Axios Generate

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August 30, 2017

Good morning and welcome back. My Axios colleague Haley Britzky has compiled a helpful list (with an amazing photo) of some of the organizations helping with Harvey relief in different ways. Onward . . .

Warning: Pollution risks are growing from Harvey's onslaught

We plan to keep you updated with the latest information on the impact from Harvey, so keep your eye on the Axios stream. Here are two pieces that discuss environmental and public health concerns stemming from storm damage:

Danger from chemical facilities: "Hurricane Harvey's winds and floodwaters have created emergencies at chemical facilities across the Houston area, from an Exxon Mobil roof collapse at its massive Baytown complex to the risk of an explosion at a chemical plant northeast of Houston," via a report from the Houston Chronicle last night.

Increased pollution from spike in air releases: Politico looks at chemical releases that are triggered from the shut down of petrochemical plants, as well as other impacts from the storm.

  • "Hobbled oil refineries and damaged fuel facilities along the Gulf Coast of Texas from Tropical storm Harvey have released more than two million pounds of dangerous chemicals into the air this week, adding new health threats to Houston's already considerable woes," they report.

Gulf Coast energy update

Happening now: Harvey, now in the tropical storm category, continues its Gulf Coast barrage and made another landfall this morning, this time in Louisiana.

  • Bloomberg warns it is "threatening yet another major U.S. refining center."

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Meanwhile, Texas continues to deal with the impact from the hurricane.

Refinery woes: According to the latest update from S&P Global Platts, over 2.3 million barrels per day of refining capacity in Texas remains down, but the true figure is likely well above 3 million when refineries running at reduced rates are factored in.

Overall, various estimates show that roughly 20% of U.S. refining capacity is out of action as of yesterday.

The ports of Houston and Corpus Christi, which are vital to energy flows, both remain closed.

Why it matters: A Goldman Sachs note Wednesday morning states that woes at refineries, ports, pipelines, and storage facilities due to the massive flooding, not the crude oil and natural gas production that's already starting to come back, is the biggest problem for the sector.

  • "We view persistent refinery and midstream capacity outages as the two biggest potential sources of sustainable disruptions, in turn creating risk that the ongoing recovery in production will only be partial," they note.
  • Problems could last: "The continued increase in flooding creates high uncertainty on the amount of damage that US refineries will incur, the pace at which the shut down will reverse and the magnitude of capacity that will be impaired over the next few months."

Gas prices: Via GasBuddy's Patrick DeHaan, average nationwide gasoline prices have climbed to $2.41 per gallon, an increase of over three cents from yesterday and are approaching a two-year high.

Big picture: The Columbia Center on Global Energy Policy is out with a good overview of the storm's effect and how changes in U.S. energy infrastructure are affecting the outcome. A few key points...

  • Uncharted waters: There has been a huge expansion of energy infrastructure on the Gulf Coast in the last decade since Hurricane Katrina.
  • "The shale boom was accompanied by a build out of a great number of oil and gas processing facilities, new pipelines and compressor stations, condensate splitters, crude and product tank farms and storage units, railcar loading and unloading facilities and coastal export terminals. The storm readiness of these facilities is unclear."
  • "While 'survivors' of Katrina may have beefed up their flood preparedness, new facilities may not prove as resilient."
  • The good news is that refiners bolstered their flood readiness after Katrina in 2005. But it's unclear if anyone imagined this kind of catastrophic rainfall.

Global impact: This Center for Strategic and International Studies analysis notes that purchasers of U.S. crude and refined product exports are on the market for alternatives as the Gulf ports and infrastructure remain hobbled.

  • "Traders are reportedly already scouring Asian and other markets in search of refined product, and refiners outside the affected area with available refining capacity — like the U.S. East Coast and Europe — could soon experience increased utilization rates and sales of gasoline, diesel, and aviation fuel."

Power update: In Texas, 274,000 customers remain without power, according to an Energy Department report yesterday afternoon.

Behind the scenes of DOE's grid study

On the record: Conservative energy economist Travis Fisher, who led the Energy Department's big grid study, sat for an in-depth interview on the latest edition of Greentech Media's Interchange podcast.

