With the 2024 election in the rearview mirror, now our attention turns to looking out the windshield and into the future. As we consider the results of the 2024 presidential election, this article summarizes our views of what the incoming Trump administration might have in store for the energy sector.
Policy
We believe the second Trump administration will take a friendlier stance towards the Oil and Gas industry than the preceding one. Donald Trump, both as a president and a candidate, has been consistent in his support for the domestic energy industry and a reliable champion of American energy independence and the nation’s role as the world’s cleanest and most efficient oil and gas supplier.
There have already been several reports of the Trump administration wanting to roll back some of the new emissions regulations established by the Biden Administration.
Trump has nominated Chris Wright, the founder, Chief Executive Officer, and Chairman of the Board of Liberty Energy, as Secretary of Energy. Wright describes himself as a “tech nerd turned entrepreneur” and is an outspoken advocate of improving human lives by expanding access to abundant, affordable, and reliable energy. He earned his undergraduate degree at MIT and did graduate work in electrical engineering at the University of California-Berkeley and MIT. In a video he posted on LinkedIn last year, Wright said, "There is no climate crisis, and we're not in the midst of an energy transition, either."
In addition, Trump has nominated former New York Congressman Lee Zeldin to head the Environmental Protection Agency (EPA). In an announcement the president elect said, "He will ensure fair and swift deregulatory decisions that will be enacted in a way to unleash the power of American businesses, while at the same time maintaining the highest environmental standards, including the cleanest air and water on the planet. He will set new standards on environmental review and maintenance, that will allow the United States to grow in a healthy and well-structured way."
Zeldin later said in a Fox News interview that he would prioritize efforts to "roll back regulations" that he said caused American businesses to struggle. The Senate must confirm Zeldin’s appointment. Since Republicans will have a majority in the Senate next year, his confirmation seems likely.
Drill Baby Drill – With Some Complications
The incoming administration is likely to prioritize domestic oil and natural gas production, making operational efficiency and profitability top priorities for the industry. Despite the early posturing and rhetoric, however, there are some nuances as to what any president can do.
The Industry has Changed Since Trump’s First Term
Much has changed in the domestic oil and gas business since Trump's first term. Over the last four years, significant consolidation has occurred putting more acreage under control of fewer, larger operators.
The Energy Information Agency (EIA) reported in March 2024 that Chevron was then the largest U.S. oil producer, accounting for 5% of the U.S. total with average production of just over 1.0 million barrels per day (b/d) in the third quarter of 2023. If Chevron’s acquisition of Hess is approved, EIA estimated that the combined company’s production could increase to 6% of annual U.S. production (we note that the merger cleared FTC antitrust approval in October 2024, subject to certain conditions).
EIA also noted that ExxonMobil was then the fourth-largest crude oil and NGL producer in the United States with the potential to increase its production to nearly 7% of total U.S. output if its merger with Pioneer Natural Resources was approved (we note that the merger was completed in May 2024).
Perhaps more important than consolidation, is that Drill Baby Drill may not result in a significant increase in oil production. Operators have been highly effective in developing the top tier acreage in U.S. shale plays, and are now moving into lower quality assets that are more sour and produce more natural gas.
The situation is different with natural gas, as a glut of associated gas has saturated the domestic market. A move by the new Trump administration to open up LNG permitting would go a long way to balancing the supply and demand for natural gas domestically, improve prices, and strengthen the U.S. as a supplier of reliable and affordable energy to the world.
Regulatory Reform Process
In March 2024, the EPA published its final rule on updated emissions regulations to 40 CFR part 60 subpart NSPS OOOOb and EG OOOOc, which became effective on May 7, 2024. NSPS OOOOb covers production sites and facilities that were built, modified, or reconstructed after December 12, 2022.
Once in office (again), President Trump can immediately reverse an Executive Order (EO) approved by a previous president, such as invalidating Joe Biden’s EO ceasing construction of the Keystone XL pipeline. The process for changing existing regulations, however, is more difficult.
