Washington Insider-- Wednesday

Court Blocks H-2A Wage Changes, Freeze

Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.

Court Blocks H-2A Wage Changes, Freeze

Labor and farmworker groups won an injunction blocking the Department of Labor from freezing H-2A guestworkers' adverse effect wage rates (AEWRs) for 2021 and 2022.

U.S. District Judge Dale Drozd issued the injunction last week, saying the plaintiffs in the suit were likely to prevail on the merits of the underlying case. The United Farm Workers and the UFW Foundation contend DOL's rule runs afoul of multiple aspects of the Administrative Procedures Act, including notice and comment requirements.

The DOL ruling would freeze H-2A wages at 2020 levels and then adjust future adverse effect rates based on the generic employment cost index rather than USDA's Farm Labor Survey.

An earlier ruling by Drozd issued an injunction prohibiting USDA from cancelling the Farm Labor Survey, which it had moved to do after DOL gave notice of its H-2A wage rulemaking. The latest ruling blocked the wage freeze aspect of the DOL rule saying it is likely to depress farmworker wages and cause them irreparable harm.

DOL's own estimates expected the rule to reduce wages paid to H-2A guestworkers by just shy of $200 million over the next two years had it been allowed to take effect. DOL is now required to publish 2021 adverse wage rates, which are expected sometime after USDA publishes updated survey data on Feb. 11 -- a delay from its typical release date of Nov. 30 due of the logistics involved in resuming the report.

The judge gave DOL and plaintiffs 14 days to submit proposed orders laying out deadlines for setting the 2021 AEWRs.

CFAP 2 Payments at $12.96 Billion

Payments under the Coronavirus Food Assistance Program 2 (CFAP 2) effort now are at $12.96 billion as of Dec. 27.

Within that amount are acreage-based payments at $6.16 billion, livestock payments at $3.39 billion, sales commodities at $2.19 billion, dairy at $1.17 billion, and eggs/broilers at $52.1 million.

Iowa continues to lead all states at $1.15 billion, followed by California ($987.3 million), Nebraska ($838.5 million), Minnesota ($814.5 million), and Illinois ($789.0 million).

Already attention is shifting to what is expected to be CFAP 3 as part of the latest COVID aid package.

Washington Insider Cleaner Energy Growth

Politico is reporting this week that president-elect Joe Biden will enter the White House next month with a "shift already underway that's likely to generate momentum for his plan to start to wean the country off fossil fuels."

"The U.S. for four years attempted to go in the opposite direction," said Mark Jones, a political science fellow at Rice University in Houston. "Where we find ourselves in 2021, is a much more stringent and demanding request for addressing climate change. Everyone views the future as renewables, not oil and natural gas."

The renewable energy sector has been cheering this week about the clean energy incentives included in the omnibus Congress passed. And it's even more optimistic about the prospects under a Biden administration, given Biden's plans for a $2 trillion effort to put the country on a path toward eliminating greenhouse gases from the power grid by 2035 and for the overall economy by 2050.

"The realization -- the market's realization, the financial community's realization and the customer's realization -- that we are moving toward the clean energy economy has already happened," said Abigail Ross Hopper, CEO of the Solar Energy Industries Association, a solar trade group. "But the pace of that transition is still what's up for grabs."

Biden is expected to speed the adoption of electric vehicles and boost power line transmission networks that will open up new opportunities for renewable power generators, Politico said. He's pledged to invest $400 billion in clean energy development and research over 10 years and work with states to deploy more than 500,000 new public electric vehicle charging spots by the end of 2030.

Renewables are now on track to surpass coal as the largest source of electricity in the world by 2025, according to the International Energy Agency. And in the U.S., the latest outlook from the Energy Department is bullish on wind and solar, which along with hydropower and other renewables will surpass 20 percent of U.S. electricity generation next year -- about the same level as coal or nuclear power. EIA is projecting the U.S. electric power sector will add a record 23 gigawatts of new wind capacity this year -- almost double the previous record -- while utility-scale solar capacity to rise by 12.8 GW in 2020, enough to power millions of homes.

There also is bad news for fossil fuels. U.S. crude oil production, which climbed to a record at more than 13 million barrels a day before the pandemic sapped fuel demand has slipped to 11 million barrels a day. Natural gas production, which has doubled since the spread of fracking began in earnest in 2005, is expected to post a modest decline amid weak prices caused by a glut of supply. Those weak prices for natural gas and crude oil, which briefly turned negative as the pandemic took hold in April, have forced 45 oil and gas companies to file for bankruptcy through the first 11 months of 2020, Politico says.

The outlook for coal is even worse. The energy source that produced more than half the U.S. electricity little more than a decade ago has seen its share of the power market drop by almost a quarter recently despite administration promises to revive the industry. Valuations for coal producers have declined sharply and the leading company, Peabody Energy, is struggling to avoid its second bankruptcy filing in five years.

Still, renewable energy won't supplant fossil fuels anytime soon and renewables remain a small portion of the overall energy market even with the rapid growth, said Erik Olson, climate and energy analyst at the Breakthrough Institute. "You're really seeing right now the early wave of renewables starting to reshape the power sector," he said.

The dramatic fall in fuel demand amid the COVID-19 pandemic accelerated the debt-laden oil and gas industry's need to shrink and companies like Exxon Mobil, which saw its market value cut by as much as half earlier this year, have been forced to lay off tens of thousands of employees and ramp down their spending as a bulwark against a flood of red ink.

Now with a new White House promising to hand down stricter regulations on capturing the heat-trapping gas methane and a ban on new permits to drill on federal land, oil companies will either have to spend money to adapt or, in the case of smaller businesses that don't have the money or expertise to do so, to look for other options.

Politico expects that the fossil fuel industry is preparing to "negotiate the edges off of Biden's plans or to start looking for ways to adapt to the new normal."

Changes in systems as large as the energy sector tend to be slower than expected. These changes often include many trends, including those that are controversial and bitterly divisive with far-reaching implications. These are battles producers should watch closely as they emerge, Washington Insider believes.

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