reality is only those delusions that we have in common...

Saturday, January 13, 2018

week ending Jan 13

 The government versus the central bank: monetary policy as the only game in town - I’ve pointed this out before, but it bears repeating: despite the large buildup in US government debt under Obama, the Obama administration ran a pretty restrictive monetary policy. In fact, compared to the other large, developed economies, Obama actually had the most restrictive post-crisis fiscal stance. Meanwhile the Republicans just passed a tax cut that will give cuts in the first few years to just about everybody that matters in states important to their electoral chances. The potential electoral benefits are so large that, despite the Trump millstone, Democrats are worried and threatening to sue based on the tax bill ‘illegally harming blue states’. Moreover, on average, every income quintile gets a cut. It’s only later when some of those tax cuts get unwound and and taxes start to go up for the middle class on average. Corporations and and the wealthy get to keep their tax benefits. Pretty crafty, huh? As far as the mid-terms go, the Republicans have a pretty good strategy. Democrats talking about deficits don’t. But this whole affair got me to thinking about how the federal government interacts with the central bank.We know the Fed has a dual mandate to keep inflation low and stable and to keep unemployment down. In the Fed’s most recent policy statement it told us it thinks 2.0% inflation and 4.6% unemployment is a good target level. And the implication is that, since we are below that level on the unemployment side, the Fed will have to move rates up a tad to make sure inflation stays manageable. Why doesn’t the federal government think this way? I’m not talking about inflation as a trade-off with unemployment. I mean, why is Jack Lew talking about deficits at all? And why was the Obama Administration running a restrictive fiscal policy when the country was still in deleveraging mode? Shouldn’t they be trying to get to full employment and low inflation, just like the Fed? The way I see it, if the Obama Administration is running a restrictive policy — i.e. an almost 6% fiscal tightening relative to the structural government balance — the Fed has to offset that. In fact, because the Fed is mandated by a 1977 law to pursue low unemployment and inflation, the Fed is guaranteed to offset tight fiscal policy.

Fed Paid $29.3 Billion To Banks 'Not' To Lend In 2017; Gave $80 Billion To Treasury - Yesterday, The New York Federal Reserve announced that it actually increased their $4.2 trillion balance sheet by $1 million rather than shrinking it.This comes on the heels of The Federal Reserve announcing that it provided $80.2 billion in payments to the US Treasury in 2017. This is the lowest remittance to Treasury since 2015, but still positive. The Fed’s $4.45-trillion of assets – including $2.45 trillion of US Treasury securities and $1.76 trillion of mortgage-backed securities that it acquired during years of QE – produce a boatload of interest income. How much interest income? $113.6 billion. Which brings us to excess reserves. Excess reserves—cash funds held by banks over and above the Federal Reserve’s requirements—have grown dramatically since the financial crisis. Holding excess reserves is now much more attractive to banks because the cost of doing so is lower now that the Federal Reserve pays interest on those reserves.  Excess reserves as of the end of 2017 are around $2 trillion and the interest rate paid on excess reserves is now 1.50%.In 2017, the interest that the Fed paid the US banks and foreign banks doing business in the US jumped by $13.8 billion to $25.9 billion. The Fed also paid banks $3.4 billion in interest on securities sold under agreement to repurchase. That brings the amount that the Fed paid to banks of $29.3 billion.The Fed will likely raise rates further this year, perhaps 4 times. This would push the rate on excess reserves to 2.5% by the end of the year. Excess reserves will likely shrink as QE is being unwound, but I am doubtful. And the amount that the Fed pays the banks this year might surge to $40 billion or more (slow shrinking and rising interest paid on Excess Reserves). So, Treasury is receiving a windfall every year from The Fed courtesy of QE. And Treasury receives another windfall from the notorious 2012 profit sweep from Fannie Mae and Freddie Mac.  Yes, Treasury makes good money from The Federal Reserve and having seized the profits from Fannie Mae and Freddie Mac. Will they relinquish control?

Balance Sheet Normalization: When Will Agency MBS Holdings Decline? – NY Fed -  In its September 20, 2017, statement, the Federal Open Market Committee (FOMC) said that, beginning in October 2017, it would initiate the balance sheet normalization program described in the June 2017 addendum to the Committee’s Policy Normalization Principles and Plans. Specifically, to reduce the Federal Reserve’s securities holdings, the FOMC directed the New York Fed’s Trading Desk (“the Desk”) to reinvest each month’s principal payments from Treasury securities, agency debt, and agency mortgage-backed securities (MBS) only to the extent that such payments exceed gradually rising caps. This policy implies that the size of the Federal Reserve’s securities holdings will decline in a gradual and predictable manner over time. In this post, we describe the mechanics of this process for agency MBS and explain why predicting the precise evolution of the size of the MBS portfolio is more difficult than it is for Treasury securities.

Federal Reserve Reform Upstaged by Trump’s Potty Mouth -  Pam Martens -  On Wednesday, the House Financial Services Committee held a hearing on a topic of critical importance to all Americans: restructuring the Federal Reserve into a modern day central bank instead of a captured regulator controlled by the very banks it purports to supervise. Dean Baker, the Senior Economist at the Center for Economic and Policy Research, presented an important assessment of reforms needed at the Fed but you will be hard pressed to find any mainstream media coverage of his testimony. Instead, President Trump’s characterization yesterday of Haiti and African nations as “sh**hole countries” is dominating the news. How much critical work is falling by the wayside because mainstream media, dependent on ratings, elects to pursue only the most sensational stories – which they have no shortage of finding under President Trump.   At Wednesday’s hearing, Baker appeared alongside three other panelists: Dr. Norbert Michel, Director of the Center for Data Analysis at the Heritage Foundation; Alex Pollock, Distinguished Senior Fellow at the R Street Institute; and Dr. George Selgin, Senior Fellow and Director at the Center for Monetary and Financial Alternatives at the Cato Institute – a “nonprofit” which was secretly owned in part by the Koch brothers for decades. Baker provided the most comprehensive assessment of the raging conflicts of interest at the Fed. His written testimony explained the following: “The Federal Reserve System has an unusual status as being a mix of public and private entities. The governors are of course explicitly part of the public sector, as presidential appointees subject to congressional approval. However, the twelve regional banks are private, being owned by the member banks in the district, who have substantial control over the district bank’s conduct. “This structure was put in place more than a century ago to fit the politics and the economy of the time. It is inconceivable that anyone constructing a central bank today would use the same framework…

Key Measures Show Inflation Increased in December -- The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning: According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.3% (3.5% annualized rate) in December. The 16% trimmed-mean Consumer Price Index rose 0.2% (2.8% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics' (BLS) monthly CPI report.  Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers rose 0.1% (1.8% annualized rate) in December. The CPI less food and energy rose 0.3% (3.4% annualized rate) on a seasonally adjusted basis.  Note: The Cleveland Fed released the median CPI details for December here. This graph shows the year-over-year change for these four key measures of inflation. On a year-over-year basis, the median CPI rose 2.4%, the trimmed-mean CPI rose 1.9%, and the CPI less food and energy rose 1.8%. Core PCE is for November and increased 1.5% year-over-year. On a monthly basis, median CPI was at 3.5% annualized, trimmed-mean CPI was at 2.8% annualized, and core CPI was at 3.4% annualized. Using these measures, inflation picked up a little year-over-year in December.  Overall, these measures are close, but still mostly below, the Fed's 2% target  (Median CPI is slightly above).

China May Halt Purchases of U.S. Treasuries – Bloomberg -China added to bond investors’ jitters on Wednesday as traders braced for what they feared could be the end of a three-decade bull market. Officials in Beijing reviewing the nation’s foreign-exchange holdings have recommended slowing or halting purchases of U.S. Treasuries, according to people familiar with the matter. Benchmark bonds reversed earlier gains on the news, with the yield on 10-year Treasuries climbing for a fifth day. China’s foreign-exchange reserves of $3.1 trillion are the world’s largest, though it wasn’t clear whether the recommendations have been adopted. The market for U.S. government bonds is becoming less attractive relative to other assets, and trade tensions with the U.S. may provide a reason to slow or stop buying American debt, the thinking of these officials goes, according to the people, who asked not to be named as they aren’t allowed to discuss the matter publicly. China’s State Administration of Foreign Exchange didn’t immediately reply to a fax seeking comment on the matter.  “With markets already dealing with supply indigestion, headlines regarding potentially lower Chinese demand for Treasuries are renewing bearish dynamics,” said Michael Leister, a strategist at Commerzbank AG. “Today’s headlines will underscore concerns that the fading global quantitative-easing bid will trigger lasting upside pressure on developed-market yields.” The Chinese officials didn’t specify why trade tensions would spur a cutback in Treasuries purchases, though foreign holdings of U.S. securities have sometimes been a geopolitical football in the past. The strategies discussed in the review don’t concern daily purchases and sales, said the people. The officials recommended that the nation closely watch factors such as the outlook for supply of U.S. government debt, along with political developments including trade disputes between the world’s two biggest economies when deciding whether to cut some Treasury holdings, the people said.

China Calls Bloomberg Treasury Report "Fake News", Yields Slide - Less than 24 hours after Bloomberg headlines rang around the world proclaiming China would "slow purchases" of US Treasuries, China’s State Administration of Foreign Exchange, SAFE, pushes back on the report, saying it is "fake news."As Blooomberg reports, SAFE says its investment in Treasuries is based on market conditions and its needs, and adds that it always diversifies investment of FX reverses.Additionally, SAFE says the earlier report may have quoted a wrong source. Following is a translation of a statement from China’s State Administration of Foreign Exchange in response to a report that said China may slow or halt purchases of U.S. treasuries."We are also aware of the news through some media reports. We think the report might have cited wrong sources or may be fake news."China has always managed its forex reserves investments in accordance with the principle of diversification, to ensure the overall safety of FX assets, to maintain and increase their value. Like other investments, FX reserves investments in U.S. treasuries is managed in a professional way according to market conditions and investment needs. China’s FX reserves management department is a responsible investor both for the FX reserves and for the market in which it participates. China’s investments have promoted the stability of international financial markets and the preservation and appreciation of China’s foreign exchange reserves." US 10Y Yields immediately tumbled 2bps, well below the pre-China-headlines levels from this morning...

"Exceptional", Record-Smashing 30Y Treasury Auction, Sends Yields Tumbling - Well, if China isn't buying US Treasurys, someone else certainly is. After yesterday's stellar 10Y reopening auction, today's just concluded sale of $12 billion in 29-year, 10-month paper was an absolute record breaker in terms of foreign demand for the ultra long end. The Auction stopped at a yield of 2.867%, stopping through the When Issued 2.888% by a whopping 2.1bps, one of the biggest stop throughs on record. The Bid to Cover, likewise, soared from 2.479 in the December auction, to a nosbleeding 2.741, the highest since December 2014. The bid/cover over the past year averaged 2.31, with a slightly larger average of 2.35 over the past six months and 2.35 for the four prior second reopening auctions.Commenting on the result, Stone McCarthy said that the auction was "exceptional" and "stopped through the 1:00 p.m. bid side by the largest amount and with the largest bid/cover since December 2014."But it was the internals that were absolutely tremendous, as the as Indirect bidders took down a record 71.5% of the auction today, up 10% from December's 61.9%, while Direct bidders took down 7.3% of the auction, slightly below last month's 9.0%. Predictably, Dealers were left with a record low 21.2%.

Trump to attend Davos economic forum | TheHill: President Trump plans to attend the World Economic Forum in Davos, Switzerland, later this month, the White House announced Tuesday. “The president welcomes opportunities to advance his America First agenda with world leaders,” White House press secretary Sarah Huckabee Sanders said in a statement. Trump, a billionaire businessman who won the presidency by running as an economic populist, would be one of only two U.S. presidents to ever attend the forum. U.S. presidents typically do not attend the gathering in the ritzy Swiss Alps resort town, an effort to avoid being seen as too cozy with some of the world’s wealthiest individuals. The only sitting president to appear in person at the Davos conference was Bill Clinton in 2000. The U.S., however, typically sends a high-ranking delegation. She added that Trump “looks forward to promoting his policies to strengthen American businesses, American industries, and American workers.” The forum, which brings together powerful politicians and business leaders, is scheduled to run from Jan. 23 to 26.

Latest 4Q17 Jumps -- Now Up To 3.3%; Previous 2.8% -- January 12, 2018 - Latest forecast: 3.3 percent — January 12, 2018.The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2017 is 3.3 percent on January 12, up from 2.8 percent on January 10.  The forecast of fourth-quarter real consumer spending growth increased from 3.0 percent to 3.8 percent after this morning's retail sales report from the U.S. Census Bureau and this morning's Consumer Price Index release from the U.S. Bureau of Labor Statistics.

 Is it getting a little warm around here? -- Jared Bernstein -- The front page of my WSJ this AM, above the fold, screams: “Treasury Yields Ripple Through Markets.” The 10-year yield was up for five days straight as of yesterday, approach a 52-week high at 2.609%.The 10-year “breakeven rate,” a market-based measure of inflation expectations (it’s the difference between the 10-year rate on inflation-protected bonds (TIPS) and the 10-year Treasury yield; thus, a measure of expected inflation, 10-years out), rose sharply in recent days, and has cracked 2% for the first time since last spring. The stock market continues to climb. The unemployment rate remains below most measures of the “natural rate,” i.e., the rate thought to be consistent with stable inflation. FTR, we cannot measure the natural rate with any degree of precision, so I wouldn’t make much of this one. What’s more important to that part of the discussion (low unemployment) is what I wrote about at the WaPo today: we are, in 2018, throwing considerably more fiscal stimulus at an economy with already low unemployment than has historically been the case.How unusual is [this]? Well, looking at data back to the late 1940s, the average deficit-to-GDP ratio when unemployment was below 5 percent was close to zero. Since 1980, that same calculation yields an average deficit-to-GDP ratio of 0.5 percent. As I mentioned, the jobless rate this year may average less than 4 percent while the deficit-to-GDP ratio could be about the same, and closer to 5 percent next year. So, pretty unusual.All of which begs the question: are we starting to overheat?My answer is “no.” Heat does not imply overheat. True, both realized and expected rates of interest and inflation are rising, but that’s what I’d expect at this point in the recovery, and they’re still at relatively low levels. Yes, the job market is tightening, but both wages and employment rates imply it is not overly hot.

Key Trade Data Shows Rapidly-Worsening Deficit -- With ECRI’s focus on economic cycles, including a large array of specialized leading indexes, we have a solid read on where we are in the business cycle. But our cyclical vantage point also allows us to distinguish between those economic developments that are cyclical, and those that are structural in nature. While we are strictly nonpartisan, political change is often spurred by economic forces, particularly longer-terms shifts, including those in foreign trade, which figured prominently in the 2016 presidential election. Donald Trump rode to the White House in part on the promise of an economic revival at home, largely by reversing the massive deficits piling up between the U.S. and nearly all its trading partners, China chief among them.A year later, there is an indication that this imbalance has increased against the U.S. and in favor of its trading partners. Trends in the three key sectors of U.S. trade are revealing. The chart shows the U.S. trade surplus in services, along with the trade deficits in both petroleum and non-petroleum goods.Since 2010 the U.S. trade surplus in services has more than doubled – an $11.6 billion increase – leveling off over the last few years.Meanwhile, the petroleum goods trade deficit has shrunk by over $21 billion this decade, to its lowest level this century, and “thanks to the fracking revolution, the U.S. has now become the third-largest producer of crude oil” in the world. This has helped the U.S. to supply about 3.5% of China’s oil imports, but this improvement in petroleum exports has “been swamped by a staggering expansion in [the] non-petroleum trade deficit to a record high” (ICO Essentials, December 2017). The non-petroleum trade deficit has more than doubled since 2010, almost a $39 billion run-up that accelerated in the past year.With the U.S. ramping up the production of oil – an industry synonymous with cyclical booms and busts –this sector’s volatility, combined with “very low trend growth increases the odds that every cyclical slowdown will open up a recessionary window of vulnerability.”

New year, same story: Government shutdown looms - Congress returns today and will immediately dive into a long list of unfinished business held over from 2017. Items to be tackled include funding the federal government and ongoing disaster relief efforts, dealing with a host of unresolved energy tax issues and possibly renewing bicameral talks on broad energy legislation. The first order of business will be preventing a looming government shutdown if it can't strike a federal funding deal. Lawmakers punted final fiscal 2018 spending decisions into the new year before adjourning for the holidays by providing short-term funding to keep agencies running through Jan. 19. Top Republican and Democratic leaders and White House officials are due to meet behind closed doors this afternoon to work on a broad budget agreement that would increase overall discretionary spending levels for both fiscal 2018 and 2019. An accord would then pave the way for appropriators to write all 12 fiscal 2018 spending bills, including those that would fund U.S. EPA and the Energy and Interior departments. The current stopgap is the third continuing resolution Congress has passed since fiscal 2018 began Oct. 1, and allows the government to remain open but flat-funded at fiscal 2017 levels. Thus far, negotiations have not been able to resolve whether both defense and domestic spending accounts would receive "parity" in their increases for fiscal 2018. Both parties support more dollars for the Pentagon, but Republicans have chafed at demands from Democrats that domestic agencies be treated equally. 

As deadline nears, parties lay out divergent priorities - Negotiations between the White House and congressional leaders will continue after parties outlined starkly different budget priorities yesterday, signaling that a final fiscal 2018 spending deal may not be imminent on Capitol Hill. An hourlong bipartisan meeting yesterday did not yield any clear breakthroughs on an impasse that is now into its fourth month. The session, hosted by House Speaker Paul Ryan (R-Wis.), included Senate Majority Leader Mitch McConnell (R-Ky.), House Minority Leader Nancy Pelosi (D-Calif.), Senate Minority Leader Chuck Schumer (D-N.Y.), Office of Management and Budget Director Mick Mulvaney and White House Director of Legislative Affairs Marc Short. Both parties and the White House are aiming for a deal on overall discretionary spending levels for the next two years before current federal funding runs out on Jan. 19 and agencies face their latest threat of a shutdown. Absent an accord, Congress would have to pass another stopgap. Even with something in hand, a brief continuing resolution may be necessary to give appropriators time to write a final fiscal 2018 omnibus. After the meeting, participants emphasized the need for funding the military and border security and warned Democrats against seeking to include immigration policy riders. "We've been clear about these budget priorities from the beginning and hope that further discussions will lead to an agreement soon," said a joint statement from the Republican side. 

 Fitch reiterates U.S. downgrade warning (Reuters) - Fitch reiterated its warning on Wednesday that the United States could lose its prized triple-A credit rating if the country’s debt ceiling is not raised in the coming months. The U.S. Treasury Department will exhaust all of its borrowing options and run dry of cash to pay its bills by late March or early April if Congress does not raise its borrowing limit, the Congressional Budget Office has said. Fitch’s head of sovereign ratings James McCormack told Reuters that even if Washington then continued to make interest payments on its main government bonds, not meeting other domestic obligations “would not be compatible with ‘AAA’ status.” During the debt ceiling showdown in August 2011, Standard & Poor’s stripped the United States of its highest rating. It has since then kept a slightly less sterling grade of AA+ on the world’s largest economy. Like Fitch, Moody’s Investors Service has maintained its top credit rating on the United States.

More Faith Based Budgeting from Mnuchin -  Menzie Chinn -  From Reuters: U.S. Treasury Secretary Steven Mnuchin said on Friday he believed the Republican tax cuts will ultimately become revenue neutral over 10 years due to higher growth, but the Treasury will likely ask Congress for more money to implement the plan.  Just to remind readers, the Treasury’s own one-page “study” does not indicate revenue neutrality (insofar as I can understand it). Nor do any of the formal assessments surveyed by CRFB.  Of course, assuming a sufficiently high growth rate will make the numbers add up: Mnuchin said that for modeling purposes, the plan assumes 2.9 percent annual U.S. growth, but “we do think we can get to three percent or higher.” For perspective, here is a graph showing what needs to happen to potential GDP growth in order to get sustained faster growth.

Answers from the MMTers -  Stephanie Kelton and Randall Wray -- A few days ago, Jared Bernstein posed some Questions for the MMTers in order to gain a “better understanding [of our] arguments.” We appreciate his interest in our ideas and, especially, his direct appeal for clarification of our views.  He raised four big questions, which our Australian counterpart, Bill Mitchell, has already answered in his own three-part series.  What follows is a response from two North American MMTers.

  •  Jared: Overheating is possible, and taxing is a lousy mechanism for dealing with it.  We agree that relying on Congress to raise/lower taxes to fine-tune the economy will not succeed. We agree with Janet Yellen that stronger automatic stabilizers are needed to enhance cyclical stability, taking pressure off lawmakers (and the Fed) to be responsive to changing conditions in the economy. Having said that, we would note that our tax system is likely already too biased to pull in more revenue when the economy booms, as evidenced by the expansion-killing surplus during the Clinton years. We would add, as Jamie Galbraith rightly argues, that overheating, while possible, hasn’t happened in at least two generations.  As Jamie says, “There hasn’t been inflation in the economy since the early 1980s. It collapsed with the end of the Soviet Union and with the rise of China as a supplier for consumer goods. So the Fed has been patting itself on the back for decades [of] holding back a phenomenon that doesn’t exist. [The Fed is like] the little Dutch boy with the finger in the dike who never troubles himself to look over the levy to see that the lake is dry.”  In other words, it’s been a couple of generations since the US economy experienced any significant inflation. Since then, inflation has become a highly global phenomenon.

How Republicans Plan to Revive Earmarks By a Different Name -- When President Trump offered his out-of-the-blue endorsement for the return of congressional earmarks on Tuesday, he broke the first rule of the hesitant House Republican bid to revive them: Don’t call them earmarks.“Our system lends itself to not getting things done, and I hear so much about earmarks—the old earmark system—how there was a great friendliness when you had earmarks,” the president told a group of about two dozen House and Senate lawmakers at the White House, in something of a non sequitur from their effort to reach an immigration accord. “Of course, they had other problems with earmarks. But maybe all of you should start thinking about going back to a form of earmarks. You should do it, and I’m there with you, because this system really lends itself to not getting along.”The lawmakers laughed. Some of them perhaps chuckled nervously, knowing that Trump had waded into politically treacherous waters by giving his blessing to the kind of pork-barrel spending that had become synonymous with Washington corruption. Before Trump had campaigned on “draining the swamp,” earmarks—spending provisions directed to specific local projects or organizations that were often slipped into bills at the last minute with little debate—had been a big part of the muck. Senator John McCain had run an entire presidential campaign in 2008 by pledging to kill federal funding for projects like Alaska’s infamous “Bridge to Nowhere,” a span connecting a small town to an even tinier island for which the state’s representatives had secured earmarks totaling $320 million. Two GOP congressmen, Representatives Randy “Duke” Cunningham of California and Bob Ney of Ohio, and a top lobbyist, Jack Abramoff, had gone to prison for crimes related to earmarks. The lawmakers were accused of abusing their earmarking power to reward contractors and campaign donors in exchange for bribes. When Republicans took the House majority in 2011, one of their first acts was to ban the system once and for all. But as Trump was likely aware, GOP lawmakers were already at work on a return to earmarks—in practice, if not in name. At the direction of Speaker Paul Ryan, the party has begun a review of what it calls “congressionally-directed spending.” Unlike the aggressive Republican efforts to repeal Obamacare and cut taxes last year, this one will be slow, methodical, and above all, cautious

 US Embassy Staff To Become Arms Salesmen As Trump Loosens Weapons Export Policy - A bombshell Reuters report details a major policy change set to be put in place by the Trump administration as early as February, and could result in a massive uptick in arms proliferation and conflict escalation around the world. What's being described as a new "Buy American" plan will involve US diplomats and military attaches stationed across the globe essentially playing the role of middle men for American arms contractors and US defense sales, while also encouraging embassy staff to aggressively promote weapons purchases abroad and allowing for much greater leeway in terms of which foreign entities the US does business with. Though it sounds like the plot from the movie War Dogs - itself based on true events involving Pentagon contractors' black market East European private gun running scheme - this plan could involve the mainstreaming of just the type of weapons trade previously considered sketchy and illegal, existing at the peripheries legally ambiguous covert opsand off the books contract deals. The plan would take the seedy underbelly of the international arms trade into the light of day as official US policy, and would further deputize American diplomats as at the forefront of arms deals. As crazy as this scenario sounds, Reuters has some jaw dropping selections in its report: A key policy change would call for embassy staffers around the world to act essentially as a sales force for defense contractors, actively advocating on their behalf. It was unclear, however, what specific guidelines would be established... “We want to see those guys, the commercial and military attaches, unfettered to be salesmen for this stuff, to be promoters,” said the senior administration official, who is close to the internal deliberations and spoke on condition of anonymity... Trump, a Republican, has the legal authority to direct government embassy “security assistance officers,” both military personnel and civilians, to do more to help drive arms sales. ...embassy staffers would engage more aggressively with foreign counterparts to push for U.S. arms sales and brief visiting senior U.S. officials so they can help advance pending deals, according to a person familiar with the matter. 

Trump Says F-52 Jet Found Only in Call of Duty Sold to Norway – BBC - President Donald Trump has mistakenly said the US sold Norway fighter jets that exist only in a video game.  He said that "F-52s", a fictional warplane from Call of Duty, had been exported to the Scandinavian country. The slip of the tongue came as he hosted Norwegian Prime Minister Erna Solberg at the White House. Lockheed Martin, the defence contractor that makes the actual aircraft sent to Norway, said it did not have an F-52 programme, reports the Washington Post. The White House has not issued a comment on the president's statement.

Donald Trump says he would ‘absolutely’ talk to North Korea’s Kim on phone - US President Donald Trump said on Saturday he would "absolutely" be willing to talk on the phone to North Korean leader Kim Jong Un and that he hopes a positive development results from talks between North Korea and South Korea. North Korea agreed on Friday to hold official talks with South Korea+ next week, the first in more than two years, hours after Washington and Seoul delayed a military exercise amid a standoff over Pyongyang's nuclear and missile programs. Trump, answering questions from reporters at the presidential retreat at Camp David, Maryland, expressed a willingness to talk to Kim but not without preconditions. "Absolutely, I would do that," Trump said. "I have no problem with that at all." Trump and Kim have exchanged insults ever since Trump took office, with Trump repeatedly calling Kim "rocket man" for testing nuclear weapons and ballistic missiles. Earlier this week Trump dismissed Kim's taunt that the North Korean leader has a nuclear button on his desk, saying he has a bigger button. The talks between North Korea and South Korea are expected to cover the Winter Olympics, to be held in South Korea next month, and inter-Korean relations. Trump suggested the talks might lead to an easing of tensions and took credit for the diplomatic breakthrough, saying it was a result of his steady pressure. "Look, right now they're talking Olympics. It's a start, it's big start. If I weren't involved they wouldn't be talking at all right now," he said. 

America Debating "Bloody Nose" Limited Military Strike On North Korea - With North and South Korea set to meet tomorrow amid a hopeful climate of de-escalation and renewed diplomatic relations, the US government has decided to remind Kim Jong-Un that he may well be a dead man walking. Confirming what the Telegraph reported  on December 20, the WSJ writes that  U.S. officials are debating whether it’s possible to mount a limited military strike against North Korean sites without igniting an all-out war on the Korean Peninsula.The idea, which as we previously reported is also known as the “bloody nose” strategy, is simple in execution: as the WSJ describes the sequence of events, the US would react to some nuclear or missile test with a targeted strike against a North Korean facility to bloody Pyongyang’s nose and illustrate the high price the regime could pay for its behavior.  The hope would be to make that point without inciting a full-bore reprisal by North Korea. Of course, such a venture "is an enormously risky idea, and there is a debate among Trump administration officials about whether it’s feasible", especially when it comes to North Korea's neighbor to the south. North Koreans have a vast array of artillery tubes pointed across the Demilitarized Zone at Seoul, the capital of South Korea, with which they could inflict thousands of casualties within minutes if they choose to unleash all-out barrage. Now, that danger is coupled with the risk that the North Koreans could attempt to use a nuclear weapon if they choose to escalate in retaliation to even a single strike. What is perhaps most surprising, is that this debate was "leaked" to the WSJ just as the diplomatic situation with North Korea appeared to be making a turn into something productive, following last week's agreement for a meeting  between North and South Korea. As some have suggested, at this point it is almost in Trump's favor to accelerate a military showdown so as not to lose face if and when South Korea manages to reach some diplomatic arrangement with Pyongyang.

North Korea: "All Our Atomic Bombs And ICBMs Are Aimed At U.S., Not At Southern Brethren, China Or Russia" - While there were some tentative signs of a diplomatic detente and mending of relations between North and South Korea after today's summit between the two nations, the first in more than two years, it appears any attempts to ameliorate tensions hit a sudden hurdle when the United States is brought into the equation. Case in point, as Reuters reports, North Korea said that it would not discuss its nuclear weapons with Seoul because they were aimed only at the United States, not its “brethren” in South Korea. Officials from the two nations sides said they agreed to meet again to resolve problems and avert accidental conflict, amid high tension over North Korea’s programme to develop nuclear missiles capable of hitting the United States, but Pyongyang said disarmament would not be part of the discussions. "All our weapons including atomic bombs, hydrogen bombs and ballistic missiles are only aimed at the United States, not our brethren, nor China and Russia," Pyongyang’s chief negotiator, Ri Son Gwon, said. While disarmament was not on the agenda, more diplomacy was: in a joint statement after 11 hours of talks North Korea pledged to send a large delegation to next month’s Pyeongchang Winter Olympics in South Korea but made a “strong complaint” after Seoul proposed talks to denuclearise the Korean peninsula Meanwhile, North Korea was clear that its beef is not with South Korea, but with just one person: Donald Trump. 

Tillerson and Mattis are reportedly trying to hold Trump back from striking North Korea - The Trump administration is debating a "bloody nose" attack on North Korea, recent reports say, with the president's inner circle split and apparently teetering between endorsing a strike and holding out hope for diplomacy. Both The Telegraph and The Wall Street Journal have portrayed Secretary of State Rex Tillerson and Secretary of Defense James Mattis as trying to caution President Donald Trump against a strike, and the national security adviser, H.R. McMaster, as advocating it. The reports come after months of mixed messages and dozens of shifts in the US's stance on North Korea. The bloody-nose strategy, which calls for a sharp, violent response to some North Korean provocation, puts a lot of weight on the US's properly calibrating an attack on North Korea and Pyongyang's reading the limited strike as anything other than the opening salvo of an all-out war. For that reason, even the limited strike envisioned by North Korea hawks carries a tremendous risk of global — and possibly nuclear — catastrophe. In mid-December, Tillerson made headlines by appearing to announce a major change in the US's North Korea policy. "We're ready to talk anytime North Korea would like to talk, and we're ready to have the first meeting without precondition," Tillerson said. Asked specifically about the apparent shift, the White House said, "The president's views on North Korea have not changed."   Meanwhile, McMaster flew to the opposite end of the spectrum, saying the chance of war was "increasing every day" and telling BBC News the US would "compel the denuclearization of North Korea without the cooperation of that regime" if needed.

How U.S. Intelligence Agencies Underestimated North Korea - NYT — At the start of Donald Trump’s presidency, American intelligence agencies told the new administration that while North Korea had built the bomb, there was still ample time — upward of four years — to slow or stop its development of a missile capable of hitting an American city with a nuclear warhead.  The North’s young leader, Kim Jong-un, faced a range of troubles, they assured the new administration, giving Mr. Trump time to explore negotiations or pursue countermeasures. One official who participated in the early policy reviews said estimates suggested Mr. Kim would be unable to strike the continental United States until 2020, perhaps even 2022.  Mr. Kim tested eight intermediate-range missiles in 2016, but seven blew up on the pad or shattered in flight — which some officials attributed partly to an American sabotage program accelerated by President Barack Obama. And while the North had carried out five underground atomic tests, the intelligence community estimated that it remained years away from developing a more powerful type of weapon known as a hydrogen bomb. Within months, those comforting assessments looked wildly out of date. At a speed that caught American intelligence officials off guard, Mr. Kim rolled out new missile technology — based on a decades-old Soviet engine design, apparently developed in a parallel program — and in quick succession demonstrated ranges that could reach Guam, then the West Coast, then Washington.And on the first Sunday in September, he detonated a sixth nuclear bomb. After early hesitation among analysts, a consensus has now emerged that it was the North’s first successful test of a hydrogen weapon, with explosive force some 15 times greater than the atom bomb that leveled Hiroshima. The C.I.A. and other American intelligence services had predicted this moment would come, eventually. For decades, they accurately projected the broad trajectory of North Korea’s nuclear program. Yet their inability to foresee the North’s rapid strides over the past several months now ranks among America’s most significant intelligence failures, current and former officials said in recent interviews. That disconnect helps explain the confusion, mixed signals and alarm that have defined how Mr. Trump’s untested national security team has responded to the nuclear crisis.

US to loosen nuclear weapons constraints and develop more usable warheads - The Trump administration plans to loosen constraints on the use of nuclear weapons and develop a new low-yield nuclear warhead for US Trident missiles, according to a former official who has seen the most recent draft of a policy review.Jon Wolfsthal, who was special assistant to Barack Obama on arms control and nonproliferation, said the new nuclear posture review prepared by the Pentagon, envisages a modified version of the Trident D5 submarine-launched missiles with only part of its normal warhead, with the intention of deterring Russia from using tactical warheads in a conflict in Eastern Europe.The new nuclear policy is significantly more hawkish that the posture adopted by the Obama administration, which sought to reduce the role of nuclear weapons in US defence.  Arms control advocates have voiced alarm at the new proposal to make smaller, more “usable” nuclear weapons, arguing it makes a nuclear war more likely, especially in view of what they see as Donald Trump’s volatility and readiness to brandish the US arsenal in showdowns with the nation’s adversaries.The NPR also expands the circumstances in which the US might use its nuclear arsenal, to include a response to a non-nuclear attack that caused mass casualties, or was aimed at critical infrastructure or nuclear command and control sites. Wolfsthal said that earlier drafts of the NPR was even more hawkish. The final draft drops proposals to develop a nuclear hyper-glide weapon, and to remove assurances to non nuclear weapons states that the US will not use its nuclear arsenal against them.

Starting ‘all-encompassing war’ with China topped Trump strategist Bannon’s White House agenda, new book reveals | South China Morning Post: An “all-encompassing” war with China was one of the earliest objectives of President Donald Trump’s chief strategist, Steve Bannon, according to Fire and Fury: Inside the Trump White House, a controversial, behind-the-scenes-account of the US leader’s first year in office. “The real enemy, said an on-point Bannon, careful not to defend Trump too much or to diss him at all, was China,” author Michael Wolff wrote in an account of a strategy session two weeks ahead of Trump’s inauguration. “China was the first front in a new cold war,” Wolff wrote, summarising Bannon’s message to former Fox News CEO Roger Ailes at the meeting. “China is where Nazi Germany was in 1929 to 1930,” Wolff quoted Bannon as saying. “The Chinese, like the Germans, are the most rational people in the world, until they’re not. And they’re gonna flip like Germany in the ‘thirties. You’re going to have a hypernationalist state, and once that happens, you can’t put the genie back in the bottle.”Although Bannon left his White House role in August, Washington is on the verge of a trade war with Beijing, a path that aligns with Wolff’s account of Bannon’s over-arching foreign policy goal: conflict with China. Trump ordered investigations into China’s trade and investment policies, moves which may result in punitive action against Chinese goods and investors. While the US and China have not approached the kind of armed conflict that Germany catalysed in the 1930s, friction has been building on the trade and investment front. 

Russia: US exploiting Iran protest to sink nuclear deal | News | Al Jazeera: The United States is exploiting the protests in Iran in order to derail the landmark nuclear deal with the Middle East country, Russia's ambassador to the UN alleged. The comments late on Friday came after the US called an emergency meeting at the UN Security Council to address the deadly demonstrations that began in late December in Iran. "The United States is abusing the platform of the Security Council. Let Iran deal with its own problems," said Russian Ambassador Vassily Nebenzia. "The real reason for convening today is not protect human rights or promote the interests of the Iranian people, but rather a veiled attempt to continue to undermine the Iranian nuclear agreement." Envoys from several other countries - from China to newcomer Equatorial Guinea - also expressed reservations about whether the council was the right forum for the issue. Almost a week of sometimes violent protests left at least 22 people dead, with Iranian authorities accusing the United States, Israel, and Saudi Arabia of involvement. The demonstrations were the most significant anti-government reaction since 2009 protests against alleged election irregularities. 

 Trump To Extend Iran Nuclear Deal, Sanctions Relief - It’s unlikely that Congress will have a comprehensive plan to improve the Iran deal ready by Friday, when the waiver of US sanctions against the Iranian regime is set to expire, the Associated Press reported.  So it’s up to Defense Secretary James Mattis, Secretary of State Rex Tillerson and National Security Adviser HR McMaster to convince President Donald Trump that there’s enough momentum behind a bipartisan accord on addressing Iran’s ballistic missile program and its support for Hezbollah to justify extending the US waiver and keeping the Iran deal intact. Per AP, any decision to waive broad sanctions would likely be accompanied by targeted sanctions against specific Iranian individuals and companies. The old, central bank sanctions largely cut Iran out of the international financial system, and are considered to be the most powerful of the penalties imposed by the U.S. during the Obama era, along with global penalties for buying Iranian oil. Some Iran hawks want to see both sets of restrictions return, but the six people with knowledge of Trump’s plans say the president isn’t planning to reinstate either at this point. The individuals said Trump’s top national security aides appear to have successfully made a different case to the president: Waiving anew for 120 days the nuclear-linked sanctions while simultaneously imposing new measures to punish Iran’s ballistic missile testing, alleged terrorism support and human rights violations. Such a balance could satisfy Trump’s demand to raise pressure on Iran, while not embarking on a frontal assault on the most central trade-offs of the nuclear agreement. While the U.S. and other world powers rolled back economic restrictions on Tehran, the Iranians severely curtailed their enrichment of uranium and other nuclear activity. Trump has complained that many of the Iranian restrictions expire next decade and has vacillated between talk of toughening the deal and pulling the U.S. out entirely. Meanwhile, if Trump changes his mind in the next few days and decides to reimpose the sanctions, Iran would resume its enrichment of uranium - even seeking to make up for lost time - the country’s atomic energy agency has said, according to Russia Today.

Iran nuclear deal: sanctions waived as Trump begins countdown to keep US in -- Donald Trump has waived a raft of sanctions against Iran as required under a 2015 nuclear agreement, staying within the deal for the time being, but the US president warned European allies and Congress it will be the last such waiver he signs if they fail to agree to radical changes. With his announcement, the president in effect began a four-month countdown until the US ceases to comply with its obligations under the agreement. The next sanctions waivers fall due on 12 May. The president laid down conditions for signing those that former diplomats involved negotiating the deal said were all but impossible to meet. The genesis of Trump’s particular antipathy to Iran is hard to pin down.  Before entering office he had been sceptical of Iran’s regional rival, Saudi Arabia. But during the 2016 election campaign all his closest foreign policy advisors, such as Michael Flynn, shared a worldview that portrays Iran as an uniquely malign actor in the Middle East and beyond. After the election, Israel, Saudi Arabia and the United Arab Emirates were successful in capturing the ear of Trump and his son-in-law and top adviser Jared Kushner. Trump said he would work with Congress to amend legislation governing US participation in the agreement, the Joint Comprehensive Plan of Action (JCPOA), but the outcome would have to include immediate access to all sites by international weapons inspectors and the indefinite extension of limits on Iran’s uranium enrichment and other nuclear activities, which have expiration dates under “sunset clauses” in the JCPOA.

Pakistan's Asymmetrical Response To Trump Is A Clever Way To Flip The Tables On Afghanistan --Pakistan’s announcement that it will seek the expulsion of over 1,5 million Afghan refugees in the next 30 days is being tacitly justified by Trump’s tweet and channels his zero-tolerance stance towards immigration from “terrorist”-prone states, but it also represents the employment of reverse-“Weapons of Mass Migration” in pushing Kabul closer towards the edge of collapse and consequently filling the Taliban’s rank of supporters. Trump is going to soon regret what he tweeted about Pakistan on New Year’s Day in accusing it of “giving safe haven to terrorists”, since Islamabad is poised to hit Washington with an asymmetrical counterpunch that it surely won’t forget. The Pakistani government just announced that over 1.5 million Afghan refugees must leave the country within the next 30 days, a plan that it’s been working on for a while but which just received a fresh impetus and internationally-acceptable justification with Trump’s tweet. Had it not been for the American President’s zero-tolerance towards immigration from what his administration labels as “terrorist”-prone countries, which crucially includes Afghanistan for substantial and not political reasons (as the latter relates to Iran’s inclusion and Saudi Arabia’s exclusion), then Pakistan would have risked drawing heavy pressure from the State Department on exaggerated claims that it’s “violating the human rights” of the refugees. Trump, however, said that Pakistan was “giving safe haven to terrorists”, and since the US formally regards Afghan refugees as being too much of a potential security hazard to allow into its own country, it’s forced to accept Pakistan’s expulsion of 1,5 million of them on the implicit basis that they also constitute a serious terrorist threat to the state such as the one that the President just tweeted about. This isn’t at all what Trump meant when he issued his tweet, nor the reaction that he was expecting, but by cleverly exploiting the President’s own policies at home and the suggestion he was making towards Pakistan abroad, Islamabad found a creative way to asymmetrically strike back at Washington.

Pakistan Suspends Military And Intelligence Cooperation With US - In the wake of President Trump’s twitter outburst last week, alleging that Pakistan has given the U.S. “nothing but lies and deceit” accompanied by the suspension of US financial aid, Defense Minister Khurram Dastgir Khan declared that military and intelligence cooperation with the United States are suspended, during an address at the Institute of Strategic Studies in Islamabad on Tuesday.Khan, who was speaking at a seminar titled: "Contours of Security Environment of Pakistan,’ said the U.S. is now facing defeat in Afghanistan after a 16-year war, despite spending billions of dollars. With defeat imminent, he claims the U.S. is using Pakistan as a ‘scapegoat,’ rather than defending and securing the Pak-Afghan border.“Pakistan does not want to put a price on its sacrifices but wants them to be recognized,” Khan added that Pakistan would not allow Afghanistan’s war to be fought on Pakistani soil.Military relations between Pakistan and the United States have stretched as far back as 1947. The Afghan-Pakistan Center of Excellence is a division of United States Central Command (USCENTCOM), with military operations sometimes jointly focused on Afghanistan and Pakistan. It’s widely known that CIA drone bases and U.S. military logistical operations for Afghanistan are located in the country. Kahn emphasized, "a wide field of intelligence cooperation and defense cooperation have been suspended,” but added the supply lines for NATO troops in Afghanistan would remain open. There was little mention of the fate of CIA drone bases operating in the country.

White House preparing for trade crackdown-  President Donald Trump’s administration is preparing to unveil an aggressive trade crackdown in the coming weeks that is likely to include new tariffs aimed at countering China’s and other economic competitors’ alleged unfair trade practices, according to three administration officials. Trump is tentatively scheduled to meet with Cabinet secretaries and senior advisers as soon as this week to begin finalizing decisions on a slew of pending trade fights involving everything from imports of steel and solar panels to Chinese policies regarding intellectual property, according to one of the administration officials. Senior aides are also laying plans to use Trump’s State of the Union address at the end of the month to flesh out the president’s trade vision and potentially preview a more aggressive posture toward China, according to the official. Aides stressed that the specifics are still in flux, but multiple officials told POLITICO that internal conversations have moved beyond the basic question of whether Trump should take tough trade steps and are now focused on what precise measures the president should impose. By turning to trade, Trump is returning to a key campaign pledge that many advisers worry he did not deliver on in his first year in office. And with limited prospects for passing legislation, trade is one of a handful of major policy areas on which the president can act without having to rely on Congress. Aides said the upcoming closed-door trade meetings with the president will help shed more light on his thinking. Trump’s senior advisers have been fighting behind the scenes for months over the direction of his trade agenda, but officials on both sides of the debate said it remained unclear exactly how aggressive the president was prepared to be. 

Renegotiating NAFTA is an opportunity to get trade policy right -- EPI Blog  - The United States, Canada, and Mexico are currently in talks over changes to the North American Free Trade Agreement (NAFTA). Renegotiating NAFTA offers an opportunity to create a new labor template based on long overdue and urgently needed labor standards that are consistently enforced and upheld. In order to accomplish this, we need to update and strengthen current language (based on the May 10, 2007 template). Among other things, there should be fewer limitations on the kinds of labor violations that are covered, and each signatory must be in compliance with the standards set forth prior to joining the agreement. The following recommendations constitute some of the steps needed to achieve these essential improvements to the labor chapter:

  1. Incorporate explicit references to labor standards reflecting the conventions of the International Labour Organization (ILO), including those concerning the freedom of association, collective bargaining, discrimination, forced labor, child labor, and workplace safety and health.
  2. Remove the footnote explicitly limiting the terms of the chapter to the ILO Declaration on Fundamental Principles and Rights at Work.
  3. Eliminate the requirement that labor violations under the agreement must be in a manner affecting trade or investment between the parties.
  4. Eliminate the requirement that labor violations must be sustained or recurring.
  5. Verify that labor standards in the agreement are being honored and enforced by the signatories prior to the agreement going into effect.

Unions, environmental groups and other groups warned about NAFTA’s threat to our economy and security before it came into force in 1994. Unfortunately, our efforts were not enough to overcome the millions of dollars poured into lobbying for the agreement. Since NAFTA went into effect, U.S. (and Canadian) workers have lost thousands of good jobs as corporations moved production to Mexico, wage inequality has skyrocketed, and our national security has been eroded. Despite the assurances that the only jobs that would leave our shores were low-skilled, low-wage jobs, NAFTA has paved the way for U.S. companies to transfer high-skilled, high-wage jobs—like those in aerospace, motor vehicles and parts, and other manufacturing industries, to Mexico—leaving U.S. workers and communities behind.

In possible boon for White House, Fed ready to lay low as tax plan kicks in   (Reuters) - U.S. Federal Reserve policymakers have come to view Donald Trump’s tax overhaul as a short-term economic boost that will neither permanently supercharge the economy, as the president says, or cause an immediate disruption that would require a central bank response, as some analysts have warned. That view emerged in recent interviews with four central bankers across the policy spectrum, from those eager to keep interest rates low, to those more inclined to raise rates as a guard against asset bubbles or any unexpected inflation jolt. The interviews offer the most detailed look yet at a key issue -- whether the changes in the tax code might prompt the Fed to raise rates more quickly and thus blunt the new law’s impact. The issue has divided analysts, with even staff at Congress’ Joint Committee on Taxation assuming an “aggressive” Fed reaction to the new law. But all four of those interviewed by Reuters shared a common conclusion that the law would provide some short-term benefit without raising any near-term risks. They predict that the combination of corporate and household tax cuts will raise growth by up to half a percentage point annually for the next couple of years, and help keep unemployment at near record lows and thus perhaps raise wages. In addition, depending on how companies respond in terms of increased investment, the plan might raise long-run potential growth by a small amount. What they do not see is any great risk that the tax stimulus will fuel inflation or a run-up in asset prices that would prompt the Fed to raise interest rates any faster than it already plans. Though not an endorsement of the legislation, it is an important sign the Fed will not stand in its way. 

Buffett's Berkshire To Reap $37 Billion Benefit From Trump Tax Cuts - For the most glaring example of Trump tax cuts benefiting the rich, look no further than Warren Buffett. According to an analysis by Barclays analyst Jay Gelb, Buffett's Berkshire will be among the greatest beneficiaries of US corporate tax reform. The bank calculates that Berkshire Hathaway’s 4Q book value could see a huge boost of as much as $37 billion (12% increase from 3Q 17 level) resulting from the US corporate tax reform due to a decline in its deferred tax liability (DTL). The one-time increase will result from Berkshire lowering its tax liability on appreciated investments.We would view this magnitude of book value increase as favorable for BRK shares since it is generally valued based on price-to-book value. Based on substantial net unrealized equity investment gains during 2017 and a lowered US corporate tax rate, we estimate Berkshire’s DTL could be $37bn lower (with a corresponding increase to its book value) than it would have been without tax reform. While Barclays concedes that while a reduction in Berkshire's deferred tax liability would be a non-cash item, it notes that as of 3Q 17 Berkshire had $109bn of cash and equivalents, of which the bank views approximately $90bn as being immediately deployable for acquisitions not including potential additional debt capacity. If Berkshire is able to acquire a large business in an all-cash deal, we would typically expect a transaction to be immediately accretive to Berkshire’s EPS.In other words, look for Berkshire to aggressively start purchasing companies in the coming months. Furthermore, Barclays expect the company’s operating earning power - the money made by subsidiaries such as Burlington Northern and Geico -to rise by around 12% in 2018 and beyond as a result of a reduced corporate US tax rate.

How Progressive States Could Fight Back Against the Republican Tax Scam - Dean Baker - The Republican Congress gave themselves and their contributors a huge Christmas present with the tax cut bill they pushed through at the end of last year. They decided to cover the costs in part by whacking Democratic states like California and New York, which have relatively high state and local taxes. The big hit was limiting the amount of state and local taxes that could be deducted. As a result, many upper-middle-class families and rich families will be paying thousands more in taxes each year. While most of these people probably can and should pay more in taxes, this tax increase was explicitly designed to make it more expensive for progressive states to provide services like health care and education to their people. In this context, it's time to take the gloves off. These states absolutely should look to fight back by finding ways to avoid the tax increase. Fortunately, there is a way. States can look to replace much of their income tax with an employer-side payroll tax. This will effectively preserve the tax deductibility of the income tax and even extend this benefit to people who don't itemize. Suppose we replace the 5 percent income tax with a 5 percent employer-side payroll tax. The person's employer will now have to pay 5 percent of the worker's salary or $10,000 to the state. Economists usually think that employer-side payroll taxes are taken pretty much dollar-for-dollar out of workers' wages. The idea is that if an employer is willing to pay $200,000 to hire a worker, they don't especially care whether they are paying that money to the worker or to the government. There will be some complications from this policy. Many people work in one state and live in another. We would want to make sure that this means neither that they escape state taxation nor get taxed by two states. This will require some work, but it is a problem that already exists under the current system.

State Governments Are Already Gaming the Republican Tax Overhaul -- Before the ink was dry on the Republican tax bill signed into law late last month, experts predicted that state governments would try to shield their residents from tax hikes they’ll suffer from a sharp reduction in state and local deductions.It didn’t take long.New York Governor Andrew Cuomo on Tuesday said that the new cap on SALT deductions was an act of “economic civil war,” and promised to fight back by suing the federal government and by changing the state’s tax code to shelter residents from the loss.In California, Senate President Pro Tem Kevin de León plans to introduce legislation this week that would allow residents to donate to a state entity called the California Excellence Fund in lieu of paying taxes — a move intended to sidestep the new federal cap.Under the old federal tax law, most filers could deduct state and local taxes from their federal returns, a benefit that applied to property, income, and other levies. The new law caps the so-called SALT deduction at $10,000, a change that could cost residents of high-tax states billions of dollars. The cap on the SALT deduction hits California and New York hardest, due to their high state taxes and large populations. Connecticut, New Jersey, and the District of Columbia round out the top five jurisdictions where individuals claimed the largest average SALT deductions.   If state lawmakers succeed in working around the new cap on SALT deductions, federal tax collectors would miss out on revenue they’re depending on to fund the corporate tax cuts at the center of the overhaul plan. The California bill builds on a nascent movement among states to provide full and partial tax credits in return for donations that fund tuition vouchers for private and religious schools. In New York, Cuomo promised to explore whether to use charitable contributions to support public programs, while also pursuing a separate plan to shift the state’s revenue collections from income to payroll taxes, which are levied on employers and remain deductible under the federal law. A similar idea described in “The Games They Will Play,” a paper published in December by 13 tax experts, suggested states could replace income taxes with a new payroll levy. States would collect the same revenue, and employers would reduce wages so workers take home the same amount.

 CA May Accept 'Charitable' Donations To Counter GOP Tax Plan - California lawmakers are worried about the impact of the federal GOP tax bill that was just signed into law. In order to fight the pain of the bill, the state may soon begin accepting "charitable" donations, if some state lawmakers have their way. Senate President pro Tempore Kevin de León (D-Los Angeles), along with Senator Ben Allen (D-Santa Monica) and Senator Jerry Hill (D-San Mateo and Santa Clara), introduced legislation this week "to protect California residents from the targeted federal tax increases that were enacted in the GOP's recent tax reform," a press release from the lawmakers states. SB 227 — dubbed the "Protect California Taxpayers Act" — would make it so taxpayers in the Golden State could make a "charitable donation" to the state, according to the lawmakers. In return, the taxpayer would receive a dollar-for-dollar tax credit on the full amount of their contribution. Of the bill, de Leon's office says: Taxpayers will then be able to deduct their contribution to the Fund from their federal taxes, as they have historically done with their state tax payments. SB 227 is modeled after laws Senator de León authored in 2014 – SB 798 and SB 174, which provided tax credits on charitable donations made to state college affordability grants, like the Cal Grant program."The Republican tax plan gives corporations and hedge-fund managers a trillion-dollar tax cut and expects California taxpayers to foot the bill," Sen. de León said. "We won't allow California residents to be the casualty of this disastrous tax scheme."Sen. Hill said the legislation will "protect" Californians from losing money in the new tax plan. The Los Angeles Times first reported on the proposal, noting that charitable donations remain deductible on federal taxes.   "Under the federal measure, residents can deduct $10,000 paid in state and local taxes from their federal taxes. The effects of the new cap would be deeply felt in many suburban areas of California where people typically pay more than that to the state and local governments. Through De León's plan, the first $10,000 would be paid via regular taxes and people would have the option of making a charitable contribution to the state for the remainder," according to the Los Angeles Times.

Agriculture Firms Warn of Unintended Impact of Tax Law - Lawyers and accountants say the overhaul gives cooperatives a significant edge over competitor. The new U.S. tax law has placed Rick Tronson, a North Dakota grain-company operator, in a precarious position by unexpectedly bestowing big benefits on his main competitors.A provision inserted into the tax code during Senate and House negotiations in December gave farmers more lucrative deductions when they sell agricultural products directly to the farm cooperatives he competes against rather than to businesses like his own.Mr. Tronson, whose four storage facilities handle 17 million bushels of grain a year, said the competition could spell the end of his 76-year-old family-owned business.“We’ve made a big investment. And this law, if they don’t change it, the scenario is that we’ll go broke,” he said.Farm groups and agricultural cooperatives battled last year to preserve a deduction on domestic U.S. production, which manufacturers also received. That deduction went away in the tax rewrite, but lawmakers including Sen. John Hoeven (R., N.D.) won the inclusion of a new deduction.

Mixed signals on infrastructure plan emerge from Trump retreat - President Trump expressed misgivings about his administration’s infrastructure plan Friday at Camp David, telling Republican leaders that building projects through public-private partnerships is unlikely to work — and that it may be better for the government to pursue a different path. Then on Saturday morning, Gary Cohn, the president’s chief economic adviser, delivered a detailed proposal on infrastructure and public-private partnerships that seemed to contradict the president. He said the administration hoped $200 billion in new federal government spending would trigger almost $1 trillion in private spending and local and state spending, according to people familiar with his comments. Cohn seemed to present the plan as the administration’s approach, although the president had suggested such an approach might not work. The seemingly contradictory statements, made within 24 hours of each other, show the uncertainty of the administration's approach to its top legislative priority in 2018: building roads, bridges and highways. Trump and his White House have been determined to pitch an infrastructure plan in 2018, despite Republican misgivings about the cost, a rapidly rising deficit and a preference to consider other matters first. White House officials and Hill aides confirmed the president’s comments. Another White House official briefed on the comments said that Trump was musing aloud and that the administration still planned to pursue public-private partnerships for infrastructure. This person, though, said Trump had continually expressed skepticism behind the scenes about such a plan. “He doesn’t think they will work,” this person said. 

White House Asks For $18 Billion To Build 700 Miles Of Border Wall - After yesterday’s meeting with the Senate Working Group on Immigration, Trump told reporters that before agreeing to any legislation enshrining DACA protections into law, Republicans would need to secure more resources for immigration officers, provisions to stop visa overstays and – crucially – legislation limiting chain migration, a topic that Trump has tweeted about regularly since the Halloween terror attack on Manhattan’s West Side Highway. And as the administration braces for the upcoming battle over US immigration policy, they're asking Congress for $18 billion to build 700 miles of new and replacement barrier along the southern border over the coming decade. Construction on the prototypes for Trump’s wall has been completed, and the Department of Homeland Security is ready for next steps: If approved, that would be a major expansion from the 654 miles of barrier now, bringing the total to nearly 1,000 miles, about half of the entire southwest border. According to the Wall Street Journal, the plans are laid out in a document prepared by the Department of Homeland Security for a group of senators who asked the administration to detail its request for border security. The document was described to The Wall Street Journal by two people who had seen it. Presumably, WSJ’s sources attended Thursday’s working group meeting. In total, the administration details about $33 billion in desired new border-security spending, including funding for technology, personnel and roads. The document refers to this as "critical physical border security requirements."

First phase of Trump border wall gets $18 billion price tag, in new request to lawmakers - WaPo - The Trump administration has told lawmakers that it wants $18 billion over the next decade for the initial phase of a Mexico border wall, laying out for the first time a detailed financial blueprint for the president’s signature campaign promise. The money would pay for 316 miles of new fencing and reinforce another 407 miles where barriers are already in place, according to cost estimates sent to senators Friday by U.S. Customs and Border Protection. If the work was completed, more than half of the 2,000-mile border with Mexico would have a wall or other physical structure by 2027. Democratic lawmakers blasted the $18 billion request, first reported by the Wall Street Journal, and it arrived in the middle of delicate budget negotiations that include the risk of a government shutdown Jan. 20 if no deal is reached. “President Trump has said he may need a good government shutdown to get his wall. With this demand, he seems to be heading in that direction,” said Sen. Richard J. Durbin of Illinois, the ranking Democrat on the Senate Immigration subcommittee. CBP provided the funding outline at the request of Durbin and other senators preparing to launch negotiations this month on several contentious immigration issues, including a potential deal to protect the hundreds of thousands of young immigrants who will be subject to deportation when the Deferred Action for Childhood Arrivals (DACA) program expires, beginning in March. The Washington Post’s Ed O’Keefe takes a look at President Trump’s demands in the negotiation over a program shielding young undocumented immigrants from deportation. (Bastien Inzaurralde/The Washington Post) With their votes needed to keep the government open, Democrats are looking to use their leverage in the spending talks to force the Republicans who control Congress to reach a deal on DACA.

Immigration advocates: DACA deal likely to give Trump his wall - McClatchy - Top immigrants’ rights advocates advising Democrats on Capitol Hill say any deal to protect Dreamers this month will have to allow President Donald Trump to take credit for a border wall. Conceding that any eventual deal will need Trump’s blessing to win over Republicans in Congress, they laid out a list of border security measures Friday that they hope would allow Democrats to negotiate a deal they could attach to a bill to continue government spending after Jan. 19. Lawmakers are trying to find a solution for the more than 800,000 recipients of the Deferred Action for Childhood Arrivals program before Trump ends the program March 5. Democrats in Washington have said they don’t want to trade a wall for protections for DACA recipients, who were brought into the country illegally by their parents as children. Republicans want any deal on DACA to correspond with increased border security. Some in the party also want to use the negotiations to overhaul the country’s legal immigration system. Frank Sharry, founder and executive director of the immigration reform group America's Voice, told reporters Friday that the “deal space” on DACA likely includes Democrats signing off on “money for border security,” plus “some fence repair and augmentation.” “Democrats will say, ‘we did not cave on a wall’, because it’s not going to be a concrete wall,” said Sharry. “Donald Trump will say, ‘I got my wall.’” 

Judge blocks Trump move to end DACA | TheHill: A federal judge in San Francisco on Tuesday temporarily blocked the Trump administration from ending the Deferred Action for Childhood Arrivals (DACA) program that protects certain immigrants from deportation. Judge William Alsup said the Obama-era program must remain in place while litigation over Trump’s decision to end the program plays out. In a court ruling, Alsup said the Department of Homeland Security's "decision to rescind DACA was based on a flawed legal premise." As a result, DACA recipients who failed to renew their status by last year’s deadline will have a chance to submit renewal applications. The decision does not, however, allow new applications to be submitted. "Dreamers' lives were thrown into chaos when the Trump Administration tried to terminate the DACA program without obeying the law," said California Attorney General Xavier Becerra, referring to DACA recipients. "Today's ruling is a huge step in the right direction." "America is and has been home to Dreamers who courageously came forward, applied for DACA and did everything the federal government asked of them," Becerra added. "They followed DACA's rules, they succeeded in school, at work and in business, and they have contributed in building a better America. We will fight at every turn for their rights and opportunities so they may continue to contribute to America." President Trump Donald John TrumpHouse Democrat slams Donald Trump Jr. for ‘serious case of amnesia’ after testimony Skier Lindsey Vonn: I don’t want to represent Trump at Olympics Poll: 4 in 10 Republicans think senior Trump advisers had improper dealings with Russia MORE announced in September that he would rescind the program, which allows certain immigrants who arrived in the U.S. illegally as children to stay and work without fear of deportation. DACA was among the issues discussed at a bipartisan immigration meeting on Tuesday. Trump indicated he would support what those in the room came up with, adding that he was willing to “take the heat” to back a bipartisan deal. 

Trump says he’ll take heat for immigration deal | TheHill: President Trump offered support for sweeping immigration legislation at a White House meeting on Tuesday, sending the signal he’s willing to embrace a bipartisan deal in a midterm election year with the GOP’s congressional majorities in play. Presiding over an unusually public negotiating session, Trump engaged with lawmakers from both parties with the television cameras rolling for about an hour on issues ranging from the Deferred Action for Childhood Arrivals (DACA) program and border security to earmarks. Trump expressed a willingness to be flexible in brokering an agreement that would prevent a government shutdown and listened intently to political allies and rivals alike. “I think my positions are going to be what the people in this room come up with,” Trump said during a Cabinet Room meeting with roughly two dozen lawmakers. “If they come to me with things that I’m not in love with, I’m going to do it, because I respect them.” He suggested he was willing to take on his own political base, saying he was willing to “take the heat” in backing a bipartisan deal. “I’ll take the heat off both the Democrats and the Republicans,” he said. Besides underlining a willingness to negotiate, the performance seemed intended to turn the page on the controversy surrounding a bestselling book about his administration and silence questions about his mental fitness. The White House initially billed the meeting as closed to the press, but in a surprise move a group of journalists was allowed to observe the meeting for roughly 55 minutes as Trump went around the room to seek input from Democrats and Republicans alike on one of the most heated issues in American politics. “This open press bipartisan meeting in the cabinet room is how you show not tell how you’ve got a handle on things. Fascinating,” tweeted Dana Perino, who served as President George W. Bush’s White House spokeswoman. White House press secretary Sarah Huckabee Sanders told reporters that Trump and others wanted the media, and the public, to witness the group at work. 

