Daily on Energy: Democrats’ methane fee takes shape

It was unclear if the methane fee would make it into the package, given skepticism from centrist Democrats representing oil and gas states in both the House and Senate who argue that it’s a bad time to raise costs on fossil fuel producers when energy prices are surging across the world.

But Democrats have modified the methane fee to accommodate concerns by providing $775 million in grants, rebates, and loans to help oil and gas operators comply with the fee, which would only be assessed on companies that waste a certain threshold of methane. The fee would start at $900 a ton in 2023 and rise to $1,500 a ton in 2025. It would apply to methane emissions that exceeded 0.20% of gas sold.

Proponents of a methane fee say it’s the only measure remaining in the package targeting fossil fuels. Natural gas industry groups have called on Democrats to withdraw the methane fee, arguing it would be duplicative with new regulations on the pollutant expected to be proposed by EPA. Anne Branbury, CEO of AXPC, a group representing independent drilling companies, said the changes “do very little to address American oil and natural gas producers’ concerns.”

Liberal climate activists, at least on Josh’s Twitter feed, derided the new proposal as a handout to the fossil fuel industry.

Robbie Orvis, senior director of Energy Policy Design at Energy Innovation, told Josh that the changes don’t diminish the findings of modeling his group released this week finding a methane fee would create massive emissions reductions while creating jobs and boosting the economy.

He argued the new version is better designed in certain ways by allowing a ramp-in period before the fee is imposed, and providing a dedicated funding stream to support companies installing methane monitoring equipment.

“It’s still a significant policy,” Orvis said. “Yes, there is probably some overlap with EPA’s forthcoming oil and gas standards, but there’s always uncertainty someone can come in and undo those. Having legislation that shores up the policy framework is very helpful.”

Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writers Josh Siegel (@SiegelScribe) and Jeremy Beaman (@jeremywbeaman). 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.

WHERE BIDEN AND DEMOCRATS STAND HEADING INTO GLASGOW: President Joe Biden is heading to the UN climate conference in Glasgow on Monday without his climate agenda finalized or passed, but Democrats and environmental activists say he has a strong hand after making substantial progress yesterday.

For example, Climate Power co-founder John Podesta commended the White House for “overcoming some real disappointments in the climate space.”

That represents a resetting of expectations after supporters had been saying for weeks that Biden needed to have the law actually signed and in hand when he goes to Glasgow next week, with the clean electricity performance program intact.

Instead, Biden unveiled a $1.75 trillion framework for his reconciliation spending bill, and House Democrats soon followed by introducing legislative text that reflected it. It’s unclear if Senate centrists will back the plan.

Sen. Sheldon Whitehouse, a Rhode Island Democrat, told reporters that Majority Leader Chuck Schumer had given senators another week to fight for provisions left out of the framework, including a carbon fee he’s been pushing.

But it’s worth mulling over some of the notable take-aways from the updated Build Back Better Act, which provides a record $555 billion devoted to addressing climate change, mostly credits and incentives to boost clean energy.

Tax credit details: The new text offers $320 billion in long-term green tax credit extensions over 10 years, providing certainty to clean energy developers.

There are several new subsidies, including production tax credits for existing nuclear plants and “clean” hydrogen, an investment tax credit for transmission and energy storage.

Several of these incentives would be eligible for “direct pay,” a main demand made by clean energy companies, allowing them to monetize credits upfront without relying on banks to finance them.

Buyers of electric vehicles would also benefit, receiving up to $12,500 in tax credits — depending on what portion of the vehicle was made in America.

That represents an overhaul of Congress’ methods for doling out clean energy tax credits in the past, as the value of many of the incentives are based on whether projects are made in America by union workers.

Democrats also appeared to split the baby with the different approaches pursued by the House and Senate. As noted by the research group ClearView Energy Partners, the first five years of credits follow the largely status quo House template before shifting into the performance-based method favored by Senate Finance Committee Chairman Ron Wyden. Wyden’s approach conditions the value of credits based on the amount of emissions reductions, and subsidies would be doled out on a technology-neutral basis.

Bigger boost for nuclear: Also of note, Democrats expand a new production tax credit for nuclear included in the previous version of the bill from five years to 10, which could be a big deal for keeping existing reactors online.

Democrats’ stripping CEPP from their reconciliation bill could have resulted in 20% of all existing U.S. nuclear generation retiring between 2025 and 2030, according to modeling from the Princeton University Zero Lab. But the Breakthrough Institute found Democrats could avoid that outcome if they extend production tax credits for nuclear from five years to the full 10-year period covered by the legislation. Message received.

ANWR leasing repeal survives: The reconciliation bill, as it currently stands, would repeal the Arctic Refuge oil and gas leasing program, established through GOP tax cut bill from 2017, and cancel all existing leases.

US OIL GIANTS BOAST BIG PROFITS, BUT HEED CAUTION ON NEW DRILLING: ExxonMobil and Chevron reported their highest quarterly profits this morning since the start of the pandemic, on the back of crude prices topping $80 per barrel.

But rather than plowing that cash into drilling, the companies are heeding investor calls to return it to shareholders after receiving years of poor returns.

Analysts are watching whether oil and gas companies will be tempted to come off the sidelines to grow crude and natural gas production amid higher prices, which would help consumers avoid painful energy prices this winter.

Exxon and Chevron, however, appear to be content staying the course.

Exxon boosts low-carbon spending: The largest U.S. company, though, did announce it will increase its spending on low-carbon initiatives, saying it would spend $15 billion on such projects from 2022 through 2027 — four times more than its current plan — including for carbon capture, hydrogen and biofuels. The company also said it will boost its emissions targets this year.

