ESG & Industry Updates

Inflation Reduction Act - Relevant Industry Item Snapshot

Posted by Kelly Burke on Aug 22, 2022 12:43:46 PM

 

Last week President Biden signed into law the “Inflation Reduction Act”, which is essentially a slimmed down adjunct bill to the “Build Back Better Act”. As the name implies, ,the goal would be to combat the crippling inflation facing the country currently – although most analysis by both CBO and federal groups has not concluded that would be the case in the long term. We shall see.

In the meantime, we pulled together some of the major industry-relevant items to keep an eye on

Federal analysis of the Inflation Reduction Act projects that the law will help cut United States emissions to 40% lower than 2005 levels by 2030. This aligns with the longer term goal of a net zero emission economy by 2050.

$370 billion dollars of the $740 billion dollars contained in the Inflation Reduction Act are directed toward addressing climate change, (including the potential cost of tax credits)

Among the points focused on are:

  • Removing the per-manufacturer cap on tax credits per unit sold of Electric Vehicles, which is meant to stimulate growth in EV sales and usage. However, there is also a provision that EV batteries have to be sourced 40% from domestic sources, which will be a major hurdle for some companies.
  • $60 billion in production tax credits for companies involved in domestic clean energy production, including multiple incentives for nuclear production to the tune of $30 billion
  • EPA granted the authority to fine oil & gas companies for emitting excessive methane emissions. This is a first of its kind provision that would kick off in 2024 and fine $900 per metric ton initially, and increase annually thereafter.
  • $9 billion dollars toward promotion of consumer adoption of renewable energy for residential use in the form of solar, heat pumps and electric systems instead of natural gas.
  • $60 billion for Environmental Justice programs, in the form of both renewable energy conversions and pollution, drought, and flooding remediation for impacted communities.
  • $51 billion for renewable energy production
  • $51 billion for clean energy investment
  • $3.2 billion for carbon capture technology
  • $27 billion for Greenhouse Gas Reduction Fund (a financing agent for startups focused on decarbonization, essentially)

Of note is that most of the federal analysis seems to conclude that the emission reductions projected would require a heavy reliance on Carbon Capture & Store technology, which at the moment is a complicated and cost prohibitive solution in many situations.

As with any massive piece of legislation, its hard to predict how different provisions will impact industry segments until the rubber hits the road as they say. Definitely something to keep an eye on as it unfolds.

Stay Tuned!

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Topics: carbon emissions, Biden Administration, environmental justice, inflation, ev, Inflation Reduction Act, Carbon Capture

Slimmed Down Biden Infrastructure Bill Clears House

Posted by Kelly Burke on Nov 8, 2021 12:07:44 PM

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This past Friday, November 5th, the House passed a $1.2 trillion dollar infrastructure bill after weeks of legislative infighting, primarily between progressive Democratic members and their more centrist colleagues, in addition to the given squabbling across party lines. 

At the end of the day, 13 Republicans supported the measure where 6 Democrats did not. Simply put, the moderate republicans & democrats a la Joe Manchin ultimately voted “yea” where “the Squad” went “nay”.

Some of the more ambitious social spending related items were ultimately trimmed from the original proposal, including parental leave, $100 billion for workforce development, $400 billion to bolstering care for disabled and elderly Americans via expanded access to long term care services, $18 billion for VA Hospital modernization, and items regarding home health care worker pay levels.

Also conspicuously absent on the other side of the ledger – the proposed increase in corporate tax rate (from 21 to 28%) was scrapped, as were multiple tax hikes proposed to pay for some measures. Presumably, the social spending items that were ultimately trimmed from the Infrastructure package will be added to the separate 1.75 trillion Climate & Social spending bill (the so called “Human Infrastructure” bill) up next.

What’s still included?

  • $110 billion for roads, bridges, and major infrastructure projects.
  • $11 billion for Transportation safety, including crash mitigation for cyclists.
  • $1 billion to reconnect communities divided by prior infrastructure projects, particularly in minority neighborhoods disproportionately impacted.
  • $39 billion to modernize public transport systems
  • $66 billion on rail infrastructure additionally, to reduce the Amtrak backlog and modernize the Northeast corridor.
  • $65 billion in Broadband Infrastructure expansion & improvement
  • $17 billion to Port infrastructure
  • $25 billion to Airports
  • $7.5 billion for zero & low emission busses and ferries
  • $7.5 billion for building out EV charger network
  • $21 to environmental remediation of Superfund sites, abandoned mines, and orphaned gas wells.
  • $55 billion to upgrade water infrastructure, including removing lead piping.
  • $65 billion to rebuild the electric grid

As mentioned previously, the passage of the infrastructure package from the view of those who work in utility contracting, electrical contracting, and other related union jobs (particularly in the Northeast) will be a huge boon to their members in terms of providing multiple long term projects, and thus multiple long term well-paying jobs.

