Daily on Energy: The Biden administration’s defense of Chevron operating in Venezuela

President Joe Biden is taking heat from Republicans and some in the press (today, it was CNBC’s Joe Kernen) who say the Treasury Department’s amendment of sanctions, which allows Chevron to restart oil and gas production there and export product to the U.S., effectively favors a repressive foreign regime over the domestic industry.

The Treasury Department’s Saturday announcement detailing the extension of a new general license to Chevron looked to head off accusations that its action was about oil price relief. The decision “reflects long-standing U.S. policy to provide targeted sanctions relief based on concrete steps that alleviate the suffering of the Venezuelan people and support the restoration of democracy,” it said.

More recently, leading officials, including National Security Council coordinator John Kirby, have said not to expect much oil to be coming here as a result of the sanctions relief to dispute characterizations of the decision as favoring Venezuelan energy over domestically produced energy.

Amos Hochstein, presidential coordinator for global infrastructure, climate and energy security, said the same this morning when pressed by Kernen: “The amount of oil that will come to the United States is not all that significant. It will help some but not all that significant.”

“This is not ‘going to Venezuela’ for oil,” Hochstein went on to say, “and that’s pretty clear from the volumes that we’re talking about here.”

What volumes are we talking about here? Treasury’s general license only liberalizes sanctions that kept Chevron from producing and exporting petroleum through its five joint ventures, meaning it leaves existing sanctions against Petroleos de Venezuela, the state-owned energy giant that was the primary target of the original 2019 sanctions, mostly in place.

Chevron is a minority partner in five joint ventures with Petroleos de Venezuela, two of which were actively producing petroleum in 2019.

When sanctions were introduced, Chevron’s share of production was around 35,000 barrels per day, although the joint ventures together have a capacity of upwards of 200,000 barrels per day.

More on the politics: Biden’s support for new regulations on the oil and gas industry, as well as the restriction of new oil and gas development on federal lands, has exposed him to criticism from Republicans and the oil and gas sector.

When energy prices began rising considerably last fall, Biden said Saudi Arabia was about the only immediate solution to high prices and officials, including Hochstein, have been instrumental in the administration’s monthslong campaign to convince OPEC to bring more crude oil to market.

The administration has also strongly urged exploration and production companies to invest more money and to increase more oil to bring down prices, or else face a windfall tax or other consequences, such as a revocation of drilling permits on federal lands.

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‘SEVERAL YEARS’ OF DEMAND SHOULD GENERATE MORE INVESTMENT: HOCHSTEIN: Hochstein, during his interview with Hernan, was also pressed to firm up the amount of time exploration and production companies could expect the administration to support more oil production such that they won’t be risking major losses if they expand operations.

“I don’t think we’re talking about two or three years. We’re talking about longer than that,” he said, adding, “We understand that the economy of the United States and around the world is going to be using oil for several more years.”

That should be enough for companies, particularly those operating onshore, to expand production, he said.

BIDEN READIES NEW COMMITMENTS TO PROTECT NATIVE AMERICAN LANDS: Biden announced new commitments to protect Native American lands today, and is readying plans to declare a new national monument around the Spirit Mountain tribal area in Nevada that would put hundreds of thousands of federal acres off limits to development.

Biden pledged at the White House tribal summit to protect the Spirit Mountain area in southern Nevada, as well as the surrounding areas. A national monument designation could put as much as 450,000 acres of land as a national monument, the Washington Post reported.

U.S. TAPS THIRD-PARTY OFFICIAL TO OVERSEE JACKSON WATER SYSTEM: The Justice Department filed a proposal in federal court yesterday that, if approved, would grant it the authority to appoint an interim water manager in Jackson, Mississippi, as it attempts to recover from the near-collapse of its water system earlier this year.

The goal of the proposal is to have someone in place while the federal government, the city of Jackson, and the Mississippi Health Department attempt to negotiate a judicially enforceable consent degree to achieve long-term sustainability for the city’s water system, officials said in a statement.

