Russia’s Targeting of Ukrainian Energy Infrastructure Shows Need to Lift Ban
Russia’s missile attack on Ukraine last Saturday hit vital energy infrastructure, underscoring the need for the Biden administration to lift its more than three-month-old ban on U.S. liquefied natural gas export permits.
What’s going on: “The [missile] attack targeted ‘the power grid and the gas transit system, particularly the gas infrastructure that ensures the security of deliveries to the EU,’” Ukrainian President Volodymyr Zelenskyy said (POLITICO Pro, subscription).
- “Russia has intensified its assaults against Ukrainian power stations in recent weeks, and its missiles are now also hitting gas storage facilities that were used by some EU companies last winter to prevent energy shortages.”
- The strikes also hit four thermal plants in Ukraine and injured a worker.
Why it’s important: “With Russia targeting energy supplies in Europe, it is critical that we lift the ban on LNG exports so the United States can fill any unexpected gaps,” said NAM Director of Energy and Resources Policy Michael Davin. “Lifting the moratorium is a national and energy security issue.”
What Americans want: People in the U.S. overwhelmingly support natural gas exports, a recent NAM poll found, with 87% of respondents saying the U.S. should continue to export the energy source.
Return to Broadband Rules Will Harm Manufacturing Economy
The Federal Communications Commission voted Thursday to restore Obama-era broadband regulations—a move that is outside the agency’s remit and will erode investment in telecom infrastructure, the NAM said.
What’s going on: “The commission voted along party lines to finalize a proposal first advanced in October to reinstate open internet rules adopted in 2015 and reestablish the commission’s broadband authority” (Reuters, subscription).
- The rules, repealed by the Trump administration in 2017, will reclassify broadband as a telecom service under a law originally passed in 1934. This change will subject 21st century high-speed internet to regulations designed for the era of the rotary phone.
- The Biden administration has been seeking a return to the 2015 regulations since 2021, when the president signed an executive order urging the FCC to reinstate them.
Why it’s important: The resuscitated regulations will have a significant and negative impact on the U.S. economy, as historical evidence shows.
- From 2011 to 2022, attempts to impose so-called “net neutrality” restrictions depressed telecom infrastructure investment by $8.1 billion each year, decreased employment by approximately 195,600 jobs and reduced gross domestic product by $145 billion annually (Phoenix Center).
Our view: “Ultimately, [the FCC]’s broadband regulations are a solution in search of a problem,” the NAM wrote in a social post. “The U.S. already has an open and fair internet. This is just the latest in a long line of decisions adding to the regulatory onslaught facing manufacturers in America.”
New Power Plant Rules Unfeasible Without Permitting Reform
Final rules released Thursday by the Environmental Protection Agency to reduce greenhouse gas emissions from traditional fuel-fired power plants are not achievable without permitting reform—and they pose a threat to U.S. national and economic security, the NAM said yesterday.
What’s going on: The new rules, part of President Biden’s pledge to create a carbon-free energy sector by 2035, mandate that:
- Existing coal-fired plants and new natural gas–fired facilities cut or capture 90% of their emissions by 2032;
- Coal-fired plants drastically reduce wastewater runoff and severely tighten the emissions standard for heavy metals; and
- Coal ash—including past deposits “placed in areas that were unregulated at the federal level until now”—be managed in storage ponds.
A first: “The power plant rule marks the first time the federal government has restricted carbon dioxide emissions from existing coal-fired power plants” (Associated Press).
- The new regulations—which face almost certain court challenges—set emissions caps that plant operators would be required to meet.
Targeting major energy sources: Natural gas generates approximately 43% of all U.S. electricity, while coal generates about 16% (AP).
Why else it’s problematic: While manufacturers appreciate that the EPA heeded the input of their industry and did not include existing gas plants in the new requirements, as written the final rules are unattainable because the administration and Congress have not undertaken much-needed, comprehensive permitting reform, according to NAM President and CEO Jay Timmons.
