Continued negotiations on an ambitious two-track approach to expedite the transition to a lower-carbon energy sector triggered a partial government shutdown Oct. 1 as surface transportation programs expired, jeopardizing highway projects and potentially dampening asphalt demand.
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Congress averted a full government shutdown by passing a stop-gap spending measure that funds federal agencies through Dec. 3. That continuing resolution did not include reauthorization of federal surface transportation programs, which expired midnight Sept. 30. As a result, about 3,700 Department of Transportation employees were furloughed Oct. 1 and road-building funds will stop flowing to the states.
A five-year reauthorization of those programs is included in the bipartisan infrastructure bill, but that measure's fate is entangled with a sprawling $3.5 trillion budget reconciliation package. Progressives in the House of Representatives have dug in their heels, insisting they will vote down the infrastructure bill if it is not accompanied by action on reconciliation, which has moderates balking at its hefty price tag.
The threats have delayed several attempts by House leadership to bring the infrastructure bill up for a vote on the House floor. They have also put the spotlight on negotiations with moderate Senators Joe Manchin of West Virginia and Kyrsten Sinema of Arizona, who have said they would tank the reconciliation bill in its current form. Reaching an agreement there is seen as unlocking the votes needed to pass the infrastructure bill.
Manchin, who leads the Senate Energy and Natural Resources Committee, has said the spending bill should be trimmed to $1.5 trillion and has aired concerns about what the proposed Clean Electricity Performance Program would mean for consumers in his coal-heavy state and for electric reliability. Sinema has been less public with her asks but has said leadership knows where her priorities lie.
"We are dealing with very real repercussions. Thousands of federal employees at USDOT are being furloughed and $50 billion of federal surface transportation programs supported by the Highway Trust Fund are being suspended. This is unacceptable," said Jim Tymon, executive director of the American Association of State Highway and Transportation Officials.
S&P Global Platts Analytics in August increased its US demand forecast for asphalt by 13,000 b/d for 2021 and by 53,000 b/d for 2022 on the belief that the housing market would remain strong and that the prospects for passing an infrastructure bill were good.
That forecast could see downward revisions if the infrastructure bill were to be taken off the table as well as due to the growing possibility of labor and material shortages and higher interest rates, Platts Analytics said.
Total US asphalt inventories at 23.211 million barrels for the week ended Sept. 24 were down 50,000 barrels from the prior week, but slightly above the five-year average of 23.173 million barrels, US Energy Information Administration data shows.
The infrastructure bill is seen as capable of spurring a supercycle of demand for asphalt pavement if it can make it to the president's desk.
The House has signaled that it will vote on a 30-day patch for the highway, transit, and safety programs.
Representative Eleanor Holmes Norton, who heads the House Transportation subcommittee on highways and transit, said Congress would not adjourn for the weekend without resolving the program lapse, whether that be through the passage of the infrastructure bill or a stand-alone measure extending the program for 30 days.
"If [the infrastructure bill] does not pass today, we are virtually guaranteed a 30-day extension," she told S&P Global Platts, adding that such a measure would be brought to the floor Oct. 1, if necessary.
President Joe Biden Oct. 1 met with the House Democratic Caucus on Capitol Hill to make the case for his Build Back Better agenda.
Following that meeting, Congressional Progressive Caucus Chairperson Pramila Jayapal, Democrat-Washington, said a vote that evening on surface transportation legislation was likely, suggesting there would not be a vote on the infrastructure bill. Still, negotiations were expected to continue throughout the weekend and into the following week, both formally and informally, on the two-track reconciliation and infrastructure packages.
The infrastructure bill would reauthorize the federal-aid highway program and other surface transportation programs for five years, provide record amounts of funding for highway improvements and prevent a revenue shortfall in the federal Highway Trust Fund used to reimburse states for road projects.
Language for a 30-day program extension has not been made public and left those in the asphalt industry leery of taking that approach.
"From the industry perspective, this talk about [an] extension is not good to get this deal done," Jay Hansen, executive vice president for advocacy at the National Asphalt Pavement Association, said. "It would take the heat off of passing the infrastructure bill," he said of an extension, whereas the program lapse adds pressure on Congress members "to do what they need to do, not to kick the can down the road but to pass this five-year reauthorization that fixes the Highway Trust Fund."
He added that an extension would also require Senate approval, and there were a number of reasons why a senator may object to the measure, including to keep the pressure on for a House vote on the infrastructure bill. "So it's not a done deal even on the extension," he asserted.
Most states can weather the highway program lapse for a few days, but a prolonged halt of payments would prompt states that are more dependent on federal dollars for roadwork to shut down highway projects.
Hansen did not see an immediate impact on the road paving sector as the construction season is wrapping up. More troubling would be a standoff on the infrastructure bill that leads to more short-term extensions of the highway program. State DOTs not knowing what the federal contribution to their highway programs will be could depress winter bid lettings and keep multi-year highway projects on the shelf.