Quo Vadis, Mr. President-elect?

“Our challenges, our risk level went up a little bit; we are going to have to redouble our efforts in 2017,” said energy policy expert Jim Massie, essaying the political landscape as the National Biodiesel Conference’s annual policy forum kicked off in San Diego.

A standing-room only crowd of more than 350 packed the small room just as, in Washington, news was leaking out that former Governor Sonny Perdue would be tapped as the new Secretary of Agriculture. This pick completed President-elect Trump’s cabinet and also the trio of officials overseeing USDA, Energy and the EPA, who have traditionally been The Three Lords of Destiny when it comes to the advanced bioeconomy.

This year, of course, is different.

We have just the one guy. This Administration is a team, so long as you generally understand that there’s one guy with the ball, he’s calling all the plays, and members of the Cabinet can block and tackle and get to be part of the team photo.

Consequently, there’s less focus than usual amongst industry and Washington insiders on the personalities of the Cabinet nominees, and an awful lot of focus around Washington on taking credit for delivering the Presidency to Mr. Trump. The “Yes We Can” of the Obama years has been replaced by the “Yes We Delivered” of this Washington winter. There are more delivery kudos going around these days than at a Domino’s Pizza employee recognition event.

It was no different at the National Biodiesel Conference, and that’s OK.

Yes, We Delivered!

Massie reminded the delegates that “the reason the President is sitting in office is that we delivered the extra votes in key states. He knows that, and what he saw in Iowa, Wisconsin, Michigan, and saw revitalization in the flyover states, saw a rebirth of the economy – our point is to keep that front and center. That’s key in retaining RFS and having a place in the tax code discussion.”

But some are less sure. Former North Dakota senator Byron Dorgan said “My head is still exploding. None of us expected this result. What’s going to happen, Lord only knows.”

“Almost anything we could say would not seem outlandish given the year we’ve had,” added industry consultant Tom Hance. “Trump keeps no formal structure, he relishes competing interests on his team. The only one who knows outcome is him. It will be a disaggregated process.”

So, doubt, fear? Small wonder.

The years of Obamawaffle

It’s been a terrible three years of Obamawaffle since 2014, watching clean energy praised and supported with awesome force on the electron side, yet any reference to renewable fuels as carefully excised as a cancerous tumor, the RFS enforced in such a way that it managed to infuriate everyone in the country and drive renewable fuel investors into the hills. Years of tax credits that don’t last and can’t be counted on, mandates that are applied late and often far short of Congressional volume intent.  And lip service of biblical proportions.

The resulting uncertainty and fear is a script as old as the Gospels. The Apostle Peter was fleeing Rome one day, certain he would be crucified if he stayed. But then he saw the image of Christ, walking towards the Eternal City.

Peter: Quo vadis? (Whither goest thou?)
Jesus: Romam eo iterum crucifigi (“I am going to Rome to be crucified again.”)

Now, the advanced biofuels industry trudges back to Rome, certain in the righteousness of the cause, but with a certain amount of dread that it might be crucified all over again, and sure that no one “will restore to you the years that the locust hath eaten”.

The farm sector’s cherished entry into energy markets, as a source of rural economic diversification, did not strike any of the experts assembled by the NBB as a “sure thing” on the incoming Administration’s list of “must deliver to our supporters”.  Some are hopeful, most are just plain perplexed.

To learn more, let’s look at the man and his music. The President-elect, that is.

What the Cabinet picks tell us

“The [Cabinet] picks tell us something about the President and his process,” said Jim Massie. “The first thing I get reminded by people working on the transition team is that the President believes that Washington is an insiders town, these are the last people to fix things when they are broken. That’s the ‘drain the swamp’ point of view. He believes that If you’re going to effect change, you can’t need a DC job at the end of it. You see that in his Cabinet selections, mostly billionaires and millionaires, not beholden to a constituency.”

But what about his style? What are the Trump interviews like?

“There are three elements,” said Massie. “First, do we have chemistry, do we get along? Second, Am I clear that you will follow my lead? Third, you understand I will fire you if you don’t? The meetings would last 30 minutes, and then the transition would make the announcement as soon as the next day. This is a man who makes his mind up and moves on.”

No Action This Day

So the decisions are unclear, because the man has not yet made up his mind, and there’s a very good chance there will be little to no action on energy at all this year, because the major issues that will dominate the first six months of the new administration are already well-established, and action on the Renewable Fuel Standard isn’t on anyone’s list of top priorities.

It’s somewhere down there with the state of affairs in Burundi, and reminds me of something Hillaire Belloc once wrote about Neville Chamberlain and his appeasement policy in 1938.

“Dear Czecho-Slovakia,
I don’t think they’ll attack yer
But I’m not going to back yer.”

Former Missouri Congressman Kenny Hulshof put it more optimistically and with considerably less emphasis on rhyme.

