McCALL: US to dump the Paris Accord?

Maureen McCall is an energy professional who writes on issues affecting the energy industryEnergy companies, advisors and associations have long been discussing possible paths forward for the industry in the event that a Republican became the next President of the United States. Now Donald Trump’s re-election has them discussing their options more intensely as new White House staff positions get announced daily.CNN reported this past Friday that Trump’s team is preparing executive orders related to energy and climate that may include withdrawing the U.S. from the Paris Climate Accord and downsizing national monuments to increase drilling on public lands. CNN had previously reported that executive orders related to energy exploration, including removing provisions or caps that prevent companies from drilling and changes to energy regulations were on the way. The New York Times reported that Trump is also expected to end the pause on permitting new liquefied natural gas exports to markets in Asia and Europe and revoke a waiver that allows California and other states to have tighter pollution standards. The energy and environmental transition team is emerging and includes Trump’s former Department of the Interior Secretary David Bernhardt and former Environmental Protection Agency administrator Andrew Wheeler, as reported in both New York Times and the New York Post.Trump first announced withdrawing from the Paris accord during his first term in office in June 2017 and effectively pulled the U.S. out of the Paris accord in 2020. He argued that the accord was ineffective because it allows countries to voluntarily restrain their own pollution (with no penalties if they don’t) and seeks to hold the US and other industrialized countries to a higher standard.It‘s further reported that Trump’s transition team has readied proclamations that would redraw the boundaries of the Bears Ears and Grand Staircase-Escalante national monuments in southern Utah as they seek to downsize national monuments to increase drilling on public lands. You may recall Trump previously reduced the amount of land under management by the federal government at Bears Ears (by 85%) and Grand Staircase-Escalante (47%) during his first term, following an expansion under the Obama administration. Many of the areas to be removed from protection in both areas are said to be rich in oil, gas, and coal resources. However, those areas are difficult to access and currently, most oil and gas interest is focused on the northeastern part of Utah, the Uinta Basin which is experiencing renewed interest in 2024 as “the next great oil play” with Chevron, Gulf and Coastal being among the top producers. Oil production in Utah has climbed nearly 40% since the end of 2022 as reported by Bloomberg although recently Ovintiv (formerly Encana) has announced they are exploring the sale of their $2 billion oil operations in the Uinta Basin. Much of the land cut from Bears Ears National Monument is also rich in uranium. It seems clear that Trump's energy policies are aimed at increasing U.S. fuel and power production and dismantling some of the previous administration's climate initiatives. In addition, the revival of the stalled 830,000 b/d Keystone XL pipeline is once again top of mind.I had the chance to sit down and chat with Kevin Birn, S&P Global’s Global Head of the Center of Emissions Excellence and Chief Analyst, Canadian Oil Markets about the potential impacts of Trump's presidency on both U.S. and Canadian energy policies and the path forward for the industry.We began looking at policies that might be coming in or changing now that Trump has been elected. Birn sees a synergy in the relationship between energy and environmental policies despite the tendency to view them as in conflict or oppositional.“I honestly think most companies want to engage in practices that minimize environmental impact,” Birn said. “That being said, based on President Trump's prior policies, he would see some of the environmental policies as potentially inhibiting the competitiveness of the oil and gas sector and the energy sector as a whole. He’d probably proceed in removing some of the ones that are top of mind like the current halt that the US government has on the approval of incremental LNG projects that could come after 2030. You could see certain other environmental policies, such as the proposed charge on methane emissions come under pressure from the White House with efforts to roll it back.”In 2022 the Biden administration imposed the charge on emissions of methane from big oil and gas producers. The “waste emissions charge,” or WEC, was part of Biden’s climate law. Facilities, from well pad to pipeline to export terminal, will begin paying $900 per metric ton of methane for 2024 emissions that exceed specified thresholds. Companies are expected to begin paying in 2025 and could end up paying a total of $750 million based on 2024 levels, according to EPA's regulatory analysis.Birn also expects to see a number of measures continue and says we would not likely see Trump undermining the IRA because it benefits so many “red” states — the states that elected Republican representatives. He predicts that industrial policy will continue to drive U.S. environmental and energy policy. One of the biggest issues for the industry would be the pause on LNG projects according to Birn. “The reality is, if you look at the U.S. system, they have the capacity to export about 14 BCF a day. They have approvals for another 12 BCF by 2030 and they have another list of another 22 approved projects for after 2030. Realistically, they wouldn't all be built and you can also see why a government may want to look at the implications of what that may mean for consumer prices. But for the industry, if you put a pause on something — and this is a lesson for Canada — whenever you layer policy on, even if there are good intentions to do a strategic review, you can cause uncertainty about what the intention is for the long-term perspective of that industry. That can cause capital to move elsewhere around the world because you're not the only game on the planet to do that kind of industrial development. So I think the LNG pause is something that could be very front center for a lot of the U.S. energy sector.”As for a path forward for oil, with over 90% of Canadian oil sold to the U.S., Birn observes that the White House, under every president, has always been sensitive to the pump prices of gasoline and oil prices can influence U.S. outcomes. He expects pump prices will continue to be a concern for the White House with caution to upset the balance.For a path for Canadian natural gas, removing the LNG pause will open up U.S. exports, which could open up opportunities for Canadian molecules according to Birn who points out that Canadian gas molecules are important for heating homes from Ohio to Michigan and are an important part of the US energy mix. He also points out that a big portion of Trump’s campaign was anti-inflation- about bringing down costs for the average American. Anything that might be perceived to disrupt that process would be paused.“I think most oil companies are watching,” Birn said. “They're certainly paying a lot of attention to domestic policy in Canada, as you see with the oil and gas emission cap and what that can mean to the ability to produce. But they're also looking very closely at China because China has been the largest source of oil demand growth last 10 years. And there are some inklings that that demand growth path is starting to falter. That is something to watch from a demand source point of view.”Maureen McCall is an energy professional who writes on issues affecting the energy industry.

McCALL: US to dump the Paris Accord?

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