DALLAS – The reversal of the nation's energy and environmental policies promised by President-elect Donald Trump "could create some interesting ripples" in North American energy infrastructure, according to Fitch Ratings, but the outlook for the coming year is stable.
The federal Clean Power Plan, which awaits a ruling by the U.S. Court of Appeals for the District of Columbia Circuit, may not even be enacted when Trump takes office Jan. 20, analysts said.
"Since President-elect Donald Trump opposes the CPP and the rule has not been implemented yet, the new EPA chairperson he appoints will likely modify the plan significantly or withdraw it outright," said Fitch senior director Gregory Remec. "While this might gut the CPP in its current form, it would not eliminate the EPA's obligation to regulate greenhouse gases from power plants."
Trump's nominee to head the Environmental Protection Agency, Oklahoma Attorney General E. Scott Pruitt, has described himself as "a leading advocate against the EPA's activist agenda."
Pruitt, whose state is one of the most energy dependent in the nation, has led multi-state lawsuits to halt EPA regulations under the Obama administration.
"The American people are tired of seeing billions of dollars drained from our economy due to unnecessary EPA regulations, and I intend to run this agency in a way that fosters both responsible protection of the environment and freedom for American businesses," Pruitt said in a statement that the Trump campaign posted on Facebook.
For his part, Trump said he supports environmental protection, but said an "out-of-control anti-energy agenda has destroyed millions of jobs, while also undermining our incredible farmers and many other businesses and industries at every turn."
Pruitt "will reverse this trend and restore the EPA's essential mission of keeping our air and our water clean and safe," Trump said.
Trump's policies could hurt demand for renewable energy projects as potential corporate tax rate reductions curb the appetite for tax-equity investments, Remec said.
"State initiatives to increase renewable energy supply and long-term objectives are more likely to be maintained nonetheless," Remec said. "What's more, both thermal power and renewable energy projects benefit from largely contracted energy sales agreements with very little exposure to market pricing, which curbs potential cash flow issues and upholds Fitch's stable outlook for these projects."
Another uncertainty next year rests with new oil & gas projects, Remec said.
"Growing worldwide liquefied natural gas (LNG) export capacity and slowing demand are limiting prospects for expansions of LNG projects or construction of new U.S. greenfield facilities," he said. "Projects of this kind also remain susceptible to operating challenges that reduce revenues and increase expenses. Even so, rated LNG export terminals under construction in the U.S. are on schedule to be up and running on time, thus supporting Fitch's stable outlook.
Fitch's projections follow a stable year for the sector, with affirmations, at 88%, dominating the rating actions for 2016, and upgrades, at 7%, slightly outpacing downgrades, which represented 5% of actions, the report said.