“The strong returns generated by our core businesses provide the near-term cash flows to fund lower-carbon opportunities that leverage our competitive strengths in technology, engineering and project development,” said Exxon CEO Darren Woods.

DEMOCRATS FACE OFF WITH OIL EXECUTIVES: House Oversight Democrats during a committee hearing yesterday accused oil executives of perpetrating a “disinformation campaign” related to fossil fuels and climate change.

The testimonies didn’t satisfy Chairwoman Carolyn Maloney, who pledged to subpoena the companies for documents in support of Democrats’ accusations that Exxon, BP, and the others knew decades ago that burning fossil fuels warms the atmosphere but hid it from the public.

“I have tried very hard to obtain this information voluntarily but the oil companies employ the same tactics they used for decades on climate policy: delay and obstruction. Well, that ends today,” Maloney said.

CHINA’S EMISSIONS PLEDGE FALLS FLAT WITH KERRY: Biden climate envoy John Kerry is unimpressed with China’s decision to stand firm on its previous emissions reduction pledges rather than boost its ambition ahead of COP26, in a potential blow to hopes for the conference.

“It doesn’t advance the ball sufficiently,” Kerry told the New York Times yesterday.

China formally submitted a pledge, known as a Nationally Determined Contribution, to the UN vowing to stop increasing its carbon emissions before 2030 and reach carbon neutrality by 2050. President Xi Jinping already announced those goals at the end of last year.

China fell short of expectations from the U.S. and other rich countries that have asked Beijing to reduce its emissions earlier this decade with a new specific date.

HOCHSTEIN 2.0: Amos Hochstein, the Biden administration’s senior energy security adviser at the State Department, was back out and about this morning stressing the importance of alleviating the strain on global oil and gas markets while also emphasizing the necessity of transitioning away from those fuels in the long term.

Hochstein identified the current energy market dynamic as a “crisis” yesterday morning, an assessment he built on during an event hosted by the Center for Strategic & International Studies.

“These are unusual times. We’re still coming out of COVID. The economic recovery has been remarkable, but fragile, and what we don’t want is in the middle of a global recovery to imperil that recovery and to threaten that recovery due to energy prices,” Hochstein said this morning.

“Don’t allow us to be in a place where we all lose,” Hochstein told oil and gas producers.

But he also emphasized that building up new infrastructure supporting fossil fuel production and distribution isn’t what should be driving energy investments.

“The energy security of the future is going to be not who controls oil and gas but who controls the inputs into a solar panel cell or into an electric vehicle battery,” he said.

POPE FRANCIS ON THE STAKES AT COP26: Pope Francis said leaders meeting in Glasgow have the opportunity to “offer concrete hope to future generations” in negotiating actions to address climate change.

The pontiff, who will not be attending the summit, told BBC News that the world faces a number of crises, including those related to the environment, healthcare, and global food supply, adding that together they create the conditions for world leaders to make “radical decisions that are not always easy” to address them.

Pope Francis’s statement coincides with the meeting of G20 leaders in Rome, a gathering that sets the stage for the Glasgow summit beginning Sunday. Francis also met with Biden earlier today to dialogue about climate change and poverty.

COAL-TO-NUCLEAR TRANSITION JOBS IMPACT: A new report estimates that the replacement of a coal-powered plant with a small modular reactor-powered one would provide a net jobs boost to a given community undergoing a coal-to-nuclear transition.

A small modular reactor plant could provide at least 237 on-site jobs, a number “well in excess” of the employment numbers supported by a typical coal plant, researchers with ScottMadden found.

The report also establishes that prospective SMR jobs would require similar skills to those in demand at a coal plant, adding that a coal-to-nuclear worker “would require some retraining, but they would not require wholesale repurposing of the workforce to a totally different job type.”

US ALLIES SET SIGHT ON NUCLEAR: A number of key U.S. allies have fixed their eyes on nuclear power as they work to cut carbon emissions and insulate themselves against the economic disruption caused by volatile fossil fuel prices, as Jeremy reports for our latest magazine issue.

The United Kingdom and France are putting up deadlines and dollar amounts to support the expansion of nuclear power generation. At the same time, a top official in Japan’s ruling Liberal Democratic Party has signaled that the country’s decarbonization targets are out of reach without restarting its closed reactors.

The Rundown

New York Times China hurries to burn more coal, putting climate goals at risk

Wall Street Journal G-20 climate talks threatened by clash over coal ahead of COP26

The Times of Israel Israel joins growing number of countries pledging to be carbon neutral by 2050

Calendar

MONDAY | NOV. 1

1 p.m. E2 will hold a virtual panel and press briefing, featuring House Select Committee on the Climate Crisis Chair Kathy Castor, to discuss the release of its “Clean Jobs America 2021 | Clean Energy Jobs By U.S. Congressional Districts” report, which will detail clean energy jobs data by congressional district.

TUESDAY | NOV. 2

10 a.m. 366 Dirksen. The Senate Energy and Natural Resources Committee will hold a business meeting to consider various nominations, including Willie Phillips to be a member of the Federal Energy Regulatory Commission, Geraldine Richmond to be Under Secretary for Science at the Department of Energy, Camille Touton to be Commissioner of Reclamation at the Interior Department, and Brad Crabtree to be an Assistant Secretary of Energy for fossil energy and carbon management.

THURSDAY | NOV. 4

10 a.m. 366 Dirksen. The Senate Energy and Natural Resources Committee will hold a hearing to examine the potential non-electric applications of civilian nuclear energy.