President Donald Trump on Tuesday signed an executive order which may slow the closure of some US coal-fired power plants and will begin a lengthy process of rescinding much of former President Barack Obama's climate change policies.
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But the order had no noticeable impact on coal, natural gas or crude oil prices Tuesday; will likely have no near-term impact on domestic fossil fuel supply; and appears to roll back regulations already being unwound in courts.
Kevin Book, a managing director of ClearView Energy Partners, said the order may exacerbate an imbalance between supply and demand, since many of the regulatory limits on US supply will be removed, but demand will remain inelastic.
"Ironically, it may mean more energy, but it may mean that not every energy company benefits," Book said Tuesday. "There is an intermediate-term risk of deregulating supply faster than demand. Some operators will do well ... but for the market as a whole, it may not be good."
While the Trump administration has indicated it wants to weaken US fuel economy standards, the demand impact of such a move would still be at least a decade away, Book said.
The market impact of the order may prove to be limited, largely due to the partisan shelf life of the order, according to Michael Cohen, head of energy markets research at Barclays.
"Is a corporation going to make 20-, 30-year capital decisions based on something that may be in place for only four years before it gets revoked?" Cohen asked.
The order, which Trump signed Tuesday afternoon at a ceremony at US Environmental Protection Agency headquarters, will attempt to rescind much of Obama's efforts to combat climate change and continues Trump administration efforts to roll back nearly all Obama-era regulations on the energy sector.
"We're going to provide regulatory certainty," Scott Pruitt, the head of the Environmental Protection Agency, said Tuesday.
Perhaps most notably, the order calls for a "review" of EPA's Clean Power Plan, the most significant piece of Obama's climate agenda, the first step in Trump's plan to rescind the rule.
The rule sought to cut carbon emissions from existing power plants by 32% from 2005 levels by 2030, with interim CO2 reduction goals to be met by 2022.
Trump put the Clean Power Plan in his crosshairs while on the campaign trail, but killing the rule is not something that can be done solely through executive order.
As attorneys and environmentalists have pointed out, regulations that were adopted through a notice-and-comment process cannot be altered through an executive order. Administrative law principles require the same notice-and-comment process that went into promulgating a new rule to overturn it.
"This is the first move of a long chess game that will take years to unfold, and future moves will be far more challenging," Richard Revesz, director of the Institute for Policy Integrity at NYU School of Law, said in a statement Tuesday. "Despite the hoopla, the executive order has no legal significance at all."
Revesz said that EPA will need to launch a lengthy rulemaking process and propose a rule explaining the legal, economic and scientific basis for moving away from the Clean Power Plan.
Any new rule crafted to rescind the Clean Power Plan will also be subject to the same level of scrutiny and legal challenges that the CPP's opponents used to fight the rule.
Given the likelihood for litigation, "this issue might not be resolved before the 2020 election, so the fate of the Clean Power Plan might ultimately be determined by the winner of that election," Revesz said.
While the landmark rule threatened the closure of numerous coal-fired power plants, roughly 60 GW of the nation's oldest, least-efficient plants have already been closed due to other regulations or competition from cheap natural gas, according to Andrew Moore, managing editor with S&P Global Platts Coal Trader. Even the repeal of the rule is unlikely to result in any new coal-fired plants given the long-term regulatory risk surrounding coal and forward natural gas markets that continue to show suppressed pricing, Moore said.
Coal prices rallied going into December as natural gas climbed, but have since come off as natural gas prices have moderated.
TRUMP'S POLICY BLUEPRINT
The order also directs federal agencies to identify any policies and regulations hindering domestic energy production.
This will start a roughly four-month process to identify those regulations and policies which the Trump administration will likely move to repeal or weaken them, forming what the official called the "blueprint" for the administration's energy policy going forward.
But it remains unclear if removal of any regulations which the fossil fuel industry would depict as development hurdles will boost supply, according to Jenna Delaney, a senior energy analyst for Platts Analytics Bentek.
On domestic oil, for example, production during the Obama administration surged by nearly 4.5 million b/d, despite Obama's regulatory regime. While production fell by more than 800,000 b/d from the supply peak in early 2015, that had more to do with prices collapsing, Delaney said.
"What this shows is that is wasn't the administration that was driving either the production growth or decline, those both happened while President Obama was in office," she said. "The increases and declines were driven by what was happening with prices."
In Tuesday's order, also calls for a review and likely repeal of guidance that Obama's White House Council on Environmental Quality finalized in August mandating federal agencies to consider climate change in environmental reviews and to eliminate a requirement for regulators to consider the "social cost of carbon" in policy decisions. The Obama administration set that cost at $36 per ton of carbon dioxide.
What action the EPA will take following receipt of the order is also being debated.
In addition, the executive order aims to end a moratorium on new leases for coal mined from federal lands the Obama administration put in place early last year and calls for a review of Obama-era rules limiting methane emissions from oil and gas operations and restrictions the Obama administration finalized in 2015 on hydraulic fracturing on federal lands.
Earlier this month, lawyers for Trump's Interior Department said they were rescinding that fracking rule and working on a new one. The fracking rule had been stayed since June when US District Court Judge Scott Skavdahl in Wyoming had ruled Interior lacked authority to regulate fracking.
The order does not address international climate efforts and the White House official said whether Trump will pull the US out of the Paris climate agreement was "still under discussion" within the administration.
Trump's order will likely be challenged by environmentalists, opposed by Democrats and tied up in federal courts for years.
"Cutting emissions from power plants is mandated by the Clean Air Act, and Trump can't undo science and law with the stroke of a pen," Kieran Suckling, executive director of the Center for Biological Diversity, said in a statement. "We'll fight in court to defend this critical effort to protect our planet from global warming."
Tuesday's order will be the latest in a series of attempts by Trump to undo many of the energy policy efforts developed under Obama's second term.
Earlier this month, Trump announced that he was reopening US fuel economy standards for 2022-25 and may ease them after a year of study, and on Friday the State Department approved the permit for the Keystone XL pipeline, which had been formally rejected twice by Obama.
Like the effort to dismantle the Clean Power Plan, Keystone XL's new permit will likely only be the beginning of a years-long process, which could be tied up in courts even longer and is expected to face fierce opposition from environmentalists.
TransCanada, the Canadian company developing Keystone XL, still faces a lengthy eminent domain battle in Nebraska.
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