The interim manager would be Edward “Ted” Henifin, a professional engineer with 40 years of public works experience. Henifin would have the authority to operate and maintain the city’s drinking water system and to oversee the implementation of near-term priorities, such as a winterization project to help protect the system against winter storms.

More than 160,000 Jackson residents were left without access to potable water to use for drinking, basic hygiene, and safety purposes this summer due to extreme flooding.

Mississippi health officials declared a state of emergency in September. The following month, Environmental Protection Agency Administrator Michael Regan announced a civil rights investigation into the state of Mississippi due to the crisis.

EUROPE’S ENERGY TAB CLIMBS PAST $700 BILLION: Europe has racked up a massive energy tab of more than $700 billion as leaders struggle to shield consumers from soaring energy costs and protect against a rise in wholesale energy costs.

Since last September, the European Union has spent more than $620 billion to protect against the price increases, according to a new report from the Brussels-based think tank, Bruegel. (Of that, $274 billion has been earmarked by Germany alone.)

Meanwhile, the United Kingdom and Norway added a combined total of more than $108 billion.

But Italy is responsible for the biggest single-month jump in November. The administration of newly-installed Italian Prime Minister Giorgia Meloni allocated two-thirds of its $36 billion budget for 2023 to provide consumers and families relief from the high energy costs.

…The report comes as much of continental Europe braces for a cold snap in the coming days. Much of continental Europe is poised to see unusually frigid weather for this time of year beginning early next week when a cold snap hits. The cold snap follows months of unseasonably warm autumn weather, and is expected to be Europe’s first real test of energy resiliency since the start of Russia’s war in Ukraine.

The cold snap is expected to extend primarily to northern Europe, forecasters said, including cities such as Berlin, Amsterdam, Helsinki, and Stockholm.

Ahead of the freeze, gas prices in Europe have soared to a six-week high and are expected to start depleting EU gas inventories, according to analysts at DB Group Europe. Read more from Bloomberg here. 

CLIMATE LAWSUITS ARE ‘CONCERNING’ AND DANGEROUS TREND, ATTORNEY WARNS:  Climate attorney Phil Goldberg joined former FERC chairman Neil Chatterjee and Breanne on this week’s “Plugged In” podcast to discuss a recent surge of climate lawsuits against utility companies and energy manufacturers.

Goldberg, a managing partner at Shook, Hardy & Bacon who specializes in climate litigation, argued that federal regulators and Congress should decide the climate change policy debate, not the courts. From a legal perspective, he said, the lawsuits are a “very concerning and dangerous” way to go about enacting change.

“These are not the kinds of issues that we can decide in the courts. The courts can’t hold hearings; they can’t make policy decisions,” Goldberg said. Listen to the full episode here.

TREASURY ISSUES GUIDANCE ON LABOR RULES FOR CLIMATE SUBSIDIES: The Biden administration released initial guidance yesterday instructing companies how to comply with novel labor requirements in the new climate law, including how to take advantage of exceptions where the requirements can’t be met.

The guidance was highly anticipated by companies who are anxious to take advantage of the Inflation Reduction Act’s beefed up tax credits for renewable, nuclear, hydrogen and other ventures.

Eight of the new and improved clean energy tax credits have prevailing wage and apprenticeship conditions which, if met, exponentially increase the credits’ value.

The guidance instructs companies how to contact the Department of Labor in the event that no prevailing wage is posted for a specific geographic area or job classification, and it clarifies what kinds of documentation companies need to provide to prove they are meeting the requirements.

It also explains how Treasury will determine whether to extend a “good faith effort exception” to companies on the apprenticeship requirements. Claimants will generally be deemed to have met them if they attempt to acquire apprentices but are unable due to a lack of access to qualified apprenticeship programs or are otherwise denied requested apprentices.

Labor unions gladly endorsed the requirements in comments to the Treasury Department.

