Daily Energy Standup Episode #136 – A Weekly Recap – Energy Shifts and Political Challenges: Unveiling the Tug-of-War in Biden’s Administration

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Video Transcription edited for grammar. We disavow any errors unless they make us look better or smarter.

Michael Tanner: [00:00:15] What is going on, Everybody, Welcome in to a special edition of the Daily Energy News Beat Stand Up here on this gorgeous Friday, June 2nd, 2023. As always, I’m your humble correspondent, Michael Tanner, coming to you from an undisclosed location here in Dallas, Texas, bringing you our weekly recap where we highlight some of our best segments from the week. It’s unfortunately a week loaded with solo shows with me so if you don’t like me, I would tune out of this episode. So I’m sure we will have horrible lessons on this one but I mostly kid. [00:00:45][30.8]

Michael Tanner: [00:00:46] Stu was out most this week on assignment, so its a lot of me. I talk too much about what’s going on with this debt debacle, Oil prices continue to slump. We actually had a nice little positive day here today actually trading up over $70, which was good considering the week was down. We talked a lot about some clean energy bills. [00:01:03][16.6]

Michael Tanner: [00:01:04] Me and Stu did a couple shows earlier in the week, which I’m sure will pull some segments from the team does a great job of quieng that up. As always, guys, I want to give a quick shout out Denver Nuggets they play tonight here in about actually 45 minutes. So I’m recording this June 1st Thursday here it’s about 620 Nuggets tip-off on the NBA finals they are playing the Miami Heat. [00:01:26][22.2]

Michael Tanner: [00:01:26] As a proud Denver eight go Nuggets the first time we’ve ever been in the finals. So soaking it all up hopefully we can come back and on Sunday night we’ll there’ll be another game on Sunday. Hopefully, we can operate a game one victory. As always, guys these stories are courtesy world’s greatest website www.EnergyNewsBeat.com Thanks for checking us out kick it over to the weekly recap we’ll see you on Sunday. [00:01:46][19.1]

Stuart Turley: [00:01:46] As utilities switch from coal to natural gas, the Biden administration does not understand physics permitting or reform or planning. I want to give you a shout-out to the Cowboy State Daily is one of the nation’s best news sources followed them they’re up in Wyoming of fantastic folks. [00:02:03][17.4]

Stuart Turley: [00:02:04] The article that they talk about says they released the 681 rule aimed at forcing coal and natural gas plants to run at nearly emissions free in the next decade. They’re not planning for retirement on these, and it’s in an orderly fashion, and the consumers are going to have to pay for incredibly high energy costs. And I’m I don’t know about you, but I’m not sure I can afford six or seven times higher this is out of the Cowboy State article. [00:02:41][36.2]

Stuart Turley: [00:02:41] If the rules become final, most of Wyoming’s electrical grid will need to run almost entirely on wind and solar. Trying to create a reliable energy supply running on intermittent sources will be extremely difficult and costly. [00:02:59][17.3]

Stuart Turley: [00:02:59] So if you can imagine a cowboy state, you know, up in Wyoming trying to survive on wind and solar in the winter, they’re not going to do it. So they’re going to have to have the natural gas plants. Natural gas plants would have to blend natural gas with 30% hydrogen by 2032 and almost be entirely hydrogen-filled by 2038. [00:03:22][22.5]

Stuart Turley: [00:03:23] There’s a lot of things to even think about when you’re talking about the creation of hydrogen, putting them in the same pipes you can. But hydrogen is a lot smaller molecule and can get out of cracks that natural gas can’t. So they may or may not be possible to use the infrastructure. I always was a big proponent of it, but there are some technical reasons why. [00:03:48][24.8]

Stuart Turley: [00:03:49] And then when you sit back and take a look also the permitting, we will continue to advocate for the tax incentives and sitting and permitting sitting and permitting reform necessary to advance and accelerate the clean energy transition. Even wind and solar projects are being slow walk-through because of regulations. So you can retire the coal units when it’s cost effective too but when is that going to be? You know, that leaves it totally wide open. [00:04:26][37.9]

Stuart Turley: [00:04:27] Let’s move on over here The Chevron PDC deal, this was a big purchase, The Chevron, PDC deal about addition, not substitution. I found this one really, really good article. The transition transaction is a 7.6 billion all stock takeover of Denver Jewels Bird, the DGA Basin Specialist PDC. The deal is $7.6 billion 6.3 billion of Chevron stock issued to PDC shareholders and 1.3 billion in assumed debt. It’s pretty, pretty slick, but what are they getting for that? [00:05:09][42.6]

