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Canada’s oil and gas sector has slashed spending plans across the industry by $8.9 billion amid the economic fallout of the novel coronavirus, according to new estimates.
IHS Markit says while the bulk of the cuts have been made by large oilsands producers, there have also been “sizeable” spending reductions to conventional, unconventional, midstream and petrochemical projects.
It pegs the reductions in capital spending in oilsands alone at around $4.4 billion.
“Western Canada is accustomed to price volatility,” IHS Markit said in an analysis released Tuesday. “However, the scale of this demand shock is unprecedented.”
The impact on the sector, it adds, is expected to be “protracted, deep with long lasting ramifications” for the industry, jobs and the overall economy.
Canada’s oil producers have been hit hard by oil prices that have plunged worldwide.
OPEC and its allies tried over the weekend to shore up global prices with an agreement to cut back production, but concern remains it’s not nearly enough to address a massive fall in demand due to the pandemic’s economic impact.
Indeed, the International Monetary Fund’s latest outlook says the global economy is projected to contract three per cent in 2020, much worse than during the 2008-09 financial crisis. It expects world oil prices to improve in the coming years but remain well below last year’s average level through 2023.
In recent weeks, the price of heavy crude from western Canada has fallen to well below $10 US a barrel, prompting a number of major producers to announce deep spending cuts.
IHS Markit’s preliminary estimate indicates that capital spending in the upstream oilsands in 2020 may be at their lowest levels in over 15 years.
It also expects drilling activity in western Canada will fall further this year, adding it was already near record lows. IHS pegs the amount of capital spending cut by conventional and unconventional energy producers at more than $3 billion.
Alberta’s provincial government has said it expects Ottawa to come to the aid of the sector soon, including some form of credit backstop and help with cleaning up after orphaned oil-and-gas infrastructure.
It’s been weeks since Finance Minister Bill Morneau said assistance was “hours, possibly days” away. Prime Minister Justin Trudeau was asked Tuesday about when the federal government would deliver such a package.
“We will and we are looking at more specific, sector-related relief and supports for those sectors that are hardest hit, whether it’s the tourism sector, the airline sector or the oil and gas industry, or others,” Trudeau said.
“We will have more to say on that shortly.”
The president of oil and gas producer Whitecap Resources expects the mood in the office today will be “not good” after the Liberals were able to hold onto power with a minority government.
After the oilpatch celebrated the victory of the United Conservative Party government in Alberta in the spring, many in the sector were eager for a double dose of good fortune in 2019 with a Conservative victory on the federal stage.
Those hopes were dashed.
Not only did the Liberals win, but the minority victory adds an extra element of uncertainty.
Grant Fagerheim, with Whitecap, anticipates many of his employees will now be asking: “Where do we go from here?”
The oilpatch’s woes began before Trudeau was elected in 2015, but the sector has often complained about some of the Liberal Party’s policies such as the carbon tax, the proposed clean fuel standard, changes to how pipelines and other major projects are reviewed, and a ban on oil tankers off a part of British Columbia’s coast.
Some companies were holding back on making certain decisions, such as hiring and proceeding with projects, pending Monday’s election outcome.
“We have to definitely look at pulling back on spending,” said Fagerheim, adding further job losses in the sector would be “a travesty.”
The Conservative Party had made campaign pledges seen as much more friendly to the industry, such as an energy corridor across the country and much less stringent environmental policies.
Trudeau’s spotty record
Trudeau seemed to have a hot and cold relationship with the oilpatch. He visited the province every year since the 2015 election, including a few trips specifically to Fort McMurray. The Liberal government funded innovation in the energy sector and gave $1.6 billion in support to the oilpatch last year.
The Liberals also purchased the Trans Mountain expansion pipeline when it looked like the project was falling apart.
Still, the oilpatch never seemed to trust Trudeau, at least in part because of his father’s decisions decades earlier that crippled the industry — namely, the National Energy Program. The policy was aimed at asserting more federal control over the energy industry and contributed to substantial job losses in Alberta and a real estate market crash.
