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TRUMP’S TRADE WAR IS ‘BAD NEWS’ FOR U.S. ENERGY: President Trump’s trade agenda could be putting the U.S. energy economy on the road to ruin from the risk of an all-out trade war with China and Europe.

Two ways it hits energy producers: The tariffs on steel and aluminum that Trump put in place “hits energy producers in two ways,” said Scott Lincicome, an international trade attorney at the Libertarian Cato Institute.

First ‘hit’: “It denies them critical things they need to produce energy,” he said. Whether it’s drill bits they import from overseas, or heavier steel products for pipelines, “Energy producers need a lot of steel and aluminum to extract the various forms of fossil fuels,” he said.

The second ‘hit’: The tariffs create “new barriers in the energy market, hurting energy producers,” said Lincicome. The barriers are created in the aftermath of Trump’s tariffs, when countries retaliate against the United States by raising the cost of American produced energy exports.

Retaliation: “And the retaliation is directly targeting commodities,” he said. Energy companies are “getting hit in multiple places,” which “is really difficult when you’re dealing with an industry trading a globally-priced commodity.”

Read more about the impacts of Trump’s trade policies on energy in today’s Washington Examiner magazine.

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TRUMP TO PROPOSE REVOKING CALIFORNIA’S FUEL EMISSIONS AUTHORITY: The Trump administration this week is expected to propose revoking the exception that allows California to set its own fuel emissions standards as part of its weakening of Obama-era clean car rules, according to a report Monday.

The Environmental Protection Agency and National Highway Traffic Safety Administration will introduce its proposal to roll back the Obama administration’s strict fuel-efficiency rules for model years 2022-2025 some time this week, likely Wednesday or Thursday, a source familiar with the plans told the Washington Examiner.

As part of that, the agencies will look to challenge California over a waiver it has under the Clean Air Act that allows it to set its own, stricter air pollution rules, Bloomberg reported.

Go your own way: California is leading a coalition of states suing the Trump administration for rejecting the Obama standards.

Under the Clean Air Act, California has been granted a waiver to fight severe air pollution problems caused by smog. Whereas normally federal regulations of interstate commerce preempt state rules, this waiver allows the Golden State to set its own fuel efficiency regulations that can be tougher than the national standards. And other states are permitted to follow California’s standards instead of the national rules. The states that do so account for more than one-third of the U.S. auto market.

Trump’s argument: The Trump administration will likely argue that the waiver does not give California authority to regulate carbon dioxide emitted from cars, a problem that is not unique to the state like smog is.

Automaker fear: Automakers want California and the Trump administration to agree to a common set of fuel standards, and EPA officials have repeatedly said they want the same. If the administration proposes weaker standards, and stops California from implementing tougher ones, it will undoubtedly provoke a legal fight.

ENERGY DEPARTMENT MULLS COMMERCIAL SALE OF OIL RESERVE: A senior Energy Department official says the agency supports selling off some of the sites that house the strategic oil reserve, but that there are “technical challenges” it has to first work out.

Steven Winberg, the head of Department of Energy fossil energy office, told the House Energy and Commerce Committee Tuesday morning that, “yes,” the agency is supportive of selling off at least one of the sites.

Study being conducted: He said the agency is in the middle of completing a study on how to do that, and once that is completed will be in a better place to discuss moving forward.

Meeting obligations: “The first requirement we have under SPRO is to make sure that we are meeting our domestic requirements as well as our [International Energy Agency] requirements” that govern the use of the strategic reserve, Winberg said.

History of reserve: The reserve is meant to supply the U.S. economy if a there is a supply disruption, such as an oil embargo, as was common when the reserve was created 40 years ago. The U.S. also has to coordinate the reserve with other countries.

Difficult to sell as is: But he also pointed out that selling the oil reserve sites, which make use of naturally-occuring salt caverns, is more difficult than one might think.

If a commercial oil company were to buy one of the sites, it would find out that in its current configuration the sites are prone to collapse once emptied, he said. This poses a problem, since a commercial user would be discharging and filling the site on a regular basis.

Reduction target: The Energy Department is looking to reduce the strategic oil reserve by 300 million barrels, and the study it is doing will inform the agency how best to do that.

SENATE ENERGY COMMITTEE ADVANCES FOUR TRUMP NOMINEES: The Senate Energy and Natural Resources Committee on Tuesday morning advanced the nominations of four Trump administration Energy Department officials.

