump said. “That’s how we’re going to make our country rich again.”

I wonder how Trump would react if the State of New Jersey said, “No problem, you can have a construction permit for your new casino, Mr. Trump, but we want a share of your profits”?

We get it, everything is a negotiation to The Donald. Art of the Deal, right?

But that sort of language isn’t helpful. Trump sounds like a Mafia don negotiating with a garbage contractor. Or Bernie Sanders.

Something other than Captain Capitalism.

A little more sophistication would create a lot more clarity for companies like TransCanada looking to invest billions into American energy infrastructure.

Oil and gas regulations

Obama – or more accurately the Environmental Protection Agency – has been locked in battle with industry for years over this issue. State governors like Greg Abbott in Texas have complained loudly about “federal overreach” and fought every new EPA regulation in court, losing just about every one. Water, emissions, fracking, greenhouse gases – the EPA has squeezed the fossil fuels industry with a plethora of new regulations.

Death by a thousand paper cuts.

Take fugitive methane emissions, for example. Industry argues that it is incentivized to reduce emissions associated with production because they have value as part of the natural gas stream, that producers have invested significantly in new technologies in recent years, and that emissions have in fact come down even as production skyrocketed.

But as I noted last year in a column about a Barnett Shale emissions studies funded by environmental groups and conducted by Texas scientists, in many cases the fixes are really simple. A broken valve or an open facility hatch, that sort of thing. The environmentalists argued the Barnett example illustrated why regulations were necessary.

I countered that “this is a great opportunity for industry to demonstrate firm leadership and show that it takes seriously both the issue at hand (fugitive methane emissions) and the larger question of climate change” by agreeing to a voluntary program, perhaps overseen by an industry association.

In the end, Obama forged ahead with regulations, published just a few weeks ago. The EPA itself estimates the cost to industry at $530 million a year by 2025.

If Trump could vacate these kind of costly – and I would argue, unnecessary – regulations but still get industry onside to fix the problem, that would be a win-win for both sides. Unfortunately, Trump was once again vague with his intentions during the speech.

“Any regulation that’s outdated, unnecessary, bad for workers or contrary to the national interest will be scrapped and scrapped completely,” he said. “We’re going to do all this while taking proper regard for rational environmental concerns.”

Is stopping methane emissions necessary? In the national interest? A response to rational environmental concerns? Who knows. Presidential candidates don’t have to spell it out, but they shouldn’t be this opaque.

OPEC and the Middle East

Trump says he wants to reduce America’s reliance on Middle Eastern producers. “Imagine a world in which oil cartels will no longer use energy as a weapon,” he said.

But the US only imports about 20 per cent of its crude oil requirements from OPEC, according to Reuters.

A Texas-based oil and gas producers group, bolstered by academic work from University of Houston economist Ed Hirs, wants the American government to enact Eisenhower-era oil import quotas, basically banning OPEC from the American market. Canada and Mexico would be exempted. US producers would still be able to export, a right they regained after the 40-year old crude oil export ban was lifted by President Obama last fall. You can read about how to ban OPEC in this column.

If Trump wants to increase American energy independence while reducing incentives to intervene with costly military adventures in the Middle East, here is a way to do it.

Paris Climate Agreement

“We’re going to cancel the Paris climate agreement,” Trump told the crowd of roughly 7,700 in Bismarck.

Well, probably not.

Christiana Figueres, executive secretary of the United Nations Framework Convention on Climate Change, is already on record saying the deal is done – a done deal is probably something Trump should actually appreciate – and the US apparently can’t pull out now.

But even if it could, it shouldn’t.

Here is a fact mostly overlooked by the fossil fuels industry: The transition to cleaner energy fuels and technologies currently underway is mostly driven by the marketplace, not White House fiat.

Coal is in trouble because of cheap natural gas created by shale fracking – something Trump also approves of, thank goodness. And the cost curves for wind and solar power are dropping so rapidly that in best case scenario installations they are cost-competitive with coal and occasionally cheaper, which is why renewable energy is leading new power generation construction.

As I argued in this column, there is an American Energy Model – natural gas + wind + solar – something Asia, with its 1,500 coal power plants waiting to be built, desperately needs. No country has the unique combination of energy technology, expertise, and capital that America has and the Paris agreement is an opportunity to promote the market-based US approach to the world.

Abrogating the agreement would be short-sighted and maybe even bad for American business.

Conclusion

Trump is running as a Republican, so of course he was going to cozy up to the fossil fuels industry and set himself as an alternative to Hillary “North American Climate Pact” Clinton and Bernie “I hate fracking” Sanders.

Given the generally scandalous blather that usually marks a Trump speech, this one was modest and thoughtful. Well, as modest and thoughtful as The Donald gets.

But the good thing about the Bismark speech is that Trump has plenty of wiggle room to add nuance to his energy policies. Expect more after he officially becomes the Republican presidential candidate next month.

Posted in: Markham on Energy

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