Daily on Energy, presented by API: The oil price recovery is not enough for many producers

Nearly a third of executives (27%) from 165 oil companies polled by the Dallas Fed said oil prices would have to rise to between $41 and $45 per barrel for the majority of producers in the U.S. to restart production.

A slightly higher percentage, 30%, said they expect production to return at $36 to $40 per barrel oil, the range where oil prices currently sit. The Dallas Fed conducted the survey between June 10–18.

A whopping 82% of companies surveyed said they shut in or curtailed production in the second quarter, giving credence to those who argued Texas producers would respond to market forces without being forced to limit their output, as the Texas Railroad Commission considered doing.

The vast majority of producers that limited production, 71%, still have some output curtailed.

Iffy long-term forecast: Producers don’t expect drilling activity to return to normal levels for at least a year.

Forty-one percent of executives expect drilling to return to pre-pandemic levels sometime in 2021, while 39% expect a return in 2022 or later.

Sixteen percent of them don’t ever foresee a return to prior levels.

Oil executives have a similar outlook for the demand side. More than half of executives — 54% — expect global oil consumption to return to pre-pandemic levels sometime in 2021. But 36% expect a return in 2022 or later, and 5% don’t foresee a return to prior levels at all.

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.

NUCLEAR INDUSTRY LEFT OUT OF HOUSE DEMOCRATS INFRASTRUCTURE BILL: The nuclear energy industry is faulting House Democrats for not including tax provisions to benefit the country’s largest zero-carbon power source as part of a massive infrastructure package that offers benefits to a range of technologies.

“The Moving Forward proposal misses that opportunity,” Maria Korsnick, the president and CEO of the Nuclear Energy Institute, told Josh. “The nuclear energy sector is ready to work with wind, solar, storage and other carbon-free technologies to achieve a carbon-free energy future, but Congress must give us the tools to do so.”

House Democrats’ $1.5 trillion infrastructure package, introduced this week, extends wind and solar tax credits by at least five years. It also extends incentives for carbon capture technology and offshore wind, and creates an incentive for energy storage, waste energy technologies, and qualifying biogas projects.

Nuclear’s problems pre-date the pandemic, but jobs are long-term: It does nothing for nuclear, which is not suffering from the job losses experienced by the wind and solar industries from the pandemic.

Nuclear plants, which run around the clock, have continued their work supplying most of the nation’s carbon-free power. But nuclear is struggling more broadly to compete with cheaper natural gas and renewables, and the industry argues it could be a major job creator coming out of the economic downturn.

John Kotek, NEI’s vice president of policy, told Josh his group is pushing for House Democrats to include investment and production tax credits for nuclear power that could be used for traditional large projects and also new smaller reactors being developed.

“If the intent of the bill is to spur long-term economic recovery, nuclear jobs are the types of jobs we should want to incentivize because a nuclear plant once built runs 60 to 80 years,” Kotek said. “Those are the types of jobs that span generations. These are the types of facilities you build a community around.”

Congress comes around to nuclear, could take ‘next step’: Korsnick and Kotek credited Congress with authorizing and funding numerous programs in recent years to support R&D for advanced nuclear technologies, which have bipartisan support as a potential option to help balance intermittent wind and solar power in a clean energy future.

But they say Congress should take the “next step” and incentivize nuclear development with tax subsidies. While the Energy Policy Act of 2005 included a production tax credit for nuclear, the subsidy is capped at 6,000 megawatts of new construction, most of which has been used already.

“There is not a lot of runaway to incentive new builds of nuclear like what we’ve seen with wind and solar,” Kotek said. “You learn by doing. The more construction you support, the faster the industry works its way down the cost curve.”

BIDEN LOOKS TO CRACK DOWN ON PIPELINES: Joe Biden is signaling he would make it difficult for developers to obtain federal permits to build fossil fuel infrastructure such as pipelines and LNG export facilities, delivering on a key priority of environmental groups, Josh reports in a story posted this morning.

“There is virtually unfettered discretion there, so long as procedural safeguards are observed,” said Glenn Schwartz, director of policy at Rapidan Energy Group, a consultancy firm.

Biden’s climate plan says he would require thorough reviews to determine whether a project’s economic value is outweighed by its contribution to climate change. Nebraska Democratic Party chairman Jane Kleeb, who led grassroots activism against the long-delayed Keystone XL oil pipeline, said Biden’s approach is “spot on.”

“We don’t need any new fossil infrastructure,” Kleeb said. “Our country has enough currently to meet our needs. The next phase of energy development and construction projects must be focused on clean energy for the next 100 years.”

A problem for Biden: Interstate gas pipelines and LNG terminals come through FERC, an independent agency, whose members have long fought over how to consider climate change.

“Any new FERC won’t be able to slam the brakes on projects willy-nilly,” said Tony Clark, who was formerly a Republican commissioner on FERC.

Power of the presidency: Still, a Biden administration could issue guidance through NEPA requiring fulsome accounting of greenhouse gas emissions, making the process so burdensome and expensive for pipeline developers that they give up before trying.

“If you don’t have a permit in hand when the Trump administration leaves office, it may be very hard to get one, either by saying no, by saying yes, requiring expensive, onerous litigation to get a permit, or saying no outright,” said Christi Tezak, managing director of research firm ClearView Energy, LLC.

OIL COMPANIES FACE NEW ROUND OF CLIMATE LAWSUITS: The attorneys general of D.C. and Minnesota have joined in the growing number of legal challenges seeking to bust major oil companies for misleading the public about climate change science and the role their products play in increasing carbon emissions.

