Recent Hurricanes Wreak Havoc, Produce Bipartisan Congressional Support and Trump Jones Act Waivers

Mainbrace | October 2017 (No.4)

C.J. Zane, Alan Rubin, and Joan M. Bondareff

As we are putting this issue of Mainbrace to bed, our thoughts are with the residents of Puerto Rico, Texas, and Florida who are still recovering from the rarest of U.S. tragedies—three major hurricanes to directly hit U.S. land within a month. These disasters brought unique opportunities for neighbors to help one another and for bipartisanship in Congress, including a new deal with President Trump. The crisis in Puerto Rico is ongoing, and we can only project the funds needed to rebuild the island’s fragile infrastructure—from ports to roads, bridges, and the electric grid.

Hurricane Harvey Aftermath
Houston is the fourth largest city in the United States, and also the country’s oil and gas capital. Harvey is considered a “once-in-a-1,000-year” storm, with an estimated 50,000 to 100,000 homes and buildings flooded in its aftermath. But, as we know, these events are becoming more frequent—think of Katrina, Super Storm Sandy, and now, Hurricanes Irma and Maria.

Texas Gulf Coast refineries provide nearly one-third of the nation’s oil and gas capabilities. At one point during the storm, 20 percent of the country’s refining capacity was offline. At this time, nine refineries in the region remain shut down, while seven others have begun the process of restarting operations.

Additionally, at least one chemical plant in East Texas closed and experienced internal explosions due to flooding and the inability to keep its chemicals refrigerated at safe levels. Transit restrictions remain in place for the Houston Ship Channel, as well as the ports of Beaumont/Port Arthur and Corpus Christi. The ports of Brownsville and Freeport, Texas, are fully open.

Residents are assessing home damage and counting their blessings if they have adequate flood insurance.

Hurricane Irma Aftermath
Hurricane Irma came ashore as a Category 4 hurricane in the Florida Keys on September 10, 2017, and headed to the west coast cities of Naples and St. Petersburg. Due to the size of Irma, all of Florida was affected by hurricane-strength winds, flooding rain, and storm surges. Power has been restored to most of Florida, but the assessment of the long-term uncompensated damage is just beginning.

The burden these storms have put on FEMA is tremendous, but, to its credit, Congress has come to FEMA’s aid and provided initial disaster relief of $15 billion. President Trump promptly signed the bill into law after reaching an unusual deal with the two Democratic leaders, Senator Chuck Schumer (D-NY) and Congresswoman Nancy Pelosi (D-CA), to attach a short-term provision lifting the debt ceiling to the relief bill, and a short-term Continuing Resolution (“CR”) to fund the federal government until December 8. This is just the first tranche of what will be further supplemental appropriations to handle recovery efforts in those states and territories affected by the hurricanes.

At the request of the Pentagon, Acting DHS Secretary Elaine Duke granted a temporary waiver of the Jones Act for cargo coming into Texas and Florida. This waiver has now expired.

Congress Responds to Harvey and Irma and Begins to Tackle Maria
This article describes what initial steps Congress has taken in response to the hurricanes, recognizing that more recovery aid will have to be forthcoming. Preliminary estimates peg Harvey’s wrath somewhere in the range of $90 to $180 billion. A similar figure may be used for the damage caused by Hurricane Irma.

Congress returned to work from the August recess on September 5, 2017. Members were already facing a plethora of difficult issues to resolve before the end of the fiscal year, including raising the debt ceiling; funding the government for FY2018, which began on October 1; and reauthorizing critical pro- grams such as the National Flood Insurance Program (“NFIP”). Adding Hurricane Harvey and Irma relief on top of this agenda was particularly challenging.

President Trump had threatened, before Harvey, to shut down the government if funding for his “border wall” with Mexico was not included in the FY2018 budget. House bill H.R. 3219 contains $1.6 billion for the wall. Due to the damage from the hurricanes and the funds required for recovery, it is very likely that President Trump and Congress will put the debate over funding for the wall aside until at least December 8, when the current short-term CR funding bill expires, in order to prioritize Harvey, Irma, and Maria relief. For a change, a divided Congress seems to be united in an effort to provide necessary relief instead of falling on political swords.

On September 8, 2017, President Trump signed into law H.R. 601, which provides $15.3 billion for disaster relief. As mentioned above, the bill also includes a CR providing funding for the federal government at 2017 rates through December 8, 2017, and raises the debt ceiling limits through to that date. Further discussions are ongoing with the Democratic leaders—to the chagrin of the Republican Caucus—to raise the debt ceiling on a permanent basis. Only four Texas members voted against the bill, due to the provision that lifted the debt ceiling without offsetting cuts to the federal budget.

