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Oil, Gas Industry -- So Far -- Not Hurt By Shutdown, Says API

American Petroleum Institute (API) CEO Mike Sommers said the partial shutdown of the federal government, which reached its 18th day on Tuesday, hasn't had a major impact on the oil and gas industry to date, but he warned that could change should the impasse continue.

Meanwhile, he is "encouraged" by reports from U.S. Trade Representative (USTR) Robert Lighthizer that talks to end the ongoing Sino-U.S. trade war were going well, and said an agreement would boost U.S. liquefied natural gas (LNG) exports to Beijing. However, Sommers also urged the Trump administration to lift tariffs and quotas on steel imports, which he said were "not good for business."

The current shutdown, the third during the Trump administration, affects one-quarter of the federal government, including the Department of Interior and the Environmental Protection Agency (EPA). It began at midnight on Dec. 21 after the White House and Congress could not agree on funding for a wall along the U.S.-Mexico border.

"To this point, we have not seen any major effects of the shutdown on our industry," Sommers said during a media call. "Many of the things that we deal with are fee-based, and those have continued to go on as planned as the shutdown has continued.

"We have not seen any real effects to this point, but we would encourage the negotiators who are in the room discussing how to reopen the government to continue those discussions and get the government opened as quickly as possible. Obviously it's not good for this shutdown to continue long-term."

When asked what would happen if the shutdown dragged on for a few more weeks, Sommers conceded that "a longer shutdown certainly isn't good for this industry," and agreed that API's efforts to have "smarter regulations" enacted at EPA and Interior could suffer.

"We want to make sure that the efforts to put in place smarter regulations continue," he said. "We are going to continue to work with both the Congress and with the administration to make sure that these issues get solved quickly. Like every other industry that is dealing with some of the issues, sometimes we get caught in the crossfire of political fights in Washington. Our focus continues to be on the production of affordable energy for the American people, and we hope the shutdown ends quickly."

Trade Talks Encouraging

A delegation of U.S. officials from the White House, USTR, and several agencies, including the Department of Energy (DOE), began trade talks with Chinese officials in Beijing on Monday. DOE's Steven Winberg, assistant secretary for fossil energy, was included in the delegation.

"I'm encouraged by reports out today that these talks between the United States and China are going well," Sommers said. "We want this dispute to end quickly. Of course, we want to make sure that U.S. intellectual property is protected, but at the same time we need to do it in a way that doesn't affect American economic leadership, which is really driven by American energy leadership."

Regarding LNG exports to China, Sommers said the Trump administration "needs to make sure that the retaliatory tariffs that have been put into effect in China don't continue and certainly don't expand. We know that if the United States is not providing LNG to China, someone else will. But other forces within the world don't produce [LNG] in a way that is as environmentally ‘clean’ as the United States does, and those regimes certainly aren't favorable to the United States.

“This is a leadership vacuum that will be filled by many of the United States' opponents. We believe that we should settle this trade dispute quickly with China." Sommers said it was unclear what inroads, if any, other nations interested in selling LNG to China have been making since the trade war began last June.

"We're monitoring that closely,” he said. “We're confident with the relationships that we have, that we'll be able to fill those markets when the retaliatory tariffs are lifted. It's important to say that many of these countries that are relying on other regimes, they would prefer to be dealing with the United States.

“A lot of times energy is used as a real club by rogue nations. This country has proven itself to be a reliable supplier and one that you can depend on when you need your energy needs filled. We're hopeful that this dispute gets resolved quickly."

Likewise, API wants ongoing tariffs and quotas on steel imports lifted soon.

"Tariffs on steel, and definitely quotas on steel, are a major issue for us," Sommers said. He said "because of these policies, there's a company in Midland, TX, that can't complete a pipeline to deliver energy to consumers because they can't get the steel that they need to complete the pipeline."

API is working closely with the Trump administration "to clear this matter up," especially as the White House looks to win congressional approval of the United States-Mexico-Canada Agreement (USMCA), which leaders of the three countries signed last month. Although the Department of Commerce outlined a procedure for the oil and gas industry to request exemptions to the steel tariffs last year, API has voiced frustration over the process.

"We're working with Congress as well, if those efforts within the administration don't prove fruitful," Sommers said. "The administration has been a reliable partner so far on a lot of these issues, and we'll continue to engage them as this issue continues. But it's not good for business, and we're going to continue to talk to everyone within administration that has any authority over this -- particularly within USTR and Commerce -- that can get these quotas lifted in a way that makes sense for American energy producers."

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