As the 2016 U.S. presidential campaign draws to a close, analysts and industry experts appear to agree that national energy policies enacted under the Obama administration will continue along a similar trajectory if Hillary Clinton is elected president, but face a major overhaul if Donald Trump wins.
Analysts with Barclays Research warned that a win by Trump could also lead to a bearish U.S. natural gas market, while a Clinton win could lead to bullish prices on crude oil. They concede, however, that any movement in the oil price through the end of the year will be more reflective of what is decided at the next meeting of the Organization of the Petroleum Exporting Countries (OPEC), which is scheduled for Nov. 30 in Vienna (see Shale Daily, Sept. 28).
"History is not a helpful predictor of the immediate aftermath," Barclays' analysts Warren Russell, Nicholas Potter and Michael Cohen said in a note Tuesday. "Most changes in administration have occurred at the same time as other macroeconomic or supply side events.
"For example, in 2000, concerns about the global economy had led observers to doubt the efficacy of an upcoming OPEC meeting (similar to our current situation) and in 2008, prices were already dropping precipitously due to the financial crisis."
Although there is a perception that U.S. natural gas producers would face a less expensive regulatory burden under a Trump administration, the analysts warn that his trade policies "would likely curb or at least limit incremental U.S. gas exports to Mexico, a major source of growth in demand for U.S. supply," leading to a bearish market (see Daily GPI, Sept. 1). The analysts added that Trump's pledge to dismantle the Clean Power Plan would allow "coal to gain back more market share from natural gas in the power sector due to a friendlier regulatory environment."
Barclays added that the Corporate Average Fuel Economy standard and the Renewable Fuel Standard program face an uncertain future under a Trump administration.
Transition this time a 'unique situation'
Not everything will change with a new administration. Legal challenges to several policies that took root, but not effect, during the Obama administration -- including the Bureau of Land Management's (BLM) proposed rule governing hydraulic fracturing (fracking) on public and tribal lands; the Clean Water Rule, which the Environmental Protection Agency (EPA) and the U.S. Army Corps of Engineers developed to clarify the definition of Waters of the United States; and EPA's rules governing methane emissions from the oil and gas industry -- are all expected to continue.
"While new executive branch folks do have the power to withdraw or modify existing regulatory rules -- that is unusual. It doesn't happen frequently," Mark Barron, an attorney with law firm Baker & Hostetler LLP, told NGI's Shale Daily on Tuesday. "But we do have a unique situation in this administrative transition in the sense that there are a number of these very important pieces of Obama's regulatory agenda that are not implemented.
"In past transitions, there would be situations where folks might be licking their wounds and looking forward to a change in administration. Right now we're in a situation where those rules are actually in limbo because there's been some success in the courtroom challenging them."
Case in point, Barron -- who represents the Western Energy Alliance (WEA) and the Independent Petroleum Association of America in the BLM fracking rule case -- said the Tenth Circuit Court of Appeals in Denver announced Tuesday that oral arguments in that case will be heard on Jan. 17, 2017, three days before the inauguration of either Clinton or Trump (see Shale Daily, June 27).
"That case will be argued right before the transition," Barron said. "Even if there were a Trump administration, the idea that he could get in, get his new folks in place and make meaningful changes that would make the appellate court's decision unnecessary -- that's a real tight time frame and I think it's unrealistic."
Barron also represents the WEA in another lawsuit against the BLM, for the latter's failure to hold quarterly lease sales (see Shale Daily, Aug. 11). That case, too, will continue, he said.
"Our lawsuit related to the lease sales is not an attempt to change the law," Barron said. "What we're saying is that the current administration is not actually following or enforcing the law. But a new administration could come in and say they are going to follow the law now. We hope that no matter who wins, they will come in and immediately correct that situation."
Some daylight between Obama and Clinton
Energy policy was a brief topic of discussion during the Second Presidential Debate on Oct. 9 (see Daily GPI, Oct. 10). During the forum, Trump accused Clinton of wanting to put coal miners out of business and claimed the EPA had put the energy industry "under siege." Clinton countered that her energy policy recognized climate change as "a serious problem," but she also embraced natural gas.
Clinton's support of natural gas hints that she could break from her predecessor in a couple ways, Barron said.
"The secretary has made some affirmative statements referencing natural gas specifically as a potential bridge fuel, which is a position that some folks in the environmental community are quite upset with her about because their message these days is 'keep it in the ground, no matter what.' Being slightly more open-minded about natural gas is one point where she might be different."
Barron added that Clinton "is much more aware of the national security implications of domestic production. She hasn't spoken much on energy policy, [but] she has been characterized as more hawkish on foreign policy than the current administration. If that's the case, then it is possible that she might be interested in using domestic oil and gas production as a geopolitical instrument against powers like Russia or some of the Middle East dictator states.
"Under the Obama administration, [energy] has been looked at exclusively as a domestic policy issue. We would hope that the secretary would recognize it as important foreign policy as well, and at least have her decisions with respect to domestic production informed by those other considerations."
Environmentalists backing Clinton
Adam Beitman, deputy national press secretary for the Sierra Club, said his organization is firmly behind Clinton.
"Hillary Clinton is the only candidate in this race who is taking the climate crisis seriously and who is committed to continuing our progress toward a clean energy economy at home and abroad," Beitman told NGI's Shale Daily on Tuesday. "Under a Clinton presidency, we would mobilize to ensure she has the support she needs to continue our transition from fossil fuels to clean, renewable power and transportation.
"A Trump presidency would not just be disastrous for our environment or our climate, but for everyone, as his knowledge of energy policy is shallower than a puddle of fracking wastewater. What we do know is that he would be the only climate denying head of state in the world if elected, and we would do everything in our power to stop him from rolling back clean air, clean water, and climate safeguards all while the market and public opinion continue to favor clean energy over fossil fuels."
Oil and gas industry has been quiet
The oil and gas industry has carefully guarded its comments on this year's presidential election.
Last month, officials with the American Gas Association (AGA) said there were several unknowns over what would come with either a Clinton or Trump administration (see Daily GPI, Oct. 21). They added that the prospects for a new omnibus energy bill didn't look promising, and it was likely that the Federal Energy Regulatory Commission would remain two commissioners short, for now.
AGA also said it had been in contact with both the Clinton and Trump campaigns and their parties' national committees. At a separate meeting last May, the American Petroleum Institute (API) conceded that it had done likewise (see Daily GPI, May 17). API and North America's Building Trades Unions also remarked on the future of the CPP, which the U.S. Supreme Court decided to temporarily block last February, before the death of Justice Antonin Scalia (see Daily GPI, Feb. 10).
The ongoing vacancy on the Supreme Court became an issue during the presidential campaign. Republicans, who control the Senate, have so far kept their promise not to schedule a hearing on Merrick Garland, President Obama's choice to fill the seat. The GOP argues that the next president should be given the opportunity to make the nomination.
It remains unclear if the Senate will schedule a hearing on Garland during its lame duck session, regardless if Clinton or Trump is elected. Some Republicans have even suggested keeping the high court at eight justices. Such a move could bode well for the future of the CPP, since the court's five conservative justices, including Scalia, brought it to a halt.