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Forecasting What the 2016 Election Means for the Oilfield

While a change in tone on federal energy and environmental policy is likely to come under President-elect Donald Trump, the oilfield should be ready to pivot its attention as activist groups shift their attention towards the states and courts.

While President Obama’s term saw a dramatic increase in US oil and gas production and the ending of the US crude oil export ban, the policies developed by the Administration were largely focused on additional regulations and combating global climate change.

Throughout the Obama Administration, new regulations focused on offshore energy production and hydraulic fracturing were prioritized and access to energy opportunities offshore and on federal lands was reduced. Regulations and international agreements were adopted to reduce greenhouse gas emissions, ushering in a major increase in the EPA’s authority over oil and gas exploration and production.

Throughout his campaign, President-elect Trump highlighted both these regulations and the potential economic impact of “tapping” oil and gas resources.  As such, it is likely that keystone achievements of the Obama Administration such as the Clean Power Plan, the Paris Agreement, and methane emissions standards will be significantly revised if not halted or rescinded under the new Administration.

These efforts may have mixed results for the oilfield, as significant increase in natural gas usage was largely driven by the shift of electricity generation from coal to lower-emission natural gas.   While the abundance of domestic gas will likely continue this shift, a slower pace may result due to a regulatory re-acceptance of coal.

The reversal of regulations such as the Well Control Rule is unlikely, as their implementation is already underway by the agencies.  That said, minor adjustments may be offered, especially if the agencies are directed by Congress.

The Obama Administration will likely push to finalize the five-year offshore drilling plan currently under development by the Department of the Interior.  If it is completed before the end of the President’s term, the opportunities for a Trump Administration to open additional areas of the Gulf of Mexico, the Arctic, or the Atlantic Coast are likely limited without direct Congressional action.

With Congress continuing under Republican control (albeit still far from the 60-vote margin in the Senate required to break a filibuster), the two chambers will likely seek to advance pro-oil and gas legislative priorities such as streamlining approvals for LNG export terminals and pipelines.  Additional Congressional priorities are likely to be issues related to the Waters of the United States regulation and reform of the Endangered Species Act.

Pipelines have been a major area of contention for the past several years, and that is not likely to change with a new White House.  TransCanada has stated they may restart efforts to obtain approval for the Keystone XL pipeline under the Trump Administration.  The continued, and sometimes violent, protests surrounding the Dakota Access Pipeline and hearings by the Federal Energy Regulatory Commission over pipeline approvals are likely to continue as the Keep it in the Ground Movement focuses on this area.  Debate continues in New York over the Constitution Pipeline, which would provide natural gas from the Marcellus region to customers in the Northeast.

With this significant change in energy and environmental policy direction at the federal level, the debates of and decisions by state legislative and regulatory bodies will grow more important.  During the Bush Administration, states showed they were willing to go their own way on climate change issues, and the pressure on states to regulate activities such as hydraulic fracturing and injection wells usage has only increased.

The activist movement that has for the past eight years focused its time, energy, and resources on Washington will likely be shifted towards states such as Oklahoma, Colorado, Ohio and Pennsylvania where oil and gas activities have already raised a great deal of public debate.

State regulatory bodies, which are sometimes obscure, will be placed in the spotlight by well-funded campaigns and through significant media attention.  In some cases, every permit will be questioned and every action by operating companies, drilling contractors, and service providers will be open to public criticism and critique.

Hydraulic fracturing is an especially likely target for these efforts, as the states already are the primary regulator onshore.  The state medical association in Pennsylvania recently called for a moratorium, and in Colorado the campaign for anti-fracturing ballot initiatives will be revisited.

The situation faced by our friends in the pipeline community offers the oilfield service, supply, and manufacturing sector much to learn from.  An industry that was hardly known by most Americans has been a steady focus of news reporting and debate for the past several years, especially around individual projects and incidents.

A further avenue will be the courts, from the local to the federal levels.  Even if a Trump Administration has decided to halt development of a new regulation or stop enforcement of an existing rule, action can be forced by the courts.  Areas such as climate regulations, especially those related to methane, are prime areas for activists to file lawsuits.

With that in mind, it is critical that PESA member companies engage with policymakers at all levels today.  By providing educational resources, you are helping ensure that that decision makers know the facts and are not solely responding to the glare of the media and the pressure of public attention.

PESA will be doing our part to help inform and educate policymakers at all levels while also helping ensure that our member companies receive timely and useful information.

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