Daily on Energy: Trump administration chases backup plan for SPR

DOE is preparing to rent stockpile space in the SPR to oil companies so they can store what they’re pumping but can’t find a consumer for, people with knowledge of the plan told Josh (Bloomberg had this first).

Allowing companies to rent space in the reserve would aid the industry, which is projected to run out of storage for the first time in history.

“Producers are putting oil wherever they can, and there’s a very active market trying to create temporary storage — so DOE’s move will be welcomed by producers,” said Dan Eberhart, CEO of the oil services firm Canary and a Trump donor.

The Energy Department’s move to rent storage space comes after Congress, as part of its phase three pandemic relief package, chose not to fund a request from Trump to purchase low-priced oil to store in the SPR.

Without the necessary funding, the department suspended that plan, withdrawing an initial solicitation for buying 30 million barrels of oil from U.S. producers.

Allowing producers to store their extra crude would not require an appropriation from Congress, according to a former Trump administration official.

“Letting someone park their car in your unused spot for a small fee isn’t as good as buying a new car for yourself at a huge discount, but it’s better than nothing,” the former Trump official said.

He said the Energy Department briefed Capitol Hill staff on the concept earlier this week, indicating it doesn’t require new funding, only a small amount of operational funding, which is available under existing appropriations.

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MURKOWSKI URGES EIA TO MONITOR STORAGE CAPACITY: Republican Lisa Murkowski, chairwoman of the Senate Energy and Natural Resources Committee, sent a letter Tuesday to the Energy Information Administration asking it to be vigilant in monitoring available storage capacity as a gauge to know whether producers have to “shut in” or stop their production if there’s nowhere to put it while demand is low.

“Based on my conversations with energy experts, I believe that we must prioritize the collection and analysis of data related to petroleum storage,” Murkowski wrote to EIA Administrator Linda Capuano. “Producers will continue to produce, filling up all kinds of tanks and tankers, until capacity is reached. Available petroleum storage can serve as a gauge of the potential for shut-in production, providing us some measure of both imminence and severity.”

ECONOMIC FALLOUT PUSHES CLIMATE CHANGE OFF ‘FRONT BURNER’: Polling shows that voters of both parties have become more concerned about climate change. But, historically, there has been less support for environmental regulation during recessions, and more support during periods of economic growth.

“What I fear is everyone is so focused on the problem at hand that I don’t think climate issues are on the front burner again,” Rep. Francis Rooney of Florida, a Republican who supports a carbon tax, told Josh.

“If the issue is framed in terms of, ‘everyone has to sacrifice for the climate,’ I don’t think that’s going anywhere,” said Travis Ridout, professor of government and public policy at Washington State University. “We think we are sacrificing right now.”

Republicans are torn: Most GOP lawmakers, many representing fossil fuel states and districts, appear most worried about an oil price crash caused partially by the coronavirus and its harm to the U.S. shale industry. They railed against Democrats attempts to address climate change as part of early coronavirus response legislation.

“It misses reality to think oil and fossil fuel state members are just going to walk away from their states’ economies and constituents. That’s just not going to happen” Rep. Greg Walden of Oregon, the top Republican on the Energy and Commerce Committee, told Josh.

Republicans have been here before. Former House Speaker Newt Gingrich even partnered with then-Speaker Nancy Pelosi on a commercial in 2008 encouraging action to combat climate change that featured them sitting together on a couch. He quickly changed his tune after the global financial crisis.

The cost of inaction: Democrats say the situation is different than during the financial crisis, with climate change becoming more urgent as the science has become finer and the effects of extreme weather becoming more apparent.

“There are enormous costs of climate inaction,” said Rep. Kathy Castor of Florida, the Democratic chairman of the House’s select climate committee. “It’s an unprecedented threat to public health just like a pandemic. It’s slower rolling, but just as deadly. People don’t buy anymore that acting on climate is going to cost them.”

Read more from Josh’s story posted this morning.

TRUMP’S DIPLOMATIC DANCE WITH SAUDIS AND RUSSIA: Trump again Tuesday flirted with escalating his role in trying to help Saudi Arabia and Russia come to a truce over the price war, but stopped short of committing to do anything — perhaps realizing he has little leverage.

“They’re going to get together and we’re all going to get together and we’re going to see what we can do,” Trump said at a White House briefing. “The two countries are discussing it. And I am joining at the appropriate time, if need be.”

Trump has already spoken once with Saudi Crown Prince Mohammed bin Salman and Russian President Vladmir Putin.

The president is also taking note of the costs and benefits of low oil prices, in one breath calling “it the greatest tax cut we have ever given” and also “it’s hurtful to one of our biggest industries.”

“It’s not even feasible what’s going on,” Trump said Tuesday.

Energy Secretary Dan Brouillette, meanwhile, said he had a “productive discussion” with Russia Energy Minister Alexander Novak on Tuesday and agreed to “continue dialogue among major energy producers and consumers, including through the G20,” the Energy Department said in a statement. The two sides agreed that an oil oversupply hurts the global economy, the Russian Energy Ministry said in its readout.

But neither revealed any coming action to address the problem.

MORE SPENDING CUTS…AND A BANKRUPTCY: BP is the latest oil major Wednesday to cut back in response to the price crash, announcing plans to reduce its 2020 capital spending to $12 billion, which is 25% less than its previous plan.

Shell, Total, Chevron and Equinor have previously announced upstream budget cuts of 20%. In total, oil and gas majors’ capital spending in 2020 will be half that of 2014, Wood Mackenzie projected Tuesday. Independent companies are faring worse.

