Climate Is on the Ballot

This week, the energy industry is gathering in Houston, TX for its biggest annual confab, CERAWeek. Inside, executives will discuss the practical realities of delivering a lower carbon future, while outside, their efforts will be met by climate activists demanding more be done faster than either economics or physics seems to allow. A new Bain & Company survey of energy executives shows the conundrum: North America is undeniably seen as the most attractive region for investment, but the incentives to do so remain unclear and the policy uncertainty makes breaking ground on projects too difficult.

With the election season upon us, that conundrum will only grow bigger and more heated – both in the U.S. and elsewhere around the world. Indeed, while abortion, the economy, and immigration may generate more noise, it is clear climate and energy policies will be on the ballot, in some cases literally, and both those in and outside of the energy sector have a tremendous amount at stake in the outcome. Here’s what public affairs professionals need to know to ensure they are not just ahead of the debate, but can shape it.

Climate Costs Are On Voters’ Minds

Voters awaken to the cost of climate policies. Politicians in Europe have recently found themselves facing intense public backlash ahead of this spring’s European Union elections from residents who blame aggressive green climate policies for cost increases on their ways of life. In the U.K., which will hold a national election sometime this year, Energy Secretary Claire Coutinho vowed to “not repeat the kind of ‘clumsy’ climate policies which have caused social unrest elsewhere in Europe.” The rise in tension around these climate policies even led Belgian central bank chief Peter Wunsch to urge EU lawmakers “to tell the truth about the real costs of ‘greening’ the economy,” arguing voters are realizing “going green won’t make you richer.” Voters have raised similar concerns in the U.S., with Republicans arguing aggressive climate policies rob consumers of choice after America took “a green turn” under President Biden. As noted by Bloomberg, “On both sides of the Atlantic, voters are anxious about the cost of living, while green regulations are starting to affect the stuff of daily life — what cars people buy and how they heat their homes,” even as some elected officials attempt to obfuscate this reality.

European politicians back off climate policies. EU policymakers that received a climate mandate in 2019 are now adjusting their policies after experiencing backlash from citizens about climate costs, including recent farmer protests against rising costs. In response, the EU has “toned down its climate policies,” even as EU climate chief Wopke Hoekstra argues “that whatever the outcome of these elections, afterward, Brussels must ‘focus just as much and probably more’ on climate action.” In the U.K., British Prime Minister Rishi Sunak “announced a series of major U-turns on climate policies” after complaints about rising costs and regulations, with his home secretary, Suella Braverman, telling “BBC that the Conservative government was ‘not going to save the planet by bankrupting British people.’” Now, President Joe Biden has found himself in a similar position having to determine how aggressive of a stance to take before the 2024 presidential election.

Dueling presidential climate policies. As voters become more aware of the costs of climate policies, Biden is walking a political tightrope to ensure his policies are not too aggressive for moderate voters but are aggressive enough to retain climate-focused voters. In January, the Biden Administration announced a pause in the LNG permitting process after environmental advocates raised concerns new LNG facilities would “lock in greenhouse gas emissions for decades.” Yet a month later environmental groups criticized Biden over his administration’s plan to ease its proposed vehicle emission requirements critics called a de facto electric vehicle mandate in what The New York Times called “ an election-year concession to labor unions.”

The policy shift didn’t stop Biden’s Republican rival Donald Trump from declaring the auto industry would face a “bloodbath” if Biden wins reelection, having previously warned Michigan voters Biden is “selling you out to the environmental extremists and the radical left.” Likewise, Trump has pledged to immediately undo Biden’s LNG pause if elected president. The differences between Biden and Trump’s environmental policies will be key in voters’ minds heading into November, but there is peril for the industry regardless of which candidate wins The White House.

This Campaign Will Define Our Energy Future – For At Least A Few Years

While the presidential race will capture industry watchers’ attention, 6,476 other federal and state elections could have an even bigger impact. This November, Americans will vote in 6,477 elections “for everything from President, Congress, Governors, and other state-level positions, plus tens of thousands of county, municipal, and special district positions.” Most of these races will go under the radar, overshadowed by the marquee races like the presidential election, yet they will shape the landscape for energy companies for years to come. These races include:

  • 11 governors that will appoint 36 members of their states’ public utility commissions and otherwise shape their states’ approach to energy and climate policies and regulations;
  • 10 Attorneys General who can direct energy and climate-related investigations and lawsuits, challenging federal agencies and targeting business practices alike;
  • 10 State Treasurers who can shape their states’ investment practices, raising questions about ESG, divestment, and other energy and climate policies;
  • 15 PUC Commissioners in 9 states that directly oversee industry practices and are quickly shifting from policy expertise to political agendas;
  • Numerous state and municipal ballot initiatives that put specific energy and climate policy questions directly to the voters;
  • Plus thousands of state legislators and municipal leaders who can determine permitting and siting for energy projects.

Define the Debate Before It Defines You

6,500+ elections is a lot to consider – here’s your playbook to stay ahead. As voters head to the polls across the U.S. and the globe, it is essential for companies to avoid getting caught in the ever-more polarized political crosswinds even as they shape the debate in productive ways. That’s the inherent challenge facing public affairs professionals. With the costs of climate policies becoming a major concern to consumers (aka voters), companies both in and outside of the energy industry must understand how the campaign debate is evolving, which stakeholders are trying to influence the candidates, and the implications these election outcomes could have for their interests. Identifying these risks means analyzing candidates and outside groups and seeking opportunities to shape the campaign conversation. That requires the right foundational research and an effective monitoring program that ensures you can avoid surprises, both before and after votes are cast. Think of Delve as your trusted partner in executing a battle-tested playbook that keeps you in the driver’s seat from now through the election.

Getting Things Built

Here’s What You Need To Know

The Inflation Reduction Act and the Infrastructure Investment and Jobs Act offer more opportunity to build new energy infrastructure than ever before, offering billions of dollars in new incentives for energy infrastructure developers investing in emerging and established energy technologies.

