Energy

Permian scramble


With help from Matt Daily

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The downturn in the oil patch has shale drillers scrambling for partners, and the latest deal has Pioneer Natural Resources scooping up Parsley Energy.

Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin breezed past a self-imposed stimulus deadline Tuesday amid hopes for a deal, although Senate Majority Leader Mitch McConnell is privately urging the White House to resist an agreement.

House Democrats formally rolled out sweeping legislation that offers a guide for protecting and restoring the nation’s waters should the party win control of the Senate.

GOOD MORNING! IT’S WEDNESDAY. I’m your host, Kelsey Tamborrino. The Natural Resources Defense Council’s Ed Chen is back with the trivia win for knowing the Electrobat, patented in 1894, was the first successful electric automobile in the U.S. For today: Who was the first member of the Republican Party to be elected U.S. president? Send your tips, energy gossip and comments to [email protected].

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: Banning fracking: It’s complicated.

PERMIAN PAIR-UP: As sure as night follows day, a downturn in the oil cycle sends hard-hit oil producers clamoring for partners. Tuesday’s match-up has Irving, Texas-based Pioneer Natural Resources setting a deal to buy Parsley Energy in an all-stock transaction valued at roughly $4.5 billion, paying a thin premium that values Parsley at a level seen only a few weeks ago.

The deal — which needed some special arms-length accommodations since Pioneer CEO Scott Sheffield is the father of Parsley co-founder and Chairman Bryan Sheffield — is the latest in what looks like a mad dash to lock up the premium Permian Basin acreage while prices are low. Those fields remain the prize in U.S. oil patch, and ME is certain that ambitious investment bankers and cash-strapped West Texas companies are looking to strike deals — which may be harder and harder to come by as the best companies get snapped up.

Adding in Parsley’s debt brings the deal total to $7.6 billion, and the companies are eyeing $325 million in annual savings as they manage an asset base of 930,000 acres in the Permian Basin, where production has started to rebound after the price shock that hit the industry this spring.

The deal follows a reconfiguration of the shale industry that’s seen ConocoPhillips buy Concho Resources Inc. earlier this week valued for $9.7 billion, a deal that came on the heels of Devon Energy’s link up with WPX Energy. “There’s really going to be three or four players left in the U.S. independent sector,” Sheffield told The Wall Street Journal on Tuesday.

While companies with stable finances may be kicking the tires on potential targets, it will get tougher to find acreage that can produce oil at the prices it’s fetching now. Adam Waterous, the founder of private equity firm Waterous Energy Fund, told the newspaper there’s no market for about 80 percent of the roughly 500 oil and gas producers in North America, many of which bought into fields when prices were far more robust. “The vast majority of these are not good assets,” he told the Journal.

ON THE ‘PATH’ TO STIMULUS DEAL: House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin are “on a path” toward a massive coronavirus relief deal, Pelosi said Tuesday, hours before her self-imposed deadline for an agreement ended. Pelosi and Mnuchin plan to speak again today after a productive, 45-minute call on Tuesday afternoon, POLITICO’s Heather Caygle and Sarah Ferris report.

Enough progress was made that both sides felt like talks should continue, with Washington still waiting to see whether months of negotiations between the two will culminate in a multitrillion-dollar stimulus plan less than two weeks before Election Day. Pelosi said she hoped to get something done by the end of the week: “That’s the plan. That’s what I would hope.”

Across the Capitol, Senate Majority Leader Mitch McConnell has privately urged the White House not to settle with Pelosi before the election. Most Republicans and many Democrats still say it is unlikely a relief package can be quickly shepherded through Congress.

ICYMI: DEMOCRATS UNVEIL OCEANS BILL: House Democrats’ sweeping measure aims to harness the world’s oceans to address climate change, Pro’s Anthony Adragna reports. The 324-page bill, introduced Tuesday by Natural Resources Chair Raúl Grijalva (D-Ariz.), would boost offshore wind energy production and bar new offshore oil and gas drilling while creating new protected areas and significantly boosting coastal and wetland restoration.

The measure offers a legislative guide for protecting and restoring the nation’s waters should the party win control of the Senate in next month’s election. Grijalva said Tuesday the lawmakers aimed to further fine tune the bill for the next Congress. “The way I look at it we are in a reciprocal relationship with nature: You reap what you sow,” Grijalva told reporters. “With solutions like this legislation and other proposals to confront climate change, we can and will do better.”

MERKLEY, LEVIN INTRODUCE ZEV BILL: Oregon Sen. Jeff Merkley (D) and California Rep. Mike Levin (D) introduced legislation Tuesday to end the sale of new U.S. gasoline-powered vehicles in 15 years. The Zero-Emission Vehicles Act would set a federal zero-emissions vehicle standard, requiring that 50 percent of new passenger vehicles sales are ZEVs by 2025. That figure would increase 5 percent each year to reach 100 percent by 2035.

