American Energy Companies Balancing Much Needed Regulatory Relief With Dramatic Changes in Tax and Trade Policy

The American energy industry has applauded President Trump’s executive orders providing for regulatory freezes, a regulatory budget, streamlining of energy pipeline projects, and generally removing regulatory barriers to economic growth. However, with all of this good news has come some cause for pause.

Requirements for pipelines to be built with American steel have raised serious questions about its availability. New restrictions on immigration concern global companies that rely upon international talent. Especially, plans to restructure America’s trading relationships have the energy industry roiling.

At this point, it is hard to tell how much of the political theatre around trade relationships is just the Art of the Deal, but there are genuine concerns about the potential dismantling of a generation of liberalized trade policies that have shaped highly efficient supply chains, including the assembly of products in the U.S. using parts from Mexico, China, and other nations.

Beyond potential dramatic restructuring of trade deals, discussion of import tariffs and a House backed Border Adjustment Tax have players in the energy industry at odds with one another. Independent oil and gas producers, who for years advocated an import fee on crude, presumably would benefit while refiners who import crude would be hurt.

Further, President Trump’s recent public statements appeared to pit Mexico against Canada, our largest trading partners of crude and natural gas. This may be more art than deal, but given the President’s sweeping trade authority, substantial change is surely coming.

To achieve President Trump’s projected increases in economic growth, major restructuring of trade relationships must be accompanied by substantial transition plans. For the good of our country, one hopes that delay tactics in approval of President Trump’s senior appointments will stop. These are complex and important matters. It does not help that our President is short staffed.


TRANSITION NEWS

  • G.O.P. Lawmakers Like What They See in Trump. They Just Have to Squint After three weeks in the White House, Mr. Trump has made clear that he is going to continue promulgating conspiracy theories, flinging personal insults and saying things that are plainly untrue. And the Republican-controlled House and Senate seem to have made a collective decision: They will accommodate — not confront — his conduct as long as he signs their long-stalled conservative proposals on taxes, regulations and health care into law. “There’s a widely held view among our members that, yes, he’s going to say things on a daily basis that we’re not going to like,” said Senator John Thune of South Dakota, the third-ranking Senate Republican, “but that the broad legislative agenda and goals that we have — if we can stay focused on those and try and get that stuff enacted — those would be big wins. Read more on New York Times