Yet today, in the country that built the Hoover Dam, the Transcontinental Railroad, and the New York City Subway in six years or less, it is harder than ever to build energy infrastructure – and certainly not in a reasonable timeframe given the federal and state permitting maze, and the sophisticated opposition facing projects today.

It is essential for firms overcome these hurdles to guarantee reliability, affordability, and the transition to a net zero carbon future. Last week we published Generating Opportunity – our proven playbook we’ve developed over years working with the energy industry. Here’s what you need to know to navigate these hurdles and get projects built.

Navigating The Regulatory Maze

The Federal Regulatory Bureaucracy. In the years since the Hoover Dam’s completion, Congress has passed myriad environmental laws, and however well-intentioned those laws were, they laid the ground work for new permitting hurdles. For example, the 1948 Federal Water Pollution Control Act ultimately led to the Clean Water Act as we know it in 1972. NEPA, “the first major environmental law in the United States,” became  law in 1970. The Clean Air Act, which initially became law in 1955, had major revisions in 1970, 1977, and 1990. As a result of these laws, and a variety of others, energy infrastructure developers must now navigate a federal regulatory maze featuring more than a dozen agencies, each with dozens of offices or bureaus within them. As a result, one in four Environmental Impact Statements required by NEPA can take more than 6 years – longer than it took to build the Transcontinental Railroad, New York City Subway, or Hoover Dam.

Laboratories Of Languishing Projects. Even if federal policymakers simplify federal permitting processes, an S&P analyst recently warned, “Developers will continue to face complex regulations that differ between regions, which can increase timelines and costs.” State regulators can cost developers millions of dollars with project delays. Even local issues, like control of “local airspace have also halted projects, such as the 500 MW Crescent Peak Renewables wind project in Nevada and the 300 MW Byers and Bluegrove wind project in Texas.” Indeed, just this month, Orsted was forced to sue a local approval board in New Jersey, “alleging the government is dragging its feet in issuing a road permit.”

Interconnection Woes. As we observed in a recent Trends in Energy note, a new report found “the total capacity of energy projects in U.S. interconnection queues grew 40% … in 2022,” and “The typical project completed in 2022 spent five years in queue for interconnection approval compared to … fewer than two years in 2008.” The interconnection queue is growing for a variety of reasons, including a lack of transmission infrastructure, and, at least according to some industry representatives, “woefully inadequate” planning from transmission authorities. Whatever the reasoning, “Interconnection queues have arguably become “the No. 1 barrier to deploying renewable energy.”

The Sophistication Of Anti-Energy Activism

Energy Activists Have Sophisticated And Scalable Resources At Their Disposal. National environmental groups provide local and regional advocates with sophisticated legal and technical expertise to oppose energy projects. From RMI’s Energy Policy Simulator to the NRDC’s activist toolkits, national environmental groups with professional staff are arming local advocates with technical expertise and strategic insights to influence communities, policymakers, and decisions. Further, national groups like the Sierra Club or 350.org allow activists to quickly amplify messaging and turn a local project into a national issue.

Energy Activists Are Never Satisfied – Even When Their Stated Objectives Are Met. Activists have become uncompromising in their demands, meaning even projects whose goals they purportedly support face hostility. Citing biodiversity, endangered species, or energy justice, today’s activists frequently oppose the very projects necessary to achieve their net zero demands. This paradox lays bare the divide between climate activists and climate industry. Climate industry wants to build and scale solutions. Climate activists, however, have little incentive to proclaim victory when their fundraising and grassroots energy relies on never being satisfied. This reality is exemplified by the Vineyard Wind project off the coast of Massachusetts, which has faced years of opposition and legal challenges, and the Gemini Solar Project, which has navigated years of resistance from environmental groups concerned about its effect on the desert tortoise.

Energy Activism Is Well Funded And Legally Adept. From the $10 billion Bezos Earth Fund to the dark money Arabella Advisors network, America’s wealthy donors have made climate activism a lucrative enterprise. Some of these funders are even building the activism infrastructure themselves, such as Bloomberg Philanthropies, which both funds and coordinates on the ground activism against a range  of industries, including coal, gas, and petrochemicals. This access to capital has helped make activists increasingly legally adept. Supported by organizations like Earthjustice, local groups are able to intervene in permit fights and pressure regulators.

The Challenges Don’t End Just Because You Have Your Permits

Not Even Acts Of Congress Or Supreme Court Rulings Stop The Fighting. Even if developers successfully obtain permits, the hurdles don’t stop as activists stand ready to challenge projects long after the permits have been issued. In recent months, this trend has shown up on a range of projects, including the Mountain Valley Pipeline, which despite a literal act of Congress, has been halted again and could end up back at the Supreme Court for a second time. Similarly, Texas LNG is facing new lawsuits this week after receiving permits in April.

Being A Good Neighbor Is No Longer Enough – You Need A Proven Playbook. It is no longer enough for developers to simply engage key permitting bodies or pledge to be a good neighbor. Instead, firms need a proven playbook to assess their risks, identify friends and foes, and approach project plans with an information advantage that ensures no surprises. To learn more, download your copy of Delve’s Generating Opportunity, and reach out if we can help support your efforts to build the energy future.

Lessons From East Palestine

Below is a look at Delve’s Trends in Energy series, delivered straight to inboxes of energy public affairs leaders looking to stay ahead of key trends affecting the industry. Prepared by Delve’s competitive intelligence experts, these regular insights can help you navigate a constantly shifting political and regulatory landscape. Sign up here to start receiving Trends in Energy.

