Issue No. 29

  • Under its Acting Chairman Willie Phillips, FERC approves acceleration of an LNG terminal in Louisiana, expansion of pipeline capacity in the Northwest, and more.
  • Opposition grows to the EPA’s powerplants rule, which threatens the reliability of the grid and constitutes regulatory overreach.
  • A Pennsylvania state Senator wants to toughen penalties for extremist attacks on the grid, a growing danger.
  • Not to be outdone by EPA, the National Highway Traffic Safety Administration wants mileage requirements that amount to a “de facto ban” on gasoline-powered vehicles.
  • The Strategic Petroleum Reserve has been depleted by 45% in less than three years. Is the reason political?
  • The Biden Administration provides $7 billion to help develop the practical application of clean hydrogen, with both Pennsylvania and natural gas playing key roles.

Over Complaints of Environmentalists, FERC Takes Bold Steps to Expand the Use of Natural Gas

The Federal Energy Regulatory Commission (FERC) took important steps at its meeting of Oct. 19 by approving a slate of new natural gas projects, including accelerated construction of a new liquefied natural gas (LNG) export terminal in Louisiana and increased capacity for a pipeline in the Northwest. The projects had drawn opposition from local activists and members of Congress.

Venture Global’s Plaquemines LNG terminal had already been approved, but the FERC action will speed it up. The terminal has an export capacity of 20 million metric tons per year.

LNG terminals convert natural gas into a liquid to be transported by ship to ports where it is then turned back into a gas. Europe became the number-one destination for U.S. natural gas last year as American LNG displaced unreliable gas by pipeline from Russia.

Because of the need for LNG, demand for gas in the U.S. is exceeding supply, and more terminals are needed. Currently, there are just seven operating – two in Louisiana, two in Texas, and one each in Georgia, Maryland, and Alaska. According to the U.S. Energy Information Administration (EIA), 15 others have been approved, but in most cases building has not yet begun. All but one (Jacksonville, Fla.) are on the Gulf of Mexico.

In a short time, the U.S. has become a global LNG powerhouse – the number-one exporter in the world, ahead of Australia and Qatar. In just five years, LNG exports from the U.S. more than quintupled. Natural gas is seen as the crucial transition fuel for electricity as the world moves toward zero carbon dioxide emissions over the next several decades.

The media outlet LNG Prime reported that in, a filing with the FERC in December last year, Venture Global “requested authorization to increase the peak workforce to up to 6,000 per day” at the Plaquemines construction site, implementing a 24-hours-a-day, 7 days-a-week building schedule. In June, the company asked for an expedited review, which was approved four months later. “The firm said at the time it hopes to start exports of LNG as soon as late 2024 and to complete the construction of both phases of the project by the end of 2026,” said the LNG Prime report.

Environmental groups opposed the Venture Global LNG project, saying that it threatens wetlands, is at risk during a hurricane and will increase greenhouse gas emissions. “Once built, the emissions from burning the fracked gas at Plaquemines LNG would be roughly equivalent to the emissions from 42 coal plants or 35.8 million cars,” claimed the Sierra Club.

FERC also approved a $75 million expansion of compressor stations at the Northwest Xpress Project, a 1,377-mile-long pipeline owned by TC Energy of Canada, the company behind the now-abandoned Keystone XL pipeline. According to an E&E News report:

The gas project known as GTN Xpress would expand an existing pipeline system in parts of Idaho, Washington state and Oregon to export natural gas from British Columbia, increasing the system’s capacity by 150 million cubic feet of gas per day.

TC Energy says the expansion is necessary “to meet increasing demand from residential, commercial and industrial customers in the Pacific Northwest region of the United States while also providing supply reliability to the Pacific Northwest and West Coast regions as natural gas supplies coming from the Rockies region of the United States decline.”

While the project was approved by all four commissioners, it drew the ire of the four Senators representing Washington state and Oregon. Sen. Jeff Merkley (D-Ore) blasted FERC as a “completely captured agency” that is just “one huge rubber stamp” for fossil fuel projects.