  • Steven Mnuchin Is Confirmed as Treasury Secretary The Senate confirmed Steven T. Mnuchin, a former Goldman Sachs banker and Hollywood film financier, to be Treasury secretary on Monday, putting in place a key lieutenant to President Trump who will help drive the administration’s plans to overhaul the tax code, renegotiate trade deals around the world and remake financial regulations. By a vote of 53 to 47, the Senate confirmed Mr. Mnuchin, who was Mr. Trump’s top campaign fund-raiser. During a long debate over Mr. Mnuchin’s credentials, Democrats argued that his experience on Wall Street exemplified corporate malpractice that led to the 2008 financial crisis. Read more on New York Times
  • McConnell Lines Up Slew of Cabinet Nominee Votes Senate Majority Leader Mitch McConnell has laid the groundwork for another procedural slog on the Senate floor that could stretch into the early part of March. First up after a previously scheduled vote Tuesday morning on Linda McMahon’s nomination to helm the Small Business Administration will be the Office of Management and Budget director nominee, Rep. Mick Mulvaney. The South Carolina Republican will receive a vote this week after what’s expected to be a blistering debate likely focused on his tea party past, including his past opposition to increased defense spending. The Senate will then turn to the nomination of Oklahoma Attorney General Scott Pruitt to be EPA administrator. Democrats have been girding for that fight, given Pruitt’s record as a legal thorn in the side of the EPA during the Obama administration. That means after dispensing with Pruitt, the next votes would be on Wilbur Ross for Commerce secretary, Montana Rep. Ryan Zinke to be Interior secretary, Ben Carson as Housing and Urban Development secretary and finally, former Texas Gov. Rick Perry to slot in as Energy secretary. Read more on Roll Call
  • Pruitt Expected to be Confirmed This Week Scott Pruitt will have to wait in line for a confirmation vote on President Donald Trump’s pick to run the White House Office of Management and Budget, but Republican senators supporting the Oklahoma attorney general’s appointment to head the EPA predicted he will still be confirmed this week. Senate Majority Whip John Cornyn (R-Texas) predicted Feb. 13 that the Pruitt confirmation would still be finalized this week. Democrats are poised to exhaust all possible debate time on both nominations, setting the stage for a possible Pruitt confirmation late Feb. 16. Cornyn recently predicted Pruitt—currently the Oklahoma attorney general—would come before Mulvaney. Sen. Jim Inhofe (R-Okla.), a staunch Pruitt supporter, also echoed that forecast in a recent interview saying Pruitt would be confirmed Feb. 15. Still, Senate Environment and Public Works Committee Democrats urged the Republican leadership to postpone the confirmation further, pointing to a pending Oklahoma District Court hearing on a long-delayed response to an open records request involving e-mails shared between the attorney general’s office and a host of fossil fuel companies. That hearing will now likely take place prior to Pruitt’s confirmation but only by several hours, according to the current timeline. Read more on Bloomberg
  • Collins to Vote Against Trump’s EPA Pick Sen. Susan Collins (R-Maine) became the first Republican to oppose President Trump’s nominee to lead the Environmental Protection Agency on Wednesday. Collins told Maine Public Radio she will oppose Oklahoma Attorney General Scott Pruitt’s nomination to head the EPA when the Senate considers his nomination, possibly as early as this week. “I have significant concerns that Mr. Pruitt has actively opposed and sued the EPA on numerous issues that are of great importance to the state of Maine, including mercury controls for coal-fired power plants and efforts to reduce cross-state air pollution and greenhouse gas emissions,” Collins said. “His actions leave me with considerable doubts about whether his vision for the EPA is consistent with the agency’s critical mission to protect human health and the environment.” Democrats have raised a host of objections to Pruitt’s nomination, including his litigious history against the EPA, his position on the science behind climate change and his ties to fossil fuel industries in Oklahoma. Democratic Sen. Joe Manchin (D-W.Va.) seems likely to support Pruitt, giving him a buffer when the Senate votes on confirmation. Read more on The Hill
  • Democrats Cry Foul as Senate Moves Toward Pruitt Confirmation Vote Democrats will hold the Senate floor through the night ahead of a confirmation vote on Scott Pruitt to lead the Environmental Protection Agency after senators voted Thursday to move ahead with his nomination. The Senate voted 54-46 to end debate on Pruitt’s nomination, with Democratic Sens. Joe Manchin (W.Va.) and Heidi Heitkamp (N.D.) joining all 52 Republicans to set up a confirmation vote. That leaves no more than 30 hours for debate before a final vote, and the clock started ticking at 7 a.m. Thursday. Pruitt’s critics called on Senate Republicans to delay the confirmation vote because a state court ordered Pruitt to release the emails. Sen. Tom Carper of Delaware, the ranking Democrat on the Environment and Public Works Committee, asked Senate Majority Leader Mitch McConnell (R-Ky.) to delay the vote until Feb. 27, but the Kentucky Republican declined, Carper said at a press conference Thursday. Now that the Senate has voted to end debate, there won’t be time for senators to review any documents before the final vote, regardless of the outcome of the court hearing, said Sen. Sheldon Whitehouse (D-R.I.). Read more on Morning Consult
  • Gorsuch Confirmation Hearing to Start March 20 The confirmation hearing for Judge Neil Gorsuch to be a Supreme Court justice will begin on March 20 and last up to four days, Senate Judiciary Chairman Chuck Grassley (R-Iowa) said today. According to the schedule, members of the Senate Judiciary Committee will give opening statements the first day. Questioning of Gorsuch begin on March 21 and will be followed by testimony from outside legal experts. Assuming all Republicans vote in favor of the judge, Gorsuch’s confirmation would require the support of eight Democrats to reach the 60-vote threshold for confirming Supreme Court nominees. Trump has pushed Senate Majority Leader Mitch McConnell (R-Ky.) to change Senate rules if necessary to confirm Gorsuch by a majority vote. Several Senate Democrats and environmentalists have raised concerns that Gorsuch could reverse long-standing environmental law. If confirmed, he would bring a deeply skeptical view of the Chevron doctrine — a key legal doctrine in environmental law — to the Supreme Court. Under Chevron, courts defer to agencies when Congress has been silent or ambiguous on an issue. In August, Gorsuch wrote a blistering critique of the doctrine in a concurring opinion in a case involving undocumented immigrants. The judge listed that case as one of his most significant over which he presided as a 10th Circuit judge in his questionnaire submitted to the Senate Judiciary Committee. Read more on E&E

 