This Week’s Trend in Brief:

  • Nearly three weeks since a Norfolk Southern train derailment in East Palestine resulted in the release of several chemicals, cleanup is ongoing, with EPA ordering Norfolk Southern to handle and pay for all necessary cleanup.
  • Since the derailment, the media and social media users have stoked significant, often exaggerated, fear about the potential health and environmental impacts the spill might have on the community and beyond.
  • The incident is also putting pressure on regulators, who are now considering new actions regarding the shipment of certain chemicals in response to public concerns and activists seizing the moment to push for more regulation, including on shipping crude oil.
  • The incident highlights how important it is for public affairs professionals across the energy industry to prepare for the worst – by identifying friends and allies, understanding where their risks exist, and being armed with the facts – because you can’t wait until the crisis has already happened to build your response.

Digging Deeper:

Nearly three weeks since a February 3rd train derailment near East Palestine, Ohio resulted in the release of several hazardous chemicals, cleanup is ongoing amidst growing public and media scrutiny. Of the approximately three dozen cars that derailed, 11 were carrying hazardous materials, including vinyl chloride, which has been linked to cancer at high levels of exposure. Cleanup could take “at least two months,” and on Tuesday, EPA announced a legally binding order to require Norfolk Southern to handle and pay for all necessary cleanup.

Since the derailment, traditional media, along with social media users, have stoked significant fear about the health and environmental risks associated with the chemical releases, despite assurances from officials that East Palestine’s air and water are safe. Despite assurances from both EPA Administrator Michael Regan and Ohio officials, media and social media users have continued to stoke fear about potential public health risks. For example, The New York Times has repeatedly reported on residents’ skepticism of government testing, while noting the “overwhelming odor.” Vox reporter Benji Jones recently asked “How bad is the East Palestine derailment, really?” concluding, it “is an environmental disaster,” though he did concede “it’s not Chernobyl.” The Hill ran a headline claiming “Environmental health expert says he would not feel safe returning to a home in East Palestine.” Simultaneously, the train derailment led to “a Perfect TikTok Storm” of “misinformation and conspiracy theories.”

Under pressure from the media and activists, policymakers are set to consider new regulations for the shipping industry. Even as Transportation Secretary Pete Buttigieg acknowledged the National Transportation Safety Board’s investigation into what caused the accident is ongoing, he claimed “it is not too soon to push toward a change in how industry approaches safety.” Ohio Governor Mike DeWine similarly called for the U.S. Congress to address how trains carrying chemicals are designated, and members of Congress are joining those demanding action. Activists groups, organized by Earthjustice, are using the incident to renew their calls for “regulating requiring electronic brake systems for trains carrying hazardous and flammable material,” including specifically crude oil.

The train derailment highlights how vital it is for public affairs professionals to prepare for the crisis before it happens. Norfolk Southern and the rail industry face significant reputational scrutiny as a result of recent derailments, and opponents of the industry are using the media and public attention to add pressure and achieve long-held policy objectives. While the energy industry does everything it can to prevent similar incidents that can capture the public attention, public affairs professionals need to prepare for the worst before it happens. As Delve CEO Jeff Berkowitz wrote in Forbes, “Today, it’s no longer a matter of if your viral moment will happen, but when. … That’s why organizations must invest time and resources before something bad happens.” For public affairs professionals across the energy industry, that means adopting “a public affairs toolbox that ensures they can respond quickly and effectively to any viral moment,” understanding where risk and vulnerability exists and who their friends and foes are before that risk becomes a reality. It also means marshalling the facts, so that when the crisis hits, public affairs professionals and the organizational leaders who rely on them can quickly and accurately mitigate hysteria and misinformation.

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Biden Goes Global

Here’s What You Need to Know

It is the grand tradition of presidents who lose control of Congress to lean into foreign policy matters in which they can act with fewer legislative constraints. President Joe Biden wasted no time following this tradition, heading around the world before the votes were fully counted. His itinerary provided a glimpse into where his administration will focus abroad, spanning the 27th United Nations Climate Change Conference (COP27) in Egypt, G-20 Summit in Indonesia, and ASEAN Summit in Cambodia, the last of which included a high-profile meeting with Chinese President Xi Jinping.

While The White House’s recently released National Security Strategy “leaves more questions than answers about the White House’s approach to global crises,” in this era of heightened geopolitics, public affairs professionals cannot wait to see how Biden tackles foreign policy in the next two years. Biden will be under pressure from a GOP-controlled House regarding assistance to Ukraine and U.S.-China relations, but countless other international debates garnering less attention will impact a wide range of industries. Here is what public affairs professionals need to know as they prepare for Biden going global.

From Climate to Covid, Biden Can Use the Multilateral Stage to Advance His Agenda

Delivering Climate Aid to Developing Countries. At COP27 last month, Biden renewed his pledge of $11 billion to assist developing countries in the energy transition, even after these funds were left out of the Inflation Reduction Act this summer. A Republican-led House is unlikely to provide any funding, but Administration officials hope to leverage federal development agencies like the Export-Import Bank and the International Development Finance Corporation and a carbon credit system U.S. climate envoy John Kerry unveiled at COP27 to circumvent Congressional opposition.

Negotiating the WHO Pandemic Accords. Biden recently appointed Ambassador Pamela Hamamoto, who served as President Obama’s envoy to U.N. agencies in Geneva, to represent the U.S. in negotiations of the WHO’s proposed Pandemic Treaty. The accord – which the WHO is looking to have finalized by May 2024 – seeks to more effectively respond to future global health emergencies, and is likely to include several provisions impacting the pharmaceutical industry and other health innovation, as it could include intellectual property waivers, mechanisms to transfer technologies, and disclosure requirements in public procurement contracts.

Pressuring Countries to Enact a Global Minimum Tax. Having secured a 15% corporate minimum tax on many large firms in the Inflation Reduction Act, expect Treasury Secretary Janet Yellen to pressure other nations to keep their commitment to enacting their own minimum tax on multinational corporations – an early Administration ‘win’ on the global stage.

