Trade

Oil industry falls out of love with Trump

HOUSTON — The oil and gas industry’s relationship with President Donald Trump is cooling off.

The administration’s 25 percent steel tariff, hostility toward NAFTA and fumbled efforts to lift restrictions on drilling are worrying executives, who have praised the president’s war on regulations but loathe uncertainty and nationalistic trade policies.

The tariff was a source of angst at a major energy industry conference this week in Houston. Executives fretted that higher steel prices could stifle projects needed to help the U.S. — the world’s biggest oil and gas producer — feed the global thirst for energy as a rising force in the export markets.

“We don’t think it would be appropriate to put a tariff on something you can’t buy in the United States,” said Greg Armstrong, CEO of Plains All American Pipeline, who worries it will become too hard to find the steel valves or other pipeline equipment the company needs. “That really kills the project.”

One company hoping to capitalize on the global appetite for natural gas, Freeport LNG, said its new Texas plant required 190 miles of new pipeline — and Trump’s tariffs would have been devastating had they been in effect at the time.

The tariff moves are also unsettling senators in energy states who have backed Trump’s moves for the sector.

“We have seven Eiffel Towers’ worth of steel,” Freeport LNG chief Michael Smith told the conference, known as CERAWeek. “This thing would cost a few hundred million dollars more if we had to pay 25 percent more than what we did.”

The tariff moves are also unsettling senators in energy states who have backed Trump’s moves for the sector. Alaska Sen. Lisa Murkowski said the tariffs could add up to half a billion dollars to the price of a proposed 800-mile pipeline the state has long wanted to jump-start its natural gas production.

“This is not coming at a good time for us,” Murkowski said at the energy conference in Houston.

The industry’s top lobby group, the American Petroleum Institute, is sending its executive committee to the White House next week — a rare move by the group as it seeks to help the president “understand what the industry wants,” one source familiar with the meeting told POLITICO.

An oil pumpjack works at dawn in the Permian Basin oil field in Andrews, Texas | Spencer Platt/Getty Images

Seeking to calm the sector’s nerves, Interior Secretary Ryan Zinke and Energy Secretary Rick Perry flew to the conference and reiterated the administration’s support for higher oil and gas production.

“The thing I heard from businessmen and women most often while I was the CEO of this state was the regulatory stability,” Perry, the former Texas governor, told reporters in Houston. “The predictability of the regulatory world — that was where the real long-term effect could be positive or negative. That’s what the president’s intent is.”

But Perry himself roiled the energy world late last year with a now-jettisoned plan to prop up struggling coal-fired and nuclear power plants — a move that would have aided Trump’s supporters in the coal industry but harmed natural gas producers. Like Trump’s tariffs and attempt to renegotiate NAFTA, Perry’s proposal raised questions about the administration’s commitment to free markets, long a hallmark of GOP policies.

Meanwhile, Zinke’s shifting plans on opening federal waters for drilling, controversial moves to shrink the size of national monuments and attempts to ease restrictions on land use in Western states have drawn sharp legal challenges — making companies wary of venturing into new areas.

In January, Zinke proposed opening nearly all federal waters off the East, West and Gulf coasts to oil exploration — but quickly backtracked and promised to take Florida’s waters “off the table” moments after a hastily scheduled meeting with Republican Gov. Rick Scott. After several other governors pushed to exclude their states, Zinke has said he was open to shrinking his proposal even further.

He also opened the door to rewriting Obama administration policies that had blocked off stretches of California’s deserts available for mining and recreation and had restricted energy and mineral operations across the multistate habitat of the greater sage grouse.

“Business people do not mind following rules, they just cannot handle uncertainty when the rules keep changing” — Sally Jewell, former Interior secretary

Obama’s second-term Interior secretary, Sally Jewell, argued that Zinke’s moves only created confusion for energy companies about where they will be allowed to operate.

“Business people do not mind following rules, they just cannot handle uncertainty when the rules keep changing,” said Jewell, a former petroleum engineer who headed retail chain REI before taking the helm at Interior. She said people in the industry have been complaining to governors and Interior officials about the changes to the sage grouse policy, for example.

“They’re hearing from oil companies saying, ‘I thought we had a deal,’” Jewell said. “They’re investing, they’re putting in work, they don’t want to be going back to the planning stages. It costs them a lot of money.”

Some industry experts said companies are also feeling whiplash from the administration’s stab at rolling back Obama-era regulations on fracking and natural gas companies’ methane emissions. That fight has been raging for over a year — and it’s just one of several environmental rule revisions where the Trump administration has faced legal setbacks.

Trump in the East Room of the White House | Pool photo by Andrew Harrer/Getty Images

For companies interested in exploring on federal acreage in Wyoming, Colorado and other states west of the Rockies, the frequent jockeying between Interior and the courts is unsettling, said Bernadette Johnson, vice president of market intelligence at Austin-based energy advisory firm DrillingInfo.

“Are you going to expend capital when the rules go back and forth daily?” Johnson said. She added: “You could have a rollback tomorrow. Or a court ruling. It certainly is a piece of the puzzle when you think, ‘Do I put rig here or go to Texas?’”

Those questions are crucial in an industry that carefully forecasts its costs for projects that often take years to execute. U.S. oil and gas companies are expected to hike their spending on exploration and production in North America by more than 20 percent this year to $116 billion, according to forecasts from Barclays analysts.

Other companies are less worried — regarding the legal fights as background noise and confident they can comply with whatever the administration finally settles on.

“The industry is faster than government,” Pioneer Natural Resources CEO Tim Dove told POLITICO. “Industry is ahead of the rules in this case.”

Original Article

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