Issue No. 13


In today’s issue:

  • Richard Glick is nominated for a second term as chairman of FERC, but can “Biden’s most effective climate change warrior” convince Sen. Joe Manchin to back him?
  • A NERC report warns of “high risk” of energy disruptions this summer, especially in the upper Midwest, an area of dysfunctional markets.
  • The nation is at a critical stage as it moves toward decarbonized energy, but chaos reigns. How can we achieve balance and coherence?
  • Cities and states, with funding from former Mayor Bloomberg, are suing energy companies in climate litigation. Critics say the suits are misguided for both legal and practical reasons.
  • Interior Department announces offshore wind leases in the Pacific as the U.S. plays catch-up.
  • Gas Exports From Pennsylvania Have Risen Spectacularly.
  • President Biden invokes the Defense Production Act to increase the supply of solar panels, but is there truly a national security justification?

Will Glick Gain Another Term as FERC Chairman?

President Biden on May 20 nominated Richard Glick to a second term as chairman of the Federal Energy Regulatory Commission (FERC). His current term ends June 30, and under FERC rules, he can serve until he is replaced, but, if no action is taken, he has to depart by the end of this year.

Glick may not have an easy time being confirmed. A Politico piece in March carried the headline, “Biden’s most effective climate warrior faces potential doom in the Senate.” Catherine Morehouse wrote:

Glick has launched perhaps the most far-reaching agenda of any leader ever at the commission…. His efforts to reshape the agency’s mission include conducting closer examinations of the climate impacts of new energy infrastructure, as well as the effects of existing natural gas pipelines and fossil fuel facilities on low-income areas and minority communities where they are often located.

Glick’s attempts to expand the scope of FERC by establishing a framework for assessing how pipelines and other facilities contribute to climate change ran afoul of Sen. Joe Manchin (D-WV), who chairs the Senate Energy and Natural Resources Committee, where confirmation hearings will be held.

As we reported in our Newsletter No. 10, FERC on Feb. 18 issued two controversial policy statements. According to a March 8 article in the National Law Review:

Most notably, this marks the first time FERC has formally incorporated environmental justice considerations into one of its policies…. FERC has fundamentally reshaped the legal landscape for approval of natural gas pipelines.

This “reshaping” was seen by critics as an overreach by FERC, which has been elevating climate change considerations in its decision-making despite a more limited official mission that directs the Commission to “assist consumers in obtaining economically efficient, safe, reliable, and secure energy services at a reasonable cost.”

At a hearing on March 3, Manchin criticized the Commission for its “shortsighted attack on fossil fuel resources” that made it more difficult to gain pipeline approvals. He said that the new policy was especially ill-timed with an “energy war” underway, a reference to the Russian invasion of Ukraine. Manchin said that the Commission was not recognizing the “heavy lifting” that fossil fuels “have done and continue to do – and the integral role they play in our economy.”

Manchin’s comments were echoed by Sen. John Barrasso (R-WY), the ranking member of the committee, who said: “These policies are going to make it next to impossible to build any new natural gas infrastructure or upgrade our existing facilities in the United States.”

According to a Law360 article, the policy statements elicited “an avalanche” of demands for reconsideration.

Then on March 17, 2021, FERC approved the certification of Northern Natural’s pipeline replacement, but only after assessing how emissions related to the project were likely to affect the climate. Utility Dive reported that the action represented “a significant break from previous assessments. FERC Chair Richard Glick has long argued the commission should be considering climate impacts as part of its assessment of environmental impacts and whether a project is in the public interest.”

Commissioner James Danly dissented, calling the Northern Natural consideration of climate impacts a “drastic departure” from usual practice; Commissioner Danly claimed FERC’s climate litmus test under Glick exceeded the commission’s authority under the Natural Gas Act.

Scrutiny over Glick’s tenure continued over the past year. Politico’s Matthew Choi wrote, in a piece headlined “Glick’s Ticking Clock”:

Manchin told reporters last week that Glick “went way out of his wheelhouse” with the policy statement and should “just do your damn job.” His office declined to say if he would vote for Glick if he were reappointed.

