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CHATTERJEE WEIGHS IN: The cyberattack on the Colonial Pipeline, a 5,500 mile artery from Houston to the doorstep of New York City responsible for nearly half of the East Coast’s fuel supply, should be a “wakeup” call for energy company CEOs, policymakers, and federal regulators, says FERC commissioner Neil Chatterjee.
“This just crystallizes that warfare in the 21st century has evolved to where private companies are now in many ways on the front lines,” Chatterjee told Josh. “It’s essential these companies working in conjunction with the government protect this critical infrastructure.”
Chatterjee, a Republican who chaired FERC in the Trump administration, says the ransomware assault — code that holds computer systems hostage — is the most significant, successful cyber attack ever on energy infrastructure in the U.S. But he worries the government has not grappled with how to respond.
“If a missile takes out a pipeline or substation, it would be a clear act of war and we would know how to respond accordingly, but a cyber attack could have the same impact to the economy and national security and we are now just being programed how to recognize and respond to that,” Chatterjee said.
Chatterjee’s ask: FERC has the authority to approve interstate gas pipelines and set their rates, but not to regulate their security, a responsibility that falls to the TSA, which has a sprawling portfolio.
Since 2018, Chatterjee has argued with fellow commissioner Richard Glick, now the Democratic chairman, that Congress should delegate authority to an agency such as the Energy Department with specific energy sector expertise.
Chatterjee and Glick said this new regulator should be vested with the power to implement minimum mandatory cybersecurity standards for companies overseeing the nation’s 2.5 million mile pipeline network, which has hundreds of thousands of devices, or touchpoints, vulnerable to attack. FERC already oversees mandatory standards over the electric grid itself, but not pipelines.
“One of the reasons Rich and I called for DOE and not FERC to do this is we didn’t want it to appear as if we are making a jurisdictional power grab,” Chatterjee said.
Biden poised to act: President Joe Biden is preparing to sign a new cybersecurity executive order, according to the New York Times.
According to a draft reviewed by the newspaper, the order standardizes basic cybersecurity practices, such as two-factor authentication, at all federal agencies and contracted software vendors. The order also imposes a zero-tolerance policy for vendors and would block those who do not comply from receiving federal contracts.
It remains unclear what effect the order would have had in preventing the Colonial Pipeline attack since it is a private company. Colonial Pipeline has not yet disclosed how the group of hackers known as “DarkSide” compromised its system.
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.
MUTED IMPACT ON PUMP PRICES, FOR NOW: Duration is the word of the day when it comes to whether the shutdown of the Colonial Pipeline will significantly impact fuel prices on the East Coast.
Over the past week, the average national gas price jumped six cents to $2.96, according to AAA, but some level of increase is normal this time of year ahead of Memorial Day, the unofficial start of summer driving season. Inventories of gasoline have built up in preparation for increased demand, and stocks normally get refilled every five to six days.
If the shutdown lasts more than a few days, prices could breach $3 or more for the first time since 2014. Wholesale gasoline futures prices have reached three-year highs.
“The overall theme so far is markets are reacting as if this is going to be resolved soon,” said Bob McNally, president of Rapidan Energy Group and former oil official in the George W. Bush administration.
“The real issue is if this is prolonged,” McNally told Josh. “If we get to Tuesday or Wednesday and we haven’t heard a confident and credible update from Colonial as to near-term plans for a restart, markets will start to register alarm.”
Areas including Atlanta, Mississippi, Tennessee, and Delaware are most likely to experience limited fuel availability and price increases, said a spokesperson for AAA. While the New York harbor can be resupplied with tankers from Europe, which is expensive and takes time to deliver, more inland regions are not as accessible.
What to watch: McNally added a critical question that could determine the length of the outage is whether the attack disrupted operations technology, or the physical ability of the pipeline to move fuel products, not just Colonial’s internal computer networks. So far, no evidence has emerged that the attackers penetrated control systems that run the pipeline.
Another issue that will affect the pump price is whether consumers fill up tanks in fear of a pending supply shortage.