Trudeau’s comments about “phasing out” the oilsands in 2017 seemed to confirm his doubters in Alberta, even though the prime minister was talking about a slow transition away from fossil fuels.
The Trans Mountain purchase received limited support in Alberta, since many blamed the federal government for not supporting the project more before it had to step in as a last resort.
“It’s a sad day for Western Canada. It probably means more job losses for Alberta,” said Robert Cooper, with the institutional sales and trading team at Calgary-based investment firm Acumen Capital Partners.
He anticipates companies will slash spending and investors will further shy away from the oilpatch.
“We’ve already seen the massive slowdown in drilling and overall activity. When you have a government that is strangling you out of existence, your risk tolerance just went out the door,” he said.
What the sector deems anti-energy policies of the last four years will continue, Cooper said, “especially if [the Liberals] are pushed from further on the left — then I think it’s clear the strangulation of Alberta and Saskatchewan’s resource-based economy will continue.”
What about that pipeline?
Besides low oil and gas prices, the biggest challenge for the sector is a lack of new export pipelines. Trudeau can hardly be blamed for some of the problems, since proposed projects like Enbridge’s Line 3 replacement and TC Energy’s Keystone XL are fully approved (and largely constructed) in Canada but are stalled in the U.S.
Critics have blamed the Liberals for the failure of other pipeline proposals, such as Energy East by TC Energy.
What happens now to the Trans Mountain project will be a prime focus for the oilpatch.
Political scientist Lori Williams, with Calgary’s Mount Royal University, said the project should continue to proceed since both the Liberals and Conservatives support the pipeline expansion and no vote is needed in Parliament as construction slowly ramps up.
Cooper, with Acumen Capital, isn’t making any assumptions, especially if the Liberals form a coalition government.
“It’s definitely not certain that Trans Mountain is a go.”
Oil export pipelines are at capacity in Western Canada and, as a result, the industry is receiving a discount price for its crude. Companies are ramping up oil shipments by rail to help alleviate the bottleneck.
While the energy sector and the Prairie provinces were of little focus during the federal election campaign, the oil and gas industry remains a key driver of the economy and the country’s largest export.
While the economy and job creation are thriving in most parts of the country, Alberta in particular continues to struggle. The unemployment rate is high, and more than 20 per cent of the downtown office towers in Calgary are vacant.
The city’s mayor is hopeful the Trans Mountain project will proceed following the election result, but he’s growing impatient.
“If they wanted to shut it down, they could have shut it down,” Naheed Nenshi said about the Liberals purchasing the pipeline project.
“But the point is it hasn’t been built yet.”
And with Bill C-69, which Nenshi says would infrastructure projects including pipeline more difficult to build, “you can see why people are getting frustrated.”
Matt Daisley said his first visit to a legal cannabis retail outlet in St. Catharines, Ont. this week ended without a purchase after he heard the prices and almost had a heart attack.
“I knew immediately that I would not leave the black market,” he said. “There’s no chance.”
The 60-year-old is a longtime cannabis user and visited The Niagara Herbalist to check out its government-approved marijuana options after the store officially opened Monday. But, when he went up to the counter to buy 3.5 grams of MK Ultra, he said he was asked to pay $45 plus tax and was rocked by sticker shock.
His complaint about the comparatively high price of legal pot was a routinely heard one from customers during the first week of legal retail sales in the province.
The Ontario Cannabis Store says its products are priced to compete with the black market but critics, including a professor at Brock University, say buying illegally offers those willing to take the risk significant savings, meaning legal prices will have to drop if they want to bring in more customers and cut out the black market. Police have also pointed to affordable pricing as an important tool to combat organized crime’s involvement in the drug trade.
Daisley claims he could buy as much as seven grams of MK Ultra for about $40 from an illicit vendor online.
That’s what he plans to keep on doing, he told CBC News, adding the laws around black market weed and the consequences for purchasing it are still vague so he’s willing to go public about his concerns in hopes the government and retailers will listen.
