A Challenge to Donald Trump’s Energy Claims: Economic Reality

A Challenge to Donald Trump’s Energy Claims: Economic Reality

- in Energy & Environment

One major consequence of the surge in domestic natural gas production has been a turn by electricity generators toward gas from coal. That has cost thousands of coal jobs. Yet Mr. Trump has both vowed to increase natural gas production even as he promises to restore coal jobs, scoffed Robert N. Stavins, director of the environmental economics program at Harvard.

“Trump will presumably support less regulation and other actions to encourage greater use of fracking. That would tend to lower natural gas prices,” Mr. Stavins wrote in an email. “And, therefore, Trump’s promised support of greater natural gas fracking would actually have the effect of lowering demand for coal, causing more mines to close.”

Mr. Stavins added, “He can’t have it both ways — talk up expanding natural gas supply when in North Dakota, and talk about bringing back coal mining jobs when in Kentucky!”

At a news conference before his North Dakota speech, Mr. Trump said he could bring the cost of coal down as well, by eliminating or easing environmental regulations.

Experts also questioned Mr. Trump’s claim that an aggressive push to expand oil and gas production would increase employment, economic growth and federal revenue.

Even with oil and gas production at or near record highs, the industry is not a large direct employer. Last year, there were 103,000 workers directly employed in oil and gas extraction, and 68,000 workers in coal mining, according to the Bureau of Labor Statistics. Yet in his speech, Mr. Trump claimed that the oil and natural gas industry “supports 10 million high-paying jobs.”

Citing research by the Institute for Energy Research, an organization partly funded by the billionaire libertarian brothers Charles and David Koch, Mr. Trump claimed that an aggressive expansion of oil and natural gas drilling would yield a $700 billion increase in annual economic output over the next 30 years, a $30 billion increase in annual wages over the next seven years, more than $20 trillion in additional economic activity over the next 40 years and $6 trillion in new tax revenue.

“This would suggest that his energy policies alone would give a 5 percent boost to the entire economy,” Mr. Victor said. “That strikes me as fantasy. The numbers seem off by an order of magnitude.”

Mr. Trump also laid out plans to spend new federal revenue that he claimed would be generated by new oil and gas drilling.

“We will make so much money with energy that we will start to pay down our $19 trillion debt,” he claimed. “We’ll use the revenue from energy for roads, schools, bridges and infrastructure.”

But energy economists dismissed the idea that new drilling could bring enough money to substantially fund such proposals. In 2015, coal, oil and gas companies paid the federal government $9.6 billion in fees and royalties for drilling on public lands and waters, in a budget of $3.8 trillion. Even with a large expansion of such drilling on public land, experts say it is difficult to predict a new such revenue stream at the scale envisioned by Mr. Trump.

The chief source of federal revenue from coal, oil and gas extraction comes from taxes and fees paid by companies drilling and mining on federal lands and waters, but most oil and gas production takes place on state or private land. Mr. Trump has declared that he will lift regulatory barriers to drilling on federal lands and waters, but experts say that will not be easy.

“It’s not like you just sit in the Oval Office and press a ‘rigs’ button,” Mr. Victor said. “There are tremendous legal and bureaucratic challenges and an extremely long time horizon.”

And as long as the global market remains glutted, companies will be disinclined to lease federal land for new drilling. With the lifting of sanctions under the nuclear deal, Iranian oil is only beginning to enter the world market in a big way.

Economists also derided Mr. Trump’s repeated calls for “energy independence” — a phrase commonly used by politicians to suggest that the United States could isolate itself from global energy markets, producing and consuming only what it needs.

Several economists pointed out that the best way to wean the nation from imported oil is to lower the dependence on oil over all, with policies designed to reduce oil demand.

Tom Kloza, the global head of energy analysis for the Oil Price Information Service, a research firm, pointed to Environmental Protection Agency regulations to increase vehicle fuel efficiency, which require automakers to build vehicles that travel farther on less gasoline.

“The oil supply side will take care of itself, through the market,” Mr. Kloza said. “The demand side is where progress can be made through policy. The best thing a president could do, given the market, would be to lower oil demand.”

He added, “I doubt if Trump understands that.”

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