Daily on Energy, presented by Renew Biodiesel: Fossil fuel plants get a boost from Trump-appointed regulators

FERC voted 2-1 in a long-anticipated action to revise market rules that govern how different energy resources are priced in PJM, the nation’s largest power market.

The changes, backed by FERC’s two Republicans, are designed to raise payments to non-subsidized sources of energy — primarily coal and gas plants — to combat state policies that subsidize carbon-free renewables and nuclear power.

PJM covers a territory representing 65 million people in 13 states from Illinois to Virginia plus Washington, D.C., about one-fifth of the U.S. power supply, many of which have policies to boost carbon-free energy sources in order to combat climate change.

“The commission is acting to protect the market from those subsidies to establish just and reasonable rates through competition,” said Republican Chairman Neil Chatterjee, speaking at FERC’s monthly public meeting. His Republican counterpart, Bernard McNamee, said renewable and nuclear generators receiving state subsidies “fundamentally undermine the competitive markets.”

Remember: The Trump administration tried and failed to get FERC to approve a more expansive policy applying in power markets beyond PJM that would have directly subsidized coal plants that can store fuel on-site.

The coal industry welcomed FERC’s new changes, arguing that state subsidies for cleaner energy sources artificially distort the market and keep prices too low.

“Far too much of the nation’s essential coal fleet has been lost to market manipulation,” said Rich Nolan, president & CEO of the National Mining Association. FERC’s action, he said, “aims to restore fairness to the marketplace and is a timely first step in addressing the loss of the nation’s baseload generating capacity.”

Democratic states and clean energy groups argue the changes discriminate against carbon-free resources, undermine individual states’ clean energy policies, and would raise consumer prices.

Democratic attorneys general have threatened to sue over FERC’s changes, contending that the commission is interfering in state policy-making that aims to counter the market’s failure to account for fossil fuels’ climate pollution costs.

Richard Glick, FERC’s lone Democrat, said the Republican-backed order is a “direct attack on state generation resource decision making.”

Glick, who opposed the order, added that if “you artificially increase capacity prices, which this order does, we are keeping existing capacity online longer.” Coal or gas plants that “might be uneconomic tomorrow might be economic [in the future] once you raise the prices.”

FERC’s order comes in response to changes proposed by PJM to impose a Minimum Offer Price Rule setting a price floor for new generation resources to combat below-cost bids from subsidized renewable and nuclear sources.

The rule adopted by FERC only applies to new clean energy resources that receive state subsidies. FERC could have gone further to target existing renewables. Glick estimated that the rule will impact 38 gigawatts of new renewable facilities in the pipeline that haven’t been built yet. His staff projects the changes could raise capacity prices at least $2.4 billion per year for consumers.

Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writers Josh Siegel (@SiegelScribe) and Abby Smith (@AbbySmithDC). 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.

US CHAMBER PROJECTS $130 A BARREL OIL PRICES FROM FRACKING BAN: The U.S. Chamber of Commerce is warning about the implications of banning fracking ahead of Thursday night’s Democratic debate.

If Bernie Sanders or Elizabeth Warren fulfill their pledges to ban fracking upon becoming president in 2021, it would cause natural gas prices to rise by 324%, causing household energy bills to “more than quadruple,” the Chamber projected in a new report.

By 2025, drivers would pay twice as much at the pump for gasoline as oil prices spike to $130 per barrel.

A fracking ban would eliminate 19 million jobs and reduce GDP by $7.1 trillion by 2025. Most of the job losses would occur in Texas, home to the oil-and-gas rich Permian Basin, where more than 3 million jobs would be affected.

Oil and gas production is also a significant contributor to federal, state and local revenue, the Chamber notes. Tax revenue at the local, state, and federal levels would decline by nearly a combined $1.9 trillion if a Democrat bans fracking.

Not great for emissions either: Banning fracking would have a questionable impact on emissions, experts previously told Josh.

In the near term, coal use might increase to offset the loss of electricity from natural gas plants. That could increase emissions overall, even if fracking limits lowered emissions of methane and raised the price of oil.

It’s also challenging to replace gas use from buildings and in the manufacturing sector immediately, so that would likely require importing more fossil fuels.

