Trump win brings potential for significant oil and gas policy effects, says GlobalData

Will Scargill, GlobalData’s Senior Oil & Gas Analyst covering Upstream Fiscal & Regulatory Regimes says:

“Donald Trump’s election as the 45th President of the United States may have significant effects for the global oil and gas industry. The policy platform laid out during the campaign on both domestic issues and foreign affairs includes a number of elements with notable impacts on regulation, tax and investment opportunities in the sector. The Republican Party’s retention of its majority in both the House of Representatives and the Senate, should facilitate legislation to progress the new administration’s initiatives. The lack of detail of Trump’s platform and absence of a track record in public office cast uncertainty over the policies that will be enacted and the effects they will have, but the tone of the campaign suggests a priority on domestic energy policy over international.

“Domestic energy policy statements during the election campaign suggest a positive outlook for the oil and gas sector. This is supported by reports that his adviser Harold Hamm, CEO of Continental Resources, is in the running for Energy Secretary. Trump’s energy plan sets out support for the shale industry and open leasing of federal lands and offshore areas for upstream operations. During the campaign he also noted opposition to environmental regulation including the Paris climate agreement adopted at the COP21 summit, suggesting that the industry will face a reduced regulatory burden under his presidency.

“The expansion of offshore lease sales would likely be supported by the Republican-controlled Congress, particularly for Alaska’s Outer Continental Shelf (OCS) and perhaps also for the frontier Atlantic OCS. The Obama administration had initially proposed a lease sale in the Atlantic OCS in the 2017-2022 program but later removed it due to environmental concerns. However, Trump’s support for the shale industry may be more difficult to realize from the Oval Office. He will have control over some regulations such as wastewater and emissions standards through the Environmental Protection Agency, but the majority of regulatory barriers have been imposed at local or state level which are currently decoupled from Federal involvement.

“On wider energy markets, Trump has indicated that he would give the go-ahead to the Keystone XL pipeline, which was vetoed in 2015 by President Obama, if the operator reapplies for approval. This could improve supply side economics on heavy crude for US refiners by increasing supply capacity from Alberta, where production is expected to increase by approximately 500,000 barrels per day by 2020. This also suggests strong prospects for the North Dakota Access pipeline which provides additional lower-cost takeaway capacity from the Bakken, for which federal agencies have requested a construction pause.

“Financial disclosures have shown that Trump has invested in the operator, Energy Transfer Partners, and that its CEO contributed to his campaign, though it is customary for sitting presidents’ assets to be held in a blind trust. Although the prospect of infrastructure projects moving forward is positive for the oil and gas sector, the inherent contradictions between his support for business and his protectionist trade position may untangle as policy is realized. A focus on US energy independence and opposition to broader trade deals could create direct or indirect hurdles for the industry in the US and abroad.”

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