One major variable to keep an eye on will be how much ongoing frustration and shortages along all facets of the supply chain, from manufacturing to delivery, may serve to push timelines on projects and ultimately slow progress forward on the outlined goals of the bill.

Stay tuned!

 

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Topics: Energy Infrastructure, Biden Administration

Everything Old is New Again - Methane Regulations on the Agenda

Posted by Kelly Burke on Nov 4, 2021 12:21:54 PM

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The Biden Administration has announced new methane regulations from the COP26 Climate Summit in Glasgow, Scotland this week. Estimates are that the new regulations will affect  up to 75% of the methane emissions in the United States. Regulations will apply largely to the Oil & Gas industry, specifically addressing “flaring” (purposeful venting) during production and leaks across the system infrastructure.

Methane is responsible for up to 30% of global warming, according to the UN Environment Program, and is estimated to be 25 times more potent than Carbon Dioxide. In recent years this had led to more focus on methane (versus Carbon) emissions, as because of the potency, decreases in methane are much more likely to have a faster and more meaningful impact on slowing Climate Change.

If this sounds familiar, it’s likely because in 2014 the Obama Administration announced similar Methane regulation controls (you can get a refresher here: Methane & Consumers Giving Nat Gas Headaches ) Those rules were enacted in 2016 and subsequently relaxed by the Trump Admin, before being reinstated by the Biden Admin. Hard to keep track of.

The oil & gas industry is responsible for an estimated 30% of methane emissions domestically, and the new rules are expected to reduce emissions from equipment, production sites, and covered areas by up to 75%. In tandem with the expanded EPA regulations, the DOT’s Pipeline & Hazmat Safety Administration is implementing the PIPES act which upgrades and expands existing pipeline setups to cut methane leakage. Other targets of emission reduction are landfills, and enhancing the abandoned mine & well closure program – orphaned mines have been an oft ignored thorn in the side of the federal government & EPA for decades, abandoned mines often leak methane and other gasses, or pollute their areas (For a refresher on that, check this article out: Accidents Happen: EPA Spill Highlights Difficulty of Mine Decontamination)

In an odd continuation of an ongoing trend, the new methane regulations will be “voluntary, incentive-based” changes in the Agricultural sector. This would seem to clash with the global concern over agriculture produced emissions, particularly those from concentrated feed lot (CAFO) based livestock production. The agricultural sector produces emissions comparable with the entire transportation sector (including airplanes) globally (14-18% for both), and agricultural emissions have increased approximately 12% since 1990, which is in contrast to the focus on emission reduction we have seen implemented (in a mandatory fashion) in other sectors. In terms of emissions, the US Agricultural sector produced approximately 698 million metric tons of CO2 equivalent in 2018, a staggering 36.2% of which was in the form of methane.

One of the items regarding agricultural emission control in the White House Proposal is investment in methane reducing practices like “alternative manure management systems”. Presumably (hopefully) this would be an investment in technology like the anaerobic digester technology we have seen make an appearance in MA, where dairy farmers have been diverting manure & food waste to be upcycled into energy. (More on that here: Mass Dairy Farmers Use Food Waste & Manure to Generate Renewable Energy)

So while we will have to wait to see how the new proposals take shape in actual regulation and enforcement, it’s worth noting that according to reports, the American Petroleum Institute (API) appears to support the proposal, with a response indicating they were “committed” to “continued progress” on methane emission reduction. 2020 methane emissions by oil & gas were down 10 percent versus 2019, but that was as a result of a collapse in production, not because of corrective action. The IEA estimates that 10% of methane could be reduced “at no perceptible cost” and where the US (along with Russia) is one of the world’s largest emitters, the new Biden regulations are an attempt to remedy that and push forward progress on a broader Climate agenda.

Stay Tuned!

 

 

 

 

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Topics: methane, climate change, climate change summit, Biden Administration

Infrastructure & Jobs Bill clears Senate, faces Hurdles in the House

Posted by Kelly Burke on Aug 11, 2021 11:43:09 AM

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The Biden Administration's 1 trillion dollar Infrastructure Package, the "Infrastructure Investment and Jobs Act" passed the Senate on Tuesday, with a voting margin of 69-30, meaning the passage was far more bipartisan than we are used to seeing as of late.

