ENERGY POLICY IN THE NEW ADMINISTRATION WHAT WE VE LEARNED SO FAR

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1 ENERGY POLICY IN THE NEW ADMINISTRATION WHAT WE VE LEARNED SO FAR ENERGY ALUMNI WEEKEND September 15, 2017 Stephen Arbogast, Director Kenan-Flagler Energy Center

2 Discussion Topics Inquiry Method: Actions vs. Words; contrast w/predecessor Areas Examined: Philosophy & Priorities Energy Supply/Price Energy Security Climate Policy Environment Regulatory Approach Summary & What We still Don t Know

3 A Word About Approach In polarized times, a focus on actions vs. rhetoric Informative to contrast actions vs. Obama Administration Major differences in philosophy, priorities More nuance in execution: E.g. Obama administration less hostile to oil & gas than portrayed Much yet to be revealed on Trump climate & regulatory details

4 Philosophy & Priorities Obama Administration: U.S. needs to begin a major transition to less carbon-intensive economy This transition will need major initiatives via government to overcome entrenched interests, popular resistance Priorities: 1. Regulate greenhouse gases 2. Support renewables penetration 3. Slow growth in fossil fuels Trump Administration U.S an energy super-power; unleash it as economic/jobs growth engine Peel back regulatory overreach in favor of markets functioning Hard Realist approach to International agreements Priorities 1. Enable all forms of energy investment 2. Undo predecessor s regulations 3. Re-do international agreements?

5 Fossil Fuel Development Obama Administration: Moratorium on Federal lands coal leasing, review of royalty rates Ban on drilling in most of Arctic Ocean, parts of Atlantic & GOM Slow-walk approval of Public Land drilling permits (254 days in 2016 vs. 30 days) Public lands fracking & new well methane emissions rules Trump Administration Coal leasing moratorium ended and royalty review suspended Arctic drilling ban overturned (subject to litigation) and DOI reconsidering A/GOM DOI order to speed up drilling permit review, 2818 requests pending 1/17 DOI proposed rule to do away with fracking rule, being litigated EPA proposing 2 year stay of methane rule, being litigated

6 Motor Fuel Markets EPA Biofuels Mandates into Gasoline/Diesel Fuel- essentially flat Volumes Used to Determine the Proposed Percentage Standards Cellulosic biofuel 123 mill gal 230 mill gal 311 mill gal 238 mill gal n/a Biomass-based diesel 1.73 bill gal 1.90 bill gal 2.0 bill gal 2.1 bill gal 2.1 bill gal Advanced biofuel 2.88 bill gal 3.61 bill gal 4.28 bill gal 4.24 bill gal n/a Total renewable fuels bill gal bill gal bill gal bill gal n/a All volumes are ethanol-equivalent, except for biomass-based diesel which is actual. DON T KNOW: longer term Trump plan for biofuel/ethanol mandates & RINs CAFÉ Standards: President Trump announced plans to rewrite requirement of fleet average 36 MPG by 2025 (up from 25 MPG today) DON T KNOW: Exact modifications; California s waiver a special challenge

7 Climate Policy 2 Biggies Trump Administration withdraws from Paris Accord Would end U.S. participation in setting NDCs to stay 2*C below pre-industrial Withdrawal effective: November 2020 DON T KNOW: whether withdrawal will actually occur, or whether Administration will offer substitute climate plans EPA has proposed rulemaking to revoke Clean Power Plan CPP already under Court-ordered stay DON T KNOW whether EPA will offer Inside the Fence power plant emissions rule or simply revoke CPP

8 Environmental Policy & Infrastructure Waters of the U.S. Wetlands Protection Rule: EPA has published a Rule proposing repeal DOI Stream Protection Rule: went into effect 1/19/17 and revoked by Congress in February under Congressional Review Act Sage Grouse Conservation Plans: DOI to amend Obama Administration plans based on Sage Grouse Review Team. DON T KNOW: recommendations Infrastructure: 1. Dakota Access Pipeline: completed 2. Many new LNG terminals authorized beyond 19.2 BCF/D authorized by Obama 3. Keystone Pipeline: Federal permit restored; Nebraska review pending 4. FERC Director quorum restored

9 Renewable Power: Wind & Solar Reversal of Clean Power Plan major negative Federal ITCs remain in place. DON T KNOW: caught in Tax Reform? EVC Tax Credits & Tax Reform? SunivaTrade/Tariff Case: Suniva, bankrupt Georgia solar panel producer, filed petition with U.S. ITC requesting duties of $0.4/watt and $0.78/watt floor price on imported panel Petition alleges China/Asian producers flooding market with below-cost panels If relief granted, benefits U.S. manufacturers but raises costs for project developers Believed to be Net Negative for U.S. Solar industry, but aligns with Trump trade policies DON T KNOW: Decision expected 9/22 w/nov. report to President Trump

10 Energy Super-Power I U.S. to become a Net Energy Exporter, based on: Refined petroleum products (and petrochemicals) LNG and pipeline natural gas to Mexico Reduced net crude imports as light crude/ngls exported Continued coal and electricity exports Integrated North American energy market Most U.S. crude imports from Mexico and Canada Pipeline infrastructure integrating crude, refined products & natural gas flows U.S. allies energy dependence bolstered by U.S. exports, reduced crude imports and low oil/gas prices

11 Energy Superpower II Oil/Gas Exports & Imports Natural Gas: BCF Exports Imports Net (1963) (1311) (671) Crude Oil/Liquids: MB/D Exports Imports Net (11.1) (9.3) (8.4) Refined Product Exports: MB/D Net (8.6) (6.6) (5.4) Source: U.S. Energy Information Administration U.S. Crude/NGL Production MB/D

12 Summary: What We Know, and Don t Yet Know What We Know: New administration is emphasizing growth, job creation, and the enhancement of national power sees energy a key asset In first year, has systematically rolled back Obama regulatory legacy focused on climate, de-carbonization, environment Immediate positive results for Trump goals, building on fracking momentum Major headwinds for Obama legacy priorities What We Don t Know: Protect U.S. solar manufacturers? - at what cost to developers? Any Trump replacement for Paris, Clean Power Plan? Rumors say Yes on CPP What happens are next year issues? CAFÉ, Ethanol/biofuel mandates