ENERGY TRANSPORTATION NEWS

  • DEQ Fines Pipeline Company $1M for 2015 Oil Spill Near Glendive A pipeline company will pay Montana $1 million for a 2015 spill that sent 31,000 gallons of oil into the Yellowstone River, contaminating a local water supply. Bridger Pipeline LLC will be required to give $200,000 to the state’s general fund and at least $800,000 to “supplemental environmental projects,” the Montana Department of Environmental Quality announced. The department defines “supplemental environmental projects” as those that reduce pollution, benefit public health or restore the environment. In January 2015, the pipeline split at a weld and spilled oil into the Yellowstone. Residents of the nearby town of Glendive soon began reporting a bad taste and smell from drinking water. Benzene, a carcinogen, was ultimately detected in the drinking water at a level three times the limit for long-term exposure risk, according to U.S. EPA. Oil was also detected in fish caught near the spill site. By the time of the incident, Bridger Pipeline LLC already had a history of 30 spills and a number of fines. Read more on Billings Gazette 
  • API Lobbyist Jumps to Transportation Panel The director of federal relations at the American Petroleum Institute is heading back to Capitol Hill, where she’ll assume a new role on the House Transportation and Infrastructure Committee. T&I Chairman Bill Shuster (R-Pa.) said yesterday that Misty McGowen would become the committee’s director of outreach and coalitions. “The quality of our infrastructure impacts the lives of every single American, and building a 21st century infrastructure for America will take a broad and diverse coalition of stakeholders,” Shuster said in a statement. McGowen has spent the last seven years as API’s director of federal relations. Prior to that, she was the trade group’s Washington associate. She is a former legislative aide to Sen. Mike Crapo (R-Idaho) and interned in the office of then-Rep. John Boozman (R-Ark.), who now serves in the Senate. McGowen has a law degree from the University of Arkansas and a Bachelor of Arts in psychology from the University of Central Arkansas. Read more on E&E
  • Trump, Trudeau Talk Energy Collaboration, Keystone XL Canadian Prime Minister Justin Trudeau today pledged the United States and Canada will collaborate “on energy infrastructure projects that will create jobs while respecting the environment.” After his first face-to-face Oval Office meeting with President Trump, Trudeau hailed the close partnership between the two nations as an engine for job creation and affirmed Canada’s commitment to building the Keystone XL pipeline. The fact that climate change was left out of the public dialogue enraged activists who plan to rally outside the Canadian Embassy later this afternoon to resist Trudeau’s partnership with Trump.”We have built the world’s largest energy trading relationship. We share the goals of energy security, a robust and secure energy grid, and a strong and resilient energy infrastructure that contributes to energy efficiency in both countries,” they stated. “We collaborate closely on energy innovation, particularly in the clean energy sphere.” It also noted future efforts on environmental cooperation, “particularly along our border and at the Great Lakes,” and continued work “to enhance the quality of our air and water. Read more on E&E 
  • Pipeline Foes Tap New Leader in Neb. Jane Kleeb, the well-known organizer and opponent of the Dakota Access and Keystone XL oil pipelines, announced today that Linda Anderson, a leader of Vermont independent Sen. Bernie Sanders’ presidential campaign in Nebraska last year, will become the new state director for Bold Nebraska, the group Kleeb founded to fight KXL. Anderson will play a pivotal role in rallying opposition to the Keystone XL pipeline, which recently reapplied for a presidential permit from the State Department with President Trump’s blessing. She will replace Amy Schaffer, who has been running the Nebraska operation since May. Kleeb’s Bold organization now has branches in Nebraska, Iowa, Oklahoma and Louisiana, and is attempting to branch out to other states through the creation of a “hub” to connect grass-roots activists and national organizations. Kleeb also recently became chairwoman of the Nebraska Democratic Party. “My work as President of the Bold Alliance is now focused on developing, with other allied national and regional groups, a ‘Fighter and Protector Hub’ for all pipeline fighters, fractivists, oil train fighters and water protectors,” Kleeb said in a statement. “Much of my attention in the coming years with the new Fighter and Protector Hub is about creating an unlikely alliance to end eminent domain for private gain.” Read more on E&E 
  • Pipeline Explodes in South Texas A natural gas pipeline has exploded in South Texas, in a fiery display that lit up the sky and could be seen for miles. Texas Department of Public Safety spokesman says the explosion occurred near Refugio (ray-FYOO’-ee-oh), a rural community north of Corpus Christi, about 15 miles from the Texas Coast. He says no one was hurt and that there are no refineries or plants nearby. He says it’s too early to know what triggered the explosion. In a prepared statement Kinder Morgan spokeswoman said the fire and natural gas release were discovered at about 12:30 am. “The company shut down the impacted pipeline segment, dispatched personnel to the site, and regulatory agencies have been notified. The fire has been extinguished, and there are no injuries,” she added . An investigation into the cause of the fire is underway, the company said. Mishaps with transmission lines are not uncommon. In the past two decades, the U.S. government has recorded more than 2,000 accidents on gas transmission lines across the country. Read more on Fuel Fix 
  • Tribe, Dakota Access Developer Face Off at House Hearing Representatives from the company building the Dakota Access pipeline and the tribe opposing it both told a House committee Wednesday that the government is responsible for the tense debate over the project. At a hearing on energy infrastructure improvements, an Energy Transfer Partners official said political appointees in the Obama administration were behind the push to slow down the project. He said it was a “political decision” to withhold an easement allowing construction at a controversial river crossing in North Dakota. But the Standing Rock Sioux tribe, which has sued to stop the pipeline, also had “no interest in discussing the project with us,” Dakota Access project director charged. “Requests for consultation were mostly denied,” she told the Energy and Commerce Committee. “We had some conversations with the tribal chairman, but at the same time we were not able to have meaningful consultation due to lack of engagement.” Energy Transfer Partners last week received an easement to build its pipeline under Lake Oahe on the Missouri River in North Dakota. Read more on The Hill
  • The Other Problem With The Diamond Pipeline “Mni Wiconi,” or “Water is Life,” has become the rallying cry for thousands in North Dakota and around the world in a struggle that is simultaneously about one North Dakota oil pipeline, and all oil pipelines. In Arkansas, that cry took on additional meaning in light of the revelation that the Plains All American Diamond Pipeline decided to route their 440 mile, 20” crude oil line within a half mile of the water intake valve for almost thirty thousand Arkansans. For a moment, I’d like us all to put aside the usual arguments we get stuck in when we try to talk about oil pipelines: fossil fuels vs. renewables, jobs, what constitutes “safe” transport, and climate change, and bring our attention to one fact: Diamond Pipeline LLC did not know that the water intake was there. Whether you are for or against the oil industry, the fact that a company could finalize plans for a pipeline of this magnitude, obtain the necessary easements, and apply for the few necessary permits yet miss such an important part of the process should be deeply disturbing at a minimum. Read more on Huffington Post
  • Keystone Developer Reapplies for Nebraska Permit The developer hoping to build the controversial Keystone XL oil pipeline submitted a renewed application Thursday to build the line through Nebraska. Nebraska state law allows TransCanada Corp. to use eminent domain in certain areas if the state approves the route and more than 90 percent of the landowners in the path previously granted permission for construction. TransCanada said the application to the Nebraska Public Service Commission follows the same route that the state’s governor approved in 2013, before former President Obama rejected the federal permit for the pipeline. Nebraska was in many ways central to previous opposition to Keystone, and the fight could focus there again. “Keystone XL is a foreign-owned pipeline, using foreign steel headed to the foreign export market,” Jane Kleeb, president of the anti-pipeline Bold Alliance, said in a statement. The Nebraska state approval process can take up to a year and includes public hearings, public input and other steps. Read more on The Hill