Stuart Turley: [00:05:10] Expected synergies, a million in annual operational expenditures, 400 million in annual capital expenditures and accredited per share earnings, cash flow, free cash flow and returns on capital employed. The agreed deal will literally double Chevron’s exposure to the Colorado Shale play, making it a top five asset in the major global portfolio. [00:05:40][29.9]

Stuart Turley: [00:05:41] The only thing I think I can see about this is at Sandstone we’ve had a lot of work with the Colorado oil and gas permitting environment. We’ve been able to help BDC in some permitting and it I don’t know that I would want to do business in Colorado. Ithink it’s fantastic. I think you’re going to see some more mergers and you’re going to see some more things going on. Hats off to Chevron, but good luck. [00:06:10][28.9]

Michael Tanner: [00:06:11] All right. Everybody’s talking about this debt deal negotiation, and I think it’s helpful to sort of just walk through like what’s happening right now. I mean, right now, there’s there’s been an agreement between our President Joe Biden and House Speaker Kevin McCarthy. There’s this Monday deadline next week. Yeah, it’s a monday deadline of next week in order to make sure that this all gets sanctified. [00:06:34][23.9]

Michael Tanner: [00:06:35] So they have a little bit of time. But the key is this has to go from committee out of this. You know, the Rules Committee, this 13-member committee, everything comes down to committee. Even the U.S. government, you think it comes down to committees at your job? Even in the U.S. government, it comes down to committees. [00:06:49][14.5]

Michael Tanner: [00:06:50] So we’ve got a committee of 13 people who then swing it out and say, okay, now we can bring it to the floor. A key Republican swing vote and Thomas Massie said he was inclined to support the bill, which had been briefly imperiled earlier after two consecutive days after two of the stories said they plan to vote against it. [00:07:07][17.3]

Michael Tanner: [00:07:07] So really, can you get out of committee can knock it out of committee, really? Again, we’re facing this Monday deadline. If it gets to the House floor, it’s probably going to pass I don’t think Kevin McCarthy is going to bring anything to the floor that he doesn’t think can pass. It’ll then, you know, you know, if if you go to energy news, but you check this article, I think in terms of what’s happening, you’ll see that then the Senate will vote. They’re most likely going to approve it there are more liberals or conservatives, so they will most likely approve whatever deal gets done in the House, because most likely this deal is going to favor or Democrats in this scenario. [00:07:41][33.4]

Michael Tanner: [00:07:42] Some interesting fallout from this deal, though, was permitting and, you know, clean energy and infrastructure reform. Remember, one of the key key bills that was passed by the Biden administration was the Inflation Reduction Act, which had an insane amount of spending on clean energy, things that, you know, when Stu and I joked about the original Porkulus bill. This was the Porkulus bill on steroids I mean, some of the stuff in there. [00:08:06][25.0]

Michael Tanner: [00:08:07] But what was what we liked about the bill was it’s permitting reform and it’s a streamlined approach to say, okay, if we need all this infrastructure for clean energy, for solar, for wind, because that’s the issue. The issue is not whether can we build enough solar to collect. Yeah, probably. Can we build enough wind? I don’t know how many wells you want to kill if you’re me, might as well just kill them all at this point. No, I say that in jest. It gives me a hard time about the whales. [00:08:32][25.1]

Michael Tanner: [00:08:32] But let’s just say for a fact you could solve the problem right now with wind and solar. What? Where you going to put it? All the battery technology there’s the guru you’ve talked at length and on this podcast how the grid is not stable and can’t couldn’t necessarily hold that you still need that dispatchable energy. [00:08:48][15.4]

Michael Tanner: [00:08:48] So unless we want to go a nuclear route and so and I’m not going to, you know, thank goodness Stu is not here because he’d be going off on some small modular nuclear reactor scheme we’ll keep it focused on. We got to move to natural gas, got to get off coal and we’ve got to use specifically the cleaner, you know, use things like carbon capture to be able to do to achieve this stuff. [00:09:07][18.4]