- “Congress and the president have not enacted permitting reform—making it impossible to achieve the EPA’s highly aspirational mandates,” Timmons said. What’s more, the final rules threaten “grid reliability because of the unrealistic timeline for power plants to adopt technologies within the next 10 years that have yet to even be proven at scale.”
- Pushing through yet another set of regulations in the absence of systemic reforms burdens an already overtaxed national electrical grid, jeopardizing U.S. security in a way that “literally could leave Americans in the dark and factories offline.”
What should be done: The EPA should partner with—not undermine—manufacturers “to achieve a more balanced regulatory framework to help reach our climate goals.”
Trade, Investment Policy Can Promote Supply Chain Resilience for Manufacturers
The NAM told the Office of the United States Trade Representative this week that it must use existing trade and investment tools to promote supply chain resilience for manufacturers in the U.S.
What’s going on: “Manufacturers and workers in the U.S. need USTR to undertake a proactive and competitive trade and investment policy that opens markets, eliminates barriers, enables the sourcing of necessary inputs and creates opportunities for inbound and outbound investment,” the NAM said Monday.
- The suggestions were in response to a USTR call for comment on “strategies that [will] advance U.S. supply chain resilience” (Federal Register).
What should be done: While manufacturers appreciate engagement with partners through frameworks such as the Indo-Pacific Economic Framework and the Americas Partnership for Economic Prosperity, the NAM encourages the government to “aggressively pursue ambitious agreements that include market access and the true removal of barriers to economic engagement with our partners.” The USTR can help manufacturers by:
- Adjusting or eliminating “current tariffs on manufacturers and ensur[ing] they are applied in such a way that creates a competitive environment for manufacturing in the U.S.”;
- “Negotiating more high-quality, modernized trade agreements with foreign partners” to remove trade barriers and address discriminatory measures; and
- Enforcing on-the-books trade agreements “to ensure that our trading partners are playing by the rules.”
Why it’s important: The aforementioned actions (and others) by the USTR would create “a competitive environment for manufacturers in the U.S. to succeed,” the NAM said.
West Coast Ports See Cargo Growth
Two major U.S. West Coast ports saw continued cargo growth in March, coinciding with supply chain fallout from the Francis Scott Key Bridge collapse in Baltimore (Los Angeles Daily News).
What’s going on: The Port of Los Angeles “processed 743,000 twenty-foot equivalent units (TEUs, the industry’s standard measurement for cargo units) last month—up 19% from March 2023. It was the port’s eighth-consecutive month of year-over-year growth.”
- The Port of Long Beach last month moved 654,082 TEUs, a cargo increase of 8.3% from March 2023. Its imports rose 8.4% compared to last year.
- The ports anticipate April—traditionally “slack season” for the entry points—being “another busy month,” Port of Los Angeles Executive Director Gene Seroka said.
Why it’s important: The growth is reflective of “resilient consumer spending, [which] is key to our nation’s growth,” Seroka continued. “U.S. economic indicators remain positive even with some uncertainty regarding interest rates and the latest inflation data.”
Shoring up systems: The Port of Los Angeles is working to ensure the safety of its systems following the March 26 Key Bridge collapse and an executive order by President Biden that increases cybersecurity regulations at all U.S. ports.
Biden Administration Limits Arctic Drilling
The Biden administration has placed new restrictions on traditional energy exploration and production in large portions of Alaska’s Arctic (Law360, subscription).
What’s going on: A rule handed down last Friday by the U.S. Department of the Interior’s Bureau of Land Management puts “[n]ew limits on fossil fuel production in the National Petroleum Reserve-Alaska,” a 22.8 million–acre site that holds large reserves of oil and natural gas.
- The rule limits future oil-and-gas leases and industrial development and “codifies a ban on new leasing across a further 10.6 million acres of the reserve, about 40% of its total area,” according to the agency.
