Trump's Energy Policies Not Yet Defined: Kemp

Donald Trump's victory in the U.S. presidential election will trigger a race among journalists, analysts and traders to explain what it means for energy policy and markets.

But the president-elect does not yet have clearly formed policies on most energy issues so the implications will become clear only in the weeks and months ahead as he starts to build an administration.

Energy analysts tend to make the mistake of assuming that everyone thinks about the detail of energy policy as much as they do themselves.

Trump's energy-related policies are probably not even known in detail to the president-elect himself - much less knowable by anyone else.

In contrast to his rival Hillary Clinton, who conducted a classic programmatic campaign, accompanied by highly detailed energy policies, Trump mounted a values-based campaign, with few detailed commitments.

Some of the broad contours of Trump's energy agenda can be discerned from his statements as a candidate and comments made by his advisers.

Trump has promised to end the Obama administration's "war on coal" and overturn unnecessary federal regulations on oil, gas and coal production.

Trump has also promised to overturn the Obama administration's Clean Power Plan, which is being litigated in the courts.

Trump is far less concerned about global warming and climate change than either his rival or the current administration.

He wants to take a much tougher line on Iran, which may include the reimposition of nuclear-related and other sanctions.

Trump also wants big tax cuts and a business-friendly pro-growth agenda, though that is complicated by his instinctive protectionism and hostility to trade agreements.

In general, a Trump administration is likely to be much friendlier towards oil, gas and coal producers, and less receptive to arguments from renewable energy and clean technology firms.

Trump's administration will pay closer attention to the concerns of the American Petroleum Institute and less to arguments from green groups such as the Natural Resources Defense Council.

The rhetoric of energy policy will undergo a transformation as the focus shifts from climate change to energy security and affordability.

But it is much less clear how far and how fast energy policy will change in practice because the incoming administration will face formidable institutional constraints to its freedom of action and difficult policy trade-offs.

CONTINUITY AND CHANGE
The United States is not an elective monarchy, for all the exaggerated attention paid to the occupants of the White House.

The U.S. constitution is one of separated institutions sharing power, and in many areas the president's power is mostly the power to persuade ("Presidential Power and the Modern Presidents", Neustadt, 1960).

Trump's administration must obtain congressional consent if it wants to legislate on energy issues and the Democrats will still have a blocking majority on most issues in the Senate.

The president can issue executive orders and rescind orders issued by his predecessors but in most areas his power is still limited by due-process requirements.

Trump's administration will be entitled to make its own interpretation of statute law, including the Clean Air Act.

But it must still ensure that its interpretations are reasonable and decisions are not "arbitrary, capricious, (or) an abuse of discretion" under the Administrative Procedure Act.

The Trump administration cannot simply rescind or withdraw federal regulations; it will have to undertake a new evidence-based rulemaking process to amend or cancel them.

There is plenty of scope to alter policies towards the production of energy on federal lands, including new leasing rounds, and environmental permitting.

But Trump's administration will have to make the case for its energy policies in the federal courts, where it is likely to be challenged by powerful and well-funded environment groups.

The Obama administration was able to use regulatory powers to help remake the energy landscape mostly because it could persuade the judiciary to agree with many of its statutory interpretations.

There is already a large corpus of judicial rulings on environmental issues which will not disappear and will constrain how much the new president can change domestic energy policy.

Most policies on energy production (including drilling regulations and renewable energy mandates) are set at state rather than federal level.

The president has a lot of power but he cannot remake energy policy on his own, at least not quickly and completely.

The Obama administration, like all its predecessors, has found out the hard way just how difficult it is to push through big changes in energy policy.

FOREIGN ENERGY POLICY
The president's power is greater in foreign policy, where he can draw on the inherent powers of his role as commander-in-chief and chief representative of the United States.

But even here, the president's power is not unlimited, and it depends crucially on his ability to build alliances with other countries to support his goals.

The Obama administration's signature foreign policy, sanctions followed by an agreement with Iran, was made possible because the White House convinced other major powers to back the U.S. policy.

U.S. foreign policy has always been successful and powerful when it can rally allies, and weakest when the United States is isolated.

President-elect Trump may want to reverse all of the Obama administration's domestic and international energy-related policies but in practice may find many of them difficult to alter.

Trump's administration must still deal with the reality of climate change, sluggish global growth, concern about income inequality, and the rising power of China, all of which have challenged the Obama administration.

If Trump wants to be re-elected in four years' time, and most presidents want the vindication of a second term, he must come up with policies to deal successfully with at least some of these issues.

Trump's administration may promise a revolution in energy policy, as in many other areas, but the reality is likely to be messier and involve a lot more compromise.

U.S. energy policy has always involved substantial elements of both continuity and change, and it has rarely been consistent or coherent. The Trump administration will be no different ("U.S. energy policy since 1945", Vietor, 1984).

For that reason, journalists, analysts and traders should be cautious about making firm predictions about what Trump's administration will do in the energy area.

The enormous uncertainty surrounding the Trump administration's energy policies is one reason that oil prices have scarcely moved following the election outcome.

The contours of Trump's energy policy will only become clearer over the next few months as he starts to staff his administration and articulate detailed policy objectives.

It is tempting to assume that a Trump administration would involve a bonfire of energy regulations at home and a complete reordering of energy-related foreign relations abroad.

The result, however, may involve much more compromise as the new president tries to adapt his bold if vague campaign rhetoric to the practical problems of governing. (Editing by Dale Hudson)
 

By John Kemp