Daily on Energy: Would a shutdown crimp oil and gas production?

On Wednesday, trade group Western Energy Alliance warned that disruptions from a shutdown would hurt production in the short term.

The group’s president, Katheleen Sgamma, said in a statement that “the handful of Republicans in Congress standing in the way of a deal basically want to stand with President Biden in owning some of the energy inflation caused by his administration’s efforts to slow walk oil and natural gas.”

She warned that the administration would use a shutdown as an “a reason to further delay projects and leasing.”

Sgamma said that day-to-day operations at energy sites on public lands are contingent on constant communication with the Bureau of Land Management to react to changing situations on the ground.

“When there’s nobody on the line at local field offices to answer a question or approve operational changes as they arise, companies cannot safely and effectively move forward with energy development,” she said.

The roles of the agencies: The bureaus within the Interior Department – the Bureau of Land Management and the Bureau of Ocean Energy Management — manage the public lands and waters where energy sites are placed, ranging from the federal government’s onshore oil and gas program to the government’s offshore wind. These agencies can also approve or deny leases for energy sites.

The Office of the Management and Budget has already begun communicating with agency officials to review and update contingency plans in case of a shutdown. Agencies have already begun updating their contingency plans to prepare – but the Department of Interior, notably, has not.

Interior, along with BLM and BOEM, have declined to comment on their contingency plans to the Washington Examiner. 

But will it affect energy production? “Ongoing oil and gas production by companies would not be impacted by a lapse in government funding,” Melissa Schwartz, a spokesperson for the Interior Department, said in a statement to the Washington Examiner. 

As it relates to approving or denying energy leases, the answer could depend on how long the shutdown will last and which agencies are closing or staying open. For example, the Sept. 2013 shutdown – which lasted 16 days – caused the National Park service to close down more than 400 parks, resulting in more than $500 million in lost visitor spending nationwide. However, the 2018-19 shutdown, which lasted more than a month during the Trump administration, ended up keeping national parks open – although no visitor services were provided, and trash and damage were piling up at sites.

Theoretically, can the Interior keep approving leases? Well, yes. During the Trump administration, then-Interior Secretary Ryan Zinke directed “essential” workers to continue approving oil drilling permits and planning oil lease sales, with BLM approving 267 onshore drilling permits and 16 leases during the 35-day shutdown.

Zinke, who now serves as a lawmaker in the House, gave some advice for Secretary Deb Haaland on how to approach the impending shutdown – but there’s no guarantee that she’ll take it.

“I can tell you the secretary has a lot of latitude in what we deem critical and essential,” Zinke said on Tuesday. “When I was secretary, I didn’t shut down the parks. I didn’t shut down inspections on our oil rigs. I didn’t shut down transportation. I didn’t shut down permits.”

But will the Biden administration follow suit? It’s worth asking whether the Biden administration will continue administering leases during the shutdown, with the administration being more averse to oil and drilling than the Trump administration. Approving leases for renewable energy is also a question.

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.

DEBATE HIGHLIGHTS, IN CASE YOU DIDN’T WATCH: In case you didn’t watch last night’s second (Donald Trump-less) Republican presidential debate in California, there were a few exchanges on energy and climate policy that might be worth consideration.

Haley went after DeSantis on drilling: Former South Carolina governor and ambassador to the United Nations Nikki Haley used a question about lowering gas prices to take a swipe at Ron DeSantis’s conservationist record as Florida (which we have explored in past reporting).

As Nancy explained in a piece on the exchange last night, just two days into his term in 2019, DeSantis issued an executive order ordering the state’s Department of Environmental Protection to oppose all offshore oil and gas activities off the coast of Florida, along with hydraulic fracturing. There have been no new oil and gas permits issued to authorize hydraulic fracturing specifically. But a bill that would have prohibited fracking more broadly has been stalled in the state legislature.