The  bill now heads to the House, where it faces a potentially more difficult road to passage, surprisingly not along the usual party lines as much as from a progressive faction in the House that has vowed  they would not vote on Infrastructure until a separate 3.5 trillion dollar social policy bill (the so called "Human Infrastructure" package) is passed. The second bill is expected to be a party line vote, occuring today or tomorrow, and it is unclear how long the standoff may be in the House regarding if the Transportation Package is passed ahead of the second bill as a standalone, or not. A lot of the answer to this likely hedges on whether the second bill is attempted to be pushed over as a budget resolution (which would allow passage sans Republican votes). 

The Transportation Infrastructure bill that is pending in the House, although at a whopping 1 trillion dollars, started back several months ago as a 2.3 trillion dollar plan.  Major concessions obviously were made to drop the totals, but here are some of the major categories the final bill is anticipated to include:

  • Infrastructure:  $110 billion in new funding for physical infrastructure - including repair to roads and bridges, and a focus on both repairing and shoring up the infrastructure in areas vulnerable to climate change related damage.  

  • Clean Energy: $73 billion to modernize the electrical grid (including transmission lines) and expand clean energy sources. New transmission lines will accomodate renewable energy sources like wind, solar, and geothermal into the grid, and higher voltage lines will allow vulnerable areas to better withstand climate related impacts to electricity access, like those we saw in Texas this past winter. 

  • Lead Pipe Replacement: $15 billion for lead pipe replacement. This one is sort of oddly lowballed in the context of both the anticipated cost itself ($45-60 billion) and the size of the bill itself. Millions of homes and hundreds of municipalities in America are still serviced with lead pipes, and as the Flint Water Crisis illustrated in 2014, damage to the pipes that results in leaching of lead into the water supply can have devastating effects. 

  • Public Transportation:  investment in rail transportation, including modernizing the Northeast corridor for Amtrak and expanding lines outside the Mid Atlantic region. Public bus and subway systems will also receive funding toward replacing aging equipment and infrastructure, as well as expanding routes with the goal of making public transportation more easily accessible to... well, the public. Currently only urban centers in some states have reliable public options and this portion of the bill is seen as a step towards expanding that access out to more rural communities. 

We'll have to wait til full passage to get into the nitty gritty and really see the end facts and figures on the bill's components, but outside of the political pundit commentary, at the very least people seem to agree that as far as regular citizens are concerned the key focus of the bill is the jobs expected to be created to handle repairing, building, and expanding infrastructure, as well as those that will be required to manufacture, manage, and coordinate those efforts. 

In the Northeast region in particular, the updating and expansion of Amtrak and public passenger rail, bridge repair, and investment toward shoring up areas vulnerable to climate related flooding and erosion is heralded by local unions as a boon to their members, particularly coming on the heels of quarantine's severe impact on construction and trade sectors. 

As mentioned, everything essentially now rests on the House and how they choose to approach passage of the Transportation bill - with or without the Human Infrastructure Bill attached. 

Stay Tuned!

 

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Topics: Energy Infrastructure, climate change, Biden Administration

The New Recovery Proposal: Infrastructure, Transportation & Climate Change, Oh My

Posted by Kelly Burke on Apr 2, 2021 4:18:58 PM

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This Wednesday, the Biden Administration unveiled a 2 trillion dollar transportation, infrastructure and economic recovery package. The goal of the bill is to create jobs, fix/upgrade US infrastructure, and combat climate change as the country attempts to recover from the COVID induced economic slump.

The bill is extremely large and multifaceted, so we are going to try and give a super brief summary of the major takeaways and points here as best we can with the disclaimer that because the bill hasn't passed yet, different points are subject to change as it moves through the legislative process.

In terms of the scope of the bill, it is anticipated to cost $2 trillion dollars over 8 years. The spending will be funded over 15 years by increasing the corporate tax rate from 21% to 28% and "discouraging offshoring" to tax havens (although specifics on the measures being taken to prevent offshoring have not yet been released). The corporate tax rate was lowered to the current 21% in 2017 by Republicans from its prior rate of 35% - so this increase, if passed, would still keep the corporate rate substantially below its prior level. Despite the fact that it will still be lower than 2016, this portion of the bill is expected to face stiff partisan opposition. It's unclear what provisions may change (if any) based on if funding sources need to be adjusted, so that is something to keep an eye on as the bill progresses. 

Projects focused on in the package on the transportation/infrastructure side include repair/replace of 20,000 miles of roads/highways, repair of 10,000 bridges, the addition of 500,000 Electric Vehicle charging stations, universal broadband, and the replacement of all lead pipes in drinking water systems nationwide. Those portions of the bill comprise about 900 million dollars, give or take (approximately 620 million for roads & bridges, 300 million for water & electric infrastructure). Additionally, there is a focus on expanding rail transport, notably in the Northeast. 

