Daily on Energy: Shale producers expected to come off sidelines as gas prices surge

Natural gas prices continue to climb higher in the U.S. as supply struggles to keep up with demand recovery from the coronavirus pandemic. Demand will only increase as temperatures begin to drop across the country and heaters are switched on in houses.

Despite robust availability of domestic oil and gas, there’s been a looming question of whether U.S. producers would respond as quickly as expected to higher prices as companies face growing pressure from Wall Street to demonstrate capital discipline and as investors sour on fossil fuels in response to public pressure to address climate change.

NGSA Chairman David Attwood sought to put that concern to bed during the group’s presentation this morning of its annual winter outlook.

“I firmly believe the market works,” Attwood said in response to a question from me during the presentation. “There is no doubt the market is giving strong signals for production to increase.”

“That supply is there and will come and meet the demand,” added Attwood, who is also vice president for Americas Trading at ExxonMobil.

The risk of customers feeling pain from price spikes is much less than Europe, despite the U.S. increasing reliance on natural gas as an electricity and heating source.

That’s because of our large domestic supply of cheap gas from shale drilling provides a layer of protection, while Europe must import most of its gas.

But U.S. production crashed along with prices during the pandemic, and has not quickly returned to normal despite higher prices.

In its winter outlook, NGSA said it expects a “gradual production recovery” during the winter months to offset rising demand.

“Despite the steady but cautious response from producers over this summer, a sustained price rally will likely translate into increased investment in new development, especially for independent gas-centric producers in North America,” the outlook notes.

The industry group, however, noted whether new supply could come online in time to fully offset demand will depend on how cold winter is, which would affect how much people warm their homes and businesses heat their offices.

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EMPTYING NOTEBOOK FROM PODCAST WITH SEN. WHITEHOUSE: In case you missed it, the inaugural podcast of my “Plugged In” podcast co-hosted with former FERC Chairman Neil Chatterjee posted yesterday afternoon, and is now available to stream on Ricochet, Apple podcasts, and Spotify.

Before it posted, I shared with you top quotes from our first guest, Sen. Sheldon Whitehouse of Rhode Island, who dished on Democrats’ reconciliation strategy and said that a fee on carbon emissions is “highly likely” to be included in the climate and social spending package.

Here are a few other nuggets from the conversation worth noting:

*Whitehouse cast doubt on whether his colleague Sen. Joe Manchin of West Virginia is actually writing legislation creating a program to pay utilities to generate more clean electricity, and penalize those that don’t.

Manchin has questioned the need for the Clean Electricity Performance Program as proposed by his fellow Democrats, but he’s also said he wants to ensure the Energy Committee that he chairs has “sole jurisdiction” over the policy.

While Manchin may technically have the pen, Whitehouse claims the West Virginia senator is not using it.

“He actually has the pen on this one,” Whitehouse told us. “It’s not a question of does he have to negotiate with somebody. He’s going to have to write it. And at the moment, I don’t think there is even a draft floating around. If so, I haven’t heard of it or seen it. That is a very big question mark.”

Manchin’s spokesman did not respond to an email request from me this morning responding to Whitehouse as of print time.

*Whitehouse also pointedly criticized former Senate Leader Harry Reid and President Barack Obama for their handling of the cap-and-trade bill in 2009, the last major climate legislation pursued by Democrats that never got a Senate floor vote after passing the House.

“Speaker Pelosi got thrown under the bus by President Obama and Leader Reid after cap and trade,” Whitehouse told us. “She passed that bill. And if that had gone into effect, we wouldn’t be in the emergency we are in now. But the Obama White House chickened out and Reid pulled the plug, and that was the end of that.”

Whitehouse brought up the cap-and-trade failure to make the point that he understood why House Democrats are gun-shy on including carbon pricing in reconciliation (the Ways and Means Committee’s markup of the package doesn’t include a carbon fee).

He said it’s up to the Senate to show it can pass a carbon price and work out the details later with the House and the Biden administration, which has also avoided featuring carbon pricing in its Build Back Better agenda.

“People want the Senate to prove it first. And I am totally cool with that,” Whitehouse said, adding in a separate follow-up interview with me after we stopped recording that “the House will not be a problem,” if the Senate acts first.

‘CLIMATE CANNOT BE CUT’: Climate hawk senators are ramping up calls on Democratic leaders to ensure no climate provisions are stripped from a slimmed down version of the reconciliation spending package being negotiated within the party right now.

“Climate cannot and will not be cut,” said Sen. Ed Markey of Massachusetts, speaking at a press conference outside the Capitol this morning with climate activist groups led by Evergreen Action. “No climate, no deal. We cannot compromise on science. There is no middle ground.”

