Daily on Energy: Revolt targeting Big Oil does not guarantee emissions reductions

First, to recap yesterday’s events: 

*ExxonMobil is essentially being forced by investors to take a more aggressive stance on combating climate change and investing in clean energy after shareholders voted to add at least two new independent board members nominated by a small activist group.

*The majority of shareholders of Chevron, the second largest U.S. oil company, voted for a proposal to reduce emissions Scope 3 emissions, or pollution from the use of the fuel it makes and sells to customers.

*And in the Netherlands, a Dutch court ruled Shell must reduce its emissions by 45% below 2019 levels by the end of 2030, including from its suppliers and customers.

What it all means? The pressures on these three Big Oil giants come a week after the International Energy Agency, in a bombshell finding, said companies must immediately stop investing in new oil and gas development in order for the world to reach net-zero emissions.

“Today’s historic developments reflect not only swelling investor, regulatory, and legal pressure to decarbonize energy systems, but also a shift in activists’ emphasis from energy consumers to producers,” Bob McNally, president of Rapidan Energy Group and former oil official in the George W. Bush administration, told Josh.

The problem with that approach is two-fold: If the ExxonMobil’s and Chevron’s of the world sell their assets to smaller producers not subject to shareholder pressures, it doesn’t mean the oil and gas production goes away.

And even if those fossil fuels stay in the ground, climate activism focused on reducing oil and gas supply faces potential risks — such as energy price spikes — if there is not a corresponding reduction in demand.

“The result of a policy push against supply combined with likely unabated, strong demand for fossil fuels will be an epic boom in oil prices later this decade,” McNally said.

‘Synergy’ needed between supply and demand: Achieving meaningful reductions in fossil fuel use requires government policy, by making alternative clean energy technologies more affordable, so consumers can more easily decide to switch electric cars and appliances, for example.

The Biden administration’s infrastructure proposal tries to do that by providing rebates and other subsidies for electric vehicles and batteries, among other things.

“The key to a smooth energy transition is synergy between demand-side and supply-side policies,” said Arvind Ravikumar, an assistant professor of energy engineering at the Harrisburg University of Science and Technology. “We need demand-side policies that make clean energy options affordable and widely available to coincide with a managed reduction in fossil fuel supply,” Ravikumar told Josh.

Fred Krupp, president of the Environmental Defense Fund, argues that yesterday’s events at Exxon and Chevron suggest that investors see where policy, technology, and society is moving, and want to be proactive about getting ahead of an inevitable decline in fossil fuel use.

“The idea that the vote today means we don’t need policy would be a false reading of it,” Krupp told Josh. “If anything, the vote today anticipates the tightening of controls on climate pollution and the tightening control of government policy.”

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.

CLIMATE ACTIVISTS RIP GOP INFRASTRUCTURE COUNTEROFFER: Climate activists are urging the Biden administration to move on from bipartisan talks after Senate Republicans this morning announced a $928 billion infrastructure counteroffer.

“Just days away from President Biden’s Memorial Day deadline, Senate Republicans have run down the clock with another unserious proposal that completely ignores the necessity of bold and equitable climate action,” said Jamal Raad, executive director of Evergreen Action.

What’s in it, and what’s not: The new measure is narrower than the $1.7 trillion compromise offer President Joe Biden’s White House staff provided the GOP a week ago and it sticks to traditional infrastructure projects that would address road, bridges, broadband and water projects. It does include $4 billion to support electric vehicle infrastructure, but it strips out $100 billion in rebates sought by Biden for customers looking to buy EVs. Funding in the GOP plan would come from unspent funds initially designated for COVID relief. Of the $928 billion, only $257 billion is new money.

Sen. Shelley Moore Capito of West Virginia, the top Republican negotiator, speaking at a press conference this morning called the plan a “serious effort to try and reach a bipartisan agreement.”

Why climate activists are worried: If Biden strikes a deal with Republicans on infrastructure legislation without major climate and clean energy provisions, it might be more difficult for Democrats to pass an additional package later on with those priorities.

That’s because even if Democrats use reconciliation, they can’t afford to lose any votes in the 50-50 split Senate, and key moderates such as Sen. Joe Manchin of West Virginia could be reluctant to back two major infrastructure spending bills. The Washington Post has more on this dynamic.