In an interview with E&E, Merkley said:

I think they need to be scrapped so we can start over with an agency that actually exists in sync with our need to take on climate change. If our national policy is that we are going to take on climate change, we have to dump an agency that greenlights fossil fuel project after fossil fuel project.

Strong words. FERC’s commissioners are nominated currently by the President and confirmed by the Senate. Currently, the two parties each have two seats with one vacant. The acting chair, Willie Phillips, is a Democratic appointee.

Along with Sens. Patty Murray (D-Wash), Ron Wyden (D-Ore) and Maria Cantwell (D-Wash), Merkley sent a letter earlier that asked FERC to reject the project, citing the climate impacts, potential safety risks and a lack of consultation with Native tribes.

According to E&E, “In previous comments on the pipeline docket, the attorneys general of California, Oregon and Washington said FERC had not done enough to evaluate the pipeline’s climate change impacts by not accounting for emissions associated with natural gas after it is shipped.”

But Phillips disagreed. He noted that Idaho, which will purchase at least half of the gas, supported the project. “We considered and balanced all the information on the record, and the commission determined this project was needed and therefore we supported its approval,” he said.

Speaking to reporters after the meeting, Phillips added, “There was no evidence presented that this project would significantly increase greenhouse gas emissions. The commission determined that this project was needed and, therefore, we support its approval.”

As we reported in last month’s newsletter, Phillips defended the importance of natural gas at the recent Gastech 2024 conference in Singapore. On Sept. 5, he stated:

I don’t see a tension between the steps we have taken to fight climate change and the use of natural gas and LNG. Natural gas and LNG will be a feature of our energy mix far into the future. When it comes to considering new projects, one of the key things I consider is the impact that these projects will have on the climate. There will be no transition of our energy system without natural gas.

Also on Oct. 19, FERC approved a certificate for approximately 60 miles of new pipeline sought by North Dakota’s WBI Energy. According to the company, “The expansion will provide an additional 20 million cubic feet of natural gas capacity per day and is expected to cost approximately $75 million. WBI Energy expects to begin construction in early 2024 and have the pipeline in service in late 2024.” The company added that “demand for natural gas service currently exceeds the current volume of gas that can be delivered on an uninterruptible basis…through the existing transmission pipeline.”

In addition, FERC approved a Tallgrass Energy pipeline to transport CO2 from ethanol plants and inject it underground to prevent airborne emissions. As the company explains:

Tallgrass is…establishing an approximately 400-mile CO2 pipeline to serve as the backbone of a regional CO2 transportation system. This project will allow us to capture, transport and permanently sequester over 10 million tons of CO2 per year from industries in Nebraska, Colorado, and Wyoming. In support of this investment, Tallgrass is developing a commercial-scale CO2 sequestration hub in southeastern Wyoming, partially funded from a grant from the Wyoming Energy Authority.

More Objections Raised to Controversial EPA Rule That Demands Power Plants Cut Emissions by 90% or Shut Down

We have reported for many months now on the powerplants rule proposed by the Environmental Protection Agency (EPA). The controversial rule will require most fossil fuel power plants – including those powered by natural gas – to cut their emissions by 90% between 2035 and 2040, or else shut down. The rule imperils many natural gas plants – even though natural gas is widely seen as the essential transitional fuel, including by FERC’s own acting chairman.

The comment period for the rule ended Aug. 8, and the EPA is reviewing a mass of critical letters calling for reconsideration. As Bloomberg Law reported:

Comments flooded the Federal Register on Tuesday for the EPA’s latest round of power plant emission rules, giving a glimpse of the prolonged legal battle likely on the horizon once the agency finalizes the standards…. Critics overwhelmingly reiterated the same point: that the technology isn’t ready to match the rule’s timelines. 

The article quoted a typical letter from the Florida Municipal Power Agency, “one of the many utilities that lambasted the rule’s feasibility,” as saying: “The compliance deadlines and technology requirements in EPA’s proposal are unrealistic and potentially harmful, resulting in inordinate costs and reliability risks.” 

Both electric utilities and regional transmission organizations – the primary stakeholders for the management of the U.S. electric grid – have criticized the rule as ignoring technological reality. Now, others are weighing in. One voice is Gene Yaw, chairman of the Pennsylvania State Senate’s Environmental Resources and Energy Committee.

