OVERNIGHT ENERGY: Global carbon dioxide emissions predicted to plunge ‘unprecedented’ 8 percent this year| Fed’s expanded lending program opens funding to oil and gas industry| Companies claiming carbon capture tax credit didn’t follow EPA requirements
HAPPY THURSDAY! Welcome to Overnight Energy, The Hill’s roundup of the latest energy and environment news.
Please send tips and comments to Rebecca Beitsch at firstname.lastname@example.org. Follow her on Twitter: @rebeccabeitsch.
Reach Rachel Frazin at email@example.com or follow her on Twitter: @RachelFrazin.
CLICK HERE to subscribe to our newsletter.
IT’S GOING DOWN FOR REAL: Global carbon dioxide emissions are expected to decline this year by a record 8 percent amid the stay-at-home orders and economic fallout caused by the coronavirus, according to a new report.
The International Energy Agency (IEA) stated in its report that the year-over-year drop will likely be six times larger than the previous record reduction in 2009.
“Not only are annual emissions in 2020 set to decline at an unprecedented rate, the decline is set to be almost twice as large as all previous declines since the end of World War II combined,” the report stated.
The IEA found that during the first three months of 2020, global emissions were 5 percent lower than in the first quarter of 2019, largely as a result of decreases in emissions from coal, oil and natural gas.
During that period this year, emissions in the U.S. declined 9 percent, although the report stated that mild weather conditions also contributed to the U.S. decline.
“CO2 emissions fell more than energy demand, as the most carbon-intensive fuels experienced the largest declines in demand during [the first quarter of] 2020,” the report stated.
The agency warned that like in other crises, the rebound in emissions could be larger than the drop unless “the wave of investment to restart the economy is dedicated to cleaner and more resilient energy infrastructure.”
The IEA projected a significant 6 percent decline in energy demand this year, with a 9 percent decline in oil demand and an 8 percent drop in coal demand expected.
It also projected reductions in demand for gas and nuclear power, but said that demand for renewables was expected to increase because of low operating costs and “preferential access to many power systems.”
“If lockdowns last for many months and recoveries are slow across much of the world, as is increasingly likely, annual energy demand will drop by 6% in 2020, wiping off the last five years of demand growth,” the report said.
“Such a decline has not been seen for the past 70 years.”
Experts have previously told The Hill that carbon emissions were expected to decline this year, but described that decline as a blip in the ongoing trend toward unsustainable emissions levels.
“The damage from CO2 just accumulates, so every ton we don’t release is not inflicted on the environment, but if everything goes back to business as usual when this ends, it won’t have much of an impact,” David Archer, a professor of geophysical sciences at the University of Chicago, said last month.
BY REQUEST: Changes to a new lending program from the Federal Reserve has paved the way for the oil and gas industry to get government financing amid the pandemic.
The expanded criteria to qualify for the soon-to-be Main Street Lending Program follows requests from Sen. Ted Cruz (R-Texas) and an industry group for small and mid-sized oil producers who said financing was needed to save the industry from bankruptcy.
The guidelines released Thursday eased restrictions on borrowing for heavily indebted companies and also allows them to use the loans to refinance existing debts — a departure from the first set of criteria released by the board.
“Because of these restrictions, small- and medium-sized oil and gas companies, who desperately need liquidity because of massive demand disruption caused by COVID-19 and foreign oil aggressive overproduction and price discounts, are unable to access the short-term liquidity they need to avoid bankruptcy,” Cruz wrote in a letter to the Treasury Department and the Federal Resource Board last week.
The expanded program will benefit a number of industries.
Companies with 15,000 employees or $5 billion in annual revenue will now qualify, up from 10,000 employees and $2.5 billion in revenue. The minimum loan size ranges from $500,000 to $1 million — a move designed to make the program accessible to both small and medium-sized businesses.
