Photographer: Jasper Juinen/Bloomberg

It looks like House v. Senate over ITC expansion

April 8, 2016 Mark Drajem

The First Word Energy team draws on Bloomberg’s worldwide resources to cover all aspects of energy policy. Learn how Bloomberg Government can help your energy lobbying or policy analysis—contact Peter Hsu at or 202-416-3035.

Today’s Agenda

Are those snow clouds on the horizon for the FAA/ITC deal?  Senate negotiators haven’t yet tied up their negotiations to extend the investment tax credit to fuel cells, geothermal projects and other types of energy projects as part of the FAA reauthorization bill, but already it’s garnering blowback from House Republicans. Sen. Ron Wyden says that he and Sen. Orrin Hatch are looking to finalize their energy tax package for a vote next week. Still, it’s Congress, so no deal is final until, well, it’s final. Hatch, for what it’s worth, says he’s “trying to stay out of it.” And the tax provisions may not be limited to the ITC: It may also include a tax credit for carbon capture projects, Sen. Heidi Heitkamp told Bloomberg BNA’s Ari Natter.

But getting support for any of these tax breaks in the House may be tougher. Rep. Marsha Blackburn, a member of the House Energy and Commerce Committee, is circulating a letter asking her colleagues to oppose the proposed ITC expansion. The ITC was limited to solar projects in the omnibus deal, and it should stay that way, she said. “Congress took time to consider this issue in December and decided that these renewable energy tax extenders were not in the best interest of the country,” she writes in a letter provided to Catherine Traywick. So far, 10 members have signed onto the letter, and it will be given to other lawmakers next week before being delivered to House Transportation Committee Chairman Bill Shuster. Shuster would lead negotiations with the Senate on the broad FAA reauthorization bill.

Of course, there once was a full-on energy bill that looked promising in the Senate.  Just two months ago we were contrasting thoughtful debates and bipartisan legislating for the Senate energy bill with the raucousness of the wide field of Republican candidates vying for the presidency in Iowa. Now Ted Cruz is pitching himself to Republican lawmakers as a consensus candidate for the presidency, and Sen. Lisa Murkowski’s broad energy bill appears to be in cold storage until after the November election.The end came not with a bang, but a whimper. In fact, there’s always a chance that Majority Leader Mitch McConnell will bring it back; an aide to Murkowski says she continues to work with Sens. Bill Nelson of Florida and Mike Lee of Utah to try and get their holds on the bill and aid package for Flint lifted. Yet with the Senate gone after one full week of post-recess work, lobbyists tell us that they’ve moved on. What torpedoed the measure in the end were two very different issues: First, there wasn’t enough in the package to get it over the hump of the objections from Lee and Nelson; second, the administration was wary of what would happen once it tossed over to the House. It had threatened to veto the House-passed bill, H.R. 8.

It’s A/V Friday.   Bloomberg Intelligence analyst Rob Barnett, the man with the best hair in Washington, discusses California’s cap-and-trade program. Lawmakers in California eventually want to see fossil fuels eliminated from the state’s energy mix due to climate-change concerns. The state’s greenhouse gas cap-and-trade program is one of the key policies for achieving that goal, but it pits utilities, oil refiners and others against each other in their bids to secure enough carbon allowances to cover their respective emissions. Oil companies and refiners, led by Tesoro, have the biggest compliance burden under the program, with industry costs likely to exceed $3 billion a year. Electric utilities, which are the second largest group of emitters in the state, are responsible for managing more than $1 billion worth of carbon allowances each year under the program.To see Barnett’s discussion of the program, and its impacts, CLICK HERE.

Coal mines can’t even be given away, anymore.  Suncoke Energy said it’s paying $10 million to unload its coal mines and leases to Revelation Energy. The company said the “sale” will be revenue neutral for it, because it will avoid on potential mine closure and clean-up costs.

