Odd bedfellows fight Trump bid to boost coal, nuclear energy

Associated Press

WASHINGTON

The Trump administration says coal is back and nuclear energy is cool. Not at the expense of natural gas, wind and solar, insists an unusual coalition of business and environmental groups.

Dow Chemical, Koch Industries and U.S. Steel Corp. are standing with environmentalists in opposing an Energy Department plan that would reward nuclear and coal-fired power plants for adding reliability to the nation’s power grid and are pressuring the administration to shift course.

Energy Secretary Rick Perry says the plan is needed to help prevent widespread outages such as those caused by Hurricanes Harvey, Irma and Maria and a 2014 “polar vortex” in the Eastern and Central U.S. The plan aims to reverse a steady tide of retirements of coal and nuclear plants, which have lost market share as natural gas and renewable energy flourish.

“The continued loss of baseload generation ... such as coal and nuclear must be stopped,” Perry wrote in a Sept. 28 letter urging the Federal Energy Regulatory Commission to adopt the new rule. “These generation resources are necessary to maintain the resiliency of the electric grid” amid sharp shifts in the U.S. energy market.

Perry’s plan coincides with President Donald Trump’s vow to achieve U.S. “energy dominance” while ending what he and other Republicans call a “war on coal” waged by the Obama administration. Perry, who has said he wants to “make nuclear energy cool again,” is certain to face questions about the plan and the opposition at a congressional hearing today.

The plan would compensate power plant owners that maintain a 90-day fuel supply protected against the elements. Critics say it could result in subsidies worth billions of dollars.

Meanwhile, in Middletown, Pa., Trump pitched his tax plan as a boost for truckers at an event, saying, “America first means putting American truckers first.”

Trump appeared before about a thousand cheering people at an airplane hangar dramatically draped with American flags. Two big rigs were in the background.

“It will be rocket fuel for our economy,” Trump said of a plan that would dramatically cut corporate tax rates from 35 percent to 20 percent, reduce the number of personal income tax brackets and boost the standard deduction.

Trump said a cut to business taxes would help truckers because there will be “more products to deliver and more contracts to fill.” He also said his plan would benefit middle-class families by lowering rates, creating new jobs and making it easier for business owners to pass companies on to their children.

“So many people have come up to me and said give it to the middle class, give it to people who need it,” Trump said.

FIGHT TO CUT TAXES

Trump is diving back into the tax fight after weeks in which his attention has shifted to rapidly emerging crises — including the mass shooting in Las Vegas and the hurricane recovery effort in Puerto Rico — as well as dramas of his own making, such as his escalating feud with Sen. Bob Corker, R-Tenn., and public tension with Secretary of State Rex Tillerson.

Taxes are the chief legislative priority for Republicans hungry for a major legislative achievement. With the 2018 campaign year looming, GOP lawmakers want something to show for their time as the majority party, and tax legislation remains their best hope.

Trump has left it up to Congress to fill in many specifics of his plan, which omits details such as the income levels for his new tax brackets. The outreach to truckers in Pennsylvania is an attempt to give a blue-collar appeal to a framework that outside tax analysts say would largely favor the wealthy.

About two-thirds of trucking firms are structured as small businesses in which the profits double as the owners’ income, what’s commonly known as “pass-through” companies, said Chris Spear, president of the American Trucking Associations.

The framework would cut the tax rate for these firms to 25 percent from 39.6 percent.

“It’s pretty critical for our membership,” Spear said.

But the liberal Center on Budget and Policy Priorities said few truckers would benefit from this preferential rate because the majority of truck drivers are employees rather than pass-through business owners, based on its analysis of Census data.

Republicans in Congress aren’t solidly behind Trump, with some from high-tax states balking because the framework calls for eliminating the federal deduction for state and local taxes. That deduction is claimed by an estimated 44 million people and costs the government an estimated $1.3 trillion in lost revenue over 10 years.

Fractious Republican lawmakers, especially those from New York, New Jersey and California, are wary of the potential financial hit to their constituents. They contend repealing the deduction would subject people to being taxed twice.

