The Pen May be Mightier than the Sword – President Trump’s First Week in Office

Energy Matters

The president’s first week in office brought a flurry of twelve executive orders on a variety of topics. In case you aren’t familiar with the difference between legislation and executive orders, an executive order is a memorandum from the president to federal agencies, that allows them to take action to develop policy or propose regulations that the president has asked for. They are a formal, public means of declaring administration policy and providing clear, across-the-board directives to federal agencies. Instead of telling individual executive branch officials to take specific actions, executive orders enable the president to tell the entire executive branch to begin taking certain actions, such as to develop policies and proposed regulations, or administer federal contracts in a particular way, provided that the instructions do not conflict with federal law. They are not legislation and cannot take the place of legislation. However, in many cases, in the absence of legislation (such as in the case of establishing a process for approving permits for pipelines that cross the U.S. international borders) they will stand and must be adhered to as the law. But, they are most importantly communication from the president, a press release with real teeth.

Orders issued this week include:

  • On his first day in office, the president signed an executive order declaring Inauguration Day a National Day of Patriotic Devotion.
  • He signed an executive order requiring all federal agencies to minimize “the economic burden” of Obamacare.
  • President Trump signed a Day One order blocking an Obama administration plan to cut mortgage fees for Federal Housing Administration borrowers, who tend to have modest means and sketchy credit. But Trump didn’t actually raise fees; he just prevented a discount.
  • He signed an order that instructed federal agencies to stop pending regulations until they can be reviewed in the form of an Inauguration Day memo from Chief of Staff, Reince Priebus. The Priebus memo could block Obama’s efforts to tighten regulation of pipelines and oil trains, put a bumblebee on the endangered species list, and reduce electricity used by walk-in coolers and several other appliances.
  • Trump announced a freeze on new federal hires. But his memorandum exempted the military and anyone deemed vital to national security or public safety, and the freeze lasts only 90 days. In fact, a separate order issued a few days later called for the hiring of 10,000 new immigration officers and 5,000 Border Patrol agents. Trump did include language in his freeze memo that instructed his budget director to develop a long-term plan to shrink the federal workforce through attrition, which could have a longer-lasting impact.
  • An order was signed declaring the United States’ intention not to join the 12-nation Trans Pacific Partnership. One of the largest free trade deals in history was already effectively dead in Congress.
  • In an executive memorandum, the president ordered the Commerce Secretary to begin a 60-day review of regulations for American manufacturers, with the goal of finding ways to speed up permitting and all federal processes for them.
  • This week he signed a pair of immigration-related executive orders that will (1) target sanctuary cities, likely by withholding federal law enforcement funding for any city or state that does not agree to comply with all deportation requests from Trump’s administration, and (2) create more detention centers and beef up federal border control agents. Finally, they declared a wall will be built along the U.S.-Mexico border.
  • President Trump ordered that federal dollars cannot go to organizations that provide abortion services.
  • He signed an executive order aimed at reviving the Dakota Access and Keystone XL oil pipelines.
  • An executive order called for “expediting environmental reviews and approvals for high priority infrastructure projects,” gives broad new authority to Trump’s still-to-be-named head of the Council on Environmental Quality (CEQ), a White House office. Governors or agency heads may nominate infrastructure projects of all types, and the head of CEQ has 30 days to determine which ones go on a high-priority list. Projects on the high-priority list are to receive expedited reviews, Trump’s order says, with deadlines set for completion of applications “and approval.” It’s a fast track, not a rubber stamp.

Much has been said about this influx of executive orders, all issued in one week, but when you consider the number and significance of the executive orders issued by President Obama in the previous administration, (275 in total) President Trump may just be returning the favor. One can hope, though, that our government returns to regular order with the three branches of government balancing each other. As Winston Churchill once said, “Democracy is the worst form of government, except for all the others.”


TRANSITION NEWS

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Senate Panel Votes to Confirm Tillerson The Senate Foreign Relations Committee voted to recommend the Senate confirm former Exxon Mobil Corp. CEO Rex Tillerson as secretary of State. The panel’s vote was 11-10 in favor of President Trump’s pick to be the country’s top diplomat, along party lines, with all Republicans in favor and all Democrats against. Democrats acknowledged Tillerson’s business success, but were concerned that Tillerson showed no signs that he could translate that into being secretary of State. “I did not see that commitment to be the advocate globally for human rights and good governance that I would like to see in a secretary of State,” said Sen. Ben Cardin (Md.), the panel’s top Democrat. Read more on The Hill

 


