Daily on Energy: Senate GOP looks for armament for oil price war

The U.S. was expected to leverage Saudi Arabia’s status as head of the G-20 to press it to halt its plan to slash export prices and flood the market with 12.3 million barrels per day next month, worsening a price crash also caused by flagging demand from the coronavirus.

Also participating in the meeting was Russia, the other major player in the price war which split from a Saudi-led OPEC pact to limit production, sparking retaliation from the Kingdom.

Before the meeting, Dmitry Peskov, spokesman for Russian President Vladimir Putin, told reporters the topic of oil would not come up. The U.S. has blamed Russia for the price war, accusing it of seeking to damage American shale producers who have taken market share while the Saudis and Moscow held back production.

Trump and Senate Republicans diverge on Saudi policy: The Trump administration has taken a lighter touch with Saudi Arabia, an ally Trump has held close even as other countries have distanced from the Kingdom after the murder of journalist Jamal Khashoggi.

Secretary of State Mike Pompeo spoke with Saudi Arabia Crown Prince Mohammed bin Salman on Wednesday, encouraging the Kingdom to embrace a “real opportunity to rise to the occasion and assure global energy and financial markets when the world faces serious economic uncertainty.”

But Senate Republicans from oil states are escalating their calls for the Trump administration to take a tougher line with Saudi Arabia. Senators Lisa Murkowski and Dan Sullivan of Alaska led a letter to Pompeo Wednesday reminding him that the U.S. has “enormously powerful tools at our disposal,” including imposing oil import tariffs and sanctions, withdrawing military aid, and even passing NOPEC legislation that would allow the U.S. to sue the oil cartel for antitrust violations.

“By taking advantage of a confusing situation and desperate time, the Kingdom risks its bilateral relationship with the United States,” the senators said.

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DOE SUSPENDS SPR PURCHASE AFTER CONGRESS DENIES FUNDING: The Energy Department is suspending its plan to buy low-priced oil to restock the nation’s emergency Strategic Petroleum Reserve after Congress chose not to provide funding for the purchase in its emergency pandemic relief package.

Dan Brouillette needs Congress to allocate $3 billion in funding in order to proceed, and he’s calling on lawmakers to do it in future rounds of legislation responding to the coronavirus.

“Small- to medium-size American energy companies and their employees should be provided the same relief being provided to other parts of our economy, and the Secretary calls on Congress to work with the administration to fund the president’s request as soon as possible,” Energy Department spokeswoman Shaylyn Hynes told Josh.

TARIFFS ON OIL IMPORTS MAY HURT SHALE GAS PRODUCERS IN PA: Pennsylvania shale natural gas producers are warning the Trump administration that they could be an unintentional victim of potential tariffs on imported oil.

The Marcellus Shale Coalition, representing 200 companies behind Marcellus and Utica production, says import tariffs on oil would worsen an oversupply of natural gas.

Since import tariffs could stimulate more domestic oil production, there would also be an uptick in associated incidental or “free” gas produced from those crude oil plays.

“The result is that flooded markets for gas would become even more untenable, inflicting harm on our Marcellus gas production,” said the group’s president David Spigelmyer, in a letter Wednesday to Commerce Secretary Wilbur Ross.

Trump spoke at the coalition’s Shale Insight conference in October, and Pennsylvania is critical to his re-election.

THE WORLD IS RUNNING OUT OF STORAGE FOR SURPLUS OIL: The global buildup of oil supplies has nowhere to go with the surplus of oil expected to get so high that it will exceed available storage capacity.

There will be a surplus of 1.8 billion barrels of oil in the first half of 2020, the consultancy IHS Markit projected Thursday, an amount that exceeds empty storage capacity in the world, which only can hold 1.6 billion barrels.

Among the three largest oil producers, Russia has the least amount of available storage capacity—about 8 days. Saudi Arabia has 18 days, and the United States has 30 days.

The consequence?: “Production is going to have to be reduced or even shut in. It is now a matter of where and by how much,” said Jim Burkhard, vice president and head of oil markets at IHS Markit.

American Petroleum Institute CEO Mike Sommers flagged the potential for a shortage of storage in an interview with Josh last week, given the double whammy of slowing oil consumption and Saudi Arabia and Russia providing more crude than the market is demanding.

“Storage is going to be a big issue going forward,” Sommers said. “Where does that excess supply go?”

US GASOLINE DEMAND COULD FALL BY MORE THAN HALF: Social distancing is causing people to abandon the open road, and could force gasoline demand to fall by as much as 4.1 million barrels per day — more than 50% — according to a second report by IHS Markit on Thursday.

