The New Recovery Proposal: Infrastructure, Transportation & Climate Change, Oh My

Posted by Kelly Burke on Apr 2, 2021 4:18:58 PM

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This Wednesday, the Biden Administration unveiled a 2 trillion dollar transportation, infrastructure and economic recovery package. The goal of the bill is to create jobs, fix/upgrade US infrastructure, and combat climate change as the country attempts to recover from the COVID induced economic slump.

The bill is extremely large and multifaceted, so we are going to try and give a super brief summary of the major takeaways and points here as best we can with the disclaimer that because the bill hasn't passed yet, different points are subject to change as it moves through the legislative process.

In terms of the scope of the bill, it is anticipated to cost $2 trillion dollars over 8 years. The spending will be funded over 15 years by increasing the corporate tax rate from 21% to 28% and "discouraging offshoring" to tax havens (although specifics on the measures being taken to prevent offshoring have not yet been released). The corporate tax rate was lowered to the current 21% in 2017 by Republicans from its prior rate of 35% - so this increase, if passed, would still keep the corporate rate substantially below its prior level. Despite the fact that it will still be lower than 2016, this portion of the bill is expected to face stiff partisan opposition. It's unclear what provisions may change (if any) based on if funding sources need to be adjusted, so that is something to keep an eye on as the bill progresses. 

Projects focused on in the package on the transportation/infrastructure side include repair/replace of 20,000 miles of roads/highways, repair of 10,000 bridges, the addition of 500,000 Electric Vehicle charging stations, universal broadband, and the replacement of all lead pipes in drinking water systems nationwide. Those portions of the bill comprise about 900 million dollars, give or take (approximately 620 million for roads & bridges, 300 million for water & electric infrastructure). Additionally, there is a focus on expanding rail transport, notably in the Northeast. 

Another 580 billion dollars of the bill is directed to "American manufacturing, research and development, and job training efforts". Presumably the job training efforts include retraining of workers for "green jobs" as the bill includes climate related provisions congruent with Biden's so called "Build Back America Better" agenda, including the EV charger expansion we mentioned, rebates for consumers to encourage EV purchases, moving 20% of school busses to electric, and a provision to replace 50,000 diesel public transportation vehicles. 

Outside of strictly transportation/infrastructure, the bill also includes spending for building & retrofitting affordable housing, providing direct aid to the elderly & disabled, and modernization efforts for water ports and airports. 

As mentioned, the bill is extremely large and covers a lot of areas - definitely something to watch as it progresses through the legislative process and we find out what does or does not get included in the passage - there's something in there that impacts almost everyone, but hopefully this quick overview was helpful in outlining some of the major points relevant to our readers. 

 

 

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Topics: Stimulus, climate change, covid-19, Biden Administration

New Administration, New Focus - Executive Orders & Industry Impacts

Posted by Kelly Burke on Jan 28, 2021 5:59:19 PM

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The new Administration is off to a running start, as Wednesday saw a flurry of Executive Orders come out, many of which deal with climate change, and the oil & gas industry. There are a lot of items, and they are all pretty detailed with substantial backstory, but we are going to try and briefly touch on the three major items relevant to the industry and quickly go over the main points (or, try to at least!) 

So, here's the recap:

Keystone XL:  The Biden Administration cancelled the permitting for the Keystone XL pipeline, an $8 billion dollar project that would run over 800K barrels per day from Canada through the United States. Specifically, the pipeline runs from Alberta to Nebraska, where it would then hook with existing pipeline infrastructure running to the Gulf Coast refineries. There seems to be no recourse for TC Energy to fight the permit cancellation per se, the only major sway could theoretically be if Canada argues on behalf of the project continuing but according to analysts, that will be a non-starter, Trudeau is extremely unlikely to broach the subject with the Administration amid attempts to smooth a relationship between the two countries that was somewhat fractured during the prior administration's tenure. 

Moratorium on Federal Oil & Gas Leasing:  Another executive order has put a moratorium on the lease of any federal land or offshore waters for oil & gas development. The order also stipulates that current permits in effect be reviewed against the new standard, presumably to see if some additional will be cancelled. The Administration has a stated aim of "protecting at least 30% of federal land and offshore waters" as a general goal, and the moratorium appears to be a part of that aim. Currently, fossil fuel leasing on Federal land accounts for approximately 25% of carbon emission output, which is the impetus for the move. However, as others have pointed out, the leasing also provides around 8.1 billion dollars annually in tax revenue to tribal, state, and federal governments.  22% of oil production, and 12% of natural gas production takes place on federal lands and although this moratorium does not affect current operations (yet) there is some concern that a move toward stopping production on federal land, which is the possible end goal, would push the US back into becoming a net importer of petroleum as the economy continues to recover and demand begins to increase. However, its important to note that states have wildly disparate levels of reliance on federal land for production - New Mexico is largely federally based, whereas even a complete halt would not affect Texas very much, as production land is almost exclusively privately held. This is a watch-and-see item for sure, as no one is really clear on the end goal or next steps on this item yet. 

 

Paris Accords  The Biden Administration has additionally rejoined the Paris Climate Accord, which the prior Administration withdrew from last year. The US, under President Obama, played a major role in crafting the Paris Accord in 2015. The agreement overall aims to keep global temperatures from rising no more than 2 degrees Celsius (ideally 1.5... we are already up 1 degree) by way of reducing greenhouse gas emissions. The agreement is essentially an international treaty with almost 200 member countries who have pledged to take various steps to curb emissions in their respective countries. There are a million details within the Accord, but for the US the actions required include (among others) cutting emissions by 26% below 2005 levels by 2025, tightening fuel economy standards, and would also heavily rely on the "Clean Power Plan" to hit targets. Rejoining the Paris agreement is an important symbolic gesture for the Biden Administration, as one of the major focuses they will have is "putting climate at the center of domestic, national security, and policy" 

 

So those are the major points relating to the industry from Wednesday, and they are definitely items we will continue to follow and update on. It will certainly be interesting to watch how these unfold and shape the energy industry landscape over the coming four years. Stay tuned! 

 

 

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Topics: Keystone XL, climate change, clean power plan, Biden Administration, paris accord

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