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On this episode of The Unregulated Podcast, Tom Pyle and Mike McKenna discuss the recent primary election results, Biden’s latest antics, and the level of sacrifice required to produce the world’s greatest tomatoes. Tom and Mike also sit down with Liz Bowman of the American Exploration & Production council to talk about all things shale production.
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Mexico’s newest oil refinery is not yet operational since it is behind schedule and over budget, but President Andrés Manuel López Obrador announced the refinery as a centerpiece to his goal of securing Mexico’s energy independence, which President Trump had secured for Americans in 2019 and which President Biden is destroying through his energy and climate policies. Mexico is ignoring (as are China, Russia and India) President Biden’s goals of ending the use of oil and natural gas, while pushing electric cars and renewable energy. The new refinery owned and operated by state-run oil company Pemex will help Mexico cut its dependence on foreign gasoline and diesel. For Mexico, sovereignty over energy production is important. In the 1930s, President Lázaro Cárdenas seized the assets of foreign oil firms he accused of exploiting Mexican workers and nationalized the industry—an event still celebrated as a national holiday.
Mr. López Obrador’s goal is to guarantee Mexican energy sovereignty, returning the country to the glory days when oil created thousands of jobs and helped bolster the economy. As a result, Mexican regulatory agencies are doing the opposite of what Biden’s regulatory agencies are doing – greenlighting projects investing in conventional energy. Mexico is keeping renewable firms out of the market, blocking their power plants from operating, and running fossil fuel-powered plants owned or run by the state. Mr. López Obrador indicates that while the transition to renewable energy will happen eventually, Mexico is simply not ready. Maybe he is seeing wisely that the electric grid and renewable technologies are not ready to make the huge leap and carry imposed costs on the system typically ignored by their promoters and media.
Mexico generates about 70 percent of its energy from fossil fuels, while renewables and nuclear power provide the rest. Mexico is planning to invest $6.2 billion to build 15 fossil fuel-powered plants by 2024. But, the country is still investing in renewable energy and is planning to spend about $1.6 billion to build a large solar plant in northern Mexico and to refurbish more than a dozen state-owned hydroelectric plants. As of June, however, over 50 wind and solar projects proposed by private and foreign firms were awaiting permits, with some applications dating back to 2019—the last time any new permits for private energy companies were approved. They represent almost 7,000 megawatts of renewable energy capacity. In 2019, López Obrador also canceled a public auction for the rights to generate wind and solar power.
Mexico has given preference to energy from coal, gas and oil plants owned by the state over privately owned renewables when dispatching them into the national grid, citing the reliability needs of the energy system. Government authorities prevented at least 14 privately owned wind and solar plants that have already been built from operating commercially. The Mexican President said his country would be open to foreign investment in renewable projects, but only if the energy ministry was in charge of planning and the state-owned utility company had a majority share.
Last year, his governing party approved a bill to rewrite rules governing how power plants inject electricity to the grid, reversing previous changes that often required renewable energy to be dispatched first, instead prioritizing state-owned plants. The new law was upheld by the Supreme Court in April, but the issue remains tied up in several lawsuits.
As a result of these changes, Mexico is not expected to meet its pledge to reduce its carbon emissions despite Mr. López Obrador still insisting that Mexico will meet its goal under the 2015 Paris Agreement to produce 35 percent of its power from renewable sources by 2024. A government report released this year showed that the country is years behind that target.
Mexico Plans to Export LNG, Using U.S. Natural Gas
Today, Mexico imports nearly all the natural gas it uses, but it intends to become one of the world’s top exporters of LNG, using American-produced natural gas. The country’s physical proximity to U.S. natural gas reserves positions it to supply American gas to Europe and Asia. Eight liquefied natural gas export projects are proposed south of the border with an annual combined capacity of 50.2 million tons. Some of the facilities plan to come online next year. Mexico’s President wants facilities in the Pacific ports of Topolobampo and Salina Cruz, as well as in Coatzacoalcos in the Gulf state of Veracruz. These plants have proven more difficult to build in the United States, especially as FERC, under Chairman Richard Glick has contemplated applying new “climate change metrics” to proposed pipeline projects.