Guess Which Line Was Missing From the Transcript of Trump’s Immigration Meeting - As part of his ongoing effort to prove he’s “a very stable genius” and “like, really smart” following the release of a book that portrays him as the exact opposite, on Tuesday afternoon President Trump held a televised meeting with members of Congress on the topic of immigration.  This did not go as planned. The most notable moment was when Trump responded with enthusiasm to Democratic senator Dianne Feinstein’s suggestion that they pass a “clean” bill making the Deferred Action for Childhood Arrivals program permanent. House Majority Leader Kevin McCarthy quickly jumped in to remind Trump that Republicans don’t want to protect DACA recipients without getting some border-security measures (or maybe even a big, beautiful wall) in return.  But that’s not what one might take away from the exchange if, for some reason, they opted to read the transcript released by the White House. The Washington Post’s Ashley Parker noticed that the line where Trump agrees with Feinstein’s proposal — saying, “Yeah, I would like to do it” — is “curiously missing” from the document. When the Post asked about it, a White House official “said that any omission from the transcript was unintentional and that the context of the conversation was clear.”  Surely, this was all an honest mistake. Video of the meeting is widely available online, so it would be a bit silly to try to mitigate Trump’s mistake in the official record. Plus, there’s absolutely no evidence that Trump has ever denied remarks that were caught on tape, or tried to convince people that their memory of something they saw with their own two eyes wasn’t accurate.

Trump: "Why Are We Having All These People From Shithole Countries Come Here?"- While a bipartisan senate group had reportedly reached an "agreement in principle" on DACA, as well as packaging immigration reform in order to avoid a government shutdown next Friday, things took another turn for the bizarre, when the WaPo reported that Trump "grew frustrated with lawmakers Thursday in the Oval Office when they floated restoring protections for immigrants from Haiti, El Salvador and African countries" as part of the proposed deal. "Why are we having all these people from shithole countries come here?" Trump burst out, referring to African countries and Haiti. Instead, he suggested that the United States should instead bring more people from countries like Norway.  The comments left lawmakers "taken aback." Sens. Lindsey O. Graham (R-S.C.) and Richard J. Durbin (D-Ill.) proposed cutting the visa lottery program by 50 percent and prioritizing countries already in the system, a White House official said.As reported earlier, the administration announced this week that it was removing the protection for over 200,000 citizens from El Salvador; meanwhile, as part of a potential bipartisan deal, lawmakers discussed restoring protections for countries that have been removed from the temporary protected status program while adding $1.5 billion for a border wall and making changes to the visa lottery system.And, as so often happens, what was until noon a tentative deal, exploded in the afternoon when Trump changed his mind:Trump had seemed amenable to a deal earlier in the day during phone calls, aides said, but shifted his position in the meeting and did not seem interested. As a result, what was until just hours ago a done deal, is now in tatters.  “We still think we can get there,” White House press secretary Sarah Huckabee Sanders said at the daily White House news briefing. Or maybe not, in which case a government shutdown may be inevitable.

Haiti Summons US Official To Explain Trump "Shithole" Comment -- The Haitian government has reportedly summoned a US official to explain why President Trump referred to the island nation as a "shithole," along with several other nations including El Salvador and some African countries.  Haiti's ambassador to the United States, Paul Altidor, reportedly told NBC News contributor Yamiche Alcindor that he and the Haitian government vehemently condemn the US President's comments, suggesting that they were based on stereotypes. Haiti’s US Ambassador Paul Altidor tells me Haiti’s government has formally summoned a US official to explain Trump’s comments to Haiti’s officials. “Haitians fought along US soldiers in the revolutionary war and we continue to be great contributors to American society,” he said— Yamiche Alcindor (@Yamiche) January 12, 2018 “Haitians fought along U.S. soldiers in the Revolutionary War and we continue to be great contributors to American society,” said Altidor, an economist who attended college and graduate school in the U.S. after his family moved there.  Trump's comment came after a bipartisan senate group had reportedly reached an "agreement in principle" on DACA and immigration reform in order to avoid a government shutdown next Friday, when the President "grew frustrated with lawmakers Thursday in the Oval Office" who proposed protections for immigrants from Haiti, El Salvador and African countries" as part of the ongoing discussion.

    "Shithole": The Word That Could Shutdown A $4 Trillion Federal Government - As the mainstream media once again loses its collective mind over Trump's "shithole" comment, Congress, after expressing optimism just a few days ago, has once again descended into complete chaos with any hopes of a bipartisan immigration deal seemingly being tossed...well, down the "shithole."  Unfortunately, this particular descension into chaos, unlike most of the others which are cleverly manufactured by seasoned politicians purely for soundbites on CNN, carries with it some real world economic risk as it could very well result in a government shutdown starting next Friday.  In fact, earlier this morning, Senator Dick Durbin (D-IL) confirmed as much when he held a press conference saying that all hope of a bipartisan deal "died yesterday." "So here’s what we’re going to do: We’re going to prepare our bipartisan agreement for introduction into the Senate next week. If the Republican leadership has a better alternative, bring it forward. If they don’t, for goodness sakes, give us a vote. I’ll be on the phone today with my Republican colleagues and my Democratic colleagues begging them to support this measure.""Time is running out. We have to get this done. I thought we might get a bipartisan agreement approved by the White House, died yesterday. We have to do this and show leadership in Congress to solve this important challenge."  As Bloomberg  notes, the chaos on immigration comes a week before the current government spending authorization expires on January 19th. Of course, as our readers are aware, even though Republicans hold control of Congress, their narrow 51-seat advantage in the Senate means they will need at least 9 Democratic votes for any stopgap funding measure as well as for a broader budget agreement. Meanwhile, Democratic leaders have insisted that Congress must pass a law protecting some young immigrants along with the funding. After bizarrely telling a bipartisan group of lawmakers earlier this week that he’s willing to sign whatever compromise on immigration they present, Trump vehemently rejected a plan worked out on Thursday and savaged the proposal on Twitter as “a big step backwards.”

    Trump's 'shithole' remark makes global headlines – but it doesn't quite translate - Donald Trump’s description of Haiti, El Salvador and unspecified African countries as “shitholes” in an Oval Office meeting with US senators to discuss immigration on Thursday quickly shot around the world.  But by the time the story arrived on screens and front pages in some countries the offensive language had been somewhat lost in translation, while in the more conservative corners of America – Utah, network TV – it was hidden by euphemism. Taiwan’s central news agency led the confusion in Asia by translating “shithole countries” as, in phonetics, “niao bu sheng dan de guo jia”, which means, mysteriously, “countries where birds don’t lay eggs”. In China, the People’s Daily decided it meant “countries that suck”, while Vietnam’s Youth newspaper in Ho Chi Minh City went for “rubbish states”. In Europe, Greece’s daily Ta Nea settled on “thieving countries”.  France’s venerable Le Monde did not quite get there with “pays de merde” – shit countries. But a sister French news site, Courrier International, went straight for the jugular with “trou a merde”, or hole of shit. It further felt the need to explain the phrase, in French, which the Guardian re-translates to the best of our ability here: “Literally, shithole means hole of shit, and refers to toilets and, by extension, backwaters, ‘ratholes’.” The headline in Poland’s liberal daily Gazeta Wyborcza, based in Warsaw, referred to “Donalda Trumpa” slamming “imigrantach z zapudia”, which means immigrants from either shitholes, hellholes or “nowhere”. Meanwhile, in some of the countries Trump insulted, there was no confusion. Digital news site La Pagina in El Salvador referred in its headline to “agujeros de mier…”, which is the equivalent of saying “s…holes”. Haiti’s oldest daily newspaper, Le Nouvelliste, ran a coy and cryptic headline in French meaning simply: “The Haitian government condemns Trump’s words.” But in the body of the story itself it dispensed with both modesty and asterisks and referred plainly to “un trou de merde”. The government of Botswana posted a tweet announcing that it has “enquired from the US Government, through the ambassador, to clarify if Botswana is regarded as a “shithole” country.” It said it viewed “the utterances as highly irresponsible, reprehensible and racist.”

    Report: 60+ Immigrants Killed After Being Deported, Despite Warnings to U.S. Officials - In a shocking report in The New Yorker published Monday, students at Columbia University's Graduate School of Journalism have identified more than 60 instances in which undocumented immigrants who were deported from the U.S. were killed shortly after returning to their home countries. The team based its numbers on interviews with more than 200 legal-aid groups, shelters, NGOs, families, and mortuaries across Central America— the U.S. government doesn’t track such records—and spanned the Obama and Trump administrations. Dozens of living deportees who were tracked down described widespread violence and living in fear. Further, more than a dozen women seeking asylum told the Columbia team that U.S. Customs and Border Patrol agents did not ask them the required questions about the threat facing them at home, ignored rights of due process, or were mocked or sexually threatened after protesting.

    Trump Exceptionalism Will Kill Every Last One Of Your Brain Cells -- “I can’t believe in the history of the White House any president has ever spoken the words that I heard our president speak yesterday.” That was Senator Dick Durbin’s reaction to Donald Trump’s instantly infamous “shithole countries” remark. But what I can’t believe is that a United States Senator (and grown man) could think Donald Trump was the first foul-mouthed racist to inhabit the Oval Office. We have LBJ on tape saying the n-word, after all, and there was almost no ethnic group that Richard Nixon didn’t make a bigoted comment about at one point or another. (His White House tapes contain remarks about “Jews, blacks, Italian-Americans and Irish-Americans.”)We can dismiss Durbin’s remark as a bit of rhetoric, of course. But many Democrats do actually believe, implicitly or explicitly, in a form of “Trump Exceptionalism,” which holds that Donald Trump is an entirely aberrant departure from previous presidents, whose conduct is of an unprecedented level of awfulness.  In narrating Trump’s presidency as totally different from what came before, though, they often end up exaggerating the extent to which Trump’s actions are actually unprecedented (or “unpresidented”). That’s a concerning tendency because it lead to the forgetting of history, but also because it ends up exonerating prior presidents for inexcusable acts. Exhibit A here is the rehabilitation of George W. Bush, who is responsible for an inconceivable amount of death and carnage, but who is increasingly seen as dignified and statesmanlike when compared to Donald Trump. Bush himself encourages that view by occasionally issuing denunciations of Trump’s less defensible outbursts. The more Trump is depicted as an aberrant departure from a sound and principled norm, the better Bush seems. The irony here is that so far, measured on Number Of Illegal Wars That Killed Half A Million Innocent People, Bush is far worse than Trump. And though Trump’s immigration policies are uniquely cruel, much of the rest of Trump’s agenda is simply orthodox Republican politics. Massive tax cuts for corporations, gutting consumer protection, eliminating ObamaCare: I struggle to think of any of Trump’s policies that put him outside the mainstream of the Republican Party.

    Popular H-1B visa bill getting tripped up in the Senate = A White House-backed plan to make it harder for Indian outsourcing companies to displace U.S. workers is moving through the U.S. House, but it’s likely to hit a dead end in the Senate, where Republicans and Democrats have little interest in addressing H-1B visas outside of a bigger immigration deal. For Democrats, it’s about first fixing DACA – the program that protects from deportation more than 700,000 young people brought illegally into the country as kids. “DACA is priority 1, 2 and 3 right now,” a Senate Democratic leadership aide said of the Obama-era program that President Donald Trump terminated last year. “And there is zero chance, timing wise, legislative calendar wise, etc. of some other immigration measure coming up before DACA. It’s not even a situation worth contemplating.” For Senate Republicans, reluctance to advance the House’s H-1B bill reflects a desire to draft a bigger bill that reduces legal immigration by curbing diversity visas and tightening chain migration, which allows immigrants to help family members into the United States. “When they have powerful sub-issues that have broad constituencies and make a lot of sense — this will sound crazy and probably is why people think Washington is broken — but things like that should move quickly, particularly if it has broad agreement,” said GOP strategist Matt Mackowiak. “But ultimately both sides want to use those popular issues in broader bills, to pass the broader bills.” 

    The leading lobbying group for Amazon, Facebook, Google and other tech giants is joining the legal battle to restore net neutrality - A leading lobbying group for Amazon, Facebook, Google, Netflix, Twitter and other tech giants said Friday that it would be joining the coming legal crusade to restore the U.S. government’s net neutrality rules. The Washington, D.C.-based Internet Association specifically plans to join a lawsuit as an intervening party, aiding the challenge to FCC Chairman Ajit Pai’s vote in December to repeal regulations that required internet providers like AT&T and Comcast* to treat all web traffic equally, its leader confirmed to Recode. Technically, the Internet Association isn’t filing its own lawsuit. That task will fall to companies like Etsy, public advocates like Free Press and state attorneys general, all of which plan to contend they are most directly harmed by Pai’s decision, as Recode first reported this week.  As an intervener, though, the Internet Association still will play a crucial role, filing legal arguments in the coming case. And in formally participating, tech giants will have the right to appeal a judge’s decision later if Silicon Valley comes out on the losing end. “The final version of Chairman Pai’s rule, as expected, dismantles popular net neutrality protections for consumers,” said the group’s chief, Michael Beckerman, in a statement. “This rule defies the will of a bipartisan majority of Americans and fails to preserve a free and open internet.”  “IA intends to act as an intervenor in judicial action against this order and, along with our member companies, will continue our push to restore strong, enforceable net neutrality protections through a legislative solution,” he continued.

    Senate bill to reverse net neutrality repeal gains 30th co-sponsor, ensuring floor vote | TheHill: A Senate bill that would reverse the Federal Communications Commission’s (FCC) decision to repeal net neutrality received its 30th co-sponsor on Monday, ensuring it will receive a vote on the Senate floor. Sen. Claire McCaskill(D-Mo.) announced her support for the bill on Twitter, putting it over the top of a procedural requirement to bypass committee approval. The bill, which is being pushed by Sen. Ed Markey (D-Mass.), would use Congress’s authority under the Congressional Review Act (CRA) to reverse the FCC’s rollback of its popular net neutrality rules.“We’ve reached the magic number of 30 to secure a vote on the Senate floor, and that number will only continue to climb,” Markey said in a statement Monday. “Republicans are faced with a choice — be on the right side of history and stand with the American people who support a free and open internet, or hold hands with the special interests who want to control the internet for their own profit.” Under the CRA, if a joint resolution of disapproval bill has enough support it can bypass committee review and be fast-tracked to a floor vote. If the bill is passed and signed into law, it would vacate the FCC's vote last month and prohibit the agency from ever trying to repeal the rules in the future. Lawmakers have 60 legislative days after the FCC submits its regulations to Congress to pass the CRA. The repeal order is currently awaiting approval from the Office of Management and Budget. With Republicans in control of both the House and Senate, the bill faces long odds to win the simple majorities it needs to reach the president’s desk. But Democrats and activists see a clear upside in forcing GOP lawmakers to take an official stance during an election year on the consumer protections, which polls have shown to be popular among voters. 

     Senate bill to block net neutrality repeal now has 40 co-sponsors | TheHill: A Senate bill that would block the Federal Communications Commission (FCC) from repealing its net neutrality rules now has 40 co-sponsors, Senate Democrats announced Tuesday. The news comes just a day after the bill won its 30th co-sponsor, ensuring that it has enough support to clear a procedural threshold and get fast-tracked to a floor vote. It appears unlikely that the bill will pass, but Democrats see political value in forcing Republicans to take a stance on the issue. Polls have found that a large majority of the public supports keeping the net neutrality rules. Sen. Ed Markey (D-Mass.) made the announcement alongside a handful of Senate Democrats, including Minority Leader Charles Schumer (D-N.Y.).The bill would use authority under the Congressional Review Act (CRA) to block the FCC’s repeal from going into effect. And with more than 30 senators on board, the legislation will be able to bypass the committee approval process and Democrats will be able to force a vote on the floor. Still, assuming every Democrat backs the legislation, they will still need at least two Republicans to join them for it to pass. But even if the bill fails, Democrats think they can use the roll call vote to give Republicans headaches in this year’s midterm elections. “There will be a political price to pay for those who are on the wrong side of history,” Markey said. 

    The Overton Window and Trump’s Judges - In its first year in power the Trump administration has done to the federal judiciary what it has done more broadly to American political discourse. It has moved the courts far to the right, beyond prior boundaries, by relentlessly nominating conservative ideologues, with and without appropriate experience, to life-tenured jobs on the bench. Thanks to the Republican-controlled Senate, which has rushed to confirm most of these picks, we now have a growing cadre of Federalist Society-infused jurists who will be meting out their particular brand of injustice for generations to come. Justice Neil Gorsuch, now ensconced on the Supreme Court, is the most notable example of the political theory known as the “Overton Window.” It posits that there is a relatively narrow range of ideas politicians can consider and still win re-election. However window can be moved right or left by the persistent introduction and discussion of once-unthinkable ideas. President Trump has moved the window with his racist, ignorant, nativistic, and misogynistic rhetoric. His administration has moved the window with prejudiced, self-defeating, delusional policies. And the White House’s judicial picks have changed the nature of our conversation about what it means to be an Article III judge. Gorsuch, who on some issues makes the late Antonin Scalia seem like William Brennan, seems reasonable and mainstream only in contrast to fellow Trump nominees such as Don Willett, confirmed last month to the 5th U.S. Circuit Court of Appeals, John K. Bush, confirmed in July to the 6th U.S. Circuit Court of Appeals, and Thomas Farr, a nominee to the federal trial bench in North Carolina. Willett, beloved by journalists for his Twitter wit, during his tenure on the Texas Supreme Court little more than a mouthpiece for his political benefactors, conservative megadonor Foster Freiss (who is contemplating a 2018 U.S. Senate run from Wyoming), and evangelist James Dobson, founder of Focus on the Family. He campaigned for the state bench, and then for re-election, as a conservative jurist who would champion pro-life, gun-rights, homeschooling causes.

     White House Takes First Step To Attach Work Requirements To Medicaid -- After passing the Trump tax cuts late last year, the White House revealed that immigration, welfare reform and the administration’s nascent infrastructure plan would be its top priorities in 2018. And while lawmakers say they’re close to a tentative immigration compromise to preserve DACA protections by packaging them with a border-security package that will presumably include some funding for the president’s promised border wall, the White House is already starting its crackdown on Medicaid. To wit, the administration issued guidance early Thursday that will force people trying to collect Medicaid that they are working, or preparing to work. The policy change, according to the Washington Post, is the biggest blow to Medicaid in the program’s 50-year history.  However, it’s widely expected that any attempts to implement this policy will be met with a court challenge by the states, which administer Medicaid, and advocacy groups. To be sure, 10 states are already lined up to adopt the new policy. They’re just waiting for federal permission to impose work requirements on able-bodied adults in the medicaid program. Furthermore, three other states are contemplating them. Health officials could approve the first waiver - probably for Kentucky - as soon as Friday, according to two people with knowledge of the process. As WaPo explains, the trend of imposing limits on Medicaid began two decades ago when a system of unlimited cash assistance was replaced by the Temporary Assistance for Needy Families. The guidance represents a fundamental and much-disputed recalibration of the compact between the government and poor Americans for whom Medicaid coverage provides a crucial pathway to health care. The idea of conditioning government benefits on “work activities” was cemented into welfare more than two decades ago, when a system of unlimited cash assistance was replaced by the Temporary Assistance for Needy Families with its work requirements and time limits. The link between government help and work later was extended to anti-hunger efforts through the Supplemental Nutrition Assistance Program, as food stamps are now called. But most health policy experts, including a few noted conservatives, have regarded the government insurance enabling millions of people to afford medical care as a right that should not hinge on individuals’ compliance with other rules.

    Trump asked ‘Why can’t Medicare simply cover everybody?’ before pushing Obamacare repeal- CNBC - President Donald Trump once asked aides, "Why can't Medicare simply cover everybody?" before eventually pushing for a repeal and replacement of Obamacare, a new book claims.Trump, according to the book "Fire and Fury" by Michael Wolff, "probably prefers the notion of more people having health insurance than fewer people having it.""He was even, when push came to shove, rather more for Obamacare than for repealing Obamacare," Wolff writes in describing Trump's mindset after winning election in November 2016."In fact, he probably favored government-funded health care more than any other Republican," said Wolff in his book, which has been roundly denounced by the Trump administration.Republicans have adamantly opposed Obamacare since before it became law in 2010.And no government-funded health-care program other than Medicaid, which covers 68 million people, provides coverage to more people than Medicare.The Medicare program currently covers nearly 59 million beneficiaries, most of them age 65 and older.Sen. Bernie Sanders, I-Vt., and other progressives have called for Medicare to be expanded to cover every American, replacing the current health-coverage system, which is a hodgepodge of private and public insurance plans. Obamacare is just one, relatively small part of that system.

     Trump health pick wary of government drug price negotiations (AP) — Empowering Medicare to negotiate drug prices could leave patients with reduced access to medications, President Donald Trump's pick for health secretary warned Tuesday. Alex Azar, a former pharmaceutical and government executive, acknowledged to the Senate Finance Committee that drug prices are too high and said he'd work to lower them if confirmed as secretary of Health and Human Services. But he said allowing Medicare to negotiate drug prices across the board would risk restricting choice for patients, since the government would have to establish an approved list of discounted medications. As a candidate, Trump called for allowing Medicare to negotiate drug prices. Yet there has been no proposal from Trump's administration in the year he has been in office, though the Food and Drug Administration is acting to promote competition from generic drugs. "If anybody's counting on 2018 to be the year the Trump team springs into action on drug pricing ... they're in for disappointment," said Sen. Ron Wyden, D-Ore. Azar's comments reflected concerns traditionally heard from the business wing of the GOP. He was responding to questions from Sen. Debbie Stabenow, D-Mich., who said she's concerned about what direction he would take if confirmed. The finance panel is expected to vote soon on sending Azar's nomination to the full Senate for a final decision. Stabenow asked Azar if he favors allowing Medicare's prescription drug program — known as Part D — to negotiate with the pharmaceutical industry, which is currently prohibited. Azar responded that the private insurance plans delivering the drug benefit are already negotiating some of the lowest prices.

    Tillerson defends Trump’s mental health - US Secretary of State Rex Tillerson says he has never doubted President Trump's mental health after a new book claimed staff saw him as a child. Author Michael Wolff said White House employees believed Mr Trump's "mental powers were slipping". His book, Fire and Fury: Inside the Trump White House, went on sale early despite the president's attempts to block its publication. Mr Trump says the book is "boring and untruthful" and Wolff a "total loser". He said it was being pushed by the media and others to hurt him. He added in a tweet: "They should try winning an election. Sad!" Mr Tillerson - who is alleged to have called Mr Trump a moron last year - told CNN: "I have no reason to question his mental fitness." He said Mr Trump was "not typical of presidents of the past". "I think that's well recognised. That's also though why the American people chose him," he said.

     The Washington Post Lied While Correcting President Trump’s 1,950 Lies -- The Washington Post put out an in-depth analysis of President Trump’s 1,950 lies and misleading claims over his first year in office. It’s an impressive feat since the Post had to fact-check everything and allow Trump’s third-grade-level speeches to enter its fact-checkers’ earholes, a punishment I wouldn’t wish on my worst enemies.  The writers at the Washington Post are correct that lies spray out of Trump’s face with the force of an untethered fire hose. They’re also correct that almost every statement by Trump is either false or misleading. However, the irony is that almost every statement the Washington Post prints in correcting Trump’s lies is in itself a lie or misleading statement. So, to be clear, I’m not saying Trump is not lying. I’m saying that the way in which our mainstream media correct him is also meant to deceive us. The Washington Post starts with December and counts backward through the year. Here are my corrections to its corrections to Trump’s lies. (This is only a few weeks’ worth, but you’ll probably get my gist and need to purge yourself in a bathroom immediately.) The quote on the left is from Trump. The writing to the right is the Post’s correction.

    Upcoming OIG Report Likely To Trigger Second Special Counsel; Comey, Lynch And Clinton In Crosshairs - While most of the MSM fixated last week on whether or not President Trump eats McDonald's in bed while watching Gorilla TV, a flurry of investigative bombshells involving Hillary Clinton, the Clinton Foundation, and conduct by the FBI's top brass during the 2016 election splashed across the headlines. As a quick review:

    • The DOJ is "taking a fresh look" into the Hillary Clinton email 'matter'
    • The FBI has launched a new investigation into the Clinton Foundation the day after the Clinton's Chappaqua property catches fire
    • Former FBI Director James Comey's full Clinton memo was released, revealing felony evidence of changes which "decriminalized" Hillary Clinton's behavior. Oh, and every one of the memos he leaked to his Cornell professor buddy was classified, per a sworn statement by the FBI's "chief FOIA officer" in a sworn declaration obtained by Judicial Watch.
    • The House Intelligence Committee will be granted access to "all remaining investigative documents," unredacted, along with all witnesses sought per a deal reached between Deputy Attorney General Rod Rosenstein and Nunes 
    • Opposition research firm Fusion GPS was forced to hand over banking records detailing various clients and their intermediary law firms, including the Clinton Campaign and a Russian money launderer whose lawyer was none other than Natalia Veselnitskaya of Trump Tower meeting fame

    Most of these wheels which appear to be in motion are the result of corresponding groundwork laid on Capitol Hill you may not be aware of, including what might be the most important document in the entire process, expected in a little over a week.  On January 15, the DOJ's internal watchdog - the Office of the Inspector General (OIG), is expected to present their findings to Congressional investigators regarding a wide variety of alleged bias and malfeasance by the FBI, the Clinton campaign, and the Obama Administration - both during and after the 2016 election. Moreover, the man heading up the OIG investigation, Michael Horowitz, fought the Obama Administration to regain investigative powers which were restricted by former Attorney General Eric Holder during the Fast and Furious scandal.

     Fusion GPS Founder’s Senate Judiciary Testimony Released - The former British intelligence officer who authored the infamous Russia dossier wanted to show it to the FBI because he was concerned that then-presidential candidate Donald Trump was being "blackmailed."Christopher Steele told the political research firm that hired him, Fusion GPS, that what he uncovered from Russian sources was serious enough to bring to the attention of U.S. law enforcement authorities, according to a transcript released on Tuesday. The transcript, of an interview that Fusion GPS founder Glenn Simpson gave the Senate Judiciary Committee, was released by the committee's top Democrat, Sen. Dianne Feinstein of California. Steele went to the FBI with the initial reports that would later form the dossier on alleged Trump-Russia ties as early as June or July 2016, Simpson testified. "Chris said he was very concerned about whether this represented a national security threat and said ... he thought we were obligated to tell someone in government," Simpson told the Senate Judiciary Committee. "He thought from his perspective there was ... a security issue about whether a presidential candidate was being blackmailed."Simpson said he neither encouraged nor discouraged Steele about going to the FBI. "This was like, you know, you're driving to work and you see something happen and you call 911," Simpson told investigators. He likened the sense of responsibility he said Steele felt to the professional obligations that attorneys have in some cases to report a crime if they learn of one.Steele eventually met with an FBI legal attache in Rome in September 2016, more than two months after the initial outreach. Steele later told Simpson that he believed the FBI would consider his information credible because the bureau had corroborating intelligence, including from a human source within the Trump organization.  Simpson did not identify the source in his Judiciary Committee testimony

    Fusion GPS Lawyer : "Somebody's Already Been Killed" Because Of Trump Dossier - CNN and Buzzfeed were widely criticized by politicians and pundits on both the right and left one year ago when they recklessly published the infamous “Trump dossier”, which contained a multitude of unverified and dubious claims about President Trump. Buzzfeed in particular is still grappling with a lawsuit filed by Aleksej Gubarev, a Russian technology executive who claims he was libeled by the dossier, even though Buzzfeed redacted his name, and the names of his companies.But a report in the Hill on Tuesday revealed that not only was the publication of the dossier potentially slanderous - it may also have been deadly. Testimony from Fusion GPS founder Glenn Simpson’s closed-door meeting with the Senate Judiciary Committee, which took place last August, revealed that Simpson’s legal team is aware that “somebody’s already been killed” because of the dossier’s publication.A lawyer for Glenn Simpson, the co-founder of Fusion GPS, told congressional investigators that “somebody’s already been killed” as a result of the publication of the controversial dossier tying President Trump to Russia.In closed-door testimony with the Senate Judiciary Committee last year, Simpson was asked by investigators if Fusion GPS took steps to “assess the credibility” of sources used by former British intelligence officer Christopher Steele, who compiled the dossier.“Yes, but I’m not going to get into sourcing information,” Simpson replied.Simpson then declined to answer a follow-up question. When asked why he was declining to answer, his attorney, Joshua Levy, said Simpson "wants to be very careful to protect his sources.""Somebody’s already been killed as a result of the publication of this dossier, and no harm should come to anybody related to this honest work," Levy added. Simpson had previously declined to answer another question posed by the committee’s investigators, citing "security."

    Trump Attorney Sues Fusion GPS, BuzzFeed For Dossier Defamation - A fourth individual has filed a lawsuit against opposition research firm Fusion GPS and Buzzfeed over the infamous unverified "Trump-Russia" dossier, Bloomberg reported Tuesday.  Donald' Trump's personal attorney, Michael Cohen, filed suit against the two companies involved in the creation and distribution of the salacious 34-page dossier, which has been a key focus of Congressional inquiries into the FBI conduct during the 2016 election - and in particular, whether it was used to launch a counterintelligence investigation against Mr. Trump. The dossier contains unverified claims that Cohen and Trump had suspicious connections with Russian figures. Most other U.S. news organizations declined to publish the document because many of its claims -- some of them salacious -- havent been substantiated.It will be proven that I had no involvement in this Russian collusion conspiracy, Cohen said in an interview on Tuesday. My name was included only because of my proximity to the president. -BloombergCohen is mentioned in the dossier 15 times, though he told Bloomberg that he and the President "don't talk about" the Russia investigations, adding "Why waste time talking about something that's not legitimate."  During testimony in front of Congressional investigators, the Trump attorney said that he has never engaged with, received money from, or communicated with anyone representing the Russian government, or anyone else about hacking or interfering with the US election, creating fake news stories to assist the Trump campaign, or hacking the Democratic party.

    Russia probe: Trump lawyers 'in talks over Mueller interview' - BBC News: Donald Trump's lawyers are in talks with investigators who are seeking to interview the US president as part of a justice department probe, reports say. The Washington Post, quoting an unnamed person close to Mr Trump, says investigation lead Robert Mueller is likely to interview him within weeks. Mr Trump's legal team has not confirmed the reports. Mr Mueller is investigating possible collusion between Trump's 2016 campaign and Russia in the US elections. Tensions between Mr Mueller, the special counsel appointed to look into alleged Russian interference, and the president have risen since the investigation led to charges against several former members of Mr Trump's campaign team. Mr Trump's administration denies working with Russia on the election, and the president has labelled the investigation "a witch hunt". According to The Post, Mr Mueller first raised the possibility of interviewing the president in a meeting with his lawyers, John Dowd and Jay Sekulow, in late December."This is moving faster than anyone really realises," the newspaper quotes a person within the president's circle, who spoke on condition of anonymity. Mr Trump's lawyers are reluctant to allow him to sit down for open-ended questioning and are discussing whether to allow him to provide written answers to some of the questions, The Washington Post and NBC News report. According to NBC, which cited three people close to the story, the talks are "preliminary and ongoing".

    Trump Sidesteps Question on Mueller Interview - — President Trump declined on Wednesday to commit to being interviewed by Robert S. Mueller III, the special counsel investigating whether his campaign colluded with Russia to sway the 2016 election, backing off his statement last year that he would be willing to talk to Mr. Mueller under oath.“I’ll speak to attorneys,” Mr. Trump said during a news conference with Prime Minister Erna Solberg of Norway, when asked whether he would agree to an interview. “We’ll see what happens.”That answer was a marked change from June, when Mr. Trump defended his firing of the F.B.I. director, James B. Comey, denying that it was related to his handling of the Russia investigation, and said he would be “100 percent” willing to give a sworn statement to Mr. Mueller.It came as the president’s advisers have been discussing whether Mr. Trump should submit to what would be an extraordinary but not unprecedented instance of a president being interviewed by a prosecutor investigating him for wrongdoing.Mr. Trump also repeated his criticism of Mr. Mueller’s inquiry as a “witch hunt” and the investigations being pursued by congressional committees as a “Democrat hoax.” In a Twitter post, he referred to Senator Dianne Feinstein of California, the senior Democrat on the Senate committee conducting an investigation into Russian interference, as “Sneaky Dianne Feinstein.” “For 11 months, they’ve had this phony cloud over this administration, over our government, and it has hurt our government,” Mr. Trump said. “It’s a Democrat hoax that was brought up as an excuse for losing an election.” The president was angry at Ms. Feinstein in particular for releasing a transcript of Senate testimony by one of the founders of the firm that produced a salacious and largely unsubstantiated dossier outlining a Russian effort to aid the Trump campaign, and he demanded that Republicans “finally take control” of the investigations.

     Trump Administration Waives Punishment For Convicted Banks, Including Deutsche — Which Trump Owes Millions - The Trump administration has waived part of the punishment for five megabanks whose affiliates were convicted and fined for manipulating global interest rates. One of the Trump administration waivers was granted to Deutsche Bank — which is owed at least $130 million by President Donald Trump and his business empire, and has also been fined for its role in a Russian money laundering scheme. The waivers were issued in a little-noticed announcement published in the Federal Register during the Christmas holiday week. They come less than two years after then-candidate Trump promised “I'm not going to let Wall Street get away with murder.” Under laws designed to protect retirement savings, financial firms whose affiliates have been convicted of violating securities statutes are effectively barred from the lucrative business of managing those savings. However, that punishment can be avoided if the firms manage to secure a special exemption from the U.S. Department of Labor, allowing them to keep their status as “qualified professional asset managers.” In late 2016, the Obama administration extended temporary one-year waivers to five banks — Citigroup, JPMorgan, Barclays, UBS and Deutsche Bank. Late last month, the Trump administration issued new, longer waivers for those same banks, granting Citigroup, JPMorgan, and Barclays five-year exemptions. UBS and Deutsche Bank received three-year exemptions. In the year leading up to the new waiver for Deustche Bank, Trump’s financial relationship with the firm has prompted allegations of a conflict of interest. The bank has not only sought the Labor Department waiver from the administration, it has also faced Justice Department scrutiny and five separate government-appointed independent monitors. Meanwhile, the New York Times recently reported that federal prosecutors subpoenaed Deutsche for “bank records about entities associated with the family company of Jared Kushner, President Trump’s son-in-law and senior adviser.” Trump owes the German bank at least $130 million in loans, according to the president’s most recent financial disclosure form. Sources have told the Financial Times the total amount of money Trump owes Deutsche is likely around $300 million. The president’s relationship with the bank dates back to the late 1990s, when it was the one major Wall Street bank willing to extend him credit after a series of bankruptcies. In 2016, the Wall Street Journal reported Trump and his companies have received at least $2.5 billion in loans from Deutsche Bank and co-lenders since 1998.

    "It Doesn’t Look Good": Intel CEO In Jeopardy For Selling Stock After Learning Of "Staggering" Flaw - Six months after Intel was informed about unprecedented vulnerabilities in its chips that could enable hackers to access user data, and which has since emerged as the most "staggering" bug to affect the global semiconductor industry, company CEO Brian Krzanich was quietly selling shares and exercising stock options worth a total of $39 million, netting him nearly $25 million, according to regulatory filings.  The trade, which took place on Nov. 29, has been called "a highly unusual move" that risked attracting regulatory scrutiny, according to lawyers and analysts who spoke to the WSJ. The timing of Krzanich’s sale “is really odd,” said Dan O’Connor, a Ropes & Gray attorney specializing in securities law. "The timing, the size, the unusual nature compared to prior sales—that’s going to get this a lot of scrutiny." To be sure, Intel pleads that it followed all the rules: an Intel spokesman said Krzanich’s divestiture was unrelated to the chip security issue and the sale was based on a prearranged trading program. However, in a clear violation of SEC rules, filings show that Krzanich established the divestiture plan about a month before the trade, on Oct. 30, long after Intel learned of the chip vulnerabilities in June. Oops. As the WSJ further notes, Krzanich’s trade stands out because it deviated from the CEO’s previous pattern of incremental sales of Intel stock, according to Ben Silverman, a researcher at InsiderScore LLC. In addition to exercising more than $28 million in options, the CEO sold nearly 50% of his unrestricted stock, reducing his unrestricted holding to 250,000 shares, the minimum set by Intel’s executive stock ownership guidelines according to the company’s most recent proxy statement. "That was an unusual move by a CEO", Silverman said. "It’s not just that he sold stock knowing about the security issue," he said. "The size and selling behavior were unusual. Put those two elements together, and certainly on the surface it doesn’t look good."

    Regulators faulted for 'box checking' mentality on anti-laundering enforcement — Lawmakers and a former FBI director sharply criticized bank regulators Tuesday for their enforcement of the Bank Secrecy Act and other anti-money-laundering rules, saying it has become a rote exercise that adds burden to banks but provides little value to law enforcement officials. The sheer number of anti-money-laundering rules has increased following the 9/11 terror attacks, with examiners focused on the numbers of suspicious activity reports filed rather than assessing the true riskiness of a bank's activities for illicit finance. “Regulators now have put the banks in a position where they are not necessarily going after that risk or putting metrics in place ... to deal with that high-risk, but they are more in the check the box mentality,” said former FBI Chief Dennis Lormel during a hearing at the Senate Banking Committee. Even a well-known bank critic, Sen. Elizabeth Warren, D-Mass., said there is room to ease the burden on financial institutions while helping law enforcement. “We need to do a lot more with our money laundering laws," she said. "I hope that we keep digging into this because I think we might be able to reduce costs for the banks and at the same time help law enforcement do this more efficiently." Financial institutions use a risk-based approach when allocating resources towards anti-money laundering and illicit finance prevention, focusing more attention on higher risk geographies, transactions and customers. But Heather Lowe, legal counsel and director of government affairs at Global Financial Integrity, a think tank focused on anti-laundering, said regulators are sometimes loath to embrace the risk-based approach and instead have a one-size-fits-all mentality.  “That shift needs to happen and it will be a big one,” said Lowe. Greg Baer, president of The Clearing House Association, said that the majority of banks use only a handful of vendors that provide compliance software, and examiners are sometimes critical if a program isn’t generating enough suspicious activity alerts.However, each alert is labor intensive and Baer said less than 10% of the suspicious activity reports filed by banks are actually reviewed by law enforcement. “That is a massive resource drain,” he said.

    PwC ruled negligent in Colonial Bank auditing case -- In a ruling that exposes the Big Four firm to heavy potential damages, a federal judge found that PricewaterhouseCoopers was negligent in its audits of Colonial Bank, which failed in 2009 in the midst of the financial crisis. The case involved a lawsuit by the Federal Deposit Insurance Corp., which sued the firm for failing to detect a multi-billion-dollar fraud against Colonial Bank and its parent Colonial BancGroup by Taylor, Bean & Whitaker Mortgage Corp., another financial firm that collapsed in 2009. The FDIC faulted PwC for letting Colonial account for certain transactions as sales of mortgages from Taylor Bean to Colonial, rather than as loans from Colonial to Taylor Bean that were secured by mortgages. Last year, PwC reached a confidential settlement with Taylor Bean’s bankruptcy trustee for an undisclosed sum (see PwC reaches settlement in Taylor Bean lawsuit).   U.S. District Judge Barbara Jacobs Rothstein agreed with the negligence claim against PwC by the FDIC, but rejected claims by the bankruptcy trustee for Colonial BancGroup, as the bank itself was responsible. “The FDIC’s professional negligence claim against PwC is granted,” she wrote Sunday. “PwC breached the professional duties it owed CBG as CBG’s independent, external auditor. However, CBG’s professional negligence claim is barred by: (a) the in pari delicto doctrine, (b) the Hinkle rule, and (3) the audit interference rule. Therefore, CBG’s professional negligence claim against PwC is denied.”  The judge also rejected breach of contract and wantonness claims against PwC. Overall, the firm said it was pleased with the judge’s ruling and does not anticipate the judge will impose substantial damages in the case.

    Fed details planned changes to large banks’ risk management - — The Federal Reserve published a proposed guidance document this week laying out core principles for its supervision of systemically risky banks, the latest in a series of suggested changes that are top priorities for the new leadership at the central bank. The proposal lays out principles in three critical areas: the effectiveness of senior management, management of the firm’s business line and the independent risk management structures within a banking organization. The proposed guidance would build on earlier proposals from August that would establish a rating system for large financial institutions and delineate responsibilities for bank boards of directors. The proposal, issued Thursday, would expand on those plans in a handful of ways. First, the guidance would be applicable not only to U.S. bank holding companies with more than $50 billion in assets, but also foreign banking organizations and their U.S. affiliates that are subject to Fed jurisdiction. The Fed’s earlier proposal “provides that an effective board of directors sets the firm’s strategy and risk tolerance, and this proposal contemplates that the firm’s senior management implements the strategy and risk tolerance approved by the board,” the proposed guidance said. “In this way, the proposed guidance would better distinguish the supervisory expectations for boards from those of senior management.” The proposal stipulates that, similar to existing practice, banks’ entire business line risk management won’t necessarily be examined each year — rather, supervisors will target areas of the firm’s business that are most likely to present material risk to the firm or present a potential weakness for the firm’s governance and controls.  Among the criteria that supervisors would use to determine whether to examine a particular business line are the “size and complexity of the business line, recent supervisory experience, the relative growth and maturity of the business line, and significant changes to strategy, structure, or management since the last exam cycle,” according to the proposal.

    Fed, FDIC release regional banks’ living will plans— The Federal Reserve and Federal Deposit Insurance Corp. on Monday released the public portions of resolution plans, also known as "living wills," for 16 regional banks and one foreign banking organization with assets of $50 billion to $100 billion. Banks with more than $50 billion of assets are considered systemically important financial institutions under the Dodd-Frank Act and must have their living wills approved, among other requirements. The Fed and FDIC jointly approve bank resolution plans.  Regulators had approved all of the regional banks’ most recent 2015 resolution plan submissions in March, with the exception of Northern Trust, whose plan was found to have a handful of shortcomings requiring attention in the 2017 submission. Those issues were related to the bank’s unique multiple-point-of-entry resolution structure; under such a resolution, regulators would take over not only the holding company, but also important affiliates in the event of a bank failure.  Northern Trust said in its public submission that it had addressed the failings the regulators identified in March. With respect to liquidity concerns, the bank said that its revised resolution plan “conservatively assumes adverse ring-fencing actions by foreign authorities and that liquidity in foreign jurisdictions remains trapped throughout the resolution scenario,” and those revised assumptions “recalibrate certain liquidity metrics and establish resolution triggers.” In addition to Northern Trust, the banks which had their living wills released were: Ally, American Express FSB, BB&T, Capital One, Comerica, Discover FSB, Fifth Third Bancorp, Huntington Bancshares, KeyCorp, M&T, PNC, Regions, SunTrust, U.S. Bancorp and Zions Bancorp. The Fed also released a resolution plan for one foreign banking organization, E.Sun FSB, which is headquartered in China. All 17 resolution plans were due to the Fed and FDIC by Dec. 31.

    Fed's Kashkari playing long game in plan to end 'too big to fail’ - — Minneapolis Federal Reserve Bank President Neel Kashkari is realistic about the short-term prospects of his agency's recently finalized plan to eliminate "too big to fail" once and for all. “We’re aware of the political environment we’re in; the winds are blowing against us,” Kashkari said in an interview with American Banker. “That doesn’t change the fact that I feel like our job is to identify risks to the economy, call them out and propose sensible solutions.”The final plan was published early Wednesday and bears a close resemblance to the draft version the Fed published in November 2016, calling for much higher equity capital levels for banks with more than $250 billion in assets and far fewer regulations for banks with less than $10 billion in assets. The plan also calls for similarly high capital levels for shadow banks with more than $50 billion in assets and a certification process for the Treasury Department to declare a large bank as no longer too big to fail. Kashkari said that in his meetings with member of Congress, there appears to be a wider base of support than is generally known for ending too big to fail and loosening capital and regulatory restrictions on community banks.“I’ve talked with lots of members of Congress on both sides of the aisle, and almost everyone that I’ve met with agrees: We really need to address too big to fail, and we need to relax regulation on small banks that are not systemically risky, and the Minneapolis Plan does that,” Kashkari said. “If we allowed the political winds to discourage us from putting our ideas forward, then we wouldn’t be doing our jobs.”He went on to say that, though some aspects of economic forecasting are inherently subjective, the analyses that led the Minneapolis Fed to conclude that a future crisis was likely and that existing capital buffers probably couldn’t prevent some kind of taxpayer intervention were sound. Though comments the agency received assailed the plan’s conclusions, he said, none were able to disprove the premise that the biggest banks require much higher capital to withstand a crisis.

    With Dodd-Frank relief near, banks set sights on AML — The Dodd-Frank Act gets more attention when it comes to regulatory burden, but the Bank Secrecy Act and other anti-money-laundering statutes arguably present even more of a compliance challenge for bankers. While Congress is close to a regulatory relief bill directed at changing Dodd-Frank, bankers are hopeful that lawmakers will next turn their attention to anti-laundering issues.  “It always comes up as probably top two or three issues that bankers raise when they talk about stressful compliance burden, cost compliance burden,” said Paul Merski, executive vice president of congressional relations at the Independent Community Bankers of America. The Bank Secrecy Act “is probably in the top three.” Former House Financial Services Committee Chairman Barney Frank has even suggested that some of the concerns about Dodd-Frank, a bill he co-authored, are misdirected. "When people complain to me about [Dodd-Frank] these days, they're not really complaining about the bill I worked on,” Frank said in a recent interview. “They're complaining about the Bank Secrecy Act, the Patriot Act. ... A lot of the problems they have are from the sanctions, terrorism, money laundering business, and we didn't do anything about that.” The Bank Secrecy Act was passed in 1970 and still represents the framework that anti-laundering and counterterrorism regulations are built upon. The Patriot Act, passed in 2001 shortly after the 9/11 terrorist attacks, added more requirements.   Bankers often prefer not to complain publicly about complying with AML and counter-terrorism-financing regulations for fear of appearing unpatriotic. But they are also concerned that the millions of suspicious activity and currency transaction reports filed each year don’t amount to much.  “The perception is that you send these things and no one even looks at them or analyzes them,” said Merski. “That is very time-consuming and costly and the regulators really come down on hard on your [Bank Secrecy Act] compliance. Bankers are scratching their heads and wondering what it all amounts to.” But Congress could be on its way to the rescue. Combined with new top leadership at the banking regulators, bankers and others in the industry are optimistic changes could be in the offing.

    Shhh! Trump’s Wall Street Regulators Keep Public in the Dark - Pam Martens - Under the Obama presidency, a key executive of the scandalized Wall Street bank, Citigroup, was secretly in charge of selecting the people who would fill top administration posts in Obama’s White House and cabinet, while the bank was in the midst of the largest taxpayer bailout in U.S. history. The staffing recommendations included top posts at the Justice Department, which would fail to prosecute any major Wall Street executives for the crimes leading up to the financial crash of 2008.  (See our prior reporting on this here and here.) Under Trump, who ran on a populist platform, the top cop of Wall Street at the Securities and Exchange Commission, Jay Clayton, is a lawyer who had represented 8 of the 10 largest Wall Street banks prior to his nomination by Trump and confirmation by the U.S. Senate to become SEC Chairman. The U.S. Treasury Secretary, Steve Mnuchin, who also sits at the helm of the Financial Stability Oversight Council to make sure Wall Street doesn’t blow up the economy again, was actually a foreclosure king at OneWest Bank Group. The top national bank regulator, the Office of the Comptroller of the Currency, which oversees Wall Street’s biggest and serially charged banks like Citigroup and JPMorgan Chase, is now headed by Mnuchin’s former pal at OneWest Bank Group, Joseph Otting.Last Thursday, the American people got a good look at how Otting plans to run the Office of the Comptroller of the Currency. The Federal agency released a statement advising that the insured bank under the Citigroup umbrella, Citibank, has been fined $70 million for failing to live up to its 2012 cease and desist order involving money laundering. But neither the press release nor the consent order provided a clue to the American people as to what Citibank had actually done. It was one of the least transparent documents that we have ever seen coming from a bank regulator, leaving the American people to wonder if a Wall Street bank, as is typical, engaged in billions of dollars of illegal activity and got off paying pennies on the dollar in a fine to a captured regulator. What we do know is that the bank violated its 2012 cease and desist order from the OCC which pertained to the bank’s failure to follow anti-money laundering rules.

    Wall Street Bank with Three Felonies Sends Employee to Head SEC Trading Division - Pam Martens - The arrogance of the captured Wall Street regulators in Washington grows exponentially with each passing day.The only Wall Street bank which has admitted to three criminal felony charges – all coming within the past three years – has been allowed to send one of its trading executives to head a key post at Wall Street’s top cop – the Securities and Exchange Commission (SEC). Failing up continues to be the business model in the nation’s capitol.The Trump administration, in its continuing Swamp-filling mandate from the billionaires behind the dark curtain, has elevated Brett Redfearn as Director of the Division of Trading and Markets at the SEC. Redfearn has worked at JPMorgan Securities from November 2004 to October 2017 when he was named to the new SEC post.In 2014 the U.S. Justice Department slapped JPMorgan with two criminal felony counts related to its banking relationship with Ponzi schemer Bernie Madoff. JPMorgan admitted to the charges and received a deferred prosecution agreement.  On January 7, 2014, FBI Assistant Director-in-Charge George Venizelos had this to say about the criminal charges: “J.P. Morgan failed to carry out its legal obligations while Bernard Madoff built his massive house of cards. Today, J.P. Morgan finds itself criminally charged as a consequence. But it took until after the arrest of Madoff, one of the worst crooks this office has ever seen, for J.P. Morgan to alert authorities to what the world already knew. In order to avoid these types of disasters in the future – we all need to be invested in making our markets safer and more equitable. The FBI can’t do it alone. Traders, compliance officers, analysts, bankers, and executives are the gatekeepers of the financial industry. We need their help protecting our markets.”

    Warren, Warner propose 'massive' fines for breaches at credit reporting agencies -  — Sens. Elizabeth Warren, D-Mass., and Mark Warner, D-Va., are set Wednesday to introduce a bill that would create mandatory penalties for data breaches at credit reporting agencies.“Our bill imposes massive and mandatory penalties for data breaches at companies like Equifax — and provides robust compensation for affected consumers — which will put money back into people's pockets and help stop these kinds of breaches from happening again,” Warren said in a press release. The Data Breach Prevention and Compensation Act would set mandatory fines at $100 for each consumer who has a piece of personally identifiable information compromised and another $50 for each additional piece of personal identifiable data. The penalties would be capped at 50% of the credit reporting agencies’ gross revenue from the prior year — except in cases of extreme negligence, in which case the fine would go up to 75% of the companies' prior year gross annual revenue. The bill comes in response to a data breach at Equifax, which revealed in September that a hack had exposed personally identifiable information such as Social Security numbers, birth dates, driver’s license numbers and credit card numbers of 145 million consumers.The lawmakers said that consumers typically get $1 or $2 in restitution if their personal data is stolen.“The financial incentives here are all out of whack," Warren said. "Equifax allowed personal data on more than half the adults in the country to get stolen, and its legal liability is so limited that it may end up making money off the breach.” The bill would also create an Office of Cybersecurity at the Federal Trade Commission, which would conduct cybersecurity inspections at the credit reporting agencies. It would also give the FTC the authority to write new regulations establishing data security standards.

    New Survey Reveals Staggering Number Of People Are Buying BitCoin On Their Credit Cards - A few weeks ago we presented anecdotal evidence from Joseph Borg, director of the Alabama Securities Commission, suggesting that people are taking out home equity loans and cash advances on credit cards just to purchase BitCoin in the hopes of getting rich quick (see: "It's In The Mania Phase": Securities Regulator Warns That "Mortgages Are Being Taken Out To Buy Bitcoin") "We've seen mortgages being taken out to buy bitcoin. … People do credit cards, equity lines," said Borg, president of the North American Securities Administrators Association, a voluntary organization devoted to investor protection. Borg is also director of the Alabama Securities Commission. "This is not something a guy who's making $100,000 a year, who's got a mortgage and two kids in college ought to be invested in." "You're on this mania curve. At some point in time there's got to be a leveling off. Cryptocurrency is here to stay. Blockchain is here to stay. Whether it is bitcoin or not, I don't know," Borg said in an interview with "Power Lunch." Now it seems that the speculation by Borg has been confirmed by a new survey conducted by LendEDU which found that, among other things, nearly 20% of people who have purchased BitCoin have done so using their credit cards. First, more than half (51.78%) of respondents stated that they either used a credit or debit card to ​fund their account to purchase Bitcoin. Specifically, 33.63 percent of investors were using debit cards, while 18.15 percent were using credit cards. Why is this concerning? The virtual currency exchanges where Bitcoin is bought and sold will charge conversion fees when either a credit or debit card is used to find an investor's account. Coinbase, the largest of the cryptocurrency exchanges, charges a conversion fee of 3.99 percent when a user uses his or her credit or debit card to bankroll their account. ​ Obviously, this is not the most financially-savvy move on the part of of a sizable percentage of Bitcoin investors; no one ever wants to pay extra than what is necessary, especially when dealing with something as volatile as Bitcoin. The wisest and most frugal way to fund a virtual currency exchange account would be through an ACH transfer, which is completely free of charge. Only 18.60 percent of our 672 Bitcoin-invested respondents were paying for the cryptocurrency in this fashion.

    'We are about to be overwhelmed by bitcoin,' cryptocurrencies, senator warns  — The Senate Banking Committee is likely to take a closer look at bitcoin and other cryptocurrencies.“We are about to be overwhelmed by bitcoin, other kinds of cryptocurrencies,” said Sen. Mark Warner, D-Va., during a banking panel hearing Tuesday. “I would hope … that we would be able to get ahead of it rather than chasing it after the fact.”Speaking afterward, panel Chairman Mike Crapo agreed that a hearing on cryptocurrencies is in order.Warner, who is also vice chairman of the Senate Select Intelligence Committee, asked witnesses testifying on Tuesday how the financial system is preparing for the expansion of cryptocurrencies.Heather Lowe, legal counsel and director of government affairs at Global Financial Integrity, a think tank focused on preventing illicit finance, said one of the challenges is that “there have been moves to make the crypto or technology more anonymous.” She made a distinction between the cryptocurrencies and the technology that they run on. “The underlying technology has positive uses,” said Lowe, who noted that the Financial Action Task Force, an international organization aimed at preventing money laundering, is exploring cryptocurrency oversight.  Treasury’s Financial Crimes Enforcement Network issued guidance on cryptocurrencies in 2013. Last July, it fined the cryptocurrency exchange BTC-e (also known as Canton Business Corporation) $110 million for not requiring enough customer information and for embracing “pervasive criminal activity conducted at the exchange.” The interest in bitcoin remains high. JPMorgan Chase CEO Jamie Dimon acknowledged Tuesday that he'd been too hard on cryptocurrency and bitcoin, saying that some of the underlying technology is potentially valuable.

    Mnuchin: "We Want To Make Sure Bad People Can't Use Bitcoin To Do Bad Things" - Today the US Treasury has figured out that the cryptocurrency is nothing less than the digital equivalent of borderless Swiss bank account, bypassing capital controls with ease and enabling money laundering anywhere and everywhere, and on Friday Treasury Secretary Steven Mnuchin said he will work with the Group of 20 nations to prevent cryptocurrencies such as bitcoin from becoming the digital equivalent of an anonymous Swiss bank account. "We are very focused on cryptocurrencies," Mnuchin explained, pointing to discussions with other regulators within the U.S. government and later stating: "We want to make sure that bad people cannot use these currencies to do bad things."Speaking at the Economic Club of Washington, Mnuchin said that the Financial Stability Oversight Council, a government body that assesses financial system risks, has formed a working group focused on cryptocurrencies, and explained that "In the United States — and people may not realize this — under our laws, if you have a wallet to own bitcoins, that company has the same obligation as a bank to Know Your Customer. So, in the United States, we have rules for anti-money-laundering, for all different types of entities, we can track those types of [transactions]. The rest of the world doesn’t have that. So one of the things we are working very closely with the G-20 on is making sure that this doesn’t become the Swiss numbered bank account."During the remarks, Mnuchin also suggested that the Federal Reserve is unlikely to develop its own digital version of fiat currency – a topic under discussion at a number of central banks worldwide – in the near future. "The Fed and we don't think there's a need for that at this point," Mnuchin said.

    Why blockchain is a belief system - Izabella Kaminska -- In an interview with Fox Business on Tuesday, JP Morgan CEO Jamie Dimon back-pedaled on his September claim that bitcoin is a fraud “worse than tulip bulbs”. He said “he regretted” making the remarks because they dismissed the technology in broad terms, adding “the blockchain is real. You can have crypto yen and dollars and stuff like that.” According to Bloomberg, Dimon “believes in blockchain” — a turn of phrase that speaks volumes about the state of the technology being advocated.As argued here, however, “blockchain” as a phrase is entirely meaningless. For the most part it is just a bundle of pre-existing technologies brought together in a cryptocurrency context to solve a problem most of the regulated financial system does not have: a lack of trusted intermediaries.Aside from solving that very specific issue — and doing so extremely expensively — blockchain achieves little beyond the novelty of broadcasting transactions publicly and pseudonymously in a way that achieves ledger immutability. To all other extents and purposes, blockchain in its original bundle is not cheaper to run, not more efficient to operate and certainly not faster than the conventional settlement system. Proof of this comes in bitcoin’s own payment dysfunctionality.

     Warren Buffett Wins $1 Million Bet That Hedge Funds Are a Rip-Off -  (video) Billionaire investor Warren Buffett bet that hedge funds were a bad investment. Ten years later, Buffett’s wager proved that hedge funds earn only one third of what a stock index investment does. NEP’s Bill Black explains the numbers on The Real News Network. You can view here with a transcript.

    Markets are ignoring ‘major risk’ of rising interest rates and end of QE, warns Citigroup - Ambrose Evans-Pritchard, Telegraph - The air is becoming treacherously thin for global asset markets and investors should start cutting their exposure before central banks shut off emergency stimulus, Citigroup’s star economist has warned.  “There are clearly signs of late-cycle froth in financial markets, in everything from equities, to corporate credit, and real estate, especially in the US. There is the risk of an overdue correction,” said Willem Buiter, the bank’s chief economist and a leading theorist on monetary policy.“We are reluctant to call an end to the bull-market in risk assets just yet but a considerable degree of caution is now warranted. Downside risks are rising as the business cycle matures,” he said.   Prof Buiter said seven of the biggest central banks will raise interest rates this year, while quantitative easing will go into outright contraction. Net bond purchases will fall to zero over coming months as the "Great Taper" gathers force, down from $180bn (£132bn) a month in mid-2016.The US Federal Reserve is leading the charge, with plans to shrink its balance sheet at an accelerating pace, reaching $50bn a month by the end of this year. “Tighter monetary and financial conditions are a major risk. We think the direct effect of global tapering on the real economy is limited, but major asset market corrections could trigger or cause a global slowdown,” he said.Veteran analysts are starkly divided over exactly where we are in the global market cycle. Renowned "value investor" Jeremy Grantham last week told GMO clients to jump in with both feet, predicting a Wall Street “melt-up” of over 50pc in the near-term – followed by a full-blooded crash later.

    Fed's Dudley Is Worried About "Elevated Asset Prices", Sees "Real Risk" Of US Overheating, Hard Landing - In today's most anticipated Fed speech, outgoing NY Fed president Bill Dudley delivered keynote remarks at a SIFMA event in New York, titled "The Outlook for the US Economy in 2018 and Beyond", in which he warned bluntly that the prospect of U.S. economic overheating "is a real risk over the next few years" and cautioned that one area he is "slightly worried about is financial market asset valuations, which I would characterize as elevated." But before algos read too much into it and decide to sell on yet another "irrational exuberance" moment, the head of the most important regional Fed immediately hedged that even a "significant" market drop would not have the "destructive impact" we saw a decade ago, to wit: I am also less worried because the financial system today is much more resilient and robust than it was a decade ago.  Thus, even if financial asset prices were to decline significantly—which presumably would occur if the economic outlook were to deteriorate—I don’t think such declines would have the destructive impact we saw a decade ago. He then reverted back to rates, saying that "I will continue to advocate for gradually removing monetary policy accommodation. As I see it, the case for doing so remains strong."The reason for that is the same one Bank of America highlighted earlier: namely that "financial conditions today are easier than when we started to remove monetary policy accommodation." Which is precisely what Goldman warned nearly a year ago, when it said that it appeared that Yellen had lost control of the market.

    Fed Pays Banks $30 Billion on “Excess Reserves” for 2017 - The Federal Reserve’s income from operations in 2017 dropped by $11.7 billion to $80.7 billion, the Fed announced today. Its $4.45-trillion of assets – including $2.45 trillion of US Treasury securities and $1.76 trillion of mortgage-backed securities that it acquired during years of QE – produce a lot of interest income. How much interest income? $113.6 billion. It also made $1.9 billion in foreign currency gains, resulting “from the daily revaluation of foreign currency denominated investments at current exchange rates.” For a total income of about $115.5 billion.  Those are just “estimates,” the Fed said. Final “audited” results of the Federal Reserve Banks are due in March. This “audit” is of course the annual financial audit executed by KPMG that the Fed hires to do this. It’s not the kind of audit that some members in Congress have been clamoring for – an audit that would try to find out what actually is going on at the Fed. No, this is just a financial audit. As the Fed points out in its 2016 audited “Combined Financial Statements,” the audit attempts to make sure that the accounting is in conformity with the accounting principles in the Financial Accounting Manual for Federal Reserve Banks. Given that the Fed prints its own money to invest or manipulate markets with – which makes for some crazy accounting issues – the Generally Accepted Accounting Principles (GAAP) that apply to US businesses to do not apply to the Fed. This annual audit by KPMG reveals nothing except that the Fed’s accounting is in conformity with the Fed’s own accounting manual. The Fed pays the banks interest on their “Required Reserves” and on their “Excess Reserves” at the Fed. Excess Reserves are the biggie: As a result of QE, they jumped from $1.7 billion in July 2008, to $2.7 trillion at the peak in September 2014. They’ve since dwindled, if that’s the right word, to $2.2 trillion:

    Meltdown and Spectre: Intel’s Seismic IT Disaster and A Look at Some Implication for Banks -  Yves Smith -  The press has greatly under-reported the two security holes, called Meltdown and Spectre, that can without exaggeration be characterized as affecting just about every computing device in use today (with very rare exceptions, like the Apple Watch). And because the media has so badly dropped the ball, your humble blogger will start with a high-level introductory piece, in the hopes that the IT and security experts in our readership will chime in, ideally in comments, with more information and ideas. Lambert has more posts planned, and they will be more technical in nature. One of the most obvious points, that cannot be made often enough, is that these security holes exist at the most foundational hardware level, the processors. Initial reports were that they could be fixed only via Very Extreme Measures, like getting hardware without the dodgy Intel chips. That was quickly scaled back to “oh, patches are being launched.” The wee problem is that with a flaw this fundamental and widespread, these patches aren’t just any patches. Given the severity of the flaws (and Spectre is more recalcitrant than Meltdown), the industry’s incentives are to say whatever it can throw at the problem is adequate whether they really address the problems or not. These fixes are also said to slow down performance by 5% to 30% per process. That is a massive haircut, particularly in a high volume setting. Perhaps later optimizations can cut the performance cost, but the flip side is that later patches that do a better job could just as well increase the performance hit. Moreover, it isn’t just that virtually everyone who has a computer (and that means smartphones too) is faced with what will feel like a big hardware downgrade in remedying these vulnerabilities. Even more important, it isn’t clear that any device with these flawed chips can ever be made secure again. While there was reason to assume that the NSA had managed to get back doors installed in every device, it’s one thing to have the NSA snooping on you. We now have the possibility of a much larger range of actors getting at your data.  We’ll provide links to some good overviews on Meltdown and Spectre and then give some initial examples from the financial services arena of their implications

    What bankers need to know about Meltdown, Spectre chip flaws - As has been the case all too often in recent months, yet another major computer security vulnerability has emerged — and, once again, it is something bankers have no choice but to treat as a direct threat.The discovery of techniques nicknamed Meltdown and Spectre that could be used to compromise most computer chips demands bankers’ immediate attention. Hackers could use them to read sensitive information stored in a computer’s memory, including passwords, account numbers and such. The good news is, though these vulnerabilities have existed for 20 years, no exploits have ever been reported. Moreover, taking advantage of Meltdown and Spectre would be difficult for cybercriminals. It requires writing software that directs malware to not only execute the technique but then do something specific like find and obtain a password. There are many simpler ways to obtain sensitive data like passwords such as keylogging, phishing and social engineering.On the other hand, this type of attack is difficult to detect, so the fact that it hasn’t been reported doesn’t necessarily mean it’s not happening. And the widespread nature of this threat, the publicity around it and the fact that banks are always a top target for cybersecurity exploits mean bank security and information-technology pros should implement all applicable security patches as soon as possible.  Here are more details about what bankers need to know.