I recommend the whole, wonky thing because I'm just scratching the surface here, but if you don't have 72 minutes, here's a few tidbits...

The big leak: "On some level it was a sense of betrayal because we had been very open and inclusive throughout the whole process," he said of leak of a staff draft of the report in July.

At the time, some speculated that the leak put DOE in a tough position because of the finding (maintained in the final) that natural gas has been the main driver of coal- and nuke-plant retirements, an important (if unsurprising) finding amid fears on the left that the Trump administration would use the report as a stalking horse to attack renewables.

  • Fisher counters: "The only thing the leak changed was that we had to tighten the process a bit to make sure that it wasn't going to go back to whoever leaked it...In terms of the politics of it, the findings, the scope of the research, none of that changed."

Market views: While the report doesn't cast renewables or environmental rules as the main driver of coal and nuclear fleet retirements, it does raise concerns about the future resilience of the grid, and contains policy suggestions that could help those sources.

  • "In this world where we are seeing a lot of new gas and a lot of new VRE [variable renewable energy], that raises a lot of interesting questions that we never really had to talk about before. Of course that pushes you into a resilience conversation because those resources have very different resilience characteristics that we haven't seen from, for example, coal and nukes," Fisher says.

Defending climate omission: Challenged on the idea that climate should have been factored into the analysis, Fisher said that wasn't part of what Energy secretary Rick Perry asked for when he ordered the study.

  • "I can say, just based on my conversations with [Perry], not necessarily relating to the study, he is very concerned with CO2 and his take on it is, if you want to get serious about CO2, why are so many people against the existing nuclear power plants that we have, and I think that is a fair question to start with."

Climate fight could await Congress

Let's follow up a little on this piece in the Axios stream, where Shane Savitzky reports on a House Republican's bid to thwart funding for the National Climate Assessment in spending legislation due on the floor next week...

What's next: Rep. Andy Biggs' effort is among several climate-related amendments that lawmakers are proposing for debate when the House takes up the bill to fund the Environmental Protection Agency, the Interior Department, and other agencies.

  • Check out the list here. It includes not only Biggs' amendment but also GOP amendments to restrict funding for other climate initiatives (which the White House is scuttling anyway), as well as many Democratic proposals.
  • The various Democratic amendments include efforts to prevent: money from being used for withdrawing from the Paris climate deal, the EPA from rolling back auto emissions rules, and agencies from suppressing climate science information.

Quick take: Who knows which climate-related amendments might actually come up for votes (the GOP-controlled Rules Committee will make that decision). But if and when some do, a key question is whether a substantial number of GOP lawmakers break with their leadership by endorsing federal climate studies and programs.

  • It's a live topic after July's floor vote that saw several dozen Republicans side with Democrats to keep language in a defense programs bill that called climate change a "direct threat" to national security and requires new Defense Department analysis of its effect on the military.

Renewables industry preps for tax debate

Getting ready: Renewable power companies are sharpening their message and advocacy ahead of the tax overhaul fight on Capitol Hill.

The American Council on Renewable Energy shared a briefing paper with Axios that it's circulating that lays out their position. A few toplines...

  • Don't mess with the existing credits for wind and solar that were extended in late 2015 and sunset anyway in few years.
  • Broaden those incentives to include technologies that weren't included in the 2015 deal, like biomass, geothermal, and hydro.
  • Allow quick write-offs of capital costs for renewables projects.
  • Make renewables and grid modernization part of an infrastructure initiative.
  • Broaden use of the Master Limited Partnership tax structure to apply to renewables.

Plus, a warning on infrastructure: The Council fears President Trump's campaign proposal for new tax credits for infrastructure could cannibalize tax equity financing opportunities for renewables.

The brief, published through their U.S. Partnership for Renewable Energy Finance arm, warns it could "exacerbate the tax equity supply-demand imbalance and thwart both infrastructure and renewable energy investment objectives."

Making their case: The group has brought renewable energy officials to meet with the House and Senate tax-writing committees in recent months and met with White House staff, and they're planning to ramp up outreach again next month with more meetings between members and congressional offices.