Subscribe today to the Washington Examiner magazine and get Washington Briefing: politics and policy stories that will keep you up to date with what’s going on in Washington. SUBSCRIBE NOW: Just $1.00 an issue!
SIGNS OF COMEBACK? Energy Secretary Dan Brouillette sees signs of a “powerful economic comeback,” he said Wednesday, that will lead to oil demand recovering near previous levels after the “shockingly rapid” decline during the depths of the coronavirus pandemic.
“Oil demand is beginning to rise, oil prices have now stabilized, and we are seeing the signs of powerful economic comeback,” Brouillette said in a virtual conversation with Fatih Birol, director of the International Energy Agency.
But new data released Wednesday by the Energy Department’s statistical arm cast doubt on the trajectory of the oil market recovery, with an unexpected buildup of crude stocks, a continued signal of a glut in the market (see more on the numbers below).
Brouillette acknowledged he’s worried about IEA data projecting new global energy investments will decline by a record amount in 2020, including a 50% cut in spending by companies in the U.S. shale sector this year. U.S. oil producers have also shut-in more of their existing wells than expected.
“What concerns me about the economic decline and loss of demand is it obviously leads to a potential situation where we have the shut-in of wells and over an extended period of time that’s a detriment because they won’t be as productive,” Brouillette said.
He predicted that technological innovations in shale would allow companies to come back faster than they might have otherwise, and that oil and gas production will increase in “very short order.”
“We know when this demand curve comes back some of this industry will come back very fast,” Brouillette said.
Different approaches to emissions cuts: Birol, meanwhile, fretted over the possibility that the record fall in global greenhouse emissions expected this year as a result of the pandemic could distract governments from implementing policies to reduce emissions and curb fossil fuel use.
Brouillette, however, indicated the Trump administration, despite that concern, won’t be tweaking its “all of the above” agenda focused on deregulation and promoting innovation in fossil fuels, nuclear, and renewables at the same time.
“We will continue to resist top-down approaches from governments to dictate what certain outcomes should be,” Brouillette said. “This type of approach can allow your economies to grow very rapidly and you can achieve the environmental goals.”
Of course, the world is only on track to reduce emissions at a record rate because the economy — and use of oil and gas — essentially shut down.
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.
MEANWHILE…OIL RECOVERY HITS SETBACK: Oil prices dipped Wednesday on new data showing that U.S. crude kept in storage rose last week after declining in previous weeks.
U.S. crude oil inventories reached a record high of 538.1 million barrels last week, the Energy Information Administration reported Wednesday. That level surpasses the peak set in 2017.
“Shut-in production that is coming back and offshore stocks that had been waiting to be unloaded are the likely reason for such a build,” said Bjornar Tonhaugen, head of oil markets for consultancy Rystad Energy, who was commenting on earlier data released by the American Petroleum Institute that also showed a buildup of crude stocks. He said the development left traders “scratching their heads.”
U.S. oil demand did rebound to 17.57 million barrels per day, compared to 15.06 million barrels per day the week prior, with gasoline and jet fuel demand both rising, but that’s still down nearly 20% year-over-year.
Production is falling too: U.S. oil production fell from a record 12.9 million barrels per day in November to 11.4 million barrels per day in May, when there were the fewest active drilling wells in the U.S. since 1987.
Oil production in the U.S. will continue to decline through next year, dropping to 10.6 million barrels per day in March 2021, then increase slightly through the rest of that year, the EIA projected in its short-term energy outlook on Tuesday.
‘SHOCK’ DEMAND HIT FOR NATURAL GAS: Natural gas will experience its largest ever “demand shock” globally in 2020, the IEA said Wednesday.
Gas consumption is expected to fall by 4% this year because lockdown measures and reduced activity crimped demand, which was already declining due to a warm winter and less use of gas in home heating.
Europe, which has become a growing market for U.S. LNG, has been the hardest hit region, with a 7% reduction in natural gas demand so far in 2020, year-on-year, but North America and Asia are also consuming less gas.
IEA expects a gradual recovery of natural gas demand in 2021, but “the Covid-19 crisis will have long-lasting impacts on natural gas markets.”
TRUMP ADMINISTRATION TO REVERSE BAN ON FINANCING NUCLEAR OVERSEAS: The Trump administration is rescinding an Obama-era ban on the federal government providing financing for civilian nuclear energy projects abroad, Josh exclusively reported Tuesday night.
