Daily on Energy: Fallout from Biden’s first energy crisis

Images of people lining up at gasoline pumps this week after the shutdown of the Colonial Pipeline from a cyberattack were an inconvenient distraction from Biden’s preferred subject of transitioning to cleaner energy, prompting his administration to wage a public relations battle all week.

“Biden’s been trying to kickstart the transition, but the fact remains that gasoline is the fuel that keeps the country running,” said Jim Krane, the Wallace S. Wilson Fellow for Energy Studies at Rice University’s Baker Institute for Public Policy.

“Our domestic supply lines need to be up and running 24-7-365,” Krane told us in an email.

How Biden responded: Early on, the administration warned against panic buying and hoarding. It has imposed a number of policy measures to ease the crunch, including easing restrictions for truckers, relaxing pollution rules, and granting Jones Act waivers to allow for foreign-flagged vessels to deliver fuel between ports.

But the damage has already been done. Prices are up across the South and East Coast. GOP critics are taking Biden to task for rising gasoline prices, even though there’s little if anything the president can do about that.

“The administration was caught completely off-guard by the panicked reaction to the pipeline shutdown. GOP critics are sure to rake him over the coals for this crisis, despite the fact that the panicked reaction was out of the administration’s hands,” Gregory Brew, an energy historian who studies the global oil economy, told us.

Does Biden play up a potential opportunity? Wary of being defensive, the Biden administration has also aimed to play offense, using the vulnerability of a 60-year-old pipeline to make the case for modernizing the nation’s infrastructure, protecting it against cyber and extreme weather threats, and easing dependence on fossil fuels.

“If I was Biden, I would turn this crisis to my advantage,” Brew said. “The real issue here is one of infrastructure and resilience.”

It remains to be seen whether that message came through and how hard Biden continues to press it, or if he prefers to let the story fade once fuel shortages are restored.

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.

BIDEN STILL MAKING MOVES TO FILL SUPPLY GAP: The Department of Homeland Security granted a second Jones Act waiver to another company last night enabling the transport of fuels between Gulf Coast and East Coast ports using a foreign-flagged vessel.

DHS granted the first waiver to refiner Valero Energy, Bloomberg reported, while the second company is unknown. The century-old Jones Act prohibits tankers from hauling goods and commodities, such as oil or natural gas, between U.S. ports unless the ships are American made, owned, and crewed. But a limited number of vessels meet that criteria, making it more expensive for refiners to ship oil products between ports.

INFRASTRUCTURE OPENING? Both sides had positive things to say after another White House meeting yesterday between Biden and a group of Republican senators.

“I am very encouraged by our meeting with President Biden today. Going forward, my colleagues and our staffs will continue to work together and with the White House toward our common goal of addressing the core areas of infrastructure that we all agree upon,” said Sen. Shelley Moore Capito of West Virginia, who is leading talks for Republicans.

So what would the contours of a deal look like? Senate Minority Leader Mitch McConnell an infrastructure package should cost no more than $800 billion, a compromise from the $568 billion Republicans previously offered, but still way down from Biden’s $2.3 trillion proposal.

McConnell also said this week the tax increases Biden wants to pay for it are the GOP’s “red line.”

But some Senate Democrats are inching towards Republicans’ preference for user fees as pay-fors, Axios reported last night.

So perhaps a bipartisan deal could focused on “hard” infrastructure like roads, bridges, and waterways, and be paid for through raising the gas tax and imposing a vehicle-miles-traveled tax on electric cars.

Caveats: Raising users fees, however, might technically violate Biden’s pledge to not raise taxes on people making less than $400,000 a year, and the administration has so far not moved off its preference for corporate tax increases.

Biden is also facing pressure from liberals who see the negotiations with Republicans as a waste of time, especially since few if any of Biden’s climate-related proposals appear to be on the table.

“We urge you to swiftly pass legislation that invests at least $4 trillion throughout the economy over this presidential term, bound by high-road labor, equity and climate standards,” wrote the leaders of a dozen liberal groups, including key Barack Obama and Hillary Clinton adviser John Podesta of the Center for American Progress, in a letter yesterday to Biden, House Speaker Nancy Pelosi, and Senate Majority Leader Chuck Schumer.

HEINRICH LOOKS TO OFFSET LOST FOSSIL FUEL REVENUES: Sen. Martin Heinrich, a New Mexico Democrat, announced legislation yesterday for the federal government to make up for lost revenue to states from fossil fuel development on public lands. New Mexico is the largest recipient of oil and gas revenue from federal lands.