 


ENERGY TAXATION NEWS

  • Brady Open to Energy Industry Input on Border Proposal A House Ways and Means Chairman Kevin Brady today vowed to work closely with the Senate and White House to push through a tax overhaul this year, but he stopped short of guaranteeing their final version would contain the controversial border adjustment tax. The Texas Republican has been the biggest backer on Capitol Hill of the BAT, which would help make U.S. companies more competitive overseas and keep domestic jobs from moving to foreign soil. The BAT has raised some concerns from energy companies, particularly refiners, that worry the new tax would hike the cost of the crude oil they import. Other domestic manufacturers that import raw goods from overseas also worry about taking a potential hit. Senate Finance Committee Republicans, including Chairman Orrin Hatch (R-Utah), are far from sold on the plan and have over the past week said they’ll offer their own ideas. The White House too has sent mixed signals on a BAT and vowed this week to release its own tax proposal in the coming weeks. Brady, though, did not rule out easing in the BAT to allow industries to absorb any adverse impact. “I have not yet heard a valid compliant that can’t be resolved very positively through the design and transition of these provisions,” he said. Read more on E&E 
  • Tax Reform Will be Important Part of Infrastructure Funding Package The Infrastructure package will include broadband, electric grid, pipeline and transportation provisions, House Transportation and Infrastructure Committee Chairman Bill Shuster said at an event in Washington. Shuster says he met with Transportation Sec. Elaine Chao yesterday to discuss infrastructure package. He is also working with Energy and Commerce Committee Chairman Greg Walden. The package won’t be released until after House wraps up Obamacare repeal and tax reform packages. Tax reform will be important piece of infrastructure funding. Read more on Bloomberg

 


