Daily on Energy: Environmentalists want SEC to remove wiggle room from emissions disclosures

The SEC’s proposal would make any corporation report to investors the emissions coming directly from its operations, as well as those generated indirectly from the purchase of energy.

It also includes a requirement that companies disclose their “Scope 3” emissions, which cover everything from emissions associated with employee commuting, transportation and distribution activities, and business travel, as well as emissions stemming from the use of a company’s products.

But the proposed rule leaves some wiggle room.

One key word: materiality: The proposal says Scope 3 must be disclosed under two conditions: One, if the firm has an established emissions reduction plan that includes such emissions, and two, if such indirect emissions are deemed “material” to investors.

That could leave a lot up to the interpretation of a given company. The SEC’s fact sheet is short on what constitutes “material,” although the finalized rule could include a more explicit definition — something for which Lena Moffitt, chief of staff for Evergreen Action, and her organization will be advocating during the comment period.

A stricter rule would put the onus on companies to calculate their footprint related to all such activities going beyond their “walls” which, according to the Environmental Protection Agency, can often account for the majority of a company’s total emissions.

“As it’s written, it really leaves it open to the companies themselves to determine what’s material and provides very little guidance on how to make that determination,” Moffitt said.

“If you don’t ask companies to reflect those emissions that are very much part and parcel and their business models, even if they are indirect, you’re not giving investors the information that they need,” she said.

Moffitt brought up oil companies as a guide.

“The end user will actually be creating those emissions by burning oil for instance, but that is really central to their business model,” she told Jeremy. “So, if the world were to transition to a climate-safe world where we’re not extracting a whole bunch of new oil, that would have an impact on that company’s business model potentially, and investors need that information.”

In any case, Moffitt said, what’s motivating the push to require more detailed disclosures is investors’ wants and needs.

“Really, investors should be the arbiters of what’s material, and what we’re seeing out there is that investors think that greenhouse gas emissions are material to their investment decisions,” Moffitt said. “We need to know how companies are assessing the impacts of the consequences and how they’re dealing with mitigating them.”

Businesses disagree about materiality: Tom Quaadman, executive vice president for the Chamber of Commerce’s Center for Capital Markets Competitiveness, responded warily to the new rule and argued it limits companies’ ability to provide information “that shareholders and stakeholders find meaningful” and requires disclosures “that are not material to investors.”

Frank Macchiarola of the American Petroleum Institute said the worry is that it could require “non-material disclosures and create confusion for investors and capital markets.”

Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writers Jeremy Beaman (@jeremywbeaman) and Breanne Deppisch (@breanne_dep). 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.

ENERGY GROUPS AIR GRIEVANCES WITH BIDEN: Oil and gas trade groups criticized the administration’s treatment of the industry and accusing officials of “maligning our motives” and telling lies about how companies operate.

“The worst mischaracterization of all by you and your administration is when you have said that you are doing nothing to hold back energy production. That is just not true,” industry representatives said in a letter sent to the administration last week and made public yesterday, signed by 10 industry groups, including the Independent Petroleum Association of America and the Western Energy Alliance.

It also includes an exhortation that President Joe Biden “pick up the phone” to Interior Secretary Deb Haaland to urge her to see through the approval of more drilling permits and that he recognize that oil and gas are strategic assets “necessary for providing the United States and its allies with energy security now and for decades.”

While the Biden administration has been calling for more production to survive the near term, necessary “for decades” is a premise it’s unlikely to accept.

Officials have maintained that the solution is more green energy and less fossil fuels, and they have rejected the notion that oil and gas are integral to a viable future energy policy.

OIL OUTPUT SLOW TO FOLLOW RISE IN DRILLING: The number of operative drilling rigs in U.S. shale patches is up significantly over a year ago, but resultant oil output has been slow to follow because many of the new wells being drilled are taking the place of depleted wells, the Wall Street Journal reports.

In short, companies with sizable operations in the leading Permian Basin, like Diamondback Energy and Occidental Petroleum, have used up their most higher yielding, already-drilled wells and are having to supplement their stocks with new wells just to maintain production levels.

Because the new wells are taking the place of old, exhausted ones — and because of inflation and difficulty hiring workers — companies are having trouble achieving net growth of production, executives told the Journal.

By the numbers: Total domestic oil production averaged 11.6 million barrels per day for the week ending March 11, and output has held steady around that level for much of the year, according to Energy Information Administration data.

The Permian is still the reigning heavyweight region. Production there has averaged above 5 million barrels per day for the last two months, well above the next nearest Bakken Formation’s 1.2 million bdp for March, and it also saw the largest growth from February to March: about 71 thousand bpd.

IN ‘PAIN AT THE PUMP,’ GOP SEES POLITICAL OPPORTUNITY: Republicans are rolling out a string of new voter registration sites at gas stations across the country, seeking to capitalize on the recent spike in fuel prices, which they believe pose a major political liability for Biden and Democrats heading into this year’s midterm elections.

The initiative is being coordinated by the Republican National Committee, and began this weekend with drives in Arizona and North Carolina, The Hill reports. Party officials also have plans to expand the effort to other states, including California, Colorado, Florida, Iowa, Maine, Michigan, Ohio, Texas and Wisconsin.

The push comes as gas prices in the U.S. have soared to their highest point in 14 years, putting Democrats on the defensive — even as they maintain that the costs are largely outside their control. Fuel prices skyrocketed in the U.S. this month following Russia’s invasion of Ukraine, and the national average currently sits at $4.24 a gallon, according to AAA.

Though analysts say the spike in costs is due to a myriad of factors, including inflation and global supply chain issues, Republicans have sought to cast blame squarely on the Biden administration’s policies. “This isn’t just due to what’s happening in Ukraine,” Sen. Deb Fischer of Nebraska told reporters in a news conference earlier this month. “It’s due to the administration’s policies.”

