Oil pipeline, producer standoff prompts new call for Texas shale curbs

ENVIRONMENT
MARCH 30, 2020 / 5:46 PM / UPDATED A DAY AGO

Oil pipeline, producer standoff prompts new call for Texas shale curbs

Jennifer Hiller
5 MIN READ

HOUSTON (Reuters) – As a weekend standoff over oil shipments emerged between Texas pipeline operators and shale producers, a state energy regulator has renewed his controversial call for mandated cuts to address a growing crude glut.

Oil prices have fallen more than 60% this year as the coronavirus pandemic has destroyed fuel demand and Saudi Arabia and Russia kicked off a price war in a battle for market share. Oil in Midland, Texas, home of the biggest U.S. shale field, traded on Monday for under $10 a barrel, far below the cost of production.

“Large-scale production interruptions appear inevitable and imminent,” executives from Pioneer Natural Resources and Parsley Energy wrote in a joint letter to the state’s energy regulatory commission on Monday. In the latest sign of a growing oil glut in the state, crude oil purchasers across Texas have warned producers that storage will be limited in May and output must be cut, they said.

In at least one case, a shale pipeline operator told customers it planned to renegotiate its contracts.

Texas Railroad Commission, the state’s energy regulator, is set to meet on April 21, but Parsley and Pioneer have asked it to meet sooner and curtail production as early as May.

“I want to do it as soon as possible,” said Ryan Sitton, the commissioner who first floated the idea of cuts two weeks ago.

“We think it’s important to save this industry,” said Pioneer Chief Executive Scott Sheffield, adding that he would suggest a uniform 20% production cut but leave out the state’s smallest producers.

INDUSTRY OPPOSITION

One of the state’s top producers and the three largest oil and gas producer groups in Texas have opposed mandated production cuts.

“Putting any kind of export quotas on Texas producers could penalize the most efficient producers,” Chevron Corp Chief Executive Michael Wirth said in an interview last week. “We don’t expect unique assistance from governments.”

Chevron is the second largest U.S. oil company and a top U.S. shale producer.

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“I’m not advocating we do anything on our own,” Sitton told Reuters, saying he would expect any state-mandated cuts to hinge on Saudi Arabia and Russia agreeing to cut their output. “If it is the right thing to keep some stability in the world, we can do it.”

His comments prompted a call from OPEC Secretary General Mohammad Barkindo and an invitation to the group’s next meeting in June. Sitton said he plans to attend.

But mandated output cuts would lead to less cash for already hurting producers, said Karr Ingham, executive vice president of the Texas Alliance of Energy Producers, which represents more than 3,300 small and midsize oil and gas companies and opposes such reductions.

“You’re worse off than you were before,” Ingham said.

The state has not imposed production limits since 1972, but has the authority to do so, said Sitton.

“For 90 years someone has been setting the price of oil in the world,” he said, referring to Texas in the 1930s and later to the role of the Organization of the Petroleum Exporting Countries. “I don’t see why we can’t at least be part of the discussion right now.”

PRODUCTION BUDGETS SQUEEZED

Top shale producers have pledged to reduce their 2020 oil budgets by 30% to 50% and slashed jobs as prices fell well below production costs. Widespread cuts could lower U.S. output by up to 1 million barrels per day by December.

U.S. President Donald Trump said he would get involved in the oil price war at the appropriate time and last week named an envoy to Saudi Arabia to press U.S. concerns.

Oil gatherers who buy shale from producers are cancelling contracts with producers and insisting on new terms, according to letters reviewed by Reuters. One buyer said its own contract with a refiner had been canceled and would be renegotiated May 1.

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“This is a uniquely catastrophic time for the industry,” said Parsley CEO Matt Gallagher, adding that mandated cuts could keep the shale industry from collapse.

The state’s two other regulators have not publicly endorsed cuts. Commissioner Wayne Christian said he is willing to discuss the topic and Commissioner Christi Craddick has declined to comment.

Reporting by Jennifer Hiller in Houston; Editing by Marguerita Choy and Rosalba O’Brien

Our Standards:The Thomson Reuters Trust Principles.

