Energy

Oil policy that burns from both ends


With help from Josh Siegel, Catherine Morehouse and Kelsey Tamborrino

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— The Biden administration’s efforts to cool fuel prices while keeping an eye on environmental concerns is triggering discontent across the board.

— EPA is expected to drop its biofuel blending targets in the coming days, potentially kicking off a bitter fight between agriculture and refiners.

— The Nuclear Regulatory Commission is getting some heat on its latest proposal on decommissioning plants.

WELCOME TO FRIDAY! I’m your host, Matthew Choi. EPRI’s Rachel Gantz gets the trivia for knowing Gordon Ramsey has earned 16 Michelin stars over his lifetime. For today: The official languages of Finland are Finnish and what? Send your tips and trivia answers to [email protected]. Find me on Twitter @matthewchoi2018.

Check out the POLITICO Energy podcast — all the energy and environmental politics and policy news you need to start your day, in just five minutes. Listen and subscribe for free at politico.com/energy-podcast. On today’s episode: Democrats rip NRC’s latest decommissioning pitch.

THE ADMIN’S OIL AGENDA: The Biden administration’s fossil fuel strategy is sending mixed signals to environmentalists and the oil and gas industry, making no one happy, Pro’s Ben Lefebvre reports.

Green groups had held onto President Joe Biden’s campaign pledge to end federal oil and gas leasing as an indicator of an aggressive climate agenda but were disappointed that the Interior Department’s latest review on the leasing program didn’t call for an end to new lease sales. They’ve also raised the alarm about new lease sales for exploration in the Gulf of Mexico after a federal court found the administration’s pause earlier this year was unlawful.

Meanwhile, energy groups see hostility toward their industry from the administration, which revoked the permit for the Keystone XL pipeline and tabled new oil and gas leases for months while it conducted its review of the program. The administration is also appealing the court order pushing it to resume sales and moving to include environmental and health considerations when processing drilling permits.

The administration was also compelled to respond to spiking fuel prices, calling on OPEC+ to increase its output to the frustration of domestic producers, while also making up to 50 million barrels of oil available to refiners to help bring down gasoline prices, which irked environmental groups who said it sent the wrong signal as the White House sought to promote its climate change efforts.

Prices have since started to cool amid concerns about the omicron Covid variant, and analysts told Ben it makes sense to keep oil and natural gas flowing to address short term effects while moving toward a longer-term transition to renewable energy. But the messaging that strategy sends could fall flat, further threatening Democrats in next year’s midterm elections.

The administration’s “actions have not been as detrimental as the oil and gas industry associations claim, nor as bad as the environmental community seems to think,” said Morgan Bazilian, director of the Payne Institute for Public Policy at the Colorado School of Mines. “Still, their work to date does not seem to have a terribly elegant strategy associated with it.” Read more from Ben here.

RFS ON THE RADAR: The long-awaited biofuel blending targets are slated to come out in the coming days, Pro’s Kelsey Tamborrino reports, possibly dropping early next week or even today. The proposed blending volumes have long been the center of attention across the agriculture and refinery sectors, with both competing for the Biden administration’s ear on whether to raise or lower the standards.

A document leaked in September hinted that the agency planned to reduce blending mandates for 2020 and 2021 below the previously finalized 2020 level. If that holds true, prepare for a bitter fight from ethanol groups and farm-state lawmakers, just as the Senate is wrapped in a smorgasbord of legislative must-dos by year’s end.

Ethanol backers have leaned on the president’s own campaign trail comments as a promise that he’d support the industry, but the administration also needs to keep an eye toward refineries, particularly in the Northeast, that have argued the current RFS has been too costly to keep up with and harms unionized labor.

Keep in mind, EPA is already over a year late in setting 2021 blending volumes and missed this week’s deadline for 2022. The agency will hold a virtual public hearing today on a proposal to extend compliance deadlines for refiners and tie future deadlines to the promulgation of the subsequent year’s standards. Read more on the latest on RFS from Kelsey.

