US energy chiefs both love and loathe Trump
While leaders welcome cuts to strangling red tape, they fear a lurch towards protectionism as the industry gains independence
America’s energy barons are purring with satisfaction at Donald Trump’s bonfire of the diktats, delighted by the coming festival of pipelines and the rehabilitation of the fossil fuel industry. They are alarmed in equal measure by his threatened assault on global free trade, the lifeblood of the major oil and gas companies. Few feel comfortable about the disastrous turn in US relations with Latin America.
Mexico absorbs 17pc of America’s surging energy exports. The country is a fast-growing – and irreplaceable – market for piped natural gas from the prolific shale fields of Texas, Lousiana, Oklahoma, and Colorado.
The industry admits grudgingly that the shale revolution and America’s emergence as a global gas superpower occurred under Barack Obama, but insists that it was in spite of him. Their grievances have been building up.
“It’s been death by a thousand cuts, and it’s hitting every industry out there,” said Harold Hamm, founder of the shale group Continental. “There shouldn’t be any surprise that we have a Trump rally going on. When you take your boot off business, the market will respond. I think Trump is going to be a truly great president,” he said at the CERAWeek energy summit by IHS Markit in Houston.
David Farr, head of the industrial conglomerate Emerson, uses much the same language. “I feel I’ve had a boot on my neck, two broken arms, a broken leg and I’m just about limping across the line. The regulations have become so burdensome that you can’t do anything,” he said.
Mr Farr has rallied enthusiastically behind President Trump, serving as a member of his new manufacturing council. His pet gripe is suffocating red tape. “Regulations cost the average US company $30,000 per employee per year, and it costs Emerson $50,000,” he said.
“We feel the US government has almost been at war with us,” said Senator Daniel Sullivan from Alaska, an ardent champion of the oil industry.
“It took 15 years to get permission for a new runway at Takoma airport. It takes seven years to get a permit to rebuild a bridge that already exists,” he said.
One shale fracker told the CERAWeek forum that it took approval from 23 different federal agencies for a pipeline from the Marcellus shale gas basin in Pennsylvania that crossed a single state line.
“We were getting close to the critical point on regulations where we might not have had an industry,” said Al Walker from the oil exploration group Anadarko. Mr Trump has already passed executive orders to lift the ban on the Dakota and Keystone XL oil pipelines, and others are to follow. He may soon open up protected federal lands for drilling. Oil companies may be allowed to deduct 100pc of their investment expenses in the first year. It is music to the ears of the industry, though what they want most is the promised cut in corporation tax to 20pc. Beyond the bluster, the quiet majority at this year’s CERAWeek are trying to restrain the wilder reflexes of the Trump administration. “I don’t think there’s been any time in industrial history where protectionism works in the long run,” said Tom Fanning, head of the power utility Southern Co.
Exxon’s new chief Darren Woods was careful to praise the new team in Washington – even repackaging $20bn of pre-agreed projects along the Gulf of Mexico as if they were a response to Mr Trump’s stimulus – but he also warned about the damage to complex supply chains if there is a lurch towards protectionism. “Trade barriers only hinder progress,” he said.
America is still a net importer of oil but it also exports 6m barrels a day of crude and liquids, reflecting the regional criss-cross structures. It is ramping up gas exports through its new terminals for liquefied natural gas (LNG), shipping ever-growing volumes to Europe, Asia, and Latin America.
By the early 2020s the US may become the biggest exporter of LNG in the world. Shale bulls insist that it will also be a net exporter of crude as the Permian miracle spreads to fresh super basins. This shift towards energy independence – and beyond – is a remarkable change in US fortunes, but it also has trade implications. The last thing the US oil and gas industry wants is any reversal of globalisation. Even Mr Hamm now sells much of his oil to the South Koreans.
Mexico is the chief outlet for excess gas from the Permian, Barnett, Eagle Ford, and Colorado basins. There are not enough terminals to ship it elsewhere as LNG. If it stayed in the US, it would cause internal gas prices to crash.
The role of Mexico will loom larger as the country shifts to gas, vastly increasing its imports from the US.
Nor are the energy industries aligned among themselves on the Trump agenda. The dichotomy of greens versus anti-greens no longer holds. Natural gas is the winner of the Paris climate accord since it displaces coal in power stations, halving CO2 emissions. The gas companies in turn have their own interest in promoting wind, solar, and other renewables. Some are joint renewable and gas conglomerates already.
Sultan Ahmed al-Jaber, head of the Abu Dhabi National Oil Company (ADNOC), said his emirate is developing a giant solar farm at a cost of 3.7 cents per kilowatt hour – the cheapest in the world – that relies on gas to cover intermittency problems.
“Big Renewables” now stride through the CERAWeek summit with as much muscular confidence as “Big Oil”, treated as equals by the powerful utilities. Solar alone employs 240,000 people in the US, twice the numbers in the coal industry.
Google has locked in 20 contracts with wind and solar companies to provide 2.5 gigawatts of power for its data centres. “We’re doing it for pure business reasons: because the costs have come down dramatically and it saves us money over time. It is not philanthropy,” said Sam Arons, Google’s energy chief.
Taken as a whole, the US energy industry no longer has an interest in pushing the anti-global warming line of Mr Trump’s circle. Feelings were mixed when climate sceptic Scott Pruitt spoke here in Houston, expounding what he plans to do with the Environmental Protection Agency – a body that he used to sue as legal sport and now commands.
Mr Pruitt had earlier in the day insisted that human activity is not “a primary contributor to the global warming that we see”.
What he offered the energy elites was a first taste of his policies, with a roll-back of tough rules. “The future ain’t what it used to be at the EPA,” he joked. Some applauded with rapture. Others sat in stony silence.