Daily on Energy: Gas tax holidays face two lines of attack

There have been two primary arguments to develop in recent weeks: that tax suspensions encourage demand at a time when the oil market needs lower demand, and, more specifically for the proposed suspension of federal fuel taxes, that they will inhibit infrastructure construction.

The demand dilemma: At the state level, Maryland and Georgia both implemented temporary suspensions for state fuel taxes. Maryland’s will be in place through April 16, while Georgia’s runs through May 31.

Republican Gov. Larry Hogan said the Maryland tax holiday is “not a cure-all” and wouldn’t insulate drivers from overall volatility in the oil market.

But there have been warnings that the action itself is contributing to volatility in the oil market.

Patrick De Haan, oil analyst with GasBuddy, declared it “official” yesterday that tax holidays are driving demand higher.

He shared figures showing that gasoline demand in Georgia and Maryland rose much more rapidly last week versus the previous four-week average.

Gasoline demand on a nationwide basis was up 8.7% for the period March 19-27, relative to Feb. 15-March 18.

By comparison, demand in Georgia was up 13% over the same period, and for Maryland, demand was up 26.2% (De Haan noted that proximity allows Washington, D.C., drivers to benefit from the tax holiday, too.)

With prices where they are, the oil market needs the exact opposite of that, Bloomberg’s Javier Blas argued last week.

“The oil market is desperately in need of demand destruction,” Blas wrote, labeling tax suspensions by the two states and European countries such as Spain rather as “demand construction.” He said governments “should either be encouraging behavioral changes such as using more public transportation or allowing expensive fuel to force consumers to change.”

Note, as did Blas, that the International Energy Agency made clear it sees a solution in lowering demand — not in lowering pump prices.

The infrastructure angle: Separately, some lawmakers have opposed a proposal by Democratic Sens. Mark Kelly and Maggie Hassan to suspend the federal gasoline tax for its prospective disruption to a reliable source of infrastructure funding.

The U.S. Chamber of Commerce is weighing in now, too, and lobbying against the proposal. The Chamber sent a letter to Congress yesterday telling members it would reward them with higher ratings for opposing the tax holiday,

Trey McKenzie, the Chamber’s vice president of government affairs, told the Wall Street Journal the group is “concerned to see the benefits of the infrastructure law undermined almost immediately with a suspension of the federal gasoline tax” and that businesses win when infrastructure is built.

Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writers Jeremy Beaman (@jeremywbeaman) and Breanne Deppisch (@breanne_dep). Email [email protected] or [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.

REGAN DEFENDS OIL PRODUCTION PUSH: EPA Administrator Michael Regan defended the Biden administration’s push to ramp up U.S. oil production, telling reporters ahead of his trip to Paris that he believes the administration’s call to increase domestic fossil fuel production can coexist alongside its goals for clean energy investments.

“I don’t think the goals are mutually exclusive,” Regan told the Financial Times shortly before departing for Europe, where he will co-chair an OECD meeting of environmental ministers. “We will continue to walk and chew gum at the same time,” he added.

Even so, Regan said that the surge in oil and gas prices caused by Russia’s war in Ukraine has underscored the degree to which the U.S. is “still, to a certain extent, held captive to fossil fuels.” He said the development of more renewable resources in the U.S. would leave the nation’s energy security less “vulnerable” in the future.

“We can see in real time that if we continue to invest in cleaner energy, and more domestically available resources, the American people will experience less pain at the pump or less pain within their individual pocketbooks,” he said.

The OECD meeting is the first such ministerial gathering to occur in six years, and has not been co-chaired by a U.S. leader since 1979. During his trip, the EPA said, Regan will “engage in bilateral meetings with his counterparts and work to advance the agency’s efforts on climate change and environmental justice.”