GM AND FORD JOIN PUSH FOR GOP-BACKED CARBON TAX: A Republican-backed group pushing for Congress to pass a carbon tax has raised more than $5 million this year after adding new corporate funders Thursday, including America’s two largest automakers: GM and Ford.

The carmakers, along with technology company IBM, are giving $100,000 each to Americans for Carbon Dividends, the lobbying arm of the Climate Leadership Council, a group led by former Republican Secretaries of State James Baker III and George Shultz.

Texas-based power companies Vistra Energy and Calpine Corp. are also providing funding to the group, with Vistra committing $1 million over two years.

“What you are seeing is a consensus position from all sectors of corporate America saying we need a national carbon price,” Climate Leadership Council CEO Ted Halstead told Josh. “It’s not just energy majors and utility majors.”

Oil and gas giants BP, Shell, ConocoPhillips, and Exxon Mobil have already donated money to the group, which advocates returning carbon tax revenue to taxpayers.

Next steps: Halstead said the $5 million that Americans for Carbon Dividends raised in 2019 will allow the group to ramp up its lobbying in 2020. The group’s managing director, former Republican Rep. Ryan Costello, has been banned from lobbying because he recently left Congress but can begin lobbying in January.

The group also expects to invest in more paid media, state field work, grassroots organizing, and additional staff and consulting.

Halstead said he hopes Congress introduces bipartisan legislation in both chambers mirroring the group’s proposal next year.

‘VOLUMINOUS’ CLIMATE BILL ON DECK: House Energy and Commerce Democrats said Thursday they’ll release a discussion draft of a comprehensive climate bill in January.

The bill is the latest iteration of Democrats’ efforts to codify plans to reach a 100% clean economy by 2050 into law. Virginia Congressman Donald McEachin introduced legislation last month that would direct federal agencies to draw up plans to meet that target.

The pending discussion draft, though, will be more comprehensive and a “very voluminous document,” said New York Congressman Paul Tonko, chair of the Environment and Climate Change subcommittee and leading the efforts on the bill. He told reporters Thursday the legislation wouldn’t include carbon pricing, though he and other committee lawmakers will continue to explore that option in the next year.

Also waiting in the wings: The full House will take up legislation to address per- and polyfluoroalkyl substances, or PFAS, in January, said House Energy and Commerce Committee Chairman Frank Pallone of New Jersey. This comes after Pallone and other House Democrats faced much of the blame for broader PFAS measures failing to pass in the defense bill.

Tonko also said to expect the committee to work on legislation to reform the Safe Drinking Water Act next year that he hopes will be bipartisan.

“I think it’s now clear we need to reform the way drinking water standards are set,” Tonko said during a news conference, adding lawmakers need to “rebalance” the drinking water law to “prioritize public health.”

CRUZ’S LAST-GASP WARNING ON NORD STREAM 2: Republican Ted Cruz of Texas put construction companies behind Russia’s Nord Stream 2 pipeline on “legal notice” Wednesday that they face “crushing and potentially fatal” sanctions if they finish the project.

The Senate approved a bipartisan $738 billion defense policy bill Tuesday sanctioning companies building the Nord Stream 2 pipeline to Germany. President Trump is expected to soon sign the bill it into law.

Cruz and Sen. Ron Johnson, Republican of Wisconsin, sent a letter to the CEO of Allseas Group S.A., a Swiss-based contractor hired by Russia to install deep-sea pipes for Nord Stream 2, warning it to stop work “immediately.”

“The consequences of your company continuing to do the work — for even a single day after the president signs the sanctions legislation — would expose your company to crushing and potentially fatal legal and economic sanctions,” the senators said.

Despite the warning, Nord Stream 2 is expected to be completed on time by as soon as January. The sanctions legislation has a 30-day wind-down period, allowing construction companies to halt their operations before the law goes into effect.

BIG CORN ISN’T HAPPY: Biofuels producers and corn-state senators slammed the Environmental Protection Agency for falling short of Trump’s promise to boost biofuel blending requirements.

The EPA on Thursday finalized volumes for 2020, keeping the mandates relatively flat and sticking with an approach to deal with the impact of small refinery exemptions that biofuels producers have said is inadequate.