The Biden Administration’s “whole of government” approach to reducing methane emissions extended through Congress with new legislation. The Inflation Reduction Act (IRA) of 2022 mandated the Environmental Protection Agency (EPA) create a regulation to impose a new Waste Emissions Charge (WEC), which is essentially a carbon tax, on the Oil and Gas industry.
Because subparts NSPS OOOOb, EG OOOOc, and the Waste Emissions Charge are regulations, not EOs, President Trump cannot simply eliminate them via Executive Order. However, the Trump Administration can change them through the Administrative Procedure Act, as described in an article by Resources. It is a more time-consuming process than simply signing an EO, but it can be done.
Waste Emissions Charge – Legislative Action Required
Additionally, because the WEC was finalized so late in Biden's term, Republican lawmakers could invalidate it through a Congressional Review Act (CRA) resolution. However, the filibuster is still alive and well in the Senate, which makes an outright repeal seem unlikely given expected Democrat opposition. Although a CRA resolution would permit the Trump administration to develop a more industry-friendly methane fee, the law remains in effect.
We note that the industry should be mindful of the October 2024 Supreme Court decision, which affirmed the EPA’s ability to enforce the new environmental regulations, collectively referred to as the “Methane Rule.”
READ MORE: Supreme Court Upholds EPA Methane Rule
We will have to wait and see if the second Trump administration halts, or at least delays, implementation of the new regulations. Until then, regulatory compliance will be an important priority for operators.
Unlocking the Value of Sour Crude Assets
Drill Baby Drill means extending development beyond the defined shale play fairways. For example, in the Permian Basin much of the Tier 1 acreage has been developed and operators are now expanding into less favorable areas. As drilling has moved westward into the Delaware Basin, crude quality has declined, consisting of higher sulfur content, particularly in West Texas where hydrogen sulfide levels reach hazardous levels exceeding typical sour crude thresholds.
Sour crude oil, with high sulfur levels, poses safety and logistical challenges across the oil and gas industry. Handling very sour crude requires specialized equipment, strict safety protocols, frequent maintenance, and specific training for workers to mitigate risks to infrastructure and health.
This very high sulfur content in newer oil fields poses a challenge as existing infrastructure and refining processes are ill-equipped to handle such extreme levels. Without adequate treatment and transport infrastructure, these assets may remain undeveloped, necessitating technological innovations for effective desulfurization solutions.
Stabilizing Light Oil in the Permian Basin
As oil and gas development in the Permian Basin moves westward out into lower quality acreage, oil production from the new regions is getting lighter, which is generally less appealing to some refiners. In fact, Reuters reported that wells being drilled in second-tier acreage are not only gassier than those drilled in the fairways, but also produce very light crude oil, some of which is approaching super-light.
The gravity specification for WTI Midland crude oil historically has had an API gravity ranging between 38 and 42 degrees. The higher the gravity, the lighter the crude. As Reuters reported, the gravity of the oil being produced from the newer wells is ranging between 41 and 44 degrees. Normally, lighter crude is priced higher because it is easier to process, but only if your refinery is configured for it.
Super-light crude also presents another problem to upstream producers – it is volatile and difficult to store for any length of time in atmospheric storage tanks. As a result, it must be stabilized until it can be transported and later blended with heavier oil.
In stabilization, a thermal process is used to separate the lighter hydrocarbons from the crude and send them to the natural gas sales line as a liquids-rich gas stream leaving behind a heavier crude oil with a lower gravity that is easier to store and transport.
As the tide of super-light crude rises in the Permian Basin, improved oil stabilization is likely to become another top priority.
Innovation for Addressing Emerging Production Issues and Maintaining Compliance
The Emissions Control Treater (ECT) from Pioneer Energy uses thermal processes to deliver cost-effective crude oil desulfurization and light oil stabilization at scale. The ECT can cost-effectively unlock the value of very sour crude oil resources.
Importantly, the ECT is a zero emission, tankless oil pad production system intended to be a replacement for nearly all existing well pad infrastructure. The ECT typically reduces pad emissions by up to 90% while increasing crude production by about 10%.
Features of the ECT system include:
Heats crude up to the point where the H2S comes out of solution.
Wide operating envelope from 500 to 2,500 barrels of oil per day (BOPD), with larger scale also possible.