Markey and other senators, including Ron Wyden of Oregon — chairman of the Finance Committee — and Tina Smith of Minnesota, demanded the entirety of core climate provisions be preserved in order to meet President Joe Biden’s pledge to slice U.S. emissions in half by 2030.

That means keeping intact the Clean Electricity Performance Program and green energy tax credits, along with a fee on methane, funding for electric vehicles, and creating a Civilian Climate Corps.

“This Build Back Better plan, it must, is required to include strong climate legislation,” said Smith, touting the CEPP program, which she has been involved in crafting. “We need to hit the president’s goals.”

GRANHOLM’S TOOLS TO COMBAT HIGH GASOLINE PRICES: Energy Secretary Jennifer Granholm said in an interview with the Financial Times that she is keeping “all tools on the table” to combat rising gasoline prices in the U.S., including considering releasing oil from the nation’s emergency stockpile, the Strategic Petroleum Reserve, and banning crude exports.

By not ruling anything out, Granholm is aiming to show the Biden administration is responsive to pump prices reaching the highest levels in seven years, even if it has little power to change things.

Indeed, Granholm pointed the finger again at the OPEC+ group of oil-producing nations that ignored calls this week from the U.S. to increase output beyond what it already has planned.

“Everybody was hoping that there would be additional supply made available so that prices would not be jacked up,” Granholm said.

The administration is worried higher energy prices will damage its political prospects ahead of next year’s midterms and dampen enthusiasm for its agenda to move the economy off fossil fuels.

HOW TO CUT METHANE EMISSIONS BY 75%: The International Energy Agency released a roadmap for governments and companies to cut methane emissions from oil and gas operations 75% by 2030 using readily available technologies.

Much of these emissions are a result of leaks along the production and supply chain that oil and gas operators fail to capture or avert, and there are cost-effective ways to limit these emissions, IEA said in a report today.

Many experts consider combating methane leaks to be the “low hanging fruit” of easy, quick emission reduction efforts, since methane has a more potent immediate warming effect than carbon, although it does not linger as long in the atmosphere.

“Methane missions are avoidable, the solutions are proven and even profitable in many cases. And the benefits in terms of avoided near-term warming are huge,” said Fatih Birol, IEA’s executive director.

The report comes out as the EPA is drafting new methane regulations for new and existing oil and gas operations, and just weeks after the U.S. and European Union announced a Global Methane Pledge to cut emissions by at least 30% from 2020 levels by 2030.

UAE TARGETS NET-ZERO EMISSIONS — RUSSIA NEXT? The United Arab Emirates has become the first Persian Gulf petrostate to set a target of reaching net-zero carbon emissions by 2050.

“We are committed to seize the opportunity to cement our leadership on climate change within our region and take this key economic opportunity to drive development, growth and new jobs,” said UAE Prime Minister Sheikh Mohammed bin Rashid Al Maktoum in an announcement this morning, adding the country would invest nearly $165 billion in clean energy by 2050.

UAE, one of the top exporters of oil and gas, would only account for carbon emitted from the extraction and processing of exported fuel, not emissions generated outside its borders.

Russia, one of the world’s largest oil producers and gas exporters and the fourth-largest emitter, is also considering unveiling a net-zero goal. Russia, however, is targeting 2060 to do it, the same later date set by China, the top global emitter.

The developments show that countries are eager to make a splash ahead of the U.N. Climate Summit in Glasgow starting Oct. 31.

But countries are under pressure at COP26 to demonstrate concrete actions they plan to take this decade to make the longer-range targets more than aspirational.

WHITE HOUSE SETS ADAPTATION PLANS The Biden administration released plans this morning for how federal agencies can ensure their facilities and operations are resilient and can adapt to climate change.

More than 20 federal agencies released their own plans, a reflection of the administration’s “whole of government” approach for addressing climate change.

As part of their plans, agencies identified which programs and missions are most at risk from climate change and created senior leadership posts focused specifically on climate resiliency.

Agencies are also revamping supply chain policies, enhancing protections for their workers from extreme heat and other climate impacts, and considering the vulnerability of “environmental justice communities” most exposed to climate hazards when siting and designing projects.

The Rundown

New York Times China’s power crunch exposes tensions ahead of key UN climate summit

Wall Street Journal GM sets ambitious revenue target, challenges Tesla with $30,000 electric SUV

Bloomberg Ford gives Michigan a ‘wake-up call’ with out-of-state EV expansion

Reuters Britain’s National Grid says it can meet winter gas demand

Calendar

THURSDAY | OCT. 7

The Senate is expected to vote to raise the debt ceiling as soon as today