Burkhard says the gasoline demand decline will be more extreme than during the 2008 recession, and could get even worse depending on how effective social distance policies are at controlling the spread of the coronavirus.

BIDEN SEES CHANCE FOR ‘GREEN DEAL’ IN CORONAVIRUS STIMULUS: He might not have been watching the Senate floor on Monday, when angry Republican lawmakers accused House Speaker Nancy Pelosi of trying to jam the progressive Green New Deal into the pandemic relief package.

It isn’t clear exactly what “green economy” elements Joe Biden wants to see included in a longer-term stimulus, but he appeared to tie climate-related provisions to infrastructure. “We’re going to need new infrastructure going down the road here. And it’s a way to generate economic growth,” Biden said during live-streamed remarks Wednesday.

Biden has experience helping broker stimulus deals with clean energy investment during the Obama administration (as he often likes to remind everyone). The 2009 American Recovery Act appropriated $90 billion in energy investments, with a focus on clean energy like solar power.

He’s not the only one thinking this way: The clean energy sector and climate advocates, even conservative ones, are eying a round four of coronavirus relief as the place to include energy-specific provisions, including potential extensions of wind and solar tax credits.

Those tax credit extenders, though, and even Biden’s own climate plan, are still relatively far from the sweeping Green New Deal proposed by progressive New York Congresswoman Alexandria Ocasio-Cortez and embraced by Biden’s challenger Bernie Sanders.

STANDING ROCK’S BIG LEGAL WIN: The Army Corps of Engineers must now conduct a full environmental impact statement for the Dakota Access Pipeline, which environmentalists have long fought to shut down after Trump greenlit the project in 2017.

A federal district court judge agreed with the Standing Rock Sioux Tribe and other opponents that the Army Corps’ initial assessment of the crude oil pipeline’s environmental impact had “serious gaps,” particularly around whether the pipeline could properly prevent or catch spills. The case is a test for the National Environmental Policy Act, which the court said here the Army Corps violated. The Trump administration is currently working to revise requirements under NEPA in order to speed permitting reviews for infrastructure, energy, and other projects.

“[I]n projects of this scope, it is not difficult for an opponent to find fault with many conclusions made by an operator and relied on by the agency,” D.C. District Court Judge James E. Boasberg wrote in an opinion Wednesday. “But here, there is considerably more than a few isolated comments raising insubstantial concerns.”

The pipeline will keep flowing for now: The Trump administration, pipeline operators, and its opponents will now get to make their case for whether or not the pipeline should be shut off while the Army Corps completes the new review.

CORONAVIRUS AND EPA’S SCIENCE TRANSPARENCY RULE: “I believe that placing timing-consuming barriers to the use of scientific information could in some cases be more than a mere annoyance or ministerial risk; it could be fatal,” Senator Tom Carper, top Democrat on the environment committee, wrote EPA Administrator Andrew Wheeler in a letter earlier this week.

Carper cites three examples of coronavirus-relevant research, including a March 2020 survey on how coronaviruses interact on surfaces with disinfectants, that he says could be restricted from use in some way by the EPA’s rule.

A quick reminder: Earlier this month, the EPA released a supplemental proposal that in many ways expanded restrictions the agency is seeking to place on what science it can use. The plan, initiated during the Scott Pruitt era, would limit the EPA’s ability to use science where the underlying data isn’t or can’t be made public.

GLOBAL COAL FLEET SHRINKS, EXCEPT IN CHINA: In fact, China’s new coal capacity in 2019 helped drive global growth in the coal fleet, even as the amount of coal plants under construction or in development dropped 16%, according to a new report.

Almost two-thirds of newly commissioned coal capacity last year (43.8 gigawatts) was in China, per the report from the Global Energy Monitor, Sierra Club, Greenpeace, and the Center for Research on Energy and Clean Air.

U.S. numbers, though, tell a different story: 2019 saw the country’s second-highest number of coal plant retirements on record, and nearly half of all coal retired worldwide was in the U.S., the report says. The groups also note coal retirements under the Trump administration are 67% higher than under the Obama administration, even as the Trump White House has tried to revive the industry.

The Rundown

New York Times Coronavirus doesn’t slow Trump’s regulatory rollbacks

Politico Climate group Sunrise Movement targets 2 powerful House Democrats

Reuters Ten signs the oil industry is bent out of shape

Wall Street Journal Investors are warming to natural gas

Calendar

FRIDAY | MARCH 27

House is expected to vote on coronavirus relief legislation. Senate is out until April 20.