Great Wall of Congress May Force Biden to Stay Tough on China with a Little Help from Some Friends

Warming up to Xi, but not recoupling. Biden’s G20 meeting with Xi highlighted his desire “to find ways to work together on urgent global issues,” but the President has shown little sign of slowing efforts to disentangle critical American industries from Chinese supply chains. His administration recently announced new export control measures restricting China’s access to chips and chip-manufacturing equipment, and the Commerce Department will soon release preliminary finding in a prominent Chinese solar panel dumping case that could spur tariffs on imports when the President’s two-year moratorium ends.

Transforming Trump’s Tariffs into Biden’s Tariffs. The Biden Administration has so far maintained the Section 301 Tariffs that levied duties of up to 25% on hundreds of Chinese imports for national security reasons. However, the statutorily required four-year review of these duties, as well as ongoing legal actions and the December 31 expiration of several product exclusions, gives the Administration the opportunity  to reassess which products should remain protected. The comment period for the four-year review is open until January 17. With strong pressure from Biden’s base to maintain protectionist policies and both parties keeping the heat on China, expect firms to increase their lobbying efforts as decision time approaches.

Coupling With Taiwan. This month, the U.S. began talks with Taiwan aimed at strengthening trade and economic ties, with hopes for a pact as soon as next year. China has condemned the trade initiative,  which would be a boon to the U.S. agriculture and technology sectors, as Taiwan is the sixth-largest export market for U.S. food and agricultural products and the number one manufacturer and exporter of semiconductor chips in the world. The pact has the potential to ease the ongoing chip shortage.

Strengthening Indo-Pacific Ties. In the wake of the historic and encompassing Regional Comprehensive Economic Partnership (RCEP) trade agreement between the ten ASEAN countries and their six regional trading partners, including China, the Biden Administration will need to consider how it approaches trade liberalization in the Indo-Pacific. The recent Indo-Pacific Economic Framework may be a start, but it is far from a full-fledged free trade deal and India, a major player in the region, hasn’t signed on to its trade pillar, despite a recent visit by Treasury Secretary Janet Yellen. Biden has also been pushing for a digital trade agreement in the Indo-Pacific. Such an agreement would signal the U.S.’s commitment to strengthening ties in the region, especially economically, with an industry that is of strategic interest and commercial value.

Balancing Climate and Energy Security in European Relations

Boosting LNG Shipments to Europe…Or Retracting? Biden is trying to thread the needle between assuaging European allies who seek more LNG imports to supplant their reliance on Russian natural gas and the environmental justice advocates in his political base who disapprove of additional fossil fuel infrastructure. Biden has pledged to expand LNG exports to the EU to 50 billion cubic meters by 2030, though members of Congress from his own party are objecting, and some European officials are becoming perturbed by American “profiteering.”

Carbon Border Tax and Cleantech Subsidies Could End Biden’s Transatlantic Climate Camaraderie. Biden came into office hopeful for a Transatlantic alliance in climate policy, but it could become a climate clash as the EU enters the final stages of adopting a tax on carbon-intensive imports from countries – including the U.S. – that do not meet their imposed carbon emissions standards, starting in 2026. The tax will impact U.S. manufacturers of aluminum, steel, electricity, cement, and fertilizers that export to the EU. Here at home, Biden has indicated support for a carbon border tax of our own, and Senator Sheldon Whitehouse (D-RI) introduced legislation to do so in June. Meanwhile, European officials are becoming increasingly incensed by the domestic cleantech manufacturing subsidies and incentives embedded in Biden’s Inflation Reduction Act.

As Latin America Goes Left, Will Biden Go Along?

Navigating a Tricky Relationship with Mexico. Even if the border crisis headlines the bilateral relationship with Mexico, the country is also the United States’ third largest trading partner. Mexican President Andrés Manuel López Obrador (AMLO) has rocked the USMCA boat with some of his recent protectionist moves, including talk of nationalizing energy production and restricting GMO corn. While possibility of an all-out trade war seems unlikely, the Administration will have to choose how hard to push back against potential violations of the USMCA, and whether to prosecute potential treaty violations through relatively untested official channels, or keep things unofficial.

Freeing Hydrocarbons Even If the People Aren’t Free. The Biden Administration recently allowed Chevron to resume operations in Maduro-controlled Venezuela even as Senator Marco Rubio (R-FL) claims the Administration tried to oppose an Inter-American Development Bank loan supporting Guyana’s development of its energy infrastructure. As Congress shifts hands, expect more scrutiny of how Biden approaches energy production in the region.

Ensuring Access to Present and Future Resources. Newly elected leftist governments mean access to natural resources may be less certain: Colombia’s Petro seeks to leave oil behind; Peru’s Castillo has pushed to increase taxes on mining companies; Brazil’s Lula promised, in contrast to his opponent, to keep Brazil’s state oil company public; and Chile’s Boric contemplated a public lithium company. Indeed, Argentina, Bolivia, and Chile are discussing a “Lithium OPEC.” The Biden Administration has signaled its commitment to free enterprise in the region, but how willing it is to push back on these policy shifts is unclear, and ensuring access to these resources could conflict with Biden’s climate agenda in the region. While Biden has unveiled a framework for regional economic cooperation similar to its Indo-Pacific proposal, his administration has yet to demonstrate real enthusiasm for new or strengthened trade agreements in either region.

Biden’s Middle East Dilemmas

Pressuring Saudi Arabia on Oil Supply. After Saudi Arabia announced its support for OPEC’s cuts in oil production by two million barrels per day despite Biden’s attempt at mending ties with the de facto Saudi ruler, Biden declared there would be consequences. Potential repercussions could include military support reductions, arms sales cancellations, and enacting the “NOPEC” bill, which would classify OPEC as an illegal cartel and subject its members to U.S. antitrust enforcement. With mixed signals on whether OPEC will increase production soon, expect this relationship to remain as volatile as oil prices.