    Consumer complaints surge for Capital One, fall for Wells Fargo -- Wells Fargo & Co. spent much of 2017 trying to dig out of several consumer banking scandals. By one measure, it’s making progress.Complaints lodged against the lender with the Consumer Financial Protection Bureau through Dec. 15 dropped 18 percent from the same period of 2016, the steepest decline among major banks, federal figures show. Still, it remained first among that group in total complaints.The drop came despite the bank announcing that employees opened more fake accounts than previously thought and that it will compensate customers who were wrongfully charged fees for extending low mortgage rates or for auto insurance they didn’t need. The bank even caught the ire of President Donald Trump, who tweeted last month that it may face even higher penalties for “bad acts against their customers.” “We have taken a number of steps over the last year, including eliminating product sales goals in our community bank, intensifying our focus on customer experience, proactively refunding customers who may have suffered harm as a result of inappropriate practices, enhancing our risk management organization, and holding executive leadership accountable for issues when they arise,” Richele Messick, a Wells Fargo spokeswoman, said in a statement.Seven of the 10 biggest banks by U.S. deposits experienced a drop in CFPB complaints compared with the 2016 period, including Citigroup Inc., JPMorgan Chase & Co., and Bank of America Corp.Capital One Financial Corp. had the biggest increase in complaints with a 36 percent jump. The lender, which has a large credit-card business, also had the most filed per dollar of deposits, a gauge favored by LendEDU, a New Jersey-based student-loan marketplace.Still, Capital One had the lowest share of complaints that resulted in refunds or credits, as less than 2 percent brought about so-called monetary relief, according to the regulator’s data. On average, about 14 percent of complaints filed last year against the 10 banks resulted in monetary relief.

    Longtime Hensarling aide named CFPB's chief of staff -- Kirsten Sutton Mork, the staff director at the House Financial Services Committee, will become chief of staff at the Consumer Financial Protection Bureau in the coming weeks, Committee Chairman Jeb Hensarling, R-Tex., said Friday.  Mork, 34, spent four years as the House panel's deputy staff director and had been Hensarling's legislative director and financial services policy adviser. She will be succeeded by Shannon McGahn, who has been a counselor for the past year to Treasury Secretary Steven Mnuchin.   "As one of my longest-serving and most dedicated aides, Kirsten has been an indispensable adviser to me for the last nine years," Hensarling said in a press release. "Her leadership, deep understanding of financial policy and the legislative process, strength of character, and commitment to conservative principles have been vital to the great victories the committee has achieved for the American People during her tenure here."

    Don’t let a credit union regulator run the CFPB - Bank Think - The credit union industry’s chief regulator is reportedly on President Donald Trump’s shortlist of potential nominees to lead the Consumer Financial Protection Bureau. As the head of a regulatory agency that advocates on behalf of the tax-free sector of the financial services industry it is charged with regulating, National Credit Union Administration Chairman J. Mark McWatters would not be a wise choice to head the CFPB.  The credit union industry is not fully subject to the entire arsenal of financial regulation, making the NCUA chairman unsuitable to head the consumer bureau. While the CFPB is responsible for consumer protection regulations across the financial services sector, the credit union industry remains exempt from taxation and many regulations, such as the requirements banks must follow under the Community Reinvestment Act. In fact, credit unions are not subject to full CFPB oversight because the NCUA shields them from much of the bureau’s regulations through its lenient interpretations and enforcement.  Further, amid concerns that the CFPB lacks sufficient checks on its regulatory authority, the NCUA’s willingness to flout Congress in its rulemakings makes its chairman suspect for leading the bureau. McWatters and others at the NCUA have been strident advocates for expanding the credit union charter far beyond what Congress intended when it established the industry in the 1930s. Established as not-for-profit institutions to serve individuals of modest means, the $1.36 trillion industry now earns billions of dollars in profits every quarter and features outsized CEO salaries while remaining tax-exempt.  The NCUA’s active role as an advocate for the credit union industry has led to multiple lawsuits and more than $1 billion in legal fees to private law firms. The agency currently faces a lawsuit against its October 2016 field-of-membership rule, which dramatically expands the service areas in which community credit unions can do business and renders statutory standards meaningless. The agency has repeatedly sidestepped statutory limits to benefit the industry it is charged with regulating.

     Warren grills CFPB head over data collection freeze - Sen. Elizabeth Warren, D-Mass., is asking acting Consumer Financial Protection Bureau Director Mick Mulvaney to account for recent directives limiting agency staff members’ ability to access or acquire electronic data, saying the moves hamper critical agency operations. “The CFPB cannot fulfill its core functions without collecting personally identifiable information,” Warren said in a Jan. 4 letter to Mulvaney. “Given how integral these data are to these basic CFPB functions, I fear that the freeze in data collection has in practice fundamentally changed how the CFPB interacts with its regulated entities, particularly in the Division of Supervision, Enforcement and Fair Lending. My staff has obtained internal CFPB documents that confirm these fears.”At issue are a handful of directives issued by Mulvaney and his support staff soon after President Trump tapped him to lead the bureau on an interim basis following the resignation of former director Richard Cordray on Nov. 24. On Dec. 4, Mulvaney told staff not to collect any personally identifiable data, citing data security shortcomings described in a pair of reports by the Federal Reserve and the CFPB inspector general (both agencies share a single inspector general). Warren said that an email sent by Paul Sanford, the CFPB's assistant director for supervision and examinations, on Dec. 4 told bank examiners not to send “any type of information request or a monitoring request … until we issue additional guidance.” Warren — citing “several sources” — also said that the data collection freeze has prevented agency lawyers from “reviewing electronic evidence they obtain in discovery.” The data freeze effectively prevents CFPB staff from carrying out their duties, Warren said, and vastly exceeds any data security concerns that may have been cited by the Inspector General.  “Director Mulvaney claims that the cybersecurity issues at the agency are so serious that it justifies ignoring congressional mandates, but the IG reports on which he bases his claims demonstrate that the agency's cybersecurity policies are robust and any problems with them are not nearly serious enough to support the action Director Mulvaney has taken,” Warren said. “In any case, the IG did not recommend halting the collection of data as a result of his findings.”

    Is CFPB’s data freeze about security or a political ploy - — The Consumer Financial Protection Bureau's recent freeze on collecting any personally identifiable information from companies it supervises is slowing investigations and could ultimately cripple the agency's enforcement function — and that may be the point, according to former agency and law enforcement officials. Acting CFPB Director Mick Mulvaney issued a directive instructing staff not to collect such data, known as PII, from lenders or businesses that can be traced back to individual consumers ostensibly because of concerns about data security. But former officials are skeptical of that rationale, arguing it's being used as a pretext. "Shutting down enforcement agency access to information about specific individuals who were harmed is like telling a waiter in a restaurant that they can collect information on the aggregate number and type of dishes ordered but not who ordered what," said Prentiss Cox, an associate professor at the University of Minnesota and former assistant Minnesota attorney general. "This is a very thinly veiled attempt to shut down fraud enforcement, which is consistent with the not-even-veiled priority agenda item of the congressional Republicans to eviscerate the CFPB." In his directive, Mulvaney cited concerns about data security laid out in a May 2017 report by the Office of the Inspector General, which found that confidential and sensitive enforcement information was accessible by a wider circle of CFPB employees than was necessary and prudent. Mulvaney said that staff instead could access aggregate data.  But Sen. Elizabeth Warren, the founder of the CFPB and one of its most vocal supporters, sent a letter to Mulvaney last week openly doubting that explanation, noting that the inspector general did not recommend a halt to the data collection.   “I believe Director Mulvaney's actions are unjustified and that he inappropriately used the reports as a pretext to halt and weaken critical agency functions,” said the Massachusetts Democrat. Other officials said they can't know for certain Mulvaney's reasoning, but said a data freeze would effectively stop the agency’s activities in their tracks.

    Judge rules against CFPB deputy's suit to unseat Mulvaney — A district court judge has denied an attempt to unseat Mick Mulvaney as acting director of the Consumer Financial Protection Bureau.U.S. District Judge Timothy J. Kelly on Wednesday refused to grant Leandra English, the CFPB's deputy director, a preliminary injunction against Mulvaney's appointment, saying her suit was unlikely to succeed and she is unable to demonstrate irreparable harm.  "English has not demonstrated a likelihood of success on the merits or shown that she will suffer irreparable injury absent injunctive relief," Kelly wrote in the 46-page opinion. English sued in late November, arguing that she should be acting director of the bureau on the basis of language in the Dodd-Frank Act. But Kelly said she had not met the legal burden and that replacing Mulvaney would disrupt the status quo."The moving party must meet a higher standard than in the ordinary case by showing clearly that he or she is entitled to relief or that extreme or very serious damage will result from the denial of the injunction," Kelly said. Kelly said that the CFPB’s operations have carried on without major disruptions after President Trump appointed Mulvaney, and the agency’s own attorneys backed the president's right to make a temporary appointment. That undermines English’s claim that she and the agency are suffering irreparable harm — a crucial element of a motion for a preliminary injunction — from Mulvaney's service as acting director, he said.“In summary, the record evidence suggests that CFPB's operations have continued with the understanding that Mick Mulvaney is the acting director,” Kelly said. “Indeed, it is notable that the CFPB’s general counsel and other CFPB attorneys are listed as ‘of counsel’ on defendants’ opposition brief.” "The balance of the equities and the public interest also weigh against granting the relief," Kelly added. "Therefore, English has not met the exacting standard to obtain a preliminary injunction."

    Despite loss, legal battle against CFPB's Mulvaney isn't over yet --  After a significant setback this week in the legal bid to unseat Mick Mulvaney as acting director of the Consumer Financial Protection Bureau, consumer groups are pinning their hopes on a second case they hope will provide a different result. Oral arguments are scheduled for Friday in a credit union's challenge to Mulvaney's appointment at the U.S. District Court for the Southern District of New York. "The legal fight is far from over," said Brianne Gorod, chief counsel at the Constitutional Accountability Center, on a conference call Thursday with reporters. The calls was sponsored by two consumer groups, Americans for Financial Reform and the Center for Responsible Lending.  The case by the Lower East Side People's Federal Credit Union is separate from the one brought by CFPB Deputy Director Leandra English, which also protests Mulvaney's appointment. U.S. District Judge Timothy J. Kelly ruled Wednesday against English's request for an injunction against Mulvaney. Kelly said English was unlikely to prevail on the merits of her case. Gorod called Kelly's ruling "disappointing." Though she said "Ms. English can appeal," she appeared optimistic about the credit union's challenge. Both lawsuits rest on the idea that the Dodd-Frank Act says the deputy director shall serve as acting director in the absence of a Senate-confirmed director. Mulvaney was appointed, however, under the Federal Vacancies Reform Act, which gives the president wide discretion to temporarily appoint acting leaders of agencies. Consumer groups and the credit union involved in the case argue that Mulvaney's decisions as acting director are invalid."Donald Trump and Mick Mulvaney executed a hostile takeover of [the CFPB], and anything Mr. Mulvaney does is illegal," said Ilann Maazel, a partner at Emery Celli Brinckerhoff & Abady LLP who represents the credit union.Linda Levy, the CEO of the $55 million-asset Lower East Side People's Federal Credit Union, said any weakening of the CFPB would impact the credit union's low-income members. "I am concerned that there are changes being made that affect our everyday work," Levy said on the call. "We just don't know where we stand anymore with regulations from the CFPB at this time."

    IRS continues repair of income verification system after mortgage industry panic - The IRS has taken corrective actions to speed up its income verification system, avoiding a possibly crippling slowdown for the mortgage industry. But issues related to recent changes with the system, which prompted widespread outcry from mortgage and banking groups, have not been fully resolved."I have been advised that the system is working well enough to keep up with current volumes," said Anne Canfield, executive director of the Consumer Mortgage Coalition. "However, this level of performance may not be good enough as we get deeper into the 2018 home-buying season.”Anne Canfield, executive director of the Consumer Mortgage Coalition, said that the IRS is considering "truncating" certain personally identifiable information in the verification transcript, which could cause more problems. Verification application volumes have been light over the holiday season, which has allowed the IRS and industry to test possible fixes and solutions, according to Rick Hill, vice president for industry technology at the Mortgage Bankers Association."But we are going to have to be vigilant in January,” he said. “The changes that have been implemented have fixed many of the issues. But it is unclear if the changes will be able to handle the higher post-holiday volumes.” “Some higher-volume vendors have indicated that the short-term fixes are working," he said. "But it is not what it needs to be long-term."  Lenders began to notice a slowdown in the IRS income verification process in mid-December that the industry later learned resulted from changes the IRS made in order to make the system more secure.  During a Dec. 18 conference call with industry groups, IRS officials said they were working to fix the problems and reduce processing times.  Since then, IRS officials have set up a working group to keep industry groups up to date on the status of the repairs, changes to the verification system and to discuss Income Verification Express System issues going forward, Canfield said.  Lenders depend on IVES to verify the incomes of mortgage applicants and other borrowers to prevent fraud.

    FHFA should resist calls to weaken mortgage standards -- Joseph A Smith - We’re already beginning to forget the lessons of the financial crisis. Fannie Mae and Freddie Mac—the two government-sponsored enterprises that support much of the U.S. mortgage market—guaranteed and purchased a significant number of nonconventional mortgages in the run-up to the crisis, more than a decade ago. As a state regulator at the time, I was working with colleagues around the country to rein in mortgage originators and reduce or eliminate the volume of these loans made on predatory and unsustainable terms.As my colleagues and I targeted the worst excesses in the mortgage market, such as waived down payments and the acceptance of lower credit scores, we faced the near constant criticism that we were standing in the way of the extension of credit to more potential homeowners and their fulfillment of the American Dream. We all know what eventually happened: The housing market deteriorated and Fannie and Freddie were placed into conservatorship, due in part to the nonconforming loan books of the GSEs. And while the crisis impacted Americans across the socioeconomic spectrum, borrowers who had been granted access to credit as a result of lowered underwriting standards were more likely to miss their mortgage payments or default on their loans. I subsequently served as monitor of the national mortgage settlement, and in the years since the crisis, we have seen genuine attempts to redress at least some of the attendant damage and to nurse the market back to health.Unfortunately, today we see a renewed call for reduced underwriting standards—this time in the form of an alternative scoring model for Fannie and Freddie that does not meet the minimum scoring criteria of the current model, the FICO score. Quite simply, lower standards generate less predictive scores, which mean higher risks for the lender. And in the case of Fannie and Freddie, that lender is ultimately the taxpayer. The Federal Housing Finance Agency is currently soliciting input on these proposed changes. Once again, the proponents for changing underwriting standards do so in the name of increasing access to credit.

    CMBS delinquency rate falls sharply in December - Late payments on securitized commercial mortgages fell in December for the sixth straight month. The Trepp CMBS Delinquency Rate ended the year at 4.89%, a decrease of 29 basis points from the November level. That’s the largest monthly drop since January 2016, when several large troubled CMBS loans were resolved, including the $3 billion Stuyvesant Town/Peter Cooper Village loan. After hitting a post-crisis low in February 2016, the reading climbed steadily for more than a year as loans from the "bubble" years of 2006 and 2007 reached their maturity dates and were not paid off. However, the delinquency level has receded since June as bubble-year loans have passed their maturity date and been resolved.  “Put another, simpler way: fewer loans are defaulting, and those that defaulted in recent years are being resolved away (often with losses),” Trepp stated in its monthly report. It thinks that further reductions could be in the cards for 2018.

    Early-stage mortgage delinquencies jump after hurricane season- Despite the overall mortgage delinquency rate being down in October, early-stage mortgage delinquencies increased following an active hurricane season, according to CoreLogic's Loan Performance Insights Report. Nationwide, 5.1% of mortgages were in some stage of delinquency in October, a 0.1 percentage point decline from October 2016 when the overall delinquency rate was 5.2%. The rate for early-stage delinquencies, defined as 30-59 days past due, was 2.3% in October, a 0.1 percentage point increase from the year prior. "The temporary rise in September's early-stage delinquencies reflected the impact of the hurricanes in Texas, Florida and Puerto Rico, but now the impact from the hurricanes is fading from a national perspective," said Frank Nothaft, chief economist for CoreLogic, in a press release. "While the national impact is waning, the local impact remains. Some Florida markets continue to see increases in early-stage delinquency transition rates in October, reaching 5% on average in Miami, Orlando, Tampa, Naples and Cape Coral," he continued.In Texas, the Houston, Beaumont, Victoria and Corpus Christie markets peaked above 7% in September, but are on the mend and improving in October.The share of mortgages that were 60-89 days past due was up 0.2% points to 0.9% both year-over-year and month-over-month in October. The serious delinquency rate, referring to loans 90 or more days past due, remained unchanged at 1.9% from September but was down from 2.3% from the previous year. The foreclosure inventory rate held steady at 0.6% since August, the lowest level since June 2007 when it was also 0.6%.

    Less mortgage credit available for lower-end borrowers - There were fewer mortgage programs available to borrowers at the lower end of the credit spectrum in December, resulting in an overall decrease in credit availability.The Mortgage Bankers Association's Mortgage Credit Availability Index fell 1.8% in December to 179.2 from November's 182.4. This is still higher than December 2016's MCAI of 175.2."In December a handful of investors made end of the year adjustments to their menu of offerings," said Lynn Fisher, the MBA's vice president of research and economics, in a press release.  "This resulted in a net decrease in credit availability for government-backed programs, and especially for lower credit score, higher loan-to-value loans, as well as streamline (requiring less documentation) refinances. Despite the decline in the jumbo credit availability over the month, the jumbo index was up nearly 20% from December a year ago, by far the largest gain among the component indices."December's decline dropped the MCAI to its lowest point since July. Still on a whole, mortgage credit availability was higher during 2017 than any time since the start of the housing bust. The post-bust MCAI high of 183.4 was set in March 2017.The government MCAI, which measures Federal Housing Administration, Veterans Affairs and U.S. Department of Agriculture mortgage programs being offered, fell 2.6% from November.There was a much smaller decline in the conventional MCAI of 0.7%.

    Mortgage interest deduction cap should help first time home buyers - The new cap on the mortgage interest deduction should help the first time home buyer market by forcing sellers to lower prices, at least in the near term. "Renters who are looking to buy an affordable starter home might find that they have more options now, as the new deduction limit should put downward pressure on home prices, or we should at least see sellers lower their prices in the short term," an analysis from said. "Nonetheless, this does not mean that it will be easier for low- and middle-income households to buy houses, as high-income households who want to buy can still compete and drive up prices for lower-end properties." This is contrary to other reports that note the inventory shortage, which particularly plagues the first time buyer market, will continue in 2018 and drive up prices. The analysis makes the claim that new caps on the mortgage interest and state and local property tax deductions make renting a better deal than buying a home. Owning a home will become more burdensome so sellers will lower their prices to speed up the process. "The new mortgage interest deduction has a tremendous impact on the homeownership both at the national and state levels," the report said. "Homes under $1 million will see escalated competition, and buying homes and carrying mortgages will certainly be more burdensome for homeowners. In high-tax states, buyers looking to buy might also choose to purchase properties in nearby lower-tax states, in some ways redistributing cash flow." The tax change levels the playing field for consumers deciding whether to purchase a home or continuing renting, the analysis said.

     Tax cuts will lead to mortgage boom, right? Wrong, says Dimon -  Given the boost coming to take-home pay and other fruits of the new tax law, it stands to reason that banks have an opportunity to loosen the rigid underwriting standards they imposed after the crisis, which allowed only consumers with pristine credit to get a mortgage.But when asked about the prospect of loosening underwriting standards Friday, JPMorgan Chase CEO Jamie Dimon said it will take much more than a tax cut — and any resultant growth — to entice banks to give mortgages to first-time borrowers, people with prior defaults and others who have been shut out of the market.During a conference call with analysts, Dimon reiterated his call for further changes to mortgage rules, saying that fixes to problems in FHA and other regulations could unleash a wave of growth in the market.“It’s not going back to subprime, it’s just opening up the credit box and reducing the cost of the average mortgage,” Dimon said.  Dimon said that the largest U.S. bank by assets has not softened its underwriting standards, even though it expects higher personal incomes and broader economic growth thanks to the tax cuts. Instead, he said, it will take policy changes at the federal level to encourage banks to make loans to borrowers with somewhat spotty credit files.“That’s going to take the agencies working together to set new rules and guidelines,” Dimon said. “If that happens, that can actually be really good for growth in America.”Dimon has previously advocated for changes to a host of mortgage-related rules. In his most recent annual letter, for instance, he expressed support for overhauling Federal Housing Administration lending regulations. Many banks have backed away from FHA lending since the mortgage crisis, out of fear that they could be sued by the federal government for violating the False Claims Act if they fail to properly follow underwriting guidelines. Policymakers should make it clear that the False Claims Act should only penalize “intentional fraud” rather than unintentional errors, Dimon wrote in his letter.Dimon also called on policymakers to simplify standards for mortgage servicing, which, he said, is made unnecessarily costly by a patchwork of state and federal requirements.

    Black Knight Mortgage Monitor: New Tax Law Could Impact Home Equity Borrowing --Black Knight released their Mortgage Monitor report for November today. According to Black Knight, 4.55% of mortgages were delinquent in November, up from 4.46% in November 2016. The increase was primarily due to the hurricanes. Black Knight also reported that 0.66% of mortgages were in the foreclosure process, down from 0.98% a year ago. This gives a total of 5.21% delinquent or in foreclosure. Press Release: Black Knight’s Mortgage Monitor: Tappable Equity at All-Time High, But Tax Code Changes Could Impact Homeowners’ Utilization: Black Knight finds that tappable equity – the amount of equity available for homeowners to borrow against before reaching a maximum 80 percent total loan-to-value (LTV) ratio – is at an all-time high. However, as Black Knight Data & Analytics Executive Vice President Ben Graboske explained, recent changes to the U.S. tax code may have implications for homeowners’ utilization of that equity. “As rates continue to rise and the cost associated with increasing the rate on an entire first-lien balance rises as well, the benefit pendulum will likely swing back toward HELOCs. Even so, the change could certainly impact HELOC lending volumes and loan amounts in the coming months and years. To a certain degree, the same question holds true for cash-out refinances, since tax debt for homeowners who will no longer itemize becomes generally more expensive without mortgage interest deduction in the equation. These refinances will likely be an attractive source of secured debt in the future, but increased post-tax costs may have a negative impact on originations. That said, it still remains to be seen whether and to what extent tax costs will impact borrower decisions in terms of either HELOCs or cash-out refinances. At this point, only time will tell.”

     MBA: Mortgage Applications Increase in Latest Weekly Survey -- From the MBA: Mortgage Applications Increase in Latest MBA Weekly Survey Mortgage applications increased 8.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending January 5, 2018. This week’s results included an adjustment for the New Year’s holiday. Results for the previous week ending 12/29/17 were revised.  ... The Refinance Index increased 11 percent from the previous week. The seasonally adjusted Purchase Index increased 5 percent from one week earlier. The unadjusted Purchase Index increased 44 percent compared with the previous week and was 1 percent lower than the same week one year ago. ... The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) increased to 4.23 percent from 4.22 percent, with points decreasing to 0.35 from 0.37 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.The first graph shows the refinance index since 1990. Refinance activity will not pick up significantly unless mortgage rates fall well below 4%

    Kansas City Fed on Housing: "Pent-Up Demand and Continuing Price Increases" - From Jordan Rappaport, Senior Economist at the Kansas City Fed: Pent-Up Demand and Continuing Price Increases: The Outlook for Housing in 2018 An excerpt on inventory:  The low rate of residential construction has been contributing to the tight supply of existing homes listed for sale. New construction provides liquidity to local housing markets, where households are often both buyers and sellers. With fewer new homes from which to choose, many homeowners considering upgrading have instead chosen to remain in their current homes and so have not listed them for sale. As a result, the number of existing homes for sale has decreased as well, dissuading other homeowners from upgrading and further dampening sales listings. This “vicious circle” has limited the efficacy of rising sales prices in eliciting more listings. Since early 2015, the number of single-family homes listed for sale has steadily declined (Chart 2, blue line). Correspondingly, the ratio of listed homes to monthly sales, also known as “months supply,” fell to 3.8 in November, its lowest value since 1982, the earliest date for which data are available (green line).

     Leading Index for Commercial Real Estate "Ends 2017 on High Note" in December --Note: This index is possibly a leading indicator for new non-residential Commercial Real Estate (CRE) investment, except manufacturing. From Dodge Data Analytics: Dodge Momentum Index Ends Year on High Note:  The Dodge Momentum Index grew 3.6% in December to 153.9 (2000=100) from the revised November reading of 148.6. The Momentum Index is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year. December’s increase was due to an 8.6% jump in the institutional component of the Momentum Index, while the commercial component eked out a 0.7% gain. For the full year 2017, the Momentum Index averaged 132.3, up 10.7% from the full year average for 2016, with similar improvement for the commercial sector (up 11.4%) and the institutional sector (up 9.7%). After retreating during the third quarter of 2017, the Momentum Index regained its upward track in the fourth quarter, which enabled December’s reading for the Momentum Index to be up 20.9% compared to the same month a year ago. The continued strengthening by the Momentum Index in 2017 suggests that nonresidential building construction activity will advance further during 2018.

    Fed: Q3 2017 Household Debt Service Ratio Very Low, Starting to Increase - Bill Mcbride - The Fed's Household Debt Service ratio through Q3 2017 was released on today: Household Debt Service and Financial Obligations Ratios. I used to track this quarterly back in 2005 and 2006 to point out that households were taking on excessive financial obligations. These ratios show the percent of disposable personal income (DPI) dedicated to debt service (DSR) and financial obligations (FOR) for households. Note: The Fed changed the release in Q3 2013.The household Debt Service Ratio (DSR) is the ratio of total required household debt payments to total disposable income. The DSR is divided into two parts. The Mortgage DSR is total quarterly required mortgage payments divided by total quarterly disposable personal income. The Consumer DSR is total quarterly scheduled consumer debt payments divided by total quarterly disposable personal income. The Mortgage DSR and the Consumer DSR sum to the DSR.This data has limited value in terms of absolute numbers, but is useful in looking at trends. Here is a discussion from the Fed:  The limitations of current sources of data make the calculation of the ratio especially difficult. The ideal data set for such a calculation would have the required payments on every loan held by every household in the United States. Such a data set is not available, and thus the calculated series is only an approximation of the debt service ratio faced by households. Nonetheless, this approximation is useful to the extent that, by using the same method and data series over time, it generates a time series that captures the important changes in the household debt service burden.

    Credit Card Debt Hits All Time High As Consumers Unleash Historic Shopping Spree   -- It's official: the reason behind the recent rebound in the economy can be explained with two words: "charge it." Readers may recall that one month ago, we reported that with Republicans in Washington on the verge of passing their first major piece of legislation in the form of comprehensive tax cuts that will allow Americans across the income spectrum to keep a little more of their hard earned cash in 2018, it appeared that U.S. consumers already "pre-spent" their savings using their credit cards.   And now we have confirmation that this is precisely what happened, because in the month of November, between revolving, or credit card, and non-revolving debt, largely student and auto loans, according to the latest Fed data, total consumer debt rose by $28 billion, or the most since November 2001, to $3.827 trillion, an annualized increase of 8.8%, or roughly 4 times faster than the pace of overall GDP growth. Broken down, consumer credit rose by $11.2 billion in revolving credit, or credit card debt, which pushed it a record $1.023 trillion, the highest credit card amount outstanding on record. This was also the second highest monthly increase in credit card debt on record.  Meanwhile, non-revolving credit - or auto and student loans - rose by $16.8 trillion to $2.805 trillion. Nonrevolving lending to consumers by the Federal government, which is mainly student loans, rose to $1.142t, on a non-seasonally adjusted basis. This was to be expected: as we showed last month, US consumers appear to be tapping out, and as a result the Personal savings rate dropped to 2.9%, the lowest since November 2007.

    Retail Sales increased 0.4% in December – On a monthly basis, retail sales increased 0.8 percent from November to December (seasonally adjusted), and sales were up 5.4 percent from December 2016. From the Census Bureau report: Advance estimates of U.S. retail and food services sales for December 2017, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $495.4 billion, an increase of 0.4 percent from the previous month, and 5.4 percent above December 2016. ... The October 2017 to November 2017 percent change was revised from up 0.8 percent to up 0.9 percent.   Retail and Food service sales, ex-gasoline, increased by 4.9% on a YoY basis.
    The increase in December was slightly below expectations, however sales in October and November were revised up. A solid report.

    December Retail Sales: Up 0.4% MoM - The Census Bureau's Advance Retail Sales Report for December was released this morning. Headline sales came in at 0.4% month-over-month to one decimal. Today's headline number was at the consensus of 0.4%. Core sales (ex Autos) came in at 0.4% MoM. October and November figures were revised. Here is the introduction from today's report:Advance estimates of U.S. retail and food services sales for December 2017, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $495.4 billion, an increase of 0.4 percent (±0.5 percent)* from the previous month, and 5.4 percent (±0.7 percent) above December 2016. Total sales for the 12 months of 2017 were up 4.2 percent (±0.4 percent) from 2016. Total sales for the October 2017 through December 2017 period were up 5.5 percent (±0.5 percent) from the same period a year ago. The October 2017 to November 2017 percent change was revised from up 0.8 percent (±0.5 percent) to up 0.9 percent (±0.2 percent).Retail trade sales were up 0.3 percent (±0.5 percent)* from November 2017, and were up 5.6 percent (±0.7 percent) from last year. Nonstore Retailers were up 12.7 percent (±1.4 percent) from December 2016, while Building Materials and Garden Equipment and Supplies Dealers were up 9.9 percent (±2.1 percent) from last year. [view full report]  The chart below is a log-scale snapshot of retail sales since the early 1990s. The two exponential regressions through the data help us to evaluate the long-term trend of this key economic indicator.

    Bankruptcy Looms As Sears Warns "Will Consider All Options" If New Financing Process Fails - Sears Holdings, the one-time giant retailer that has been teetering on the edge of bankruptcy for years now, announced this morning that, following yet another disappointing holiday season (shocking), they've initiated new discussions with lenders aimed at renegotiating terms on some $1 billion of "non-first lien debt."  According to a press release from the company, the debt concessions would be accompanied by another $200 million of cost cuts.Sears Holdings Corporation announced today it has raised $100 million in new financing and is pursuing an additional $200 million from other counterparties. In addition, Sears Holdings has amended its existing second lien notes, maturing October 15, 2018, to increase their borrowing base advance rate for inventory and defer their collateral coverage test and restart it with the second quarter of 2018, and is in discussions with certain lenders regarding additional transactions to improve the terms on potentially more than $1 billion of its non-first lien debt.The Company also outlined incremental actions to further streamline its operations to drive profitability, including cost reductions of $200 million on an annualized basis in 2018 unrelated to store closures.Rob Riecker, Sears Holdings' Chief Financial Officer, said: "As previously announced, we are actively pursuing transactions to adjust our capital structure in order to generate liquidity and increase our financial flexibility. The new capital we have secured represents meaningful progress towards those objectives and demonstrates that we continue to have options to finance our business." Of course, the most important part of this morning's press release is the following statement which serves as a not so thinly-veiled threat to junior creditors that any failure to grant financial concessions could result in a bankruptcy filing. However, should the Company's efforts to complete these transactions not be fully successful, the Board will consider all other options to maximize the value of its assets.

    Consumer Price Index: December Headline at 2.1% -  The Bureau of Labor Statistics released the December Consumer Price Index data this morning. The year-over-year non-seasonally adjusted Headline CPI came in at 2.11%, down from 2.20% the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 1.78%, up from the previous month's 1.71%.  Here is the introduction from the BLS summary, which leads with the seasonally adjusted monthly data: The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 percent in December on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 2.1 percent before seasonal adjustment.An increase of 0.4 percent in the shelter index accounted for almost 80 percent of the 1-month all items increase. The food index rose in December, with the indexes for food at home and food away from home both increasing. The energy index, which rose sharply in November, declined in December as the gasoline index decreased.The index for all items less food and energy increased 0.3 percent in December, its largest increase since January 2017. Along with the shelter index, the indexes for medical care, used cars and trucks, new vehicles, and motor vehicle insurance were among those that increased in December. The indexes for apparel, airline fares, and tobacco all declined over the month.The all items index rose 2.1 percent for the 12 months ending December, compared to 2.2 percent for the 12 months ending November. The index for all items less food and energy increased 1.8 percent over the last year; the 12-month change has now been either 1.7 or 1.8 percent for eight consecutive months. The food index rose 1.6 percent over the past year; the index for energy increased 6.9 percent, with all of its major component indexes rising during 2017. [More…] was looking for a 0.2% increase MoM in seasonally adjusted Headline CPI and 0.2% in Core CPI. Year-over-year forecasts were 2.1% for Headline and 1.7% for Core. The first chart is an overlay of Headline CPI and Core CPI (the latter excludes Food and Energy) since the turn of the century. The highlighted two percent level is the Federal Reserve's Core inflation target for the CPI's cousin index, the BEA's Personal Consumption Expenditures (PCE) price index.

    US core consumer prices post biggest gain in 11 months - Underlying U.S. consumer prices recorded their largest increase in 11 months in December amid strong gains in the cost of rental accommodation and health care, bolstering expectations that inflation will gain momentum this year. The Labor Department said its Consumer Price Index excluding the volatile food and energy components rose 0.3 percent last month also as prices for new motor vehicles, used cars and trucks and motor vehicle insurance increased. That was the biggest advance in the so-called core CPI since January and followed a 0.1 percent gain in November. Core CPI increased 1.8 percent in the 12 months through December, picking up from 1.7 percent in November. Economists polled by Reuters had forecast core CPI rising 0.2 percent month-on-month and holding steady at 1.7 percent on an annual basis. Weak import and producer price reports this week had raised concerns about the inflation outlook, although the two reports do not have a strong correlation with the CPI data. Economists are hoping that a tightening labor market, rising commodity prices and a weak dollar will lift inflation toward the Federal Reserve's 2 percent target this year. The U.S. central bank's preferred inflation measure, the personal consumption expenditures (PCE) price index excluding food and energy, has undershot its target since May 2012. The U.S. central bank is forecasting three rate hikes this year. It increased borrowing costs three times in 2017. Supporting the rise in underlying inflation pressures last month, rents increased 0.4 percent. Owners' equivalent rent of primary residence climbed 0.3 percent after gaining 0.2 percent in November. The cost of medical care increased 0.3 percent, with prices for prescription medication surging 1.0 percent after rising 0.6 percent in November. The cost of both hospital and doctor visits increased 0.3 percent. Households also paid more for new motor vehicles, which rose 0.6 percent in price last month, the biggest gain since January. The cost of motor vehicle insurance increased 0.6 percent. Apparel prices, however, fell 0.5 percent. Cheaper gasoline prices limited the increase in the overall CPI to 0.1 percent in December after climbing 0.4 percent in November. That lowered the year-on-year increase in the CPI to 2.1 percent from 2.2 percent in November. Last month, gasoline prices fell 2.7 percent after rebounding 7.3 percent in November. Food prices rose 0.2 percent after being unchanged for two straight months.

    December Producer Price Index: Final Demand Down 0.1% MoM - Today's release of the December Producer Price Index (PPI) for Final Demand came in at -0.1% month-over-month seasonally adjusted, down from last month's 0.4%. It is at 2.6% year-over-year, down from 3.1% last month, on a non-seasonally adjusted basis. Core Final Demand (less food and energy) came in at -0.1% MoM, down from the previous month and is up 2.3% YoY NSA. MoM consensus forecasts were for 0.2% headline and 0.2% core.Here is the summary of the news release on Final Demand:The Producer Price Index for final demand fell 0.1 percent in December, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices advanced 0.4 percent in both November and October. (See table A.) On an unadjusted basis, the final demand index climbed 2.6 percent in 2017 after a 1.7-percent rise in 2016.Most of the December decline in the final demand index is attributable to a 0.2-percent decrease in prices for final demand services. The index for finaldemand goods was unchanged.Prices for final demand less foods, energy, and trade services edged up 0.1 percent in December after rising 0.4 percent in November. In 2017, the index for final demand less foods, energy, and trade services climbed 2.3 percent following a 1.8-percent advance in 2016. More…The BLS shifted its focus to its new "Final Demand" series in 2014, a shift we support. However, the data for these series are only constructed back to November 2009 for Headline and April 2010 for Core. Since our focus is on longer-term trends, we continue to track the legacy Producer Price Index for Finished Goods, which the BLS also includes in their monthly updates. As this overlay illustrates, the Final Demand and Finished Goods indexes are highly correlated.

    Deflation Re-Emerges - Producer Prices Plunge In December  Following the deflationary core import price index print, producer prices dropped 0.1% in December, missing expectations dramatically and 'deflating' the most since Aug 2016.

    • Final demand ex food, energy fell 0.1% m/m vs est. up 0.2%
    • Final demand rose 2.6% y/y vs est. up 3%
    • Final demand ex food, energy rose 2.3% y/y vs est. up 2.5%
    • Final demand ex food, energy and trade services rose 0.1% m/m
    • Final demand personal consumption fell 0.2% m/m
    • Final demand personal consumption rose 2.6% y/y

    The index for final demand services moved down 0.2 percent in December following nine consecutive increases. Most of the decrease can be traced to a 0.6-percent decline in margins for final demand trade services. (Trade indexes measure changes in margins received by wholesalers and retailers.) Prices for final demand transportation and warehousing services fell 0.4 percent.Conversely, the index for final demand services less trade, transportation, and warehousing inched up 0.1 percent.  A major factor in the December decline in prices for final demand services was the index for automotive fuels and lubricants retailing, which fell 10.7 percent.The indexes for loan services (partial); airline passenger services; apparel, footwear, and accessories retailing; legal services; and health, beauty, and optical goods retailing also moved lower.In contrast, prices for inpatient care advanced 0.7 percent. The indexes for truck transportation of freight and apparel wholesaling also increased. In December prices for beef and veal fell 6.3 percent. The indexes for gasoline, fresh and dry vegetables, liquefied petroleum gas, and turbines and turbine generator sets also moved lower.

    US import prices post smallest gain in five months (Reuters) - U.S. import prices recorded their smallest increase in five months in December and underlying imported price pressures were muted amid declining costs for food and consumer goods. The slowdown in import price growth came despite a weak dollar, which could temper expectations that inflation will pick up this year and keep the Federal Reserve on a path of gradual interest rate increases. “Fed officials are desperate for more inflation and will take it from any quarter,” said Chris Rupkey, chief economist at MUFG in New York. “Today’s import price data will worry the Fed doves even more about too-low inflation.” The Labor Department said on Wednesday import prices edged up 0.1 percent last month after accelerating 0.8 percent in November. That was the smallest gain since July and was well below economists’ expectations for a 0.5 percent increase. In the 12 months through December, prices increased 3.0 percent, slowing from November’s 3.3 percent jump. The dollar lost 7 percent of its value against the currencies of the United States’ main trading partners last year.  U.S. financial markets were little moved by the data as investors digested a report from Bloomberg News that Chinese officials have recommended the country slow down or halt its purchases of U.S. securities. China is the largest foreign holder of U.S. government debt. The yield on the benchmark 10-year U.S. Treasury note jumped to a 10-month high, while the dollar fell against a basket of currencies. Stocks on Wall Street were trading lower. Last month, prices for imported petroleum rose 2.0 percent after surging 8.1 percent in November. Import prices excluding petroleum fell 0.2 percent, reversing a 0.2 percent gain in November. Import prices excluding petroleum rose 1.3 percent in the 12 months through December.

    U.S. Heavy Truck Sales up Year-over-year in 2017 - Heavy truck sales increased 3% in 2017 compared to 2016, and heavy truck sales were up 18% year-over-year in December.  First, here is a table of heavy truck sales since 2000 (source: BEA). Note that sales peaked during the housing bubble, and really collapsed during the great recession.  This graph shows heavy truck sales since 1967 using data from the BEA. The dashed line is the December 2017 seasonally adjusted annual sales rate (SAAR). Heavy truck sales really collapsed during the great recession, falling to a low of 181 thousand in April and May 2009, on a seasonally adjusted annual rate basis (SAAR). Truck sales softened with the decline in oil prices, however with the increase in oil prices over the last year, heavy truck sales increased too. Heavy truck sales were at 447 thousand SAAR in December 2017, down slightly from 451 thousand in November, and up from 379 thousand in December 2016.  With solid construction and rising oil prices, heavy truck sales will probably increase in 2018.

     Update: Framing Lumber Prices Up Sharply Year-over-year -- Here is another update on framing lumber prices. Early in 2013 lumber prices came close to the housing bubble highs - and prices are once again near the bubble highs. This graph shows two measures of lumber prices: 1) Framing Lumber from Random Lengths through November 2017 (via NAHB), and 2) CME framing futures. Prices in early 2018 are up solidly year-over-year and might exceed the housing bubble highs in the Spring of 2018.  Note: CME prices hit an all time high briefly in November. Right now Random Lengths prices are up 22% from a year ago, and CME futures are up about 46% year-over-year. There is a seasonal pattern for lumber prices. Prices frequently peak around May, and bottom around October or November - although there is quite a bit of seasonal variability.  It looks like we will see record prices this year.

    Wholesale Sales Surge Near Most In 7 Years As Inventories Rebound -  Following a disappointing tumble in October, November wholesale inventories rebounded 0.8% MoM (better than expected) but slowed modestly YoY (+3.96%). However, wholesale sales surged 1.5% MoM, pushing it to a near-7-year-high 9.85% YoY surge. So this should be a modest positive for Q4 GDP (better than expected inventory growth) erasing October's loss for a 0.5% gain so far in Q4. Further good news is that the wholesale trade "gap" continues to decline... The question is - how sustainable is the credit-fueled buying spree? And what happens if retail doesn't follow the same path, buying this product from wholesale?

    U.S. Business Inventories Rise More Than Expected In November - Business inventories in the U.S. increased by slightly more than anticipated in the month of November, according to a report released by the Commerce Department on Friday. The report said business inventories climbed by 0.4 percent in November, while economists had expected inventories to rise by 0.3 percent. Revised data showed no change in business inventories in October compared to the originally reported 0.1 percent drop. Manufacturing inventories also increased by 0.4 percent in November after rising by 0.3 percent in October, while retail inventories inched up by 0.1 percent after coming in unchanged in the previous month. Additionally, the Commerce Department said business sales surged up by 1.2 percent in November after climbing by 0.8 percent in October. Wholesale and manufacturing sales jumped by 1.5 percent and 1.2 percent, respectively, while retail sales increased by 0.9 percent. With sales rising faster than inventories, the total business inventories/sales ratio edged down to 1.33 in November from 1.34 in October. 

    Meltdown and Spectre FAQ: Crapification at Scale -- Lambert Strether - Yesterday, Yves posted a “primers on Meltdown and Spectre”, which included several explanations of the two bugs from different viewpoints; if you feel you don’t have a handle on them, please review it. Today, I want to give an overview of the two bugs. I will dig into the details of these two bugs in the form of a FAQ, and then I’ll open a discussion of the larger business and political economy issues raised in the form of a MetaFAQ. First, I should make one point: Meltdown is a bug; Specture is a class of bugs (or, if you prefer, a strategy).ThreatPost explains: “Meltdown is a well-defined vulnerability where a user-mode program can access privileged kernel-mode memory. This makes patching Meltdown much easier than Spectre by ensuring kernel memory is unmapped from a user-mode, which is what we see in the form of kernel page-table isolation (KPTI),” said Jeff Tang, senior security researcher at Cylance.  Ben Carr, VP of strategy at Cyberbit, said there is not a single patch that can be applied for Spectre and mitigation efforts will require ongoing efforts. He said Spectre attacks do not rely on a specific feature of a single processor’s memory management and protection system, making future attacks part of a generalized strategy to undermine a CPU. “In the case of Spectre, it is a class of attack not a specific vulnerability… Exploits are based on the side effects of speculative execution, specifically branch prediction. This type of exploit will be tailored and continue to morph and change making patching extremely difficult,” Carr said. Researchers say Spectre also represents a larger challenge to the industry because it requires a greater degree of coordination among stakeholders to mitigate. This distinction is important to make because press coverage, in lumping the two together, will have the tendency to make people think that both are fixed when only Meltdown is fixed, when in fact Spectre will require years of remediation.

    Microsoft says security patches slowing down PCs, servers - (Reuters) - Microsoft said on Tuesday that software patches released to guard against microchip security threats slowed down some personal computers and servers, with systems running on older Intel processors seeing a noticeable decrease in performance. The comments in a blog post were the clearest signal from Microsoft that fixes for flaws in microchips from Intel and rivals described last week could meaningfully degrade performance. The topic is of keen interest to large data center operators, which could incur significant cost increases if computers slow down.  Microsoft also said that security updates froze some computers using chipsets from Intel rival AMD, dragging AMD’s shares down nearly 4 percent. Shares in Intel, which reiterated on Tuesday that it saw no sign of significant slowdown in computers, fell 2.5 percent taking the loss since the issue surfaced last week to about 7 percent or around $15 billion in market value.   Security researchers disclosed the flaws on Jan. 3 that affected nearly every modern computing device containing chips from Intel, AMD and ARM Holdings, owned by Japan’s SoftBank Group Corp (9984.T). "We (and others in the industry) had learned of this vulnerability under nondisclosure agreement several months ago and immediately began developing engineering mitigations and updating our cloud infrastructure," Microsoft executive Terry Myerson wrote in a blog post on Tuesday. (

    Intel’s telling some customers to avoid its fix for the Spectre and Meltdown attacks — because of a big bug -- Intel is quietly telling some of its big customers to "delay" installing a fix it issued that was intended to address a major security vulnerability that became public last week, the Wall Street Journal reported. The giant chipmaker is giving that advice because the recently issued software update can cause its latest processors to reboot when they're not supposed to, something the company acknowledged in a statement on Thursday. "We have received reports from a few customers of higher system reboots after applying firmware updates," Navin Shenoy, executive vice president and general manager of Intel's data center group, said in the statement. "We are working quickly with these customers to understand, diagnose, and address this reboot issue." Notably, Intel didn't give the same advice to consumers as it's giving to its big customers.  "End-users should continue to apply updates recommended by their system and operating system providers," Shenoy said in the statement.

    Intel needs to come clean about Meltdown and Spectre - Intel hasn’t had the best of times recently. Meltdown and Spectre security flaws have helped reveal fundamental issues with processor designs over the past 20 years, and the software updates to protect PCs will have performance impacts. Even as I write this, it’s still not clear to anyone exactly how bad these performance impacts will be for older desktop systems, or how significant they’ll be to server-based cloud platforms. It’s all a bit of a mess, and Intel hasn’t helped with its lack of transparency. It’s time for Intel to stop hiding behind cleverly worded statements.Intel’s first response to the initial Meltdown and Spectre rumors was an angry blog post that provided few details, and claimed “performance impacts are workload-dependent,” and that they “should not be significant” to the average computer user without even a mention of potential server problems. Intel made it clear it wasn’t the only chipmaker affected by the issue, and the buzz over performance issues continued.The initial response was angry and confusingA day later, Intel issued a second response. This time, the company admitted “performance impact from the software updates may initially be higher” on some workloads, but the wording was still vague and confusing. Intel promised updates for 90 percent of processor products introduced in the past five years by the end of this week to fix the security problems. These updates are BIOS firmware updates, which are not distributed centrally by Intel or Microsoft, and require PC makers to properly manage and alert customers that they even exist. The buzz over performance issues continued. Intel CEO Brian Krzanich took to a CES keynote stage last night and addressed the continued noise by repeating Intel’s promise of security updates and admitted that “some workloads may experience a larger impact than others,” without elaborating on exactly what workloads would be affected. Intel’s stock price has dropped 7 percent since the flaws were uncovered, and there’s concerns over Krzanich’s Intel stock sales. Before Intel even managed to issue its third statement on the CPU flaws, Microsoft revealed some of the extent of the performance issues facing Windows PCs and server-based systems. Windows 7 and Windows 8 machines running Haswell or older processors are going to be impacted the most according to Microsoft, and “most [of those] users will notice a decrease in system performance.”

    Here’s how, and why, the Spectre and Meltdown patches will hurt performance - As the industry continues to grapple with the Meltdown and Spectre attacks, operating system and browser developers in particular are continuing to develop and test schemes to protect against the problems.  Since news of these attacks first broke, it has been clear that resolving them is going to have some performance impact. Meltdown was presumed to have a substantial impact, at least for some workloads, but Spectre was more of an unknown due to its greater complexity. To recap: modern high-performance processors perform what is called speculative execution. They will make assumptions about which way branches in the code are taken and speculatively compute results accordingly. If they guess correctly, they win some extra performance; if they guess wrong, they throw away their speculatively calculated results. This is meant to be transparent to programs, but it turns out that this speculation slightly changes the state of the processor. These small changes can be measured, disclosing information about the data and instructions that were used speculatively. With the Spectre attack, this information can be used to, for example, leak information within a browser (such as saved passwords or cookies) to a malicious JavaScript. With Meltdown, an attack that builds on the same principles, this information can leak data within the kernel memory. Meltdown is fixed by changing how operating systems handle memory. Operating systems use structures called page tables to map between process or kernel memory and the underlying physical memory. Traditionally, the accessible memory given to each process is split in half; the bottom half, with a per-process page table, belongs to the process. The top half belongs to the kernel. This kernel half is shared between every process, using just one set of page table entries for every process. This design is both efficient—the processor has a special cache for page table entries—and convenient, as it makes communication between the kernel and process straightforward. The fix for Meltdown is to split this shared address space. That way when user programs are running, the kernel half has an empty page table rather than the regular kernel page table. This makes it impossible for programs to speculatively use kernel addresses.

    ‘It Can’t Be True.’ Inside the Semiconductor Industry’s Meltdown - Months earlier, cybersecurity researcher Anders Fogh had posted a blog suggesting a possible way to hack into chips powering most of the world’s computers, and the friends spent part of the evening trying to make sense of it. The idea nagged at former Intel Corp. engineer Thomas Prescher, so when he got home he fired up his desktop computer and set about putting the theory into practice. At 2 a.m., a breakthrough: he’d strung together code that reinforced Fogh’s idea and suggested there was something seriously wrong. “My immediate reaction was, ‘It can’t be true, it can’t be true,’” Prescher said. Last week, his worst fears were proved right when Intel, one of the world’s largest chipmakers, said all modern processors can be attacked by techniques dubbed Meltdown and Spectre, exposing crucial data, such as passwords and encryption keys. Prescher was one of at least 10 researchers and engineers working around the globe -- sometimes independently, sometimes together -- who uncovered Meltdown and Spectre. Interviews with several of these experts reveal a chip industry that, while talking up efforts to secure computers, failed to spot that a common feature of their products had made machines so vulnerable. "It makes you shudder," said Paul Kocher, who helped find Spectre and started studying trade-offs between security and performance after leaving a full-time job at chip company Rambus Inc. last year. "The processor people were looking at performance and not looking at security." Kocher still works as an adviser to Rambus.  Spectre fools the processor into running speculative operations -- ones it wouldn’t normally perform -- and then uses information about how long the hardware takes to retrieve the data to infer the details of that information. Meltdown exposes data directly by undermining the way information in different applications is kept separate by what’s known as a kernel, the key software at the core of every computer.

     Small Business Optimism Index Declines in December -- Earlier from the National Federation of Independent Business (NFIB): Average Monthly Optimism Sets All-Time Record in 2017 The Index of Small Business Optimism lost 2.6 points in December, falling to 104.9, still one of the strongest readings in the 45-year history of the NFIB surveys. The highest reading of 108.0 was reached in July 1983, only slightly above November’s 107.5. The lowest reading of 79.7 occurred in April 1980. Two of the 10 Index components posted a gain, five declined, and three were unchanged. The decline left the Index historically strong and maintained a string of exceptional readings that started the day after the 2016 election results were announced. Following the election announcement, the Index rose from 95.0 (a below average reading) for October and pre-election November, to 102.0 in the November weeks after the election, and then to 105.0 in January. This surge in optimism has led to 2017 achieving the highest yearly average Index reading in the survey’s history. The average monthly Index for 2017 was 104.8. The previous record was 104.6, set in 2004.Job creation was slow in the small-business sector as owners reported a seasonally adjusted average employment change per firm of 0.01 workers. Clearly, a lack of “qualified” workers is impeding the growth in employment. ... Nineteen percent of owners cited the difficulty of finding qualified workers as their Single Most Important Business Problem (up 1 point), second only to taxes. This is the top ranked problem for those in construction (30 percent) and manufacturing (27 percent). This graph shows the small business optimism index since 1986.

    BLS: Job Openings "Little changed" in November - From the BLS: Job Openings and Labor Turnover Summary: The number of job openings was little changed at 5.9 million on the last business day of November, the U.S. Bureau of Labor Statistics reported today. Over the month, hires and separations were little changed at 5.5 million and 5.2 million, respectively. Within separations, the quits rate was unchanged at 2.2 percent and the layoffs and discharges rate was little changed 1.1 percent. ...  The number of quits was little changed at 3.2 million in November. The quits rate was 2.2 percent. The number of quits was little changed for total private and increased for government. The following graph shows job openings (yellow line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.  This series started in December 2000.Note that hires (dark blue) and total separations (red and light blue columns stacked) are pretty close each month. This is a measure of labor market turnover. When the blue line is above the two stacked columns, the economy is adding net jobs - when it is below the columns, the economy is losing jobs. Jobs openings decreased in November to 5.879 million from 5.925 in October. The number of job openings (yellow) are up 4.4% year-over-year. Quits are up 3.1% year-over-year. These are voluntary separations. (see light blue columns at bottom of graph for trend for "quits"). Job openings are mostly moving sideways at a high level, and quits are increasing year-over-year.

    Weekly Initial Unemployment Claims increase to 261,000 -- The DOL reported: In the week ending January 6, the advance figure for seasonally adjusted initial claims was 261,000, an increase of 11,000 from the previous week's unrevised level of 250,000. The 4-week moving average was 250,750, an increase of 9,000 from the previous week's unrevised average of 241,750.Claims taking procedures continue to be disrupted in the Virgin Islands. The claims taking process in Puerto Rico has still not returned to normal.The previous week was unrevised. The following graph shows the 4-week moving average of weekly claims since 1971.

    Walmart clouds pay rise by closing Sam Club's stores - BBC News: Walmart has revealed plans to close 10% of its Sam's Club wholesale stores and lay-off thousands of workers. The closures were revealed on the same day the world's biggest retailer said it would start paying its US staff at least $11 an hour and hand some of them a one-off cash bonus. Walmart said the pay rise was due to the US tax overhaul which has cut the corporate rate from 35% to a flat 21%. Hourly-paid employees will receive the higher wage from next month. Walmart is closing 63 of its 660 Sam's Club stores. US Treasury Secretary Steven Mnuchin claimed that Walmart's pay deal was further proof that the new US tax bill is returning money to workers as the administration promised. However, at a press conference on Thursday, Mr Mnuchin dismissed questions about the layoffs. "Lots of things are going on in the economy," he said. "We appreciate what Walmart's doing." Senate Democrats, who opposed the tax changes, said the store closures are a reminder that lower corporate tax bills will primarily benefit "wealthy shareholders, leaving thousands of workers standing in the cold without jobs."

    Walmart Suddenly Shutters Numerous Sam’s Club Stores without Notice, Chaos Breaks out on Twitter - Numerous local radio stations in various cities across the US reported that Sam’s Club is permanently closing stores in their cities, and without announcement. In a number of cases, employees showed up to work this morning and found the doors locked and a notice saying that the store would be closed.KHOU in Houston, Texas, alerted by locked-out employees and customers, said that of the 10 stores in the area, two had voice mail messages which said that the stores are closed. It was also checking into rumors of a third store being shuttered in the Houston area.At the other end of the nation, KTUU in Anchorage, Alaska, reported that both Sam’s Club stores in Anchorage and the store in Fairbanks were closed:Customers of Sam’s Club noticed the Anchorage-area stores closed early Thursday, Jan. 11, with no indication as to why. Now, according to a representative of Sam’s Club, it’s not just Thursday that the stores will be shuttered.“It’s closed today, to let associates prepare for the eventual closing of the stores,” the Sam’s Club employee told KTUU. “They will be closed for good on January 26th.”  Jessica Buckner, an audit team lead at the Sam’s Club in the Tikahtnu Commons in Anchorage, told KTVA that all Alaska stores are closing as part of a larger downsizing. “From what I heard, there’s over 260 stores that have been closed down,” she said.In Ohio, “at least” two stores in Cincinnati were closed “without notice,” WCPO reported. “This came as a surprise to both employees and customers.” This erupted across the country. Rumors are swirling because there was no announcement in advance of the closures. It seems Walmart — which imports the vast majority of its merchandise — was too busy today brown-nosing up to the White House and hogging the media limelight with its announcement that the corporate tax cuts motivated it to increase the starting wage by $2, add some benefits, and hand out one-time bonuses – from $200 for newer employees to $1,000 for an employee with 20 years’ service. Massive, OK.

    Amazon makes list of large companies with workers receiving food stamps - In short order, Amazon has become one of Ohio’s largest employers, after receiving tens of millions of dollars of state tax incentives for building warehouses, data centers and other projects along the way.Now, the online giant has quickly made its way onto another list, one charting the state’s employers with the most workers and their family members who also qualify for food stamps. Amazon ranks 19th on the list of 50 large employers, according to Policy Matters Ohio, a progressive policy group.Amazon had 1,430 workers and family members receiving benefits as of August, the group said Friday. A typical food-stamp beneficiary receives benefits for about two people, meaning Amazon likely has about 700 workers receiving food stamps, more than 10 percent of its Ohio workforce.To be on the list, a company has to have a large number of workers in the state. In addition, that company has to have a significant number of workers who don’t make much money or maybe work part time.Workers getting food stamps in essence becomes an additional taxpayer subsidy for the companies that pay low wages, said Zach Schiller, Policy Matters’ research director. “We’ve appreciated having more employment, but maybe we should be focusing economic development dollars on good jobs. It’s pretty clear that a lot of these jobs are not good jobs,” he said. “That should raise a policy question for our public officials, and that’s why we think its worth pointing out.”

    The White and Black Murder Rates Are Both Rising, But for Different Reasons -- There’s no longer much debate, at least as far as experts are concerned: For two straight years — 2015 and 2016 — the murder rate in the United States went up, significantly. This fact isn’t the result of media hysteria or cherrypicking or the never-ending attempts on the part of some demagogues to churn up fears about violent crime — it is a statistical reality. The basic facts, as summed up in an important National Institute of Justice paper published last year, are that the homicide rate rose from 4.4 to 4.9 homicides per 100,000 Americans from 2014 to 2015, “an 11.4-percent increase and the largest one-year percentage rise in the U.S. homicide rate since 1968.” Then, from 2015 to 2016, there was another, albeit smaller increase — from 4.9 to 5.3 per 100,000, or an increase of 8.2 percent.  But this reality has been misunderstood by a lot of people, partly because it’s difficult to talk about violent crime in anything but a political way — especially given that the homicide rise in question took place as candidate and then president Donald Trump attempted to paint many American cities as blighted death zones — and partly because when it comes to something as complicated as the homicide rate, it takes a lot of time and effort to understand what’s going on. It isn’t unusual for there to be a years-long gap between the discovery of a trend in criminology and anything approaching an adequate explanation of what gave rise to it.  Richard Rosenfeld, the lead author of the NIJ paper and a criminologist at the University of Missouri–St. Louis, is starting to unravel the mystery of America’s recent crime increase, though, and what he’s found so far should cause a lot of people to rethink their views on the subject — and highlights the extent to which white Americans and black Americans are living in very different worlds affected by very different sociological factors. Last week, I spoke with Rosenfeld about criminologists’ ongoing attempts to understand the recent uptick, and three important points jumped out from both our conversation and from the NIJ paper he lead-authored:

    • Rather than there being a single rise in the homicide rate, there are two: one black and one white. Most of the conversation about the increasing homicide rate has focused on black perpetrators and victims for a couple reasons. … In reality, though, while the rate of black homicide victimization has gone up, that’s just part of the story — white people, too, are both murdering and getting murdered at strikingly increasing rates as well, as two charts from the paper show:
    • There are two different “Ferguson effects.”  It could be the case that yes, deteriorating relationships between communities and the police are helping drive the increased homicide rate, but that things go in the other direction. That is, some communities have come to view the police with such profound anger and fear that their members are less likely to seek out the assistance of law enforcement, and this is making it easier for people to get away with murder.
    • People should be concerned, but shouldn’t mistake what’s going on now for the 1970s or 1980s.

