Apr 26, 2019

Axios Generate

By Ben Geman
Ben GemanAmy Harder

Happy Friday! I only have 1 thing to say: Next week will be 40 years since Blondie ascended the top of the Billboard charts with today's intro tune...

1 big thing: Trump's big chill on offshore drilling
Giphy

President Trump's bid to vastly expand areas available for offshore drilling is on ice — a development rooted in politics, oil markets, and the legal hurdle of unwinding a predecessor's policies.

Driving the news: A judge's ruling in March upholding President Obama's ban on Arctic development has delayed the wider 2019–2024 U.S. offshore leasing plan, Interior Secretary David Bernhardt told the Wall Street Journal.

But, but, but: It's political, man! Bloomberg reported yesterday that the plan is delayed until after the 2020 elections amid bipartisan concern among Atlantic Coast politicians.

Between the lines: I'm seeing three immediate takeaways...

1. Bureaucracy is hard. Bernhardt told WSJ that completing the plan may wait until U.S. District Court Judge Sharon Gleason's decision goes through appeals.

  • Her ruling thwarted Trump's executive order reversing an Obama-era move to permanently put vast Arctic regions off limits. She said Congress would need to do that.
  • It's the latest sign of the roadblocks inherent in making sure-to-be-litigated regulatory decisions, especially without new legislation.

2. Politics is hard. Expanding lower-48 offshore drilling outside of the central and western Gulf of Mexico has long been a politically volatile idea.

  • "Administration officials are worried that the president and Republican leaders in the southeast U.S. would lose votes if they pushed forward with the plan to sell new drilling rights in the Atlantic, Arctic and Pacific oceans," Bloomberg's Jennifer Dlouhy reports.
  • Regional politics vary. There's also widespread opposition on the West Coast, while Alaska politicians back offshore development.

3. Markets aren't helping Trump here. The onshore shale boom of the last decade and modest prices have sapped the urgency around widening offshore leasing, especially in the Arctic.

  • Arctic seas are thought to hold massive hydrocarbon deposits, but projects in the harsh region would be complex and expensive. Companies have a wealth of other opportunities to pursue in the lower 48. 
  • Sure, industry is keen to see offerings outside the western and central Gulf. But the whole thing just isn't the pressure cooker it was circa mid-2008, when oil and gasoline prices were vastly higher, the shale oil production surge hadn't started, and Congress let East and West Coast leasing bans lapse.

Flashback: Last year Interior floated expansive draft plans for offshore leasing in 2019–2024 that envisioned a huge expansion beyond the Gulf of Mexico.

  • It included areas off both coasts and Arctic waters off Alaska. Much of the eastern Gulf areas is under a congressional moratoria until 2022.
  • Draft offshore plans get scaled back en route to completion, but it was nonetheless a clear sign that Trump wants to provide the industry with much wider access.
2. What they're saying on the offshore leasing delay

I exchanged emails with an energy lobbyist, who requested anonymity but offers some insight into the status of the 5-year offshore leasing plan...

Where it stands: This source noted several reasons why there's no rush to finish the plan.

  • Draft plans for lease sales in Arctic waters this year and in 2020 can't happen that quickly anymore.
  • The eastern Gulf of Mexico is under a congressional moratorium until 2022 anyway.

The big picture: "If the urgency is gone because [Alaska] is off the table and [the eastern Gulf of Mexico] is under wraps until 2022, why bother charging any political land mines if you don’t need to? There’s only pain picking fights in NC, SC, or GA and especially FL right now, or any time before 11/3/2020," the lobbyist writes.

On the record: "Given the recent court decision, the Department is simply evaluating all of its options to determine the best pathway to accomplish the mission entrusted to it by the President," Interior Department spokesperson Molly Block said.

What they're saying: Some groups responded to the news...

  • The American Petroleum Institute's Erik Milito said in a statement to news outlets: "We are hopeful that an appeal of this case will move quickly and that we can proceed with the important work of exploring for America’s offshore resources without unnecessary delay."
  • Environmentalists cheered the delay and said it shows the politics are on their side. "Given the recent court decision, the Administration is right to set aside its plan, but it needs to go one step further and fully and permanently scrap its plan to open our coasts to unfettered offshore drilling," said National Wildlife Federation CEO Collin O'Mara.
3. Breaking: Exxon's Q1 profits miss expectations

ExxonMobil shares dipped Friday morning after the oil giant reported first-quarter revenue and profits that missed analysts' expectations, CNBC reports.

Why it matters: Exxon is the largest U.S.-based multinational giant, and it's been stuck trying to pull itself out of what has been a difficult performance stretch in recent years.

By the numbers: Revenue came in at $63.63 billion against the $64.82 billion that had been forecast, while earnings were at 55 cents per share against an expected 69 cents per share. Those profits were down nearly 50% from its 2018 Q1 profits.

