with Paulina Firozi
Here are the energy headlines from the tax bill that the president on Wednesday said would be "an incredible Christmas gift for hard-working Americans" after his allies in the GOP Congress approved the package in record time:
1. The oil and gas industry will reap billions of dollars in tax savings from the cut in corporate income tax rates and the generous tax treatment of capital expenditures.
2. In a bitter setback for environmentalists, the bill opens portions of the Arctic National Wildlife Refuge to oil exploration. Over 20 years, advocates of development had failed to win approval from Congress for a standalone measure aimed at drilling in the refuge. Though included as part of the sweeping tax measure, opening the ANWR will generate, at most, only a small amount of federal revenue. Created by President Eisenhower, the Alaska wildlife refuge is the largest in the United States.
3. The renewable energy industry fended off potentially damaging proposals that were originally in the House bill but were omitted from the final version. In the end, production and investment tax credits and the $7,500 per car electric-vehicle credit went unscathed.
One of the tax bill’s biggest benefits for the energy industry is hiding in plain sight: The cut in the corporate tax rate.
Barclays equities analysts have calculated that the 14-percentage-point cut in the corporate tax rate will add $1 billion to the profits of the U.S. oil and gas exploration and production firms, equivalent to a $1 a barrel increase in oil prices. A Barclays report to investors Wednesday said that the tax cut could add 5 percent to the earnings per share of international oil giants such as Exxon Mobil and Chevron. The tax savings would have been even greater, but the big oil companies already use effective tax strategies.
“The big picture is the dramatic lowering of effective [corporate] rates, which has a big impact on any company paying those rates. And the expensing provisions are very important for any capital-intensive industry,” said Liam Donovan, a tax lobbyist and principal at the Washington-based firm Bracewell. The bill allows companies to expense 100 percent of their investments over five years.
Pavel Molchanov, energy analyst at the investment firm Raymond James, said the windfall from the corporate rate cut will be even bigger for oil refiners. He estimates the earnings per share for refiners will jump by an average of 23 percent, ranging from 14 percent for Valero Energy to 28 percent for PBF Energy (PBF).
Integrated oil giants like Exxon, Shell and Chevron, which own refineries, will also profit from the new approach to international earnings.
Jack Gerard, president of the American Petroleum Institute, says in a statement that money flowing to the oil industry and the rest of American business will spur faster economic growth: “Today Congress has fulfilled its pledge to modernize the tax code for the 21st century, setting us on a course towards greater economic growth, job creation, and increased U.S. competitiveness around the globe."
A look into the weeds of the tax bill shows additional benefits to investors in master limited partnerships (MLPs), a corporate vehicle that has grown popular for oil pipeline companies as well as some renewable ventures.
MLPs are used by the likes of Energy Transfer Partners, which owns controversial pipelines such as the Dakota Access and Rover lines. These partnerships are “pass- through” entities, meaning they don’t pay taxes at the partnership level but that the investors pay the taxes themselves. In the past, the pass-through rates investors paid were the same as their personal income tax rates. But the tax bill slashes the pass-through rates to 20 percent.
The influence of the oil and gas industry was also evident in what was left out of the tax bill.
Congress didn't eliminate tax breaks that have been in effect for a century or so, sparing the oil depletion allowance and tax breaks for intangible drilling costs. The biggest oil companies are no longer allowed to use those, but most of the country’s independent firms still employ them. GOP lawmakers also deleted an early proposal to drop a 15 percent tax credit for enhanced oil recovery.
Many other energy items also failed to win spots in the bill. The Renewable Fuel Standard, which pits ethanol makers and oil refiners against one another, went untouched.
Sens. Charles E. Grassley (R-Iowa) and Dean Heller (R-Nev.) had opposed turning the tax bill into an energy bill.
The utility industry is also poised to do well under the tax bill. The cut in the corporate rate and the full expensing of capital investments will save billions. And the industry persuaded Congress to make an exception to preserve its ability to deduct state and local taxes.
The Edison Electric Institute said that regulated utilities would have to turn over savings to rate payers, potentially saving them billions of dollars.
“Due to the regulated nature of the electric power industry, this is a huge win for customers as the drop in the corporate rate is mostly flowed back to them over time in rates,” the EEI said in a statement.
For the renewable energy business, the tax bill is a dodged bullet. The House would have accelerated a phaseout of the production tax credit used by the wind industry. The original version of the tax bill also included a provision tightening aspects of the investment tax credit used in the solar industry.
The wind and solar industries pushed back, and they succeeded except for a small portion of an item known as the base erosion anti-abuse tax or BEAT. But they failed to make other technologies such as fuel cells, geothermal and distributed wind eligible for the same tax credits as wind and solar.
