California Continues Crusade against Affordable, Reliable Natural Gas

The California Energy Commission is in the process of retooling state building codes to limit the use of natural gas in new buildings across the state, according to E&E News. In addition to last year’s mandate that requires all new homes have solar panels, the agency now plans to tighten rules on natural gas for home heating and hot water, a code update that would take effect in 2023.

E&E News reports:

Environmental groups want a complete ban on natural gas in new homes, but the state commission has signaled that isn’t likely right now. Officials instead in the coming months are likely to use incentives to urge developers to pick electric options for heating, like heat pumps. More muscular requirements could come later.

“We are really ratcheting up the efficiency across the board,” agency Commissioner Andrew McAllister said in an interview. “We anticipate that we’ll be providing incentives for the market to scale up its adoption of heat pumps.”

“You need to give the marketplace reasons to adopt it before you step in and maybe mandate it,” McAllister added. “That’s the pathway that we’re likely on.”

These regulations come after more than 40 cities and counties across the state have already tightened rules on natural gas use in new homes, including San Francisco, which has banned it entirely. As GAIN strategic advisor and former Congressman Albert Wynn wrote in Bloomberg Law last June, these efforts are misguided and shortsighted. Wynn highlights the affordability and environmental benefits of natural gas:

According to the American Gas Association, households that use natural gas for heating, cooking, and clothes drying save an average of $874 per year compared to homes using electricity for those applications. Further, natural gas furnaces offer the greatest energy savings for customers, as oil furnaces, electric heat pumps, and electric resistance furnaces cost two to four times as much as the most efficient gas furnaces...

…natural gas has been and remains a key part of the solution towards a sustainable future and lowering carbon emissions—as President Barack Obama admitted in his 2014 State of the Union speech. According to the International Energy Agency (IEA), the rise of natural gas for power generation has been crucial in declining emissions from the power sector. In fact, the U.S. saw the largest decline in energy-related carbon emissions in 2019 than any other country largely due to the increased use of natural gas power generation.

Natural gas plays an important role in providing a safe, reliable, and affordable source to meet our nation’s energy needs. An “all of the above” energy strategy that encourages development of renewable sources but also recognizes the critical role of natural gas is key to fueling the American economy for decades to come.

U.S. LNG Exports Set Record in November

The US Energy Information Administration (EIA) reported US liquefied natural gas (LNG) exports set a record in November at 9.4 billion cubic feet per day, surpassing the previous record set in January 2020. This development is notably impressive considering monthly exports of LNG from the US during the summer were the lowest in more than two years.

The EIA reports several factors contributed to this increase in LNG exports, noting:

International natural gas and LNG prices increased in Asia and Europe because global natural gas demand increased after COVID-19 restrictions were eased and global LNG supply fell due to unplanned outages at LNG export facilities in Australia, Malaysia, Qatar, Norway, Nigeria, and Trinidad and Tobago. In addition, 2.7 Bcf/d of new U.S. LNG export capacity was added in 2020, and several U.S. LNG terminals affected by hurricanes and annual maintenance have resumed LNG shipments.

Increasing American energy exports and bolstering our energy capabilities is key to strengthening both the American economy and national security, as well as the US’ position internationally by providing reliable, affordable, cleaner-burning fuels to our allies around the globe.

Biden’s energy policies could be detrimental to U.S. energy security

              Morning Consult featured an op-ed from former EIA administrator Guy Caruso in which he highlights how Biden’s energy policies could threaten U.S. energy security. The U.S. energy industry has worked hard to bolster oil and gas production, creating jobs and easing reliance off of unstable foreign sources. However, this reliable system is in jeopardy as Biden has promised to “eliminate” the fossil fuel industry.

Caruso further describes Biden’s planned changes to U.S. energy policy:

“While the president-elect’s comments, and later walk-backs, may be difficult to interpret, his proposals are not. Mr. Biden’s climate plan seeks to eliminate carbon-generated electricity by 2035 (fossil fuels account for 63 percent of power generation currently). That goal will require as much as $1.7 trillion over the next ten years, including subsidies for solar and wind, which now provide only about 9 percent of American’s energy needs. Biden needs to implement a more pragmatic approach to the transition away from fossil fuels. He should recognize the longer time element required.

Meanwhile, Biden has pledged to cut so-called subsidies for the oil and gas industry — a position he regularly doubled down on when correcting statements that went too far on the campaign trail. “I’d stop giving to the oil industry. I’d stop giving them federal subsidies,” he said in the Oct. 22 presidential debate.”

While the mission of working towards alternative energy solutions remains important, it is critical for the Biden administration to understand that this is a journey that takes time. Fossil fuel projects are critical to powering our nation and putting Americans to work. The Biden administration needs to consider a more thoughtful, realistic approach on the path to a greener energy future.

