“The destination of the oil tankers that can’t cross the Canal is mostly Europe, but Europe is also now the continent that is imposing the strictest lockdowns and where oil demand is decreasing rather than requiring more product,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy, in a note this morning.

The larger issue for energy markets created by the blockade could be for deliveries of liquified natural gas, especially from Qatar, the world’s top LNG exporter (Last year, nearly 260 LNG cargoes were sent from Qatar to Europe through the Suez Canal, according to Rystad). The Suez Canal, which facilitates around 8% of global LNG trade, is a key route to Europe, where natural gas demand is not suffering as much as oil.

Only a handful of LNG cargoes were in close vicinity of the Suez Canal when the incident started, said Lucas Schmitt, an analyst with Wood Mackenzie, in a note this morning.

“The impact of this disruption on the LNG market will be limited if the disruption is solved within a day or two,” Schmitt said. “The impact could be greater if the disruption lasts longer.”

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.

IT HAPPENED…API ENDORSES CARBON PRICING: The American Petroleum Institute, after weeks of flirtation, endorsed carbon pricing today, putting the weight of the largest U.S. oil and gas lobbying group behind what many economists consider to be the most efficient policy to combat climate change.

API’s support for the policy after years of resistance shows how pricing carbon, either through a tax or cap-and-trade program, has become the most palatable option for business groups despite its political unpopularity. The oil and gas industry is looking to demonstrate commitment to fighting climate change while fending off mandates and regulations that have become the preferred approaches of the Biden administration and most Democrats.

“The administration is talking about command and control approaches,” API CEO Mike Sommers told Josh in an interview. “We want to enter into this debate on one of biggest issues of the day to pursue a more market-based approach.”

Questions on what it means: But API is not endorsing a specific carbon pricing policy, leaving unanswered critical questions about how high a tax on companies should be and how to handle the revenue raised from it.

Sommers also said API won’t be lobbying for a carbon tax to be included as a revenue source as part of Biden’s forthcoming infrastructure/climate package. “We are not designing this to be some new flywheel for government spending,” he said.

SENATE DEMOCRATS TO TARGET TRUMP METHANE ROLLBACK WITH CRA: A cohort of Democratic senators introduced a Congressional Review Act resolution today to quickly cancel a Trump administration action that would essentially block the EPA from controlling methane from oil and gas production.

The resolution is being led by Sens. Martin Heinrich and Angus King. Several Democrats, led by Rep. Diana DeGette, are introducing a companion resolution in the House.

“This isn’t a difficult decision, nor is it an expensive one — capturing methane emissions can be done at a modest cost for a gigantic benefit for our planet and our grandchildren,” King said in a statement. Senate Majority Leader Chuck Schumer has called holding a CRA vote on the methane rollback “one of the many initiatives we are pursuing to fight the climate crisis.”

The CRA is a legislative tool that allows both chambers of Congress to pass a joint resolution to end recently implemented regulations. Critically, CRA resolutions require only a simple majority vote from the Senate, and they can be fast-tracked to come quickly to the floor.

The Trump EPA action that King and Heinrich are targeting took aim at the agency’s ability to regulate the potent greenhouse gas methane from oil and gas facilities directly.

BIPARTISAN PUSH TO EXPAND CARBON CAPTURE INCENTIVES: Sens. Tina Smith and Shelley Moore Capito are leading a bipartisan group of senators to propose legislation to enhance federal incentives for carbon capture, including by extending the deadline for projects to qualify by five years and making the credits available as direct cash payments.

The bill is backed by a dozen senators, split evenly by party and including the top Democrat and Republican on the Senate Energy Committee. In addition to enhancing carbon capture tax credits, the bill also provides additional funding support for direct air capture, which pulls carbon directly from ambient air, and adjusts tax credits for coal plant retrofits so carbon capture can qualify.

The legislation is also endorsed by a number of labor unions and environmental groups. Lee Beck, policy innovation director for carbon capture, utilization, and storage with the Clean Air Task Force, said the new bill, paired with a recent bipartisan push to support carbon dioxide pipelines and storage infrastructure, “forms a must-pass policy package for the large-scale deployment of carbon capture, removal, and storage for a net-zero U.S.”

TOOMEY DEMANDS BRIEFING FROM SEC ON CLIMATE DISCLOSURE: Sen. Pat Toomey, the top Republican on the Senate Banking Committee, is raising concerns the Securities and Exchange Commission is jumping to conclusions about requiring companies to disclose their climate-related risks before completing a review of prior disclosure guidance and offering an opportunity for public input.

“The SEC also should not use enforcement actions as a backdoor for imposing new regulations on ESG and climate change issues,” Toomey wrote in a letter sent yesterday to acting SEC chair Allison Herren Lee. He requested a staff briefing on the issue by the week of April 5.

Toomey’s letter follows Lee’s announcement last week that the SEC is seeking public input on how to set up a regime for climate disclosures, a first step toward the commission likely requiring them.

DEMOCRATS WANT BIDEN TO PUSH FOR ALL ZERO-EMISSION CARS: A group of 71 House Democrats and 10 Democratic senators wrote to Biden yesterday calling on him to issue new fuel economy standards that at least match the stringency of those issued during the Obama administration (requiring a 5% fuel economy improvement each year), with a long-term plan to eliminate emissions from passenger cars.

