Executive orders aim to foster oil and gas permitting, but Trump’s own trade policies also put kibosh on rapidly growing export markets.
President Donald Trump’s executive orders to speed up approvals of new oil and gas pipelines is no doubt welcome in an industry long plagued by regulatory delays. But he should look at his own trade policies instead if he really wants to help U.S. energy businesses.
The executive orders signed this week require that two federal agencies review their rules and guidelines for approving new energy development and that sole authority for permitting any new pipelines will be with the President. Both moves aim to override state and local opposition to new oil and gas pipelines.
“When it comes to the future of America’s energy needs, we will find it, we will dream it, and we will build it,” President Trump said of the executive orders.
“You are the men and women who get up every day and make this country run and, frankly, make this country great." pic.twitter.com/cDGx7tLvAL
— The White House (@WhiteHouse) April 10, 2019
But many companies have already found it, dreamt it, and are already building it, leaving market reaction to the news nonplussed.
The Alerian MLP Exchange Traded Fund (NYSE: AMLP), which comprises a broad basket of U.S. oil and gas pipelines, was down slightly on the announcement. Commodity markets were also mixed on the news with the price of benchmark U.S. oil for May delivery down slightly flat and U.S. natural gas prices for June delivery showing small gains.
Local opposition to energy projects that Trump aims to surmount has done little to stop the U.S. from becoming an energy giant. Overall, U.S. oil and gas production set a new record in February reaching over 12 million barrels per day, according to the American Petroleum Institute.
Moreover, much of that production comes from Texas, where President Trump signed the bill and which has little aversion to new oil and gas pipelines.
The order could jumpstart some projects. TransCanada (TSX: TRP) may finally get the go-ahead for its Keystone XL Pipeline, which has been waiting for approval from Nebraska’s public utility commission. The U.S. Northeast is also facing strains due to limits on new pipeline capacity to bring natural gas.
But with America’s oil and gas use flatlining due to increasing energy efficiency, the growth market is overseas, where the U.S. energy industry has made big strides since former President Barack Obama signed an executive order in 2015 ending the 40-year old ban on seaborne crude oil exports from the U.S.
Since the signing of that order, U.S. crude oil exports have grown from 560,000 barrels per day, nearly all of which went to Canada, to 2 million barrels per day, with China, South Korea, Taiwan and the United Kingdom among the biggest consumers.
The only hiccup in that growth was Trump’s trade fight with China. Once one of the fastest growing customers for U.S. oil, China went to almost zero imports during the second half of 2018 as trade fight picked up steam.
Exports have since picked up again as the two sides declared a truce, but “the trade war appears to be limiting the United States’ access to crude export markets,” said API Chief Economist Dean Foreman said at the time.
“As we produce more energy here at home, the U.S. needs markets for its products in order for our economy to continue to grow.”
In addition, Trump’s decision to put tariffs on imported steel has also raised costs for U.S. pipeline companies.
Yet, even before Trump’s move, oil and gas companies were readying for more hydrocarbons to reach U.S. Gulf Coast export markets. The EPIC Pipeline, Plains All American’s (NYSE: PAA) Cactus II Pipeline, and Phillips 66’s (NYSE: PSX) Gray Oak Pipeline are expected to bring an additional 2 million barrels per day from inland Texas to the Gulf Coast by the latter part of this year.
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