ENERGY TRANSPORTATION NEWS

North Dakota Tribe Formally Calls on Pipeline Protesters to Disperse A Sioux tribal council last Saturday formally asked hundreds of protesters to clear out of three camps near its North Dakota reservation used to stage months of sometimes violent protests against the proposed Dakota Access Pipeline. The Standing Rock Sioux Tribe on Friday unanimously passed a resolution calling for the camps to be dismantled, it said on its Facebook page on Saturday. The tribe has been encouraging protesters to go home since the U.S. Army Corps of Engineers agreed to an environmental review of the $3.8 billion project in December. Despite earlier discussions about alternative sites, the resolution made no provision for relocating the estimated 600 protesters, which include non-native environmental activists and Native Americans from outside the tribe. Read more on Reuters

Meet Trump’s Secret Weapon on Infrastructure Elaine Chao could be President Trump’s secret weapon to help pass a massive infrastructure bill. Her political and personal ties to Capitol Hill were on full display during her confirmation hearing to be Transportation secretary earlier this month, when senators peppered her with compliments and questions about her ideas for revitalizing the nation’s aging infrastructure. Chao, a former Labor secretary who is married to Senate Majority Leader Mitch McConnell (R-Ky.) and is expected to easily win confirmation, will be tasked with overseeing Trump’s promised $1 trillion rebuilding package. Trump doubled down on his pledge during the inauguration, vowing to erect “new roads and highways and bridges and airports and tunnels and railways all across our wonderful nation.” There are three ways in which Chao could be key to helping Trump fulfill that promise. Trump will need the support of some Senate Democrats to push a bill through Congress, especially if fiscal conservatives and rural Republicans hesitate to back his ambitious proposal. She is well-liked and respected on both sides of aisle, and has personal relationships with several key members and their families. Democrats were just as effusive in praising Chao as Republicans during her hearing. Chao is a veteran Cabinet member, having served under two previous Republican presidents. In addition to running the Labor department, Chao was also Federal Maritime Commission chairwoman and deputy Maritime administrator at the Department of Transportation. “Elaine Chao is a friend and proven leader with the necessary experience and policy insights to helm the Department of Transportation during this critical time,” Jay Timmons, president and CEO of the National Association of Manufacturers (NAM), said in a statement. “Now is the time for a bold and serious investment in our nation’s highways and bridges, railways and airports, seaports and pipelines. Read More on The Hill

Protesters, Oil Companies Gear Up for Next Round at Standing Rock Protesters opposed to the Dakota Access Pipeline are gearing up for a new round of clashes. So are oil companies—and the private security firms they have hired to police the protests. Several hundred additional protesters arrived at the main protest campsite in North Dakota last weekend. Thousands of protesters have been gathering for months near Cannon Ball, N.D., and have argued that the pipeline endangers the tribe’s water supply and sacred sites. Standing Rock tribe leadership has asked protesters to leave by February 19, but many are determined to stay, convinced that the Trump administration will give the project the green light soon. When protests over the pipeline began this summer, Energy Transfer Partners did something rarely seen on U.S. soil: It hired several private security firms in an attempt to get control of the situation. The firms include North Carolina-based TigerSwan, which is made up primarily of former special forces soldiers who often provide security services in war-torn nations such as Iraq and Afghanistan. Oil companies usually coordinate with local law enforcement, hire off-duty law enforcement officers, and use their own internal security teams, according to industry experts. But the scale of the protests, and the relative inexperience of local law enforcement, led to an influx of private security firms to the site. Now, as protests kick back up in North Dakota and spread to other states—a small group of protesters inspired by the movement at Standing Rock recently set up camps near oil installations in western Texas—oil firms and industry trade groups are rethinking how they deal with protests. While most pipeline infrastructure is under ground, the rising threat to above ground facilities means “pipeline companies have been increasing outreach and coordination with local law enforcement and FBI to increase local vigilance.” Read more on Wall Street Journal

Canada Oil Pipeline Spills 200,000 Liters on Aboriginal Land A pipeline in the western Canadian province of Saskatchewan has leaked 200,000 liters (52,834 gallons) of oil in an aboriginal community, the provincial government said. The government was notified late in the afternoon on Friday, and 170,000 liters have since been recovered, said assistant deputy minister in the Ministry of the Economy, which regulates pipelines in Saskatchewan. Oil pipelines are viewed by the oil-rich provinces of Alberta and Saskatchewan as a critical lifeline to move crude to the coast, but they have drawn fierce opposition from environmental and indigenous groups. The spill came seven months after another major incident in Saskatchewan, in which a Husky Energy Inc. pipeline leaked 225,000 liters into a major river and cut off the drinking water supply for two cities. It was not immediately clear how the current incident happened or which company owns the underground pipeline that leaked the oil. Tundra, a privately held unit of Canadian grain trading and energy conglomerate James Richardson and Sons, released a statement saying it is cooperating with all levels of government and will ensure “the affected land is restored appropriately.” The incident happened in the lands of the Ocean Man First Nation 140 km (87 miles) southeast of the provincial capital of Regina, according to the province. Ocean Man has 540 residents, one-third of whom live on the reserve, Big Eagle said. Read more on CNBC

