Lawmakers weigh how to help struggling energy industry
Lawmakers in both chambers are looking for ways to assist the energy industry as the economic fallout hits fossil fuels and renewables alike.
Oil demand has plunged amid stay-at-home orders and concerns over travel. The renewable energy industry has lost about 600,000 jobs as the economy falters.
A suite of high-ranking officials and major industry groups appeared before committees in both the House and Senate Tuesday to discuss the issue.
“Put simply, the COVID-19 pandemic has created the biggest shock to global energy systems since at least World War II,” David Turk, acting deputy executive director at the International Energy Agency (IEA), told the Senate Energy and Natural Resources Committee.
IEA estimates global energy demand will fall 6 percent this year — the equivalent of losing all of the demand from India. In the U.S. the organization predicts a 9 percent drop in energy demand.
That drop is being felt different across the industry. Oil demand is expected to drop 8 percent globally while electricity demand is forecast to fall 5 percent.
“Renewables have been the most resilient of all the fuels so far, and the only energy source that we expect to grow in 2020. Although I should say at much lower levels than we forecast before the crisis,” Turk said.
Lawmakers on both sides of the aisle are looking to future stimulus bills as a way to boost the industry, even though earlier efforts for measures preferred by each party were not included.
Democrats failed to get tax credits for renewables included in any of the bills, and Republicans didn’t secure funding requested by President Trump to buy oil to fill the nation’s Strategic Petroleum Reserve.
But as future packages consider a broader array of impacts of the virus, more specific assistance for industries could fare better.
Industry groups and officials have conflicting ideas, however, about how to move forward.
“The energy sector has stuffed acutely and uniquely,” said Sen. Lisa Murkowski (R-Alaska), adding that her energy bill, which would spur investment in research and development across the sector, was “ready made for action.”
In the absence of a federal bill, agencies have taken their own measures to offer relief to industries, most notably an Environmental Protection Agency memo lifting mandates for businesses to monitor their pollution and a move from the Federal Reserve Board changing its requirements to open financing to the oil and gas industry.
Some have called for Congress to pursue additional similar efforts.
“I think more temporary relief, both regulatory and royalty relief, for energy producers is needed,” Sen. Steve Daines (R-Mont.) said, suggesting cutting government rates companies pay to extract oil on public lands.
Democrats, however, have pitched a bigger-picture remake of the industry, gearing more towards renewables.
“We will need millions of new jobs in order to climb out of the COVID-19-induced economic hole and most likely additional, extraordinary actions by the federal government,” former Obama administration Energy Secretary Ernest Moniz told lawmakers on the House Energy and Commerce Committee.
“Given the demonstrated track record of the energy sector in having considerable leverage for job creation, major investments now in the clean energy transition, and any further stimulus and appropriations, should have a high priority,” Moniz said.
Environmental groups have repeatedly made calls for tax credits for the renewable industry as well as tax benefits for companies that are able to capture carbon before it is released into the atmosphere.
The fossil fuel industry, however, has largely advocated for the government to steer away from relief efforts, arguing that reopening the economy, and the demand for energy that would accompany it, would be most beneficial.
“In terms of asks going forward, our major request would be essentially do no harm, to prevent short-term measures that are maybe put in place with good intentions” but risk long-term impacts, said Frank Macchiarola with the American Petroleum Institute, which represents the oil and gas industry.
“What I’m talking about there are things like punitive trade measures or tariffs and production quotas. We think that’s the wrong direction to go. And we really appreciate the leadership of Congress and the administration and not heading in that direction.”
Trump had once suggested the U.S. place tariffs on oil imported from Saudi Arabia or impose production cuts — something he lacks the ability to do under U.S. antitrust laws preventing coordination among competing companies.
The oil industry opposed efforts in Texas to limit production, particularly since capping wells can reduce their productivity over the long term.
Experts caution it could take years for the energy industry to recover from the pandemic.
Oil prices may not return to the $50 pre-coronavirus price until 2021 when demand has more consistently stabilized.
“We believe the most significant declines have already occurred and the consumption will recover over the next 18 months. However, we do not expect consumption returns [to] 2019 levels by the end of 2020,” Stephen Nalley, deputy administrator for the U.S. Energy Information Administration, told senators.
But he was unsure to what extent the rest of the industry would recover along with the economy.
“I think the uncertainty that we’re all dealing with is the most challenging,” he said.