Biden administration, oil industry come to a detente

Dec 22, 2021

With help from Kelsey Tamborrino

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Quick Fix

— The Biden administration has softened its tone on the oil industry in recent weeks as it faces the political realities of a tight energy market.

— President Joe Biden remains resolute on working with Sen. Joe Manchin to find a path forward on the reconciliation package.

— The Biden administration approved solar projects in federally controlled California desert, reviving a plan the Trump administration tried to scrap.

WELCOME TO WEDNESDAY. I'm your host, Matthew Choi. We're having some guest co-hosts from the Pro Energy team this week writing their analysis on a few of the big stories of the year and how they relate to where we are now. For today, Ben Lefebvre chimes in on the Biden administration's ups and downs with the oil industry.

And now for trivia: Sadly no one knew that Mount Toubkal is the tallest in North Africa. But many people correctly responded that the Atlas Mountains are the tallest mountain range in North Africa and that Mount Kilimanjaro is the tallest in Africa as a whole. For today's trivia: In what year was William the Conqueror crowned king of England? Send your tips and trivia answers to mchoi@politico.com. Find me on Twitter @matthewchoi2018.

Check out the POLITICO Energy podcast — all the energy and environmental politics and policy news you need to start your day, in just five minutes. Listen and subscribe for free at politico.com/energy-podcast. On today's episode: From the archives: Is clean hydrogen an illusion?

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Driving the Day

OIL LANG SYNE: The oil industry has seen quite a change in tone from the Biden administration since the beginning of 2021. What started off in January with President Joe Biden signing the executive order finishing off the Keystone XL pipeline's chances and launching the biggest-ever push to elevate climate change action has morphed into a call for companies to deploy more roughnecks to the oil patch.

What prompted that change? The cyberattack that hit the Colonial Pipeline and sparked a run on gas stations in the Southeast certainly spooked the administration. But it was surging crude oil and gasoline prices later that fed into the near-panic around inflation and next year's midterm elections that really marked the White House's change of heart.

While the relationship between the White House and the oil and gas industry will never be exactly chummy, Energy Secretary Jennifer Granholm's recent outreach via the National Petroleum Council appears to have settled some nerves just in time for the holidays, sources tell ME. Tensions had risen when Biden's Chief of Staff Ron Klain floated the notion of re-imposing a ban on oil exports, something that unnerved the industry (and wouldn't necessarily do anything to combat high prices).

It's unclear whether Klain was seriously pushing to cut off the flow of the 3 million barrels per day of U.S. crude shipments or if he was using the idea as a political cudgel — ME suspects the latter. But Granholm's putting the idea to rest during the mid-December Q&A with industry heads, plus her exhortations to "hire workers...get your rig count up," soothed nerves, multiple industry executives who attended the meeting said. "That was good," one executive told ME. "The message she delivered was something our guys wanted to hear."

The former Michigan governor earlier had literally laughed at the idea of increasing domestic oil production to offset rising gasoline prices. Instead, the Biden administration had called on OPEC to open their taps, a move considered a slap to the domestic industry's collective ego.

"It's important for the American oil and gas industry to address near term energy demands while also recognizing that they need to begin transitioning their companies," a DOE spokesperson said in a statement Wednesday. "The industry just spent the past two decades innovating, and it's time for them make good on their own net zero commitments to help their companies and workers lead again, this time in the global clean energy revolution."

But with Granholm patching up relations with the oil industry, it's opened up a new rift with some progressive groups. "It's disturbing that Secretary Granholm cares more about placating the fears of oil industry millionaires than helping the countless people around this country sickened every day by fossil fuel pollution," said Brett Hartl, government affairs director at the Center for Biological Diversity. "If the White House is hearing fossil fuel executives loud and clear on exports or anything else, that's a terrible sign of where Biden's climate agenda is headed."

Still, there's plenty of issues that will require industrial-strength antacids on both sides. The Biden administration ultimately wants to push the country toward much greater use of renewable energy, something that will help the battle against climate change but isn't necessarily great for the oil business in Texas or North Dakota. Other priorities, including cutting back on methane emissions, have gotten some industry buy-in, but the language in the Build Back Better bill — itself on life support — hasn't been settled yet.

Politically, the administration will have to play nice with oil companies as long as the threat of gasoline price spikes give Republicans an electoral issue to exploit. Granholm's peace offering has eased some of the tensions and may have been enough to return the relationship between the administration and the oil sector to simply frosty. Or, as one lobbyist told ME: "Now both sides need to reduce the volume of the shooting war between them so all can return to just low grade skirmishing."

STEP INSIDE THE WEST WING: What's really happening in West Wing offices? Find out who's up, who's down, and who really has the president's ear in our West Wing Playbook newsletter, the insider's guide to the Biden White House and Cabinet. For buzzy nuggets and details that you won't find anywhere else, subscribe today.

On the Hill

BIDEN BACK AND NOT BITTER: Biden isn't throwing in the towel on BBB — or on Joe Manchin for that matter. After giving an update on the Omicron variant Tuesday, Biden assured reporters that he doesn't have a grudge against the West Virginia senator who halted the reconciliation package in its tracks this weekend and said he will keep working on the legislation into the new year.