Plains All American Buys Permian Pipeline for $1.2 Billion Houston-based Plains All American oil pipeline giant is buying big into the resurgent Permian Basin through new pipeline acquisitions and expansions. Plains said it will buy the new Alpha Crude Connector pipeline gathering and storage system for $1.2 billion from Midland-based Concho Resources and Dallas private-equity firm Energy Spectrum Capital. Plains also said it will expand its existing BridgeTex and Cactus pipeline systems in West Texas. The Alpha Crude Connector system was built primarily in southeastern New Mexico and completed in late 2015. Concho built it with Frontier Energy Services, an Energy Spectrum portfolio company, and put it up for sale late last year as activity picked up in the resilient Permian, particularly in the Delaware Basin portion. The Permian — primarily in West Texas and extending into New Mexico — is now home to more than half of the nation’s active drilling rigs as the oil sector slowly begins to rebound from a two-year bust. Permian Basin crude oil production could grow by 50 percent in the next two or three years. Read more on Fuel Fix

Trump Revives Pipeline, Looking for Better Deal for U.S. President Donald Trump’s decision to revive TransCanada Corp.’s Keystone XL pipeline may herald a new era of pipeline abundance for Canadian oil producers after years of bottlenecks. The U.S. president signed documents to advance the project, more than a year after his predecessor Barack Obama rejected it on grounds it would contribute to climate change. The decision follows the Canadian government’s approval in November of Kinder Morgan Inc.’s Trans Mountain line to the Pacific and Enbridge Inc.’s expansion of Line 3 to the U.S. Midwest. The three lines would add 1.8 million barrels a day of crude export capacity, enough to handle Western Canada’s growing oil production for 20 years, according to National Energy Board projections. That would add more than $4 billion a year to Western Canada’s economy by making the region’s crude more valuable relative to other grades. Because of the lack of capacity, refiners haven’t paid as much for Canadian crude. More pipelines from Canada would also “generate greater competition for crudes of comparable quality such as those imported from Mexico or Venezuela. Trump said he wanted to renegotiate terms to get a better deal for the U.S., including more U.S.-made materials in the lines. Kinder Morgan’s TransMountain line and Enbridge’s Line 3 are scheduled for completion by the end of the decade, both companies have said. Read more on Bloomberg

Trump Takes Action to Revive Keystone, Dakota Pipelines President Donald Trump took steps to revive two controversial oil pipeline projects that had been rejected by the Obama administration, moves that likely represent the leading edge of a sweeping overhaul of his predecessor’s environmental agenda. Mr. Trump accompanied his actions on the Keystone XL and Dakota Access projects with broader directives that aim to ease regulations on infrastructure projects and American manufacturing, and he ordered his team to craft a plan to maximize the use of American-made materials in U.S. pipelines. The actions were part of a flurry of activity in Mr. Trump’s first few days intended to set a pro-business tone that would contrast with former President Barack Obama and possibly with Congress. President Donald Trump said he plans to announce his Supreme Court pick next week, moving to fill a longstanding vacancy. The energy industry welcomed his actions. Shares of the companies behind the projects jumped and the prospect of ramped-up infrastructure projects helped drive up shares of miners and manufacturers, sending some major stock indexes to record levels Of Mr. Trump’s five executive actions Tuesday, two were the presidential memorandums aimed at reviving and expediting approval for Keystone XL and Dakota Access. Keystone would send up to 830,000 barrels of oil a day, mostly from Canada’s oil sands to Steele City, Neb., where it would link to existing pipelines to Gulf Coast refineries. The Dakota Access project would carry up to 570,000 barrels of oil a day from North Dakota to Illinois.“ Read more on Wall Street Journal

Keystone XL’s Rebirth Likely Means Death for Energy East The Keystone XL pipeline proposal will move forward, likely scuttling a trade lawsuit seeking billions in damages. But the revival of KXL may scuttle something else — the Energy East pipeline, another project being pushed by TransCanada Corp., the company behind KXL. Previously billed as an alternative to Keystone XL, Energy East would send crude from Alberta’s oil sands to eastern Canada, bypassing Gulf of Mexico coastal refineries and allowing for direct exports rather than re-exports of oil sands crude through the United States. Refineries in the U.S. Gulf Coast are also eager to see KXL built. Meanwhile, Canadian regulators have just formed a new board to review TransCanada’s application for Energy East TransCanada officials didn’t respond to requests for comment on Energy East’s potential fate or on the NAFTA suit. The company’s CEO, Russ Girling, is scheduled to speak at an investors conference in British Columbia later today. Read more on E&E

