Behind Trump pipeline orders, a pledge to deliver energy jobs
He's issued executive orders backing pipelines, and wants to open federal lands and loosen regulations. All that may add jobs in the industry, but market forces are in driver's seat.
Near the top of candidate Donald Trump’s promise list was a revival of jobs in America’s fossil fuel sector, a pledge that helped him forge a presidency-winning message in places like the fuel-producing states of Pennsylvania and Ohio.
Now, in his first week in the White House, President Trump is trying to make good on that pledge.
In two executive actions Tuesday he moved to advance construction of the controversial Keystone XL and Dakota Access pipelines.
This sets the table for other expected Trump efforts on the energy front: lifting some of the Obama administration’s rules and regulations on the industry, opening more federal lands to energy production, and taking steps to help an ailing coal industry.
Even with such moves, though, the reality is that a jobs surge in this sector is tough to achieve. Some new jobs are likely, industry analysts say, but they add that market forces – notably low prices for oil and natural gas – make a boom in oil-patch investment unlikely. Also, amid the price bust of the past two years, energy companies have become more efficient. That means that, even if prices may now be tilting upward, firms can produce oil and gas with fewer people.
Other energy jobs – in solar and wind power – could shrink under an administration that so far shows no enthusiasm for boosting the rise of clean power supplies.
"President Trump's policies will help fossil fuels and hurt renewables," energy research firm Doyle Trading Consultants said in a December report for clients, and "much of the help on the fossil fuel side will help gas rather than coal."
"Pipelines will alleviate bottlenecks in the supply chain, ... lowering oil and gas prices less than people might think," added the Colorado-based firm, which specializes in the coal industry. "Global energy trends will still be in the driver's seat."
The calculus of job creation
In theory, lower energy prices can fuel job creation in the wider economy, by making energy cheaper and more available to everyone from manufacturers to vacationers. But low prices, or worries about future profitability, can make energy firms less eager to drill and mine, and undercut job growth in that sector.
It's an equation that coal workers already know well, as competition from cheaper natural gas has been eroding their employment for years.
"Revitalizing coal industry, of course we would love to see it.... I worry about [Trump’s] promises with the coal industry because the gas is so cheap," says Ben Wilkinson, president of the Utility Workers Union of America System Local 102, which represents workers in coal- and gas-fired power plants in Pennsylvania and several neighboring states.
"I'm trying to give him the benefit of the doubt with what he says, like working for the people," Mr. Wilkinson adds. "As a labor person, seeing his track record and what he did in his professional life, and who he's brought into his cabinet, I have a lot of reservations. But I'm still going to try to be optimistic, and I hope he does the right thing."
Trump pledged on his campaign website an "America First Energy Plan" to "make America energy independent, create millions of new jobs, and protect clean air and clean water.... We will unleash an energy revolution that will bring vast new wealth to our country."
One economic analysis, published by the conservative Institute for Energy Research (IER), has predicted that 2.7 million jobs could be created by opening more federal lands for energy extraction. One-quarter of the jobs would be directly in energy, the rest in other parts of the economy. Most would come down the road, not before the next presidential election.
Other economists have questioned the report's methodology, however. For one thing, its projected energy-job gains are enormous, given current job figures in the industry. About 400,000 US jobs are in oil and gas production, and about 54,000 in mining coal, according to federal statistics, for example.
Opening up federal lands "won't necessarily lead to more wells if natural gas prices are low," says Lincoln Pratson, a professor at Duke University’s Nicholas School of the Environment.
Gas gaining at coal's expense
Nevertheless, gas has displaced coal as the fuel of choice for electric power – not only because of its price but also because of its status as a cleaner fuel, as the American public and investment community press for a lower-carbon economy.
“I don’t know how they will really change those fundamental market forces,” says Susan Tierney, a former assistant secretary for policy at the US Department of Energy. “It’s really a race between [natural] gas and coal. If the new administration and Congress can find a way to change that it would surprise me."
Trump has pledged to “embrace the shale oil and gas revolution,” boosting the industries in part by revoking policies restricting new drilling technologies and by lifting moratoriums on energy production.
Already, since energy companies began applying horizontal drilling techniques to hydraulic fracturing (or fracking) in 2009 the gas industry has taken off. US natural gas production increased 33 percent between 2005 and 2013, according to the Energy Department, and last year it surpassed coal as the country’s largest source of electricity, even though about 95 percent of American coal is used to generate electricity.
