Daily on Energy: Biden yields to Nord Stream 2 pipeline completion

  • Jul 21, 2021
  • Washington Examiner

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US AND GERMANY NOTCH NORD STREAM 2 DEAL: The U.S. and Germany are expected to announce a deal today paving the way for the completion of Russia’s Nord Stream 2 natural gas pipeline, as the Biden administration effectively yields to the inevitability of the project’s construction and looks to repair relations with its key European ally.

The two sides are committing to ensuring that Ukraine continues to receive roughly $3 billion in annual transit fees for natural gas that Russia pays under an agreement with Kyiv, the Wall Street Journal reports.

Ukraine, also a U.S. ally, fears the pipeline will strengthen Russia’s influence.

Germany and the U.S. will also invest in Ukraine’s clean energy infrastructure, spend on energy efficiency projects, and ensure energy security, according Reuters.

The $11 billion Nord Stream 2 pipeline, which is 98% complete, will double the volume of natural gas exported to Germany via an existing portion of the pipeline, using a route beneath the Baltic Sea, while bypassing an existing path through Ukraine.

How we got here: The new agreement enshrines a decision made by the State Department in May to waive sanctions on the corporate entity in charge of Nord Stream 2.

The State Department, in a mandatory report to Congress, said the company and its CEO are engaged in sanctionable activities, but the administration would waive penalties anyway, citing an interest in rehabbing the U.S. relationship with Germany that was frayed under former President Donald Trump.

Berlin views the pipeline as a commercial project and has bristled at sanctions as violating its sovereignty.

Political risks to Biden: In choosing not to sanction the main actor behind the pipeline, the Biden administration received criticism from Republicans and hawkish Democrats that it is being soft on Russia.

Sen. James Risch of Idaho, the top Republican on the Foreign Relations Committee, criticized the Biden administration’s pending agreement last night.

“This proposed ‘agreement,’ to allow the completion of Nord Stream 2 between the United States and Germany is full of promises and assurances, but offers little in the way of meaningful measures to address the key national security threats Nord Stream 2 poses to U.S. allies and interests,” Risch said.

Biden’s defense: The administration has emphasized that it always opposed the Nord Stream 2 for its potential to increase Europe's reliance on Moscow for energy.

The European Union already imports 45% of its natural gas from Russia.

But the administration was in a tough spot since the project progressed during the Trump administration and was mostly finished before President Joe Biden took office.

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CHAMBER PRESSES FOR ‘REALISTIC’ CES THAT CREDITS NATURAL GAS: The U.S. Chamber of Commerce sent a letter today (which I obtained) to relevant congressional committees with recommendations for how lawmakers should design a clean electricity standard, a top priority of the Biden administration.

The Chamber earlier this year endorsed carbon pricing, but in sending the letter, is conceding that a CES is favored by Democrats.

The Chamber envisions a much less aggressive approach than what the Biden administration and Democrats are shooting for.

It calls for Democrats to set a timeline for cutting emissions that is “realistic,” arguing “there is no clear path” to achieving net-zero emissions in the power sector.

Democrats are aiming to set a standard requiring the utility sector to use 80% clean power by 2030, a target that would keep pace with Biden’s goal of 100% carbon-free electricity by 2035.

A CES should also be “flexible” to consider the possibility that certain clean technologies might not be “deployable” on a time frame required by Congress, the Chamber said. It calls for a CES to be “fuel neutral” and to enable a “broad suite” of compliance options, allowing for partial credit to lower carbon options such as natural gas.

This conflicts with the path sought by Democrats working on a CES such as Sen. Tina Smith of Minnesota, who has said natural gas should only be credited if plants are equipped with carbon capture technologies.

The Chamber also says utilities should be “exempt” from other power sector regulations that might overlap with a CES.

ENERGY DEPARTMENT ENDORSES STRICTER BUILDING CODES: The Energy Department announced new building code determinations this morning.

“More efficient building codes are key ways to eliminate wasted energy, lower Americans’ energy bills, and reduce carbon emissions that contribute to climate change,” said Energy Secretary Jennifer Granholm in a statement.

DOE said its preferred building codes would achieve energy savings of 4.7% for commercial buildings and 9.4% for residential buildings compared to the previous editions of the model energy code, resulting in 900 million metric tons of avoided carbon emissions, equivalent to annual emissions from nearly 200 million cars.

America’s residential and commercial buildings account for 35% of U.S. carbon emissions, and 40% of the nation’s energy use.

Building codes in the U.S. are set by state and local officials, but they are usually based on model codes set by the International Building Code or International Residential Code.

REPUBLICANS POISED TO BLOCK BIPARTISAN INFRASTRUCTURE DEAL...FOR NOW: Senate Republicans say they’ll vote this afternoon to block debate on a $1 trillion infrastructure framework because of unsolved differences and a lack of information about the package, the Washington Examiner’s Susan Ferrechio reports.

Senate Majority Leader Chuck Schumer has rejected calls from key GOP negotiators to postpone the vote until Monday in order to provide more time to iron out differences and calculate detailed cost analyses.

"There's absolutely no reason why he asked to have the vote tomorrow, and it does not advance the ball,” Sen. Susan Collins, a co-author of the package and a Maine Republican, told Ferrechio. “It does not achieve any goal except to alienate people.”