White House Memo May Impact PHMSA’s Unpublished Pipeline Accident Rules The Pipeline and Hazardous Materials Safety Administration is under pressure to complete upcoming pipeline and hazmat safety rules, despite a regulatory freeze from the White House. In the days leading up to the presidential inauguration, PHMSA moved rules updating emergency notifications after pipeline accidents, extending reporting and inspection requirements to more pipelines, aligning hazardous material regulations with international standards as well as other changes. On Jan. 20, White House chief of staff Reince Priebus issued a memo asking agencies to hold off on their unpublished rules. According to the memo, rules published in the Federal Register must postpone their effective date for 60 days from Jan. 20, if not further. Though PHMSA’s rules may not be emergency regulations, the agency is under pressure to get them finalized. At least three of PHMSA’s recent pipeline rules may be affected by the memo.
Read more on Bloomberg


OIL AND GAS INDUSTRY NEWS

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Trump Plan to Tap Energy Revenues Faces Budget Realities President Trump’s plan to use federal energy revenues to pay for infrastructure projects is raising budget questions among lawmakers on Capitol Hill, who nonetheless expressed bipartisan interest in learning more about the White House proposal. As a candidate, Trump made clear that he would work to clear regulatory hurdles to boost domestic energy production, while also pledging a massive push to rebuild the crumbling infrastructure in the United States. While there has been talk about using the tax code to stimulate private-sector investment in infrastructure, the new White House website that went up after Trump was sworn in Friday offered a clue as to how the administration envisions paying for a package that as a candidate he suggested could top $1 trillion: oil and gas revenues. The link between energy revenues and infrastructure caught even members of the Senate Republican leadership off-guard. Sen. Martin Heinrich (D-N.M.) this week said he would withhold judgment on the White House’s proposal until he learned more details, but noted that under current law, federal offshore energy revenues are supposed to fill the Land and Water Conservation Fund, while lease sales and royalties from onshore public lands are split roughly between the federal Treasury and the states where the resources are produced. Compounding the fiscal math is data released by the U.S. Energy Information Administration showing a continued decline in federal revenues from public lands resulting from low oil prices in recent years. Read more on E&E

Canadian Drillers to Increase Production After 2-year Lull From the oil sands of northern Alberta to the substantial reserves of Saskatchewan, drilling is set to increase in Canada after a two-year decline. The decline from 2014 to 2016 saw western Canadian oil companies slashing capital spending in half, according to the Canadian Association of Petroleum Producers. About 110,000 employees also lost their jobs between late 2014 and April 2016. The increased production is expected to have a ripple effect on the Canadian economy, leading to growth in several provinces as major oil companies reactivate rigs. The effects of the expanded production will be felt across western Canada. Alberta’s economy is expected to grow 2.1 percent this year, while Saskatchewan’s economy is expected to grow 1.7 percent. Still, the economy is only beginning to recover. Alberta, which holds the third-largest crude reserves, is still slowly boosting its unemployment rate from 9 percent in November. Read more on E&E


ENERGY REGULATORY NEWS

Trump Orders Sweeping Freeze, Pledges Energy Reforms President Trump ordered a mandatory freeze on a wide range of pending Obama administration rules over the weekend, taking the first steps toward what he has promised will be a sweeping assault on the former president’s regulatory agenda. In a memorandum, released Friday, Chief of Staff Reince Priebus called for most pending rules to be halted “in order to ensure that the President’s appointees or designees have the opportunity to review any new or pending regulations,” he wrote. The freeze could have an immediate effect on a number of non-final rules from agencies like the Department of Agriculture, the Department of Energy, U.S. EPA, the Department of Transportation, among others, according to federal records. The order calls for all regulations that have been sent to the Office of Federal Register but not published to be immediately withdrawn. For regulations that have been published in the Federal Register but have not yet taken effect, the order calls for their postponement for at least 60 days. The memo makes exceptions for rules regarding emergency situations relating to health, safety, finance or national security matters. Trump has also relaunched the White House website, clarifying his mission to rollback Obama rules. In the “America First Energy Plan,” the administration lays out goals to reverse Obama actions geared towards combating climate change, while bolstering the oil, gas and coal industries. The revenue from energy production will be used for major infrastructure projects, according to the website. Read more on E&E