Reengaging In Nuclear Talks with Iran. With the U.S. condemning Iran’s brutal attacks on human rights protestors, Biden faces a challenging new dilemma: how can he continue his efforts to revive the Obama-era nuclear deal amidst some of the most widespread protests against the regime’s brutality in ten years? There are indications he has put the deal on the shelf for now, but a renewed deal was a key campaign pledge eagerly sought by many of his advisers.

Responding To Netanyahu’s Return. With Benjamin Netanyahu returning as Prime Minister of Israel, Biden will be working with a new (again) leader of the U.S.’s most important Middle East ally. The relationship between Biden and Netanyahu is decades-old and fraught with disagreements, including over the aforementioned 2015 nuclear deal with Iran, the necessity for a two-state solution, and the status of Israeli’s disputed territories. Now, as Netanyahu works to form a government, Biden’s Justice Department has launched “a rare, if not unprecedented” probe into a Palestinian-American journalist’s death, despite an already concluded inquiry by the State Department that found no intentional wrongdoing. Biden and Bibi are also likely to disagree over the value of the Abraham Accords, which the latter negotiated and views as the key to regional security. Yet the Biden Administration has displayed skepticism if not hostility to the Accords and their value in the region, even as they open trade and economic development between key countries in the region.

Critical Industries Have a Lot at Stake

Facing a divided Congress, President Biden will go his own way a lot more in the next two years, wielding the “phone and pen” of executive action on domestic policy and spending more time on foreign policy matters in which he has more autonomy to act. To advance and protect their organizations’ business and policy objectives, public affairs professionals should be prepared for the impact that Biden’s actions abroad may have for their industry, and how different interests and stakeholders can shape and influence those actions.

Trade Winds Blow Against Renewables

Here’s What You Need To Know

From the Kyoto Protocol to the Paris Climate Accords, international agreements have historically been a boon to the growth of renewable energy. However, as a recent U.S. Department of Commerce investigation of possible Chinese dumping of solar panels into the U.S. highlights, international currents can also inhibit renewables development. The inquiry, which stalled solar projects across the U.S., is just the latest example of an escalating trend of international trade turbulence disrupting the development of renewable energy infrastructure.

While China’s dodging of U.S. trade rules is nothing new, it is just one example of the way trade rules hinder growth in the renewable energy sector. Public affairs professionals helping firms navigate the energy transition will have to factor in the shift in global attitudes towards trade taking place and how that shift will complicate renewable power development and corporate commitments to a net zero carbon future.

Trade Disruptions Are Impacting Growth of Renewables

The ongoing Commerce Department investigation has grabbed recent headlines, but it is not even the first trade case on Chinese dumping, which has caught flak in the U.S. and European Union for years. The trade issue also stretches well beyond this silicon schism:

Why Are Trade Disruptions Accelerating Alongside the Energy Transition?

Competing Policy Priorities: Even as countries push to accelerate the energy transition, national interests are complicating their environmental ambitions. That is because nations are confronted with two competing interests: investing in a domestic manufacturing base of the clean energy technologies that will secure the country’s energy future and constructing as much renewable power capacity as quickly and economically as possible to meet aggressive emission reduction commitments. As Georgetown professor Joanna Lewis warned nearly eight years ago, “there is a fundamental conflict between the political economy of domestic renewable energy support and the basic principles of global trade regimes, with direct implications for nations’ abilities to transition to low-carbon economies.” The emerging post-COVID policy environment has only accelerated countries’ interest in protecting and reshoring industries with national and economic security implications, such as clean power generation.

The Return of Geopolitics: In addition to the U.S. and China’s continued decoupling, Russia’s invasion of Ukraine is the latest signal geopolitics is back, with countries issuing sanctions and other restrictions in response to Russian aggression. Russia, however, is a major producer of copper, nickel, platinum, and other minerals vital for renewable energy, and the global divestment from Russia has skyrocketed the price of such materials. Nickel, for example, has reached an 11-year high. Rising geopolitics has seeped into the renewable market, as these developments have shaken up the supply chain and impeded the upward trajectory of renewables’ share on the world’s energy grid.

Clean Energy Requires Clean Trade, too: Today, many companies are making social impact commitments and enforcing environmental, social, and governance (ESG) standards in their operations. Even for companies not doing so proactively, an increasing number of investors expect their portfolio companies to meet such standards. For an industry that presents itself as a cleaner, more responsible alternative to incumbent power producers, there will be considerable scrutiny for failing to live up to such commitments, some of which are also becoming government mandates. Just last week, The Uyghur Forced Labor Prevention Act went into effect restricting the importation of goods manufactured in the Xinjiang region of China “unless an importer can establish that the products were not made with forced labor.” This new mandate adds a layer of complexity for renewable developers, as the region produces 50% of world’s supply of polysilicon, a key solar panel component. Nor is it the first-time Congressional action regarding trade has complicated renewables development. 2010’s Dodd–Frank Wall Street Reform and Consumer Protection Act mandated the disclosure of the use of conflict minerals, which are crucial to building renewable infrastructure.

Where Do We Go From Here?

As the demand for renewables continues to grow, the industry and its investors and consumers will face more trade winds causing uncertainty in the marketplace. Consequently, clean energy public affairs professionals will have to go to trade school, because navigating this new reality and bringing more renewables on to the grid will mean understanding the broader trends and interests shaping trade policies and the geopolitical landscape, both within and outside of the energy industry.

Blame Game Bingo

Here’s What You Need To Know

As oil majors reported a “big jump” in profits amidst record-breaking gas prices in the U.S.—where the average price for a gallon of regular unleaded gasoline hit its highest ever last month—the finger-pointing has reached a fever pitch over who bears responsibility for the pain at the pump, and not surprisingly, energy firms are caught in the partisan crossfire.

