Good morning! Today's Smart Brevity count: 1,085 words, ~ 4 minute read.
Situational awareness: PG&E might cut power to over 200,000 customers across 15 counties to lower wildfire risks ahead of strong winds that may arrive later this week.
- The California power giant's late Monday announcement follows a larger, widely criticized planned outage earlier this month. The San Francisco Chronicle has more.
And today marks exactly 50 years since Led Zeppelin released "Led Zeppelin II," which provides today's intro tune...
1 big thing: Warren's ascent sends ripples through industry
Sen. Elizabeth Warren's rise in the Democratic primary fight is forcing oil companies and analysts to grapple with the potential effects of the liberal Massachusetts senator winning the White House.
Why it matters: Warren, now challenging Joe Biden for frontrunner status, has pledged to halt hydraulic fracturing — the extraction technique that has enabled the U.S. oil and natural gas boom.
- Warren has also pledged to end new leasing on federal lands.
What they're saying: "Elizabeth Warren’s comments to 'ban fracking everywhere' drew a lot of attention and raised concerns for those invested and active in the industry," notes a recent RBC Capital Markets report.
- Tudor, Pickering, Holt & Co. analyst Jake Roberts tells the Wall Street Journal that clients are abuzz about Warren's plans. “‘If Sen. Warren were to win’ was getting a lot of airtime in our meetings,” he said.
- The same WSJ piece reports, "Analysts with Piper Jaffray’s Simmons Energy heard so much about Ms. Warren from money managers recently that they parsed her energy and infrastructure policy proposals in a note sent to clients last week."
Where it stands: Warren would need Capitol Hill help for an outright fracking ban, and that's very unlikely to materialize.
- But even the prospect of curtailing fracking and new leasing on federal lands is sending ripples through the sector.
- RBC's U.S. production forecast would be 1.2 million barrels per day lower in 2025 if there was a fracking ban imposed on federal lands starting in 2021.
The intrigue: Targeting federal lands in particular would create bigger risks for some companies than others, based on how much of their acreage centered in those areas versus state and private holdings.
- RBC and other analysts are already tracking which companies would have significant exposure, like big independent producers Devon Energy and Concho Resources.
But, but, but: Efforts to stymie drilling on federal lands would face vigorous legal and political opposition and bureaucratic hurdles.
- The RBC report notes that the industry would "pursue legal recourse including an injunction until courts make a final decision on that action."
- And a Bloomberg story on Warren's plans earlier this month, summarizing analysis from Sanford C. Bernstein's Bob Brackett, states that "any impact from a Warren win may be short-lived."
2. Central banks step up climate work as U.S. lags
Axios' Dion Rabouin reports with me ... The world's top economic institutions are going deeper in the fight against climate change, and central banks are re-evaluating policies and pushing new principles to integrate climate-related risks into financial supervision, leaving the U.S. behind.
On one side: The impacts of climate change are "everywhere," European Central Bank chief economist Philip Lane said during the IMF's fall meetings last week.
- "Every sector will be affected … it’s absolutely core to central banking."
- "To deliver our core mandate we absolutely have to be involved," Lane added.
That sentiment has been backed strongly by ECB chief Mario Draghi as well as Bank of England president Mark Carney.
- Carney has organized a coalition of 46 central banks and regulators called the Network for Greening the Financial System (NGFS) that last week published a technical guide to help its members weave sustainability into portfolio management.
- The People's Bank of China has started incorporating environmental factors into its monetary policy framework and financial stability assessments, and has been a global leader on the issuance of environmentally conscious green bonds.
- Even noted skeptic David Malpass, now president of the World Bank, has committed to a $200 billion Climate Change Action Plan.
On the other side: President Trump yanked the U.S. out of the Paris climate agreement and his administration announced "climate change will not be on the agenda" at the June G7 meeting in Florida.
- Fed chair Jay Powell called climate change "an absolute first-order issue" in a speech earlier this month, and some Fed branches are analyzing climate risks. But Powell said it was not clear to him if it's "a first order of business for central banks."
- The Fed and Bank of Brazil are the only major central banks not taking part in NGFS.
The big picture: While the IMF and World Bank have for years examined climate and pushed for carbon pricing, the institutions are getting more active — substantively and symbolically.
- A senior IMF official tells Reuters that the fund is looking at how much climate-related risks are priced into market valuations.
- "We are going to look at stock markets country by country, then by sector,” said Tobias Adrian, who heads IMF's monetary and capital markets department.
- And as the Financial Times notes, new IMF managing director Kristalina Georgieva announced that the organization “is gearing up very rapidly to integrate climate risks into our surveillance work."
- "For the IMF, we always look at risks, and [climate change] is now a category of risk that absolutely has to be front and center in our work," she said.
3. Big Oil's lobbying numbers are in
Several oil companies reported a slight dip in their hefty lobbying numbers in the third quarter.
Why it matters: Disclosure filings reveal how much money is flowing through Beltway influence efforts and the specific topics they're working on.
The big picture: BP reported a slight increase, showing $1.26 million in Q3, up from $1.18 million in Q2. Others show drops...
- Chevron reported $2.25 million in Q3 lobbying, a dip from $2.38 million in Q2.
- ExxonMobil listed $1.94 million in Q3 lobbying, down from $2.45 million in Q2.
- Shell disclosed $1.68 million, compared to $1.96 million in the prior period.
- The powerful American Petroleum Institute, which represents companies of all sizes, posting $1.6 million in Q3 lobbying, down from $2.05 million in Q2.
But, but, but: It's real money! But lobbying ebbs and flows depending on what's happening in Congress and agencies, and it's well below levels from a decade ago.
- For instance, Exxon reported $7.16 million in lobbying in Q3 of 2009.
4. Scenes from the shale slowdown
A couple bits of news caught my eye that underscore how the U.S. shale boom is slowing down.
Deals (or not): Reuters reports that UBS Group AG and Piper Jaffray's Simmons Energy are cutting staff from their oil and gas investment banking teams "as U.S. dealmaking continues to dry up."
- "Mergers and acquisitions activity within the shale business is at its lowest level in a decade, excluding Occidental Petroleum Corp’s purchase of Anadarko Petroleum Corp, as shareholders squeeze producers to focus on returns and develop existing acreage rather than expansion," they report.
Earnings: Via the Houston Chronicle, "Declining activity in U.S. shale fields continued to sting Houston oilfield service company Halliburton during the third quarter."
- The oilfield heavyweight yesterday reported lower profits and revenues compared to Q3 of 2018.
- "Although revenue grew in Latin America, Europe, Africa, the Middle East and Asia, Halliburton’s third quarter revenue from North America declined by $790 million when compared to the same period last year," the paper reports.