Daily on Energy: Automakers caught in tug-of-war between Trump and California

Back in 2017, when the Trump administration first came into office, car companies lobbied the Environmental Protection Agency and the Transportation Department to take another look at federal fuel economy standards. The Obama EPA in its final few months had rushed through a determination to keep the stringent standards, and car companies wanted some relief, they told the administration.

But now, car companies are the ones being lobbied by two warring factions — the Trump administration and its allies on one side, and California, Democratic lawmakers, and environmentalists on the other.

Each side wants the industry to back them up in the ever-escalating battle over the future of fuel economy and greenhouse gas limits for passenger cars.

And at this point, even if automakers don’t pick a side, they might end up getting burned — by years-long litigation prolonging uncertainty in the market and potential enforcement actions from either side against each other or the automakers themselves.

“You talk to the engineers at the car companies, and they say, ‘Just tell me what the rules are,’” Maureen Gorsen, partner in Alston & Bird’s environment, land use, and natural resources group based in California, told Abby. The politics are “all fun and games, but they just need to know.”

But nothing is set in stone at this point, she said, adding the landscape could dramatically change depending on what action the courts take and who wins the presidency in 2020.

In July, four automakers finally chose sides. Ford, Honda, Volkswagen, and BMW struck a deal with California to follow standards weaker than the Obama-era rules but much more stringent than what the Trump administration proposed.

Tensions between Trump and California keep getting higher, and the automakers’ deal is caught up in it: During an announcement at EPA headquarters Thursday that the Trump administration would eliminate California’s authority to set its own greenhouse gas limits for cars, agency officials also hinted they could take legal action against the California deal.

That would be separate from an antitrust investigation the Justice Department has already launched against the four companies to explore whether they violated federal competition laws by teaming up with California.

California needs to apply for a new waiver from the EPA to be allowed to change its state-level vehicle rules to accommodate the deal made with the automakers, EPA general counsel Matt Leopold told reporters Thursday.

“California knows this full well,” Leopold said, in response to questions from Abby. “We haven’t been contacted by California to seek any waiver, so we question the legality of that.”

Leopold didn’t say directly whether the EPA could bring an enforcement action against California, but he didn’t rule it out either.

“I will say that the law is clear that absent a waiver from the EPA, they can’t adopt or attempt to enforce — that’s the language of the statute — standards,” he added.

Meanwhile, automakers’ phones are ringing off the hook: Senator Tom Carper of Delaware, the top Democrat on the Senate environment committee, told reporters Wednesday he and his staff called nearly a dozen automakers to urge them to join the California deal.

Environmental groups are putting increasing pressure on the companies, too.

“Investors understand that California’s stronger standards spur innovation and keep the U.S. auto industry competitive, and they know undermining those standards would throw the industry into disarray,” Sue Reid, vice president of climate and energy for the sustainable investment group Ceres, said in a statement.

Reid urged other automakers to join the compromise with California.

No other car companies have spoken up to join the deal so far. But some in the auto industry are still holding onto hope and urging the Trump administration and California to come back to the negotiating table.

Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writer Josh Siegel (@SiegelScribe) and Abby Smith (@AbbySmithDC). Email [email protected] for tips, suggestions, calendar items, and anything else. If a friend sent this to you and you’d like to sign up, click here. If signing up doesn’t work, shoot us an email, and we’ll add you to our list.

WHEELER GETS HEAT OVER WEAKENING METHANE REGULATIONS: House members of both parties criticized Wheeler Thursday for EPA’s recent proposal to weaken federal regulation of methane emissions from oil and gas operations.

“It threatens the livelihood of people in this industry who I represent,” said Democrat Conor Lamb of the fracking state of Pennsylvania, in comments directed to Wheeler at a House Science Committee hearing. “You are on the wrong side of both business and public opinion.”

BP, Shell, and Exxon are among the oil and gas majors who wanted EPA to keep Obama-era methane rules.

“I suggest you leverage the leadership of Exxon and Shell to bring up the smaller competitors who should comply with that stuff,” said Francis Rooney of Florida, a Republican who opposes EPA’s weakening of methane rules. “If you help level the playing field, they could use your steady hand to raise the bar.”

But smaller companies that can’t as easily afford technologies to capture leaks of methane supported EPA’s weaker regulations.