Also today,  charting the real price of natural gas, and drillers have finally heeded the age-old adage: if you find yourself in a hole, stop digging. Plus Bloomberg View’s Christopher Flavelle on how rising seas could upend U.S. politics, and Al Gore returns to the scene of Love Story. And then this: Get ready for Sunday’s Paris-Roubaix race by watching this amazing footage of riding the cobblestones.


“Tax extenders for renewable energy have consistently failed to promote economic growth and create jobs,” Blackburn writes in her letter. “Worse, they have proven to be carve-outs for special interests in the renewable energy industry at the expense of the American people.”

The Predictor

Some day this wonderful election will be over, and then there will be a lame duck session of Congress. Expect the Senate energy bill to return then.

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Chart of the Day

The Marcellus Discount  

How cheap is natural gas? This chart shows that for many power customers it’s a lot cheaper than the benchmark futures price for Henry Hub, a trading hub in southern Louisiana. While producers have freaked out as Henry Hub prices hover near $2/mmbtu, the price at Dominion South Point, which is in the Marcellus region near Pittsburgh, is at $1.47, and had dipped to less than $1 just last month. At that rate it’s almost as cheap as Texas wholesale electricity on a windy night.

In Depth

A Different Kind of Story at Harvard for Al Gore  Al Gore’s plane from New York to Boston was canceled on a night of pouring rain and high winds. So he hopped in a car from New York to Harvard, where a crowd of 1,000 waited. Half an hour late, he took the audience through the global grimness stemming from what he called systemic change in the environment: the Zika virus, drought that ravaged Syria, flooding in the U.S., even the 2008 financial crisis. One of his solutions, however, would tap financial markets. Carbon trading is beginning in China, and he said the Chinese should link up their nascent market with the longstanding one in Europe. “We are winning this struggle,” he concluded. “We are going to win this. It matters how fast we win it: We’re not winning fast enough now, but we’re going to win it.”

Inside the Beltway

LNG Tax Parity Amendment Filed to FAA Bill   An amendment that would provide parity for the excise taxes on liquefied natural gas for marine transportation on inland waterways with diesel and gasoline has been filed to Federal Aviation Administration legislation in the Senate by Sen. Bill Cassidy (R-La.). It remains unknown if the amendment, which is supported by companies such as Shell Oil Co. and AGL Resources, will get a vote, Cassidy told Bloomberg BNA’s Natter.

White House Reviewing Second Rule in Methane Package   The White House Office of Management and Budget began its review of a final Environmental Protection Agency rule (RIN 2060-AS06) that would clarify agency air permitting rules for the oil and natural gas industry, Bloomberg BNA’s Anthony Adragna reports.

Outside the Beltway

Maryland Senate Panel Approves Hogan PSC Nominee: Baltimore Sun   A “forgiving” state Senate committee voted Thursday to confirm an appointee of Gov. Larry Hogan to the powerful body that regulates utilities in Maryland, despite his acknowledged mistakes in email exchanges with his former administration colleagues. Michael Richard won a recommendation for a five-year term on the Public Service Commission on a 15-2 vote by the Senate Executive Nominations Committee. Several senators expressed confidence that he had learned his lesson from the controversy generated by his sharing of confidential information with Hogan’s staff after he took his seat on the panel.

Ohio Shale Oil Pipeline to Supply Marathon’s Canton Refinery: Cleveland Plain Dealer   Marathon Pipeline LLC. this week said it will soon begin building a pipeline from Cadiz in Harrison County to Marathon’s Canton refinery in Stark County. The pipeline will move light oil mixtures condensed from raw gas and “natural gasoline” from Harrison County shale wells through Tuscarawas and Carrol counties to the Canton refinery. The line will replace most of the fleet of tank trucks that have been running 24 hours a day to deliver the condensate oils and gasoline to the refinery, said Jason Stechschulte, a senior engineer with Marathon Pipe Line, in an interview.