Dylan Reed, head of congressional affairs at an association Advanced Energy Economy, said that the tax bill was “a missed opportunity.” But he added “We dodged the bullet from items with the most negative impacts.”
Not so with the wildlife refuge in Alaska, one of the most politically charged issues over the past four decades.
The tax package instructs the Interior Department to hold two lease sales in the next seven years. Proponents say exploration would provide needed oil and boost federal and state revenues. Opponents say drilling would threaten the pristine environment and wildlife and that the economic case for developing the remote area is weak.
The Congressional Budget Office estimated that opening the refuge would generate roughly $1 billion over 10 years, which made it eligible for the tax bill even though that sum amounts to less than 0.1 percent of the overall tax cuts contained in the overhaul. Opponents of drilling in the refuge said CBO’s estimate was too high.
The opening of the refuge has received active support from Alaska’s two GOP senators, Lisa Murkowski, chair of the Senate Energy and Natural Resources Committee, and Dan Sullivan, who argue that it affects only the 1.6 million acre coastal plain of the 19 million-acre refuge.
But other lawmakers were upset with the measure and the tactic of including it in a tax bill governed by budget rules that subject to a simple majority vote.
“The decision to permit Arctic Refuge drilling as part of the Republicans’ tax package is based on an unbelievable and cynical approach that believes drilling for oil can co-exist with a wildlife refuge,” Sen. Maria Cantwell (D- Wash.), the top Democrat on the Senate Committee on Energy and Natural Resources, said in a statement. “It is another example of this Administration earning an ‘F’ for land stewardship. No one in America will think that makes sense.”
Environmental groups said they would attempt to block development through litigation and public pressure.
“We are going to take our case to the American public now to educate them about how the Republicans buried this deeply unpopular decision deep in the bowels of the tax bill,” Cantwell promised.
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-- Rosselló vows revenge: Puerto Rico Gov. Ricardo Rosselló says he will urge Puerto Ricans on the mainland United States to shake up November’s midterm elections in response to the Republican tax plan he warns will do harm to the island’s economy. “We are a significant voting bloc in the United States that perhaps hasn’t been organized well in the past,” he told Politico in an interview. “The diaspora, the Puerto Rican exodus, has always wanted to help Puerto Rico, it just hasn’t been crystal clear how they can do it. If we can establish that organization we can have plenty of influence.”
Politico’s Lorraine Woellert reports: “The 3.4 million U.S. citizens living on the island have no vote in Congress, but they do have 5.3 million fellow Puerto Ricans scattered across the mainland who do have a vote. It’s that political power Rosselló plans to leverage...Even if he can get the tax changes fixed and pick up other legislative wins, Rosselló said he intends to stick to his plan. His office has begun cataloging Puerto Ricans and Latinos living on the mainland to see where they can have an impact…So far, he figures they can sway congressional district votes in 14 states, including Florida, Ohio, Virginia, Pennsylvania, North Carolina, South Carolina and Texas. He pointed to the influence of Florida’s 2.7 million Cuban-Americans, a powerful and well-organized constituency.”
Here's the problem with the tax bill, as explained by Ed O’Keefe: The tax package “includes a new 12.5 percent tax on profits derived from intellectual property held by foreign companies — a move designed to compel those companies to move back to the United States. Puerto Rico is considered part of the United States in all realms except taxes — meaning that island residents don’t pay federal income taxes but do pay into Social Security. Companies based on the island are treated as if they were located in other Caribbean tax havens not under an American flag ... Given its status as a U.S. territory, 'Puerto Rico is not a foreign tax haven,' Rosselló said in a letter to top lawmakers Tuesday, adding that changing the island’s tax status to treat it like the rest of the United States 'makes common sense.'
New York Democrat Nydia Velazquez, who was born on the island, had a more dire warning, reports Ed: she warned the package “will visit another Hurricane on Puerto Rico — an economic hurricane.”
-- Speaking of hurricanes, the $81 billion disaster relief package now seems to be slated for a separate congressional vote that might slip into next year. The package was plagued by attacks from House hardline conservatives who didn't like the fact that it wasn't being paid for and would add to the deficit (don't try to apply that same logic to the tax package, which Congress approved yesterday and those same hardliners supported). Here's the latest from Politico's Rachael Bade and John Bresnahan:
"The $81 billion relief package has run into problems in the Senate, however, and may get pushed into next year. That, however, would infuriate Texas and Florida lawmakers who have vowed not to leave town for the holidays until they get the disaster funding approved ...