    Is Your Child Lying to You? That’s Good -- Should parents be troubled when their kids start to deceive them? Odds are, most of us would say yes. We believe honesty is a moral imperative, and we try to instill this belief in our children. Classic morality tales like “The Boy Who Cried Wolf” and “Pinocchio” speak to the dangers of dishonesty, and children who lie a lot, or who start lying at a young age, are often seen as developmentally abnormal, primed for trouble later in life. But research suggests the opposite is true. Lying is not only normal; it’s also a sign of intelligence. Kids discover lying as early as age 2, studies have found. In one experiment, children were asked not to peek at a toy hidden behind them while the researcher withdrew from the room under false pretenses. Minutes later, the researcher returned and asked the child if he or she peeked. This experiment, designed by the developmental psychologist Michael Lewis in the mid-1980s and performed in one form or another on hundreds of kids, has yielded two consistent findings. The first is that a vast majority of children will peek at the toy within seconds of being left alone. The other is that a significant number of them lie about it. At least a third of 2-year-olds, half of 3-year-olds and 80 percent or more of children 4 and older will deny their transgression, regardless of their gender, race or family’s religion. Children are also remarkably good at lying. In a series of additional studies based on the same experimental model, a range of adults — including social workers, primary-school teachers, police officers and judges — were shown footage of kids who were either lying or telling the truth about having committed a transgression, with the aim of seeing who could spot the liars. Astonishingly, none of the adults (not even the kids’ parents) could consistently detect the lies. Why do some children start lying at an earlier age than others? What separates them from their more honest peers? The short answer is that they are smarter. 

    Ballooning pension costs affecting recent education financial gains  --In 2013, Gov. Jerry Brown signed into law “revolutionary” legislation that promised to replace an inequitable funding system with one that would bring more resources to the neediest students.The system is called the Local Control Funding Formula, and it eliminated the way in which districts were funded through “categories” – which tied the money to specific projects – and gave money per student with added resources for the neediest among them — English-learners, low-income, and students in foster care.But those added funds are being depleted by the sharp increases districts are having to pay into employees’ pensions. Under California’s 2014-15 budget, school districts contributions to the California State Teachers’ Retirement System (CalSTRS) and the California Public Employees’ Retirement System (CalPERS) were set to increase from 8.3 percent of payroll in 2013-14 to 19 percent by 2020-21.According to Brown’s plan, the state was going to be increasing the money it pays into the Local Control Funding Formula until it would be fully funded by 2021 “but that did not consider the increase in PERS and STRS contributions by the employer,” said Kari Yeater, superintendent of the North Monterey County Unified School District. “If we’re going to be fully funded but only back to 2007-08 levels and PERS is going to be almost up by 20 percent … that’s a huge game changer. It’s going to be really hard to sustain and maintain program services and positions over time.” Districts across the state began sounding alarm bells in June, when they approved budgets with “deficit spending” meaning they were spending more money than they were receiving from the state. Most of these districts balanced their sheets using reserves, but as districts begin planning for the 2018-19 school year, some are realizing they’ll need to cut expenses to stave off financial nightmares. That’s what happened at the Monterey Peninsula Unified School District when administrators proposed finding $5 million in cuts, which have mostly been identified and some even approved.

    Universal screening increases the representation of low-income and minority students in gifted education - Low-income and minority students are substantially underrepresented in gifted education programs. The disparities persist despite efforts by many states and school districts to broaden participation through changes in their eligibility criteria. One explanation for the persistent gap is that standard processes for identifying gifted students, which are based largely on the referrals of parents and teachers, tend to miss qualified students from underrepresented groups. We study this hypothesis using the experiences of a large urban school district following the introduction of a universal screening program for second graders. Without any changes in the standards for gifted eligibility, the screening program led to large increases in the fractions of economically disadvantaged and minority students placed in gifted programs. Comparisons of the newly identified gifted students with those who would have been placed in the absence of screening show that Blacks and Hispanics, free/reduced price lunch participants, English language learners, and girls were all systematically “underreferred” in the traditional parent/teacher referral system. Our findings suggest that parents and teachers often fail to recognize the potential of poor and minority students and those with limited English proficiency.

    "It's Not His Job" - Illinois Treasurer Plays Liberal Activist With College-Savers' Cash - Through a Freedom of Information Act request we’ve learned who owns those shares of stock on which Illinois Treasurer Michael Frerichs is playing activist shareholder: college savers in Illinois 529 accounts. That’s not his mission and they aren’t his shares. It’s bad policy and a dangerous precedent.. Frerichs also is using his position in pharmaceutical companies to push them to do what he wants on the opioid crisis. Do something about opioids, he told Cardinal Health and AmerisourceBergen, or we’ll punish your stock prices by selling your shares.  The response to the Freedom of Information Act request we filed shows all these shares are held in various funds, mostly broad index funds, all of which are in the 529 college savings programs run through the Treasurer’s office. It’s wrong for the Treasurer to be asserting his personal views on various social issues , through those shares, for a number of reasons:

    • They’re just not his! The Treasurer is merely the administrator of the 529 programs and the shares are paid for entirely with college savers’ money. He doesn’t even manage the funds the shares are in. If shareholders want to use their position to influence social issues, fine, but that should be up to them.
    • It’s not his job .Under Article V Section 18 of the Illinois Constitution, the Treasure is “responsible for the safekeeping and investment of monies and securities deposited with him and for their disbursement upon order of the Comptroller.” That’s it. His sole focus should be on maximizing return and safety of investments. With his implicit and explicit threat to sell shares to punish companies he doesn’t like, he’s subordinating rate of return to other matters.
    • He’s accountable to and directed by nobody as to what issues he takes on or what action should be taken. Even if you think the Treasurer is acting appropriately, should his decisions be his alone?
    • He doesn’t have the resources to do it right. This isn’t about whether the particular actions Frerichs took are right as you or I see things. The fact is that issues like fake news and what pharma companies’ roles are in the opioid crisis are complicated, require expertise and are subject to reasonable differences of opinion. Even if the focus is just on how their conduct is impacting share price, that’s for professional fund managers and share owners to decide.
    • It’s a dangerous precedent. Would a different Treasurer with different politics seek to punish, for example, companies like Starbucks that is pro-gay marriage? Or Nordstrom because it dropped Ivanka Trump’s clothing line?

    The tax on university endowments is anti-intellectualism and cultural resentment masquerading as fiscal policy -- One small feature of America’s tax changes passed at the end of last year was explicitly designed to punish institutions of higher learning. Universities, which are otherwise exempt from paying tax because they are non-profits, will now have to pay 1.4 per cent of their endowment income to the federal government if their endowments are large enough relative to the size of their student body.There are only about 30 schools currently liable to pay the new tax, although, thanks to the ambiguity of the law and the arbitrariness of the cutoffs, no one knows for sure. Some leftists, who might not be expected to support an assault against higher learning, are in favour of the new tax. They think large endowments reinforce inequality between schools. Others simply seem to be motivated by animosity to any private concentration of wealth, even if the income generated from this wealth goes directly to financial aid for students from poor backgrounds and to supporting basic research.  From the right, John Cochrane argues the tax is justified because there should no tax preferences for any non-profit. Cochrane, however, is an outlier and unrepresentative of how the elected politicians who voted in favour of the new tax thought about what they were doing. Does anyone seriously believe the theocratic wing would want to take away the large tax preferences for churches? Even Cochrane admits that “some of the endowment tax is blowback” and that “it may only be the beginning”.That gets to the real explanation for this seemingly pointless new levy. As thoughtful proponents of the endowment tax explained off the record, they want to use fiscal policy to punish people with views they don’t like. In particular, they object to what they see as the “noxious, unflinching left-liberal ideology” promoted by places such as Yale, Princeton, and, apparently, CalTech. (What exactly makes this “ideology” so “noxious” was unspecified but it seems to include the notion that homosexuals should be treated equally under the law.)

    The secret lives of students who mine cryptocurrency in their dorm rooms -- Mark was a sophomore at MIT in Cambridge, Massachusetts, when he began mining cryptocurrencies more or less by accident. In November 2016, he stumbled on NiceHash, an online marketplace for individuals to mine cryptocurrency for willing buyers. His desktop computer, boosted with a graphics card, was enough to get started. Thinking he might make some money, Mark, who asked not to use his last name, downloaded the platform’s mining software and began mining for random buyers in exchange for payments in bitcoin. Within a few weeks, he had earned back the $120 cost of his graphics card, as well as enough to buy another for $200. Each time Mark mined enough ether to cover the cost, he bought a new graphics card, trading leftover currency into bitcoin for safekeeping. By March 2017, he was running seven computers, mining ether around the clock from his dorm room. By September his profits totaled one bitcoin—worth roughly $4,500 at the time. Now, four months later, after bitcoin’s wild run and the diversification of his cryptocoin portfolio, Mark estimates he has $20,000 in digital cash. “It just kind of blew up,” he says. Exploiting a crucial competitive advantage and motivated by profit and a desire to learn the technology, students around the world are launching cryptocurrency mining operations right from their dorm rooms. In a typical mining operation, electricity consumption accounts for the highest fraction of operational costs, which is why the largest bitcoin mines are based in China. But within Mark’s dorm room, MIT foots the bill. That gives him and other student miners the ability to earn higher profit margins than most other individual miners. In the months since meeting Mark, I’ve interviewed seven other miners from the US, Canada, and Singapore who ran or currently run dorm room cryptomining operations, and I’ve learned of many more who do the same.

    Inmates Can't Receive Donated Books Anymore, They Have to Buy Them - Instead of inmates being able to receive donated books in the mail from family members and community groups, inmates at three New York prisons now have to purchase books selected by six, state-approved vendors. And the selection is limited. And expensive, activists say.Novels cost $11.25 from one vendor.A book about chess costs $29.95 from another. When there were five vendors, 77 books were available for purchase and 24 of the titles were coloring books. According to the Department of Corrections and Community Supervision, the directive is in an effort to restrict contraband from entering the prison "through a more controlled inmate package program.”  “It is possible that with feedback from incarcerated individuals and their families some adjustment in prices may occur,” a spokesman for the Department said. The directive restricts almost all packages from entering the prisons. Family members can no longer send food to inmates, either. Food also has to be purchased through the vendors. 

    Smoking penalties, ER fees, premiums on the poor: How states want to shrink Medicaid -- Indiana hopes to make Medicaid enrollees pay a fee if they smoke cigarettes. Arizona wants to put a five-year limit on how long its poor residents can be enrolled in the program. And Kentucky wants families earning as little as $5,100 to pay Medicaid premiums — and to kick patients out of the program if their payments get 60 days behind. These proposals are part of a host of changes that mostly conservative states have unsuccessfully sought for years to overhaul Medicaid, a federal insurance program for the poor and disabled. Now, the Trump administration is giving at least some of these initiatives the green light. On Thursday, health officials issued new guidance to state Medicaid directors, saying the administration would allow states to impose work requirements on certain Medicaid recipients — a first in the program's 53-year history. Doing so will help Medicaid recipients who are not disabled find employment, Seema Verma, administrator of the Centers for Medicare and Medicaid Services, argued in announcing the changes. Ten states have already filed requests for waivers to add work requirements to their Medicaid policies, and the Trump administration approved a proposal Friday from Kentucky to overhaul its Medicaid program, including by imposing new work requirement and premiums. The states' proposals vary widely, from small tweaks to changes that would dramatically reduce their program's size and scope. And many plans go far beyond the new work requirements, pitching provisions that include raising premium payments for Medicaid enrollees, new fees for emergency room visits and requirements for drug testing and treatment. States administer Medicaid, but it is a federal program. And for states to make the changes they're suggesting, they need approval from the Trump administration. Health-care experts say many of these proposals are likely to be adopted. The Trump administration has already told one state, Iowa, that it can sharply limit how providers are paid for treating Medicaid patients, and new premium payments for the poor are also expected to be accepted. 

    Kentucky becomes first U.S. state to impose Medicaid work provisions (Reuters) - Kentucky on Friday became the first U.S. state to require that Medicaid recipients work or get jobs training, after gaining federal approval for the fundamental change to the 50-year-old health insurance program for the poor. The Centers for Medicare and Medicaid Services issued policy guidance on Thursday allowing states to design and propose test programs with such requirements. Kentucky’s waiver, submitted for federal approval in 2016, requires able-bodied adult recipients to participate in at least 80 hours a month of “employment activities,” including jobs training, education and community service. The Kentucky program also imposes a premium on most Medicaid recipients based on income. Some who miss a payment or fail to re-enroll will be locked out for six months. The new rules will take effect in July, Kentucky state officials said. “Kentucky will now lead on this issue,” Governor Matt Bevin said at a news conference on Friday. “They want the dignity associated with being able to earn and have engagement in the very things they’re receiving,” he said of Medicaid recipients. Democrats and health advocacy groups blasted the federal policy on Thursday, saying it would make it tougher for the most vulnerable Americans to have access to healthcare. The Southern Poverty Law Center liberal advocacy group said it planned to file a legal challenge. The rules apply to those between 19 and 64 years old. Certain groups are exempt, including former foster-care youth, pregnant women, primary caregivers of a dependent, full-time students, the disabled and the medically frail. The Trump administration also said states would have to make “reasonable modifications” for those battling opioid addiction and other substance-use disorders. Kentucky, along with 30 other states, expanded Medicaid to those earning up to 138 percent of the federal poverty level under the Affordable Care Act, commonly called Obamacare. More than 400,000 Kentucky residents gained health insurance through the program, the highest growth rate of Medicaid coverage of any state.

    “But How Will We Pay for It?”: Modern Monetary Theory and Democratic Socialism - Medicare for All has quickly become a principal rallying cry for many progressives and leftists alike. Organizations ranging from Our Revolution, National Nurses United and certain branches of Democratic Socialists of America (DSA) have done much of the day-to-day work to bring single-payer health care to the forefront of political debate. Their efforts have helped push Medicare for All to the floors of the United States Senate and House. Currently, there are 16 senators and 120 Congress people cosponsoring Rep. John Conyers' (D-Michigan) Expanded & Improved Medicare For All Act.With greater congressional backing of Conyers' bill and the grassroots surge in democratic socialist politics, questions have moved from the desirability to the viability of programs like Medicare for All. Partisans and opponents of social democracy alike are wondering, "Single-payer health care sounds great, but how can we pay for it? How can we pay for any universalistic program without going bankrupt?" If democratic socialists see social democracy as one of the key stepping stones towards a truly egalitarian society, the issue of how we can sustainably finance such programs is of the utmost importance. An economic doctrine named Modern Monetary Theory (MMT) is surging in popularity and offering answers. MMT is debunking popular narratives about the harsh necessity of austerity and belt-tightening. It is showing that money is not a finite abstraction, but a limitless public utility that can be used to meet human needs. More than this, however, MMT and its heterodox economic cousins offer a framework to build directly democratic, egalitarian political structures, and thus reimagine and recalibrate the viability of democratic socialism.  Governments with their own currency and a floating exchange rate (sovereign currency issuers like the United States) do not have to borrow from "bond vigilantes" to spend. They themselves first spend the money into existence and then collect it through taxation to enforce its usage. The state can spend unlimited amounts of money. It is only constrained by biophysical resources, and if the state spends beyond the availability of resources, the result is inflation, which can be mitigated by taxation.

    Trump Administration Rule Paves Way For Association Health Plans - KHN - The Department of Labor on Thursday released proposed new rules that proponents say will make it easier for businesses to band together in “associations” to buy health insurance. These rules, supporters say, will lead to more affordable choices for some small businesses and sole proprietors, likely starting in 2019. Association coverage “should be cheaper and arguably just as comprehensive” as what many employers can now buy, said Christopher Condeluci, a Washington, D.C., attorney who specializes in employee benefits and has served as the tax and benefits counsel to the U.S. Senate Finance Committee. Critics, though, are wary about whether the plans will provide consumers adequate protection. “This approach allows associations to offer coverage that doesn’t have to come into compliance with all the critical consumer protections that would otherwise apply to small employers and individuals. It might not be as comprehensive,” said Kevin Lucia, project director at Georgetown University’s Health Policy Institute. The proposal — which now faces a 60-day comment period — broadens the definition of those eligible to join or form such groups and rolls back some restrictions on association health plans set by the Obama administration. Specifically, the rule would allow associations to be created for the sole purpose of offering insurance to members. In some cases, such associations could have members nationwide, making the insurance available across state lines. For the first time, the rules would allow sole proprietors with no employees to join such group coverage. 

    Hospitals wrestle with shortage of I.V. bags, linked to hurricane - The United States is facing a nationwide shortage of I.V. bags in large part because Baxter International, a major manufacturer in Puerto Rico, was affected by the hurricane that slammed its plants on the island. FDA said on January 4 that production at Puerto Rico plants remains fragile. Many U.S. hospitals are being forced to use more time-consuming ways to administer drugs and to weigh a halt on elective procedures and clinical trials. Some hospital officials said they have only a day or two of supplies and worry whether they would be able to handle an influx of patients as the influenza virus ramps up. Baxter said its two I.V. plants in Puerto Rico now are hooked up to the electrical grid but that power is "intermittent" and that the plants have backup diesel generators in place. The company said it expects "to return to more normal supply levels for products made in Puerto Rico in the coming weeks." Massachusetts General Hospital in Boston has nurses spending as long as 35 minutes delivering medications using I.V. syringes, known as an I.V. push. Instead of a 4–5 day supply of bags, the hospital now has 1 or 2 days' worth. The hospital is so concerned it is looking at using glass bottles for patients instead of the I.V. bags.

    Former Montana GOP House Majority Leader Facing 30 Years in Prison After Pleading Guilty to Running Meth Ring - The former leader of the Republican-dominated House is facing up to 30 years in prison for running a meth ring over a seven-month period in 2016, reports the Billings Gazette.According to the report, prosecutors have recommended  former lawmaker Michael David Lange serve 28 years after acting as “the central player” in a meth ring that distributed 20, and possibly up to 50 pounds of the drug, into the Billings area.The 57-year-old Lange pled guilty in September to conspiracy to possess and distribute methamphetamine and possession of methamphetamine with the intent to distribute.“Lange was responsible for polluting the Billings community and surrounding areas with a significant quantity of highly pure methamphetamine,” Assistant U.S. Attorney John Sullivan detailed in the government’s sentencing recommendation, adding, “The negative impact associated with at least 20 pounds of methamphetamine is difficult to overstate.” The Gazette reports that Lange, while in office, supported giving $4 million in taxpayer dollars to an anti-meth public relations campaign. He was later removed from his leadership spot after being captured on video in an obscene tirade against then-Gov. Brian Schweitzer (D).

    Ibuprofen linked to male infertility, study says -- Ibuprofen has a negative impact on the testicles of young men, a study published Monday in the journal Proceedings of the National Academy of Sciences found. When taking ibuprofen in doses commonly used by athletes, a small sample of young men developed a hormonal condition that typically begins, if at all, during middle age. This condition is linked to reduced fertility.  Advil and Motrin are two brand names for ibuprofen, an over-the-counter pain reliever. CNN has contacted Pfizer and Johnson & Johnson, the makers of both brands, for comment.  The new study is a continuation of research that began with pregnant women, explained Bernard Jégou, co-author and director of the Institute of Research in Environmental and Occupational Health in France.Jégou and a team of French and Danish researchers had been exploring the health effects when a mother-to-be took any one of three mild pain relievers found in medicine chests around the globe: aspirin, acetaminophen (also known as paracetamol and sold under the brand name Tylenol) and ibuprofen.Their early experiments, published in several papers, showed that when taken during pregnancy, all three of these mild medicines affected the testicles of male babies. Testicles not only produce sperm, they secrete testosterone, the primary male sex hormone. All three drugs then are "anti-androgenic," meaning they disrupt male hormones, explained David M. Kristensen, study co-author and a senior scientist in the Department of Neurology at Copenhagen University Hospital.

    Eli Lilly Tested an Erectile Dysfunction Drug on Children - When Donald Trump’s nominee for HHS secretary was a top executive at Eli Lilly, the patent on its blockbuster Cialis was soon to expire. So Lilly tested it on kids. The drugmaker believed the erectile dysfunction drug might help a rare and deadly muscle-wasting disease that afflicts boys. The drug didn’t work — but under a law that promotes pediatric research, Lilly was able to extend the Cialis patent anyway for six months — and that’s worth a lot when a medication brings in over $2 billion a year.   Critics say the brand-name drugmakers are “gaming” the patent system, finding all sorts of ways to protect monopolies and delay competition from generics. And Alex Azar — the former president of Eli Lilly's U.S. operations, now poised to become the top U.S. health official — professes to oppose such tactics.  But the tension between his past actions as a drug executive and his likely future as the nation’s top health official are evident in both the Cialis story and in Lilly’s tripling of the price of insulin. Questions about his commitment to rein in skyrocketing drug costs, an unfulfilled Trump campaign pledge, are likely to dominate his confirmation hearing before the Senate Finance Committee on Tuesday. The full Senate is likely to vote on his nomination to lead the Department of Health and Human Services late this month. He'd succeed Tom Price, who resigned after a taxpayer-funded travel scandal.

    How antidepressants are ending up in Great Lakes fish - A new study might depress anyone concerned with Great Lakes water quality. Antidepressant drugs, making their way through an increasing number of people's bodies, getting excreted in small amounts into their toilets, and moving through the wastewater treatment process to lakes and rivers, are being found in multiple Great Lakes fish species' brains, new research by the University of Buffalo has found. Researchers detected high concentrations of both the active ingredients and metabolites — byproducts of the parent drug — of popular antidepressant pharmaceuticals including Zoloft, Prozac, Celexa and Sarafem in the brains of fish caught in the Niagara River connecting Lake Erie and Lake Ontario. Affected species included smallmouth and largemouth bass, rudd, rock bass, white bass, white and yellow perch, walleye, bowfin and steelhead. While the concentrations aren't potentially harmful to humans eating the fish, they are problematic, said University at Buffalo chemistry professor Diana Aga, the lead author of the study published Aug. 16 in the journal Environmental Science and Technology."It is a threat to biodiversity, and we should be very concerned," she said.  Previous research has shown antidepressants in water create "suicidal shrimp" that swim toward light instead of away from it, making them vulnerable to predator fish and birds, Aga said."Other research teams have shown that antidepressants can affect the feeding behavior of fish, or their survival instincts," Aga said. "Some fish won't acknowledge the presence of predators as much."That has the potential to affect delicate ecological balances in the Great Lakes, already under siege from invasive species. Ultimately, it could disrupt the sport fishing that fuels a multibillion-dollar industry in Michigan.

    ‘Raw water’ is the latest pseudo-scientific craze that could make you sick - Apparently people are rushing to get "raw water." Just wait till they get "raw cholera".  — Sarah Parcak  High-profile Bay Area denizens are skipping tap water in favor of drinking unfiltered, untreated, and expensive “raw” water that comes straight out of the ground, Nellie Bowles reports for The New York Times. Proponents claim that raw water’s health benefits include naturally occurring minerals and microbes. But the reality for any inadequately treated water from the tap or a spring is that those minerals can sometimes include arsenic, and those microbes can be deadly.  The trend is borne of distrust for the public water supply, Bowles writes — including the disinfection processes the water undergoes, the fluoride that’s sometimes added to it, and the lead pipes that might carry it. But adding fluoride prevents tooth decay. (“There is no scientific evidence that fluoride is a mind-control drug, but plenty to show that it aids dental health,” Bowles writes.) And disinfecting water is key for preventing the spread of dangerous viruses, bacteria, and parasites. In fact, civilizations have been trying to clean up their water supplies for millennia. As early as 1500 BCE, the ancient Egyptians are said to have clarified cloudy water using techniques similar to ones we use today, according to a report from the Environmental Protection Agency. “Sanskrit and Greek writings recommended water treatment methods such as filtering through charcoal, exposing to sunlight, boiling, and straining,” the report says.

    The EPA is still warning Puerto Ricans about sewage-laced water nearly four months after Maria -- At this point, Puerto Rico’s water troubles sound like a broken record. The Environmental Protection Agency’s latest update on the island post-Hurricane Maria, released on Friday, warned residents to be careful when playing in or touching the water in Puerto Rico’s rivers, streams, and oceans, because raw sewage could be entering it. More than 100 days have passed since Hurricane Maria made landfall on the U.S. territory back in September, yet the situation continues to be dire for these U.S. citizens. Energy generation isn’t at full capacity, and mental health is suffering as a result. Then there’s the water. About 96 percent of the Puerto Rico Aqueduct and Sewer Authority’s more than 1 million active customers have potable water,according to the Puerto Rican government and according to the Federal Emergency Management Agency, 94 percent of sewage treatment plants are up and running on generator power throughout the island. Per data provided by the EPA, this should include all of the island’s 51 wastewater treatment plants, and 112 out of the 115 drinking water plants operating. But the EPA is still recommending that people take additional precautions when coming into contact with water bodies “out of an abundance of caution.” A similar recommendation was issued in the EPA’s Hurricane Maria update from December 18, but not in updates from late November.  EPA press officer David Bryan told Earther that although some plants are now running, they’re still experiencing issues where sewage is escaping. Some of these issues could include anything from a pipe rupture to a blockage. “Now, the [EPA] has to go and check every [plant] one by one,” he told Earther.

    Nursing homes under scrutiny as deaths mount -- Disturbing images of oven-baked and flooded nursing homes has made the public confront questions about the safety of elderly Americans during this year's record-breaking hurricane season.More than a dozen seniors struggled through waste-deep floodwater before rescuers air-lifted them from a Texas assisted-living facility during Hurricane Harvey. And days after Hurricane Irma roared over Florida, emergency responders wheeled more than a hundred gasping people in wheelchairs and stretchers from a Hollywood rehabilitation facility that lost power. At least nine of them died; they were between 71 and 99 years old. It's grim evidence that the stakes for adapting nursing homes to climate change are high — and getting higher as storms threaten to grow more powerful and the American public gets more wrinkles.The Census Bureau predicts the share of people older than 65 will hit nearly 21 percent in 2050, compared with 14.5 percent in 2014. Meanwhile, scientists anticipate that seas could rise by several inches. In the retirement hub of southeast Florida, waters could rise by as much as 2 feet by 2060. That makes it easier for storms to flood coastal communities.As those storms roar onto shore, research suggests nursing homes are still the safest place for elderly people despite the high-profile tragedies that have grabbed headlines since Hurricane Katrina, when 78 people died in Louisiana nursing homes in 2005. Even accounting for those immediate deaths, the average elderly person was better off sheltering in place during a hurricane, researchers from universities and the Department of Veterans Affairs wrote in a 2012 study published in the Journal of Post-Acute and Long-Term Care Medicine.

    170 Million Americans Drink Radioactive Tap Water - Drinking water for more than 170 million Americans in all 50 states contains radioactive elements that may increase the risk of cancer, according to an Environmental Working Group (EWG) investigation released Thursday. Radiation in tap water is a serious health threat, especially during pregnancy, and the U.S. Environmental Protection Agency's legal limits for the most widespread radioactive elements are more than 40 years old. But President Trump's nominee to be the White House environment czar rejects the need for water systems to comply even with those inadequate standards. The most common radioactive element in American tap water is radium. EWG's analysis of test data from almost 50,000 public water systems found that from 2010 to 2015, more than 22,000 utilities in all 50 states reported radium in the treated water delivered to customers' taps. EWG's interactive map shows the utilities with radium contamination and how many people were affected. Only a small percentage of those systems exceeded the EPA's legal limits for radium, set in 1976. But almost all exceeded California state scientists' public health goals for two separate radium isotopes, set in 2006, which are hundreds of times more stringent than the EPA's standard for the two isotopes combined. The elevated risk of cancer, as well as potential harm to fetal growth and brain development, decreases with lower doses of radiation but does not go away. "Most radioactive elements in tap water come from natural sources, but that doesn't take away the need to protect people through stronger standards and better water treatment,"   "Millions of Americans are drinking water with potentially harmful levels of radioactive elements, but the outdated federal standards mean many people don't know about the risk they face when they turn on the tap." California has the most residents affected by radiation in drinking water. In Texas, which has a smaller population, about 80 percent of the population was served by utilities reporting detectable levels of those elements.

    170 Million in U.S. Drink Radioactive Tap Water. Trump Nominee Faked Data to Hide Cancer Risk - EWG - Drinking water for more than 170 million Americans contains radioactive elements at levels that may increase the risk of cancer, according to an EWG analysis of 2010 to 2015 test results from public water systems nationwide.   Radiation in tap water is a serious health threat, especially during pregnancy. But the Environmental Protection Agency’s legal limits for several types of radioactive elements in tap water are badly outdated. And President Trump’s nominee to be the White House environment czar rejects the need for water systems to comply even with those outdated and inadequate standards. The nominee, Kathleen Hartnett White, former chair of the Texas Commission on Environmental Quality, admitted in a 2011 interview that the commission falsified data to make it appear that communities with excessive radiation levels were below the EPA's limit. She said she did not "believe the science of health effects" to which the EPA subscribes, placing "far more trust" in the work of the TCEQ, which has a reputation of setting polluter-friendly state standards and casually enforcing federal standards. Last month, after Hartnett White again admitted to the Senate Environment and Public Works Committee she knew the TCEQ had ignored the EPA’s radiation regulations, her nomination was sent back to the White House. But on Jan. 8, the White House renominated her, setting up another confirmation vote before the committee, and then by the full Senate. EWG's Tap Water Database compiles results of water quality tests for almost 50,000 utilities nationwide. EWG also mapped the nationwide occurrence of radium, the most common radioactive element found in tap water. From 2010 to 2015, more than 22,000 utilities serving over 170 million people in all 50 states reported the presence of radium in their water.  The EPA has classified all ionizing radiation as carcinogenic. There is clear evidence that high doses of radiation cause cancer in various organs. The probability of developing cancer decreases with lower doses of radiation, but it does not go away.

    Canadian Research Adds to Worry Over an Environmental Threat the Pentagon Has Downplayed for Decades -- New research by Canadian scientists into the spread of a chemical commonly used in military explosives has confirmed some of the worst fears of U.S. environmental regulators tracking the threat posed by the Pentagon’s handling of its munitions in this country. The Canadian research — published Nov. 17 in the Journal of Environmental Quality — analyzed soil and water samples at nine sites where military explosives were detonated between 1990 and 2014, and came up with data about where and in what concentrations the explosive compound known as RDX, a possible human carcinogen, had turned up. Calling RDX “an internationally known problem,” which “has led to an international warning on possible soil, surface water, and groundwater contamination on military training sites,” the research described with actual measurements how RDX floats on the wind and seeps through soils into water supplies.  The researchers took water samples from groundwater at the explosives sites and found that in 26 out of 36 samples, the RDX that had made its way into aquifers exceeded levels considered safe. As a result, the researchers suggest that the data can be used to model RDX contamination at any site where munitions are routinely detonated, and for the first time, give environmental experts a way to quantify how much of it is spreading into surrounding communities.  For decades, the Pentagon has known about RDX’s potential health and environmental threat. But the Pentagon has long maintained that the risk is not great, and it has both financed research and flexed its political muscle to have its view prevail. Most recently, the Pentagon has waged an intense fight to not have the U.S. Environmental Protection Agency upgrade its classification of RDX’s health threat, a move that could expose the Department of Defense to billions of added dollars in cleanup costs. The research found that while the highest concentrations of RDX remained in a ring around the sites where munitions had exploded, pieces of explosive, perhaps as large as a centimeter, were carried on the wind and later settled in the soil. Surface and groundwater samples showed that the RDX ultimately did not quickly dissolve or degrade as it sank deeper into the earth, where it usually was carried into water supplies.

    Denmark and Greenland sign deal to clean up waste the US military left on the Arctic island (AP) — Denmark and its autonomous Arctic island of Greenland have signed an agreement to clean up US military installations that were left to rust in the pristine landscape after the Cold War. The deal earmarks 180 million kroner ($29 million) over six years for the cleanup. Greenland Premier Kim Kielsen and Denmark Environment Minister Esben Lunde Larsen finalized it in Copenhagen on Thursday. Lunde Larsen said a Danish-Greenland group will decide when and where to start the cleanup. A 1951 deal between Copenhagen and Washington allowed the United States to build 33 bases and radar stations in Greenland. The agreement didn't specify who would be responsible for cleanup. One such facility, Bluie East Two, was abandoned by the US Air Force in 1947, leaving rusted equipment, aviation-fuel barrels, and collapsed buildings eerily dotting the landscape.  The deal between Denmark and Greenland doesn't cover a US facility that is still in use or an under-ice missile project abandoned in 1966.

    States Confront the Spread of a Deadly Disease in Deer - On the edge of this south-central Montana village, where deer hunting is a way of life, the game check station has become the front line of the state’s efforts to stop the spread of a deadly infection known as chronic wasting disease. It has ravaged deer herds throughout the United States and Canada and forced the killing of thousands of infected animals in 24 states and three Canadian provinces. It has also been found in Norway and South Korea. With the disease widespread in Wyoming, the Dakotas and the province of Alberta, Montana officials had been bracing for its emergence. So in November, when biologists discovered it in six deer in this part of Montana and in another near the Canadian border, officials began setting up special hunts and stations for testing. On Friday, the department announced that two more deer from this region, taken early in the special hunt, tested positive for the disease. Other test results are pending. Chronic wasting disease is a contagious neurological disease that infects elk, deer, moose and caribou, and reduces their brains to a spongy consistency. Animals become emaciated, behave strangely and eventually die. It’s not known to be transferred to humans. Neither is it known to be spread from wild to domestic animals. There is no treatment, although a vaccine has been successful in tests in wild deer. It is among a class of diseases known as transmissible spongiform encephalopathy, or TSE. Most experts believe the infectious agent is something called a prion, a misfolded cellular protein found in the nervous system and lymph tissue. The disease was first noted in captive deer in Colorado in the 1960s. The most closely related animal disease is scrapie in sheep. The emergence of chronic wasting disease here is a blow to Montana, which prides itself on world-class deer and elk hunting and where many people hunt both animals for subsistence. It has renewed a dispute over how Wyoming manages its elk, and sparked fears that the epidemic could grow much worse, even spreading into the vast wildlife herds of Yellowstone National Park, with which the states share a border.

    Salmon and Orca Survival Threatened by Chlorpyrifos Pesticide: Government Report  - A group of three widely used agricultural pesticides jeopardizes the survival of endangered salmon , according to a National Marine Fisheries Service (NMFS) biological opinion unveiled this week. Chlorpyrifos , malathion and diazinon—all organophosphate pesticides—harm salmon and their habitat to the point that their survival and recovery are at risk, according to the report . Southern Resident Killer Whales, or orcas, are also at risk as they depend on salmon.  The NMFS crafted the report to comply with a 2014 court deadline for the agency to determine whether these pesticides threatened salmon with extinction. Upon determining that these organophosphates jeopardize salmon survival, the biological opinion offers three options for protective measures to avoid that outcome with a variety of measures including buffer zones, spray reduction technologies and pesticide stewardship programs. "The best available science clearly shows these pesticides are a major threat to endangered salmon and to our orca whales , which need salmon to survive," said Patti Goldman, managing attorney at Earthjustice. "These pesticides are bad for people every way they are exposed to it and toxic to salmon." Chlorpyrifos, widely used in citrus, nuts and orchards, is acutely toxic and associated with neurodevelopmental harms in children. The U.S. Environmental Protection Agency ( EPA ) refused to ban chlorpyrifos in 2017, despite overwhelming evidence that shows the pesticide harms children, workers and the environment.  Malathion is used in more than 100 food crops, and about half of total applications in the U.S. are on alfalfa, cotton, rice and wheat. A number of growth anomalies have been observed when fish were exposed to malathion, according to studies. Diazinon is used on rice, fruit trees, sugarcane, corn, potatoes and horticultural plants.

    EPA Rule Change Would Expose Teenagers to Highly Toxic Chemicals - The U.S. Environmental Protection Agency ( EPA ) is taking aim at two rules designed to prevent exposure to toxic chemicals by workers under the age of 18. The agency has filed notices with the federal register of its intent to either tweak or outright eliminate these protections for underage workers.   The first rule the agency is looking to change is one the Obama administration adopted in 2015 which prohibited farmworkers under the age of 18 from handling and dispersing certain pesticides deemed too toxic for public sale.  Typically, the pesticides used on large agricultural sites contain far more potent and toxic chemicals, and these pesticides are only available for sale to commercial farms due to their toxicity. These are known as "restricted use" pesticides, and the EPA provides a full list of the thousands of chemicals that fall into this category.  According to HuffPost , the rules were put in place in 2015 after doctors lobbied for tighter restrictions for underage workers due to the potential impacts of this class of chemicals on the still developing bodies of children, and they warned about very severe health impacts that these chemicals could have on brain development.  As DeSmog has pointed out in the past , children are far more susceptible to chemical toxicity than adults, making these proposed rule changes a potential disaster waiting to happen:  As the Centers for Disease Control explained , children require more food, oxygen and water than adults in comparison to their body size. This means that a contaminant in any one of those areas will have a greater presence in the body of a child compared to the body of a full grown adult.  The CDC also said that some organ systems within the body do not fully mature until a child is in their teens, and a developing system is far more susceptible to pollutants than an established organ system, as different pollutants can delay or alter development. The CDC described out how different types of environmental contaminants affect children differently than adults: "A well-known example is the effect of lead on young children's developing nervous systems; intellectual development is exquisitely sensitive to even small amounts of lead; this sensitivity is not seen in adults."

    Deadly irukandji jellyfish 'drifting south towards Gold Coast' as sea temperatures rise - Deadly irukandji jellyfish are drifting further south along Queensland’s coastline and could eventually put tourism as far south as the Gold Coast at risk, an expert has warned. Prof Jamie Seymour has “little doubt” irukandji will keep moving after a stinger was found at Fraser Island on Sunday and a boy was stung on Mooloolaba beach on the sunshine coast 12 months ago. “It would shut beaches. It would collapse tourism,” the toxinologist from James Cook University said. Seymour said warmer sea temperatures behind the irukandji’s drift south, and they could become a regular occurrence at Mooloolaba, and even as far south as Coolangatta on the Gold Coast. The lack of forward planning on the issue is a point of frustration for Seymour, who is “sick of” warning of the risk of the highly venomous species. “How many more people need to get stung before it’s realised it is not just a one-off?” he said. “Be proactive, don’t wait until it becomes a larger problem. Throw money at it now.” The irukandji jellyfish caught on the western side of Queensland’s Fraser Island on Sunday prompted a warning for swimmers to stay out of the water. “We’re urging everyone to stay out of the water entirely on that western side of the island while conditions are hot and humid,” the Surf Life Saving Queensland regional manager, Craig Holden, said on Wednesday. However, Queensland Tourism Industry’s chief executive officer, Daniel Gschwind, said there was no need for panic. “We want people to have a great time here and go away healthy. We are concerned about any potential risk but there is no need to be alarmed at this point,” Gschwind said. 

    Great Barrier Reef: 99% of These Sea Turtles Are Turning Female - A new study reveals increasing temperatures are turning green turtle populations almost completely female in the northern Great Barrier Reef (GBR). The Current Biology paper says the northern GBR population of more than 200,000 nesting females—one of the largest in the world—could eventually crash without more males. Increasing temperatures in Queensland's north, linked to climate change , are being blamed because the incubation temperature of eggs determines the sex of turtles with a warmer nest resulting in more females. There are two genetically distinct populations of green turtles on the reef. One population breeds at the southern end and the other nests in the far north, mostly at Raine Island and Moulter Cay. Scientists caught green turtles at the Howick Group of islands where both populations forage. Using a combination of endocrinology and genetic tests, researchers identified the turtles' sex and nesting origin. Of green turtles from warmer northern nesting beaches, 99.1 percent of juveniles, 99.8 percent of subadults and 86.8 percent of adults were female. Turtles from the cooler southern GBR nesting beaches showed a more moderate female sex bias (65 to 69 percent female).   Lead author Dr. Michael Jensen, from the National Oceanic and Atmospheric Administration ( NOAA ), said northern GBR green turtle rookeries have been producing primarily females for more than two decades resulting in "extreme female bias."

    Watchdog to investigate flood risks to Superfund sites (AP) — A federal government watchdog agency will investigate the threats from flooding and other natural disasters to the nation's most polluted places. The Government Accountability Office told members of Congress it was assigning investigators to study the risks to human health and the environment that natural disasters pose to the more than 1,300 sites in the Environmental Protection Agency's Superfund program. The study, which comes after a historic hurricane season that inundated major cities and caused billions of dollars in damage, also seeks to determine what the federal government can do about it. The GAO's letter, dated Dec. 21, was in response to 10 senators — nine Democrats and an independent — who earlier in December requested a study of risk to the sites posed by natural disasters intensified by climate change. That request followed reporting by The Associated Press in September that more than a dozen Superfund sites were flooded by heavy rains as Hurricane Harvey struck the Houston area. A subsequent AP review of EPA records and Census data revealed that more than 2 million Americans live within a mile of 327 Superfund sites in flood zones or areas at risk from rising sea levels. 

    The nation’s rivers and streams are getting dangerously saltier --  Nearly everywhere you turn during this frigid stretch of winter, much of the world seems covered in a layer of salt aimed at keeping our roads drivable and sidewalks free of ice. All that salt is one reason — although not the only one — that many of the nation’s rivers and streams are becoming saltier, according to new research published Monday in the Proceedings of the National Academy of Sciences. Increased salt poses risks to drinking-water supplies for millions of Americans, threatens urban infrastructure, and has the potential to upend ecosystems. “The fact it is occurring so widely surprised us,” said Gene Likens, an author of the new study who is a University of Connecticut professor and president emeritus of the Cary Institute of Ecosystem Studies. “The impacts we humans are having on natural systems are really widespread.” Researchers used five decades’ worth of data from 232 U.S. Geological Survey monitoring sites to document long-term changes in the salinity of rivers and streams throughout the country, as well as changes in their acidity. They documented stark chemical changes in major waterways, such as the Hudson, Potomac and Mississippi rivers, which supply drinking water to major population centers. While the sources of excess salt in the water vary by region, in much of the country waters have been growing increasingly salty and more alkaline over time. In the Mid-Atlantic and Northeast, the heavy use of sodium chloride — better known as table salt — to maintain roads in winter was a main contributor. In the Midwest, certain fertilizers with high potassium content played a key role. In other areas, mining waste and the weathering of concrete, rocks and soils can release certain salts into nearby waterways. 

    2017 Weather and Climate Disasters Cost U.S. Record $306 Billion - 2017, one of the hottest years in modern history, was also an extremely costly year. According to a new report from the National Centers for Environmental Information, a division of the National Oceanic and Atmospheric Administration ( NOAA ), "the U.S. experienced 16 weather and climate disasters with losses exceeding $1 billion, with total costs of approximately $306 billion—a new U.S. annual record." The federal agency listed several noteworthy events, including the wildfires in the west, with total costs of $18 billion, tripling the previous U.S. annual wildfire cost record. The year's string of devastating hurricanes were also very expensive. Hurricane Harvey had total costs of $125 billion. Hurricanes Maria and Irma had total costs of $90 billion and $50 billion, respectively. 2005 was the previous most expensive year for the U.S., with losses of $215 billion mostly due to Hurricanes Katrina, Wilma and Rita.  The tropical cyclones, storms, floods, a crop freeze, drought and wildfires in 2017 were not only costly financially—they also caused a total of 362 direct fatalities, the report said.   With 16 billion-dollar disasters in 2017, the U.S. has now experienced 219 weather and climate disasters since 1980—total losses exceed $1.5 trillion. NOAA NCEI Climate  The report noted that 2017 was the third warmest year since record keeping began in 1895. The average annual temperature for the contiguous U.S. last year was 54.6 degrees Fahrenheit, 2.6 degrees above the 20th century average.

    These Billion-Dollar Natural Disasters Set a U.S. Record in 2017 - Extreme weather events caused a total of $306 billion in damage in the United States last year, making 2017 the most expensive year on record for natural disasters in the country, the National Oceanic and Atmospheric Administration said Monday. A trio of major hurricanes, Harvey, Irma and Maria, contributed hundreds of billions to the total. But the year was seemingly mired in disaster, from a freeze in the Southeast that damaged fruit crops in March, to hail storms that whipped across Colorado, Oklahoma and other central states in May, to the tornadoes that struck the Midwest in June.  Unusual consequences of extreme weather could be found all over the map. Thirteen cows died in a field in Pennington County, S.D., after ingesting anthrax spores from the soil; they had changed their grazing patterns during a drought that lasted much of the year in South Dakota, North Dakota and Montana. The cows’ demise was a small part of the $2.5 billion of damage that struck the three states. In all, there were 16 natural disasters that caused more than $1 billion of damage in 2017. In 1980, when NOAA first started tallying records, there were only three such disasters, adjusted for inflation. This year’s $306 billion in damage broke a record set in 2005, when Hurricane Katrina contributed to a total of $215 billion in damage, also adjusted for inflation. Scientists cannot always say with certainty how a given natural disaster was influenced by climate change. But some may be related to warming, and the contiguous United States experienced its third-warmest year on record in 2017. The temperature average was 2.6 degrees Fahrenheit above the 20th century average, said Jake Crouch, a climate scientist from NOAA’s National Climatic Data Center. Here are the 16 billion-dollar disasters from 2017: Some made headlines for weeks, and some were simply overtaken in the public’s consciousness by the next one. (photos)

    US east coast hits record lows on Sunday as deep freeze lingers - The National Weather Service (NWS) said the temperature in Worcester, Massachusetts, fell to -9F (-23C) on Sunday, breaking a record of -5F (-21C) set in 1942. In Providence, Rhode Island, temperatures fell to -3 (-19C), breaking a record low of -1 (-18F) set in 1912. And in Hartford, Connecticut, the temperature dropped to -9F, smashing the previous record of 1F (-17C), also set in 1912. Boston tied a low-temperature record set more than a century ago, in 1896, of -2F (-19C). By Monday, temperatures in Boston should return to a more seasonable low 30s. The city could see temperatures in the mid-40s by Thursday and as high as the low-50s on Friday. Many north-east residents endured jaw-clenching temperatures and brutal wind chills on Saturday as clean-up continued from the storm that dropped as much as 18in (46cm) of snow in some places on Thursday. Aviation crews at South Carolina’s busiest airport, Charleston International, struggled to clear runways of snow and ice so they could be reopened. In New England water main breaks, frozen hydrants and burst pipes created new problems for officials. Residents of Boston and its suburbs were cleaning up after the tide that came in on Thursday, flooding streets and forcing some residents to be evacuate as the water started to freeze. Hartford, Connecticut, registered 10F (-12C) with a wind chill of -20F (-29C) while Burlington, Vermont, was -1F (-18C) and had a wind chill of -30F (-34C). The temperature registered -37F (-38C) on Saturday at the Mount Washington Observatory in New Hampshire, one of the coldest places on the planet. The wind chill was -93F (-69C). It tied for second place with Armstrong, Ontario, as the coldest spot in the world. 

    First Came the Snow Bomb, Now Comes the Salt Bomb  -  More than 15 million tons of salt is applied annually, only to wash away with snowmelt or spring rains. But just because it’s gone from your block doesn’t mean it’s gone for good.  In fact, it may end up in your faucet.  Road salt is an influential part of a decades-long chemistry experiment local governments have unwittingly conducted on soil, waterways and infrastructure. Studying river data nationwide, research published Monday explains that 37 percent of all U.S. river systems have greater salinity, and 90 percent have seen a decrease in acidity, compared with a century ago. Why is less acid bad? Here’s how nature usually works. Raindrops absorb atmospheric carbon dioxide, turning them slightly acidic. It’s the same reaction that makes drinking a lot of seltzer potentially bad for your teeth. When that rain hits the ground, specifically rock and soil, the acid frees up ions from mineral salts—and washes such things as magnesium and calcium into rivers and out to sea, a process that scientists call “weathering.” Humanity has put this process on steroids. First, we’ve increased the amount and types of acid in rain. Industrial pollution turned precipitation so ecologically harmful by the middle of the last century that Congress had to amend the Clean Air Act to reduce emissions. The move worked, which means there’s less acid pounding the pavement. But there’s still plenty. Second, man-made environments such as cities are often made of materials much more easily “weathered” than natural ones—the manmade “rocks” of roads and buildings are washed away into rivers more easily. Infrastructure is an easier target for stronger acids to dislodge calcium, magnesium, sodium, manganese and other positively charged ions from otherwise-stable salts.  Finally, winter storm managers take what’s already an easily weatherable, salt-rich urban and suburban environment and slather it in road salt. North American rivers take in this additional salt, wreaking slow-moving havoc on drinking water and infrastructure in the process. Road salt, sewage, irrigation run-off and briny water from fossil-fuel production and mining all change the chemical composition of soils, dislodging the calcium, potassium, and magnesium that are supposed to be there and replacing them with sodium, which isn’t.

    Sydney swelters on hottest day since 1939 as mercury hits 47.3C -  The Australian city of Sydney has experienced its hottest weather in 79 years with temperatures in the region hitting as high as 47.3C (117F). In Penrith, west of Sydney, residents sweltered as the town bore the brunt of the heat on Sunday. Severe fire warnings were issued for the greater Sydney area and total fire bans were put in place across the city. Sunday's temperatures fell short of the scorching heat to hit the area in 1939, when the mercury reached 47.8C. The sweltering temperatures reached in Penrith were confirmed by the Bureau of Meteorology.ABC reported that one charity, Mission Australia, helped transfer homeless people to hospital for treatment while taking others into shelters to avoid the heat. About 7,000 properties across New South Wales were left without electricity, partly because of the heat, the Sydney Morning Herald reported. 

    Temperatures In Australia Hit 117 Degrees As Sydney Sees Hottest Day In 78 Years -- A brutal heat wave in Australia skyrocketed temperatures in Sydney on Sunday to 117 degrees Fahrenheit (47.3 Celsius), making it the hottest weather New South Wales’ capital has seen in 78 years, weather officials said.The bizarre forecast follows record low temperatures in other parts of the world.The worst of the weekend’s heat was recorded in the Sydney suburb of Penrith where the triple-degree temperature was just slightly lower than a 118-degree (47.8 C) reading recorded in the town of Richmond in 1939, according to the New South Wales’ Bureau of Meteorology. Temperatures became so hot across southern Australia that police in the neighboring state of Victoria warned drivers on Twitter that a 6-mile freeway was “melting.”Fire warnings and bans were also issued across Sydney in response to the high heat threat that has caused multiple wildfires. There was also an air quality warning issued by the NSW Office of Environment and Heritage for higher than normal ozone levels, according to The Sydney Morning Herald. Adding to some of the misery felt, a power outage left thousands of people in Sydney without electricity on Sunday evening as temperatures stayed between 91 and 113 degrees Fahrenheit, the local news site reported. A spokeswoman for local electricity provider Ausgrid, speaking to Australia’s Special Broadcasting Service, partially blamed the outage on a surge in power use.

    What a weekend: Sydney hits 117F while it snowed in the Sahara Desert -- Fresh off the arctic blast along the East Coast that saw a "bomb cyclone", Mother Nature shifted her wacky weather attention to other continents this past weekend. Perhaps the zaniest sight was snowfall in parts of the Sahara Desert.Photographer Karim Bouchetata snapped these incredible pics of snow on the dunes in the Algerian city of Ain Sefra.   Some media reports, including Forbes, claimed as much as 15, 16 or 18 inches of snow fell on the higher dunes (although none of the publications I found sourced where they got that measurement. The photos, in my opinion, don't seem to suggest that much snow. That would require the rough equivalent of over 1.5 inches of rain's worth of moisture.) But it's obvious that *some* snow did fall.  It marks the second time in a row this part of the Sahara has received snow. A dusting of snow visited that region on Dec. 26, 2016, but before that, it hadn't snowed there since 1979.England's The Sun quoted Bouchetata as saying the snow fell Saturday night and they awoke to the dunes covered in snow and didn't begin melting until that evening. Ain Sefra is at about 3,300 feet elevation, The Sun said.Meanwhile, "Down Under", where summer is in full swing, parts of Sydney, Australia hit 117 F (47.3C) on Sunday making it the hottest day in the city since 1939, just missing the all-time record of 118.Thousands were left without power, according to the Associated Press, and total fire bans were put in place as officials warned of a severe danger.  Storms rolled in as the work week began and temperatures were expected to cool back into the more manageable 70s and 80s.

    It’s so cold in Florida, iguanas are falling from trees: It’s so cold in Florida that iguanas are falling from their perches in suburban trees. Temperatures dipped below 40 degrees Fahrenheit (5 degrees Celsius) early Thursday in parts of South Florida, according to the National Weather Service in Miami. That’s chilly enough to immobilize green iguanas common in Miami’s suburbs. Palm Beach Post columnist Frank Cerabino tweeted a photograph of an iguana lying belly-up next to his swimming pool. WPEC-TV posted images of an iguana on its back on a Palm Beach County road. The cold-blooded creatures native to Central and South America start to get sluggish when temperatures fall below 50 degrees (10 degrees Celsius), said Kristen Sommers, who oversees the nonnative fish and wildlife program for the Florida Fish and Wildlife Conservation Commission. If temperatures drop below that, iguanas freeze up. “It’s too cold for them to move,” Sommers said. They’re not the only reptiles stunned by this week’s cold snap: Sea turtles also stiffen up when temperatures fall. The wildlife commission’s biologists have been rescuing cold-stunned sea turtles found floating listlessly on the water or near shore, but no such rescue is planned for iguanas. Well-meaning residents finding stiffened iguanas are advised to leave them alone, as they may feel threatened and bite once they warm up. “Don’t assume that they’re dead,” Sommers said.

    Hundreds of Flying Foxes 'Boil' in Extreme Australia Heat - The catastrophic heat wave in Australia led to the death of hundreds of flying foxes in the Sydney suburb of Campbelltown on Sunday.  Temperatures hit 117.14 degrees Fahrenheit in the Sydney metropolitan area that day—its hottest temperature in nearly 80 years.   “So many little lives lost due to the extreme heat and not enough canopy cover to shade them or keep them cool," the Help Save the Wildlife and Bushlands in Campbelltown campaign posted on Facebook. “As the dead bodies were recovered and placed in a pile for a head count the numbers had reached 200 not including the many hundreds that were still left in trees being unreachable, sadly a few adults were also included in the body count." Local rescuers and carers tried to save as many as the bats possible by rehydrating them and taking them to places to cool down, the Guardian reported. "There were tears shed and hearts sunken," the Facebook post continued, "it's [devastating] when a colony like our local one goes down like this due to heat, this colony needs more canopy cover and shaded areas to help with our ever rising hot summers because this episode will surely not be the last." About 204 dead bats, mostly juvenile, were collected that day, Campbelltown colony manager Kate Ryan told local media . However, the final death toll "could run to thousands," WIRES Wildlife Rescue group said . Ryan said the bats “basically boil" in the extreme heat. “It affects their brain—their brain just fries and they become incoherent," she said. “It would be like standing in the middle of a sandpit with no shade."  Scientists have declared 2017 as one of the hottest years in modern history. EcoWatch reported earlier this week that the triple-digit heat wave in several parts of Australia has also prompted warnings of dangerous bushfire and has literally melted part of a busy highway.

    These Birds of Prey Are Deliberately Setting Forests on Fire - A new study incorporating traditional Indigenous Australian ecological knowledge describes the largely unknown behaviour of so-called 'firehawk raptors' – birds that intentionally spread fire by wielding burning sticks in their talons and beaks. These flying firestarters are spread across at least three known species – the Black Kite (Milvus migrans), Whistling Kite (Haliastur sphenurus), and Brown Falcon (Falco berigora) – but while their hell-raising may be observed in Indigenous knowledge, that's not so elsewhere. While news of aerial arsonists fire-bombing the landscape may seem surprising or even shocking, the researchers are eager to emphasise that this destructive phenomenon has actually been witnessed for untold millennia."We're not discovering anything," one of the team, geographer Mark Bonta from Penn State Altoona, told National Geographic. "Most of the data that we've worked with is collaborative with Aboriginal peoples… They've known this for probably 40,000 years or more." According to the team, firehawk raptors congregate in hundreds along burning fire fronts, where they will fly into active fires to pick up smouldering sticks, transporting them up to a kilometre (0.6 miles) away to regions the flames have not yet scorched."The imputed intent of raptors is to spread fire to unburned locations – for example, the far side of a watercourse, road, or artificial break created by firefighters – to flush out prey via flames or smoke," the researchers write. This behaviour, documented in interviews with the team and observed first-hand by some of the researchers, sees prey driven toward the raptors by a wall of flame, enabling them to engage in a feeding frenzy upon fleeing or scorched land animals.

    California: Thirteen dead in Montecito rains and mudslides - BBC News: At least 13 people are dead amid "waist-deep" mudslides in Southern California, where heavy rains triggered flooding, say officials. Some 163 people have been taken to hospital. Twenty had "storm-related injuries" and four were critically hurt. A group of up to 300 people are reportedly trapped in Romero Canyon, east of Santa Barbara. Police said the scene "looked like a World War One battlefield". The flooding and mudslides, affecting areas scorched by wildfires last month, have shut down more than 30 miles (48km) of the main coastal road. Emergency services said a number of people were unaccounted for and they expected the number of deaths to rise. Thousands fled the deluge and more than 50 rescues have been performed. The hardest-hit homes were those that were not in the evacuation zone, officials say. Heavy rain run-off caused a mudflow in the community of Montecito, where some homes were knocked off their foundations, said Santa Barbara County Fire Department spokesman Mike Eliason. Boulders the size of small cars were rolling down hillsides and blocking roads, reports BBC News Los Angeles correspondent James Cook. Among those taken to safety was a 14-year-old girl who had been trapped for hours in the ruins of her home. The fire department published a picture of the girl encased in mud as she was led to safety. County Fire Captain Dave Zaniboni said that five people were found dead on Tuesday in Montecito and may have been killed as result of the storm. The upmarket neighbourhood includes homes owned by celebrities such as actor Rob Lowe and chat show host Ellen DeGeneres. Oprah Winfrey also has a property in Montecito that is reportedly worth nearly $90m (£66m). 

    California Mudslides Kill 15 in Areas Wrecked by Wildfires - Southern California, which just endured the largest wildfire in state history , is being bombarded by flooding and destructive mudslides triggered by torrential downpours. The "waist-high" mud destroyed homes, uprooted trees and washed away dozens of cars in Santa Barbara County, CNN reported. Thousands of Californians who were already forced to flee their homes due to last month's horrific wildfires were also ordered to evacuate over threat of mudslides. At least 15 people were killed and more than two dozen were injured as of Wednesday, according to the New York Times . Another two dozen people are missing. "We don't know how many additional people are still trapped," Santa Barbara County Sheriff Bill Brown said on CBS This Morning. "We know there are some, and we're still making our way into certain areas of Montecito and the adjacent areas to determine if anyone is still there and still alive."  Emergency helicopters airlifted about 50 people to safety on Tuesday, according to Kevin Taylor of the Montecito Fire Department. The video below shows rescuers helping a driver whose car was swept away by the mud.  As the Times pointed out, the devastation is "not a coincidence but a direct result of the charred lands , left vulnerable to quickly forming mudslides."  The December wildfires not only scorched away grass, shrubs and other vegetation that hold soil in place, but they also baked a waxy layer into the Earth that prevented the rains from being absorbed into the ground, Reuters explained.

     Death toll rises to 17 in Montecito; 100 homes destroyed by mudslides - LA Times: The death toll from massive debris flows that buried homes and cars under a torrent of mud and boulders rose to 17 in Montecito, where local personnel and the U.S. Coast Guard continued rescue operations Wednesday afternoon.About 300 people who were stuck in their homes in Montecito’s Romero Canyon neighborhood throughout the debris field were rescued Tuesday night. Authorities had said late Tuesday that residents were still stuck and that first responders planned to launch helicopter rescues at daybreak.The mudslides began around 2:30 a.m. Tuesday, when intense rains dislodged boulders and caused heavy mudflow along hillsides that were scarred by the sprawling Thomas fire late last year. A number of homes were ripped from their foundations, with some pulled more than half a mile by water and mud before they broke apart.“It looked like a World War I battlefield,” Santa Barbara County Sheriff Bill Brown said Tuesday.The death toll rose to 17 after bodies were recovered Wednesday, Brown told reporters at an afternoon news conference. At least 28 others had been reported injured, and 17 more are missing, officials said. Approximately 100 homes were destroyed and 300 were damaged in the mudslides. Eight commercial properties were also destroyed. Officials have yet to publicly identify any of those killed in the mudslides. Mike Eliason, public information officer for the Santa Barbara County Fire Department, said there were juveniles among the deceased. With much of the area still inaccessible, officials have said they fear the number of people killed in the mudslides could rise. Southern California was drenched Tuesday, but nowhere did the rainstorm inflict more pain than in Montecito, just weeks after the coastal community dealt with the devastating Thomas fire. Some 500 firefighters from across the state rushed to help, with crews struggling through clogged roads, waist-deep mud and downed trees throughout the day in search of victims. Dozens of survivors were hoisted to safety in helicopters. The rain overwhelmed the south-facing slopes above Montecito, flooding the creek and sending mud and boulders into residential neighborhoods, officials said. 

    Warming oceans could scupper marine food system – scientists - Failure to rein in global temperature rises could cause the marine food web to collapse, devastating the livelihoods of tens of millions of people who rely on fisheries for food and income, scientists have warned. Warming oceans restrict vital energy flows between different species in the marine ecosystem, reducing the amount of food available for bigger animals - mostly fish - at the top of the marine food web, according to a study in the journal PLOS Biology published on Tuesday. This could have “serious implications” for fish stocks, said Ivan Nagelkerken, a professor of marine ecology at Australia’s University of Adelaide and one of the study’s authors. Globally, about 56.5 million people were engaged in fisheries and aquaculture in 2015, according to the latest data from the United Nations’ Food and Agriculture Organization (FAO). In addition, almost a fifth of animal protein consumed by 3.2 billion people in 2015 comes from fish, FAO said. The Adelaide scientists set up 12 large tanks, each holding 1,800 litres of water, in a temperature-controlled room to replicate complex marine food webs, and test the effects of ocean acidification and warming over six months. Plant productivity increased under warmer temperatures but this was mainly due to an expansion of bacteria which fish do not eat, Nagelkerken said in a phone interview. Recent studies have sounded alarm bells for oceans and its inhabitants as the earth continues to experience record-breaking heat. A Jan. 4 paper published in the journal Science said ‘dead zones’ - where oxygen is too low to support most marine life - more than quadrupled in the past 50 years due to human activities. Another said high ocean temperatures are harming tropical corals, which are nurseries for fish, almost five times more often than in the 1980s.. 

    Warming in oil-rich Arctic terrain is a public health issue — report — At a time when the Trump administration is opening vast new regions of Alaska to oil and gas drilling, state health experts are warning that the impacts of climate change could increase the incidence of infectious disease, respiratory illnesses and other human health problems throughout the state. In an epidemiology bulletin released Monday, the Alaska Division of Public Health noted that air and water temperatures in Alaska are warming twice as fast as the rest of the nation, causing a unique set of problems in the frozen north. The permafrost which underlies 80 percent of Alaska lands is beginning to thaw, damaging roads and water and sanitary systems in some communities. The report warned that melting permafrost could also cause oil and gas pipelines to rupture, leading to uncontrolled release of hazardous materials. The climate impacts are likely to be particularly acute in Alaska's Native communities, nearly 90 percent of which are located along the state's coasts. As sea levels rise, several villages have already been inundated with tidal waters, which have caused extensive erosion and damaged infrastructure. Indigenous communities that rely on traditional underground ice cellars to preserve their foods are discovering that warming ground temperatures are causing food to thaw and spoil. Changing climate conditions are affecting communities that rely on subsistence harvests of fish and wildlife resources for food. Warming waters are causing seal, walrus and fish species to shift away from traditional hunting regions. Some coastal villagers have reported that thinning sea and river ice makes it more dangerous to hunt for wild foods along Alaska's coasts. The warmer temperatures are also predicted to cause more frequent and larger fires across Alaska, leading to serious air pollution problems that can worsen respiratory and cardiovascular illnesses. In addition, the report warns that climate change can cause depression, anxiety and a sense of loss as communities experience unwanted environmental shifts. The report noted that those changes can "influence interpersonal violence, community conflict, and can impact mental health and wellbeing through changes in factors such as family structure, economic status, and cultural continuity." 