The bill, set to be introduced next week, could become part of infrastructure discussions as the Biden administration this summer decides how to handle the future of developing oil and gas on federal lands, after pausing new leases earlier this year.

Heinrich’s Schools and State State Budgets Certainty Act would set a baseline for federal fossil fuel revenues received by each state, county, or tribe, and decrease that level by 5% each year to reflect the transition to cleaner energy as a result of market forces and government policy.

If the actual payments to recipients falls below the projected baseline, the federal government compensates the difference with a “energy transition payment.”

FOSSIL FUEL EXPORTS WON’T BE CUT OFF UNDER BIDEN: A top State Department official has clarified that the Biden administration does not intend to stop fossil fuels exports, especially of LNG.

In a recent briefing with foreign media, Jonathan Pershing, an adviser to climate envoy John Kerry, said U.S. fossil fuel exports were “something that we are discussing”, but added “low carbon doesn’t necessarily mean no fossil fuel.”

A media outlet in Ireland this week reported the Biden administration has no plans to stop a U.S. company from building an LNG import terminal planned there.

Pershing told the Irish Independent that while “we’re not seeing the same kind of interest” in fossil fuels around the world, “we’re seeing a need to maintain reliability and security in the existing grids and the existing energy systems.”

“It does not serve anyone to cut things off,” Pershing added.

BLINKEN AND KERRY ON THE MOVE: Secretary of State Antony Blinken is heading to Denmark, Iceland, and Greenland beginning Sunday for meetings on climate change.

In Denmark, Blinken will “meet with leaders and innovators leading the transition to green technologies and working to combat climate change,” the State Department said today.

While in Iceland next week, Blinken will participate in the Arctic Council Ministerial to discuss protecting the Arctic, where warming is occurring twice as fast as the rest of the globe, against the effects of climate change.

Kerry, meanwhile, is expected to travel to the Vatican tomorrow to meet with Pope Francis. Kerry is in Rome as part of a three-country Europe tour.

KERRY: WE’RE NOT PRESSURING BANKS TO MAKE CLIMATE PLEDGES: Big U.S. banks and financial institutions are making climate pledges because they see the financial risks posed by climate change, Kerry told Rep. Andy Barr, who recently led GOP colleagues in a letter raising concerns that the Biden administration was pressuring banks to set such commitments.

“We would like to reassure you that at no point have any financial institutions been pressured into making extralegal commitments,” Kerry wrote in a response letter dated April 28. Kerry said that the Biden administration is simply “giving these announcements more visibility by aggregating and highlighting them in our public communications.”

Republican lawmakers have raised increasing concern that the climate commitments made by banks and other financial institutions will cut off capital to fossil fuel producers. They have also raised alarm at efforts by the Securities and Exchange Commission to set requirements for public companies to disclose their emissions and the risks they face from climate change.

Kerry, in his letter, stressed that the SEC is an “independent” agency, and he noted that other countries in Europe already have climate disclosure requirements in place. “To ensure that our companies and banks are not put at a competitive disadvantage, and to ensure that U.S. investors are adequately protected, the United States will have to grapple with these issues quickly,” he said.

A MILESTONE FOR OFFSHORE WIND: The Biden administration’s approval of the 800-megawatt Vineyard Wind project this week could help jumpstart an industry that thus far has been stagnant in the United States.

“It will facilitate the first wave of significant projects,” said Laura Morton, the senior director of offshore policy and regulatory affairs for the American Clean Power Association.

That is in part because it frees up federal officials to turn to other offshore wind projects in the queue waiting for approval, armed with a blueprint of how to assess them. In addition, the approval could help the U.S. attract investment that was previously going to already-burgeoning offshore markets such as Europe.

However, Vineyard Wind’s approval is a small first step toward meeting the goal Biden set in March for the U.S. to deploy 30 gigawatts of offshore wind power by 2030. Currently, the U.S. only has two small-scale pilot offshore wind projects in operation, one off the coast of Rhode Island and the other off the coast of Virginia, totaling about 42 megawatts of power.

More on the significance of the Vineyard Wind decision in Abby’s story appearing in next week’s Washington Examiner magazine.

EPA TAKES FIRST STEPS ON METHANE REGULATIONS: The EPA announced this morning a series of public listening sessions and trainings to collect information to inform requirements it intends to craft for oil and gas producers to curb their methane emissions.

