An unprecedented presidential election, court battles over
hydraulic fracturing and oil pipelines, Arctic drilling plans and
additional Renewable Fuel Standard drama rounded out the top five US
oil policy stories of 2016.
But rather than just serving to fill out a year-end list, the
biggest policy events of this year are likely to shape the policy
path of the next, perhaps more than ever before.
Here's a look at the top five stories of 2016 and how they will
affect 2017:
TRUMP ELECTION
On November 8, businessman and reality television star Donald Trump
was elected president, an unexpected result that may prove to be the
start of the most significant shift in the direction of oil policy
in decades.
Trump, who made promises on the campaign trail to boost US oil and
gas output and roll back regulations unfriendly to industry, is
expected to be a stark policy departure from President Barack Obama,
who spent much of his political capital over the past four years
pushing efforts to combat climate change.
Whether Trump is successful in repealing those efforts, such as new
rules on methane emissions, remains unclear at the moment, as does
whether the White House can even play a role in how much oil
producers actually drill.
But Trump's picks so far to fill out his cabinet, including
ExxonMobil CEO Rex Tillerson to serve as secretary of state, show
that the Trump White House will likely take a much more
industry-friendly path.
PIPELINE PERMITTING
Trump has promised to quickly approve Energy Transfer Partners'
Dakota Access Pipeline for Bakken crude and TransCanada's Keystone
XL pipeline for Canadian diluted bitumen.
To move Dakota Access, he can appoint a new head of the Army Corps
of Engineers to replace Jo-Ellen Darcy, who called December 4 for a
new environmental review of the project, withholding the final
federal approval the pipeline needed.
The application remains open because Darcy's order did not
officially deny the needed easement to build on Army Corps of
Engineers land in North Dakota.
Reviving the dormant Keystone XL project would depend on
TransCanada's interest in refiling its application based on the
current demand outlook for Alberta's oil sands.
New environmental reviews could take some time, but it would likely
easily receive a permit to cross the US-Canada border with former
ExxonMobil CEO Rex Tillerson leading the State Department.
Trump could accelerate other energy infrastructure projects like LNG
export terminals and natural gas pipelines by pushing agencies to
make quicker comments and decisions.
He will be able to appoint two or three commissioners to the Federal
Energy Regulatory Commission, including its next chairman.
OFFSHORE PLAN
On November 18, the Obama administration finalized the legal
schedule for all offshore oil and gas lease sales between 2017 and
2022.
The plan offers 11 potential lease sales in four planning areas,
including 10 in the Gulf of Mexico and one off the coast of Alaska
in the Cook Inlet.
But the plan also excluded sales planned for the Beaufort and
Chukchi seas and an earlier version of the plan removed a lease sale
planned for the Atlantic Ocean.
On December 20, Obama went even further, designating the majority of
federal waters offshore Alaska and portions of the Atlantic
permanently off limits to oil and gas drilling.
The move, paired with an announcement that Canada would block oil
and gas development from their Arctic waters for at least five
years, was hailed by environmentalists and criticized by industry,
setting up a likely court battle that could play out for years.
President-elect Trump has said he wants to expand the amount of
drilling on federal lands and waters, likely including lease sales
for both the Arctic and Atlantic. But redoing the offshore lease
plan could take as long as three years and the expected legal fight
to undo Obama's prohibitions on drilling in US Arctic and Atlantic
waters could take even longer.
This means that the Trump administration would not likely be able to
hold a sale outside the Gulf of Mexico or Cook Inlet much before
2020.
COURT BATTLES
On June 21, US District Court of Wyoming Judge Scott Skavdahl
overturned Obama administration rules over fracking on federal and
Indian lands, ruling they exceeded the Interior Department's
statutory authority.
The 10th US Circuit Court of Appeals in Denver will hear the Obama
administration's appeal of that decision January 17, with Trump
expected to be inaugurated three days later.
The timing complicates federal regulation of oil production and sets
up a 2017 that likely will be filled with an incoming administration
abandoning appeals or defenses of rules being challenged by industry
groups and states, such as lawsuits against the Department of the
Interior's and Environmental Protection Agency's methane rules. But
environmental groups will likely pick up these cases, meaning the
legal challenges will probably not go away, but the sides could
switch.
BIOFUEL MANDATE
On November 23, EPA said it will require refiners and blenders to
mix 19.28 billion gallons of renewable fuel into the US
transportation fuel supply in 2017, 480 million gallons more than it
proposed in May.
But the next administration's support for biofuels remains to be
seen, after Trump sent mixed messages during the campaign and
appointed Oklahoma Attorney General Scott Pruitt to lead the agency.
Pruitt has sued EPA over various regulations and called the
Renewable Fuel Standard "unworkable."
Iowa Governor Terry Branstad said Trump assured him personally he
would support ethanol, and farm-state lawmakers in Congress are sure
to stand in the way of any attempts to weaken the program.
But Pruitt could decide to reverse EPA's proposal in November to
deny requests to shift the RFS' point of obligation from refiners
and importers to the wholesale rack. In November, he will be able to
set blending levels for 2018.
In Congress, it remains uncertain if the $1/gal biodiesel tax credit
will be retroactively extended after it expires December 31.
Biodiesel producers are lobbying lawmakers to shift the incentive to
domestic producers from blenders in response to rising biodiesel
imports from Argentina and other countries.
--Brian Scheid, brian.scheid@spglobal.com --Meghan Gordon,
meghan.gordon@spglobal.com --Edited by Valarie Jackson,
valarie.jackson@spglobal.com
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