Energy Part of Ex-Im Pile On

Politico reported this week that the future of the U.S. Export-Import Bank is seriously in doubt:

Supporters are beginning to throw up their hands and admit that the agency is very likely to lose its charter after June 30… [T]he lack of available floor time in the Senate — combined with scant pieces of must-pass legislation awaiting action this month — means the political football will almost certainly be punted until July after the bank’s charter expires, according to top Senate Republicans and Democrats following the matter. That means bank supporters are sure to try to revive the bank later this summer, an effort that will cause a major rift within the GOP.

The bank has a lot of problems, but energy policy is a major reason for its current plight.  But first, here is a little background on what the bank is.  One of the bank’s biggest supporters is the National Association of Manufacturers, and this is how they explain it:

The U.S. Export-Import Bank (Ex-Im) is a vital tool to help grow U.S. exports and increase American jobs. As the official export credit agency of the United States, Ex-Im Bank assists in financing U.S. exports from thousands of American companies and bolsters our global competitiveness. In fact, nearly 90 percent of Export-Import Bank’s transactions directly support U.S. small business. Ex-Im Bank operates at no cost to the taxpayer, and it has a track record of generating a profit for the government.

And here is their explainer video:

Many take a more dim view of the bank.  Here is the CATO Institute, for example:

The Export-Import Bank is a New Deal era agency with no relevance in a liberal global economy. It has not helped cause U.S. prosperity, but has certainly imposed opportunity costs larger than any alleged benefits; it has not corrected so-called market failures, but has rewarded foreign countries for failing to adopt market-oriented policies and institutions; and it affects such a small percentage of U.S. exports that even in the face of foreign nations’ wrong-headed, export-finance programs, the “playing field” already seems to favor U.S. businesses.

The Export-Import Bank of the United States is a wholly owned U.S. government corporation that assists in the financing of U.S. exports and goods.  The bank hit its first real bout of controversy in 2012, as the Associated Press explained at the time:

Since the Export-Import Bank was founded in 1934, Congress has methodically renewed its charter two-dozen times with little or no controversy, attesting to the independent federal agency’s low-key, generally well-regarded mission of helping finance American companies’ overseas sales.

The bank’s charter was renewed in 2012, and though it popped up some in the 2014 election, few recognized how much trouble it was in.  Liquefied natural gas exports are one source of the bank’s problems.  A few years ago, developing a worldwide LNG market was a major policy goal of the federal government, and that likely helped influence Ex-Im’s support of major LNG plants abroad.  As E&E reported last year:

The bank’s critics on the left have pointed to a $3 billion loan to Exxon in 2009 to help finance a $19 billion LNG export project in Papua New Guinea. At the time, it was the single biggest loan in the bank’s history. In 2012, ConocoPhillips and Bechtel Power Co. received a $2.95 billion loan for its Australia-Pacific LNG project.

Last month, the Ex-Im’s inspector general reported oversight problems with the $3 billion loan package. The bank failed to “sufficiently analyze” foreign exchange risks that contributed to significant cost overruns. In a response to the finding, the bank’s staff emphasized its “extensive due diligence” and attempts to head off potential foreign exchange issues.

These projects are a major point of contention for some of the bank’s opponents.  Perhaps more importantly, with the U.S. about to become a net exporter of natural gas, there are few in Congress willing to defend the deals.  Here is Rep. Jim Jordan (R-OH) at a hearing in April 2015:

The bank went on to make, in my view, a major political mistake in December 2013.  The bank adopted a new rule limiting “high-carbon intensity projects.”  In other words, they decided not to support any more coal-fired power plants, with limited exceptions.  The bank seemed to recognize the political problems, and tried to soften the blow to coal by saying:

The revised guidelines adopted today require carbon capture and storage in most countries in order to secure Bank financing for coal-fired power plants, but would provide flexibility for the Bank with respect to the important energy needs of the poorest countries in the world.

The guideline revisions approved today are not designed to impact mining projects or coal exports produced by American coal miners. Ex-Im staff have worked with other agencies to ensure that the flexibility of these guidelines would be consistent with those of other federal agencies.

Congress, led by Kentucky’s own Appropriations Chairman (R-KY) slipped a rider into an appropriations bill passed at the end of 2014 that banned the use of any appropriated funds to for the:

…Supplemental Guidelines for High Carbon Intensity Projects approved by the Export-Import Bank of the United States on December 12, 2013, when enforcement of such rule, regulation, policy, or guidelines  would prohibit, or have the effect of prohibiting, any coal-fired or other power-generation project…

Now, the Ex-Im bank generally operates on funding it gets from its customers, and therefore does not usually need appropriations.  So it is arguable that this provision is not binding.  Ex-Im does not appear to have made any policy changes to react to the new law, and the White House appears to be disregarding it, according to a recent Reuters report:

“We are also fully committed to ending public financing for the most polluting power plants overseas, except in the poorest countries, and oppose language that would hinder implementation of the president’s Climate Action Plan,” [White House spokeswoman Jennifer] Friedman told Reuters.

Today, the Ex-Im bank is getting hammered by Congress over the coal issue.  Here is the Ex-Im Bank’s enemy number one, Rep. Jeb Hensarling (R-TX), in April 2015:

Rep. Jim Jordan (R-OH) made a similar argument:

One thing you can see from a lot of these folks, is that they are not necessarily huge coal supporters.  Sen. Bob Corker (R-TN) pointed that out at a June 2015 hearing, in fact.  He said he is not a huge “lover of coal” but he finds it “offensive” that Ex-Im would ban coal without a mandate from Congress.

Members that are more interested in coal have serious problems with the anti-coal policy, even though they may support the bank.  Here is Sen. Mike Rounds (R-SD), who sounds supportive of the bank, asking why it is making political statements:

Sen. Heidi Heitkamp (D-ND), who supports both coal and the Ex-Im, is working on a compromise that would overturn the anti-coal provisions:

Members from coal country are just straight up mad.  Here is Rep. Any Barr (R-KY) in June 2015:

In sum, it appears that the Ex-Im and its supporters have drastically underestimated the backlash it would receive from the anti-coal policy.  It has politicized the bank, and in my view is a major reason why Republicans are pushing to shut it down.