Administration Views on Debt and Tax Reform Revealed

Energy Matters

Last week, business leaders in Houston, Texas, repeatedly raised questions about the House Republican’s “Better Way” Tax Reform package – specifically, its bold change to a territorial tax system and the attitude of the new governing majority to the federal debt.

In a Fox News interview, Treasury Secretary Mnuchin clearly addressed some of the White House thinking on these issues.

On Tax Reform and the Border Adjustment Tax (BAT): “We are looking closely at the House Plan; we’re looking at it seriously. We’re working very closely with Paul Ryan. And we’re working very closely with the Senate leadership. When we come out with the plan, it’s going to be a combined plan of the leadership of the House and the Senate and the administration. And it’s going to be something that’s focused on growth and we will have listened to people’s concerns and we will have taken them into account.

“We haven’t come out with our view on the Border Adjusted Tax and what aspects of that may or may not be included. One of the issues is it has certain complexities; it has certain assumptions on what happens to the currency. These are complicated issues. We are taking this all into account. And I can assure you when we come out with the plan we will have very carefully thought through all of these issues and included it in the plan.

“We believe in dynamic scoring. And we’ll be scoring this over a 10-year period. So there’s no question in our mind that both the tax plan as well as the changes to regulatory will absolutely impact dynamic scoring and create more growth in tax revenues.”

On the Administration’s Priority on Debt Limit: “The absolute level of debt is a concern for me and a concern for the president. Under the last administration they doubled the debt. Having said that our number one focus is economic growth. We need to get to economic growth to solve the issues that we have in this country. So the debt is a longer -term issue, not a shorter term issue. But absolutely something that we’re focused on as well.”

On the Budget: “The president’s priority and he’s commented on this, we’ve got to focus on our defense and make sure that our military has the capabilities that they need. That our borders have the capabilities that they need to protect the American citizens. So I’m not going to comment overall on the budget. You’re going to see it soon. But I will tell you it does reflect the president’s priorities in what he has campaigned on and what he believes in.”

Finally, in an interview with Reuter’s last week, President Trump himself said plans to create a “border adjustable” business tax could help the economy. He said it could “lead to a lot more jobs,” though the wire service reported he stopped short of endorsing the proposal. “I certainly support a form of tax on the border. What is going to happen is companies are going to come back here, they’re going to build their factories and they’re going to create a lot of jobs and there’s no tax.”

It appears tax reform is coming and federal debt reform will wait, but change is on the way. President Trump addresses Congress on February 28th, so look for more information then.


