Welcome to Generate, the new Axios newsletter on the politics and business of energy. Thanks for reading! I'm in Houston reporting all week from the huge CERAWeek energy conference, where industry CEOs and foreign officials will be sizing up what Trump and the markets have in store for them. Look for coverage all week in Generate and daily updates in the Axios Stream. Tips and feedback to email@example.com.
Yergin sets the stage
Daniel Yergin, who won Pulitzer for his oil history book "The Prize," is the person to talk to for the lay of the land at CERAWeek. He's the vice chairman of conference host IHS Markit and the founder of Cambridge Energy Research Associates (which IHS bought in 2004) and chatted with Axios ahead of today's conference opening. A few highlights ...
The vibe: He said the oil industry has a stronger pulse than it did at last year's gathering. Why? "The industry is feeling better … prices are 75 percent higher than they were last time at CERAWeek, and the confidence that there is a kind of a floor under the oil price."
"At $50 a barrel, this is a very productive industry, and at $55, we think U.S. production this year could increase by between 500,000 and 600,000 barrels a day," Yergin said.
One theme of the week is also how U.S. shale oil producers can bring oil from the ground for less money. Technology advances are one of the major reasons why, and drilling services companies have also cut what they charge. Key statistic: his firm calculates that each dollar spent on shale today will produce 2.5 times more oil than a dollar spent just two years ago.
"Permania." That means "Permian mania." The continued output growth and dealmaking in the Permian Basin shale region in Texas and New Mexico will be a theme this week. "You will hear it from the CEOs of the major companies. These are companies that are not thinking about new, big, multi-billion dollar mega projects that will take 10 years, they are thinking about wells that you can drill in 90 days, and that is a huge change," he said.
Carbon emissions: The conference is unfolding amid a mystery about whether Trump will abandon the Paris climate change deal that is supported by almost 200 countries (more on that below). He noted that the oil-and-gas industry isn't united on this, with some of the U.S. independent oil producers skeptical of the Paris accord that won backing from the international majors that operate worldwide. The majors, he said, will continue preparing for a lower carbon-emission world. "I don't see them going backwards from it," Yergin said, noting the focus on natural gas (which emits less carbon than coal when burned) and developing carbon capture technology.
Channeling Trump, oil’s rebound, and … the planet’s future
The mammoth CERAWeek industry conference is really concentric circles of events. Yergin chats onstage with heads of the world's most powerful oil companies, government ministers, the OPEC chief and more. Behind the scenes, there's all kinds of exclusive, invite-only events and parties, dealmaking, and candid sideline chatter. A few things and themes I'm watching …
Peter Thiel. The billionaire tech entrepreneur who bucked much of Silicon Valley and backed Trump campaign is now an influential player in Trump-world. Recent evidence: Thiel's chief of staff will be Trump's deputy chief technology officer. Thiel speaks Tuesday night.
Russia. Energy Minister Alexander Novak will be onstage for the opening plenary session at 1:35 pm Monday, an address that arrives amid intense focus — to put it mildly — on the Trump administration's relationship with Putin's regime. The next big name onstage a half-hour later? Exxon CEO Darren Woods, whose company would benefit if sanctions against Russia are lifted.
OPEC and shale. U.S. shale oil producers are increasing output and adding rigs now that prices have climbed back after the down cycle. But the sensitive markets will be looking for signs of whether the production cutting deal struck by OPEC and some other countries, including Russia, late year will be renewed when OPEC meets this spring. OPEC Secretary General Mohammad Barkindo speaks Tuesday.
EPA Administrator Scott Pruitt. The new EPA chief, an ally of fossil fuel companies, is a late add to the conference schedule. He speaks Thursday, and there's a lot to talk about as Trump seeks to decimate EPA's budget and Pruitt begins efforts to unwind Obama's climate change rules.
Climate change. Patricia Espinosa, the top UN climate official, speaks here Monday facing massive uncertainty about whether Trump will yank the U.S. — the world's second largest greenhouse gas emitter — out of the 2015 Paris climate pact. Some powerful oil companies including Exxon back the deal, but whether we'll see real pressure on Trump to stay involved is something to watch. CEOs of BP and Shell and other big companies are speaking this week.
Three things with Sen. Lisa Murkowski
Axios recently chatted with Sen. Lisa Murkowski, the Senate's top Republican on energy policy, during her layover in Seattle en route home. She chairs the Energy and Natural Resources Committee and the Appropriations subcommittee that writes Interior Department and EPA spending bills. Highlights:
Undoing Obama's big Arctic move: Murkowski is developing a multi-pronged strategy for attacking ex-President Obama's maneuver to permanently ban drilling in Arctic waters off her state's coast. She's weighing appropriations riders, separate legislation, and working with Trump.
