President-Elect Trump late Wednesday nominated Oklahoma Attorney General Scott Pruitt to serve as Administrator of the Environmental Protection Agency (EPA).
The Pruitt selection confirms Trump’s promises on the campaign trail to roll back Obama EPA regulations. As a result, Pruitt also looks to be the Trump nominee out of the entire cabinet to get the most heat and opposition from Democrats. However, with Republicans in control of the Senate, Pruitt’s confirmation seems to be a sure thing.
Under Pruitt, we are likely to see the end of President Obama’s plan to decarbonize the US economy. We view the pick as favorable for coal, energy, utility and auto stocks; and negative for renewable stocks.
Pruitt is best known as the leader of other Republican Attorneys General that challenged EPA’s Clean Power Plan (CPP) and other regulations affecting the power and energy sectors. The CPP, which the Supreme Court stayed last February while being litigated in lower courts, is the most at-risk Obama environmental policy. The next Supreme Court Justice to be nominated by President-Elect Trump will almost certainly be the key deciding vote on the rule’s fate. But EPA under Pruitt can take other administrative actions such as not defending the CPP in litigation or withdraw the rule altogether.
CPP was less of a carbon regulation than it was a stimulus program for renewable energy so that sector will take a hit on the Trump EPA policies. Coal will receive favorable treatment and much regulatory relief under Pruitt but will still be impacted to a large extent by low natural gas prices.
EDITOR'S NOTE
This is an excerpt from an institutional research note written by Hedgeye Senior Energy Policy analyst Joseph McMonigle. To read the full note on the Pruitt nomination for EPA, please contact sales@hedgeye.com.
