Daily on Energy: The latest on big business positioning on carbon pricing

The U.S. Chamber of Commerce and American Petroleum Institute industry had recently shifted their positioning to broadly support the idea of carbon pricing as an alternative to regulations and mandates. Individual companies, including in the oil and gas industry, have been asking for a carbon tax for years.

Business interests, however, are unlikely to single out carbon pricing as an area to support when they vehemently oppose the broader reconciliation package, which has a host of provisions that would harm their interests, including corporate tax increases and efforts to raise costs to develop oil and gas on federal lands.

“The Chamber believes that reconciliation is the wrong vehicle to consider climate change legislation,” Matt Letourneau, a spokesman for the Chamber’s Global Energy Institute, told me. “We think that climate change policy should be durable and bipartisan.” The Chamber supports the bipartisan infrastructure bill scheduled for a vote Thursday that includes narrower climate provisions, such as funding for demonstration projects for a host of new clean energy technologies and electric vehicle charging stations.

API in particular has lobbied aggressively against Democrats’ proposed methane fee, which could have a more direct effect on natural gas compared to a modest carbon price that could initially lead to more coal to gas switching.

The oil and gas group reiterated to me that they support carbon pricing but did not say whether they would support a tax being included in reconciliation.

“Throughout the reconciliation process, we’ve consistently advocated for economy-wide carbon pricing as the most impactful way to reduce emissions and tackle climate change,” Stephen Comstock, API’s vice president of corporate policy, told me. Todd Spitler, a spokesman for ExxonMobil, chimed in, “we continue to advocate for establishing a market price on carbon,” without answering my question on whether Exxon is engaging Democrats on including carbon pricing in reconciliation.

Business groups are also reluctant to weigh in during the negotiation phase, as Democrats have yet to introduce a formal proposal that grapples with issues like regulatory pre-emption and how to handle the revenue.

“There has been a diversity of opinion in the business community regarding carbon taxes,” said Scott Segal, a lobbyist with Bracewell who represents energy clients. “Support has traditionally been conditioned on a preference for the tax over more conventional regulations. So, if the administration and Congress were to support preemption of EPA regulatory authority in favor of a carbon tax, that might make a material difference.”

But the reluctance of business groups to lobby directly when the issue is live and active is rubbing environmental activists who support carbon pricing the wrong way.

“This is what distinguishes businesses and trades who are getting serious about climate from those that aren’t,” Nat Keohane, president of the Center for Climate and Energy Solutions, told me. “If the Chamber wants to be taken seriously on what it says about climate action, this is the moment to step up.”

Carlos Curbelo, a former Republican congressman from Florida who introduced a carbon tax bill, told me that business groups should be plugging for pricing as an alternative to the clean electricity performance program (CEPP), Democrats’ centerpiece climate policy.

“For the oil and gas industry in particular, it is a unique opportunity to express their views, specifically on the possibility of carbon pricing in this bill even while they oppose other portions of this legislation,” Curbelo said.

Some business allies predict industry could still yet boost its advocacy if other problematic provisions are stripped out, such as corporate tax increases, as as passage becomes closer to reality.

“If there is a feeling passage is inevitable, I believe all groups and all stripes impacted by this bill will be working to improve it in any way they can. That is how we can see a more concerted push coming together for a carbon fee which businesses by and large support,” said an industry representative familiar with negotiations among Democrats.

Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writer Josh Siegel (@SiegelScribe). 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.

MANCHIN REMAINS RELUCTANT: The political pressure and the ad buys from liberal groups haven’t swayed Sen. Joe Manchin on Democrats’ reconciliation package.

The Senate Energy and Natural Resources Committee, of which Manchin is the chair, heard testimony this morning from members of the Federal Energy Regulatory Commission, and Manchin made it known (again) that the reservations he’s had throughout the whole reconciliation process remain: Too swift a transition to zero-carbon sources threatens energy security and affordability.

“The energy mix has been and is continuing to undergo a transition due to market forces and weather patterns are changing, and we’d all better focus on solving for the challenges [that] come with this ongoing transition,” Manchin said in his opening statement.

“In my view the only way to do it without sacrificing reliability and affordability is with policies that spur innovation, not elimination,” he added.

Manchin has for weeks taken aim at Democratic proposals to penalize the use of fossil fuels, and he pointed to increased energy and fuel prices during the hearing to warn about what could happen if lawmakers are especially aggressive on the carbon reduction front.

Democrats’ CEPP gets a beating: To close the hearing, Manchin reiterated his concerns about Democrats’ proposed plan to provide grants to utilities to use more clean power, saying it doesn’t make sense to “pay utilities what they are going to do anyway.”

Sen. John Barrasso, the committee’s top Republican, more directly teed off on the CEPP, warning it could lead to natural gas shortages like Europe. GOP FERC commissioners, in response to his questioning, agreed.

Commissioner James Danly said he thinks higher prices and energy shortages are “inevitable” under the CEPP, adding it would “drop an H bomb” in the middle of electricity markets.