Conclusion
Mexico wants to be energy independent and in control of its energy sources and technologies. It also sees fossil fuels as a way to achieve that goal, giving priority to them in the dispatch order, rather than to renewable energy. That allows their fossil fuel plants to recover their costs, operating at more than 80 percent of their capacity. When natural gas and coal plants are used solely as back-up to intermittent wind and solar plants, they are forced to operate inefficiently at low capacity factors and are unable to recover their costs, thereby being forced to retire. Mexico is wisely not falling into that trap, which is increasingly affecting electricity prices in the United States.
*This article was adapted from content originally published by the Institute for Energy Research.
Biden’s climate and tax bill, the so-called Inflation Reduction Act, and last year’s infrastructure law will supposedly cut emissions by 40 percent by 2030—close to Mr. Biden’s goal of cutting emissions roughly in half by then, according to Biden’s Department of Energy. To close the gap between DOE’s estimates and Biden’s promises, the White House intends to pursue new regulations through the Environmental Protection Agency (EPA). The new climate and tax bill provides billions of dollars to the EPA to reduce emissions from power plants and help to fund the development of wind, solar and other non-carbon emitting power sources. The law also encourages states to adopt California’s plan to phase out gas-powered vehicles by 2035. The administration believes it has help in the regulatory arena due to the language in the bill that identifies carbon dioxide produced by the burning of fossil fuels as an “air pollutant.” Others doubt that is the case since the climate and tax bill was passed via budget reconciliation–a category of legislation focused on government spending and revenue, where significant changes in law are proscribed. Because it is not definitive, the new language will not stop new lawsuits and regulatory fights.
Regulation combined with the new legislation and action from states is what President Biden intends to use to meet his promise to cut greenhouse gas emissions by 50 percent, compared to 2005 levels, by the end of the decade. Biden plans to deploy a series of measures, including new regulations on emissions from vehicle tailpipes and power plants and oil and gas wells. EPA is working to develop a new rule for coal-fired power plants and gas plants that will conform with the recent Supreme Court’s mandate that ruled out requiring utilities to switch from coal to wind or solar power. According to Gina McCarthy, a climate tsar, the government is working on new regulations on soot and other traditional pollutants, which she argues is a way of cutting carbon emissions. The EPA also has been working on a rule to regulate methane, which is expected to be finalized later this year. A separate regulation to curb vehicle tailpipe emissions could be issued next year.
President Biden expects the expansion of federal loan programs that is contained in the Inflation Reduction Act to help meet his goal by providing more money to renewable energy and converting plants that run on fossil fuels to nuclear or renewable energy. The law authorizes as much as $350 billion in additional federal loans and loan guarantees for energy and automotive projects and businesses. The loans are in addition to the provisions in the climate and tax bill that offer incentives for electric cars, solar panels, batteries, and heat pumps. The hope is that the money will help futuristic technologies that banks might find too risky to lend to or projects that are just short of money. These loans are reminiscent of the failure of Solyndra, a solar company that had borrowed about $500 million from the Energy Department, during the Obama administration, when similar climate and energy policies were tried. In that Green Energy spending program, large political contributors received funds from the DOE under President Obama and his Vice President Biden, who oversaw the program.
Last month, the Energy Department lent $2.5 billion to General Motors and LG Energy Solutions to build electric-car battery factories in Michigan, Ohio and Tennessee. The department’s loan program office is reviewing 77 applications for $80 billion in loans sought before the climate and tax law was passed. The “Inflation Reduction Act” will add $100 billion to existing loan programs for financing production of electric vehicles and for projects on tribal lands. It will also add up to $250 billion in new loan guarantees and $5 billion to support the costs of loan programs.