“I’m making a conscious choice to use the black market rather as opposed to the legal market. I understand the ramifications of that,” he said. “[But] what can they really do to a 60-year-old guy who’s smoked for the better part of 25 years every day?”
The price has to be right to defeat organized crime
The laws around cannabis use in Canada are still evolving and need to be tested in court, so there’s “some validity” to Daisley’s point, according to Joe Couto, a spokesperson for the Ontario Association of Chiefs of Police.
He added police aren’t naive enough to think legalization means the black market will die overnight — especially if there’s a big price difference.
“I don’t know if the price is right,” he said, adding law enforcement officials have to trust the government to make those decisions.
“We’ve always recommended to them that if you don’t price the product at a market price obviously it does create pressures and black market activity.”
Cannabis has long been a source of income for organized crime in Canada, explained Couto, so police are concerned they’ll take advantage of the early stages of legalization to turn a profit.
“If we’re going to eliminate cannabis as a potential source to fuel criminal activities … obviously ensuring the product is accessible and is priced right is really important.”
Daisley said up his experience at The Niagara Herbalist was largely positive until he went up to the counter and found out how much he would be charged.
He said he’d prefer to purchase cannabis legally, but believes that, like him, the buying decisions for most cannabis consumers will be dollar-driven and the price tags raise questions about markup that will keep people out of legal stores.
Like comparing a ‘fine wine’ to moonshine
Hamilton-based cannabis consultant, Olivia Brown, disagrees. She says the quality legal outlets offer is worth paying for.
“I wouldn’t compare a $180 bottle of fine wine to moonshine just because it’s cheaper.”
Brown said the prices charged by private legal retailers are generally similar to those posted on the OCS online store, but added that, like gas stations, consumers could see a slight difference of $1-3 depending on which shop they’re in.
Still, Brown said she hears people complaining about the price of legal pot every day.
She agreed black market prices are lower than their legal counterparts, but pointed out government regulated cannabis is a big business that has to pay many employees and meet all sorts of standards.
“It’s very highly regulated, it’s very expensive to maintain and has huge operating costs.”
Brown also said cannabis is a product where you get what you pay for — there’s a reason the black market is so much more affordable.
“It’s probably grown outside by someone who may not know what they’re doing, they could be using pesticides or have all kinds of bugs or whatever,” she explained. “These people aren’t understanding the difference between really fantastic, lab-tested quality-grown, labeled, packaged beautiful products.”
Offering more options for purchasing those high-quality, legal products is the only way to make sure black market usage is really curbed, according to Hamilton Mayor Fred Eisenberger.
The mayor’s comments came in response to recent criticism leveled at police and officials in Hamilton by Premier Doug Ford who said failure to shut down illegal dispensaries in the city was his “biggest frustration” when it came to cannabis legalization in Ontario.
OCS says legal cannabis is ‘competitively priced’
In a statement to CBC News a spokesperson explained the OCS buys its cannabis from producers licensed by Health Canada then sets a retail price, which can go up or down based on factors including market conditions, supply and the purchase price from producers.
Absolutely the black market enjoys a big price advantage.– Michael Armstong , Brock University
Legal products are tested and “competitively priced” with the illegal market in mind, the statement read.
The spokesperson added the pricing structure for retailers allows them to set their own prices that “reflect their individual business models.”
On the OCS website MK Ultra, the same strain Daisley said he was trying to buy is listed from $12.85 / gram or $39.95 for 3.5 grams — though it does not appear to be currently available.
Customers need a discount option like ‘No Name’ weed
In the short term the limited number of stores in Ontario mean each location should be able to draw plenty of customers, but an associate professor at Brock University said big changes have to happen if government wants to compete for the long haul.
Michael Armstrong teaches at the Goodman School of Business and has been watching Canada’s foray into legalization closely.
“Absolutely the black market enjoys a big price advantage,” he said, pointing to a Statistics Canada report for the last quarter of 2018 showing the average price paid for legal, dried cannabis was $9.70, compared to $6.51 its illegal counterpart.
At some point, the pool of customers willing to pay up to 50 per cent more for a legal product will dry up and the stores will have to start appealing to people who are only willing to cough up something in the range of 25 cents more per gram.