Trump finalizes rollback of Obama-era vehicle fuel efficiency standards

ENVIRONMENT
MARCH 31, 2020 / 10:09 AM / UPDATED AN HOUR AGO

Trump finalizes rollback of Obama-era vehicle fuel efficiency standards

David Shepardson
6 MIN READ

WASHINGTON (Reuters) – President Donald Trump’s administration on Tuesday completed a rollback of U.S. vehicle emissions standards adopted under his predecessor Barack Obama and will require 1.5% annual increases in efficiency through 2026 – far weaker than the 5% increases in the discarded rules.

FILE PHOTO: Traffic travels along a highway next to Los Angeles, California, U.S. October 11, 2019. REUTERS/Mike Blake/File Photo

The announcement – condemned by Democrats and environmentalists while being lauded by Republicans and business interests – sets up a legal battle, with California and 22 other states planning to challenge the rewrite of what had been one of most ambitious U.S. policies aimed at combating climate change.

The Trump administration called the move its largest single deregulatory action and said it would will save automakers upwards of $100 billion in compliance costs. The policy reversal marks the latest step by Trump, a Republican, to erase environmental policies pursued by Obama, a Democrat.

James Owens, acting head of the U.S. National Highway Traffic Safety Administration, said the plan “strikes the right balance between environmental considerations, health and safety considerations and economic considerations.”

Writing on Twitter, Trump said his administration was “helping U.S. auto workers by replacing the failed Obama Emissions Rule.” Auto-producing states like Michigan could be pivotal in Trump’s Nov. 3 bid for re-election.

House of Representatives Speaker Nancy Pelosi, a Democrat, said the administration’s decision will harm public health and endanger U.S. economic security.

“The Trump administration’s anti-science decision to gut fuel standards will unleash massive amounts of pollution into the air at the worst possible time,” Pelosi said, alluding to the coronavirus pandemic.

A coalition of states previously challenged the Trump administration’s decision to revoke California’s authority to set its own stiff vehicle tailpipe emissions rules and require automakers under its Zero-Emission Vehicle Program to sell an increasing number of electric cars and trucks in the most populous U.S. state.

Under the Obama-era rules, automakers were to have averaged about 5% per year increases in fuel efficiency through 2026, but the industry lobbied Trump to weaken them. The new requirements mean the U.S. vehicle fleet will average 40.4 miles per gallon rather than 46.7 mpg under the Obama rules.

The Trump administration said the new rules will result in about 2 billion additional barrels of oil being consumed and 867 to 923 additional million metric tons of carbon dioxide being emitted and boost average consumer fuel costs by more than $1,000 per vehicle over the life of their vehicles.

ENVIRONMENTAL REVERSAL

Obama’s environmental policies were intended to cut carbon emissions that drive climate change, while Trump has ditched numerous environmental regulations that his administration deemed harmful to industry and has aimed to increase the use of fossil fuels. Trump also has pulled the United States out of a global climate accord and moved to reverse clean water regulations and pollution standards for coal-burning power plants.

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California Air Resources Board chief Mary Nichols said her agency will move forward with its zero-emissions program.

“This is a watershed moment marking the death of the old view of cars and emissions tied to petroleum use, and another that looks to vehicle technology driven by innovation,” Nichols said.

The Trump administration in August 2018 initially proposed freezing requirements at 2020 levels through 2026. Reuters reported in October automakers expected a 1.5% annual increase after talks with administration officials.

A trade group that represents General Motors Co, Volkswagen AG (VOWG_p.DE), Toyota Motor Corp and others said automakers need policies that support “a customer-friendly shift” toward electrified and other highly efficient technologies. “We are carefully reviewing the full breadth of this final rule to determine the extent to which it supports these priorities,” it said.

The U.S. Chamber of Commerce, a business group, said the final rule provides a “workable path forward on a unified national program that provides regulatory certainty while strengthening fuel economy standards and continuing emissions reductions.” Auto dealers also praised the revisions.

The administration said the revised rules will cut the future price of new vehicles by around $1,000 and reduce traffic deaths. Environmentalists dispute that the rule will reduce traffic deaths. The administration said drivers will pay more in increased fuel costs than they will save in lower vehicle prices but concluded they will save more in overall vehicle ownership costs.

