Daily on Energy: Clean energy boosters getting nervous about stimulus timeline

Negotiations over a big infrastructure package, touted last week by both President Trump and House Speaker Nancy Pelosi as a means to reboot the economy, could be clean energy’s best bet to secure the policies developers say they need to stop the bleeding from virus-related disruptions, as well as the policies climate advocates say they want to ensure economic recovery positions the U.S. for a low-carbon future.

But infrastructure talks are fading into the background as Congress and the White House realize they’ll need to do more to support families and businesses hard hit by the pandemic and related travel and shelter-in-place restrictions. The next coronavirus bill is likely to be a “Phase 3.5,” expanding on the programs in the $2 trillion package agencies are just now starting to implement.

It tees up a critical question for the clean energy sector: Do they try to make their case more strongly now, or do they wait for stimulus (and infrastructure) talks to begin in earnest?

“With each bill that gets passed, it becomes more politically challenging to get the job done,” said Ethan Zindler, head of Americas at Bloomberg NEF, on a webinar hosted Monday by the Atlantic Council. Each round of negotiations in Congress is likely to get more partisan, he added.

Clean energy has already been caught in partisan crossfire. In Phase 3 talks, Republicans railed on Democrats for trying to jam the “Green New Deal” into pandemic relief legislation — even though what Pelosi was pushing, emissions limits for aircraft and clean energy tax credit extenders, is far from the sweeping agenda that progressive platform lays out.

Renewable energy sees an immediate need for help: The wind, solar, and battery storage industries are all taking hits from virus-related project delays and demand drops.

Zindler said BNEF had initially projected 2020 would be a record year for renewable energy buildout in the U.S., at roughly 27 gigawatts of installations. BNEF now expects that to drop to about 22 GW, but it could fall even further if the pandemic lasts longer, Zindler said. (Right now, BNEF’s projections assume the economy begins to return to life sometime in the fourth quarter of 2020).

Wind and solar groups have been asking Congress to extend the deadlines to qualify for federal tax credits, as well as allow a “direct pay” option to allow projects to be financed without tax equity.

Well-vetted bipartisan ideas could provide a foundation: Regardless of when Congress gets to an infrastructure discussion. Rich Powell, executive director of the ClearPath Foundation, said he sees bipartisan Senate energy and highway bills as the best place to start, echoing recent calls from another conservative clean energy group.

Powell said he envisions potentially multiple economic stimulus packages down the road, with plenty of opportunity to fund low-carbon technology and infrastructure like transmission and carbon dioxide pipelines.

“This is going to be a long, deep, very painful crisis,” Powell said on the webinar, adding governments around the world “are going to feel obliged” to give their economies multiple jolts of recovery.

One more incentive for the U.S. to look to low-carbon recovery: Its global competitors will be. China and the European Union “will be putting big bets” on their climate policies and green infrastructure in their economic stimulus packages, said Adnan Amin, a former director-general of the International Renewable Energy Agency who is now a fellow at the Atlantic Council’s Global Energy Center.

“It will be very important that there be a discussion in the U.S.” to capitalize on its ability to lead in the development of many low-carbon technologies, he said.

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.

CAN’T NOBODY TELL TRUMP TO FORCE PRODUCTION CUTS: Trump said Monday that “nobody” from OPEC+ has asked him for the U.S. to make a formal commitment to cut oil production as part of an unprecedented global coalition to raise prices.

Instead, Trump adopted an argument made by industry officials and analysts, that the market is already forcing private companies to cut spending and shut down their wells, without there being a mandate to do so.

“I think the cuts are automatic, if you’re a believer in markets,” Trump said his daily White House briefing, adding companies are “already cutting” and “it’s the market, it’s supply and demand.”

The big question: Will Saudi-led OPEC and Russia accept natural declines in production from U.S. companies as a sufficient contribution to a global pact, which they hope to finalize at a virtual briefing on Thursday, or do they want something more durable and official?

The Energy Information Administration said Tuesday that U.S. oil production is now expected to fall in 2020 for the first time since 2016, after projecting an increase just last month.

“I sense some flexibility to accept this as a U.S. contribution,” said Joe McMonigle, a former chief of staff at the Energy Department in the George W. Bush administration and president of the Abraham Group, an international strategic consulting firm.

McMonigle reminded Josh that Mexico and Malaysia are a part of OPEC+ and those countries haven’t offered voluntary government cuts. All are from natural declines.

A deal is close: Saudi Arabia and Russia, the two largest oil producers outside the U.S., are nearing a deal to cut production by 10 million barrels per day or more, according to Bloomberg, after engaging in a price war that has worsened historical low prices caused by the coronavirus styming demand for fuels.

But OPEC+ is still hopeful for some kind of U.S. involvement, along with contributions from non-members like Canada and Brazil.

A drop in the bucket: Even if an agreement is reached, a cut of 10 million barrels per day (representing about 10% of the world’s normal daily consumption) would barely reduce a glut of oil created by the slowdown of the global economy, with lost demand projected to reach as high as 35 million barrels per day.

HAROLD HAMM SAYS TARIFFS ARE TRUMP’S ‘BIGGEST WEAPON’: Shale billionaire Harold Hamm says imposing tariffs on Russian and Saudi Arabian oil is the “biggest weapon” Trump has to combat the historic oil price crash.

“I can’t sit here and say what the president will or won’t do. What I do know is the president has all the authority for whatever he needs to do on this issue,” Hamm, the executive chairman of the Oklahoma City-based shale producer Continental Resources, told Josh in an interview Monday. “The president realizes our industry is a vital part of the national security interest, and it’s something he wants to make sure is not taken undue advantage of.”

Trump threatened Sunday to slap “very substantial” tariffs on oil imports after previously suggesting he’d prefer to sit back and let the market dictate a resolution.