GOING NUCLEAR ON DECOMMISSIONING PLANS: The Nuclear Regulatory Commission is getting flack for the streamlined decommissioning proposal it advanced last month, with critics saying it doesn’t provide the commission adequate oversight over the lengthy and costly process, and shuts out meaningful public participation. The commission currently only reviews plans for plants to shut down, rather than approve or deny them — something the latest proposal doesn’t change. And rules don’t allow stakeholders to bring an adjudicatory claim to the commission about the process until years or decades after it kicks off.

Democratic NRC Chair Christopher Hanson told Pro’s Catherine Morehouse that the rule is meant to ensure safety during decommissioning and acknowledged the areas of concern. He said there is still opportunity to address public participation concerns, especially as NRC turns an eye toward environmental justice and transparency.

“We’ve really encouraged the staff to think creatively as they undertake that review, because environmental justice has two aspects, right? One is about outcomes, but another one is about process,” Hanson said. Catherine has more for Pros.

Related:Southern’s Georgia Nuclear Plant Could See Delays Until 2023,” via Bloomberg.

WATER, WATER MONEY EVERYWHERE: States are soon going to see the fruits of the bipartisan infrastructure funding for water infrastructure projects, EPA Administrator Michael Regan wrote to governors Thursday. Regan outlined the agency’s plans to dole out the cash, which will be allocated largely based by population. A little more than half of the money will be in the form of low-interest loans, while 49 percent will go out as grants or principal forgiveness loans. The plan also reduces state match requirements and urges states to use the money with an eye toward environmental justice. Alex Guillén has more for Pros.

FERC’S PHILLIPS COUNTDOWN: Senate-confirmed FERC nominee Willie Phillips is expected to be sworn in as a commissioner “very soon,” a spokesperson for the federal agency confirmed Thursday. Chairman Richard Glick reportedly told a group of reporters at a Solar Energy Industries Association event that Phillips is expected to officially fill the fifth seat “within a matter of days.”

Phillips, who previously chaired the D.C. Public Service Commission, would break the commission’s current deadlock, bringing FERC to a 3-2 Democratic majority as the commission considers critical issues related to transmission, pipelines and more.

LNG WATCH: Venture Global LNG filed with FERC on Thursday to construct and operate a proposed $10 billion LNG export facility in Louisiana that would hold 20 million metric tonnes of LNG per annum. The proposed terminal comes as countries around the world are struggling to meet gas needs, and amid growing concerns that increased U.S. exports are driving up domestic fuel prices.

HEADS OR TAIL-WINDS: Deputy national climate adviser Ali Zaidi told the solar industry Thursday that the Biden administration will be its partner as it seeks to bring manufacturing home – but underscored that significant challenges remain. “It’s a little disheartening, really, to look back at the last several decades and think about how many times we’ve been on the frontier, and yet somehow managed to cede that time and time again,” Zaidi told SEIA’s 30×30 policy forum.

Zaidi pointed to previous failures to invest and provide the business certainty necessary to expand U.S. manufacturing capacity. “That’s going to change,” he said, pointing to provisions in both the bipartisan infrastructure and reconciliation packages. The newly enacted bipartisan infrastructure law created a new program that allows DOE to serve as an “anchor-tenant” for a new transmission line or to upgrade an existing line, while the tax credits under the reconciliation package would incentivize deployment in low income areas and provide workers prevailing wages.

Still, Zaidi said, “we’ve got real challenges when it comes to the supply chain. We’ve got real challenges in the international economic policy context. And we’ve been, I think, having a really honest dialogue with the industry about what it’s going to take to create the conditions, again, for private capital to feel confident, rushing in and making the sort of investments that we’re going to need to grow this market.”

NORD STREAM 2’S NDAA MOMENT: Sen. Ted Cruz (R-Texas) is still pressing for a vote on his amendment to the National Defense Authorization Act that would sanction Russia’s Nord Stream 2 natural gas pipeline to Germany. But Cruz appears ready to declare victory if Senate Democrats choose to vote on an alternative amendment offered by Foreign Relations Committee Chair Bob Menendez that would apply sanctions only in the event that Russia invades neighboring Ukraine.

