In just thirteen words, a US judge has summed up the problem with almost everything that’s happened since Donald Trump became US President: “I think the government hasn’t had a full chance to think about this.” That was how Judge Ann Donnelly of the federal district court in Brooklyn summed up the situation that erupted over the weekend when airports began to implement the now infamous Muslim Ban.
Which by the way President Trump says isn’t a Muslim Ban, and is working “very well.”
But let’s look closer to home at decisions which impact on the industry. Using the powers of the Executive Order, he brought back the Dakota Access and Keystone XL projects.
With the Dakota Access decision, his intention is to allow the development of a 1,100-mile pipeline to transport 450,000 barrels a day from the Bakken fields of North Dakota to Illinois. For months now there have been clashes between protesters and private security forces, as those against the completion of the project refuse to stand aside. It’s around 75% there and only the crossing of Lake Oahe remains.
The tribespeople argue that the pipeline has the potential to burst or leak and contaminate their water supply. The chairman of the Standing Rock Tribe David Archambault II wrote to President Trump, warning him not to use his own power alone. “This change in course is arbitrary and without justification. The law requires that changes in agency positions be backed by new circumstances or new evidence, not simply by the president’s whim. The problem with the Dakota Access pipeline is not that it involves development but rather that it was deliberately and precariously placed without proper consultation with tribal governments.”
While new evidence in support of the pipeline is lacking, there is also the issue that the US army corps of engineers is currently undertaking an environmental impact statement prompted by the warnings that the pipeline could poison a water supply not only for the tribe but also millions of people living nearby. This enables authorities to explore different potential routes. President Trump has asked the army to think about dropping the review, and “take all actions necessary and appropriate” to speed up the development – the implications of which do nothing to counter Donnelly’s argument that people have not had a chance to think about this.
Furthermore, as reported in The Guardian, “Trump has held a stake in Energy Transfer Partners, the Texas-based company behind the Dakota Access project. The investment was disclosed last year but Trump’s spokesman has said, without providing evidence, that the president has sold his stake in the business and therefore removed the potential conflict of interest.”
As vox.com notes, an approval of some pipeline appears likely – it’s just which route. And a disconcerting question about why President Trump is refusing to consider a route that won’t risk drinking water. (At this point, we are reminded of the fact that the guy who predicted the housing bubble collapse in 2008 Dr Michael Burry, who made $1bn betting against Wall Street, is now focussing all his trading on one commodity – water.)
Moving to Keystone XL now. We’ve previously discussed how this was a priority for Republicans under the Obama administration and even though Josh (not so) Earnest said it was “certainly possible” that the then president would change his mind, he didn’t. Obama argued it would undermine America’s “global leadership” on climate change. President Trump, a man with bigger things on his mind than climate change (a ‘concept’ he once ascribed to the Chinese as a means of waging industrial war on America) overturned that in just five days.
This 1,179-mile pipeline would carry 830,000 bpd of Alberta’s oil sands product from Hardisty, Canada to Steele City, Nebraska. In typical form, he’s asked the State Department to approve this plan in no more than 60 days.
“If we can get that pipeline built. A lot of jobs; 28,000 jobs. Great construction jobs,” he said. However the State Department which reported on the proposal under Obama came up with a different figure when it looked into it. It suggested there would be between 2000 and 4000 direct construction jobs, depending on how long the project took to complete. Once complete, 35 people would be needed to maintain it, with 15 temporary jobs. Interestingly the company that is behind the pipeline, TransCanada, didn’t dispute those numbers.
As with all things Trump, there is no excuse for surprise when he does things he always said he would do. Even though the Pew Research Center reported that 65% of Americans believe renewable energy should be prioritised over fossil fuels, Trump campaigned on getting the coal miners back to work. He also came out with his America First strapline, with all the ghastly echoes that brings, and a natural step was for the President to decree through a third Executive Order on the same day that all new and upgraded pipelines in the US would “use materials and equipment produced in the United States, to the maximum extent possible and to the extent permitted by law.”
This potentially poses a problem for TransCanada as only about 50% of the pipe suppliers were American. The rest came from Italy, India and Canada. Good job they’re not on that ban list. (Yet. Did you see what Trudeau was tweeting at the weekend? Lolz.)
Of course, Trump’s support for the coal workers may prove to be his trickiest sleight of hand. He vowed to resurrect the industry but overlooked the fact (perhaps because he didn’t have time to think about it) that the reason that the US coal industry has declined in recent years is precisely because the US natural gas industry blew up the market. Competition caused by increased production led to reduced prices and people turned their backs on coal. The much-repeated insistence that the new administration would remove cumbersome regulatory burdens will not support coal – they would enable oil and gas supply in the States to increase.
A report issued by Goldman Sachs last week suggested that if the two new pipelines go ahead, US oil output could rise by 1.5m bpd in 2018, which would almost double its current projection. As we know higher oil production usually means higher gas production too.
The next natural step is to wonder what impact this will have on the fledging deal struck by OPEC and some non-OPEC countries. How long will they abide by an agreement to cut production when the US sails ahead and puts America First? No-one’s going to want to come in last, and that is going to make for a rocky time ahead. If only there’d been time to think about that first.