Then on March 24, Glick and the majority of the Commission reversed themselves, halting the policy changes that would have given FERC a more powerful role in regulating energy based on its estimated effect on the climate.

In a statement, Manchin said that he was pleased with the action:

Today’s unanimous vote during FERC’s open meeting was a course correction from their previous partisanship, and I appreciate their willingness to address the significant concerns raised by raised by many members of the Senate Energy and Natural Resources Committee.

The question now is whether Manchin and other members of the committee with concerns (which is split, 10-10 between Democrats and Republicans) are satisfied that Glick has backed off his previous aggressive stance.

At the March 3 hearing, Manchin clarified that climate change is an appropriate area of activity for many government agencies, including the Environmental Protection Agency, the Army Corps of Engineers, and the U.S. Fish & Wildlife Service. But for FERC, reliability and affordability are supposed to be their paramount issues and not superseded by climate change priorities. Glick will stand or fall on this issue.

High Risk of Energy Emergencies’ This Summer, Especially in the Upper Midwest

The North American Electric Reliability Corporation, or NERC, issued a sobering report last month on what’s ahead as the heat rises. Powermag headlined, “NERC Warns of Mounting Reliability Risks, Urges Preparation for Challenging Summer.”

The report highlighted specific challenges facing the Midcontinent Independent System Operator (MISO), assessing the region it covers as being at “high risk of energy emergencies during peak summer conditions.”

The NERC report stated that “capacity shortfall projections reported…as far back as the 2018 LTRA [Long-Term Reliability Assessment] have continued…. Across MISO, peak demand projections have increased by 1.7% since last summer due in part to a return to normal demand patterns that have been altered in prior years by the pandemic.” At the same time, however, “MISO will have 3,200 MW (2.3%) less generation capacity than in the summer of 2021.”

MISO covers a tier of states from the Dakotas and Minnesota in the north to Oklahoma and small pieces of Texas in the south. The report said that the northern part of MISO was especially vulnerable. The NERC report also pointed to portions of Louisiana and Arkansas, in the SERC Reliability Corporation, as being at “high risk.” Nearly the entire area of the U.S. west of the Mississippi River is at “elevated risk,” with the “potential for insufficient operating reserves in above-normal conditions,” according to the report.

Wall Street Journal editorial on May 27, headlined, “America’s Summer of Rolling Blackouts,” urged readers to buy a home generator if they can find one in stock.

The piece put heavy blame for impending power-delivery problems on “the green energy transition.” The Journal argued that climate policies have provided subsidies for wind and solar generation, but, meanwhile, coal and nuclear plants “can’t make money running only some of the time, so many have shut down. Natural-gas-fired plants can help pick up the slack, but there aren’t enough of them to back up all of the renewables coming onto the grid.”

The editorial pointed to the NERC report and warned that the cheap and reliable power on which manufacturers in the Midwest have depended “may be a thing of the past.” The Midwest will be especially vulnerable this summer if there’s little wind blowing. “That’s because 3,200 MW in net generation capacity—mostly coal and nuclear—have shut down since last summer. That’s enough to power about 2.4 million homes.”

The threat to the Midwest grid will worsen in the coming years. The Journal notes that “electricity supplier Vistra has announced it will retire 6,800 MW of coal power by 2027, blaming an ‘irreparably dysfunctional’ market and the state renewable subsidies.”

Said the CEO of the Illinois Manufacturers’ Association: “We don’t have the opportunity to just shut down a facility for four hours or six hours or eight hours a lot of time. If you’re making certain products, take a food product for example, you can’t just shut down and have that food remain on the line.”

Meanwhile, an Electric Power Supply Association blog on June 9 elaborated on MISO’s problems:

In an efficiently designed capacity construct, a lack of sufficient generation and increasing prices would – over time – send clear and dependable price signals to competitive suppliers supporting investment in new or upgraded resources needed to preserve reliability. However, MISO’s capacity construct has historically sent flawed price signals, leading to the worst of all outcomes: higher prices this year that will not necessarily incentivize new generation needed to preserve reliability into the future.