DOE Analysis
According to the DOE analysis, most of the projected emissions reductions would come in promoting “clean energy,” mostly solar and wind power and electric vehicles. More than half of the overall projected emission reductions would come in changing the way the nation generates electricity, and about 10 percent of the reductions in emissions would come from agriculture and land conservation.
IRA Referred to as Climate and Tax Bill
The Inflation Reduction Act is now the climate and tax bill because politicians no longer can claim that it reduces inflation. Now they claim that it will lower energy prices for Americans. But, those lower prices do not occur until 2030, when annual energy bills are expected to be reduced by $16 to $125 per household due to the bill. Democrat politicians, however, are claiming that the reductions are around $1,000 per household and are avoiding telling their constituents that the lower costs do not occur until 2030. So far, the addition of renewable energy to the electric grid has not resulted in lower electricity prices.
In fact, prior to 2030, homeowners can expect to spend a lot more on energy as options will be whittled down and technologies will need to be replaced to conform to the new system of renewable energy and electric vehicles. Supply will become unreliable as the favored technologies of wind and solar are intermittent and require major investment in transmission that is sorely missing from the new climate and tax bill. Americans can expect huge increases in electricity prices from offshore wind and battery back-up as these technologies are very expensive and are at the heart of Biden’s plans. And taxpayers will be footing the bill for the transition the climate and tax bill advocates. That means, many Americans will be charged twice for increasingly unreliable and expensive energy.
Conclusion
Biden is grateful to have signed the climate and tax bill into law for it supposedly gets him 80 percent of the way to his emissions reduction goal in 2030 that he promised early in his Presidency. His administration believes they can get to the rest of the reduction through regulation and state action. The EPA is working on rules that will be promulgated during the next 2.5 years of Biden’s presidency that cover the power sector, oil and gas production and transportation, but have yet to be shared with the American public and the businesses that must conform. Because of the massive changes contemplated in the law in the allowed energy uses and the prices people will need to pay for them, it is likely the courts will be actively employed to ensure it is done legally. Americans may end up paying much more for energy, but it is evident that for lawyers, it will prove a windfall.
*This article was adapted from content originally published by the Institute for Energy Research.
President Biden is depleting the U.S. Strategic Petroleum Reserve (SPR), which is currently at its lowest level in 37 years. On July 26, 2022, the U.S. Department of Energy announced an emergency sale from the reserve of up to 20 million barrels, which will go through the end of October, just prior to the mid-term election in November. And, along with that announcement, Goldman Sachs revised its forecast for gasoline prices upward to $5 a gallon by the end of the year. Previously, its price forecast was at $4.35 a gallon. That’s because despite the Biden SPR releases, the market must still balance demand with tight supplies. According to Goldman Sachs, a sustained $5 price should eventually solve the market deficit. The $5 gas price is accompanied by a Brent futures price expectation of $130 a barrel.
Skyrocketing natural gas prices in Europe resulting mainly from Russia’s supply cuts due to sanctions Europe placed on Russia for its invasion of Ukraine have prompted many industrial consumers, including refiners and power plants, to switch from natural gas to oil. Natural gas has been reaching prices of $60 per million Btu, equivalent to oil prices around $360 a barrel. Scorching temperatures have also increased demand for air conditioning, particularly in the Middle East, where a significant amount of oil is used during summer to generate electricity. The combination of relatively lower oil prices and the continued reopening of economies are also expected to increase oil consumption. As a result, the International Energy Agency has upped its world oil consumption increasing by 2.1 million barrels a day this year, or about 2 percent—up 380,000 barrels a day from its previous forecast.
Here in the United States, the lack of an inventory buffer for gasoline and diesel at a time when refiners are heading into their maintenance season is also expected to aggravate the supply outlook for these fuels.
