Trump’s energy agenda under attack from Democrats — and Republicans

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President Trump’s energy agenda is under attack in his push to help coal, nuclear power, and renewable fuels. It’s not surprising that opposition comes from the Left, but it’s also coming from the president’s most ardent supporters in the industry.

One of the more controversial policies Trump has proposed is a regulation that many on the Left and Right believe would up-end interstate electricity markets, managed by the Federal Energy Regulatory Commission.

Energy Secretary Rick Perry fast-tracked the proposal in September by sending FERC a rule and a letter explaining how he would like to see it implemented within 60 days. The proposed rule would reward coal and nuclear plants with rate payments if they maintain 90 days of fuel onsite to ensure they can keep generating electricity during major disruptions such as hurricanes.

There was an immediate backlash from a united oil industry, which typically supports Trump’s pro-business policies, and the wind and solar industry, which hates his rejection of climate regulations.

The groups formed a coalition to try to block FERC from adopting Perry’s plan to incentivize coal and nuclear plants.

The oil and refinery industries are also resisting the support of the Environmental Protection Agency’s administrator, Scott Pruitt, for ethanol and biofuels by keeping Renewable Fuel Standard mandate intact. Supporting the standard was a Trump campaign promise.

Pruitt had floated a proposal to curtail the mandate through 2019, prompting a sharp response from Iowa’s Republican senators, Chuck Grassley and Joni Ernst. They mounted a big pressure campaign to get Trump and Pruitt to back down and keep the regulation that is so irksome to oil refiners.

To the chagrin of refiners, Trump gave the renewable fuel industry what it wanted, although some are reserving judgment until Nov. 30, the deadline for the standard to be finalized. In the meantime, Trump is facing renewed pressure from the fossil fuel industry and its supporters on Capitol Hill to renew Pruitt’s commitment to cutting the RFS requirements.

On top of that are the increasing pressures for the president to open up the Arctic National Wildlife Reserve, in Alaska, to energy drilling, which has been a Republican goal for decades and is on Trump’s agenda.

But conservative groups also want the president to keep his pledge to stop Washington from using the tax code to pick winners and losers, particularly tax credits for wind power and other green technologies.

And then there is the issue of energy exports. If oil and natural gas exports are to keep rising, as Trump wants, so must production infrastructure. That is a priority for some of the president’s most important supporters, such as oil mogul Harold Hamm, chief executive of Continental Resources.

Pipelines to move more oil from North Dakota to refiners in the East face unflagging opposition from environmental groups and climate activists, who want to stop all new fossil fuel production in pursuit, ultimately, of relying on renewables for all of America’s energy.

Then, of course, there is coal.

“In the long term it’s going to be really hard for coal to compete with natural gas,” said Dan Eberhart, CEO of the oil services firm Canary, a Trump backer. “Natural gas is cleaner, the transportation costs are lower, and it’s plentiful and abundant. I don’t see how coal wins that in the long term.”

The cost at which gas production can be profitable, which is holding at about $3 per unit, is sufficiently low to drive electricity generators everywhere to switch from coal, forcing coal power plants out of business.

Eberhart explained that “for coal to come back, you are going to have to see $8 to $12” per unit natural gas prices. “That’s what will bring coal back. But I don’t see that happening.”

Many coal mine openings that Trump has touted since his inauguration are for the coal used in making steel, not the steam coal used in power plants.

“It’s a very discreet, technical, specific thing as opposed to a macro ‘coal is coming back’ thing,” Eberhart said.

When it comes to coal-fired electricity, Trump is focusing on FERC markets and the Perry proposal to provide incentives to coal plants. Electricity generators are an important part of the coal industry’s customer base.

The grid plan would use FERC’s electricity markets to incentivize coal’s role in providing what Perry calls grid “resiliency.” The added payments protect coal plants from competition from natural gas plants, which are cheaper to operate.

The natural gas and oil industries and an array of renewable trade associations say Perry’s grid plan is an affront to the free and open power markets that FERC has overseen and built in the past 20 years.

“The commission is simply not authorized to provide an entire class of generation with a new payment stream, whether temporary or permanent, based on a desire to keep all options open for the future,” the coalition said last week in the final round of comments on Perry’s proposal. The next step will be the commission making a final decision, which will come by Dec. 11.

While FERC debates the proposal, temporary FERC Chairman Neil Chatterjee said he wants to create an “interim step” to subsidize coal and nuclear plants. “What I don’t want to have is plants shut down while we’re doing this longer-term analysis, so we need an interim step to keep them afloat,” he said last week.

“I don’t know that we can get everybody in the lifeboat,” Chatterjee said. Chatterjee acknowledged that his short-term plan would have to be approved by a majority of FERC’s five members, which is no sure thing.