While President Biden and Congressional Democrats have dubbed it the “Putin price hike,” the truth is that gas prices have been escalating since the onset of the Biden presidency, a full year before the Russian invasion of Ukraine. Indeed, last year, the Biden Administration was demanding a Federal Trade Commission investigation of oil companies over price hikes and even now, Democrats in Washington are blaming oil company “price gouging” for the hikes.

Republicans, of course, lay the blame on Biden’s anti-fossil fuel policies, though factcheckers are quick to insist Biden’s steps since taking office “have had little [direct] impact on prices.” The reality, as is often the case, is more complex. While factors outside the control of either industry or elected officials are the main drivers of gas prices, the tone set by the Biden Administration has sent clear market signals that made it more difficult for producers to boost domestic energy production just as demand was swiftly recovering from the pandemic. As public affairs professionals in the energy sector navigate through this blame game, here’s what you need to know.

What Is Really Causing the Price Hikes? 

While Russia plays a significant role in global energy markets, and the country’s invasion of Ukraine certainly impacted gas prices, growing demand post pandemic, and a lag in energy production due to difficulties faced by oil producers in ramping up output, had been contributing to an upsurge that long preceded the incursion and remains a major contributor to higher gas prices. A review of average retail gas prices show they began an upward advance following Biden’s election, which coincided with the distribution of vaccines that signaled a reopening of the economy. More recently, a tight labor market is causing a shortage of crews, which has yielded a stock pile of drilled, but uncompleted wells (DUCs).

Presidential Policies Don’t Set Prices, but They Can Prevent Investment

While the Biden Administration and Congressional Democrats insist federal policies are not responsible for limiting oil and gas development, the Administration’s rhetoric – even today as they seek increased oil supply to reduce pain at the pump – has made clear fossil fuels’ days are numbered, and investment in oil and gas production would be disfavored.

Before taking office, Biden pledged to “take a whole-of-government approach to the climate crisis,” and within hours of taking office, Biden cancelled the Keystone XL pipeline. While the long delayed pipeline’s cancellation had little impact on short term supply, the decision sent a message that the new administration was not interested in new fossil fuel projects, even though the Administration now finds itself scrambling for another solution to increase oil imports from our neighbor to the north. Upon taking office, Biden also quickly moved to pause leasing on federal lands, another decision that may have marginal impact on overall supply, but made the Administration’s policy direction clear.

If it was not clear enough, though, Administration officials have put a fine point on matters. Biden’s climate envoy John Kerry earlier this year sentenced the natural gas industry to death in 10 years, regardless of whether renewable energy sources will be able to sufficiently replace natural gas a reliable resource by that date. More recently, White House National Climate Advisor Gina McCarthy insisted Biden is “absolutely committed to not moving forward with additional drilling.”

Meanwhile, the Federal Energy Regulatory Commission, now led by Biden-appointed Chair Richard Glick, issued a major overhaul of pipeline approvals and adopted sweeping new guidelines for natural gas ventures, including a first-ever new framework for evaluating projects’ greenhouse gas emissions. While FERC backtracked, the message to infrastructure developers was clear: new fossil fuel infrastructure is only going to get harder to build. At the Securities and Exchange Commission, Biden-appointed Chair Gary Gensler has been aggressively advancing new, far-reaching rules on climate disclosure requirements for companies both within and outside of the energy industry.

Investors Can Read the Signals, and Send Their Own

It is not just the Administration’s rhetoric or even the new SEC rules shifting investment dollars away from the oil and gas sector. Many investors have made commitments to reduce CO2 emissions—often as part of corporate ESG policies—on their own as well, even before President Biden took office. For years there has been a demand from investors for more clarity in how companies disclose their environmental impacts, and  at the start of the new year, KPMG noted investors are “increasingly seeking greater transparency” in climate related disclosures. Further, while major Wall Street firms like Blackrock and Citi have rejected calls to divest from fossil fuels, it is only so they can continue to apply ESG pressures to such firms within their portfolios. In 2022 alone, Axios reports, “Investors have filed a record 215 climate-related shareholder resolutions.”

Not surprisingly, oil firms are quick to point to such investor concerns when asked why they aren’t increasing production. While these concerns are often framed as a need for more capital discipline, last year saw such financial concerns marry with environmental activism to upend Exxon’s board and shift its fossil fuel production strategy. This trend is not new. As we noted in early 2020, “Financial institutions have given into these growing social pressures and have adapted to avoid this risk … by planning to reduce the amount of capital available for … investments in fossil fuels.” More recently, a January BCG survey of 250 institutional investors found 57% felt pressured to divest from fossil fuels and 75% felt pressured to go “green” in their portfolios.

Where Do We Go From Here?

While the Biden Administration and Congressional Democrats point fingers at Putin and oil companies for rising gas prices, the reality is that policies adopted by the Administration—driven by commitments they made to activists in their political base— have led to higher energy prices and constrained supply. Now, as Democrats fear voters’ pain at the pump will lead to their pain at the poll, public affairs professionals in the energy sector will have to marshal the facts into a clear narrative about how we really got here, all while avoiding the ire of the administration, activists, and a wide range of other stakeholders that can impact the industry’s future.

Your Exclusive Guide to the Never-Ending “Infrastructure Week”

Here’s What You Need To Know

The last month in Congress looked a little like Groundhog Day as legislators moved closer than ever to passing major infrastructure investments, only to have the apparent consensus crumble over how and whether the bill should be linked to President Joe Biden’s broader “Build Back Better” reconciliation package.

For those wondering what happened and why the so-called “Infrastructure Week” seems to never end in Washington, our team of analysts dug deep to produce an important report for your consideration.

Digging Deep: Why ‘Infrastructure Week’ Just Won’t End details 10 of the biggest fights on the horizon – far beyond the sensational headlines of price tag squabbles and intraparty meltdowns. Our analysis instead focuses on the numerous unsettled debates beneath those headlines in which competing interests clash and the infrastructure debate will keep on going long after whatever bill is eventually signed into law.