“We don’t do our regulations for big business,” Wheeler said Thursday. “We want to make sure our regulatory approach does not stifle innovation.”

FERC APPROVES CHANGES TO LAW PROMOTING RENEWABLES: The Federal Regulatory Energy Agency approved a proposal Thursday to change a 1970s law designed to promote renewable energy after the Arab oil embargoes.

The short-handed commission, which is down two commissioners, approved the changes to the Public Utility Regulatory Policies Act of 1978, or PURPA, thanks to its two Republicans, chairman Neil Chatterjee and commissioner Bernard McNamee. FERC’s sole Democrat, Richard Glick, issued a partial dissent on the vote, arguing that the agency does not have the authority to make wholesale changes to the law. Proposals to alter the law have failed to pass in Congress.

“We are supposed to act humble as a regulator,” Glick said before the vote at FERC’s monthly meeting. “If we were drafting PURPA 2019 we might do it quite differently. That’s for Congress to address.”

What PURPA does: PURPA was created under President Jimmy Carter in response to the 1970s energy crisis to encourage energy conservation and support domestic renewable energy.

The grid back then was less fuel diverse, and the law was intended to promote energy conservation by bringing smaller, distributed electricity generators into the market.

Distributed energy systems can generate clean electricity on site and are disconnected from the centralized grid.

“It is an understatement to say the energy landscape has changed drastically since the commission implemented PURPA,” Chatterjee said. “It was enacted at time of energy scarcity with the goal of preserving dwindling supplies of gas and oil by promoting more efficient technologies. Today we have ample natural gas and renewables prices continue to fall. Now is precisely the right time to take a comprehensive look at our regulations.”

What’s changing: PURPA imposed mandatory purchase requirements to allow renewable developers the opportunity to get favorable long-term contracts from utilities.

Utilities have complained about the law for years, saying it imposes high costs for them and their customers. Renewables today can better compete with natural gas and other energy sources in the open markets, utilities say.

FERC’s revisions to PURPA — which still have to be finalized after public comment — are meant to limit the renewable projects that can benefit from mandatory purchase contracts, by reducing the threshold of sites that can qualify from ones producing 20 megawatts of power, to one megawatt. The agency also altered the so-called 1-mile rule, which directs operators to keep generating facilities at least a mile away from each other to qualify for the contracts.

Facilities sited between one and 10 miles apart would be presumed to be different facilities.

POMPEO DEEMS ATTACK ON SAUDI’S OIL ‘AN ACT OF WAR’: Secretary of State Mike Pompeo on Wednesday called last week’s drone and cruise missile attack on Saudi Arabia’s oil infrastructure as “an act of war.”

Pompeo spoke to reporters en route to Saudi Arabia to consult with Crown Prince Mohammed bin Salman about “deterring” Iran, the Washington Examiner’s Jamie McIntyre reports.

“We are working to build out a coalition to develop a plan to deter them. And this is what needs to happen,” Pompeo said.

Pompeo told reporters on his plane that the U.S. intelligence community has “high confidence” that the kinds of weapons used in the attack would not have been in the possession of Yemen’s Houthi rebels, who have claimed to be behind the strike.

In addition, the flight patterns of the missiles and drones showed they didn’t come from the south, he said, noting Yemen is due south of most of all of Saudi Arabia. “It didn’t come from the Houthis,” Pompeo said. “This was an Iranian attack.”

More sanctions coming: President Trump also announced more economic pressure on Tehran, in addition to its existing sanctions curbing Iran’s oil exports.

“We’ll be adding some very significant sanctions onto Iran. We’ll be announcing it over the next 48 hours,” Trump said Wednesday.

TRUMP SAYS SAN FRANCISCO’S HOMELESS POPULATION MANAGEMENT IS VIOLATING ENVIRONMENTAL RULES: Trump said the EPA is planning to issue a warning to San Francisco because the city’s homeless population is polluting the ocean through waste washed through storm drains.

The president also said as he was returning from a fundraiser in California that Los Angeles is in “a terrible situation” but stopped short of saying the city is in violation.

“You know, there’s tremendous pollution being put into the ocean because they’re going through what’s called the storm sewer,” Trump said, referring to Los Angeles and San Francisco. “We have tremendous things that we don’t have to discuss pouring into the ocean. You know there are needles, there are other things.”