BIDEN BUDGET ASKS FOR MORE GREEN: President Joe Biden is asking Congress to provide more money to key agencies and initiatives to enact his green energy and climate change agenda, including an additional $2 billion for the Environmental Protection Agency over the current authorization. The White House budget put out yesterday also asks for an additional nearly $3 billion for the Interior Department and $6.3 billion more for the Energy Department.

It also marks more than $11 billion for international climate finance, a special priority of climate envoy John Kerry’s and point of emphasis at COP26, and asks for $3.3 billion for various “clean energy projects,” including $502 million to weatherize and retrofit low-income homes.

Tax changes, too: The budget also proposes amending the tax code to reduce or cut incentives that oil and gas companies utilize to offset things like drilling costs. It includes a repeal of the enhanced oil recovery credit, which Biden’s Fiscal Year 2022 budget proposed and is a frequent target of Democratic opposition, among other provisions they regard as subsidizing fossil fuels.

UN NUCLEAR WATCHDOG CHIEF MAKES UNANNOUNCED TRIP TO UKRAINE: International Atomic Energy Agency Director-General Rafael Grossi traveled to Ukraine today to launch a new safety assistance program aimed at protecting Ukraine’s nuclear facilities from the war.

The visit was announced by Grossi on Twitter. Later, the IAEA said in a statement that it will start delivering assistance to the country’s nuclear sites at Kyiv’s request: “The aim of the Director General’s visit is to initiate prompt safety and security support to Ukraine’s nuclear facilities,” it said. “It will include sending IAEA experts to prioritized facilities and the shipment of vital safety and security supplies including monitoring and emergency equipment.”

The surprise visit comes after Grossi tried and failed for weeks to reach agreement with both countries on a framework to ensure the safety of Ukraine’s nuclear fleet amid the ongoing war. Since it launched its invasion last month, Russian troops have seized control of the Chernobyl site, as well as Zaporizhzhia, Ukraine’s largest nuclear power plant.

The IAEA added that it had drawn up “concrete and detailed” assistance plans for nuclear sites in Ukraine, including its four operating nuclear plants, as well as Chernobyl, a radioactive waste facility.

GCF WARNS OF AUSTERITY, AS SOME BLAME US FOR OUTSTANDING DEBTS: The head of the Green Climate Fund –– the United Nations’ flagship climate fund–– said this week that it may have to cut its emissions-cutting projects in developing countries if its donors––namely, the U.S.–– do not pay off their outstanding debts.

Speaking at a GCF board meeting yesterday, director Yannick Glemarec said that without additional funds, “some turn off will be unavoidable.” “It’s one of my fears,” he added.

Some have blamed the U.S. for the possible cutbacks, noting that then- president Barack Obama paid only one-third of the $3 billion he pledged to GCF in 2014. That deficit continued under Trump, who made zero payments to GCF.

“If the GCF needs to limit its operations in the near future due to lack of funding, it’s hard to find any single country more at fault than the United States,” Action Aid policy director Brandon Wu told Climate Home News.

Though Biden has attempted to increase funds to GCF, his efforts have so far been stymied by Republicans in Congress, who blocked the $1.25 billion in GCF funds he requested in last year’s budget. It’s unclear whether lawmakers will approve the $1.6 billion for GCF he requested in the latest budget proposal, but if not, some have warned that Biden may have to get creative to ensure the U.S. can pay off its debts to GCF.

Such options include the use of “flexible funds,” such as the State Department’s Economic Support Fund, which would allow the administration to circumvent congressional approval.

COMMERCE WEIGHTING NEW DUTIES ON ASIAN SOLAR IMPORTS: The Commerce Department’s decision yesterday to investigate whether solar cell and module imports from four Asian countries circumvent antidumping and countervailing duties on Chinese products sparked a furor from green energy trade groups who insist it will delay solar deployment, make it more expensive, and trigger cancellation of projects.

Commerce agreed to open the AD/CVD investigation after California-based cell manufacturer Auxin Solar filed its petition last month, asking for duties to be extended to imports from Cambodia, Malaysia, Thailand, and Vietnam.