Haley and Scott fought over gas prices: In an instance of South Carolinian-on-South Carolinian violence, Sen. Tim Scott criticized Haley for her proposal, as governor, to raise the gas tax by 10 cents (while cutting income taxes). The back-and-forth, though, quickly degenerated into a squabble over spending on curtains at the UN ambassador’s office in New York.

Newsom took on Pence on energy production: California Gov. Gavin Newsom, who was present at the debate at the Ronald Reagan Presidential Library in Simi Valley, took exception to Mike Pence’s claim that the U.S. has lost “energy independence” because Biden declared “war on energy.”

“We’re more energy independent today under Biden. Pence doesn’t know that, your audience doesn’t know that,” the Democrat told Fox News’s Sean Hannity in a post-debate interview. “More domestic oil production than any time in history, we’re on pace this year.”

Indeed, the Energy Information Administration projected last month that U.S. oil production would reach a record high this year.

Under Biden, oil and gas production recovered from pandemic lows to record or near-record highs. The U.S. has also become the world’s largest exporter of LNG.

It’s a set of facts that tends to be underappreciated because it is inconvenient for Republicans, who try to portray the Biden administration of destroying U.S. fossil fuel production, as well as for Biden, who has sought to burnish his climate credentials and limit unrest among environmental activists.

MEANWHILE, TRUMP STICKS TO TALKING POINTS: Trump attempted counterprogramming to the debate last night with a speech at Drake Enterprises in Clinton Township, Michigan, where he also vied for support from autoworkers, as the UAW engages in a historic strike against the Big Three automakers.

Trump blamed the workers’ problems on electric vehicles and faulted the Biden administration for discouraging domestic drilling for oil and gas.

“Do me a favor. Just get your union guys, your leaders to endorse me,” Trump said at one point.

… RESPONSE FROM UNION: UAW chief Shawn Fain made clear this week that he had no plans to meet with Trump while he visited Detroit, saying the former president’s track record on unions “speaks for itself.”

“I find a pathetic irony that the former president is going to hold a rally for union members at a nonunion business,” Fain said on CNN.

Fain has been outspoken in his criticism of Trump, saying in a recent interview that a second Trump presidency would be “a disaster.” (The union has not yet endorsed a presidential candidate for 2024.)

Fain said in a statement to UAW members Wednesday that “Every fiber of our union is being poured into fighting the billionaire class and an economy that enriches people like Donald Trump at the expense of workers.”

CANTWELL & MURKOWSKI COLLAB ON HYDRO: Sens. Maria Cantwell and Lisa Murkowski will re-introduce a bipartisan resolution today that aims to spur hydropower upgrades, according to two sources familiar with the matter.

The bill, dubbed the “Maintaining and Enhancing Hydroelectricity and River Restoration Act,” would amend the Internal Revenue Code of 1986 to support upgrades at existing hydroelectric dams. The measure would also enforce the removal of river obstructions to improve the health of the waters and associated wildlife, and increase clean energy production. The pair introduced the measure during the last Congress, with Sens. Debbie Stabenow and Dan Sullivan also supporting the bill.

“With energy prices impacting consumers and businesses alike, hydropower is even more important as a part of Alaska’s energy portfolio,” Murkowski said in a statement. “With this bill, we’re spurring hydropower development in Alaska, diversifying our energy supply, reducing our emissions, and investing in Alaska’s energy future.”

The bill enjoys broad support amongst hydropower companies and trade groups, according to two letters of support the Washington Examiner was able to obtain. Read them here.

SHELL CEO UNDER INTERNAL PRESSURE ON RENEWABLES: Shell CEO Wael Sawan is facing internal pressure from employees over his plans to slow the company’s renewable energy investments and investments in low-carbon business, after an open letter was posted on the company’s internal website earlier this month and generated a strong internal response.

The letter, which was written by two Shell employees and reported by Reuters, urges Sawan and others on Shell’s executive committee not to slow the company’s efforts on renewables, after Sawan detailed plans to do so in June as part of Shell’s broader strategy to boost company returns.

