Jan 4, 2019

Axios Generate

By Ben Geman
Ben GemanAmy Harder

Launching Monday: Axios is bringing Smart Brevity to sports! Written by Sports Internet founder Kendall Baker, Axios Sports is a daily look at the stats, trends, personalities and storylines dominating the sports world. Sign up here.

Onto music. Happy birthday to Michael Stipe of R.E.M., who will play us into today's edition...

1 big thing: What's next for Democrats on climate

Illustration: Sarah Grillo/Axios

It's a climate contradiction! Democrats still have almost no power to make policy in Washington. But what they do next matters a lot.

The big picture: Two overlapping events — the soft launch of the 2020 White House race and Democrats assuming House control this week — open a crucial period.

  • What happens in 2019–2020 could decide what kind of policy Democrats will push if they regain White House and perhaps Senate control.

Driving the news: Democrats used their first day in the House majority yesterday to signal that climate would be a focus.

  • Speaker Nancy Pelosi called it the "the existential threat of our time" in the first speech of her second stint with the gavel.
  • Energy and Commerce Chairman Frank Pallone said the panel's first hearing would be on the topic.
  • Democrats voted to create a Select Committee on the Climate Crisis that's empowered to craft policy recommendations.

Why it matters: Democrats — on the campaign trail and on the Hill — need to lay the policy and political groundwork if the window for legislation or administrative moves opens after 2020.

  • Republicans' failure to unify in advance around a plan to replace Obamacare is something of a cautionary tale.

The intrigue: There are tensions within the party and among activists. Here are a few of the fault lines that are already apparent or could open up...

1. Rep. Alexandria Ocasio-Cortez (AOC) and some other insurgent progressives  backed by activists with the Sunrise Movement and Justice Democrats — say the new select committee is too weak.

  • They wanted a panel tasked with crafting a detailed proposal for a Green New Deal. They also wanted it to have subpoena power and to bar members who take fossil fuel money.

2. Competition for political attention on the campaign trail and in the House will be rampant. I know I'm a broken record here, but climate and energy are typically second-tier (at best) topics in national elections.

  • Sen. Elizabeth Warren, the first top-tier Democrat to launch a 2020 White House bid, has barely grazed the topic in her rollout in recent days and initial interviews.
  • However, her office did tell Axios that she backs the idea of a Green New Deal.
  • Some other potential candidates, including Sen. Bernie Sanders (I-Vt.) and Washington Gov. Jay Inslee, make climate a priority. But large swaths of the potential 2020 field have focused their careers on other topics.

3. The nitty-gritty of crafting policy recommendations will bring some tough questions to the forefront, such has how much to emphasize carbon pricing.

  • One is whether to push for a transition to 100% renewable electricity — a pillar of the Green New Deal — or back a wider suite of technologies that a number of experts say should be part of decarbonizing power.

4. The tensions between establishment liberals like Pelosi and the new AOC crowd have been sucking up the oxygen, but getting aggressive on climate could also bring clashes with centrist and oil patch Democrats.

  • Politico has some reporting on this dynamic: "Rep. Henry Cuellar (D-Texas), who co-chairs the centrist Blue Dog Coalition, said he plans to speak with incoming select panel chairwoman Rep. Kathy Castor (D-Fla.) and Energy and Commerce Chairman Frank Pallone (D-N.J.) about the direction and scale of climate legislation."
2. Shale patch headwinds and more petro-notes
Giphy

The Dallas Fed said a survey of oil-and-gas companies in its region, which spans Texas and parts of New Mexico and Louisiana, showed that growth in energy sector activity "slowed significantly" in the fourth quarter.

What's next: Over half the 163 firms surveyed said the recent drop in oil prices would affect their spending plans in 2019. Nonetheless, 53% still expect to increase outlays.

Why it matters: The latest survey is a sign of how the steep drop in oil prices is changing the calculus for oil companies in the banks' region, which includes the surging Permian Basin and other shale regions.

Details, per the report:

  • "The business activity index — the survey’s broadest measure of conditions facing Eleventh District energy firms — remained positive, but barely so, plunging from 43.3 in the third quarter to 2.3 in the fourth."
  • "Readings near zero indicate activity was largely unchanged from the prior quarter, a break from the 10-quarter-long trend of rising activity."

Go deeper: CNBC has more on the report here.

* * *

A couple more oil-and-gas items...

LNG, part 1: Per Reuters, "A record amount of liquefied natural gas (LNG) production is expected to get the green light in 2019 amid strong global demand, especially from China, analysts said."

  • Top candidates for final investment decisions include 3 projects along the U.S. Gulf Coast.

LNG, part 2: Via S&P Global Platts, "Alaska has extended a deadline for Chinese companies to agree on LNG purchases and financing for the $43 billion Alaska LNG project, a spokesman for the state-owned Alaska Gasline Development Corporation said Thursday."

  • Backers have not yet decided about proceeding with the huge project, the latest in a years-long string of various proposals to get Alaskan gas to markets.
3. On my screen: Zinke, Texas power, EVs

Interior: The Washington Post reports, "The Justice Department’s public integrity section is examining whether newly departed Interior Secretary Ryan Zinke lied to his agency’s inspector general investigators, according to three people familiar with the matter, a potential criminal violation that would exacerbate Zinke’s legal woes."

