FORBES - How Gorsuch Could Mean Change For U.S. Energy Sector


Change is in the offing in Washington, especially energy and environmental policies -- and potentially with a new U.S. Supreme Court nominee who may try to nullify existing rulings. But such a revolution requires widespread support, which President Donald Trump does not have — best evidenced by his loss in the popular vote by 3 million and the angst he has already created.

The president, though, could spark a subtle evolution, or the freedom to explore for more oil, gas and coal and to be able to more easily transport those fuels that is more in line with his campaign promises. His pick to fill a seat on the Supreme Court, Judge Neil Gorsuch, would likely facilitate those objectives from a judicial point of view. Given the escalating demand for natural gas, there is in fact a need for more pipelines. And given the country’s desire to use domestically-produced oil, the same may be true for pipelines lines headed out of shale-oil rich North Dakota.

But neither the Supreme Court nor the Executive Branch can help coal compete with natural gas, which at $3.25 per million Btus is tough to beat for nearly every fuel used to power electric generation. In a note, Bloomberg New Energy Finance says that coal use will remain flat not because of regulations but because of cheap natural gas.

“Natural gas is very competitive,” says Nicholas Potter, vice president of Commodities at Barclays, at a Bloomberg Intelligence web conference. “There is still room for gas to grow.”

However, if the Clean Power Plan is tossed by the Supreme Court -- now tied at 4-4 -- it would then have an effect on natural gas markets. Given that natural gas has about half the carbon emissions as does coal, it has become the immediate beneficiary of a national policy to cut carbon emissions.

Without that strategy, natural gas use falls by 11% by 2030, says the U.S. Energy Information Administration. Pipeline operators like EQT Corp., Spectra Energy, Dominion Resources and Duke Energy would thus get hurt, says Bloomberg.

At the same time, the coal sector can only hope that some utilities would keep certain coal-fired plants alive. That would then change the dynamics of the grid, Bloomberg says, especially in Texas and in the PJM Interconnection that encompasses a 13-state region in the Mid Atlantic and Midwest. That may throw a blanket to certain coal developers but it would burn utilities that rely on alternative fuels like Berkshire Hathaway and Consolidated Edison.

“Utilities have built gas plants and they will use them,” says Kit Konolige, senior utilities analyst for Bloomberg Intelligence. “The momentum is already there … Trump will be more supportive of building gas pipelines. But getting from a theoretical standpoint to actual construction is a different matter.”

So how does the Trump theory of running an energy economy comport with that of the developed and the developing world? Both the European Union and Japan have said that they will remain committed to the Paris climate accord that seeks to curb carbon emissions and to limit global temperature increases. But neither one said it was willing to pick up the slack if the United States either withdrew from the deal or cut back on its commitments.

Among those obligations, by the way, is one affirmed by President Obama that would give $3 billion over four years to help developing countries incorporate more clean energy and new technologies. Trump has said that the money would be better spent in this country, developing such things as advanced coal plants.

China, meantime, ratified the Paris agreement in September alongside the United States. At the World Economic Forum in Davos in January, China’s President Xi Jinping said that his country will help lead the charge if the U.S. reneges. To that end, China has promised to invest $360 billion in renewable energy through 2020 while at the same time suspending 100,000 megawatts of coal capacity, says Bloomberg New Energy Finance.

India, too, is bucking up and says it will assume more responsibility.

If the United States pulled out of the Paris accords, it would have to give notice. At the same time, if the American court system upholds the Clean Power Plan, it will be difficult to wipe it off the books, although the Trump administration could choose not to enforce the law. And if that is the case, plenty of interest groups, and some states such as New York and California, have said they will use the judiciary system to compel such compliance.

Federal Judge Gorsuch of Colorado, though, may change the calculus. Progress Now in Colorado says that the nominee would set back environmental causes. Meantime, NextGen President Tom Steyer said that the U.S. Senate owes "no deference" to Trump, who lost the popular vote. 

As a practical matter, the United States is more than halfway to meeting the goals of the Clean Power Plan, which is to cut carbon by 32% by 2030. Altering that course may help the coal sector at the margins but it will assuredly put a dent in the natural gas sector that Trump has also pledged to assist. What now?

“The wheels to change policy take time,” says Rob Barnett, analyst with Bloomberg Intelligence. “Reversing direction is a different matter altogether.”

The storm by which Trump has assumed the White House will eventually peter out. The same is true for the energy and environmental policies promised by the president, despite his nomination of Gorsuch. To get ahead, Trump must have popular backing and market support, both of which he clearly lacks.

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