Daily on Energy: House Democrats speed toward oil and gas leasing overhaul

While we wait for the Interior Department’s delayed report on how it envisions the future of leasing, Democrats on the Natural Resources Committee are providing a blueprint with their portion of the $3.5 trillion reconciliation package released to the public last night.

The committee, which oversees energy production on federal lands, released its reconciliation bill ahead of a markup of the legislation scheduled for Thursday morning.

What’s in the bill: As expected, the sprawling bill contains a suite of provisions long-pursued by the committee’s Democrats led by Chairman Raul Grijalva to raise royalty rates, rental fees, and minimum bid amounts; strengthen bonding requirements on operators — meaning that when a company goes bankrupt, there is more assurance they could foot the bill to reclaim their wells; and assess a new royalty on all extracted methane from oil and gas operations on public lands and waters.

The bill would also end the practice of “uncompetitive leasing” that allows companies to secure leases unsold at auction without paying a bonus bid.

Committee Democrats say together the package of reforms would provide a fairer return to taxpayers, and reorient the use of public lands away from fossil fuel production to other practices, such as clean energy development.

The royalty rates that companies pay to the government to drill on public onshore lands haven’t been raised since the 1920s, while minimum bid requirements set at $2 an acre have not been lifted in decades.

The big question: But Republicans and some Democrats from fossil fuel states (see Sen. Joe Manchin of West Virginia) are unlikely to go along with these, and it’s unclear if they will survive when the House and Senate merge their priorities into a final reconciliation product.

“All of these reforms are good for West Virginia and are good for every place,” committee Democrat Rep. Jared Huffman of California told me in a phone call last night. “It’s only right these industries should pay their fair share and are beholden to high environmental and public health standards.”

Opponents pursue delay tactic: Committee Republicans and fossil fuel industry groups are arguing the timing is bad for pursuing these reforms.

Republican members led by top Republican Bruce Westerman of Arkansas last night issued a statement calling on the committee’s Democrats to postpone the markup on the reconciliation bill scheduled for Thursday, citing other “crises facing our nation that are unresolved.”

Erik Milito, president of the National Ocean Industries Association, the offshore energy trade group, warned in a statement provided to me that imposing “more restrictive and less competitive” lease terms for oil and gas operators in the Gulf of Mexico would especially harm companies and workers as they recover from Hurricane Ida in Louisiana.

Huffman, however, said he finds these arguments to delay the reconciliation process “less than convincing.”

“There is never a time when this [oil and gas] industry that has had nothing but subsidies and immunity for a century and beyond would ever say is the right time to see these reforms,” Huffman said.

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RALLYING CRY…HYDROGEN KEY TO BIDEN’S DECARBONIZATION GOALS: Biden administration officials and private sector leaders rallied together this morning to discuss strategies to meet the Energy Department’s goal of cutting the cost of hydrogen 80% within the decade, or to $1 per kilogram.

Energy Secretary Jennifer Granholm, kicking off the agency’s first ever “Hydrogen Shot Summit,” underscored that current commercialized clean energy technologies aren’t sufficient to reach the Biden administration’s goals of cutting emissions in half by 2030 and to net-zero by 2050.

“We may need to innovate our way to new solutions, particularly in hard to decarbonize areas,” Granholm said, touting how hydrogen could be used in energy-intensive processes like producing steel and cement, along with being used as a sustainable aviation fuel and for long-duration storage.

Granholm alluded to a recent controversial study showing blue hydrogen produced via natural gas with carbon capture and storage is not as clean as claimed, vowing “those challenges have to be addressed” and that DOE would pursue “honest, data-driven answers.”

International flavor: Climate envoy John Kerry, also speaking at the summit, emphasized that innovations in hydrogen domestically can be exported abroad, where he said 90% of future emissions will come from.

He added that half of the emissions reductions needed to reach net-zero have to come from technologies not yet ready for commercialization, including hydrogen, which he said could represent a “multi-trillion” global market in coming decades.

Plugging bipartisan infrastructure bill: Manchin, another event speaker, said investments in the bipartisan infrastructure bill awaiting action in the House can be a “downpayment” to make “the promise of clean hydrogen a reality.”

The bill includes $9.5 billion for research, development, and demonstration projects, and another $1 billion to bring down the cost of electrolyzers needed for producing green hydrogen by using renewable energy.

Billionaire Bill Gates of Breakthrough Energy, the keynote speaker, said these investments are critical to driving down the “green premium,” or cost competitiveness, of hydrogen compared to fossil fuel alternatives. He reiterated his commitment to spend $1.5 billion to support the clean energy demonstration projects in the bipartisan infrastructure bill — including for hydrogen — if it passes the House and is signed into law.

LATEST ON HURRICANE IDA: The EPA announced last night it issued emergency fuel waivers for Louisiana and Mississippi allowing them to bypass certain fuel requirements to address potential shortages of gasoline.

Data collected by GasBuddy showed about 10% of gas stations in the Baton Rouge area were out of fuel over the weekend, as were 7.5% near New Orleans, according to the Wall Street Journal.

Those figures could worsen and it may take a week or two for regional supplies to recover in the state’s hardest-hit areas, said GasBuddy’s Patrick De Haan.

But De Haan is still not expecting major price spikes nationally.

Colonial Pipeline, the key hub for transportation fuels to the Southeast that was hit by a cyberattack in April, said it restarted operations after shutting down two lines as a precautionary measure.

What about power? Entergy, a Louisiana utility, said in an update yesterday that 216 substations and more than 2,000 miles of transmission lines remained out of service.