Releases of Oil from the U.S. Emergency Reserve
On March 31, 2022, the Department of Energy announced an immediate release of one million barrels per day for six months from the Strategic Petroleum Reserve that was to be coordinated with international allies and partners. The six months was orginally expected to end in September, but the July DOE announcement mentioned above indicates the releases will go through the end of October, placing oil supply from the emergency reserve on the market right up until the mid-term election. So the reprieve of high price gasoline will be short-lived as the U.S. emergency reserve is being depleted, particularly of high-quality oil.
The SPR basically contains two kinds of crude: medium-sour, and light-sweet. The medium or light designation refers to the oil’s density, the sour and sweet designation refers to its sulfur content. Typically, U.S. refiners prefer medium-sour crude, which is a variety they can easily process into gasoline and other products due to their highly sophisticated plants. Medium-sour is the quality of oil pumped by Russia, most Middle Eastern countries and Venezuela. Over the last year, 85 percent of the oil the SPR has sold has been medium-sour, according to government data. In early May, there were more sweet barrels of oil left inside the SPR than sour: 235 million barrels vs. 234.9 million barrels. (See graph below.) By the end of October, the SPR is estimated to have only 179 million barrels of medium-sour quality oil. During the period June 2021 to October 2022, the United States is expected to sell about 180 to 190 million barrels of medium-sour oil from the reserve.
The Biden administration described the most recent SPR sale as a bridge to get supply and demand in balance as domestic producers increase output. “We want to make sure that bridge is as long as it can be and as flexible as it can be so that we can deal with further challenges as we have them,” such as hurricanes, Deputy U.S. Energy Secretary David Turk said. The withdrawals as of early August pushed SPR’s supply down to 464.6 million barrels, the lowest level since 1985 when U.S. demand was significantly lower than today. According to Turk, DOE will use money from the current sales to buy oil back at lower prices. When that will happen has not been determined.
At the current rate, the United States is selling more barrels from its emergency reserve than the production of most medium-sized OPEC countries, such as Algeria or Angola, or twice as much as the U.S. derives from Alaska. This is expected to shrink the reserve to a 40-year low of 358 million barrels by the end of October, when the releases are due to stop. A year ago, the SPR, located in four caverns in Texas and Louisiana, contained 621 million barrels. When those releases end just before Election Day, gasoline prices will start increasing and if the Goldman Sachs forecast is correct, they will be back at $5 a gallon by the end of the year.
Conclusion
If Biden’s latest SPR sales are successful in reducing the reserve by 180 million barrels, the SPR will be at 50 percent of its capacity and have only 179 million barrels of medium sour oil available for further sales to cover legitimate emergencies, such as hurricanes. That leaves little room for Biden to deal with escalating gasoline prices that Goldman Sachs is forecasting by the end of the year. The Biden administration has very cleverly added supply to the market to reduce gasoline prices by using the SPR and continuing the sales just until Election Day. The answer to Biden’s high gas price problem, however, is not SPR releases, but favorable oil policies that allow U.S. oil producers to have greater access and less regulation. Unfortunately, his so-called Inflation Reduction Act did not provide much favorable policies. Rather, it increased royalty rates and fees on federal lands and added a hefty methane fee on producers, while his administration continues to block oil and gas lease sales on federal lands and waters.
*This article was adapted from content originally published by the Institute for Energy Research.
On this episode of The Unregulated Podcast, Tom Pyle and Mike McKenna discuss the bizarre talking points coming from the Biden administration regarding the recently passed reconciliation bill, and the big winners and losers from the bill’s provisions.
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Europe’s move toward decarbonization 30 years ago has resulted in skyrocketing energy prices, the need for severe conservation, possible rationing that could shut down entire industrial sectors and likely future blackouts. It is the result of the continent moving to unreliable and intermittent renewable energy before it was ready to replace fossil fuels and being overly dependent on Russia for natural gas—the backup fuel to renewables. European countries have closed coal and nuclear plants as part of the “green transition.” Now, national and local governments across Europe are pushing to curtail energy usage as Russia cuts its natural gas shipments in response to Western sanctions from Russia’s invasion of Ukraine.