22 U.S. independents have cut investment for 2020 by a total of $20 billion, an average of 35%.

U.S. shale company Whiting Petroleum, meanwhile, became the first large independent producer to file for Chapter 11 bankruptcy protection on Wednesday. Denver-based Whiting is a big player in North Dakota’s Bakken basin. The company cited the “severe downturn in oil and gas prices driven by uncertainty around the duration of the Saudi / Russia oil price war and the COVID-19 pandemic,” in announcing its decision.

ICYMI: TRUMP TAPS THE BRAKES ON OBAMA CAR RULES: The Transportation Department and the EPA finalized their long-awaited fuel economy rollback Tuesday, setting year-over-year efficiency targets at 1.5% as opposed to the nearly 5% the Obama administration’s rule would have required.

Get up to speed: Abby has updated coverage of the new rule here, complete with the auto industry trade group’s tentative — but certainly not outright — statement of support. And if you missed Tuesday’s Daily on Energy, catch up here on some of the challenges the agencies’ could face on the numbers they use to back up their rule.

Trump touts the new rule, with a dig at auto companies: In a series of tweets, the president boasted his agencies’ new rule would lower average car prices “by more than $3500” (the agencies’ numbers actually say $1,000), and he slammed auto industry officials as “foolish executives” and “politically correct.”

That’s because some automakers sided with Trump’s rival, California: Ford Motor Company said Tuesday it would stick with a deal it made with California last summer to meet fuel economy targets stricter than what the administration finalized. Bob Holycross, Ford’s vice president of sustainability, environment, and safety engineering, said the California framework “is what’s best for our customers, the environment, and the short- and long-term health of the auto industry.”

EPA’S LACKING COMMUNITY OUTREACH: The EPA hasn’t conducted outreach with communities living around 16 of the 25 priority facilities it has listed as high emitters of ethylene oxide, a known carcinogen, the agency’s Office of Inspector General said in a report (and podcast) Tuesday.

The EPA also doesn’t have any plans yet to reach out to communities near 11 of those facilities, most located in either Texas or Louisiana, the report added, arguing the agency needs to promptly provide those communities with a forum to voice concerns about exposure to ethylene oxide.

Worth noting: Ethylene oxide concerns could be even more acute amid the coronavirus pandemic because the pollutant is emitted from facilities that sterilize medical equipment. On Wednesday, a federal judge ordered a county in Georgia to temporarily lift all ethylene oxide restrictions on a sterilization facility so it could resume normal operations, Bloomberg Environment reports.

EPA sees a big ‘disconnect’: “Most surprising is that in our final meeting with the IG’s office on this matter they provided no indication that there would be any unresolved issues,” EPA Administrator Andrew Wheeler said in a statement, asking the watchdog to rescind the report. The agency said it has been working “vigorously” with communities affected by ethylene oxide.

DEMOCRATS TO INTERIOR: DON’T LET NATIONAL PARKS BECOME ‘HOT SPOTS’: West Virginia Senator Joe Manchin, in a letter Tuesday, urged Interior Secretary David Bernhardt to “empower” local National Park Service Managers to make decisions in their communities’ best interest, even if it means closing down more areas. Eight Democratic lawmakers, led by Natural Resources Chairman Raul Grijalva, asked Bernhardt to close the Grand Canyon park, as well as other popular public lands like Zion National Park.

Their pleas to Bernhardt come as at least seven Park Service employees have tested positive for the coronavirus. And the Interior Department’s decision to leave some parks open, and offer free entry, has raised concerns people could crowd parks as they seek outdoor recreation amid social distancing protocols.

QUANTIFYING RENEWABLES’ CORONAVIRUS DELAYS: In its worst-case scenario, in which every step of the solar supply chain grinds to a halt for multiple weeks, Wood Mackenzie projects U.S. utility-scale solar developers could see more than 5 gigawatts of projects pushed back. Even under the firm’s best-case, which sees up to four weeks of supply delays, developers would experience as much as 2 GW in delays this year, according to a report released Wednesday.

A separate report Wednesday from BloombergNEF finds coronavirus-related delays could push back 2.4 GW worth of projects in the U.S., a slowdown the analysts say comes at the “worst possible time,” given companies are racing to break ground by the end of the year to qualify for expiring tax credits. The U.S. would see the biggest cut to its 2020 wind market, and globally, BNEF says impacts from the virus slashed its 2020 projections by 9 GW.

The silver lining: Both Wood Mackenzie and BNEF say they generally don’t expect delays to cancel projects altogether, but simply push those projects into 2021. The analysts also anticipate solar and wind developers will keep pushing for tax credit flexibility from Congress and federal agencies to account for the delays.

REPUBLICAN DANLY SWORN IN AT FERC: James Danly, formerly FERC’s general counsel, officially became a commissioner Tuesday after the Senate confirmed him last month.

“I’m so glad to have James join my colleagues and me as a Commissioner, particularly as FERC is dealing with many pressing issues related to the COVID-19 pandemic in addition to continuing the important work of the agency,” FERC Chairman Neil Chatterjee said.

Chatterjee named David Morenoff as FERC’s acting general counsel. Morenoff was deputy general counsel under Danly. Republicans now have a 3-1 advantage at FERC after the White House declined to nominate a Democrat to pair with Danly.

The Rundown

Wall Street Journal Wind, solar farms are seen as havens in coronavirus storm

S&P Global Trump considering crude oil import limits for US refiners

Reuters China may ease electric car quotas, delay emission rules to help automakers

New York Times Oil companies on tumbling prices: ‘disastrous, devastating’

Utility Dive New Jersey looks to exit PJM capacity market, worried the MOPR will impede its 100% carbon-free goals

Calendar

WEDNESDAY | APRIL 1

House is not expected to meet before April 20. Senate is out until April 20.