Armstrong said the government has to be ready and offered a few suggestions for how to cut costs.
The first is lowering the overall production cost by going large scale, automating the process or moving growing operations outdoors. When those saving lead to a drop in price, the professor said provinces should lower their wholesale process so retailers can also sell for less.
Another obstacle is the federal government’s excise tax structure. Armstrong said excise tax currently varies by province, but the default is about $1 per gram minimum, which makes it tough to keep up with the black market.
“Even if a producer can make it really cheaply and a retailer is willing to sell it for a low price, that dollar is a big chunk.”
He argues the government should drop that minimum and just set the tax at 10 per cent.
Under that model a premium product could pay around $2 a gram in tax and an average products could pay around $1, but retailers could offer a discount brand.
“Eventually the retail stores need to be able to sell something like a No Name cannabis, pre-rolled joints for maybe $5 a gram, maybe $3 bucks a half gram,” said Armstrong.
“To compete with the black market in the longer term absolutely we need some of the products priced low.”
Five types of foreign steel will no longer face a 25 per cent surtax in Canada after the Canadian International Trade Tribunal (CITT) filed a report that found inadequate evidence to justify most of the Finance Department’s emergency safeguards to protect Canadian steelmakers.
Last October, Finance Minister Bill Morneau used a rare emergency safeguards measure to bring in a provisional surtax on seven types of steel: heavy plate, concrete reinforcing bar, energy tubular products, hot-rolled sheet, pre-painted steel, stainless steel wire and wire rod.
The department never released a rationale for the surtax. The emergency measure allowed him to apply surtaxes first and investigate their merits later — through what the tribunal called one of the most complex inquiries it’s ever done, with 119 participants submitting over 38,000 pages of evidence.
“The tribunal believes that there is an important public interest issue in achieving a balanced recommendation on remedy, one that removes the threat of serious injury to the domestic producers from increased imports, while, at the same time, minimizing the costs to the Canadian economy,” the panel wrote in its report Wednesday.
The surtax bolstered the federal government’s argument that cheap foreign steel could not find its way into the American market by using Canada as a back door. Many kinds of steel faced a 25 per cent levy in both countries.
The safeguards also protected Canadian steelmakers from any sudden dumps of cheap product displaced from the U.S. by the Trump administration’s recent tariffs.
But the tribunal determined these safeguards were only partially justified by the market evidence presented during its hearings last January — putting Morneau in a tight spot.
Surtax ends April 28
The three-person panel was ordered to investigate whether each product was coming into Canada in quantities or under conditions that would risk serious injury to domestic producers of similar goods.
Hot-rolled sheet, pre-painted steel and wire rod are not being imported in increased quantities, the tribunal determined.
Imports of concrete reinforcing bar and energy tubular products are up, the tribunal said — but those increases and the conditions under which these products are being imported are not causing, or threatening to cause, serious injury.
The Department of Finance wrote participants in the hearings to inform them that as a result of the CITT findings, the surtaxes on these five products will cease on April 28.
The provisional safeguards apply until then, but the government intends to refund what importers have paid, the statement said.
Morneau “moved too quickly to get the duties in place, and now he’s got a little bit of egg on his face,” said trade lawyer Cyndee Todgham Cherniak, who represented clients at the inquiry.
“It’s obvious that they were just doing what the domestic industry had asked them to do.”
The government could have consulted Statistics Canada import data to learn that there wasn’t a case for surtaxes on those three products, she said. “There’s no reason for them to have missed that part.”
Surtax on two products may continue
The tribunal determined that foreign imports of heavy plate and stainless steel wire are a legitimate threat to the domestic industry.
Morneau now has until May 12 — when the provisional safeguards expire — to decide whether to keep applying this surtax on imports above a tariff rate quota (TRQ) based on historic trade volumes.
“Our government is carefully reviewing the CITT’s findings and recommendations before deciding on next steps and will respond in the coming weeks,” said Morneau’s spokesperson, Pierre-Olivier Herbert.