Louisiana still had more than 1 million outages as of 10:30 a.m. this morning, including 791,913 Entergy customers.

Hurricane Ida knocked out all eight transmission lines into New Orleans, a level of damage utility Entergy deemed “catastrophic.”

Entergy said it is conducting inspections of its system to assess the scope of repairs, which will take “several” days. Customers in the direct path of a storm could experience outages for more than three weeks, but 90% of customers will see their power restored sooner.

Rod West, Entergy’s group president of utility operations, blamed “jaw-dropping wind” reaching 150 miles per hour for damaging its transmission system.

West told the Wall Street Journal that Entergy has been working in recent years to rebuild its transmission system to withstand higher winds.

But Hurricane Ida, he told S&P Global, “brought a really devastating punch to the fight,” suggesting the wind was worse than during 2005’s Hurricane Katrina, where the main problem was flooding.

EPA’S REGAN PREVIEWS METHANE AND POWER PLANT RULES: EPA Administrator Michael Regan yesterday said methane regulations his agency plans to issue next month on new and existing oil and gas sources would be “something that’s never been done as aggressively as we plan to do it.”

“We are looking for deep cuts to methane,” Regan said at an webinar event hosted by Resources for the Future.

Regan also reiterated EPA is taking a “fresh look” at imposing carbon emission regulations on power plants.

A federal appeals court in January rejected the Trump administration’s rollback of carbon standards for power plants, known as the ACE rule.

That rule replaced the Obama administration’s Clean Power Plan, which set first-time carbon emissions limits for the power sector.

The Supreme Court in 2016, in a rare out-of-turn move, paused the Clean Power Plan from going into effect before even the lower court considered its legal merits.

Can Biden EPA thread the needle? It isn’t clear whether the courts will look fondly on a reprise of the Obama administration’s sweeping approach, which allowed utilities to reduce emissions by switching from coal to cleaner fuels such as natural gas and renewables.

Regan said EPA “learned a lot” from the Clean Power Plan and is “building on prior lessons.”

He said he feels “really good” that the new rule would “get [carbon emissions] reductions we are all looking for,” and that the regulation would be “guided by science, guided by the law and guided by our Clean Air Act obligations.”

WILD SUMMER CONTINUES…EVACUATION OF SOUTH LAKE TAHOE: Authorities issued evacuation alerts for residents in South Lake Tahoe yesterday as the Caldor fire expanded toward the Lake Tahoe Basin around Echo Summit, the Washington Examiner’s Kaelan Deese reports.

The Caldor fire has been ablaze for 16 days and has scorched 177,260 acres of land across El Dorado County, the heart of one of California’s most prominent recreation wilderness areas.

High winds make the challenge of extinguishing the flames even more difficult for firefighters, as the fire was just 14% contained, according to the California Department of Forestry and Fire Protection.

The forecast for the next several days calls for extreme heat with possible triple-digit temperatures, leading the National Weather Service to issue a red flag warning for critical fire conditions across the northern Sierra.

HOUSE DEMOCRATS PUSH AGAINST FOSSIL FUEL SUBSIDIES: Democrats on the House Oversight Committee led a letter of more than 50 colleagues yesterday to Speaker Nancy Pelosi and Majority Leader Steny Hoyer requesting they include the repeal of fossil fuel subsidies in the reconciliation package.

“We support a deal that sufficiently enhances climate justice, especially in repealing fossil fuel subsidies. Congress must follow through in implementing the President’s vision,” wrote the Democrats, led by chairman Carolyn Maloney of New York and Rep. Ro Khanna of California, who leads the Oversight Committee’s Subcommittee on the Environment.

Biden, as part of his fiscal 2022 budget request, proposed to eliminate more than a dozen tax breaks for fossil fuel companies in an effort to align the tax code with his aggressive climate regulatory agenda.

ELECTRIC VEHICLE SALES ARE GROWING, BUT MOSTLY IN EUROPE AND CHINA: Global electric vehicle sales are expected to vault over 6 million this year, Wood Mackenzie projected today, with sales in the first half of this year nearly tripling from the same period of 2020.

EV sales now account for 7% of vehicle sales globally.

But the EV share in the U.S. has is growing only modestly, to 1.4%, with about 270,000 sales in the first half of 2021. Price continues to be the biggest issue for U.S. consumers, with most sales representing the luxury end of the market.

China and Europe, which have more aggressive EV subsidies, accounted for over 85% of all EV sales in the first half of this year. While Democrats are expected to propose expanded subsidies and rebates in their reconciliation bill, the U.S. has a tough road to reach Biden’s new target of 50% electric vehicle sales by 2030.

The Rundown

Wall Street Journal Oil industry surveys damage after Hurricane Ida slams Louisiana

Reuters Biden administration aims to cut costs for solar, wind projects on public land

Associated Press US climate envoy in Japan to push efforts to cut emissions

Washington Post Federal judge throws out Trump administration rule allowing the draining and filling of streams, marshes and wetlands

Calendar

WEDNESDAY | SEP. 1

12:30 p.m. The Nuclear Innovation Alliance will hold a webinar event for the release of the new NIA resource, “Advanced Nuclear Reactor Technology: A Primer.”

1 p.m. The House Select Committee on the Climate Crisis will hold a virtual briefing on the IPCC’s 6th Assessment Report.

THURSDAY | SEP. 2

10 a.m. The House Natural Resources Committee will hold a remote markup of its reconciliation bill.