- The regulation also rules out construction of a road proposed by the Alaska Industrial Development and Export Authority to allow miners to reach mining sites in Alaska’s north-central region.
Why it’s problematic: The move—which the administration said is intended to protect wildlife habitats and “honor the culture [and] history” of Alaska Natives—erodes U.S. energy security and independence while financially harming local indigenous people.
- “The final rule ‘will hurt the very residents the federal government purports to help by rolling back years of progress, impoverishing our communities, and imperiling our Iñupiaq culture,’ Voice of the Arctic Iñupiat President Nagruk Harcharek said.”
- The NPR-A contains approximately 8.7 billion barrels of oil and 25 trillion cubic feet of natural gas resources, according to the U.S. Geological Survey.
The last word: “The rich resources of the Arctic should be part of a responsible, all-of-the-above approach to U.S. energy security and independence,” said NAM Director of Energy and Resources Policy Michael Davin. “This rule is a step backward on the path to achieving a sustainable energy future.”
Durable Goods Orders Rise
New orders for durable goods in the U.S. increased more than expected last month (Business Insider and U.S. Census Bureau). Shipments were virtually unchanged.
What’s going on: Orders for manufactured durable goods rose 2.6% in March, to $283.4 billion.
- The rise followed a downwardly revised 0.7% increase in February.
- Shipments of durable goods slipped slightly, down $0.1 billion, but remained essentially flat at $282.4 billion following a 1.2% increase in February.
The details: Excluding transportation, new orders increased 0.2%, and excluding defense, new orders rose 2.3%.
- Transportation equipment drove the slight decrease in shipments of durable goods.
Inventories and unfilled orders: Stocks of manufactured durable goods were nearly unchanged at $527.9 billion, a decrease of less than $0.1 billion from February. This follows seven consecutive monthly increases.
- Unfilled orders for manufactured durable goods rose 0.4% in March to $1,397.2 billion, following a decrease in February.
Norfolk Southern Pivots to Serve Customers After Bridge Collapse
It’s been nearly a month since a cargo ship hit the Francis Scott Key Bridge in Baltimore, Maryland, resulting in six deaths, the destruction of the bridge and the shuttering of an important East Coast port.
- But thanks to hard behind-the-scenes work by Norfolk Southern railway since the accident, customers aren’t feeling the supply chain pinch the way they otherwise would.
What happened: NAM President and CEO Jay Timmons, along with an NAM delegation, visited the Port of Baltimore last Friday to tour Norfolk Southern’s operations there. The port is the largest for vehicle shipping in the U.S. and was the 17th biggest in the nation by total tonnage in 2021.
- On March 26, the day the Singapore-flagged Dali cargo vessel hit the Key Bridge, Norfolk Southern—which moves 7 million carloads of cargo annually—began strategizing ways to support increased shipping volumes on behalf of its customers. And it’s been doing that ever since.
- “We often say the weight of the world moves on rail … and it’s true,” Norfolk Southern Chief Marketing Officer and NAM board member Ed Elkins told the NAM during the site visit. “Our ability to serve the market through temporary disruption is really a demonstration of our strategy in action, where we leverage the experience of our railroaders and the strength of our franchise to find a Better Way to provide safe, reliable service.”
Quick adaptation: Norfolk Southern’s strategy for adapting to the closure of Baltimore’s port has included:
- The launch early this month of a dedicated new service to move freight between the ports of New York and New Jersey and Baltimore’s Seagirt Marine Terminal;
- The facilitation by the railway’s Triple Crown Services Inc.—a door-to-door East Coast truckload transit network—of a dedicated intermodal service for cargo owners who require door-to-door service;
- The use of “Go Teams,” groups of employees ready for rapid response service and created by Norfolk Southern during the pandemic; and
- Regional collaboration with the Port of Virginia to leverage service points including the Virginia Inland Port and others.
Reopening: The Port of Baltimore could be back to full functionality by the end of May, the U.S. Army Corps of Engineers said earlier this month.