White House Freezes All Pending Regulations White House Chief of Staff Reince Priebus Jan. 20 instructed federal agencies to freeze all pending regulations, a move that seems to include a number of labor and employment initiatives that were in the works under the Obama administration. Priebus told the agencies to hold off on sending new regulations to the Office of Management and Budget and to postpone for at least 60 days all regulations that have been published but haven’t yet taken effect. He also encouraged agencies to “consider potentially proposing further notice-and-comment rulemaking” for any regulations that have been held up over legal questions. The move appears to put the Labor Department’s overtime rule on ice, along with regulations to expand federal contractor disclosure requirements and require employers to provide information about union-busting “persuader” activities. It may also pause new pay data disclosure requirements set to be put in place by the Equal Employment Opportunity Commission. The overtime, contractor disclosure and persuader rules were already on hold, pending the outcome of court battles. The EEOC pay data requirement was set to go into effect in March 2018. The rule was expected to make some 4 million workers newly eligible for time-and-a-half pay before a federal judge in Texas put it on hold late last year. The problem is that many businesses have already made changes to their pay rates to comply with the new rule. Some Republicans have suggested that they would support a smaller eligibility increase, but it’s not clear whether that might be done through legislation or by the DOL withdrawing the rule and issuing a new one via the notice-and-comment process. Read more on Bloomberg

Trump Vows to Cut Regulations in Meeting with U.S. Automakers President Trump met Tuesday with top domestic auto executives, vowing to cut regulations that will make it easier to build and sell cars in the U.S. Trump told leaders from Ford, General Motors and Fiat Chrysler that he will simplify the regulatory process for constructing manufacturing plants here to boost jobs. “We’re going to make the process much more simple for the auto companies and for everybody else who wants to do business in the United States,” Trump said. Even before everyone sat down for the meeting, Trump playfully said to two of the executives, “start building in the U.S,” according to a press pool report.The president called himself an environmentalist, but argued that those regulations are “out of control” and promised to push the permitting approval process along at a much faster clip. “We’re bringing manufacturing back to the United States big league, we’re reducing taxes very substantially and we’re reducing unnecessary regulations,” Trump said. Trump has criticized U.S. and foreign automakers, arguing that they should build their plants here if they want to sell cars here. He has threatened to apply hefty tariffs on U.S. companies that move their operations abroad and import their products back here. Read more on The Hill


RENEWABLE ENERGY NEWS

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N.Y. Utility Gives Green Light to Largest Project in U.S. A New York utility approved the largest-ever offshore wind project in America on Wednesday, and officials said it shouldn’t add much more than a dollar to customers’ monthly bills. The Long Island Power Authority, a public utility that reports to Gov. Andrew Cuomo (D), gave the green light to a 90-megawatt project off the South Fork of Long Island. The target operation date is Dec. 1, 2022. The approval came after months of negotiations with Deepwater Wind LLC, which has rights to develop in those federal waters. The forecast cost is $740 million, according to Deepwater Wind. LIPA estimates a bill impact of $1.19 per month. Economics will be the key issue as offshore wind tries to gain a foothold in America. Although hundreds of turbines have been built in Europe, in the United States the industry has to compete with cheap natural gas. That competition may even intensify if President Trump gives a boost to the fossil fuel industry. Observers were therefore curious about how the cost of the New York proposal would come in, since a project of this size has never been attempted in the United States. The only other project in America, which Deepwater Wind built off Rhode Island, is one-third the size. It went live in December. Cuomo, meanwhile, hopes the project will be the first of many in the Empire State. New York is trying to get half of its power from renewables by 2030, a target that officials say isn’t affected by the election.Offshore wind developers say they have cut costs dramatically in Europe and that by scaling up in America, they can wring out more costs. State officials asked Deepwater Wind to be mindful of the fishing community as it proceeds. Read more on E&E


ENERGY TAXATION NEWS

IRS Relax Rules on Natural Resources Qualifications for Master Limited Partnerships The Internal Revenue Service relaxed a previous proposal about what types of natural resources activities qualify a business as a tax-preferred master limited partnership. The rules include processing of natural gas liquids into olefins, which are used in plastics, as an approved activity. In a previous draft of the rules, Westlake Chemical Partners LP could have lost its MLP status because the regulations didn’t allow for that processing. “The Treasury Department and the IRS recognize that changes in technology have expanded the ways to create liquid fuels,” the government said in final rules (T.D. 9817). The rules also removed a provision that had an “exclusive list” of activities that were approved for special tax treatment. The rules are likely to be seen as a win for the master limited partnership industry, which fought the proposal because businesses said it too narrowly defined what types of companies could qualify as MLPs. IRS officials have said the rules are necessary to provide a framework so the agency can treat all requests to be MLPs fairly. Read more on Bloomberg 