Additionally, Caruso alerts readers that a fracking ban on federal lands and waters would kill 1 mission jobs by 2022 and cause millions in lost U.S. gross domestic product by the year 2030, according to data from the American Petroleum Institute. This would devastate the national economy – the last thing we need in the midst of a global pandemic.

Biden’s promises to restrict shale energy development could hinder America’s steadfast path toward energy independence. Perhaps Biden should look to advice from the leaders before him – like President Obama – regarding energy policy. Caruso writes in conclusion:

“In his 2014 State of the Union address, President Barack Obama heralded natural gas as a “bridge fuel that can power our economy with less of the carbon pollution that causes climate change.” That hasn’t changed. The president-elect would be wise to revisit the position he once championed and embrace the U.S. oil and gas industry as an ally, rather than the enemy. Otherwise, the United States could be on a course to revisit its days of energy insecurity.”

The North Face Joins Growing Corporate Hypocrisy Signaling Against Oil & Gas Industry Despite The Facts

Many companies within corporate America, particularly clothiers and banks, have folded to social pressures to assign climate change blame entirely to the oil and gas industry. Some companies have sworn against engaging in business dealings with oil and gas companies without acknowledging the industry’s critical role and how their business itself exists, or at minimum, benefits from American oil and gas products.

For example, many lenders have sworn off approving loans for oil and gas projects. The few (but loudest) activists that have yet to consider the importance of industry to their lives and livelihoods celebrate these business embargoes. Similarly, ‘ESG’ investing mirrors this, placing an emphasis on ‘environmental, social, governance’ concerns ahead of returns when investing in capital markets. As a result, fossil fuel divestment movements have swept the country and even state pension funds.

The latest instance of companies discriminating against oil and gas industry members comes courtesy of The North Face. The outdoor clothing retailer refused to fill a custom jacket order for Innovex Downhole Solutions, an oil and gas services company, for reportedly not meeting their “brand standards.” Innovex Downhole Solutions CEO Adam Anderson’s now-viral response to parent company VF Corp. reveals The North Face would not sell the company jackets because of their business in the oil and gas industry.

Anderson notes the incredible modern achievements and significant quality of life improvements (particularly medical) that relied on materials or energy from oil and gas production. Anderson rightfully points out that North Face needs oil and gas materials to manufacture their clothes…making their denial a masterclass in hypocrisy.

In Addition, the Denver Business Journal last year reported that North Face’s parent company, VF Corp., had purchased a swath of land near a Denver area airport so that it could build a personal hangar for its company’s private corporate jets.

So just to recap this hypocrisy: The North Face won’t have an oil and gas company’s logo appear on their jackets – jackets that were manufactured with petroleum products – but have no problem taking jet fuel to accommodate their corporate travel and continue to benefit from the affordable energy and resources provided by the U.S. oil and gas industry for their continued business success.

Infrastructure Projects in the Permian Basin must be supported under Biden’s administration

The San-Antonio Express News published an op-ed from former Texas state representatives Harvey Hilderbran and Doug Miller in which they call on the Biden administration to recognize the importance of energy and infrastructure development in the Lone Star State. Hilderbran and Miller raise concern that President-elect Joe Biden’s environmental promises could negatively impact the economy in the state. The authors point to infrastructure projects in the Permian Basin that could yield benefits to offset economic hardship brought on in 2020 and bottlenecks in the region. Data proves how necessary oil and gas projects are to Texas’s economy:

“A recent Texas Tech University study found in 2019, the oil and gas industry provided more than $48 billion in economic output, nearly $3 billion in state and local revenue, and supported more than 238,000 jobs. The expansion of pipeline construction alone in 2019 resulted in nearly 29,000 construction jobs and $5.5 billion in gross economic value from construction projects.”

One project Hilderbran and Miller discussed is from energy infrastructure developer Kinder Morgan. The developer has completed construction on the Permian Highway Pipeline in the Permian Basin, and the project will benefit the state’s economy by creating jobs and revenue for public needs:

“The Permian Highway Pipeline is estimated to provide around 2,500 local construction jobs and 18 full-time jobs. In addition, an estimated $42 million of increased annual revenue will stream to applicable state and local coffers. Schools, first responders and other emergency services will benefit from the nearly $1 billion in oil and gas production tax revenue that will come from the pipeline.”

This is a critical project for Texas as approximately 3.7 million Texans have filed for unemployment relief since March of this year. The Biden administration must be careful not to instill any policies that would stand in the way of economic progress for Texas and other energy-producing states. In addition to the Permian Highway Pipeline bringing economic support to Texas, an additional pipeline project from Energy Transfer, the Lone Star Express Pipeline, will help support energy production in the Permian Basin:

“Separately, developer Energy Transfer recently announced the completion of the Lone Star Express Pipeline Expansion Project, adding an additional capacity of 400,000 barrels per day of natural gas liquids, or NGL, to the existing pipeline system. Projects like the Permian Highway and Lone Star Express are critical to putting Texans back to work, supporting our state’s economy and meeting the energy needs of our nation and its allies.”