MOODY’S: COAL DEMISE IS HERE TO STAY: U.S thermal coal’s decline will continue no matter who is elected president in November, but the trend would accelerate under a Joe Biden administration, says a new report from Moody’s Investors Service. “Demand for thermal coal will remain in secular decline in the 2020s regardless of the winner of the presidential election given expectations for a small improvement in 2021 followed by continued contraction driven by a combination of factors including persistently low natural gas prices, increasing emphasis on renewable energy, and long-term regulatory uncertainty,” the report said.

Biden’s proposed plans for carbon-free electricity by 2035 would mean increased pressure on utilities and power generators to reduce emissions, which in turn would accelerate the decline in demand for U.S. thermal coal, Moody’s said. Biden’s plan to establish a technology-neutral Energy Efficiency and Clean Electricity Standard, along with clean energy tax credits, would leave coal-fired power plants the hardest hit, the report said, and coal would be affected more quickly than other fossil fuels, including natural gas. In particular, Moody’s said, unregulated power generators “would be directly exposed to the market effects of new environmental regulations.”

President Donald Trump has promised to save the coal industry, though he has failed to stem its woes. Trump, given a second term, would likely pursue the same policy agenda generally considered favorable to coal, but Moody’s finds, “efforts to this point have been insufficient to reverse the decline in demand that started in the late 2000s.”

WILDERNESS GROUP TARGETS COLLINS: Alaska Wilderness League Action launched a digital ad campaign in Maine on Tuesday targeting GOP Sen. Susan Collins for her 2017 vote to allow oil and gas leasing in the Arctic National Wildlife Refuge as part of the tax bill. The Facebook ad will run for the next two weeks. Watch the ad.

GM BETS ON EVs: General Motors announced its Spring Hill, Tenn., assembly plant will transition to producing electric vehicles — making the plant the company’s third electric-vehicle manufacturing site. The company also confirmed investments in five Michigan plants for future EV crossover and full-size pickup production. The six U.S. facility investments total more than $2 billion, GM said. “These investments underscore the success of our vehicles today, and our vision of an all-electric future,” said GM Chair and CEO Mary Barra in a statement.

BY THE NUMBERS: At the end of September, loans to fossil fuels through the Federal Reserve’s Main Street Lending Program more than tripled to $265.1 million, according to new analysis released this morning by the left-leaning BailoutWatch, Public Citizen and the Friends of the Earth.

The Fed purchased $181.6 million in new loans to 15 fossil fuel companies, marking about 15.4 percent of all new loans, according to the analysis of Fed data, bringing fossil fuels’ portion of the total loan book to 11.5 percent. Prior to September, fossil fuels accounted for 7.4 percent of Main Street Lending Program loans. The same analysis found six green energy companies received loans totaling $58.6 million — about 2.5 percent of the total portfolio — in line with previous months.

MONITOR DETAILS PG&E SHORTCOMINGS ON WILDFIRE RISK: Pacific Gas & Electric’s work to reduce wildfire risk has not improved from 2019 to 2020, the company’s court-appointed monitor told a federal judge. Kirkland & Ellis partner Mark Filip, who was appointed to monitor PG&E on its fire mitigation tasks and other safety compliance, wrote that his team’s inspections and analyses “have identified material shortcomings in PG&E’s progress” toward its risk reduction goals, Pro’s Colby Bermel reports. While acknowledging that the company’s work has somewhat helped, “it strongly appears” that PG&E “failed” to properly prioritize that work in 2019 and 2020.

Those “material shortcomings” could lead U.S. District Judge William Alsup to impose stricter conditions on the company as part of its criminal probation stemming from the 2010 San Bruno pipeline explosion, Colby writes.

GREENS SUE OVER CHEMICALS IN PORTLAND: A coalition of five environmental groups, represented by ACLU of Oregon, sued the federal government Tuesday over what they allege are violations of the National Environmental Policy Act stemming from the use of “an unprecedented amount of dangerous chemical weapons” in Portland. The lawsuit against the Homeland Security Department, filed in the U.S. District Court in for the District of Oregon, claims DHS failed to analyze the potential health and environmental impacts before deploying tear gas and other chemical munitions against protesters in Portland as required by NEPA.

— Ernst & Young LLP appointed Karen Felton to serve as EY Americas power and utilities leader and Mitch Fane to serve as EY Americas oil and gas leader. Felton succeeds Dana Hanson, who was recently named EY UK&I technology consulting leader, and Fane succeeds Deborah Byers, who will continue to serve as the EY Americas industry leader.

— “Trump nemesis Mary Nichols on shortlist to run Biden EPA,” via Bloomberg.

— “U.S. steps up sanctions pressure on Nord Stream 2 gas pipeline contractors,” via S&P Global Platts.

— “Trump admin starts work on climate report after outcry,” via E&E News.

— “Biden’s approach to Brazil’s Bolsonaro could prove he’s serious about climate change,” via Huffington Post.

— “Trump environmental rollback spurs mining near Okefenokee,” via Associated Press.

THAT’S ALL FOR ME!



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