Trump’s historic win will bring significant shift in U.S. energy policy
Former President Donald J. Trump will be President again, come Jan. 20, 2025, after his historic comeback win in the U.S. presidential election of Nov. 5, which extended into the wee hours of Nov. 6. Trump made history Tuesday night and early Wednesday morning by becoming only the second former President to win a second, non-consecutive term, Fig. 1. The first President to pull off this feat was Democrat Grover Cleveland, who won his first term in 1884, lost his initial re-election bid in 1888, and then came back to win a second term in 1892. Following that same pattern, Trump won his first term in 2016, lost his initial re-election bid in 2020, and has now come back to win a second term in 2024.
As of late afternoon on Wednesday, the vote counts nationally and in several states were not completely finalized. However, Trump already had won 295 votes in the Electoral College, 25 more than the 270 minimum needed for victory. And he potentially was on track to add to that total, with two states unresolved. In addition to winning the White House, Republicans gained control of the Senate, with at least 52 seats confirmed. The fate of the House of Representatives remained up in the air, although there were projections of a very small Republican majority, once a number of races in a number of states are resolved in the next couple of days.
Effects of Trump win on energy policy. The resounding win by Trump will mean some new directions (or should we say a return to previous directions) for U.S. energy policy, particularly for oil and gas. Upon taking office, Trump will no doubt try to ramp up drilling across the U.S., in an effort to restore the country’s energy independence. However, it should be pointed out that operators are likely to be slow to increase drilling in 2025. Some of the factors underpinning this view include the fact that many operators continue to exercise fiscal discipline; commodity prices need to remain above certain thresholds to assure reasonable profits; the costs for equipment and services still have not come down enough to suit many operators; and companies are looking for the new Trump Administration to begin to peel back the regulatory excesses of the Biden Administration. One thing that is likely to be a Trump priority is a concerted refilling of the Strategic Petroleum Reserve (SPR) as a national security matter. The Biden Administration has repeatedly drained oil out of the SPR to keep crude and product prices artificially low.
One area where Trump can make a difference quickly is the matter of E&P activities on federal lands—both onshore and offshore—where the current administration has pulled out every trick in the book over the last 3 ½ years to stifle activity on these parcels. In an effort to stifle offshore drilling and development, the Biden White House has minimized the number of lease sales over the next five years. On Sept. 29, 2023, the Bureau of Ocean Energy Management within the Department of the Interior published its Proposed Final and continuing through June 30, 2029. The PFP only schedules three potential oil and gas lease sales in the Gulf of Mexico (GOM) Program Area. This is far less than the average number of sales in various, previous five-year programs.
Meanwhile, onshore, the Biden administration postured that there were plenty of approved and available permits to drill on federal lands controlled by the Bureau of Land Management, Fig. 2. Of course, what officials have failed to mention repeatedly is that on many of these tracts there is either no guarantee of finding hydrocarbons, or operators have determined that it is not commercially feasible to continue on some of them. In addition, there is the problem of governmental honesty regarding the actual number of permits available. In March 202, President Joe Biden stated that based on available BLM data, there were 9,173 approved and available permits on federal lands. However, in February 2023, BLM published an updated number for approved and available permits to drill. The new total was 27% smaller, totaling 6,653 permits.
The agency explained to PolitiFact at the time, "This number has been updated to account for a reporting discrepancy resulting from a transition to a new database in mid-2020. Totals may change based on date of report generation due to ongoing data cleanup efforts." So, was this discrepancy due to I.T. problems, agency incompetence, a deliberate lie by officials, or all of the above? We leave this to you, the readers, to judge.
Regarding natural gas, look for the new Trump Administration to strongly promote development, use and export of natural gas. Development of natural gas reserves in the Marcellus and Utica shales of the northeastern U.S. hit an artificial ceiling in recent years, due to the federal government (sometimes in cahoots with state government) actively working to block/stop new pipeline projects that could move out greater amounts of gas. This also limited the amount of gas that could be utilized from the region for LNG export.
LNG situation. Speaking of LNG, the Biden Administration in January 2024 had placed a “temporary pause” on the granting of new LNG export licenses. On July 1, 2024, a federal court judge in Louisiana stayed the pause “in its entirety, effective immediately.” And then, on Nov. 1, the Biden Administration asked a federal appeals court to set aside the order for the U.S. Department of Energy to lift its "pause" on issuing LNG export approvals, arguing that the challenge by Republican-led states against the permitting suspension should be dismissed for lack of jurisdiction. That action is ongoing. Nevertheless, look for the incoming Trump Administration to untangle the bureaucratic mess surrounding LNG, Fig. 3.
IRA rollback. At the Independent Petroleum Association of America (IPAA) annual meeting last week, executives discussed the negative impacts of the misnamed Inflation Reduction Act (IRA) on independents. There is little doubt that the new administration will move quickly to repeal much of the IRA. However, because some of its planks are tied up in the Clean Air Act, it will take a fully Republican Congress (assuming the Republicans retain the House). They also are likely to quickly undo the subsidies in the IRA for carbon capture and hydrogen. And look for the new administration to roll back Biden’s electric vehicle mandates.
Environmental. Last, but not least, the excesses and penalties that the Environmental Protection Agency and other agencies have tried to impose on the industry, particularly the onerous methane reporting rules, will be stopped by Trump. However, it may take a while to get this done. As was discussed at the IPAA meeting, the “methane train” is already on the tracks, and it will require some time to repeal all the rulemaking that has transpired.
