Wyoming’s energy industry looks to Trump
CASPER, Wyo. — President-elect Donald Trump has promised to invigorate the nation’s energy economy, and in Wyoming, that promise resonated.
Wyoming is fundamentally an industry state. Its economy is largely dependent on industry revenue. Coal, oil and gas are the foundation of the lives and livelihoods of many Wyomingites.
But in the aftermath of his win, Trump’s lack of direct policy regarding the energy industry has left a vacuum into which analysts, industry leaders and environmentalists are staring. At this point, much is still conjecture, and all sides admit to uncertainty leading up to the new administration. They also concede that energy is bigger than one man’s term as president.
Coal miners listened when Trump promised to revitalize coal and save mining jobs. But companies are looking at the market with a wider eye.
Coal producers see Trump as friendly to their industry at a time when low prices have already contracted production.
The main way he can help coal is by reducing regulations, such as the coal moratorium on federal land and perhaps the emissions-reducing Clean Power Plan that is now being battled in the courts.
After historically low prices, the coal industry is establishing a new normal for production. Reduced regulations may give the industry some breathing room, said Jim Thompson, who leads North American coal research at IHS Energy, a consulting firm.
The mining industry is hopeful that Trump will make good on his campaign promises to roll back restrictions on coal, said Travis Deti, president of the Wyoming Mining Association.
“He’s given every indication during his campaign that he is going to try and help the industry, and that’s ground for optimism on our part,” Deti said.
The largest coal companies operating in Wyoming are embracing the opportunity of a less regulative White House.
“The American people clearly rejected the overreach of the Obama administration and the onslaught of regulations we’ve seen over the last eight years,” said Rick Curtis, spokesman for Gillette-based Cloud Peak Energy, one of Wyoming’s largest coal companies by production.
Peabody Energy, which operates the largest coal mine in the United States near Gillette, echoed a desire for an administration focused on working with coal and not against it.
However, experts say competition has hurt coal more than regulations have, particularly cheap natural gas, which is taking more and more of the electricity market from coal.
Coal will be around for a long time, as many power plants are still coal-fired or are capable of using both coal and natural gas. But plants being built for future use tend to be natural-gas-fired plants. It’s cheaper to build them, they are more flexible to use and they fit the current trend toward reduced emissions, said Rob Godby, director of the Center for Energy Economics and Public Policy at UW.
It’s impossible to say if renewed support for coal from the White House would change the market pressures coal faces, said Thompson, the coal analyst.
“I don’t think anybody sees (Trump) as instant coffee for coal, but (he) certainly will be seen as an opportunity to get some relief, whether that leads to any renewed construction of coal-fired power plants,” Thompson said. “I think that is a much more difficult argument to make because the economics are just against it right now.”
The long-term approach
Regulatory overreach is a common complaint from industry against the current administration.
President Barack Obama’s agencies increased regulations to a point that businesses felt they couldn’t operate effectively, said Bill Miller, Power Company of Wyoming’s senior vice president for energy and land resources.
Trump has promised to unleash energy resources on public lands, and industry has responded favorably to the opportunity.
Economists are more doubtful, particularly in Wyoming.
Restrictions could pave the way for more production, but that might not be good news for Wyoming, said Godby, the UW economist.
Greater production will further depress the price of oil, he said.
“I certainly see how it is in the interest of an individual producer, but what they miss is the larger market,” Godby said. “OPEC is certainly not cheering about it. Oil prices went down with [Trump’s] presidency.”
The reality is that increased U.S. oil and gas production was a factor in the latest bust, he said. It was America’s unprecedented production that threw the market out of balance.
“It only takes a surplus of 1 million barrels a day on the world market to cause this disturbance, where prices have fallen by half from two years ago,” Godby said.
However, companies are also looking at investments that have 30- to 50-year lifespans. They are looking at opportunity and economic growth for their companies that supersede the politics of one or two presidents, he added.
Further, oil and gas companies are aware of the tenuous balance of supply and demand, said Miller, of the Power Company of Wyoming.
They hope Trump builds an environment for companies to become more efficient and respond to the market cycle as they always have, he said.
If Trump opens more opportunities for drilling and production, there will have to be a similar increase in demand and economic growth to keep the price of the commodities from tanking, he admitted.
Trade is also a consideration. Trump has promised to renegotiate tougher trade deals, relationships that currently benefit the U.S.’ commodity markets, Godby said.
“If he follows through with trade restrictions with Asia in particular, which is what he threatened, that could really reduce demand in Asia,” Godby said. “It would slow their growth, so more depressing effects on prices.”
Growth in Asia has stoked coal demand. Meanwhile, multinational climate policies have led to self-imposed caps on coal production by the Chinese, which has drawn down the stock of coal worldwide. Both of those things could be hurt if Trump makes good on some of his promises.
Trade wars don’t increase growth — they stifle it, Godby said.
Climate change and policy
Not everyone is ready for Trump to roll back regulations on emissions, some of which were hard-fought wins for environmentalists. Those in favor of reducing greenhouse gas emissions are waiting to see what the Trump presidency brings.
“We have yet to see a concrete policy proposal from the incoming Trump administration, something we can respond to or react to,” said Shannon Anderson, a member of the Powder River Basin Resource Council. “There is a lot of uncertainty about what could actually happen.”
Trump recently appointed a lead climate change denier to oversee the EPA’s transition, and some see him as a likely candidate to lead the agency under Trump’s administration. It has caused some to fear an anti-environmental stance from the new White House.
Wyoming used to lead the way in denying that climate change is caused by people, but that is not the full picture, Anderson said.
“Our day-to-day folks out there on the ranch, they see the climate changing, they see it happening. It’s 60 degrees outside, and that is not normal,” she said. “What the cause is, and how to actually respond to it, there are some differences there … the solution part has always been the hardest.”
It is not just environmentalists working to reduce emissions.
Coal companies are looking at cleaner ways to burn. Investors are favoring natural gas for the same reason, because with or without Trump, the movement away from greenhouse gas emissions has already begun.
Cloud Peak Energy’s CEO consistently refers to the reality of climate change. The day after Trump won the election, Cloud Peak’s spokesman echoed that commitment.
“Cloud Peak Energy continues to advocate for a sensible solution to carbon emissions through carbon capture technologies—a solution that officials from both parties have endorsed,” he said.
Much like one president can’t change the market, one administration can’t roll back years of court cases, Godby added.
“Changing energy policy drastically is really hard,” said Godby, the professor at UW. “You can roll back some regulations. But just because you have the power to nominate a Supreme Court nominee doesn’t mean you can reverse a whole bunch of laws that have previously been upheld in the courts. President Bush found this out, President Obama found this out and President Trump will find this out.”