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THE LANDSCAPE HAS SHIFTED DRAMATICALLY: It’s worth taking a step back and reflecting on just how drastic the change has been.
Two weeks ago today, we were just days away from President Biden’s inauguration. We were reporting on ways the Trump administration was attempting, in its waning hours, to make it harder for Biden’s team to implement his aggressive climate agenda. We were starting to see subtle shifts in how powerful industry lobbies were talking about climate change, and we were wondering how they might seek to work with the Biden administration.
Now, a week and a half into Biden’s tenure, the policy pendulum has already started to swing sharply in the other direction.
Biden has followed through on promises to kick the federal government’s actions to address climate change into high gear. His sweeping climate change executive order last week paused new oil and gas leasing on federal lands, took aim at U.S. financing for fossil fuels overseas, elevated climate change to a national security priority, and directed the federal government to ramp up purchase of carbon-free power and electric cars.
He has also flagged more than 100 Trump administration environmental deregulatory actions for reversal, with promises to issue more aggressive emissions mandates for cars, power plants, and oil and gas operations.
The dramatic policy shift has put Republican lawmakers, especially those from oil and gas states, on the defensive. Democratic lawmakers are looking for ways to leverage their new-found political power on climate, but they also have to make sure they win over their most conservative member (now one of Washington’s most powerful people) Sen. Joe Manchin.
Business groups, including the U.S. Chamber of Commerce, the American Petroleum Institute, and the Edison Electric Institute, are saying outright they want to work with the Biden team on emissions rules. Just to emphasize that point: After more than a decade of fiercely fighting methane controls, the American Petroleum Institute is now asking to be regulated.
All this to say if you’re feeling a little bit of whiplash, you’re not alone. The power dynamics on climate and energy flipped upside down almost overnight.
However, whether this flip creates more permanent changes in policy, climate politics, and in the U.S. greenhouse gas emissions trajectory remains to be seen.
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.
EXAMINING EXXON-CHEVRON MERGER TALKS: America’s two largest oil and gas companies have discussed joining forces, according to a blockbuster report from the Wall Street Journal yesterday.
Consolidation has been the name of the game during the pandemic, as companies sought to reduce financial strain associated with reduced oil and gas demand and lower prices.
But the talks between Exxon and Chevron to join forces, which were preliminary and not active, are on another level in that it could be one of the largest corporate mergers ever.
Frederick Lawrence, an oil industry economist formerly with the Independent Petroleum Association of America, told Josh that we shouldn’t be surprised these conversations occurred.
There’s some logic here: Even the largest companies are weighing how to cut costs and maintain operational efficiency during a historic period of low demand, with no certain end date, he noted.
“I am not surprised by the dialogue especially as the pandemic put many companies (even the largest) on defensive footing,” Lawrence said in an email. “There are many companies looking for new strategies in this very challenging macro climate. Given the uncertainties about the energy transition, I think the companies would be interested in collaborating in the areas of how to deal with an evolving climate strategy in regard to emissions, activist investors and regulatory pressure.”
Exxon and Chevron share a similar outlook on how to manage the clean energy transition, with the U.S. majors spitting from the European ones in terms of focusing more specifically on oil and natural gas rather than pivoting towards renewables.
“Chevron and Exxon share a similar business outlook in trying to be the last oil-producing company standing,” Dan Eberhart, CEO of the oil service company Canary, told Josh. “A merger would give the new company a competitive edge and put it on an equal footing with national oil companies like Saudi Aramco and the Russian companies.”
Big caveat: The Journal notes the Biden administration’s Justice Department on antitrust grounds could look skeptically at a merger that would form the world’s second largest oil company, given its interest in reducing fossil fuel dependence.
“They may have missed their window,” Eberhart said. “The time to do it was under the previous administration. This may be a trial balloon to see if a merger is still doable.”
WATCH YOUR PERMITS: At least some drilling permits are not safe under the Biden administration. The Interior Department on Friday revoked about 70 onshore permits deemed invalid because they were issued by agency workers without the approval of top political appointees, as required under a temporary order, according to an interesting report in Bloomberg.
If you recall, before Biden last week decided to only freeze new oil and gas leases on federal lands, and not permits, the Interior Department issued a separate order putting permitting decisions in the hands of top agency officials, instead of being reviewed by field offices across the country. The order lasts two months, and the companies who had their permits revoked could still have them approved if they go through the proper channels, the Interior Department suggested.
No new friends: Still, the move will likely further strain relations between the Biden administration and an oil industry that has been surprised by the pace of the president’s orders targeting fossil fuel development.
“By revoking 70 drilling permits that have been in the works for months, the Interior Department is demonstrating how President Biden’s ill-advised leasing ban has immediate impacts on existing leases and the western workers and state budgets that depend on that development,” said Kathleen Sgamma, president of the Western Energy Alliance, which already filed suit over the broader leasing pause order.
MEANWHILE, LOCAL PRESSURE ON NEW MEXICO’S DEMOCRATIC SENATORS: The mayor of Carlsbad, New Mexico is warning the state’s federal elected officials to “protect” the oil and gas industry by opposing Biden’s federal leasing pause.
