Wednesday, November 23rd, 2016 and is filed under Oil and Gas Current Events
The past eight years for the oil and gas industry have been quite a roller coaster ride. Oil prices have seen highs over $120/bbl and lows under $30/bbl. The industry has been hit hard with government regulations, rules, and mandates. Major projects such as the Keystone XL pipeline have faced delays and denials from government officials. Permits to drill on federal land were increasingly hard to come by. Cutting through the red tape made it more and more difficult to operate in the oil and gas industry… and more expensive. However, the situation may be about to change for the oil and gas industry under a Trump presidency.
The election of Donald J Trump has experts speculating as to what that means for oil and gas. However, most experts agree that Trump will likely be a positive for the industry.
Speaking on federal regulations, Trump said, “For every new regulation, two existing must go.” This could be the start of the unraveling of the burdensome red tape that has encumbered the oil and gas industry for years.
Trump has also promised to rescind the EPA’s Clean Water Rule, which many in the oil and gas industry believe was an attempt to regulate fracking. Ironically, the EPA violated their own Clean Water rules when they breached a containment dam in an abandoned gold mine and subsequently contaminated Colorado’s Animus River. While the EPA has used the rules to levy fines against the oil and gas industry as well as other industries, it strangely suffered no consequences when violating those same rules.
Another situation that could easily change with the stroke of a pen is the Keystone XL pipeline. Trump could rescind a Bush 43-era executive order that gave the State Department authority over energy projects that cross international boundaries. Doing away with that executive order would return the authority to energy regulators who have shown to favor the Keystone project. Trump has also indicated that he supports the Keystone pipeline.
During the last eight years, domestic oil production has skyrocketed due to the shale boom. However, that increase in production was largely on private lands. The chart below shows that oil production on federal lands remained relatively flat during the Obama administration.
One of the reasons that oil production remained flat on federal lands is that the number of leases issued by the BLM was down considerably from the previous administration. BLM permits issued under the Bush ’43 administration were 2,879 and that figure has dropped to 1,753 under the current administration.
Another factor affecting oil production on federal lands is the time it takes for the BLM to process a drilling permit. In 2005, it took approximately 154 days for the Bureau of Land Management to process a drilling permit. However, in 2012 that figure jumped to an astounding 307 days. On the other hand, North Dakota takes an average of 10 days to process similar permits. Will a Trump administration be able to streamline the process and reduce the lead times in order to drill on federal lands? One can hope.
President-elect Trump’s transition team has floated the names of Harold Hamm and North Dakota Representative Kevin Cramer as possible candidates for energy secretary. Hamm is an Oklahoma entrepreneur who made his fortune in the oil and gas industry. Rep. Cramer is from a major oil producing state and is known to be a friend of the oil and gas industry. Either of these two men would likely favor rolling back the stringent policies that have held back the oil and gas industry for years.
The oil and gas industry has suffered many setbacks over the last eight years, but “hope” may be on the horizon.