Today we talk about five things in the news from the week of July 27, 2015.
- Senate Moves Two Energy Bills, One Popular
- Hillary and Jeb Talk Climate
- Clean Power Plan Set for Launch, Details Leak
- Natural Gas Trucks Get a Tax Fix
- Bad News Week for Oil and Gas Jobs
1. Senate Moves Two Energy Bills, One Popular
Last week, the Senate Energy Committee passed two major energy bills. The first is “The Energy Policy Modernization Act of 2015,” a broad bipartisan package that has a solid chance of becoming law. It passed the Committee on an 18-4 vote. As we discussed last week, the bill was introduced with two significant provisions for natural gas. First, it will take some steps to clear up jurisdictional questions for fracking regulations on federal land. That provision passed the committee unchanged. Second, the bill would set a hard deadline for the Department of Energy to approve a liquefied natural gas (LNG) export terminal once the project completes its Federal Energy Regulatory Commission (FERC) review. That provision did garner some debate, with several Senators calling for additional studies. The Committee did agree to an additional study requested by Sen. Elizabeth Warren (D-MA).
The bipartisan Energy Bill was also amended to include an important provision that has previously struggled to gain support in the House, as Bloomberg BNA explains:
During the July 30 markup, the committee adopted an amendment by Sen. Shelley Moore Capito (R-W.Va.) that would expedite the federal process for approving natural gas pipelines.
The measure would require the Federal Energy Regulatory Commission to approve or deny an application within one year of receiving a complete application that is ready to be processed. The agency then responsible must make a decision to approve or deny a project within 90 days of FERC’s review.
The Committee also passed a more controversial bill called the Offshore Production and Energizing National Security Act of 2015, on a 12-10 vote. That bill would expand offshore drilling and repeal the crude oil export ban.
2. Hillary and Jeb Talk Climate
Hillary Clinton released her climate plan this week. She set two main goals, which she says will help “make the United States the world’s clean energy superpower:”
- The United States will have more than half a billion solar panels installed across the country by the end of Hillary Clinton’s first term.
- The United States will generate enough clean renewable energy to power every home in America within ten years of Hillary Clinton taking office.
The plan also contains three other interesting points, which she says will be explained in further detail later:
- Modernizing North American Infrastructure: Improve the safety and security of existing energy infrastructure and align new infrastructure we build with the clean energy economy we are seeking to create.
- Safe and Responsible Production: Ensure that fossil fuel production taking place today is safe and responsible, that taxpayers get a fair deal for development on public lands, and that areas that are too sensitive for energy production are taken off the table.
- Coal Communities: Protect the health and retirement security of coalfield workers and their families and provide economic opportunities for those that kept the lights on and factories running for more than a century.
Jeb Bush gave a written interview to Bloomberg BNA, where he staked out a number of interesting positions:
Bush: The climate is changing; I don’t think anybody can argue it’s not. Human activity has contributed to it. I think we have a responsibility to adapt to what the possibilities are without destroying our economy, without hollowing out our industrial core….
Bloomberg BNA:Are there any other energy and environmental issues of particular concern in your campaign?
Bush: Generally, I think as conservatives we should embrace innovation, embrace technology, embrace science. It’s the source of a lot more solutions than any government-imposed idea and sometimes I sense that we pull back from the embrace of these things. We shouldn’t. We’re the party that should be the party of discovery, the party of science, the party of innovation and tear down the barriers so that those things can accelerate in our lives to find solutions for all these things.
3. Clean Power Plan Set for Launch, Details Leak
The White House and its Environmental Protection Agency are signaling that the final Clean Power Plan will be unveiled on Monday, August 3. Leaks that came out this week suggest the rule will be loosened in two significant ways. First, it looks like the EPA will give states a little more time, as UtilityDive reported:
On Tuesday evening, the New York Times and Washington Post cited unnamed agency sources in revealing that the agency would push back the start date for the compliance period of the regulations by two years — from 2020 to 2022 — giving states more time to comply. The next morning, EnergyWire bolstered the case for that theory, revealing an internal EPA timeline it obtained indicating the final rule would be released on Aug. 3 and that states would be given the two additional years to comply:
While additional compliance time has been the top request of many power sector stakeholders for the revised plan, those revelations have set off alarm bells for many environmentalists, who are concerned that emissions reductions would be weakened by a longer compliance timeframe.
A second major change is that, according to E&E, the state targets will be adjusted:
President Obama on Monday will release the final rule for existing-power-plant carbon emissions that does not include the draft version’s “building block 4,” the official said, reconfiguring the way states are assigned emissions reduction responsibilities.
