Axios Generate

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October 16, 2017

Good Monday morning! We have some Axios news to share. There's now a dedicated stream for energy content on Check it during the day for the latest breaking energy news and to catch up on the best parts of Generate. You'll find it at:

My latest Harder Line column delves into the dicey issues at play in the solar trade battle. You can catch a glimpse below before Axios' Ben Geman gets you up to speed on the rest of the news. Let's dive in.

America's Chinese solar dilemma

America has built a booming solar industry thanks largely to cheap Chinese solar panels, helping to create jobs and cleaner energy. But one part of the sector — manufacturers based in the U.S. — has been decimated by the overseas competition.

Why it matters: That conflicting dynamic reflects America's open-trade policies that President Trump has said he wants to reverse. It's also at the heart of an effort by two solar manufacturers urging Trump to issue tariffs or other remedies against a flood of cheap imports, a move he's likely to take. The protectionist measures by themselves are unlikely to alter what are decades-long policies pushed by politicians from both parties that have driven manufacturing of all kinds out of the United States.

Read the rest in the Axios stream here.

Trump's safe space (for now): reg rollbacks

Those shots above are President Trump's weekend Twitter pique at a New York Times piece on his incomplete efforts to reverse pillars of Obama's legacy on health care, Iran and more.

Why it matters: Boasting of pipeline approvals and rolling back Obama-era climate policies gets to an important point about this White House.

  • While it may lack the high profile of the Affordable Care Act wars, the administration has been moving aggressively to undo its predecessors energy and climate policies — an area where Trump has lots of runway because many Obama-era policies were undertaken without legislation.

Thought bubble: One reason why Trump has been able to advance some of those goals is because the intra-party friction in the GOP right now is relatively small on energy and climate compared with other topics consuming the White House.

Reality check: It gets harder from here and success is uncertain. Keystone pipeline developer TransCanada may never build Keystone despite the White House approval. Plus, the Environmental Protection Agency's move last week to withdraw the Clean Power Plan was the start of a long, contentious, and eventually litigious fight.

Case in point: Friday brought signs that a key battle in the fight over coal's future won't be resolved anytime soon.

Federal Energy Regulatory Commission chairman Neil Chatterjee said he's got lots of options to respond to Energy secretary Rick Perry's push for final action within 60 days on his proposal for new wholesale power market rules that better compensate coal and nuclear plants.

Chatterjee, while commending the "bold" proposal, said "final action" could actually mean a half-dozen potential steps that would keep the process going longer, such as...

  • issuing a new proposal for comment
  • extending the comment period on Perry's plan
  • convening "technical conferences."

Big in oil: Saudi Aramco's cloudy IPO

Driving the news: Let's revisit Friday's reports that Saudi Arabia may delay selling shares of state oil giant Aramco on international exchanges next year, and may even shelve the plan entirely.

The company is instead weighing plans to privately offer stakes to investors including China, according to various media reports including the Financial Times, which broke the story on Friday. FT says options includes selling shares to big sovereign wealth funds and institutional investors.

Why it matters: The planned IPO would likely have been the largest ever, generating massive fees for exchanges in New York or London, the leading candidates for the principal listing venue. It's meant to raise tens of billions of dollars to seed Saudi Arabia's long-term plan to modernize its economy and diversify away from oil.

Thought bubble, part 1: My Axios colleague Dan Primack passed along some context on what it would mean to scuttle a public listing and shift to private sales:

  • For Aramco, this would still bring in lots of cash. But having an IPO on a big public exchange would have enabled the company to float more shares in the future relatively seamlessly if the kingdom wants to raise fresh capital. That's harder with unique transactions negotiated with private buyers.
  • There are also risks for buyers, who would have a harder time dumping shares in the company if they decided to divest for one reason or another.

Thought bubble, part 2: The 11th-hour uncertainty is truly remarkable, given the stakes and the years spent planning for the IPO of 5% of the company.

For the record: The company called the FT report "entirely speculative" on Twitter over the weekend, adding: "All listing venues under review for optimal decision, IPO process is on track for 2018."

Be smart: David Goldwyn, who was the State Department's top energy official early in Hillary Clinton's tenure, says the uncertainty stems from the Saudi's aversion to putting information about the company in the public realm.