ELEPHANT IN THE ROOM ON BIDEN CLIMATE AGENDA: The administration is considering taxing imports of carbon-intensive goods, but economists warn such a policy would be unworkable unless the U.S. imposed a carbon tax or a similar pricing scheme on its own domestic goods, an unlikely short-term prospect.
“If the U.S. didn’t have a national carbon price, it just doesn’t make sense to have a border carbon adjustment,” Shuting Pomerleau, a Niskanen climate policy analyst, told Josh for a story posted this morning. “You are not putting a price on carbon emissions domestically, so how do you justify a tax on imported goods?”
What’s the problem? The first is an accounting question. If the U.S. set a carbon tax starting at $50 per ton, for example, the U.S. could simply tax imported goods equivalently. Without that, it’d be difficult to come up with a fair rate to tax imports.
The second problem is fairness.
Pomerleau said doing a border carbon adjustment without a U.S. carbon tax could run afoul of the “most favored nation” clause of the World Trade Organization, which prohibits a WTO country from discriminating against others.
“It would be perceived as protectionist by trading partners,” Pomerleau said.
US risks being left behind: The European Union and Canada have already implemented domestic carbon pricing systems, and both could impose border carbon adjustments imposing a tax on the exports of countries like the U.S. that don’t put a price on pollution.
SPEAKING OF…FITZPATRICK INTRODUCES CARBON TAX BILL: Republican Rep. Brian Fitzpatrick re-introduced carbon tax legislation with Democrat Rep. Salud Carbajal of California Friday that would use the revenue to fund infrastructure projects while also eliminating the gasoline tax.
Fitzpatrick, a moderate from the Philadelphia suburbs, is the only Republican in Congress publicly backing a carbon tax.
“We are at a crossroads with regard to infrastructure and climate change,” Fitzpatrick said. “This Congress has the unique opportunity to come together to forge bipartisan consensus on both of these critical issues.”
So far, Congress has not shown much of an interest in matching a carbon tax with Biden’s $2.3 trillion infrastructure and clean energy spending package, despite the neat fit it could provide as a revenue raiser.
TAKING STOCK OF BIDEN’S PROGRESS PROCURING ELECTRIC CARS: The federal government is on track to triple its procurement of zero-emissions vehicles this year, but putting that progress in context shows it will likely take many years to reach Biden’s goal to electrify every federal vehicle.
So far this fiscal year, the federal government has ordered 474 zero-emissions vehicles, according to data provided to Abby by the General Services Administration, which manages much of the roughly 645,000-vehicle federal fleet. That’s already more than twice the number of zero-emissions vehicles the federal government procured last fiscal year, and the bulk of them were ordered since Biden took office in January.
Even with those procurements, however, still less than 1% of the entire federal fleet is electric, and that includes plug-in hybrid vehicles, according to a review of GSA data.
Electric vehicle advocates see a significant opportunity for Biden to put the pieces in place to drive zero-emissions vehicle procurement more quickly. But there are also some near-term challenges: higher upfront cost of many electric models, a lack of electric options in certain vehicle categories, and a need to build out infrastructure to support electric procurement.
More in Abby’s story posted over the weekend.
ELECTRIC CARS COULD REACH PRICE PARITY BY 2027 IN EUROPE: Battery electric vehicles will become cheaper to buy in Europe than their gas-powered counterparts by 2027, as battery pack prices continue to fall, BloombergNEF says in new research released this morning.
The report, commissioned by European environmental group Transport & Environment, finds European sales of battery electric vehicles will increase steadily over the next decade, driven by economics. BNEF expects battery prices, which make up a large portion of electric vehicle costs, to fall below $100 per kilowatt hour in 2024 and reach $58 per kWh in 2030.
In addition, BNEF expects more than a quarter of Europe’s vehicles sales to be plug-in electric by 2025, rising to 50% of sales by 2030 and 85% of sales by 2035. To reach 100% electric sales by 2035, however, European governments would need policies to accelerate adoption, such as stricter carbon emissions standards and an expansion of vehicle charging networks.
