Trump’s Chinese gas deal raises ethics issues for Wilbur Ross

November 9, 2017 3oliver

U.S. Secretary of Commerce Wilbur Ross gives a speech at the annual CBI (Confederation of British Industry) conference in London on Nov. 6, 2017. Andy Rain / EPA

Navigator did not respond to questions about the impact of the natural gas market and Ross’ policymaking on its own business. Asked whether the LNG deal with China posed a conflict of interest, the Commerce Department said that Ross works closely with the department’s ethics officials “to ensure the highest ethical standards,” a department spokesman, James Rockas, wrote in an email. “They continually review the Secretary’s activities and advise him on appropriate recusals.”

Ross began divesting from Navigator months ago “for reasons unrelated to the current controversy,” says Rockas, adding that Ross is “nearing the conclusion of that process.” According to federal documents, Ross

sold $15,001 to $50,000 in Navigator stock on May 31, a little over two weeks after the Commerce Department announced the trade deal with China. On Tuesday, the Commerce Department told the Center for Public Integrity that Ross has also divested himself from Diamond S Shipping Group, a petroleum-shipping company that raised similar conflict-of-interest concerns.

The question of whether Ross or Navigator will directly benefit from the China deal, or from the growth in the market for LNG, is not a settled one. Ethics lawyers say that they would need more information to determine whether Ross acted properly. While Navigator “strongly suggests” in its financial filings that expanding natural gas facilities would have a positive impact on the market for the product it ships, Painter says that “it is not certain this is true.”

What’s more, it’s unclear whether the specific trade deal that Ross delivered on LNG would necessarily increase the demand for Navigator’s work in shipping a different kind of gas.

Both LNG and LPG are derived from shale gas, the production of which has been

booming in the U.S. Shale reserves of “wet” gas produce a mixture of methane and substances like propane, butane, and ethane. The methane can be used to create LNG if it is cooled to very low temperatures. The other substances can be separated out to create LPG, which is used for heating, cooking and vehicle fuel.

That’s why industry experts say that a boom in liquefied natural gas could also help the LPG market. “The expansion of LNG production and natural gas production would have a tendency to lead to greater LPG production,” says Jason Feer, global head of business intelligence for Poten & Partners, an energy and transportation consulting firm in New York. “We’re still producing more than we can consume ourselves. If you saw an additional increase in natural gas production, you would get more LPG exports.”

‘A no-go for a commerce secretary’

Navigator appears to conflate the two types of fuel in its SEC filings. “U.S. based shale plays have been developing rapidly over the last few years, increasing LNG production, which consists of among others, propane, butane and ethane molecules,” the company

wrote. Navigator adds that the growth in LNG markets has helped boost international trade by clearing bottlenecks at export terminals — another change that Ross has advocated for as commerce secretary.

Higher LPG exports would probably

increase the demand for shipping companies that specialize in transporting the substances, but certain types of ships might be favored over others. Navigator, for example, specializes in medium-size vessels, but the fastest growing demand for LPG is in Asia, which is more likely to rely on large carriers for long-haul trips. As a result, it would be difficult to determine whether any specific shipping company would benefit from a boom in natural gas, says Feer. “It’s just not predictable.”

So while there might be a connection between expanding the market for LNG — the goal of Ross’ trade agreement with China — and the product that Navigator ships, that isn’t necessarily a problem under federal law. The connection between the policy matter and the financial interest “can’t just be speculative,” Clark says. “There is a big dollop of uncertainty about whether the conflict of interest statute comes into play” in Ross’ case, given the complexities of the natural gas market, she adds.

Such thorny questions are why some ethics experts say that Ross should have divested from Navigator and any other shipping company before he joined the administration. The Commerce Department

said that Ross would recuse himself from “any matters focused on transoceanic shipping vessels,” adding that he hasn’t had to seek any ethics exemptions so far. “There is no conflict of interest,” Ross told Bloomberg TV, because “we don’t regulate shipping.”

But Painter points out that there is far more that the Commerce Department can do to affect the financial outlook for shipping companies, given the integral role of transportation in international trade. “This is a brain-dead idea, to keep a shipping company,” he says. “A shipping company is a no-go for a commerce secretary.”

Jeff Hauser, a long-time progressive activist and executive director of the Revolving Door Project, an advocacy group that works to prevent the private enrichment of public officials, believes that “an impartial prosecutor” should be empowered to determine whether Ross ran afoul of federal conflict of interest laws. “Ross’ behavior clearly fails the smell test,” he says.

But Hauser and other ethics advocates say their concerns about Ross’ behavior go beyond the letter of the law. “There are legal questions, and there are norms that have served us well,” says Meredith McGehee of

Issue One, an advocacy group seeking to reduce the role of money in politics. “The tradition has been to bend over backwards to assure the American people that no conflict exists. This administration has thumbed their nose at that norm.”