2020 has been a difficult market for the oil and gas sector. With new leadership on its way in 2021 and beyond, it is crucial we ensure the years to come will only bring growth and success that can only be ensured with stable energy policies.

Northeast Natural Gas Bans Don’t Square With Energy Security or Emissions Reductions

On the cusp of winter, and after a summer of witnessing rolling electrical blackouts in California, natural gas bans are back on legislators’ plates.

As E&E News reported, Brookline town legislators – a suburb to Boston, Massachusetts – voted last week to ask the state Legislature for the right to prohibit natural gas infrastructure within its jurisdiction. A similar measure passed last month in Arlington, Massachusetts.

E&E News reports:

The aim is to make Massachusetts more like California, where energy officials grant towns and cities much greater latitude to pass building codes requiring electric technologies for heating and cooking. Several dozen California municipalities have placed such restrictions on gas infrastructure, including San Francisco and other large cities, in a policy intended to reduce greenhouse gas emissions.

Memories must be short.

Golden State electeds (and now Massachusetts local officials, too) have jumped the gun in the race to renewables by prematurely shedding fossil fuel infrastructure, particularly natural gas. A weakened natural gas supply and reliance on intermittent renewable resources (those that can’t generate energy round the clock) left the state without enough supply to meet demand.

Brookline could face a similar fate as winter settles in.  

Other oversights are baked into Brookline’s natural gas ban. Of importance is the complete disregard or acknowledgement of the environmental gains natural gas has afforded the country. The United States has been recognized as a global leader in emissions reductions, and the Environmental Protection Agency showed that increased natural gas use has allowed for greenhouse gas reductions by displacing more carbon-intensive resources.

Natural gas is eminently abundant, too. Few places are left wanting for the resource thanks to a growing infrastructure network and record setting production trends in Texas, Pennsylvania, and New Mexico.

State and local freedoms to conduct energy policies as they see fit are a great representation of the “laboratories” for public policy established by American federalism but the latest developments in Brookline are sure to deliver bad outcomes and bad outcomes only to constituents.

Proposals to Ban Non-Electric Vehicle Sales are Economically and Logistically Unsound

As progressive politicians rush to prove their environmental credentials with aggressive anti-energy proposals, some governors are considering bans on non-electric vehicle sales. Others have already ordered them. In a recent RealClearEnergy op-ed, attorney and former Oklahoma Corporation Commission chairman Patrice Douglas explains why plans to force electric vehicle purchases are destined to fail.

California Governor Gavin Newsom made waves in September when he announced that sales of non-electric vehicles would be banned statewide in 2035. Less than a month later, New Jersey Governor Phil Murphy hinted that he might do the same. Douglas argues that:

“Despite the political appeal, these initiatives come with great costs to us as taxpayers and consumers… The economic and social challenges associated with their actualization renders these proposals premature at best and broadly detrimental and self-defeating at worst.”

The most obvious of those challenges is cost. Electric vehicles are unaffordable for many Americans and policies designed to incentivize their purchasing only benefit the wealthy. According to Douglas:

In 2016, 83% of EV tax credits were claimed by individual taxpayers with an adjusted gross income of over $100,000, which as a group represent only 17% of the US population.”

Any ban on non-electric vehicle sales would further disadvantage the overwhelming majority of people who rely on them.

Cost and economic inequality are not the only issues that have been overlooked. Even if electric vehicles were affordable, infrastructure requirements would still present a major challenge. Installing charging stations across entire states would be a logistical nightmare, and making them functional would require dramatically expanded power grids – all while also working to aggressively phase-out traditional energy sources like natural gas. Douglas explains:

“Such significant updates to the power grid would require not only decades of planning, engineering and construction, but also billions and billions of ratepayer and consumer dollars.”

For these reasons and others, the rapid adoption of electric vehicles is little more than a political pipe dream with dangerous economic implications. Douglas concludes:

“A range of legitimate options exist for modernizing energy production and transportation, but none of them entail government-imposed phase-outs on gasoline-fueled vehicles. Governors like Newsom, Murphy, and others inclined to follow their lead would do well to eschew current proposals and adopt an all-of-the-above energy strategy that generates progress through innovation and a diverse mix of energy sources and technologies.”

U.S. Healthcare system relies on oil and gas industry to function

The Washington Times published an op-ed from GAIN spokesman Craig Stevens, former senior advisor to U.S Energy Secretary Sam Bodman and HHS Secretary Tommy Thompson, in which he discusses the critical role the oil and gas industry plays in supporting our nation’s healthcare system. Stevens highlights how many hospitals have been reaching capacity due to the high number of COVID-19 cases. As a result of this strain on our healthcare system, state leaders must carefully consider the impact of any proposed policies that would stand in the way of oil and gas projects and reliable energy that are critical to supporting the U.S. healthcare sector.