The administration has battled with California over auto regulations. Last month, the U.S. Justice Department closed an antitrust investigation into a voluntary agreement between four automakers and California on emissions without taking any action.

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Ford Motor Co, BMW AG, Honda Motor Co and VW struck the deal last year, prompting the federal investigation. The deal bypassed a White House effort to strip California of the right to fight climate change and drew Trump’s ire. Volvo Cars confirmed on Tuesday it was also in talks to reach a California emissions agreement.

Ford said on Tuesday it remains “committed to meeting emission reductions consistent with the California framework.”

Reporting by David Shepardson; Editing by Will Dunham

Coronavirus lockdowns give Europe’s cities cleaner air

ENVIRONMENT
MARCH 29, 2020 / 6:08 PM / UPDATED 14 HOURS AGO

Coronavirus lockdowns give Europe’s cities cleaner air

Kate Abnett
3 MIN READ

BRUSSELS (Reuters) – Air pollution has decreased in urban areas across Europe during lockdowns to combat the coronavirus, new satellite images showed on Monday, but campaigners warned city-dwellers were still more vulnerable to the epidemic.

Cities including Brussels, Paris, Madrid, Milan and Frankfurt showed a reduction in average levels of noxious nitrogen dioxide over March 5-25, compared with the same period last year, according to the Sentinel-5 satellite images.

That coincides with lockdowns in many European countries which have curbed road transport – the largest source of nitrogen oxides – and slowed output at gas-emitting factories.

The new images, released by the European Space Agency (ESA) and analyzed by the non-profit European Public Health Alliance (EPHA), show the changing density of nitrogen dioxide, which can cause respiratory problems and cancer, like heat maps.

Daily weather events can influence atmospheric pollution, so the satellite pictures took a 20-day average and excluded readings where cloud cover reduced the quality of the data.

Data from the European Environment Agency (EEA) showed a similar trend over March 16-22. In Madrid, average nitrogen dioxide levels decreased by 56% week-on-week after the Spanish government banned non-essential travel on March 14.

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The EPHA said people living in polluted cities may be more at risk from COVID-19, because prolonged exposure to bad air can weaken the immune system, making it harder to fight infection.

“That connection is very likely,” Zoltan Massay-Kosubek, policy manager for clean air at EPHA, told Reuters. “But because the disease is new, it still has to be demonstrated.”

Air pollution can cause or exacerbate lung cancer, pulmonary disease and strokes.

China also recorded a drop in nitrogen dioxide pollution in cities during February, when the government imposed draconian lockdown measures to contain the raging epidemic.

Slideshow (4 Images)

In some regions of Poland, however, nitrogen dioxide levels remained relatively high during the period despite its lockdown, perhaps due to the prevalence of coal-based heating.

Countries that went into lockdown later – such as Britain, which did so on March 23 – look set for a pollution reprieve in coming weeks, EPHA said.

Air pollution causes around 400,000 premature deaths each year in Europe, EEA data show.

Reporting by Kate Abnett in Brussels; Additional reporting by Agnieszka Barteczko in Warsaw; Editing by Andrew Cawthorne

Our Standards:The Thomson Reuters Trust Principles.

Carbon-free hydrogen production needs multi-billion dollar subsidies to make it cost effective: research

SUSTAINABLE BUSINESS
MARCH 30, 2020 / 8:08 AM / UPDATED 14 HOURS AGO

Carbon-free hydrogen production needs multi-billion dollar subsidies to make it cost effective: research

3 MIN READ

FRANKFURT (Reuters) – The falling cost of producing hydrogen from renewable power offers a promising route to cutting emissions, but governments need to step in and provide $150 billion of subsidies over the next decade to scale up the technology, according to research from Bloomberg New Energy Finance (BNEF).

Renewable hydrogen can be made by splitting water into hydrogen and oxygen, using electricity generated by cheap wind and solar power.

The technology to do this is currently funded by companies, but BNEF estimates that if governments worldwide were to provide $150 billion in funding over the next 10 years – less than half the amount currently spent on subsidies for fossil fuel consumption – that would help halve the cost of producing hydrogen from renewable energy sources.