“They need our votes” on the tax plan, said Rep. Chris Collins, R-N.Y., a member of the group.

Discussions with House leaders on a possible compromise took place last week but are on hold, Collins and other lawmakers in the group said Wednesday. They said they were confident of a compromise.

Trump highlighted the tax plan’s provisions aimed at encouraging international companies to bring back, or repatriate, cash that they’ve kept overseas. All told, there’s more than $1 trillion in cash held abroad by S&P 500 companies, according to Deutsche Bank.

“We will totally eliminate the penalty on returning future earnings back to the United States and we will impose a one-time low tax on money currently parked overseas so it can be brought back home to America, where it belongs and where it can do its job,” he said. He added that his Council of Economic Advisers estimates that the change, along with a lower tax rate, “would likely give the typical American household a $4,000 pay raise.”

“Could be a lot more than that, too,” he said.

The $4,000 in additional income estimate comes from a back of the envelope calculation by White House economics adviser Kevin Hassett based on companies returning 71 percent of their foreign profits over the course of eight years.

This estimate appears to assume that the returned profits would flow to workers in the form of higher wages. But many economists say much of it would likely be returned to investors in the form of stock dividends and buybacks.

ENERGY MATTERS

Environmental groups say the plan would boost dirty fuels and harm consumers, while the energy industry warns about interference in the free market and manufacturers complain about higher energy prices that could be passed on to consumers.

“Rick Perry is trying to slam through an outrageous bailout of the coal and nuclear industries on the backs of American consumers,” said Kit Kennedy, an energy policy expert for the Natural Resources Defense Council. “This radical proposal would lead to higher energy bills for consumers and businesses, as well as dirtier air and increased health problems.”

A coalition of industry groups, ranging from the American Council on Renewable Energy to the American Petroleum Institute and the Natural Gas Supply Association, also blasted the plan, saying it could harm “entire industries and their tens of thousands workers.”

Amy Farrell, senior vice president of the American Wind Energy Association, said the proposal could “upend competitive markets that save consumers billions of dollars a year.”

Marty Durbin, executive vice president of the petroleum institute, the top lobbying group for the oil and gas industry, said officials “need to be careful that government doesn’t put its thumb on the scale” in energy markets. “It’s better to let markets choose, which is what the United States is seeing with the growth of natural gas” as the leading U.S. electricity source, Durbin said.

The Industrial Energy Consumers of America, a trade group that represents Dow, Koch Industries and other manufacturing giants, is among those lobbying against the plan. In a letter to Congress, the group called the proposal “anti-competitive” and said it could distort or “destroy competitive wholesale electricity markets, increase the price of electricity to all consumers” and harm U.S. manufacturing.

The manufacturers and other critics say there is no evidence of a threat to the grid’s day-to-day reliability that would justify the emergency action Perry is seeking.

Indeed, in a report commissioned by Perry and delivered in August, the Energy Department said “reliability is adequate today despite the retirement of 11 percent of the generating capacity available in 2002, as significant additions from natural gas, wind, and solar have come online since then.”

Gerry Cauley, CEO of the North American Electric Reliability Corp., an international regulatory authority, said at a conference in June that “the state of reliability in North America remains strong, and the trend line shows continuing improvement year over year.”

Even so, coal and nuclear groups hailed the plan. National Mining Association President and CEO Hal Quinn called Perry’s action “a long-overdue and necessary step to address the vulnerability of America’s energy grid,” while Maria Korsnick, president and CEO of the Nuclear Energy Institute, said disruptions caused by hurricanes and other extreme weather events show that “the urgency to act in support of the resiliency of the electric grid has never been clearer.”

The Energy Department seeks final action by mid-December, although industry groups and some members of Congress have pushed for a delay.

Sen. Maria Cantwell, D-Wash., said the energy commission should reject Perry’s plan. “Secretary Perry has embraced an obsolete view of the grid (that) would bail out coal and nuclear power plants at the expense everyone else,” she said.