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Daily on Energy: Exxon eyes more aggressive climate policy support after scandal

Josh Siegel Abby Smith July 02, 12:26 PM July 02, 12:38 PM

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EXXON’S LATEST POSITIONING: ExxonMobil seems to be feeling the pressure to increase the scope of climate policies it advocates for after one of its senior lobbyists claimed in a sting video that the oil and gas giant’s support for a carbon tax is for show.

In a new statement this morning, Exxon CEO Darren Woods called a carbon price “essential to achieving net zero emissions.”

But given political “resistance” to a carbon tax, Exxon is also “actively and publicly discussing other options, including lower-carbon fuels and other sector-based approaches that would place a uniform, predictable cost on carbon.”

A nod to CES? The generic call-out to sector-based approaches caught our eye and could mean a lot of things. Could Exxon potentially be nodding to a clean electricity standard, the in-vogue policy to drive carbon emissions from the power sector favored by environmentalists, the Biden administration, and the utility industry? It’s generally been thought the oil industry might prefer a carbon tax to a CES since it most immediately would likely lead to more fuel-switching from coal to natural gas. But if a CES enables natural gas to get partial credit as clean energy, Exxon could see that as a win.

Exxon facing multiple pressure points: The timing of Exxon’s latest “debacle” comes soon after the company’s board shakeup in which shareholders voted to install three new members nominated by an activist hedge fund.

That could add further pressure on Exxon to expand its advocacy for climate policies, including more directly supporting methane regulation. Exxon, unlike other oil and gas companies, did not endorse the Congressional Review Act resolution President Joe Biden signed Wednesday reinstating requirements for operators to identify and fix leaks of methane, canceling a Trump administration action.

Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writers Josh Siegel (@SiegelScribe) and Abby Smith (@AbbySmithDC). Email jsiegel@washingtonexaminer.com or asmith@washingtonexaminer.com for tips, suggestions, calendar items, and anything else. If a friend sent this to you and you’d like to sign up, click here. If signing up doesn’t work, shoot us an email, and we’ll add you to our list.

Daily on Energy will not publish on Monday, July 5. We’ll be back in your inbox on Tuesday, July 6.

WAITING ON AN OPEC+ DEAL: Oil markets are on edge as OPEC, Russia, and other allies failed to reach an agreement yesterday on how much to increase production in the coming months.

If OPEC+ fails to reach a deal, the current agreement will remain in place, keeping around 6 million barrels a day of potential production in the ground. Carrying that output level over could lead to a spike in prices, which have already risen to its highest point since 2018 thanks to improving demand and the success of the coordinated production cut that OPEC+ enacted during the pandemic.

“if OPEC+ members don’t have a deal and current output levels persist from August, oil prices are sure to climb further, creating a very tight market and making oil very expensive in what is a very busy season for gasoline consumption,” said Louise Dickson, oil markets analyst at Rystad Energy.

OPEC+, as part of a historic production cut deal, spent more than a year trying to resuscitate prices from record lows during the pandemic, but they have started cautiously adding supply as demand has returned. Analysts have been expecting OPEC+ this week to agree to gradually bring back more supply but not too much too fast, because of the uncertain economic recovery and global reopening.

The group appeared to be close to a deal yesterday to add about 400,000 barrels a day of crude starting in August, according to Bloomberg, but the United Arab Emirates is pushing to increase output by even more while oil consumption is rising. Saudi Arabia, the world’s largest oil exporter, prefers a more cautious approach, since higher prices could lead to increased competition from U.S. shale. U.S. producers are only modestly restoring production so far, but that could change if oil approaches $100 a barrel, as some analysts project could happen.

EXXON SCANDAL GIVES FUEL TO CAMPAIGN TO NIX SUBSIDIES: The liberal activist group Evergreen Action is calling on Democrats in Congress to eliminate fossil fuel subsidies in the reconciliation infrastructure bill and redirect those funds to pay for investments to combat climate change.

In a memo this morning, Evergreen Action cites the Exxon scandal as another reason to scrap tax provisions benefiting the oil and gas industry.

“For decades, oil and gas interests have used their power to block vital climate action, fund climate denying shadow groups, and obtain hundreds of billions of dollars every year in subsidies from the U.S. government. But it doesn’t have to be this way,” said Becca Ellison, Evergreen Action’s deputy policy director.

BIDEN CAREFULLY FLOATS CLIMATE CHANGE LINK TO CONDO COLLAPSE: Some people affected by the condominium tower collapse in Surfside, Florida, are questioning what role climate change played in the disaster, Biden said yesterday during a visit near the site.

In the hours he spent with survivors, families of missing and dead residents, and rescuers, Biden said it was “interesting” to him how many raised “the impact of global warming.”

“I didn’t raise it,” he said at the St. Regis Bal Harbour Resort, blocks from the site. “They talked about sea levels rising and about how, the combination of that and a concern about incoming storms, incoming tropical storms.”

With a U.S. National Institute of Standards and Technology investigation underway, Biden added there was still no “definitive judgment” about what caused the Champlain Towers South condo complex to partially collapse last week.

A ‘MIDDLE PATH’ FOR NATURAL GAS: The Center for Climate and Energy Solutions, a climate group that often works closely with big business, is advocating a “middle path” for natural gas to play a role in decarbonizing the U.S. economy.