The blog also noted that “it wasn’t all that long ago that FERC Chairman Rich Glick opined that these markets needed to look to MISO as an efficient model for resource adequacy.” Whoops. The events of the past month suggest that, to the contrary, MISO should adjust its gaze toward the Eastern U.S., “which has three RTOs/ISOs with more robust capacity markets.” NERC found that, “based on risk scenario analysis in these areas, resources and energy appear adequate.

How the Pathway for Energy Decarbonization Can Shift From Chaos to Coherence

The Journal editorial emphasized the imbalance in climate change policy at this historic moment, when renewables are inadequate to meet demand but, at the same time, coal and nuclear are being discouraged and transitional natural gas can’t fill the gap – in part because it too is being maligned by policy makers.

An RTO Insider opinion piece, headlined, “Coherence Over Chaos: Choosing the Right Path for Energy Decarbonization,” addresses this thorny issue. Paul Segal, CEO of LS Power, and Reid Capalino, the company’s senior vice president of business development, write that “we are confronted with a fork in the road.” Opposing extremes seem to dominate the conversation, with one group “ignoring the imperative to decarbonize” and the other “seeking a fossil-free end state on an unrealistic timeline in terms of cost and risks to system reliability.”

LS Power, based in New York, owns and operates more than 45,000 MW of power generation and 660 miles of transmission infrastructure. The company is “one of the largest owners of gas-fired assets in the U.S., focused on a sustainable energy transition.” The authors note that modeling by International Energy Agency shows a U.S. fossil-fuel consumption decline by more than half in the next 20 years. But the trajectory is not a simple straight line.

As the transition occurs, write Segal and Capalino, “standby gas-fired generation will remain necessary to ensure energy reliability during peak weather events (e.g., extreme cold or hot temperatures) when renewable energy sources alone may not be sufficient to balance supply and demand.” But unfortunately, they write, “states such as Illinois are mandating the retirement of gas-fired generators without adequately planning to replace the flexible capacity.”

So what can we do?

The authors make three suggestions:

  1. support long-term federal tax credits and state incentives for low-carbon sources while at the same time “advocate for policies that value the flexibility of gas-fired generators”;
  2. advocate for standards “to reduce fugitive methane emissions” and support investment in natural gas infrastructure like pipelines; and
  3. “support efforts to deploy new zero-carbon technologies” while repurposing existing fossil-fuel infrastructure, such as “retrofitting carbon capture onto existing power plants.”

This is a true balanced approach. The authors say it favors coherence over chaos. It is what we need, they say, to power homes and businesses today while protecting the planet and strengthening the resilience of the power system for tomorrow.

Local Government-driven Climate Litigation, Backed by Private Funding, Is Criticized as a ‘Lose-Lose Policy’

A new Issue Brief from Dr. Wayne Winegarden of the Pacific Research Institute, publisher of this newsletter, examines the public-nuisance litigation being filed by dozens of states and localities. These lawsuits claim that “oil and gas companies should be responsible for the alleged financial harm these municipalities experience from global climate change.”

Dr. Winegarden concludes that the suits are troubling for three pragmatic reasons: First, cities and states are attempting to make energy policy through the courts rather than the appropriate legislative process. Second, the lawsuits are “counterproductive because they discourage the innovative process that is necessary to sustainably address global climate change.” In an interview with the Northern California Record, Dr. Winegarden elaborated:

Just like natural gas was once heralded as an important low-emission source but is now subject to lawsuits, the litigation creates a new risk for today’s potential innovators that their technologies will be subject to future lawsuits. The increase in risks requires a higher return, which means less innovation.

Third, the suits will retard economic growth, imposing what Dr. Winegarden calls “exceptionally large cost burdens on those least able to afford it. In short, these municipal lawsuits are a regressive government policy.”