ENERGY REGULATORY NEWS

EPA

  • Trump Undertakes Most Ambitious Regulatory Rollback Since Reagan President Trump has embarked on the most aggressive campaign against government regulation in a generation, joining with Republican lawmakers to roll back rules already on the books and limit the ability of federal regulators to impose new ones. After just a few weeks in office, the new administration is targeting dozens of Obama-era policies, using both legislative and executive tactics. The fallout is already rippling across the federal ¬bureaucracy and throughout the U.S. economy, affecting how dentists dispose of mercury fillings, how schools meet the needs of poor and disabled students, and whether companies reject mineral purchases that fuel one of the world’s bloodiest conflicts. The campaign has alarmed ¬labor unions, public safety advocates and environmental activists, who fear losing regulations that have been in place for years, along with relatively new federal mandates. Business groups, however, are thrilled, saying Trump is¬ responding to long-standing complaints that a profusion of federal regulations unnecessarily increases costs and hampers their ability to create jobs. Read more on Washington Post
  • Interior Energy Rules Land in CRA Crosshairs Resolutions to kill a pair of signature Obama-era Interior regulations are just the tip of the iceberg for Republican lawmakers seeking to loosen the federal government’s grip on energy development on public lands. A group of GOP lawmakers representing Western states has proposed to repeal at least eight rules related to oil and gas extraction on federally controlled lands and waters, using powers granted under the Congressional Review Act (CRA). The House has already passed two of those measures: to repeal the Bureau of Land Management’s methane and Planning 2.0 rules. A third, which would block a revision of the Office of Natural Resources Revenue’s (ONRR) mineral valuation rule, is expected to be introduced today by Rep. Scott Tipton (R-Colo.). The caucus is targeting 13 rules President Obama introduced during his last months in office. Not all of the regulations listed affect oil and gas operations, and some — like Planning 2.0 — are not specific to the industry, but affect oversight of productive uses of public lands. Read more on E&E
  • Trump to Sign CRA Resolution as Republicans Tee Up Others The list of environmental regulations congressional Republicans want to repeal got longer with the addition of the Interior Department’s recent change to how it values federal fossil fuels. Rep. Scott Tipton (R-Colo.) introduced H.J. Res. 71 yesterday along with House Majority Whip Steve Scalise (R-La.) to undo the Office of Natural Resources Revenue’s rule for calculating the value of oil, gas and coal extracted on public lands. ONRR finished the rule June 30. That means it is recent enough for lawmakers to use the Congressional Review Act to undo it. The Obama administration updated the valuation standards to stop companies from gaming the system to avoid royalty payments. But fossil fuel companies and advocacy groups have sued Interior twice over the new standards, which they call unnecessary, vague and overly complex. Montana Republican Rep. Ryan Zinke, President Trump’s nominee to lead the Interior Department, has long spoken out against the ONRR rule. President Trump plans to sign his first CRA resolution today, H.J. Res. 41, to overturn the Securities and Exchange Commission rule mandating that oil, gas and coal companies disclose payments made to governments. Read more on E&E 
  • GOP Leaders Can’t Count on Majority SUpport for Resolution to Block Bureau of Land Management Regulation Sen. Rob Portman is “still reviewing” a proposal to block a rule aimed at limiting methane emissions from oil and gas drilling on federal lands and has not decided how he will vote, a spokesman for the Ohio Republican said today. Portman brings to three the number of Senate Republicans who have not yet committed to backing a Congressional Review Act resolution blocking the Bureau of Land Management regulation. That means GOP leaders cannot at this point count on majority support for the measure from their own ranks, and Democrats who typically side with them on fossil fuel issues remain undecided as well. Senate Majority Whip John Cornyn (R-Texas) said today that Republicans decided to put off a vote on the methane CRA because of time constraints this week. They were “best prepared” to pass a CRA undoing required background checks for gun purchases by mentally disabled Social Security recipients, Cornyn said today. “But the methane one is still on our list.” Sen. Susan Collins (R-Maine) has said she has “concerns” with the methane resolution, and Sen. Cory Gardner seemed to be leaning toward supporting the measure in an interview last week, but he said he has not made up his mind. While CRA resolutions cannot be filibustered, Republicans are still working with narrow margins in their 52-member caucus. Read more on Politico
  • Panel Sends Rulemaking Bundle to Floor as Reform Marches On A House panel yesterday debated and sent three regulatory reform bills to the chamber floor for consideration. The House Oversight and Government Reform Committee favorably reported measures that seek to address federal rulemaking, including the “Searching for and Cutting Regulations That Are Unnecessarily Burdensome (SCRUB) Act” (H.R. 988), the “Regulatory Integrity Act” (H.R. 1004), and the “Office of Information and Regulatory Affairs (OIRA) Insight, Reform and Accountability Act” (H.R. 1009). The “SCRUB Act,” which passed the committee 22-17, would establish a nine-member body and authorize an appropriation of up to $30 million to independently assess which regulations are outdated or unnecessarily burdensome which would then report to Congress on which regulations could be tossed out. The commission would sunset after five years with a goal of reducing 15 percent of the rules in the Federal Register. “The Regulatory Integrity Act,” reported favorably by a vote of 22-16, would require agencies to disclose actions about their pending rules along with their public communications about those rules. It would also prohibit agencies from using those communications to lobby the public for support of their rules.  Read more on E&E
  • Report Lists ‘High Risks’ Needing Trump’s Attention Every two years, at the beginning of a congressional term, GAO provides something for everyone in Congress. It’s the high-risk list that covers serious issues with programs all across the government. This year’s list is almost 700 pages long and much of it is deadly dull but important, nonetheless. Here’s a look. “Since GAO’s last high-risk update, many of the 32 high-risk areas on the 2015 list have shown solid progress,” the 2017 report says. “Twenty-three high-risk areas, or two-thirds of all the areas, have met or partially met all five criteria for removal from the High-Risk List.” “Since the 2015 list, “only one program was removed. GAO’s list now has 34 items, including these three new areas:
    • Federal environmental liabilities: The government is financially responsible for cleaning places where federal activities contaminated the environment, according to GAO. “Because of the lack of complete information and the often inconsistent approach to making cleanup decisions, federal agencies cannot always address their environmental liabilities in ways that maximize the reduction of health and safety risks to the public and the environment in a cost-effective manner.” Since 1994, 13 of 28 GAO recommendations in this area have not been implemented.
    • Management of Indian programs: The departments of the Interior and of Health and Human Services “have ineffectively administered Indian education and health care programs and inefficiently developed Indian energy resources. Thirty-nine of 41 previous GAO recommendations on this issue remain unimplemented.”
    • The 2020 census: It costs a lot to count. At $12.3 billion, the 2010 census was the most expensive ever and 31 percent costlier than the 2000 count. The Census Bureau has extensive plans, including greater use of technology, for the 2020 count that also “raise serious concerns about the Bureau’s ability to conduct a cost-effective enumeration.”
      Read more on Washington Post