The U.S. International Development Finance Corporation is proposing this week to reverse a ban that prevents it from funding civil nuclear projects overseas. The agency will take 30 days of public comment on the proposed policy change.
“Access to affordable and reliable power is essential for developing countries to advance their economies,” said Laura Allen, a spokesperson for the DFC. “This change would bring advances in technology and offer a zero-emission power source to the developing world while serving as an alternative to the predatory financing of authoritarian regimes.”
The move delivers on a longtime request from Senate Energy Committee Chairman Lisa Murkowski, a Republican, and her colleague Joe Manchin, the panel’s top Democrat, who argued that the prohibition “sends a harmful signal that American primacy in the civil nuclear sector is waning.”
“Nuclear energy technology can help meet the world’s clean energy needs,” Murkowski told Josh in reaction to the policy change. “Our energy future is global, and steps like this DFC decision are crucial to meeting climate and energy leadership goals.”
The new policy is geared toward promoting smaller and cheaper advanced nuclear reactors under development in the U.S.
In April, a Trump administration working group released a strategy for reviving the U.S. nuclear industry that included a recommendation for the DFC to “fix legacy policies that disallow support for nuclear projects” to help compete against state-backed nuclear energy in China and Russia.
COASTAL SENATORS SAY CONSERVATION BILL IS BIASED AGAINST THEM: The Senate is taking another procedural vote Wednesday afternoon on the bipartisan “Great American Outdoors Act,” but it’s still unclear if Majority Leader Mitch McConnell will allow votes on amendments that could divide his Republican caucus.
Senators Bill Cassidy of Louisiana and Murkowski spoke on the Senate floor Tuesday to tout Cassidy’s proposed amendment to the public lands package that would provide more offshore oil and gas revenue from the bill to Gulf and coastal states to fund land loss and resilience.
“This bill actually only benefits certain states at the expense of many,” said Cassidy, raining on the bipartisan parade promoting the bill.
He said that coastal states get $7.53 per person from the Land and Water Conservation Fund, which would get full and permanent funding under the bill, while inland states receive $17.66.
“The LWCF is supposed to be a fund that functions to benefit all Americans, but it really benefits select regions of America,” Cassidy said. “The Gulf Coast just wants equity.”
Sen. Sheldon Whitehouse, a Democrat from Rhode Island, has his own amendment addressing the issue, saying Wednesday he would nonetheless support the underlying bill with a “heavy and frustrated heart” even though it “fails to meet the needs of coastal communities.”
McConnell, however, dismissed any suggestion of dissension in his party, predicting the legislation would pass the Senate “with a very large majority.”
SHELDON WHITEHOUSE WANTS ANSWERS ON ‘POLITICAL’ FUEL ECONOMY PROBE: So far, the Justice Department’s responses have been insufficient and didn’t even reflect the fact that the antitrust probe into the four automakers that struck a deal with California was closed earlier this year, Whitehouse wrote in a Wednesday letter to Makan Delrahim, the head of Justice’s antitrust division.
“The timing and circumstances of the Division’s investigation—including statements made at the time by President Trump and the availability of obvious legal defenses to any antitrust liability—raises concerns of political interference and improper use of the Department’s legal authority to intimidate businesses that made decisions contrary to the interests of the President,” Whitehouse wrote. He added he would continue to hold up expedited consideration of bipartisan antitrust reform legislation until he receives “satisfactory answers.”
GOOD NEWS, BAD NEWS FOR CLIMATE IN CLEAN ENERGY INVESTMENT TRENDS: The world added its largest-ever amount of clean energy capacity in 2019, and 20 more GW than the year prior, even while spending levels remained relatively flat, a testament to the falling costs of wind and solar power, according to a new report Wednesday.
Almost 78% of new generating capacity in 2019 was low-carbon, and investments in renewable energy was more than triple the money spent on new fossil fuel plants, said the report from BloombergNEF, UN Environment Programme, and the Frankfurt School-UNEP Collaborating Centre
Nonetheless, the world is slated to add 826 GW of new wind and solar power by 2030, which is less than the 1,200 GW added last decade and not nearly enough to reach the Paris Agreement goals. According to the report, at least 3,000 GW of renewables would need to be built worldwide by 2030 to be on track with the Paris targets.
