Trump's reversal of Obama climate-change policies could actually hurt oil & gas companies
You would think a president who appoints the CEO of ExxonMobil and the former Governor of Texas to key cabinet positions would love the oil and gas industry. Perhaps President Trump does, but his latest executive order could amount to an unintentional regulatory shot across the bow of big oil & gas.
When Leonardo DiCaprio and I met with Donald Trump last December, he was surprised to learn that his advocacy of more domestic oil and gas development was at odds with his apparent love of coal. We shared a chart with him that showed 260,000 coal jobs in America in 1980, which dropped to about 100,000 by the time Presidents Reagan and Bush left office 12 years later, not because of government regulation, but because of automation in the industry. The chart also showed that the next big drop, to around 65,000 jobs today, corresponds to cheap natural gas and that coal jobs actually increased slightly during President Obama’s two terms in office.
We also explained the Paris climate agreement to Mr. Trump. He seemed to have a lack of understanding of these issues, which wouldn’t be surprising, given that his experience is in very different industries, but we hoped these lessons would make him realize there is often more to the story than simply “regulation = SAD!”
“[I]f Trump lets pollution from power plants and vehicles off the hook, his administration will likely have to ratchet down even tighter on the remaining sources of carbon pollution, the largest of which include refineries, oil and gas rigs, pipelines, oil tankers in U.S. waters, and gas station pumps.”
The Trump administration now proposes to roll back the Obama administration’s Clean Power Plan (CPP), which would reduce harmful carbon emissions from power plants. The CPP does not specify the fuel that plants should use, just the limits on emissions they must achieve. He is also expected to roll back “CAFE” fuel economy standards for cars and trucks, which not only exist to reduce carbon pollution, but also other emissions like ozone and the fine particles that cause asthma and lung cancer.
So how might Trump’s rollbacks potentially hurt the domestic oil and gas industry? U.S. environmental laws, like the Clean Air Act and Clean Water Act, function largely by the federal government setting health-protective limits on various pollutants, then delegating responsibility to the states for achieving those goals in their region. In the case of clean air, a state must submit a “State Implementation Plan” or SIP to the U.S. Environmental Protection Agency showing how it will achieve clean air and by what date. SIPs are zero sum games — if one of the measures in a SIP falls short or is eliminated, the other measures must make up the difference.
Given that the Supreme court ruled in 2007 that greenhouse gases (carbon) are pollutants as defined by the Clean Air Act (and given that the USEPA has found the public “endangered” by that pollution) any administration is now legally required to adequately address the problem. This means that if Trump lets pollution from power plants and vehicles off the hook, his administration will likely have to ratchet down even tighter on the remaining sources of carbon pollution, the largest of which include refineries, oil and gas rigs, pipelines, oil tankers in U.S. waters, and gas station pumps.
This has happened before — when I was secretary of the California Environmental Protection Agency. In November 2003, California Governor Arnold Schwarzenegger had been in office for less than a day when we got word that Congress was trying to dismantle California’s right to regulate polluting two-stroke engines (used in some boats, lawn mowers, chainsaws and other items). I called Joe Sparano, president of the Western States Petroleum Association (WSPA) and reminded him that if California couldn’t reduce emissions from small, polluting two-stroke engines, but we still had to attain federal air quality standards, then additional reductions would have to come from refineries and other sources already being regulated — sources represented by WSPA. Fearing that additional burden on his members, Sparano helped us oppose the measure and it was ultimately defeated.
The Clean Power Plan and CAFE standards are expected together to cut nearly a billion tons of carbon pollution, but will simultaneously reduce other harmful emissions and thereby benefit the lungs of all Americans, not to mention reducing health care costs. Big oil and gas could do itself, our planet, and our lungs a huge favor by once again opposing a myopic, ill-informed policy, which may well be the first of many coming from the Trump administration.
Commentary by Terry Tamminen, Secretary of the California Environmental Protection Agency in the Schwarzenegger administration. He is president of Seventh Generation Advisors, an operating partner at Pegasus Capital Advisors and the CEO of the Leonardo DiCaprio Foundation. He is also the author of “Cracking the Carbon Code: The Key to Sustainable Profits in the New Economy.” Follow him on Twitter @terrytamminen.