LePage, Public Advocate Differ Over What’s Best for Maine Ratepayers: Bangor Daily News   Gov. Paul LePage and the man he appointed to advocate for the public on energy and utility issues aired differing views on what was best for ratepayers and the environment during a student forum Wednesday. LePage and public advocate Timothy Schneider spoke at the University of Maine during Power Dialog, a national effort to put college students in front of officials to discuss the future of energy and climate issues. Unity College, UMaine and the Maine Conservation Alliance organized the event that drew more than 100 attendees. The two men spoke a day after LePage had sharply criticized Schneider on a talk radio show. “He puts up numbers that don’t work, and then he tries to sell it as honesty,” LePage said Tuesday when the radio hosts mentioned Schneider during a discussion about solar power. The governor described appointing Schneider in 2013 as “one of the worst, worst decisions ever in my life.”

Former Prosecutor Against Blankenship Expects Him to Serve Full Sentence: AP   Ex-coal company chief Don Blankenship should have to serve his full, one-year sentence in a minimum-security federal prison because time off for good behavior applies to terms of more than a year, the former U.S. attorney who prosecuted Blankenship said Thursday. Blankenship was sentenced this week to the maximum penalties of a year in prison and a $250,000 fine for a misdemeanor of conspiring to willfully violate mine safety standards at Upper Big Branch Mine, which exploded in 2010, killing 29 men.

GE Installing 3 Megawatts of Solar at New York Sites: Albany Times Union   General Electric Co. is installing just under 3 megawatts worth of solar panels between its Schenectady campus and its North Greenbush site. The installations will be made by GE’s new smart grid division known as Current, powered by GE. The installation would likely be one of the largest by any one business in the Capital Region.

Dominion Says Proposed Costs Coming Down for 2 Offshore Va. Turbines: AP   Dominion Virginia Power says it’s working to bring down the cost of two proposed research wind turbines 25 miles offshore, an important step in developing a wind farm on 113,000 acres in Atlantic waters. The power company told a teleconference Thursday that a key challenge is keeping down the costs of huge ocean-going vessels needed to deliver and install the towering turbines. All are located in Europe and cost hundreds of thousands of dollars daily to operate.

Oil, Gas and Coal

Market Wrap:  Oil is poised for a weekly gain as U.S. crude output continues to drop before a meeting between suppliers to discuss freezing production. West Texas Intermediate for May delivery advanced as much as $1.41 to $38.67 a barrel on the New York Mercantile Exchange and was at $38.57 as of 9:38 a.m. London time, bringing this week’s gain to 4.8 percent. Natural gas futures for May delivery rose 0.2 percent on the Nymex to $2.022/mmBtu by 7:30am London time.

Kuwait Proposal May Pave Way for Oil Cap Deal With Iran: Chart

The final deal on an oil output freeze may be near as the OPEC-Russia coalition is closing a gap in talks with Iran, the stumbling block to the agreement. The proposal from Kuwait to cap output at the February rather than January levels better suits Iran, which grew production over 6 percent month-on-month to 3.1 million barrels per day. Iran’s oil minister Bijan Namdar Zanganeh on Wednesday said Iran is set to reach a 4 million barrels per day threshold only by next March, indicating the country prepares for a slowdown in production growth.

Germany to Get Tough on Dirty Diesels by Empowering City Bans   German towns and cities plagued by car and truck pollution will soon get the legal tools they need to ban older diesel vehicles from streets where emissions are highest.Chancellor Angela Merkel’s government will remove the legal uncertainty that has made town mayors and councils hesitate from banning older diesel vehicles from their streets, said Deputy Environment Minister Jochen Flasbarth. The ordinance will be enacted this year, he said in Berlin on Thursday.

California Judge Denies Sempra’s $621 Million Gas Pipeline Plan   There are more cost-effective ways for Sempra’s Southern California Gas utility to ensure supplies than building a new pipeline that would feed gas from the northern part of its system to the southern part, an administrative law judge with the state Public Utilities Commission said in a proposed decision. The commission may decide whether to uphold the judge’s decision as soon as May 12. The project’s denial would be yet another way that the nearly four-month leak from Sempra’s Alison Canyon field is still haunting both the utility and the state.