NEW CYBER RULES FOR PIPELINES: The Transportation Security Administration announced a new directive this morning requiring pipeline owners and operators to report confirmed and suspected cyberattacks to the government, in response to the assault on the Colonial Pipeline that crippled East Coast gasoline supply.

It will also force pipeline companies to review their current cybersecurity practices, identify any weakness that could be exploited by hackers, and describe potential efforts to fix them within 30 days.

TSA is considering additional mandatory measures, in a huge shift from the hands-off way in which the pipeline industry has been regulated with only voluntary guidance.

The American Petroleum Institute, which has resisted the prospect of mandatory rules, issued a muted statement this morning responding to the new order.

“Any potential regulations should enhance reciprocal information sharing and liability protections, as well as build upon our robust existing public-private coordination to streamline and elevate our efforts to protect the nation’s critical infrastructure,” said Suzanne Lemieux, API’s manager of operations security and emergency response.

SUMMER OF DARKNESS COULD LOOM, NERC WARNS: Parts of the U.S. are at elevated or high risk of energy shortfalls this summer because of projected above-average temperatures, the North American Electric Reliability Corporation warned yesterday.

California is at the highest risk again after the state’s grid operator resorted to the rolling outages last summer because it didn’t have enough power feeding into the system. The state, which relies heavily on imports, has added 3 gigawatts of additional energy resources since then. But most of that is solar, whose output drops off during the evening when air conditioning use is highest.

Texas, New England, and some midwestern and western states (other than California) are facing an “elevated risk” of energy shortages this summer, a less severe designation.

ANOTHER JAPANESE COMPANY PARTNERS WITH NUSCALE: A Japanese company will supply manufacturing components to NuScale’s small nuclear plants.

IHI, a Tokyo-based engineering firm, plans to invest at least $20 million into Oregon-based NuScale, the companies said in a joint statement yesterday.

JGC Holdings, a Tokyo-based engineering firm, announced a similar investment in NuScale last month.

What’s in it for Japan: Japan may need small nuclear reactors as it restarts its nuclear power program in the aftermath of the Fukushima disaster a decade ago in order to meet its goal of carbon neutrality by 2050.

NuScale, looking to be the first U.S. company to operate a small nuclear reactor, also hopes to export them, aiming for its product to reach the market for sale by 2027.

GOP SENATORS TRY TO CORNER BANKS ON CLIMATE: Several Republican senators sought to challenge the CEOs of big U.S. banks on their climate targets yesterday, in an attempt to get the banks to admit fossil fuels will still be needed well into the future.

“I know that the voices in your guys’ ears are the left. It is the ‘woke crowd,’ or it’s the environmental extremists speaking through proxies or speaking through their institutional investors,” Sen. Kevin Cramer said during yesterday’s Senate Banking hearing with the CEOs of the top six U.S. banks. “I just want you to know that I’m going to be another voice in your ear.”

Citigroup’s coal policy under fire: Citigroup received the most scrutiny from Republican senators, who criticized its recent decision to not take on any clients after 2021 with plans to expand coal-fired power. Citigroup has also said it will increasingly minimize the exposure of its portfolio to coal-fired power over the next few decades.

“When a policy says we won’t invest anymore in anybody that uses more than 5% coal to generate electricity, I would say well what if that coal-generated electricity actually has zero emissions 10 years from now because of technology?” Cramer said to Citigroup CEO Jane Fraser.

Fraser, however, defended the policy, saying Citigroup’s decision to move away from investing in coal-fired power is “reflective of a risk-based assessment” in which the bank sees “declining demand” for coal and takes into account “reputation and other risk factors.”

When asked by Sen. Pat Toomey, the top Republican on the Senate Banking Committee, whether Citigroup intends to develop a similar policy to restrict oil and gas investment, Fraser said no.

Democrats pressure banks to do more: Democrats such as Sen. Chris Van Hollen, meanwhile, encouraged the other bank CEOs to follow Citigroup’s lead on restricting coal financing. Most of the other CEOs, in response, said they are working with their clients to transition them to lower-carbon energy.

“We need a carbon tax. We need industry policy. It’s not just about stopping financing. We’re going to need oil and gas for a long time,” said JPMorgan CEO Jamie Dimon in response. “The conversation should be about how we’re going to accomplish this in the right way.”

