Daily on Energy: Oil stockpiles haven’t recovered, and welcome, Nancy!

In recent weeks, refining facilities owned by Phillips, Exxon, and Marathon have all suffered unplanned outages or have been forced to shut down for repair, threatening a supply crisis in the event of a hurricane or other natural disaster.

By the numbers: Overall, unplanned refining outages nearly doubled in June at about 550,000 bpd, according to data from the refining intelligence firm IIR—crimping the U.S.’s ability to re-fill its distillate inventories as it normally does in the summer.

That’s nearly double the unplanned outages compared to June 2022—adding further pressure to markets, especially if the global economy picks up in the months ahead.

Why the outages? “The equipment at [these refineries] is not rated to operate routinely above 100 degrees,” Patrick De Haan, the head of petroleum analytics at GasBuddy, said in an interview.

U.S. oil refineries already operate under extremely hot conditions—well into the hundreds of degrees—and adding on recent high surface temperatures can risk equipment breakdowns and malfunctions.

From the Northeast to South Texas: Outages have occurred in Galveston Bay, where a 75,000-bpd Marathon reformer has been offline for the last three months after a deadly fire broke out and killed one employee.

Phillips 66’s New Jersey refinery, meanwhile, has been offline for most of the summer due to unscheduled repairs.

And, as we noted yesterday, ExxonMobil’s Baytown, Texas facility is also struggling to bring some of its units back online after an outage earlier this month.

That’s put industrial production roughly 10% lower compared to late 2022, according to the EIA. And with the U.S. expected to see its hottest summer on record, these refining concerns aren’t expected to go away any time soon.

“This is not normal stuff,” one Houston-based refined products trader told Reuters.

Looking ahead: Supplies could also be a problem if flooding or hurricanes affect other refining capacity, senior IIR official Hillary Stevenson told Reuters.

Last November, U.S distillate inventories dropped to their lowest point since 1951, adding extreme price pressure to the refined petroleum and threatening large swaths of the Northeast, where many rely on the fuel for home heating oil. The U.S. was also unable to turn to Russia for supplies, which prior to the war had exported roughly 700,000 barrels of petroleum per day to the U.S.

Analysts said at the time that the country’s best shot of refilling its diesel inventories would be summer—but it appears that current conditions have put that timeline out of reach.

Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writers Breanne Deppisch (@breanne_dep) and Nancy Vu (@NancyVu99). 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.

PLEASE WELCOME NANCY VU: Please welcome Nancy Vu to Daily on Energy!

Nancy joins the Washington Examiner from Politico, where she roamed the halls of Capitol Hill as a Congress reporter.

Nancy can be reached at [email protected] or on Twitter, @NancyVu99. Please send along introductions, tips, and anything else of interest!

NEW BULLISH OIL PREDICTIONS PUSH PRICES HIGHER: Oil prices steadied near the highest point in roughly three months today, amid signs of tighter markets and expectations that China’s economy will rebound faster in the second half of the year.

Futures for international benchmark Brent crude rose to a high of $83.05 per barrel by mid-morning, a 31-cent increase from the previous day of trading, while futures for the U.S.-based West Texas Intermediate saw a 35-cent rise to $79.09 per barrel.

That’s the fourth straight weekly gain in a row for crude benchmarks, and comes on the heels of recent supply cuts announced by OPEC and OPEC+ member Russia. Bullish projections from China are also expected to increase demand, tightening supplies and adding price pressure for the second half of the year.

“On the supply side, whilst remote for now, risks are growing following Russia’s escalation and bombing of Ukrainian port infrastructure along the Danube River,” ING said in a note today, adding: “The market is starting to become a little nervous over a potential supply disruption.”

“Tighter fundamentals are driving the uptick, but market concerns over demand remain, with China the persistent focus of attention,” Raad Alkadiri, the managing director of energy at the Eurasia Group, told Bloomberg.

HOUSE MOVES TOWARD VOTES ON NORTHERN LONG-EARED BAT AND LESSER PRAIRIE CHICKEN: The House Rules Committee is slated Tuesday to consider measures under the Congressional Review Act that would overturn protections for two species — the northern long-eared bat and the lesser prairie chicken – and nullify the Biden administration’s rules implemented by the Fish and Wildlife Service.

The agency published a rule listing both species as endangered under the Endangered Species Act last November – and a number of Republicans flocked to attack the move, arguing the rules would hamper the development of infrastructure and agricultural projects.

House Republicans have also pushed to “modernize” the ESA, which was signed into law 50 years ago. House Natural Resources Committee Bruce Westerman of Arkansas and Congressional Western Caucus Chairman Dan Newhouse of Washington also launched a working group last week aimed at updating the bill.

“We don’t want to do away with the ESA,” Westerman said of the working group. “We want to make it something that actually works for endangered species. And to do that, it doesn’t need to be a political weapon.”