MINNESOTA POISED TO ADOPT CALIFORNIA TAILPIPE STANDARDS: A Minnesota administrative law judge approved the state’s proposal to adopt California’s greenhouse gas tailpipe and zero-emissions vehicle standards in a ruling Friday.
While the state’s government must still formally adopt the proposal, the judge’s ruling clears a path for Minnesota to become the first Midwest state to join the more than dozen other states that follow California’s rules.
California has long had the ability to set its own tailpipe standards stricter than the federal government’s rules. The Trump administration revoked that authority, but the Biden administration has already taken steps to restore it.
UNITED STATES DEVELOPMENT BANK STAFFS UP ON CLIMATE: The U.S. International Development Finance Corporation is bringing on board its first-ever climate officials, hiring Jake Levine as chief climate officer and Aparna Shrivastava as deputy chief climate officer, the institution announced this morning.
The hires come after the DFC announced last month, as part of Biden’s international climate finance plan, that it would strive to reach net-zero emissions across its portfolio by 2040, a goal environmentalists say isn’t as ambitious as it should be. The DFC also unveiled plans to have at least one-third of its investments be climate-focused starting in fiscal year 2023.
Levine was most recently an attorney at Covington & Burling, and he has worked on climate policy in California and in the Obama White House. Shrivastava most recently served as the climate finance lead at Mercy Corps.
INTERIOR PULLS TRUMP WEAKENING OF OFFSHORE SAFETY RULES: The Interior Department on Friday withdrew a Trump administration proposal issued in December that would have weakened offshore oil and gas safety regulations related to drilling in the Arctic.
The Trump administration had argued the 2016 rules, put in place after the Deepwater Horizon spill, contained “unnecessary, burdensome provisions.”
There is no active drilling in the Arctic, so the impact of the rule change is moot for now. Meanwhile, the Biden administration has paused all new offshore leasing, and seems unlikely to expand acreage in waters beyond where drilling occurs now, mostly in the western Gulf of Mexico.
HOW FEBRUARY’S COLD SNAP AFFECTED GAS PRODUCTION: The deep freeze that hit Texas and much of the rest of the U.S. earlier this year drove the largest monthly decline in natural gas production on record, the Energy Information Administration said in a research note today.
Gas production fell by 7% between January and February of this year, with Texas accounting for most of the decline. Natural gas production in the state fell by a record 4.3 billion cubic feet per day, the EIA said, noting the state’s gas infrastructure isn’t winterized and fell victim to the cold temperatures.
The EIA also noted that Texas experienced a monthly record high residential gas consumption for February this year, 53% higher than consumption levels last February. Commercial sector gas consumption in Texas also increased that month, reaching its highest level since January 2018, the EIA said.
The Rundown
Wall Street Journal Colorado drillers to combine, as consolidation continues in oil patch
Politico Biden contemplates a climate deal with the ‘Trump of the tropics’
Washington Post Biden wants to move energy offshore, but choppy seas are ahead
New York Times Gas flaring declined in 2020, study finds
Calendar
TUESDAY | MAY 11
10 a.m. 216 Hart. The Senate Environment and Public Works Committee’s Subcommittee on Transportation and Infrastructure will hold a hearing titled, “Equity in Transportation Infrastructure: Connecting Communities, Removing Barriers, and Repairing Networks across America.”
WEDNESDAY | MAY 12
10 a.m. 301 Russell. The Senate Environment and Public Works Committee will hold a hearing to consider the nominations of Shannon Estenoz to be the Interior Secretary’s assistant secretary of Fish and Wildlife and Parks, Radhika Fox to be the EPA’s assistant administrator for water, and Michal Freedhoff to be the EPA’s assistant administrator for chemical safety.
THURSDAY | MAY 13
10 a.m. 366 Dirksen. The Senate Energy and Natural Resources Committee will hold a hearing to examine offshore energy development in federal waters. It will also consider the nomination of Tommy Beaudreau to be deputy secretary of the Interior.
10:30 a.m. The House Energy and Commerce Committee’s Environment and Climate Change Subcommittee will hold a remote hearing on Superfund provisions in the “CLEAN Future Act.”
