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Congressional Update: Year-End Spending, 301 Tariffs, Oklahoma Spotlight

YEAR-END SPENDING
The U.S. House and Senate are currently working through the final year-end spending bill, which covers a quarter of the government’s operations. The rest of the operations passed earlier this year.

At issue is $5 billion in funding for the construction of a border wall that is being requested by President Trump. Absent a deal in the coming days, it is very possible that a partial government shutdown will happen as congressional leaders try and come up with a deal. Indications are that the White House may soon back down from the border wall demand, and a deal could be reached soon.

In the House of Representatives, House Ways and Means Chairman Kevin Brady (R-Texas) has added a pair of temporary tax provisions to the latest version of his year-end tax bill. House Republicans would permanently extend a credit for railroad track maintenance, and extend and then phase out an incentive for biodiesel and renewable diesel fuel in the new legislation.

ADMINISTRATION ANNOUNCES DELAY FOR 301 TARIFFS
On December 14, the United States Trade Representative (USTR) announced that due to ongoing discussions with China, the 25% increase on List 3 products covered under Section 301 would be delayed until at least March 2, 2019. Duties on items on USTR’s List 3 were originally scheduled to increase from 10% to 25% on January 1, 2019. The delay, however, has no effect on duties already in place for items on USTR’s Lists 1 and 2.

The Trump Administration’s Lists 1 and 2 tariffs under Section 232 of the Trade Expansion Act of 1962 and Section 301 of the Trade Act of 1974 have already caused significant harm to the oilfield services and equipment sector’s supply chain and innovation.

Implemented progressively throughout the first half of 2018, the Section 232 tariffs target steel and aluminum with 25% and 10% duties, respectively. Section 232 was designed during the Cold War to facilitate the investigation of trade practices that threaten national security. Now, its measures are being applied to allies Canada, Mexico and the European Union, in addition to China and other trading partners. All have retaliated in-kind.

Historically, tariffs have been proven to reduce economic competitiveness and increase manufacturing costs. PESA will continue to advocate for an alternative strategy to rectify trade imbalances, one that combines stakeholder input with forward-thinking analysis to secure our industry’s future. PESA staff and Member Company representatives will be in the nation’s capital in Februaryto meet with Members of Congress and Administration officials and share with them the negative impact the tariffs have had on the sector. If you would like to add your company’s voice, register for the meeting today.

STATE UPDATE: OKLAHOMA

  • Oklahoma Governor-elect Kevin Stitt has selected Kenneth Wagner to be his Secretary of Energy and Environment. Wagner, a senior advisor to the former EPA Administrator Scott Pruitt, attended law school at the University of Tulsa, and was owner and managing partner of Latham, Wagner, Steele & Lehman, P.C. prior to joining EPA. Energy leaders praise the choice touting Wagner’s experience with regulations and energy production.
  • Industry’s use of temporary water lines to transport produced, treated water to completion locations are still an issue in Kingfisher County. The Oklahoma Supreme Court ruled in mid-November that county commissions could not regulate what is carried through the lines. Local officials don’t want produced water in lines along county rights of way for fear of spills and resulting contamination. Kingfisher County officials are still not issuing permits and have asked the Oklahoma Supreme Court to reconsider the order that gives the Oklahoma Corporation Commission exclusive authority over the industry.
  • The Oklahoma Court of Appeals ruled on November 16 that a worker was eligible for workers’ compensation benefits even though he failed a drug test after a workplace accident. The worker sustained a hand injury due to another worker’s negligence, and the victim had marijuana in his system. The court ruled the accident wasn’t his fault, and he should receive work comp benefits even though he failed his drug test. This ruling sets a precedent that could affect oilfield companies that historically have denied workers’ compensation benefits to anyone failing a drug test. As states with a high industry presence legalize marijuana (Colorado) and medical marijuana (Oklahoma), the sector will need to have discussions about the laws and the safety of their employees.