Daily on Energy: Signs US oil production is returning

Oil prices rose to their highest level in three months early Wednesday, with the international benchmark Brent crude clearing $40 per barrel, on expectations that Saudi-led OPEC and Russia would extend a production cut agreement (although reports say a deal is uncertain).

But U.S. shale producers, looking to capture some cash flow that has been non-existent for months, are starting to come back.

Some examples: Jim Wilkes, president of Texland Petroleum, a small, private Texas shale producer, told Josh his company started selling oil again June 1 after not selling any barrels in May.

“We expect to ramp up as the month goes along,” Wilkes said. “Many of our tanks are full of oil and the truckers are behind in hauling oil to the pipelines, so it will probably take a few weeks for them to catch up.”

Parsley Energy, a mid-sized Permian producer that had asked Texas oil regulators to mandate output cuts, plans to “restore the vast majority of curtailments in early June,” the company said recently. In May, it reduced output by about 26,000 barrels per day due to low oil prices.

Montage Resources, a producer in the Utica and Marcellus shale region of southeast Ohio, West Virginia, and Pennsylvania, “has returned substantially all its previously curtailed production due to the significant improvement in cash margins,” the company announced Tuesday.

Production is also returning in North Dakota, one of the hardest hit states and home to the Bakken shale basin. As of May 28, North Dakota reported Bakken crude shut-ins of 6,800 wells and 475,000 barrels per day compared to 7,500 wells and 510,000 barrels per day on May 15.

Eye of the beholder: Frederick Lawrence, an economist with the Independent Petroleum Association of America, told Josh that his group’s members are bringing back “a rather small and compact percentage” of shut-in wells.

Lawrence said producers would be “very selective” and focused on wells that can be profitable at prices in the mid-30s, which is below the break-even price for many producers. The recovery of demand, he noted, is still uncertain.

Total products supplied (the Energy Information Administration’s term for demand) slightly declined the week ending May 29 compared to the week prior from 15.96 million barrels per day to 15.07 million barrels per day.

Stocks, a gauge of expectations for economic output, have soared recently — the S&P 500 is up nearly 40% from the lows following the pandemic shock.

Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writers Josh Siegel (@SiegelScribe) and Abby Smith (@AbbySmithDC). 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.

THE ‘GOLDEN OPPORTUNITY’ TO KILL FOSSIL FUEL SUBSIDIES: The plunge in oil prices and demand caused by the coronavirus pandemic has decreased the value of global fossil fuel consumption subsidies to the lowest annual level since 2007, the International Energy Agency reported Tuesday.

Lockdown policies and the economic slowdown have naturally brought fossil fuel prices closer to the artificially low prices for consumers that exist in many countries due to subsidies, decreasing the value of the subsidy per unit of consumption.

IEA said the price crash provides a “golden opportunity” for countries to eliminate fossil fuel consumption subsidies, which could eliminate a key roadblock to a cleaner energy future.

It’s easier for politicians to do so when prices are low.

“It would prevent countries with artificially low fossil fuel prices from locking in a new cycle of market distortions that favour polluting and inefficient technologies,” the IEA said.

There are “few signs” so far that governments are taking advantage of this opportunity.

INTERIOR DEFENDS RE-OPENING OF NATIONAL PARKS: The Interior Department declined Tuesday to provide documentation to Natural Resources Committee Chairman Raul Grijvala related to its decision to re-open national parks and public lands, declaring the request “overly broad and unreasonably burdensome.”

The letter coincided with a hearing hosted by committee Democrats intended to criticize Interior’s push to reopen parks during the coronavirus pandemic, which they say leaves workers vulnerable and risks overcrowding.

More than 50 National Parks that were closed during the pandemic have re-opened in recent weeks with more to join the ranks in the coming days and weeks, according to the Interior Department.

Interior’s director of congressional and legislative affairs, Cole Rojewski, told Grijalva in the letter that the agency is “closely monitoring” potential issues in re-opening parks such as overcrowding and visitors entering closed areas. As an example, he said the Grand Canyon National Park has experienced low visitation and few problems since re-opening May 15.

