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There’s one group not ready to ditch the Donald: ethanol producers

May 9, 2016 Mark Drajem

The First Word Energy team draws on Bloomberg’s worldwide resources to cover all aspects of energy policy. Learn how Bloomberg Government can help your energy lobbying or policy analysis—contact Peter Hsu at yhsu24@bloomberg.net or 202-416-3035.

Today’s Agenda

There’s one group not ready to ditch the Donald: ethanol producers.  Bob Dinneen, president of the Renewable Fuels Association, says he’s confident that the next president — whether Donald Trump, or Democratic front-runner Hillary Clinton — would be fine for the biofuel industry. It’s a critical question for the makers of corn-based ethanol, because in 2022 annual biofuel targets disappear from federal law — putting the future of the Renewable Fuel Standard entirely in the hands of EPA. Congressional Republicans are also moving to rewrite or repeal the RFS mandates. (See more on this below in Catherine Traywick’s interview with Joe Barton.)

Both Trump and Clinton advocated for ethanol while campaigning in the Corn Belt. “Trump — he’s all about America; he wants American energy,” Dinneen said. “I don’t suspect he’s going to be negative toward fracking or deep-water drilling.” And while “you don’t have guarantees with any politician,” that should be the same for homegrown ethanol, he said, according to Jennifer Dlouhy.

The drop in oil and natural gas prices could mean a nice tax refund for producers.  Tax credits for so-called “marginal wells” and for enhanced oil recovery, are back in the mix this year, because they only kick in below certain prices. “Nobody has ever claimed this credit,” Brian Americus, senior manager in Deloitte Tax’s Washington National Tax practice, said of the credit for marginal wells. “Because of the low price of natural gas in 2015 this credit is expected to be available for the first time.”

The production tax credit provides a 50-cent credit for the first 18,000 cubic feet of daily natural gas production from a marginal well – a well that produces less than 90,000 cubic feet a day,Bloomberg BNA’s Ari Natter reports. However, the credit only starts to phase in when natural gas prices drop below $2. (Oil prices haven’t dropped below that trigger point, $18.) The low prices have left producers wondering what it takes to qualify. “We’re getting so many calls we don’t know what to do with them,” Phil Tiegerman, an IRS attorney, said. “People are asking us when the guidance is coming in, and we don’t have any formal plan for any kind of guidance.” In addition, the 15% EOR credit kicks in at a price that hasn’t been announced yet by the IRS. Americus said he expects the full credit to be available.

Sally Jewell says “keep it in the ground” activists are naive.  “The fossil fuels are part of the problem; we’re also highly dependent” on them, Jewell told the Desert Sun. “It’s going to take a very long time before we can wean ourselves from fossil fuels. So I think to keep it in the ground is naive; to think we can shift to 100% renewables is naive. We’re really going to have a transition over time.”

Welcome back, Yucca.  Senate appropriators have skirted around Yucca Mountain in their energy and water funding bill, but that was before the NRC’s report last week showing that any environmental impacts could be small over one million years. That may help the House win the debate, and push ahead with funding if the two spending bills ever get to a conference. Getting that bill through the Senate seems like the initial hurdle. And then there’s always Harry Reid. Also today, Laura Curtis’ dispatch on the West Virginia governor’s race, a possible deal on TSCA, a cheat sheet explaining the changes in Saudi Arabia and a look at vampire power by The New York Times.

Drajem’s Don’t Miss

Later this week, Energy Secretary Ernest Moniz is expected to tell us what he thinks about nuclear fusion. The Senate Energy and Water appropriations bill would eliminate funding for the International Thermonuclear Experimental Reactor, but whether funding for that project gets reinstated could depend on what Moniz, a nuclear physicist, says in his evaluation of the project. If Moniz comes out against the project, that could allow appropriators to follow through on their bid to ax the funding.

Quotable

“So I build, and I build a lot of stuff. And I go into areas where they have tremendous water… And you have sinks where the water doesn’t come out. You have showers where I can’t wash my hair properly, it’s a disaster!” Donald Trump said in December, according to Time magazine. The shower heads “have restrictors put in. The problem is you stay under the shower for five times as long.”

“The market right now is saying that coal isn’t competitive,” EPA’s Gina McCarthy said Friday. “It’s saying it louder and clearer every day.”

The Predictor

Coal consumption will decline by 4%, to 711 million short tons in 2016, but coal production will take another 12% cut to 784 million short tons, as utilities use up unusually high inventories and producers shut mines and curtail production, Moody’s said in a report on the industry.

Week Ahead

Worth Watching  

Energy Outlook: Adam Sieminski of the Energy Information Administration is scheduled to discuss EIA’s 2016 International Energy Outlook at CSIS on Wednesday. The IEO2016 includes projections of world energy demand by region and primary energy source through 2040. The event is at 9:30 a.m. at 1616 Rhode Island Ave.

Role of Natural Gas in Low-Carbon Pathway: CSIS is holding a second event on Wednesday, this one at 4 p.m., to discuss the analysis by Doug Arent about the role natural gas can play in cutting U.S. greenhouse-gas emissions. The analysis is on natural gas and the electricity sector, and explores the question of natural gas as a bridge to a more sustainable electricity sector. It’s also at 1616 Rhode Island Ave.

NAS on Transportation Fuels: The National Academies of Sciences is holding a two-day meeting about the use of petroleum, natural gas and ethanol as a transportation fuel, and safety risks. The open meeting is Thursday from 10:30-4:30 at the NAS Building, 201 Constitution Ave.