Sen. Yaw, a Republican who is a widely recognized energy policy leader, wrote an opinion column about the harmful impacts of power plants rule, which he called dangerous and threatening to “Pennsylvania’s severely strained electric grid.” He added:

The Biden Clean Power Plan would set unachievable limits using technology that is unavailable in the United States for new and existing gas-fired combustion turbines and existing coal plants, which currently generate two-thirds of Pennsylvania’s electricity.

The new mandates will impose an effective moratorium on new natural gas plants and force existing natural gas and coal plants to shutter prematurely. Meanwhile, electric ratepayers, mostly families, will bear the brunt of this dual attack on electric reliability and affordability.

Pennsylvania, which is the second-largest supplier of energy (after Texas) “would be particularly devastated by this mandate,” Sen. Yaw wrote. Pennsylvania provides 25% of the capacity of the PJM power grid, which extends to all or parts of 13 states plus the District of Columbia. He added that he has “held multiple hearings to review grid reliability. Overwhelmingly, the testimonies stated that a rush to shutter our fossil fuel-fired power plants would directly impact our bulk power supply.”

Legislation Addresses the Danger of Extremist Attacks on the Power Infrastructure

In June, Sen. Yaw introduced legislation that would “increase fines and penalties against those who intentionally vandalize or attack critical infrastructure in Pennsylvania” – a crime that has been increasing sharply. A Politico headline in September stated, “Extremists are trying to trigger mass blackouts.”

Under Senate Bill 819, those who willfully damage or tamper with equipment in a critical infrastructure facility will face a minimum of third-degree felony charges, fines and the potential exposure to civil suits for damages to personal or real estate interests.

This issue became apparent last year after 20 attacks across the country. Five states were hit on Christmas Day in the Northwest and Southeast, and Politico reported last month that utilities registered 60 incidents that “they characterized as physical threats or attacks on major grid infrastructure, in addition to two cyberattacks, during the first three months of 2023 alone.” As Sen. Yaw stated when he introduced the bill:

Destabilizing the power grid comes with huge national security risks and doing so should not be taken lightly. Purposeful damage to these facilities can have a far-ranging impact. We need to send a message to those who would attempt to destroy vital infrastructure and hold these bad actors accountable.

National Highway Traffic Safety Administration Pushes Hard for Electric Vehicles with Requirement for 58 MPG Fuel Economy by 2032

In the past, this newsletter has reported on concerns about the EPA’s tailpipe emissions rule for light and medium-duty vehicles. The rule’s intention is to speed up electrification of the transportation sector. A remarkable 67% of purchases of new sedan, crossover, SUVs and light trucks; up to 50% of bus and garbage trucks; 35% of short-haul freight tractors; and 25% of long-haul freight tractors will be required to be electric by 2032, the White House projected.

The rule has come under fire for several reasons, including the strain that a rapid conversion to electric vehicles (EVs) will put on the grid, diminishing its reliability at a critical time.

Members of Congress have pointed to the Supreme Court’s decision last year that limited the EPA’s regulatory authority in West Virginia v. EPA. “If finalized, these proposals will effectively require a wholesale conversion from powering vehicles with widely available liquid fuel to charging BEVs [battery electric vehicles] off our nation’s electric grid,” said a Senate letter sent by Sen. Shelley Moore Capito (R-WV), ranking member of the Senate Environment and Public Works Committee and others.

Critics also say that the rule would threaten the reliability of the electric grid and require an overreliance on China for critical minerals used in manufacturing EVs and batteries. Charging infrastructure is lacking, and consumers will almost certainly face higher transportation costs.

Not to be outdone, the National Highway Traffic Safety Administration (NHTSA) in July unveiled aggressive new Corporate Average Fuel Economy standards that will require cars and light trucks to increase fuel efficiency 10% a year starting in 2030. The estimated average fuel economy in 2022 was 26 miles per gallon. “With previously passed CAFE rules for 2024 through 2026 requiring a fleet average of 49 mpg by 2026, the feds are essentially asking for a fleet average of 58 miles per gallon by 2032,” reported Autoweek. And that number will keep climbing.

