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Trump Appears to Be Picking Pro-Energy Cabinet

Trump Appears to Be Picking Pro-Energy Cabinet

One interesting thing we can gleam so far is Donald Trump appears to be picking a very pro-energy cabinet. Mr. Trump has selected numerous potential cabinet members with ties to the energy industry or who are known to be favorable to oil and gas.

As I have written about in the past, it is my firm personal belief (you may disagree), that energy jobs are some of the most important jobs in the country. And I am not just saying that because I benefit from this industry. Forgetting the strategic importance of U.S. oil and gas to our national defense and ability to remain independent, I believe in an economy driven primarily by middle class spending. The energy industry offers high paying jobs that allow families to not just enjoy substance but even abundance, often without advanced degrees. Their economic spending (think Ford 150 and new bass boat) further spurs economic development in other areas of the economy. While the car industry used to be that for America, that ship sailed a long time ago (for the most part).   Energy is now what drives high paying jobs to preserve America’s middle class.  

So, I find it very interesting (and hopefully beneficial to our industry), that Mr. Trump has picked what appears to be a very pro-energy cabinet. Let’s start with the big one – Exxon CEO Rex Tillerson.

Rex Tillerson (SecState)

As head of one of the largest oil companies in the world with operations spanning the entire globe, Mr. Tillerson is probably well informed about different governments around the world and used to navigating government regulations and bureaucracy. He is clearly an experienced negotiator as Exxon has negotiated with many foreign governments for drilling rights, amongst a myriad of other issues that come up when one wants to extract oil in foreign lands. He manages a $360 billion global company with operations in 50 countries. By contrast, the State department has a budget of $65.9 billion dollars. I think he’s up to the task.

Some have criticized that Exxon has done deals with Russia and that he has apparent close ties to Mr. Putin. Personally, I think that as a CEO operating in Russia, he would be foolish not to befriend Mr. Putin if he has the chance. In fact, that is arguably one of his selling points – he is used to negotiating and getting what he wants out of foreign governments. The fact that he has befriended a few world leaders along the way is positive (in my opinion).

While I have read pieces indicating that he will certainly be good for Exxon, I think his knowledge and familiarity with our industry will mean that he understand some of the geopolitics that inherently drive oil and will be positive for the entire oil industry. For example, I suspect that he will have a good idea on how the U.S. can use its energy policy to positively impact trade negotiations between the U.S. and China.

Scott Pruitt (EPA)

Current Attorney General for the State of Oklahoma, Mr. Pruitt has ben a vocal critic of the EPA. Mr. Pruitt views the current EPA as pursuing an activist agenda and joined with 27 other states to sue the federal government over implantation of regulations aimed at combating climate change. He argued that those regulations violate citizens' property rights and stifle the oil and gas industries that largely drive his state's economy.

As a lawyer, this argument fascinates me. But I will save that for another day. I know at least one of our readers is like me – a lawyer who took over the family business. To get into the merits of this argument is something you spend an entire semester of constitutional law in law school trying to figure out. Suffice it to say, he is definitely a friend of our industry and we can pretty safely assume he will be less apt to strictly enforce regulations that may be detrimental to exploration and production.

Ryan Zinke (Secretary of Interior)

Congressman Zinke is an ex-Navy SEAL commander who earned two Bronze Stars for his combat missions in Iraq. He was a member of the Armed Services and the Natural Resources Committees in Congress.

Contrary to popular thought (I had to admit, I didn’t know), the Department of Energy has very little to do with shaping the Nation’s energy policy (more on that below). However, the Department of the Interior oversees energy exploration on all public lands and waters in the U.S. That is tremendous. That means they control the regulations for offshore drilling. On land, the Bureau of Land Management (part of the Department) controls 250 million acres of Federal land, and the National Park Service, which covers an additional 84 million acres of national parks, monuments, and historic sites. To put this into further perspective:

Federal government estimates place total U.S. oil resources, in addition to proved reserves (about 40 billion barrels at the end of 2014), at more than 120 billion barrels, including roughly 30 billion barrels onshore  and 90 billion barrels offshore.  Now, not all of these areas are attractive. The waters off the west and east coasts are estimated to hold nearly 15 billion barrels of oil, but most states lack necessary infrastructure, while some like California are deeply opposed to drilling and have a substantial say in what happens off their coasts. More than 23 billion barrels are located off the coast of Alaska, where difficult operating conditions and a high regulatory burden have raised the cost of development, and where Shell infamously drilled a dry hole  after $7 billion and several years of trial and error in 2015. (http://www.forbes.com/sites/ucenergy/2016/12/15/yes-donald-trump-can-increase-u-s-oil-production/#3f68a8782374)

So, having a friend of oil in the Department of the Interior is probably the most important place as they will oversee when and how Federal land/ocean resources are exploited and under what terms and conditions.

Rick Perry (Secretary of Energy)

So all of us Texans are familiar with Governor Perry. The irony of this story lies in Mr. Perry’s unsuccessful Presidential bid when, during the primary debates in 2011, Mr. Perry famously stated that immediately upon election to office, he would eliminate 3 federal departments. When asked which ones, he said education and commerce. Then he said this, “The third agency of government I would — I would do away with Education, the –Commerce…Commerce and, let’s see. I can’t. The third one, I can’t. Sorry — oops.”

Ironically, he was referring to the Department of Energy. Sorry folks, that’s funny no matter who you are.

But the more interesting thing is that the Department of Energy is not what you probably think it is. According to the White House, the agency’s long roster of responsibilities includes “advancing the national, economic, and energy security of the United States; promoting scientific and technological innovation in support of that mission; and ensuring the environmental cleanup of the national nuclear weapons complex.”

However, of its $27 billion annual budget – about 65% is allocated to national defense. That’s right, the DOE is in charge of the nukes! Only a small portion of the budget (21%) is allocated to energy related functions, like conservation, emergency energy preparedness, and energy supply. The other amount of the budget (about a 1/5) is for general science, space, and technology research. Here’s a breakdown

In essence, the DOE has little to know impact on our industry. However, I will again point out, Governor Perry has always been a friend to Oil and Gas in the State of Texas. We have every reason to assume he will continue to be. Even though he might now have much direct political impact, he is another friendly voice at the table.

Forrest Lucas (Secretary of Agriculture) – Rumored

Mr. Lucas, a self made man and co-founder of oil products company, is allegedly the front-runner for Secretary of Agriculture. Originally, he was slotted for Interior. Since it is rumored, we will not cover him much. But again, I think we can say he is friendly to oil.

Overall, I think we can read a great deal of significance into Mr. Trump’s desired cabinet – and all of it bodes will for our industry.

By: Ty Chapman

Five Star Metals, Inc.
Raising the Bar for Customer Service and Quality
Twitter: @FSM_TY

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