Carlsbad is in the epicenter of the state’s oil and gas operations, which mostly occur on federal lands, the mayor, Dale Janway, wrote in a letter obtained by Josh sent on Friday to New Mexico’s Democratic senators Martin Heinrich and Ben Ray Lujan, and Republican Rep. Yvette Herrell.
“An unchecked suspension will ultimately cost tens of thousands of New Mexicans their jobs and result in this state losing billions of dollars, which could have been invested in our schools, toward our seniors, and with our roads,” Janway said.
Both Heinrich and Ray Lujan have said they support a pause on leasing.
GRANHOLM MOVES TOWARD CONFIRMATION: Biden’s nominee for Energy secretary, Jennifer Granholm, will get a vote Wednesday in the Senate Energy Committee,
Granholm, the former governor of Michigan, appears on an easy path to confirmation after assuring Republicans that fossil fuels, with carbon management techniques, would play a part in Biden’s climate goals.
2020 SCARS: In another data point showing the devastation of the coronavirus on fossil fuel demand, the Energy Information Administration reported Friday that global consumption of petroleum and other liquid fuels declined 9% in 2020, the largest fall since at least 1980.
Demand was 92.2 million barrels per day last year, off the normal global consumption of around 100 million barrels p/d.
BY THE NUMBERS…THE GOVERNMENT’S PURCHASING POWER: The federal government is a huge customer of carbon-intensive building materials such as concrete, cement, and steel, and greening that procurement could help drive a broader market for lower-carbon products, according to a new report from the center-left think tank Third Way and Global Efficiency Intelligence.
The report released today examines federal procurement data from 2012 (the most recent year the groups could find comprehensive numbers for). In that year, the federal government directly spent $23.8 billion on construction and another $51.6 billion “indirectly” on construction through grants to state and local governments.
Procurement of goods and services accounted for roughly 43% of that spending, the report finds. In 2012, the federal government spent around $2.3 billion on concrete and $190 million on steel alone. The groups say roughly 55% of the greenhouse gas emissions associated with public institutions come from federally purchased goods and products.
“If you’ve got the kind of purchasing power the federal government has and you’re not using it to advance national priorities, you’re not getting your money’s worth,” said Ryan Fitzpatrick, who directs Third Way’s climate and energy program.
Biden’s procurement focus: Biden, in his sweeping climate change executive order last week, called on federal agencies to purchase more carbon-free power and electric vehicles, directing several Cabinet officials to develop a plan to “stimulate clean energy industries by revitalizing the Federal Government’s sustainability efforts.”
Fitzpatrick told Abby the Biden administration should issue procurement guidance to federal agencies and install energy managers at each agency to oversee a ramp-up of clean energy and low-carbon purchasing.
“When you have an entity that owns thousands of buildings and needs to source power for them, you have the ability to send a huge market signal just by making decisions internally,” Fitzpatrick added.
JUDGE SCRAPS TRUMP SCIENCE RULE: A federal district court judge has scrapped, at the Biden administration’s request, the Trump EPA rulemaking that restricted the types of science the EPA could use in policymaking to only those studies where the underlying data could be made public.
The ruling is a huge win for the Biden administration, which had identified the science rule as one of nearly 50 Trump EPA actions it wanted to reverse.
Environmentalists and public health experts said that rulemaking could make it harder for the Biden administration to set stricter pollution limits, because it could keep the EPA from being able to use studies examining individual health data to determine how pollutants affect human health.
The Biden administration, in a filing late yesterday, had asked the court to scrap the rule and send it back to the EPA. That request followed a ruling last week that sided with environmental groups and found the Trump EPA unlawfully rushed to have its rule take effect immediately. In that ruling, the judge also cast doubt on the underlying legal justification for the rule.
ONLY COAL CARBON CAPTURE PLANT SHUTTERED ‘INDEFINITELY’: The Petra Nova plant, touted as a carbon capture success story and the only capture unit on a coal-fired plant in the U.S., is being mothballed “indefinitely,” the plant’s operator NRG Energy told the Texas grid operator last week.
NRG had initially shut down the carbon capture unit last spring amid falling oil prices during the pandemic, saying it would bring the project back online when economics improved. The indefinite shuttering of the unit doesn’t bode well for future coal carbon capture units, and it’s likely the focus of carbon capture investments will be elsewhere, in the industrial sector or paired with natural gas power plants.
SCORING G20 NATIONS ON CLIMATE POLICY: Germany, France, South Korea, the United Kingdom, and Japan have the most comprehensive set of policies to curb greenhouse gas emissions of the G20 nations, according to a new scorecard from Bloomberg NEF.
The U.S. is in the second quartile. But it bests all the other G20 countries in decarbonizing fossil fuels, due to “wide-reaching” federal and state incentives for technologies such as carbon capture and bioenergy, BNEF says.
The Rundown
Reuters Shell targets power trading and hydrogen in climate drive
Bloomberg Biden’s secret weapon to cleaning up energy is spelled FERC
New York Times Former US climate leaders press Biden on Amazon deforestation
Calendar
WEDNESDAY | FEB. 3
10 a.m. The Senate Energy and Natural Resources Committee holds a hearing to examine global climate trends and progress in addressing climate change.
2 p.m. The Senate Environment and Public Works Committee holds a hearing on the nomination of Michael Regan to be the EPA administrator.
