Daily on Energy: Interior hides behind rare whale in oil

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RICE RICE BABY: The Biden administration’s new proposed restrictions on oil and gas companies operating in the Gulf of Mexico has sparked condemnation from industry officials, who view it as an unjustified and targeted blow to fossil fuel producers that threatens to restrict U.S. energy production.

How it happened: The proposed restrictions were borne out of a settlement agreement struck quietly last month between the National Marine Fisheries Service and a coalition of environmental groups led by the Sierra Club, which had sued the administration in 2020 over what it argued were inadequate protections for the Rice’s whale, an endangered species that habitates and traffics in the eastern Gulf of Mexico.

The Interior Department’s new proposal essentially extends existing vessel restrictions from the eastern Gulf to oil and gas producers operating offshore in the western Gulf as well — where nearly all of oil and gas activity exists and where “there’s little to no data that this whale actually transits or lives,” one official told the Washington Examiner.

After reaching a settlement with the groups, the Bureau of Ocean Energy Management, which was not party to the suit, went a step further — proposing new restrictions on oil and gas companies operating in a 11 million acre zone in the Gulf of Mexico, including imposing speed requirements on oil and gas ships, expanding protected zones, and limiting the hours the vessels can operate.

The response: The proposed restrictions have sparked ire from industry groups, which argue they are unjustified by current data on Rice’s whale activity in the western Gulf and that they unfairly single out oil and gas producers despite the fact that the area is one of the most heavily trafficked commercial vessel waterways in the United States.

They’re also outraged by the quiet way in which the deal was struck. “It was really just a closed-door negotiation between the Biden administration and environmental groups,” one industry official told the Washington Examiner of the settlement and subsequent restrictions. “It bypasses career staff at Interior. It bypasses Congress and bypasses other stakeholders. It’s just a one-on-one agreement with people who don’t want domestic production.”

Next steps: Several officials with knowledge of the operations told the Washington Examiner they’re waiting to see whether Interior will include the new restrictions in Lease Sale 261, the second of two congressionally mandated lease sales included in the Inflation Reduction Act, which is slated to take place in September.

Already, Interior said this week it will reduce Lease Sale 261’s acreage by 10 million acres, as detailed in its Notice of Sale, and any acreage will be “incredibly difficult” to develop with such stipulations in place, an industry official with knowledge of the proposed requirements said.

“We’ve seen a dramatic fall in leasing, both offshore and onshore,” in recent years, the official said. “And so we’re again seeing new restrictions to access, which, again, eventually will likely continue to impact production.”

Why it matters: The Gulf of Mexico is a strategic energy asset that provides nearly 2 million barrels of oil per day, is home to most of the country’s refining and processing capacity — 47% for petroleum, 51% for gas — and is recognized as providing among the lowest carbon-intensive barrels in the world. Estimates suggest that the proposed restrictions could impact vessel traffic by as much as 50%.

But industry advocates say the proposed restrictions are the latest in a line of frustrating mixed messaging from the Biden administration, making it harder for them to produce even after the president urged them to ramp up activity following Russia’s invasion of Ukraine.

The Biden administration “continues to throw up roadblock after roadblock to American energy production,” Holly Hopkins, API’s vice president of upstream policy, said this week.

Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writers Breanne Deppisch (@breanne_dep) and Nancy Vu (@NancyVu99). Email bdeppisch@washingtonexaminer.com or nancy.vu@washingtonexaminer.com for tips, suggestions, calendar items, and anything else. If a friend sent this to you and you’d like to sign up, click here. If signing up doesn’t work, shoot us an email, and we’ll add you to our list.

GAO REPORT ON NRC: A report released by the Government Accountability Office yesterday lays out recommendations for the Nuclear Regulatory Commission to prepare to license advanced nuclear reactors.

The report was originally requested by House Energy and Commerce Chairwoman Cathy McMorris Rodgers (R-WA) and Senate Environment and Public Works Committee ranking member Shelley Moore Capito (R-WV) in February 2022, when the lawmakers asked the GAO to assess the commission’s preparedness to review and approve advanced nuclear reactor applications.

Why it’s important: As support for nuclear energy continues to grow, the NRC is expecting a “significant increase” in the number of applications for advanced reactors in the next several years. However, since the agency’s licensing practices have been geared toward evaluating existing technologies, the commission would need to make changes to its process to license the newer reactors.

