CERAWEEK: Energy industry should not overreact to Trump's tariff threats: oil group CEO

The energy industry should not overreact to headlines about the Trump administration's tariff threats because he is using it as a negotiating tactic and he is bringing much-needed change to US policy, Mike Sommers, President and CEO of the American Petroleum Institute, said on March 11.

"I would encourage all of you not to overreact, in terms of what we witnessed in just the last 12 hours," Sommers said at the CERAWeek by S&P Global energy conference in Houston.

Over the course of the day, Ontario imposed tariffs on electricity exports in response to planned US tariffs, US President Donald Trump threatened to increase the tariff on Canadian steel and aluminum coming into the US from 25% to 50% starting on March 12, and then both Ontario and Trump appeared to have reversed course.

"I think all of us have to be prepared for this kind of chaotic action," Sommers said. "We elected a disruptor and by the way, there are a lot of things that need to be disrupted, particularly in the energy space because we have gotten energy policy so wrong for so long," he added.

The energy industry has made the case that energy trade should be treated differently in tariffs, Karen Harbert, President and CEO of the American Gas Association, said.

Trump had planned a 25% tariff on Canadian products across the board, but it was reduced to 10% for energy and then cut to 0% for energy because energy is covered by the US-Mexico-Canada trade agreement, she said.

"So, there is a recognition of the importance of the energy relationship between us and Canada," Harbert said.

Permitting reform

Panelists agreed on the need for permitting reform for all energy sectors, from oil and gas to renewables and nuclear.

Environmental permitting for nuclear facilities is much harder than it needs to be, said Maria Korsnick, President and CEO of the Nuclear Energy Institute.

In a license renewal for a nuclear plant that has been operating for years, the environmental permitting takes longer than the safety analysis for the continued operation of the plant, Korsnick said.

"The regulator says, 'We can't possibly do this in less than 18 months,'" Korsnick said. "I'm like, 'My god, there has been a plant operating there for 50 years, you've had all kinds of time to analyze it,'" she said. "I think we just need to kind of reframe and make sure that we can do these things much more efficiently."

Sommers underscored the importance of permitting reform but expressed skepticism about its prospects in Congress. Policy in 2025 is going to get done by executive order, by the agencies or through the reconciliation process in Congress, which is inherently partisan, he said.

"By the time they get around to permitting reform, there's going to be a lot of scar tissue that's been built up," Sommers said. "I think the best permitting reform that we're going to get is actually from the regulatory agencies in the short term."

Congress concerns

The energy industry will have to take on a new role in the legislative process, said Jason Grumet, CEO of the American Clean Power Association.

"When Congress used to function, we all used to be able to be a little bit petty," Grumet said. "We could all just talk about the stuff we wanted, and we could count on Congress to metabolize the differences and go through the committee process and produce something that represented the interests of the country."

But Congress is not good at that anymore, and that puts a lot of burden on industry to basically be the ballast in the system to prevent careening politics from pulling policy away from the national interest, Grumet said.

Looking ahead, it is possible that "terrifying" demand growth could be a wake-up call, Grumet said. "I think if we start to see those prices going in the wrong direction, we will quickly see the bipartisanship of our nation relocate to energy pragmatism," Grumet said.