    Interior Department strikes land swap deal with Alaskan village for road through national wildlife refuge - The Interior Department has approved a land swap deal that will allow a remote Alaskan village to construct a road through the Izembek National Wildlife Refuge, according to local officials. The action effectively overrules wilderness protections that have kept the area off limits to vehicles for decades. The land exchange, which has been agreed to but not formally signed, sets in motion a process that would improve King Cove’s access to the closest regional airport. The village, with roughly 925 residents, has lobbied federal officials for decades to construct a 12-mile gravel road connecting it to the neighboring town of Cold Bay.  Environmentalists, along with two Democratic administrations, have blocked the road on the grounds that it would bisect a stretch of tundra and lagoons that provide a vital feeding ground for migrating birds as well as habitat for bears, caribou and other species. The refuge was established by President Dwight Eisenhower, and all but 15,000 of its 315,000 acres have been designated as wilderness since 1980.  Conservationists and ecologists caution that the very act of constructing a road could fragment critical habitat for species that need it, especially the waterfowl that undertake an arduous migration along North America’s Pacific Coast. In spring and fall, nearly the entire global population of emperor and Pacific black brant geese consume the refuge’s eelgrass. In winter, tens of thousands of the threatened Steller’s eider sea ducks stay in Izembek and molt. The 1964 Wilderness Act bars new roads and the use of motorized vehicles in areas designated under the law except in rare instances — such as to provide access for the development of existing mining claims — and there appears to be no precedent for the executive branch’s approval in this case. “Bulldozing a road through the heart of the refuge violates federal laws designed to protect Alaska’s pristine wild places,” Spivak said. “Zinke’s backroom deal is an end run around Congress and will destroy world-class wetlands critical to millions of migrating birds, bears and other wildlife. Once it’s destroyed, we’ll never get it back.”

    DOI to Allow Road Construction Inside National Wildlife Refuge in Alaska - The Interior Department has reached a deal with a remote Alaskan village to construct a controversial road through a national wildlife refuge. Local officials from King Cove in the Aleutian Islands said last week that the Interior Department has approved a land swap that would allow the village to build a 12-mile gravel road through the Izembek National Wildlife Refuge that will connect the village to the nearby town of Cold Bay. The proposed road, which would cut through key habitat for grizzly bear, caribou and other species, has been a political flash point for decades. Interior Sec. Ryan Zinke 's move to allow the road will overturn a 2013 decision by then-Interior Sec. Sally Jewell to block the road's construction. As reported by the Washington Post: "Randi Spivak, who directs the public lands program for the Center for Biological Diversity , said in an email that the advocacy group was prepared to challenge the agreement in federal court if it is finalized. The proposed project, she argued, would probably run afoul of the Wilderness Act, the National Wildlife Refuge System Improvement Act and the Alaska National Interest Lands Conservation Act. 'Bulldozing a road through the heart of the refuge violates federal laws designed to protect Alaska's pristine wild places,' Spivak said. 'Zinke's backroom deal is an end run around Congress and will destroy world-class wetlands critical to millions of migrating birds, bears and other wildlife. Once it's destroyed, we'll never get it back.'"   In a press release, Defenders of Wildlife President Jamie Rappaport Clark said, "We will not stand by while some of the world's most vital wildlife habitat is ripped from public ownership to satisfy commercial interests. We will challenge this illegal scam in federal court."

    Joe Romm: Stunning NASA chart shows how fast the ground beneath our feet is heating up Global temperatures are rising faster on the land, where we live, than the oceans, where we don’t, NASA charts reveal. Since scientists have long predicted this trend and say it will continue, it’s worth a closer look.Let’s start with the long-term global warming trend. According to NOAA, “Since 1880, surface temperature has risen at an average pace of 0.13 °F (0.07 °C) every 10 years, for a net warming of 1.71 °F (0.95 °C).”But the warming is not evenly distributed: “Over this 136-year period, average temperature over land areas has warmed faster than ocean temperatures: 0.18 °F (0.10 °C) per decade compared to 0.11 °F (0.06 °C) per decade.” So over the entire record, the land is warming nearly 70 percent faster than the oceans.But the warming is also speeding up. Over the last 45 years, surface temperature has been rising at an average rate of around 0.3 °F per decade — more than double the rate over the whole 135-year period. This speed up was also predicted. After all, emissions of CO2, the most important heat-trapping greenhouse gas, have increased by a factor of six since 1950 — and the rise of overall CO2 levels has sped up.The disparity between the rate of land and ocean warming has also gotten bigger.  NASA Goddard Institute for Space Studies (GISS) recently posted some charts that show just how much faster it has been warming in recent decades — and how much the  disparity has grown. In the past six decades, land temperatures have risen about  2.3 °F, a warming rate of nearly 0.4 °F a decade, as the top chart shows. That’s nearly double the temperature rise of the ocean, which is 1.25 °F per decade. Moreover, in the past 30 years, the rate of warming appears to have sped up even more, with land temperatures rising more than 0.6 °F a decade. That’s now a bit more than double the ocean warming.

    The Bottom of The Ocean Has Started Sinking Under The Weight of Melting Glaciers - Decades of measurements and predictions of sea level rise could have underestimated the scale of the problem, experts warn, due to scientists not accounting for the weighty, warping effects of our ever burgeoning oceans. Existing assessments of sea level rise haven't factored in that as the total ocean mass increases due to melting glaciers and ice sheets, the weight of all that extra water pushes down on the sinking ocean floor, deforming the seabed – and disguising just how much the oceans are truly swelling. "The Earth itself is not a rigid sphere, it's a deforming ball," geoscientist Thomas Frederikse from the Delft University of Technology in the Netherlands told Earther. "With climate change, we do not only change temperature." The implications, according to Frederikse and his team, is that as the ocean bottom subsides elastically, the actual increasing volume of the ocean – called barystatic sea level rise – is masked from measurements based on satellite observations. That's because satellite readings only tell us one side of the story: geocentric sea level rise, as seen from the surface side. Overall, the researchers say purely satellite-derived assessments of sea level rise for the period could have underestimated barystatic sea level rise by as much as 8 percent – which is definitely something we need to think about in the future, especially this hidden variable will only become more significant as the world gets hotter and sea level rise accelerates. "In a future warming climate, the sea-level rise induced by ice sheets will increase, and therefore, the magnitude of the bias due to elastic ocean-bottom deformation will grow," the team writes. 

    The best countries to escape the worst effects of climate change - A safe haven sounds like a good idea right about now. Somewhere that's warm but not too warm, free from roof-toppling hurricanes and close to a river or ocean but far enough to avoid the threats of flooding and sea-level rise.  According to climate scientists and urban planners, that doesn't leave a lot of options.  "The bottom line is it's going to be bad everywhere," Bruce Riordan, the director of the Climate Readiness Institute at the University of California, Berkeley, told Business Insider. "It's a matter of who gets organized around this." That said, some countries will fare far better than others, according to UK-based energy comparison service Eco Experts, which created a color-coded map using data from the Notre Dame Global Adaptation Index. The index analyzes 181 countries based on factors like healthcare, food supply, and government stability and ranks them on their ability to cope with the challenges posed by a warming planet. Norway ranked #1, while a handful of other Nordic countries (and New Zealand) followed.   While the maps provide a great zoomed-out perspective of what will happen globally as the earth warms, there are a couple caveats to keep in mind when checking it out:   The map looks only at country-level data, not at states, regions, or cities. While the US gets a green light on this map, many cities within its borders are poorly prepared for climate change.   Developed countries in general have larger budgets and more infrastructure to work with, automatically shifting them toward the top of the list while lower-income countries are shuffled down.  Here's the full graphic:

     Trump Re-Nominates Anti-Wildlife Climate Denier to Top Environment Post - The Trump administration re-nominated Kathleen Hartnett White on Monday to be chair of the Council on Environmental Quality ( CEQ ) after she failed to secure a Senate confirmation last year. The CEQ chair oversees environmental policy across all federal agencies. But during Senate hearings in November, White struggled to answer basic questions about the CEQ's role and whether she would use factsin environmental recommendations to the president. She continues to deny that carbon dioxide is harmful to the planet. "White is a disastrous candidate who will have a profoundly destructive effect on our climate and wildlife if given this job in the Trump administration," said Stephanie Kurose, endangered species policy specialist at the Center for Biological Diversity. "Her extreme views and disturbing record should disqualify her from this crucial leadership position."White has previously argued there is a " moral case " for expanding fossil fuel development regardless of carbon dioxide emissions. She also claimed there is a "connection between the abolition of slavery and humanity's first widespread use of energy from fossil fuels." In her current position at the Texas Public Policy Foundation—a conservative think tank that has received huge donations from fossil fuel interests that include Koch Industries, ExxonMobil and Chevron—White has worked to undermine the Endangered Species Act.

    U.S. Fails to Submit Reports on 1 January as Required Under U.N. Climate Treaty - The United States has failed to meet a key deadline (January 1, 2018) for submitting a major report, required under the UN Framework Convention on Climate Change (UNFCCC). Under Section 12 of the UNFCCC, countries listed in Annex I of the Convention (including the US) are required to periodically submit to the Treaty’s Secretariat a detailed “National Communication,” which presents a wide range of information regarding the nation’s implementation of the agreement. UNFCCC guidelines on reporting and review stipulate use of a common format to facilitate analysis and evaluation and allow for comparisons among the national reports. Further, CSPW sees no indication that this report is even underway; a complete failure to submit this report would be unprecedented.  The Parties to the Convention have agreed that the Annex I parties should submit the reports every four years. The Seventh National Communication (NC7) was due on January 1. Once submitted, these reports are promptly posted by the Secretariat. According to the listing, Submitted National Communications from Annex I Parties, the majority of Annex I Parties have already submitted their reports, but the United States is not one of them.  In addition to the National Communication, the US and other Annex I Parties are required to submit smaller “Biennial Reports” to the Secretariat. Here too, there are specific reporting guidelines. The third such report (BR3) was also due on January 1. According to a table published by the UNFCCC, Submitted Biennial Reports from Annex I Parties, the US is among a minority of countries that still have not submitted a report.  Again, a complete failure by the US to submit these reports would be unprecedented; the US has submitted all six previously required National Communications, traditionally calling them “Climate Action Reports.”

    EPA moving quickly to write new climate rule in 2018 -- Environmental Protection Agency staffers are under orders from the Trump administration to complete a replacement for former President Barack Obama’s major climate change rule by the end of the year, far faster than the normal pace the agency uses to develop major regulations, according to three sources familiar with the process. That short time frame would give EPA lawyers the chance to defend the regulation from the legal challenges it is certain to face during President Donald Trump's current term. That would allow the proposal from Scott Pruitt's EPA to avoid the fate of the Obama EPA's Clean Power Plan, which was held up in court and is now being rescinded by a new administration that opposed the original carbon dioxide regulation. .EPA's air chief, Bill Wehrum, has directed staffers to develop a schedule for conducting analysis, public hearings and revisions that would be completed in 2018. Staff would need to complete a proposal by summer and allow time for the White House to review it before publication. The tight timeline would mean that the agency would have to repeal and replace the Obama power-sector climate rule simultaneously but in separate processes. EPA would also have to finish revising a separate carbon rule for future fossil fuel plants, which must be in place in order to regulate existing generators. 

    Group details 'systematic' removal of climate content from federal websites | TheHill: The Trump administration has undertaken a “systematic reduction” in presenting information and content about climate change on federal government websites, a new report concludes. The Environmental Data & Governance Initiative (EDGI) has been tracking changes across tens of thousands of government websites since President Trump's inauguration nearly a year ago, and rolled out a one-year report Wednesday on its findings. “Our examination of changes across many federal agencies over the first year of the Trump administration demonstrates a systematic reduction in access to climate information and content,” the group said in its report.“Links have been cut from pages or rendered useless, language has been changed to alter emphasis and drop mentions of climate-change-related topics, and entire climate websites have been removed and made significantly less accessible.” The changes have usually reflected different priorities by the administration and political officials. EDGI pointed out that no climate-related data has actually been removed, and the changes have been mostly editorial in nature. Some of the most visible changes have included multiple agencies removing sections on international climate cooperation, the Bureau of Land Management removing a page on how it deals with climate change and the Environmental Protection Agency taking down an entire website section on climate change, some of which it has started to replace. EDGI warned changes to the content, even if they are just editorial in nature, can hide important information from the public and from people who need it. “These changes have made it harder for the public to gain access to years of well-researched and organized information paid for by their tax dollars, information that is crucial in helping inform the important discussions on how to best mitigate and adapt to the effects of climate change,” the group concluded. 

    How Much Has ‘Climate Change’ Been Scrubbed From Federal Websites?  A Lot - Nearly a year into the Trump administration, mentions of climate change have been systematically removed, altered or played down on websites across the federal government, according to a report made public Wednesday.The findings of the report, by the Environmental Data and Governance Initiative, an international coalition of researchers and activist groups, are in keeping with the policies of a president who has proudly pursued an agenda of repealing environmental regulations, opening protected lands and waters to oil and gas drilling, withdrawing the United States from the Paris climate accord, shrinking the boundaries of federal monuments, and appointing top officials who have questioned or denied the established science of human-caused climate change. The authors of the study said that the removal of the words “climate change” from government websites, and a widespread effort to delete or bury information on climate change programs, would quite likely have a detrimental impact.“Why are these federal agencies putting so much effort into ‘science cleansing’ instead of using time and resources to fulfill agency responsibilities, such as protecting the environment and advancing energy security?” they wrote. “Removing information regarding climate change from federal websites does not affect the reality of climate change, but may serve to obfuscate the subject and inject doubt regarding the scientific consensus that climate change is happening and that it is caused by human activity.” The report tracks the Environmental Protection Agency’s removal of hundreds of websites connected to state and local climate change programs; the removal of information about international climate change programs from the State Department, Energy Department and E.P.A. websites; and the deletion of the words “climate change” from websites throughout the federal government.

    Trump Says U.S. “Could Conceivably” Rejoin Paris Climate Accord - U.S. President Donald Trump said on Wednesday that the United States “could conceivably” return to the Paris Climate Accord. At a press conference with visiting Norwegian Prime Minister Erna Solberg, President Trump criticized the deal the U.S. had signed up for in the Paris Agreement. “I will say that the Paris Agreement, as drawn and as we signed, was very unfair to the United States. It put great penalties on us. It made it very difficult for us to deal in terms of business. It took away a lot of our asset values,” President Trump said. “It treated the United States very unfairly and frankly, it’s an agreement that I have no problem with, but I had a problem with the agreement that they signed,” he added.“So we could conceivably go back in,” President Trump said, without elaborating or directly answering a reporter’s question as to what could persuade the U.S. to stay in the Paris Accord.

    EPA staffing falls to Reagan-era levels | TheHill: The Environmental Protection Agency’s (EPA) staffing is now lower than it was in former President Reagan’s final year in office. An EPA spokeswoman said Tuesday that, as of Jan. 3, the agency had 14,162 employees, down from about 15,000 at the beginning of last year. That’s even lower than the 14,400 employees the agency had in fiscal year 1988, Reagan’s final year.The figures come after President Trump and EPA Administrator Scott Pruitt’s pledges to shrink the size of the federal government as part of their efforts to demonstrate that they are saving money and reducing regulatory burdens. “We’re proud to report that we’re reducing the size of government, protecting taxpayer dollars and staying true to our core mission of protecting the environment,” Pruitt said in a statement. If every EPA employee eligible to retire by 2021 does so, the EPA would have less than 8,000 employees by the end of Trump’s term, a cut of nearly half. The reductions have come from employees voluntarily leaving without being replaced, including through early retirements and buyouts. The New York Times and ProPublica reported last month that some of the hundreds of employees who have left were key to critical missions at the agency. For example, about 200 scientists had left as of last month, along with 96 environmental protection specialists and nine department directors, many of whom won’t be replaced, the news organizations reported. 

    The Interior Department has cleared the way for energy developers to destroy natural habitats - Just before Christmas, the Interior Department quietly rescinded an array of policies designed to elevate climate change and conservation in decisions on managing public lands, waters and wildlife. Order 3360, signed by Deputy Secretary David Bernhardt, explains that the policies were rescinded because they were “potential burdens” to energy development.The order echoes earlier mandates from President Donald Trump and Interior Secretary Ryan Zinke to Interior’s 70,000 employees: Prioritize energy development and de-emphasize climate change and conservation. The order is another in a long string of examples of science and conservation taking a backseat to industry’s wishes at the Interior Department under Zinke. The sweeping order, which Bernhardt signed Dec. 22., affects a department that manages a fifth of the nation’s land, 19 percent of U.S. energy supplies and most of the water in the 12 Western states. It fulfills a high-profile executive order by Trump and a secretarial order from Zinke, both announced in March. Interior did not publicize the order but posted it on its website with other secretarial orders. The Interior Department refused to answer questions about order 3360 on Thursday. “Sorry, nobody is available for you,” Heather Swift, the department spokesperson, wrote in an email. The Bureau of Land Management last week did announce a related policy change that makes it easier for companies to develop oil and gas in core sage grouse habitats that were protected in 2015 as part of an unprecedented conservation initiative. The BLM replaced six instructional memoranda that direct field staff on how to manage 67 million acres of prime sage grouse habitat across 10 Western states. Among other things, the new instructions relieve BLM staff from the requirement that they prioritize drilling outside of prime sagebrush habitat areas.

    German coalition negotiators agree to scrap 2020 climate target: sources (Reuters) - Germany’s would-be coalition partners have agreed to drop plans to lower carbon dioxide emissions by 40 percent from 1990 levels by 2020, sources familiar with negotiations said on Monday -- a potential embarrassment for Chancellor Angela Merkel. Due to strong economic growth and higher-than-expected immigration, Germany is likely to miss its national emissions target for 2020 without any additional measures. Negotiators for Merkel’s conservative bloc and the center-left Social Democrats (SPD) told Reuters the parties had agreed in exploratory talks on forming a government that the targeted cut in emissions could no longer be achieved by 2020. Instead, they would aim to hit the 40 percent target in the early 2020s, the sources said, adding that both parties are still sticking to their goal of achieving a 55 percent cut in emissions by 2030. The deal would represent something of a U-turn for Merkel, who has long presented herself as an advocate of climate protection policies on the international stage. Merkel ally Michael Grosse-Broemer told reporters in the evening that negotiators had made significant progress, but there was still a lot of work to do before party leaders could discuss a joint and comprehensive policy paper on Thursday. Grosse-Broemer declined to give any details. Sources said both parties had also agreed that the share of renewable energy in Germany’s electricity consumption should rise to 65 percent by 2030 from roughly a third last year. Currently, the government plans to raise the renewable energy quota to between 45 and 55 percent by 2025. Negotiators also agreed to cut the tax on electricity in order to reduce energy costs, according to a document seen by Reuters. They also plan to tender an extra 4 gigawatts of solar energy as well as onshore and offshore wind-generating capacity. The agreement, worked out by energy experts from both sides, must still be approved by party leaders. 

    India rejects US solar claim at WTO, explores new defense  (Reuters) - India hit back on Monday at Washington’s latest legal assault on its solar power policies at the World Trade Organization, rejecting a U.S. legal claim and exploring possible new protection of India’s own solar industry. Last month the United States triggered a new round of litigation at the WTO, arguing that India had failed to abide by a ruling that it had illegally discriminated against foreign suppliers of solar cells and modules. In a statement published by the WTO on Monday, India said it had changed its rules to conform with the ruling and that a U.S. claim for punitive trade sanctions was groundless. “India underscores that the United States’ request is not a valid request,” the Indian statement said. It said Washington had skipped legal steps, failed to follow the correct WTO procedure, and omitted to mention any specific level of trade sanctions that it proposed to level on India, leaving India “severely prejudiced”. India would be vindicated if the proper process was followed, it said. “In view of the above, India strongly objects to the U.S. request of 19 December 2017,” it said. Renewable energy has become an area of severe trade friction as major economies compete to dominate a sector that is expected to thrive as reliance on coal and oil dwindles. India unveiled its national solar program in 2011, seeking to ease chronic energy shortages in Asia’s third-largest economy without creating pollution. But the United States complained to the WTO in 2013, saying U.S. solar exports to India had fallen by 90 percent. The WTO judges agreed that India had broken the trade rules by requiring solar power developers to use Indian-made cells and modules. 

    One appliance could determine whether India, and the world, meet climate change targets  - Raheel Shaikh had worked his way up from a $90-a-month entry-level job in digital marketing to a position that paid 10 times as much. Finally, this summer, the 30-year-old Shaikh splurged on the new must-have item for the upwardly mobile Indian: an air conditioner. On a warm afternoon in November, Shaikh sat inside his living room and explained how the $800 Japanese appliance quietly exhaling overhead had made it easier for his parents to sleep in the deadening tropical heat of Mumbai, India’s commercial capital, and bearable to work on his laptop late into the night. It had also pleased his fiancee to know she would move into an air-conditioned home. “My parents lived without it all their lives, but I am earning well so I wanted to give them that comfort,” Shaikh said.  More than any other household good, the air conditioner symbolizes the soaring aspirations of one of the world’s fastest-growing major economies. Although only 5% of Indians own the appliances today, they are buying millions more every year, driving a worldwide boom that, according to one estimate, will nearly triple the planet’s stock of air conditioners to 2.5 billion by 2050. The average air conditioner sucks 20 times as much energy as a ceiling fan, and studies show that space cooling accounts for 40% to 60% of the peak energy load during the summer in hot Indian cities such as Mumbai and New Delhi. By 2030, Abhyankar projects, the explosion in air conditioning alone will raise India’s electricity demands by 150 gigawatts, the equivalent of adding three economies the size of California to its power grid.

    UK Government scheme to fund electric car charging points falls flat - A Government bid to spark an electric car revolution by offering councils funding to install vehicle charging points has fallen flat after just five local authorities applied for the cash. Ministers invited councils to bid for part of a £1.5million fund in 2017/18 but interest from town halls has been “extremely disappointing”. Just £150,000 has been allocated so far with two councils – Portsmouth and also Kensington and Chelsea – benefitting while the three other applications are still being assessed.  The money that has been handed out is only enough to deliver approximately 110 chargepoints and bidding for the £1.5m is no longer open which means much of the funding is likely to be handed back to the Treasury.However, the Government is urging councils to bid for a slice of a new £4.5million fund which has been set aside for 2018/19 and 2019/20.Councils have blamed the poor take up on the fact that the funding can only be used to pay for 75 per cent of the cost of buying and installing a chargepoint. They claim that Whitehall cuts to overall local government funding have left cash-strapped councils unable to find the remaining 25 per cent to make the scheme work.

    Bitcoin could end up using more power than electric cars -  The global power needed to create cryptocurrencies this year could rival the entire electricity consumption of Argentina and be a growth driver for renewable energy producers from the U.S. to China. Miners of bitcoin and other cryptocurrencies could require up to 140 terawatt-hours of electricity in 2018, about 0.6 percent of the global total, Morgan Stanley analysts led by Nicholas Ashworth wrote in a note Wednesday. That’s more than expected power demand from electric vehicles in 2025. “If cryptocurrencies continue to appreciate we expect global mining power consumption to increase,” Ashworth wrote in the note. While the figure is too small to be a major driver of global utility shares, it represents an important growth story for companies investing in wind and solar power combined with energy storage -- a list that includes NextEra Energy Inc., Iberdrola SA and Enel SpA, according to the note. Other potential beneficiaries include big oil companies that are investing in renewable energy and green-power developers that are backed by initial-coin-offering capital raises. Miners will probably concentrate in low-cost power regions, including China and the U.S. Midwest and Pacific Northwest, the report said. Miners earn bitcoin-denominated rewards for performing the complex calculations needed to confirm transactions in the cryptocurrency. One eager entrant is Hydro-Quebec, Canada’s biggest electric utility. It’s in “very advanced” talks with more than 30 cryptocurrency miners -- many of them currently operating in China -- and expects to announce agreements in 2018, Marc-Antoine Pouliot, a spokesman, said Wednesday in a phone interview.    Within four years, Hydro-Quebec envisions miners soaking up about five terawatt-hours of power annually -- equivalent to about 300,000 Quebec homes -- from the surplus created by the region’s hydroelectric dams. “If we have to invest in our transmission network, these investments will be paid for by the miners,” Pouliot said.

     More equipment, crews head to Puerto Rico for power boost — Federal officials said Monday that efforts to fully restore power to Puerto Rico in the wake of Hurricane Maria should get a boost with more work crews and more supplies arriving in the coming weeks. The U.S. Army Corps of Engineers said that it is getting its own barge to ship items and that materials it requested several months ago have been manufactured and are finally on their way to the U.S. territory. “We’re doing everything we can to increase the (power company’s) ability to do this as fast as possible for the people of Puerto Rico,” said Col. John Lloyd, who is helping oversee power restoration efforts for the Corps of Engineers. He told The Associated Press that officials over the weekend also discovered some needed materials in a previously overlooked warehouse owned by Puerto Rico’s Electric Power Authority. The lack of some of those hard-to-find pieces had delayed energizing certain lines, according to the Corps of Engineers, which said the material included transformers, splices and hundreds of a key small piece no longer in stock elsewhere. Puerto Rico’s energy infrastructure is about 44 years old, compared with an average 18 years on the U.S. mainland, so a lot of parts damaged or destroyed by the hurricane are no longer available and have to be manufactured, Lloyd said. It is unclear why power company officials had not provided the equipment previously. The Corps of Engineers said that the company’s transmission division controls that warehouse and that it lacked transparency in inventory and accountability.

    Puerto Rico’s power outage keeps getting weirder and more infuriating. Grist - It turns out that the territory’s utility has been withholding supplies needed to restore power after Hurricane Maria.  In a tense, armed standoff last weekend, FEMA and the U.S. Army Corps of Engineers seized much-needed electrical equipment from a warehouse owned by the Puerto Rico Electric Power Authority, Kate Aronoff reported for the Intercept. Governor Ricardo Rosselló said the Department of Justice is investigating the power utility after the incident.  The feds quickly distributed the seized materials to contractors — who were apparently spending their time watching movies in their trucks because they didn’t have the supplies they needed.  Because the energy infrastructure in Puerto Rico is more than twice as old as the rest of the United States, many of the parts needed to repair the damaged grid aren’t readily available and need to be manufactured. The lack of materials has contributed to the epically slow recovery on the island.  Needless to say, people are really pissed off. “Hundreds of thousands of families have been in the dark for more than 125 days, people keep dying, and businesses continue to close due to the lack of energy while the necessary spare parts were in the possession of PREPA,” Eduardo Bhatia, minority leader of the Senate of Puerto Rico, told the Intercept.This week’s drama is just the latest in a string of mismanagement that has plagued the recovery process, including the canceled contract with Whitefish Energy.

    Regulators kill Perry’s proposal to prop up coal, nuclear power plants | TheHill: The Federal Energy Regulatory Commission (FERC) Monday rejected Energy Secretary Rick Perry's proposal to prop up coal and nuclear power plants. In a unanimous order released Monday afternoon, the five-person commission — four of whom President Trump nominated — said Perry and other supporters of the proposal failed to show that current electricity markets are not just or reasonable, findings that would be necessary in order to mandate the higher electricity payments that Perry sought. The rejection is a major victory for natural gas, wind, solar and other industries that compete with coal and nuclear. They joined with conservative activists, environmentalists, grid experts, big businesses and others in opposition to the proposal.But in a concession to coal and nuclear, FERC launched an effort to formally ask electric grid operators what they are doing, if anything, to ensure that their grids remain resilient, which was the goal of Perry’s plan. “The [Federal Power Act] is clear: in order to require [grid operators] to implement tariff changes as contemplated by the Proposed Rule ... there must first be a showing that the existing [grid] tariffs are unjust, unreasonable, unduly discriminatory or preferential,” the commission wrote. “Neither the Proposed Rule nor the record in this proceeding has satisfied the threshold statutory requirement of demonstrating that the [grid] tariffs are unjust and unreasonable,” it said. “In addition, the extensive comments submitted by the [grid operators] do not point to any past or planned generator retirements that may be a threat to grid resilience.”

    FERC rejects DOE NOPR, kicking resilience issue to grid operators - After months of hand-wringing for the power sector, Secretary Perry's coal and nuclear plan died Monday with a whimper, not a bang. In a brief order on Monday, FERC rejected the DOE's Notice of Proposed Rulemaking (NOPR), which would have provided cost recovery for power plants that keep 90 days of fuel onsite. Instead, the Commission asked regional grid operators to review an extensive list of questions about improving power system resilience and report back within 60 days.In its September letter announcing the NOPR, the DOE argued that the expected retirement of coal and nuclear plants in the nation's wholesale power markets could put the U.S. power supply at risk. FERC, however, said the agency and supporters of the rule failed to prove that to the commission."While some commenters allege grid resilience or reliability issues due to potential retirements of particular resources, we find that these assertions do not demonstrate the unjustness or unreasonableness of the existing RTO/ISO tariffs," FERC wrote in the order. "In addition, the extensive comments submitted by the RTOs/ISOs do not point to any past or planned generator retirements that may be a threat to grid resilience."Additionally, DOE and its allies did not convince the commission that the NOPR's cost recovery proposal would be an improvement on existing market structures."[T]he Proposed Rule would allow all eligible resources to receive a cost-of-service rate regardless of need or cost to the system. The record, however, does not demonstrate that such an outcome would be just and reasonable," FERC wrote. "It also has not been shown that the remedy in the Proposed Rule would not be unduly discriminatory or preferential." The 90-day fuel supply requirement, FERC noted, would "appear to permit only certain resources to be eligible for the rate, thereby excluding other resources that may have resilience attributes." The order notably rejected calls from coal and nuclear interests for FERC to lend short-term support for plants at risk of retirement as regulators took on a long-term assessment of resilience. Those arguments became the centerpiece of a short-term plan to preserve the struggling generators floated by Commissioner Neil Chatterjee, then chairman of the commission, in November.  Chatterjee, however, concurred with the final decision, writing that while he would have preferred short-term subsidies, the order is a "positive step forward in addressing these critical issues."

    DOE pivots on NOPR, will 'respect' and 'honor' FERC order - On Monday, FERC handed DOE its biggest defeat of the Trump administration, unanimously rejecting its proposal to grant cost recovery to plants with onsite fuel supplies.But you wouldn't realize it talking to Dan Brouillette."We are actually encouraged," Brouillette told reporters after a hearing at the House Energy and Commerce Committee. "We think they are taking the appropriate steps and we are looking forward to working with them."In their rejection order, FERC asked regional grid operators to answer an extensive list of questions on grid resilience — the ability to "bounce back" after outages. During the hearing, Brouillette tried to position the DOE proposal as part of the ongoing conversations at many of these grid operators over reforming generator compensation."In some respects it wasn’t the DOE asking [for market changes]," Brouillette said. "It was the people who actually run the grid, the PJM folks in particular and others, who were asking for changes to market rules because they themselves acknowledge in certain cases the providers of this [baseload] electricity are not properly compensated.""They have sought changes as well and that’s what we were participating in was the conversation to do exactly that," he added. Grid operators like PJM, ISO-NE and MISO were all discussing changes to how generators are compensated before the DOE proposal was announced in September, and those discussions continue. The DOE plan, however, would have gone beyond the pricing proposals, potentially moving plants out of the wholesale markets and into full cost recovery.That dynamic inspired fears in many market participants and former FERC regulators that the DOE plan could "blow up" wholesale power markets, and the regional grid operators filed comments against the DOE proposal, saying it is not necessary to preserve reliability.  In the aftermath of the decision, coal and nuclear interests said they would push FERC to quickly approve pricing reforms to keep their plants online. Brouillette, however, said he has not met with those interests and would not pressure FERC to move faster on its new resilience docket.

    Coal mining executive blasts U.S. regulators for rejecting subsidies  (Reuters) - Robert Murray, the chief executive one of America’s largest coal mining companies, criticized U.S. regulators on Tuesday for rejecting the Trump administration’s proposed subsidies for aging coal and nuclear power plants - saying the decision could lead to higher electricity costs for consumers. The backlash from one of President Donald Trump’s big supporters reflects frustration in the coal industry as the White House struggles to deliver on a promise to revive the coal sector, which has been in decline for years due to competition from cheaper natural gas. “This is a bureaucratic cop-out,” Murray, CEO of privately-held Murray Energy said in a statement. “I fear that we will now immediately observe the announcement of further decommissioning of nuclear and coal-fired electricity generation that will further exacerbate this critical situation,” he said, warning that power prices could rise as a result. Energy Secretary Rick Perry had proposed the idea of allowing coal and nuclear power plants to recoup their operating costs through regulated pricing in September, saying the perk was needed to stem a string of plant closures in recent years and shore up grid resilience. The Federal Energy Regulatory Commission (FERC) on Monday rejected the proposal saying it was not needed, may not be fair to competing generators using natural gas, solar energy or wind, and was beyond the commission’s responsibilities. The decision by the five-person commission - which includes four Trump administration nominees - was a setback for Trump’s pro-coal agenda, but cheered an unusual alliance of natural gas drillers, environmentalists, and renewable energy advocates that either compete with coal or oppose its emissions. Murray vigorously lobbied the Trump and the Energy Department last year to help the coal industry, saying he handed the administration a three-page list of s uggestions to do so.

    Trump touts coal resurgence during deep freeze - The Trump administration is playing up the resurgence of King Coal during the two-week deep freeze as proof of the need for coal as part of the nation’s energy mix, while trying to put a positive spin on Monday’s defeat of Energy Secretary Rick Perry’s plan to subsidize coal and nuclear plants. Coal provided more than 40 percent of the electricity in the frozen East and Midwest, with nuclear the second-biggest power provider and natural gas number three.Even as temperatures warmed up Tuesday, coal use still hovered above 50 percent in some parts of the country, pushing out nuclear and natural gas in the region controlled by the Midcontinent Independent System Operator, the second largest energy market in the country. On Wednesday, the MISO fuel mix by the end of morning demand surge was just under 50 percent of the market for coal. Further East, in the region overseen by PJM Interconnection, coal’s contribution was lower than it was last week by more than 10,000 megawatts an hour generated, but it was still beating the power output of nuclear and natural gas power plants. The surge in coal use didn't help the industry at the Federal Energy Regulatory Commission, which on Monday unanimously rejected Perry's plan to reward coal and nuclear power plants for their ability to store fuel on-site. The commissioners did call on the grid operators it oversees to begin a discussion on the state of grid resilience.On Tuesday, members of the administration were on Capitol Hill trying to play up that part as a win for the administration and its goals to keep coal and nuclear plants humming.  “FERC responded yesterday with the unanimous decision to direct regional transmission organizations and independent system operators to pro-actively evaluate the resilience of the bulk power system,” said Deputy Energy Secretary Dan Brouillette before a panel of the House Energy and Commerce Committee Tuesday.

    How a coal baron's wish list became Trump's to-do list - Houston Chronicle: - President Donald Trump's first year in office has been a boon for the coal industry, with the Trump administration rolling back regulations on coal-fired power plants and withdrawing the United States from the Paris climate change agreement.Most Popular1 Beloved Houston indie rock figure, and former Giant Princess... 2 Texans GM search: Brian Gaine the favorite 3 Voting in Texas for 2018 just weeks away thanks to nation's... 4 Lazy weed 5 Review: FM Kitchen & Bar plays to Houston's icehouse-loving heart 6 DNA results in Heights case released: Whose bones were in the... 7 $20M gift will create regional mental health center Environmentalists have expressed alarm at the new direction, and have complained that Trump was following a blueprint from the coal industry. A confidential memo written by the head of the country's largest coal mining company suggests they might not be wrong. The memo, obtained by the New York Times, was written by Robert Murray, a longtime Trump supporter who donated $300,000 to the president's inauguration. In it, Murray, the head of Murray Energy, presented Trump with a wish list of environmental rollbacks just weeks after the inauguration.Nearly a year later, the White House and federal agencies have completed or are on track to fulfill most of the 14 detailed requests, even with Monday's decision by federal regulators to reject a proposal by Energy Secretary Rick Perry to subsidize struggling coal and nuclear plants. The March 1 memo, which was obtained by Sen. Sheldon Whitehouse, D-R.I., and shared with the New York Times, is addressed to Vice President Mike Pence. The sweeping wish list of regulatory overhauls includes ending regulations on greenhouse gas emissions, ozone and mine safety as well as cutting the staff of the Environmental Protection Agency "at least in half" and overhauling the Labor Department's office of mine safety.

    Duke Energy agrees to pay $84K penalty for coal ash leaks   (AP) — The country's largest electricity company will pay an $84,000 penalty and work to stop potentially toxic waste from three North Carolina coal-burning power plants from leaking into groundwater and nearby rivers under a deal with state regulators announced Tuesday. The deal, already signed by a Duke Energy Corp. executive, includes the penalty for nearly two dozen leaky spots detected at coal ash pits at the Rogers, Allen and Marshall power plants before 2015. The agreement acknowledges the leaks from unlined, earthen holding basins at the power plants into the adjoining Catawba and Broad rivers, a violation of pollution laws. Coal ash is the residue left after decades of burning coal to generate power. It can contain toxic materials like arsenic and chromium. The agreement with the state Department of Environmental Quality is significant because the company acknowledges the pollution and accepts its obligation to stop it, said D.J. Gerken, an attorney for the Southern Environmental Law Center, a frequent adversary of Duke Energy. "In terms of a Duke vice president signing on the line and acknowledging that this is happening, and acknowledging that the company has an obligation to stop the pollution, this is a first," Gerken said. The company has previously acknowledged that liquids leaking from its basins have infiltrated underground water tables, Duke Energy spokeswoman Paige Sheehan said. But the tainted groundwater flows toward nearby rivers and away from private water wells at homes near the power plants, the Charlotte-based company has said.

    Duke Energy neighbors mark 1,000 days on bottled water - Some Charlotte-area neighbors of Duke Energy power plants are marking a depressing milestone: 1,000 days of relying on bottled water to avoid using well water that might be unsafe.Duke says the coal ash it stores at the plants isn’t the source of contamination found in local wells. State officials waffled, initially warning residents in early 2015 not to drink their water, then later rescinding that advice.Now more than 500 neighbors of Duke power plants on Lake Norman, Lake Wylie and in Rowan County are waiting for Duke to finish installing miles of water lines, ordered by state legislators, that will connect them to municipal systems. Legislators in 2016 ordered the water lines, or installation of filtration systems in some cases, to be completed near Duke power plants statewide by Oct. 15. Until then, many Charlotte-area residents will continue to drink, cook and bathe in the bottled water that Duke gives them.  Environmental advocates with Appalachian Voices and the Sierra Club, working with the Alliance of Carolinians Against Coal Ash, say the state should adopt a more stringent safety standard for hexavalent chromium. The possibly cancer-causing form of the metal was found in many wells near Duke’s ash ponds but also in groundwater far from the ponds. The advocates add that some residents with contaminated wells can’t connect to municipal water lines because they live more than a half-mile from the ponds, a limit set by the legislature.

    Utility giant prioritizes fossil fuel projects over renewables in merger proposal - A proposed merger between two major energy companies could have offered the promise of accelerated renewable energy growth in the Southeast. Instead, the deal between Dominion Energy and South Carolina-based SCANA Corp. is expected to prioritize expensive fossil fuel projects, a move that could have long-term implications for millions of utility customers.  South Carolina electricity customers and lawmakers are still reeling from the demise of a major nuclear power expansion project in the state. The project’s failure means SCANA subsidiary South Carolina Electric & Gas (SCE&G) — and Dominion, if the merger succeeds — will need to find alternatives to the 2,200 megawatts of electric generating capacity that will not be coming online. Nowhere in their Wednesday merger announcement did Dominion officials mention a commitment to building new renewable energy projects to replace the electricity from the failed V.C. Summer nuclear project.  Dominion, a Richmond, Virginia-based company, announced it would issue refunds totaling $1.3 billion — a portion of the $9 billion spent on the canceled project — to customers in South Carolina. If the merger deal is completed, Dominion also promised cash refunds of about $1,000 per household to SCE&G’s 662,000 customers. The acquisition of SCANA would make Dominion a utility with a total of 6.5 million customers in eight states. Environmental groups cautioned that Dominion’s acquisition of SCANA would still force South Carolina customers to pay an enormous portion of the costs for a nuclear plant that will never produce power. The deal also will likely serve as a springboard for extending Dominion’s controversial Atlantic Coast Pipeline (ACP) into South Carolina. Opposition to the proposed pipeline has intensified in Virginia and North Carolina over the past couple of years due to its projected impact on the environment and its role in increasing greenhouse gas emissions.

    US coal generation to decline into 2019 as gas prices stay under $3/MMBtu: EIA - While coal crept closer to natural gas in total US electricity generation share in 2017, gas will widen the gap between the fuels this year and though 2019 on expected lower prices and new capacity, the US Energy Information Administration said Tuesday. In its monthly Short-Term Energy Outlook, and its first report looking ahead to 2019, the EIA predicts gas' generation share will increase to 33.1% this year, up from 31.7% in 2017, and rise again to 34.3% in 2019. At the same time, coal's generation share will fall to 29.6% this year, down from 31.7% in 2017, and dip further to 28.1% in 2019. The EIA said gas' generation shared slipped 2.1% in 2017 primarily because of a 16% year-over-year increase in average delivered fuel cost to $3.33/MMBtu. But the agency predicts delivered costs to slightly decline this year. The Henry Hub gas price, which averaged $2.99/MMBtu in 2017, is predicted to dip to an average of $2.88/MMBtu this year and stay well under the $3/MMBtu mark in 2019 at an average of $2.92/MMBtu. An EIA survey shows 20 GW of new gas-fired generating capacity will come online this year, much of it using combined-cycle technology, marking the largest increase in gas capacity since 2004, while about 13 GW of coal-fired capacity will retire this year. With the loss of generation share, coal consumption by utilities is expected to decline this year by 1% from a total of 666.4 million st in 2017 and fall another 4% in 2019 to 629.5 million st. Coal export volumes surged in 2017, the EIA said, to 95 million st, with thermal coal accounting for 41 million st. The agency noted export volumes though the first 10 months of 2017 were up 70% from the year-ago period and the 78 million st exported through October was 29%, or 18 million st, more than exports in all of 2016. The EIA predicts exports to fall to 80 million st this year and to 75 million st in 2019 on declining thermal volumes.

    Coal's Best Bet for a Bailout May Now Come From Rust Belt --The U.S. coal industry’s best hope for a bailout may lie in the Rust Belt now that Washington’s plan has fizzled.The largest U.S. power grid -- covering Pennsylvania, Ohio and other states -- has been considering an initiative that may keep struggling coal plants afloat. The idea, which would boost revenue for generators including coal and nuclear plants, has drawn skepticism from analysts and isn’t nearly as sweeping as the White House plan rejected Monday by regulators. But at least two coal miners say it could aid their industry. The proposal from the regional power grid, PJM Interconnection LLC, was formally introduced in November. It aims to revamp the way generators are paid during peak demand. When electricity use spikes, bottlenecks form on transmission networks, preventing the cheapest sources of power from flowing to the areas where they’re needed most. As a result, inefficient power plants that happen to be closest to demand centers are forced to ramp up and operate at a loss. In many cases, they’re coal plants.Currently, PJM compensates these plants with out-of-market “uplift payments.” The pending proposal -- which ultimately needs approval from federal regulators -- would allow coal and nuclear plants to set the price of energy when they’re in use, reducing the need for uplift payments.  The new rule may raise market prices by $4 per megawatt-hour, Guggenheim Securities analysts including Shahriar Pourreza said in a note late Monday. Over the course of a year, it could earn generators “hundreds of millions of dollars,” Moody’s Investors Service analyst Toby Shea said in a November note.The losers, according to critics of the plan, would be ratepayers who may ultimately have to shoulder that extra bill.

    Massachusetts turns to oil and coal during the cold snap -- For a region that prides itself as a leader against climate change, the numbers were sobering: As recently as Monday, 19 percent of New England’s energy supply came from oil, and 7 percent from coal, according to the grid operator. Rates had climbed even higher on the worst days of the recent cold spell, when power plants in New England burned tons of the dirtiest fuels available. On some days, oil accounted for more than 30 percent of the region’s energy mix. Efforts by some environmental activists to block natural gas infrastructure, mainly pipelines, have had the opposite of their intended effect. The goal was to prevent more greenhouse gas emissions, but the constraints on natural gas have forced electricity generators to turn to high-emission coal and oil instead. The region would have produced less pollution this month, not more, if it had better gas infrastructure.

    Utah’s top coal producer is fighting to reverse a California city’s ban on exporting coal and open new markets for local mines -- Between Utah’s rich coal beds and potential markets overseas lie 850 miles of rail track and 5,000 miles of ocean that converge in the California port city of Oakland.  A proposed Oakland export terminal once promised an economic lift for distressed portions of California’s prosperous East Bay — and a new conduit for Utah’s coal to reach Asian markets. But the controversial project is now mired in a legal swamp, as one of Northern California’s most prominent developers takes on his own city over a coal-handling ban Oakland leaders enacted in 2016. Under agreements with the city, which owns the 35-acre site known as West Gateway, Phil Tagami is developing a deep-water bulk-freight loading station on a decommissioned military base at the foot of the Bay Bridge. But those plans jackknifed in 2016 after word got out that four coal-producing Utah counties had pledged $53 million toward the project, called Oakland Bulk and Oversized Terminal, or OBOT, in exchange for guaranteed export capacity. News of that Utah connection ignited a political firestorm that led to Oakland City Council’s vote to prohibit coal; Tagami responded with a federal suit that heads to trial this month in a San Francisco courtroom. The suit alleges Tagami’s firm holds a “vested right” to process any legal commodity it chooses at the terminal. Key adversaries in the drama include Utah’s leading coal producer Bowie Resource Partners and activist groups looking to reduce global reliance on the carbon-heavy fuel most closely linked to climate change.And according to court filings, the firm that would operate the Oakland export station is a wholly owned subsidiary of Bowie Resource Partners, which is bankrolling Tagami’s suit to the tune of at least $1.7 million.

      Asia powers demand for thermal coal -  Thermal coal, the least loved major commodity, has jumped to its highest level since late 2016 as strong manufacturing activity in Asia and appetite from China drives demand.  Thermal coal is burnt to generate electricity, and is a big source of income for miners such as Glencore, Whitehaven and Yancoal, which produce material for the seaborne market. While the fossil fuel is being phased out in Europe on environmental grounds, it still accounts for about 40 per cent of energy consumption in emerging markets. Its fortunes are therefore closely tied to manufacturing activity and the global economy, which most forecasters believe is enjoying the strongest period of expansion since the financial crisis. Indeed, coal-fired power generation rose in most of Asia’s major economies last year, boosting demand, according to BMO Capital Markets.“Thermal coal — once again it is powering Asian growth and urbanisation,” said Glencore’s chief executive Ivan Glasenberg. “It’s another commodity where there’s been under-investment over the years.”Australian coal with an energy content of 6,000 kcal/kg — benchmark for the vast Asia market — is trading at $103 a tonne, according to a price assessment from Argus Media. Six months ago it was just above $80 a tonne.  On the supply side, big new thermal coal mines are not in the works and projects are becoming more difficult to finance as banks and investors fret about their environmental credentials. This has helped tighten the market and drive up prices.

    Japan to allow new coal power plants but demand offsetting emissions cuts elsewhere - Chugoku Electric Power will need to offset emissions from a planned coal-fired power plant through such steps as shutting down old fossil-fuel capacity, Japan’s environment minister said, warning that the project threatens the nation’s ability to meet its climate goals. The utility seeks to build another heavily polluting plant at a time when Japan already finds it challenging to achieve emissions reduction targets, Masaharu Nakagawa said in an environmental impact assessment. Chugoku Electric plans to break ground on the 1 million kilowatt plant in the western prefecture of Shimane this November and bring it online in 2022. Coal accounts for nearly 60% of the company’s power generation — double the national average. Nakagawa said he will let the project go forward but demand steps to mitigate its impact, such as scrapping or suspending old, inefficient fossil-fuel facilities or limiting the new plant’s use.

    Diablo Canyon to Close Without Clean Energy Guarantees - California regulators have approved a plan to close Diablo Canyon, the state’s last nuclear power plant, that has environmental and clean energy groups, local communities, and even utility Pacific Gas & Electric crying foul over the results. On Wednesday, the California Public Utilities Commission approved a plan for PG&E to close the Central Coast plant by 2025, and recover $241.2 million in costs to pay for it, mostly expenditures associated with paying employees to run the plant through its closure. That’s half the amount of money -- $448 million -- for worker retention, retraining and community support that PG&E, the Natural Resources Defense Council, unions and community groups agreed on in a joint agreement that opened the discussion of Diablo Canyon’s closure last summer. The CPUC’s proposed decision, which first emerged in November, made drastic changes to this joint agreement, including halving its employee retention and retraining budget.It also cut completely an $85 million Community Impact Mitigation Program for San Luis Obispo County, local cities and the school district to partially offset lost tax dollars and job cuts to come, citing the “absence of express legislative authorization, although PG&E may choose to use shareholder funds” to support it. The proposed decision, which was roundly decried by community groups, clean energy advocates and PG&E alike, also cut a proposal for a 53 percent increase in PG&E energy efficiency programs. Those programs are expected to make up a huge portion of the resources being sought to replace Diablo Canyon.  Finally, it fails to mention a key promise of last summer’s compromise -- replacing the 2.3 gigawatts of always-on power that Diablo Canyon provides the regional and statewide grid with zero-carbon resources. Since nuclear power doesn’t emit carbon, adding anything else would add to the state’s greenhouse gas burden.

    California regulators vote to shut down Diablo Canyon - The last remaining nuclear power plant in California will begin shutting down operations in six years after state regulators Thursday unanimously approved a plan outlining details of the closure. “We chart a new energy future by phasing out nuclear power here in California,” California Public Utilities Commission President Michael Picker said before the 5-0 vote to shut down the Diablo Canyon Nuclear Power Plant in San Luis Obispo County. The decision comes after the plant’s operator, Pacific Gas & Electric, announced an agreement in 2016 with a collection of environmental and labor groups to shutter the plant that has delivered electricity since 1985.The utility said Diablo Canyon would not be economically feasible to run because of changes in California’s power grid — specifically, the growth of renewable energy sources, increased energy-efficiency measures and the migration of more customers from traditional utilities to community choice aggregation (CCA) for their local electricity needs.

    Gail Tverberg: The Coming Energy Depression - (Gail Tverberg and Chris Martenson) Energy is THE master resource. Without it, nothing can get done.  Energy analyst and professional actuary Gail Tverberg returns to the podcast this week to revisit the global energy outlook. And fair warning, Gail warns it's quite grim.To her, it's a simple math problem. We have too many people placing too much demand on the world's depleting energy resources. The cost of energy is rising, which we are compensating for in the short term by using financial gimmicks to make "affordable" -- when all we're really doing is creating future promises that cannot possibly be repaid. The increasing cost of energy is manifesting in higher prices (for everything, not just fuels) and lower real wages, a divergence she sees only worsening from here. This path leads to another Great Depression-style crisis from which she does not see a clear path out of: What we really live on is what we pull out of the ground each year, in terms of oil or coal or natural gas or whatever. So what we have is just what we pull out. But oil prices higher than $20 per barrel are putting too much pressure on the economy. The cost of everything goes up at the same time. You use oil to get your metals out because you're using that in your extraction process. Also, the same things that cause oil prices to rise cause natural gas prices and coal prices to rise, too. So what happens is everything has to go up in cost at the same time. Though people's wages are the one thing that don't. So what happens is they get squeezed. They get squeezed badly, and they start defaulting on their loans; auto loans and student loans first. We probably will soon see more business loans default, too. But it's also the individuals who are getting squeezed the worst. This will only worsen as oil prices rise and as other prices rise, too. The crisis we're likely to face is going to look like the Great Depression. It's going to look like people being laid off from their obs. It's going to look like banks closing. And it's going to be that kind of crisis.We simply don't have nearly enough affordable energy to support today's population. This should be very disturbing to every one of us. Apart from taking increasingly desperate short-term measures to put the crisis it off a little bit, it's hard to see a solution. Click the play button below to listen to Chris' interview with Gail Tverberg (63m:24s).

    City Council commits to codifying citizen-OKed laws, including anti-fracking, pot de-penalization - Athens NEWS - Athens City Council members agreed Monday evening to codify into city law two successful citizen initiatives, one for de-penalization of marijuana in the city and the other banning fracking and other oil and gas related activities in city limits.Council spent the first 40 minutes of Monday’s committee meetings hearing citizen comments regarding the codification of two citizen initiative petitions that have yet to be written into the official city code.City voters overwhelmingly approved the marijuana de-penalization initiative in November, and passed the anti-fracking Community Bill of Rights and Water Protection initiative in 2014 by a heavy margin. With no proposals for drilling activities in the city since then, the Bill of Rights has not had any reason for enforcement. “Way back when this ordinance or this petition was originally adopted by the voters, it came to council and we really didn’t do anything with it, we didn’t codify it,” City Council member Jeffrey Risner explained, referring to the Community Bill of Rights. He added that council had adopted an ordinance to add the language from the petition to the code but due to a “clerical error,” the language was not the same as what voters had approved on the ballot. Risner said the problem could easily be solved by having City Council President Chris Knisely sign and approve a corrected version of the Bill of Rights ordinance with the appropriate language – a version that Risner said was likely ready for approval already. Both measures should be voted on and codified in next Monday’s regular City Council meeting, he said.

    Federal judge slams legal theory behind local fracking laws - Athens NEWS - A federal judge has sanctioned two attorneys for advancing “frivolous” arguments on behalf of the Pennsylvania community attempting to ban oil and gas wastewater injection wells. The legal arguments rejected by the judge closely resemble the basis for an anti-fracking ordinance in Athens and another proposed for Athens County.  The resemblance is not a coincidence.The two sanctioned attorneys, Thomas Linzey and Elizabeth Dunne, work on behalf of the Pennsylvania-based Community Environmental Legal Defense Fund. The CELDF has worked both with Grant Township, Indiana County, Pennsylvania and Athens city and county, Ohio, to pass laws that assert the authority of local community rights over corporate rights and state and federal laws that regulate oil and gas drilling and other industrial activities.The CELDF has worked with numerous communities in Ohio, Pennsylvania and other states to pass similar laws. In Ohio, no civil court to date has endorsed the CELDF’s legal approach any more than federal Magistrate Judge Susan Paradise Baxter did in Grant Township, Pennsylvania. In a decision issued on Friday, Judge Baxter granted sanctions against Linzey and Dunne in the amount of $52,000, to be paid within 120 days to Pennsylvania General Energy Co. (PGE). Baxter also ordered that her decision be forwarded to the Pennsylvania Supreme Court’s disciplinary board “with a request to determine appropriate disciplinary measures, if any, to be imposed upon attorney Linzey…”In a Rolling Stone magazine article on the ruling, Linzey said he intends to appeal the sanctioning to a Circuit Court in Philadelphia. The $52,000 represents 10 percent of more than $500,000 in attorneys’ fees and costs that PGE claims it spent while challenging a community bill of rights ordinance that Grant Township enacted in 2014, with guidance and legal underpinning from the CELDF. The ordinance bans oil and gas wastewater injection wells, an issue that’s also of major concern to many Athens area residents.

    Sunoco says its Mariner pipeline adds $9.1B to economy; activists contend it's 'dubious research' -   Less than a week after state regulators shut down construction of the Mariner East 2 pipeline, a consultant for Sunoco Pipeline on Monday updated its estimated economic impact of the project to $9.1 billion — assuming the company is able to resume construction.Sunoco Pipeline LP and its parent company, Energy Transfer Partners LP (ETP), are spending $5.1 billion over five years in Pennsylvania on the Mariner East system, including pipelines and reconstruction of a former refinery in Marcus Hook, according to the report by Econsult Solutions, a Philadelphia firm hired by Sunoco.Econsult more than doubled its 2015 estimated direct and indirect economic impact of the Mariner East project from $4.2 billion to $9.1 billion, attributing the higher estimate to the addition of a third pipeline, as well as the construction of a gas-liquids processing facility in Marcus Hook.  The project, which is designed to carry gas liquids such as  propane from the Marcellus Shale to the Marcus Hook terminal, will support 57,070 direct, indirect, and induced jobs between 2014 and 2019, or 9,500 jobs a year, with total earnings of $2.7 billion, Econsult said.  In addition to the one-time economic boost during construction, the associated projects will produce $140 million to $210 million of ongoing annual economic impact in Pennsylvania, according to the report. The report was released only a few days after the Pennsylvania Department of Environmental Protection halted construction on the Mariner East 2 pipeline to correct “egregious and willful violations,” including unauthorized drilling to install the pipeline and failing to notify the agency when discharges or spills of drilling fluid occurred.

     For those living along Sunoco's Mariner East 2 pipeline, a human chain of frustration  - Patrick Robinson is one of 105,419 people who live along the 350-mile, 17-county corridor of the Mariner East 2 natural gas pipeline. Landowners have been complaining about cloudy water, permit violations, illegal drilling and dumping since construction began almost a year ago. Last week, state regulators stopped construction, citing a pattern of "egregious and willful violations" by Sunoco Logistics. The state Department of Environmental Protection has noted more than 30 spills. Millvale-based FracTracker Alliance has posted maps showing locations of spills and proximity of the pipeline to 40 schools. The $2.5 billion pipeline would carry butane, ethane and propane from near Scio in eastern Ohio to the Marcus Hook industrial complex on the Delaware River near Philadelphia, mostly for export. About 480 feet of pipelines run through Mr. Robinson’s property on 9.5 rugged acres in Indiana County, the closest town being Armagh. For him, the state’s halt on construction is “too late. I have rainbow colored water coming up out of the ground. I keep getting told, ‘We’ll fix it later.’ What are they going to fix? They mixed the clay and gravel up already. “I signed the lease because they said they were going to do directional drilling instead of open trench,” he said. “You go for the best deal you can; you have no choice. “They have a 50-foot right of way,” he said, “but they park wherever they want to. Numerous times I’ve been told I have no rights. This is my property. I pay taxes on it. “I have lived here 14 years and never had an issue until they started digging the pipeline” last summer. “My drinking water now has a lot of mud and sediment in it. All my faucet screens are eaten through. I have a sediment filter for washing and flushing, but it clogs. “I don’t know how they got away with some of the stuff they did.”

    A Fracking Company Is Suing a Victim of Its Own Pollution for Speaking Out (Video) - Cabot Oil & Gas, a petroleum, natural gas and natural gas liquids exploration and production company based in Houston, Texas, has filed a $5 million lawsuit against water pollution victim Ray Kemble and his lawyers for speaking out about his polluted water well. Kemble, who lives in Dimock, Pennsylvania, a tiny town in the rural northeast corner of the state whose aquifer was famously polluted by gas extraction, hasn't had clean water since Cabot started hydraulically fracturing, or fracking, near his home eight years ago. The town’s fracking-related pollution was featured in the HBO films Gasland and Gasland II. In addition to the stress of living with a contaminated water well, Kemble is now being sued by the same company that polluted his water in the first place. Cabot is arguing that he has defamed its business by speaking publicly about the pollution in his well. At the first hearing in the case in early December, Judge Jason Legg called Cabot's $5 million damage claim improper, noting that such a large number is used only to gain attention and possibly biased media coverage. "Cabot is substantially offering this basically as a marketing exercise because they want to have their version of the story out in the media." said one of Kemble's attorneys, Rich Raider.  Cabot's lawyers argued that once a pollution victim has signed a settlement agreement, Cabot then has the right to re-pollute that victim because the victim has waived all future litigation rights. Cabot's lawyers also argued that the silence agreement contained in the settlement Kemble signed with the company waived his rights to Anti-Slapp law protections and first amendment freedom of speech. Kemble did sign a settlement agreement when Cabot originally polluted his water well. Just after the agreement was signed, Cabot was allowed to frack three gas wells near Kemble’s home. New cases of water pollution were reported in the area and Ray’s water turned a darker black. “You've got new contamination that wasn't there before. That was not from drilling, just fracking. So does fracking cause groundwater contamination? You figure that one out," said Kemble at a press conference.

    Victory: Constitution Pipeline Request Denied by FERC - Thursday, the Federal Energy Regulatory Commission (FERC) issued a decision , which spells bad news for the proposed Constitution Pipeline, a 124-mile natural gas pipeline slated to run through New York State and Pennsylvania. Constitution Pipeline went to FERC and asked them to invalidate the New York Department of Environmental Conservation's (NYSDEC) denial for a necessary Clean Water Act permit for the project. Thursday, FERC rejected that request.FERC had already approved the pipeline, but NYSDEC concluded that Constitution did not provide enough information to insure that the pipeline would comply with the Clean Water Act. The company appealed NYSDEC's decision to the U.S. Court of Appeals 2nd Circuit, which upheld the state agency's decision to deny the pipeline company's application in August of 2017. Earthjustice intervened in that case to help defend New York's decision on behalf of Catskill Mountainkeeper, Riverkeeper and Sierra Club.In its decision Thursday FERC maintained the State's decision and rejected Constitution's attempts to shorten the time states have to consider natural gas pipeline applications for Clean Water Act permits."We are ecstatic that FERC rejected Constitution's desperate attempt to undermine New York's authority to safeguard the quality of the State's waterways," said Earthjustice attorney Moneen Nasmith, who represented intervenors helping to defend NYSDEC's decision and a group of organizations that has opposed FERC's approval of the project. "The Commission's decision is great news for the broad coalition of groups and individuals that has been fighting to protect New York's waters from this unnecessary fossil fuel project for years." Constitution will be able to appeal FERC's decision or to go back to New York State and try to reapply with a different application.

