Daily on Energy: Game time for US LNG

Ahead of the European Council and G-7 meetings in Brussels today, European Commission President Ursula von der Leyen said she will talk with President Joe Biden about “how to prioritize LNG deliveries from the United States to the European Union in the coming months.”

“We are aiming to have a commitment for additional supplies for the next two winters,” she said.

Separately, national security adviser Jake Sullivan told reporters en route to Brussels yesterday to expect the U.S. to take her up on that.

“I think you can expect that the U.S. will look for ways to increase LNG supplies, surge LNG supplies to Europe not just over the course of years, but over the course of months as well,” Sullivan said.

Months in the making: Biden and von der Leyen laid the groundwork for this kind of partnership back in January, before Russia moved into Ukraine and sent Western leaders on a tear to cut ties, or at least begin the cutting of ties, with Russian energy.

The two put out a joint statement saying they would intensify collaboration on energy policy, especially deploying renewables and cutting emissions.

While they said that LNG would help EU members in the “short term” and acknowledged the U.S.’s leading role as an LNG supplier to Europe, the statement said they would work on ensuring supply of natural gas to the EU “from diverse sources across the globe.”

Further, at that time, Biden administration officials had also been visiting other top LNG producers, including Qatar, to strategize on supplies for Europe. Now, the White House is more explicitly promoting domestic LNG as a salve to soothe Europe’s strained economies.

Shipments have been sailing: To be sure, the market has already been doing this itself. U.S. LNG shipments to Europe hit record levels in January, and while there were some disruptions in shipments last month causing the per-day average to fall compared to January, the Energy Information Administration estimates more LNG export record-setting is in order this year. EIA’s projections foresee a 16% increase in average daily export volumes for 2022.

What industry wants: The oil and gas industry has sought to get out in front of the issue and promote itself as the proper alternative to Russia for Europe. To that end, industry groups are asking Biden to speed up regulatory approval of 17 pending applications for LNG projects, as well as 15 gas pipeline projects.

Heads of the Interstate Natural Gas Association of America, American Gas Association, Independent Petroleum Association of America, and Natural Gas Supply Association told Biden in a letter sent yesterday that the industry needs the new infrastructure and called the projects “vital as we work towards the cleaner energy future we all want while continuing to support our allies as the war in Ukraine rages on.”

One more thing: Biden is supposed to make an announcement related to a “joint action on enhancing European energy security and reducing Europe’s dependence on Russian gas” during his visit. A senior administration official declined to get ahead of Biden and reveal more details in a call with reporters today, but Sullivan’s comments would seem to signal enough in themselves as far as what to expect.

Fred Hutchison, CEO of LNG Allies, told Jeremy that while he and his group don’t believe a whole lot more can be done on increasing exports in the immediate term, he hopes Biden’s announcement “will help foster more commercial contracts between U.S. LNG exporters and EU importers so as to bolster European energy security in the second half of the decade.”

“We’re ready. Let’s go,” he said.

Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writers Jeremy Beaman (@jeremywbeaman) and Breanne Deppisch (@breanne_dep). 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.

EU PURSUING MANDATORY GAS STORAGE TARGETS: The European Commission published details of several proposals yesterday for near-term solutions to its energy crisis, including mandatory natural gas storage levels and a common purchasing strategy, in an attempt to protect itself during the winter months.

The commission’s proposal would obligate EU states to reach a minimum of 80% of gas storage capacity by Nov. 1 of this year, and the level would rise to 90% in coming years.

To help achieve those levels, it also proposes that members band together to purchase gas via a refilling task force as a means of wooing producers and keeping prices affordable.

“The EU should act jointly to harness its market power through negotiated partnerships with suppliers,” the commission said in a communication document. Separate materials said the task force would “reinforce the EU’s international outreach to suppliers to help secure well-priced imports.”

A number of countries had been pushing this kind of approach for months, even before Russia’s invasion of Ukraine fractured relations between it and the bloc.

MEANWHILE, OIL-RICH OPEC EXPRESSES MOUNTING CONCERNS ABOUT A POSSIBLE BAN: OPEC remains deeply concerned about the EU’s possible ban on Russian oil supplies, citing the pain consumers would likely feel as a result. Last week, OPEC Secretary-General Mohammad Barkindo traveled to Brussels to meet with EU Energy Commissioner Kadri Simson to discuss the “extraordinary times for the energy market,” Reuters reports. The news comes as major OPEC members, including Saudi Arabia and the UAE, have sought to chart a more neutral course between the West and Russia, a member of OPEC+.

Asked for comment about the visit, an EU official said: “OPEC presented their analysis of the oil market situation and informed us of their plans in terms of oil production.”

“As we have consistently said, nothing is off the table in terms of future sanctions,” this person added.

EPW TAKES UP ENERGY SECURITY: The Environment and Public Works Committee dug into the issue of energy security yesterday in the face of record gasoline prices, and the competing visions of how government should respond to current strains on markets and consumers were on stark display.

Congress should take the current crisis as “our moment, our signal to move to the future,” said Democratic Sen. Ed Markey, plugging the Democrats’ green energy spending agenda and especially its subsidizing of electric vehicles.

“We can tell Saudi Arabia we don’t need their oil any more than we need their sand. We can do it, but we have to unleash this incredible revolution, and that’s all in the legislation that’s still pending,” he said.