Eberhart has written op-eds slamming Perry’s plan as the wrong direction to take, although, “in general, Trump has been great for the energy industry” because of his overall approach to deregulation.

The National Mining Association, the lead trade group for the coal industry, sees the macro push by the administration as the real benefit.

“It’s not only, and even maybe not primarily, the regulations that he has lifted off the industry, like the Stream Protection Rule and the Clean Power Plan, etc., it’s the fact that he is trying to lift this weight from this industry, that he is sending a signal to the energy sector, broadly, that ‘I want you to stay in business, and I want you to be effective and profitable,’” said Luke Popovich, spokesman for the industry group.

It may be that when it comes to implementing specific policies, the administration is much more challenged and perhaps more vulnerable to attack.

The industry coalition describes Perry’s plan as “a solution in search of a problem,” said Abby Hopper, CEO of the Solar Energy Industries Association, the largest trade group for the solar industry. Hopper is standing with the oil and natural gas industry in opposing the proposed FERC rule.

“We welcome any conversation about how do we improve the resiliency or the reliability of our energy supply, but it should be done in a transparent and thoughtful way and not trying to ram through a rule that does not reflect the realities of the market place,” Hopper said.

Hopper would rather see the FERC-overseen grid operators sort out the issue, taking a page from the nation’s largest electricity market operated by PJM Interconnection, which extends from New Jersey to Illinois.

“If they come and say we have a problem [and] we need to address it, those are the right places because it sort of takes into account the geographic differences between areas, the fuel mix between areas, the operational needs of that particular grid,” Hopper said.

“That’s where that change should be happening because people that have the obligation to operate the grid are the first ones who are going to say if we have a reliability or a resiliency problem,” she said.

Eberhart sees the grid plan as a “straw man” proposal where Trump can gain political points for trying to help the coal industry even if it fails.

But Trump isn’t scoring any points from conservative groups, with his former Energy Department transition chief, Tom Pyle, coming out against the Perry plan.

Pyle thinks the administration should be much more focused on rolling back the subsidies for wind and other resources that are distorting markets. That goes beyond the FERC process.

“My concern about it is, we should be going the other way,” Pyle said. “We should be working to unwind the favors that have been given to other sources.

“I know it’s harder to do it that way, but unless and until we really take strides to unwind the interventions that already exist, we will continue to see this strange market response” where natural gas prices may be low, but electricity prices are flat or rising, Pyle said.

“If we continue to layer mandates and subsidies … on top of each other, it’s kind of this death spiral of subsidization,” he said. “I get it as a knee-jerk, short-term jolt, if you will, but much like other attempts to put the thumb on the scale in favor of other energy sources, it’s ultimately not the right approach.”

Pyle’s lack of support for Perry’s coal subsidy plan also extends to Trump’s recent defense of the EPA’s ethanol mandate and RFS.

The RFS and the Perry plan have become two of the most contested pieces of energy policy to rise to the fore in recent weeks.

Trump recently reined in Pruitt’s plan to cut the renewable fuel targets over the next two years. Pruitt’s plan had angered both the renewable industry and conservative groups, but for different reasons.

Pyle supports “complete and total repeal” of the RFS. “There is a market for corn ethanol. It will survive in a post-RFS world.”

But what has been “going on over the last couple of weeks is case-in-point as to why the program needs to go away,” he said. “Pruitt basically put forth a rulemaking that said we want to match the biodiesel volumes with reality in the world, and the corn mafia in the Senate basically said ‘one word change and I’m blowing up the entire Trump agenda.’ ”

He noted that Grassley and Ernst led a protest that gummed up the works for advancing the president’s energy and environment nominees.

The pressure campaign forced the White House to respond. Pruitt backed down and sent a letter to Ernst and Grassley assuring them he would stick to Congress’ intent under the law and not alter the program.

Pruitt also pledged to work with them to help find an administrative way to blend more ethanol into the nation’s gasoline supply.

Pyle said the only short-term fix he is willing to look at is a deal in which detractors would support the continuation of the program, but only in exchange for a definite date for a permanent end to the RFS.

For the time being, “we disagree with President Trump on this issue,” Pyle said.

The refinery industry is also not fond of the president’s support for the renewable fuel program.

Independent oil refiners would like the White House to address increased costs that stem from complying with the program. They argue that the higher costs of renewable identification number credits, or RINs, which are generated by blending ethanol in gasoline, place them at the bidding of the major integrated oil companies such as Exxon Mobil and Shell that can both make gasoline and control the downstream facilities to blend it.

This gives the big companies the advantage of generating their own RINs and selling them to the independent refiners that can’t blend fuels.

That means they have to buy the credits from their competitors. The president’s support for the RFS is seen as undermining their businesses and even forcing some to consider laying off workers or closing.

But the renewable fuels group aren’t taking Trump’s support for granted. They descended in force on Washington last week to make clear that RFS is in need of support and not reform or repeal.