ENVIRONMENTAL NEWS

EPA

  • Pruitt Wants 24/7 Bodyguards U.S. EPA Administrator Scott Pruitt — one of President Trump’s most controversial Cabinet-level picks — was expected to request an around-the-clock security detail from his agency, according to an internal agency email. Such protection would mark a dramatic increase from security given past administrators and could curtail resources available for EPA’s criminal enforcement, according to former agency officials. Ahead of Pruitt’s Senate confirmation, the head of EPA’s criminal enforcement office sent an email to staff noting, “Based on conversations with the transition team, we anticipate that Mr. Pruitt will initially request a 24/7 detail.” Security for Cabinet-level officials was increased dramatically after the Sept. 11, 2001, terrorist attacks. If Pruitt maintains a full-time detail, it’s possible EPA could hire more staff for the Protection Services Detail. Read more on E&E
  • Trump to Roll Back Obama’s Climate, Water Rules Through Executive Action President Trump is preparing executive orders aimed at curtailing Obama-era policies on climate and water pollution, according to individuals briefed on the measures. While both directives will take time to implement, they will send an unmistakable signal that the new administration is determined to promote fossil-fuel production and economic activity even when those activities collide with some environmental safeguards. One executive order, aimed at bolstering American energy independence, will instruct the Environmental Protection Agency to begin rewriting the 2015 regulation that limits greenhouse-gas emissions from existing electric utilities. It also instructs the Interior Department’s Bureau of Land Management (BLM) to lift a moratorium on federal coal leasing. A second order will instruct the EPA and Army Corps of Engineers to revamp a 2015 rule, known as the Waters of the United States rule, that applies to 60 percent of the water bodies in the country. Read more on Washington Post
  • Pruitt Questions Agency’s Authority to Regulate Carbon U.S. EPA Administrator Scott Pruitt is questioning whether his agency is empowered to regulate greenhouse gas emissions. Pruitt said he expects to withdraw the Waters of the U.S. rule as well as the Clean Power Plan, which reduces power plants’ carbon emissions, soon. As Oklahoma attorney general, he was part of litigation against both those rules. Asked whether EPA would regulate carbon dioxide, Pruitt said that is under question. “There will be a rule-making process to withdraw those rules, and that will kick off a process,” Pruitt said. “And part of that process is a very careful review of a fundamental question: Does EPA even possess the tools, under the Clean Air Act, to address this? It’s a fair question to ask if we do, or whether there in fact needs to be a congressional response to the climate issue.” Read more on E&E
  • Judges in EPA Lawsuit Skeptical of Agency’s Authority A panel of federal appeals court judges appeared skeptical that the EPA has the authority to force a phaseout of a refrigerant on the grounds that it contributes to climate change. An unfavorable ruling for the Environmental Protection Agency in this case could hamper the agency’s power to regulate some of the most potent greenhouse gases released into the atmosphere. A pair of chemical makers are suing the EPA in the U.S. Court of Appeals for the District of Columbia Circuit over its regulations on hydrofluorocarbons, or HFCs, which are used in refrigeration and air conditioning. Though HFC emissions are small, the chemicals are extremely potent, with a heat-trapping potential more than 1,000 times that of carbon dioxide. The three-judge panel hearing the case—which includes two George W. Bush appointees—seemed sympathetic to the plaintiffs’ arguments during the hearing. Read more on Bloomberg
  • Oil Groups May Question Basic CO2 Measurement The lead attorney for U.S. manufacturers and oil and gas companies on a climate change lawsuit didn’t know the answer to a measurement fact when asked in court, court papers show. At a Feb. 7 hearing of Juliana, et al v. United States of America, et al — a case a group of kids, young adults and environmentalists brought in 2015 against the U.S. government — Frank Volpe said he didn’t know whether carbon dioxide levels had reached 400 parts per million, a measurement of atmospheric concentration. Asked by Judge Thomas Coffin whether the groups he represents “acknowledge that the CO2 levels in the atmosphere are currently at 400 ppm,” Volpe did not answer. “So as we sit here today, do you have an expert witness that the intervenors intend to call that you can identify that will opine that the CO2 levels are not 400 ppm, but are something other than that and, if so, what?” he asked. “I don’t know, your honor,” Volpe responded. Read more on E&E 
  • No Mention of Climate in Pruitt’s Address to EPA Employees Environmental Protection Agency Administrator Scott Pruitt did not mention climate change or specific regulations in his first address to employees, instead emphasizing the agency’s limitations and the need to provide more certainty for the energy industry. Pruitt also did not mention air pollution or water pollution, key portions of the agency’s mission, during the 11-minute address, and did not take questions. The speech could signal how Pruitt is focused more on avoiding government overreach rather than propagating new regulations. “Regulators exist to give certainty to those that they regulate,” he said, adding that he wants the agency to “avoid abuses that occur sometimes.” That includes “using the guidance process to do rulemaking.” Pruitt’s process-oriented speech differed in tone from the approach of his predecessor, Gina McCarthy, who emphasized the need for strong protections from pollution. Read more on Morning Consult
  • Automakers Ask EPA Head to Withdraw Obama-era Emissions Standards The auto manufacturers’ lobby is pushing the new Environmental Protection Agency head to withdraw an Obama administration decision locking in strict vehicle emissions standards. The Auto Alliance argued in a letter to EPA Administrator Scott Pruitt released Wednesday that the Obama administration acted improperly when it decided last month that the greenhouse gas emissions standards plan set in 2012 can go forward through 2025. Since the 2012 regulations were previously made final, any attempt to change them would require a comprehensive regulatory process.” Read more on The Hill
  • Southern Co.’s New ‘Clean Coal’ Plant May Not be Cost-Efficient Southern Co. said it has nearly completed a first-of-its-kind “clean coal” power plant, though a new analysis suggests it might not make sense to burn coal in it. After taking nearly seven years and $7.1 billion to build, the Kemper County, Miss., facility, which can burn coal and capture much of the carbon-dioxide output, should be fully operational by the middle of next month, the company said. But a required economic analysis of the project, the most expensive fossil-fuel power plant ever built in the U.S., found that lower natural gas prices and higher-than-expected operating costs “negatively impact the economic viability” of the facility. The company analysis, disclosed this week, concludes that only if natural gas prices are high would the economics of the clean-coal plant compare favorably to a gas-burning plant. The Kemper facility was initially forecast to cost $3 billion in 2010. Read more on Wall Street Journal
  • Kushner, Ivanka Trump Pushed to Remove Words Critical of Climate Deal from Executive Order At the request of President Donald Trump’s son-in-law, Jared Kushner, and his wife, Ivanka Trump, language critical of a global climate deal was struck from an executive order that Mr. Trump is planning to sign soon, according to multiple people familiar with the move. Mr. Trump is expected to sign within days at least two executive orders that will begin the process of trying to dismantle former President Barack Obama’s climate and environmental regulations. The executive order, which targets Mr. Obama’s broad climate agenda, now includes no mention of the climate deal, which nearly 200 nations struck in Paris in 2015, in large part due to a strong push by the Mr. Obama’s administration. One White House official said both Mr. Kushner and Ms. Trump have been considered a moderating influence on the White House’s position on climate change and environmental issues. Read more on Wall Street Journal