Pulling the 'supply' lever
In essence, Trump has promised to do everything in his power to boost the “supply” side of the fossil fuel market, such as by opening new leases and relaxing regulations. The pipelines, too, would add to America's energy infrastructure, allowing US refiners to process Canadian fuel in the case of Keystone. That in turn could lead to exports as well as domestic sales.
But the other half of the free market equation is the demand side, and there presidents are almost completely at the whim of market forces.
Domestically, risks on the demand side have been seen recently in idle fracking wells, as a glut of gas has depressed demand. A May tally of almost 400,000 jobs in oil and gas production is down from a peak of 538,000 in October 2014, according to the US Energy Information Administration.
For oil, the major use is in transportation, and Professor Pratson says that demand from car drivers and truckers looks more stable than poised for big increases.
"The real market is the international market, and there you're up against some heavy hitters, like the Middle East," he says.
For gas, he says a way to influence demand could be by increasing the permitting of liquefied natural gas (LNG) facilities for export. But again the question would be competition from rivals like Qatar, the world's leading exporter.
Trump's promise of reviving the coal industry can be interpreted a variety of ways. If Trump's pledge means saving the coal industry from extinction, experts and industry leaders alike believe he can do that. He just might not be able to do much more.
Some 54,000 people are employed in US coal mining industry today, a decrease from around 173,000 in 1985. Many in the sector accused President Obama of unfairly targeting them and trying to regulate them out of business.
Regulations have played a part. The Mercury and Air Toxics Standards (MATS) rule has contributed to some coal plant retirements, and Mr. Obama’s Clean Power Plan, which now appears likely to be blocked, would impose strict emissions requirements on coal-fired power plants.
Even though the plan isn't in effect (it's now in court), many utilities have switched over to gas-fired plants in anticipation of the rule. His administration’s Waters of the US rule, which limits energy development near waterways, has made mining on private land more difficult. A moratorium on energy production on federal lands made mining on public land harder as well.
Some solace for coal country?
“Trump cannot reverse the damage that’s already been done,” says John Hanou, a coal industry analyst. “He’s going to make it easier for companies to develop energy sources, and then it’s going to be the market that determines what plants run and what plants don’t.”
Coal country politicians and industry leaders have been making similar noises. Robert Murray – CEO of Murray Energy, the largest private US coal company – has asked Trump to “temper his expectations.”
Trump's efforts could delay the scheduled retirements of some coal-fired plants – at least those plants that haven’t already been converted to burn natural gas – and possibly bring some recently retired plants back into operation. This could be particularly helpful to Western coal country, where the coal is cleaner, more abundant, and cheaper to mine.
But while these kinds of announcements could generate good press, like the 1,000-job Carrier deal after Trump’s election, the payoff in terms of actual jobs may be quite limited.
In the swing state of Pennsylvania, for example, there are five recently retired coal plants and six plants scheduled to be retired. Delaying the retirement of the small Beaver Valley plant in western Pennsylvania, slated to shut down in June 2017, would preserve 35 jobs.
Reopening the shuttered Titus coal plant in eastern Pennsylvania, and bringing its workforce back to pre-retirement levels, would create about 50 jobs. Reopening a trio of coal plants that shut down in 2012 and 2013 – the Armstrong, Mitchell and Hatsfield’s Ferry plants – could create close to 400 new jobs.
Reopening the plants would make a big difference to those communities.
Industry experts say the long-term survival of the coal industry hinges on making it cleaner.
“Any attempt to bring coal back that doesn’t recognize the concerns that others have isn’t going to work,” says Richard Reavey, vice president of public affairs for Cloud Peak Energy, a Wyoming-based coal company.
A long-touted avenue for this is capturing carbon emissions and either storing them underground or converting them into other products. The technology has been researched for years, and 21 projects are in operation or under construction around the world. The technology is not yet widespread, however, and both its environmental effectiveness and economic feasibility have faced questions.
Still, in coal country today, many are cautiously hopeful about a fossil fuel rebound.
“Do I think it can come back to the days it once was? I don’t know that I would go that far,” says Duane Miller, deputy director of LENOWISCO, a planning district representing four counties in southwestern Virginia. “But a re-emergence in coal-sector jobs? That’s what we’re hoping for.”
[Editor's note: This story has been updated to clarify the role of energy-job pledges in Donald Trump's election win.]