REPUBLICANS KEEP UP CRITICAL MINERALS PUSH: Sen. Lisa Murkowski, the chairman of the Energy Committee, and Rep. Rob Bishop, ranking member of the Natural Resources Committee, led a bicameral letter of Republicans on Tuesday pressing the Trump administration to streamline regulations governing domestic mining of critical minerals.

“Such changes would help to strengthen domestic supply chains for every facet of the manufacturing economy, which would support the President’s trade policy objectives,” the Republicans wrote to Interior Secretary David Bernhardt and Agriculture Secretary Sonny Perdue.

Republicans are asking the Trump officials to implement recommendations from a Department of Commerce strategy report released last June on how to rebuild the U.S. critical minerals supply chain, which included updates of regulations for the permitting process for mining on federal lands, which can take up to 10 years.

DEMOCRATS CALL FOR CLEAN ENERGY SUPPORT IN NEXT VIRUS BILL: Congress must do much more to help the clean energy industry in future coronavirus recovery legislation, more than 50 Senate and House Democrats wrote congressional leadership in a letter Tuesday.

“As Congress works to help the American economy recover, we must ensure robust investments are made to spur growth in renewable energy, energy storage, energy efficiency, clean vehicles, clean and efficient infrastructure, clean fuels, and workforce development,” reads the letter, led by Sen. Martin Heinrich and Rep. Paul Tonko.

The effort suggests a growing number of Democrats are getting frustrated that prior pandemic relief bills have largely ignored pleas from the renewable energy sector for tweaks to their tax credits, to address issues brought on by the coronavirus. The latest relief bill from House Democrats included nothing for clean energy, despite news the sector has shed more than 500,000 jobs since the pandemic began.

In their letter, the Democrats say extensions and additional flexibility for clean energy tax credits are an “important facet of a quick recovery.”

COAL GROUPS SEEK UPDATE TO GRID RELIABILITY REPORT: The North American Electric Reliability Corporation drastically underestimated how much U.S. coal would retire in a 2018 assessment of grid reliability, the CEOs of America’s Power, the National Mining Association, and the Lignite Energy Council wrote in a letter Tuesday.

The coal industry groups are calling on NERC to update its assessment to consider the reliability risks of the greater number of coal retirements. NERC’s 2018 report used a reference case estimating 18,000 megawatts of coal retirements between 2017 and 2022, but the coal groups say their estimates show retirements during that period will now reach 49,700 MW. The groups say it’s possible even more coal will retire due to drops in power demand from the coronavirus.

“This troubling decline in fuel-secure sources of electricity is why we also believe it is important that NERC establish a standard for fuel security, just as NERC has standards in place for other services that are essential to grid reliability,” the groups wrote NERC CEO James Robb.

CARBON CAPTURE PROJECTS GREW 32% IN TWO YEARS: There are now 396 carbon capture, utilization, and storage projects around the world, with 207 of those in the U.S., according to an updated map released Tuesday by the clean energy group Third Way.

The growth in the last two years is significant, but it’s still not nearly realizing the potential of carbon capture technology, said Matt Bright, a policy adviser for Third Way. Large-scale projects that capture at least 400,000 tons per year need to scale up more quickly, and there needs to be a greater focus on “underrepresented” applications like natural gas plants and the heavy manufacturing sector, Bright said on a webinar Tuesday.

A glimpse at carbon capture employment: John Larsen, a director at Rhodium Group, also previewed research the firm will unveil this summer quantifying employment opportunities created by retrofitting existing power plants and industrial facilities with carbon capture. A typical retrofit project would create around 400 to 700 direct jobs, Larsen said, though some types of projects would create several times that.

For example, retrofitting a natural gas plant could create 1,100 to 2,000 direct jobs, and retrofitting a coal plant could create as many as 3,300 direct jobs, Larsen said. Building out pipelines to carry carbon dioxide could generate 1,200 to 2,100 jobs, and every megaton of direct air capture (which sucks carbon dioxide directly from ambient air) would create roughly 3,500 jobs, he added.