The House letter, led by Rep. Doris Matsui of California, asks Biden to set post-2026 standards that would ensure 60% of new passenger cars are zero-emissions by 2030. The Senate letter, led by Sen. Ed Markey, goes further, calling on Biden to set a date certain by which sales of gas-powered vehicles must end, similar to California’s directive to do so by 2035.

Biden has directed the EPA and the Transportation Department to propose tighter fuel economy standards by July.

ELECTRIC VEHICLE COALITION ASKS BIDEN FOR INCENTIVES AND CHARGING STATIONS: A new coalition of electric vehicle groups and environmental organizations are calling on the Biden administration and Congress to ramp up funding and policy support for electrifying all aspects of transportation, including by providing federal dollars to build out charging stations and creating new purchase incentives to lower the cost of zero-emission trucks.

The coalition, known as CHARGE, includes EV lobbying groups such as the Zero Emissions Transportation Association and Plug In America, as well as environmental groups such as the Environmental Defense Fund and the Natural Resources Defense Council.

LOW-COST CARRIERS DRIVING US AIRLINE EMISSIONS GROWTH: Most of the increase in carbon emissions from U.S. airlines has been driven by low-cost carriers such as Spirit, Frontier, and Southwest that have been growing quickly in traffic despite operating more fuel-efficient fleets, the International Council on Clean Transportation found in a new report released this morning.

Overall, ICCT found carbon emissions from U.S. carriers grew 7% from 2005 to 2019, with 90% of that growth driven by the low-cost carriers. The data suggests that the U.S. should sharpen its focus on reducing emissions from U.S. domestic flights, which ICCT notes accounted for 15% of the total but aren’t covered under global agreements to cap aircraft emissions.

The Trump EPA, before it left office, finalized first-time greenhouse gas emissions standards for new aircraft engines, consistent with international limits. Environmentalists and Democratic states, however, say those standards are far too weak and don’t cover in-service aircraft, and they have urged the Biden administration to tighten the rules.

ICCT also notes that the air traffic downturn last year due to the pandemic bought airlines five more years to get on track with a net-zero emissions pathway. Prior to the pandemic, airlines were expected to veer off course from that trajectory in 2020.

CANADIAN HIGH COURT AFFIRMS CARBON TAX: The Supreme Court of Canada upheld the nation’s carbon tax in a ruling this morning, securing the country’s pivotal climate policy against a challenge from three of its highest-emitting provinces.

“It is a threat of the highest order to the country, and indeed to the world,” wrote Chief Justice Richard Wagner in the majority opinion, which upheld the carbon tax was constitutional because climate change is a matter of national concern. “The undisputed existence of a threat to the future of humanity cannot be ignored.”

Interestingly, Wagner cites the landmark U.S. Supreme Court ruling on greenhouse gas emissions in 2007 — Massachusetts v. EPA — in his ruling to bolster his point that individual province’s emissions contribute measurably to climate change, even though it is a global problem.

THE RETURN OF PERMIAN METHANE EMISSIONS: Methane emissions from oil and gas operations in the Permian Basin in Texas and New Mexico have returned to pre-pandemic levels, according to a study accepted this week in the journal Atmospheric Chemistry and Physics.

The analysis, conducted by the Environmental Defense Fund, shows that from March to April of last year, emissions plunged 60% because of a decrease in Permian drilling activity and reduced flaring of associated gas, but have now returned to pre-pandemic levels.

DOE’S NEW NO. 2: The Senate yesterday approved David Turk to be deputy Secretary of Energy, the No. 2 spot at the agency, by a resounding 98-2 vote.

Republicans who have opposed many of Biden’s energy-related nominees recognized Turk’s extensive experience and appreciated commitments he made to support and expand carbon capture and nuclear power.

Turk most recently worked at the International Energy Agency and previously coordinated international clean energy efforts at the Energy Department and was deputy envoy for climate change at the State Department.

ANOTHER GREEN GROUP WARNING AGAINST ADVANCED NUCLEAR: The Environmental Working Group released a report today claiming small reactors can’t be made cheaply or quickly enough to “make a significant dent in the need to transition rapidly to a carbon-free electricity system.”

Proponents of small reactors, the earliest of which are not slated to come online until late this decade, say they can be produced more cheaply than traditional nuclear plants because they can be manufactured in an assembly-line fashion.

The report’s author, Arjun Makhijani, an electrical and nuclear engineer who is president of the Institute for Energy and Environmental Research, argues the road to mass manufacturing will be “rocky” and that small reactors won’t be able to achieve the same economies of scale of large plants. Makhijani also claims federal investments in advanced nuclear would “divert” resources from more proven solutions such as wind and solar.

The Rundown

Los Angeles Times Los Angeles now has a road map for 100% renewable energy

Washington Post The island where it rained oil

New York Times How illicit oil is smuggled into North Korea with China’s help

Calendar

THURSDAY | MARCH 25

1:30 p.m. RENEWPR will hold a virtual event titled “The Business Perspective on Decarbonization Policies,” featuring remarks from three CEOs.

MONDAY | MARCH 31

12 p.m. CRES Forum will hold a virtual event titled “Driving Innovation: How can private and public sectors speed EV deployment.”