Border Adjustability Would Remedy U.S. Trade Disadvantages Deep tax cuts would have to be sacrificed if the House GOP proposal to tax imports and exempt exports goes by the wayside, House Ways and Means Committee Chairman Kevin Brady (R-Texas) said. The Republicans’ idea, known as border adjustability, is a crucial revenue component in the overall tax revamp plan the House GOP put forth last year and would remedy trade disadvantages U.S. companies currently face, Brady said. Business critics from the retail, banking and oil refinery sectors have said it would raise U.S. consumer costs. “There are severe consequences for America if special interests succeed in blocking this provision,” Brady said at the U.S. Chamber of Commerce. “Foreign products would continue their tax advantage over ‘Made in America’ products, undercutting President Trump’s focus on American jobs and growth. Tax rates on businesses would have to increase significantly from the proposed 15 and 20 percent rates, undercutting our ability to make America competitive again.” Border adjustments would help level conditions for U.S. companies, House Speaker Paul D. Ryan (R-Wis.) said at a news conference, echoing Brady. Trump has signaled skepticism about border adjustments, but Brady said talks remain under way on the issue and other tax matters. He said he was confident a deal would emerge. Republicans in the House and Senate will meet in Philadelphia Jan. 25-27, with Trump scheduled to join them. Tax reform is a central item on their agenda. Border adjustability backing also came from Grover Norquist, president of Americans for Tax Reform, who said in a CNBC interview that he supported the idea because it is part of a larger tax reform package. Read more on Bloomberg


ENVIRONMENTAL NEWS

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Trump Team Plans Big Cuts at EPA The Trump administration’s transition team for the Environmental Protection Agency (EPA) is planning major budget cuts, as well as regulatory and scientific overhauls at the agency, according to a new report. The team’s plan for the EPA identified more than $800 million in planned budget cuts, including to state and tribal assistance grants, climate programs and environmental programs and management, according to Axios. But Myron Ebell, who led the Trump transition team for the EPA, cautioned that the document in question was an initial briefing document, prepared in October— before Election Day—for the transition team. Ebell, the head of the environment program at the conservative Competitive Enterprise Institute and the author of the document, said it is not the transition team’s “Action Plan” for the EPA, which was written much later and identified what the team wants to do with the agency. Ebell declined to provide the Action Plan. The briefing document devotes significant attention to reforming how the EPA uses science. “EPA does not use science to guide regulatory policy as much as it uses regulatory policy to steer the science,” the document says, according to Axios. “This is an old problem at EPA. In 1992, a blue-ribbon panel of EPA science advisers that [sic] ‘science should not be adjusted to fit policy.’ But rather than heed this advice, EPA has greatly increased its science manipulation. ”The document says that the EPA should not fund scientific research, should make all science used for regulatory decisions public and should overhaul its scientific advisory board. It also lists numerous regulations to cut, including the carbon dioxide rules for new and existing power plants, the Waters of the United States rule, and the Chesapeake Bay cleanup plan. The extent to which the plan aligns with official Trump administration policies is unclear, as is whether they’re merely wishes of the transition team. Read more on The Hill

Audit Faults FWS Fee Programs for Offsetting Development Federal auditors are warning that the Fish and Wildlife Service is not doing enough to ensure that payments made by developers to offset the damage they do to protected species are actually benefiting the rare plants and animals. The Government Accountability Office’s finding comes in response to a request to investigate compensatory mitigation options for the endangered American burying beetle from Sen. James Lankford (R-Okla.), the chairman of the Homeland Security and Governmental Affairs Subcommittee on Regulatory Affairs and Federal Management. When negative impacts are unavoidable, the agency has signed off on a suite of compensatory mitigation strategies for developers. In the case of the burying beetle — an inch-and-a-half-long orange and black bug that has been protected by FWS since 1989 — mitigation is provided by mitigation banks and in-lieu fee programs. Beetle conservation fee programs have popped up in Oklahoma and elsewhere because the cost of bank credits “has skyrocketed,” Lankford said in a statement today touting the 76-page report. But oversight of fee programs has been less robust, GAO found. “FWS tracks key information about the conservation banks it approves, such as the location and credits available, but it does not track in-lieu fee programs,” the report said. As a result of the agency’s data shortcomings, “FWS may be unable to respond to inquiries from the public and private sectors, or to track administrative and ecological compliance by in-lieu fee program sponsors, among other things,” GAO said. “In addition, FWS is limited in its ability to evaluate whether in-lieu fee programs are an effective strategy for conservation.” While FWS officials told auditors they were aware of the problem, the agency had no immediate plan to fix it. GAO recommended that the FWS director “establish a timetable with milestones” for incorporating data on fee programs into a mitigation tracking database maintained by the Army Corps of Engineers. The Interior Department, which includes FWS, agreed to implement the recommendation. Read more on E&E