“What I see is an opportunity, a blank slate. There are a couple of hard and fast positions, like building the wall with Mexico, but in a lot of other instances, the President is going to want to hear contrary point of views and make a decision. The renaissance of rural America has to be front and center, as people talk about growing the economy. And when we look at the red and blue map of states in Presidential elections, we have to make sure everyone looks at those strong rural red areas.”

The Super Bowl for Tax Nerds

What will this year be about? There will be the ritual sacrifice of Obamacare. Then, we’ll have the usual government hiring freeze and flurry of executive orders designed to show that the President is doing something. In particular, we’ll see an order to build the wall with Mexico.

Then, there will be tax reform and the Ritual of the Closing of the Loopholes, which is very much like the Closing of the Eyes During Prayer: it feels very good and doesn’t last very long.

“For tax nerds, this year in potentially a Super Bowl,” said NBB’s primary tax policy expert Tim Urban. “The last big reform was 1996. The President-elect campaigned on repealing Obamacare and moving fundamental tax reform, and that’s the same macro agenda as all the major leaders in the Senate and House. So it is extremely likely that tax reform will be passed by the House and possibly enacted this year.

“But it is predicated on passage in the Senate on using a process known as budget reconciliation, and that mechanism will not be available until at least after the Obamacare repeal debate finishes. And that debate is getting more complicated, not less complicated, every day. So, people who are saying March or April are very optimistic.”

Is the Renewable Fuel Standard at risk, really?

Jim Massie thinks there’s room for concern. “Icahn’s voice is resonating in the President’s executive suite now. We to have to have strong relationships within EPA. I sense a lot of wiggle room between what he said on the campaign and what he might do. We have to hold his feet to the fire. Greg Walden of Oregon is heading the House Way & Means committee, and he supports reforming RFS and freezing corn ethanol. The Senate committee overseeing the RFS is headed now by John Barasso of Wyoming, who favors repeal.”

With those cautions in mind, former North Dakota Senator Byron Dorgan advised against panic. “We don’t really know where policy heads this year. With respect to biodiesel, we wrote the RFS 12 years ago, and it is a strong success story, Trump likes success. My hope he will take a look at this, recognize it and be a booster. We need to make sure the RFS  – likely a tax bill, we need to be a part of it. We need to be in the tax bill in a positive way.

“And, the CEO of the American Petroleum Institute said ‘we’ve got to make sure they understand what the oil & gas industry’, which shows in many ways we’re all on the same starting line. There are 4 new folks on Ways and Means, and we have to educate them. That’s the blocking and tackling that needs to get done.”

Hulshof agreed, and noted “We are not Johnny-come-lately’s to any of these issues. we have done the spade work for years.”

A decision at USDA

As the conference continued, official confirmation arrived on the nomination of Sonny Perdue as Secretary of Agriculture. Initial reaction was mixed.

In the Remains to be Seen Department, we found Michael Helmstetter, CEO of TechAccel, who said,  “The fact is: agriculture touches every facet of American life. We need a leader who can represent a diverse population – much of it under economic stress today – as well as a visionary who can promote policies for healthy development in ag innovation, technology, education and research. Does Sonny Perdue reflect these leadership traits? That remains to be seen. It’s almost too much to ask for. If Mr. Perdue can be a big voice for sane policies across the nation, from coast to coast – not just in the farmland – that’s a win for not just America but the entire global commodities realm.”

In the We Say We’re Confident But Not Really Department, we found Growth Energy CEO Emily Skor who added, “We congratulate Governor Perdue on his nomination to be the next Secretary of Agriculture. We are confident that each of President-elect Trump’s cabinet picks are fully aware of his vocal support of the Renewable Fuel Standard and the ethanol industry.”

Ourselves, we are more confident that the Secretary-designate will be “fully aware” on this point of the President’s feelings about the Renewable Fuel Standard following a meeting with Senate Agricultural Committee chairman Pat Roberts of Kansas. ISUPPORTTHERFS may well be the password to unlock the door to get into the committee’s hearing room.

The Bottom Line

Dorgan was hopeful. “Diversified energy supplies and a huge advantage in emissions, Trump I hope will see what the investment has done for jobs, expansion, and a brighter future. If the Administration understands it, they will want to back it and claim it as their own.”

The standing room only crowd was attentive and appreciative, but they may not have been convinced that it will take anything short of heavy lifting to protect the statutes that have advanced renewable fuels — and to secure the tax credits that are propelling the energy supply beyond first-generation biofuels and into the deeper emission cuts and diversified feedstocks that are the hallmarks of advanced biofuels.

We’ll likely find about about taxes before energy policy, because the drums are beating for Tax Reform and that debate will precede almost anything else in 2017, in Washington, D.C. You can already hear the nickels rolling down the chutes from the Treasury, though we are not yet quite sure which lap all the nickels will fall into.

Will the Trump Administration see a tax credit for biomass-based diesel as a lightening of the tax burden on a domestic industry in order to unleash its potential? Or, as a hand-out given by The Dwellers of the Swamp to their claques of supporters?

The 20th of January is nigh and we do not have long to wait.