Energy Update: Week of November 21

Friends,

Can you believe it is Thanksgiving week already!!!   Stating off today by mentioning that Hannah made the Final Four for NCAA D III field hockey over the weekend as an umpire. And the World Cup is under way with Ecuador taking a 2-0 victory over host Qatar.  The match begins of the final chapter of 12 years of corruption, human rights and geopolitics controversies over awarding of this World Cup. For the first time, this event will be playing in Winter months and European teams have been crowned champions at every tournament since 2002, with the trophies shared among Italy, Spain, Germany and France.  This year, expectations are swelling in Argentina and Brazil that the time has come again for one of the two South American powerhouses to return to the top. The US begins play today against Wales at 2:00 p.m. and will face one of the favorites, England later in Pool B play. Many expect the US to make it to the round of 16 which begins on December 3^rd.

COP27 in Egypt wrapped up on Saturday with a typical conclusion on “loss and damage” issues. Negotiators say the agreement is “historic” but it really is nothing more than an informal agreement that developing countries should be paid with absolutely no details set and left for future COP meetings. (BTW, that has been the developing country position since 1999) If it sounds familiar, it Is because it is…  While some have argued this is a big shift from the US and EU, I don’t think it is until you start getting into the specifics. The US agreement (which Biden has been signaling for some time) does not at this point include any financial promises from Washington and also aims to ding heavy emitters and economic powers like China as well. While the funding questions are likely to find no quarter with the incoming Republicans who are set to take control of the House next year, the China bashing Is likely to be given a hearty harrumph.

Sen. Kevin Cramer gave a hint of the upcoming challenge calling the funding part “insanity” while blasting the Biden team for “apologizing for our excellence” for being a leader in emissions reductions over several years. He told POLITCO “Congress did not give any authority nor appropriations for this global climate reparations fund.”  The Wall Street Journal Editorial page also chimed in saying the deal was “the latest climate shakedown.”

I have a short COP 27 Quick Take from our team at Bracewell with links in the section below.

While everyone was focused on loss and damage, the final text also included a nod to “low-emission energy” (or natural gas) which is sure to annoy enviro activists. They will also disappointed that the final agreement didn't increase ambition around actually cutting emissions from fossil fuels, which of course if you look at the current energy reality of Europe, it is pretty obvious why.

There is much more there. Our friends at the Business Council for Sustainable Energy, the US Chamber’s Global Energy Institute, C3, Citizens for Energy Solutions, EPRI and ClearPath all were on site and are good resources. Let me know If you need help reaching them.

Not much else happening this week. As my friends Josh Siegel wrote in Morning Energy today on the schedule: Crickets!!!!

That doesn’t mean we are not watching for those “News Hole Drops” on Thanksgiving Wednesday or Black Friday. Top targets we are watching are the NAAQS rules which are due any day, RFS provisions with the reset imminent and more oil and gas leasing drops (which were the flavor for last year’s Thanksgiving weekend). So don’t worry, if you are napping after a big turkey dinner, we are keeping a close watch.

And important CCS news today, Gulf Coast Sequestration, a Louisiana-based company building the largest carbon sequestration hub in North America, and leading direct air capture (DAC) company Climeworks announced the signing of an MOU that will aim to enable the permanent removal of one million tons of carbon dioxide from the air annually by 2030, with the capability to expand to multi-million ton capacity in future years. See More HERE.

Remember, as the elections shook out and now Republicans are clearly going to take the House, the Dem Leadership shift is on and as potential Speaker Kevin McCarthy maneuvers for votes, the Policy Resolution Group at Bracewell has kept up our award-winning post-election analysis materials to provide insight on some of the top issues of the day.  And If you missed our post-election webinar held on the morning after the election, November 9^th, you can view it here.  Of course, the materials include an updated overview, the White House response and a brief on potential oversight now that Republicans will hold the House Committee gavels. Key issues briefs include Clean Energy, Oil & Gas, permitting reform, energy/tax, supply chain issues, consumer product safety and healthcare.