- “The NAM will stay in close coordination with our members regarding supply chain impacts stemming from the collapse of the Francis Scott Key Bridge,” said NAM Director of Transportation, Infrastructure and Labor Policy Max Hyman. “We also remain engaged with leading federal officials on recovery efforts and will continue to support critical infrastructure projects such as the Port of Baltimore.”
Granholm: LNG Export Permit Freeze “a Study”
Energy Secretary Jennifer Granholm called the Biden administration’s recent moratorium on liquefied natural gas export permits “a pause for a study” at a Senate Energy and Natural Resources Committee hearing Tuesday, according to POLITICO Pro (subscription).
Committee Chairman Sen. Joe Manchin (D-WV) questioned several recent energy-related moves by the Biden administration.
What’s going on: “It is a pause for a study. You don’t need to hype it out beyond what it is,” Granholm told the committee on Tuesday. “It is a pause to get data.”
- The administration has received bipartisan criticism for the freeze of LNG export permits since announcing the move in January. NAM President and CEO Jay Timmons said the pause “undercut[s] President Biden’s own stated goals” and “weakens our country while giving Russia an upper hand.”
An examination of prices: Granholm told the committee the pause “was needed to examine prices and market demand since the last time a study was conducted.”
- She said the study will take into account foreign nations’ emissions “that may be linked to the absence of U.S. natural gas shipments.”
45V guidance: Sen. Manchin asked Granholm about proposed guidance on the Inflation Reduction Act’s first tax credit, known as the 45V. In a news release from the committee, Sen. Manchin said the proposed guidance, “if implemented … would jeopardize the viability of the industry before it even has a chance to get off the ground.”
- Sen. Manchin mentioned a recent letter to the administration from all seven “hydrogen hubs”—locations designated late last year by the administration to scale up the nation’s clean hydrogen production—saying the centers would “no longer be economically viable” without revision to the 45V proposed guidance.
- “Do you think we should heed the warning of [the Department of Energy]’s own seven hubs, and do you have any insight into what might be changed?” he asked.
- Granholm responded that the administration has “gotten over 30,000 responses, and they are working through those responses.”
- She added, according to POLITICO Pro, “The bottom line is clearly we want the hubs to succeed.”
Our take: “No matter what you call it, the administration’s pause on LNG export permits runs counter to the wishes of the American people and the interests of the United States and our allies,” said NAM Director of Energy and Resources Policy Michael Davin.
- “According to a recent NAM survey, 87% of Americans believe the U.S. should continue to export natural gas. The administration should listen.”
Biden Calls for Tax Hikes in Hometown Speech
President Biden called for tax increases during a visit to his hometown of Scranton, Pennsylvania, on Tuesday, the Associated Press reports.
What’s going on: “Biden used Scranton, a city of roughly 75,000 people, as the backdrop to argue that getting rich in America is fine, but should come with heftier tax bills.”
What he said: President Biden—who has proposed a 25% minimum “billionaires tax”—used the bulk of his speech to call for tax hikes.
- “The president said decades of Republicans’ policies that cut taxes for the wealthy with the idea of stimulating the economy ‘failed America.’”
- President Biden has said raising taxes on the wealthiest Americans is “how we invest in the country.”
However … The Tax Cuts and Jobs Act of 2017 was “rocket fuel” for manufacturing, NAM President and CEO Jay Timmons said during his 2024 State of Manufacturing Address in February.
- In fact, as we discuss in another story in this edition of Input, the expiration of three pro-growth tax provisions from that law has harmed manufacturers throughout the U.S. And more tax hikes are scheduled to take effect at the end of 2025.
- It is critical to a healthy manufacturing industry and U.S. economy in general that expired, pro-growth provisions be reinstated—and that Congress act to forestall further tax increases next year.
The final say: “[T]he path is clear,” Timmons said in his February address. “No new taxes on manufacturers.”