Sen. Kevin Cramer and other Republicans demurred.

“I don’t want to be the leader of a new world order. I want to be the leader of a free world order,” he said. “That’s what the oil and gas industry has provided us in this country and what we are able to provide the world today.”

SEC rule shows its face: The Securities and Exchange Commission’s new proposal to mandate climate-related disclosures also came up intermittently.

Kathleen Sgamma, head of producer trade group Western Energy Alliance, complained the rule’s provisions “are specifically meant to get to an answer of ‘no’ on any new fossil fuel projects” and would increase imports of energy.

CONSUMERS IN THE US FACE MORE THAN STICKER SHOCK AS GAS PRICES SOAR: With gas prices in the U.S. climbing to their highest point in 14 years, drivers across the country are facing a new kind of pain at the pump: fueling limits that may deny them a full tank.

Many are seeing for the first time a credit card limit that prevents them from spending more than $75 per fill. Though the $75 limit isn’t new, most people have never paid near that high a price to fill their tanks before — touching off deep frustration and confusion, especially for those with larger vehicles or who have long work commutes that require them to refuel more often than an average driver.

Stunned by the limits, some drivers turned to social media this week to voice their frustration.

Jonathan Moore, an engineering and project management consultant, told Breanne he was surprised when he was cut off in the middle of refueling his vehicle — especially since he was using a debit card. “The way it seems to have been for me is I hit a $75 hold limit, and the pump shut off,” said Moore, who says he was later able to swipe a second time.

“I’ve just never had an opportunity to fill above $75,” he said.

Damien King, a lead petroleum service technician in Raleigh, North Carolina, has worked in the industry for years. While he told Breanne he was less surprised by the rise in fuel prices, it was certainly jarring for his 18-year-old daughter, a college student who balances her studies with a full-time job as a waitress.

She’s always paid for her own gas, King noted proudly, and when she started driving two years ago, she “could fill up her whole tank for around $20.”

But that’s no longer the case. “She came home the other day and said, ‘Dad, it cost $44’” to refuel, King recounted. “I mean, she was really upset.” For a waitress in North Carolina, he said, “$44 can, you know, be [a] four-hour shift.”

EFFORTS TO REDUCE THE PAIN: California Gov. Gavin Newsom announced a sprawling $11 billion proposal this morning to help ease the burden of high gas prices in the state. Among other things, his proposed relief plan would include weekly, $400 payments to residents for each vehicle registered in their name, regardless of their income level. Motorcycles and electric vehicles are also included, the Los Angeles Times notes, though payments are capped at two vehicles per person.

It would also allocate $750 million to public transit in the state in a bid to help drive down, or eliminate completely, the cost of trains and buses for those without vehicles. The move comes as gas prices in California have soared in recent weeks, climbing to a statewide average of $5.88 per gallon, and $6 per gallon in L.A.

But Newsom isn’t the only state leader weighing a plan to put money back in the pockets of U.S. consumers, who have been squeezed for months by high inflation rates and gas costs.

At least a dozen states, including Kansas, Maine, Minnesota, and New Mexico, have proposed sending rebate checks directly to taxpayers. As the AP reports: “The relief plans vary by state. Minnesota Gov. Tim Walz, a Democrat, released a plan for spending the state’s budget surplus that included a proposal for income tax rebate checks of $1,000 per couple. … [Meanwhile], Pennsylvania Gov. Tom Wolf is seeking a one-time property tax subsidy for lower-income homeowners and renters. In Illinois, Gov. J.B. Pritzker has proposed halting a 2.2-cent increase in the motor fuel tax, suspending a 1% grocery sales tax for a year and providing a property tax rebate of up to $300.” Maine Gov. Janet Mills is pushing for one of the most generous plans, which would send $850 to most residents as part of the state’s budget bill.

The move comes as many states have money left in their coffers following two separate COVID relief bills. It also comes at a tough time for many families. “Inflation boosted the typical family’s food expenses by nearly $590 last year, according to the Penn Wharton Budget Model. … Overall, the average family had to spend $3,500 more last year to buy the same amount of goods and services as they purchased in previous years.”

DPA PUSH GAINS MOMENTUM: A group of Democratic senators urged Biden in a letter yesterday to use his authorities under the Defense Production Act and military sales to boost U.S. manufacturing and the deployment of “electric heat pumps, efficient electric appliances, renewable energy generation and storage, and other clean technologies.” Signatories included Sens. Elizabeth Warren, Markey, Martin Heinrich, Cory Booker, and Jeff Merkley.

In doing so, the group told Biden, “You could bolster our national security, create good-paying American jobs, fight the climate crisis, and build a just, resilient, American-led international clean energy economy.”

Encouraging the DPA to be used is fashionable these days. Green groups urged Biden earlier this month to invoke it for the same reasons as Markey et al. The Congressional Progressive Caucus did too.

Other lawmakers have sought use of the DPA for oil and gas production.

The Rundown

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Politico How the Ukraine war could go nuclear

Washington Post Gas and go. Pay later. How some drivers are dealing with higher fuel costs.

Calendar

THURSDAY | MARCH 31

10:00 a.m. 366 Dirksen The Senate Energy and Natural Resources Committee will hold a hearing about domestic critical mineral supply chains.