Separately, speaking of Big Oil earnings...

  • Total: Reuters reports: "French energy major Total said its net profit for the first three months of the year fell 4 percent to $2.8 billion (£2.2 billion) compared with a year ago due to volatile oil prices and debt costs, despite record oil and gas output."
  • Chevron: CNBC writes: "Chevron reported quarterly earnings that beat analysts’ expectations on Friday, while revenue fell short of forecasts."
4. Renewable standards bring cheaper clean energy

Wind turbines near Palm Springs, Calif. Photo: Robert Alexander/Getty Images

Requirements that utilities purchase a share of their electricity from renewable sources may carry costs that outweigh their benefits, according to the preliminary findings of a working paper by University of Chicago economists, which was discussed by Axios' Amy Harder here.

The other side: But, a complete accounting of the benefits of renewable portfolio standards (RPS) would paint a different picture, per Axios Expert Voices contributor Jesse Jenkins. He writes...

The study’s methods provide little clear policy guidance, and its findings about such standards — now in place in 29 states and Washington, D.C. — warrant skepticism.

What's new: The study attempts a complete estimate of the costs of these standards, which have helped kickstart the wind and solar industries. Its authors found that because RPS policies on average cost ratepayers $130 or more per ton of carbon dioxide (CO2) reduced, “the current costs of RPS programs exceed their benefits.”

  • Yes, but: The accuracy of that cost estimate aside, this approach misrepresents the objectives of RPS policies, which aren’t all about CO2 and are not intended to stand-in for carbon pricing.
  • Lower air pollution and cheaper renewable energy are also important benefits, for example.

Between the lines: The paper has yet to go through formal peer review and likely revision, but at this stage raises 2 methodological concerns.

  1. It treats all RPS policies as the same and tries to estimate their average effect. In reality, each policy is unique in structure, stringency, definitions of eligible resources, and requirements for specific technologies.
  2. RPS policies are not the only factors likely to affect electricity rates. Beyond controlling for 3 specific measures, the paper doesn’t offer a way to distinguish the effect of an RPS from any other policy or time-varying trend.

Read more

Jenkins is a postdoctoral fellow at the Harvard Kennedy School and the Harvard University Center for the Environment.

5. Why Texas lags in rooftop solar
Expand chart
Adapted from the Federal Reserve Bank of Dallas; Chart: Axios Visuals 

Texas is generally big in all things energy (including wind, where it's tops in the nation), but the Dallas Fed has an interesting note about why the state is a lagging in rooftop solar deployment.

The big picture: "Solar energy, while experiencing robust growth in recent years, still only provides 0.5 percent of Texas’ total electricity generation, with residential solar supplying a meager 0.1 percent of total generation."

What they found: The note says a variety of forces explain why residential solar is such a small slice of the pie (check out the chart above on capacity per million residents). They include...

  • Texas is among just 2 states that don't force power companies to buy surplus power from residential projects (also called "net metering").
  • Electricity is just cheap in Texas. "The comparatively inexpensive electricity translates into a relatively longer repayment period to recoup an initial residential solar investment," the report notes.

By the numbers: According to Solar Energy Industries Association's data about total capacity (that is, not per capita):

  • Texas ranks 5th in the country in installed solar generation capacity, a tally that includes residential, non-residential and utility-scale projects.
  • The huge state ranks 9th in residential solar capacity.
6. On my screen: Tesla, Biden, renewables

Lobbying: Tesla has brought on the firm Mehlman Castagnetti Rosen & Thomas to lobby for legislation that expands the availability of tax credits for purchasing electric vehicles, a newly available filing shows.

  • Why it matters: Tesla has hit the 200,00 vehicles-per-manufacturer cap on the $7,500 credit that lowers consumers' costs for buying EVs.
  • Legislation introduced in both chambers of Congress would add 400,000 vehicles for each automaker (at a slightly lower level of $7,000).

Politics: Joe Biden's newly launched presidential campaign is short on policy specifics so far. His website notes that climate change "threatens communities across the country" and that "we must turbocharge our efforts" to address it.

  • NYT reports: "Like every other Democratic candidate, he wants to keep the United States in the Paris Agreement, which President Trump intends to withdraw from."
  • "As a senator, he supported tax credits for renewable energy and had an 83 percent lifetime rating from the League of Conservation Voters; as vice president, he supported a series of emission reduction regulations that Mr. Obama established but Mr. Trump is reversing."

Power deals: Via Greentech Media, "Duke Energy Renewables, the competitive renewables arm of U.S. utility giant Duke Energy, has agreed to sell insurer John Hancock a minority share of its wind and solar portfolio, amounting to 1.2 gigawatts of generation capacity and $1.25 billion in enterprise value."

Ben GemanAmy Harder