Apr 1, 2020

Axios Generate

By Ben Geman
Ben GemanAmy Harder

Welcome back. Today's Smart Brevity count: 1,244 words, < 5 minutes.

🎵Tomorrow brings the birthday of the late Marvin Gaye, whose brilliance opens today's edition...

1 big thing: Renewable industry eyes next COVID-19 bill

Illustration: Aïda Amer/Axios

The renewables sector is pressing for the "Phase 4" COVID-19 response bill to provide the aid that was omitted from the recent $2 trillion rescue package — and they might have a wider opening this time around.

Why it matters: Wind and solar developers are warning of project cancelations and layoffs as activity is frozen, supply chains are disrupted, and companies risk missing deadlines to use tax credits.

Where it stands: The industry has been seeking provisions including extended deadlines to qualify for incentives, and the ability to receive them as upfront payments because the collapsing economy is freezing the tax financing market.

The odds: While the next package, like the last one, will be the stuff of intense lobbying from a range of industries, there's reason to think the sector could have a chance.

  • House Speaker Nancy Pelosi has listed the energy grid and infrastructure more broadly among the areas she'd like to address.
  • The first bills were largely emergency rescue and stabilization plans, the next phase is shaping up as a better fit with the notion of stimulus and recovery.
  • President Trump yesterday tweeted that he wants to revive focus on infrastructure (though he's not a fan of renewables).
  • The White House and Republicans didn't get their sought-after $3 billion for buying oil for the Strategic Petroleum Reserve in the last package, so that could be an energy-related bargaining chip.

But, but, but: All that said, it's not clear how wide the opening is. For one thing, a bipartisan infrastructure deal is almost a mythical beast — spoken of at times, but never materializing.

Plus, Republicans, like last time around, are warning Democrats against what they're framing as extraneous provisions.

  • Via NBC News, Sen. Lindsey Graham told Fox News on Tuesday that "it is not time to do the Green New Deal."
  • Senate Majority Leader Mitch McConnell yesterday told conservative talk radio host Hugh Hewitt: "I’m not going to allow this to be an opportunity for the Democrats to achieve unrelated policy items that they would not otherwise be able to pass."

What they're saying: Bill Parsons, COO of the American Council on Renewable Energy, tells me via email...

  • "Now that Congress is turning its attention to infrastructure and other sector-specific concerns, we want to make sure policymakers understand the significant supply chain disruptions and other pandemic-related project delays currently threatening the jobs of hundreds of thousands of workers in the renewable sector and the time-sensitive tax incentives on which those projects depend."
  • The industry "wants to be a key economic driver to help the nation through this downturn, as well as an effective climate solution over the long haul."

Go deeper: Left-behind industries clamor for billions in next stimulus bill (Bloomberg)

Bonus: The global stimulus picture

The International Energy Agency wants to help governments weave climate-friendly provisions into economic recovery packages crafted in response to COVID-19.

Driving the news: IEA head Fatih Birol said via Twitter that they're preparing a report that will "offer actionable measures for governments to support economic recovery & job creation while achieving structural emissions reductions."

  • Birol also met remotely yesterday to discuss the topic with EU energy commissioner Kadri Simson and Frans Timmermans, who is the European Commission's executive vice president in charge of the European Green Deal.

Go deeper: Coronavirus response should promote clean energy — IEA

2. Oil crisis news: Saudi Arabia, Trump, BP

Trump keeps floating the idea of some kind of petro-diplomacy, yesterday saying at the White House that he'd be "joining at the appropriate time if need be" in Saudi-Russia discussions.

But, but, but: For now, there's no apparent sign of a thaw. Bloomberg reports this morning...

  • "Saudi Arabia showed no sign of bowing to pressure from U.S. President Donald Trump to dial back its oil-price war with Russia. Instead, the kingdom pushed crude supply to record levels."
  • Their story also notes that while Russia has struck a "more conciliatory tone" by saying it would not undertake a major production increase, it "hasn’t offered any concrete proposals to end hostilities" with the Saudis.

* * *

BP this morning became the latest oil giant to announce cutbacks amid the collapse in prices and the cratering of oil demand from the pandemic.

  • The company said it's reducing planned 2020 capital spending to $12 billion, a 25% cut from prior plans. This includes cutbacks in U.S. shale production, something that's happening with many producers (more on that below).
3. The coming shale patch pain
Reproduced from Wood Mackenzie; Chart: Axios Visuals

The consultancy Wood Mackenzie has tallied how much U.S. oil producers are cutting back spending as the industry moves to crisis footing.

The big picture: What's already announced — from both independent producers and global giants like Chevron and BP — is eye-popping.

  • And there's more to come as companies deal with prices at their lowest levels in two decades due to COVID-19 crushing demand and the Saudi-Russia price war.

Driving the news: "22 U.S. independents have cut investment for 2020 by a total of US$20 billion, an average of 35%, and three by 50% or more," they write.

  • The chart above shows some of those announcements, but the cutbacks are deepening.
  • Indeed, Devon Energy and Diamondback energy announced even further cuts this week.

Flashback: U.S. producers also cut back sharply when prices nosedived in the mid-2010s.

  • Wood Mackenzie notes that this time the spending cuts so far have been similar, but have arrived faster — and more are expected.
  • "[C]ompanies today are far leaner than back then; and what we’ve seen so far may just be a taste of what’s to come," they write.
  • They note that multiple rounds of spending reductions already announced by some companies are a sign that "further, deeper cuts" are coming for many U.S. independent producers.

Go deeper:

4. Battle lines drawn over Trump's auto rules

The response to the Trump administration's final rules weakening vehicle mileage and emissions standards through the mid-2020s offers a hint of the shifting plates in the industry and the battles ahead.

Why it matters: The prior rules were a pillar of the Obama-era climate agenda, and transportation is the nation's largest source of greenhouse gas emissions.

  • In a sign of the weight and intensity of the fight, former President Obama took what Axios' Ursula Perano points out is the rare step of publicly rebuking the administration.
  • And the White House last night released a statement hailing the rules for giving a "reality check to radical Green New Deal environmental activists" and "delivering the largest deregulatory action" of Trump's tenure.

Catch up fast: Reuters has an excellent piece on yesterday's joint EPA and Transportation Department announcement of rules that run through model year 2026. The upshot is that they require 1.5% annual efficiency gains, compared to 5% under the prior mandate.

  • The administration says the rule will "result in about 2 billion additional barrels of oil being consumed and 867 to 923 additional million metric tons of carbon dioxide being emitted and boost average consumer fuel costs by more than $1,000 per vehicle over the life of their vehicles."
  • But, but, but: "The administration said the revised rules will cut the future price of new vehicles by around $1,000 and reduce traffic deaths. Environmentalists dispute that the rule will reduce traffic deaths," Reuters reports.

The intrigue: The responses offer a window into the tensions within the auto industry.

  • Most of the industry thought the Obama-era rules had become infeasible, but from there, things get more confusing and scattered.
  • In a sign of those internal disputes, the Alliance for Automotive Innovation, which is the industry's main trade group, yesterday declined to offer a firm position.
  • The group instead said it's "carefully reviewing the full breadth" of the rule to gauge how much it supports their various market, consumer and environmental priorities.
  • Another sign of industry divisions: Volvo yesterday said it's joining the preliminary agreement California reached last year with Ford, VW, BMW and Honda to meet tougher standards for its nationwide fleet than the Trump plans require.

What's next: Litigation. California and states that follow its lead on emissions are certain to sue, and so will environmental groups.

Ben GemanAmy Harder