Who’s who: The committee approved by voice vote Teri Donaldson to be Energy Department inspector general; Christopher Fall as director of the Office of Science; and Karen Evans to be assistant secretary for Cybersecurity, Energy Security, and Emergency Response.

Daniel Simmons, Trump’s nominee to assistant secretary for Energy Efficiency and Renewable Energy, passed by a slimmer 14-9 margin.

Simmons, who has led the renewable energy division on a temporary basis since last year, previously pushed to eliminate funding for the office when he worked in the private sector as a fossil fuel lobbyist.

What’s next: The nominations now go to the Senate floor for full consideration.

US CAN’T PRODUCE ENOUGH OIL TO LOWER PRICES, IEA OFFICIAL SAYS: An official of the International Energy Agency said Tuesday morning that the U.S. can’t increase oil production significantly enough to lower prices this year, and will have to depend on the OPEC cartel to fulfill its pledge to boost output.

Pipeline problem: Keisuke Sadamori, IEA’s energy markets and security director, testified to the Senate Energy and Natural Resources Committee that the U.S. can’t be expected to supply additional oil this year to the global market than it is already producing because of pipeline constraints.

New pipelines in Texas, for example, aren’t expected to come online until 2019.

“Pipeline takeaway capacity is preventing further growth in the short term,” Sadamori said.

Can’t ‘drill out of this problem’: Sen. Maria Cantwell of Washington, the top Democrat of the committee, expressed concern that the shale boom has not weaned the U.S.’ reliance on OPEC to determine oil and gas prices based on how much member countries produce.

She said the “only effective way” to reduce fuel costs is to reduce dependence on oil by investing in electric vehicles and keeping tough fuel-efficiency standards that Trump wants to weaken.

“Why is record level U.S. production not providing any relief at the pump?” Cantwell said, complaining that gasoline prices are more than 50 cents higher than they were a year ago. “It is clear that we cannot drill our way out of this problem.”

DEFENSE BILL SAYS GOODBYE TO SAGE-GROUSE RIDER: A major defense spending bill scrapped a contentious rider over endangered species protections for the chicken-sized sage grouse bird. Lawmakers in these negotiations between the House and Senate decided to drop the sage grouse rider, which would have granted the military a way around federal protections for the bird.

Bye-bye beetle: The rider would have prevented the bird from going on the endangered species list for a decade. Another endangered species rider for the burying beetle was also dropped, according to aides.

EPA, INTERIOR SPENDING BILL HITS SENATE FLOOR: The EPA and Interior Department spending package is now being debated on the Senate floor, paving the way for its passage before August.

The House passed its version of the bill last week, rejecting most of Trump’s program cuts, and funding EPA well above what the White House wanted.

‘Rejects’ cuts: New Mexico Sen. Tom Udall, the top Democrat on the Appropriations Subcommittee on Interior, Environment, and Related Agencies, said the Senate’s version of the bill “rejects” most of President Trump’s drastic cuts to programs meant to safeguard environmental and public lands.

Bipartisan: Udall crafted the bill with Sen. Lisa Murkowski of Alaska, the chairwoman of the appropriations subcommittee.

Safeguards: “It is Congress’ responsibility to safeguard the environment, protect our air and water, fulfill our trust and treaty responsibilities, and conserve public lands the federal government holds on behalf of the American people,” Udall said on the floor Monday evening. “These responsibilities require a reliable stream of resources to carry out,” he said. “This Senate bill accomplishes those goals.”

Land and water: The bill provides $425 million for the Land and Water Conservation Fund, funding for which has been a top Democratic priority.

WHEELER TO MAKE NICE WITH BIOFUEL PRODUCERS, SORGHUM FARMERS: EPA Acting Administrator Andrew Wheeler will join with members of Congress Tuesday afternoon to open up a new avenue in the production of biofuels from the corn-like crop sorghum.

Feet dragging: Biofuel proponents and farmers have argued that former EPA chief Scott Pruitt, who resigned earlier this month over a slew of scandals, dragged his feet in approving the crop for production of biofuels under the Renewable Fuel Standard program.

Eight months later: The agency published its intent to allow sorghum to be used as a feedstock under the RFS in December, but final approval of the rule has not been made.

Farmers’ needs: Senators and congressmen had called on Pruitt to approve sorghum, as farmers face low crop prices and are looking for new markets for their crops.  

A notice from the EPA said Wheeler will make the announcement from agency headquarters at 5 p.m. The event will be streamed at https://www.epa.gov/live.