“For a long time, it has been Shell’s ambition to be a leader in the energy transition. It is the reason we work here,” said the letter, which was signed by two employees in Shell’s low-carbon division.

“The recent announcements at and after the capital markets day deeply concern us… We can only hope the optics of the CMD announcements are deceiving us and that Shell continues its path as a leader in the energy transition,” they added.

The letter was viewed more than 80,000 times internally, and sparked a long comment exchange internally, Reuters notes—including an eventual response from Sawan himself.

The internal debate comes as Shell has slowed or canceled its renewables investments in recent months, including exiting two offshore wind projects in Europe, selling its UK power business, and weighing the sale of Sonnen, the battery storage company acquired in 2019. Read more on the internal divisions here.

EUROPEAN UNION FINALIZING AFRICA MINERALS DEALS TO DIVERSIFY FROM CHINA: The European Union is finalizing partnerships with the Democratic Republic of Congo and Zambia to help build out critical minerals supply chains as the bloc looks to diversify its critical minerals supplies and move away from China.

The planned MOUs, slated to be signed at the EU’s Global Gateway summit in Brussels next month, are a signal of good faith to local governments and the private sector from that the bloc is committed to backing the development of local supply chains, a key request from the African nations, which currently ship the bulk of their lithium and cobalt supplies to China for processing.

The EU has also signed similar deals with Canada, Kazakhstan, Namibia, Ukraine, Argentina and Chile, Bloomberg reports, and is looking into striking similar partnerships with Rwanda and Uganda.

HAWAIIAN ELECTRIC CEO TESTIFIES BEFORE CONGRESS OVER MAUI WILDFIRE: Hawaiian Electric Co. CEO Shelee Kimura denied that the utility played a role in last month’s deadly Maui wildfires, telling members of the House Energy and Commerce Committee’s Oversight and Investigations Subcommittee today that it’s still not clear what started the so-called “Afternoon Fire” that killed at least 97 people.

“We all want to learn about what happened on Aug. 8 so that it never happens again,” Kimura told lawmakers, adding that the investigation into the cause of the blaze may take 12-18 months.

“We are working tirelessly to figure out what happened, and we are cooperating fully with federal and state investigators,” she said.

Kimura also said that Hawaiian Electric had de-energized all of its power lines for more than six hours prior to the Afternoon Fire.

Her appearance comes as the utility has been under intense scrutiny over its potential role in the fire, and is named in several suits filed on behalf of victims’ families, who allege Hawaiian Electric was negligent in failing to act more quickly despite heightened wildfire risk, Blomberg reports. It is also being sued by the County of Maui, which has alleged the company failed to properly prepare its equipment and protect against wildfire threat.

FOR YOUR RADAR: The White House is hosting a Climate Resilience Summit today, part of the Biden administration’s effort to bolster its state and local partnerships and enable communities across the country to better respond to effects of climate change and extreme weather-related disasters.

The summit includes representatives from 25 states, territories, and tribal nations, the White House said in a press release, and is accompanied by the release of its National Climate Resilience Framework.

That framework identifies specific actions to expand and accelerate progress on six objectives: 1) Embedding climate resilience into planning and management; 2) Increasing reliance to acute climate shocks as well as longer-term “chronic” stressors; 3) Mobilizing capital, investment and innovation to advance climate resilience; 4) Equipping communities with information and resources to best assess their climate risks and develop the most appropriate solutions for response and prevention; 5) Protecting and sustainably manage lands and waters to enhance resilience; and 6) Helping communities become more resilient, healthy, and economically strong.

The U.S. has sustained over 23 separate billion-dollar weather and climate disasters so far in 2023 alone—more than any other year on record. Read more on the White House effort here.

The Rundown

Wall Street Journal $67 billion of rare minerals is buried under one of the world’s biggest carbon sinks

Financial Times Jersey Shore mobilises against offshore wind power