Please ENJOY your holiday week and family gatherings and by all means PLEASE TRAVEL SAFELY!!!.  Remember, the lame duck session of Congress hits full stride in the next few weeks so take the much-needed rest this holiday week. Call with any questions about lame duck, election follow up, politics or COP27. Happy to help.

 

FRANKLY SPOKEN

      

“It's a well-known fact that the United States and many other countries will not establish … some sort of legal structure that is tied to compensation or liability. That's just not happening.”

US International Climate Envoy John Kerry telling an audience at COP27 on last week in Egypt.

“The Select Climate Committee was always a show horse — not a workhorse” adding that the standing House committees such as Energy and Commerce, Ways and Means, and Natural Resources “are perfectly equipped and capable of addressing our country’s climate policy needs.”

Former GOP Rep. Carlos Curbelo of Florida, a vocal proponent of action to address global warming, argues against the importance of the select committee — a creation of Speaker Nancy Pelosi — in POLITICO, saying the symbolism of the GOP potentially changing It is being overstated.

 

ON THE PODCAST

Plugged In Talks to Solar Leader – Our friend and former NYTimes science/climate reporter Andy Revkin, who runs the SustainWhat podcast, recently engaged in a climate discussion on global warming science and policy with Lex Fridman, the popular podcaster and MIT researcher working on applying artificial intelligence in autonomous vehicles, human-robot interactions and more, and Bjorn Lomborg, the Danish political scientist who is the bestselling author of False Alarm, The Skeptical Environmentalist and other provocations and president of the Copenhagen Consensus Center consultancy.  The group spoke for more than four hours, so don’t take this all in in a single setting, although the links for doing that are below. His small team just posted more than a dozen discrete moments on YouTube, which provide a good starting place. I’ve set them up as a playlist here.

 

FUN OPINIONS

LAT Column Looks at Climate Scientists, Advocacy – In his column in the LA Times, Nicholas Goldberg writes an interesting and fair piece on whether climate scientists can engage in advocacy. He highlights two who were recently arrested at climate protests but also notes that they have faced pushback from traditionalists who insist that scientists should be disinterested, impartial “seekers of truth” who keep their opinions to themselves, thank you very much. The scientific method itself is built on the notion of “values-free” thinking, which is presumed to lead to more honest, more credible results. For hundreds of years, scientists have embraced empiricism and impartiality through processes like measurement and quantification, and repetition and verification. And through random sampling and double-blind trials designed to weed out bias and boost credibility.

 

FROG BLOG

More Energy, Not Windfall Profits Taxes – In an opinion in Real Clear Energy and blog post for CSIS Energy Security and Climate Change Program, former EIA administrator and CSIS senior advisor Guy Caruso writes Americans need more energy to reduce prices. not new windfall profits taxes. Federal data is painting a very clear picture of the next three decades. The key takeaway? Oil and natural gas aren’t going anywhere as leading fuel sources to meet our demand as Americans recover from the pandemic and increased economic activity re-emerges. Biden should embrace policies that boost domestic energy production to continue improving prices at the pump. Unfortunately, a windfall profits tax won’t secure America’s energy future. The only thing that can? Producing more American energy.

 

FUN FACTS

Loss and Damage and History of Emissions: A great chart from Axios with data from the Global Carbon Project:

OUR COP27 QUICK TAKE

• Summary:  In the waning hours of the COP27 meeting – and after a not atypical extension of the meeting, delegates produced an agreements that advanced a new deal for the COP process.  Developed nations agreed to the creation of a new global fund to address climate damages in less wealthy nations.  However, the agreement is short on details regarding the final funding mechanism, delaying that discussion principally to COP28, to take place next year in the United Arab Emirates.  Despite this gain, climate activists were disappointed at the failure of nations to adopt more aggressive goals for actual emissions reductions.  And in the end, mysterious language appeared in the final COP27 instrument that could be read as supporting – or at least not opposing – further reliance on natural gas. 
• Wins: 
  • For the activist community and for the developing world, the biggest win would have to be the establishment of a fund to support developing nations suffering from the ill effects of climate-induced disasters.  The fund is a vindication of a United Nations principle known as “loss and damage” compensation, a concept debated against the backdrop of severe climate events spanning the globe from floods in Pakistan to sea-level rise and coral bleaching in Pacific island nations to forest fires and heat waves in the U.S. and Europe.  While the establishment of the fund was a hard fought win that will come with some political consequences in the United States and elsewhere, the agreement was somewhat light on the details regarding how the fund will be filled.  Revised payment proposals were circulating among delegates, but ultimately payment commitments will be shunted off until next year.  Aside from direct payments from the national treasuries of developed nations, other dedicated sources of revenue were discussed, including methane fees, cross-boarder adjustments, and taxes placed on fossil fuel exports.
  • The draft agreement reaffirms commitments from the COP26 conference in Glasgow and the 2015 Paris Climate Agreement, including the "goal of holding the increase in the global average temperature to well below 2 °C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5 °C above pre-industrial levels," see here.
  • The Biden administration announced a variety of new actions to be undertaken by the US government to reduce American emissions profiles. The most notable announcements were new rules regarding methane emissions, including a New Source Performance Standard, and a rule requiring federal contractors to disclose their emissions and climate-related financial risks. The administration also announced additional funding for global climate adaptation efforts and to support research & development in 37 "game-changing" sectors, see here. 
• Setbacks or Points of Dispute: 
  • Environmental groups have criticized the draft agreement at COP27 for not calling for the completing "phasing out" of fossil fuel resources. Although Presidential Climate Envoy John Kerry has supporting "phasing down" the use of "unabated oil and gas," some participants are worried that this pledge is insufficient to meet climate targets established in the Paris Agreement, see here.
  • In particular, the attempt to broaden beyond coal phasedowns in favor of phasedowns for other fossil fuels was underscored by a last-minute addition to the text of the phrase “low-emission” energy as a potential mechanism to address the impacts of climate change.  Some delegates suggested that the phrase at least applies to the establishment of a clean hydrogen economy and certainly nuclear, including small modular reactors.  But the conclusion that replacing coal with natural gas may in some circumstances be included as a low-emission strategy is certainly enticing.  While the U.S. State Department declined commentary on the topic, the Egyptian delegates would not rule it out.  COP27 President Sameh Shoukry termed natural gas “a transitional source of energy” that could facilitate transition to renewable energy.  The President of the African Development Bank stated clearly, “Africa needs gas. We want to make sure we have access to electricity. We don’t want to become the museum of poverty in the world.”  So, a setback for fossil fuel phase outs across the board, but potentially a win for natural gas.
  • There had been some hope that COP27 would push for tougher carbon reductions, but sustained opposition from Saudi Arabia and China essentially knocked this result off the table.  Even as scientists say the capacity to fashion a global response to warming of 1.5°C becomes more difficult, further numerical reductions seems to have been delayed to future COPs. 

 

What are the implications of any new agreements/pledges/implementation measures for financial firms and risk management teams?