Schumer is likely to ensure that he can bring the measure back up for a vote in the future, but Democrats would not commit to it, arguing the GOP should simply vote to proceed to the bill this afternoon.

But following a meeting last night, several senators leading talks on a bipartisan infrastructure package expressed hope that a deal is still possible, with legislative text possibly available early next week.

“Wednesday is premature, but I think Monday would be sufficient time for us to get all the remaining issues solved and socialize the legislation,” Sen. Mitt Romney, a Utah Republican, told reporters.

JAPAN’S NEW CLEAN ENERGY TARGETS FOR 2030: Japan announced big revisions today to its clean energy targets for this decade, proposing to double the share of renewable energy in its power grid and slashing fossil fuels to less than half.

But coal will continue to persist in Japan, the world’s third largest economy, with the dirtiest fuel targeted to provide 19% of Japan’s power in 2030, down from 32% in 2019.

More surprisingly, Japan is also planning an even bigger cut in LNG power generation, proposing to slice the cleaner burning fossil fuel to 20% of the country’s power mix by 2030 from 37% — a nearly 50% fall. Japan is the world’s largest importer of LNG and helped pioneer the industry, as Bloomberg’s Stephen Stapczynski notes in this helpful thread.

Japan pledged — at Biden’s climate summit earlier this year —- to cut emissions 46% by 2030 compared to 2013 levels.

Japan is aiming for renewables (solar, wind, hydro) to make up 36-38% of its power mix by 2030, compared to its old target of 22-24%.

Nuclear power will have to make a comeback in order for Japan to reach its goals, but its target remains unchanged from the previous plan: 20-22% of power generation by 2030 from 6% today.

Only 10 of Japan’s nuclear reactors have restarted after the 2011 Fukushima disaster, but the country is aiming for 27 of its reactors to resume operations to hit its target.

Japan, which is seeking to build a supply chain for hydrogen, includes a target for the fuel for the first time, proposing that 1% of its power come from hydrogen or ammonia in 2030.

AIR QUALITY ALERTS CAUSED BY WILDFIRES: Hazy air along the East Coast and parts of the Midwest is being caused by more than 80 wildfires burning over 1 million acres across 13 Western states, the Washington Examiner’s Noah Adamitis reports this morning.

Multiple areas have had air quality alerts issued, including the entire state of New York, which issued it yesterday over concerns about the amount of "Fine Particulate Matter" in the air. Other areas include parts of New Jersey, Baltimore and other parts of Maryland, the majority of Minnesota, and several counties in central Pennsylvania.

Oregon's Bootleg Fire, which has been classified as a megafire and is the fourth largest in the state's history, is one of many driving the decrease in air quality. The Beckwourth Complex Fire in California has also reached megafire status after burning over 100,000 acres.

US OIL DEMAND TICKS UP: U.S. oil demand bounced back last week, rising to 20.6 million barrels per day after dipping to 19.3 million barrels p/d the week prior, the Energy Information Administration said today in its Weekly Petroleum Status report.

Diesel consumption jumped the most, but gasoline demand also crept up while jet fuel use declined.

EIA also reported a crude oil inventory build of 2.1 million barrels after weeks of declines.

THE ROAD TO 40: The White House issued guidance to agencies yesterday on how to implement Biden’s promise that 40% of the benefits from federal energy and environmental spending are directed to “disadvantaged communities.”

The Biden administration outlined variables that define a vulnerable community, including those facing high cumulative pollution, high energy costs, exposure to the effects of climate change, and lost fossil fuel jobs due to the transition to cleaner energy.

It lists 21 programs that will distribute benefits under the “Justice40 initiative,” including flood mitigation grants, drinking water funding, grants to remove lead from homes, and rural energy financing.

E&E News has much more on this, which is just the first step as the White House confronts friction among Democrats over the definitions of “disadvantaged communities” and the benefits included in the program.

E&E News Bernhardt: Trump tried to boost offshore wind, not kill it

New York Times China breached dozens of pipeline companies over last decade, US says

1 p.m. ConservAmerica will host a webinar examining the pros and cons of carbon pricing.

9:30 a.m. 366 Dirksen. The Senate Energy and Natural Resources Committee will hold a business meeting to consider the nominations of Tracy Stone-Manning to be director of the Bureau of Land Management, Andrew Light to be DOE’s assistant secretary of energy, Samuel Walsh to be DOE’s general counsel, Shalanda Baker to be director of the Office of Minority Impact at DOE, and Robert Anderson to be Interior’s solicitor.

10 a.m. 406 Dirksen. The Senate Environment and Public Works Committee’s subcommittee on chemical safety, waste management, environmental justice, and regulatory oversight will hold a hearing to examine “current issues that adversely affect environmental justice communities.”

10 a.m. 366 Dirksen. The Senate Energy and Natural Resources Committee will hold a hearing to examine White House budget request for the Department of the Interior for Fiscal Year 2022.

10:30 a.m. 2123 Rayburn. The House Energy and Commerce Committee’s energy subcommittee will hold a hearing on oversight of the Federal Energy Regulatory Commission.