In a statement announcing the voter registration push, RNC Chairwoman Ronna McDaniel dubbed the increase in fuel prices the “Biden Gas Hike.”

“The RNC is mobilizing at gas stations across the country to register voters and remind folks that the anti-American energy of Biden and the Democrats is costing them more,” McDaniel said, adding: “The Biden Gas Hike is a product of his own doing, and Americans have faced record high gas prices as a result.”

IN BRUSSELS, EU LEADERS FAIL TO REACH CONSENSUS ON RUSSIAN ENERGY SANCTIONS: EU leaders are gathering in Brussels this morning for the second in a two-day meeting, where the agenda will again be dominated by Russia’s war in Ukraine, as well as whether the bloc should move to impose sanctions — or even a full-out ban — on Russian energy supplies. But member countries remain deeply divided on what their next steps should be, and diplomats warned yesterday that a rapid decision in any direction is “unlikely.”

“Several EU members, including Germany, remain reluctant to support an oil ban, and would only consider gradual restrictions—not a sudden cutoff—if the situation in Ukraine deteriorates,” the Wall Street Journal reports. But a “smaller group of member countries, including Poland and the Baltic states, have been pushing it, and there is now broader support among other members, diplomats said.”

At yesterday’s meeting, foreign ministers from countries “including Sweden, Ireland, Slovenia, the Czech Republic, and Slovakia, said a ban on oil should at least be an option at this point …” WSJ reports. “Other countries, including Denmark, have said they would support the move if consensus emerges in the bloc.”

What they’re saying: “Europe cannot give an impression of fatigue when the war in Ukraine has not ended,” Lithuanian Foreign Minister Gabrielius Landsbergis told reporters in Brussels yesterday. “We cannot get tired of imposing sanctions,” he added. “It is unavoidable to start talking about the energy sector, and we definitely can start talking about oil.”

Landsbergis also urged EU members to consider what kind of Russian attack would in fact constitute a “red line” that would enable it to take tougher measures against the Kremlin. Russia’s shelling of cities and civilians, he said, doesn’t appear to be enough to convince some members “but somewhere there, there has to be one.”

Ireland’s foreign minister, Simon Coveney, also appeared to signal early support for sanctioning Russian energy supplies. “Looking at the extent of the destruction in Ukraine right now, it’s very hard in my view to make the case that we shouldn’t be moving into the energy sector—particularly oil and coal,” for sanctions, he told reporters.

Bigger picture: Leaders are hoping to use the meeting to lay groundwork and coordinate their messaging ahead of larger summits happening Thursday with the European Council, NATO, and G7.

Meanwhile, in Bulgaria: Prime Minister Kiril Petkov announced yesterday that its long-delayed gas pipeline with Greece will be completed in June, an effort that will help Sofia reduce its deep reliance on Russian energy supplies amid the country’s war in Ukraine.

Currently, Bulgaria imports roughly 80% of natural gas from Russia, Breanne reports — but the new pipeline will allow Bulgaria to increase its gas capacity significantly, from 3 bcm to 5 bcm per year.

Completion of the Greece-Bulgaria interconnector is also a historic step for Bulgaria, which has deep historical and cultural ties to Moscow, and has often been dubbed the “Trojan Horse” for Russia inside the EU. But Petkov has taken steps to align the country more closely with NATO and the EU — and days earlier, Bulgarian Deputy Prime Minister Asen Vasilev said Sofia will not renew its 10-year contract with Russian gas giant Gazprom when it expires at the end of this year, citing the violence in Ukraine.

Instead, Bulgaria is looking to alternative suppliers to help offset the loss. They are “in talks” with Greece and Turkey for additional LNG supply, as well as Azerbaijan, with whom the country already has a contract. “In this situation, there cannot be talks with Gazprom,” Vasilev said. “There are alternatives.”

FORMER FERC CHAIRMAN WEIGHS IN ON US ENERGY SECURITY, CYBER VULNERABILITIES: Former energy consultant and FERC chairman Jon Wellinghoff joined “Plugged In” host Neil Chatterjee on this week’s podcast to discuss the latest on the war in Ukraine, as well as the importance of shoring up vulnerabilities in the U.S. electric grid to protect against Russian cyberattacks.

Wellinghoff stressed the importance of interagency coordination, especially with DOE and DHS —whose cyber agency, CISA, is tasked with overseeing all designated areas of U.S. critical infrastructure and protecting them from online attacks.

“I’d like to see a little bit more coordination among the agencies; among DHS, among DOE, and [with] FERC, as well,” Wellinghoff said. Reflecting on his own time at FERC, he said, “I think — at least when I was there, there wasn’t that significant level of [interagency] coordination that there needed to be.”

“I think this siloing we’ve seen within the federal agencies is really … something we have to overcome,” he added. “We really have to better coordinate among the agencies to ensure that we can protect against these threats. The threats are still there. And not only are they there, but these perpetrators continue to get more sophisticated — both on the cyber side, and on the physical side …” We’re seeing a level of activity that could “cause havoc with our grid,” he said. Listen to the full podcast here.

The Rundown

E&E News Russia sends more gas to Europe. Is it Putin’s war strategy?

Euractiv EU bets on green gases and electricity to break away from Russian fossil fuels

AP Tesla opens ‘Gigafactory’ near Berlin, its 1st in Europe

Politico Why Biden can’t help Europe rid itself of Russian gas

Sacramento Bee ‘Historic dry conditions’: California warns that mandatory water cuts are likely coming

Calendar

WEDNESDAY | MARCH 23

10:00 a.m. The Senate Environment and Public Works Committee will hold a hearing to discuss U.S. energy security and investments in climate solutions.