DEMOCRATS ADVANCE CLEAN ENERGY TAX BILL: The Senate Finance Committee voted on party lines yesterday to advance a bill from Chairman Ron Wyden that would overhaul the energy tax code, replacing more than 40 energy tax credits with three streamlined incentives supporting technologies that curb emissions.

The new incentives would be technology-neutral — meaning energy technologies such as wind and solar power, as well as carbon capture and storage, would all be eligible. Technologies that prompt higher emissions cuts would receive greater incentives under the bill.

During yesterday’s markup, Senate Republicans attempted to pass several amendments that would have delayed implementation of the bill and limited expansion of electric vehicle tax incentives, all of which failed on party lines. Some Democratic priorities, however, did make it into the updated legislation, including a recent proposal from Sen. Tom Carper to create a tax incentive for clean hydrogen production.

Wyden has long worked to streamline energy tax credits, introducing the first version of a technology-neutral clean energy incentive in 2015. Republicans, however, are slamming Wyden’s bill as disadvantaging fossil fuels and instead promoting legislation that would offer incentives to nascent clean energy technologies, as opposed to wind and solar energy that GOP lawmakers say is already commercially mature.

LNG COMPANY LAUNCHES CARBON CAPTURE PROJECT: Venture Global LNG unveiled plans this morning to install carbon capture equipment at two of its liquified natural gas export facilities, a first-of-its-kind project the company says will capture and store roughly 500,000 tons of carbon per year.

The company, whose projects are based in Louisiana, said its carbon capture project is “shovel-ready” and waiting only on regulatory approvals. Venture Global LNG said it is also planning a similar carbon capture project on another one of its LNG facilities. In total, the two projects would capture around 1 million tons of carbon per year, the company said.

“Through this historic carbon capture and sequestration project, we will build upon our existing state-of-the-art technology to develop even cleaner LNG at our facilities to displace coal around the world,” said Mike Sabel, the company’s CEO. The project also has the backing of Louisiana Gov. John Bel Edwards, a Democrat, who wants his state to take a leadership role in developing and commercializing carbon capture and storage technologies.

FORD’S ELECTRIC FUTURE: Ford said yesterday it already has 70,000 customer reservations for its all-electric F-150 pickup truck since it was unveiled last week, and the automaker is boasting that it is leading an “electrification revolution.”

By 2030, Ford said it expects 40% of its global vehicle volume to be fully electric. The automaker said its all-electric Mustang is already bringing new customers to Ford, and it expects to have electric transit commercial vans on the road later this year.

In total, Ford said it will invest more than $30 billion in electric vehicles by 2025, and that includes significant investments in battery manufacturing. Ford’s electric vehicle focus underscores the shift many automakers have made recently to invest more heavily in building mass-market electric vehicles, which they now see as a moneymaker in the United States, as Abby wrote for this week’s magazine.

EPA FORMALLY SCRAPS TRUMP SCIENCE TRANSPARENCY RULE: The Biden administration has officially trashed a Trump EPA rule restricting the types of science the agency could use in rulemaking.

The Trump EPA issued the science transparency rule in the waning days of its tenure, and environmentalists said the action would keep the Biden administration from setting stricter pollution limits.

The Biden administration got a boost from the court, however. In January, days after Biden took office, a federal district court judge ruled the Trump EPA had unlawfully allowed its rule to take effect immediately, and the judge also cast significant doubt that the EPA had authority to issue the rule. The Biden EPA then asked the court to scrap the rule and send it back to the agency.

“This action ensures that EPA can utilize the best available science and data to support our work to protect the public from pollution,” EPA Administrator Michael Regan said, adding the Biden administration has “an unwavering commitment to scientific integrity.”

The Rundown

New York Times Biden administration defends huge Alaska oil drilling project

Washington Post White House to face key decisions on climate, elder care if bipartisan deal with GOP emerges

Wall Street Journal Colonial pipeline missed requested security review before hack

Calendar

THURSDAY | MAY 27 

1 p.m. Energy Secretary Jennifer Granholm will testify remotely before the House Science Committee on DOE’s science and energy research.

FRIDAY | MAY 28 

10:45 a.m. Granholm will tour a hydrogen facility in Houston with Rep. Lizzie Fletcher.

3 p.m. Granholm will join a roundtable in Houston on “Advancing the Clean Energy Economy in Texas” with Fletcher, Rep. Sheila Jackson Lee, and Houston Mayor Sylvester Turner.