"The question was always whether the Saudis could tolerate the transparency requirements of the listing agencies," he tells Axios. "They pressed very hard for U.K. and others to relax their requirements. To their credit, the agencies did not lower their standards."

Goldwyn said Crown Prince Mohammad bin Salman and Aramco may have hoped that the appetite for the IPO was so strong that Aramco could sell shares without opening their books like a western company.

"That's not going to happen. The debate is not over, but score this round one point for the forces of transparency in the capital markets and zero for the forces supporting transparency in Saudi Arabia," said Goldwyn, who now runs a consultancy with energy industry clients.

A new demand forecast and other oil market notes

New peak forecast: A new report from the consulting firm Wood Mackenzie predicts that increasing vehicle efficiency and the rise of electric cars will lead global gasoline demand to peak by 2030.

  • "It's a double whammy for gasoline: in the next decade it's a fuel efficiency story. Post-2025, it's an EV story, as the ramp up in electric vehicle penetration displaces significant volumes of gasoline demand," they note.

However, overall global crude oil demand growth — driven by petrochemical needs — is not expected to peak until 2035 at the earliest, but will have slowed way down compared to prior decades.

Big picture: "Although oil demand grows to 2035 on aggregate, it is minimal compared with what we have seen over the past twenty years. The prospect of peak oil demand is very real," the report states.

"The oil industry is right to be concerned and should start to plan for the future," it says.


Explosion in Louisiana: An oil rig exploded in Lake Pontchartrain, which is near New Orleans. At least seven people were hospitalized and one is unaccounted for, according to the Times-Picayine.

Iraq conflict drives prices: Via Reuters, "Oil markets jumped on Monday as Iraqi [forces] entered the oil city of Kirkuk, taking territory from Kurdish fighters and raising concerns over exports from OPEC's second-largest producer."

New plant closure plans highlight coal's cloudy future

Driving the news: The Texas power company Luminant announced Friday that it plans to shutter two more coal-fired power plants. "Sustained low wholesale power prices, an oversupplied renewable generation market, and low natural gas prices, along with other factors, have contributed to this decision," the company said.

The plan to shutter 2,300 megawatts of capacity — which the Houston Chronicle notes is enough to power 460,000 Texas homes on a hot day — followed the company's announcement of a separate retirement a week earlier. All told that means roughly 4,100 megawatts of coal-fired capacity coming offline in Texas early next year.

Why it matters: Check out the chart above by Axios' Andrew Witherspoon, based on the consultancy M.J. Bradley & Associates' tracking of coal-plant retirements. The Texas announcements add to a wave of nationwide closure as coal is under pressure from cheap natural gas, renewables and regulations.

Big picture: The latest decisions come as the Trump administration is ramping up efforts to make power and environmental rules more coal-friendly, but whether those moves will halt or slow the trends is highly uncertain.

Go deeper: Utility Dive makes an important point here, noting that the Energy Department's push to have FERC rewrite wholesale power market rules in a way that helps coal would not affect these units, because FERC does not have jurisdiction over Texas power markets.

On our radar this week

A few things we're tracking...

Budget showdown: The Senate is expected to vote this week on the fiscal year 2018 budget package.

  • We'll keep a lookout for amendments on energy and climate change — the marathon "vote-a-rama" is often heavy on nonbinding messaging votes that nonetheless serve to take the political pulse on these topics.

Appropriations action: The Senate Appropriations Committee will mark up a fiscal year 2018 spending package for EPA and the Interior Department this week, with subcommittee action slated for Tuesday and the full panel meeting Thursday.

  • Why it matters: The bill will signal how much Senate GOP lawmakers want to support the White House push for very deep cuts to EPA's budget.

Nominees in focus: The Senate Environment and Public Works Committee gathers Wednesday to vote on nominees for high-level roles at EPA and other agencies.

  • Why it matters: The nominees will likely play important roles in EPA efforts to pare back Obama-era rules. They include Bill Wehrum, who will be EPA's top air pollution regulator if and when he's confirmed by the full Senate.

FERC: The next open meeting is Thursday, and the agenda is here.