As we explored the consequences of these proposals for a wide array of industries – energy, environment, FinTech, pharmaceuticals, transportation, telecommunications – several key themes emerged. Here’s what you need to know:

The Energy Transition Has Unlikely Opponents

The Infrastructure Investment and Jobs Act (IIJA) encourages industry to invest in technology and infrastructure that reduces emissions and greens the grid. But as is increasingly the case for a variety of alternative energy projects, such solutions face obstacles from the very environmentalists advocating for cleaner options. While the IIJA has been called the “most ambitious portfolio of carbon management policies in the world to date,” tools like carbon capture remain immensely controversial among green activists and their allies among lawmakers. Activists are similarly concerned about what they call “the hydrogen hype,” for which the IIJA provides significant support. Beyond these individual technologies, the bill would support a transmission line buildout to bring renewable energy from where it is best generated to where it is most needed. However, new authority granted to FERC by the IIJA is likely to face a variety of opponents including state regulators, environmentalists, and incumbent power producers.

President Biden’s Desire for Streamlined Permitting Clashes With His Efforts To Expand Public Participation

President Biden wants more infrastructure built more quickly. That’s why the IIJA seeks to streamline permitting. However, his administration also wants to expand public participation and include broader climate and environmental justice considerations into such decision-making, inevitably prolonging the process. Already, environmental groups are criticizing IIJA’s permitting provisions, complaining they “gut needed safeguards” and “curtail the way the public can weigh in on how projects building roads, laying pipelines, cutting timber, and mining for hard-rock materials are done.” Such groups are better-funded, better-organized, and more legally proficient than ever before, making them highly adept at using public comment periods and public engagement processes as a means of delaying and derailing infrastructure projects they oppose. That means they are likely to question any new limitations on public engagement in their legal challenges to permitted projects.

Being a Convenient Pay-for Can Cost an Industry Big

Lawmakers seeking to pay for their ambitious suite of proposals are targeting a variety of industries to help foot the bill for IIJA. For example, lawmakers proposed billions in new Superfund excise taxes on a dozens of chemicals, critical minerals, and metallic elements. The superfund taxes are the result of a “dozen years” fight to “hold polluters accountable,” and represent just how quickly a heated but seemingly settled issue can become a convenient pay-for when legislators seek to fund other priorities. In addition to the superfund provisions, pharmaceuticals, cryptocurrency “brokers”, and others all play undesired roles in funding the IIJA’s many initiatives. Organizations in these sectors were probably surprised to learn they would be responsible for covering the costs of one of America’s most expensive pieces of legislation in history, and that puts them – and their allies on Capitol Hill – at odds with IIJA.

For Some Long-sought Objectives, Passing the Bill Will Just Be the End of the Beginning, Not the Beginning of the End

IIJA seeks to advance several long-sought objectives that have run aground in the past due to unsettled debates about how to implement those initiatives. Even if IIJA passes, these challenges remain. One such area is IIJA’s electric vehicle provisions, which set the stage for fighting among states and localities for charging infrastructure. Similarly, the bill proposes to invest billions to fund initiatives to ensure access to drinking water free of contaminants such as lead and PFAS, as well as to “expand Internet access” to underserved and low-income communities. However, in both of these cases, significant implementation hurdles, and major regulatory uncertainty means even if IIJA passages, the communities targeted by the bill, and those who serve them, are unlikely to be able to tap into the IIJA’s funds in the near term.

Get an Information Advantage With an Exclusive Copy of Our eBook

No matter how long or what form it takes, the infrastructure bill will affect countless companies and industries. So, chances are it will affect your organization, too.

Smart public affairs professionals understand that to achieve desired results, they need to anticipate what’s next and organize support ahead of time. That’s why competitive intelligence is the foundation for any successful public affairs effort.

To dig deeper and better understand what comes next in the never-ending Infrastructure Week, click here to download the full report. As you prepare for the big fights to come, you’ll be armed with the information advantage you need to win what matters.

 

Trends in Energy Infrastructure: Mid-Year Update

In This Issue:

  • What the recent Exxon shareholder vote means for ESG activism
  • Are environmentalists turning against the energy transition?
  • Regulatory uncertainty is giving way to post-construction regulatory reversal
  • Will the post-Colonial cybersecurity debate lead to legislative action?

Despite Recent Exxon Win for ESG Activism, Keeping Financial and Political Interests Aligned May Prove Difficult

Financial And Political Shareholder Activism Merges For Exxon Vote. Company management and boards have long had to contend with two different types of shareholder activism: Activists focused on the fundamentals of the business and on maximizing profits, and activists primarily driven by social and environmental concerns, not financial objectives. In May, investor activists at Exxon showed these two types of financial activists have merged, with hedge funds now making fundamentally profit driven arguments directly driven by the belief that environmental and sustainability issues, and a firm’s social responsibilities, directly impact that firm’s bottom line and long term value. However, while this shift is being hailed by many as a major climate victory by financial activists challenging the “existential risk” caused by fossil fuels, the reality is that the merger of financial and political activists is much more nuanced.While the financially motivated investors take credit for Exxon’s “sudden enthusiasm” for investing in clean technology like carbon capture and expect the firm to invest wisely in continuing to meet the world’s oil and gas demand, their politically motivated allies expect nothing less than Exxon’s complete departure from fossil fuels and already oppose Exxon’s proposed $100 billion carbon capture project. While this tie-up between financial and political interests among shareholders will have major impacts for managements and boards, the marriage of the two may prove difficult to maintain as some shareholders’ focus on effective firm governance will not always align with the moving targets of environmentalist expectations.