Europe’s energy prices began to skyrocket when demand started coming back after COVID lockdowns were lifted. Along with the higher demand, the continent was experiencing lower wind resources, so more backup power was needed, which was supposed to come mainly from natural gas with Russia supplying the majority of it via pipeline. Russia, however, started cutting back on gas shipments to Europe even before its invasion of Ukraine due to supposedly needing the gas for themselves, and then slowly curtailed more gas shipments with the Nord Stream 1 pipeline now operating at only 20 percent capacity. After Russia invaded Ukraine, Germany also pulled the plug on Nord Stream 2, on which President Biden had lifted sanctions in May, 2021.
To deal with the limited gas imports from Russia, in early August, the European Union approved a request that member states reduce gas consumption by 15 percent — a request that several members initially balked at. In Spain, the government announced restrictions on commercial air-conditioning, which may not be set below 27 degrees Celsius, or almost 81 degrees Fahrenheit, and it maxed out heating at 66 degrees Fahrenheit through 2023. Spain has mandated that automatic doors be installed to ensure air does not escape. The government estimates changes in behavior could reduce energy demand by 5 percent in the short term. Italy limited air conditioning in public buildings to no lower than 77 degrees Fahrenheit and capped heating around 70 degrees Fahrenheit. Hungary instructed schools to look into wood-burning to keep warm.
In France, “urban guerrillas” are taking to the streets, shutting off storefront lights to reduce energy consumption. In the Netherlands, a campaign called Flip the Switch is asking residents to limit showers to five minutes and to drop air-conditioning and clothes dryers entirely. Some public pools had to lower temperatures, city centers are losing overnight lighting and fountains are running dry. Belgium reversed plans to retire nuclear power plants, and Germany, having ruled out such a possibility in June, is now considering it.
The UK is bracing for potential blackouts and soaring electricity rates. Under the government’s latest “reasonable worst-case scenario,” Britain could face an electricity capacity shortfall totaling about a sixth of peak demand, even after emergency coal plants have been fired up. Under that outlook, below-average temperatures and reduced electricity imports from Norway and France could expose four days in January when the UK may need to trigger emergency measures to conserve gas. UK power bills are set to hit $5,000 a year, which will drive one-third of households into “fuel poverty.” About 10.5 million households will be in fuel poverty for the first three months of next year, meaning that their income after paying for energy will fall below the poverty line.
Heavy industry may be faced with shutdowns as electricity prices and inflation soar. Some chemical, fertilizer and steel plants are already shutting down. Manufacturers depend on natural gas both as a source of energy and a raw material in production. Ammonia, used to make fertilizer, accounts for around 70 percent of the natural gas Europe uses as a raw material and has been hit particularly hard by shut downs. Natural gas prices in Europe are around $60 per million British thermal units—about 7 or 8 times higher than the price in the United States of around $7 to $8. At that cost, it is equivalent to about $360 per barrel oil and so those who can are switching to oil because it is much cheaper.
The sacrifices could increase in the coming months, as countries dependent on Russian gas brace for winter and the possibility of a total shut-off. Russia is using natural gas as a weapon and trying to supply just enough gas to Europe to keep Europe in a perpetual state of panic about its ability to have enough energy for this coming winter. Hydraulic fracturing is not allowed by most governments in Europe, so they have not developed their resource the way the United States has. Europe has been finding other natural gas supplies, but governments are realizing that those supplies are not going to be sufficient. European leaders realize they need to curb demand and to prepare for the possibility of severe energy rationing this winter.