From a legal standpoint, the suits appear to have little merit as well. Dr. Winegarden notes that the federal judge hearing New York City’s second case making these claims said the city was “trying to dress up a wolf in sheep’s clothing.” An opinion piece in the New York Daily News stated that the judge “said this case is no different from the city’s previous lawsuit, and the Supreme Court already said it is not the job of courts to set climate policy. Besides, the court continued, ‘Aren’t the plaintiffs using the product?’ Soon after, a local state judge threw out a climate lawsuit brought by the State of New York, calling the allegations ‘hyperbolic’ and ‘ill-conceived.’”

Still, these cases are flooding the courts, and adjudication is still up in the air. A Climatewire piece on June 9 noted that there are now 23 such cases nationwide. A major issue is whether they should be heard by state or federal courts, with energy companies preferring the latter since the claims are national and even global in nature.

“The Supreme Court has already engaged in the debate once,” said the article, “with a decision last May that sent a host of cases back to federal appeals courts, instructing judges to consider a broader range of factors when deciding whether the liability lawsuits should be heard in state or federal court. The 10th Circuit was the first appeals court to decide that the cases still belonged before state judges. Other federal appeals courts have since followed suit.”

Exxon and Suncor have petitioned the Supreme Court for another hearing, pointing to a circuit court split over the jurisdiction question.

Meanwhile, a report released by the American Tort Reform Foundation (ATRF) on June 15 revealed how state attorneys general and local municipalities have coordinated with environmental activists on the litigation campaign against oil companies across the country.

The report shows how privately funded special assistant attorneys general (SAAGs) have been embedded in the offices of state AGs solely to litigate climate change suits. Says the report:

The SAAGs’ salaries and benefits are covered by grants to the New York University School of Law State Energy and Environmental Impact Center that in turn are funded by a $5.6 million grant from Bloomberg Philanthropies. To date, we are aware of ten attorneys general who have applied for and received Bloomberg-funded SAAGs to date, including the AGs of Connecticut, Delaware, Illinois, Massachusetts, Maryland, Minnesota, New Mexico, New York, Oregon, and Washington, D.C.

The report calls the practice “a disturbing usurpation of traditional state police powers by private political activists.” Tiger Joyce, ATRF’s president, stated, “With energy prices soaring to record highs and American energy sources becoming more critical than ever, now is the time to stop these baseless multi-billion-dollar lawsuits.”

Joyce added, “Companies that create highly regulated, legal products that benefit the general public should not face legal battles claiming those same products create a public nuisance. Climate change is a global concern deserving of a global solution from policymakers – regulation through litigation is not the answer.” 

As Dr. Winegarden concludes his brief:

These cases are lose-lose policies. Most importantly, these lawsuits create unnecessary obstacles that will hinder the most important strategy for addressing global climate change – innovation.

Offshore Wind Takes Its Place in the U.S. ‘All-of-the-Above’ Pantheon

Sen. Manchin is among the notable policy makers pushing hard for an “all-of-the-above” strategy. Such a strategy must certainly include wind energy generated by turbines offshore, but it was not until last month that the U.S. Department of the Interior announced its first-ever lease sale along the West Coast.

The sale notice includes three areas in the Morro Bay Wind Energy Area off coastal central California and two in the Humboldt Wind Energy Area off coastal northern California. The areas total 373,000 acres with, the department says, “the potential to unlock over 4.4 gigawatts of offshore wind energy,” enough to power “more than 1.5 million homes and support thousands of new jobs.”

The U.S. lags far behind Europe in offshore wind, but the Biden Administration is trying to catch up. The goal is to generate 30 GW of offshore wind power by 2030.

The Bureau of Ocean Energy Management has already issued 25 commercial offshore wind leases on the East Coast, from Massachusetts to North Carolina. A sale earlier this year of leases off New York drew $4.4 billion in high bids.

An agreement was announced May 5 between the North America’s Building Trades Union and Orsted, a Denmark-based company that is the leader in U.S. offshore energy, to ensure that all the turbines along the East Coast are built by union labor. Industry reports project that offshore wind will directly create approximately 80,000 jobs,” said a press release.