Another 580 billion dollars of the bill is directed to "American manufacturing, research and development, and job training efforts". Presumably the job training efforts include retraining of workers for "green jobs" as the bill includes climate related provisions congruent with Biden's so called "Build Back America Better" agenda, including the EV charger expansion we mentioned, rebates for consumers to encourage EV purchases, moving 20% of school busses to electric, and a provision to replace 50,000 diesel public transportation vehicles. 

Outside of strictly transportation/infrastructure, the bill also includes spending for building & retrofitting affordable housing, providing direct aid to the elderly & disabled, and modernization efforts for water ports and airports. 

As mentioned, the bill is extremely large and covers a lot of areas - definitely something to watch as it progresses through the legislative process and we find out what does or does not get included in the passage - there's something in there that impacts almost everyone, but hopefully this quick overview was helpful in outlining some of the major points relevant to our readers. 

 

 

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Topics: Stimulus, climate change, covid-19, Biden Administration

New Administration, New Focus - Executive Orders & Industry Impacts

Posted by Kelly Burke on Jan 28, 2021 5:59:19 PM

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The new Administration is off to a running start, as Wednesday saw a flurry of Executive Orders come out, many of which deal with climate change, and the oil & gas industry. There are a lot of items, and they are all pretty detailed with substantial backstory, but we are going to try and briefly touch on the three major items relevant to the industry and quickly go over the main points (or, try to at least!) 

So, here's the recap:

Keystone XL:  The Biden Administration cancelled the permitting for the Keystone XL pipeline, an $8 billion dollar project that would run over 800K barrels per day from Canada through the United States. Specifically, the pipeline runs from Alberta to Nebraska, where it would then hook with existing pipeline infrastructure running to the Gulf Coast refineries. There seems to be no recourse for TC Energy to fight the permit cancellation per se, the only major sway could theoretically be if Canada argues on behalf of the project continuing but according to analysts, that will be a non-starter, Trudeau is extremely unlikely to broach the subject with the Administration amid attempts to smooth a relationship between the two countries that was somewhat fractured during the prior administration's tenure. 

Moratorium on Federal Oil & Gas Leasing:  Another executive order has put a moratorium on the lease of any federal land or offshore waters for oil & gas development. The order also stipulates that current permits in effect be reviewed against the new standard, presumably to see if some additional will be cancelled. The Administration has a stated aim of "protecting at least 30% of federal land and offshore waters" as a general goal, and the moratorium appears to be a part of that aim. Currently, fossil fuel leasing on Federal land accounts for approximately 25% of carbon emission output, which is the impetus for the move. However, as others have pointed out, the leasing also provides around 8.1 billion dollars annually in tax revenue to tribal, state, and federal governments.  22% of oil production, and 12% of natural gas production takes place on federal lands and although this moratorium does not affect current operations (yet) there is some concern that a move toward stopping production on federal land, which is the possible end goal, would push the US back into becoming a net importer of petroleum as the economy continues to recover and demand begins to increase. However, its important to note that states have wildly disparate levels of reliance on federal land for production - New Mexico is largely federally based, whereas even a complete halt would not affect Texas very much, as production land is almost exclusively privately held. This is a watch-and-see item for sure, as no one is really clear on the end goal or next steps on this item yet. 

 

Paris Accords  The Biden Administration has additionally rejoined the Paris Climate Accord, which the prior Administration withdrew from last year. The US, under President Obama, played a major role in crafting the Paris Accord in 2015. The agreement overall aims to keep global temperatures from rising no more than 2 degrees Celsius (ideally 1.5... we are already up 1 degree) by way of reducing greenhouse gas emissions. The agreement is essentially an international treaty with almost 200 member countries who have pledged to take various steps to curb emissions in their respective countries. There are a million details within the Accord, but for the US the actions required include (among others) cutting emissions by 26% below 2005 levels by 2025, tightening fuel economy standards, and would also heavily rely on the "Clean Power Plan" to hit targets. Rejoining the Paris agreement is an important symbolic gesture for the Biden Administration, as one of the major focuses they will have is "putting climate at the center of domestic, national security, and policy" 

 

So those are the major points relating to the industry from Wednesday, and they are definitely items we will continue to follow and update on. It will certainly be interesting to watch how these unfold and shape the energy industry landscape over the coming four years. Stay tuned! 

 

 

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Topics: Keystone XL, climate change, clean power plan, Biden Administration, paris accord

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