Energy Sector In Arkansas Expects Shift Under Trump, Not Upheaval

by Kyle Massey  on Monday, Jan. 9, 2017 12:00 am  

What a difference a year makes ... or does it?

As 2016 began, the Arkansas energy industry faced deepening trends: Fossil fuels were under siege and renewable energy was on the rise. Electric utilities were shunning coal generation in favor of cheap natural gas and emissions-free nuclear and renewable generation. Government regulatory forces reinforced all that.

A year later, an oil- and coal-friendly Trump administration is taking power in Washington, promising a real shake-up with far less federal regulation and a cabinet stocked with traditional energy champions, hydraulic fracturing believers and climate change skeptics.

Led by ExxonMobil CEO Rex Tillerson as the choice for secretary of state, Donald J. Trump’s nominees for key positions include Oklahoman Scott Pruitt, an avowed foe of the Clean Power Plan, to lead the Environmental Protection Agency. Texan Rick Perry is poised to lead the Department of Energy, one of the three federal departments he proposed eliminating when he was running for president.

Still, Arkansas energy observers caution against expecting a huge shift.

“None of us have any idea what will really happen with Trump,” said Alan Mantooth, distinguished engineering professor at the University of Arkansas.

Utility leaders, infrastructure builders and researchers think the new administration’s policies will have an impact, perhaps in tandem with price-raising production reductions by OPEC and Russia, but they say much larger economic forces hold sway. “There’s a certain inertia in economic realities,” Mantooth said.

Discussions with nearly a dozen Arkansas observers yielded this consensus: A sea change in energy is unlikely, big coal isn’t coming back, and fracking in the Fayetteville Shale area — where drilling came to a standstill a year ago — may be revived only at the margins. Renewable energy may well lose some incentives and federal support, but long-term corporate trends and cost realities favor it.

“From an Arkansas perspective, I’m not ready to expect big changes from Day One in the Trump era,” said Kathy Deck, director of the Center for Business & Economic Research at the University of Arkansas. “The energy sector, like others, is just so large — there is never just one thing. Different forces interplay. There is this idea that regulations will be less burdensome, but that may not affect things as much as many other factors, most notably prices.”

Because Arkansas wells employing hydraulic fracturing yield just natural gas, not oil, neither Deck nor Arkansas Oil & Gas Commission Director Larry Bengal expects a major revival in the shale fields of north-central Arkansas. Bengal noted a slow two-year decline in oil and gas production in Arkansas, and an abrupt halt in new gas well drilling a year ago.

Drilling of traditional oil wells may get a small boost in 2017 as oil prices tick up, and exploration and production companies like Murphy Oil Corp. of El Dorado can hope for a return to profitability after a run of record losses. But a major fossil-fuel resurgence also seems unlikely. Murphy Oil officials declined requests for an interview.

Rajesh Sharma, a professor and renewable energy specialist at Arkansas State University in Jonesboro, summed up a popular line of thought: “Trump may be more supportive of the oil and gas industry and can help in terms of leases, permits and less regulation, but that does not really influence how much it costs to produce oil here.”

 

 

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