US Oil & Gas Association: Advocate for the Oil & Gas Industry Since 1917 Washington Update from USOGA

Permitting Reform Update

US Oil & Gas Association

Advocate for the Oil & Gas Industry Since 1917

Washington Update from USOGA

Permitting Reform Update:

We anticipate the GOP permit reform legislation from Senate Energy and Natural Resources as well as Senate Environment and Public Works Committees being introduced late next week. We will circulate those bills as soon as we see them. We have been working closely with Committee staff to develop a great legislative proposal to begin the Senate negotiations. Staff and members have been great to work with and we will give you more next week.

EPA is coming for natural gas-fired power plants (and coal) 

Over the weekend, EPA and the White House started leaking plans to impose limits on greenhouse gas emissions from natural gas and coal-fired power plants. While the rule isn’t out yet, it would appear that EPA plans to claim that carbon capture is the “best system of emissions reduction” under the Clean Air Act.   

The Clean Air Act gives EPA the authority to determine the “best system of emission reduction” (BSER) for existing power plants, and then to require those emissions controls on new and existing power plants. To determine what emissions controls are “best” the Clean Air Act requires that the controls be ‘‘adequately demonstrated’’ and sets emission standards based on that best system, ‘‘taking into account’’ ‘‘cost . . . non-air quality health and environmental impact and energy requirements.’’ 

In the Supreme Court case West Virginia v. EPA, the issue of what EPA could determine was the best system of emissions reductions was front and center. In the Obama administration’s Clean Power Plan, EPA tried to say that it was the best system of emissions reduction to reduce carbon dioxide emissions through generation shifting—that is shifting from coal to natural gas, solar, or wind. 

One of the reasons the Supreme Court struck down Obama’s Clean Power Plan, was that EPA was trying to require changes “outside the fence line” of the power plant. In other words, the Clean Air Act gives EPA authority to require emissions controls that are attached to the power plant or inside the fence line, but not to require things well outside of the power plant.   

In EPA’s upcoming regulation of natural gas and coal-fired power plants, the leaks from EPA indicate that they will set an emissions standard so low that it can only be met with carbon capture or with mixing hydrogen with natural gas. 

The problem is that carbon capture in power plants hasn’t worked very well. When carbon capture has been tried on coal-fired power plants (at Kemper and Petra Nova) it has failed. In the case of Petra Nova, while it was running, the carbon dioxide was used for EOR, something the Biden administration isn’t a fan of. 

At natural gas power plants, there is the NET Power Demonstration Facility, which is a 50MW demonstration plant that appears to be more of a success.   

It seems obvious that carbon capture is not adequately demonstrated at coal fire power plants, given that the times it has been tried it has failed. But it is a bit closer call for natural gas power plants given the apparent success of Net Power. But the cost is still an important consideration and it is unclear how expensive it really is.

Regardless, EPA’s number #1 goal is not to do something legal, but rather to do something that might possibly be legal to continue to shift investment away from carbon dioxide emitting sources. The Biden administration has no respect for the law.   

The Siren Song of Ethanol Tax Credits to Midwesterners  

One of the must-past items for Congress this year is raising the debt ceiling. The Republicans obviously see this as an opportunity to extract concessions on spending from the Democrats. On Wednesday, the House narrowly passed a bill that would raise the debt ceiling, but would also implement several spending cuts.  

To get an idea of the difficult task the Speaker has ahead, here is an example. Raising the debt ceiling has nothing to do with energy except that the earlier draft of the debt ceiling bill reduced some tax credits for ethanol. Here’s how E&E News describes the situation:  

At first, GOP leaders agreed to zero out a slew of clean energy tax incentives codified through the Inflation Reduction Act, which a group of rank-and-file Republicans initially demanded as a condition of supporting the debt limit bill. 

But then leaders had a problem: The four-member Iowa delegation and other Midwestern Republicans didn’t like that the bill would scrap tax credits for biofuels and other alternatives… 

Once tax credits and other subsidies find their way into the system, it is incredibly hard to take them away.  That is why the Inflation Reduction Act – despite costing three times as much as originally projected will never be repealed. Ethanol has been receiving subsidies for decades and Midwesterners, of both parties, will fight hard to keep the money flowing to corn country.  

President Biden is running for election.  

President Biden announced this week that he was running for reelection, but most Americans aren’t feeling the thrill run up the leg in anticipation.  Only 26 percent of people think he should run for reelection and 70 percent think he shouldn’t. His job approval rating has also fallen lately. 

My take - President Biden is running for reelection is because Trump is also running.  Biden thinks he can beat Trump. It’s that simple.  The other reason Biden is running for reelection is because there is no successor. The Vice President is less popular than President Biden and there is no other obvious replacement.  

We will keep you posted as things develop.

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