ENERGY POLICY NEWS

  • Angst in GOP over Trump’s Trade Agenda Republican lawmakers are concerned about where President Trump is headed on trade and are asking who in the administration is in charge of policies that could affect their home-state economies. Their biggest worries are what will replace the Trans-Pacific Partnership — the largest trade deal in U.S. history until it was scrapped by President Trump — and the future of NAFTA, which the president has called “the single worst trade deal in history.” Texas, the most populous Republican state in the country, is heavily dependent on trade with Mexico; a trade war could cause significant disruptions to its economy. “There’s some uncertainty about the direction of the administration,” Cornyn added in a later interview. “For my state it’s a big deal, and I would argue it’s also a big deal for the country. Six million American jobs depend on bi-national trade with Mexico alone.” Read more on The Hill 
  • McConnell Vows Attacks on Obama Rules, GOP-only Tax Reform Senate Republicans plan to continue their efforts to overturn Obama administration regulations, repeal and replace the Affordable Care Act, and return to a “normal” appropriations process during the 115th Congress, Majority Leader Mitch McConnell (R-Ky.) said today. “When we finish the Cabinet, we’ll go back to Congressional Review Act actions here in the Senate,” McConnell said, referring to the 1996 law congressional Republicans have been using to repeal several Obama-era rules, including many affecting energy and the environment. President Trump so far has signed two into law. The majority leader also said he was hopeful the appropriations process could get back on track. Read more on E&E

 

ENERGY REGULATORY NEWS

  • DOJ Wants Justices to Skip Case Testing Agency Deference The Justice Department is urging the Supreme Court to pass on a case that challenges a legal doctrine under which courts give deference to agency interpretations of rules. DOJ attorneys asked justices to decline to grant review in the case, which centers on an order issued by the Interior Department’s Bureau of Safety and Environmental Enforcement forcing Noble Energy Inc. to permanently plug and abandon a well off the coast of central California. In its petition for high court review, Noble Energy said that appellate court had improperly applied the Auer doctrine when it deferred to Interior’s reading of its rules. Noble wants the Supreme Court to consider whether to completely overturn the doctrine, named for a 1997 high court decision. Read more on E&E 
  • CRA Provision Might Widen Path for Congressional Reviews A technical provision in the Congressional Review Act could invalidate some federal rules going back 21 years, some conservative legal advocates said today at a Washington forum. The law requires agencies to report final rules to Congress and the Government Accountability Office before they can take effect. Congress then has 60 legislative days to review the rules and possibly vote them down with a simple majority. But if a rule was never sent to Congress, the panelists agreed, the 60-day review period cannot start and the regulation isn’t legally enforceable. Under the CRA, agency guidance documents are included in the definition of “rule” and must also be sent to Congress. At a discussion hosted by the Heritage Foundation, Pacific Legal Foundation Executive Director announced the launch of a website aimed at finding and reporting regulations that didn’t go through CRA procedures. Read more on E&E
  • Assault on Rules Key to Broad Trump Agenda — Bannon President Trump’s chief strategist, Steve Bannon, said that a White House priority is the “deconstruction of the administrative state. Speaking at the annual Conservative Political Action Conference, Bannon noted that the administration’s work will involve reversing many of the rules put in place by Democrats in addition to a broader overhaul of the federal regulatory system. “The way the progressive left runs is if they can’t get it passed, they’re just going to put in some sort of regulation in an agency,” he said. “That’s all going to be deconstructed, and I think that that’s why this regulatory thing is so important.” That effort is reflected in Trump’s picks for agency leaders, he added. “If you look at these Cabinet appointees,” he said, “they were selected for a reason, and that is the deconstruction.” Several of Trump’s appointees have suggested scaling back or even eliminating the agencies they’ve since been hired to lead. Read more on E&E
  • CEOs Want to Slash Clean Power Plan, WOTUS, Ozone Curbs An association of top U.S. executives is calling on President Trump to slash or tweak three key Obama environmental regulations. The Business Roundtable sent a letter to National Economic Council Director Gary Cohn listing the National Ambient Air Quality Standards, Clean Power Plan and Waters of the U.S. rules as their top priorities for review. The Business Roundtable conducted a survey of its members and identified “top regulations of concern” along with recommendations to mitigate the rules’ impacts. Roundtable members concluded that when U.S. EPA lowered the NAAQS for ground-level ozone in 2015, the agency stalled economic growth without adding health benefits. Read more on Greenwire