Contact Us

Send us your comments and tips for Laura Curtis on where to find the best food in Charleston, West Virginia. Shoot us an e-mail: Mark Drajem is the editor (mdrajem@bloomberg.net or @drajem), Catherine Traywick (ctraywick@bloomberg.net or @ctraywick) and Laura Curtis (lcurtis7@bloomberg.net or @LouKCurtis) cover Congress and regulation.Bloomberg Government subscribers can get this and any of our eight other newsletters in their inbox every morning. Click here to modify your subscriptions. Contact Peter Hsu at 202-416-3035 or yhsu24@bloomberg.net for more information or if you have colleagues that would also value access.

Chart of the Day

Coal production in West Virginia dropped more than 14% in 2015 to its lowest level in nearly four decades.

Inside the Beltway

Boxer, Inhofe Claim Agreement on TSCA Overhaul   Sens. James Inhofe and Barbara Boxer reached an agreement on a bill to overhaul the nation’s primary industrial chemicals law. “We have negotiated in good faith and are extremely pleased that we have reached an agreement on key sticking points of the TSCA reform bill,” both senators said in a May 6 statement. House agreement still is needed before a single measure can be put to a vote. Legislators are negotiating a consolidated version of two bills: the TSCA Modernization Act of 2015 (H.R. 2576) which would narrowly amend TSCA and passed 398-1 in June 2015, and the more sweeping TSCA overhaul that passed unanimously in the Senate in December, the Frank R. Lautenberg Chemical Safety for the 21st Century Act. Originally numbered S. 697, the Senate bill passed as an amendment to H.R. 2576. Neither Inhofe’s nor Boxer’s office provided any detail on what sticking points were resolved, Pat Rizzuto reported.

Hello, Again, Energy and Water  For the Senate’s return today from the week-long congressional recess, Majority Leader Mitch McConnell has teed up the third cloture vote on advancing legislation to fund federal water and energy programs, including the Energy Department and the Army Corps of Engineers. Democrats have twice defeated procedural motions to limit debate to prevent Arkansas Republican Tom Cotton from offering an amendment to bar government funds from being used to purchase heavy water from Iran in the 2017 fiscal year. The White House has warned that President Barack Obama would veto legislation containing the Cotton amendment.

Electricity and Renewables

Exelon to Close Two Reactors Without Clean-Energy Credits   Exelon Corp., the largest U.S. nuclear-power generator, said it will close two nuclear plants in Illinois unless the state adopts new policies to make them profitable. The Clinton plant will close June 1, 2017, and the Quad Cities plant June 1, 2018, unless Illinois passes “adequate legislation” to preserve them by May 31, Chicago-based Exelon said Friday in its quarterly earnings statement. To remain in operation, Quad Cities must also win contracts for generating capacity in a market auction.

Tallying Up If Your Electronics are Really Off: The New York Times   Once upon a time, there was a difference between on and off. Now, it’s more complicated: Roughly 50 devices and appliances in the typical American household are always drawing power, even when they appear to be off, estimates Alan Meier, a senior scientist at the Department of Energy’s Berkeley Lab. It adds up. About a quarter of all residential energy consumption is used on devices in idle power mode, according to a study of Northern California by the Natural Resources Defense Council. That means that devices that are “off” or in standby or sleep mode can use up to the equivalent of 50 large power plants’ worth of electricity and cost more than $19 billion in electricity bills every year, according to the New York Times.

Wind Farms Get Longer to Qualify for Tax Credits   The U.S. government extended the construction timetable for wind farms to qualify for federal tax credits renewed last year by Congress, giving developers at least two more years to complete projects. Builders now have four calendar years to finish developments and still be eligible for the production tax credit, according to a statement May 5 from the Internal Revenue Service. For example, if construction of a new wind farm started in 2013, then the project must be completed by the end of 2017.

Coal-fired Power Plant to Shut Down in Michigan: Toledo Blade   A utility that serves five southern Michigan communities plans to shut down its coal-burning power plant on May 31. The Daily Reporter of Coldwater reports the Michigan South Central Power Agency will end operations at the 55-megawatt Endicott power plant. Officials have said cost is the reason for shutting down the plant. Plans call for the plant to be demolished after it is decommissioned. The three-decade old plant has 65 employees who will be out of work.

Oil, Gas and Coal

Market Wrap:  Crude rose as expanding Canadian wildfires knocked out about 1 million barrels a day of production, outweighing the new Saudi Arabian oil minister’s pledge to maintain the country’s policy of near-record output. West Texas Intermediate for June delivery gained as much as $1.28 to $45.94 a barrel on the New York Mercantile Exchange and was at $45.43 at 7:52 a.m. London time. Natural gas futures for June delivery declined 0.2% and were trading at $2.096/mmBtu on the Nymex at 8:38am London time.

Alberta Fires Spread Toward Oil-Sands Sites   Wildfires raging through Alberta have spread toward the main oil-sands facilities north of Fort McMurray, knocking out an estimated 1 million barrels of production from Canada’s energy hub. A cold front scheduled to pass through the area may bring light rain that would help fire fighters battle the inferno. The blaze was forecast to expand to more than 2,500 square kilometers (965 square miles) in the next few days, but rain and cool weather could check its spread.

A Guide to Saudi Arabia’s Plan to Reorganize Its Government   Saudi Arabia’s King Salman issued more than 50 royal decrees on Saturday reorganizing the government of the world’s largest oil exporter. In a statement published by the official Saudi Press Agency, the royal court said the changes were consistent with “Saudi Vision 2030,” the kingdom’s blueprint for the post-oil era, which was announced in April. The shifts will “focus and clarify responsibilities, and ease procedures to offer better services,” the royal court said.

Saudis’ New Oil Boss Seen Chasing Record Output to Stymie Shale   Saudi Arabia will probably keep producing crude at near-record levels under its newly appointed oil minister, Khalid Al-Falih, as the world’s largest exporter sticks with his predecessor’s policy of defending market share against higher-cost shale.