You would think a President who appoints the CEO of Exxon/Mobil and the former Governor of Texas to key cabinet positions would love the oil and gas industry. Perhaps he does, but his latest executive order amounts to an unintentional regulatory shot across the bow of Big Oil & Gas.
When Leonardo DiCaprio and I met with Mr. Trump last December, he was surprised to learn that his advocacy of more domestic oil and gas development was at odds with his apparent love of coal. We shared a chart with him that shows 260,000 coal jobs in America in 1980 dropped to about 100,000 by the time Presidents Reagan and Bush left office twelve years later, not because of government regulation, but because of automation in the industry. The chart also shows that the next big drop, to around 65,000 jobs today, corresponds to cheap natural gas and that coal jobs actually increased slightly during President Obama’s two terms in office.
We also explained the Paris climate agreement to Mr. Trump, as I described in my CNBC blog of January 13. His lack of understanding of these issues was not surprising, given that his experience is in very different industries, but we hoped these lessons would make him realize there is often more to the story than simply “regulation = SAD!”
His administration now proposes to roll back the Obama administration’s Clean Power Plan (CPP), which would reduce harmful carbon emissions from power plants. The CPP It does not specify the fuel that plants should use, just the limits on emissions they must achieve. He is also expected to roll back “CAFE” fuel economy standards for cars and trucks, which not only exist to reduce carbon pollution, but also other emissions like ozone and the fine particles that cause asthma and lung cancer.
So how do Trump’s ill-informed rollbacks constitute an attack on the oil and gas industry? US environmental laws, like the Clean Air Act and Clean Water Act, function largely by the federal government setting health-protective limits on various pollutants, then delegating responsibility to the states for achieving those goals in their region. In the case of clean air, a state must submit a “State Implementation Plan” or SIP to the USEPA showing how it will achieve clean air and by what date. SIPs are zero sum games - - if one of the measures in a SIP falls short or is eliminated, the other measures must make up the difference.
Given that the Supreme court ruled in 2007 that greenhouse gases (carbon) are pollutants as defined by the Clean Air Act (and given that the USEPA has found the public “endangered” by that pollution) any administration is now legally required to adequately address the problem. This means that if Trump lets pollution from power plants and vehicles off the hook, his administration will have to ratchet down even tighter on the remaining sources of carbon pollution - - refineries, oil and gas rigs, pipelines, oil tankers in US waters, and gas station pumps. In sum, a broad regulatory attack on the oil and gas industry.
Is this hyperbole or, as it’s called today, “fake news”? Nope. It’s happened before. In November 2003, the Schwarzenegger Administration had been in office for less than a day when we got word that Congress was trying to dismantle California’s right to regulate polluting two-stroke engines. As Secretary of the California Environmental Protection Agency, I called Joe Sparano, President of the Western States Petroleum Association (WSPA) and reminded him that if California couldn't reduce emissions from small, polluting two stroke engines, but we still had to attain federal air quality standards, then additional reductions would have to come from refineries and other sources already being regulated - - sources represented by WSPA. Fearing that additional burden on his members, Sparano helped us oppose the measure and it was ultimately defeated.
The Clean Power Plan and CAFE standards are expected together to cut nearly a billion tons of carbon pollution, but will simultaneously reduce other harmful emissions and thereby benefit the lungs of all Americans, not to mention reducing health care costs. Big Oil and Gas could do itself, our planet, and our lungs a huge favor by once again opposing a myopic, ill-informed policy, which may well be the first of many coming from the Trump administration.