GLOBAL ENERGY NEWS

  • Market Currents: Saudi Crude Heads to Asia, Not U.S. The word on the street is that Asian refiners will receive full allocations of Saudi crude in March, as OPEC’s kingpin chooses to keep its Asian customers well-supplied – at the expense of those in North America. Asia was the destination for 68 percent of Saudi’s crude exports last year, while North America accounted for some 16.5 percent of volumes. There appears a distinct trend in July and December last year: exports heading to North America spiked at the expense of flows to Asia. The December spike has been reflected in strong arrivals of Saudi crude to the U.S. in January and through the first half of February. However, as the share of January exports heading to Asia spiked to its highest percentage on our records, the share of flows heading to North America is dropping once again. Read more on FuelFix 
  • US Defense Secretary: We’re Not in Iraq to Seize Oil Before departing for his first trip to Baghdad as US Defense Secretary, James Mattis told reporters, “We’re not in Iraq to seize anybody’s oil.” His comments appeared to be a departure from President Donald Trump, who since taking office has made controversial comments about Iraq and its oil. A day after his inauguration, Trump said about Iraq: “We should have kept the oil. Maybe we’ll have another chance.” He repeated the comments a few days later in an interview with ABC’s David Muir: “We should have taken the oil. You wouldn’t have ISIS if we took the oil.” Trump has said the US has spent trillions of dollars fighting ISIS but that the effort could have been avoided if Americans had just co-opted the terrorists’ oil supply after the US invasion. Critics have said taking Iraq’s oil would have amounted to stealing from civilians and thus been a war crime and a violation of international law. Read more on CNN 
  • China Steel Mills Caught on the Hop by North Korea Coal Ban China’s steel mills and traders were scrambling to find alternative supplies of coking coal for steel making after Beijing slapped a surprise ban on coal imports from its isolated northern neighbor. Chinese prices of steel, coking coal and coke all rallied, as traders and analysts said mills will likely be forced to buy more expensive domestic material or seek alternatives further afield from Russia or Australia, driving up costs. While North Korea accounts for only a small portion of China’s total coal imports, it is the main foreign supplier of high-quality thermal coal, called anthracite, which is used to make coke, a key ingredient in steelmaking. Business with North Korea had become increasingly difficult under years of sanctions and the once-bustling trade handling coal from the north had shrunk to just a few private merchants. Read more on Reuters 
  • Energy Companies Face Crude Reality: Better to Leave It in the Ground Exxon Mobil Corp. is expected to announce that a sizeable amount of its oil reserves are no longer profitable to extract amid low crude prices and stricter regulations on climate change. The energy giant has said that as many as 3.6 billion barrels of oil that it planned to produce in Canada will be left in the ground unless crude prices rise. The move is in response to U.S. regulations that require companies to take oil reserves off their books if they aren’t profitable at existing prices. During the past decade, Exxon and other giant oil companies have spent billions of dollars in Canada to replenish their sources of supply.But now a supply glut that led to a price collapse in 2014 and an anemic recovery have left energy producers wondering if demand for oil will reach a peak and decline in the coming decades. Read more on Wall Street Journal
  • Russia Overtakes Saudi Arabia as World’s Top Crude Oil Producer Russia pumped 10.49 million barrels a day in December, down 29,000 barrels a day from November, while Saudi Arabia’s output declined to 10.46 million barrels a day from 10.72 million barrels a day in November, according to data published Monday on the website of the Joint Organisations Data Initiative in Riyadh. That was the first time Russia beat Saudi Arabia since March. Saudi Arabia and fellow producers from the Organization of Petroleum Exporting Countries decided at the end of November to restrict supplies by 1.2 million barrels a day for six months starting Jan. 1, with Saudi Arabia instrumental in the plan. Non-member producers, including Russia, pledged additional curbs. Brent crude prices have climbed about 20 percent since the end of November. Read more on Bloomberg