Drillers Go Rigless as Gas Price Collapse Heralds Austerity Era   Explorers have idled drilling equipment at historic rates — a drop in prices has resulted in the fewest rigs in at least three decades searching for new output. Southwestern Energy Co., the third-largest U.S. gas producer, has stopped drilling altogether, while Chesapeake Energy Corp. has no rigs in the gas-rich U.S. East, down from an average of about 13 in 2014.

TransCanada Says 63,600 Liters Spilled as Keystone to Stay Shut Till Next Week: Canadian Press   The Calgary-based company says its spill estimate is based on the excavation of soil covering more than 30 meters of pipe around the spill site, about 60 kilometers southwest of Sioux Falls. Company spokesman Mark Cooper says they still have not identified the source of the leak. With the investigation and cleanup continuing, TransCanada says it doesn’t expect to reopen the pipeline until at least early next week rather than the end of this week as previously indicated.

Up for Debate

How Rising Seas Could Upend U.S. Politics

By Christopher Flavelle, Bloomberg View

If the latest projections about the pace and scope of sea-level rise are even close to accurate, then get ready for a fight — not starting in decades, but right now — over which communities get saved, and who pays for it.

Detailed online mapping tools, including the National Oceanic and Atmospheric Administration’s Sea Level Rise map and the nonprofit Climate Central’s Surging Seas project, can tell us which states would be hit the hardest by the effects of melting Antarctic glaciers and other environmental changes.

Two things jump out. First, thanks to the vagaries of topography as well as tidal and development patterns, the social and financial burdens that the coastal states will have to bear are wildly unequal from one to the next. Second, the states in the most danger are generally among the country’s poorest.

There are different ways of measuring risk. Start with the most obvious: How much land would each state lose if sea levels rose by six feet, the amount projected by 2100 in a recent paper? The clearest takeaway is the disproportionate vulnerability of Louisiana, and to a lesser degree Florida and Delaware:

But just as interesting is that even assuming a sea-level rise of six feet, most coastal states would lose less than 1 percent of their land. Among the 24 coastal states plus the District of Columbia, only five would face a loss of 5 percent or more. For most coastal states, a six-foot rise in sea levels would be economically challenging but not catastrophic. It’s far different for a handful of states, most of them in the Southeast, most of them poor. Of the seven states with more than 10 percent of their coastal-county property value at risk from that magnitude of sea rise, all but New Jersey are in the bottom half of the national per-capita income distribution.

So why does it matter how the hazards of rising sea levels vary between states? The ones that are most affected will demand federal assistance — for sea walls, levees, more resilient roads and bridges, and, if all else fails, money to rebuild farther inland.

Those projects are enormously expensive. After Hurricane Katrina, the U.S. Army Corps of Engineers spent $14 billion rebuilding the levees that guard New Orleans. In southeastern Virginia, the Hampton Roads Planning District Commission estimated that coping with three feet of sea-level rise would cost between $12 billion and $87 billion.

QuickTake Climate Change

Finding that kind of federal money for a handful of communities is one thing. But as requests for help increase, the constraints on providing it will be political as much as technical. Money spent on the needs of coastal states struggling with rising sea levels is money the federal government can’t spend on Social Security, highways, education or anything else.

It’s not hard to imagine those coastal states making common cause in arguing that the federal government has a responsibility to help. South Carolina, Louisiana and Alabama may oppose a strong federal government when it comes to social programs. They may feel otherwise when the activity in question is saving their cities and towns.

Inland states will probably view the federal government’s obligations differently. And so sea-level rise has the potential to augment, in new and unpredictable ways, the schisms that already shape U.S. politics: urban versus rural; red versus blue; wet versus dry.

What happens to the Republican Party, for example, if the coastal Deep South becomes the leading advocate for big government and a carbon tax? And how much will the vast majority of voters — who face much less risk of losing their homes, even a century from now — be willing to offer those who do?
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.