It is nearly impossible to reach such levels without a massive conversion of the fleet to electric vehicles (EVs), and even then, “by NHTSA’s own analysis, Ford would likely pay $1 billion in civil penalties if the proposal is finalized,” said Ford Motor Co. in a letter to NHTSA commenting on the rule. As an official of the American Petroleum Institute put it: “These rules amount to a de facto ban on cars and trucks using liquid fuels.” 

A majority of U.S. Senators, including Sen. Joe Manchin (D-WVa), the chairman of the Committee on Energy and Natural Resources, wrote a comment letter criticizing the rule, as did 27 state attorneys general, led by West Virginia’s Patrick Morrissey. The AGs letter said:

Our power grid — already stretched thin by increasing electrification across all sectors and other governmental action — could not handle the massive predicted uptick in EVs. And even if it could, we don’t have the supply chains to make that manufacturing increase feasible.

The letter added, “At a minimum, U.S. manufacturers will have no option but to become embroiled with geopolitically troubling suppliers. The Proposed Rule cannot explain how our energy and manufacturing infrastructures will handle the EV wave it wants to create.”

Has Politics Made the Strategic Petroleum Reserve No Longer Strategic or Much of a Reserve?

With the Middle East facing its worst crisis in decades, thus jeopardizing the global flow of oil, the U.S. Strategic Petroleum Reserve (SPR) has dropped to its lowest level in 40 years.

The SPR was established in 1975 in the aftermath of the 1973-74 oil embargo as a safety valve in times of international crisis or unforeseen natural disasters. It is the world’s largest supply of emergency oil, with a capacity of about 700 million barrels, stored in salt mines in Louisiana and Texas, along the Gulf of Mexico.

The Energy Department calls the Reserve a tool “used to alleviate the market impacts of both domestic and international disruptions, caused by weather, natural disasters, labor strikes, technical failures/accidents, political disputes or conflicts.”

But the SPR has dwindled to 351 million barrels as of mid-September (the latest reading) as a result of a decision by the Biden Administration last year to “address the market supply disruption caused by Russia’s full-scale invasion of Ukraine and to help lower energy costs,” according to the EIA.

It is hard to say how long the 351 million barrels can last, but in 2022, the U.S. imported 8.3 million barrels of oil from abroad each day, on average. Only about 1.3 million comes from OPEC countries. The majority is from Canada and Mexico. In addition, the U.S. could cut its exports for domestic use in an emergency.

Critics contend that the Administration is using the SPR for political purposes, trying to hold oil prices down to curry favor with voters. In January of 2021, when President Biden took office, the SPR held roughly 638 million barrels of oil. It’s now down by 45% from that level.

In June 2022, shortly before the mid-term elections, the average price of gasoline in the U.S. spiked to record levels – above $5 a gallon. The Treasury Department concluded that the Administration’s release of oil from the SPR “lowered the price of gasoline by 17 cents to 42 cents per gallon, with an alternate approach suggesting a point estimate of 38 cents per gallon” (their boldface).

The Treasury release then stated, “This decline in prices had meaningful benefits for American consumers and helped to mitigate the impacts of rising gas prices on economywide inflation. Moving forward, the Biden Administration is committed to further addressing concerns about rising energy prices.”

There are ways to increase the U.S. energy supply without tapping the SPR, which is typically reserved for embargoes and large hurricanes. After all, this nation has an abundance of oil, and it could produce a great deal more if the Administration had not chilled capital-intensive projects.

Critics, for example, point to the cancellation of the Keystone XL pipeline – an act that occurred on President Biden’s first day in office. The project would have carried 830,000 barrels of Alberta oil sands crude daily to Nebraska and on to the Gulf Coast for exports.

As we reported in our last newsletter, the Administration announced one of the smallest five-year offshore oil and gas leasing plans in decades.

The Administration also recently lifted sanctions on Venezuelan oil to increase imports from that volatile nation, ruled by an autocrat – rather than encouraging production at home.

“This administration is turning to Venezuela,…one of the world’s dirtiest energy producers and an oppressor of its own people, to help make up the production that they refuse to allow in America,” stated Sen. Joe Manchin in a press release.