Strangling a Huge Climate Policy Machine Won’t Be Easy for Trump If the Trump administration intends to strangle the flow of climate change information produced by the federal bureaucracy, it will be no small task. The government apparatus of climate policy involves dozens of agencies and offices, and they spend billions of dollars a year. Their public activities number in the hundreds, from rules and scientific reports to research programs, webinars and internships. Thousands of employees, grant recipients and contractors are engaged in federal climate science, policy and communications. To bring all this under control, to satisfy Trump’s apparent desire to stymie programs that run counter to his policies, could also require reining in forces outside the bureaucracy. That could include trade associations, universities, citizens’ groups and state and local governments who work closely with federal counterparts as advisers, partners in regulation, or even as lobbyists for special interests. Throughout this realm, nerves are on edge in the early days of the administration. The incoming Trump team shows signs of launching a broad campaign of information control intent on eradicating activities that offend the fossil fuel industry and its allies. Some of the position papers and directives they are wielding speak of abolishing whole programs or radically reorienting their purposes to suit Trump’s pro-fossil-fuel, anti-regulatory agenda. Nowhere has this been more vivid than at the Environmental Protection Agency, where Trump officials have clamped down hard on sharing information. If some agencies have escaped a clampdown so far, nobody knows how long that will last. Read more on Inside Climate News

Trump Delays Dozens of EPA Regs The Environmental Protection Agency (EPA) will delay dozens of Obama-era regulations that were ensnared by President Trump’s regulatory moratorium. The EPA said it is freezing 30 regulations, most of which were published in the Federal Register after the 2016 election but have not yet taken effect. They will be delayed until March 21. The renewable fuel standard published in December is the EPA’s highest-profile rule to fall victim to Trump’s regulatory moratorium. Emissions standards for wood manufacturers will also be delayed. This will give Trump’s EPA pick, Oklahoma Attorney General Scott Pruitt, time to review the rules after he is confirmed by the Senate. At that point, many of the EPA’s more controversial rules could be entirely dismantled. Per Trump’s regulatory moratorium, the Transportation Department also withdrew new regulations for hazardous materials that have not yet been published in the Federal Register. This is one of 18 rules scheduled to be withdrawn Thursday by federal agencies. Here are a few other rules that will be published in Thursday’s edition of the Federal Register: The Commodity Futures Trading Commission (CFTC) is delaying automated trading regulations. The CFTC proposed new rules for automated trading in December 2015, and updated its proposal last November, but is now extending the comment period to give the public more time to consider the changes. The public has until May 1 to comment. The Fish and Wildlife Service (FWS) is delaying new conservation regulations that would protect endangered species. The conservation regulations address enhancement-of-survival permits. The rules were scheduled to go into effect on Thursday, but will be delayed until March 21 in response to Trump’s regulatory moratorium. Read more on The Hill


STATE ENERGY NEWS

Texas Senate, House Disagree Over How to Fund the Railroad Commission The Texas Senate and House disagree when it comes to funding the Railroad Commission of Texas, the state’s oil and gas regulator. In budget proposals submitted last week, the Senate proposed cutting $13.6 million from the commission’s funds. The House, on the other hand, has proposed raising the agency’s budget by $35 million, one of the few budget hikes for agencies proposed by the House. The Railroad Commission budget comes mostly from industry fees and has been hard hit by the oil downturn as companies cut production and many went out of business. The agency has had to cut staff and reduce the number of orphan wells it plugs. The agency has asked for an additional $44.9 million, part of which will go towards growing its staff of 158 inspectors. The inspectors oversee around 440,000 oil and gas wells, more than 75 percent of which are considered active, according to budget documents. Read more on Fuel Fix

Becerra Confirmed as Attorney General; Special Election Next California Gov. Jerry Brown (D) swore in former Rep. Xavier Becerra (D) as the Golden State’s attorney general, after the state Senate approved his appointment on a party-line vote. The state Assembly signed off Friday.. Becerra replaces new Sen. Kamala Harris (D-Calif.), who left the post after she won the seat previously held by former Sen. Barbara Boxer (D-Calif.). Brown appointed Becerra to fill the remainder of Harris’ term, through 2018. Becerra’s departure from Congress necessitates a special election to replace him representing the 34th District, which takes in downtown Los Angeles and nearby neighborhoods. Read more on E&E


