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HYDROGEN HUB HEADACHE: The Biden administration announced on Friday they would grant $7 billion to fund seven regional hydrogen hubs across the country — projects that will accelerate the use of the odorless gas as an energy source for vehicles, manufacturing, and more, Nancy reports. However, green groups are already pushing back on the program, arguing that some of the projects don’t actually reduce emissions and could actually run down a slippery slope towards polluting communities and raising energy prices.
Green groups are already weighing in on the announcement, finding fault with the administration funding hydrogen powered by processes such as natural gas and marketing it as “clean.”
Only two projects are expected to use renewable sources exclusively to power operations — the California hub and the Pacific Northwest hub.
Ben Jealous, the executive director of Sierra Club, issued a word of warning to the administration: don’t be fooled by the oil and gas industry’s attempt to prolong their operations.
“The fossil fuel industry is working to continue our nation’s reliance on fossil fuels by any means necessary – and hydrogen offers yet another possible inroad for Big Oil and Gas to lock in polluting and non-economic uses of gas for decades to come,” Jealous said in a written statement. “Decision-makers in the administration and at the local level must be wary of these attempts and ensure as much hydrogen-specific funding as possible goes to green hydrogen and its most efficient end uses to ensure this investment actually addresses climate change.”
A bit of background: “Green hydrogen” is produced using renewables such as solar and wind — and less than 1% of hydrogen is now produced through this method. However, hydrogen that is created from natural gas is considered “grey,” while “blue hydrogen” is created through the same process but is coupled with carbon capture and storage. “Pink” hydrogen is powered by nuclear.
Marion Gee, the co-executive director at Climate Justice Alliance, called the projects a “corporate scam” that could further pollute local communities and “present a safety risk in transit.” There has been public debate on the safety of transporting hydrogen, with many asserting that hydrogen is seen as more hazardous than natural gas.
Local groups are also raising concerns with the buildout of the hubs in their states. The Ohio River Valley Institute, a left-of-center think tank, stated that the buildout of the Appalachian Regional Clean Clean Hydrogen could yield “little economic or climate benefit” – and instead, may actually raise energy costs for families.
However, a number of lawmakers are praising the administration’s hydrogen projects – including members from across the aisle. GOP Sen. Shelley Moore Capito, the ranking member of the Senate Environment and Public Works Committee, called the project a “major win” for energy production in West Virginia.
Looking ahead: President Joe Biden will name the winners during his trip to Philadelphia later this afternoon, where he’s expected to tout the bipartisan infrastructure bill that paid for the project. The Regional Clean Hydrogen Hubs program, which allocates $8 billion total toward clean hydrogen production and use, will finance projects that are estimated to produce 3 million tons of hydrogen per year, or nearly one-third of the country’s 2030 clean hydrogen production goal.
“With this historic investment, the Biden-Harris Administration is laying the foundation for a new, American-led industry that will propel the global clean energy transition while creating high quality jobs and delivering healthier communities in every pocket of the nation,” Energy Secretary Jennifer Granholm said in a written statement.
Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writers Breanne Deppisch (@breanne_dep) and Nancy Vu (@NancyVu99). 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.
OIL PRICES SOAR AMID FEARS OF RUSSIAN SUPPLY CUTS, MIDDLE EAST TENSIONS: Oil prices jumped by 4% this morning after the U.S. announced sanctions on two companies for violating the Russian oil price cap, sparking fears of further supply cuts at a time of high demand.
Prices for international benchmark Brent crude rose to $89.30 per barrel as of mid-morning, an increase of $3.30 from the previous day of trading. Meanwhile, prices for U.S.-based West Texas Intermediate saw gains as high as $4 this morning before settling slightly lower at $86.23 per barrel, a $3.32 jump.
The price gains were due primarily to concerns over potential constraints in the Middle East amid the Israel-Hamas war, and from Russia, after the U.S. announced sanctions on two shipping companies for violating the Russian oil price cap.
“[A] geopolitical risk premium still lingers around the corner that is likely to support oil prices in the short-term,” Kelvin Wong, a senior analyst at OANDA, told Reuters. Markets are most concerned by the potential for supply disruptions emanating from the Middle East tensions and potential for broader conflict, as well as retaliatory measures from Russia, which has threatened repeatedly to throttle or halt its oil exports.
Fears of Russia taking more oil off the market are not unjustified. Russian seaborne oil product exports dropped last month by 2.5% compared to August, according to new industry data, underpinned by temporary bans on gasoline and diesel exports, and its 500,000 bpd oil production cut that is slated to last through the end of the year.
In total, Russia exported 9.456 million metric tons of seaborne crude products, Reuters reports, bolstering analysts’ fears that a drop-off in Middle East supplies could cause a significant supply shortage.
MEANWHILE, U.S. PRODUCTION HITS RECORD-HIGH: U.S. oil production rose last week to a record-high of more than 13 million barrels per day, the U.S. Energy Information Administration said yesterday, exceeding expectations and boosting the nation’s oil inventories to levels far higher than analysts had anticipated.
According to the EIA’s Weekly Petroleum Status Report, U.S. crude oil production increased by roughly 300,000 barrels per day last week compared to the previous seven-day period, averaging a record-high production level of 13.2 million bpd.
That’s a significant increase from the previous high, set in March 2020, just before the pandemic struck, when U.S. output rose to 13.1 million bpd. It’s also the largest week-on-week gain since early August.
The high production also boosted U.S. crude inventories, which rose to 464.2 million barrels in the last seven-day period, or a 10.2 million barrel jump compared to the previous week. The numbers far outpace market forecasts, which had predicted inventories to increase from between 500,000 barrels to 900,000 barrels in the seven-day period, according to market surveys.
Political implications: News of the record-high production complicates messaging for Republicans, who have accused President Joe Biden of waging a war on energy and stifling U.S. oil production. But it also contradicts Biden’s own campaign trail promises to transition the U.S. away from the oil industry and end all new oil and gas drilling on federal lands. Read more from Breanne here.
NEW YORK REJECTS RATE HIKE REQUEST FROM OFFSHORE DEVELOPERS, THREATENING PROJECTS: New York regulators rejected offshore wind developers’ request for 54% more project funding this week—a decision that risks threatening the state’s renewable energy targets and canceling some 4.2 GW of planned offshore power.
Offshore developers, including Equinor and Orsted, had asked for major adjustments to their contracts, tied to higher materials costs and inflation that have pushed the cost of building much higher.. But the New York Public service Commission unanimously rejected their request, noting yesterday that it would have saddled consumers with up to $12 billion in added costs.
Orsted and others have already threatened to pull out of their projects if no adjustment is made, arguing that the cost estimates were modeled for years ago and do not adequately reflect market demands and higher interest rates.
“We are reviewing the PSC’s order, but Sunrise Wind’s viability and therefore ability to be constructed are extremely challenged without this adjustment,” David Hardy, Orsted’s chief executive officer for the Americas, told Bloomberg in response to the news. “We will evaluate our next steps and communicate the status of the project as soon as possible as our joint venture and board consider the best options going forward.”
Bigger picture: The New York projects aren’t the only ones on the chopping block, according to E&E News. Since July, four contracts were canceled offshore Massachusetts, while another developer offshore Connecticut moved to end his contract last week.
The Rundown
Financial Times ‘As big as Saudi Arabia’: the Permian oilman who sold Pioneer to Exxon
Wall Street Journal The oil price has a safety valve. Gas doesn’t.
Bloomberg US air pollution progress is slowing. Researchers are looking at cities.
