Market watchers anticipating drastic changes in energy regulations under President-elect Donald Trump should temper their expectations, according to Kevin Book, managing director at ClearView Energy Partners.
Book said Trump and the Republican-controlled congress have their plates full with an ambitious agenda that includes a Supreme Court nomination, tax and immigration reform, repealing Obamacare and devising a massive infrastructure spending package.
That leaves little time to roll back the Obama administration’s many regulatory initiatives aimed at reining in climate change, he said. Book sees Congress taking aim at relatively recent rules that limit coal mining near waterways and flaring natural gas on federal land.
The biggest immediate change Trump can make would be to enforce existing regulations less stringently, Book said. That could include expediting lease applications for oil and gas drilling on federal lands.
“In the end, it’s going to go further than environmentalists want, but probably not nearly as far as Republicans hope,” Book told CNBC’s “Squawk Box” on Thursday.
Book noted that Trump has nominated a slate of “fossil energy-friendly” nominees, including former Exxon Mobil CEO Rex Tillerson for Secretary of State, Oklahoma Attorney General Scott Pruitt for Environmental Protection Agency administrator and former Texas Gov. Rick Perry for Energy Secretary.
If confirmed, those men will likely hold off when they have the option of taking regulatory action, but that won’t solve market-based problems in the U.S. coal and oil industries.
“The problem is that standing back on coal, for example, can ease some of the pain, but it can’t cure the sickness,” he said.
The U.S. coal industry has seen a wave of bankruptcies and mine closures in the face of falling demand, a global glut of coal, and international efforts to reduce carbon emissions. Trump has vowed to put coal miners back to work by easing regulations and ending Obama’s moratorium on mining on federal land.
However, U.S. coal production has fallen not primarily because of regulations, but largely because it can’t compete with cheap, cleaner-burning natural gas. Cheap coal from Wyoming has also put pressure on Appalachian miners.
Trump has said he wants to simultaneously increase both oil and natural gas production, but energy economists say that would only further eat into coal’s share of the market. The International Energy Agency says the U.S. coal industry needs to close more mines and consolidate in the coming years before it can return to health.
U.S. shale oil drillers also face a daunting global oversupply of crude that has kept prices low for more than two years, Book noted.
“Changes can happen tomorrow, but the market’s a slow ship to turn,” he said.