Energy industry says ‘no thanks’ to Trump aid

Source: Peter Behr, E&E News reporter • Posted: Wednesday, February 1, 2017

Shopping lists for billions of dollars in potential construction projects that circulated last week raise questions about whether the nation’s sprawling energy sector will share in the spoils of an infrastructure plan coming out of Trump’s White House.

The National Governors Association distributed one list to state governors after the election, and the second came from Senate Democrats. Both contained high-voltage power lines and pipeline proposals.

But even as energy companies hurriedly scanned the lists last week, industry organizations backed away from anything that smacked of taxpayer-funded largess.

“I hope that this is the beginning of a constructive conversation about improvement in, and expansion of, the transmission system,” said Kathleen Shea, president of the power industry group WIRES, which advocates for transmission projects.

“Let’s be clear, however,” she added. “The transmission sector does not seek taxpayer funding for the challenges that ail us. We look for the kind of leadership and vision that fosters practical policy and regulatory solutions at all levels.”

To keep up with the needs of rapidly changing U.S. power grid, WIRES has said at least $100 billion will be spent on interstate transmission lines over the next two decades.

The Interstate Natural Gas Association of America, the pipeline industry’s trade group, tapped the brakes, too. “Interstate natural gas pipelines are privately funded. We’ve never suggested or called for federal funding,” said Catherine Landry, INGAA’s communications vice president.

President Trump and Congress start out on the same page on the need for more infrastructure investment. The president told a meeting of Republican congressional members Thursday in Philadelphia, “The thing I do best in life is build.”

The Senate Democrats’ “A Blueprint to Rebuild America’s Infrastructure” promises “a historic $1 trillion federal investment to modernize our crumbling infrastructure and create more than 15 million jobs that our economy desperately needs.”

Still, Congress has to find the money to pay for it. The small-government tea party faction could fracture the Republicans, and Senate Democrats face mounting pressure from the left to hammer at Trump’s agenda. All the while, Trump is stacking the legislative agenda with efforts to overturn Obama-era regulations.

Another fault line that separates Trump and Senate Democrats is on what an investment in the grid looks like. Should federal cash give a leg up to big-ticket projects designed to move carbon-free energy from wind turbines and utility-scale solar?

“We will invest $100 billion in much-needed power transmission and distribution upgrades, and we will consolidate and reform existing tax incentives for clean, renewable energy,” says the Democratic plan.

It also calls for a permanent tax incentive for electricity generation, transportation fuels, and energy efficiency improvements. “The level of incentive would be based on performance: the cleaner the technology or the more energy conserved, the larger the incentive,” says the plan.

The White House sees it differently. In its “America First Energy Plan,” the White House pledges to use revenues from increased oil and gas production on federal lands to “rebuild our roads, schools, bridges and public infrastructure.”

There’s no mention of renewable power (Climatewire, Jan. 24, 2017).

The White House statement is also silent on infrastructure support for pipelines and power lines.

Revenue-neutral reality

The biggest clue to the approach the Trump administration may take for privately owned infrastructure is a paper issued during the presidential campaign by equity fund investor Wilbur Ross, Trump’s choice to head the Commerce Department, and economist Peter Navarro, an outspoken China critic picked by Trump to head a White House office on trade and industrial policy.

“So far, that’s the only plan that we know of associated with the Trump administration,” says Reed Hundt, founder of the Coalition for Green Capital.

The Ross-Navarro plan provides large tax credits that would cut income tax obligations for investors in private infrastructure projects. But whether the Ross-Navarro plan was a roadmap for legislation specifically designed to help private-sector projects isn’t clear, Hundt said.

“Financing a trillion dollars of infrastructure would necessitate an equity investment of $167 billion, obviously a daunting sum,” Ross and Navarro wrote.

They said the tax credits would be recovered from tax collections on the incremental wages of workers hired for the new projects, and, to a lesser extent, from taxes collected on contractor profits.

“The gist of the mechanism is that the private developer would get a big tax credit and would also be able to borrow a lot of money. It is a very attractive plan from a developer’s perspective,” Hundt said.

“If you really want to have a lot of investment and job creation, what you would want would be a combination of the tax credits plus public-private investment,” Hundt said.

“That would be a combination of the Ross plan and the Democratic plan. That would drive a tremendous volume of investment,” Hundt added. “Quite an elixir.”

Too rich a brew in fact for budget-focused Republicans, says Robert Sussman, senior policy counsel at the EPA during the Obama administration. “I’m skeptical this will come together with the Congress on a fiscal basis that is acceptable to the Republicans,” he said.

“I don’t think that this would be a high priority for the Republicans in the absence of Trump,” Sussman said (E&E Daily, Jan. 25, 2017).

“They are focused on tax cuts, and they’ve said those need to be revenue neutral, and all of a sudden we’re spending $10 billion, $20 billion, $100 billion on infrastructure and the budget goes out of whack,” he said. “There will be Republicans in Congress who will be very concerned about that.”

The Ross-Navarro approach drew a sharp critique from Ronald Klain, an assistant to President Obama, and an adviser in Hillary Clinton’s 2016 campaign. Klain called it “a massive corporate welfare plan for contractors” and a trap for Democrats in Congress.

“Because the plan subsidizes investors, not projects; because it funds tax breaks, not bridges; because there’s no requirement that the projects be otherwise unfunded, there is simply no guarantee that the plan will produce any net new hiring. Investors may simply shift capital from unsubsidized projects to subsidized ones and pocket the tax breaks on projects they would have funded anyway,” Klain wrote inĀ The Washington Post.

How do we plan for the future?

The Edison Electric Institute’s new survey of transmission projects by investor-owned utilities features a selection of more than 150 major projects that were completed in 2015 or are planned over the next four years.

“These featured projects, which represent only a portion of the total transmission investment that EEI’s member companies anticipate through 2019, total approximately $41 billion,” EEI said. Those appear to be the kinds of projects that Klain said would be built anyway.

There is another issue if the Trump administration gets involved in advancing some energy projects but not others, said James Hoecker, former chairman of the Federal Energy Regulatory Commission and counsel to WIRES.

“How do you decide which is a high priority project? If you had Dakota Access pipeline competing against Keystone, who would decide which one gets built? It’s an interesting dilemma,” he said. “On the transmission side, the approval process is different but leads to the same problem. Who decides that a particular transmission line is in the public interest? My answer is, everybody.”

According to Hoecker, the nation’s challenge is not energy projects that are likely to be built without a federal infrastructure boost, but rather needed projects that aren’t advancing far enough to win financial support.

Long-range power lines that could link prime Great Plains wind farms or Sun Belt utility solar parks with distant population centers face approval high barriers, for example. “People can’t get interregional projects built or even off the drawing board,” Hoecker said.

He said the issue isn’t as much capital as differences from state to state and across regions in how transmission projects are handled and costs allocated.

The United States is at an inflection point in planning and building a future power grid, and those plans aren’t forthcoming fast enough, he said. “There is a likelihood that over the next 10 to 15 years more of our economy is going to be digital,” he said. “The transportation industry will be more fully electrified. We’re going to need higher quality electric power, and even though demand is relatively flat, we’ll be using more power in more ways.”

“How do we plan for that, given that it takes 10 years to build a line?” he said. “That kind of planning isn’t being done now in most places.”