ENVIRONMENTAL NEWS

  • Shakeups, Executive Orders Expected After Pruitt Lands U.S. EPA employees are preparing for major changes once Scott Pruitt arrives at the agency, which could happen later this week. The Oklahoma attorney general is expected to be confirmed as President Trump’s EPA administrator as early as Friday, despite fierce opposition from Senate Democrats and green groups. Agency staffers and sources outside EPA expect dramatic changes in policy to come soon after Pruitt takes the helm. The White House is rumored to be considering executive orders repealing some of the Obama administration’s signature environmental regulations, key political jobs will likely soon be occupied by permanent staffers, and career employees will get a clearer sense of how the Trump administration intends to act on its campaign promises to scale back EPA. Reports that Trump may soon visit EPA to sign executive orders scaling back regulations have staffers nervous about what’s to come. The Trump administration is widely expected to take action to scrap the Obama administration’s climate rules for power plants and the contentious Waters of the U.S. rule (or WOTUS). Read more on E&E 
  • Republican Bill Takes Aim at Environmental Litigation Republican lawmakers are taking aim at environmental groups’ ability to obtain attorneys’ fees for litigation brought against the federal government. Legislation introduced in both the Senate and House yesterday would require the independent Administrative Conference of the United States to maintain an online searchable database of claims against the administration and associated fees and expenses. The database would include the names of all parties receiving monetary awards in litigation against federal agencies. In a statement, Republican Senate sponsors of the bill said it was needed to create an “open book” on the money that groups receive from suing the government. They accused “large environmental groups” that “frequently challenge the government in court” of abusing the Equal Access to Justice Act, which authorizes the payment of attorneys’ fees to parties that bring claims against the government. Senate Judiciary Chairman Chuck Grassley (R-Iowa) and Sens. Jeff Flake (R-Ariz.) and James Risch (R-Idaho) co-sponsored the legislation. Rep. Doug Collins (R-Ga.) introduced a companion bill in the House. Read more on E&E
  • EPA: US Greenhouse Gas Emissions Declined in 2015 Greenhouse gas emissions in the United States declined by 2.2 percent between 2014 and 2015, federal officials reported on Tuesday. In its annual draft greenhouse gas report, the EPA said total emissions of climate change-causing gases decreased in 2015 after back-to-back years of small growth. The report uses the most up-to-date data about greenhouse gas emissions. The EPA attributed the overall decline to lower carbon dioxide emissions from burning fossil fuels, which itself came about because of less coal consumption in favor of natural gas, warmer winter weather that decreased heating fuel demand and lower electricity demand overall. Carbon dioxide emissions, which make up 82.2 percent of overall U.S. greenhouse gases, decreased by 2.9 percent in 2015, the agency said. Because fossil fuel consumption accounts for more than 93 percent of those emissions, carbon trends are driven primarily by changes in the energy market. Overall emissions decline when there is decreased demand for energy, as well as a reduction in the carbon intensity of fuels burned for energy. The EPA’s draft study previews a final version of its annual emissions report, which is due to the United Nations in April. Read more on The Hill
  • Senate Democrats Hone in on Icahn Carl Icahn has largely flown below the ethics radar since President Donald Trump tapped him as an informal regulatory adviser in late December. But Senate Democrats are now directing their firepower at Icahn, the billionaire Trump ally whose petroleum refinery and other business interests will be directly affected by a regulatory overhaul. And watchdog officials are crying foul. The still-opaque ties between Icahn and Trump marks a departure from past special-adviser relationships at the White House and could lead to a reshaped regulatory framework that directly benefits Icahn. As of a few months ago, Icahn owned 82 percent of CVR Energy Inc., a Sugar Land, Texas-based company involved in petroleum refining. That company and at least some of its subsidiaries have to comply with the renewable fuel standard (RFS). Icahn has publicly called for a change of the biofuel mandate’s compliance arrangements, urging that it move from refiners and importers to downstream entities such as retailers. In announcing the relationship in December, the Trump transition team said Icahn will not serve as a federal employee or a special government employee. Instead, Icahn will advise the president “in his individual capacity” and “will not have any specific duties,” the transition team said. Icahn rejected allegations of a conflict of interest immediately following that announcement, arguing he will simply continue to contribute informal advice. Read on Bloomberg