Closed-loop system.
No open flame.
Electric powered.
Thermal process, not a chemical reaction.
Benefits of the ECT for Crude Oil Desulfurization and Light Crude Stabilization
The ECT system delivers several benefits:
Light Oil Stabilization. As the H2S is driven out, all liquids remain in the crude providing for better separation and ability to recapture the valuable oil. The ECT’s thermal process drives volatile components out of light and super-light crude oil leaving heavier molecules behind. If onsite tank storage is used, the heavier crude is easier to store in tanks and transport for later sale or blending.
H2S Removal with No Byproducts. The ECT uses heat to drive the H2S out of crude instead of using a chemical reaction, so there are no harmful byproducts or special waste disposal requirements.
Emissions Mitigation. The process is hermetically sealed for no venting or flaring.
Enhanced Safety Profile. Elimination of venting, flaring, and fugitive emissions enhances the operational safety profile.
Life of Well Solution. The ECT lineup includes a variety of sizes so operators can right-size the equipment as a well naturally declines. As production moves down the decline curve, larger units can be swapped out with smaller ones that use less power for lower LOE, while the larger unit gets redeployed for service on newer wells.
Profitable Compliance for Marginal Wells. A downsized Emission Control Treater (ECT) for marginal wells is a fully integrated, all electric, prefabricated, zero emissions production facility designed specifically for marginal wells (< 40 BPD). The ECT for marginal wells can extend the economic life of legacy production by profitably reducing emissions and avoiding the WEC.
Eliminate Routine Tank Flaring. By eliminating surface production equipment, including tank storage, the Emissions Control Treater (ECT) can eliminate routine flaring of tank vapors that fail to meet pipeline specification.
Other Pioneer Energy Solutions
In addition to the Emissions Control Treater, Pioneer Energy offers Oil and Gas operators several solutions that not only significantly reduce emissions from Oil and Gas production operations, but also improve operational efficiency and profitability:
Emissions-Free Gas Plant Expansion. Our Pegasus and Pegasus Mini solutions are field-tested, proven modular gas processing solutions for extracting C3+ hydrocarbons with minimal emissions. Our modular gas plant expansion solution effectively increases plant refrigeration capacity without major capital investments that typically have long lead times.
Summary
We expect the incoming Trump Administration to prioritize domestic oil and natural gas production to strengthen America’s role as the world’s supplier of choice for affordable and reliable energy. As a result, we believe Oil and Gas operators will need advanced technology-based solutions for cost-effectively unlocking the value of sour and super-light crude oil assets as they push development outside the shale play “fairway.”
Although we believe the second Trump administration will lean towards relaxing some of the more controversial elements of the new Methane Rule, change will not occur overnight and operators will have to make compliance a priority, especially when it comes to the Waste Emissions Charge that goes into effect in 2025 for 2024 emissions reported under the updated Subpart W of the Greenhouse Gas Reporting Program (GHGRP).
Fortunately, Pioneer Energy offers Oil and Gas operators proven, technology-based solutions that not only help with compliance, but also improve operational efficiency and profitability.
Importantly, we note that the web of environmental regulations is complex, can be confusing, and impossible to cover comprehensively in a short blog article. Consequently, we recommend consulting with legal and regulatory experts to obtain a clear picture of how the regulations affect your specific operations.
Contact us today to learn how Pioneer Energy technology can help you maximize production efficiency and profitability while minimizing your exposure to the Waste Emissions Charge, meet stringent emissions regulations, and avoid Title V operating permit requirements.
About Pioneer Energy
Pioneer Energy is a leading provider of field equipment for processing natural gas at oil and gas production well sites and facilities. We are pioneering technology for decarbonizing oil & gas production with innovative technologies that offer operators the most reliable, rugged and easy-to-use solutions for reducing emissions and converting inefficiencies into profits.
Based in Colorado, our technologies are operating successfully in multiple oil and gas regions. Pioneer Energy’s engineering, field service, and remote operations teams provide best-in-class support for our domestic and international customers, and we offer custom engineering design and fabrication services in our state-of-the-art facility.
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