Talk is cheap, ⛽ isn’t
“Common Sense“ Energy News
The Empowerment Alliance
March 25th, 2022
Biden Administration officials have changed their tune over the past few weeks.
Climate Czar John Kerry recognized the importance of natural gas as a part of America’s energy future. “Many countries, most countries, have the ability to deploy very significant additional amounts of renewables and they’re not choosing to do that. They’re moving towards gas. And, gas is a bridge fuel. Gas can be helpful in this transition. Gas is going to be important to the transition.”
The President himself said, “I’m going to work like the devil to bring gas prices down” – President Joe Biden, 2/10/2022
Of course, he tempered that hopeful remark with a statement that, “work surrounding public-facing rules, grants, leases, permits and other projects has been delayed or stopped altogether” – Biden Administration court filing regarding oil and natural gas leases.
And he is now reportedly seeking to support the oil and gas industries in Saudi Arabia, Venezuela, and Iran. At least he seems to understand that increasing supply would lower prices?
Then at CERAweek, Secretary of Energy Jennifer Granholm took to the stage in front of a room full of energy executives with a simple message: raise output. “We are in an emergency, and we have to responsibly increase short-term supply where we can right now to stabilize the market and minimize harm to American families,”
She continued to make a plea to Wall Street investors, “I hope your investors are saying these words to you as well: In this moment of crisis, we need more supply … right now, we need oil and gas production to rise to meet current demand.”
And yesterday, it was reported that Brian Deese, Senior Adviser to the President, said, “There should be greater oil production in the United States.”
This is all a big shift from President’s tone on the campaign trail.
Bottom Line: For the man who campaigned on ending fossil fuels, then called them greedy, it’s a welcome change for the Biden Administration to be taking this conciliatory tone towards natural gas and oil production.
One aspect of the Administration’s attempt to shift the blame away from themselves (a huge task after a year of policy attacks on American industry) and onto oil and gas companies is to talk about the “unused federal leases”. One can see the attraction to the sound bite, but let’s put it another way…
Let’s say you have a plate but for whatever reason you aren’t sure if there is food on it. You are fairly confident that there is food, otherwise you wouldn’t have bought the rights to that plate. Nonetheless it will be a significant cost to determine if there is food on it. Whether or not there is food on it is one thing but then you have to get the food off the plate and to your body for processing into a usable form of energy. Knowing this transit from plate to body is an issue, you check with the person you bought the plate from for permission to execute that transit. They then proceed to make it even more difficult to get that approval. So, why bother investing the capital in checking for food if you aren’t certain you can get it from the plate to your body? You would probably just continue to get food from the plate you know has food and that you know you can transit from the plate to your body.
As convoluted as that analogy is, the real energy discovery, extraction, transportation and refining process is even more complicated. A Federal lease is one step of many. You also need local and state permits for each step along the way. (Those hurdles are a contributing factor in why projects like Jordan Cove, Atlantic Coast, and PennEast were pulled by developers.) To say there are 9,000 approved Federal permits is only part of the picture. Even if the industry develops all 9,000 leases, FERC recently added several new factors to the approval process for pipelines making fulfilling the Administration’s request to increase production even more complicated. To put it simply, “There’s no energy company [that’s] gonna spend the money to develop a new lease if they can’t build a pipeline to move the project.” Complete nonsense and typical hypocrisy for this administration.
Bottom Line: Even though the Biden Administration is saying the right things, they’re doing nothing to remove barriers to actively increase domestic production.
The Federal Energy Regulatory Commission (FERC) issued new guidance, effective upon publication, regarding what factors the commission will use to review natural gas pipeline applications. The new guidance expands the considerations to include climate change impacts and carbon emissions. This significant expansion to the criteria under consideration will effectively pause all current pipeline projects currently pending approval because not a single one collected nor planned to collect this data when drafting their applications. It is like moving the goalpost while the game is underway.
Every American business that started the process is now facing an undue burden in information collection that they neither planned for nor secured capital for when they initiated their planning and construction. The new information being collected is outside the scope of the commission’s authority so it isn’t relevant and this is a new collection so it misses the threshold for frequency and format of the collection too.
Final notes, the Commissioners voted along party lines (3-2) and the guidance is subject to public comment regarding information collection burden (via the Paperwork Reduction Act) until April 4.
Bottom Line: In the same weeks that the Administration is encouraging industry to increase production, they sure are making it more difficult to do so.
As we head into the warmer months, demand will most likely continue to increase. If supply does respond in kind, prices will continue to climb. Brace yourselves for an expensive summer..
COMMON SENSE QUOTE OF THE WEEK
“It should be weird that we’re obsessed with polar bears having to move to a different piece of ice and don’t care that three billion people have less electricity than a typical American refrigerator.”
– Energy Expert Alex Epstein on Twitter.