On the day after Election Day, the Farmington Daily Times, the biggest newspaper in the San Juan Basin oil and gas patch in northwestern New Mexico, ran a story headlined with, “Trump win has energy industry leaders hopeful.” Most of the local industry folks quoted felt that President-elect Donald Trump would relax regulations on drilling on public land. Some suggested that maybe drilling might kick back up as a result. Meanwhile, over on Facebook, energy workers were ecstatic, convinced that a President Trump would put them back to work almost immediately.
They should know better.
The San Juan Basin’s energy-reliant communities have been hit especially hard in recent years. The first blow came in 2008, after horizontal drilling and multi-stage hydraulic fracturing opened up huge shale formations in the East to development. Supply increased to glut levels; prices plunged; San Juan Basin drill rigs were put in storage.
Shortly thereafter, oil prices skyrocketed to as high as $150 per barrel, prompting drill rigs to pop up again all over North Dakota’s Bakken formation and, a little later, in the San Juan Basin’s Gallup shale. The fossil fuel mojo was back, until it wasn’t. As global supply increased faster than demand, prices started dropping, and OPEC declined to cut production, which might have kept prices stable. In 2014 prices crashed, the oil boom busted.
It’s a simple equation. When demand outpaces supply, prices increase. When prices get high enough to make drilling profitable, companies invest in development and put people to work. When all that drilling increases supply, prices crash, as do the drill rigs. Today, oil prices are stubbornly stuck below $50 per barrel; forecasters expect it to stay there or even drop in the next year. Just one rig is working in the San Juan Basin, and the vast equipment yards in Farmington and Aztec, New Mexico, are crammed full of idle rigs. Thousands of workers have lost their jobs.
President-elect Trump promised to “lift restrictions on … energy reserves,” and to dismantle as many environmental regulations as he can, as quickly as he can. Will the drill rigs go back up as a result? No. Will laid-off energy workers get their jobs back? Nope. Why? Because regulations have nothing to do with this bust. Nothing. Commodity booms and busts are driven by supply and demand, not regulations.
So the only way to kick-start the faltering industry would be to increase oil and natural gas prices. And the only way to do that is to curtail oil supply or increase demand, no easy task with a global commodity traded on global markets. There are plausible scenarios, I suppose. Trump could impose massive tariffs on foreign oil, though it’s hard to imagine laissez-faire congressional Republicans or corporate leaders getting behind that one. He could launch World War III in the Middle East or bomb the Saudi Arabian oil fields into oblivion, thus cutting off foreign supplies altogether. While that might not bother Trump voters, the resulting skyrocketing gas prices could spark a revolt among the large car crowd.
Natural gas supply and demand, and therefore prices, would be somewhat easier to manipulate, since the commodity is regional, not global, meaning we export and import very little of the stuff. A president could boost demand by subsidizing a nationwide fleet of natural gas-burning long haul trucks, which might make gas drillers happy, but not the oil drillers (since it would displace gasoline-burning trucks). He could ram through liquefied natural gas export-terminal permits, opening up foreign markets to domestic natural gas. If foreign demand was high enough, that might do the trick, but Trump’s promise to kill the Trans Pacific Partnership would damage, not help, efforts to sell natural gas overseas. A president could regulate power plant emissions in such a way that encourages utilities to replace coal with natural gas in the electricity generation mix. Oh, wait, that one’s already in the works. It’s called the Clean Power Plan, or CPP, which Trump has pledged to repeal.
The San Juan Basin is also coal country, so at least the workers at the mines and two massive power plants will get to go back to work, right? Wrong. Coal-burning units at both plants have been shut down in recent years, meaning less coal is burned and less power produced. That, however, had nothing to do with the CPP. The curtailments came from settlements with the Environmental Protection Agency over Clean Air Act violations, and because California didn’t want to buy coal power anymore. Killing the CPP — even eliminating the EPA — won’t restore these plants to their former smog-spewing, coal-burning glory.
While the environment and the people who live near the rigs are getting a break during this bust, the economic pain in the oil patch these days is real, and deep. Individuals who just a few years ago were raking in $80,000 or more per year are struggling to hang on. City, county and state governments have watched revenues plummet, forcing cuts in services. It’s the sort of malaise that breeds resentment and a dark shade of nationalism, and that spurs people to vote for the likes of Trump.
It is maddening and tragic to see these people put so much hope in one person, particularly when that person is clearly so unequipped to deliver on it, and is likely, in the long run, to make their lives more miserable by removing what few social safety nets exist. It’s also scary. What will they do after Trump has finished rolling back all the regulations, dismantling the rules that keep us safe and our environment healthy, and they still don’t have a job? Who will they blame then?
Jonathan Thompson is a contributing editor at High Country News. He is currently writing a book about the Gold King Mine disaster. Follow @jonnypeace
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