President Trump this week signed an executive order titled, “Promoting Energy Independence and Economic Growth,” which set in motion repeal of President Obama’s Clean Power Plan.
History of Clean Power Plan
In June 2014, President Obama and the EPA announced the Clean Power Plan (CPP) which included sweeping regulations reducing carbon emissions for existing power plants. After numerous public comments and amending the proposed rule, EPA published the final rule in October 2015. The states most affected by the CPP were Midwestern manufacturing states that historically had relied on electricity generated by coal-fired power plants.
Legal Challenges to Clean Power Plan
Before the ink was dry on the final CPP, Attorneys General on behalf of 29 states as well as industry groups filed petitions for review with the D.C. Circuit Court of Appeals. The parties argued that the EPA lacked authority under the Clean Air Act to regulate carbon emissions for existing power plants. After the D.C. Circuit denied the petitions, the states and industry groups filed an application with the U.S. Supreme Court seeking a stay of the EPA’s final rule. Many considered this a long shot given the U.S. Supreme Court had never issued a stay of an agency’s final rule. But on February 9, 2016, in a 5-4 decision the U.S. Supreme Court issued an order granting the stay application and putting on hold indefinitely the CPP.
President Trump Announces Plan to Repeal Clean Power Plan
In speeches during the campaign Donald Trump announced that if elected he would repeal the CPP. On Wednesday, March 28, President Trump made good on that pledge. At a signing ceremony at the EPA headquarters in Washington, D.C., President Trump signed the executive order requiring the EPA to begin taking actions to repeal the CPP, along with other rules and agency actions.
Specifically, the executive order:
- Requires all agencies to immediately review all agency actions that potentially burden the “safe, efficient development of domestic energy”;
- Revokes a number of energy and climate-related presidential and regulatory actions;
- Requires the EPA to begin a review of the CPP and all related rules and agency actions, and to begin to begin the process of rescinding the related rules and guidance; and,
- Requires the EPA to review the final rule issued on June 3, 2016, “Oil and Natural Gas Sector: Emission Standards for New, Reconstructed, and Modified Sources,” and begin the process of rescinding the rule.
It could still be years before all the regulations and guidance documents are repealed as the EPA must go through the rulemaking process. Also, legal challenges are expected by proponents of the CPP, which will likely extend the final repeal of the regulations.
Future of Coal
While the CPP undoubtedly would have had significant impact on the coal industry, the sharp decline in natural gas prices has been the main reason for the reduction of coal-fired electricity. According to the U.S. Energy Information Administration, natural gas in 2016 was expected to surpass coal in the mix of fuel used for electricity generation (see chart below). Repeal of the CPP will ensure that some existing power plants will continue to burn coal, but if natural gas prices remain at current levels, it is unlikely that coal will make a sharp rebound in the near future.
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FROM THE CHART ROOM
U.S. Crude Oil Exports Reach More Parts of the World in 2016
In 2016, U.S. crude oil exports averaged 520,000 barrels per day (b/d), 55,000 b/d (12%) above the 2015 level, despite a year-over-year decline in domestic crude oil production. Even though oil exports have increased, growth in U.S. crude oil exports has slowed significantly from its pace from 2013 to 2015, when annual U.S. crude oil production grew rapidly. Following the removal of restrictions on U.S. crude oil exports in December 2015, the United States exported crude oil to 26 different countries in 2016, compared with 10 countries the previous year. In 2015, 92% of U.S. crude oil exports went to Canada, which was exempt from U.S. crude oil export restrictions. After restrictions were lifted, Canada remained the top destination but received only 58% of U.S. crude exports in 2016.
Aside from Canada, European destinations such as the Netherlands, Italy, United Kingdom, and France rank high on the list of U.S. crude oil export destinations. The second-largest regional destination is Asia, including China, Korea, Singapore, and Japan. In 2016, the United States exported to eight different Central and South American destinations, including Curacao, Colombia, and Peru.
Some nations listed as receiving crude oil exports from the United States in EIA export statistics, such as the Marshall Islands, Bahamas, Panama, and Liberia, are unlikely to be actual final destinations. Ports in the United States are not deep or wide enough to allow safe navigation and loading of the largest and most economic ships such as Very Large Crude Carriers to transport crude oil. Instead, U.S. crude oil is exported on smaller vessels and is then transferred to larger vessels in deeper waters outside of port. Many vessels are registered in nations such as the Marshall Islands, Bahamas, Liberia, and Panama—meaning the exported crude oil was likely destined elsewhere.
Curacao, located in the Caribbean Sea north of Venezuela, received 30,000 b/d of U.S. crude oil in 2016, making it the third-largest destination. Petróleos de Venezuela (PDVSA), the state-owned oil company of Venezuela, operates the 330,000 b/d Isla refinery on Curacao, as well as crude and petroleum product storage facilities on the island. Trade press reports and tracking of ship movements indicate that U.S. crude exports to Curacao are likely being blended with heavy Venezuelan crude oil, either for processing at the Isla refinery or for re-export to PDVSA customers.
Several factors appear to have contributed to the rise in U.S. crude oil exports in 2016. Increased crude oil imports in 2016 substituted for some domestic crude oil at U.S. refineries, allowing higher exports despite lower U.S. production and increased refinery runs. Low tanker rates for most of 2016 helped to narrow the price spread needed to allow for an economically attractive trade between the United States and overseas markets. With the average daily volume of crude imports more than 12 times the average daily volume of crude exports, many tankers were available for back-haul voyages at rates significantly below regular tanker rates, likely further reducing the cost of reaching export markets. Read more on EIA
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