Takeaway: Trump's energy speech was short on details but it likely provided some reassurance to those in the oil, natural gas and coal sectors.

Energy promises to play a big role in the 2016 presidential election and will provide sharp contrasts between the candidates on energy policies. The November election will be a key catalyst on several issues of interest to investors. This is the first in a series of client notes on The Energy Election.

As with most issues, Donald Trump has not provided much if any details on his energy policies to date. There is no energy plan on his campaign web site so we have been left with some campaign trail rhetoric with some snippets in press interviews and tweets.

Today we got a little more visibility on Trump’s energy policies during the candidate’s speech to the annual Williston Petroleum Conference in North Dakota. It was an important venue and the home state of Trump energy advisor - Congressman Kevin Cramer.

While the speech was still lacking details, it likely provided some reassurance to those in the oil, natural gas and coal sectors.

As expected, Trump offered strong support hydraulic fracturing in the heart of North Dakota shale country and vowed to defend the industry from attacks from environmental activists. Trump said that if the US would ban fracking “you’re going to be back in the Middle East and we’re going to be begging for oil.”

It will serve as an important contrast to Hillary Clinton who has moved further left to appease environmental groups in the Democrat coalition. Clinton has said she will oppose fracking where states and local governments have enacted bans but we suspect liberal groups will want her to voice tougher opposition as the campaign continues. Bernie Sanders has said he opposes fracking, period.

This is mostly campaign rhetoric as states have the lead role on regulating hydraulic fracturing and the federal government’s role is currently limited to development on federal lands. However, we believe environmental groups will try to push EPA and congressional Democrats to find novel ways to increase the federal government’s regulatory reach into fracking. Therefore, the party that wins the White House will have significant influence on the outcome for the industry moving forward.

Trump also said he would “100 percent approve” the Keystone XL pipeline but he would seek a cut of the profits. The takeaway here is that he will likely approve KXL in the first few days of his administration. The part about getting a cut of the profits is just rhetoric so ignore it.

Energy independence was another theme of the speech as Trump said he favors US crude exports. Since the law lifting the US crude export ban was enacted last year, there is not much Trump or any politician can do on this front. Market forces will be the key decider on US energy production as producers need higher oil prices to reverse flat and declining production. However, the populist rhetoric will be noted by OPEC member and Russia.

The other main topic of Trump’s speech today was his support for coal and his opposition to EPA’s clean power plan (CPP) and carbon regulations. In a Reuters interview a few days ago, Trump said that he would “renegotiate” the Paris climate agreement which prompted environmental groups to say it was impossible to renegotiate with over 100 countries and cited a little-known provision of the agreement that disallows countries to withdraw for four years.

Here’s where a little interpretation of Trump-speak is needed. The media and environmental groups are focusing too much on Trump’s use of the word “renegotiate”. What Trump really means is that he opposes the climate pact and will likely disavow the Obama Administration commitments. The White House asserts that international pressure will preserve the US commitments to the Paris agreement but any Republican President will surely abandon the pact. As far as the four-year ban on withdrawals, the Paris pact is not a treaty so therefore it is not legally binding on future Administrations. Of course, we would expect that Clinton would honor the agreement and continue to pursue aggressive carbon reductions.

Trump said he opposes the CPP and will likely try to withdraw the rule or greatly modify it in the rule making process. Environmental groups and others believe it is now impossible for any Republican President to nullify or change the CPP regulation but President Obama has already provided the example of pushing the bounds of executive authority. Look for Trump to start referring to the CPP as a Washington power grab.

In contrast, Clinton supports the CPP and will likely proceed with implementing the regulation and expand carbon rules to other sectors, like refineries.

Finally Trump gave more nuanced positions on the Renewable Fuel Standard (RFS) and wind energy in the North Dakota campaign stop. In past appearances in Iowa, Trump said he was “totally in favor of 100 percent ethanol.” Today he said “we’re going to look at the ethanol mandate past 2022” implying that he might extend the mandate after the law expires in 2022. While it was less emphatic support than his previous comments, we view this as generally positive for biofuel producers. Still, we somehow think his RFS position is a moving target.

On wind, Trump said it was not economical without subsidies but added that he was “into all types of energy.” Again, Trump seems to be hedging his earlier comments of support for wind energy on the campaign trail in Iowa. We would view a Trump Administration as negative for federal subsidies and other support for wind and renewables in general.