NEW ADMINISTRATION, NEW REGULATIONS

December 22, 2016

When Donald Trump takes office as the 45th President of the United States on January 20, 2017, he will undoubtedly usher in a number of policy changes. With the Republican Party also firmly in control of both houses of Congress, those changes may be quick and significant. In particular, President-elect Trump will hold the power to massively reshape both the oil and transportation industries in any number of ways. While some of his administration’s specific policy goals remain uncertain and ill-defined, it’s possible to begin piecing together a clearer picture of how these industries will change under his leadership.

THE RETURN OF THE PIPELINE

In recent years, several high-profile oil pipelines – most notably the Keystone XL and Dakota Access pipelines – have foundered as landowners and other interested parties have launched legal challenges and protests against the projects. President Obama has also generally sided with pipeline opponents, but that is likely to change under a Trump administration. The President-elect has repeatedly vowed to make the pipelines a priority during his first 100 days in office, with a particular focus on reviving the stalled Keystone XL.

Though many opponents remain intransigent, and some of the pressure to finish the Keystone pipeline has been alleviated by the use of other Canadian pipelines and railroads, Keystone is likely to see a resurgence once Trump has taken office. The Dakota Access project is less clear, in part because of conflict of interest concerns arising from Trump’s business ties to the company behind the pipeline. Nonetheless, it remains clear that pipeline projects are likely to be embraced and facilitated during the next four years. That should be welcome news to the midstream sector of the oil industry.

DOUBLING DOWN ON DRILLING

One of the hallmarks of President-elect Trump’s energy policies is the emphasis on exploiting the oil reserves of the United States to their fullest capacity. That means, among other things, a renewed push to drill at greater volumes and to drill in areas that currently remain off-limits. In particular, many offshore areas in the Atlantic, Pacific and in Alaska’s Arctic refuge, as well as other lands currently under federal protection, may soon be opened to drilling if Trump has his way. Drilling in the Arctic National Wildlife Refuge is likely to be among the highest priorities, as the state of Alaska has been hit hard in recent years by falling oil prices and sagging in-state production. Deep-water areas in the far eastern Gulf of Mexico may also be a target, as even President Obama had signaled a willingness to open the region in the months before the massive Deepwater Horizon oil spill.

Such a widespread increase in drilling and production is likely to bring a mixed bag of results. Local and regional economies may benefit from an infusion of spending, but additional oil production could exacerbate an already serious global oil surplus. It’s also unclear how increased production may be viewed by OPEC and its member nations, which recently struck a deal to curb their output in an attempt to stabilize the markets and ease the surplus.

ROLLING BACK REGULATIONS

One policy detail that should be welcome news for both the oil and transportation industries is the push for deregulation, as Donald Trump and the Republican-controlled Congress have each made the issue a clear priority. In detailing his energy policy, the President-elect pledged to scrap “any regulation that is outdated, unnecessary, bad for workers, or contrary to the national interest,” reiterating his belief that the energy policies of the Obama administration have represented “death by a thousand cuts” to the energy and transportation sectors.

While few specific regulations have been singled out, Trump has often leveled his strongest criticisms at the Environmental Protection Agency. That’s unlikely to change in the near future given the nomination of Scott Pruitt to head the agency. An outspoken critic of the EPA and its activities over the last eight years, Pruitt is likely to set about quickly and decisively reversing many of the agencies policies and activities if he is confirmed to the position. Everything from carbon emission regulations to overtime laws may soon be on the chopping block – resulting, according to the President-elect, in much less red tape and fewer legal obstacles standing in the way of smooth and profitable business operation.

SHIFTING GEARS ON TRUCKING

When it comes to transportation, and the trucking industry especially, the election of Donald Trump presents a murky vision of the future. One of the hottest topics is sure to be recent mandates pushed by the Federal Motor Carrier Safety Administration. The most controversial of the FMSCA’s mandates is the proposed requirement that all new Class 8 trucks be fitted with speed limiters as a safety feature. Many in the industry are wary of the rule proposal, believing that such a regulation could exacerbate a projected truck capacity shortage by causing trucks travel more slowly and unnecessarily lengthening transit times. As with a number of other controversial mandates, the proposal is likely to be met with resistance from the Trump administration and is expected to be heavily modified during the evaluation process – if it passes at all.

One area in which Mr. Trump has been especially vocal is his desire to launch broad new infrastructure spending initiatives, rebuilding aging roads, bridges and tunnels and expanding the nation’s highway system to better serve today’s transportation needs. Such initiatives would represent a tremendous boon to virtually all sectors of the transportation industry, as well as many other industries that rely heavily on transportation, but they also come with a downside: massive spending increases require massive revenue increases. Since Trump has pledged not to increase the deficit to fund such projects, his plan focuses on generating P3 (public-private-partnership) infrastructure projects, where private industry funds and builds the infrastructure in exchange for ongoing toll revenues. While potentially a boon for the federal budget, these P3 infrastructure projects may result in increased tolls and other fees that could hit carriers and their drivers hard.

For better or worse, the election of Donald Trump and the shift in power toward Republicans at all levels of government signals what is likely to be a significant change in the relationship between government and industry. The next four years are likely to usher in an era of less regulation, greater emphasis on exploiting America’s natural energy reserves even as green energy and other alternatives continue to become cheaper. The ultimate impact of these changes remains far from certain, but both the trucking and oil industries have good reasons to be optimistic.


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