HBW / natural gas processing

Energy Policy’s Impact on the Manufacturing Sector

Sept. 23, 2018
Current production of oil, natural gas, and coal is challenged by regulations that prohibit access and impede production, transport, and refining of energy resources.

Industrial manufacturing accounts for almost 22% of the energy consumed in the United States.  In 2017, the primary energy sources for the sector were derived from natural gas (45%) and petroleum (38%).[1] As such, U.S. manufacturers are susceptible to upstream regulations imposed on the production of raw materials and energy feedstocks.

Current production of oil, natural gas, and coal is challenged by regulations that not only prohibit access but encumber processes involved during the production, transport, and refining of energy resources. While the Trump Administration has taken numerous steps to relieve regulatory burdens and open access to energy resources, several rules remain in place that will impact manufacturing-related energy supplies and feedstocks.

Early in 2017, the administration released a series of executive orders outlining specific steps to reduce the number of regulations on the books.  These included the “2-for-1” order that mandates for every new regulation, two prior regulations must be identified for elimination. The president also ordered agencies to review existing regulations that inhibit development of domestic energy sources.

Access to energy resources

President Trump’s “America First Energy Plan” has been focused on unleashing oil-and-gas resources located on federal lands and waters.

National Outer Continental Shelf Oil-and-gas Leasing Program — The Bureau of Ocean Energy Management (BOEM) is responsible for developing a five-year plan outlining proposed U.S. offshore oil-and-gas lease sales.  BOEM is currently operating under the approved 2017-2022 Program that restricts access to the Gulf of Mexico and Alaska’s Cook Inlet.  Expanded access in the Gulf of Mexico and other regions, such as the Atlantic and Alaskan Arctic, could yield potentially tens of billions of barrels of oil and over 100 trillion cubic feet of natural gas.[2]  In April 2017, President Trump ordered a revised program schedule, and BOEM currently is developing the 2019-2024 Program, and evaluating opportunities for expanded access to American offshore energy resources.

Antiquities Act — Presidents are granted authority to set aside land in order to protect “historic and scientific interest” by designating it as a national monument. Excavation activities, including farming, grazing, fishing, timber harvesting, mining, and oil-and-gas exploration on these lands are prohibited. 

Of particular interest to the oil and natural gas industry are two national monuments in Utah — Bears Ears, declared by President Obama in December 2016, and Grand Staircase-Escalante, declared by President Clinton in September 1996.  These areas cover large basins with oil and natural gas resources.  On April 2017, President Trump signed an executive order recognizing that monument designations can “create barriers to achieving energy independence.”[3]  On August 15, 2018, the U.S. Bureau of Land Management released proposed management plans for Bears Ears and Grand Staircase-Escalante that include energy and mining development for the regions.

Environmental Regulations

In addition to challenges limiting access to energy resources, energy producers and manufacturers also face several environmental mandates.  A few of these that are particularly impactful to industry are highlighted below.  As noted, the Trump Administration’s attempts to revise or rescind several existing environmental regulations have been met with varying levels of success.  In addition to these actions, the U.S. Environmental Protection Agency recently sought comments to increase consistency and transparency in its cost-benefits analysis for future proposed rules.

National Ambient Air Quality Standards (NAAQS) — These regulations establish primary and secondary NAAQS that define levels of air quality necessary to protect public health and welfare.  This rulemaking has implications for oil-and-gas operations in certain regions that do not comply with emissions standards, as it requires state planning agencies to include Reasonable Available Control Technology level controls in their air quality plans.  After much speculation, in early August 2018, the EPA announced it would not revisit the controversial 2015 ozone NAAQS and instead would focus on completing the scheduled 2020 review on time.

New Source Performance Standards (NSPS) — These regulations establish air-pollution emission standards for new stationary sources of emissions. NSPS have been established for a number of individual categories related to energy development, including oil-and-gas production facilities, onshore natural gas-processing plants, petroleum refineries, bulk gasoline terminals, petroleum liquid storage vessels, coal preparation plants, and steam generators. The rule was updated in 2016 to curb emissions of methane volatile organic compounds, and air toxins.

In 2017, the U.S. Court of Appeals for the D.C. Circuit ruled that the EPA unlawfully attempted to delay implementation of NSPS methane regulations for new oil-and-gas operations.  As a result, those regulations remain in place.

Clean Power Plan (CPP) — This rule was unveiled as part of President Obama’s strategy to reduce carbon dioxide emissions.  The CPP aims to shift power generation facilities from using coal and move them toward natural gas or renewable energy sources.  Since its introduction in 2015, the plan has been challenged multiple times by industry and states required to implement the rule.  The Trump Administration is expected to release a plan to roll back the CPP by easing emission reduction requirements and providing more regulatory authority to states.
Beth Everage is the Policy Director at HBW Resources, a strategic consulting and advocacy firm.

[1] U.S. Energy Information Administration, “U.S. primary energy consumption by source and sector, 2017.”
[2] U.S .Bureau of Ocean Energy Management, “Assessment of Undiscovered Oil-and-gas Resources of the Nation’s Outer Continental Shelf, 2016a.” 
[3] Presidential Executive Order on the Review of Designations Under the Antiquities Act