Democratic leaders agreeing to vote on Menendez’s measure would be “highly revealing” because it means Democrats are “acknowledging the likelihood of Russia invading Ukraine has risen dramatically because of President Biden’s surrender on Nord Stream 2,” Cruz told POLITICO’s Josh Siegel. “In the entire course of the debate this year, not a single Senate Democrat has defended Biden’s surrender on the merits. It is indefensible substantively,” Cruz added.

Menendez said in a statement his amendment is designed to deter Russian aggression against Ukraine by imposing sanctions on the pipeline and also against senior Russian leaders, its banking and other industries, and its ability to issue sovereign debt. A Senate Democratic laid it out in starker terms: “Only in Ted Cruz’s wildest fantasies does it make any sense to suggest Ukraine is at threat of being invaded because of any other reason other than Putin’s long obsession with seizing Ukraine.”

The Biden administration’s decision to waive sanctions on Nord Stream 2 in order to heal relations with Germany has emerged as a major sticking point stalling approval of the usually low-drama NDAA, and it has become a political headache for the White House and Democrats.

Cruz has slow-walked dozens of foreign-policy nominees because of Biden’s decision, although he’s promised to begin lifting them if Democrats agree to vote on Nord Stream 2-related amendments.

NOT SO DISPOSABLE: Industry groups representing wholesale distributors and cooling contractors have sued over a few specific provisions in EPA’s recent hydrofluorocarbon phase-down rule (Reg. 2060-AV17). Led by Heating, Air-Conditioning & Refrigeration Distributors International, the suit argues that the rule’s ban on selling HFCs in disposable cylinders and requiring cylinder tracking exceeded the authority granted EPA by Congress a year ago. Those provisions will increase costs, argue the groups, which noted they otherwise support the rest of the regulation.

Disposable cylinders pose a major enforcement concern for EPA. “The vast majority of illegal imports of HFCs in other countries have been shipped in disposable cylinders… because they are cheaper, easier to transport, and difficult to trace,” EPA said in its rule. The agency estimated the ban’s cost at $441 million through 2050, or about $22 million annually. However, when the requirements are fully phased in after 2027, EPA said it expected net annual savings “resulting from the need to purchase significantly fewer cylinders each year.”

SUPPLY CHAIN WOES HIT THE POWER GRID: The CEO of the National Rural Electric Cooperative Association on Thursday warned President Biden that supply chain constraints are exacerbating an “alarming” shortage of basic components essential to the reliability of the U.S. electric grid. In a letter to the White House, Jim Matheson, a former Utah Congressman, warned the shortfalls could also lead to higher electricity bills as limited supplies raise prices for individual parts.

“These delays mean that some electric cooperatives face impossible choices as they restore power after an outage, work to provide new service to areas under construction or upgrade existing service to ensure reliability,” Matheson wrote.

CALIFORNIA HEAT PREP: California’s Public Utilities Commission is trying to avoid the rolling blackouts state residents had to contend with last year by advancing policies Thursday to secure the grid from further strain ahead of extreme heat forecast over the next two summers. These policies include ordering utilities to procure an additional 2,000 to 3,000 megawatts to increase supply and expanding a program designed to help residential customers during emergencies. Pro’s Colby Bermel has more.

Edith Naegele is joining the American Gas Association as vice president for membership and strategic development. She comes from the U.S. Chamber of Commerce, where she served as senior vice president for corporate development, and replaces Gary Gardner, who is retiring from AGA after 27 years.

— “Exxon Plans Below-Inflation U.S. Pay Raises Despite Banner Year,” via Bloomberg.

— “EPA union announces agreements with agency expanding work from home,” via The Hill.

— “Surprise OPEC+ Supply Boost Offers Rare Cheer for Oil Tankers,” via Bloomberg.

— “Senate sinks deeper into quagmire of dysfunction,” via POLITICO.

THAT’S ALL FOR ME!





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