Instead of rewarding bad actors across the globe, the U.S. could be supporting domestic production and energy infrastructure. That way, our energy supply can be secure.

Releasing oil from the SPR may be beneficial politically in the short term, but, as Javier Blas, a Bloomberg Opinion columnist, has noted, it weakens our national security – especially now, with the Middle East a powder keg. The U.S. has no need to rely on any other nation for its energy. We are blessed with our own resources if our government allowed some of the most technologically advanced companies on earth to take it from below the ground.

Blas wrote on Oct. 17, “There’s a growing danger that oil supplies could be disrupted should the conflict spill over beyond Israel and Gaza, ensnaring Iran.” He added:

The SPR fulfils two roles. First, it deters hostile nations from threatening to use oil as a weapon; second, it’s a backstop if global supplies are curtailed. To accomplish both, it requires enough barrels. I don’t think what’s left today is enough. Many blame President Joe Biden for the shortfall, but the truth is that both US parties have played politics with the reserve.

Blas believes the SPR needs to be lifted to 500 million barrels. That cost would be roughly equivalent to the $13.3 billion “spent on the new aircraft carrier Gerald Ford, the vessel the administration has dispatched to the eastern Mediterranean.”

The Biden Administration Hands Out $7 Billion for Clean Hydrogen Hubs, and Pennsylvania Will Be A Large Recipient

As part of the bipartisan infrastructure bill, whose official name is the Infrastructure Investment and Jobs Act of 2021 (IIJA), the Biden Administration selected seven Regional Clean Hydrogen Hubs as recipients of a total of $7 billion in federal funds.

According to the federal Office of Clean Energy Demonstrations:

Clean hydrogen hubs will create networks of hydrogen producers, consumers, and local connective infrastructure to accelerate the use of hydrogen as a clean energy carrier that can deliver or store tremendous amounts of energy.

The Department of Energy (DOE) hopes that hydrogen will help achieve the goal of a “100 percent clean electrical grid by 2035 and net-zero carbon emissions by 2050.”

Out of 79 initial proposals, DOE chose hubs in Appalachia, the Gulf Coast, the Heartland, Midwest, Mid-Atlantic, California, and Pacific Northwest. The first four of the projects on the list include blue hydrogen in their plans.

According to National Grid:

Blue hydrogen is produced mainly from natural gas, using a process called steam reforming, which brings together natural gas and heated water in the form of steam. The output is hydrogen, but carbon dioxide is also produced as a by-product. So, the definition of blue hydrogen includes the use of carbon capture and storage (CCS) to trap and store this carbon.

Pennsylvania, which boasts one of the largest natural gas reserves in the world in the Marcellus Shale, is home to two of the hubs: Mid-Atlantic Clean Hydrogen Hub (MACH2) and Appalachian Hydrogen Hub (ARCH2). Gov. Josh Shapiro says his state has repositioned itself as “the leader of our country’s clean energy future.”

The MACH2 hub, says an Oct. 13 state press release, “will help unlock hydrogen-driven decarbonization in the Mid-Atlantic while repurposing historic energy infrastructure and using existing rights-of-way.” The release continues:

It plans to develop clean hydrogen production facilities from renewable and nuclear electricity using both established and innovative electrolyzer technologies, where it can help reduce costs and drive further technology adoption.

The ARCH2 hub “will leverage the region’s ample access to low-cost natural gas to produce low-cost clean hydrogen and permanently and safely store the associated carbon emissions. The strategic location of this Hydrogen Hub and the development of hydrogen pipelines, multiple hydrogen fueling stations, and permanent CO2 storage also have the potential to drive down the cost of hydrogen distribution and storage.”

“Hydrogen,” said a New York Times article about the federal awards to the hubs, “is widely seen as a promising tool to fight climate change, as long as it can be produced without creating any greenhouse gases. When burned, hydrogen mainly releases water vapor.” The article adds:

In theory, hydrogen could be used to help produce steel, cement, chemicals and fertilizer. It could also be used to power trucks, ships or airplanes or to produce electricity, all without emitting the greenhouse gases that are dangerously heating the planet.