The BNEF Hydrogen Economy Outlook said that usage of carbon-free hydrogen is currently small and costs are high, slowing the deployment of hydrogen production, storage and transport infrastructure, which could help industries decarbonize.

“This needs policy coordination across government, frameworks for private investment and the roll-out of around $150 billion of subsidies over the next decade,” said Kobad Bhavanagri, head of industrial decarbonization at BNEF.

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The cost of electrolyzer technology to make hydrogen from renewable power has fallen by 40% in the last five years in Europe and North America, while Chinese-made systems are 80% cheaper than those in the West, according to BNEF.

This has encouraged industries such as steel, heavy vehicles, shipping, cement, fertilisers and power generation to explore measures to replace natural gas usage with hydrogen, to cut carbon emissions under climate targets.

In Japan, carmaker Toyota (7203.T) seeks to establish hydrogen-powered cities and transport and in Germany, oil majors and utilities including BP (BP.L) and RWE (RWEG.DE) plan plants and pipelines while the government is drawing up a hydrogen strategy.

BNEF said the cost of producing a kilogram of hydrogen from renewable power could fall to a range of $1.14-2.71 per kilogram in 2030, compared with $2.53-4.57/kg now, if subsidies to the tune of $150 billion were provided.

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In 2050, the production cost could even fall to $0.8-1.6 in most parts of the world, making hydrogen competitive with current gas prices in Brazil, China, India, Germany and Scandinavia, it estimated.

However, achieving this hinged on how governments enforced CO2 curbing targets to drive out conventional processes, it said.

Reporting by Vera Eckert, editing by Susan Fenton

Our Standards:The Thomson Reuters Trust Principles.

Indians breathe easier as lockdowns to halt coronavirus clear smog

Indians breathe easier as lockdowns to halt coronavirus clear smog

Alexandra Ulmer
3 MIN READ

MUMBAI (Reuters) – Indians breathed easier on Monday as lockdowns ordered to combat the spread of the coronavirus in India’s megacities kept cars off the road and closed factories, improving air quality and letting people see blue skies instead of heavy gray smog.

FILE PHOTO: A view of deserted roads along Bandra during a 14-hour long curfew to limit the spreading of coronavirus disease (COVID-19) in the country, in Mumbai, India, March 22, 2020. REUTERS/Francis Mascarenhas/File Photo

Last year, India accounted for around half of the world’s 50 most polluted cities, according to Swiss firm IQAir, with emissions caused partly by industry, vehicle exhaust and coal-fired plants.

Now, however, New Delhi and at least 75 Indian districts are under lockdown to stop the virus, which has infected at least 341 people in India and killed seven.

Many Indians also heeded Prime Minister Narendra Modi’s call to observe voluntary confinement on Sunday, leaving roads that are usually crammed with cars, rickshaws, motor-bikes and buses eerily empty.

In New Delhi, the world’s most polluted capital city, the Air Quality Index sank to roughly 93, a level considered moderate, on Monday afternoon. New Delhi’s air is regularly considered unhealthy, and AQI averaged around 161 in March 2019, according to IQAir.

In financial capital Mumbai, levels were at 90, versus an average of around 153 in March 2019. Air quality is deemed to be good when the number drops below 50.

“(The drop) is mainly because of a huge reduction in vehicular traffic,” said Dr. Gufran Beig, project director at the government environment monitoring agency SAFAR.

As a result, skyscrapers usually shrouded in smog were visible and some residents reported spotting more stars than usual.

“We went for a walk and my wife found that breathing was easier,” said retired sea captain Francis Braganza, 74, whose wife suffers from chronic breathing problems he attributed to pollution.

India’s toxic air claimed 1.24 million lives in 2017, according to a study published in Lancet Planetary Health.

Some research also links air pollution to an increased risk of respiratory virus infections – which include COVID-19, the disease caused by the coronavirus.

“Once we get over this crisis, it will be as bad as before,” Braganza said while walking on a quiet Mumbai road.

Reporting by Alexandra Ulmer; Editing by Simon Cameron-Moore

Our Standards:The Thomson Reuters Trust Principles.