Republican commissioner Mark Christie, seemingly appealing directly to Manchin, warned that retiring fossil fuels too quickly could lead to increased costs and harm reliability.

BIDEN MEETS WITH MANCHIN AND SINEMA: President Joe Biden will meet later today with two key Senate Democrats in a bid to pave the way for a deal on a social and climate spending package by a critical Thursday deadline.

Manchin and Kyrsten Sinema of Arizona will huddle with the president in separate meetings to discuss what it will take for them to back the massive spending package, aides confirmed to the Washington Examiner’s Susan Ferrechio.

COMPARING US NATURAL GAS PRICE SURGE TO EUROPE: The head of top U.S. LNG exporter Tellurian cast doubt that an energy shortage and natural gas price surge in Europe will expand to the U.S.

“From the standpoint of the fundamental position for the United States, we are in a very strong position. Our energy costs a lot less than around the world,” said Charif Souki, executive chairman of Tellurian, at an event this morning hosted by the Center for Strategic & International Studies.

The U.S. Henry Hub natural gas price has topped $6/mmbtu for the first time since 2014, from $2/mmbtu a year ago. While that may sound like a big jump, Souki said that price is still “relatively cheap on an historical basis” and compared to the rest of the world. In Europe, natural prices have surged past $25/mmbtu.

The U.S. is less vulnerable to price spikes because of its large domestic supply of cheap gas from shale drilling, while Europe must import most of its gas.

“The difference from five years ago is what happens in America doesn’t just affect America, it also affects the rest of the world because we are significant piece of the global trade for oil and gas,” Souki said.

‘Catastrophe’ still possible without more investments: Souki, however, said the market has become “complacent” by a long period of low natural gas prices, and he warned the U.S. must continue to invest in its LNG export infrastructure to serve energy demand overseas.

U.S gas export plants are operating at capacity in response to high overseas prices, and projects in the queue won’t be ready for five to six years, he said.

“Our global energy policy is nothing more than a prayer,” he said.

“We are hoping for a warm winter around the world. It’s kind of disconcerting,” Souki added, projecting future “catastrophe.”

OIL PRICES SPIKE TOO: The Brent crude oil price has exceeded $80 per barrel for the first time in nearly three years on the back of growing demand due to recovery from the coronavirus pandemic and tight global supply.

This development shows “the balance has changed dramatically,” since the start of the pandemic nearly two years ago from “global demand destruction and negative prices to supply tightness as demand returns,” said Louise Dickson, senior oil markets analyst at Rystad Energy, in a note this morning. Demand is expected to further surge this winter, while analysts say producers aren’t investing enough to maintain supplies due to pressure for capital discipline from shareholders.

Prices could hit $90 this year as stock drawdowns deepen, Goldman Sachs Group said in a note, while Bank of America projected an outside chance of hitting $100 over the winter, as Bloomberg reports.

FORD’S BIG ELECTRIC VEHICLE BET: Ford and a South Korean supplier will spend $11.4 billion on three battery factories and a new electric truck assembly plant in the largest manufacturing investment in the U.S. automaker’s history.

Ford announced yesterday it will build two battery plants in Kentucky and one in Tennessee while building a “mega campus” at the Tennessee location to make electric F-Series trucks.

All together, its investment with South Korean battery maker SK Innovation stands to create 11,000 U.S. jobs, Ford said.

The move is a boost toward the Biden administration’s goal of making the U.S. a manufacturing hub for electric vehicles and building a domestic supply chain for batteries to reduce reliance on Asia. Ford’s decision earned bipartisan support, including from Senate Majority Leader Mitch McConnell of Kentucky, who said the EV battery plants will provide a “much-needed economic boost to the region.”

Ford said it expects 40% to 50% of its global vehicle fleet to be fully electric by 2030 as it seeks to compete with other big U.S. automakers like G.M., which said this year that it aims to end production of gasoline-powered vehicles by 2035.

Will sales follow? It remains an open question whether these investments and targets by automakers will help Biden reach his goal of 50% electric vehicle sales by 2030, a big jump of the 3% market share EVs constitute now.

That could depend on the success of his Build Back Better agenda that seeks to pave the way for EV adoption by making them more attractive to buyers, reducing the cost of the cars through subsidies and rebates, while providing grants to states and localities to build 500,000 charging stations.

The Rundown

New York Times Power outages hit China, threatening the economy and Christmas

New York Times As gas stations run dry, Britons cope with disruptions to daily life

Washington Post Some Chinese solar-panel manufacturers have stopped shipping to the U.S. over tariff concerns, installers say

Politico Biden’s solar dilemma: Promote domestic manufacturing — or climate goals

Calendar

WEDNESDAY | SEP. 29

10 a.m. SVC-217. The Senate Foreign Relations Committee will hold a closed hearing with Amos Hochstein, the State Department’s senior adviser for energy security, for an update on the Biden administration’s efforts “Regarding Energy Security Including Nord Stream 2.”

10:30 a.m. 2123 Rayburn. The House Energy and Commerce Committee will hold an oversight hearing on the Chemical Safety Board.