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  • 16

    EPA Settles Another Legal Case With Environmentalists

    Alex Mills

    The President Obama’s Environmental Protection Agency (EPA) said on January 3, in another last minute attack on the nation’s oil and gas industry, that it will consider revising standards for oil and gas waste as a result of another legal settlement with environmental groups.

    The agreement, reached just before Christmas and finalized in a consent decree on December 28, requires the agency to review the Resource Conservation and Recovery Act (RCRA) for possible changes that could classify oil field waste as hazardous materials and require more stringent controls.

    Railroad Commissioner Ryan Sitton blasted the EPA, saying the RRC has regulated oil field wastes for years. 

    “There is no rational basis for EPA to layer additional bureaucracy on top of our regulation of oil and gas waste disposal rules,” Sitton said.

    “The decision by EPA to settle caters only to environmental groups and adds unnecessary, burdensome regulation to an already suffering energy industry and economy,” he said.

    Industry groups noted the duplication of regulations is very costly in terms of both time and money.  Recently adopted regulations have created economic pain with very little environmental gain.

    “We support assigning many of the federal programs to the states for permitting, inspection, and compliance,” John Tintera, executive vice president of the Texas Alliance of Energy Producers, said.  “This includes looking for opportunities, whenever a federal statute is opened, to increase delegation opportunities to the state.”

    The U.S. House of Representatives is considering several bills that would change the regulatory process. 

    The Regulatory Accountability Act, H.R. 5, would combine six reform measures that passed the House in the last few sessions of Congress.  It would reverse the negative effects regulations are having on the nation’s economy, Rep. Bob Goodlatte (R-Va.), the bill’s sponsor, said.  It would require agencies to find the lowest-cost option for new rules, increase public input in the rulemaking process, and prevent rules from becoming final until courts can resolve litigation.

    The House also is considering the REINS Act (Regulations from the Executive in Need of Scrutiny), H.R. 26,

    Another bill on the front burner is the Regulatory Accountability Act, which would make regulators and members of Congress more accountable for passage of new rules.

    The recent actions of the Obama administration has caused members of House to debate the Midnight Rules Relief Act, sponsored by Rep. Darrell Issa (R-Cal.), which would allow Congress to overturn regulations finalized in the last days of an administration. 

    Business groups have expressed frustration with the disregard federal bureaucrats had for the comments of industry during the adoption of regulations. 

    Tintera noted EPA had exempted marginal wells from the methane rule, but reinstated reporting requirements in the final rule after environmental groups complained.  He also pointed out that EPA reversed itself during the issuing of its report on hydraulic fracturing after environmental group expressed displeasure with the report’s initial findings.

    Alex Mills is President of the Texas Alliance of Energy Producers.  The opinions expressed are solely of the author.

  • 04

    DEPA January 2017 report

    Martin Frost

    History has a peculiar way of repeating itself, particularly in politics.  It will be interesting to see if the new Trump Administration can avoid making the makes that Presidents Clinton and Obama both made during their first two years in office.

    Both Bill Clinton and Barack Obama entered their first two years with majorities for their party in both the House and the Senate, just as Donald Trump enjoys in 2017.  In fact, their majorities were even greater than the Republicans currently hold. 

    Within two years, the tables were turned due to some missteps by the new presidents.  Trump is a different kind of president but the challenges remain.

    Both Clinton and Obama wound up pushing policies that were disliked by a significant part of their own political base and the Democrats proceeded to lose the House in the next election.

    Clinton pushed an early version of health care reform that was not well thought out and a crime bill that included a ban on assault weapons opposed by many blue-collar Democrats.  Obama pushed through health care reform without any bi-partisan support and made House Democrats walk the plant on a major energy bill dealing with climate change that was opposed by Democrats in the key coal producing states such as Kentucky, Virginia, West Virginia, Pennsylvania and Ohio.  Democrats lost House seats in all these states in 2010 and ultimately lost all these states in the 2016 presidential election.

    There are some key Republican Members of Congress who are proposing a sweeping change to the Medicare system (privatization) which would strike at the heart of Trump’s blue collar middle class constituency and would also be opposed by senior citizens.  If Trump were to go along with this dramatic change to the very popular Medicare system, he might suffer the same fate as Clinton and Obama did.

    Middleclass America lives in fear of facing financial ruin due to a major illness or injury.  The current Medicare system is their particular social safety net.

    There is every indication that Trump’s political antenna is well attuned to the political needs of his middle class blue collar base but most observers thought that Bill Clinton and Barack Obama had good political instincts when they took office.

    Friends of the new president will be well advised to remind his staff that history could repeat itself if he takes on his base over an issue they really care about.

    There will be a lot going on in Washington in the months ahead.  This is one bouncing ball worth watching.

  • 07

    If you're not at the table during tax reform, you're on the menu

    Martin Frost

    Now that the dust has settled from the 2016 elections, it is time to take a serious look at what could happen on the subject of tax reform in the next Congress. The Trump Administration clearly wants Congress to pass significant tax reform and there is a very good chance that something will happen in the next two years.