• Summary: the ground-breaking approach to establishing a multinational fund to address climate consequences underscored a general sense of urgency in the international community. Implementation and revenue sources for the fund are as yet unclear, and may have significant impacts for financial firms and those assessing climate risk management.  New sources of revenue for climate mitigation and clean-energy projects in the developing world may create concrete opportunities for banks and other investment firms, particularly those with core competence in working with multilateral financial institutions.  Future pledges to speed reductions in emissions may also create opportunities.
  • While financial firms may stand to benefit significantly from new international climate finance pledges, they must remain attuned to increased international scrutiny to combat "greenwashing" and to ensure investments achieve tangible environmental goals. A variety of new public and private climate financing initiatives were announced at COP27 to channel investment to poorer nations impacted by climate change, but these finance efforts will involve stricter scrutiny to ensure funds are reducing emissions and not simply offsetting them. Financial firms and risk management teams should continue to monitor implementation of these international climate finance pledges to see how they can participate in new public-private and to understand how international compliance regimes may impact their investment decisions.
  • As an example, the COP27 instrument also calls upon the World Bank group and the International Monetary Fund to undertake an analysis of how they can make more funds available to address climate consequence and energy transition.  In order to effectuate such action, it is likely that the firms will have to become more aggressive in expanding their portfolios and must undertake more risk in the loans they make – commensurate with the risk of inaction described by the COP delegates. 
  • In light of the adoption of the Inflation Reduction Act in the United States, and continued inflationary impacts in part related to government spending, it is difficult to see the Biden Administration advocating for large funding commitments to an emerging United Nations effort.  While the U.S. negotiating team did reverse previous views on compensation, and offered support for the concept, a Presidential election is just two years away in the United States – placing COP28 squarely in campaign season.  As the ranking Republican on the Senate Energy Committee said in reference to the deal, “Sending U.S. taxpayer dollars to a U.N. sponsored green slush fund is completely misguided. The Biden administration should focus on lowering spending at home, not shipping money to the U.N. for new climate deals. Innovation, not reparations, is key to fighting climate change.”  Similar statements can be expected as negotiations proceed on how the U.S. might make contributions to the fund.  Another front: what contributions will wealthy nations like China and Saudi Arabia – in the past considered to be “developing” – be required to make.
  • On the other hand, while poorer nations that stand to be significantly impacted by climate change have criticized "loss and damage" funding from foreign governments as insufficient, new public-private partnerships may help accelerate the green transition and provide opportunities for investment firms, see here. For example, the Biden administration's commitment to "Climate Finance +" and investments of over $2 billion for the International Development Finance Corporation may assist in channeling private capital to a variety of lower income countries, see here.   
  • Led by Presidential Climate Envoy John Kerry, the United States government announced a partnership with The Rockefeller Foundation and the Bezos Earth Fund to create an "Energy Transition Accelerator" that will drive private investment in the energy transition. This group will focus on "verified greenhouse gas emission reductions" and will "establish strong transparency requirements and address how companies' investments in verified emissions reductions through the ETA could be recognized." The proposal also calls for the use of "marketable carbon credits," but Kerry emphasized that buyers "must use these credits to supplement and not substitute emission reductions" and that "this is not in lieu of any other finance commitment," see here, here.

 

IN THE NEWS

ECOS Launches Climate & Energy Workgroup to Advance Environmental Progress, Emphasize Common Ground – The Environmental Council of the States (ECOS) is launching a new Climate & Energy Workgroup to deliver timely recommendations and build capacity for bipartisan, durable solutions. The announcement comes as COP27 concludes in Egypt and ECOS members continue to increase their attention to mitigation of greenhouse gases and adaptation and resiliency to climate change here at home.

“State environmental agency leaders are committed to working together with all of our partners and co-regulators for the benefit of our communities and ecosystems,” said ECOS President Myra Reece, Director of Environmental Affairs with the South Carolina Department of Health & Environmental Control.

The comprehensive new focus of state environmental regulators is all the more important as opportunities and urgencies grow globally, nationally, and locally. COP27 highlighted efforts around the world among nations, communities, businesses, and citizens, as well as the need to do more to protect public health and grow clean energy economies. In the last year in the United States, unprecedented funding for environmental infrastructure and climate policy has been enacted through the Bipartisan Infrastructure Law and Inflation Reduction Act (IRA). ECOS will first form a Climate & Energy Steering Committee, co-chaired by ECOS Past President Todd Parfitt, Director of the Wyoming Department of Environmental Quality, and Katie Dykes, Commissioner of the Connecticut Department of Energy & Environmental Protection. The committee will develop a work plan of priorities, including coordination with the federal government on implementation of the landmark IRA, identification of best practices and strategies for climate resilience, and promotion of regulatory and market-based innovations and streamlining efforts to reduce carbon pollution and boost equity and economic growth. 