 ENERGY MARKET NEWS

  • Energy Shares: Last Year’s Winners, This Year’s Laggards Energy shares have cooled in 2017 following a market-beating performance last year, wrong-footing many investors who bet the sector would benefit from oil-price stability. Energy was the best-performing sector in the S&P 500 last year, rising 24% as oil prices rebounded from multiyear lows reached last Feb. 11. A year later, crude prices are holding their gains, with New York crude rising Friday to close at $53.86 a barrel. But the S&P energy sector is down 3.6% in 2017, trailing the 3.5% gain in the S&P 500 index and putting energy shares near the bottom of the sector list. The reversal in energy shares, according to analysts and investors, reflects overly optimistic expectations for crude prices, the realization that it may take a few quarters before higher energy prices translate into improved earnings and signs that the stocks are already overvalued. The slide is the latest example of a sudden reversal in a popular trade. Read more on Wall Street Journal
  • U.S. Oil Exports Are Rising U.S. oil exports are on the rise, fueled by comparatively higher prices for foreign oil they compete with and lower shipping rates. But analysts say any further increases in exports will be slow and the prospect of American energy independence remains a lofty goal. Crude-oil sales abroad were prohibited for decades until the government lifted the export ban 14 months ago in the hopes of reducing a bulging oversupply that had helped send an oil boom into a bust in late 2014. Now, after a slow start, exports are starting to gain traction. The U.S. has exported an average of 623,000 barrels a day of crude oil so far in 2017, 42% more than the same period of 2016. That figure still pales in comparison to the 8.6 million barrels the U.S. imports every day from places like the Middle East. One factor encouraging U.S. oil companies and traders to sell their oil overseas is a growing discount on typical U.S. crude oil, known as West Texas Intermediate, or WTI, compared to its widely traded competitor overseas, known as Brent. Read more on Wall Street Journal 
  • Energy Companies Face Crude Reality: Better to Leave It in the Ground A new era of low crude prices and stricter regulations on climate change is pushing energy companies and resource-rich governments to confront the possibility that some fossil-fuel resources are likely to be left in the ground. In a signal that the threat is growing more serious, Exxon Mobil Corp. is expected in the coming week to disclose that as much as 3.6 billion barrels of oil that it planned to produce in Canada in the next few decades is no longer profitable to extract. The acknowledgment by Exxon, after the company spent about $20 billion to put the oil sands at the center of its growth plans, highlights how dramatically expectations have changed about the future prospects of the region. Once considered a safe bet, Canada’s vast deposits are emerging as among the first and most visible reserves at risk of being stranded by a combination of high costs, low prices and tough new environmental rules. Amid a glut of supply that led to a price collapse in 2014 and a tepid recovery, investors and executives at some of the world’s biggest energy producers are considering the possibility that oil demand could peak and then slow in the coming decades. The shift from a preoccupation with insufficient supply to worries about demand has altered investment priorities away from high-cost opportunities in the Arctic, ultra-deep waters and the oil sands. Canada was once thought to hold the world’s third-largest trove of crude, enough to meet U.S. demand for almost 30 years, largely due to the oil sands in northern Alberta—giant deposits of crude with the consistency of a hockey puck. Read more on Wall Street Journal

STATE ENERGY NEWS

Fearing Worse, Oil Industry Fights to Save Cap and Trade In the battle over whether to preserve California’s landmark climate change program, an unlikely defender has emerged: an influential trade group for the oil industry. The Western States Petroleum Association (WSPA) doesn’t think the state-mandated cap-and-trade system is perfect and is urging changes to it. But the coalition also sees a bigger threat on the horizon. Groups representing low-income communities and people who live near sources of air pollution want the state to force carbon cuts at those sites. WSPA, casting a nervous eye toward new and more costly regulations, argues that shouldn’t happen. As the state talks about extending cap and trade beyond 2020, she said, “we have to also deal with community exposure,” so that environmental justice groups don’t seek only “source-specific measures.” It’s a tension that soon will confront California lawmakers and air regulators, who will decide whether to continue cap and trade, impose other climate rules, or do both. Read more on E&E