But the potential for oil companies to benefit from the loan program has irked many Democrats, some of whom fought to ensure no coronavirus stimulus funds would go to fossil fuel companies. These efforts included blocking $3 billion in funds requested by the Trump administration in order to buy oil for the Strategic Petroleum Reserve.
Lawmakers on both sides of the aisle have since become avid correspondents with both Treasury and the board, penning multiple letters arguing both for and against assistance for oil companies as drop in demand and surge of supply has sent prices tanking.
“By hook or by crook, Big Oil is going to try to get a bailout while small businesses shutter,” Sen. Ed Markey (D-Mass.) said in a statement following the new Main Street Lending Program guidelines.
“President Trump’s fossil fuel cronies lobbied and are going to take money that was meant to help businesses survive the coronavirus pandemic in order to bail themselves out of $200 billion in existing debt. It is deplorable to spend good money after bad and waste taxpayer dollars on an industry that has been struggling for years due to bad business decisions….It’s unacceptable, unwarranted, and unjust, and we cannot let this stand.”
Read more on the Trump administration’s plans for the oil industry here.
TAXING: The vast majority of money claimed through a clean air tax credit over the past decade was done by companies that were not properly compliant with its requirement, according to an internal government watchdog.
The section 45Q tax credit incentivizes the use of still-developing technology to remove carbon from the atmosphere. One way it’s used is in oil recovery, rendering the method controversial among critics who oppose fossil fuel extraction.
In a report released Thursday, the Treasury Department’s Inspector General for Tax Administration determined that 10 entities had claimed more than $1 million each between tax years 2010 and 2019, and that their combined claims made up 99.9 percent of credits given.
The watchdog found that about 87 percent of claims from these 10 taxpayers, or $893,935,025, were made while they were not in compliance with credit requirements from the Environmental Protection Agency (EPA).
The watchdog listed as an example failure to submit a monitoring, reporting and verification (MRV) plan, which helps the EPA verify that carbon dioxide is actually sequestered. The report also said that only three of the 10 entities in question currently have EPA-approved MRV plans.
The investigation reported that the IRS has taken action against four of the 10 taxpayers.
The probe was undertaken following a request by Sen. Bob Menendez (D-N.J.), who said in a statement that the results point to an “apparent failure of the fossil fuel industry to act in good faith.”
In a letter to IRS Commissioner Charles Rettig, Menendez said the IRS should take enforcement actions against those who were not in compliance.
He specifically called on the service to audit every taxpayer that has claimed more than $10,000 in credits and retroactively deny those that did not comply with requirements.
An IRS spokesperson declined to comment on whether it would be taking additional actions, citing taxpayer privacy.
The EPA plays an accounting role in implementation of 45Q credits, but is not responsible for compliance, according to the environmental agency.
Brad Crabtree, the director of the Carbon Capture Coalition, which promotes the use of carbon capture technology, said in a statement that the problems identified with the “old 45Q program cannot be allowed to taint the new and reformed 45Q program,” referring to legislation passed in 2018 that changed and expanded the program.
OUTSIDE THE BELTWAY:
Report: Natural gas is a loser for long-term utility shareholder value, Utility Dive reports
Trump seizes on pandemic to speed up opening of public lands to industry, The Guardian reports
In fast-warming Minnesota, scientists are trying to plant the forests of the future, The Washington Post reports
Indian Affairs Employee Is Interior Department’s First COVID-19 Death, HuffPost reports
ICYMI: Stories from Thursday…
Global carbon dioxide emissions predicted to plunge ‘unprecedented’ 8 percent this year
Government probe finds companies claiming carbon capture tax credit didn’t follow EPA requirements
Fed’s expanded lending program opens funding to oil and gas industry
FROM THE HILL’S OPINION PAGES:
Fossil fuels: Save the workers, kill the industry, argues Johannes Urpelainen, a professor at the Johns Hopkins School of Advanced International Studies and director of the Initiative for Sustainable Energy Policy.
The Hill has removed its comment section, as there are many other forums for readers to participate in the conversation. We invite you to join the discussion on Facebook and Twitter.