Nowhere is the transition to renewable energy and dependence on Russian gas more obvious than Europe’s economic powerhouse, Germany. Under former Chancellor Angela Merkel, the country embarked on the so-called “Energiewende” to transition to “green” energy, like wind and solar. Germany provided hundreds of billions of dollars to the “green transition” while closing baseload coal plants and shunning their own potentially bountiful natural gas reserves. Merkel even began the policy of closing nuclear power plants after the Fukushima nuclear accident in Japan in 2011. Now, Germany’s economy is teetering on the brink of ruin, and officials are concerned about social upheaval and widespread unrest if things really take a turn for the worse this winter.
Conclusion
The pitfalls of this misguided energy policy are obvious – wind and solar power need tremendous amounts of backup fuel sources given their intermittent nature, which is why Europe and Germany in particular became addicted to cheap Russian gas. The more renewables Germany built, the more dependent it became on Russian’s energy to back them up.
Unfortunately, for the United States, the Biden administration wants to walk in Europe’s footsteps regarding energy and climate policy. The Biden administration joined Europe in committing to the goal of “net zero” greenhouse gas emissions in the coming decades. But that goal will just make energy prices skyrocket. While gasoline prices have come down, they are still unnecessarily high because of President Biden’s war on fossil fuels. Despite the president’s talk of pro-oil production, his actions are the opposite. There is zero indication he will substantively change course when it comes to implementing climate policies similar to the ones that Europe implemented. Biden’s policies will just make the United States become dependent on the Chinese Communist Party for the critical minerals to power Biden’s “green” revolution, since China is the world’s largest supplier of the minerals and processing that underpin “green energy” manufacturing.
*This article was adapted from content originally published by the Institute for Energy Research.
Billions in handouts and subsidies for corporations and other special interests.
WASHINGTON DC (08/16/2022) – Today, President Biden is returning to the White House to sign the Inflation Reduction Act, a spending package that Democrats pushed through Congress using the budget reconciliation process. The bill will cost an estimated $437 billion, with $369 billion allocated for investments in what Democrats are calling “energy security and climate change.”
The bill is full of incentives for renewable energy technologies, chief among an extension of wind and solar tax credits significantly increasing subsidies for them, provided additional criteria are met during construction. It also offers new tax credits for domestic manufacturing of solar panels and wind turbine parts as well as energy storage projects sited separately from renewable generation facilities. Wind and solar projects will get an extension on tax credits for production and investment, as would stand-alone energy storage projects.
AEA President Thomas Pyle issued the following statement:
It has been twenty months and the best the Democrats could do is pledge to give away hundreds of billions of dollars in federal subsidies to large corporations and Democratic special interest groups over the next ten years. Apparently addressing climate change is now just an excuse to pay off your political supporters at the expense of already cash-strapped American families. This measure will increase utility bills and cause more pain at the pump, not less. The Republicans should promise to undo this whole mess if they replace the leadership in the House and Senate this November.
AEA Director of Policy and Federal Affairs Kenny Stein issued the following statement:
This legislation is nothing more than a collection of handouts to special interests, historic only in the number of subsidies to be distributed. Despite its name, the legislation will not do anything to fight inflation. By increasing a range of taxes on energy it is far more likely to increase inflation. At a time when energy bills are already soaring thanks to the Biden administration’s war on affordable energy, the taxes and distortions to energy markets in this legislation could not come at a worse time.
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On this episode of The Unregulated Podcast Tom Pyle and Mike McKenna discuss the ongoing drama surrounding Joe Manchin’s inflation bill and the details coming about regarding the FBI raid of Mar-a-Largo.
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Senator Manchin said that Democratic leaders had “committed to advancing a suite of commonsense permitting reforms this fall that will ensure all energy infrastructure, from transmission to pipelines and export facilities, can be efficiently and responsibly built.” With that promise, Manchin agreed to the “Inflation Reduction Act” that recently passed the Senate along party lines. But since then, 47 of his fellow Democratic Senators rejected a permit streamlining measure. The Senate voted 50–47 to approve a Congressional Review Act resolution sponsored by Senator Dan Sullivan that would undo the Biden administration’s regulatory changes to the National Environmental Policy Act (NEPA), but Manchin was the only Democratic Senator who voted in favor. NEPA is the 50-year-old law that requires federal agencies examine the environmental impacts of their actions, essentially regarding all new projects from funding a new road or permitting a new pipeline or power plant. The vote is not a good omen for streamlining regulations since to proceed outside of the Budget Reconciliation process, 60 votes will be necessary.
