Daily on Energy: John Kerry questions long-term future of natural gas

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THE BIDEN ADMINISTRATION STANCE ON NATURAL GAS: Climate envoy John Kerry says natural gas is not “anything near a long-term solution” to help address climate change even while it can help replace coal in certain countries in the near-term.

Kerry’s stance, declared in an interview with the New Yorker published last night, is notable because the Biden administration has struggled to articulate a consistent position on the role of natural gas.

Here is the entire quote: “Russia has an option of quickly closing coal plants that are more than forty years old, not working that effectively, and not needed, in favor of transitioning to gas for the moment. I emphasize ‘for the moment’ because gas is still a fossil fuel, and gas is mostly methane, so it leaks and also produces CO2. It’s not, in our judgment, anything near a long-term solution, unless somebody discovers one-hundred-percent abatement.”

Energy Secretary Jennifer Granholm has repeatedly said that shipping U.S. liquified natural gas abroad can play an important role in replacing dirtier coal, especially in Asia. She has also pressed the oil and gas industry to do a better job of reducing methane emissions associated with LNG in order to make that case credible. But she has not definitively said how long gas can continue playing a useful role in the clean energy transition.

Still, liberal climate activists who have been pushing the administration to reject natural gas, even as a replacement for dirtier coal abroad, are interpreting Kerry’s comments as being closer to their position.

“Special Envoy Kerry’s comments were definitely encouraging,” Collin Rees, senior campaigner with Oil Change U.S., told me. “It’s good to see a recognition from Kerry that ‘slightly less dirty’ won’t cut it — and that zero emissions means no gas or other fossil fuels.”

Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writer Josh Siegel (@SiegelScribe). Email jsiegel@washingtonexaminer.com for tips, suggestions, calendar items, and anything else. If a friend sent this to you and you’d like to sign up, click here. If signing up doesn’t work, shoot us an email, and we’ll add you to our list.

ANOTHER TAKE…NATURAL GAS CAN BE ‘SECOND PILLAR’ CLIMATE TOOL: The versatility of gas infrastructure — particularly its ability to be converted to carry low-carbon fuels — creates an opportunity for gas to be a “second pillar of decarbonization” over the long-term, according to a new study by IHS Markit, a research group.

Natural gas pipelines have the potential to carry low-carbon gases, such as ammonia, hydrogen, synthetic methane, and renewable natural gas.

The study found that these applications of low-carbon gas could be viable in the market if policymakers imposed a carbon price between $40-$60 per ton.

It also says that natural gas replacing coal power generation in Asian countries could cut emissions by around 1 gigaton, equivalent to around 3% of all greenhouse emissions from the energy sector. Achieving that would require an increase in global gas production of about 15% from today’s level.

IHS Markit looks to respond to concerns that natural gas investments would “lock in” future emissions for several decades, since the infrastructure supporting gas can be repurposed.

Pipelines can ship renewable natural gas or hydrogen, while gas-fired power plants can convert to run on hydrogen or ammonia, or in some circumstances be retrofitted to use carbon capture technology.

“Renewable capacity will continue to grow, electrification will broaden its reach and improvements in battery storage will make a decarbonized grid more reliable,” said Michael Stoppard, chief strategist of global gas at IHS Markit. “But the transition to a low-carbon gas supply will also be needed to serve the sectors beyond the reach of electrification and wires.”

INFRASTRUCTURE BILL FLOATS NATIONAL MILEAGE FEE: The $1.2 trillion bipartisan infrastructure accord would institute a multiyear “national motor vehicle per-mile user fee pilot” program, the Washington Examiner’s Christian Datoc reports.

Top White House officials stated for months that paying for the infrastructure investments by indexing gas taxes to inflation or instituting new electric vehicle mileage fees were hard red lines for the president on the grounds that they would raise taxes on people earning less than $400,000 per year.

Transportation Secretary Pete Buttigieg and Treasury Secretary Janet Yellen are directed in section 13002 of the bill to provide recommendations to Congress three years into the pilot’s life cycle, at which time Congress could choose to pass new legislation implementing national per-mile fees fully as an established funding source for infrastructure improvements.

Still, White House officials disputed the idea that the inclusion of the pilot program in the infrastructure bill guarantees the establishment of a future, nationalized mileage fee and suggested that, depending on how Buttigieg and Yellen’s recommendations shake out, the White House could oppose legislation implementing the tax.