Michael Tanner: [00:09:07] But again, getting the grid and upgrading the grid can go a long way in shifting to whatever clean energy future there is okay. So specifically, let’s go to the Mountain Valley Natural Gas pipeline. You can check this article out, EnergyNewsBeat.com. [00:09:21][14.1]

Michael Tanner: [00:09:23] You know, in this whole game of will the debt ceiling get move, will it not? Regardless of what happens, this pipeline has been included in the current deal that’s sitting in Congress right now, which is critical. This 303-mile pipeline was placed in the budget between US President Joe Biden and Kevin McCarthy. It’s backed by Joe Manchin, who’s a Democratic senator out there in West Virginia. And again, his vote is going to be heavily needed if the Republicans are minority in the Senate. [00:09:53][30.5]

Michael Tanner: [00:09:54] So there’s a bunch of negative court rulings the project’s been delayed. You know, the equities midstream, you know, they thought they were going be able to finish it by 2030, 2023. But their CEO had a quote that said they were made significant risk and uncertainty, including regarding and likely the litigation. So they’re expecting litigation to come down. [00:10:14][20.1]

Michael Tanner: [00:10:14] Now, if we can get this approved, it’ll be very can be or if this debt approval moves forward. Hopefully this can get streamlined, get this turned on, you know, alleviate some of that refined product issue. Again this is going to alleviate gas prices best thing you do for gas prices, build pipelines in here. The best thing you can get rid of the Jones Act but Stu is not here so we’ll just we will only get to talk about it once you’re never going to be dead but I do agree. [00:10:38][23.3]

Michael Tanner: [00:10:39] Stu on that from the beginning The Jones Act. You know, the other thing that this oil price or the you know, I sort of spilled the beans there before I said it. But what this debt ceiling is also impacting is oil prices. You know, we saw oil prices fall more than 4% today, mainly on whether or not what’s going to happen. I mean, obviously, I think we’re going to pass this the real question is what passes? And I think that’s what the street is, is wondering. [00:11:03][23.8]

Michael Tanner: [00:11:03] You know, Kevin McCarthy originally came out and said, hey, there’s a chance that we do a raise that gets us through the next presidential cycle. Well, that alleviates a lot of concern for the markets and helped to deal about strategies which kick the can down the road to as well as we’ll deal with it later. What do you do when you’re five years old? These deals are tomorrow and you realize, oh, well, showed up tomorrow. It’s like Friday do you do you work on Friday? Your Leaving for Monday. They get done over the weekend jameis will figure out the problem now so you don’t have to have the problem on Monday or whatever. [00:11:31][27.8]

Michael Tanner: [00:11:32] You know, some sort of analogy of that point where if that’s what happens, we kick the can down the road two years, Great! The market’s going to view that as, okay, relax. We can now, we can now chill out we can get back to worrying about other things, get back to growth, get back to everything. [00:11:44][12.3]

Michael Tanner: [00:11:45] If the agreement is, hey, we’re only going to go to the end of the month, we’re only going to get into the year, well, then everybody’s still on edge because it’s we’ve just now moved the needle just a little bit for we haven’t solved the underlying issue of what’s going to happen Congress appropriates more money than that it wants to legally be allowed to spend. [00:12:00][15.6]

Michael Tanner: [00:12:01] I mean, the 14th Amendment is an option that’s out there it hasn’t necessarily been signaled by the Biden administration that they want to go that route, but they could if they really wanted to. So now they’ve said they don’t want to do that because it likely will get challenged and you’re talking about going to the Supreme Court and all this other stuff. [00:12:15][14.9]

Michael Tanner: [00:12:16] We got to talk about what’s going on in California so this is something that I think got slipped through by Gavin Newsom a couple of weeks ago and finally today, things kind of came to a head. So about two weeks ago, Gavin Newsom at the last minute as budget is due by June 1st, a.k.a. Friday, he attempted to slip in ten bills conveniently known as Q, e, or CEQA, which is a play on a pretty horrendous bill that has to do that. That’s already just basically just the name that this, this climate bill that he’s trying to pass is said. [00:12:54][38.1]

Michael Tanner: [00:12:55] He basically tried to stuffed ten bills under this name, secure in at the last minute and he tried to slip it in through the budget committee okay. So today in a 3-0 vote, the Senate, the California’s Senate Budget Committee decided, okay, no, no, no, we like the idea. Of course, they say they have to say they like the idea. But even that even because we like it, we can’t pass this because we don’t have enough time to read it. [00:13:19][24.9]