The pipeline permitting situation is holding up oil and natural gas pipelines that are needed to ship these fuels so that Americans can have the fuel they need for transportation, heating and electricity production. Pipelines are the safest and least costly method of shipping oil and natural gas. But, pipelines are having difficulty getting the permits they need and are often caught up in multiple legal challenges from opponents of energy projects.
Mountain Valley Pipeline
Senator Manchin believes he got approval for the Mountain Valley pipeline to move natural gas from West Virginia to southern Virginia that was originally set for completion in 2018 and that is 94 percent complete. The delays have increased the pipeline’s cost from the original estimate of $3.5 billion to $6.6 billion. The White House and congressional leaders have agreed to ensure final approval of all permits for the Mountain Valley Pipeline, according to a summary released by Manchin’s office that also details what the Senator expects in permitting reform including restrictions on NEPA reviews. The agreement, which requires separate legislation under “regular order” (requiring 60 votes) would also move any further legal challenges to the Mountain Valley pipeline permits from a federal appeals court to the D.C. Circuit Court of Appeals.
Great Lakes Tunnel and Line 5
Another pipeline operator, Enbridge, wants to replace its Line 5, an oil pipeline that crosses the Great Lakes through the Strait of Mackinac, with the Great Lakes Tunnel that will be bored through rock about 100 feet below the lakebed virtually eliminating the chance of a pipeline spill. The Great Lakes Tunnel is a $500-million private investment by Enbridge that was conceived in 2018. While attempting to get the necessary permits for the project, Michigan governor Gretchen Whitmer took legal action to close Line 5 supposedly due to the potential for an oil spill, despite no major spill occurring in its 69-year history. Line 5 runs from Superior, Wisconsin to Sarnia, Ontario, and together with Line 78 forms a critical part of the Enbridge Mainline system out of western Canada. Line 5, which typically runs at full capacity can ship about 540,000 barrels per day of light oil and natural gas liquids to refineries in Detroit, Michigan; Toledo, Ohio; Warren, Pennsylvania; and Ontario and provides oil interconnections to Montreal, Quebec. Enbridge has filed a complaint seeking an injunction to prevent the shutdown, stating that pipeline regulation is a U.S. federal matter, not a state matter.
There are nine refineries served by the system that encompasses Line 5 with oil distillation capacity of more than 1 million barrels per day that produce over 400,000 barrels per day of gasoline, 200,000 barrels per day of diesel and 150,000 barrels per day of jet fuel. The impact of closing line 5 would mean that these refineries would need to obtain oil elsewhere, use other more expensive forms of transportation (rail or truck), or operate at reduced rates. Some of these refineries would be at a major competitive disadvantage relative to other refineries that are still able to receive oil by pipeline. A Line 5 shutdown could result in higher petroleum product prices in a market that has recently seen record prices and would further tighten conditions for existing refineries due to refinery closures from COVID lockdowns and converting several refineries to biofuels due to lucrative state and federal subsidies. It would also affect propane prices in Michigan, which is heavily dependent on it for a source of heating as well as for agriculture.
Conclusion
Pipeline permitting reform is clearly needed to ensure Americans have the fuels they need. But, it is unclear whether Senator Manchin can get his fellow Democratic Senators to enact the reform he has indicated in his summary that covers several aspects of permitting. Manchin expects new legislation this fall that will provide that reform. However, the situation does not look good given that 47 Democratic Senators voted against the Sullivan amendment, which would be a start to reform, by rolling back the Biden administration’s changes to NEPA.
*This article was adapted from content originally published by the Institute for Energy Research.