"Hopefully I am going to have an opportunity to bring it up directly with the president, because I think he needs to understand what this action really effectively does and how limiting it is," she said.
Defending key cleantech and loan programs in the budget: She remains supportive of the Energy Department loan guarantee program but knows some House Republicans may come for it. "You are going to have some push on that issue," she said.
Murkowski is even more vocal about the Advanced Research Projects Agency-Energy, the plucky DOE branch that funds research into "high-risk, high-reward" breakthrough technologies. The program can "really make a difference" on innovation, job creation and finding ways to deliver energy that's affordable and green, she said.
The real appropriations work with Trump's people is beginning: Her Appropriations staff has begun initial meetings with Trump aides. "When I say very preliminary, I mean exactly that in terms of getting into the greater details, we have not yet done that, but part of that is just knowing who it is that we are dealing with and making sure we are all operating off of real information, and not rumors," Murkowski said.
The State Department’s low-key energy outreach in CERAWeek
This year's CERAWeek onstage lineup doesn't include anyone from the State Department. But Axios has learned that the State Department is sending a small delegation from its Bureau of Energy Resources for behind-the-scenes discussions.
Who will be there: Mary Burce Warlick, State's acting special envoy for the bureau, will lead the team. "The special envoy will meet with company representatives and foreign government officials to promote U.S. energy security and commercial priorities," a State Department official said.
Tea leaves: The trip signals that the bureau created under Hillary Clinton has a future under the new regime. It works to help other countries develop various kinds of energy resources (one aim has been to help curb Europe's reliance on Russian gas).
State's climate change work is expected to be eliminated or drastically curtailed. But Secretary of State Rex Tillerson lauded the energy bureau's work in written responses to questions from Sen. Jeff Merkley during his confirmation process, arguing it helps open markets for U.S. cleantech companies.
Trump readies EPA assault
An executive order taking aim at EPA's sweeping carbon emissions rules for power plants—a central pillar of the Obama climate agenda—is slated to arrive this week, though the White House has not provided firm plans.
Sharpen your pencils and your legal theories. A splashy attack on the rule is a political theatre that only signals the beginning of the real bureaucratic work that will take years. EPA must carefully document its rationale for unwinding the climate rule, and environmentalists will surely sue over the outcome.
Changing rules of the road. Beyond the power plant rules, Trump's administration is also taking aim at another big Obama climate policy: tough vehicle mileage mandates that will force automakers to meet a fleet wide average of 54.5 miles per gallon for cars and light trucks by 2025. As soon as this week, EPA is expected to reopen a decision made in the waning days of the Obama administration that the standards remain feasible, according to press reports.
The stakes of Trump’s Paris decision
I bumped into Fatih Birol, the executive director of the International Energy Agency, in the lobby of the Hilton Americas hotel where the conference unfolds. He sized up the stakes of Trump's decision about whether the U.S. will abandon the Paris climate accord.
"I don't know what the new position of the U.S. government will be in terms of climate change and specifically on Paris, but given the sheer size of the economy, U.S. energy markets and the role the United States plays internationally, I think the position of the U.S. government will be very important for the climate change agreement," he said.
Why it matters: The remarks reflect international concern that Trump will follow through on his campaign pledge to walk away from U.S. engagement (he's already making it harder for the U.S. to meet its carbon commitments by attacking Obama's emissions rules). But since the campaign Trump's plans have gotten pretty mysterious, and advocates for Paris are making their case for the U.S. to remain part of the pact that's designed to prevent the most dangerous amounts of global warming.
"I hope the U.S. will make that decision for the United States and for the rest of the world," Birol said.
Final jolt: Ken Bone is worried about Trump's EPA
Newly available this morning: Ken Bone is the coal-fired power plant operator who became a celebrity after asking about energy in the second Trump-Clinton debate. Now the famous red sweater is revealing a real green streak on the brand new edition of Platts Capitol Crude podcast, delving into the nuances of grid modernization, renewables, pipelines, and more. Takeaways ...
1. EPA chief Scott Pruitt's opposition to climate action worries him. "If we lose four years to someone who doesn't seem to believe that that is a real issue, that could put us in real trouble."
2. A big infrastructure deal should focus heavily on modernizing the "ancient" power grid in order to accommodate big increases in renewable power.
3. He's of two minds on Trump, supportive of his overall energy goals, but he's skeptical about outcomes and disagrees with steps like killing protections for streams from coal mining waste.
- "Right now, I think President Trump is doing the wrong things for the right reasons," Bone said. "He's removing some regulations in hopes it's going to create jobs and I'm not entirely sure it's going to work and I think it could have some negative consequences."