    New York City is taking on the oil industry by selling off billions in fossil fuel investments and suing the top five oil companies - New York City is taking on the oil industry on two fronts, announcing a lawsuit Wednesday that blames the top five oil companies for contributing to global warming and saying the city will sell off billions in fossil fuel investments from the city's pension funds. Democratic Mayor Bill de Blasio received immediate blowback from some of the companies, while winning praise from environmentalists and others.  "We're bringing the fight against climate change straight to the fossil fuel companies that knew about its effects and intentionally misled the public to protect their profits," the mayor said. "As climate change continues to worsen, it's up to the fossil fuel companies whose greed put us in this position to shoulder the cost of making New York safer and more resilient." The city alleges the fossil fuel industry was aware for decades that burning fuel was impacting climate change. The defendants in the city's federal lawsuit are BP, Chevron, ConocoPhillips, Exxon Mobil and Royal Dutch Shell. Three of the companies shot back against the mayor's accusations, while two others — ConocoPhillips and BP — declined to enter the fray. Reducing greenhouse gas emissions is a global issue and requires global participation and actions," said Exxon Mobil's Scott Silvestri. "Lawsuits of this kind — filed by trial attorneys against an industry that provides products we all rely upon to power the economy and enable our domestic life — simply do not do that." Chevron spokesman Braden Reddall called the lawsuit meritless and said the litigation will do nothing to address climate change. Curtis Smith, a Shell spokesman, said the courts are not the venue to address climate change. New York's lawsuit, filed in federal court follows similar litigation filed by San Francisco, Oakland, and Santa Cruz in California.  Also Wednesday, de Blasio and Comptroller Scott Stringer said they intend to divest the city's five pension funds of roughly $5 billion in fossil fuel investments out of its total of $189 billion. They say the divestment is the largest of any municipality in the U.S. to date.

    Cold weather, higher exports result in record natural gas demand - Estimated U.S. natural gas demand on January 1, 2018 reached 150.7 billion cubic feet, surpassing the previous single-day record set in 2014, according to estimates from PointLogic. Much colder-than-normal temperatures across much of the United States have led to increased demand for heating, much of which is provided by natural gas. Although residential and commercial natural gas consumption did not appear to surpass previous records, higher consumption in the electric power and industrial sectors, greater exports of natural gas to Mexico, and more demand for liquefied natural gas (LNG) feedstock gas contributed to the recent record demand level.  Natural gas consumption is typically highest in the winter months, when residential and commercial demand for heating fuels increases. Industrial sector consumption of natural gas is relatively less seasonal but is also higher in winter months. Although the electric power sector consumes the most natural gas during summer months, when overall electricity demand is highest, power sector consumption of natural gas can also increase in winter months. Many homes and commercial buildings use electricity either as their primary or secondary heating fuel, and overall increases in electricity demand are often met by natural gas-fired generators.  This past week, increases in demand led to higher prices in natural gas and electricity markets. Day-ahead natural gas prices for delivery for January 1, 2018, neared $30 per million British thermal units at trading locations in the Mid-Atlantic region, New York, and Boston, according to Natural Gas Intelligence. Because the spot price of natural gas affects power prices in many parts of the United States, spot wholesale electricity prices also rose, surpassing $200 per megawatthour (MWh) in New York City and $185/MWh in New England, according to data from SNL Energy.  Record demand levels are likely to lead to high withdrawals of natural gas from storage fields. EIA’s Weekly Natural Gas Storage Report (WNGSR) showed that in the Lower 48 states, natural gas storage levels as of Friday, December 29, were 3,126 billion cubic feet (Bcf), or about 6% lower than both the previous five-year average (2012–2016) and year-ago levels.  During the previous record withdrawal for the week ending January 9, 2014, U.S. population-weighted heating degree days reached 255. In that week, 288 billion cubic feet of natural gas were withdrawn from storage. For the week ending January 5, 2018, heating degree days are forecast to reach 281.

    Fuel price spikes add to weather misery in US north-east  -Oil typically accounts for a tiny fraction of the fuel mix behind New England’s electricity. But in the past week, oil-fired stations such as Canal were generating more than one-third, according to the grid operator. As energy demand soared during a record-breaking cold snap, oil made sense despite being a dirtier fuel. After spot prices for natural gas soared in the region and a winter storm knocked out a large nuclear power plant, using oil suddenly became an economical way to keep the lights on.  The shifts reveal the fragility and complexity of US energy markets, even at a time of overall abundance. And they put a spotlight on efforts to maintain reliable energy supplies while addressing greenhouse gas emissions from fossil fuels.   The ISO New England grid operator warned late Sunday that managing the region’s power system “continues to be challenging”, noting that some of the region’s oil-fired generators were “quickly depleting their fuel supply”.  New England generates almost half its electricity from gas-fired plants, on average. But these plants were forced to compete for fuel with homeowners trying to keep warm as low temperatures crashed through records in cities such as Hartford, Connecticut and Providence, Rhode Island. Enbridge, a pipeline company, says it had to limit volumes from its recently-expanded Algonquin Gas Transmission system for customers that did not have firm contracts.  “The situation in New England is due to a lack of adequate natural gas pipeline capacity, despite repeated efforts by pipeline companies to boost capacity,” says a spokeswoman for the Interstate Natural Gas Association of America, a pipeline industry group. “This lack of capacity has cost New Englanders dearly.”  Meanwhile, plant owner NRG Energy says it might have to curtail operations at Canal to comply with rules set forth by the Global Warming Solutions Act, a state climate law. 

     New England dual-fuel units burning through oil, emissions limits amid cold snap - New Yorkers and New Englanders are cranking up their thermostats to stay warm amid an extreme cold snap, but New England's grid overseer and its generators are finding that dual fuel generators are burning through not only needed wintertime oil supplies but also emissions allowances for the rest of the year. ISO New England spokesperson Marcia Blomberg said the regional power system is operating under normal conditions but the extreme cold weather is increasing demand for natural gas for heating, creating pipeline constraints, driving up natural gas prices and causing dual-fuel generators to switch fuels. As a consequence, oil- and coal-fired power plants are generating much more power than usual and wholesale power prices have soared, said Bloomberg.  34% of New England's electricity was being supplied by oil-fired generation (which over a given year supplies less than 1% of the region's generation), followed by natural gas at 25%, nuclear at 23%, renewables at 9%, coal at 6% and hydro at 4%. Of the renewable generation, 62% of it was supplied by greenhouse gas-emitting wood-, refuse- and landfill gas-fired generation, with wind supplying 38% and solar less than 1%. According to data from SNL Energy, ISO-NE's internal hub clocked a day-ahead power price of $210/MWh at peak on Jan. 2, up from a Dec. 22 peak of just $66.25/MWh. In neighboring New York, which also faces wintertime gas capacity constraints, grid overseer New York ISO said the state has sufficient generation capacity and reserves to meet Jan. 2's projected peak demand of 24,500 MW, with some dual fuel units switching to oil as a result of increased demand for natural gas and both higher gas and wholesale electricity prices.  "We are seeing a historic cold snap here with the longest sustained period of high temperatures under 20 [Fahrenheit] degrees in over a hundred years," asserted Dan Dolan, president of the New England Power Generators Association, in an interview. "We usually see this type of severe cold later in January, early February."

    What Happens When You Don't Build Natural Gas Pipelines? - What happens when you don't build natural gas pipelines? A really, really bad chain reaction, magnified during winter and peak demand. With a pipeline shortage, a natural gas shortage is created, prices for both natural gas and electricity skyrocket, and CO2 emissions go up because more carbon-intensive fuels are forced to compensate. Centered in New York, New Jersey and New England (hereafter collectively described as the Northeast), the devastating consequences of the anti-pipeline business just popped up again as we faced the coldest temperatures since the Polar Vortex of 2013-2014. Two fellow writers recently knocked this issue outta the park again in pieces for FORBES, so see them for mind-blowing stats on price spikes:

    Let me just say that natural gas prices in some parts of the Northeast boomed 60-70 times their recent rates because there's not enough pipeline capacity in the region to bring in natural gas in times of high demand. After years of warnings, this remains a massive problem: Gas is increasingly being utilized in the Northeast for generating both electricity and heat. For example, gas provides over half of the power in the region, despite no significant gas-producing state there. With such gas shortages, heating oil was forced to make up about 35% of New England's electricity during the time, which is highly problematic for those in the region that promote themselves as "climate leaders" but continually block new gas pipeline capacity: heating oil's CO2 emissions are 30-40% higher than those for natural gas.  Indeed, bad policy helps explain why yearly home electricity rates in the Northeast average about 19 or 20 cents per kWh, compared with the national average of 12-13 cents.

    Climate Change Fanatics Would Have You Die (Opinion) - News Radio 1310 KLIX -- Let’s say you wake tomorrow and discover a new United Nations mandate, supported by our own government, has banned pumping oil.  Oh, and fracking for natural gas and nuclear power are outlawed.Meanwhile heating your home now requires wood. Or whatever sagebrush you can scrounge. In a couple of days your car runs out of gas and you now must walk or bike from Buhl to Twin Falls for work.  At 5:00 A.M., before sunrise and sometimes in snow and ice.  Meanwhile heating your home now requires wood.  Or whatever sagebrush you can scrounge.How long before the global economy tanks and billions freeze and starve?I’m a big proponent of solar power.  The sun will come up every morning for a very, very long time.  It’s just at the moment we’re not ready to transition civilization away from traditional fuels.  I saw a post on the web about the recent cold snap in the Northern Midwest and Northeast.  In New England 80 percent of the fuel used to keep people warm came from oil, natural gas and nuclear.  These are all enemies of granola chomping leftists and just like they did with coal they plan to put these industries out of business. Then they call themselves compassionate.  They claim if we don’t starve and freeze 5 billion people today we may have scarcity 100 years in the future.  Again, “may” have scarcity due to climate change.  Currently, I’m not freezing.  I’ll take my chances with what I know today against what may or may never occur.

    “Drive Fast, Freeze a Yankee!” - Power Line (blog) It is now well understood that the “energy crisis” of the 1970s was entirely the product of bad government policy.  Federal price and allocation controls meant that disruptions in the oil market by OPEC were magnified here at home, with the result being artificial shortages.Everyone remembers the lines for gasoline. What is less recalled are the shortages and price spikes for natural gas, whose price and supply was also regulated at the federal level. But in Texas, intrastate natural gas outside the federal purview was abundant and cheap, and the lack of pipeline capacity to transport it, along with the price controls, meant Texas enjoyed cheap natural gas while the rest of the country shivered or paid out for expensive home heating oil and oil-fired electricity (oil-fired electricity was nearly 20 percent of the nation’s total electricity in 1973; today the figure is less than 1 percent). Hence there was a popular bumper sticker in Texas back then: “Drive fast, freeze a Yankee.” . But from the looks of things the northeast is living back in the bad old days during the current bout of global warming climate change gripping so much of the country. The spot prices for natural gas and electricity are soaring:  Gee—how can natural gas be so expensive when its abundant and cheap (thank you fracking—see the chart at the bottom*), and moreover available in nearby states like Pennsylvania and Ohio? It’s not necessary any more for eastern natural gas customers to have to deal with those cowboy hat-wearing folk in Oklahoma and Texas. Ah, maybe headlines like this have something to do with it: In fact Gov. Cuomo has blocked at least three natural gas pipelines in New York. (The Federal Energy Regulatory Commission overruled Cuomo on one of these last fall.) And since Cuomo has blocked fracking activity for gas in New York state, it is missing out on the prosperity that has revived so many parts of rural Pennsylvania and eastern Ohio.

    Cold Snap Leads To Biggest US Natural Gas Draw Ever - The freezing temperatures in most of the Eastern U.S. in the week to January 5 led to the biggest ever weekly withdrawal from natural gas storage, data by the U.S. Energy Information Administration (EIA) showed on Thursday.  In its Weekly Natural Gas Storage Report, EIA said that in the week to January 5, working gas in storage decreased by 359 billion cubic feet (Bcf) from the previous week. As of January 5, working gas in storage was 2,767 Bcf. Natural gas stocks were 415 Bcf less than at this time last year, and 382 Bcf below the five-year average of 3,149 Bcf. At 2,767 Bcf, total working gas is within the five-year historical range, EIA said.Last week’s draw was the largest weekly withdrawal ever, according to Reuters estimates of government energy data since 1994. The previous record natural gas withdrawal was 288 Bcf in January 2014 when an Arctic cold airmass surged south into the central and eastern U.S.The record withdrawal in the first week of this year also beat estimates by analysts polled by Reuters, who had predicted a 333-Bcf withdrawal.  Even though the stocks are below the five-year average for this time of the year, traders told Reuters that natural gas supplies are enough to meet demand for heating in the winter. Weather forecasts also suggest that U.S. temperatures will remain mostly within seasonal limits for the rest of the winter. Expectations are also that U.S. production will stay high. On New Year’s Day, the U.S. burned the most natural gas ever recorded. The U.S. consumed 143 bcf of natural gas on January 1, breaking the previous record of 142 bcf during the polar vortex in 2014. While natural gas stocks are currently below the five-year average and the market has significantly tightened over the past few months, natural gas prices are not surging because soaring production keeps the markets confident that there won’t be supply shortages, analysts say. 

    Working gas stocks post all-time record weekly withdrawal -- Net withdrawals from natural gas storage totaled 359 billion cubic feet (Bcf) for the week ending January 5, 2018, topping the previous record of 288 Bcf set four years ago by 25%. Weekly net withdrawals have totaled at least 249 Bcf only 10 times since 1993, most recently in January 2015, and have never exceeded 300 Bcf. Of the 10 largest storage pulls on record, four occurred during the winter of 2013–14, which was significantly colder than normal. Net withdrawals from storage since December 22, 2017, have totaled 565 Bcf, which is higher than the previous two-week withdrawal record of 510 Bcf reported during January 1–15, 2010.Similar to January 2014, sustained periods of frigid temperatures in the East, Midwest, and South Central regions resulted in strong natural gas demand for space and water heating, contributing to robust withdrawals from storage. At the end of December 2017, temperatures were quite cold in large areas of the Lower 48 states and turned markedly colder during the first few days in January, especially in the eastern half of the country. Consumption of natural gas in the residential/commercial sector, as estimated by PointLogic Energy, totaled 452 Bcf during the week ending January 5, compared with 348 Bcf during the prior report week. Overall, total natural gas consumption in the Lower 48 states increased 150 Bcf during the storage week to 961 Bcf, which includes exports (pipeline exports to Mexico were 29 Bcf and liquified natural gas (LNG) feedstock exports were 21 Bcf). Freezing temperatures had an impact on natural gas production during the cold snap. Dry natural gas production was at a record level of 539 Bcf during the December 29, 2017 report week, and declined to 517 Bcf during the following week, according to PointLogic Energy estimates. Cold weather led to freeze-offs in the Appalachian and Permian Basins that reduced natural gas production. Pipeline imports from Canada and LNG imports increased during this period, partially offsetting some of the production declines. Withdrawals from storage played a key role during this period in meeting natural gas demand.

    Report: US May Get First LNG Import From Russia Despite Sanctions (Reuters) - A vessel that may be carrying liquefied natural gas from Russia's new Yamal LNG export terminal could be heading to the United States despite sanctions against the company that operates the Russian facility, according to a report by S&P Global Platts and Thomson Reuters shipping data. The tanker Chris. De Margerie picked up a cargo from Novatek PAO's Yamal facility, Russia's second LNG export terminal, on Dec. 9 and dropped it off at National Grid Plc's Isle of Grain LNG facility near London on Dec. 28, according to Thomson Reuters data. Since then, Engie SA's Gaselys LNG tanker picked up LNG from the UK facility on Dec. 30 and is expected to arrive in Boston on Jan. 22. It is possible that some of the LNG on the Gaselys is from Yamal, according to a report by S&P Global Platts. Reuters has not independently verified that report, but the shipping data does show the routes the tankers are taking. The final destination could change. Carol Churchill, a spokeswoman for Engie, which bought the cargo in the United Kingdom and loaded it onto one of its vessels, said: "This transaction is compliant with all U.S. trade laws." "Given the exceptionally cold temperatures and resulting high gas demand in the U.S. Northeast, Engie purchased this spot cargo to supplement our other contracted supplies from Trinidad," Churchill said. Engie owns the Everett LNG import terminal near Boston. Churchill did not answer a question about whether any of the gas came from Russia. National Grid said customer confidentiality limited what information it could disclose. "But I also believe we told people at the time that the gas from the Christophe de Margerie had not entered the UK grid," said Sean Kemp, said a spokesman for National Grid, directing further questions to the shippers and owners. The U.S. Energy Department was not immediately available for comment. 

    Siberian Gas by Way of London Rescues Chilly Boston - Not many people had expected the U.S. to turn to Europe for natural gas this winter. Yet the polar chill that gripped the U.S. East Coast this month, and sent spot prices to records, has led to a tanker loading a cargo of liquefied natural gas in the U.K. for Boston, some of which was likely produced by a project in Siberia targeted by U.S. financial curbs.  The Gaselys tanker is due to arrive in Boston on Jan. 22 after loading fuel from storage tanks at the U.K.’s Isle of Grain, according to ship-tracking data compiled by Bloomberg. The vessel docked at Grain shortly after the terminal near London received the first cargo from the $27 billion Yamal LNG plant in Russia’s icy north.   “Gas from anywhere is profitable into that northeastern U.S. gas market as prices are the highest in the world,” said Trevor Sikorski, head of natural gas, coal and carbon at Energy Aspects Ltd. in London.  The arrival from the U.K. would make it the first LNG reload into the U.S. since a cargo from the tanks of the Huelva terminal in Spain was imported in June 2014, according to data through October from the U.S. Department of Energy. U.S. imports of the super-chilled fuel, mostly into Boston from Trinidad and Tobago, have dropped since exports started from the Gulf of Mexico coast in 2016.  Isle of Grain terminal operator National Grid Plc said it doesn’t comment on the intentions of gas shippers using its facilities. It’s not immediately clear who owns the cargo.  U.S. domestic demand climbed to a record last week as snow and winds bombarded Americans on the East Coast. Temperatures tonight in Boston may fall to as low as 15 degrees Fahrenheit (minus 9 degrees Celsius), with a cold outlook persisting through this month, according to AccuWeather Inc.

    Why would Russia be selling natural gas to the US? --  Companies in the United States are trying to force Russia out of the European gas market. Now, though, it has emerged that Russian liquefied natural gas is being supplied directly to the US. How does this fit together? Russia is the world's biggest exporter of natural gas. And for decades, Moscow has been dependent on the pipelines that carried the valuable commodity from its gas fields in northern Russia and Siberia to Western Europe. State energy giant Gazprom still does the majority of its business via these pipelines. They are often the subject of disputes, however, as there are always several countries involved. The Kremlin is relying more and more on liquefied natural gas, which is created by cooling natural gas until it is condensed into a liquid, thereby allowing it to be transported via tanker rather than through a pipeline.  For years now, Novatek has been developing a gigantic liquefied natural gas delivery system on the Yamal polar peninsula. Novatek controls 60 percent of the operation, but the French oil company Total is also involved, as are Chinese investors. News that Russian liquefied natural gas from Yamal is being transported to the United States for the first time, via a French intermediary, came as quite the surprise. To the US!  Washington is doing everything it can to make it harder for Russia to export gas to Europe. And now the US itself is buying Russian gas? These circumstances are less spectacular than they at first appear, though. Energy prices in the US have temporarily spiked because of the recent cold snap there. The country suddenly needs natural gas to cope with the severe weather, and it's turning to the international market for a solution. "There's nothing political about it," 

    It’s a Record Year for Natural Gas. Yay? - The Energy Information Administration's latest short-term outlook, published on Tuesday, had an eye-catching prediction: America's gas production is forecast to set new records this year and next.   That 68 percent increase since 2005 is pretty remarkable on its own. What isn't clear from that chart is just how big a year 2018 is expected to be. Here's the same data, but showing the change each year: This year isn't just expected to see the highest U.S. natural gas output ever, but also the biggest jump in production by far  That extra 6.9 billion cubic feet of gas production expected in 2018 is like the U.S. adding the entire output of Turkmenistan -- one of the world's largest gas exporters -- in the space of just one year. Two big reasons for this are logistics and oil. Pipelines able to carry roughly 7 billion cubic feet of gas a day away from the prolific Appalachian region are due to start up this year, allowing production that's been bottled up in the East to flood out. Meanwhile, rising oil production in the Permian shale basin and elsewhere will bring increased quantities of associated gas.  I wrote last week about how gas prices were strangely subdued despite the bitter cold gripping large parts of the U.S. These projections are a big reason. It is notable that the EIA's numbers incorporate estimates for lower gas prices this year and next compared to 2017. The cost structure of U.S. gas production has changed fundamentally.  The structure of supply and demand has also changed fundamentally, and in tandem. In the first decade of this century, the U.S. was short of about 9 billion cubic feet a day of gas, on average, relative to its consumption. Imports made up the difference. The latest projection from the EIA shows that this has almost entirely flipped:  The structure of the U.S. gas market is set to flip on its head in 2018.  Growing exports of gas, via pipelines to Mexico and, increasingly, shipped as a liquid on tankers, are the one bright spot in the market today. Just as new pipelines spreading out from the eastern U.S. will allow Appalachian producers to tap into higher prices, so foreign markets will provide a relatively small, but vital and growing, outlet for the country's excess supply overall. Similarly, U.S. oil producers got some relief when restrictions on crude exports were lifted in late 2015.

    NYMEX Feb natural gas up 2.7 cents at $2.933/MMBtu as storage offsets weather -- NYMEX February natural gas futures edged higher in overnight US trading as bullish storage expectations offset bearish weather outlooks. At 6:55 am EST (1155 GMT), the contract was 2.7 cents higher at $2.933/MMBtu. High heating demand because of freezing weather is expected to be reflected in a record high US storage withdrawal in the week ended January 5.The data from the Energy Information Administration due for release at 10:30 a.m. EST is expected to show a 337-Bcf withdrawal, according to an S&P Global Platts analysts survey. Responses ranged between 324 and 365 Bcf.However, storage draws could slow as the cold abates. The National Weather Service sees average to below-average temperatures in most of eastern two-thirds of the US in the next six to 10 days, but becoming confined to the Northwest and the Pacific in the eight-to-14-day forecast.

    NYMEX February gas contract soars following record draw from US storage - The NYMEX February natural gas futures contract spiked Thursday after the US Energy Information Administration announced an all-time high withdrawal from storage. The February contract settled at $3.084/MMBtu, up 17.8 cents from Wednesday's close, its highest since November 29. The EIA announced an estimated 359 Bcf pull from national storage stocks for the week ended January 5, well above the 337 Bcf withdrawal expected by a consensus of analysts surveyed by S&P Global Platts. The withdrawal topped the previous record of 288 Bcf in the week ended January 10, 2014, according to EIA data. The record pull from stocks came as temperatures across much of the country were well below average for the duration of the week, pushing demand to record levels and causing production freeze-offs in some areas. The unprecedented withdrawal led to record pulls in the East, Midwest, Mountain and South Central regions, and dragged total national stocks down to an estimated 2.767 Tcf, a 12.1% deficit to the five-year average, according to EIA data. The upward movement in price brings the front-month contract to a familiar place, the $3/MMBtu level. Since May 22, the front-month contract has only strayed more than 25 cents in either direction of $3/MMBtu 11 times, during a period in mid-December when record production met unseasonably warm temperatures. US demand is projected by Platts Analytics' Bentek Energy to climb over the next week, averaging 104.2 Bcf/d over the next seven days, well above the 89.2 Bcf forecast for Thursday. The increase in demand can be attributed in part to a forecast drop in temperatures across some demand areas in the US, as the most recent outlook for Chicago from the National Weather Service calls for a likelihood of below-average temperatures, with high temperatures reaching the low 20s through Wednesday, below the average high of 31.

    Another Round of Arctic Cold Lifts Natural Gas Spot Prices; Futures Surge to $3.20 -- Coming off a record storage pull, and with the latest weather data trending colder, prompt-month natural gas futures rallied Friday to their highest levels since November. Meanwhile, the arrival of more cold weather saw elevated winter pricing return to the cash market, especially along the East Coast; the NGI National Spot Gas Average jumped $1.97 to $5.15/MMBtu.  February natural gas traded higher Thursday overnight and carried that momentum through to the close, settling 11.6 cents higher at $3.200 after a 17.8-cent surge the day before. Friday's intraday high of $3.224 is the most expensive February 2018 trade since prices reached $3.244 on Nov. 15. March settled 6.8 cents higher at $2.993.In the midday weather data Friday “colder trends held” for the coming week before a break expected Jan. 19-22, said. But guidance “was impressively colder-trending with a weather system tracking out of the Central U.S. and into the East Jan. 23-25,” which appeared to get a reaction from the market, according to the firm.“We must expect that any further colder trends over the weekend and prices could continue higher, while if the Jan. 24 system were to trend back milder” and if warmer conditions Jan. 26-28 “were to look to last a little longer, a gap lower could be expected,” NatGasWeather said.The Energy Information Administration (EIA) reported a staggering 359 Bcf withdrawal from U.S. natural gas stocks for the week ending Jan. 5, a bullish surprise that easily toppled the previous record set in January 2014.Coming off the most potent stretch of heating demand since the notorious polar vortex-influenced 2013-2014 winter, consensus estimates before the report had predicted a record withdrawal. But the actual number still surpassed the median estimates by around 25 Bcf.

     Eminent domain challenge heads to appeals court - A high-stakes dispute over how natural gas pipelines are built across private property is heading to a federal appeals court.The 4th U.S. Circuit Court of Appeals will hear a case involving the constitutionality of the Federal Energy Regulatory Commission's practice of granting eminent domain authority to pipeline developers. The Mountain Valley pipeline, which would stretch from Virginia to West Virginia, is facing new legal challenges. Mountain Valley Pipeline LLCA group of Virginia and West Virginia landowners last night gave notice of their appeal of a recent district court decision scrapping their challenge to FERC's eminent domain system.The landowners have argued that the conferral of condemnation authority to pipeline companies violates property rights protected under the Fifth Amendment. In particular, they're challenging the use of eminent domain in relation to the 303-mile Mountain Valley pipeline, which would stretch from West Virginia to Virginia.The argument against FERC's eminent domain practice is gaining traction among pipeline critics and property rights advocates, with other cases pending in district courts in New Jersey and Washington, D.C. (Energywire, Sept. 13, 2017).If any case is successful, it would likely dramatically change the way pipelines are approved and constructed, making it much more difficult for developers to acquire land from holdout property owners along a proposed route.Attorneys pushing the argument had hoped district courts would agree to weigh the claims. So far, however, district courts in Ohio and Virginia have refused, ruling that the lawsuits essentially challenge FERC pipeline certificates and the Natural Gas Act directs all certificate challenges to appellate courts. The U.S. District Court for the Western District of Virginia dismissed the eminent domain arguments in the Mountain Valley case last month, prompting yesterday's appeal to the 4th Circuit (Energywire, Dec. 12, 2017). The Richmond-based appellate court will be the first circuit court to weigh in on the recent spate of similar cases.

    NASA just made a stunning discovery about how fracking fuels global warming - A new NASA study is one final nail in the coffin of the myth that natural gas is a climate solution, or a “bridge” from the dirtiest fossil fuels to low-carbon fuels like solar and wind. NASA found that most of the huge rise in global methane emissions in the past decade is in fact from the fossil fuel industry–and that this rise is “substantially larger” than previously thought. And that means natural gas is, as many earlier studies have found, not a climate solution. Natural gas is mostly methane, a potent greenhouse gas. And methane emissions are responsible for about a quarter of the human-caused global warming we’re suffering today. So scientists have been scrambling to figure out why methane emissions have been soaring in recent years after leveling off around the year 2000. The total methane in the air has been rising by 25 teragrams (27.5 million U.S. tons) a year, which NASA helpfully explains is the weight of some 5 million elephants. Many studies have estimated that leaks from oil and gas production, particularly fracking, are a major driver of rising methane emissions. “A review of more than 200 earlier studies confirms that U.S. emissions of methane are considerably higher than official estimates,” as one 2014 Stanford University analysis explained. “Leaks from the nation’s natural gas system are an important part of the problem.” But, NASA notes, other research groups have estimated that the rise in methane emissions was due to a rise in “microbial production in wet tropical environments like marshes and rice paddies.”  After a very deep dive into multiple ground and satellite datasets, NASA determined that a third source of methane emissions — global fires — had been declining much more rapidly than previously realized (see animation below). Significantly, the authors point out that the huge rise in fossil fuel methane emissions “found here is substantially larger than in previous literature.” In short, the recent jump in methane emissions from oil and gas production appears to be a whole lot bigger than we previously thought.

    Trump Proposes Most Aggressive Offshore Drilling Plan Ever - The Trump administration just proposed the most sweeping offshore drilling plan in history, a proposal that calls for opening up the Arctic, Atlantic and Pacific Oceans for drilling, while also opening up parts of the Gulf of Mexico that have been off limits. Experts say the proposal is unprecedented in regards to the geographical extent and in the number of lease sales. The five-year drilling plan from the Department of Interior for 2019-2022, which would replace the 2017-2022 plan from the Obama administration, calls for 47 lease sales. The acreage on offer would consist of more than 90 percent of the entire U.S. outer continental shelf, including areas that have either never seen drilling or haven’t experience drilling in decades. The only area that would remain off limits would be the North Aleutian Planning Area in Alaska. In other words, Trump is trying to open up essentially the entire U.S. coast to oil and gas drilling. The administration believes the proposed territory holds some 90 billion barrels of oil and 319 trillion cubic feet of natural gas, or reserves that are about 80 percent larger than is currently available. "Under President Trump, we are going to become the strongest energy superpower this world has ever known," Interior Secretary Ryan Zinke told reporters. Needless to say, the proposal is being met with some pushback. Opposition from environmental groups is expected – a joint letter from 64 environmental groups blasted the decision, arguing it will inflict “severe and unacceptable harm” to U.S. publicly-owned oceans, coastal economies and marine life. "This radical offshore drilling free-for-all is a clear example of politics over people, ignoring widespread local and state opposition," Diane Hoskins, a campaign director Oceana, said in a statement.  Argus Media points out that the Interior Department typically includes very large swaths of territory in the draft proposals because new territories cannot be added at a later date without starting the lengthy process all over again. So, the inclusion of so much territory is, in part, intended to simply keep options open. The likelihood of drilling in all of these regions is pretty low. The oil and gas industry praised the move. “To kick off a national discussion, you need a national plan — something that has been lacking the past several years,” said Randall Luthi, president of the National Ocean Industries Association.

    Trump’s Offshore Oil Drilling Plans Ignore the Lessons of BP Deepwater Horizon Spill - The Trump administration is proposing to ease regulations that were adopted to make offshore oil and gas drilling operations safer after the 2010 Deepwater Horizon disaster. This event was the worst oil spill in U.S. history. Eleven workers died in the explosion and sinking of the oil rig, and more than 4 million barrels of oil were released into the Gulf of Mexico. Scientists have estimated that the spill caused more than US$17 billion in damages to natural resources. I served on the bipartisan National Commission that investigated the causes of this epic blowout. We spent six months assessing what went wrong on the Deepwater Horizon and the effectiveness of the spill response, conducting our own investigations and hearing testimony from dozens of expert witnesses. Our panel concluded that the immediate cause of the blowout was a series of identifiable mistakes by BP, the company drilling the well; Halliburton, which cemented the well; and Transocean, the drill ship operator. We wrote that these mistakes revealed “such systematic failures in risk management that they place in doubt the safety culture of the entire industry.” The root causes for these mistakes included regulatory failures. Now, however, the Trump administration wants to increase domestic production by “reducing the regulatory burden on industry.” On December 7, 2017 BSEE ordered the National Academies to stop work on a study that the agency had commissioned on improving its inspection program. This was the most recent in a series of studies, and was to include recommendations on the appropriate role of independent third parties and remote monitoring. BSEE estimates that its proposals to change production safety rules could save the industry at least $228 million in compliance costs over 10 years. BSEE’s projected savings are also trivial compared to the $60 billion in costs that BP has incurred because of its role in the Deepwater Horizon disaster. Since then explosions, deaths, injuries and leaks in the oil industry have mainly from production facilities. On-the-job fatalities are higher in oil and gas extraction than any other U.S. industry. Some aspects of the Trump administration’s proposed regulatory changes might achieve greater effectiveness and efficiency in safety procedures. But it is not at all clear that what Angelle describes as a “paradigm shift” will maintain “a high bar for safety and environmental sustainability,” as he claims. Instead, it looks more like a shift back to the old days of over-relying on industry practices and preferences.

    Trump has big plans for offshore oil development--but will it ever happen? - With characteristic flamboyance, the Trump administration has set in motion a grand scheme to lure energy companies to explore for oil and gas across virtually all of America’s outer continental shelf, a deep marine domain encompassing billions of acres of ocean bottom. Drawing a distinction from the Obama administration’s concerns about climate change and restricting offshore fossil energy development, Interior Secretary Ryan Zinke cast President Trump’s offshore drilling campaign as a study in American strength. “We’re embarking on a new path for energy dominance in America,” Zinke said. “We are going to become the strongest energy superpower.” Yet like other marquee directives that Trump has issued in the past year to empower the domestic fossil fuel industry, the offshore plan may not bear out its grand ambitions. Many energy analysts already are predicting that exorbitant costs, flat prices, civic opposition, climate concerns and new transportation technology make major new offshore drilling enterprises, at least outside the Gulf of Mexico, unlikely.  Even in the Gulf, which produces 1.6 million barrels of oil daily, or 16% of U.S. production, the cost of exploration, permitting and operations in deep water is well over $1 billion per well, according to the American Petroleum Institute. Energy analysts also say it will take at least 10 years for a new well to begin producing in the Gulf, and twice that anywhere else on the outer continental shelf. By that time, according to industry forecasts, demand for oil will be well past its peak and dropping due to the advent of electric vehicles, more efficient engines for planes and ships and new materials that are not made with oil or natural gas. In short, many of these experts say, the administration’s offshore drilling plan could be out of touch with its time. “The price of crude is the determining factor,” said Ron Stein, founder of PTS Staffing Solutions, an Irvine-based company that provides professional staff to energy companies. Producing oil offshore is a money-burner, he said. “If the price of oil isn’t right, they won’t do it.”

    Michael Moore Threatens to Begin Fracking Off Trump's Florida Resort -- Filmmaker Michael Moore threatened Saturday to begin fracking off President Donald Trump's Mar-a-Lago resort in Florida to protest the administration's decision to open nearly all U.S. offshore waters to drilling for oil and natural gas. Moore, who has long opposed Trump and his policies, took to Twitter:  We are back on the air in September — in prime time! “Michael Moore LIVE FROM THE APOCALYPSE!” Our fracking off the coast of Mar-a-Lago begins right after Labor Day. I’ve already got the rig — a beautiful Halliburton G-0008 fracking system with a monster Caterpillar engine!  — Michael Moore (@MMFlint) January 6, 2018  Here’s our fracker! We’ll be drilling right off the coast of Mar-a-Lago. God Bless You Donald Trump for making this possible! The oil we drill just off your beach will pay 4 our entire show! And any spills - we’re going to let the ppl of Florida keep whatever they collect 4 free!  — Michael Moore (@MMFlint) January 6, 2018  Interior Secretary Ryan Zinke announced a plan Thursday to open nearly all U.S. offshore waters to oil and gas drilling, reversing protections in the Arctic, Atlantic and Pacific.  He said the draft National Outer Continental Shelf Oil and Gas Leasing Program for 2019 to 2024 would make over 90 percent of the outer continental shelf's total acreage available for leasing, including areas put off-limits by the Obama White House.

    Zinke removes waters off Fla. from leasing plan - Interior Secretary Ryan Zinke said late yesterday that federal waters surrounding Florida would not be open to exploration, an abrupt change of course after the Trump administration proposed new leasing areas in the region last week. Earlier this month, the White House proposed plans to open vast new waterways around the U.S. to leasing, including the eventual lifting of an eastern Gulf of Mexico drilling moratorium. But yesterday, after meeting with Florida Gov. Rick Scott (R), Zinke said the state's waters would be off limits. "I support the governor's position that Florida is unique and its coasts are heavily reliant on tourism as an economic driver," Zinke said in a statement. Democrats and environmentalists are interpreting the move as political because Scott may run for Senate. "This is a political stunt orchestrated by the Trump administration to help Rick Scott, who has wanted to drill off Florida's coast his entire career. We shouldn't be playing politics with the future of Florida," Sen. Bill Nelson (D-Fla.) said. Alex Taurel, deputy legislative director for the League of Conservation Voters, called Zinke's move a "publicity stunt." "Florida is at risk for offshore drilling because the Trump administration chose to put it at risk," he said.Diane Hoskins, campaign director at Oceana, wondered whether the administration would "give equal consideration to all the other coastal governors from both parties who overwhelmingly reject this radical offshore drilling plan." Republicans tend to support more oil and gas development, but some GOP lawmakers from states with sensitive coasts or military installations questioned the Zinke plan.

    Zinke rolls out Fla. exemption on Twitter -- Yesterday afternoon, Interior Secretary Ryan Zinke was stuck in the airport. "Delayed three hours and counting," he tweeted at 2 p.m. "At some point I'll make it to #Florida. #WheelsUp." Zinke was making good on a promise to meet with Florida's Republican governor, Rick Scott, to discuss Interior's draft proposed five-year offshore drilling program.Unveiled last week, the plan would open nearly all federal waters for leasing. On a phone call Thursday with reporters, Zinke indicated that he would have a dialogue with Scott, a likely Republican candidate for U.S. Senate later this year, who he knew would oppose the plan (Energywire, Jan. 5).   Almost as soon as Zinke touched down in the Sunshine State, Florida was exempted from the sweeping effort to open U.S. waters to oil and gas drilling. Drilling would still be banned off Florida's coast. "I have witnessed Governor Scott's leadership through hurricane season and am working closely with him on Everglades restoration. He is a straightforward leader that can be trusted," Zinke wrote in a statement attached to a 6:48 p.m. tweet. "President Trump has directed me to rebuild our offshore oil and gas program in a manner that supports our national energy policy and also takes into consideration the local and state voice," he added. "I support the governor's position that Florida is unique and its coasts are heavily reliant on tourism as an economic driver. As a result of discussion with Governor Scott's and his leadership, I am removing Florida from consideration for any new oil and gas platforms."The decision was far from sudden, Scott and Zinke told reporters yesterday in the Tallahassee, Fla., airport. Both said the agreement evolved during meetings over the last 12 months."Our tactic was to open everything up and then meet with the governors, meet with the stakeholders to make sure as we shape it, we shape it right," Zinke said. "The president makes it very clear that local voices count, states count." Zinke held firm that it was Scott who swayed the White House's decision and did not offer any other explanation when pressed by reporters. His answer was the same when asked why this decision meant there would be no drilling off Pensacola but there could be off of Gulf Shores, Ala., which is a mere 20 miles away.

    Politically important Florida gets a pass on drilling plan --The Trump administration says it will not allow oil drilling off the coast of Florida, abruptly reversing course under pressure from Republican Gov. Rick Scott. Interior Secretary Ryan Zinke said Tuesday after a brief meeting with Scott at the Tallahassee airport that drilling would be "off the table" when it comes to waters in the eastern Gulf of Mexico and the Atlantic Ocean off Florida. The change of course — just five days after Zinke announced the offshore drilling plan — highlights the political importance of Florida, where President Donald Trump narrowly won the state's 29 electoral votes in the 2016 election and has encouraged Scott to run for Senate. Zinke said Tuesday that "Florida is obviously unique" and that the decision to remove the state came after meetings and discussion with Scott. Zinke announced plans last week to greatly expand offshore oil drilling from the Atlantic to the Arctic and Pacific oceans, including several possible drilling operations off Florida, where drilling is now blocked. The plan was immediately met with bipartisan opposition on both the Atlantic and Pacific coasts. Scott, who is expected to run for Senate later this year, came out against the Trump administration plan when it was first announced, saying his top priority is to ensure that Florida's natural resources are protected. "For Floridians we are not drilling off the coast of Florida, which clearly the governor has expressed that's important," Zinke said, adding that he knew when he announced the drilling plan last week that it would spark discussion across the country.

    Oil industry slams Zinke for closing Florida waters to offshore drilling | TheHill: The oil industry criticized the Trump administration Wednesday for excluding waters near Florida from offshore drilling. The American Petroleum Institute (API) said the decision to remove the eastern third of the Gulf of Mexico from drilling consideration is “premature” and ignores safety advances the industry has made. “This announcement is premature,” API President Jack Gerard said in a statement following the late Tuesday decision from Interior Secretary Ryan Zinke. “The Gulf of Mexico is the backbone of our nation’s offshore energy production and restricting access to the Eastern Gulf puts hundreds of thousands of jobs at risk across the country and along the Gulf Coast, particularly in Florida, Alabama, Louisiana, Texas, and Mississippi,” he said. “Not only that, but securing reliable sources of energy helps fuel other industries like tourism, especially in states like Florida that relies on more than 200 million barrels of gasoline and diesel each year to fuel its economy.” Zinke’s action has also been criticized by governors and other leaders of various other coastal states. The administration said last week it is considering allowing drilling all along the Pacific and Atlantic coasts. Nearly all of those states’ leaders have come out in opposition to it. Zinke also excluded the Atlantic coast of Florida. But the Gulf of Mexico hosts the bulk of the United States’ offshore drilling, so the eastern Gulf is the industry’s top prospect. 

    Florida decision puts Trump drilling plan on shaky ground - Interior Secretary Ryan Zinke may have put the Trump administration on shaky legal ground by agreeing to remove Florida’s waters from consideration for offshore drilling.Zinke announced his decision Tuesday, minutes after meeting with Florida Gov. Rick Scott (R) at Tallahassee’s airport. Florida would be removed from consideration for drilling, Zinke said, due to the importance of tourism to the state. “I support the governor’s position that Florida is unique and its coasts are heavily reliant on tourism as an economic driver,” Zinke said in a statement late Tuesday. But after Zinke’s announcement, the leaders from numerous other coastal states quickly chimed in, saying they’re entitled to the same treatment. “New York doesn't want drilling off our coast either. Where do we sign up for a waiver @SecretaryZinke?” New York Gov. Andrew Cuomo (D) tweeted. “We'd like a word in Virginia,” wrote incoming Virginia Gov. Ralph Northam.  Rep. Mark Sanford (R-S.C.), an opponent of offshore drilling, criticized the decision, saying it was likely self-serving on President Trump's part due to the costal location of his private Mar-a-Lago club. “I mean, you can't say 'I don’t want to see an oil rig from Mar-a-Lago as I look out from the waters of Palm Beach, but it’s OK to look at an oil rig out from Hilton Head of Charleston, S.C.,' " he said on CNN. From both a political and a legal perspective, Zinke may have painted himself into a corner. If the Trump administration extends the logic applied to Florida to the rest of the country, its “Energy Dominance” agenda could be in peril.  Zinke, last week, proposed considering offshore oil and natural gas drilling nearly everywhere, including along the Pacific, Atlantic and Gulf of Mexico coasts and in nearly every spot around Alaska, save for Bristol Bay.  The only coastal state governors who have not asked to be excluded from the drilling are in Maine, Georgia and Alaska.

    Christie wants Trump admin to exempt N.J. from offshore drilling | TheHill: New Jersey Gov. Chris Christie (R) on Wednesday announced his intention to request an exemption from the Trump administration's expansion of offshore drilling rights, similar to the one granted to the state of Florida. In a press release from the governor's office, Christie called for the Interior Department to grant New Jersey an exemption to Interior Secretary Ryan ZinkeRyan Keith ZinkePatagonia files suit against Trump cuts to Utah monuments Presidential power over monuments should have checks and balances Overnight Regulation: Feds push to clarify regs on bump stocks | Interior wants Trump to shrink two more monuments | Navajo Nation sues over monument rollback | FCC won't delay net neutrality vote | Senate panel approves bill easing Dodd-Frank rules MORE's recent announcement that nearly all of the nation’s outer continental shelf is being considered for drilling. Zinke on Tuesday granted Florida an exemption through 2024."For eight years, the Governor has been steadfastly opposed to drilling off the New Jersey coast. He remains so today. If exceptions are being made for other states, the Governor will certainly pursue the same type of exception for New Jersey. He also will consult with the Attorney General on additional steps to continue his policy of protecting New Jersey's coastline," Christie's press secretary Brian Murphy said in the release.  Christie's request follows similar ones from the governors of California and New York, who issued similar statements after Zinke's announcement. “New York doesn't want drilling off our coast either,” Cuomo tweeted Tuesday. “Where do we sign up for a waiver @SecretaryZinke?” Florida's exemption came after a near-unified opposition effort from the state's elected officials on Capitol Hill as well as Florida Gov. Rick Scott (R), who met with Zinke on Tuesday to discuss the drilling expansion. Last week, Florida's senior Sen. Bill Nelson (D) spoke out against the expansion of offshore drilling on the Senate floor.

    Bayou Bridge pipeline winds up in court as environmentalists, state square off - Opponents of the Bayou Bridge Pipeline have sued the state for granting a permit needed to allow construction. The state and company responded with disbelief. Pipelines are safer than transporting oil by truck and train, and Bayou Bridge underwent arduous vetting, said assistant attorney general Harry Vorhoff and pipeline attorney Jimmy Percy. As Vorhoff discussed why it's desirable to bundle oil and gas pipelines, the judge broke in. Turner didn't disagree, but remarked that the state's argument didn't sound great. It may be advantageous to build pipelines and storage facilities in concentrated areas so there aren't pipes and tanks strewn across Louisiana, but that's of little consolation to the people who live nearby and are subjected to higher emissions. History has also shown that when companies and regulators decide where to place the infrastructure, it disproportionately winds up in the backyards of African-American communities, he observed. "The question is, 'When does it stop?'" Turner said. But he also emphasized that he doesn't put decades of industrial development at the feet of Bayou Bridge, nor does he necessarily think it's his place to try to unilaterally reverse the trend. 

    Keystone XL pipeline opponents appeal Nebraska route approval (Reuters) - Opponents of TransCanada Corp’s proposed Keystone XL pipeline appealed a decision by Nebraska regulators to approve a path for the project through the state, a lawyer for the opponents said on Friday. The legal challenge throws up another obstacle to the long-delayed project, which environmentalists have made a symbol of their fight against climate change but which President Donald Trump supports as a job creator. The Nebraska Public Service Commission in November approved a route for Keystone XL, lifting what appeared to be the last big regulatory hurdle for the 1,179-mile (1,897-km) pipeline linking the oil fields of Canada’s Alberta province to U.S. refineries, initially proposed nearly a decade ago. But the approval was not for TransCanada’s preferred path, and was instead for an alternative route that shifted it eastward to an existing pipeline right-of-way. Lawyers for opponents of the pipeline - which include landowners along the route - have argued that the commission was not permitted to approve anything but the original route TransCanada had requested in its application. Attorney David Domina told Reuters on Friday that TransCanada’s approval was for a “route not supported by an application. ... So we appealed.” The appeal was filed on Dec. 29. The proposed pipeline has been a lightning rod of controversy for nearly a decade, pitting environmentalists worried about spills and global warming against business advocates who say the project will lower fuel prices, shore up national security and bring jobs. The Trump administration granted TransCanada a federal permit for the pipeline in March, reversing a decision by former President Barack Obama to reject the project on environmental grounds. That left Nebraska - the only one of three states that had not approved a route for the line - as the final hurdle.

    Trump plan to expand oil and gas leasing in West draws, for the most part, a big yawn from industry    - Federal lease auctions have attracted far less excitement than anticipated from oil and gas producers, even in heavily drilled areas of Wyoming, North Dakota, Utah and Colorado. In other Western states, and in Alaska, producers greet most new auctions with yawns. In March, Trump issued an executive order to unshackle the energy industry from “regulatory burdens” and dispatched Interior Secretary Ryan Zinke to accelerate and expand the scope of federal oil and gas lease auctions. It was a major part of the president’s plan to re-establish “American energy dominance.” Overall, the administration has insisted that its efforts are successful: The Interior Department reported that auctions of federal drilling leases earned $316.2 million in revenue in 2017, about 61% higher than the $196.7 million that the government made from leasing in 2016. In a handful of oil-rich areas of the West, producers are eager to lease. A February lease auction attracted $129 million in sales for 183,155 acres, mostly in Wyoming, an average of $705 an acre. A September lease sale in New Mexico’s Permian Basin attracted nearly $131 million in sales from 61 parcels covering 15,331 acres, an average of about $8,545 an acre. But those leases are the exception. In early December, the Bureau of Land Management, a unit of the Interior Department, held a lease auction for 900 parcels and 10.25 million acres of the National Petroleum Reserve along Alaska’s North Slope. Just seven parcels covering nearly 80,000 acres received bids. The highest bid was $14.99 an acre, indicating meager interest. Another December auction in Wyoming offered 45 parcels for lease. Four parcels covering 2,978 acres attracted strong bids ranging from $301 to $3,271 an acre. But 19 parcels covering almost 37,000 acres were bid at just $2 an acre, the minimum amount accepted by the government. Four other parcels covering over 4,000 acres attracted no bids at all.  

    US oilfield service firms dust off IPO plans as crude prices surge (Reuters) - U.S. oilfield service companies are gearing up for initial public offerings, according to regulatory filings and analysts, after several shelved equity sales last year during a weak period for oil prices. Oil is trading near its highest level since early 2015, fueling demand for service firms to bring new shale wells to production. Energy executives surveyed last month said they would increase drilling sharply at prices above $60 a barrel. Crude CLC1 recently traded at about $61.50 a barrel. Investors’ appetite for the shares will be tested soon. Liberty Oilfield Services, which provides hydraulic fracturing services to shale producers, last week filed to raise about $160 million by selling 10.7 million shares at about $15 a share. If its IPO performs well, it could open the gates for several other companies aiming to raise funds for new expansion or to buy rivals. Since August, the Van Eck Vectors Oil Services ETF (OIH.P) is up nearly 28 percent, behind the 32 percent gain in the SPDR S&P Oil and Gas Exploration and Production ETF (XOP.P). Denver, Colorado-based Liberty was one of four oilfield firms that shelved IPOs last year after producers trimmed spending budgets as crude dipped to $45 a barrel. Liberty did not respond to requests for comment. Other service firms also have updated their filings, signaling they may try again. “We could see a quick ramp up (in IPOs) because there are so many in a good position to go quickly once market conditions improve,” said A.J. Ericksen, a partner with law firm Baker Botts who focuses on mergers and acquisitions and capital markets. His firm represents the underwriters in Liberty’s public offering. Underpinning the improving market for fracking services, there are some 7,300 drilled-but-uncompleted wells across the United States as of November, the U.S. Energy Information Administration recently reported. Those are wells that have yet to be hydraulically fractured. BJ Services, FTS International and Nine Energy Service, all of which offer hydraulic fracturing of shale wells, last year filed registration statements with the U.S. Securities and Exchange Commission but did not proceed.

    Denver-based Liberty Oilfield Services pumping up for a big IPO - Liberty Oilfield Services plans to offer 10.7 million shares at between $14 to $16 a piece next week, according to a securities filing by the Denver-based company. Liberty Oilfield said it plans to price its shares on Thursday evening, with trading to start Friday on the New York Stock Exchange under the ticker LBRT. Depending on investor demand, the company expects to raise between $142.1 million to $161.3 million after expenses. Producers contract with the company for hydraulic fracturing fleets to complete drilled wells. The company started with one fleet in 2011 and had 19 at the end of last year.“The demand for our hydraulic fracturing services exceeds our current capacity, and we expect, based on discussions with customers, to deploy three additional standard fleets, as well as upgrade four existing standard fleets to high pressure fleets,” the company said in its filing.Proceeds from the offering will go to add the additional fleets, as well as to make asset acquisitions and repay debt. Assuming an offering price of $15 a share, investors in the IPO will control about 16.1 percent of class A common shares, with voting control of about 9.2 percent.

    Why Oil Is Up But Rig Count Is Not – - For U.S. shale drillers who have seen prices climb almost 50 percent in six months, it’s been largely a rig-less recovery, a conundrum for traders seeking to forecast the future. The reason: explorers are doing more with less, forcing traders to use a bigger toolbox of stats, metrics and gauges to track U.S. production that’s expected to top 10 million barrels a day as the year progresses. That includes everything from producer spending surveys to oilfield hiring reports, and even demand for the tiny grains of sand that prop open oil-bearing cracks. The combination of faster and faster horizontal drilling and more intense fracking has allowed production to explode even as the number of rigs drop. Up until about four years ago, it was safe enough to use the rig count to track activity because the industry was more reliant on single vertical wells. "You’ve got different levers to pull to get increasingly efficient," James Wicklund, an analyst at Credit Suisse in Dallas, said in a phone interview. "There is not one clear acknowledged reporting source for the metrics that we use. It makes it a little bit murkier." Brad Handler and other analysts at Jefferies cobbled together a chart of nine other metrics besides the rig count in a note to investors this month. For example, the number of frack stages in a well are expected to increase 14 percent this year to an average of 28.5, more than double what explorers were able to do in 2014. And the total amount of sand crammed into wells this year is expected to grow 20 percent to more than 100 million tons.Chesapeake Energy Corp. heralded in the arrival of the monster frack a little more than a year ago, declaring what it called "propageddon" on one gas well in Louisiana with more than 25,000 tons of sand pumped into it.After switching from the old standby rig count to closely watching the well count a few years back, the latest shift about a year and a half ago is to track how long the wells are drilled sideways under ground and how many frack stages are in each of those wells, Wicklund said.At 7,500 feet, the average lateral length of a well is 50 percent longer compared to three years ago. And a rig can drill 25 wells a year, compared to 15 just two years ago, he said.

    Colo. grappling with response to suburban pipeline explosion --Colorado regulators appeared no closer to resolving conflicts about the state's proposed pipeline safety regulations yesterday, after two days of testimony.The Colorado Oil and Gas Conservation Commission wrapped up its hearing yesterday without taking a final vote on the rules, which Gov. John Hickenlooper (D) ordered last year in response to a pipeline-related explosion that destroyed a home.The rules would require more safety tests and reporting for flow lines, which are low-pressure lines that connect oil or gas wells with tanks and other equipment. Local governments and environmental groups have argued for tougher requirements, including a publicly available map of all the flow lines in the state (Energywire, Jan. 5).Industry groups, though, objected to the idea of mapping the lines, saying it could create the potential for vandalism, though that's rarely happened. Turning the information over to local governments could create problems, too, a pipeline operator said.The industry also objected to some of the staff proposals, which were negotiated over several months, such as a requirement that companies test the shut-off valves on their pipelines. A requirement for a "root cause analysis" of serious oil-and-gas-related accidents could force companies to turn over information protected by attorney-client privilege, since companies sometimes use attorneys for those investigations, a producer said.The nine-member commission didn't indicate how it would resolve those concerns, but the comments seemed to leave the commission staff and some of the individual commissioners nonplussed. "I feel like we're in a semantic spin cycle here," commission Director Matt Lepore said in response to the testimony about root-cause analyses. The COGCC has ordered two companies to produce those reports in the last few months, without running into legal issues, Lepore said.

    Five Spills, Six Months in Operation: Dakota Access Track Record Highlights Unavoidable Reality — Pipelines Leak - Representatives from Energy Transfer Partners, the company behind the controversial Dakota Access pipeline, traveled to Cambridge, Iowa, in October to present a series of $20,000 checks to emergency management departments in six counties, an acknowledgement of the months of anti-pipeline protests that had taxed local agencies during construction.  Less than a month later, in Cambridge, the Iowa section of the Dakota Access pipeline would experience its first spill.  On November 14, “excessive vibration” caused 21 gallons of crude to leak out of a crack in a weld connection at one of the pump stations, which are situated along pipelines to keep the product moving and monitor its flow. Since the leak was contained at the site, it went unreported to the Iowa Department of Natural Resources, although it did make it into a federal pipeline monitoring database. The Dakota Access pipeline leaked at least five times in 2017. The biggest was a 168-gallon leak near DAPL’s endpoint in Patoka, Illinois, on April 23. According to federal regulators, no wildlife was impacted, although soil was contaminated, requiring remediation. DAPL went into operation on June 1, along with its under-the-radar sister project, the Energy Transfer Crude Oil pipeline, a natural gas pipeline converted to carry crude. Together, the two make up the Bakken pipeline system. ETCO leaked at least three times in 2017. Most of the Bakken system leaks were considered minor by state and federal monitors. According to regulators, water was not impacted in any of the cases. The only spill considered “significant” by the federal Pipeline and Hazardous Materials Safety Administration, or PHMSA, was a 4,998-gallon leak on the ETCO pipeline in Dyersburg, Tennessee, on June 19. Tennessee Department of Environment and Conservation spokesperson Kim Schofinski told The Intercept that reporting the spill to the agency was not required because it was contained within the pumping station where it occurred. The series of spills in the pipelines’ first months of operation underlines a fact that regulators and industry insiders know well: Pipelines leak.

     Could good times be coming soon for a resurgent Bakken? -  During the oil market’s downturn from mid-2014 through 2016, the Bakken Shale, primarily located in North Dakota, was at the forefront of the collapse. The Bakken rig count dropped from a high of 219 to a low of 24 as production fell by 300 Mb/d, or 24%. For many, it was time to write off the Bakken as a one-hit wonder. But as drilling productivity increased and prices rebounded, so did production. Crude oil output is again above 1.1 MMb/d and the rig count has doubled from its low point. Today, we begin a blog series on recent developments in Bakken production, well productivity and market pricing, and discuss RBN’s latest production forecast for the play. As producers in the Bakken reduced their capital expenditures in 2015-16, the Bakken’s oil rig count dropped from the low 200s to a low of 24 (orange line and right axis in Figure 1) in June 2016, with most of the decline occurring in 2015.  Shortly thereafter, production fell too, dropping from 1.26 MMb/d at the end of 2014 to below 1 MMb/d by the summer of 2016, bottoming out at just under 960 Mb/d in December 2016 (see What Goes Up). Since then, crude oil prices have recovered to well above $55/bbl and we’ve seen the rig count steadily rise, averaging almost 50 rigs in the latter half of 2017. Bakken production climbed back over the 1 MMb/d mark in February 2017 and rose another 100 Mb/d or so over the next 10 months — putting the play’s output close to its peak level three-plus years ago.

    900-mile natural gas liquids pipeline proposed for Bakken -  Oneok recently announced plans for a 900-mile natural gas liquids pipeline that will accommodate increasing North Dakota production and play a role in reducing natural gas flaring. The proposed Elk Creek Pipeline will have the capacity to transport up to 240,000 barrels per day of natural gas liquids from a terminal near Sidney, Mont., to Bushton, Kan. The pipeline will run adjacent to Oneok’s existing Bakken NGL and Overland Pass pipelines, which are operating at full capacity.Terry Spencer, Oneok president and CEO, said in a statement that a new pipeline is “critical to meeting the needs of producers who are increasing production and are required to meet natural gas capture targets in the Williston Basin.” The $1.2 billion Elk Creek Pipeline will not cross North Dakota but will connect to existing pipelines in northwest North Dakota. It’s expected to be complete by the end of 2019, but still needs regulatory approvals from federal, state and local agencies. Justin Kringstad, director of the North Dakota Pipeline Authority, said additional pipelines are needed to transport growing volumes of natural gas liquids, such as ethane, propane and butane. Kringstad estimates that North Dakota produces more than 400,000 barrels of natural gas liquids per day. But due to insufficient pipeline capacity, about 40,000 to 60,000 barrels a day are transported by rail, he estimates. Under Kringstad’s forecast, North Dakota natural gas liquids production is projected to more than double by the 2030s to between 800,000 and 1 million barrels per day. Oneok said the Elk Creek Pipeline could be expanded to transport 400,000 barrels per day with additional pump facilities. The pipeline, which will cross Montana, Wyoming, Colorado and Kansas, also will transport natural gas liquids from the Rocky Mountain region. The Elk Creek Pipeline would transport Y-grade natural gas liquids to existing Oneok facilities in Kansas. That means the natural gas liquids are mixed together for transportation and later separated into products, such as ethane and propane. 

     Radioactive Bakken waste buried in Montana, while ND has no licensed dump sites – — Montana's capacity for radioactive oilfield waste could be nearing expansion soon as regulators finalize rules for disposal. State officials are reviewing the license application for the Yellowstone Disposal landfill. It's a project backed by a North Dakota-based company, which plans to build on 2,600 acres of land 4.5 miles southeast of Sidney. Within that site would be a 55-acre special waste unit with a capacity of more than 5 million cubic yards. That area would be licensed to handle material with radioactivity levels up to 50 picocuries per gram, or pCi/g. Most of the waste comes to Montana from North Dakota, where the state's health department created rules specific to this kind of waste after scores of illegal dumps were found around the Bakken region. While North Dakota enacted those rules in 2016, no landfills have been licensed to operate under them. Companies have looked across the border to Montana, which still has no universal set of rules for that type of waste. Officials have been working on a draft set and may have a final version by the fall. Montana has licensed landfills on a case-by-case basis. If approved, the Yellowstone Disposal landfill would be the fourth facility licensed to handle that material. The state received praise for the move toward regulation, but eastern Montana residents have wondered why their area is the destination for radioactive oilfield waste. "Until Montana develops standards and protections, we're going to continue to be North Dakota's dumping ground," said

    Upside Down - A Drill Down Report On Big Changes Coming To The Condensate Market --Through the first half of the 2010s, U.S. production of field condensate — the ultra-light liquid hydrocarbon that bridges the gap between superlight crude oil and heavier natural gas liquids like natural gasoline — more than doubled, peaking at about 640 Mb/d in early 2015. As condensate production ramped up in the Eagle Ford and other plays, conde prices were discounted to move the product, markets were developed to absorb the barrels, and infrastructure was built to move the conde to those markets. Then, in a dramatic turnaround that continued into 2017, condensate production fell by more than one-third, the new markets — splitters and exports — were starved for product, and conde prices flipped from discounts to premiums. But the market is shifting yet again. Conde production is once more on the rise, with the Eagle Ford rebounding and production rising in the star of the show in crude oil markets: the Permian. Today, we discuss highlights from RBN’s new Drill Down Report on the condensate market roller-coaster. In the half-century before the Shale Revolution, field condensates were a proverbial backwater of energy commodity markets, ignored and forgotten except by accountants who had to tabulate the few barrels produced. Most of those conde barrels never made it beyond a few miles from the lease — they were blended off into crude oil near the wellhead or at a nearby terminal. But with the Shale Revolution came expanded U.S. production of light and superlight crude (with API gravities of 40 to 50 degrees and 50 to 55 degrees, respectively) and their ultra-light cousin, field condensate, which has an API gravity of 55 to 70 or more. The Eagle Ford played (and continues to play) an outsized role; the South Texas production region for several years now has been churning out more than half of total U.S. output of field condensate.

    Trump’s plan to open California coastal waters to new oil and gas drilling probably won’t go very far -  There are two things working against the Trump administration’s proposal to open up California coastal waters to new oil and gas drilling: state regulators and simple economics. California has powerful legal tools to head off new offshore development, and the price of oil offers little incentive to the energy industry to pursue expensive drilling projects next to a hostile state. “This just seems like grandstanding” by the Trump administration.  The Interior Department on Thursday released plans to open vast areas off the Atlantic and Pacific coasts to new oil and gas exploration and drilling through a five-year leasing program that would begin in 2019.  But there are myriad obstacles opponents can throw in front of the proposal, not to mention questions about whether the oil industry has much of an interest in California’s offshore reserves at a time when domestic oil production is at its highest level in decades. Under the plan, the federal government would offer 47 leases in U.S. waters on the outer continental shelf, including two each off the Northern, Central and Southern California coasts and one off Washington and Oregon. The governors of all three states issued a joint statement Thursday saying they would do whatever it takes to block new leasing off their shores, which include some of the nation’s most pristine coastlines.  In California, the state coastal commission also has the authority to review activities in federal waters to ensure they are consistent with the state’s coastal management plans.