Senate Minority Leader Chuck Schumer (D-N.Y.) complained that the disaster bill — while almost double the Trump administration's initial proposal of $44 billion — "still does not treat Puerto Rico, California and the U.S. Virgin Islands as well as Florida and Texas."
Senate aides believe there was some support for postponing final action on the disaster package until January, although this possibility would anger lawmakers from Texas and Florida, who want the bill approved before the holiday recess. Some told GOP leaders that they would vote against a spending package if the disaster package doesn’t pass."
Stayed tuned. As usual, Congress is fond of creating its own kind of messes.
On the ground in Puerto Rico, recovery is going to take a long, long time: The U.S. Army Corps of Engineers said Wednesday that in working with the Puerto Rico Electric Power Authority, the island could have 95 percent power restored by late February or early March, and power could be fully restored by May, Stars and Stripes reported.
The New York Time’s Frances Robles breaks down the timeline down further in a series of tweets worth a read:
The U.S. Army Corps of Engineers says that they estimate that the power will not be fully restored in Puerto Rico until the end of May.— Frances Robles (@FrancesRobles) December 20, 2017
"Most" people will have power back by the end of February, but hard to reach remote areas will take about another three months.— Frances Robles (@FrancesRobles) December 20, 2017
So let's get our calendars out and do the math: that means rural, mountain areas of Puerto Rico are expected to go without power for eight months.— Frances Robles (@FrancesRobles) December 20, 2017
They need 50,000 electrical poles and ordered 1 million feet of cable. (about 60% of the 30,000 miles of power line was affected by the storm.)— Frances Robles (@FrancesRobles) December 20, 2017
Some materials ordered 45-60 days ago to help repair the grid are just arriving now.— Frances Robles (@FrancesRobles) December 20, 2017
Lares, Utuado and Adjuntas are going to take the longest.— Frances Robles (@FrancesRobles) December 20, 2017
-- Power up?: Georgia’s Public Service Commission will hold a special energy committee meeting on Dec. 21 to decide whether to approve or cancel the continued construction of two new reactors at Georgia Power’s Vogtle nuclear plant.
The project is running five years behind schedule and at roughly double the original cost estimate, and the design company Westinghouse is in bankruptcy. Georgia Power, a subsidiary of Southern Co. that is part of a consortium on the project, has given the commission a plan for financing the construction. But the commission is wary about being asked to impose more financing costs on rate payers and is worried about whether it can trust the latest cost estimates. Georgia ratepayers have already paid about $2 billion in financing costs. Opponents of the project say Southern should tap its own ample financial resources instead of imposing costs on ratepayers.
The Vogtle project has $8.3 billion in loan guarantees from the Obama administration and the Trump administration has pledged another $3.7 billion. Toshiba, the parent of the bankrupt Westinghouse, recently paid $3.2 billion to help complete the project.
The utility pressed to move up the commission meeting by 45 days for tax reasons. Opponents of the project complain the commission won’t have enough time to review briefs. The request arrived at an awkward time, coming just days after an electrical fire in a tunnel led to an 11-hour power outage at Atlanta’s Hartsfield-Jackson airport.
Because the fire was in a tunnel adjacent to backup cables, the main power system and its backup both went out. The utility responsible? Georgia Power.
-- "Will the tax bill finally defeat the Arctic National Wildlife Refuge?" Elizabeth Kolbert writes in The New Yorker on ithe tax package's legalizing drilling in part of ANWR, which she notes “nearly had to be eliminated for parliamentary reasons.”
From her story:
"The G.O.P. contends that the provision will raise more than a billion dollars over the next decade, but, like so many other claims about the legislation, this one is almost certainly fallacious. What the provision will do, assuming that it’s ultimately allowed to take effect—and wilderness advocates have vowed to fight it—is destroy one of the nation’s last unspoiled places, a coastal plain that’s often called 'America’s Serengeti.'
What’s so depressing about the ANWR provision—besides the effect it will have on caribou, polar bears, grizzlies, and hundreds of other species—is that more oil infrastructure is exactly what the world in general, and the Arctic in particular, does not need…
As some commentators have pointed out, the G.O.P.’s demonstrably false claims about the tax bill are very much in keeping with its demonstrably false claims about climate change. In both cases, the Party is walking around with its proverbial fingers in its ears, pretending that ignoring the facts will make them go away.
But, as John Adams observed, 'Facts are stubborn things.' The world is warming; the sale of oil leases in ANWR won’t raise a billion dollars; the tax bill favors the rich. The only question that remains—and it is unfortunately the great question of our time—is whether voters will wake up to the G.O.P.’s charlatanism or whether American politics has also reached a 'new normal,' one founded on a series of lies.”