    Let’s start with some basic concepts:

    1. Tax reform is never easy because of competing economic interests. It took Ronald Reagan four years to pass the Tax Reform Act of 1986.
    2. Whatever ultimately passes must be revenue neutral and not add to the debt of the country. Congress and the Administration will attempt to incorporate the idea dynamic scoring – that is, cutting taxes in of itself generates enough new business activity to increase tax revenue in a way that makes up for revenue lost from lower rates. It is doubtful that Congressional tax writing committees will accept this concept fully.
    3. Cutting corporate tax rates is easier than lowering individual rates and thus requires fewer offsets to make up for lost revenue.
    4. If you are not at the table when the decisions are being made, you are on the menu.

    Obviously, our industry needs to protect both intangible drilling costs (IDCs) and percentage depletion. The more ambitious plans for cutting individual and corporate rates become, the more vulnerable individual industry specific provision become. Lowering corporate rates from 35 percent all the way down to 15 percent means that tax writing committees will start looking more broadly at all kinds of deductions in current law. The same applies to major reductions of the individual rate from 39.6 percent to a much lower figure.

    Guarding against adding to deficit spending is not strictly a partisan issue. A number of conservative Republicans and moderate Democrats will resist any plan that could add to the deficit and thus may be willing to examine a broad range of deductions and preferences currently in the tax code. One of the questions we heard most in recent years was “How low does the tax rate need to be so that you don’t need IDC’s and percentage depletion anymore?” We must be prepared to respond that one size does not fit all industries in the same way.

    There is no question that tax reform that lowers rates will help independent oil and gas producers but we must have plenty of facts to demonstrate the value of provisions that help America become even less dependent on imported oil and promote our national security. Also, these same provisions promote additional supplies that will permit more crude oil exports which in turn lower our trade deficit with the rest of the world.

    Many politicians in both parties are looking for simple solutions to complex problems. That argues for our industry to vigorously make its case as tax reform progresses and for us to not assume that everyone who say they are our friends necessarily understands how the industry works.

    We need to all keep our eyes on the ball and not get caught up in the euphoria over lower rates. In the final analysis, there are a lot of hard decisions that will need to be made before effective and fair tax reform becomes a reality.

    Martin Frost is a former United States Congressman and DEPA lobbyist. Frost is a keen observer of national politics who has held a number of leadership positions for the Democratic Party and is considered one of the party’s top strategists.

  • 10

    Trump victory will change US energy policy

    Alex Mills

    Astonishing!  Incredible!  Surprising!

    These are just some of the many words used to describe Donald Trump’s defeat of Hillary Clinton on November 8th.

    What does it mean? 

    We do know that there will be a reversal in energy policy from the previous eight years.

    Trump said during the campaign that the oil and natural gas industry is overregulated by the federal government.

    “Our nation’s regulatory system is completely broken,” Trump wrote in the October issue of The American Oil and Gas Reporter. “Terrible rules are written by unelected, unaccountable bureaucrats who often know nothing about the people they are regulating.  The regulators have all the power. We have too many costly, burdensome and unwise regulations that are bad for America and do little or no good.”

    Trump believes that the federal government has overreached its authority and many of the rules need be returned to the states.

    He pledged to pull the US out of the Paris climate agreement, and to kill the Environmental Protection Agency’s (EPA) Clean Power Plan. He thinks the Endangered Species Act needs modification.

    He is a supporter of hydraulic fracturing, increasing oil and natural gas production in the US, increased production on federal lands and offshore, and improving of infrastructure (including pipelines).

    Tax reform will become a top priority.

    Trump will be able to make key appointments to federal courts, including an appointment to the US Supreme Court.

    The new president will be facing many challenges left by the Obama administration. The Wall Street Journal cited a recent Congressional Budget Office report, which warns of a large and growing federal budget problem. The annual budget deficit in 2016 rose from $439 billion to $587 billion, a 34% increase. Looking at the budget deficit another way, the 2016 deficit is 3.2% of gross domestic product, up from 2.5% last year.

    Trump also inherits the issue of growing costs of Social Security, Medicare, and Medicaid, which grew by $75 billion last year and now account for 10% of the entire US economy, the highest level ever, and rising, WSJ stated.

    Even though Republicans will have control of the Senate and House, Trump will face many barriers as he tries to get the country’s economy moving in the right direction. Already there have been protests, and he hasn’t even taken the oath of office. Environmental groups have pledged “civil disobedience.”

    E&E News reported on Nov. 9 that the League of Conservation Voters, NextGen Climate Action, the Sierra Club and others groups collectively spent over $100 million working to elect pro-environment candidates are holding meetings in Washington to discuss strategy.
    Other groups – Food & Water Watch, Friends of the Earth, and – all vowed that the “environmental resistance will stand against Trump.”

    These environmental radicals will present a major obstacle in bringing the country closer together.

    Alex Mills is President of the Texas Alliance of Energy Producers, a DEPA collaborating trade association partner.

  • 09

    Hamm: No need to be dependent on Middle East


    Harold Hamm, Continental Resources chairman and chief executive officer, discusses drilling on federal lands. He speaks with Bloomberg's Alix Steel on "Bloomberg Markets." [video]