 

ENERGY TRANSPORTATION NEWS

  • Pipeline Operator Enbridge’s Earnings Fall Enbridge Inc. said its fourth-quarter earnings fell as the pipeline operator’s systems recovered from wildfires earlier in the year. Calgary, Alberta-based Enbridge, which is working to close its $28 billion takeover of Houston’s Spectra Energy Corp., said throughput on its liquids mainline averaged more than 2.5 million barrels a day in the latest quarter, recovering from curtailed deliveries caused by wildfires in May that raged through northeastern Alberta and caused a number of oil-patch operators to shut down operations. In all for the quarter, Enbridge posted earnings of 365 million Canadian dollars or 39 Canadian cents per share down from C$378 million or 44 Canadian cents per share. Excluding certain items, the company’s earnings fell to 56 Canadian cents per share from 58. Analysts polled by Thomson Reuters had expected adjusted earnings of 58 Canadian cents a share. Read more on Wall Street Journal 
  • Blasio Asks Financial Institutions to Halt Dakota Access Financing New York City Mayor de Blasio contacted 17 banks, inc. Wells Fargo, Societe General, ING, BNP Paribas and Mizuho Bank asking them to halt Dakota Access financing. Mayor Bill de Blasio says in letter there are financial, reputational risks with the project and “the banks’ financing poses a risk of losses to City pension funds that have more than $165 billion in assets“ “The Dakota Access Pipeline not only poses a threat to the environment, but to the human, tribal and water rights of the entire Standing Rock Reservation. We deplore allowing our pension funds to run the risks of being associated with such a dangerous and misguided project, ”the letter is quoted as saying.“ Read more on Bloomberg 
  • Inside the Buried Memo that Could Decide Pipeline’s Fate An overlooked memo from the Interior Department’s top lawyer could play a critical role in the fate of the Dakota Access pipeline, and the Trump administration is considering erasing it. Obama-era Interior Solicitor Hilary Tompkins late last year issued a formal legal opinion outlining reasons the government should conduct further study before granting final approval for the controversial oil project. The 35-page memo says the existing environmental assessment for Dakota Access suffers from fatal flaws, including inadequate consideration of tribal treaty rights and uneven treatment of the project’s impacts on native and non-native populations. The Trump administration quietly suspended the opinion two weeks ago as it prepared to approve the pipeline and halt deeper environmental study. The document, known as an “M-opinion,” is dated Dec. 4, 2016 — the same day the Army Corps of Engineers agreed to do more review — but it only recently surfaced in legal filings at a federal court in Washington. Read more on E&E 
  • Oil Could Flow Through Pipeline in 2 Weeks The Dakota Access pipeline could see its first drops of oil in less than two weeks, company lawyers told a federal court yesterday. In a weekly status report, ordered by the U.S. District Court for the District of Columbia, lawyers said workers have completed a “pilot hole” for construction of the project beneath Lake Oahe and are preparing to place pipe in it. “As of now, Dakota Access estimates and targets that the pipeline will be complete and ready to flow oil anywhere between the week of March 6, 2017 and April 1, 2017,” the filing said. Tribal lawyers had hoped to get the fundamental legal questions handled before the pipeline began accepting oil. Dakota Access lawyers previously estimated that it would take 60 days after an easement was granted for oil to start flowing. Yesterday’s status report indicates oil could flow in half that time. Read more on E&E 
  • Public Divided Over KXL, Dakota Access — Poll Americans are split over the Keystone XL and Dakota Access oil pipelines despite President Trump’s full backing of the contentious projects, according to the results of a Pew Research Center poll released yesterday. The center’s poll, conducted earlier this month, found that 42 percent of the 1,503 adults surveyed by phone said they “favored” building the Keystone XL pipeline from Canada’s oil sands to Texas refineries. Forty-eight percent of those asked said they opposed the oil pipeline. The Dakota Access oil pipeline, which recently received federal approval for its last leg under the Missouri River in North Dakota, saw a similar public split. The Pew Research Center found 43 percent of those surveyed favored building Keystone XL from North Dakota’s Bakken Shale play, with 48 percent opposing it. The Dakota Access project has roiled climate activists and members of the Standing Rock Sioux Tribe but has drawn support from labor unions and the Trump administration. Read more on Greenwire 
  • Pipeline Fights Move from Dakota Prairie to Louisiana Bayous Louisiana’s bayous have become the new front line in the ongoing fight over pipeline construction. Fisherman, landowners, flood protectionists and environmentalists are banding together to fight projects, including some by Energy Transfer Partners, the company behind the Dakota Access pipeline. A planned extension of the Bayou Bridge line would cross southern Louisiana for about 160 miles. Opponents fear polluted drinking water, degraded wetlands, more coastal erosion and damage to local fisheries. Jody Meche, a fisherman, said the impact of the oil industry is obvious on crawfish stocks. “The stagnant water is not good for them at all,” Meche said. “They don’t grow as well, they don’t eat as much, they are very lethargic.” Studies show that spill detection technologies noted 20 percent of known leaks between 2010 and 2016, according to a Reuters analysis of Pipeline and Hazardous Materials Safety Administration data. Protests have also emerged in West Texas at Energy Transfer’s Trans-Pecos gas line, in Arkansas and Tennessee over the Plains All American Pipeline company’s Diamond line, and in Pennsylvania, where Williams Cos. hopes to add 185 miles to the Atlantic Sunrise pipeline.Many have borrowed protest tactics from the Standing Rock Sioux Tribe, setting up camps and blocking construction.” Read more on Reuters 
  • Trump to Give Details on Modernizing the Nation’s Infrastructure President Donald Trump will give Congress more details about how he plans to modernize the nation’s infrastructure during an upcoming joint address, White House spokesman Sean Spicer said. During a press briefing, Spicer told reporters they could expect to hear more about Trump’s infrastructure priorities when he addresses House and Senate lawmakers Feb. 28.“The infrastructure projects and priorities that the president has talked about, there’s air—air control and our airports. Or, the roads and bridges will be something that he’s going to work with [the Department of Transportation] but also talk about in his budget, and you’ll see more in his joint address to Congress,” Spicer said. Trump is expected to release a framework of his federal budget proposal in mid-March. Read more on Bloomberg

