While uncertainty lingers, there’s increasing clarity about how energy policy would take shape under a Donald Trump presidential administration. In May, Trump spoke in North Dakota presenting the case to open up more land to oil and gas drilling. Elaborating on this strategy, fracking mogul Harold Hamm, reportedly the top candidate for Energy Secretary should Trump win in the fall, spoke before the Republican National Convention in Cleveland on Wednesday, further articulating the benefits of limiting regulations on the oil and gas industry and describing domestic production as a way to fight terrorism.
Hamm, the CEO of independent Continental Resources, argued oil is the strongest geopolitical weapon the U.S. has and importing oil from overseas funds terrorism, giving urgency to boosting U.S. domestic production in order to achieve “energy independence.”
“President Trump will release America’s pent-up energy potential, get rid of foreign oil, trash punitive regulations, create millions of jobs, and develop our most strategic geopolitical weapon: Crude oil,” Hamm said.
“Every time we can’t drill a well in America, terrorism is being funded,” Hamm told the convention. “Climate change is not our biggest problem. Terrorism is.”
Fracking mogul Harold Hamm, reportedly the top candidate for Energy Secretary should Trump win in the fall, articulated the benefits of limiting regulations on the oil and gas industry and described domestic production as a way to fight terrorism.
Hamm, whose company is active in the Bakken oil fields in North Dakota, noted that the U.S. has more reserves than Saudi Arabia and Russia and that the country’s goal should be to double production, which would “put America in a league of its own.” He added: “Donald Trump will restore America’s rightful place as energy leader of the world.”
Norwegian consultancy Rystad recently said that the U.S., when including recoverable oil from existing fields, discoveries and yet undiscovered, holds 264 billion barrels, above giants such as Saudi Arabia and Russia. But the estimates are disputable. BP, in its latest Statistical Review of World Energy 2016, put U.S. reserves much lower at 55 billion bbl at the end of 2015, well below Venezuela, Russia, the Saudis and other Gulf states.
During his speech, Hamm pointed out that petroleum imports have dropped dramatically during Obama’s two terms. He argued, however, the improved energy security occurred in spite of Obama, not because of him. Obama had very little to do with this output surge, but he also didn’t put together forceful regulations at the federal level to undermine the growth. His main attempt to regulate fracking included rules for activity federal lands, which would affect only a fraction of overall U.S. production, but the law was blocked by a federal judge. Critics will also note his flip-flop on opening the federal Atlantic Outer Continental Shelf (OCS) to development.
The Republican platform adopted at the convention calls for an aggressive drilling strategy, moving federal rules to the state level in order to speed up permitting, and limiting environmental regulations.
The biggest fight on the oil and gas side during the presidential race and beyond will surround regulation of fracking.
The biggest fight on the oil and gas side during the presidential race and beyond will surround regulation of fracking. Environmentalists contend that the process of fracking contaminates wells and uses excess water. Democratic candidate Hillary Clinton has said that she will crack down on fracking, but she overestimates presidential authority in this area. The oil boom during this decade took place mostly on private lands. As a result, the president has little authority over production, particularly since most regulation takes place at the state level.
Pioneer’s Sheffield: Industry needs better messaging
Sheffield said that the key for the industry is to better educate policymakers no matter who wins.
One of Hamm’s peers in the shale patch, Scott Sheffield of Pioneer, had a different message this week while speaking in Washington. During a Q&A at the Center for Strategic & International Studies (CSIS), Sheffield said that the key for the industry is to better educate policymakers no matter who wins. Throughout his four decades in the oil world, the industry has done a poor job in messaging, Sheffield said. When asked about whether oil companies would support Trump during the 2016 election, he did not endorse either candidate but said the industry, during his career, has performed better under Democratic administrations than during times Republicans held the presidency. He highlighted the massive industry growth and stellar stock performances from 2009-14 after Obama took office, pointing out the irony of how well oil and gas companies faired under a Democratic president.
Despite the strong performance for the first half of this decade, the oil industry is hurting now as a result of low oil prices from a global supply glut. OPEC’s decision in November 2014 to not throttle back to lift prices has taken a major toll on U.S. oil companies, particularly independents that produce shale. U.S. oil production is now at 8.5 million barrels per day, up from 5 mbd in 2008, but down from 9.7 mbd reached during April of last year. While the new president will surely matter for the industry, a price recovery will be more important for its performance during the next four years, and beyond.