Industry groups warned then, as they had with a similar but unsuccessful petition effort initiated last year, that the opening of a probe and any ensuant duties would smother the industry, and they made the same assessment yesterday.

Gregory Wetstone, president and CEO of the American Council on Renewable Energy, said the department’s decision “will upend the renewable energy industry at the worst possible time.”

American Clean Power Board Chair Craig Cornelius predicted the probe will suppress the buildout of solar “to levels less than what was achieved under President Trump” and accused Auxin of abusing trade law.

Building a greener grid vs. a manufacturing base: Auxin is seeking a remedy that will protect domestic manufacturers from foreign competition, and the Biden administration is trying to support and build out domestic manufacturing capacity with other tariffs and legislation.

Industry groups, though, maintain that tariffs in general and the AD/CVD tariffs put on Chinese products in 2012, which Auxin now wants extended to targeted countries, haven’t and won’t enable growth in domestic manufacturing at the scale needed.

“We have over a decade of experience and evidence,” Abigail Ross Hopper, president and CEO of the Solar Energy Industries Association, told Jeremy yesterday. “You don’t have to rely on Abby Hopper saying that tariffs don’t work.”

Hopper and others at SEIA emphasize that they support domestic manufacturing and want to see U.S. firms grow but that federal legislation with tax credits is the proper means to that end rather than tariffs.

COLORADO’S YEAR-ROUND FIRE HAZARD: Colorado’s wildfire season is a year-round affair, a local fire official said in the face of another major fire event in Boulder County, the Washington Examiner’s Misty Severi reports.

Wildland Fire Division Brian Oliver said in an interview “there’s really no season,” an assessment that follows the burning of the Marshall Fire, which struck Boulder in January and destroyed over 1,000 homes, as well as the ignition of a fire over the weekend which triggered evacuation orders of 19,000 people. That order has since been lifted.

Containment of the fire was at 68% as of yesterday afternoon as it continued burning 190 acres.

NEWSOM ORDERS STRICTER WATER CONSERVATION: Gov. Gavin Newsom is ordering local water agencies in California to do more to conserve water in response to ongoing, severe drought conditions, the Sacramento Bee reports.

January-March has been the driest first quarter of a year on record, according to the governor’s office, and Newsom pressed localities to act on contingency plans to conserve more water.

State water levels in major reservoirs are 31% below normal for this time of year, and while the state is approaching three years of drought conditions, Newsom has held off on mandatory cutbacks, the Bee notes.

IRENA LEADER SAYS WORLD MUST TAKE ‘RADICAL ACTION’ ON CLIMATE: The head of the International Renewable Energy Agency said the world must take “radical action” to shift away from fossil fuels and hit key climate goals, including investing $5.7 trillion annually in clean power to ensure global warming doesn’t “pass dangerous thresholds.”

“The energy transition is far from being on track and anything short of radical action in the coming years will diminish, even eliminate, chances to meet our climate goals,” Francesco La Camera, the director-general of IRENA, said in the group’s 348-page report.

“Scientists say global emissions need to drop 45% by the end of the decade compared to 1990 levels,” the AP reports. “But recent data show they are going up, not down, in part due to rising energy demand and the expansion of fossil fuel use.”

The Rundown

Axios White House officials open crypto climate inquiry

Wall Street Journal For Japan’s leader, Russian gas is also a hometown affair

Financial Times EU confronts UK on wind turbines in first WTO dispute since Brexit

Calendar

TUESDAY | MARCH 29

2:00 p.m. 1324 Longworth The House Natural Resources Subcommittee on Water, Oceans, and Wildlife will convene to hear three bills focused on U.S. conservation efforts.

THURSDAY | MARCH 31

10:00 a.m. 366 Dirksen The Senate Energy and Natural Resources Committee will hold a hearing about domestic critical mineral supply chains.