HOUSTON — Republican Sens. Lisa Murkowski of Alaska and John Cornyn of Texas talked energy, environmental regulations and their mutual concerns over tax reform proposals as CERAWeek by IHS Markit ended March 10.

Both senators also voiced support from a modernized and updated version of the North American Free Trade Agreement (NAFTA), which President Donald J. Trump has called the “worst trade deal maybe ever signed anywhere, but certainly ever signed in this country.”

Cornyn said he has been encouraged to hear U.S. Commerce Secretary Wilbur Ross say he’s in favor of updating NAFTA, “not throwing it in the waste bin.”

Cornyn said the energy renaissance experience in North America is now in its earliest stages in Mexico, thanks to the government’s shift to allow foreign investment into the country.

It’s also an example of how things have radically changed since NAFTA was enacted more than two decades ago, Cornyn said.

Murkowski, sharing the stage with Cornyn, said she agrees that it’s fair to reevaluate the agreement given the changes “particularly within the energy space.”

Cornyn said he and fellow senators traveled to the Texas border region where he made the point that some 5 million U.S. jobs depend on bi-national trade with Mexico alone.

“It’s real important we do nothing to damage that,” he said. “Trade’s been a very important element of our economic development in Texas.”

One key area of growing trade is natural gas exports, which have increased significantly over the past several years and are beginning to gradually displace Mexico’s LNG imports, according to the U.S. Energy Information Administration.

The U.S. trade deficit with Mexico was about $63.2 billion, a 4% increase from 2015 but overall a small contributor to the nation’s overall $743 trillion trade imbalance with the world.

But U.S. energy exports utterly dwarfed Mexico’s as the country becomes especially dependent on natural gas for electrical generation as well as gasoline.

In 2016, U.S. energy exports to Mexico totaled $20.2 billion — more than double Mexico’s energy imports back to the U.S. of $8.7 billion, according to the U.S Energy Information Administration (EIA).

“I think people in the United States may be surprised by the changes in our energy trade with Mexico over recent years,” Howard K. Gruenspecht, acting EIA administrator, told Hart Energy in a recent interview.

While Cornyn understands the president’s distaste for multilateral agreements such as the Trans-Pacific Partnership, “I like to say that NAFTA’s not a dirty word in Texas.”

Cornyn said the loss of manufacturing jobs and a more complicated marketplace due to globalization is worth addressing.

“But I don’t think it’s fair to put all those ills at the feet of trade. I think trade’s been very helpful,” he said.

Both senators were also unsure whether a proposed border adjustment tax is a wise course for tax reform now being hammered out by Republicans in Congress.

Conceptually, Rep. Kevin Brady, R-Texas, sees the current trade system carrying a “made in America” tax globally. The border adjustment tax (BAT) would eliminate the ability for companies to deduct the cost of imports.

“At the same time, it would eliminate the tax on income attributable to exports,” according to analysis by the Tax Foundation.

The BAT could also have implications on U.S. exports to other nations, including its energy trading partners.

Cornyn said he’s concerned about the ramifications of the plan.

“The more I’ve looked at it the more I worry that the assumptions on which its based are really unproven, and I think it’s just huge gamble when you’re talking about a trillion-dollar revenue,” he said.

Cornyn said the tax also appears to cut corporate rates while raising them on consumers through higher prices on gasoline, consumer goods and automobiles “dependent on the current business model and tax structure.”

Cornyn added that he is in support of tax reforms.

Murkowski also has misgivings about the BAT, particularly as it relates to energy costs.

Congress needs to understand the impact and implications as well as the politics associated with it, she said.

“From oil producing state like Alaska, we can see there is real benefit from exporting our oil,” she said. “But we’re also one of the highest-cost energy states when it comes to what we pay for the price of fuel within state.”

Murkowski said she’s not interested in a policy that would increase the price of gasoline in Alaska, where motorists pay up to $7 per gallon compared with AAA’s average price of $2.31 per gallon.

Murkowski said she wants to make sure that “the assumptions upon which we’re basing this approach and this model really do play forward.”

Darren Barbee can be reached at dbarbee@hartenergy.com.