The agency faces a September deadline, set in Biden’s climate executive order, to issue plans to reduce methane from both new and existing oil and gas operations. The EPA’s effort is getting an assist from Congress, which is poised to scrap a Trump administration action that would have prevented the EPA from directly regulating methane. The Senate has already voted to approve a Congressional Review Act resolution canceling that action.

“As we move forward to reduce pollution from oil and gas operations, it is vitally important to hear from all stakeholders, including those from impacted communities and industry,” EPA Administrator Michael Regan said of the public listening sessions. He stressed the EPA wants to hear from “communities that have historically borne a disproportionate burden from pollution.”

The EPA has also opened a public comment docket on the forthcoming methane proposal.

DEMOCRATS CALL ON GARLAND TO SWITCH POSITIONS IN CLIMATE CASES: Nine Senate Democrats are calling on Attorney General Merrick Garland to reverse the stance taken by the Trump administration supporting oil companies in lawsuits seeking to force them to pay for climate damages.

Under the Trump administration, the Justice Department had filed amicus briefs backing the oil companies in many of the lawsuits brought by states and cities accusing the industry of deliberately covering up the harms their products would cause. On its last full day in office, the Trump administration argued in front of the Supreme Court in favor of the oil companies in a procedural appeal related to whether the cases should be heard in federal or state court.

“The fossil fuel industry will continue to undermine justice by using these briefs until the Department reverses the positions it has taken in those lawsuits,” the Senate Democrats, led by Sens. Richard Blumenthal and Sheldon Whitehouse, wrote to Garland in a letter earlier this week. The senators reminded Garland of Biden’s campaign promise to “strategically support ongoing plaintiff-driven climate litigation against polluters.”

In addition, the Senate Democrats reiterated a request that the Biden administration take up its own investigation of the oil and gas industry focused on “the same deceptive practices that lie at the heat of these lawsuits.”

HOW TO GO CARBON NEGATIVE: Carbon180 is out with a comprehensive set of policy recommendations to capitalize on the growing political support for carbon removal.

The recommendations, directed to Congress and the Biden administration, include expanding and creating new tax incentives for carbon removal technologies; utilizing federal procurement to drive deployment; supporting the buildout of infrastructure to transport and store carbon; and expanding research and development of natural carbon removal solutions such as capturing carbon in soils.

Several of the group’s recommendations already feature in bipartisan legislation on the Hill, as well as the Biden administration’s infrastructure plan and skinny budget. “This is the first time that we’ve seen that level of engagement and support of carbon removal,” said Erin Burns, Carbon180’s executive director.

For example, Burns pointed to a proposal in Biden’s skinny budget to change the name of the Energy Department’s Office of Fossil Energy to include “carbon management.” The name change would show that the office’s purpose is “for us to think about carbon removal technologies as a way to address climate and not solely as how do you keep fossil fuel plants online,” Burns told Abby.

Burns also stressed that Carbon180’s recommendations are rooted firmly in ensuring carbon removal is a solution that benefits those in minority and poorer regions that have been the hardest hit with pollution.

Environmental justice is “really foundational to the success of carbon removal, not only from the perspective of the clearly right and moral thing to do, but also the thing that’s going to get you the sorts of durable political coalitions” supporting the technology, Burns said. “It’s going to get you the success on the ground.”

The Rundown

Bloomberg Colonial Pipeline has been a lucrative cash cow for many years

Reuters Fed privately presses big banks on risks from climate change

Calendar

TUESDAY | MAY 18

10 a.m. 366 Dirksen. The Senate Energy and Natural Resources Committee will hold a hearing to consider the nominations of Robert Anderson to be solicitor of the Interior Department, Shannon Estenoz to be assistant secretary for fish and wildlife and parks, and Tanya Trujillo to be an assistant secretary of the Interior (Water and Science).

WEDNESDAY | MAY 19

10 a.m. G-50 Dirsken. The Senate Environment and Public Works Committee will hold a hearing titled, “Examining Biodiversity Loss: Drivers, Impacts, and Potential Solutions.”

10:30 a.m. Energy Secretary Jennifer Granholm will testify remotely before the House Energy and Commerce Committee’s Subcommittee on Energy on the agency’s fiscal year 2022 budget request.

2 p.m. Green 2.0 will host a virtual discussion with Asian-American and Pacific Islander leaders on the future of the environmental movement.