The change will not limit states’ ability to tap energy efficiency policies and programs in their state implementation plans for the rule….State targets will now be based on the rule’s other three building blocks: heat-rate improvements at coal-fired power plants, increased use of combined-cycle natural gas generation to displace coal power and deployment of zero-carbon energy. These inputs set the targets but don’t mandate how states comply with them.
The EPA is apparently countering these changes with greater incentives for renewables.
It is also worth noting that in the leadup to the announcement, the EPA certainly does not seem to be shying away from natural gas in this effort. In an interview with Vox few days ago
[Vox Reporter] Brad Plumer:The fracking boom and the availability of cheap shale gas has played a big role in cutting US carbon dioxide emissions since 2005 — and it also seems like it’s enabled EPA to pursue these CO2 rules. At the same time, environmentalists have raised concerns that things like methane leaks might undercut those climate benefits. How do you think about the role of fracking in climate policy?
Gina McCarthy: Hydrofracking has certainly changed the energy dynamic considerably. You are absolutely right, it has created an opportunity for a shift away from coal into natural gas, and that shift has been enormously beneficial from a clean air perspective, as well as from a climate perspective.
But it’s not EPA’s job to decide whether we like natural gas or coal better. It’s our job to actually look at where we can get continued carbon pollution reductions from both fossil fuels.
4. Natural Gas Trucks Get a Tax Fix
Congress is working on passing a long-term highway bill, but came up short last week and settled for a three-month extension. Buried in that news, however, is a win for natural gas vehicles. The trade association NGV America explains:
NGVAmerica celebrates the passage of legislation by the House of Representatives and the Senate that corrects a longstanding inequity in the way liquefied natural gas (LNG) is taxed….Currently, fleets operating LNG-powered trucks are effectively taxed for their fuel at a rate 70 percent higher than that of diesel fuel. This is an unfair penalty on trucking fleets that use domestically produced LNG. The provision modifies the highway excise tax on LNG to be based on energy content, rather than volume, and thus brings the tax on LNG into parity with that of diesel.
Starting Jan. 1, 2016, LNG will be taxed based on a diesel gallon equivalent (DGE) unit….This fix reduces the excise tax on LNG from approximately 41.3 cents per DGE to 24.3 cents per DGE. To illustrate the significance of the change, consider that a natural gas truck traveling 100,000 miles per year at 5 miles per DGE consumes 20,000 DGE per year. Prior to the passage of the new law, the LNG truck would have a highway fuel tax bill of $8,262. With this change, the LNG truck will now pay $4,860 a year in highway fuel taxes, a savings of $3,402 per year.
5. Bad News Week for Oil and Gas Jobs
A lot of oil and gas companies announced layoffs this week. Per the New York Times:
Royal Dutch Shell said on Thursday that its profit fell sharply in the second quarter as a strong performance in marketing and refining failed to offset the brunt of lower oil and gas prices. The oil giant also said it would cut its capital investment and eliminate 6,500 jobs as the drop in oil and gas prices squeezes its vast global exploration and production operations.
Chevron Corp, the second-largest U.S. oil company, said on Tuesday it would lay off 1,500 employees, about 2 percent of its global work force, as it trims costs to offset declining crude prices. Nearly all of the layoffs will be in Texas, where the company has expanded in recent years to develop land in the Permian shale formation, and California, where Chevron is headquartered.
Per Trib Live:
Range Resources Corp. cut 11 percent of its workforce this year as it reduced costs to deal with low natural gas prices, the company disclosed Wednesday.
Consol Energy Inc. is eliminating about 470 positions throughout the company. The Cecil-based firm confirmed that 290 cuts are coming from its natural gas and corporate divisions, and 180 from its coal division.
The Wall Street Journal had positive news for some smaller drillers, however:
Take Cimarex Energy Co., which drills in Texas and Oklahoma. The oil producer’s stock price has fared better than that of Chevron Corp., the second largest American oil company by revenue, since crude-oil prices started crashing last June… And as of this week, Cabot Oil & Gas Corp., a Houston-based shale-gas specialist, had bested all the big oil companies in stock-market performance since last summer when the price of crude first began to crash….
The share-price buoyancy of elite shale drillers, including EQT Corp., Concho Resources Inc. and EOG Resources Inc., could be a sign that investors are betting on a rebound in oil and gas prices. Or it might reflect a bet that some of the smaller, most efficient players will be bought at a premium by the big oil companies, said Doug Terreson, head of energy research at Evercore ISI.