Quitting coal: The Houston Chronicle describes new Rice University research showing that Texas is a place where "natural patterns of wind and sun could produce power around the clock."

Electric vehicles: The Verge writes, "General Motors confirmed on Thursday that it sold its 200,000th plug-in vehicle in the US during the fourth quarter of 2018, which has triggered a slow phaseout of the $7,500 federal tax credit over the next 15 months. GM is the second automaker to pass this mark; Tesla reached 200,000 vehicles sold in the US last summer."

4. FERC's Kevin McIntyre dies at 58

The energy community is mourning the death of Federal Energy Regulatory Commission member Kevin McIntyre, who was chairman of the agency until recently. He was 58.

Background: McIntyre, a Republican, was treated for brain cancer in 2017 before becoming chairman in December of that year. But he stepped aside as chairman last fall after announcing a "serious health setback."

  • E&E News, which first reported on his passing, notes that McIntyre's brief time heading FERC was nonetheless consequential.

His work included:

  • Leading the unanimous rejection of Energy Secretary Rick Perry's push for huge changes in power market rules to benefit coal-fired and nuclear plants.
  • Opening a separate proceeding into the resiliency of the power grid in wholesale markets.
  • Launching a review of how FERC vets gas pipeline proposals.

Between the lines: McIntyre's passing now leaves FERC with a 2-2 split between Republicans and Democrats until a successor is nominated and confirmed by the Senate. That could lead to some policy deadlocks, ClearView Energy Partners said in a note...

"Such partisan divides appear most relevant in the case of Commission approvals for LNG terminals and natural gas pipelines, and potentially on orders that impact the fuel mix of the electric generation sector."

What they're saying: FERC Chairman Neil Chatterjee called it a "deeply sad day" for the commission and all who knew McIntyre personally and professionally.

  • “Kevin exhibited strong leadership and an unmatched knowledge of energy policy and the rule of law. He exemplified what it means to be a true public servant each and every day, no matter the challenges that lie ahead of him," Chatterjee said.
  • Statements from other FERC commissioners are here.

McIntyre graduated from San Diego State University and Georgetown Law, and helped lead the energy practice at the firm Jones Day before joining FERC in 2017. He's survived by his wife Jenny and their 3 children: Lizzie, Tommy and Annie.

5. What Trump's science aide thinks about climate

Axios' Andrew Freedman has a look at Kelvin Droegemeier, who won Senate confirmation this week to head the White House Office of Science and Technology Policy (OSTP).

Why it matters: Trump took longer to name a science adviser than any other president since Dwight D. Eisenhower. The Trump administration has been grappling with complex science topics with a depleted science staff and no OSTP director.

  • The OSTP coordinates science policy across the federal government and conducts outreach to the private sector. Topics it works on range from the delicate nuclear negotiations with North Korea to quantum computing, AI and climate change.

The big picture: Once he starts work, Droegemeier will stand out within the administration for his mainstream views on climate science and other issues about which the president has baselessly spurned scientific evidence.

Go deeper

6. The disconnect between coal and Paris

One of the last 5 coal plants in France, which plans to close all by 2022. Photo: Loic Venance/AFP via Getty Images

Axios Expert Voices contributor Justin Guay writes that for the first time, the International Energy Agency has projected declining coal demand from 2021 to 2022 as well as overall flat consumption through 2023.

  • The IEA also found that, despite recent small increases in both 2017 and 2018, world consumption still likely peaked in 2014.

The big picture: According to the Intergovernmental Panel on Climate Change’s latest report, OECD countries must eliminate coal by 2030 in order to keep global warming under 1.5°C. Now that global coal consumption may have peaked, the question is how fast OECD countries will move from this plateau to absolute declines.

  • While the IEA is the world’s leading energy forecaster, it also has continually overestimated coal consumption and simultaneously underestimated clean energy growth.
  • The fact that the IEA no longer sees growth for the coal industry will therefore send a powerful signal to the market.

What’s next: Coal plant retirements in the OECD may gather speed given the rapid fall in clean energy prices, which are now lower than coal everywhere in the world except Japan. More importantly, 96% of existing coal plants will be more expensive to run than to replace with clean energy by 2030.

  • This could be a point of no return, after which retirements will accelerate faster than historical averages as utilities realize economic gains from clean energy.

Yes, but: IEA found pockets of coal-consumption growth in the developed world, particularly South Korea. More significantly, the agency still forecasts long-term growth in South and Southeast Asia, especially in India, which led the world in increasing consumption by 40 million tons in 2018.

The bottom line: Staving off the worst impacts of climate change will require curbing the growth of the coal industry in the developing world and phasing it out entirely in OECD countries.

  • Peak consumption is significant on its own, but the time it takes to go from that peak to shuttering the last coal plant will prove the most important variable.

Guay directs global climate strategy at the Sunrise Project and advises the ClimateWorks Foundation.

Ben GemanAmy Harder