 

ENERGY TAXATION NEWS

  • Conservatives Announce Campaign Against Tax Overhaul Plan Not long after House Speaker Paul Ryan offered a full-throated affirmation of his tax-overhaul plan, an influential conservative group announced a grassroots campaign against it and a Senate leader said a key part of the proposal is “on life support.” Senate Majority Whip John Cornyn was diagnosing Ryan’s plan to replace the U.S. corporate income tax with a new, “border-adjusted” levy on U.S. companies’ domestic sales and imports. The proposal has stirred sharp divisions among businesses: Retailers, automakers and oil refiners that rely on imported goods and materials oppose it, while export-heavy manufacturers support it. So far, the opponents are winning, interviews with lawmakers, lobbyists and tax specialists show. Some House Republicans have already expressed reservations about the plan. And President Donald Trump, who has promised to produce the outline of his own “phenomenal” tax plan within weeks, hasn’t taken an official position on border adjustability. Read more on Bloomberg 
  • Outside Groups Begin Campaigns Over Border Adjustment Tax Outside groups are ratcheting up spending over a proposed border adjustment tax as House GOP leaders seek to make it central to their plan for comprehensive tax reform. The Club for Growth, an advocacy group known for promoting conservative economic policies, announced plans today to spend $150,000 on television and digital ads urging Rep. Kristi Noem (R-S.D.), a Ways and Means Committee member, to oppose it. Noem, who already has announced she will run for governor in 2018, has yet to weigh in on the BAT. The BAT would begin taxing certain imports by as much as 20 percent while ending most taxes on U.S. goods exported. Americans for Prosperity, an advocacy group associated with the pro-fossil-fuel Koch brothers, said last week that it’s planning to organize grass-roots efforts in 35 states against the BAT, which it labels a “consumer tax.” It said the effort will target mostly districts with members who sit on the tax-writing Ways and Means Committee. Read more on E&E 
  • Republican Senators Banking on Trump to Adopt Import Tax The fate of a controversial import tax in the House tax overhaul plan now rests with the White House after pointed criticism from several Republican senators in the past week. House Speaker Paul D. Ryan (R-Wis.), Ways and Means Chairman Kevin Brady (R-Texas) and other supporters, who have been backed into a corner about the 20 percent import tax, now have their hopes set on President Donald Trump. “I am assuming that Donald Trump adopts this plan,” Rep. Peter Roskam (R-Ill.). “If Donald Trump adopts this plan, then I think the dynamic fundamentally shifts.” Trump has been ambivalent about his support for the border adjustability proposal, although more clarity is expected when the White House announces its tax plan in the coming weeks. “Even if the president endorses it, it may only mean that they can get it out of committee and maybe through the House, not through the Senate.”White House press secretary Sean Spicer told reporters Feb. 21 that a tax plan was expected in the “next couple of weeks.” Read more on Bloomberg
  • Exclusive: Trump Says Republican Border Tax Could Boost U.S. Jobs President Donald Trump said plans to create a “border adjustable” business tax could help the economy. In an interview with Reuters, he said it could “lead to a lot more jobs,” though the wire service reported he stopped short of endorsing the proposal. “I certainly support a form of tax on the border,” he told Reuters on Thursday. “What is going to happen is companies are going to come back here, they’re going to build their factories and they’re going to create a lot of jobs and there’s no tax.” Trump has previously expressed skepticism about the plan, pushed by House Republican leaders. Asked today about Trump’s remarks, as well as critics’ complaints that the border-adjustment plan will lead to higher prices for consumers, White House press secretary Sean Spicer defended the idea. “That benefits our economy, it helps the American workers, it grows more jobs, it grows the manufacturing base,” Spicer told reporters. Read more on Reuters