Hamm, a Trump donor, has encouraged the Commerce Department to initiate a national security investigation into Russia and Saudi Arabia for “excessive dumping” in oil markets.

He said he doesn’t think the U.S. government should partner with Saudi Arabia and Russia to cut oil production, a “naive” option given antitrust laws.

He said companies like his are naturally delivering the production cut Saudi Arabia is seeking because of low prices, nonexistent demand, and a lack of storage space.

“We are having to shut down production and other operators all over are doing the exact same thing,” Hamm said. “You don’t have any choice.”

CONTINENTAL TO CUT PRODUCTION AROUND 30%: Like clockwork, the company announced Tuesday it will cut its output by around 30% in April and May to match the reduction in global crude and product demand.

Continental, one of the largest independent drillers in the country, will also suspend its quarterly dividend to shareholders.

Hamm insisted that his company, the largest producer in North Dakota’s Bakken Shale oil field, has no plans to cut his 1,200-person workforce, something Continental also avoided during a downturn in 2014-15. “We have ridden out a lot of storms. Continental is going to be alright,” Hamm said.

EXXON REDUCES CAPEX BY $10B: U.S. oil major Exxon Mobil said Tuesday it is reducing its 2020 capital expenditures to $23 billion from $33 billion, a 30% cut.

Exxon will mostly cut spending in the Permian Basin, the rich oil field straddling West Texas and New Mexico, where the company says short-cycle investments can be more quickly adjusted to reflect market conditions.

Darren Woods, Exxon’s CEO, said in a statement that Exxon’s long-term plans have not changed, predicting growth in population and energy demand, along with an economic recovery.

Exxon follows oil major competitors that are also cutting spending, including Chevron, BP, and Shell.

GLOBAL METHANE AT AN ALL-TIME HIGH: Levels of the potent greenhouse gas hit a record last year, according to preliminary data released Monday by NOAA. It’s the biggest increase in global methane in the last 20 years, one scientist says.

“It’s too early to say why, but increases from both agriculture and natural gas use are likely,” Rob Jackson, a professor of Earth system science at Stanford who chairs the Global Carbon Project, told Bloomberg. Jackson added that natural gas production jumped 2% in 2019.

Permian producers are wasting more than they say: They’re releasing methane, the main component of natural gas, at nearly three times the national rate reported by the EPA and about 15 times higher than methane reduction goals oil majors have set for themselves, according to new data from the Environmental Defense Fund. The environmental group says the amount of wasted gas totals 1.4 million tons per year, which could meet the annual needs of homes in Dallas and Houston combined.

“As company staffing and state oversight are stretched thin, it’s all the more crucial to maintain close watch on these emissions so leaks don’t go unnoticed or unrepaired,” said Matt Watson, EDF’s vice president for energy, in a statement.

The data was collected as part of EDF’s PermianMAP initiative, which used tower-based monitors, ground-based mobile sensors, fixed-wing aircraft, and helicopters to gather data from a 10,000 square-kilometer area in the oil basin responsible for 40% of its production.

EPA TO DONATE GLOVES, COVER-ALLS, AND MASKS TO VIRUS EFFORT: The agency announced Monday it had identified an excess of around 225,000 pieces of personal protective equipment it would donate to state and local first responders.

The EPA is working with FEMA to quickly distribute the PPE. Already, the agencies are working to distribute more than 10,000 pieces found in Region 5 to first responders in that region’s states — Illinois, Indiana, Michigan, Minnesota, Ohio, and Wisconsin. That distribution includes N95 masks, according to a news release Friday.

The EPA has a supply of PPE that it uses to respond to emergencies such as spills of chemicals, oil, or hazardous waste.

FREE-MARKET GROUPS LAUD TRUMP FOR ‘RIGHT-SIZING’ FUEL ECONOMY: The administration’s new rule, which sharply relaxes Obama-era standards, is “tough but fair” and would make sure consumers are able to buy the vehicles they want, a coalition of free-market groups wrote Monday to the president.

The coalition, which includes American Energy Alliance, Americans for Tax Reform, the Competitive Enterprise Institute, and Heritage Action, is offering full-throated support for the weaker fuel economy rules even as the auto industry (which asked for the rewrite) is hesitant to. At least two automakers, Ford and BMW, have said they’ll follow stricter fuel economy targets they agreed to with California last year, in a deal that bucked Trump.

DEMOCRATS SAY ACROSS-THE-BOARD ROYALTY CUTS ARE ILLEGAL: Natural Resources Committee Chairman Raul Grijalva and 15 other House Democrats argue that Interior cannot legally implement an across-the-board royalty payment cut for drilling on federal lands and waters because of a 1986 decision by Interior’s appellate review body. That decision found that Interior’s Bureau of Land Management can only cut the royalty rate on a case-by-case basis if a company can demonstrate the cut is necessary for the site to keep operating.

“It is not sufficient to demonstrate that a cut would benefit the company financially,” the Democrats wrote in a letter to Interior Secretary David Bernhardt asking him to reject a request from Republicans and oil industry groups to cut royalty payments.

“Note that it is the interests of the Government, and the taxpayers it represents, that are critical here, not the interests of individual oil and gas companies,” the lawmakers said. “These two sets of interests are not synonymous.”

The Rundown

New York Times New research links air pollution to higher coronavirus death rates

Wall Street Journal OPEC seeks to rally producers over fears of filled storage

Bloomberg Oil’s big crash has Permian explorers flaring less gas

Washington Post Oil and mining companies should disclose what they pay, the law says. Critics say the SEC is undermining it.

New York Times Oil companies are collapsing, but wind and solar energy keep growing

Calendar

TUESDAY | APRIL 7

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