Daily on Energy: Trump getting pushed and pulled by oil producers

The Energy Department is weighing a plan to purchase oil from small and medium-sized oil companies struggling from a price collapse on the condition that the producers don’t extract or deliver the oil, people familiar with the matter confirmed to Josh for a story posted Wednesday night.

The DOE plan would pay companies to not produce as much as 365 million barrels worth of oil, Bloomberg reported, which then could be counted as part of the government’s emergency stockpile even if it doesn’t go into the Strategic Petroleum Reserve.

The agency’s unprecedented move would likely be batted down by Democrats in Congress, just like its much narrower proposal to buy oil from U.S. producers to store in the SPR.

Big vs. little: But the fact we are even discussing a proposal like this shows the push and pull the administration is feeling from the conflicted oil industry.

Large integrated companies backed by trade groups like the American Petroleum Institute want the federal government to stay humble, and let demand rebound on its own to restore the oil market to normalcy. Some smaller and medium-sized companies, at risk of being eaten by larger rivals or going bankrupt, are seeking more action.

“The largest integrated companies are quietly okay with what’s going on, and hoping this drives medium-sized independents in their laps,” said Dan Eberhart, CEO of oil services company Canary and a donor to President Trump. “The medium-sized companies are afraid, and that’s why they are grasping at solutions like being paid for oil in the ground as opposed to trying to wait this out,” Eberhart told Josh.

Mike McKenna, a White House energy adviser until leaving the administration recently, told Josh, “there is no doubt some folks in industry” would take federal government money to not produce their oil “in a heartbeat.”

But he predicted it won’t “be seriously considered by too many people in the administration before we see how the next 30 days or so goes,” as the OPEC+ oil production cut agreement plays out, and U.S. producers continue slash output based on market forces.

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STATE DEPARTMENT’S FANNON ASSURES TRUMP ALLEGIANCE TO FREE MARKETS: Francis Fannon, the State Department’s top energy official, reiterated Wednesday the Trump administration’s public position of siding with free markets as it grapples with the price crash.

In a press call with reporters, Fannon said, “The U.S. has been clear that it remains a free-market economy” and that projections for U.S. oil production to fall by as much as 2 million barrels per day by the end of 2020 “is a direct response to markets, not the government dictating private sector behavior.”

Fannon batted down speculation that OPEC+ would eventually look for the U.S. government to mandate additional production cuts on companies if the new output cut agreement by oil producing countries does not resolve the glut.

“I have the greatest faith that if a company announces billions of dollars in investment curtailment, that that will realize a less volume of production,” said Fannon, assistant secretary for energy resources. “Other countries may find our free-market system disconcerting, but that’s not new.”

Fannon said the federal government would support the rights of states such as Texas and Oklahoma to force output cuts on producers, saying “that’s for them to figure out.”

“But at the federal level, you’ve heard time and time again the recognition that we are strong supporters of markets and market reactions,” Fannon said in a response to a question from Josh.

For the record: Fannon also took a question on whether the Trump administration is still considering imposing oil import tariffs or other retaliatory action against Saudi Arabia and/or Russia. The wire services had a ball with Fannon’s response, which was actually quite generic and non-committal.

The full quote: “In terms of the tariffs, I think it continues to be something that’s on the table. It’s certainly something the president had weighed but he consistently said it was a lever he didn’t think he would need to pull.”

RELATED…CONOCOPHILLIPS TO CUT 225K OF OIL PRODUCTION PER DAY: U.S. oil giant ConocoPhillips announced Thursday it will voluntarily cut 225,000 gross barrels per day.

The Houston-based company is also cutting capital expenditures, operating costs, and share repurchases by $3 billion, on top of a previously announced $2.2 billion spending reduction for 2020.

ConocoPhillips will also cut all fracking crews in U.S. shale operations, Chief Operating Officer Matthew Fox said on a webcast, according to Bloomberg.

ConocoPhillips joins a slew of oil and gas majors, along with independent shale companies, that have announced cutbacks in response to the coronavirus.

Global capital spending by oil exploration and production companies in 2020 is expected to drop by about 32% this year to the lowest level in 13 years, the International Energy Agency said on Wednesday.

SHELL RAISES CLIMATE GOALS EVEN AMID PANDEMIC: The oil major is joining BP in setting a target to reach net-zero emissions no later than 2050 (meaning scope 1 and scope 2 emissions), and it will aim to be a “net-zero energy business” by mid-century, including the products it sells.

“We announce this today, because large parts of society have now set their sights on limiting the global temperature rise to 1.5 degrees Celsius,” said Ben Van Beurden, Shell’s CEO, in remarks to investors Thursday. “And because those that can move fast, must move fast.”

Shell’s target includes stronger medium-term goals: The oil company said it will cut the net carbon footprint of its energy products by 30% by 2035 and by 65% by 2050. “Over time, Shell aims to sell fewer of these products that create emissions, and more products that are low or no-carbon,” Van Beurden said.

But Van Beurden also said Shell will have to depend in part on its customers also reducing their emissions to help tackle its scope 3 output (or the emissions from the products it sells), and the company will work with its customers to address those emissions. “Indeed, we can only achieve our ambition to be a net-zero emissions energy business as part of a society that is also working to be a net-zero emissions society,” he said.

US CRUDE STOCKS REACH RECORD: U.S. crude oil stockpiles, excluding those in the SPR, increased by a record 19.2 million barrels from the previous week, according to weekly data released Wednesday by the Energy Information Administration. There are 503.6 million barrels of oil in commercial tanks across the U.S., 6% above the five-year average for this time of year.