 

 

TRANSITION NEWS

AmericanFlag

State Dept. Carries Out Layoffs Under Rex Tillerson While Rex Tillerson is on his first overseas trip as Secretary of State, his aides laid off staff at the State Department. Much of seventh-floor staff, who work for the Deputy Secretary of State for Management and Resources and the Counselor offices, were told that their services were no longer needed. These staffers in particular are often the conduit between the secretary’s office to the country bureaus, where the regional expertise is centered. Inside the State Department, some officials fear that this is a politically-minded purge that cuts out much-needed expertise from the policy-making, rather than simply reorganizing the bureaucracy. There are clear signals being sent that many key foreign policy portfolios will be controlled directly by the White House, rather than through the professional diplomats. Read more on CBS

 


 

ENERGY MARKET NEWS

Oil Prices Settle Higher After Stockpiles Report Oil prices settled at their highest level in more than a year and a half as federal data showed U.S. crude glut grew more slowly than expected last week. Prices had climbed even higher in earlier trading, approaching the upper end of the narrow band they have traded in this year, before pulling back. The amount of oil in storage has increased for seven straight weeks to hit new records. But the 564,000 barrel increase reported in data from the U.S. Energy Information Administration fell well short of the 3.4 million barrel addition analysts and traders surveyed by The Wall Street Journal had anticipated. The smaller-than-expected increase was largely due to sharply lower volumes of imported crude—potentially a sign the supply cuts by major exporters are showing up in the U.S. Some analysts have attributed steadily increasing U.S. oil inventories to surge of production late last year by members of the Organization of the Petroleum Exporting Countries. Read more on Wall Street Journal


 

 

 


OIL AND GAS INDUSTRY NEWS

oil

Texas Oil Fields Rebound from Price Lull, but Jobs are Left Behind Oil and gas workers have traditionally had some of the highest-paying blue-collar jobs — just the type that President Trump has vowed to preserve and bring back. But the West Texas oil fields, where activity is gearing back up as prices rebound, illustrate how difficult it will be to meet that goal. As in other industries, automation is creating a new demand for high-tech workers — sometimes hundreds of miles away in a control center — but their numbers don’t offset the ranks of field hands no longer required to sling chains and lift iron. So while there is a general sense of relief in the oil patch that a recovery is gaining momentum, discussions at company meetings and family kitchen tables are rife with aching worries, especially among those who are middle-aged with no more than a high school education. Roughly 163,000 oil jobs were lost nationally from the 2014 peak, or about 30 percent of the total, while oil prices plummeted, at one point by as much as 70 percent. The job losses just in Texas, the most productive oil-producing state, totaled 98,000. Read more on New York Times


 