The report outlines four recommendations to the chair of the NRC, which include: establishing and managing a review schedule for incomplete applications, including applications for first-of-a-kind designs; drafting guidance to clarify the extent to which advanced reactor developers should participate in pre-application communication with the NRC; assessing strategies to help the NRC retain and hire the staff necessary to license advanced reactors; and clarifying when and how advanced reactor developers should engage with the Advisory Committee on Reactor Safeguards during the licensing process.

According to the report, the NRC generally agreed with the recommendations.

“This report’s recommendations align with the Energy and Commerce Committee’s bipartisan legislative efforts and reinforce the need for a modern, efficient, predictable regulatory environment to ensure a robust nuclear industry,” Rogers said in a press release.

Judi Greenwald, the executive director of the Nuclear Innovation Alliance, told the Washington Examiner the NIA supports the main recommendations within the GAO report — but she also recommended a broader review of the NRC that could help identify “cultural, organizational, or management issues that limit NRC effectiveness when reviewing new reactor license applications.” Greenwald then pointed to several reports the NIA has released on NRC reform.

CALI JUDGE RULES TO KEEP DIABLO CANYON PLANT OPEN: A California judge dismissed an environmental group’s lawsuit that looked to block the state’s largest utility from seeking to extend the operating life of the nuclear Diablo Canyon Power Plant.

Friends of the Earth filed a lawsuit in the state Superior Court in April, hoping to derail a state-supported proposal that would keep the power plant running for another five years. The environmental group was part of a 2016 agreement with operator Pacific Gas and Electric to shutter the state’s nuclear power plant by 2025.

However, Gov. Gavin Newsom (D-CA) and the state legislature gave a way for PG&E to extend their operations for longer last year. The environmental group argued the 2016 deal to close the reactors was still valid and that the utility would break a binding contract if federal regulators extended the operating licenses.

In an 18-page ruling, Judge Ethan P. Schulman rejected the complaint, agreeing with PG&E that Friends of the Earth was asking that the court “impermissibly hinder or interfere” with state regulatory oversight of the power plant located midway between San Francisco and Los Angeles. More from Nancy here.

HAWAIIAN ELECTRIC CEO’S BONUS DID NOT INCLUDE WILDFIRE RISK: Hawaiian Electric’s CEO received an annual bonus last year tied to profit, worker safety, and bolstering the supply of renewable energy — but not linked to reducing wildfire risk, according to a Reuters’s review of company disclosures.

The company’s CEO, Shelee Kimura, received a cash bonus in 2022 based on her performance against 10 measures, including profit and customer satisfaction. Wildfire risk mitigation was not on the list.

The state’s largest utility is being investigated over its role in the wildfire that killed more than 114 people on the island of Maui earlier this month — the deadliest U.S. wildfire in a century. The county of Maui on Thursday sued Hawaiian Electric, accusing it of acting negligently by failing to shut down electric equipment, which the county claimed started the fire.

Now, some investors and regulators are advocating for pay incentives to be tied to cutting risk — a strategy that could help prevent wildfire losses nationwide. However, California is the only state whose utilities implement this method. Read more here.

RESIDENTS URGED TO EVACUATE: Local emergency officials are responding to a naphtha release and fire at a storage tank at the Marathon Petroleum refinery in Garyville, Louisiana.

According to a statement from the petroleum company, the release and fire are contained within the refinery’s property, with no offsite impacts detected and no injuries reported. Air monitoring has also been deployed within the community. Residents within a mile radius of the refinery are being ordered to evacuate as a precautionary measure.

Naphtha is a term used to describe a class of hydrocarbon mixtures obtained from distilling petroleum. When breathed in or passed through the skin, it can cause headaches, nausea, and vomiting.

It’s unclear how the fire began. Officials from the company said an investigation will be conducted to determine the cause of the release. Read more from Nancy on that here.

ICYMI: Yesterday was National Hydropower Day, and at least one lawmaker was celebrating: Sen. Steve Daines (R-MT).

The Montana Republican teamed up with utility company Flathead Electric Cooperative to applaud hydropower in a video and used the opportunity to tout his own bill, the Community and Hydropower Improvement Act — a bill that would amend the Federal Power Act and aims to modernize and improve the licensing of nonfederal hydropower projects.

“While radical voices seek to undermine hydropower by breaching dams and overbearing permitting processes, I will always support hydropower and am glad to work toward a bright future for this key energy resource,” Daines said in a statement.