MOODY’S: RISING OIL PRICES GOOD FOR FIVE LARGEST OIL COMPANIES: Credit ratings giant Moody’s says rising oil prices are not a bad thing when it comes to five largest oil companies.

The big five: ExxonMobil, Chevron, Royal Dutch Shell, Total and BP “are set to reap the benefits of a partial recovery in oil prices,” the financial giant said in a report. Oil prices have recovered over the last year from abysmal lows that cut profits in half for the oil giants. But that is all changing, says Moody’s.

Belt tightening pays off: In the time of low prices, the big five “cut costs, slashed capital spending and divested assets, positioning their businesses to prosper in a world of range-bound commodity prices,” according to the report.

Five percent for the big five: This meant the companies will be spending more on improving their infrastructure. Moody’s projects a 5 percent annual increase in capital spending by the companies in 2019.

RUSSIAN HACKERS BROKE INTO U.S. UTILITIES LAST YEAR, COULD HAVE CAUSED BLACKOUTS: Russian hackers were able to access the control rooms of U.S. electric utilities last year, homeland security officials said Monday.

That access could have enabled the Russians to turn the power off. The officials, the Wall Street Journal reported, say the Russian hacking is continuing.

Method to madness: The hackers work for a state-sponsored group called Dragonfly, or Energetic Bear. They broke into networks owned by utilities by first accessing the networks of vendors who worked with the power companies, the Journal said.

“They got to the point where they could have thrown switches” and disrupted power flows, said Jonathan Homer, chief of industrial-control-system analysis for DHS.

Trump’s response: The Trump administration in March for the first time publicly accused Russia of targeting the U.S. power grid with cyberattacks.

In response, the Energy Department announced plans to create a new cybersecurity office, known as the the Office of Cybersecurity, Energy Security and Emergency Response.

IRAN PLANS TO RETALIATE IF TRUMP CUTS OFF OIL EXPORTS: Iran plans to retaliate if the Trump administration eliminates the country’s oil exports with sanctions, the foreign ministry said Tuesday.

Iran’s armed forces chief, meanwhile, said U.S. threats to cut off oil would prompt an “unimaginable and regrettable” response.

‘Equal countermeasures’: “If America wants to take a serious step in this direction it will definitely be met with a reaction and equal countermeasures from Iran,” foreign ministry spokesman Bahram Qassemi said in comments broadcast by the state news agency IRNA.

Zero-tolerance: The U.S. expects all countries to cut oil imports from Iran to “zero” by November or risk sanctions cutting their access to U.S. markets and financial institutions. It will consider exemptions as a last resort on a case-by-case basis.

Words are weapons: Iran’s threats of retaliation come after Trump Sunday night fired off a furious tweet directed at Iranian President Hassan Rouhani:

“To Iranian President Rouhani: NEVER, EVER THREATEN THE UNITED STATES AGAIN OR YOU WILL SUFFER CONSEQUENCES THE LIKES OF WHICH FEW THROUGHOUT HISTORY HAVE EVER SUFFERED BEFORE. WE ARE NO LONGER A COUNTRY THAT WILL STAND FOR YOUR DEMENTED WORDS OF VIOLENCE & DEATH. BE CAUTIOUS!”

REPUBLICAN REP. BILL SHUSTER INTRODUCES BILL TO RAISE GAS TAX: House Transportation Committee Chairman Bill Shuster, R-Pa., introduced legislation Monday night to raise the federal gas tax in the short-term before eliminating the tax in a decade.

The bill would increase the federal tax on gasoline and diesel by 15 cents and 20 cents per gallon, respectively, phased in over three years and then indexed to inflation, before eliminating fuel taxes in 2028.

Status quo: The tax, which has not been increased in 25 years, is currently 18.4 cents for gasoline and 24.4 cents for diesel.

The federal government does not have a long-term funding source for transportation and has been reluctant to increase user fees such as the gas tax.

New funding: But raising the gas tax would be a way to pad the funding of the Highway Trust Fund, which spreads money to states for infrastructure spending.

RUNDOWN

Wall Street Journal Tariff dispute threatens China’s thirst for U.S. oil

Bloomberg Trump’s war of words with Iran shines spotlight on vital oil route

Washington Post A toxic town, a search for answers

Reuters Cost to insure Tesla’s debt rises on growing default fears

Wall Street Journal Silicon Valley pitches data services, A.I. to a wary oil industry