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This column was difficult to write predicated on what has transpired since the new administration has taken charge. Since his inauguration, President Joe Biden’s administration has moved swiftly and aggressively to shackle our economy's energy sector.
The third month of the first quarter is here, ending a quarter that dramatically impacted the energy sector. The oil and gas sector, in particular, has been affected severely by the cancellation of the Keystone XL Pipeline project.
The outcome of legislation put forth to revoke the cancellation is unknown at the time of this writing.
Revocation of the Keystone permit through Executive Order 13990 has dealt a devastating blow to our economy, eliminating more than 11,000 well-paying jobs and taking $2.2 billion in payroll out of workers’ pockets.
That is the immediate impact; however, those workers' payrolls are expanded exponentially through the economy, impacting the industries that provide goods and services to these workers. Grocery stores, hospitality, restaurants, bars, automobile services, doctors, lawyers, education, local taxes and more are negatively impacted at a time when relief is vitally needed.
Canada will still be pumping oil, and it will be going someplace. It’s too valuable not to, and we will still need oil. It’s going to China or other countries that do not have the United States' environmental regulations to process the oil responsibly. The United States has specific locations where they have the know-how to process heavy crude oil.
The pipeline is the most efficient and environmentally safe way to move the oil versus using rail cars. Now the oil will probably go by rail car to other counties, some hostile to the United States.
In addition to the XL Pipeline permit's revocation, the Biden administration placed a moratorium on new drilling permits on federal land. This is a setback for smaller drillers; however, the larger companies have secured long-term leases and will continue operations
Biden’s lengthy executive order required the U.S. Environmental Protection Agency and the Department of the Interior to take various steps to reverse President Donald Trump’s initiatives. At the same time, it moved to restore or enhance President Obama’s initiatives, which include many elements:
• Controlling methane emissions from oil and gas exploration and production sectors
• The Interior Dept. must place a moratorium on leasing program activities on the Arctic National Wildlife Refuge's coastal plain
• Reimpose Obama-era restrictions lifted by President Trump for much of the U.S. Arctic waters and the Bearing Sea.
These are just a few of the executive order elements that have until mid-year to be executed.
Additional regulations are expected soon as President Biden continues to govern via executive order. The impact on the energy sector will be assessed as it unfolds in future columns.
Texas Strikes Back
Texas Gov. Greg Abbott issued an executive order relating to the protection of Texas’s energy industry from federal overreach.
Under the order, Abbott directed every state agency to use all lawful powers and tools at their disposal to challenge any federal action that “threatens the continued strength, vitality and independence of the energy industry.”
President Biden signaled “extreme hostility” toward the energy industry by rejoining the Paris Agreement, a “job-killing” agreement, and the signing of Executive Order 13990 to revoke the Keystone XL pipeline permit.
The governor also outlined that the executive order directed the EPA to rescind its 2020 methane rule as an “apparent prelude to burdensome new regulation of the energy industry’s emissions in Texas and in sister states.” He warned that more and greater threats to the Texas energy sector seem imminent as President Biden “embraces Green New Deal policies.”
With all that said, the U.S. economy is expected to expand more rapidly in 2021 than officials had projected in July 2020; it is now projected to reach pre-pandemic peak by mid-2021. The Congressional Budget Office expects to see the gross domestic product grow 3.7 percent in the fourth quarter of 2021. The CBO also projects the jobless rate will fall to 5.3 percent by the end of this year.
PVF Prices on the Rise
As the U.S. economy expands and the world economies rebound from the COVID-19 pandemic, coupled with increases in costs due to additional regulations on the energy sector, the PVF industry is poised for price escalation.
A quicker than expected recovery in U.S. manufacturing is resulting in supply disruptions and higher costs for materials used in everything from kitchen cabinets to washing machines and automobiles, as well as oil and gas production and distribution.
As a result, prices for industrial commodities used in these areas have climbed to their highest levels in years. Increases in forged-steel flange prices and various commodity steel products have already been posted. Increases in seamless carbon-steel pipe are anticipated shortly.
Close contact with your suppliers regarding both price and availability is strongly suggested so as not to be caught off guard regarding the status of the carbon-steel buttwelding fitting and forged-steel flange markets.
The Biden administration is also addressing the Buy America Act to increase the use of domestic manufactured materials in government projects. I, therefore, encourage the sourcing of domestic welding fittings, forged-steel flanges, special forging, pipe and related PVF products for quality and liability issues, along with compliance with President Biden’s executive order.
Front-end savings from unregulated low-cost offshore sources are often offset by increases in backend costs of fabrication due to poor quality and increased liability exposure.
Most of the piping infrastructure is located in the heart of the structure under construction; a failure can lead to costly repairs and consequential liability issues
PVF Roundtable News
As a member of the PVF Roundtable’s board of directors, as well as its charitable foundation, I encourage you and your associates to attend the networking meetings and fund-raising events promoting the PVF sector of our economy.
The first 2021 networking meeting of the PVF Roundtable is scheduled for April 13, 2021, at The Bell Tower on 34th in Houston, 713-868-2355. The meeting will begin at 4:30 p.m. and end at approximately 7:30 p.m.
This is a unique venue for you and your associates to network with peers in the PVF industry, share information, meet new contacts and initiate new friendships.
Please check the PVF Roundtable website (www.pvf.org) regularly for possible changes in the networking meeting schedule due to the COVID-19 restrictions on gatherings of our size.