RENEWABLE ENERGY NEWS

  • Ethanol Credit Prices Fall on Trump’s Regulatory Feeze President Donald Trump’s decision to delay an increase in the amount of ethanol blended into the country’s fuel supply appears to have offered some reprieve to U.S. oil refineries. The price of the Renewable Identification Number credits the government requires refineries to buy in order to produce gasoline fell by almost half during the month of January to 44 cents a gallon as of February 1, according to a new paper by Bud Weinstein, associate director of Southern Methodist University’s Maguire Energy Institute. “The reduction in RIN prices that has resulted from the freeze supports the notion that speculators in the RIN market have caused some of the harm that contributes to fuel margin differences,” he wrote. “Changing the point of obligation will provide permanent relief to keep spectators out of the RIN market and stabilize RIN prices while making fuel margins more equitable.” Read more on Fuel Fix
  • Trump Reaffirms Support for Ethanol in Industry Letter President Trump reiterated his support for the federal ethanol fuels mandate in a letter to industry supporters on Tuesday. Addressing attendees at the National Ethanol Conference, Trump said in a letter that he “value[s] the importance of renewable fuels to America’s economy and to our energy independence.” He promised to work with the industry’s Renewable Fuels Association (RFA) to “identify and reform” regulations on the industry, which he said “has suffered from overzealous, job-killing regulation.” Trump added, “As I emphasized throughout my campaign, renewable fuels are essential to America’s energy strategy.” Trump supported the Renewable Fuels Standard throughout his campaign, a position he refined during a second-place effort in the Iowa caucuses. Despite Trump’s letter, some officials in his administration have signaled support for reforming the Renewable Fuel Standard. Read more on The Hill

 

 

STATE ENERGY NEWS

Lawmakers Move to Trump-Proof Environment Rules California state lawmakers introduced a package of bills aimed at defending federal and state environmental regulations against President Trump’s administration. The three bills are aimed at preserving current federal environmental laws on the state level, preventing public land transfers and protecting federal whistleblowers. S.B. 49, by de León and state Sen. Henry Stern (D), would make current federal air, climate, water, worker safety and endangered species laws enforceable under state law. S.B. 50, by Sen. Ben Allen (D), would direct the State Lands Commission to establish a right of first refusal for any proposed sale of federal lands to other parties. It would also have the agency review any transactions of federal lands within California. And S.B. 51, by Sen. Hannah-Beth Jackson (D), would ensure that federal employees who report legal violations or unethical actions would not lose their professional certifications within California, if they are licensed in the state. It would also direct state agencies to protect environmental and public health data if the federal government orders its censorship or destruction. Read more on E&E


 

FROM THE CHART ROOM

LNG Exports Expected To Drive Growth In U.S. Natural Gas Trade

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The U.S. is expected to become a net exporter of natural gas on an average annual basis by 2018, according to the recently released Annual Energy Outlook 2017 (AEO2017). The transition to net exporter is driven by declining pipeline imports, growing pipeline exports, and increasing exports of liquefied natural gas (LNG). In most AEO2017 cases, the U.S. is also projected to become a net exporter of total energy in the 2020s, due in large part to increasing natural gas exports. In 2016, the U.S. was a net importer of natural gas, with net imports of 0.9 trillion cubic feet (Tcf), or 2.6 billion cubic feet per day (Bcf/d). As construction is completed on several LNG export projects, LNG exports are expected to make up a growing share of natural gas exports and to surpass pipeline exports of natural gas by 2020.

The Sabine Pass facility in Louisiana became the first operating LNG export facility in the lower 48 states in 2016. By 2021, construction is expected to be completed on four LNG export facilities. Combined, these five plants are expected to have an operational export capacity of 9.2 billion cubic feet per day. After 2021, projected U.S. exports of LNG grow at a more modest rate as U.S. natural gas faces growing competition from other global LNG suppliers.

U.S. exports of natural gas by pipeline to Mexico are also expected to increase. U.S. exports to Mexico have doubled since 2009, and are projected to continue rising through (at least) 2020 as pipeline projects currently under construction are completed.

U.S. imports of natural gas, most of which come by pipeline from western Canada, are projected to continue declining. In addition to importing less natural gas from Canada (primarily from Alberta), increasing amounts of natural gas from the Marcellus and Utica basins in the Northeast and Midwest regions of the U.S. are expected to flow to eastern Canadian provinces.

Despite these trends, the U.S. is expected to remain a net importer of natural gas by pipeline from Canada through 2040 in all but one case in the AEO2017 analysis. In the High Oil and Gas Resource and Technology case, higher natural gas production leads to greater exports of natural gas, and the U.S. becomes a net exporter of natural gas by pipeline to Canada by 2030. 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.