ENVIRONMENTALISTS SAY DUKE ENERGY NEGLECTING LOW-INCOME CUSTOMERS: Customers in Duke Energy’s territories experience an affordability gap of more than $1.4 billion, and the utility is doing little to help close that gap, the Environmental Working Group says in a report released Wednesday.

According to EWG, the North Carolina-based utility has repeatedly tried to raise fixed charges and has underfunded programs designed to help low-income consumers pay their bills and increase energy efficiency. That’s despite Duke Energy executives pledging to focus on making electricity bills more affordable, the report says.

About 20% of Duke Energy customers live below the poverty line, and only about 150,000 of 2.1 million households in Duke’s territory eligible for the federal Low-Income Home Energy Assistance Program receive it, EWG found. The report is part of an ongoing effort by EWG and several other environmental groups to draw scrutiny on the North Carolina-based utility, which they say is falling short on climate and clean energy.

Duke Energy responds: The utility’s work during the coronavirus pandemic demonstrates its commitment to low-income customers, said Phil Sgro, a spokesman for the company. Duke was one of the first utilities in the country to suspend disconnects for customers who can’t pay their bills amid the crisis, and the company has provided $6 million in grants and assistance through the Duke Energy Foundation, Sgro told Abby.

Sgro also said the company is working with many stakeholders, including environmental groups on the local, state, and federal level, as it targets net-zero emissions by 2050. “It’s unfortunate that their criticism seems to be rooted less in the facts of our efforts and more in trying to drown out our good progress,” he said of the EWG report.

CLEAN ENERGY GROUPS SET GOAL FOR 2030: The four major renewable energy trade groups — the American Wind Energy Association, the Solar Energy Industries Association, the Energy Storage Association, and the National Hydropower Association — are setting their sights on reaching at least 50% renewable energy in the U.S. in the next decade.

The shared target, which CEOs of the groups announced Tuesday, is a bid to align the sectors’ policy agenda. That way, the industries can speak with one voice when advocating for federal and state policies to support clean energy, the CEOs said.

How the 50% breaks down: In their vision, wind and solar would each make up 20% of U.S. generation in 2030, and hydro would make up 9%. Those renewables would be supported by 100 gigawatts of energy storage.

TREASURY TIGHTENS OIL SANCTIONS ON VENEZUELA: The Trump administration imposed sanctions Tuesday on four oil tanker companies allegedly involved in facilitating trade to the Maduro regime in Venezuela.

“These sanctions further isolate the Maduro regime and are another step toward gaining freedom and prosperity for the people of Venezuela,” Secretary of State Mike Pompeo tweeted.

Three of the vessel companies are based in the Marshall Islands and one is registered in Greece.

The sanctions are an escalation of the Trump administration’s efforts to choke off Venezuela’s oil industry, a main source of revenue to the Maduro regime, in order to pressure it to relinquish power.

A TROPICAL STORM MAY APPROACH THE US: Tropical Storm Cristobal became the earliest third named storm over the Atlantic Ocean in what forecasters predict will be an above-average hurricane season, the Washington Examiner’s Zachary Halaschak reports.

As of Tuesday, Cristobal was packing 40 mph maximum sustained winds after forming in the Gulf of Mexico northwest of the Yucatan Peninsula in the Bay of Campeche, according to the National Hurricane Service. The system is moving southwest at a leisurely 3 mph, but some forecasts show it turning north toward Louisiana this week.

The Rundown

Bloomberg OPEC+ meeting in doubt on dispute over oil-quota cheating

Alaska Public Media Another judge tosses land swap for King Cove road

Reuters China says sticking to climate pledges despite coronavirus outbreak

Calendar

THURSDAY | JUNE 4

10 a.m. G50 Dirksen. The Senate Environment and Public Works Committee holds a hearing titled, “Infrastructure: The Road to Recovery.”