When Leonardo DiCaprio and I met with Donald Trump last December, he was surprised to learn that his advocacy of more domestic oil and gas development was at odds with his apparent love of coal. We shared a chart with him that showed 260,000 coal jobs in America in 1980, which dropped to about 100,000 by the time Presidents Reagan and Bush left office 12 years later, not because of government regulation, but because of automation in the industry. The chart also showed that the next big drop, to around 65,000 jobs today, corresponds to cheap natural gas and that coal jobs actually increased slightly during President Obama’s two terms in office.
We also explained the Paris climate agreement to Mr. Trump. He seemed to have a lack of understanding of these issues, which wouldn’t be surprising, given that his experience is in very different industries, but we hoped these lessons would make him realize there is often more to the story than simply “regulation = SAD!”
“[I]f Trump lets pollution from power plants and vehicles off the hook, his administration will likely have to ratchet down even tighter on the remaining sources of carbon pollution, the largest of which include refineries, oil and gas rigs, pipelines, oil tankers in U.S. waters, and gas station pumps.”
The Trump administration now proposes to roll back the Obama administration’s Clean Power Plan (CPP), which would reduce harmful carbon emissions from power plants. The CPP does not specify the fuel that plants should use, just the limits on emissions they must achieve. He is also expected to roll back “CAFE” fuel economy standards for cars and trucks, which not only exist to reduce carbon pollution, but also other emissions like ozone and the fine particles that cause asthma and lung cancer.
So how might Trump’s rollbacks potentially hurt the domestic oil and gas industry? U.S. environmental laws, like the Clean Air Act and Clean Water Act, function largely by the federal government setting health-protective limits on various pollutants, then delegating responsibility to the states for achieving those goals in their region. In the case of clean air, a state must submit a “State Implementation Plan” or SIP to the U.S. Environmental Protection Agency showing how it will achieve clean air and by what date. SIPs are zero sum games — if one of the measures in a SIP falls short or is eliminated, the other measures must make up the difference.
Given that the Supreme court ruled in 2007 that greenhouse gases (carbon) are pollutants as defined by the Clean Air Act (and given that the USEPA has found the public “endangered” by that pollution) any administration is now legally required to adequately address the problem. This means that if Trump lets pollution from power plants and vehicles off the hook, his administration will likely have to ratchet down even tighter on the remaining sources of carbon pollution, the largest of which include refineries, oil and gas rigs, pipelines, oil tankers in U.S. waters, and gas station pumps.
This has happened before — when I was secretary of the California Environmental Protection Agency. In November 2003, California Governor Arnold Schwarzenegger had been in office for less than a day when we got word that Congress was trying to dismantle California’s right to regulate polluting two-stroke engines (used in some boats, lawn mowers, chainsaws and other items). I called Joe Sparano, president of the Western States Petroleum Association (WSPA) and reminded him that if California couldn’t reduce emissions from small, polluting two-stroke engines, but we still had to attain federal air quality standards, then additional reductions would have to come from refineries and other sources already being regulated — sources represented by WSPA. Fearing that additional burden on his members, Sparano helped us oppose the measure and it was ultimately defeated.
The Clean Power Plan and CAFE standards are expected together to cut nearly a billion tons of carbon pollution, but will simultaneously reduce other harmful emissions and thereby benefit the lungs of all Americans, not to mention reducing health care costs. Big oil and gas could do itself, our planet, and our lungs a huge favor by once again opposing a myopic, ill-informed policy, which may well be the first of many coming from the Trump administration.
Commentary by Terry Tamminen, Secretary of the California Environmental Protection Agency in the Schwarzenegger administration. He is president of Seventh Generation Advisors, an operating partner at Pegasus Capital Advisors and the CEO of the Leonardo DiCaprio Foundation. He is also the author of “Cracking the Carbon Code: The Key to Sustainable Profits in the New Economy.” Follow him on Twitter @terrytamminen.
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