“The fact of the matter is that no fossil fuel product is safe nor clean,” said D.C. Attorney General Karl Racine in announcing a lawsuit Thursday against ExxonMobil, BP, Chevron, and Shell. “It all creates carbon emissions and it all represents a threat to consumers.”

Minnesota Attorney General Keith Ellison’s lawsuit, filed Wednesday, is the first to name Koch Industries and the American Petroleum Institute, the oil and gas industry’s main lobbying group. His complaint also leads by noting climate change disproportionately harms people of color and low-income people.

These lawsuits take a different tack than many of the pending climate challenges: D.C. and Minnesota are both bringing claims under their consumer protection laws, alleging the oil companies defrauded and misled consumers about the effects of their products. Other state and local lawsuits against oil companies have been brought as public nuisance challenges.

BROUILLETTE TOUTS ENERGY TIES WITH POLAND AFTER TRUMP MEETING: Energy Secretary Dan Brouillette touted U.S.-Poland cooperation on LNG trade and nuclear power after joining President Trump in a meeting Wednesday with Polish President Andrzej Duda.

“Poland, our longstanding NATO ally, shares our desire for an “all-of-the-above” energy strategy that strengthens our energy security through energy diversity,” Brouillette tweeted.

The U.S. and Poland signed an agreement in June 2019 to increase cooperation on building nuclear power plants in Poland with U.S. technology. Poland aims to develop 6-9 gigawatts of nuclear power capacity by 2043, according to the Energy Department.

Poland has also contracted for 9 billion cubic meters per annum of LNG from U.S. suppliers starting in 2023.

The European country is looking to eliminate its dependence on Russian natural gas imports.

REFINING LOBBY LOOKS FOR HELP WITH MEXICO: The main U.S. oil refining lobby is asking the Trump administration to confront Mexico about recent moves to undermine the ability of American companies to do business there.

The American Fuel & Petrochemical Manufacturers, in a letter to Trump this week, detailed multiple steps the Mexican government has taken to restrict U.S. investments. These actions flout the intent of the new U.S.-Mexico-Canada trade deal the Trump administration negotiated.

AFPM lists restrictive actions taken by Mexico, including delaying permits for developing refining infrastructure, canceling import permits, and creating voids and waivers in regulations favoring state-owned companies such as PEMEX.

“These actions threaten not only the direct investment U.S. companies have made, but also future revenue and U.S. jobs to make those investments viable in the long-term,” AFPM president and CEO Chet Thompson wrote in the letter.

Mexico is the U.S.’ largest export market for refined products, a development enabled when the Mexican government permitted American companies to invest there for the first time beginning in 2013. Mexico’s leftist President Andres Manuel Lopez Obrador campaigned on reining in constitutional reforms that opened Mexico’s formerly nationalized energy industry to foreign investment.

POLL FINDS GOP SUPPORT FOR CLIMATE POLICIES INCREASING: Nearly three-quarters (72%) of Republicans back federal action to reduce emissions of carbon dioxide and methane, up from 53% just last year, according to a new nationwide poll released Thursday by Citizens for Responsible Energy Solutions.

The poll, which surveyed 1,009 Republicans and Republican-leaning independents earlier this month, also found strong support (76%) for federal policies to accelerate clean energy, with two-thirds of Republicans agreeing clean energy investments should be included in economic recovery packages.

The survey also reveals some potential new policy areas for GOP lawmakers: CRES tested a question on a carbon-neutral by 2050 target for the first time, and found more than half (58%) of Republicans think that target is realistic.

“Republicans have steered clear of deadlines,” but those results will allow CRES to advise GOP candidates and the party that “we can set a target and work to meet it,” said Heather Reams, CRES’ executive director.

“I would hope that we’ll see more Republicans talking about a goal of 2050,” Reams told Abby, adding there’s an opportunity for the GOP to wrap policies around that target that are distinct from what Democrats have proposed for years.

The poll may allude to one avenue for GOP lawmakers to consider, too. An overwhelming majority (81%) believe the U.S. should require foreign companies to disclose their pollution when selling to the U.S., and nearly three-quarters (72%) think that requirement should also be extended to domestic companies.

EPA DROPS PRUITT SCIENCE ADVISERS DIRECTIVE: The EPA said Wednesday it won’t appeal a recent ruling in New York vacating a 2017 directive blocking recipients of agency grants from serving on its scientific advisory panels.

The EPA suffered a string of recent court losses on that directive, put forward by former Administrator Scott Pruitt. The EPA said in a news release Wednesday it will revert to policies prior to the 2017 directive, after determining a D.C. Circuit ruling in April barred the agency from making a “blanket prohibition on the participation of EPA grant recipients” without issuing a supplemental ethics rule alongside the Office of Government Ethics.

“The court’s decision does not prevent future actions by EPA to regulate the composition of its advisory committees, including policies and regulations governing the participation of the committee members who receive grants from EPA,” the agency said. It also said it won’t be required to change the current make-up of its science panels.

The Rundown

Washington Post Trump is headlining fireworks at Mount Rushmore. Experts worry two things could spread: virus and wildfire.

Bloomberg Big Oil’s long bet on hydrogen offers a climate lifeline

New York Times Projects to stash carbon dioxide underground get a boost

Reuters Trump administration wind and solar approvals lag Obama record: study

Calendar

TUESDAY | JUNE 30

2:30 p.m. 366 Dirksen. The Senate Energy and Natural Resources Committee holds a hearing to examine the impacts of the COVID-19 pandemic in the territories.