In a report released yesterday, C2ES outlines a continued role for natural gas to displace more carbon-intensive coal-fired power, noting that such fuel switching has been responsible for roughly 70% of the emissions reductions the U.S. has achieved since 2000.

C2ES then proposes adding carbon capture equipment to remaining natural gas power plants and to industrial facilities. The report also lays out a crucial role for natural gas with carbon capture to help produce clean hydrogen, which is a zero-carbon fuel (so long as it is produced without carbon).

“What we’re saying is we shouldn’t pretend that there will be no fossil fuels in use somewhere in the world toward the middle of the century. If that’s the case, we should be prepared,” said Bob Perciasepe, C2ES’ outgoing president. He told Abby C2ES’ strategy is a “clear-eyed” look at how to manage natural gas emissions in a decarbonizing world.

Gas in a clean electricity standard: While the C2ES report doesn’t prescribe specific policies, Perciasepe said a clean electricity standard that initially allows some partial credit for natural gas would align with the pathway the report lays out. That partial credit for gas would phase out over time or terminate at a date certain, he said.

That approach is taken, for example, in the clean electricity standard top House Energy and Commerce Democrats have crafted, though those partial credits have been a point of contention with some climate activists along with that standard’s inclusion of carbon capture and nuclear.

Perciasepe also said it is likely the U.S. would have to build some more natural gas power plants to complement growing adoption of renewable energy across the country and ensure reliable electricity. But he said any buildout of new gas plants must be coupled with a regulation such as a clean electricity standard “that would be assuring the other side of that equation, that the overall emissions would continue to go down.”

COURTS DEAL ANOTHER BLOW TO BIOFUELS: A federal appeals court has reversed an EPA rule lifting restrictions on the sale of higher-blend ethanol fuels, known as E15, a blow to biofuels producers just one week after another significant loss before the Supreme Court on the EPA’s ability to grant exemptions from the Renewable Fuel Standard to small oil refiners.

The EPA’s rule, issued during the Trump administration, modified fuel volatility limits for E15 so it could be sold year-round, a key promise that former President Donald Trump had made to farmers and the biofuels industry. A three-judge panel on the D.C. Circuit Court of Appeals ruled this morning that the EPA had exceeded its authority in doing so, siding with oil refiners.

Biofuels groups are saying they will pursue every option, both in the courts and through regulation and legislation, to cancel the court’s decision. The Renewable Fuels Association, Growth Energy, and the National Corn Growers Association, which intervened in the lawsuit to support the EPA, said the court’s decision “could impact summertime sales” in certain markets “where nearly two-thirds of retail sites offering E15 currently do business.” No E15 sales in those markets would reduce total summertime sales of the fuel blend by 90%, the groups said.

Some biofuels supporters, too, are signaling they could appeal the D.C. Circuit’s decision to the Supreme Court.

“It is painfully ironic that last week we lost an important RFS lawsuit when the Supreme Court found that agencies could broadly construe the word ‘extension,’ while today the D.C. Circuit Court rules against us because an agency did not employ the most narrow and limiting definition of the word ‘contains,’” said Monte Shaw, executive director of the Iowa Renewable Fuels Association. “Perhaps last week’s Supreme Court loss sowed the seeds of this decision’s future reversal.”

SHELL’S NEW GREEN HYDROGEN PROJECT: The oil major announced this morning it has started up the biggest electrolyzer in Europe to produce hydrogen from renewable energy, with a capacity of 10 megawatts that can produce up to 1,300 tons of “green” hydrogen per year.

The electrolyzer, which splits water into hydrogen and oxygen, was funded in part by the European Commission, and it is located in Germany. The European Commission launched an aggressive hydrogen strategy last year as part of its efforts to dramatically curb greenhouse gas emissions. Shell says its project is the first to use electrolyzer technology at this large a scale at a refinery, and it has plans to ultimately expand its capacity to 100 MW.

“Shell wants to become a leading supplier of green hydrogen for industrial and transport customers in Germany,” said Huibert Vigeveno, Shell’s downstream director. “We will be involved in the whole process — from power generation, using offshore wind, to hydrogen production and distribution across sectors.”

BIDEN PRESSURED TO MOVE ON PICKING NUCLEAR REGULATORS: The American Nuclear Society is urging Biden to quickly restore the Nuclear Regulatory Commission to its full slate of five members.

The vacancy of Commissioner Annie Caputo’s seat beginning this month will reduce the NRC to three commissioners, which ANS suggested could undermine the effectiveness of the commission in protecting public health and safety while approving the deployment of new nuclear technologies.

In a letter yesterday, ANS president Steven Nesbit and CEO and executive director Craig Piercy told Biden to act expeditiously and nominate people to fill Caputo’s seat and an additional seat vacated by former chair Kristine Svinicki in January. They said the White House should seek nominees who are scientists or engineers, noting that Caputo’s departure from the Commission means it has no remaining members with a “strong technical foundation.”

The Rundown

Wall Street Journal Americans face higher gas prices heading into July 4 weekend

E&E News Inside the Exxon sting: Aliases, fake oil funds, a payday

Politico Climate scientists take swipe at Exxon Mobil, industry in leaked report

New York Times Here’s how Biden aims to increase electric car sales

Washington Post Capping methane-spewing oil wells, one hole at a time

Calendar

THURSDAY | JULY 8

12 p.m. CRES Forum will hold an online event titled, “How Conservatives are Planning to Tackle Climate Change.”

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