    Trump’s offshore drilling plans rattle coastal communities across Alaska --  For years, the debate over offshore drilling in Alaska has focused on the Arctic. But this week, the Trump administration proposed opening almost all Alaska waters to oil and gas leasing, from Southeast to the Bering Strait to the Canadian border. That includes areas that have never seen drilling, and it’s raising concerns in Alaska’s coastal communities. Linda Behnken heads up the Alaska Longline Fishermen’s Association in Sitka. Asked for her reaction when she first heard the Trump administration’s proposal, Behnken took a deep breath. “I probably better not say that on tape,” she said. And that pretty much sums up the response in many of Alaska’s coastal communities, where residents worry that oil and gas development could threaten commercial fisheries and subsistence resources. Behnken said she’s concerned that an oil spill anywhere in the Gulf of Alaska or Bering Sea could affect fish stocks all over the state. “It’s really deeply disturbing to see a willingness to place at risk…the renewable resources that are the cornerstone of the economy and people’s way of life,” she said. That’s a feeling echoed by Mark Vinsel, who runs the United Fishermen of Alaska, representing the state’s commercial fisheries. Vinsel said he’s glad the Trump administration excluded the North Aleutian Basin planning area, which borders Bristol Bay. But, he said, fishermen haven’t forgotten the 1989 Exxon Valdez oil spill. He said one major lesson from the spill was the need for robust community oversight, and if more waters are opened up to oil and gas development, UFA would want local input modeled after the citizens’ advisory councils in Prince William Sound and Cook Inlet.

    US oil output to surpass record earlier than expected: EIA (Reuters) - U.S. crude oil production is expected to surpass 10 million barrels per day (bpd) next month, en route to an all-time record months ahead of previous forecasts, the U.S. Energy Information Administration said Tuesday. Production was expected to rise to an average 10.04 million bpd during the first quarter of this year, the agency said in a monthly report. The 10 million-bpd milestone previously had not been expected to be reached until the fourth quarter. That would match the all-time monthly record of 10.04 million bpd set in Nov. 1970; oil production declined after that as the United States increasingly relied on imported crude. That has changed in the last several years due to the shale revolution, but these projections surpass earlier expectations. The monthly average for February is expected to surpass 10 million bpd, said Tim Hess, the lead analyst for the report. That will be the first time production has reached that level since 1970. Only Russia and Saudi Arabia have produced more crude, hitting peak output of over 11 million bpd and about 10.7 million bpd respectively in recent years. The EIA revised its production growth forecast for 2018 sharply higher to 970,000 bpd from 780,000 bpd in its previous outlook. U.S. output will continue to rise in 2019, surpassing 11 million bpd by the end of that year, the EIA report said. The average production in 2019 will rise 580,000 bpd to 10.85 million bpd, the agency said in its first outlook for next year. “The major risk factors would be more global in nature, rather than anything specific domestically,” EIA acting administrator John Conti said on a conference call. “Domestically, things are lining up in terms of moderate prices and increased opportunity for production.” Much of the production growth will be concentrated in the Permian Basin, the largest U.S. oilfield stretching across Texas and New Mexico, said John Staub, the EIA director of the office of petroleum, natural gas and biofuels analysis. As a result, pipeline capacity constraints should not be a major limiting factor in starting new production, he said. Despite the rising production, oil prices edged higher on Tuesday, with U.S. crude touching its highest since December 2014, closing at $62.96 a barrel. 

     Tax overhaul could hold unexpected downsides for oil companies - The cuts to corporate tax rates that headlined the recent tax overhaul won praise from oil majors, but other features of the new system could prove less favorable to the sector.A new provision that reduces the interest payments that companies can deduct from 100 percent of taxable income to 30 percent could "hit a fair number of those highly leveraged companies," according to Steve Marcus, a tax partner at Baker Botts LLP.The cut to corporate rates also carries a downside for companies with "tax assets," or deductions on future earnings stemming from past losses. And companies will only be able to offset 80 percent of their annual earnings, down from 100 percent before the tax law took effect.Other changes to the taxation of costs associated with exploration could favor shale drillers over conventional oil and gas producers.Such provisions have injected uncertainty into the fourth-quarter earnings reports slated for later this month. "We're going to have to see what companies say in their earnings call to get a sense of how they see this new law," said Bloomberg Intelligence analyst Andrew Silverman. "In some cases, it may be surprising"

     Oil lobby wants pipelines in Trump’s infrastructure push | TheHill: The oil industry wants President Trump and Congress's infrastructure plan to include policies boosting oil and natural gas pipelines and making them easier to build. American Petroleum Institute (API) head Jack Gerard told policymakers and reporters on Tuesday that the group is making a push to jump on the bipartisan excitement for a promised infrastructure bill. The oil lobby group, which represents numerous parts of the industry, has long been looking for regulatory and permitting changes to simplify and speed up pipeline decisions.“We’re not looking for a government program, we’re not looking for funding in that way,” Gerard said after delivering his annual “State of American Energy” speech, which he uses to set the group’s annual agenda. “We’re merely looking for certainty and predictability in things like permitting processes and the ability to get the requisite permit necessary to build infrastructure.” The oil sector also relies on railroads and maritime transportation to move products, but pipelines are usually the cheapest and safest option when they’re available. The API’s push comes after years of high-profile protests of pipelines by environmentalists, fueled by major projects like the Keystone XL pipeline and the Dakota Access pipeline. Combined with increased local opposition to pipelines, the oil industry is having more difficulty than it has before in developing its infrastructure. API wants reforms at the Federal Energy Regulatory Commission and elsewhere to reduce opportunities to block pipelines and to streamline the permitting process, among other changes. 

    Oil lobby aims to defend NAFTA in 2018 - Retaining trade protections through the North American Free Trade Agreement and enhancing regulatory "certainty and predictability" top the American Petroleum Institute's wish list for 2018 as the oil and gas industry sets priorities for a second year of Republican control in Washington.Speaking at an annual "state of the industry" event, API President and CEO Jack Gerard said yesterday that North American energy companies have prospered under the liberal trade structure provided by NAFTA, and holding onto that framework is the lobbying group's top policy goal."NAFTA makes energy more affordable and improves opportunities for U.S. companies in Canada and Mexico," Gerard told an audience of industry executives. "If we can modernize NAFTA, we should, and if not, we should leave it alone."Gerard pointed to an integrated supply chain for petroleum products as an example of NAFTA's effectiveness. Oil might be produced in Mexico, shipped to Houston for refining and then shipped back south of the border to Mexican markets. Oil sands crude from Canada is similarly shipped to the Lower 48 for refining in Gulf Coast facilities before sale. Ensuring that those cross-border flows continue without new regulation is important to the North American energy marketplace, he said.  The policy worry comes as the White House continues trade talks on the future of the North American pact. Gerard said API has engaged extensively with Congress and the administration on the issue, with a message that NAFTA has served the energy industry well and should not be abandoned (Energywire, Nov. 17, 2017). The existing NAFTA, established in 1992, makes little mention of energy, in part because at the time Mexico's energy industry was under government control and not open to free trade. Reforms of the past few years have led to an opening of the industry to private players throughout the oil and gas value chain, and a surge of new investment by U.S. energy companies in projects south of the border. Gerard suggested that development of new oil and gas leases and other planned projects could stall out without a free-trade agreement in place.

    Rail shipments of Canadian oil to US seen rising over 60 percent - Canadian crude shipments to the United States by rail could rise more than 60 percent this year on demand by Gulf Coast refiners for the heavy crudes and the wide differential between Canadian grades and the U.S. benchmark. The rail shipments could reach as much as 350,000 barrels per day (bpd) by year end and average some 400,000 bpd in 2019, estimated analysts at Tudor, Pickering, Holt & Co. Last year, the shipments averaged 130,000 bpd, according to U.S. government data. Canadian crudes have been replacing heavy oil from Venezuela and Mexico at the Gulf Coast, due to production declines in both countries. "Canadian barrels are a great fit for Gulf Coast refiners right now. It's just a matter of getting those barrels down here," said a Gulf Coast trader. Western Canada Select for February delivery traded Thursday at $25.05 per barrel below West Texas Intermediate, the widest since December 2014. Including transportation costs of between $11 and $14 a barrel to ship the crude by rail to the Gulf Coast, it is affordable to more refiners, said analysts and traders. "Based on where the differentials are today, as an oil producer, you're incentivized to ship product by rail to the Gulf Coast," said Matt Murphy, a Tudor Pickering researcher. The current differential is driven in part by increased supplies. Canadian crude oil production averaged 4.2 million barrels per day in 2017, according to National Energy Board estimates, up from 3.9 million bpd in 2016. Production is expected to rise further this year as new projects like Suncor Energy's 190,000 bpd Fort Hills oil sands plant expand operations. However, the increase in shipments will be capped by railroad operators' willingness to accept spot deliveries. Companies such as Canadian National Railway, have insisted on long-term crude-by-rail commitments before providing more rail capacity.

    Ineos 'misled' public over fracking in Sherwood Forest -- One of Britain’s top fracking firms has been accused of misleading the public over its intent to explore for shale gas in a protected area of ancient woodland in Sherwood Forest.Ineos, a UK-based petrochemicals firm, has said publicly it would exclude sensitive areas of the legendary home of Robin Hood from its seismic surveys.However, documents released under freedom of information rules reveal the company privately later sought and won permission from authorities to survey those areas, which involves laying small explosive charges underground. Guy Shrubsole, a campaigner at Friends of the Earth, the group that obtained the documents, said: “It’s clear that Ineos will stop at nothing to explore for shale gas, even in Sherwood Forest, home of Robin Hood and one of our most cherished woodlands. “They have misled everyone, promising publicly to spare the most ecologically sensitive parts of Sherwood Forest from their intrusive seismic surveys – while negotiating behind closed doors to press ahead with them.” Ineos is one of the four main players exploring for oil and gas trapped below ground in shale rock across the country. The firm has taken a robust and sometimes controversial approach to exploration, winning and defending an injunction against anti-fracking campaigners, bypassing tardy councils and appealing to authorities to force the National Trust to allow it access to their land.In planning documents submitted to Nottinghamshire county council in May, Ineos said it would not undertake a seismic survey in a part of the forest known as a site of special scientific interest (SSSI), one of 4,000 of the most important nature sites in England. But just over a month later, the company sought a licence agreement with the Forestry Commission that included maps showing parts of the Birklands SSSI would be within its survey areas.

    Petrochemicals giant Ineos unveils legal challenge to Scottish fracking ban - A petrochemicals giant has announced it is taking SNP ministers to court in the hope of overturning their “unlawful” fracking ban in Scotland.   Ineos, the operators of the huge Grangemouth petrochemical plant, which is responsible for four per cent of Scotland’s GDP, said it has lodged a petition for judicial review at the Court of Session.The firm and business partner Reach argued that Scotland's highest civil court should find there was a "failure to adhere to proper statutory process and a misuse of ministerial power".Tom Pickering, its operations director, said the company had “no option” but to initiate legal action after £50 million it had spent on acquiring two fracking licenses and planning permissions had been “rendered worthless” without the payment of any compensation.The SNP administration now faces a protracted legal fight and a potential outlay of millions of pounds of taxpayers’ money.The ban was announced in October following a two-year moratorium during which Scottish minsters commissioned a series of reports about the controversial shale gas extraction technique.Although energy policy is reserved to Westminster, their control over the planning system means they can block any application to frack.Paul Wheelhouse, the SNP Energy Minister, sought to justify the ban by arguing the move had overwhelming public support, fracking would add only 0.1 per cent to Scotland’s GDP and it would be concentrated around densely populated areas in central Scotland. But Ineos warned Scotland’s communities will miss out a billion pounds of investment and 3,100 jobs over the next two decades as the oil industry declines, with England reaping the benefits.

    Europe to Resume Role as Global Gas Sink - Europe will resume its role as a global gas sink from 2018-2020, absorbing surplus volumes of global LNG as supply growth outstrips demand.That is the view of oil and gas analysts at BMI Research, who stated in a recent report that the region’s ‘large and liquidly traded’ gas hubs, strong pipeline interconnectivity, extensive regasification capacity, substantial volumes of flexible supply and price responsive demand will enable Europe to adopt this position.BMI analysts highlighted that Europe's role in rebalancing the LNG market was previously established from 2009-2011, when it absorbed volumes that had been backed out of the US market by the rise in shale and released them out to Asia following the Fukushima nuclear incident.For 2018, BMI analysts forecast a net LNG import growth of 9.3 billion cubic metres for the EU28 + Turkey, compared to 8.5bcm in 2017. Growth last year was not a result of a global LNG surplus, the analysts said.“The growth in 2017 was largely the result of higher gas demand in Europe, due to a range of factors including a strong pickup in economic activity, rising coal prices, closure of the Rough storage facility in the UK, nuclear outages in France and low hydropower generation in Southern Europe,” BMI analysts stated in a report sent to Rigzone.“It was not the result of a global LNG surplus, with the LNG market remaining tight, driven by a surge in emerging market demand (largely China) and delays in the start-up and commissioning of various liquefaction plants,” the analysts added.

    Europe Becomes Victim Of Russia's Newest Oil Strategy -- Higher shipments of Russian crude oil to China may saddle European importers with a fatter bill, an industry consultancy warned at the end of last year, noting the latest stage of Russia’s Eastern pivot: the launch of the expanded East Siberia-Pacific Ocean pipeline that would lift Urals crude supply to China twofold, to 30 million tons annually. FGE said in a note quoted by Bloomberg that Russia will start moving more Urals eastward right after the launch of the pipeline extension, at a rate of 160,000 bpd. The overall increase of Russian crude shipments to China, according to the consultancy, could be around 200,000 bpd. This means less oil for Europe, which is Russia’s number-one oil client. This only highlights the significance of Moscow’s Asian pivot amid lingering European sanctions following the 2014 annexation of Crimea and Russia’s involvement in separatist conflicts in the Ukraine. In 2016, Russia exported an average 3.7 million barrels daily to European countries, compared with less than a million bpd to China, according to figures from the Energy Information Administration (EIA). In percentage figures, Europe accounted for 70 percent of Russia’s 2016 crude oil exports, while the share of China was just 18 percent. Yet this is changing fast, as this chart from the EIA shows: The rise in Chinese exports has been quite steep since 2014: as of November last year, Russia shipped 1.3 million barrels of oil daily to China. All the latest signs point to further growth. However, exactly how much this would hurt European buyers is unclear.  The Urals is currently trading at a discount of about $4 to Brent crude but WTI’s discount to the international benchmark is $6 a barrel. In other words, Russia’s diverting of crude oil from Europe to China could be an opportunity for U.S. exporters as long as they can keep their transport costs low enough. Europe will probably be grateful for the diversification. Over the long term, things are even more uncertain.  Clearly, Russia has prioritized its relationship with China: In addition to the ESPO expansion, Gazprom is on track to complete the Power of Siberia gas pipeline by 2019. The 2,500-km mammoth of a pipeline will pump 1.3 trillion cu ft of gas to China annually.

    Analysis: Venezuela's oil production plummets amid chaos and industry defections - Staggering debt, crumbling equipment and infrastructure, and mass worker resignations, have set back Venezuela's oil industry decades, with experts saying they see scant prospects of any turnaround. Crude output of 1.70 million b/d lowest since strike in 2003: Platts survey Lack of safety protocols could cause 'catastrophic' refinery accident: analyst Traders say PDVSA's moves in the market signal company distress Venezuelan crude output plummeted in December to 1.70 million b/d, according to the latest S&P Global Platts OPEC survey released Monday. The output level represented a decline of 100,000 b/d from November and a low not seen for more than 15 years, when a major strike from December 2002 to February 2003 hobbled production. Not counting strike-affected months, Venezuela's production was last this low in August 1989, more than 28 years ago. Sources in the country say new PDVSA President Manuel Quevedo, a brigadier general in the National Guard who was also named the country's oil minister in November, sacked several high-level company officials in a so-called corruption purge at the end of the year and these people have yet to be replaced. PDVSA is also facing internal protests and widespread resignations of refinery personnel who fear a serious accident, since security protocols are not being followed, added the sources, who spoke on condition of anonymity. Several market watchers have put Venezuela top of their geopolitical risk lists, with the economic crisis and PDVSA woes seen likely to continue, if not accelerate, amid threats of further US sanctions. "The Venezuelan economy could collapse at any moment," said Torbjorn Kjus, oil market analyst with Norway's DNB Bank. "We could envisage scenarios spanning from outright civil war to a state coup, to a general strike or even just one more year of strangulating slow death for the economy. Neither of these outcomes bodes well for Venezuelan oil production."

    Venezuela Oil Production Plummets To 28 Year Low Amid Chaos, Corruption - Staggering debt, crumbling equipment and infrastructure, and mass worker resignations, have set back Venezuela's oil industry decades, with experts saying they see scant prospects of any turnaround. Venezuelan crude output plummeted in December to 1.70 million b/d, according to the latest S&P Global Platts OPEC survey released Monday. The output level represented a decline of 100,000 b/d from November and a low not seen for more than 15 years, when a major strike from December 2002 to February 2003 hobbled production. Not counting strike-affected months, Venezuela's production was last this low in August 1989, more than 28 years ago. Sources in the country say new PDVSA President Manuel Quevedo, a brigadier general in the National Guard who was also named the country's oil minister in November, sacked several high-level company officials in a so-called corruption purge at the end of the year and these people have yet to be replaced. PDVSA is also facing internal protests and widespread resignations of refinery personnel who fear a serious accident, since security protocols are not being followed, added the sources, who spoke on condition of anonymity. Several market watchers have put Venezuela top of their geopolitical risk lists, with the economic crisis and PDVSA woes seen likely to continue, if not accelerate, amid threats of further US sanctions.   Service company Baker Hughes, which tracks rig counts internationally, reported this week that Venezuela had 50 rigs drilling in December, up from 39 in October, which had been the fewest since 2003 during the worker strike. Einstein Millan, an independent Venezuela-based analyst who formerly worked for PDVSA, estimated that the company would need 100 to 110 active rigs to reverse its production decline, let alone achieve a presidential directive of increasing oil output by 1 million b/d. The rig pullback and accelerating field decline rates will cause Venezuelan oil production to fall by another 300,000 to 400,000 b/d in 2018, analysts with Washington-based Rapidan Energy forecast. The scarcity of rigs is only part of Venezuela's problem. There is evidence of advanced stages of corrosion and deterioration in much of the country's operational infrastructure, including pipelines, gas compression plants, crude upgraders, storage facilities and refineries.

    3 Million Barrels Per Day Could Go Offline In 2018 -- Venezuela’s oil production has been falling for years, but 2018 could mark a new, darker chapter for the South American nation.Late last year, Venezuela’s government defaulted on millions of dollars’ worth of debt, with larger and more significant payments maturing this year. The ability to service billions in debt payments this year is almost certainly out of the question, although the size of the default this year remains to be seen.The cash crunch that Venezuela has suffered through has worsened substantially over time, and the country’s oil sector has paid the price. Venezuela produced over 3.5 million barrels per day (mb/d) in the late 1990s, but output has been falling for much of the past two decades, although often at a gradual pace. The declines really started to accelerate in the past two years. But 2018 could be even worse. A year ago, Venezuela produced between 2.0 and 2.2 mb/d, depending on whose data one uses. By the end of 2017, production really began to plunge, dipping to just 1.7 mb/d in December, according to S&P Global Platts. That is the lowest figure since the 1980s, aside from a brief period in 2003 when a strike knocked output offline.Worryingly for Venezuela, the monthly declines are accelerating. A year ago, monthly declines typically ran somewhere between 10,000 bpd and 30,000 bpd. By the third quarter, those monthly dips ballooned to around 40,000 bpd, month-on-month. But Between November and December, output fell by massive 100,000 bpd, according to S&P Global Platts. Argus Media says the losses are even larger than that, with production falling by 151,000 bpd in December to 1.686 mb/d. The scary part is that the situation is probably only going to grow worse. Venezuelan President Nicolas Maduro removed the head of PDVSA in November, putting a general in charge at the state-owned oil company. The move was probably made to placate the military, but it also jeopardized the operations of the oil company. S&P Global Platts says that the general in charge, Manuel Quevedo, purged the company of officials at the end of the year. The move, ostensibly to root out corruption, will likely hollow out some of the technical talent that helps keep oil operations running, such as they are.

    ExxonMobil sees sixth 'home run' oil discovery in Guyana - ExxonMobil's sixth "home run" oil find on the Stabroek block offshore Guyana in less than three years may not only push estimated recoverable reserves notably higher, but could further whittle down breakeven costs, analysts said Friday. The Ranger exploration well, announced by ExxonMobil Friday, also opens a new part of the frontier Guyana play, located about 130 miles offshore the South American country, where 3.2 billion boe of recoverable oil equivalent has been found in ExxonMobil's five prior discoveries -- Liza, Payara, Liza Deep, Snoek and Turbot. Ranger will add to the total, Hess Corp, a 30% partner in the Stabroek block, said separately, without providing an estimate. ExxonMobil holds 45% of Stabroek, and CNOOC Nexen the remaining 25%. ExxonMobil and Hess could not be reached for comment, but analysts agree that Stabroek appears to hold much more potential. "What is significant is [the] size" of the Stabroek block, which is 6.6 million acres, or 26,800 square kilometers, PIRA Energy analyst Rene Santos said. "This is equivalent to over 1,000 Gulf of Mexico Outer Continental Shelf blocks."

    OPEC's Oil Cuts Claim a Victim as Supertanker Earnings Crash -- OPEC’s strategy to end a worldwide crude glut is causing havoc for a vital link in the oil industry’s supply chain: the fleet of supertankers that shuttle fuel between continents.The ships’ average earnings plunged last year by more than half to levels not seen since 2009 and far below what shipping analysts had been predicting. Now, the producer group’s extension of output cuts throughout 2018 is adding to the downturn.“These cuts reduced the number of cargoes from the Middle East to Asia significantly at a time when a large amount of newly-built vessels are being delivered,” Olivier Jakob, managing director at Petromatrix GmbH in Zug, Switzerland, said in a phone interview. Oil supertankers, known in the industry as very large crude carriers, or VLCCs, can measure a quarter of a mile in length and haul about 2 million barrels of crude. Since the beginning of 2017, the Organization of Petroleum Exporting Countries and its allies have sought to reduce oil production by almost 1.8 million barrels a day, curbing exports and business for tankers on key trade routes. The group in June plans to revisit the cuts, which currently run through the end of the year.Crude exports from OPEC’s Persian Gulf members last month dropped below 18 million barrels a day for the first time since August, tanker-tracking data compiled by Bloomberg show. In particular, observed shipments declined to China and Japan from Saudi Arabia, Iran and the United Arab Emirates.Meanwhile, the global supertanker fleet is expected to expand by 4 percent this year, after growing 5.3 percent last year and 7.4 percent in 2016, Clarkson Research Services Ltd. estimates. Shipping rates have tumbled in recent months, a time of year when they often strengthen.“If OPEC lifts the output cut in its revision in June, the rates would improve as more oil will be pumped to the market,” said Jakob. “But if it doesn’t then the rates would suffer the whole year.”

    India's 2017 oil demand growth posts lowest gain since 2013  (Reuters) - Indian oil consumption in 2017 grew at its slowest in four years, according to government statistics, hit by the government’s demonetisation move and a tax increase that knocked the gain in fuel use back to a modest 2.3 percent. The low growth also coincided with another year of weak, albeit improving, new vehicle sales. Last year’s oil demand was held back “by headwinds from demonetisation and a new goods and services tax,” U.S. bank Morgan Stanley said in a note to clients. India imports almost all of its oil, shipping in around 4.2 million barrels per day (bpd) of crude in 2017, according to trade flow data in Thomson Reuters Eikon. “Gasoline demand rose 7.4 percent, or 41,000 barrels per day, down from 12 percent growth in 2016 as demand was affected by demonetisation at the start of the year,” the bank said. India in late 2016 pulled all 500- and 1,000-rupee notes out of circulation, crimping retail and wholesale markets. “The demonetization exercise hit consumption, particularly in the first half of 2017. We are likely to see better growth this year,” said Sukrit Vijayakar, director at Indian energy consultancy Trifecta. India also saw some structural demand changes that affected the use of refined oil products. A government push for household to use more liquefied petroleum gas (LPG) has India challenging China as the world’s top LPG importer. This has come at the cost of a straight 15-month decline in jet fuel and kerosene demand in India, Morgan Stanley said. Also, “naphtha demand ... was down 8 percent for 2017 as a whole, possibly driven by more LPG use in petrochemicals,” it said. 

    China gas heating crisis leaves fertilizer makers in the cold (Reuters) - China’s campaign to heat millions of homes this winter by natural gas has left fertilizer producers short of supplies and profits, an industry association said, with urea and ammonia plants halving their operating rates from a year ago. The feedstock crunch has tightened supplies and boosted prices of fertilizer components in the world’s top agriculture market, and the trouble may carry into spring planting. Chinese fertilizer and chemical industry associations are considering an appeal to the government to lower natural gas prices once winter is past to allay the effects of the supply shortages, according to two officials from the groups. “We are losing lots of money every day,” said Huo, a manager at a major gas-based urea and compound fertilizer producer in northwestern China. Huo declined to give his full name or identify his company due to the sensitivity of the issue. His company had to halt production of urea and synthetic ammonia last month to help ensure supplies of natural gas to households in the north. “Prices of urea and synthetic ammonia went up significantly ... We need to buy these raw materials now,” Huo said. “We also still need to pay maintenance fees for the machines and salaries for the workers. The loss is severe.” Gas-based ammonia and urea plants usually limit operations during winter and ramp up when gas supplies are ample, but this winter, shortages have been worse than expected. “In previous years, we were also asked to limit usage but suspension was incremental ... This year, we were asked to basically shut all lines,” Huo said. Operating rates at gas-based nitrogen fertilizer plants have plunged to just 15 percent, down from about 31 percent at the same time last year, data from the China Nitrogen Fertilizer Industry Association (CNFIA) showed. Chinese urea prices as of Wednesday were at 2,044 yuan ($314.11) per tonne, the highest in four years. Synthetic ammonia has jumped 8 percent to 3,242 yuan a tonne in the past 30 days, according to Zhuochuang, a commodity consultancy based in Shandong province. “The supply gap in natural gas is hitting gas-based urea producers harder this year. Many plants may not reopen once they halt production,” 

    Oil tanker burning off China's coast at risk of exploding - An Iranian oil tanker that caught fire after colliding with a freighter off China's east coast is at risk of exploding and sinking, Chinese state media reported Monday as authorities from three countries struggled to find its 32 missing crew members and contain oil spewing from the blazing wreck. State broadcaster China Central Television, citing Chinese officials, said none of the 30 Iranians and two Bangladeshis who have been missing since the collision late Saturday have been found as of 8 a.m. Monday. Meanwhile, search and cleanup efforts have been hampered by fierce fires and poisonous gases that have completely consumed the tanker and surrounding waters, CCTV reported. The Panama-registered tanker Sanchi was sailing from Iran to South Korea when it collided late Saturday with the Hong Kong-registered freighter CF Crystal in the East China Sea, 257 kilometers (160 miles) off the coast of Shanghai, China's Ministry of Transport said. China, South Korea and the U.S. have sent ships and planes to search for Sanchi's crew, all of whom remain missing. The U.S. Navy, which sent a P-8A aircraft from Okinawa, Japan, to aid the search, said late Sunday that none of the missing crew had been found. All 21 crew members of the Crystal, which was carrying grain from the United States to China, were rescued, the Chinese ministry said. The Crystal's crew members were all Chinese nationals. It wasn't immediately clear what caused the collision. State-run China Central Television reported Sunday evening that the tanker was still floating and burning, and that oil was visible in the water. Photos distributed by the South Korean government showed the tanker on fire and shrouded in thick black smoke.

    Fears of Environmental Disaster After Oil Tanker Collision - The oil tanker that set fire after colliding with a freight ship off the east coast of China may explode and sink , possibly putting the environment and human health at risk, experts warned. The Iranian tanker was carrying 150,000 tons, or nearly 1 million barrels, of condensate crude oil when it collided with the CF Crystal on Saturday. Condensate is an ultra-light hydrocarbon that is highly toxic and much more explosive than regular crude oil. The size of the oil spill from the ship and the extent of the environmental harm are currently unknown but the disaster has the potential to be the worst since the ABT Summer spill off the Angolan coast in 1991, Reuters noted. Chinese authorities have since dispatched three cleaning boats to the site. Search and rescue are also underway for the 32 crew members that have gone missing after the collision in the mouth of the Yangtze River Delta. "First and foremost, Greenpeace hopes that the search and rescue operations of the Chinese coast guard go smoothly and the 32 missing crew will be found," said Greenpeace East Asia campaigner Rashid Kang. But the environmental organization is also concerned about the potential environmental damage that could be caused by the release of the oil on board.  "We are worried about the potential environmental impact that could be caused by leakage from the vessel that was holding almost 42 million gallons of crude oil. A clean up procedure is already underway and we will be monitoring its progress," Kang said.   As the BBC reported, condensate is both color- and odor-less, making it hard to detect, contain and clean up compared to heavy crudes.  Additionally, condensate is "not like crude, which does break down under natural microbial action; this stuff actually kills the microbes that break the oil down," Simon Boxall, of the National Oceanography Centre at the University of Southampton, explained to the news service.

    A giant oil tanker is on fire and could explode in the East China Sea -- Beating rains, fire and 10-foot waves are making it impossible for rescue crew to reach the Sanchi, an oil tanker on fire in the East China Sea.Three days after it collided with another ship off the coast of Shanghai, the tanker is still ablaze. At least 30 Iranians and two Bangladeshi citizens were aboard the tanker when the collision occurred. One body has been recovered but not publicly identified. Rescue crews said there were no signs of survivors.The South Korean Coast Guard told Reuters they had to stay three miles from the tanker.Since the crash, the Sanchi has been billowing thick plumes of black smoke into the air. Unless the fire can be brought under control, officials worry that the ship might explode and sink, releasing its 1 million barrels of oil into the water. The resulting spill would be about three times as big as the Exxon Valdez spill of 1989, one of the worst environmental disasters in history. It would double what the Prestige oil tanker released when it sank off the coast of Spain in 2002. That accident damaged beaches in France, Spain and Portugal, and led to the closure of one of Spain's richest fishing areas. The Sanchi was transporting oil from Iran to South Korea on Saturday when it ran into the CF Crystal, a Hong Kong-registered ship carrying grain from the United States. The crash occurred about 160 miles off the coast of Shanghai and near the mouth of the Yangtze River. The cause remains unknown. Experts are especially worried because the ship is carrying condensate, an ultralight version of crude oil. Condensate is highly toxic and even more combustible than regular crude oil. It also is nearly colorless and odorless, which makes it difficult to detect.

    East China Sea oil tanker burns for third day as winds, high waves lash rescuers (Reuters) - Strong winds, high waves and toxic gases are hindering dozens of rescue boats struggling to locate missing sailors from a stricken oil tanker in the East China Sea and to extinguish a fire that has burned for the past three days on the ship. The poor conditions, with rain and waves as high as 3 meters (10 feet), frustrated efforts to tame the fire and search for the 31 remaining tanker crew members, China’s Ministry of Transport said in a statement on Tuesday. The flames were forcing the South Korean Coast Guard’s search and rescue team to stay as far as 3 miles (4.8 km) away from the tanker, two South Korean officials told Reuters. The Chinese government said late on Tuesday it had not found a “large-scale” oil leak, and the ultra light oil, known as condensate, was burning off or evaporating so quickly it would leave little residue - less than 1 percent - within five hours of a spill. That reduces the chances of a crude-style oil slick. Still, condensate is highly volatile when exposed to air and water and concerns were growing the tanker could explode and sink while a flotilla of 13 search and rescue vessels comb a 900-square-nautical-mile (3,100 sq km) area for the crew. The tanker Sanchi, run by Iran’s top oil shipping operator, National Iranian Tanker Co, collided on Saturday with the CF Crystal (IMO:9497050), carrying grain from the United States, about 160 nautical miles (300 km) off China’s coast near Shanghai and the mouth of the Yangtze River Delta. The Sanchi was carrying 136,000 tonnes of condensate to South Korea, equivalent to about 1 million barrels and worth about $60 million. Chinese state media CCTV showed footage on Monday of boats dousing the flames with water as plumes of thick dark smoke continued to billow from the tanker. The size of the oil spill from the ship and the extent of the environmental harm were not known, but the disaster has the potential to be the worst since 1991 when 260,000 tonnes of oil leaked off the Angolan coast. Satellite imagery of the ship showed the blaze has weakened since the weekend, although the strong winds are dragging the tanker away from the Chinese coast, according to Greenpeace. Between Sunday and Monday, the floating inferno traveled some 50 kilometers (31 miles) south east, according to Rashid Kang, campaigner at Greenpeace East Asia. Another major concern is damage to the region’s rich fish reserves. The Zhoushan fishing ground where the crash occurred is known as one of the biggest in the East China Sea, particularly for mackerel and croaker, according to Greenpeace. 

    Iranian tanker accident: Impact on shipping and oil markets – Platts Commodities Spotlight podcast - An Iranian tanker carrying condensate bound for South Korea was involved in a fiery accident in the East China Sea. In this podcast, Shipping associate editor Wanda Wang and Oil analyst Alexander Yap examine the incident's impact on tanker, condensate and naphtha markets.

    Analysis: South Korea may seek prompt naphtha after condensate cargo collision - Ultra-light crude and naphtha sellers in Asia may focus on South Korea for potential sale of prompt oil supplies after a crude tanker carrying close to a million barrels of Iranian condensate caught fire over the weekend, failing to reach the country's petrochemical complex in Daesan as planned, market sources said Monday. An Iranian tanker, carrying around 960,000 barrels of South Pars condensate, caught fire late Saturday after a collision with another vessel off in the East China Sea. The cargo was purchased by South Korea's Hanwha Total Petrochemical and it was scheduled for delivery to Daesan on January 8-10. Hanwha Total said the company will implement its own contingency plan as it has sufficient ultra-light crude in storage units, but may need to look for some alternate feedstocks in the regional spot market for prompt delivery. "We have our contingency plan for backup. We have an alternative fleet and backup storage to replace it," a spokesperson at Hanwha Total told S&P Global Platts. "Still, we might need to look around [in the regional spot] markets to see if any prompt [condensate or naphtha] is available ... it's probably best to buy straight-run naphtha because regional condensate supply is very tight," a company trade source said. Industry sources said Hanwha Total may scramble to find naphtha for the typically busy winter season as plants typically run close to their maximum capacities during early first quarter.

    EIA's Short-Term Energy Outlook -- January 9, 2018 -- Oil markets:

    • EIA estimates that OPEC countries cut crude oil production output in 2017, but those cuts were offset by increased production in non-OPEC countries, especially the United States and Canada
    • EIA forecasts U.S. crude oil production to grow by 980,000 barrels per day in 2018, and we expect most of that growth to come from tight rock formations in Texas and North Dakota
    • led by U.S. production, particularly in the Permian Basin, and new oil sands projects in Canada, non-OPEC production is forecast to continue growing through the end of 2019. We expect to see growth near 2.0 million barrels per day in 2018 and 1.3 million barrels per day in 2019
    • EIA expects Brent crude oil prices to remain near $60 per barrel over the next two years
    • EIA estimates that U.S. crude oil production averaged 9.9 million barrels per day in December, which would be the fourth-highest level of monthly production on record, behind only the final three months of 1970
    • EIA raised its estimate for December production from its previous estimate as reported survey data on October production came in significantly higher than expected. The incoming data contributed to a reassessment of our previous views on well productivity, particularly in the Eagle Ford, Bakken, and Permian regions.
    • EIA forecasts U.S. motor gasoline consumption in 2018 to total about 9.3 million barrels per day, which would top the record for highest annual consumption set in 2016 [making America great again]
    • EIA is expecting a strong increase in the use of ethane in 2018 and 2019 as several new petrochemical facilities on the U.S. Gulf Coast that use ethane as a feedstock open
    • EIA forecasts LNG exports to increase to 3 billion cubic feet per day in 2018. The sharp increase from 2017’s level of 1.9 billion cubic feet per day is the result of infrastructure projects in several states, including Maryland, Georgia, and Texas, coming online in 2018
    • the forecast for natural gas exports to Mexico anticipates that growth will continue in the wake their reforms to the energy market and our increased capacity from new export infrastructure in the United States
    • the electric power sector reduced its use of natural gas in 2017. EIA attributes that shift to competitive coal prices and higher-than-average hydroelectric generation, which was part of increased competition from renewables as a whole
    • EIA is forecasting reduced U.S. coal production in 2018, retreating by 2% following a 6% increase in 2017. We expect to see the biggest production decreases in the Appalachia region, which is currently forecast to dip by 25 million short tons
    • EIA is forecasting 2019 to be the first year wind overtakes hydropower as the leading source of renewable electricity generation, due to a combination of hydro’s cyclical nature and the continued growth in wind capacity

     Hedge funds build record long position in heating oil and diesel: Kemp - Hedge funds have built record bullish positions in the middle distillates used as heating oil and diesel fuel – even as they become more cautious about the outlook for crude following a blistering rally.Hedge funds and other money managers had amassed a record net long position of 92 million barrels in U.S. heating oil futures and options and 137 million barrels in European gasoil by Jan. 2.Portfolio managers boosted their net long position in heating oil by almost 10 million barrels and their net long position in gasoil by 0.8 million tonnes or about 6 million barrels.There were few changes in other parts of the petroleum complex, according to position data published by regulators and exchanges ( Net long positions in gasoline rose by 2 million barrels to 81 million. .Growing bullishness towards mid-distillates masked a more wary approach to crude and other refined fuels in the week to Jan. 2.Portfolio managers have solid fundamental reasons to think middle distillate prices and refining margins will increase further in 2018.Distillate consumption, which is closely linked to industrial activity and freight movements, is growing rapidly as a result of the synchronised global economic expansion and faster growth in world trade.At the same time, refiners are struggling to make enough to meet demand. U.S. distillate stocks fell by 24 million barrels over the course of 2017, the largest annual drawdown for at least a decade.Exceptionally cold weather across the major population centres of the central and eastern United States since the start of the year has boosted consumption of heating oil and threatens to draw down stocks even further.The most intense cold is concentrated in parts of the northern and northeastern United States that rely most heavily on heating oil to warm homes and offices and as an auxiliary fuel for power stations.The winter heating season has not yet reached the half-way point in the United States and already heating demand has been much higher than in the two previous years, though still slightly below the long-term average. Even before the recent burst of cold weather, U.S. stocks of distillate fuel oil had fallen below the 10-year seasonal average.

    NYMEX Feb natural gas up 6.5 cents at $2.860/MMBtu as high storage draw seen - NYMEX February natural gas futures rose in overnight US trading as the recent cold supported expectations of a record storage draw. At 7:00 am EST (1200 GMT) the contract was 6.5 cents higher at $2.860/MMBtu. Freezing weather through and coming off the New Year's holiday weekend drove total demand to an all-time high estimated at 150.7 Bcf on January 1, surpassing the previous single-day record set in 2014, the US Energy Information Administration said in its latest Natural Gas Weekly Update. The National Weather Service's six-to-10-day forecast shows a large swath of below-average temperatures across most of the Midwest and south-central US flanked by bands of average temperatures enveloping nearly the entire Eastern Seaboard and parts of the west-central US, as above-average temperatures hold over the entire West and fringes of the west-central US In the eight-to-14-day forecast, above-average temperatures overtake nearly the entire country.

    Oil prices rise, reclaim level near 3-year highs - Oil prices finished higher on Monday, adding to last week's rally as traders welcomed data showing a weekly decline in the number of U.S. drilling rigs. February West Texas Intermediate crude gained 29 cents, or 0.5%, to settle at $61.73 a barrel on the New York Mercantile Exchange, recouping some of its 0.9% loss on Friday. March Brent crude added 16 cents, or 0.2%, to $67.78 after a 0.7% decline Friday. Even with the slides in Friday's session, WTI and Brent still scored weekly gains of 1.7% and 1.1%, respectively, boosted by a seventh-straight weekly drop in U.S. crude supplies and ongoing concerns over unrest in Iran. Analysts said Friday's pullback was only natural after such a strong rally that had sent both contracts to their highest level since December 2014 on Thursday, above $62 for WTI and above $68 for Brent. Data out on Friday further added to the overall upbeat assessment of the oil market. Weekly data from Baker Hughes (BHGE) showed the number of active U.S. rigs drilling for oil unexpectedly fell by five to 742 last week. That indicates production could slow down, which usually is a positive factor for oil prices. Stephen Brennock, oil analyst at PVM Oil Associates, said that despite its "air of invincibility", U.S. shale oil is now facing several headwinds that could curtail production. "Shareholders have grown tired of the negative cash flow model that has become the norm among shale players," he said in a note. "Drillers are now coming under pressure to prioritize profit margins over supply growth. Accordingly, producers must balance higher production and shareholder returns which in turn may put the brakes on spending plans," he added. Against this backdrop of lower U.S. oil supplies and geopolitical concerns, speculative financial investors continue to bet on further price rises, with net long Brent positions climbing to a record high last week, according to Commerzbank. This "increases the potential for correction once the factors that are currently determining prices move out of focus or disappear," the analysts said.  

     Crude oil futures gain on Iran tensions, prospect of US stock draw - Crude oil futures edged higher in mid-morning European trading Tuesday, on the back of bullish market sentiment driven by recent US stock draws and uncertainty over the future of crude exports from Iran. At 1131 GMT, ICE March Brent crude futures were 8 cents/b higher from Monday's settle at $67.78/b, sitting comfortably in the price range last seen in mid-2015, while NYMEX February light sweet crude contract was up 22 cents/b at $61.94/b. The US Dollar Index was up 0.18% at 92.26. On Tuesday, the market was looking ahead to whether US stock data released on Tuesday and Wednesday will show another large weekly draw. Analysts surveyed Monday by S&P Global Platts were expecting US crude stocks to fall 3.5 million barrels for the week ended January 5, after stocks fell 7.42 million barrels the previous week, exceeding analyst expectations. Figures from the American Petroleum Institute are due on Tuesday, while the more definitive numbers from the US Energy Information Administration will be released on Wednesday. Meanwhile, the market is awaiting a Friday deadline for US President Donald Trump regarding sanctions on Iran which had been waived as part of the nuclear deal. If that deal unravels, some analysts say up to 800,000 b/d of crude exports from the country could be at risk. Iran is also in the midst of anti-government protests that have erupted over the previous two weeks, raising concerns that exports could eventually be disrupted. Meanwhile in the South China Sea, an Iranian oil tanker carrying nearly a million barrels of condensate is still on fire, according to local media, following a collision.

    US crude hits three-year high as prices climb in tight market (Reuters) - Oil prices edged higher on Tuesday, with U.S. crude touching its highest since December 2014, supported by OPEC-led production cuts and expectations that U.S. crude inventories have dropped for an eighth week in a row. The Organization of the Petroleum Exporting Countries and allies including Russia are keeping supply limits in place in 2018, a second year of restraint, to reduce a price-denting glut of oil held in inventories. U.S. West Texas Intermediate (WTI) crude rose $1.23, or 2 percent, to settle at $62.96 a barrel after touching its highest since December 2014 at $63.24. Brent crude ended the session up $1.04, or 1.5 percent, at $68.82 per barrel after hitting a session high of $69.08, its highest since May 2015. Both contracts had their strongest close since December 2014. Prices extended gains in post-settlement trade after industry group the American Petroleum Institute said crude inventories fell by 11.2 million barrels in the week to Jan. 5 to 416.6 million, compared with analysts’ expectations for a decrease of 3.9 million barrels. [API/S] If confirmed by U.S. government data at 10:30 a.m. EST (1530 GMT) on Wednesday, the draw will be the largest since Sept. 2, 2016. U.S. stockpiles fell by 14.5 million barrels during that week. “You’re so long this market at this point, you could certainly get more interest at these levels,” said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management. “This is a little more confirmation of what speculators have been looking for and after tomorrow’s (U.S. government inventory) report, we’ll see if they look to do some profit-taking.” OPEC is cutting output by even more than it promised and the restraint is reducing oil stocks globally, a trend most visible in the United States, the world’s largest and most transparent oil market. 

    WTI/RBOB Spike After Massive Crude Draw - WTI/RBOB prices soared once again today amid hopes for an 8th straight week of crude draws (and overall stockpiles near 5y average levels). API did not disappoint with a massive 11.19mm crude draw (biggest since Sept '16) and continued builds in gasoline and distillates. WTI Knee-jerked to the highs of the day. The market is anticipating a pretty good draw in the crude oil storage number,” Bob Yawger, director of futures at Mizuho Securities USA Inc. in New York, said by telephone. API

    • Crude 11.19mm (-421k exp) - biggest draw since Sept 2016
    • Cushing -2.156mm (-1.5mm exp)
    • Gasoline +4.685mm (+3.25mm exp)
    • Distillates +4.635mm (+2.25mm exp)

    Last week's massive product inventory builds (and ongoing crude draw - last week biggest draw since Aug) continued with a massive crude build (11.19mm would be the bigg4est crude draw since Sept 2016 if it hold sup for DOE data).

     Can Oil Break The $70 Threshold? -  Oil has held onto the strong gains from last week, despite some choppy trading. As of early trading on Tuesday, Brent was sitting at roughly $68 per barrel and WTI at $62. Brent is not far from the key psychological threshold of $70, a level that hasn’t been hit since 2014 during the beginning of the market downturn.    Iran’s oil minister said that OPEC does not want oil to rise any more than it already has so as not to spark a shale drilling boom. “Members of the Organization of the Petroleum Exporting Countries are not keen on increased Brent crude prices above $60 a barrel because of shale oil," Bijan Namdar Zanganeh said in comments on the ministry’s news agency Shana. Earnings for supertankers that move oil around the world fell by more than half in 2017, in large part because of the OPEC cuts. Fewer shipments came at a time when the shipping industry brought new capacity online, crushing their day rates. “These cuts reduced the number of cargoes from the Middle East to Asia significantly at a time when a large amount of newly-built vessels are being delivered,” Olivier Jakob, managing director at Petromatrix GmbH, told Bloomberg. Earnings per day fell to $17,794 on average in 2017, the lowest figure since 2009. The poor conditions for the oil tanker industry are set to continue this year, with capacity expected to expand by another 4 percent at a time when OPEC will continue to hold back supply.. FERC, the powerful energy regulator in the U.S., rejected a proposal from the Department of Energy to prop up aging coal and nuclear power plants. The logic behind the proposal was to reward power plants that provide “resilience” to the grid. That is, the proposed rule change would have led to a premium for plants that held a 90-day supply of fuel on site – a definition only met by coal and nuclear plants. FERC rejected the proposal, and instead asked grid operators to come up with ideas to improve resilience. The rejection is a blow to the coal and nuclear industry, as well as the Trump administration, which supported the proposal.

    US crude stocks drop, fuel inventories up: EIA (Reuters) - U.S. crude oil stocks fell last week while gasoline and distillate inventories rose more than anticipated, the Energy Information Administration said on Wednesday. Crude inventories fell 4.9 million barrels in the week to Jan. 5, compared with analysts’ expectations for a fall of 3.9 million barrels. Oil prices dipped on the news before recovering. The decline in crude stocks fell short of industry group the American Petroleum Institute, which reported an 11 million-barrel crude draw on Tuesday evening. In addition, refining runs fell, pulling back from a 12-year-high in capacity utilization, and stocks of gasoline and distillates like diesel rose. However, U.S. production dropped sharply, though those figures are not considered as reliable as monthly data, which is released with a lag. U.S. production fell 290,000 barrels per day to 9.5 million bpd, the EIA said. “There must be a special factor at play, perhaps the extreme winter weather in North Dakota, which hampered shale oil production in the Bakken,”  U.S. crude futures CLc1 were trading 22 cents to $63.19 a barrel as of 10:49 a.m. EST, while Brent rose 14 cents to $68.95 a barrel. Gasoline stocks rose 4.1 million barrels, compared with analysts’ expectations in a Reuters poll for a 2.6 million-barrel gain. Distillate stockpiles, which include diesel and heating oil, grew 4.3 million barrels, versus expectations for a 1.5 million-barrel increase, the EIA data showed.. Refinery crude runs fell 285,000 bpd as utilization rates fell by 1.4 percentage points to 95.3 percent of total capacity, EIA data showed. Crude stocks at the Cushing, Oklahoma, delivery hub USOICC=ECI fell by 2.4 million barrels, EIA said. Net U.S. crude imports USOICI=ECI rose last week by 152,000 bpd.

    Oil Stays At 3-Year Highs as U.S. Crude Stocks Fall More Than Forecast - Crude prices held on to gains on Wednesday, staying close to their strongest level in around three years after data showed U.S. oil supplies fell more than forecast last week.The U.S. Energy Information Administration said in its weekly report that crude oil inventories fell by 4.9 million barrels in the week ended Jan. 5. That compared with analysts' expectations for a decline of 3.9 million barrels, while the American Petroleum Institute late Tuesday reported a supply-drop of 11.2 million barrels.Supplies at Cushing, Oklahoma, the key delivery point for Nymex crude, decreased by2.4 million barrels last week, the EIA said.Total U.S. crude oil inventories stood at 419.5 million barrels as of last week, which the EIA considered to be in the middle of the average range for this time of year.U.S. crude oil production fell by 290,000 barrels per day (bpd) to 9.49 million bpd.The report also showed that gasoline inventories increased by 4.1 million barrels, much higher than expectations for a gain of 2.6 million barrels. For distillate inventories including diesel, the EIA reported a rise of 4.3 million barrels. U.S. West Texas Intermediate (WTI) crude futures tacked on 32 cents, or about 0.5%, to $63.28 a barrel by 10:40AM ET (1540GMT). Prices were at around $63.34 prior to the release of the inventory data. Meanwhile, Brent crude futures, the benchmark for oil prices outside the U.S., were at $68.95 a barrel, up 11 cents from their last close. The contract rose to its best level since May 2015 earlier.

    US Crude Oil Inventories Decreased Almost 5 Million BPD -- EIA -- January 10, 2018 - EIA weekly petroleum report:

    • US crude oil inventories decreased by 4.9 bbls (significantly different than what API reported yesterday afternoon
    • US crude oil refineries operated at 95.3% capacitiy
    • gasoline production decreased, averaging about 9.3 million bpd
    • interestingly enough, distillate fuel production also decreased, averaging 5.3 million bpd
    • gasoline product supplied up slightly during same period last year

    WTI/RBOB Extend Losses After Smaller Crude Draw; Production Plunged -  Both WTI/RBOB are fading into this morning's data after API's massive crude draw print. DOE disappointed with a mere 4.95mm draw (vs 11.2mm draw from API) as gasoline inventories built for the 9th week in a row. However, production plunged almost 3%. Bloomberg Intelligence Senior Energy Analyst Vince Piazza noted that U.S. oil inventories typically build this time of year, but refineries are chugging away and focusing on West Texas intermediate instead of higher-priced Brent. The North Sea grade's price remains elevated, reflecting tensions in the Middle East.)   DOE:

    • Crude -4.95mm (-3.75 exp)
    • Cushing -2.4mm (-1.5mm exp)
    • Gasoline +4.13mm (+3.25mm exp)
    • Distillates +4.25mm (+2.25mm exp)

    8th week in a row of crude draws and gasoline builds, but the crude draw was considerably lower than API predicted... Notably Cushing stockpiles are below their 5year average for the first time since Jan 2015...

     Crude oil futures hit fresh three-year highs on US stock drawdowns - Crude futures held at fresh three-year highs in European morning trading Thursday, as a larger-than-expected draw on US crude stocks continued to outweigh signs of rising oil product stocks, and the market looked ahead to a deadline Friday on the fate of the Iranian sanctions waiver. At 1120 GMT, ICE March Brent crude futures were 32 cents higher than Wednesday's settle of $69.20/b which was the highest since early December 2014. The NYMEX February light sweet crude contract was up 40 cents at $63.97/b. The US Dollar Index was up 0.08% at 92.19. Weekly data released on Wednesday from the US Energy Information Administration showed stockpiles fell 4.948 million barrels in the week to January 5, to 419.515 million barrels. As a result of that fall, the surplus to the five-year average has nearly halved over the past eight weeks. Those figures exceeded analysts' expectations of a drawdown of 3.5 million barrels, but were far lower than figures published on Tuesday by the American Petroleum Institute that indicated a drawdown of 11.2 million barrels, which helped push prices to fresh three-year highs. The EIA drawdown was also in contrast to larger than expected builds in gasoline and distillate stocks. Gasoline stocks rose 4.135 million barrels, while distillate stocks rose by 4.254 million, roughly double analysts' expectations. "It was a bit [of a] mixed outlook when you look at products. It gave some swings around when both [API and EIA figures] published, [but] prices look still very supported by the Iran question and a lot of technical trading," senior oil risk manager at Global Risk Management in Copenhagen Michael Poulsen said. On Friday, US President Donald Trump will face a deadline on the waiver for Iranian sanctions as part of the nuclear deal. Analysts have said that 800,000 b/d of Iranian exports could be at risk if the deal unravels. Alongside falling production from Venezuela, where economic and political crisis has pushed output to its lowest in around 15 years, that would offer a further boost to bullish sentiment and help the pace of overall production cuts, analysts said, but that same bullishness could also risk promoting further supply.

    Oil prices sit at three-year highs as march to $70 slows - As oil prices marched up to three-year highs today, US stockpile data somewhat dampened the black stuff's momentum.Weekly data from the US Energy Information Administration (EIA) showed crude stockpiles fell by 4.9m barrels, more than the 3.89m barrel draw analysts expected, according to Thomson Reuters.Gasoline inventories rose by 4.1m barrels to near the top of the average range, while analysts expected a smaller 2.6m barrel increase. A knee-jerk drop sent Brent crude oil to an intra-day low of $68.75 a barrel, but it soon recovered to trade around $69 again. Earlier in the day it reached a high of $69.37 a barrel. US West Texas Intermediate (WTI) prices reached a December 2014 high of $63.67 a barrel earlier on. David Madden, market analyst at CMC Markets UK, said: "WTI and Brent crude oil have sold off in the wake of the EIA report which showed yet another decline in oil stockpiles, while gasoline inventories increased. "It was the typical market reaction as oil initially jumped due to the drop in oil inventories, then [it sank] in that gasoline stockpiles surged, which prompted selling."

    Brent crude settles below $70 per barrel as global inventories tighten (Reuters) - Oil prices retreated from big gains on Thursday, but still managed to settle at three-year highs after the global Brent benchmark hit $70 a barrel on signs of tightening supply in the United States. Brent crude futures settled 6 cents higher at $69.26 a barrel, after hitting $70.05 a barrel during the session, its highest level since November 2014. Brent’s settlement still represents a three-year closing high. Brent has gained 5 percent since the beginning of the year, picking up from its late-year surge. U.S. West Texas Intermediate (WTI) crude futures settled at $63.80 a barrel, up 23 cents, the highest since December 2014. Prices came off highs after an early surge that took benchmarks past key resistance levels that produced a flurry of buying in an active day in the market. However, analysts said it would take more than one day to convincingly break through $70 a barrel on Brent. “The propulsion of the upside was due to short-covering and no buying,” The relative strength index (RSI), which measures the speed and breadth of a rally, shows oil in an overbought condition, suggesting the move has come too far, too fast. “You have a very overbought market. Oil is acting like an internet stock and when it does that you know it’s getting overcooked,” Oil has been in an upward trend thanks to a steady, pronounced drop in global supply, particularly in the United States, the world’s largest consumer. On Wednesday, the U.S. Energy Information Administration said crude inventories fell almost 5 million barrels to 419.5 million barrels last week. Production slowed by nearly 300,000 barrels per day, which analysts attributed to colder-than-usual weather across the United States last week. Adding to bullish sentiment on Thursday, market intelligence firm Genscape estimated a draw of more than 3.5 million barrels at the Cushing, Oklahoma delivery point for U.S. crude futures for the week ended Tuesday, according to traders who saw the data. Production cuts, led by the Organization of the Petroleum Exporting Countries and Russia, which are set to continue throughout 2018, have underpinned prices. The United Arab Emirates (UAE) Energy Minister and OPEC President Suhail al-Mazrouei said he expects the market to balance in 2018 and that the producer group is committed to its supply-reduction pact until the end of this year. 

     Oil Prices Higher, Up 19% Year-over-year - From Bloomberg: Crude Oil Prices Are Up 49%, and It’s Not All Thanks to OPEC: The bottom line: A 49 percent surge in benchmark North American crude futures since late June, putting prices at a three-year high... "We expect inventories are going to build this year -- slightly,” said Michael Cohen, Barclays Head of Oil Markets Research, in an interview on Bloomberg TV. "You’re going to see a bunch of new crude supply coming on to the market this year from the U.S. So all in all, on a balanced basis, we don’t see the kind of shortage to bring us to $80 for a sustainable basis." The first graph shows WTI and Brent spot oil prices from the EIA. (Prices today added). According to Bloomberg, WTI is at $64.29 per barrel today, and Brent is at $69.66. Prices really collapsed at the end of 2014 - and then rebounded a little - and then collapsed again at the end of 2015 and in early 2016. Now, with the global economy stronger and less domestic production, oil prices are rising. The second graph shows the year-over-year change in WTI based on data from the EIA. Six times since 1987, oil prices have increased 100% or more YoY.  And several times prices have almost fallen in half YoY. Currently WTI is up about 19% year-over-year.

    Oil Tops $70 For First Time Since 2014 - As WTI crude futures top $64.50, amid what looks like a stop-run over $64. At the same time, Brent crude futures spiked above $70 for the first time since Dec 2014. As Citi notes, just before the London open, Reuters, citing the UAE energy minister said that OPEC would commit to a supply deal for all of 2018.  WSJ also rehashed higher Street forecasts, which have been coming in since the end of 2017. Investors have piled into commodities markets in the last month as the most bullish oil market structure in years is buttressed by OPEC-led production cuts, strong global economic growth and a softer U.S. dollar.  WTI hits $64.50... And Brent tops $70...

    Oil prices expected to trade around $60-$70 through 2020: Kemp (Reuters) - Oil prices are expected to remain close to current levels, averaging around $60 to $70 per barrel through the end of the decade, according to the annual survey of energy professionals conducted by Reuters.Forecast prices have changed very little since the last survey a year ago, and are only modestly higher than in the first survey conducted in 2016, when spot prices were much lower than they are today and near the bottom of the cycle.Long-term price expectations have become anchored around $70 per barrel - with forecasts clustered in a range of $60-$70 for 2018 widening to $60-$80 by 2020 ( results are based on a questionnaire sent to over 7,000 energy market professionals. Responses were received from just over 1,000 between Jan. 9 and Jan. 11.Brent prices in 2018 are expected to average $65 per barrel, which is only marginally higher than the $60-65 forecast in last year's survey. Brent prices in 2019 are expected to average $65-70, up from about $65 in the 2017 survey.By the end of the decade, prices are expected to average around $70 in 2020, basically unchanged since the surveys in 2017 and even 2016. Forecasts for 2018 and even 2019 are tightly clustered, with only 5 percent of respondents expecting prices to average less than $55 per barrel in either year.  Similarly, only 5 percent of respondents think prices will average more than $75 in 2018 or more than $85 in 2019.Even by 2020, the majority of respondents think prices will average between $60 and $80, with few expecting prices to be below $55 or above $85. Compared with previous surveys, fewer forecasters expect prices to slump again to very low levels in the $30s and $40s – which perhaps reflects growing confidence in the sustainability of the cyclical recovery. But only 4 percent of respondents expect prices to return to average $100 or more by 2020, the level that prevailed between 2011 and the first half of 2014.

    Brent crude tops $70 a barrel, West Texas Intermediate approaches $65 - Oil prices retreated from big gains on Thursday, but still managed to settle at three-year highs after the global Brent benchmark hit $70 a barrel on signs of tightening supply in the United States. Brent crude futures settled 6 cents higher at $69.26 a barrel, after hitting $70.05 a barrel during the session, its highest level since November 2014. Brent’s settlement still represents a three-year closing high. Brent has gained 5 percent since the beginning of the year, picking up from its late-year surge. U.S. West Texas Intermediate (WTI) crude futures settled at $63.80 a barrel, up 23 cents, the highest since December 2014. Prices came off highs after an early surge that took benchmarks past key resistance levels that produced a flurry of buying in an active day in the market. However, analysts said it would take more than one day to convincingly break through $70 a barrel on Brent. “The propulsion of the upside was due to short-covering and no buying,” said Marty Wallace, broker for LLC in Chicago. The relative strength index (RSI), which measures the speed and breadth of a rally, shows oil in an overbought condition, suggesting the move has come too far, too fast. “You have a very overbought market. Oil is acting like an internet stock and when it does that you know it’s getting overcooked,” said Walter Zimmerman, chief technical analyst for United-ICAP. Oil has been in an upward trend thanks to a steady, pronounced drop in global supply, particularly in the United States, the world’s largest consumer. On Wednesday, the U.S. Energy Information Administration said crude inventories fell almost 5 million barrels to 419.5 million barrels last week. Production slowed by nearly 300,000 barrels per day, which analysts attributed to colder-than-usual weather across the United States last week.[EIA/S]

    Rig Count Shoots Up As Oil Nears $70 - The number of active oil and gas rigs rose this week, according to Baker Hughes data, increasing by 15 total rigs, bringing the total rigs to 939, which is an addition of 280 rigs year over year.The number of oil rigs in the US increased by 10, while the number of gas rigs increased by 5. The number of oil rigs stands at 752 versus 522 a year ago. The number of gas rigs in the US now stands at 187, up 136 a year ago. At 11:35am EST, the price of a WTI barrel was trading down $.34 (-0.53%) to $63.46, while the Brent barrel was trading down $0.30 (-.43%) to $68.96. Both benchmarks are up week on week, but down from Thursday levels which saw Brent over $70. This week marks four straight weeks of gains. Despite the oil price rise, US crude oil production dipped last week. It had been on a steady upward trajectory during Q4 2017—a thorn in OPEC’s side which has managed to cap price spikes courtesy of various supply disruptions and unrest in Iran. But the first week of 2018 saw production in the United States slipping from 9.782 million bpd in the last week of 2017, down to 9.492 million bpd. Canada has seen severe swings in its active oil and rig count. This week, Canada saw 87 oil rigs and 15 gas rigs added.The Permian basin rig count increased by 3 this week, standing at 403 rigs, or 135 above this same week last year. Arkoma Woodford, DJ-Niobrara, Haynesville, and the Mississippian basins each gained a rig. By state, New Mexico and Louisiana were the big winners this week, both adding 5 rigs. At 1:09pm EST, WTI was trading at $63.94 (+$0.14) with Brent trading at $69.42 (+$0.16).