“[A]gency officials had a chance to finally make things right with this final rule — but they blew it,” said Geoff Cooper, president and CEO of the Renewable Fuels Association. Cooper added that while the EPA’s final rule is an improvement over its initial plans, it doesn’t guarantee the EPA will fully enforce the RFS law’s 15-billion-gallon biofuel blending requirement.

The EPA, though, says its final rule would effectively set a blending requirement of 15.8 billion gallons, that would balance out to 15 billion gallons when accounting for exemption waivers to small refiners. Those waivers have been a sticking point in the contentious battle between biofuels producers and the oil industry over the future of the RFS — getting the Trump administration caught in the middle of two important constituencies.

OUT ON THE OIL RIG: Harold Hamm wants to teach Warren about the “economic engine” that is Oklahoma oil and natural gas production.

Hamm, the executive chairman of Continental Resources who has close ties to the Trump administration, invited Warren to tour an oil rig during a trip to the state this weekend. Warren, the Massachusetts senator and Democratic presidential candidate, will hold a town hall Sunday in Oklahoma City, where she was born.

Warren has pledged to ban fracking and block new oil and gas leases on federal lands.

“As you no doubt know, thanks in huge part to natural gas replacing coal as the fuel of choice when it comes to electricity production, CO2 emissions are at 25-year lows in the U.S., making us the envy of the industrialized world,” Hamm wrote to Warren in a letter Wednesday. “Meanwhile, hundreds and hundreds of new coal fire plants are being built by countries like India and China, to serve their energy hungry people and industries, which is why the Madrid talks were doomed from the start.”

Hamm said Warren’s staff hasn’t returned Hamm’s call, email, or letter yet.

NATURAL GAS’ CLIMATE POTENTIAL: Don’t count natural gas out of the solution set to cut greenhouse gas emissions in buildings, the American Gas Association says.

The natural gas lobby released two new studies Thursday — with one report showing that using more efficient technologies could slash emissions from natural gas appliances in homes and businesses by 24%, at a net savings of $51 per ton of carbon dioxide. Even higher penetration of efficient technologies could achieve a 40% emissions cut, at $66 per ton, the study found.

AGA’s second study looks at the potential for renewable natural gas, produced from biomass or renewable resources that could be switched with conventional gas. The research finds significant production potential to tap into, on the order of 4.513 trillion Btu annually by 2040.

That level of deployment, the study estimates, could cut greenhouse gases by 101 million to 235 million metric tons by 2040. Those reductions would be equivalent to the annual emissions of 21 million to 49 million cars on the road.

VIRGINIA DEMOCRATS SEEK 100% CLEAN ELECTRICITY: Virginia state legislators introduced a 100% carbon-free electricity bill Thursday requiring utilities to eliminate emissions by 2050.

The Virginia Clean Economy Act would enact a statewide Renewable Portfolio Standard requiring 30% carbon-free electricity by 2030, and 100% carbon-free by 2050. It would also commit Virginia to join the Regional Greenhouse Gas Initiative, the northeast’s cap-and-trade program covering the power sector. And it would make “major” investments in efficiency, enacting an Energy Efficiency Resource Standard establishing long-term energy reduction targets.

The legislation would implement a goal set this year by Gov. Ralph Northam, a Democrat, for Virginia to produce all of its electricity from carbon-free sources by 2050.

“This will be the most significant climate bill that Virginia has ever passed,” said Democratic state senator Jennifer McClellan, a co-sponsor of the bill, during a press conference in Richmond. “It will catapult our clean energy economy.”

Democrats now control both the House of Delegates and Senate.

The Rundown

Washington Post Neil Jacobs, meteorologist and acting head of NOAA during a turbulent time, nominated to lead the agency

Missourinet Grain Belt Express Transmission line wins in appeals challenge against landowners, Missouri Farm Bureau

Financial Times Norway resists growing environmental pressure over oil

Reuters Oil patch woes: Amid downturn, Alberta rages at Canada’s Trudeau

Calendar

THURSDAY | DECEMBER 19

3 p.m. 2154 Rayburn. The House Oversight and Reform Committee’s Environment Subcommittee holds a hearing on “climate change and the costs of inaction.”