GLOBAL ENERGY MARKET NEWS

Saudi Arabian and Venezuelan Oil Suppliers Shrug Trump’s Plans to End OPEC Dependence OPEC’s two biggest suppliers to the U.S. shrugged off a vow by President Donald Trump to end dependence on the group’s oil, saying the world’s biggest economy would continue to need crude from abroad. The U.S. is “closely integrated in the global energy market,” Saudi Arabia’s Energy and Industry Minister Khalid Al-Falih said, while his Venezuelan counterpart Nelson Martinez said he expects his country’s crude exports to the world’s top consumer to remain stable. Just after his inauguration on Friday, Trump said he was “committed to achieving energy independence from the OPEC cartel and any nations hostile to our interests,” by exploiting “vast untapped domestic energy reserves”, according to a plan posted on the White House website. The U.S. imported about 3 million barrels a day from the organization last year, with Saudi Arabia and Venezuela accounting for 1.81 million, according to data compiled by Bloomberg. This isn’t the first time a U.S. president promises to end the country’s reliance on supplies from the Organization of Petroleum Exporting Countries. Former President George W. Bush promised to cut imports from the Middle East when he said in 2006 the nation was “addicted to oil.” Shipments from OPEC rose 10 percent during Bush’s time in office. Every U.S. president going back to Richard Nixon has pledged to reduce the country’s reliance on foreign oil. Venezuela’s Martinez played down any concern that his country’s shipments to the U.S. might dwindle under a Trump administration. “The export volumes will be maintained,” he said. “There is a lot of interdependence in the world of energy. It’s good to maintain it for everyone’s good.” Al-Falih suggested Saudi Arabia could always export its oil somewhere else, if the U.S. stopped buying. “Oil is fungible, so it flows around — what doesn’t get sold in one market can be sold in another,” he said. Read more on Bloomberg

Trump’s Directive to Use U.S. Steel in Pipelines Runs Counter to Long-standing Trade Law President Trump’s executive order yesterday requiring pipeline developers to use steel made in the United States would likely violate 70 years of settled international trade law. The World Trade Organization and the General Agreement on Tariffs and Trade require members to give the same treatment to imports from other members and also to treat imported goods and services no less favorably than domestically produced items. Trump’s plan to require U.S. pipelines to be built with U.S. steel, a “local content requirement,” is inconsistent with those rules. The United States has in the past been a fierce opponent of local content requirements as discriminating against American exporters and investors. The most well-known ruling on the subject came in the 1980s when the United States successfully challenged a Canadian law that made investment approvals conditional on the purchase of certain products from domestic sources. The United States has also challenged local content requirements applied by India, Argentina, China, Turkey and the Philippines on products from solar cells and wheat to auto parts. Trump’s secretary of Commerce will be called upon to craft a local content requirement for pipelines but might struggle to fit the law into the United States’ trade obligations. Read more on St. Louis Post Dispatch


FROM THE CHART ROOM

EIA Projects Increased Demand and Production Tightening the Market

Forecast for increased oil demand

EIA estimates that crude oil and other liquids inventories grew by 2.0 million barrels per day (b/d) in the fourth quarter of 2016, driven by an increase in production and a significant, but seasonal, drop in consumption. Global production and consumption are both projected to increase through 2018, but consumption is expected to increase at a faster rate than production. As a result, global balances are expected to tighten. The production increase in the fourth quarter of 2016 largely reflects members of the Organization of the Petroleum Exporting Countries (OPEC) ramping up production in advance of implementing the November agreement on production cuts. Global production is expected to have increased by 1.6 million b/d in the fourth quarter of 2016, with OPEC accounting for 0.9 million b/d, or 55%, of this increase. EIA estimates that total global production averaged 96.4 million b/d in 2016. Global production is expected to increase to 97.5 million b/d in 2017 and to 98.9 million b/d in 2018.

The large seasonal consumption declines in the fourth quarter of 2016 are not expected to continue as global consumption of petroleum and liquids is forecast to grow at a faster rate than production through 2018. The January 2017 Short-Term Energy Outlook forecasts annual crude oil balances to tighten over the next two years, with 2017 averaging a 0.3 million b/d stock build and 2018 averaging a 0.1 million b/d stock build. By the second half of 2018, inventories are expected to decline by an average of 0.1 million b/d.

With annual inventory builds, along with a lack of a significant draw on existing inventories, prices remain below $60/b through the end of 2018. Brent crude oil spot prices are expected to remain fairly flat during 2017, in part as a result of the responsiveness of U.S. tight oil production to rising oil prices in late 2016, and they are expected to average $53/b for the year. EIA forecasts Brent prices will slowly increase in 2018, beginning the year at $54/b in January and ending the year at $59/b in December, averaging $56/b annually. Read more on EIA


 

Michael Best Strategies

Michael Best Strategies’ Energy Team

About Michael Best Strategies

Michael Best Strategies focuses on achieving clients’ objectives through unparalleled strategy development and deployment for implementation, pragmatic guidance on public policy development, and government relations. The Strategies team specializes in a full range of services, including government relations, public policy consulting, grassroots advocacy, public affairs, conference planning, and strategic political relationships. For more information, visit michaelbeststrategies.com.