“We will continue to work with affected businesses and workers in the steel, aluminum and manufacturing industries, to ensure they have the support they need.”
The panel was ordered to exclude products from free trade agreement partners Korea, Panama, Peru, Colombia and Honduras if they did not cause or threaten serious injury.
Other free trade agreement partners like Chile and Israel, and some developing countries, did not face the safeguards.
This surtax also is not applied to imports from the U.S. Those have been subject to separate retaliatory tariffs since the Trump administration’s decision to slap a 25 per cent tariff on Canadian steel.
The tribunal recommended the government periodically review its measures as global market conditions change, taking into account trade measures in the U.S., the European Union and elsewhere.
Washington’s reaction to Ottawa’s scaling back of the surtax may be critical, as Canada tries to persuade the Trump administration to lift its “national security” tariffs.
‘Disappointed and concerned’
The Canadian Steel Producers Association (CSPA) warned in a statement Wednesday it was seeing “strong expectations from the U.S. government that [Canada] will take every action necessary to keep unfair steel out of North America.”
“We are disappointed and concerned with the tribunal’s recommendations,” president Catherine Cobden said in a statement.
“Furthermore, the continued surge of low-priced imports and deteriorating market conditions that have persisted following the conclusion of the CITT’s hearing were not considered and further supports the imposition of final safeguard measures.”
The CSPA said the tribunal’s report is not binding on the minister and urged Morneau to “exercise his statutory authority” to keep taxing all seven products.
In a statement, the head of the United Steelworkers called for the same thing, saying Morneau must “act decisively” to keep out “illegally subsidized steel from jurisdictions including China, Turkey and Vietnam.”
“If existing safeguards are not finalized, a surge of foreign imports will devastate Canada’s steel industry and communities across the country,” United Steelworkers National Director Ken Neumann said.
Other countries have taken measures to protect workers, he said, and Morneau has a “moral obligation to act.”
The World Trade Organization’s agreement on safeguards, however, obliges Canada to respect the findings of the tribunal as a quasi-judicial body.
CBC News asked Morneau’s office whether the minister has the authority to disregard the tribunal’s advice. Herbert said “we are still in the process of analyzing the CITT recommendations” and wouldn’t speculate on the next steps.
“If the Canadian government were to ignore the CITT decision or report, then what does that do, on a going forward basis, for all of the anti-dumping cases?” Todgham Cherniak said.
“They’d undermine every decision that they’ve had in the past, and our ability to use it in the future, if they ignore a tribunal report for political reasons.”
Drivers hit by the jump in gas prices at the pumps this week after the introduction of the carbon tax should brace themselves for even higher prices in the coming months.
Some analysts predict gas prices could rise by another 10 to 15 cents a litre by this summer, and that has nothing to do with the carbon tax.
A combination of higher world oil and an increase in demand for diesel, plus seasonal factors such as the shift from winter to summer gasoline and higher demand in the warmer months means the big drop in prices that started late last year could be a thing of the past.
Dan McTeague, senior petroleum analyst at GasBuddy, expects prices to raise another five cents as early as next week as the shift from winter to summer gasoline takes place across much of Eastern Canada.
“Ontario, Quebec, and the Maritimes are looking at a net five cent increase on top of Monday’s five cent increase,” McTeague said. That federal carbon levy at $20/tonne that applied in Saskatchewan, Manitoba, Ontario and New Brunswick added about 4.4 cents per litre.
“Western Canada, sort of, is seeing this being phased in a little slower, and they’ve already started seeing [a rise of] probably about two cents worth.”
B.C. and Alberta already had a carbon tax and their gasoline is refined closer to home, making a difference in when price increases take effect.
Big demand for diesel
Susan Bell, oil analyst at IHS Markit, expects gas prices to rise by 10 cents from now to the end of summer as a gasoline inventory glut in the market starts to ease, and crude oil prices head higher, in part due to demand for diesel fuel.