-- Americans would be less likely to visit a national park if entrance fees are hiked, a new poll has found. The Hill’s Timothy Cama reports the Outdoor Alliance for Kids -- which opposes the Trump administration’s plan to increase fees to as much as $70 per car, commissioned a bipartisan survey that found “64 percent of respondents would be less likely to visit parks with higher fees, while 68 percent oppose the Trump administration’s proposed fee hikes.”
The National Park Service previously extended the proposal's public comment period, which will now end on Friday.
-- Coal companies are divided in how to approach climate change, writes E&E News’s Benjamin Storrow. The two sides of the debate, per Storrow: While some companies argue coal firms should acknowledge their contribution to climate change, others worry they will never get enough credit for reducing emissions and thus should oppose any reduction efforts.
"The simmering debate, which has largely played out in private, burst into public view this week when the Australian mining giant BHP Billiton Ltd. announced it was leaving the World Coal Association over disagreements on climate change…
BHP had backed Australia's so-called clean energy targets while the World Coal Association supported their elimination. BHP also said it is reviewing its membership in the U.S. Chamber of Commerce, which has expressed doubts about the emission targets called for in the Paris climate accord… The disagreement mirrors the split in the U.S. coal industry, where divisions have been illustrated by companies' differing approach to carbon capture and sequestration (CCS).”
-- New research reveals a “surprisingly large” estimate of how people’s treatment of land surfaces and vegetation has altered the planet, The Post’s Chris Mooney writes:
"Using a series of detailed maps derived from satellite information and other types of ecological measurements, [lead study author Karl-Heinz Erb] and his colleagues estimated how much carbon is contained in Earth’s current vegetation. The number is massive: 450 billion tons of carbon, which, if it were to somehow arrive in the atmosphere as carbon dioxide, would amount to over a trillion tons of the gas. (The mass is greater due to the addition of oxygen molecules.)…
But the study also presented an even larger and perhaps more consequential number: 916 billion tons. That’s the amount of carbon, the research calculated, that could reside in the world’s vegetation — so not in the atmosphere — if humans somehow entirely ceased all uses of land and allowed it to return to its natural state.”
The bottom line: Human treatment of land and vegetation slashes the potential storage of carbon by roughly half. If these estimates are true, Mooney notes, it could affect how humans shape their response to climate change.
-- Despite what at times appeared to be an unrelenting series of natural catastrophes, disasters in 2017 caused fewer deaths worldwide than other years in recent history, reports BuzzFeed’s Peter Aldhous:
"The charts below show annual death tolls and counts of disasters recorded since 1960 in the International Disaster Database, which keeps tabs on natural events — such as hurricanes, earthquakes, and storms — and technological disasters, like ferry sinkings and plane crashes… In part, the low death count in 2017 comes down to luck. How many people are killed in any given year depends crucially on where earthquakes strike, where major storms make landfall, and so on. But the charts above also tell a story of how humanity is getting better at minimizing the death toll from disasters, as economic development and better planning have increased the resilience of communities across the developing world.”
Here are the charts, tweeted via Aldhous:
-- Dancing bears, burned in effigy: On Thursday, a small town of Bluff in Utah will set two 15-foot dancing bears ablaze to honor the Bears Ears National Monument as part of an annual winter solstice celebration. Interior Secretary Ryan Zinke and President Trump recently announced plans to downsize the national monument. From The Salt Lake Tribune’s Brian Maffly:
“The past year was momentous for Bluff, bracketing both the creation, then the near-complete elimination of Bears Ears National Monument at its doorstep. The monument is now a memory but its landscapes, which many Native Americans consider sacred, will, of course, remain in southeast Utah.
And the dream of a monument will also certainly endure, as fights over the issue shift to the courts. Bluff residents largely supported the controversial, late-2016 monument designation by President Barack Obama, but San Juan County’s elected leaders saw it as intolerable encroachment by federal officials and ‘special interests’ into local affairs. They cheered President Donald Trump’s Dec. 4 order sharply narrowing its boundaries to encompass just Bears Ears Buttes and Comb Ridge."
- Politico holds an event on "Driverless Cars and the Future of Mobility" on Jan. 16.
No, the Trump administration didn't make the economy great again all on its own:
Here's who gains and who loses under the GOP's tax bill:
Watch the U.S. Coast Guard free a turtle tangled in a web of floating cocaine bales in the eastern Pacific Ocean:
Late Night with Seth Meyers takes a closer look at the Republicans overhaul of the tax code: