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Washington Update From the US Oil and Gas Association - 4.26.2024

David Blackmon
Apr 27, 2024


Let the Good Times Roll

April 26, 2024

The Regulatory onslaught continues—powerplant edition

This week the Biden Administration finalized carbon dioxide regulations on new natural gas and coal-fired power plants. If courts uphold the regulation, new natural gas power plants that operate at least 40 percent of the time would need to install carbon capture systems by 2032 and existing coal plants would also need to install carbon capture systems by 2032.


Many parties are already preparing legal challenges to this regulation. The Clean Air Act requires EPA to utilize the “best system of emission reduction” that has been “adequately demonstrated.” Obama’s Clean Power Plan was struck down by the courts because it took a ridiculously expansive view the term a “system of emissions reduction” to include measures far from the power plants being regulated.

The Biden administration learned from the Obama Admin getting slapped down in court and this time states that CCS (carbon capture and sequestration) is the best system of emission reduction (along with co-firing green hydrogen). The problem for Biden’s EPA is the requirement that the emissions controls be “adequately demonstrated.”

Jeff Holmstead, the head of President Bush’s air office at EPA said recently that, “There isn’t a single commercial-scale gas-fired power plant anywhere in the U.S. — or as far as I know, anywhere in the world — that uses CCS to control its emissions,” he said. "This fact alone could make it hard for EPA to convince the courts that CCS has been adequately demonstrated."

It is hard to argue that something has been adequately demonstrated when it hasn’t been tried anywhere in the world at scale.

CCS hasn’t been adequately demonstrated for coal either, but it’s a closer call. CCS on coal plants has been tried in the United States, but it has failed repeatedly. Here are some examples:

American Electric Power Mountaineer – canceled in 2011

FutureGen 2.0 – canceled in 2015

Texas Clean Energy Project – canceled in 2016

Southern Company’s Kemper Project – canceled in 2017 so the plant could run on natural gas

Petra Nova – suspended in 2020 after three years of operation

With this history of failure, how can EPA argue to a court that the technology is adequately demonstrated? The actual demonstrations show that it is a failure.

I expect the courts will strike down this new powerplant rule, just as the courts struck down Obama’s powerplant rule and Biden’s people know this. This rule, along with the GHG regulations on cars and trucks, the new regulation banning fossil fuels in new federal buildings, and other rules are not legal.

But as we learned with student loan forgiveness, the law apparently doesn’t apply to bureaucrats trying to force change regardless of the law backed up by an Administration. That worked for Obama, and they are trying the same tactics again.

The model the Biden administration is following is the Obama Admins illegal Mercury and Air Toxics standards. That rule dramatically increased the cost of operating coal plants. After a couple of years of litigation, the rule was struck down by the Supreme Court. When asked about the regulation, EPA administrator Gina McCarthy, wasn’t concerned about losing in court. She said, “Most of [the powerplants] are already in compliance, investments have been made…”

In other words, they got the result they wanted with an illegal rule because utilities moved away from coal and invested in other things.

Following the law wasn’t important for the Obama administration and it isn’t important for the Biden administration. What is important is trying to achieve their climate goals regardless of the law. These same approaches will apply to our industry. The intent is to force movement away from fossil fuel production by regulation or a protracted legal process. They fully intend to wait the industry out.

Biden’s illegal ban on fossil fuel use in new federal buildings

I noted above that Biden has a new regulation banning fossil fuel use in new federal buildings. I’ll explain why it’s illegal here. Section 433 of the Energy Independence and Security Act of 2007, requires that “[new federal] buildings shall be designed so that the fossil fuel-generated energy consumption of the buildings is reduced” by 55 percent by 2010, 90 percent by 2025, and 100 percent by 2030.

The first question people should ask about Biden’s rule is, “why did it take so long?” Why didn’t Obama promulgate a rule to comply with this requirement? They had eight years and the statutory language above was on the books the entire time. The reason, amazingly, is that the Department of Energy’s attorneys read the statutory language and couldn’t come up with a legal regulation.

The statutory language requires a reduction of “fossil fuel-generated energy consumption.” This obviously includes electricity that is generated off-site. Obama’s Department of Energy understood that the only buildings that could comply with this statutory language were buildings that would be completely off the grid because otherwise, the buildings would use electricity generated from fossil fuels. So, the Obama administration and the Trump administration after it, never implemented this statutory language.

The way the Biden administration got around this pesky statutory language is to pretend it says something different. They are pretending that Congress wrote, “on-site fossil fuel-generated energy consumption.” The problem is that “on-site” is not in the statute.

Once again, the Biden administration is not following what the law says.

EVs are struggling—Ford edition

CNN reports:

Ford’s electric vehicle unit reported that losses soared in the first quarter to $1.3 billion, or $132,000 for each of the 10,000 vehicles it sold in the first three months of the year, helping to drag down earnings for the company overall.

…

The EV unit, which Ford calls Model e, sold 10,000 vehicles in the quarter, down 20% from the number it sold a year earlier. And its revenue plunged 84% to about $100 million, which Ford attributed mostly to price cuts for EVs across the industry.

EVs are struggling—Tesla edition

While EVs are supposed to be taking over the world, Tesla is seeing its finances go the wrong direction:

Tesla reported a steeper-than-expected 55 percent plunge in profit for the first quarter but managed to avoid a major beating on Wall Street on Tuesday by declaring a flurry of bold commitments that appeared to satisfy investors: ramping up the production timeline of a more “affordable” car, doubling down on its fully autonomous “Cybercab” and outlining nearly $1 billion in cost savings from job cuts.