The IMO is introducing a sulphur limit rule for 2020, known as IMO 2020, which will decrease the amount of sulphur allowed in the fuel from 3.5 per cent to 0.5 per cent. This will affect large ships that use low grade fuel, which is considered the bottom of the barrel, because of its air-polluting qualities. In order to comply, many ships will likely have to switch to diesel, pushing up demand for heavy crude oil, which is used to make diesel.
“International factors such as the International Maritime Organization’s (IMO) global bunker fuel oil specification change will require refiners to increase crude oil runs to meet strong diesel demand,” Bell said.
“This, along with crude oil supply challenges that result from U.S. sanctions against Iran and Venezuela, will support crude oil price increases. Gasoline prices will respond in kind with the increase in crude oil prices.”
McTeague said a more-than-six-cents-a-litre jump in the price of diesel “will pretty much affect the price of everything.”
“It has direct and indirect costs, and I think it’s the indirect ones that we really haven’t calculated,” McTeague said. “But, I do get nervous when I see that food prices, the basket of goods that make up grocery prices have skyrocketed this year compared to last year, much of it driven by fuel.”
He said many people have already made the switch to smaller cars, but this kind of price rise may necessitate new ways to economize.
“Most people have moved to more efficient vehicles, but is there room for more efficiencies? For sure.”
The price of benchmark U.S. crude oil — West Texas Intermediate (WTI) — has surged nearly 47 per cent since hitting a one-year low in December, now trading around $62 US a barrel. Meanwhile, the price of Western Canadian Select (WCS) has quadrupled — jumping more than 300 per cent to around $54 US — since hitting a yearly low in November.
Impact of the carbon tax
Meanwhile, analysts are split over how much of an impact the carbon tax on fuel will have on consumers.
McTeague said those shrugging their shoulders over a five cent increase in gas prices this week need to remember that a 2.5 cent per litre increase annually over the next three years will result in gas prices higher by at least 12.5 cents when all is said and done.
“When there’s a component that pushes prices up that is discretionary such as the carbon tax, which is a policy decision as opposed to an economic factor, it means that price remains permanently cemented in place, and it will continue to build over the years,” McTeague said.
“We’ll have to see how that affects the bottom line — disposable incomes. The concern, of course, is if you’re not spending on gasoline — what other purchases are they foregoing, and in what parts of the economy and how will this cascade through the economy.”
Bell, however, said while higher prices at the pumps will affect the affordability of fuel, the overall impact of the carbon tax is relatively small when compared to the wild swings in the oil market.
With the carbon tax adding 4.4 cents per litre to the price of fuel, that equates to less than $100 per year of increased cost per vehicle (assuming a typical 20,000 km of driving per year at an average 10 litres/100 km fuel economy).
“On a single [gas] fill of 60 litres, the carbon levy is less than $3. So, the overall impact is relatively small,” Bell said.
“Layering on the 10 cents per litre in expected gasoline price increase that is the result of increased crude oil costs and refining margins results in a more significant hit to the consumer.”
The 10-cents-per-litre increase will cost the consumer an additional $6 per fill-up, or about $200 a year using the same annual assumptions, Bell said. “At this cost increase, some consumers may back away from discretionary gasoline spending.”
Opponents of the long-stalled Keystone XL oil pipeline asked a U.S. federal court Friday in a lawsuit to declare President Donald Trump acted illegally when he issued a new permit for the project in a bid to get around an earlier court ruling.
In November, U.S. District Judge Brian Morris ruled that the Trump administration did not fully consider potential oil spills and other impacts when it approved the pipeline in 2017.
TransCanada disputes that, saying Keystone XL has been studied more than any other pipeline in history. “The environmental reviews are clear: the project can be built and operated in an environmentally sustainable and responsible way,” said Russ Girling, TransCanada’s president and CEO.
Trump’s new permit, issued last week, is intended to circumvent that ruling and kick-start the proposal to ship crude oil from the oilsands of western Canada to U.S. refineries.
White House officials have said the presidential permit is immune from court review. But legal experts say that’s an open question, and that the case could further test the limits of Trump’s use of presidential power to get his way.
Unlike previous orders from Trump involving immigration and other matters, his action on Keystone XL came after a court already had weighed in and blocked the administration’s plans.
