President Trump touted surging oil and gas production, regulatory rollbacks in the energy sector and progress on trade disputes that he largely instigated, as evidence of the success of his economic agenda during his 2020 State of the Union address Tuesday night.
“Thanks to our bold regulatory reduction campaign, the United States has become the No. 1 producer of oil and natural gas anywhere in the world, by far,” Trump told legislators.
While domestic hydrocarbon output has indeed reached record highs because of advances in horizontal drilling and high-volume hydraulic fracturing, the production surge was well underway by the time Trump took office in January 2017.
The United States surpassed Russia in 2011, during President Obama’s first term in office, as the world’s largest natural gas producer, and overtook Saudia Arabia in early 2018 as the leading producer of crude oil, according to the Energy Information Administration (EIA).
In terms of petroleum production, which includes crude oil and lease condensate, natural gas plant liquids (NGPL) and biofuels, the United States has been the world’s top producer since 2013.
Crude oil production rose by 71.2% under Obama, from 5.14 million b/d in January 2009 to 8.8 million b/d in December 2016, EIA data show.
Under Trump, oil output has risen to 13 million b/d from 8.86 million b/d in January 2017 as of last month, a 46.7% increase. However, EIA is forecasting nearly flat production growth from seven of the Lower 48’s main unconventional plays in February.
Trump added, “With the tremendous progress we have made over the past three years, America is now energy independent. And energy jobs, like so many elements of our country, are at a record high.”
The United States became a net natural gas exporter on an annual basis for the first time in 2017, while September 2019 was the first recorded month for which the country was a net exporter of crude oil and petroleum products.
However, the country imported about 9.94 million b/d of petroleum from nearly 90 countries in 2018 to cover domestic demand, and about 7.9 Bcf/d of natural gas, mostly via pipeline from Canada.
As part of an aggressive deregulatory push, Trump’s administration has sought, with mixed results, to loosen methane emissions standards for the oil and gas industry, expand domestic offshore drilling, open up swaths of the National Petroleum Reserve in Alaska for drilling, advance controversial oil pipelines such as Keystone XL and Dakota Access, and exempt oil and gas infrastructure from constraints imposed by the National Environmental Policy Act.
These efforts have coincided awkwardly with a campaign by the industry, amid mounting public pressure to address the climate crisis, to polish its image as a steward of the transition to a low-carbon economy. Trump did not mention climate change during his speech, although Energy Secretary Tom Brouillete following the address said, “Under President Trump’s leadership, it is innovation, not regulation, that drives our nation’s energy success. America has become energy independent this year, leading the world in oil and natural gas production as well as carbon emissions reductions, notably surpassing every Paris accord signatory.”
Trump announced in June 2017 that the United States would withdraw from the United National climate accord, aka the Paris agreement, claiming that it placed an unfair economic burden on the country.
Victory On Trade?
Trump on Tuesday night also highlighted the United States-Mexico-Canada-Agreement (USMCA), an updated version of the North American Free Trade Agreement, or NAFTA, that he signed into law last week, as a notch in his belt.
Trade policy has been among the main drivers of tension between Trump and Mexico President Andrés Manuel López Obrador, commonly known as AMLO, who succeeded Enrique Peña Nieto in December 2018.
“One of the biggest promises I made to the American people was to replace the disastrous NAFTA trade deal,” Trump said. “In fact, unfair trade is perhaps the single biggest reason I decided to run for president.”
The USMCA will “bring trade with Mexico and Canada to a much higher level, but also to a much greater degree of fairness and reciprocity, we will have that...I say that finally, because it has been many years since we were treated fairly on trade,” Trump said.
As it relates to energy, the USMCA largely maintains the bedrock provisions of NAFTA, including the tariff-free flow of energy products between North American countries, and the investor-state dispute settlement provisions from NAFTA’s Chapter 11 for the energy sector.“
It is evident that a major objective of this coverage, which was accepted by the then-incoming AMLO administration as well as the Trump and Peña Nieto administrations, is to give American petroleum and natural gas investors a strong sense of confidence in Mexico,” the Baker Institute for Public Policy’s David A. Gantz, Will Clayton Fellow in Trade and International Economics at the Institute’s Mexico Center, wrote in a September 2019 report on the USMCA.
Citing a promise “to confront China’s massive theft of America’s jobs,” Trump said, “Days ago, we signed a groundbreaking new agreement with China that will defend our workers, protect our intellectual property, bring billions of dollars into our treasury, and open vast new markets for products made and grown here in the U.S.A.”
However, observers of the liquefied natural gas (LNG) market remained unconvinced as of January that the China trade deal would provide a material boost to U.S. LNG exports to China.
He’s The Man
The major U.S. oil and gas trade groups largely expressed alignment with Trump’s address, while stressing the industry’s commitment to safety and protecting the environment.
“Natural gas infrastructure plays a critical role in transitioning to a lower carbon economy domestically and globally,” said Interstate Natural Gas Association of America interim CEO Alex Oehler. The environmental and economic benefits of gas “are made possible by the continued safe operations of our nation’s natural gas infrastructure systems.”
Last year, Oehler said, the Pipeline and Hazardous Materials Safety Administration finalized the gas pipeline transmission safety rule, “which embraces new pipeline safety technologies and engineering practices and constitutes the most significant enhancement in safety regulations for our industry in the last 50 years.”
American Petroleum Institute CEO Mike Sommers, CEO, said, “Ideologies come and go with each transition of power. But every president from Jimmy Carter to Donald Trump has agreed that affordable, reliable, and homegrown energy is essential to the country’s economic growth, national security, and overall prosperity...The strength of America’s energy future depends on bipartisan support for infrastructure expansion, trade agreements, economic growth, and environmental protection.”
American Energy Alliance President Thomas Pyle also weighed in. “In terms of great comebacks, it’s impossible to overlook the American energy story...But this comeback story is far from over. In order to achieve true energy dominance and unlock our nation’s full potential, President Trump must have the courage to do what Congress has failed to do for decades. In the next year and beyond, President Trump must provide Congress with a blueprint to fix our broken, abused, misused and outdated environmental laws.”