Gas Exports From Pennsylvania Have Risen Spectacularly

“Mariner East Pipeline has sparked a boom in fracked gas exports from Philly region,” said the final headline on the front page of the Philadelphia Inquirer on Sunday, May 8.

For all of the year 2011, with shale gas just picking up steam, only a single vessel left Delaware Bay with gas liquids. But, said the article,

By last year, 328 tankers left Delaware River terminals carrying shipments of gas liquids, or nearly one out of four of the 1,346 cargo vessels that set sail from the region (container vessels accounted for the majority). While other industrial sectors stalled during the pandemic, the number of vessels loaded with propane, butane, and ethane at Philadelphia-area wharves jumped 61% in the last two years.

Almost all those products reached the rebuilt Marcus Hook Terminal from the Marcellus and Utica Shale formations in Western Pennsylvania and neighboring states via the Mariner East Pipeline System, “the fuel transportation network whose protracted construction was hugely disruptive along its 350-mile route but finally seems to be delivering on its promise as an economic engine.”

The fuels are unloaded in markets in Europe, the Caribbean, Asia, Africa, and South America, where, said the article “they’re used for heating, motor fuel, and as raw material for petrochemical manufacturing.”

Propane “is widely used overseas for heating, cooking, and in some petrochemical production. It’s also an alternative fuel in Europe for piped Russian gas. Butane is blended into gasoline. And ethane is the raw material in the production of ethylene, a building block for plastics, and is considered a cleaner and more efficient alternative to petroleum products.”

Pennsylvania has benefited from the hydraulic fracturing and gas transport boom in new jobs and economic activity, but it’s far from being the only winner. “Exports of natural gas liquids increased exponentially from 164,000 barrels per day in 2010 to 2.3 million barrels per day last year, according to the U.S. Energy Information Administration. Most of the export traffic originates from Texas and Louisiana ports on the Gulf of Mexico.”

Controversy Surrounds President Biden’s Invocation of Defense Act to Produce Solar Panels

The Biden Administration has drawn criticism for invoking the Defense Production Act (DPA) to expedite the production of solar panels in the United States.

When asked why the President was issuing an executive order based on the DPA, which is normally reserved for a national security crisis, Press Secretary Karine Jean-Pierre responded that the Administration wants to “rapidly expand domestic production of solar panel parts, building insulation, heat pumps and more.”

A White House Fact Sheet elaborated: “While President Biden continues pushing Congress to pass clean energy investments and tax cuts, he is taking bold action to rapidly build on this progress and create a bridge to this American-made clean energy future.”

In other words, rather than wait for legislation that may never come, the President is using the DPA, which he has already invoked for vaccine production, to ramp up supplies of goods like solar panels that will combat climate change.

“Ensuring a robust, resilient, and sustainable domestic industrial base to meet the requirements of the clean energy economy is essential to our national security, a resilient energy sector, and the preservation of domestic critical infrastructure,” Biden said.

Utility Dive reported:

Besides pausing tariffs on certain solar imports for two years, the Biden administration also plans to use the federal government’s procurement power to support the solar sector…. Biden called for creating “master supply agreements” to speed the sale of domestically-made solar systems to the U.S. government as well as “super preferences” to apply domestic content standards for federal procurement of solar systems.

The national security justification appears vague and attenuated to many, and journalists and Republican lawmakers responded with skepticism and some antagonism.

Rep. Byron Donalds (R-Fla.) tweeted, “Biden’s irresponsible & arguably constitutionally corrupt misuse of the Defense Production Act should concern every American. The DPA isn’t a get out of jail free card to cover for lazy & inept governance, which is exactly how this administration uses it.”

An article in the New York Post noted, “When Biden was vice president, the Obama administration aggressively pushed for solar energy production — sparking the Solyndra scandal when a politically-connected firm went bankrupt after getting $535 million in federal loan guarantees.”