“This is somewhat dumbfounding, the idea that a president would claim he can just say, ‘Never mind, I unilaterally call a do-over,”‘ said William Buzbee, a constitutional scholar and professor at Georgetown University Law Center.
The pipeline proposed by Calgary-based TransCanada has become a flashpoint in the debate over fossil fuel use and climate change.
Opponents say burning crude from the oilsands of Western Canada would make climate change worse. The $8 billion project’s supporters say it would create thousands of jobs and could be operated safely.
The line would carry up to 830,000 barrels (about 132 million litres) of crude daily along a 1,900-kilometre path from Canada to Nebraska.
Trump trying to ‘evade rule of law’: environmental groups
Stephan Volker, a lawyer for the environmental groups that filed Friday’s lawsuit, said Trump was trying to “evade the rule of law” with the new permit.
“We have confidence that the federal courts — long the protectors of our civil liberties — will once again rise to the challenge and enforce the Constitution and the laws of this land,” Volker said.
The pipeline’s route passes through the ancestral homelands of the Rosebud Sioux in central South Dakota and the Gros Ventre and Assiniboine in Montana. Earlier this week, a court granted the tribes’ request to intervene in an appeal of Morris’s November ruling that was filed by TransCanada. That case is pending before the 9th U.S. Circuit Court of Appeals.
Tribal officials contend a spill from the line could damage a South Dakota water supply system that serves more than 51,000 people including on the Rosebud, Pine Ridge and Lower Brule Reservations.
An existing TransCanada pipeline, also called Keystone, suffered a 2017 spill that released almost 10,000 barrels of oil near Amherst, S.D.
U.S. President Donald Trump called on the Federal Reserve to begin cutting interest rates, saying the economy will take off like a “rocketship” if the Fed begins loosening policy.
Trump, speaking with reporters on the South Lawn of the White House, said that he believes the central bank “really slowed us down” with the four rate hikes it imposed last year.
The president said those were unnecessary because there is “very little, if any inflation.”
“I think they should drop rates and I think they should get rid of quantitative tightening. You would see a rocket ship,” Trump said.
Trump has announced he intends to nominate to conservative political allies — Stephen Moore and former 2012 Republican presidential candidate Herman Cain — for two current vacancies on the seven-member Fed board.
Not meddling, says economics advisor
A top economics adviser to Trump says the administration is not trying to damage the independence of the Federal Reserve by appointing two of Trump’s close political allies to the Fed board.
Larry Kudlow, head of the president’s National Economic Council, says in an interview on the Fox Business Network that the administration is allowed to put people at the central bank who share the president’s views on the economy.
Kudlow was responding to criticism after Trump’s announcements that he plans to nominate conservative political allies — Stephen Moore and former 2012 GOP presidential candidate Herman Cain — to the two vacancies on the seven-member Fed board.
Trump’s choices were seen as escalating an effort by the White House to exert political pressure on the central bank.
Boeing has found another software issue that needs fixing on its 737 Max jets, and the discovery explains why the aircraft maker is delaying its schedule for getting the planes back in the air.
A Boeing spokesman on Friday called it a “relatively minor issue” and said the plane maker already has a fix in the works.
The spokesman, Charles Bickers, said the latest issue is not part of the flight-control software that Boeing has been working to upgrade for months.
That software, known by its acronym MCAS, is suspected in two recent deadly crashes in Indonesia and Ethiopia that led regulators to ground the plane worldwide last month.
FAA defends record
Meanwhile, the acting head of the U.S. Federal Aviation Administration told a senator that safety inspectors who certified the Boeing 737 Max jet are properly trained.
In a letter to the chairman of the Senate Commerce Committee, Daniel Elwell said members of the flight standardization board that evaluated the Max are fully qualified for their jobs.
Committee chairman Roger Wicker wrote in a letter to Elwell that whistleblowers had told senators the inspectors didn’t have all the training required by the agency.
The FAA’s certification of the Max is under scrutiny after the crashes, which killed a total of 346 people.