Renewable fuel producers said their message to the refiners is to blend more biofuels in gasoline and to build the infrastructure to do so. The major oil companies are profiting from selling the independent oil refiners’ RIN credits, they said.

Emily Skor, the CEO of Growth Energy representing the ethanol industry, said Trump has built a reputation for supporting the RFS.

“Time and again the president had expressed and demonstrated, through his actions, support for a strong Renewable Fuel Standard that continues to encourage greater use of homegrown biofuels in our nation’s fuel supply,” Skor wrote in an email. “I see nothing to question that commitment.”

Last week’s lobbying push by the biofuel industry followed a bipartisan letter sent this month led by Rep. Bob Goodlatte, R-Va., chairman of the House Judiciary Committee, to Pruitt.

The Goodlatte letter, which was signed by more than 60 lawmakers, urged the EPA chief to move forward with his original plan to reduce the annual RFS goals.

“The combined effects of this ethanol mandate have created a hidden tax on every American,” the letter stated. “Simply put, in its current state, the [Renewable Fuel Standard] has run out of gas.”

Sen. Mike Lee, R-Utah, and eight of his GOP colleagues sent a letter to Trump at the end of last month asking for a meeting to hash out a deal that would save refining jobs.

“We request that within the next three weeks you convene a meeting regarding the RFS and pro-jobs policies with us, our colleagues who previously lobbied you on the behalf of the ethanol industry, the relevant members of your administration, to discuss a pathway forward on a mutually agreeable solution that will also save refining jobs.”

Lobbyists and others following the issue say there has been no word on when, or if, a meeting will occur.

Oil and natural gas drillers see opportunity in exports as the Asian market and Europe are increasing demand for both oil and gas.

Hamm, the Continental CEO and Trump confidante, has reportedly made getting greater access to the Asian markets a top priority from his operations in North Dakota.

The only thing that is lacking is the infrastructure to move oil from the fracking fields in North Dakota to markets east and west.

“I can tell you in meeting with him that Harold Hamm was a big pusher of oil exports and they are very focused on trying to develop China and South Korea as markets for Continental,” Eberhart said.

“In the past we couldn’t export. So, our relationship with this stuff and our infrastructure on this stuff is not that deep and it’s all pretty nascent,” he said. “But we are doing it.”

U.S. oil exports rose to more than 2 million barrels per day at the end of last month. In the first week of November exports settled around 869,000 barrels per day, according to the Energy Information is limited right now … but Shell and others are quickly putting plans in place to be able to increase that,” he said.

He sees shale continuing to overproduce, but because of the now open export market, the industry isn’t crashing as it did when the oil glut took hold in 2014. The oversupplied market caused the price of oil to fall and made it uneconomical to drill, causing many companies to close and lay off hundreds of thousands of rig workers.

Prices are beginning to climb, and analysts are beginning to speculate that the market could see a return to near $100 per barrel of oil at some point in the next two years.

“Supply and demand are legitimately crossing and we’re headed for higher prices,” Eberhart said. “I think the price is going to move upwards. And I think the spread between WTI and Brent is basically the opportunity for U.S. exporters to develop markets.”

He was referring to the difference between the U.S.-based West Texas Intermediate price for oil and the international Brent price. The WTI price gives U.S. producers an advantage because it tends to be cheaper and therefore more attractive to Asian buyers.

That could pose both an opportunity and risk for Trump. The opportunity comes from potential job growth from rising oil production and exports. But it could also cause him some pain if prices rise at the pump for consumers, some analysts have suggested.

Environmentalists are looking to stop Trump’s “energy dominance” agenda in its tracks, working with lawsuits, state procedural processes and environmental reviews to try to delay fossil fuel infrastructure development from pipelines to energy export terminals.

Environmentalists won a huge victory in federal appeals court over the summer in their effort to block all new natural gas pipelines. The groups convinced the D.C. Circuit Court of Appeals to order FERC to assess the downstream climate change impact of all new pipeline projects. That means not just the pipelines effects, but also how the natural gas is used once it’s delivered and burned by, for example, a power plant.

The victory has since been used by green groups to stymie pipeline infrastructure projects with growing success.

Last week, anti-pipeline groups managed to get the D.C. Circuit Court of Appeals to place an indefinite halt on a pipeline project to deliver natural gas from the fracking fields of Pennsylvania to Virginia, Maryland, and the Southeast after arguing in an emergency motion that FERC had not adequately assessed the climate impact.

“This roadblock — even if just temporary — sends a chilling message to an industry that is looking to invest billions of dollars in private infrastructure projects, not to mention to the thousands of Pennsylvania workers who may not have a job to go to tomorrow — an especially tough blow to these families on the eve of the holiday season,” said Craig Stevens, spokesman for the coalition.

John Siciliano

www.washingtonexaminer.com