Michael Tanner: [00:13:20] Here’s the quote from the committee chair, Senate Committee Chair Josh Becker, He’s a Democrat from San Mateo. The overwhelming agreement is that we need to build clean faster and cut the green tape that’s been a legislative priority for me I will continue to be a legislative partner, although today we are rejecting the governor’s trailer bill proposals based on process as seven days is insufficient to vet the hundreds of pages of policy nuance in these proposals. We look forward to working with the administration on all of these critical issues. [00:13:46][26.1]

Michael Tanner: [00:13:46] So they have to, of course, say they like it. Now, what’s funny is they’re giving us the impression that they’re actually going to read this bill, which I’d be shocked if anyone actually read this bill. You know, again, most of this stuff is being written by lobbyists. So, I mean, this is probably got Sierra’s club name all over and I hope they got rid of the watermark on it. [00:14:05][18.7]

Michael Tanner: [00:14:06] So, I mean, let’s just be very clear they obviously want this to pass, but I thought it was funny and worth it to bring up that even in California, they’re not even going to let they’re not going to let him slip and this is even too much for California. They’re checking gavin Newsom has to like it, you know, because if we keep this up, that dude might be our president that’s a scary thought. I wish I could have, Stu to opine on what that would be like but thank goodness he’s on assignment because he might fall out of his chair dying. [00:14:31][24.7]

Michael Tanner: [00:14:32] Clean Tanker demand drop weighs on us Gulf rates. Basically, what we’ve seen really since the beginning of 2023 was a drop in U.S. crude oil tanker shipping rates, which is really a sign of profitability as these tanker rates are heavily tied to not only the price of the commodity, but the short term future supply and demand, and is arguably one of the best indicators of where prices will go. [00:14:54][22.9]

Michael Tanner: [00:14:55] We’ve seen tanker rates drop substantially currently in 2022 that we averaged about basically 950,000 per month. But to give you an idea, it’s now about 713,000 per month, so you can break that down on a daily basis pretty insane what you pay for these tankers. [00:15:11][16.6]

Michael Tanner: [00:15:12] The point is, the Gulf of New Mexico tanker has not been as profitable as it used to be. And part of the reason why export demand is facing headwinds has been basically Brazil turning away U.S. diesel in favor of cheaper Russian supplies. I mean, that is unfortunately, when you create when you put sanctions on and you’re the only one abiding by the sanctions, other countries are going to take advantage. [00:15:35][22.7]

Michael Tanner: [00:15:35] And Brazil’s doing what Brazil should do is say, hey, we’re going to be able to buy Russian refined diesel on the cheap. They’re important. 95,500 barrels per day of Russian diesel up from, you know, up an average of basically 8000 barrels a day. Remember our diesel imports or excuse me, they were averaging 1800 barrels of Russian diesel import in 2022 and in 2023, they’re doing 95,000 a day so, I mean, that’s basically what a million increase involved. [00:16:02][26.5]

Michael Tanner: [00:16:03] Give you an idea Brazil Diesel’s imports from the U.S. have fallen to 75,000 barrels per day from 163,000 barrels per day. To give you know, they originally tried to blame, you know, the Gulf’s slow, sluggish performance on poor refinery maintenance. You know, we did see some pretty low refinery utilization in last December, about 86.6%. We’ve averaged about 95.4 in 2023 so you really can’t use that. [00:16:31][28.3]

Michael Tanner: [00:16:31] So it’s really just, again, Brazil going on the rag and being like, yo, we’re buying Russian diesel. It’s cheap. Sorry is what it is. I mean, it’s pretty crazy. And this is the lowest level, you know, the lowest level since last February, which is kind of crazy to think about. [00:16:48][16.3]

Michael Tanner: [00:16:48] And again, it’s it’s countries doing what countries are doing, looking out for themselves. You know, be nice if we all played well but, you know, BRICS, you know, this podcast is part of BRICS. So we got offered to buy Russian diesel we said, no, you don’t need any buy now. I’m just kidding we are in BRICS Plus so we didn’t quite get the offer. [00:17:05][16.9]

Michael Tanner: [00:17:05] Check us out on www.EnergyNewsBeat.com, Dashboard.EnergyNewsBeat.com and for questions email us at Questions@EnergyNewsBeat.com Have a Great Weekend Guys! [00:17:05][0.0]