    U.S. drillers add most oil rigs in a week since June: Baker Hughes -  (Reuters) - U.S. energy companies added 10 oil rigs this week, the biggest increase since June, as crude prices rose to their highest levels in three years, prompting drillers to return to the well pad. The total rig count rose to 752 in the week to Jan. 12, the most since September, General Electric Co’s Baker Hughes energy services firm said in its closely followed report on Friday. The U.S. rig count, an early indicator of future output, is much higher than a year ago when only 522 rigs were active after energy companies boosted spending plans in 2017 as crude started recovering from a two-year price crash. The increase in U.S. drilling lasted 14 months before briefly stalling in the second half of last year as some producers trimmed their 2017 spending plans after prices turned softer over the summer. “Drilling activity may not be up every week, but we continue to expect growth through the first quarter of 2018 and longer if prices hold,” U.S. crude futures traded around $64 a barrel this week, near its highest since December 2014. That compares with averages of $50.85 in 2017 and $43.47 in 2016. Looking ahead, futures were trading around $62 for the balance of 2018 and $58 for calendar 2019. In anticipation of higher prices in 2018 than 2017, U.S. financial services firm Cowen & Co said 23 of the roughly 65 E&Ps they track have already provided capital expenditure guidance for 2018 indicating a 12 percent increase in planned spending over 2017. Cowen said the E&Ps it tracks said they would spend about $66.1 billion on drilling and completions in the lower 48 U.S. states in 2017, which was about 53 percent over what they planned to spend in 2016.   There were 939 oil and natural gas rigs active on Jan. 12. On average, there were 876 rigs available for service in 2017, 509 in 2016 and 978 in 2015. Most rigs produce both oil and gas. Overall, U.S. production is expected to rise to an all-time high of 10.3 million barrels per day in 2018 and 10.9 million bpd in 2019, up from 9.3 million bpd in 2017, according to a federal energy projection this week. U.S. output peaked on an annual basis at 9.6 million bpd in 1970, according to federal energy data.

    US Oil Rig Count Surges By Most In 7 Months - Will Shale Show Restraint? - Just as we suggested, US oil rig counts surged last week, tracking the lagged uptick in WTI prices and suggesting production's upward path will continue (after last week's weather-impacted drop).US Oil Rig Count rose 10 to 752 last week - the most since June 2017... The question is - as's Nick Cunningham asks (and answers) - Will Shale restrain itself?Brent recently hit $70 per barrel and WTI surpassed $64.50, and oil executives from the Middle East to Texas no doubt popped some champagne. The big question is whether or not U.S. shale will spoil the party by ramping up production to extraordinary heights, setting off another downturn.The EIA made headlines a few days ago when it predicted that U.S. oil production would surge this year and next, topping 11 million barrels per day by the end of 2019.But shale executives repeatedly promised their shareholders that they would be prudent this time around, eschewing a drill-no-matter-what mentality that so often led to higher levels of debt…and ultimately to lower oil prices. Shale executives repeatedly insisted in 2017 that they would not return to an aggressive drilling stance even if oil prices surged.We will soon find out if oil in the mid-$60s can entice shale drillers to shed their caution and jump back into action in a dramatic way. For its part, Goldman Sachs seems to believe the promises from the shale industry.The investment bank said that at an industry conference in Miami on January 10-11, shale executives reiterated their strategies of caution. “Shale producers are largely not looking to use $60+ oil in their budgets and spoke more proactively about debt paydown, corporate returns and returning cash to shareholders.”This newfound restraint would contribute to still more gains in oil prices, the investment bank said. “With Discipline along with Demand and Disruptions (the 3 Ds) key drivers of Energy equity sentiment, we see potential for a grind higher as long as datapoints are favorable,” Goldman wrote. Global oil demand is set to grow at a robust rate this year, and a series of disruptions could keep supply offline in places like Venezuela, Iraq, Iran, Libya and Nigeria. It remains to be seen if Goldman, along with the rest of us, are being taken for a ride by the shale industry. The investment bank said that guidance announcements in February will be “key” to figuring out if shale drillers will follow through on their promises of restraint for 2018.

    Oil retreats from $70 highs but set for fourth week of gains (Reuters) - Oil prices rose for a sixth day on Friday after Russia’s oil minister said that global crude supplies were “not balanced yet,” alleviating market concerns about a wind-down of the OPEC-led deal to reduce production. Russian Energy Minister Alexander Novak said ministers from leading OPEC and non-OPEC producers will discuss the possibility of exiting the deal at a coming committee meeting, but said that “we see that the market surplus is decreasing, but the market is not completely balanced yet.” His comments boosted prices, which rebounded from earlier decline, though the market has not hit the heights it touched on Thursday, when Brent crude topped $70 a barrel for the first time since December 2014. Markets remained buoyed by the comments throughout the session, shrugging off data that suggested the U.S. production may continue to surge. Brent crude futures LCOc1 rose 61 cents to settle at $69.87 a barrel. U.S. West Texas Intermediate (WTI) crude futures CLc1 rose 50 cents to $64.30. WTI hit its strongest since late 2014 at $64.77 on Thursday. For the week, Brent rose 3.3 percent while WTI jumped 4.7 percent. The agreement between the Organization of the Petroleum Exporting Countries and Russia reached in late 2016 to cut 1.8 million barrels of crude daily is due to last until the end of 2018. Novak said the current oil price was short-term, and he would discuss the situation at a ministerial monitoring committee meeting in Oman, scheduled for Jan. 21. Russia’s Lukoil Chief Executive Vagit Alekperov said Russia - part of the global agreement with the Organization of the Petroleum Exporting Countries to reduce supply - should start to exit the pact if crude prices remain at $70 a barrel for more than six months. Major oil producing-countries have grown concerned that as prices remain near these levels, it will spur additional production from U.S. shale patches in Texas and North Dakota, risking overwhelming the market with additional supply, and hurting OPEC’s market share.

    OPEC Doesn’t Want Brent Over $60 a Barrel, Says Iran’s Oil Minister - A key OPEC minister has warned that the group risks overheating the oil market as crude prices head toward $70 a barrel.“Members of the Organization of Petroleum Exporting Countries are not keen on increased Brent crude prices above $60 a barrel because of shale oil,” Iran Oil Minister Bijan Namdar Zanganeh said, according to the ministry’s news service Shana. Prices have climbed in recent days because of production cuts and increased demand for petroleum products due to cold weather, he said. While the view isn’t universally held among OPEC ministers, the comments show concerns among some countries that keeping production curbs in place as a strengthening global economy drives demand could spur more output from shale producers in the U.S. Higher prices also encourage producers to hedge future output, adding to supplies. OPEC and allies including Russia agreed in November to extend output cuts to the end of this year to reduce global inventories. Iran, OPEC’s third-largest producer, pumped 3.8 million barrels a day in December, according to data compiled by Bloomberg.

     Shadows picked up by satellites suggest Saudi Arabia under reported its oil stores last year — Satellite imagery of two of Saudi Arabia's largest oil refineries suggests the kingdom may have underreported its oil stores in the first half of 2017. Satellite images gathered by the tech startup Bird.i suggest the level of crude oil held in two major Saudi refineries, Ras Tanura and Yanbu, increased last year from January to June. The kingdom's official figures show supplies as having declined amid a commitment to reduce supply in the face of low prices. Bird.i collects and analyzes satellite, drone, and airborne images from numerous sources, some of which are captured in monochrome and some in full color. The technology allows the fullness of oil tanks to be estimated according to the shadows cast by tanks' floating roofs: More shadow suggests the roof and oil stores are low. Factors such as the time the photos were taken, the position of the sun, and the satellite's position are also considered. Images taken of the Ras Tanura refinery, which with a capacity of 550,000 barrels a day is Saudi Arabia's largest, suggest stocks were relatively low in January compared with in May, when the shadows cast were much shorter — indicating a higher supply. The Ras Tanura refinery in January 2017. Image © 2017 DigitalGlobe, Inc. Ras Tanura refinery in May — where less shadow can be seen. Images of Yanbu terminal, a major refinery on the Red Sea with a capacity of 225,000 barrels a day, suggest stocks in November 2016 were relatively low compared with those in May of last year, when the tanks look to be "almost full," according to Corentin Guillo, the founder and CEO of Bird.i. A third — and the most recent — image of Yanbu, taken in December, shows more shadow, suggesting oil supplies fell again in the second half of the year.   Saudi Arabia also reported falling stores throughout 2017. In official data submitted to the Joint Organisations Data Initiative, the kingdom reported oil stocks had declined by 5.4 million barrels last year from January to June and were on a downward trajectory from March to September.  "It would be pretty destabilising for the oil price, and for OPEC, if Saudi Arabia was shown to be saying one thing and doing another,"

    Eleven Saudi princes detained following protest over utility bills - (Reuters) - Saudi Arabian authorities have detained 11 princes after they gathered at a royal palace in Riyadh in a rare protest against the government suspending payment of their utility bills, the public prosecutor said on Saturday. Saudi Arabia, the world’s top oil exporter, has introduced reforms that include reducing energy subsidies, introducing value-added tax and cutting some perks to royal family members to try to cope with a drop in crude prices that has caused a budget deficit estimated at 195 billion riyals ($52 billion) in 2018. The princes had gathered on Thursday at Qasr al-Hokm palace demanding the cancellation of a recent decree that halted state payment of water and electricity bills for royal family members and seeking compensation for a death sentence implemented in 2016 against one of their cousins, Prince Turki bin Saud al-Kabeer. “Despite being informed that their demands are not lawful, the 11 princes refused to leave the area, disrupting public peace and order. Members of a security services stepped in to restore order and the princes were arrested,” the public prosecutor’s statement said, without identifying the princes. “Following their arrest, they have been charged on a number of counts in relation to these offences. They are detained at Al-Hayer prison south of the capital pending their trial.” News website Sabq earlier identified the leader of the group of princes by the initials S.A.S. The Saud al-Kabeer branch of the House of Saud descend from a cousin of late King Abdulaziz, who founded the modern kingdom. The meteoric rise of 32-year-old Crown Prince Mohammed bin Salman, the king’s favored son, and his ambitious, sometimes aggressive, policies have caused rare tensions within the royal family, which for decades favored rule by consensus. Dozens of prices, high officials and senior businessmen were rounded up in November in a crackdown on graft that has boosted Prince Mohammed’s power. They have been held at the five-star Ritz-Carlton hotel in Riyadh while government officials negotiate financial settlements, asking them to hand over assets and cash in return for their freedom. The round-up followed a meticulously planned palace coup in June through which Prince Mohammed ousted his elder cousin Prince Mohammed bin Nayef as heir to the throne. 

     Saudi Handouts Show Prince Bet on Citizens After Royal Crackdown -  Saudi Crown Prince Mohammed bin Salman’s high-speed U-turn on state handouts suggests he’s betting on the backing of ordinary citizens rather than traditional pillars of support as he consolidates power. It took less than a week of Saudis grousing on social media and TV for authorities to announce they’d plow billions of riyals into people’s pockets to help offset government-initiated price increases. That sidestepped a mainstay of the prince’s plan to revamp the economy in part by weaning citizens off government largesse, indicating that consistency in fiscal policy isn’t his top priority right now.  During his swift rise to power, the kingdom’s 32-year-old de facto leader has swept aside rivals, arrested senior royals and billionaires -- including 11 princes detained on Thursday -- and defied the ultra-conservative religious establishment by letting women drive. That’s left him reliant on those Saudis eager for social change but struggling with austerity measures needed to achieve his vision of turning Saudi Arabia into a global investment hub no longer reliant on oil.  “The crown prince can’t afford to alienate his young constituency,” said Fawaz Gerges, a professor of international relations at the London School of Economics. “It’s not just about economic reforms. It’s also about the consolidation of the new leadership’s social base and the opposition from very entrenched interests by some members of the royal family.”  King Salman on Saturday ordered extra pay for Saudi government workers and soldiers this year after the Jan. 1 introduction of value-added taxation and a surge in fuel prices stirred grumbling among citizens. The cost to the state: more than 50 billion riyals ($13.3 billion), Saud Al-Qahtani, an adviser to the royal court, said on his Twitter account. Saudis privately expressed mixed feelings about the about-face, with some overjoyed, and others finding it too stingy or worried about its limited duration. Some said the sudden swerve -- one of several since the prince announced his Vision 2030 blueprint for reordering the economy nearly two years ago -- made them question the government’s strategy.

    Saudi Arabia Is Taking Over The Binladin Group - Back in November, among the numerous high-profile figures arrested in Saudi Arabia on “anti-corruption” charges, in addition to the shocking detention of prince Alwalaleed bin-Talal another unexpected name emerged: that of Bakr bin Laden, chairman of Saudi Binladin Group and brother of Osama bin Laden. Considering that the real intention of the mass arrests was a shakedown of royals for money, bin Laden's arrest made sense: after all The Binladin Group is one of Saudi Arabia's biggest construction companies, with an annual turnover of $30 billion.Or rather was, because as Reuters reports, Saudi Arabia is confiscating taking managerial control of Saudi Binladin Group and discussing a possible transfer of some of the giant construction group’s assets to the state while its chairman and other family members are in detention. As we discussed in November, Binladin, which had over 1 00,000 employees at its height, is the biggest builder in the country and important to Riyadh’s plans for large real estate, industrial and tourism projects to help diversify the economy beyond oil. However, over the past couple of years, the group was hurt financially by the slump in the local construction industry and a temporary exclusion from new state contracts after a crane accident killed 107 people at Mecca’s Grand Mosque in 2015. It was forced to lay off thousands of employees.Why the forced nationalization?One suggestion, provided by Reuters industry sources, Riyadh’s move to take control appears "aimed at ensuring the group can continue to serve Saudi Arabia’s development plans." Another, more realistic one, is that Saudi Arabia will simply exchange corporate assets in exchange for bin Laden's freedom.

    Caught On Video: Houthi Rebels Shoot Down Saudi F-15 Over Yemen - Houthi rebels have released dramatic footage showing the use of a FLIR Systems sensor turret, manufactured by an American defense company, recording the moment a Surface-to-air missile shot down a Royal Saudi Air Force F-15 over Yemen's capital, Sana’a.On Monday, Houthi rebels released the infrared video, which shows the sensor tracking the F-15S (Boeing MFG.), while it was shot down over Yemeni skies, according to Saba News.The video was first released by the Houthi-run al-Masirah television network on Monday, which shows the FLIR Systems logo on the top left of the frame. A separate statement by the group’s Saba News Agency says their forces shot down the Saudi warplane over northern Saada province on Sunday.Yemen air defense on Monday morning fired a ground-to-air missile at a Saudi enemy warplane while it was flying over the capital Sanaa, the army said in a statement received by Saba. The targeted plane is F-15, read the statement without providing further details. Monday missile attack came one day after the Yemeni army shot down a Saudi warplane over northern Saada province.In the video, the FLIR Systems sensor turret is seen in full working capacity as it tracks the Saudi warplane overhead. Watch the video below:According to The Drive, if confirmed the downing  of the F-15 could be somewhat embarrassing for the United States, considering the Americans have sold defense products to Yemen.

    Iran's Former President Mahmoud Ahmadinejad Arrested For Inciting Unrest: Report -- The London-based Arabic daily newspaper Al-Quds Al-Arabi reports this morning that former Iranian president Mahmoud Ahmadinejad has been arrested by security forces for allegedly inciting unrest against the government, according to "reliable sources in Tehran." The newspaper describes the former president's arrest in the southwest city of Shiraz as coming after a series of provocative statements given in support of anti-government protests that have gripped the country for more than a week, and that his detention was granted approval by Supreme Leader Ali Khamenei.Starting early in the protests, Ahmadinejad, who led the nation from 2005 to 2013 and has long been considered a hardliner, made public statements denouncing the Rouhani government as well as the clerical establishment as being detached from the daily reality of ordinary Iranians. Starting in November 2017 Ahmadinejad began making what was widely viewed as a surprise political comeback while running a populist message, focusing on the fight against corruption as his main emphasis and attacking the rich and corrupt, along with severe criticisms against the government for squandering public funding intended for the people's welfare. He's also reported to have broadly utilized social media for aggressive rhetoric targeting the judiciary and challenging Iran's supreme leader.

     Iran has foiled plot to use protests to overthrow system, leader says (Reuters) - Iran has foiled attempts by its foreign enemies to turn legitimate protests into an insurgency to overthrow the Islamic Republic, supreme leader Ayatollah Ali Khamenei said on Tuesday. Comments on his Twitter feed and in Iranian media underscored the establishment’s confidence that it has extinguished the unrest that spread to more than 80 cities in which at least 22 people died since late December. “Once again, the nation tells the U.S., Britain, and those who seek to overthrow the Islamic Republic of Iran from abroad that ‘you’ve failed, and you will fail in the future, too’,” Khamenei tweeted. The Revolutionary Guards, the military force loyal to Khamenei, said on Sunday security forces had put an end to the unrest that it also said had been whipped up by foreign enemies. At least 1,000 people have been arrested in the biggest anti-government protests for nearly a decade, with the judiciary saying ringleaders could face the death penalty. A judiciary official said on Tuesday that a detainee in Arak, a town about 200 km (124 miles) south of Tehran, committed suicide, according to Mizan, the website of the Iranian judiciary. On Monday, a separate judiciary official announced that a detainee had committed suicide in Tehran’s Evin prison. The reports have raised concerns among human rights activists and some Iranian politicians that detainees may have been killed by security forces while in custody. “I warn the president and security and judiciary officials to prevent the occurrence of a second Kahrizak,” Mahmoud Sadeghi, a parliamentarian, tweeted on Monday. The Kahrizak prison gained notoriety when a handful of detainees were tortured and killed at the site after unrest in 2009.

    After mass protests, Iran bans English in schools to fight Western 'cultural invasion' - Iran has banned the teaching of English in primary school classrooms. The announcement follows claims by Iran's supreme leader Ayatollah Ali Khamenei that early learning of the language paves the way for "cultural invasion" of Western values. The government's decision comes shortly after a week of mass protests against the country's leadership which spread to more than 80 cities and small towns and left at least 21 dead.“Teaching English in government and non-government primary schools in the official curriculum is against laws and regulations,” Mehdi Navid-Adham, head of the High Education Council, told state TV on Saturday.Adham added that primary education is crucial in instilling the Iranian culture and values in its students. Khamenei has often criticized creeping Western influence in the Islamic Republic, and expressed deep concern in 2016 over the spread of English to "nursery schools," The Guardian reported.“That does not mean opposition to learning a foreign language, but [this is the] promotion of a foreign culture in the country and among children, young adults and youths,” he said at the time. English will still be taught in middle schools and high schools.

    Who Killed The Iran Protests? - One prime indicator that anti-government protests in Iran have truly died down to the point of now being completely snuffed out as reports today suggest, and as we began reporting at the end of last week, is that current headlines are now merely focused on the barely lingering and ephemeral "social media battle" and anonymous YouTube activism, along with multiple postmortem accounts of a failed movement already out. It seems there's now clear consensus that Iran's streets have grown quiet.   It was evident by the end of last week that demonstrations were fizzling - even as the headlines breathlessly attempted to portray a bigger and more unified movement than what was really occurring on the ground. By many accounts, it was the much larger pro-government rallies that began to replace the quickly dying anti-regime protests by the middle of last week. But a central question that remains is, who killed the Iran protests? There seemed to be a direct correlation between Western and outside officials weighing in with declarations of "solidarity" and support for regime change, and the drastic decline in protest size and distribution. And then there was Bibi Netanyahu's surprising televised address to "the Iranian people" on behalf of the state of Israel, wishing them "success in their noble quest for freedom" - something which we predicted would only have an adverse effect on the demonstrators' momentum, considering that authorities in Tehran accused protest leaders of serving the interests of and being in league with foreign "enemies" like Saudi Arabia and Israel nearly from day one. The address was surprising precisely because it was the surest way to kill the protests as quickly as possible. From the moment Netanyahu publicly declared, "When this regime [the Iranian government] finally falls, and one day it will, Iranians and Israelis will be great friends once again" - all the air was sucked out of whatever momentum the protesters had.  For many average Iranians who had not yet joined anti-government demonstrations at that point, Bibi's speech gave them every incentive to stay home. All that the regime had to say at that point was, "see, you are in league with enemies of the nation!" And that is exactly what Tehran did. It was on the very Monday of Netanyahu's speech that Iran's elite Islamic Revolutionary Guard Corps (IRGC) announced it would be taking charge of the security situation in Tehran, though likely they were mobilized earlier.

    Iran could greatly increase uranium enrichment, says spokesman (Reuters) - Iran’s atomic energy agency said on Wednesday a reimposition of sanctions by the United States would be a violation of Tehran’s nuclear deal with world powers, adding that the Islamic Republic had the capacity to greatly increase its enrichment of uranium. U.S. President Donald Trump must decide by mid-January whether to continue the suspension of U.S. sanctions on Iran’s oil exports under the pact, which eased economic pressure on Tehran in exchange for limits on its nuclear programme. “If the suspension is not continued it’s a violation of the (nuclear deal) and the Islamic Republic of Iran will, of course, take the necessary actions,” Behrouz Kamalvandi, spokesman for the Atomic Energy Organization of Iran, said in an interview with state TV. He did not specify what such actions might be. Later in the interview, he said: “The capacity exists within the atomic energy agency to speed up nuclear work in various fields, particularly in the field of enrichment, which can be increased several times more than in the period before the nuclear agreement.” Enrichment, a process which can produce weapons-grade uranium, is restricted under the terms of the deal. Supporters of the pact insist that strong international monitoring will prevent Iran from developing nuclear bombs. Iran has denied that it wants to acquire nuclear weapons. “The American government should think wisely,” Kamalvandi said in the interview. “Even though they have shown until now unfortunately that they are not thinking or acting wisely.” The head of the Atomic Energy Organization of Iran, Ali Akbar Salehi, said on Monday Tehran might reconsider its cooperation with the International Atomic Energy Agency (IAEA) if the United States failed to respect its commitments in the deal. The IAEA, the UN’s nuclear watchdog, seeks to promote the peaceful use of nuclear energy. It is scrutinising Iran’s compliance with the agreement. 

    Russia presses EU to pay up for rebuilding Syria - A top Russian diplomat has urged the EU to launch reconstruction efforts in Syria within months, escalating a row over who should foot the bill for rebuilding the nation as President Bashar al-Assad reasserts his control. Vladimir Chizhov, Russia’s representative to the EU, told the Financial Times that European states would “bear the responsibility” if they failed to recognise that it was “high time” to back a programme likely to cost “dozens of billions” of euros. His comments are part of Moscow’s efforts to exploit Europe’s growing dilemma over how it can spend money to stem the flow of Syrian refugees without appearing to boost the regime in Damascus. The tensions over the issue have been rising as Moscow, which backs the Syrian government, has gained increasing sway over the peace process to end the near seven-year conflict.  European diplomats  cknowledge the potential for divisions in the bloc over Syria. Countries hosting millions of Syrians, such as Turkey and Lebanon, have been pressing the EU to help ease their refugee burdens. But European officials bristle at what they see as attempts by Moscow to force Europe to pick up the tab for Russia, whose fighter jets took part in the bombardment of rebel-held areas such as Aleppo. Syrian activists said last week that Russian warplanes were involved in bombing Eastern Ghouta, a besieged rebel-controlled area near Damascus, where recent fighting has killed dozens of people. Russia intervened militarily in the conflict in 2015 and tilted the balance of the war in the Syrian government’s favour as the rebels were driven from their urban strongholds. Moscow is now keen to secure a political process and halt its military operations in the Arab nation.

    US-backed Forces In Syria Release Hundreds Of ISIS Members - The US-backed Syrian Democratic Forces (SDF) released 400 former ISIS fighters a mere few weeks after they had been captured, the opposition media outlet Syrian Observatory for Human Rights (SOHR) reported on Tuesday. The report added that the released ISIS fighters include dozens of well-known ISIS members and commanders. Moreover, the SOHR said that the SDF even allowed 120 former ISIS fighters from Deir Ezzor and al-Hasakah governorates to join its ranks. The former ISIS fighters who joined the SDF are all related to SDF leaders, according to the report. The release of these former ISIS fighters has led to new tensions in eastern Syria, as the locals who were victims of these fighters clashed with them in many villages, according to the SOHR. The media outlet even said that weapons were used by the new “SDF members” against the locals; however, the US-backed forces didn’t step in to end the clashes, according to the source. Significantly, SOHR is a well-known pro-rebel opposition source which has served as a go-to prime outlet for the mainstream media over the course of the war in Syria.

    First-Ever Drone Swarm Attack Has Struck Russian Military Bases, Sources Claim -- Ever since technological advancements made drones possible, people have warned of the potential dangers of weaponised UAVs (unmanned aerial vehicles), which could effectively become murderous slaughterbots we need to defend ourselves against. Now, it looks like those fears have become a reality. The Russian Ministry of Defence claims its forces in Syria were attacked a week ago by a swarm of home-made drones – the first time such a coordinated assault has been reported in a military action. According to the Ministry of Defence, Russian forces at the Khmeimim air base and Tartus naval facility "successfully warded off a terrorist attack with massive application of unmanned aerial vehicles (UAVs)" last Friday night.  "As evening fell, the Russia air defence forces detected 13 unidentified small-size air targets at a significant distance approaching the Russian military bases," the Ministry said in a statement."Ten assault drones were approaching the Khmeimim air base, and another three – the CSS point in Tartus."Six of the assault force drones were intercepted by Russian electronic warfare units, with three of the UAVs being brought to land outside the base, while the remaining three exploded on contact with the ground. Another seven drones were "eliminated" by Pantsir-S anti-aircraft missiles fired by the Russians, with the bases reporting no casualties or damage, the statement explains.

    Syria – Erdogan (Again) Switches Sides – Delivers New Supplies For Terrorist Attacks - Turkey, in line with U.S. services, decided to block the current Syrian advance in south-east Idleb. Yesterday an ad-hoc alliance of jihadi "rebels" launched a counteroffensive to stop the Syrian army from cutting off a big chunk of "rebel" held territory in east-Idleb. The Turkish and U.S. supplied "rebels" (see below) made a few local advances capturing some 12 villages of the 150 villages the Syrian army had recently liberated. They were soon beaten back. Some 50 Ahrar al-Sham fighters were killed or wounded after they ran into a trap. Some 10 Syrian soldiers have been captured by the enemy. Syrian and Russian air support is very active in the area and the Syrian army is again moving forward.There is no mention or picture (yet) of al-Qaeda in Syria, currently labeled HTS, taking part in the "rebel" counterattack. Four days ago HTS published photos of its leader Joulini meeting with his military commanders to assess the situation. It looked bad for them. The squabble with other "rebels" increased. Two days ago Jouliani issued a statement that HTS would stop fighting other factions in Idleb to enable all to confront the advancing Syrian government forces. It seems that this was a condition for the renewed Turkish/U.S. support. The counteroffensive could only proceed because Turkey (again) delivered hundreds of tons of weapons to the jihadis. New supplies of TOW anti-tank missiles, distributed exclusively by the CIA, have also been seen. (Turkey is also again supplying jihadists in Libya. The Greek navy just caught a ship going from Turkey to Libya with 29 containers full of bomb precursors, detonators and other bomb making parts.)

    China Sets New Records for Gobbling Up the World’s Commodities - China continues to gobble up the world’s commodities, setting new records for consumption of everything from crude oil to soybeans.In a year of flux marked by industrial capacity cuts, environmental curbs and financial deleveraging, demand for raw materials has continued to grow in the world’s biggest consumer, helping drive a second annual gain in global commodity returns.The Bloomberg Commodity Index was up 0.2 percent at 9:55 a.m. London time, climbing for a fourth day. The gauge of returns from raw materials rose 0.8 percent last year after advancing 11.4 percent in 2016.As President Xi Jinping consolidates power behind an economy that may have posted its first full-year acceleration since 2010, there are few signs of the Chinese commodity juggernaut slowing as it rolls into 2018.“China’s economic expansion has been beating expectations since the second half of last year, boosting demand for all kinds of commodities,” Guo Chaohui, an analyst with Beijing-based China International Capital Corp., said by phone. “We are expecting continued strength in economic growth in 2018 which will keep up the nation’s import appetite.” The crown of the world’s biggest oil importer now sits firmly atop China after the nation’s shipments surpassed the U.S. on an annual basis for the first time ever. What’s more, it’s also one of the largest buyers of American crude.Inbound shipments from across the globe -- Russia to Saudi Arabia and Venezuela -- jumped about 10 percent to average 8.43 million barrels a day in 2017, data from China’s General Administration of Customs showed on Friday.The unprecedented purchases may be bettered in 2018, if import quotas granted by the government to China’s independent refiners are a signal. The first batch of allocations was 75 percent higher than for 2017. The world’s second-biggest economy is also realizing that the key to winning its war on smog may lie overseas. Record amounts of less-polluting grades of iron ore -- typically not available within China -- are being pulled in to feed the nation’s mammoth steel industry, with imports rising 5 percent to 1.07 billion metric tons in 2017.

    China’s Inner Mongolia admits cooking economic data, puts key road and subway projects on hold | South China Morning Post: A second major Chinese region has admitted to severely inflating fiscal and economic data, pledging to mend its ways and tame government borrowings in the next few years in part by halting various debt-burdened public projects. The admission by the authorities in the Inner Mongolia autonomous region comes after Beijing made preventing financial risk one of its top economic priorities for the next three years at a key national policy conference chaired by Chinese President Xi Jinping last month. At a two-day economic policy meeting last week, the government of Inner Mongolia said its industrial output figure for 2016 should be revised down by 40 per cent, and its fiscal revenue for that year was 26 per cent less than initially stated, the official Xinhua news agency reported on Wednesday. The northeastern rust-belt province of Liaoning made a similar confession last January, when the authorities said its cities and counties had fabricated fiscal data between 2011 and 2014. The meeting in Inner Mongolia confirmed for the first time that the government had halted a 30.5 billion yuan (US$4.7 billion) subway project in Baotou, the region’s biggest industrial city, financial news outlet Caixin reported on Sunday. The meeting also yielded confirmation that another three subway projects in the regional capital Hohhot were on hold, according to Xinhua. In addition, an expressway project linking Hohhot and Ordos had been suspended, Caixin reported, citing banking regulators.

    China Fails to Woo U.S. With Financial Sector Opening -- Now that the dust has settled, one thing is clear: President Donald Trump’s visit to Asia in November served as a milestone in the increasingly rapid transfer of power from the U.S. to China. President Xi Jinping’s enthronement during the 19th Party Congress as China’s leader for the foreseeable future did most of the work, but Mr. Trump helped by failing to advance a clear agenda articulating the U.S.’s key national interests regarding China.The transfer of economic power to China has only accelerated since Mr. Xi came to power. It will accelerate further if and when China institutes real economic reform. But when China announced reforms to open up its financial sector—just hours after Mr. Trump concluded his visit to Beijing—the reaction from the Trump administration was muted at best, as the administration remains focused on China’s too-benign attitude toward North Korea and its nuclear missile program.Reaction from investors, too, was muted. The only significant announcement came from UBS for a securities investment that was approved months before the announcement. Recall that China has been promising to open its financial markets since entering the World Trade Organization in December 2001. Beyond the lack of progress so far, the announcement does not fully cast away doubts about the speed and depth of the opening going forward. . Until further clarification, this probably means foreign investors can only gain control of non-listed securities firms, which are, of course, much smaller. There’s even less clarity regarding the banking and insurance sectors. We already know that reforms are delayed for another three years. However, China’s vice finance minister, Zhu Guangyao, told The New York Times that China would raise the investment in insurance companies to 51 percent in three years and 100 percent in five years. In addition, China also plans to end its current 25 percent limit of foreign ownership in banks, according to what Mr. Zhu told the Times.

    China: The Aging Dragon - The father of the Chinese state, Mao Zedong, had an expansive vision of the future, anticipating that the Chinese would in time have a strong presence throughout the world. Consistent with this dream, his policies promoted large families. The fertility rate (the number of births per woman) stabilized around 5.9 in the 1970s.The pace was unsustainable and in his last years, Mao proposed a new vision: Wan, Xi, Shao (“later, longer, fewer”). The new program aimed at slowing the birth rate by encouraging people to live longer with less children, and in fact it was not unsuccessful.Nevertheless, Mao’s successor Deng Xiaoping opted for a stricter approach. Around 1980, the one-child policy was instituted throughout China. Judging by the intimacy of its reach and the sheer number of individuals affected, it could be considered the most extensive social engineering operation in the history of the world. In view of the current state of China, it will not be the last such operation. According to quantitative analyses produced by the Chinese government (which should be examined seriously, but must be taken with a grain of salt given the government’s track record massaging figures), this policy has impeded approximately 400 million births. One result has been an aberration in the gender of newborns. There are no reliable figures for the number of abortions that have taken place in China in order to make sure that boys are born rather than girls. There is now a surplus of circa 60 million males, who will often experience serious problems finding romantic partners. In addition to these issues, there is a less visible trend: aunts and uncles are disappearing – after all, if you are an only child, you have no siblings. This phenomenon has frayed the fabric of rural life, propelling more towards the cities and suburban centers. The tradition of children caring for their elderly parents in homes was once a familiar sight (as in Europe), but is now fading away.

    China’s hi-tech missile ambitions are marching ahead at warp speed | South China Morning Post: The word “hypersonic” conjures up the idea of immense speed, as it should. The word itself refers to any speeds in excess of five times the speed of sound, or Mach 5. But when it comes to missile technology, “hypersonic” speed isn’t particularly impressive or new. Indeed, due to the gravitational forces involved, long-range ballistic missiles – including the United States’ first-generation SM-65 Atlas intercontinental ballistic missiles and the Soviet Union’s R-7 Semyorka – would see their payloads reach massive speeds well in excess of Mach 5 during atmospheric re-entry. Nevertheless, burgeoning hypersonic technologies stand to challenge strategic stability between superpowers. For years, the United States, Russia, and China have been investing considerable resources into the research and development of hypersonic glide vehicles – a decades-old concept that only now is seeing widespread interest. These weapons, at their core, involve a simple trade-off that sets them apart from their simpler ballistic missile counterparts. They sacrifice long-range ballistic missile re-entry speeds for extended range and their flight pattern allows them to present unique challenges to existing ballistic missile defence systems. Hypersonic boost-glide weapons also feature more complex trajectories compared to the roughly parabolic ones seen in ballistic missiles, posing further challenges for missile defence. China fires up advanced hypersonic missile challenge to US defences For now, China appears to be in the lead with hypersonic weapons technology, at least as far as a battlefield-ready implementation is concerned. In November, the People’s Liberation Army Rocket Force conducted the first flight tests of a new missile known as the DF-17.The DF-17 is the first missile system anywhere that uses a hypersonic glide vehicle as its payload and is intended for operational deployment. While the United States and Russia have both conducted developmental tests, neither country is known to have taken concrete steps towards deploying these systems. 

    First Djibouti … now Pakistan tipped to have Chinese naval base -South China Morning Post - Beijing plans to build its second offshore naval base near a strategically important Pakistani port following the opening of its first facility in Djibouti on the Horn of Africa last year. Beijing-based military analyst Zhou Chenming said the base near the Gwadar port on the Arabian Sea would be used to dock and maintain naval vessels, as well as provide other logistical support services. “China needs to set up another base in Gwadar for its warships because Gwadar is now a civilian port,” Zhou said. “It’s a common practice to have separate facilities for warships and merchant vessels because of their different operations. Merchant ships need a bigger port with a lot of space for warehouses and containers, but warships need a full range of maintenance and logistical support services.” Another source close to the People’s Liberation Army confirmed that the navy would set up a base near Gwadar similar to the one already up and running in Djibouti. “Gwadar port can’t provide specific services for warships ... Public order there is in a mess. It is not a good place to carry out military logistical support,” the source said.The confirmation follows a report this week on Washington-based website The Daily Caller in which retired US Army Reserve colonel Lawrence Sellin said meetings between high-ranking Chinese and Pakistani military officers indicated Beijing would build a military base on the Jiwani peninsula near Gwadar and close to the Iranian border.

    CPEC is Transforming The Least Developed Parts of Pakistan -- In a New York Times Op Ed titled "How Not to Engage With Pakistan",  ex US Ambassador to Pakistan Richard G. Olson says "Its (CPEC's) magnitude and its transformation of parts of Pakistan dwarf anything the United States has ever undertaken".  Olson goes on to warn the Trump Administration that "Without Pakistani cooperation, our (US) army in Afghanistan risks becoming a beached whale". Among the parts of Pakistan being transformed by China Pakistan Economic Corridor (CPEC) are some of the least developed regions in Balochistan and Sindh, specifically Gwadar and Thar Desert. Here is more on these regions: Gwadar is booming. It's being called the next Shenzhen by some and the next Hong Kong by others as an emerging new port city in the region to rival Dubai. Land prices in Gwadar are skyrocketing, according to media reports. Gwadar Airport air traffic growth of 73% was the fastest of all airports in Pakistan where overall air traffic grew by 23% last year, according to Anna Aero publication.  A new international airport is now being built in Gwadar to handle soaring passenger and cargo traffic. In addition to building a major seaport that will eventually handle 300-400 million tons of cargo in a year, China has built a school, sent doctors and pledged about $500 million in grants for an airport, hospital, college and badly-needed water supply infrastructure for Gwadar, according to Reuters. The Chinese grants include $230 million for a new international airport in Gwadar, one of the largest such disbursements China has made abroad, according to researchers and Pakistani officials.New development work in Gwadar is expected to create as many as 20,000 jobs for the local population. Thar Desert, one of the least developed regions of Pakistan, is seeing unprecedented development activity in energy and infrastructure projects.  New roads, airports and buildings are being built along with coal mines and power plants as part of China-Pakistan Economic Corridor (CPEC). There are construction workers and machinery visible everywhere in the desert. Among the key beneficiaries of this boom are Thari Hindu women who are being employed by Sindh Engro Coal Mining Company (SECMC) as part of the plan to employ locals. Highlighted in recent news reports are two Hindu women in particular: Kiran Sadhwani, an engineer and Gulaban, a truck driver.

    North Korea to send team to Winter Olympic Games - BBC News: North Korea is to send a delegation to the 2018 Winter Olympic Games taking place in South Korea in February, officials from the South say. The breakthrough announcement came as the countries met for their first high-level talks in more than two years. The delegation will include athletes, officials and a group of cheerleaders. A military hotline between the nations, suspended for nearly two years, will be reinstated from Wednesday, the South's officials said. Talks have continued all day and the developments have been conveyed by officials from the South:

    • Vice unification minister Chun Hae-sung told journalists: "The North side proposed dispatching a high-level delegation, National Olympic Committee delegation, athletes, supporters, art performers, observers, a taekwondo demonstration team and journalists" to the Games
    • The South proposed that athletes from both Koreas march together at the opening ceremony in Pyeongchang as they did at the 2006 Winter Olympics
    • The South pushed for the reunion of family members separated by the Korean War - a highly emotional issue for both countries - to take place during the Lunar New Year holiday, which falls in the middle the Games
    • The South also proposed resuming negotiations over military issues and the North's nuclear programme
    • The South said it would consider temporarily lifting relevant sanctions, in co-ordination with the UN, to facilitate the North's participation in the Olympics

    The North's response to all of the South's proposals is not yet known. The opening remarks of head of the North Korean delegation, Ri Son-gwon, were fairly neutral. He said he hoped the talks would bring a "good gift" for the new year and that the North had a "serious and sincere stance".

     North Korea nuclear weapons may be why new talks with South Korea - North Korean leader Kim Jong Un has ignored recent peace overtures from Seoul but he's due on Tuesday to hold a formal dialogue with his southern neighbor for the first time in more than two years.The sudden interest in talks may have something to do with Pyongyang's nuclear arsenal. "The North has made significant advances in its ballistic missile and nuclear weapons program so I think they feel a bit more willing to engage in talks now that they've actually demonstrated an incipient nuclear capability that can strike the U.S.," said Taylor Fravel, associate political science professor at MIT.In November, the rogue state launched a new type of intercontinental ballistic missile capable of reaching the U.S. mainland. Known as the Hwasong-15, it can fly over 13,000 kilometers, or 8,080 miles.Speaking on the sidelines of the UBS Greater China Conference in Shanghai, Fravel said he isn't expecting much from Tuesday's discussion, which he believes will largely focus on potential North Korean participation at the Winter Olympics in the South Korean city of PyeongChang.   Kim has said that he was open to sending a delegation to the sporting event. In response, South Korean President Moon Jae-In's administration offered high-level talks to Pyongyang. "The key thing to watch is whether or not there's a second round of talks," said Fravel, who's also a member of the board of directors for the National Committee on U.S.-China Relations. "Certainly, not very much can be resolved in one meeting ... we'll have to see just how far the North is willing to go."

    North Korea Is Walking Back War – And Pundits Are Strangely Disappointed - Pundits seem more concerned about the North driving a “wedge” between the U.S. and the South than about preventing nuclear war. In talks this week at the DMZ, South Korea welcomed the participation of North Korea in the upcoming Winter Olympics. The two countries also discussed restarting reunions of divided families and reducing tensions on the Korean peninsula. Earlier, both sides reestablished their hotline.All of this adult conversation is a welcome change from the war of epithets between the “dotard” president of the United States and the “little rocket man” in Pyongyang.Strange, then, that a politically diverse set of pundits in the United States has been worried only about how North Korea could use these talks to drive a wedge between South Korea and the United States.Scott Snyder, from the Council on Foreign Relations, speculates that Kim Jong Un’s overture is a ploy to trap South Korean President Moon Jae-in “into concessions that might weaken South Korea’s alliance with the United States.” According to Danny Russel, the top Asia policy person in the Obama administration, “This is a classic united we stand, divided we fall situation. It’s always easier to maintain five party solidarity when North Korea is behaving badly.”And from the American Enterprise Institute on the right, Nicholas Eberstadt warns that “Pyongyang regards South Korea as the weakest link in the gathering global campaign to pressure North Korea to denuclearize” and urges Seoul not to “get played.”Then there’s the Wilson Center’s Robert Litwak, writing a piece in The New York Times entitled “A United Front Against North Korea.” Here’s the core of his argument:We should be wary of Mr. Kim’s intentions. His gambit may be a ploy to buy time for the additional testing needed to acquire the capability to strike the continental United States. He may simply be trying to extract economic relief. Or his overture may be purely strategic, an attempt to drive a wedge between South Korea and its superpower patron, the United States.

    Japan succession crisis could rip links out of auto supply chain - Japanese automakers and major parts manufacturers are dealing with one headache after another. "The chief of a supplier has grown old and is less motivated, leading to product quality problems," one industry insider lamented. Another complained of a different problem: "A small supplier for a top tier supplier went through a merger with little warning, undermining our efforts to hedge risk by ordering from multiple sources." This is the new reality in rapidly aging Japan, where nearly 1.3 million small and midsize companies are thought to be in danger of going out of business in 2025. The precarious future of smaller suppliers is a big worry for the auto industry that depends on them. Looking at all small and midsize companies, the owners of more than 60% will be at least 70 years old in 2025. The Ministry of Economy, Trade and Industry estimates 1.27 million such proprietors have not yet found anyone to take the reins. Half of all small and midsize companies that opt to fold are turning profits. Increasing closures of small and midsize businesses could rob Japan of 6.5 million jobs and 22 trillion yen ($193 billion) worth of gross domestic product by 2025. Still, not all companies have a sense of urgency. A survey conducted in October by Teikoku Databank found that just 13.6% of about 10,000 companies saw business succession as a top priority. While the figure for manufacturers was close to 15%, the ratio among transportation machinery and equipment manufacturers was only 8.8%. 

    Reuters Journalists Working to Expose a Mass Grave in Myanmar Have Been Charged - Prosecutors in Myanmar have formally charged two Reuters journalists with obtaining state secrets—an alleged violation of the authoritarian country’s Official Secrets Act. U Wa Lone and U Kyaw Soe Oo were investigating a potential mass grave of Rohingya Muslim migrants in Rakhine state when they were arrested Dec. 12, shortly after allegedly obtaining “important secret papers” from two police officers. Police and security officials in the area are blamed for the internationally reported rights abuses perpetrated against Rohingya Muslims. From the back of a police vehicle, Wa Lone said Wednesday: “I want to tell you that that they are charging us like this to stop us finding the truth. Their actions are wrong and unfair.” If convicted, the pair could face as much as 14 years in prison. The news agency’s editor-in-chief, Stephen J. Adler, said he was “extremely disappointed” by the charges. “We view this as a wholly unwarranted, blatant attack on press freedom,” Adler said in a statement.

    Macron tells Erdogan: No chance of Turkey joining EU  -BBC - French President Emmanuel Macron has told his Turkish counterpart, Recep Tayyip Erdogan, that there is no chance of progress towards Turkey joining the European Union at present. At a joint news conference in Paris, Mr Macron said there were differences over human rights since Turkey's purges following a failed coup in 2016. Mr Erdogan said Turkey was tired of constantly imploring to join the EU. He lashed out at a journalist who asked about claims Turkey sent arms to Syria. The journalist had asked him about a story in Cumhuriyet newspaper from 2015 which suggested that Turkish intelligence had sent the supplies.. Mr Erdogan responded by accusing the journalist of talking like a member of the Gulenist movement, which he blames for the 2016 coup. "When you ask your questions, be careful on this point. And do not speak with the words of another," he said. The two leaders promised to deepen their co-operation in the fight against terrorism "As far as the relationship with the European Union is concerned, it is clear that recent developments and choices do not allow any progression of the process in which we are engaged," he said. The talks were in effect halted following Mr Erdogan's crackdown after the coup. 

    Hungary's PM: "We Don't See Them As Refugees, We See Them As Muslim Invaders" - In an interview with German newspaper Bild, Hungary’s prime minister Viktor Orban called the migrant crisis an invasion.  He said: “We do not consider these people to be Muslim refugees, we regard them as Muslim invaders.” “One has to cross four countries to arrive from Syria in Hungary”, Orban said. “Those people do not run for their lives but seek a better life. The refugees should have requested admission in advance, but instead they had breached the border illegally.” As Deutsche Welle reports, according to Orban what Europe has seen was not a wave of refugees, but an invasion. He mentioned that he never understood how in a country like Germany the chaos and the illegal crossing of borders could be celebrated as something good. When asked by Bild whether it was fair for Germany to accept hundreds of thousands of refugees and migrants while Hungary accepted none, Orban responded:"The difference is, you wanted the migrants, and we didn't."  Migration, he said, threatens the "sovereignty and cultural identity" of Hungary.The Hungarian prime minister rejected the idea that his country should accept people from Muslim-majority countries.  “We believe that a large number of Muslims inevitably leads to parallel societies, because Christian and Muslim society will never unite,” he said. "Multiculturalism is only an illusion."  Orban added that Germany’s SPD leader Martin Schulz should have more respect for his country.

    Continent desperately seeking inflation -- Here’s a bright idea: Since the European Central Bank has struggled for years to reach its inflation target, why not change the target?To be sure, the idea is nowhere near ECB President Mario Draghi’s agenda, but the persistently low level of inflation in the eurozone has prompted some economists, bankers and policymakers to wonder whether that might not be worth considering — while other voices are arguing against it. At the core of the suggestion is the idea that globalization and technological innovation have changed the very nature of inflation. As summed up by Daniel Gros, director of the Center for European Policy Studies, these forces pressure production and distribution costs and bring universal competition to everyone’s doorstep. Central banks, the reasoning goes, keep fighting 21st-century inflation with 20th-century concepts and tools. Just before the euro’s creation in 1999, the nascent ECB decided that its treaty-enshrined mission to maintain price stability would mean that inflation should be kept below 2 percent “over the medium term.” A few years later, in 2003, the ECB’s governing council clarified that the target meant that inflation, while below, should also be kept “close to” the 2 percent target. The last time the ECB met its target was in 2012. In most recent years, it has missed the target by a wide mark. The preliminary estimate of inflation in December 2017 released on Friday shows that prices rose by only 1.4 percent on an annual basis, according to the EU’s statistical agency, Eurostat.That’s in line with the ECB’s own forecast, which saw inflation at 1.5 percent for all of 2017, with moderate energy prices and notably, subdued domestic wage increases. Looking ahead, the central bank is still nowhere near fulfilling its one and only mission. Inflation is even expected to decline this year — to 1.4 percent, then rise slowly in 2019 (1.5 percent) and in 2020 (1.7 percent). By then, it will amount to eight full years of ECB failure on the inflation front.

    Merkel meets with Social Democrats as preliminary ′grand coalition′ talks begin -  DW - German Chancellor Angela Merkel has returned to the negotiating table, this time with SPD leader Martin Schulz. She expressed optimism about the outcome, but admitted the parties were facing "a huge piece of work."German Chancellor Angela Merkel on Sunday met with the chairman of her Bavarian sister party, Horst Seehofer, and Social Democratic (SPD) leader Martin Schulz at the start of preliminary coalition talks in Berlin.As the negotiations got underway, Merkel acknowledged there was a lot of work ahead, but said she was "optimistic" the parties could reach an agreement. "I think that it can be done. We will work very swiftly and very intensively," she told journalists. Schulz said he hoped for "constructive and open" talks, adding that the German people deserved to see speedy progress. "We're not going to draw any lines in the sand, but we want to push through as many red policies in Germany as possible," Schulz said, referring to the representative color of his party. The talks come more than three months after Germany's federal elections in September last year. The vote saw all three parties lose considerable ground compared to 2013, with the far-right Alternative for Germany picking up most of the migrating voters.A first attempt by Merkel's Christian Democratic Union (CDU) to form a ruling coalition government with the Free Democrats (FDP) and Green Party failed back in November, after FDP chief Christian Lindner walked away from the negotiating table. Another coalition with the SPD therefore remains the only feasible option open to the chancellor, aside from the never-before-used option of a minority government. The Social Democrats know this all too well and might hope to drive a hard bargain despite their own weakened negotiating position.

    Merkel′s conservatives, Social Democrats agree on blueprint for formal coalition talks | News | DW | 12.01.2018: Chancellor Angela Merkel says exploratory talks in Berlin between her conservatives and rival Social Democrats are to go on to formal coalition negotiations. The SPD's Martin Schulz says he'll ask his party to proceed.German Chancellor Angela Merkel, Bavaria's Horst Seehofer and lead Social Democrat Martin Schulz have recommended the opening of formal next-stage negotiations on a possible "grand coalition." Merkel told a Berlin news conference that the participants in exploratory talks — underway since Sunday — had overcome their reservations. Schulz said all 13 Social Democrat (SPD) negotiators had endorsed the preliminary deal. "Excellent results" had been achieved, he said. Friday's joint leadership news conference took place at SPD headquarters. The draft policy document — texted by potential coalition intermediaries meeting overnight at SPD party headquarters in Berlin — spanned 28 pages, reported DPA. A "breakthrough" had also earlier been reported by Germany's parliamentary television channel Phoenix, adding that amendments to the text had been sought, especially among the SPD.  Some details have emerged from the draft copy, with DPA reporting that the sides had agreed to keep the top tax rate at 42 percent rather than raising it to 45 percent as wanted by the Social Democrats. An agreement was also reportedly reached to limit the number of migrant family members who will be allowed to join asylum seekers in Germany, as well as the overall number of migrants allowed in the country each year.

    Catalonia won’t be silenced By Carles Puigdemont - The Spanish government’s attempt to repress the voice of the Catalan people has failed.In last month’s Catalonian parliamentary election, pro-independence parties won the greatest support in their history. There were 113,000 more pro-independence votes than in the previous parliamentary election, in 2015, and 35,000 more votes than in the October 1 referendum on independence. It was, moreover, a record turnout for an election to the parliament of Catalonia.The final count shows support for independence at 2,079,340 votes (almost 180,000 more votes than those won by the constitutionalist bloc). Not only has the threshold of 2 million votes been surpassed, but independence sentiment has been consolidated and continues to grow. These figures serve as a ratification of the results of the October 1 referendum, which was held in highly adverse conditions. On that occasion, the Spanish government’s propaganda disparaged the results, arguing that there had not been sufficient guarantees. Madrid claimed that the census was not official, that the electoral authority was not independent, that the parties opposed to independence refused to take part and that the count hid fraudulent practices.  In spite of the extreme violence deployed by the government to try to prevent us from voting, the results of the referendum that I later conveyed to the parliament of Catalonia reflected a true, rigorous and valid opinion. The election on December 21 was called by Madrid, with its census, with its electoral authority, its ballot count and its rules of the game. What was the result? More votes for independence than on October 1.  I want to highlight these figures because it is on them, and not on propaganda, that one needs to base one’s opinion and make decisions. The results are a total rebuttal of the thesis that the Spanish state has been maintaining and disseminating: that pro-independence sentiment is declining (false) and is in a minority (false). The desire to be free from Madrid is rising, it is in the majority and it is lasting over time, despite the huge difficulties it faces.

    Catalan separatists to re-elect Puigdemont as regional leader - Politico -- The main Catalan separatist parties have agreed to re-elect Carles Puigdemont as regional leader later this month, the ousted leader’s spokesman said Wednesday.  Puigdemont, from the Junts per Catalunya political platform, struck the agreement with Marta Rovira, the second-in-command of the Catalan Republican Left (ERC), who is the party’s caretaker while leader Oriol Junqueras is in jail, at a dinner in Brussels on Tuesday, El País reported.  The new parliament is set to convene January 17. Puigdemont, who fled to Belgium to escape being jailed, plans to appear before the parliament via video link or have his speech, which candidates for the leadership must deliver before a vote, read by a proxy, according to El País.  The former Catalan leader said Tuesday, “It is not possible to return to Catalonia.”  Puigdemont faces possible charges of rebellion, sedition and misuse of public funds in relation to the independence referendum if he returns to Spain. He has previously said he will only come back if Madrid offers certain “guarantees.” Several Catalan activists and officials are still behind bars in provisional detention. The pact between Junts per Catalunya and ERC came after former Catalan President Artur Mas announced Tuesday he would step down as head of his separatist PDeCat party. Secessionist parties won the most seats in the December 21 election, called after Spanish Prime Minister Mariano Rajoy fired Puigdemont and his Cabinet as a result of the regional parliament voting in favor of a declaration of independence from Spain in October.

    Angry Protesters Burn EU Flags As Chaos Strikes Bulgaria -- It was supposed to be a time of celebration of Europe's unelected oligarchs. Instead, protests broke out on the streets of Sofia, Bulgaria where demonstrators burned EU flags because they feel ignored by the bloc. Appropriately, protests kicked off in the capital Sofia on the same night Bulgaria took over its first Presidency of the European Council from January 2018 until June 2018. EU commissioners are in the city as Bulgaria begins its presidency - and guests at the opening ceremony of the presidency in Sofia, including European Parliament President Antonio Tajani, European Commission President Jean-Claude Juncker and the Council head Donald Tusk, the Express reports. According to Sofia Globe, 11 protests are being held across the city tonight. Former president Rossen Plevneliev said: "These protests are not a symbol of future political action, but they are telling us something important – the whole political elite has not done its job over the years." George Pykov, a Bulgarian who is currently an executive committee member for Young Independence and studying Law at the University of Portsmouth told “The EU has no interest in Bulgaria or any Eastern European country. "Issues that were meant to be solved have not, and I’m pleased to hear that Bulgarians are fighting back against an expansionist and fanatic Union. "I and many other Bulgarians living in Britain hope that, one day, we will see a Bulgarian exit from the EU to join the UK in an exciting new, independent future. "It is time for Bulgaria to be free from mob rule.” 

    ECB Spawned Financial Dependency That’s Now Very Hard to Undo -- As the Eurozone economy continues to grow, pressure is rising on Europe’s biggest bond buyer, the ECB, to withdraw from the market, a process it has already begun. No one believes that more than the head of Germany’s Bundesbank, Jens Weidmann, who recently told Spanish newspaper El Mundo that the ECB should soon set a date to end its multi-trillion euro asset-buying program. ”The prospects for the evolution of prices correspond to a return of inflation to a level sufficient to maintain the stability of prices,” he said. “For this reason, in my opinion, it would be justifiable to put a clear end to the buying of bonds by establishing a concrete date (for ending the program).”Weidmann, who is hotly tipped to replace Draghi in 2019, has been one of the most vocal critics of the ECB’s QE program. “Central banks have become the largest creditors of nation states,” Weidmann noted. “With our program of bond purchases, the financing conditions of Member States depend much more directly on monetary policy than in normal times. This could lead to political pressure on the ECB board to maintain lax monetary policy for longer than would in fact be justified from the perspective of price stability.”  Though it has lowered its asset purchases to €30 billion a month, the ECB has pledged to keep buying until at least September. But with the Eurozone economy growing faster than it has since the crisis and inflation comfortably above 1%, the ECB is widely expected to wind down the program thereafter. “If the economy continues to do so well, we could let the program run out in 2018,” ECB rate-setter Ewald Nowotny told Sueddeutsche Zeitung.But what would that mean for the countries, companies, and banks that have grown to depend so much on the ECB’s extraordinary largesse?

    Brexit: Philip Hammond refuses to rule out UK staying in ‘a customs union’ after leaving EU -- Chancellor Philip Hammond has refused to rule out being in a customs union with the EU after Brexit. Mr Hammond was offered the opportunity to close down the option of the UK remaining in a long-term customs union with the EU during an exchange of letters.Chair of the Treasury Select Committee Nicky Morgan who wrote to the Chancellor, said it proved the option was still on the table. It comes as British negotiators prepare to hammer out details of how the UK’s transition period will be governed once the country’s EU membership ends, expected to be in March 2019.Theresa May has said the country will leave the existing EU customs union at that point, with Brexiteers demanding the move to allow Britain to negotiate new trade deals.But in her exchange of letters with the Chancellor, Ms Morgan offered Mr Hammond the opportunity to rule out the UK being in any customs union with the EU – something he declined to do.The Conservative Committee Chair said: “It was widely thought that being in a long-term customs union with the EU had been ruled out by the Government. But the Chancellor’s letter confirms that this is not the case.“It is vital that the Cabinet reach agreement on these central questions about the UK’s future relationship with the EU, as a matter of urgency.”The Cabinet is still divided over what the end state relationship with the EU should be with Mr Hammond and Home Secretary Amber Rudd backing a closer relationship with Europe, while the likes of Foreign Secretary Boris Johnson and Environment Secretary Michael Gove are pushing for greater divergence.Mr Hammond’s response suggests the idea of being in a form of modified customs union with Brussels is still something being considered by the Prime Minister. But the notion will anger Brexiteers who want the country to completely break free from the EU, and sign new trade deals with other countries – something that a customs union of any sort is likely to exclude.

    Theresa May’s Cabinet Reboot Descends Into Chaos -  U.K. Prime Minister Theresa May’s attempt to give her government a 2018 reboot was marred by a chaotic cabinet reshuffle as senior ministers refused to follow her orders. It’s a development that bodes ill for her ability to successfully navigate the next, even trickier stage of Brexit talks.May’s office flagged Monday’s events as “a refresh” of her top team. But instead of the usual parade of lawmakers arriving at her office in quick succession to accept their new roles, things went off script. First Health Secretary Jeremy Hunt, then Education Secretary Justine Greening were locked in discussions with her after rejecting proposed moves.Hunt eventually won his argument to stay on, but Greening, who spent more than two hours in 10 Downing Street, quit rather than accept another job. May was said to be “disappointed” at losing Greening, who opposed Brexit, and could now vote with pro-European Union rebels in the House of Commons. It was not the restart she wanted. There were echoes of her botched decision to call an election in her announcement of a reshuffle she didn’t have to carry out. In both instances May seemed to dissipate any political goodwill she recouped. She’ll chair the first meeting of her new cabinet on Tuesday, as she continues a reshuffle of the junior ranks of government.“We’re only now just getting into the wider part of the reshuffle,” new Conservative party Chairman Brandon Lewis said on Tuesday in a BBC TV interview. “You can look forward to seeing some good fresh talent coming through and also a really good diverse government being put in place across all departments.” The premier had begun the new year in a position of relative strength, having concluded a problematic first phase of talks over Brexit -- still the issue that will define her political legacy and will only get more complicated this year.

    Philip Hammond and David Davis warn of a global crash if financial services are excluded from final Brexit trade deal -- EXCLUDING financial services from the final Brexit trade deal with the EU would raise the risk of a fresh global crash, Philip Hammond and David Davis suggested last night.In a carrot and stick offer in an article in a German newspaper the Chancellor and Brexit Secretary said that only a deal that “supports collaboration within the European banking sector” would protect both UK and German economies. Raising the spectre of a repeat of the 2008 global financial crash for the first time, the pair wrote: “The economic partnership should cover the length and breadth of our economies including the service industries — and financial services.“Because the 2008 Global Financial Crisis proved how fundamental financial services are to the real economy, and how easily contagion can spread from one economy to another without global and regional safeguards in place.”Their appeal for financial services to be included in the final trade deal came as the EU’s chief Brexit negotiator Michel Barnier signalled he was warming to the idea - despite categorically ruling out a deal for the City of London last month. Speaking yesterday, Mr Barnier said Britain will be offered a “tailor made” trade deal that can “include provisions on regulatory cooperation” on financial services.Hammond was recently feuding with Davis over a No Brexit Deal scenario But he ruled out granting the vital passporting rights for British banks that are crucial in allowing them to trade freely across the EU. The show of unity from Mr Hammond and Mr Davies comes after feuding between their departments over preparation for a No Deal Brexit scenario.

    Brexit: UK Still Refusing to Do Any Thinking Re Trade  - Yves Smith -  We are in a relatively quiet period regarding Brexit, which in and of itself isn’t a good thing. If the UK had the remotest apprehension of the massive changes that it has set in motion, both government officials and business leaders would be moving heaven and earth to try to minimize disruption and move the country as rapidly as possible into operating like more of an autarky (not that the UK can become self-sufficient, but driving in that direction would be beneficial).In the way of a mini-update, two stories highlight a manifestation of Brexit denialism. It has been both fascinating and distressing to watch an entire country sleepwalking towards a cliff, telling itself that things won’t change much, or if they do, they won’t be all that bad or will somehow be worth the sacrifice. In reality, the UK will undergo a significant, permanent decline in its standard of living. And it is not as if the UK is cohesive enough to take that at all well. One of bizarre ongoing features is the Government’s refusal to engage the question of what sort of post-Brexit arrangement it wants with the EU. The EU has, Lord only knows how many times, told the UK what its boundary conditions are, most importantly that any arrangement has to fit within the parameters of existing deals. The UK’s negotiators doesn’t even have the self-awareness to see the fact that Barnier had to produce this chart in December to tell them that there was only one option, given UK red lines, was pathetic: Yet we still have UK leaders prattling on about “special relationship,” “bespoke,” and “Canada plus plus plus” when nothing remotely like that will happen unless the UK retreats from some of its red lines.The UK is even managing the difficult feat of regressing. Chancellor Philip Hammond, who had seemed more capable than the other ministers in May’s cabinet (admittedly a very low bar), has now joined the Brexit race to the bottom with his insistence that it is the EU that is holding things up by not saying what kind of post-Brexit arrangement it wants with the UK.  Richard North does his usual able job of eviscerating this nonsense:

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