“We’re going to be giving San Francisco, they’re in total violation, we’re going to be giving them a notice very soon,” Trump said, later specifying that the EPA will announce the notice in less than a week. “They have to clean it up.”

San Francisco’s mayor, London Breed, called Trump’s comments “ridiculous.”

“To be clear, San Francisco has a combined sewer system, one of the best and most effective in the country, that ensures that all debris that flow into storm drains are filtered out at the city’s wastewater treatment plants,” Breed said in a statement to the New York Times. “No debris flow out into the bay or the ocean.”

BLOOMBERG’S ‘BEYOND CARBON’ LAUNCHES 6-FIGURE AD CAMPAIGN: Michael Bloomberg’s $500 million “Beyond Carbon” campaign launched a 6-figure digital ad buy ahead of the two-day climate forum with Democratic presidential candidates beginning Thursday.

The five-part video series posted online will highlight state and local climate policies being implemented “in the face of federal inaction.”

“We’re not waiting for the next administration. We’re acting now to put America on the path to 100% clean energy,” Bloomberg, former New York City mayor and billionaire climate activist, says in the video. “That way the next president can take action on day one.”

Bloomberg’s Beyond Carbon is an expansion of the “Beyond Coal” campaign that he has partnered on with the Sierra Club and other environmental groups that has helped retire more than half the nation’s coal plants.

Beyond Carbon will employ a similar strategy to start killing oil and gas.

INTERIOR DEPARTMENT TRANSFERS 560 ACRES OF FEDERAL LAND TO ARMY FOR BORDER WALL CONSTRUCTION: The Interior Department announced Wednesday night it transferred over 500 acres of federal land to the Army to build more barriers along the U.S.-Mexico border.

National parks or parts of Native American reservations were not included in the land transfer.

Parts of El Paso, Texas; San Diego, California; and Yuma, Arizona were transferred.

“I’ve personally visited the sites that we are transferring to the Army, and there is no question that we have a crisis at our southern border,” Bernhardt said in a statement. “Absent this action, national security and natural resource values will be lost. The impacts of this crisis are vast and must be aggressively addressed with extraordinary measures.”

API HIRES FORMER UTILITY OFFICIAL AS VICE PRESIDENT AND CHIEF LEGAL OFFICER: The American Petroleum Institute on Wednesday named former utility official Paul G. Afonso as its new vice president and chief legal officer.

Afonso was most recently a leader of the energy, utilities and environmental group at Brown Rudnick in Boston. He’s also been chairman and general counsel of the Massachusetts Public Utilities Commission and chairman of the state’s Energy Facilities Board.

Working for Massacussets’ chief energy regulator, he oversaw competitive electricity markets, gas and electric transmission infrastructure projects, and the development of renewable energy projects and energy efficiency programs.

“Paul comes to API with deep energy, legislative, and regulatory experience, and we are lucky to have him,” said Mike Sommers, API president and CEO.

STRIKING FOR CLIMATE: A week’s worth of walkouts and strikes to urge action on climate change across the country and the world starts Friday, and will continue through the week of Sept. 23 when the United Nations hosts its climate week in New York.

The Rundown

Wall Street Journal To keep exports flowing, Saudi Arabia looks to import oil

CNBC Jeff Bezos unveils sweeping plan to tackle climate change, Amazon will buy 100,000 electric vans from Rivian

Bloomberg Solar and wind power so cheap they’re outgrowing subsidies

Reuters As Amazon burns, 230 big investors call on firms to protect world’s rainforests

Washington Post Wild horses have long kicked up controversy. Now both sides say they have a solution.

Associated Press: Casualties in fight over new gas pipelines: The customers

Calendar

THURSDAY | SEPTEMBER 19

10 a.m. to 6:30 p.m. 37th & O Streets, N.W. Georgetown University, MSNBC, Our Daily Planet, and New York Magazine host the first day of “Climate Forum 2020” with presidential candidates from both parties.

FRIDAY | SEPTEMBER 20

9 a.m. to 3 p.m. 37th & O Streets, N.W. Georgetown University, MSNBC, Our Daily Planet, and New York Magazine host the second day of “Climate Forum 2020” with presidential candidates from both parties.