"Sen. Manchin and I are going to get something done," Biden said sharply. "Thank you."

It's a stance that finds middle ground between the doom and gloom predictions for the massive climate and social spending package and the forget-him attitude of some exasperated progressives who want to go ahead on a vote with or without the centrist Democrat. Biden appeared to echo several Democrats and clean energy interest groups who cut through their disappointment earlier this week to get back to the drawing board, telling your host, along with Pro's Josh Siegel and Kelsey Tamborrino ICYMI, that the stakes were simply too high to not proceed.

"Some people think maybe I'm not Irish because I don't hold a grudge," Biden said. "Look, I want to get things done. I still think there's a possibility of getting Build Back Better done."

Senate Democrats huddled on Tuesday night for the first time since Sunday's shake up, where Senate Majority Leader Chuck Schumer said he intends to have BBB on the floor for a vote by January. But Manchin reiterated that he's had the same reservations on the plan for the past five months, POLITICO's Marianne LeVine reports.

CALIFORNIA DEMS RAISE THE ROOF(TOP): House Democrats from California are urging their state's grid regulators not to do away with incentives for rooftop solar that have been at the center of a contentious fight this year. The eight lawmakers wrote to California Public Utilities Commission President Marybel Batjer on Tuesday that a recent proposal by the commission to lower bill credits and add a monthly charge on solar owners would have the effect of "potentially putting rooftop solar out of reach for many Californians, undermining grid resilience, and making it harder for our nation to reach its national clean energy targets."

The proposal is meant to balance out costs after utilities and some consumer and environmental groups raised concerns that current incentives unfairly shift grid maintenance costs to consumers without home solar panels. But solar backers in California rebut that home solar generation has environmental and grid benefits for everyone and that adding fees would shut out all but the rich from deploying their own solar. Pro's Colby Bermel has more from California.

Around the Agencies

DESERT RENEWABLE PLANS BACK ON THE TABLE: The Biden administration is revitalizing an Obama-era agreement between the federal government and California to deploy renewable energy on federal lands. The Interior Department approved the Arica and Victory Pass solar projects Tuesday as part of the agreement, dubbed the Desert Renewable Energy Conservation Plan, and predicted the projects would generate up to 465 megawatts of electricity and up to 400 MW of battery storage.

"This is a major milestone for the Arica and Victory Pass projects, and we're grateful to the state and federal leaders who came together to support renewable energy on public lands. We look forward to starting construction on these projects next year so that they can provide clean, reliable, affordable power when California needs it most," said Julia Zuckerman, head of external affairs in the Western US for Clearway Energy Group, which is developing the projects.

The Biden administration is pushing ahead with more renewable energy deployment on federal lands after the Trump administration tried to derail the federal-state agreement. The Bureau of Land Management has so far permitted 36 wind, 35 solar and 48 geothermal projects on lands it manages with a total combined capacity of about 12 GW, Principal Deputy Assistant Secretary for Land and Minerals Management Laura Daniel-Davis told reporters on Tuesday. The Interior Department said it also expects to soon approve the Oberon solar project, also in California. Pro's Kelsey Tamborrino has more.

HALT AND REASSESS: EPA isn't too thrilled about FERC's environmental review process for new LNG compressor stations and wants the commission to hit pause on further decisions until it updates its policy. EPA said the commission doesn't sufficiently account for upstream greenhouse gas emissions and urged FERC to consider using the social cost of carbon in its evaluations. The agency made its critique in comments filed to FERC on Monday over proposed LNG compressor units by Iroquois Gas Transmission System in New York. Pro's Catherine Morehouse has more.

RESETTING HEATING STANDARDS: The Energy Department on Tuesday published a final rule undoing Trump-era changes that created new classes of water heaters and home furnaces that efficiency advocates warned allowed cheaper, less efficient products to remain on the market. DOE's rule reinstates the previous interpretation that the technology used to supply heated air or hot water for residential furnaces and commercial water heaters is not a performance-related "feature" for the purpose of establishing energy conservation standards. The Trump administration had finalized a rule in its last days that said such technology was a performance-related feature and thus could not be eliminated through adoption of an energy conservation standard.

Advocates said the new Biden rule could save consumers money and cut emissions, but reiterated there is still work to be done to set stronger standards. "Getting rid of this roadblock was critical, and now the department's bigger challenge ahead will be setting strong standards for each of these products," said Andrew deLaski, executive director of the Appliance Standards Awareness Project, in a statement. Meanwhile, Dave Schryver, president and CEO of the American Public Gas Association, said the organization was "disappointed in the Administration's decision to disregard the differences between condensing and non-condensing appliances," saying doing so would "impose high installation costs on consumers, require physical changes to homes and businesses, and end up limiting consumer choice with regards to fuel type."

NEW DOE OFFICE: The Energy Department announced a new Office of Clean Energy Demonstrations on Tuesday — a body supported by $20 billion from the bipartisan infrastructure package. The office will key in on nascent technology including hydrogen, carbon capture, energy storage and advanced nuclear. The money is part of $62 billion allocated to the department to support clean energy demonstration projects.

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