For example, Stevens sheds light on how natural gas bans can harm our healthcare systems, pointing to California:

“Take California, for example. The state is in the process of transitioning away from fossil fuels with self-imposed regulations and natural gas bans. On Aug. 14 and 15, California literally ran out of energy. Half-a-million homes and businesses lost power during the state’s first rolling black outs in nearly 20 years. During an extreme heat wave, state agencies reportedly failed to plan for the spike in energy demand. And the lights went out.

California’s approach isn’t good enough for America’s health care system, especially during a pandemic. Our hospitals need the reliability fossil fuels offer. Natural gas is one of the safest, most reliable and most affordable energy sources out there. Unlike wind and solar, gas is not weather-dependent and can easily be stored during a period of low energy demand and withdrawn during high demand. Americans rely on an extraordinary gas pipeline network that zigzags 3 million miles across our country to safely deliver reliable energy to our homes, businesses and hospitals — 24 hours a day, 365 days a year.”

According to the EIA, natural gas is a relatively clean-burning fossil fuel and releases fewer emissions of carbon dioxide (CO2) and other air pollutants than coal. In addition, natural gas is a reliable source of energy as it is already abundantly produced right here in the U.S. – meaning we do not need to rely on unstable foreign regimes for our energy.

The oil and gas industry goes beyond just powering hospitals. Stevens remarks that hospitals rely on petroleum-based products such as critical PPE equipment that includes hand sanitizer, latex gloves, medicines, and other important equipment used daily. We cannot take the production of these necessities for granted.

In closing, Stevens urges policymakers across the nation to consider the needs of the healthcare industry when making important decisions about oil and gas projects:

“Our leaders must recognize the critical role of oil and gas in not only powering our health facilities, but also in fueling the American economy out of this pandemic. The next presidential administration should embrace an all-of-the-above energy strategy, or California’s dark reality could become the rest of the country’s.”

Enbridge Inc. Line 3 pipeline wins final permit approval

In a win for our nation’s energy security and domestic energy capabilities, E&E News reported Minnesota regulators have given Enbridge Inc.’s Line 3 upgrade project final approval to move forward into construction. The Minnesota Pollution Control Agency issued a construction stormwater permit allowing Enbridge to replace and expand its aging Line 3 system across the state. Recognizing this milestone, Enbridge Executive Vice President Vern Yu said:

“This is a historic day for the Line 3 project which will strengthen the safety of the system for years to come…With all of the permits in hand, we can now start construction.”

E&E News reported the $2.6 billion Minnesota-based portion of the project would generate 4,200 construction jobs. This is huge success for Minnesota – as the state’s unemployment rate sunk even further in October 2020 – down 1.3% to a low of 4.6%. In addition to providing economic benefits, the project will be more environmentally friendly than other means of transportation. The Line 3 Replacement pipeline will transport 760,000 bpd which is the equivalent of 10,000 rail cars per day or 24,000 tanker trucks per day. This project should not be an option for Minnesota – it is a necessity for safe crude oil transit across a number of states.

Although the project has received pushback from environmentalists and local Native American tribes, the update to the pipeline is necessary for continued safety of the project and to minimize any environmental risk as the original pipeline was built in the 1960s.

Proponents of the project have ensured the public that the project is strong. Vice President for midstream at the American Petroleum Institute Robin Rorick stated:

“Enbridge’s approach to the replacement of Line 3 will ensure minimal impacts to the environment and safe operations while providing the reliable and affordable energy that powers the lives of American families and small businesses.”

The GAIN Coalition applauds Minnesota regulators for issuing a final approval for the Line 3 system upgrade. Enbridge plans to begin construction by the end of this year.

Senate Fills FERC Positions, A Positive for Energy Infrastructure

Hat tip to the U.S. Senate for confirming Mark Christie and Allison Clements to the Federal Energy Regulatory Commission (FERC) this week, bringing the commission to its full five member panel for the first time in almost two years.

Mark Christie, a Republican, was previously chairman of the Virginia State Corporation Commission and served as the President of the Mid-Atlantic Conference of State Utility Regulators.

Allison Clements, a Democrat, is founder of Goodgrid, an energy policy and strategy consulting firm, after spending two years as the director of energy markets at the Energy Foundation.

FERC wears a number of hats pertinent to energy, its markets, infrastructure involved in ensuring the America’s network of production, processing, and deployment of energy resources is secure and improving.

A key FERC responsibility is the review and approval of infrastructure projects like export terminals and more. It is encouraging to have a full commission available to attend to the needs of America’s energy infrastructure as the country emerges from the COVID-19 pandemic.