If you’ll recall: The Senate passed both CRA resolutions back in May, with Sen. Joe Manchin of West Virginia joining Republicans to overturn protections for both species, and Sen. Amy Klobuchar of Minnesota voting to disapprove of the long-eared bat protections.

The Rules hearing is expected to take place today at 3 p.m.

HOT GIRL SUMMER (LITERALLY): After a month of record-breaking temperatures in June, July also saw some historic heat extremes in large areas of the U.S., according to World Weather Attribution, with the group attributing the extreme temperatures to human-induced climate change.

Many are deeming this the hottest week for the Lower 48, with the heat hanging over the Desert Southwest to Texas and south Florida, and further building over the north-central states, the National Weather Service reports. 

The heat wave that spread across the Southwest, the Southern Plains and the Gulf Coast is spreading to even more parts of the country, with the worst forecast for Wednesday and Thursday. More than 250 million people are expected to experience heat indexes over 90 degrees, with temperatures predicted to be above normal in all regions but the Pacific Northwest.

What the forecast looks like today: Triple digit temperatures could reach as far east as Kansas City, while more records could fall from the Texas Panhandle westward.

CASAR’S THIRST STRIKE: Rep. Greg Casar is set to begin an all-day thirst strike on the steps of the Capitol today, in protest of Texas’s law eliminating protections requiring employees working in heat to have a 10 minute break every four hours.

In a tweet on Tuesday, the freshman Texas Democrat announced he would be protesting, along with holding a vigil, for workers rights on the Hill in reaction to the latest move by Texas Gov. Greg Abbott, a Republican.

What he wants: In a letter with more than 100 Democrats published Monday, Casar is calling on the Biden administration to enact “the fastest possible implementation” of a workplace heat standard with the Occupational Safety and Health Administration, modeling the standard after a bill introduced by Rep. Judy Chu, a California Democrat. Read the letter here. 

WATERS ADVOCACY COALITION SEEKS REVISION TO BIDEN WOTUS RULE: A group of 45 industry leaders asked the Biden administration to revise its updated 2023 WOTUS rule text more closely with the Supreme Court’s decision in Sackett v. EPA, arguing in a new letter that the rule was issued without proper input from Congress and from regulators, and is inconsistent with SCOTUS precedent.

The groups, led by the Waters Advocacy Coalition, said that, “to be durable and defensible, any definition of WOTUS must not significantly impinge of the States’ traditional and primary authority over land and water use. A definition that pushes the outer limits of the Agencies’ CWA authority and fails to give adequate weight to the Section 101(b) policy would be legally vulnerable and would undermine the Agencies’ stated goal of establishing a durable rule.”

At issue is the Biden administration’s decision to expand the jurisdiction of the federal government over wetlands on private property. In issuing the new rule, the EPA and Army Corps “ignored the concerns of Congress and the regulated community and moved forward with finalizing another complex and confusing rule,” the groups said.

Signatories urged the EPA and Army Corps to revise the 2023 rule to eliminate standalone interstate waters and wetlands, adopt a “relatively permanent standard consistent with Supreme Court precedent; excluding ditches,” and clarify the rule’s definition of “adjacent” in accordance with Sackett. 

“The WOTUS rule has profound implications on nearly every corner of the American economy, so it is vital that the federal government gets it right,” said Courtney Briggs, the head chair of the Waters Advocacy Coalition. Read more on their effort here.

BUFFETT BETTING ON FOSSIL FUELS: Famed investor Warren Buffett has been upping his investments in fossil fuels this year, Bloomberg notes, including by increasing Berkshire Hathaway’s stake in the Cove Point LNG Terminal in Maryland and buying more of Occidental Petroleum Corp.

Buffett successfully invested in oil and gas producers during the depths of the pandemic and said earlier this year that “We do not think it’s un-American to be producing oil.”

SCHUMER ON FERC PERMITTING: Senate Majority Leader Chuck Schumer called on FERC in a new letter to “strengthen” and finalize rules to expedite the deployment of transmission lines, cost allocation rules, and a backstop electric transmission siting authority rule–three major efforts that he said could help clear the way for more action on permitting reform.

“Following those two rules, FERC will have more work to do on rules that make further progress on generator interconnection queue reforms and interregional transfer requirements to deliver reliable, affordable, and clean power to Americans,” Schumer said.

“Absent such a path to move forward with cost allocation when any state withholds support on a cost allocation method, there will be a significant risk of either projects being stalled due to deadlock, or that states that benefit from a transmission line are incentivized to act as free riders and avoid any costs,” he added.

The letter comes as part of a broader push for permitting action from Senate Democrats, who will also hold a hearing on the issue tomorrow morning.

The Rundown

E&E News Permitting Plan B: Democrats lean on FERC, DOE