NO MAJOR CAR MAKER IS IN LINE WITH PARIS GOALS: The world’s 14 biggest car companies are on track to produce 43 million more internal combustion engine cars over the next five years than are needed to limit global warming to less than 2 degrees Celsius, according to a report released Wednesday.
The report, from the European-based Institutional Investors Group on Climate Change’s 2° Investing Initiative, finds only two of the 14 car makers, Daimler and Geely, would produce enough electric cars in the next five years to stay consistent with the Paris Agreement goals. In total, the car makers are set to significantly underproduce electric cars and hybrid vehicles, the report says.
To align with the Paris Agreement goals within five years, the 14 automakers would have to slash production of internal combustion engine cars by 35% and sharply increase production of hybrids and EVs, by 125% and 110%, respectively. If the companies did so, it would avoid 1.5 billion tons of carbon emissions, the report notes.
RETHINKING CLEAN ENERGY SUBSIDIES POST-CORONAVIRUS: Policymakers should shift federal tax incentives from cost-competitive wind and solar to more nascent low-carbon technologies like offshore wind, energy storage, carbon removal, advanced nuclear, and geothermal, the Breakthrough Institute says in a new policy brief Wednesday.
The institute is advocating for postponing the phaseout of wind and solar tax credits until the end of 2022 and making all clean energy credits fully refundable for projects starting before 2022, to account for the coronavirus-related downturn. But after that near-term relief, the brief recommends ending incentives for onshore wind and solar, while extending credits for emerging technologies until 2030. The institute also suggests new incentives for grid-scale storage and for “regionally significant” transmission projects.
ENERGY COMMITTEE DEBATES TRUMP EFFECT ON MINORITY COMMUNITIES: There was a clear political split during Tuesday’s House Energy and Commerce hearing on the coronavirus and environmental injustices — between Democrats who said Trump’s environmental rollbacks are detrimental to minority communities who bear the brunt of pollution increases and Republicans who argued Trump’s economic policies would bring them jobs and wealth.
Republicans spent much of the hearing touting the opportunity zones program created by the Trump tax cuts law, designed to bring investments into low-income communities. Some GOP lawmakers, such as Rep. David McKinley of West Virginia, argued that program should be expanded, and he slammed Democrats for pushing a phaseout of fossil fuels, accusing them of “taking advantage of the public health crisis.”
Democrats and hearing witnesses, though, said reducing fossil fuels is critical to improving the health of minority communities, who often live closest to high-emitting facilities like refineries. “I would more frame that as frontline communities’ quest for health and survival,” said Jacqueline Patterson, senior director of the NAACP’s environmental and climate justice program, in response to McKinley’s remarks.
And while some Democrats also praised the opportunity zones program, they said it doesn’t address the root of the problem, which is that minority communities are more exposed to pollution and the Trump administration isn’t adequately protecting them.
“I supported opportunity zones to help create jobs, but that’s not going to help our black and brown communities that have to live in these communities right next to air pollution,” said Rep. Nanette Diaz Barragán of California.
FERC’S NEW PIPELINE RULE TO ‘PROTECT LANDOWNERS’: FERC issued a rule Wednesday night that would prevent developers of natural gas pipelines approved by the commission from beginning construction until FERC addresses requests for “rehearing,” or appeals of decisions, by stakeholders.
FERC Chairman Neil Chatterjee, a Republican, said the rule is intended to promote transparency and fairness to the public and to improve procedural protections for landowners near the pipelines.
Democratic commissioner Richard Glick opposed the rule, accusing FERC’s Republican majority of retaining a “Kafkaesque regime” by still allowing natural gas pipeline companies to begin eminent domain proceedings before landowners are able to take their case to court.
“FERC cannot credibly claim to care about landowners so long as it allows natural gas pipelines to go to court to take their land before it allows them to go court to challenge FERC’s decisions,” Glick said.
The Rundown
Politico Sources: Interior to push drilling in Florida waters after November election
New York Times Environmentalists targeted Exxon Mobil. Then hackers targeted them.
Bloomberg The pandemic has everyone ditching coal quicker — except Asia
Washington Post Capturing the green energy of the deep blue sea
NPR As EPA steps back, states face wave of requests for environmental leniency
Calendar
WEDNESDAY | JUNE 10
2 p.m. The House Natural Resources Committee holds a virtual forum entitled, “Examining Coronavirus Impacts on Wildland Fire Operations and Vulnerable Communities.”