ENDANGERED SPECIES ACTS

  • Barrasso Hopes to Sell Democrats on Reforms The Senate Environment and Public Works Committee this week will take a fresh look at reforming the Endangered Species Act — a long-held Republican priority that may now be possible with the party’s unified control of Congress and the White House. But to get any ESA reform bill past a Senate filibuster, Republicans will need to secure at least eight Democratic votes. In a sign of the seriousness with which EPW Chairman John Barrasso (R-Wyo.) is approaching that endeavor, the majority of planned witnesses for this week’s hearing have Democratic ties. Lawmakers will hear from Fish and Wildlife Service directors who led the agency during the Clinton and Obama administrations, a former Democratic governor of Wyoming, the president of the Wisconsin Farm Bureau Federation, and the executive director of the North Carolina Wildlife Resources Commission. Dan Ashe, CEO of the Association of Zoos and Aquariums, said while serving as President Obama’s FWS director that “I do believe that the Endangered Species Act should be reauthorized, and I think there could be room for improvement of the law.” Read more on E&E
  • Split Court Refuses to Rehear Key Critical Habitat Case A federal court has declined to rehear a controversial case over critical habitat for an endangered frog species. Judges on the 5th U.S. Circuit Court of Appeals voted 8-6 to deny rehearing the case en banc, or in front of the full court. Today’s decision lets stand a three-judge panel’s June 2016 split ruling that upheld the federal government’s habitat decision for the frog. The legal question at the center of the case was whether the government can designate an area as critical habitat for an endangered species even if that species doesn’t occupy that area. At issue is the habitat for the endangered dusky gopher frog, which was historically found in Louisiana, Mississippi and Alabama. Today there are about 100 frogs left in Mississippi. The Fish and Wildlife Service in 2012 designated 6,477 acres as critical habitat for the frog, of which 1,544 acres was private land located in St. Tammany Parish, La., where the frogs haven’t been seen for decades. Read more on E&E
  • The Endangered Species Act May be Heading for the Threatened List. This Hearing Confirmed It A Senate hearing to “modernize the Endangered Species Act” unfolded Wednesday with round after round of criticism from Republican lawmakers who said the federal effort to keep species from going extinct encroaches on states’ rights, is unfair to landowners and stymies efforts by mining companies to extract resources and create jobs .The two-hour meeting of the Environment and Public Works Committee was led by Sen. John Barrasso (R-Wyo.), who said last month that his focus in a bid to change the act would be “eliminating a lot of the red tape and the bureaucratic burdens that have been impacting our ability to create jobs,” according to a report in Energy and Environment News. Barrasso’s view is in lockstep with the Trump administration, which wants to cut regulations that impede business, particularly energy cultivation. Last week, the Interior Department under President Trump delayed the start date of protections for the endangered rusty patched bumblebee, which has lost an estimated 90 percent of its population in the past two decades. Read more on Washington Post

 


FROM THE CHART ROOM

President Trump Will Renegotiate NAFTA

(Chart graphics courtesy of Bloomberg)

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Effective Jan. 1, 1994, it was the first FTA to include both wealthy developed countries and a low-income developing country.The agreement eliminated most tariffs, and established intellectual property protections and dispute resolution procedures. It also includes supplemental agreements on environmental and labor cooperation. Effects of NAFTA are unclear and difficult to separate from other economic changes, according to CRS. NAFTA didn’t cause major aggregate job losses in the U.S.; in fact 39 states have a NAFTA country as top export destination. The agreement’s effect on U.S. GDP was modest.

Trump’s renegotiation priorities are unclear as of now. Commerce Secretary nominee Wilbur Ross said renegotiation could include country of origin rules and dispute resolution mechanisms. Outside experts speculate the administration may seek to limit Canadian and Mexican companies’ ability to sue the U.S. government or bid on contracts. The agreement could be modernized for economic changes such as e-commerce.

Canadian officials have expressed willingness to renegotiate the agreement. Canada’s priorities include expansion of pre-clearance facilities for travelers, regulatory harmonization, and shared infrastructure investment. Canadian officials initially said their aim was to preserve U.S. trade, which could be through a bilateral agreement; later clarified that trade with Mexico is also a priority. Although Trump has focused on Mexico, the U.S. has had more NAFTA-related trade disputes with Canada; and Trump says he will favor Canada over Mexico in recent press conference. If the deal collapsed, relations would likely revert to the 1989 FTA between the two countries.

Mexico will also come to the table, but won’t pay for a wall. Mexico has listed 10 priorities for renegotiation, including preservation of tariff-free trade, the free flow of remittances, and the humane treatment of migrants. Tensions have flared between President Trump and Mexico over his demand that Mexico pay for a wall along the U.S.-Mexico border. Mexican officials have said they could leave the pact if an agreement can’t be reached. If the deal collapsed, tariffs would likely revert to those dictated by most-favored-nation status at the World Trade Organization.


 

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.