BOEM Adds New Wind Areas – The Bureau of Ocean Energy Management (BOEM) today released the draft Wind Energy Areas (WEAs) for the Central Atlantic region. The draft WEAs cover approximately 1.7 million acres offshore North Carolina, Virginia, Maryland, and Delaware, with their closest points ranging from approximately 19 to 77 nautical miles off the U.S. central Atlantic coast. A map of the draft WEAs can be found on BOEM’s website.

ACP Comments – The American Clean Power Association’s Josh Kaplowitz said: “It is especially significant that five of the eight draft WEAs identified are in shallow waters that allow for the use of offshore wind turbines with fixed bottom foundations. These areas represent our best chance to extend the fixed bottom project pipeline on the East Coast that will spark further supply chain investments in the mid-Atlantic and help meet current and anticipated state and federal offshore wind and greenhouse gas reduction goals. Developing offshore wind in these areas has the potential to generate approximately 20.6 gigawatts of reliable, domestic clean energy, which is enough to power 7.2 million homes. This development will also bring skilled jobs, unlock investment, and create supply chain and manufacturing opportunities to the region. At the national level, the further development of offshore wind in the Central Atlantic will help the U.S. meet its goal of deploying 30 gigawatts of offshore wind by 2030 and demonstrates the administration’s continued dedication to generating clean, affordable, and secure sources of domestic energy.”

NASA Artemis Launch Finally Rolls – Last week, NASA successfully launched its Artemis I moon mission.  It was the third attempt at liftoff after the first two attempts were scrubbed due to minor technical problems and navigating two hurricanes. The space agency launched the uncrewed flight in the early morning hours Wednesday from the Kennedy Space Center in Florida. Here was NASA’s official launch broadcast. The actual launch occurs around 3:17:00 mark of the broadcast, and it is totally AMAZING to watch…

Air Liquide Support for Launch – As you know there is a lot that goes into a space launch and our friends at Air Liquide played an important part in the launch. Air Liquide supplied the high-pressure nitrogen to Launch Complex-39B at Kennedy Space Center in Florida.  For over 50 years, dating back to the Apollo era missions in 1968, Air Liquide has played a valuable role in NASA’s advancement of the U.S. space program through the supply of high-pressure nitrogen. The continuous supply of nitrogen has been integral to the lunar missions of the 1970’s, the 30-year Space Shuttle program, the construction of the International Space Station and most recently the first commercial launches of crew and cargo to orbit from U.S. soil since the shuttle program ended in 2011. Artemis 1 is the first in a series of increasingly complex missions as NASA conducts integrated tests of their deep space exploration systems. The expansion of Air Liquide’s Merritt Island capabilities played a critical role in the launch’s success, as the Artemis launch required nearly double the amount of high-pressure nitrogen than any previous launch. Air Liquide’s flexible and reliable supply of high-pressure nitrogen will help NASA meet its commitment and capability to extend human existence to the Moon and beyond.

Mike Graff, Chairman & CEO, American Air Liquide Holdings, Inc., said: “Air Liquide is committed to the innovation and advancement of the space program not only in the United States but across the globe. Our expertise in gas applications for the space industry has made Air Liquide a major contributor to space exploration for 60 years. We are proud of the support we are able to provide to an innovative leader like NASA and remain dedicated to delivering operational excellence to the Artemis program and NASA’s pursuit to land the first woman and first person of color on the moon, and to space exploration beyond the moon.”