Analysts called Tuesday’s earnings report a “make or break moment” for the electric-vehicle maker as it continues to struggle with falling sales, stiff competition from China and uncertainty over its business outlook. Tesla’s earnings report was indeed grim: For the three months ended March 31, net income fell 55 percent from a year earlier to $1.13 billion while revenue fell 9 percent to $21.3 billion.

EVs are struggling—European edition

The EU needs to rethink its policies to make a 2035 ban on new petrol car sales feasible as electric vehicles (EVs) remain unaffordable and alternative fuel options are not credible, the EU's external auditor said, jeopardising its 2050 climate goals.

…

The EU wants to have at least 30 million zero-emission cars on European roads by 2030, or about 12% of the current car fleet. However, the European Court of Auditors (ECA) cautioned the bloc may create new economic dependencies and hurt its own industry.

As it stands, high EV production costs in Europe means the bloc will have to rely on cheap imports, mainly from China, if it sticks to the 2035 goal. China accounts for 76% of EV battery output compared with the EU that represents less than 10% of production globally.

"The EU faces a conundrum, how to meet goals without harming industrial policy and hurting consumers," Annemie Turtelboom, an ECA member, told reporters. She added that 2026 will be a key year for a policy review.

That’s the problem—how can the EU (or Biden) meet climate goals without harming industry or consumers? The EU is starting to see that it can’t achieve its climate goals without massive economic pain.

Biden declaring a climate emergency—a bad idea that refuses to go away

For the past few years, environmental activists have dreamed of Biden wielding dictatorial powers to stop oil and gas production and export merely by declaring a “climate emergency.”

The White House discussed the idea last year, and they are now discussing this idea again. Bloomberg reports on the latest discussions:

White House officials have renewed discussions about potentially declaring a national climate emergency, an unprecedented step that could unlock federal powers to stifle oil development.

Top advisers to President Joe Biden have recently resumed talks about the merits of such a move, which could be used to curtail crude exports, suspend offshore drilling, and curb greenhouse gas emissions, according to people familiar with the matter who asked not to be named because a final decision has not been made.

White House advisers are divided over the idea of declaring a climate emergency, with some saying it wouldn’t provide Biden with enough newfound authority to make substantial changes, the people said. Others, however, argue such an announcement would galvanize climate-minded voters.

If Biden declares a climate emergency, the only purpose will be to appeal to “climate-minded voters.” If Team Biden believes it will help him politically, he will declare a climate emergency, regardless of the dubious legality of such actions. As Biden has shown with his writing off student loans, he has no regard for the law if something could help him electorally.

The questions Team Biden are considering are when to declare a climate emergency and what will happen to gas prices. If Biden declares a climate emergency and takes actions that increase the price at the pump, this will backfire terribly on Biden because far more people vote based on gas prices and inflation than to vote based on climate.

I could easily see Biden declaring a climate emergency in the summer if a large hurricane strikes the United States. Hurricane forecasters are predicting a very active hurricane season and if a Katrina-like storm hits the U.S., that would give Biden the opening to declare a climate emergency and take some steps to reduce CO2 emissions. The limiting factor of Biden’s actions will be what does he think he can do without driving up gasoline prices too much. This is one reason why Biden’s advisors are already talking about new releases from the SPR.

U.S. could release more SPR oil to keep gas prices low, senior White House adviser says

Biden loves using the Strategic Petroleum Reserve to lower the price at the pump. In 2022, Biden sold 180 million barrels of oil to help the Democrats' electoral chances in November 2022. Those massive releases succeeded in blunting higher gasoline prices and helped make Biden’s economic policies look as disastrous as they are.

The White House is already taking steps to release more oil from the SPR in the runup to the presidential elections this November. John Podesta stated earlier this week , “The president did it (release oil from SPR) before ... and I think he wants to keep the price of gasoline affordable, and he will do what he can to make sure that happens.”

If gasoline prices increase during the summer, then expect to see more releases from the SPR.

Climate policies bend back towards reality

The BBC is reporting that Scotland’s energy policies are slowly bending toward reality because people aren’t willing to make the lifestyle choices necessary to achieve the goals. The BBC reports:

The Scottish government is to ditch its flagship target of reducing greenhouse gas emissions by 75% by 2030.

The final goal of reaching "net-zero" by 2045 will remain, but BBC Scotland News understands the government's annual climate targets could also go.

Ministers have missed eight of the last 12 annual targets and have been told that reaching the 75% milestone by the end of the decade is unachievable.

While no one outside of Scotland cares what Scotland does with their climate and energy policies, this is an example of how reality is asserting itself with climate goals. Countries, like Scotland, set aggressive CO2 emission reduction goals based on a lack of understanding about energy. Now the incredible difficulty in meeting these goals is starting to become apparent. The BBC continues:

The new legislation required ministers to set annual targets for reducing emissions.

In a sense it was a hostage to fortune with the yearly totals heavily influenced by the winter weather which determines how much gas we use to heat up our homes.

But the trend was clear as eight out of 12 of the targets were missed.

With the closure of Scotland's last coal-fired power station at Longannet in 2016, politicians conceded that the low-hanging fruit had all been picked and any future progress would require big changes to how we live our lives.

This portion in bold italics is key. People say they want to do something about climate change, but there is no interest in making any lifestyle changes. This is the reality of climate change policies. Policies that reduce CO2 emissions work if they are not costly and do not require people to change their lives.

That is all…

https://blackmon.substack.com/p/washington-update-from-the-us-oil-e99?publication_id=712558&post_id=144069680&isFreemail=false&r=rd9j8&triedRedirect=true