Over the past four weeks, motor gasoline supplied to consumers averaged 6.4 million barrels a day, down by 31.6% from the same period last year. Jet fuel product supplied was down 39.7% compared with the same four-week period last year.

FERC LARGELY DENIES APPEALS OF ORDER TARGETING CLEAN ENERGY SUBSIDIES IN PJM: The Federal Energy Regulatory Commission largely denied Thursday a request from states, and renewable and nuclear companies to review its controversial December decision targeting state-issued clean energy subsidies in the PJM power market.

FERC Chairman Neil Chatterjee, a Republican, said during a remote audio hearing that the commission voted to affirm the core of its order imposing a price floor in PJM, the nation’s largest power market, to combat below-cost bids from state-subsidized renewable and nuclear.

But the commission did agree to grant certain narrow requests for rehearing, clarifying an aspect of its order by allowing voluntary renewable energy credit transactions to not count as a state subsidy and thus not trigger the price floor.

“Today’s order makes clear the commission continues to find that a broad MOPR (price floor) with certain limited exceptions is an effective way to address the price distortions of subsidies,” Chatterjee said.

Democratic Commissioner Richard Glick, who opposed what he called a “stunningly awful decision” by his Republican colleagues, predicted that critics of the order would file court challenges, and that the courts would remand the order back to FERC. He says the order would result in higher payments to fossil fuel plants that will encourage companies to build more gas and to keep online coal, undermining state policies to combat climate change.

“Today’s order forces consumers to pay billions more for generating capacity they don’t need, directly targeting the clean energy transition,” Glick said.

In other news: Chatterjee also rejected a call by Democratic lawmakers for FERC to issue a moratorium on pipeline reviews and approvals during the coronavirus pandemic.

“To shut our doors to work on the nation’s critical energy infrastructure would be as irresponsible as it is short-sighted,” he said.

COMING LATER TODAY: The EPA is set to unveil its long-awaited rollback of the underpinnings of its mercury limits for power plants later this afternoon, an opening salvo in a larger battle over how broadly the agency should count the costs and benefits of pollution regulations. Abby has a preview of what to expect here.

EPA CAN’T BAR GRANTEES FROM ADVISORY BOARDS, COURT SAYS: The agency won’t be able to implement the policy, crafted during former EPA Administrator Scott Pruitt’s tenure, while it works to properly justify it, a federal district court judge said Wednesday. Pruitt’s directive would bar any scientists who have received EPA grants for research from serving on the EPA’s scientific advisory boards.

New York District Court Judge Denise Cote, though, said the EPA “had failed to articulate any reason for changing its longstanding practice” of allowing grant recipients to serve on advisory committees. Pruitt and other EPA officials had suggested the policy was to ensure the panels are objective, but Cote said the agency “provided no basis” that grant recipients “suffered from bias” from the funding they’d received.

The ruling is a victory for environmental groups, who argue the EPA’s directive would stack the bench on the advisory boards with industry experts less likely to rely on federal grants for research. Vivian Wang, an attorney with the Natural Resources Defense Council, said the ruling is a “repudiation of EPA’s effort to stifle the voices of independent scientists.”

OIL STATES SEEK RELIEF FROM BIOFUEL MANDATE: The coronavirus pandemic creates “extraordinary circumstances” in which depressed demand for fuel is hurting oil refiners, the governors of Texas, Oklahoma, Utah, Wyoming, and Louisiana wrote EPA Administrator Andrew Wheeler on Wednesday. This year’s obligations under the Renewable Fuel Standard “risk transforming the current severe economic harm to existential harm for some of the refineries in our state,” the governors said.

The governors are seeking a waiver from the EPA to exempt refineries from the RFS mandate, which requires a certain amount of biofuels to be blended into the nation’s fuel supply. They note that prices for Renewable Identification Numbers (RINs), credits refiners can purchase to help them comply, have tripled, even as demand for transportation fuel has declined sharply.

Counterpoint: Ethanol producers slammed the governors’ claims as outrageous, arguing the RFS program requirements already “adjust in tandem” with changes in fuel consumption. Depressed fuel demand is hurting the biofuels industry “to an even greater extent: Nearly half of the nation’s ethanol production capacity has been idled as a result of falling gasoline demand,” said Geoff Cooper, president and CEO of the Renewable Fuels Association.

NO FOSSIL FUEL BAILOUTS AMID PANDEMIC, DEMOCRATS SAY: “We urge you to reject big oil’s ill-timed and unworthy request for assistance,” more than 40 Democrats from the House and Senate wrote Treasury Secretary Steven Mnuchin and Federal Reserve Chairman Jerome Powell on Wednesday.

The Democrats, led by California Congresswoman Nanette Diaz Barragán and Massachusetts Senator Ed Markey, are calling on the officials to ensure fossil fuel companies don’t receive money from loan programs set up by Congress’ Phase 3 coronavirus relief package.

The Rundown

Bloomberg Utilities pay customers to take power after virus guts demand

Huffington Post Former Jay Inslee 2020 staffers form new group to promote climate plan to Democrats

New Yorker How the Russian-Saudi oil war went awry — for Putin most of all

New York Times Wildlife collapse from climate change is predicted to hit suddenly and sooner

Calendar

THURSDAY | APRIL 16

Neither the Senate nor the House is expected to meet before May 4.