Included in the emergency funding is $7.4 billion in emergency supplemental funding for FEMA’s Disaster Relief Fund, $450 million for the Small Business Administration’s (“SBA”) disaster loans, and $7.4 billion for the U.S. Department of Housing and Urban Development’s (“HUD”) Community Development Block Grant (“CDBG”) Program for housing and other related purposes. Given the enormous size of the recovery and relief estimates, this is easily seen as a down payment for further supplemental appropriation bills.

Another critical issue facing Congress is what to do about flood insurance—in particular, the National Flood Insurance Program (“NFIP”) whose authorization would have expired on September 30, and which is currently $25 billion in debt. Although five out of six residents in Houston do not have flood insurance, and 40 percent are living in flood-prone zones in Florida, those who do will depend on the reauthorization and extension of the NFIP for reimbursement. Even before the recent hurricanes struck, Congress was divided over how to restructure the NFIP. Some members wanted to include private insurers in the mix, while others wanted to limit flood insurance in certain areas prone to repeated flooding. But, post-Harvey, it is likely that a straight reauthorization of the current NFIP without serious restructuring will occur, leaving further reforms for a later day. The supplemental appropriation bill, above, also extended the NFIP until December 8, leaving more significant improvements to a later day.

By December 8, Congress will have to either provide funding for the government for the rest of FY2018 (likely in an “Omnibus” package), or pass another temporary, short-term CR on or before that date to allow themselves more time to pass an Omnibus appropriations bill for the balance of FY2018. It remains to be seen whether Congress will continue to slash budgets for programs that could mitigate the impact of future hurricanes.

The Trump administration’s proposed FY2018 budget called for reduced funding of FEMA and related pro- grams (e.g., the Coast Guard, National Oceanic and Atmospheric Administration, National Weather Service, Chemical Safety Board, CDBG Program, etc.), and we anticipate that these cuts will be seriously recon- sidered in light of Harvey, Irma, and Maria. It’s easier to slash federal budgets when everything is going well, but in the face of this natural emergency, allowing coastal states to use Coastal Zone Management Act (“CZMA”) money, for example, to build resiliency plans makes a lot more sense. Who can argue now against full funding for FEMA? Or against the Coast Guard whose personnel, boats, and helicopters alone rescued 6,000 residents from rooftops and flooded homes in Houston? Or against HUD’s CDBG Program? Or against small business loans from the SBA? Likely, only a few diehard members of the House Freedom Caucus will try to hold the line on increasing federal spending and deficits.

Following the passage of an immediate Hurricane Harvey and Irma relief package, Congress will have to turn to longer-term issues facing Texas, Louisiana, Florida, and other regions hard-hit by Harvey, Irma, and Maria. These include rebuilding ports and critical infrastructure, providing short-term housing, creating new ways to expedite small business and home rebuilding loans, and, perhaps, providing funding for FEMA to have its own fleet of small boats.

Puerto Rico Devastated by Hurricane Maria, President Trump and Congress Respond
On September 20, 2017, Puerto Rico took the full brunt of Category 4 Hurricane Maria, and the entire island is presently without power and water. The governor of Puerto Rico is said to be in discussions with House Speaker Ryan for immediate aid, especially to rebuild the power grid. House Minority Leader Pelosi has called on the Navy to bring supplies to the island, and USNS Comfort is now steaming towards the island. A three-star army general has been put in charge of the relief efforts.

Under pressure from certain members of Congress and the governor of Puerto Rico, on September 28, 2017, the secretary of homeland security waived the Jones Act for the transportation of all products into Puerto Rico for 20 days. Others like Senator John McCain (R-AZ) are calling for a permanent waiver. Ironically, most containers brought to Puerto Rico by U.S.-flag vessels are still sitting on the docks at the port because the distribution system throughout the island is non-existent.

In the meantime, Congress has passed new legislation granting tax relief to taxpayers in all areas affected by the three hurricanes. A proposal to allow private insurers to be part of the NFIP was left on the cutting-room floor after Senate opposition. Puerto Rico will be able to use some of the FEMA funds provided earlier for Florida and Texas. A new request from the White House for Puerto Rico relief is expected later this month.

What Happens Next
Today, we’re overwhelmed by stories about tragic loss of life, overcrowded shelters, closed hospitals, nursing home losses, the courage of survivors, the thousands of water rescues, neighbors helping neighbors, residents of nearby states helping Texans and Floridians, and first responders and engineers trying to get to Puerto Rico to do what they can to rebuild the island’s infrastructure. Once the flood waters recede, Congress will turn to longer-term issues to help the recovery process, including preparing an aid package to help businesses get back to work, building stronger levees, restructuring the NFIP, and cleaning up polluted rivers and ship channels. Even some residents and officials in Houston are debating whether to rebuild in the same areas that flooded in Harvey and previous floods. Florida will have to assess whether the new building codes imposed after Hurricane Andrew withstood the power of Irma. How to rebuild the infrastructure and electric grid in Puerto Rico to enable the quickest recovery and withstand future storms will be top priorities for Congress and the private sector to address.

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