How it would work: The program directs Buttigieg and Yellen to “establish, on an annual basis, per-mile user fees for passenger motor vehicles, light trucks, and medium- and heavy-duty trucks, which amount may vary between vehicle types and weight classes to reflect estimated impacts on infrastructure, safety, congestion, the environment, or other related social impacts.”

The Cabinet officers must also provide annual reports to Congress on the program’s progress and the viability of full-national implementation and “establish a mechanism to collect motor vehicle per-mile user fees” with or without the help of third-party vendors. The bill explicitly states that any fees collected would not be considered “tolls,” which transportation law specifically states are not taxes.

The pilot program would be funded through 2026 and enlists volunteer drivers “from all 50 States, the District of Columbia, and the Commonwealth of Puerto Rico” to test “vehicle-miles-traveled collection tools.”

MCCONNELL’S WARNING TO DEMOCRATS…MOVE SLOW: Senate Minority Leader Mitch McConnell is threatening to block the bipartisan infrastructure package if Democrats cut off debate on amendments too quickly, the Washington Examiner’s Susan Ferrechio reports.

The Kentucky Republican’s warning comes in response to a plan by Democrats to wrap up the measure this week.

Democrats are planning a vote tomorrow to end debate on the carefully negotiated legislation and to pass it before leaving town for the Friday funeral of former Sen. Mike Enzi of Wyoming, who died following a bicycle accident last week. That’s too fast, McConnell says.

“There’s an excellent chance it will be a bipartisan success story for the country, and to try to truncate an amendment process on something of this magnitude, I think it’s a mistake,” McConnell said of the bill.

Republicans say Majority Leader Chuck Schumer is attempting to rush passage of the spending bill in order to clear next week’s schedule for a critical budget resolution that would give Democrats the authority unilaterally to pass a $3.5 trillion spending measure later this year, which is expected to have major climate provisions.

US OIL DEMAND KEEPS CHURNING UP: U.S. oil demand rose for the third straight week, increasing to 21.2 million barrels per day from 21.1 million barrels p/d the week prior, the Energy Information Administration said today in its Weekly Petroleum Status report.

Consumption of gasoline saw a 5% jump to 9.8 million barrels p/d for the week ending July 30.

EIA also reported a crude oil inventory build of 3.6 million barrels after a stock draw last week, forcing oil prices lower this morning.

At the time of writing, Brent crude was trading at $71.37 while the U.S. benchmark WTI traded at $69.18.

COURT REBUKES FERC OVER LNG APPROVALS: The U.S. Court of Appeals for the D.C. Circuit yesterday ordered FERC to redo permits for the Rio Grande LNG and Texas LNG facilities, ruling the commission did not undertake a rigorous analysis of environmental impacts. The court said FERC fell short on its social cost of carbon analysis for calculating the projects’ effect on climate change and did not sufficiently take into account concerns of nearby residents.

“It provides another example of where FERC took so narrow a view of its statutory responsibilities during the Trump Administration that it has created a problem for projects it sought to facilitate,” the research group ClearView Energy Partners said in a note.

ENERGY DEPARTMENT MOVES TO REPEAL TRUMP DISHWASHER RULE: The Department of Energy issued a proposal yesterday to repeal a Trump administration rule creating a new class of dishwashers that wash and dry faster.

The Trump administration’s rule established a separate product class for dishwashers that clean and dry dishes within one hour, an action that excluded those appliances from current energy and water conservation standards.

The Energy Department is arguing the Trump administration didn’t follow a law requiring an analysis of whether the rule changes to dishwashers were designed to achieve the best efficiency improvement that’s technologically feasible and economically justified.

The Rundown

Wall Street Journal New Zealand’s renewable energy dreams get a reality check

New York Times Democrats seek $500 billion in climate damages from big polluting companies

The Detroit News Ford slated to spend more on EVs than on internal combustion engine vehicles in 2023

Calendar

THURSDAY | AUG. 5

10 a.m. 366 Dirksen. The Senate Energy and Natural Resources Committee will hold a hearing to examine the role of and programs within the Department of Energy’s Office of Science.

WEDNESDAY | AUG. 11

12 p.m. CRES Forum will hold a virtual event titled, “Resiliency & Clean Energy: Keeping the Lights on While Reducing Emissions.”