Biden and Democratic leadership have closely aligned themselves with unions and sought to do more to serve union interests in the reconciliation package than was ultimately codified in law. Sen. Debbie Stabenow helped write language that would qualify only electric vehicles assembled with union labor for the full EV tax credit, but the provision was axed after Sen. Joe Manchin came out strongly against it.

TOP ENERGY REPUBLICANS DEMAND ANSWERS ON SPR’S INTEGRITY: Leading energy committee Republicans are demanding answers from the Department of Energy about whether Biden’s emergency drawdowns of reserve oil have affected the structural integrity of the infrastructure and storage caverns at Strategic Petroleum Reserve sites.

Sen. John Barrasso and Rep. Cathy McMorris Rodgers, ranking members of the Energy and Natural Resources and Energy and Commerce Committees, publicized a letter today they sent to Secretary Jennifer Granholm earlier in the week asking for information about any damage and increased maintenance requirements that has occurred as a result of the drawdowns.

The lawmakers also want to know whether any of the SPR’s storage caverns have collapsed under the stress of the drawdown process and whether the construction of new caverns will be necessary to accommodate oil the administration purchases to refill the depleted reserve.

The potentially compromised integrity of the SPR is a relatively new line of attack from Republicans, who have been criticizing Biden’s use of the reserve to lower fuel prices since he first announced price-related releases of reserve crude oil last November.

Their letter to Granholm follows a recent request penned to Barrasso and Senate Energy Chairman Joe Manchin by Tristan Abbey, a former National Security Council and senior Senate ENR committee staffer who oversaw the Strategic Petroleum Reserve, who asked the committee to look into the condition of the SPR.

DOE responds: “We all agree that the SPR is a critical national and energy security tool,” a department spokesperson said in a statement, “and as such we urge Congress and the authors of the letter to support DOE’s funding request to modernize the SPR to maintain its operational readiness for Congressionally mandated sales and future efforts to address global energy supply chain disruptions.”

WASTE STORAGE SOLUTION IS ABOUT PUBLIC TRUST: DOE NUCLEAR HEAD: Making progress on an interim solution for storing spent nuclear fuel is not about eliminating an existing risk to the public but is rather about regaining public trust in the safety of nuclear energy, Assistant Secretary for the Office of Nuclear Energy Katy Huff said yesterday during a webinar hosted by the Breakthrough Institute.

Permanent storage of nuclear waste at Yucca Mountain in Nevada, the nation’s congressionally designated waste repository, has long failed to be realized due to court challenges and opposition from locals.

Nuclear waste has meanwhile been stored on-site at nuclear facilities. Utilities conduct security and safety activities for waste storage at more than 70 sites around the country.

In recent years, DOE has been charged by Congress with establishing a federal interim storage facility for waste, and the department put out a request for information last December on the development of a “consent-based siting process,” which Huff said is about “[making] the needs of the people and communities central to the process.” (i.e. to avoid the endless back-and-forth between the government and those who don’t want highly radioactive material in their backyards).

Ultimately, she said, the department is not pursuing a storage solution because the current arrangement is unsafe.

“This is about trust 100%. Our history comes along with us as the Department of Energy,” she said, referring to the department’s decades of failure at finding a federal storage solution, “and it’s critically important that we regain the public’s trust that we can meet our obligations.”

Opponents of nuclear energy often promote the lack of a permanent waste storage solution as a primary reason why nuclear power should either be phased out or not expanded.

The Rundown

New York Times With federal aid on the table, utilities shift to embrace climate goals

Bloomberg China’s Covid Zero policy is putting its climate action on ice

Sacramento Bee ‘Unconscionable’: California oil companies facing new tax are no-shows at gas price hearing

Calendar

THURSDAY | DECEMBER 1

10:00 a.m. 366 Dirksen The Senate Energy and Natural Resources Committee will hold a hearing to consider pending legislation.