WoodMac Sees Bright Future for US LNG Market – Liquefied natural gas buyers' hunt for reliable, affordable and diverse supplies could boost US LNG exports to 29 Bcf/d by 2033, a nearly threefold increase from current levels, energy consultancy Wood Mackenzie predicts. "The North America gas market expansion for the next decade will be equivalent to adding two new Permian basins," said WoodMac Director of Americas Gas and LNG Research Dulles Wang. High demand in Europe, high natural gas prices, and increased export capacity made the United States the world’s largest LNG exporter in the first half of 2022, the U.S. Energy Information Administration said in July. The United States is shipping record volumes of LNG to Europe to help EU allies in their efforts to fill gas storage ahead of the winter. 

 

ON THE SCHEDULE THIS WEEK

Reporters Discuss COP27 Takeaways – With the completion of COP 27, POLITICO and E&E news reporters will take a look back on COP27, analyze the discussions, and review what to expect moving forward today at 10:00 a.m.  Reporters Ryan Heath, Karl Mathiesen, Jean Chemnick and Avery Ellfeldt all provide insights.

Forum to Focus on Energy Storage in Canada – Energy Storage Canada holds a webinar today at 11:00 a.m. looking at a report on key pathways to Net Zero. This webinar will feature an in-depth review of Energy Storage Canada’s recently commissioned White Paper, Energy Storage: A Key Net Zero Pathway in Canada, with the paper’s author, Power Advisory. The report emphasizes the critical role for energy storage if Canada is to reach its 2035 net zero goals by providing the first estimate of installed capacity for energy storage in Canada, a breakdown by province, to optimally support Canada’s existing and future infrastructure. In total, the report estimates a potential for eight to twelve gigawatts of installed capacity for energy storage by 2035.

THANKSGIVING – Thursday November 24^th

 

IN THE FUTURE

Senate EPW to Hold Goffman Meeting – On Tuesday November 29^th, the Senate Environment Committee will hold a business meeting on nominees including EPA Air office Head Joe Goffman. Also, on Wednesday, the will hold a hearing on the infrastructure law , getting views from the private sector.

RFF Looks at Wildfire Insurance – Resources for the Future (RFF) holds an RFF Live event on Wednesday November 30^th exploring wildfire insurance, the third in the “Sparking Solutions” webinar series. In this session, experts will discuss the important role that insurance plays in sending signals about risk, how to balance that with equity and affordability, and what options exist for handling the growing problem of insuring wildfire risks.

DC Energy Conference Set – The 3^rd annual, IN-PERSON Energy Transition Forum will be held on Wednesday and Thursday December 7 & 8^th at the Cosmos Club of Washington, D.C. The main focus of this year’s Forum is the US response to the global energy crisis. The Forum is an opportunity to gain market intelligence on the latest energy infrastructure such as LNG infrastructure, gas storage, O&G pipelines, power grids and power plants, renewable energy projects, upstream production, carbon capture and storage, hydrogen production, storage and transportation. Nearly 25 members Congress and other business leaders will speak.

BOEM Plans Dec. 6 Leasing Round for CA Offshore Wind – The Bureau of Ocean Energy Management has confirmed it will hold a leasing round for five offshore wind tracts in California's Morro Bay and Humboldt Bay areas on Dec. 6. The sites could support 4.5 gigawatts of capacity and would support both the Biden administration and California's offshore wind targets.

EXIM Bank Conference Set – The EXIM’s 2022 Annual Conference will be held on December 13^th. The conference will bring together leaders in business, finance, government, policy and media to highlight the importance of U.S. manufacturing, supply chains, economic security through exports, critical minerals and transformational exports, clean energy technology, small businesses, doing business in Africa, and much more. The speakers include DOE Secretary Jennifer Granholm, Houston Mayor Syl Turner, US Trade Rep Katherine Tai, our friend Yahoo Finance reporter Kevin Cirilli, Arkansas Gov. Asa Hutchinson and Presidential Energy Advisor Amos Hochstein and many more.

State of American Energy Set – The annual State of American Energy address from the American Petroleum Institute will be held on Wednesday, January 11, 2023, at 8:30 a.m. at Capital Turnaround.