Despite Recent ESG Successes, Green Groups Remain Unsatisfied. As activist investors advance ESG, so too are major banks, financial regulators, and congressional Democrats. In April, JPMorgan Chase, Citi, and Bank of America each made trillion dollar ESG announcements. The announcements come as the Federal Reserve  and SEC seem set to address disclosures and other measures related to ESG. Congressional Democrats are also looking to “allow fiduciaries to consider ESG factors in selecting investment strategies for employer-sponsored plans,” a reversal of Trump Labor Department efforts to prevent such considerations. Despite these ESG successes, environmentalists with the “Stop the Money Pipeline” movement remain unimpressed, and on April 17, 2021, (only two days after JPMorgan’s ESG announcement) marched to JPMorgan’s New York City headquarters in an attempt to “shut JP Morgan Chase down for the day.” For groups like Stop The Money Pipeline, the goal posts will continue to shift until banks “immediately end financing for fossil fuel expansion, and put in place a stringent, rapid plan to phase out its overall support for the fossil fuel sector.”

The Energy Transition Is Here and Environmentalists Are Already Against It

Industry Is Embracing The Energy Transition, But Practical Solutions Are Not Meeting Environmentalist Demands. More and more, the energy industry is taking steps to advance a cleaner grid and fight climate change. The oil industry is working with White House Climate Adviser Gina McCarthy, energy trade groups are supporting methane regulations, and oil majors are making climate and net-zero pledges. As noted elsewhere in this report, those firms not seen as moving fast enough are facing pressure from investors, not just activists. However, as these companies take steps to invest in the necessary technology and infrastructure to meet their climate goals, environmentalists are shifting the expectations. Much like natural gas was once considered a cleaner technology and is now reviled by environmentalists, activists are already raising objections to the next generation of technologies that could help us reach a low or net zero carbon future.

Environmental Activists Are Organizing Against Carbon Capture, Utilization, And Storage (CCUS). While The White House has acknowledge the role carbon capture can play in meeting key climate emissions goals, a May 13 report issued by The White House Environmental Justice Advisory Council (WHEJAC) objected to CCUS, arguing such projects “will not benefit a community.” Citing the high cost of the technology and the “uncertainties” regarding “waste streams, CO2 sequestration and emissions of criteria pollutants that can’t be captured by CCS systems,” WHEJAC’s Co-Chair Peggy Shepard, who leads a New York-based environmental activist group, pledged “to ensure that these projects are not happening in communities of color.” WHEJAC’s opposition comes after more than  650 environmental groups, including the Center for Biological Diversity, Food & Water Watch, and Friends of the Earth, sent a letter opposing “filthy and false solutions such as…carbon capture and storage.”

Environmentalists Are Beyond Hydrogen Before It Arrives. Like CCUS, hydrogen power is another nascent technology seen by industry and investors as offering great promise but meeting skepticism and claims of “greenwashing” by environmentalists. Recent environmentalist op-eds published in The Guardian and Morning Consult have urged readers not to “fall for the hydrogen hype.” Opponents of hydrogen cite concerns that a hydrogen future “risks locking in a dependency on fossil fuels,” as activists in Newburgh, New York argue in their opposition to a permit for a proposed natural gas peaker plant that would one day run on hydrogen, calling the company’s plan to convert the plant to hydrogen in the future a “bait-and switch” and “greenwashing.” Similarly, in Minnesota, opponents of a proposed natural gas plant that could someday run on hydrogen have questioned the feasibility of the technology in PUC filings. In Ohio, local opponents dismissed an announcement that the proposed Mountaineer NGL Storage Facility was exploring green hydrogen demand as “well-crafted PR messaging.” Even “Green Hydrogen,” which is hydrogen created by using renewable sources “to power the electrolysis of water,” is facing opposition from activists who call it a “false solution.”

Increased Scrutiny On Battery Technology Means Activist Pressures Are Likely To Follow. On May 6, 2021, The New York Times reported on “The Lithium Gold Rush” to help offset the “near total reliance by the United States on foreign sources of lithium,” which is needed for electric vehicles and power storage systems for renewable energy sources. Despite this drastic need for the energy transition, the Times notes greens are attempting to block proposed domestic mining projects. Similarly, a May 11, 2021 Wall Street Journal  op-ed titled “Biden’s Not-So-Clean Energy Transition” expressed concern about mining the “energy transition minerals” needed for renewable energy. The op-ed cited a recent IEA report titled “The Role of Critical Minerals in Clean Energy Transitions,” calling it “devastating to those [clean energy] ambitions.”Now, as it becomes increasingly clear what investments and technologies are needed to advance the energy transition, the Biden Administration seems to have flipped on a campaign promise to support domestic production of such minerals in an attempt to “placate environmentalists.” The more battery and storage technologies move to the forefront, the skepticism and concern about their environmental footprint is likely to grow with it. As we noted in a clean energy analysis last year, “It’s Not Easy Being Green.”

As Activists and the Administration Try To Accelerate the Energy Transition, Regulatory Uncertainty Is Giving Way to Regulatory Reversals

Getting Infrastructure Constructed And Into Operation Is No Longer A Guarantee Projects Can Continue Forward. The announcement by TC Energy that the firm would cancel Keystone XL after more than a decade of controversy is an important reminder that once activism and controversy surrounds a project, it is difficult to see it through to completion. However, other recent notable headlines on pipeline infrastructure shows that is no longer the end of the activism story. Even if a project is able to secure the political will and regulatory approvals to undertake construction, and even if a project begin operations, the past several months have provided several examples of projects continuing to face an onslaught of legal, regulatory, and activist pressures to shut down even after construction is complete.Such fights include battles against the Dakota Access Pipeline, and Enbridge’s Line 5. This phenomenon becomes particularly relevant as infrastructure ages and requires updates or replacements. According to PHMSA, as of 2020 approximately 50 percent of gas transmission miles and 41 percent of hazardous liquid transmission miles were installed pre-1970. Such is the case with Enbridge Line 3, which was originally built in the 1960s, and now faces coordinated financiallegal, and on the ground activism as Enbridge looks to replace the aging pipe. With challenges to infrastructure persisting throughout the life of a project, companies need to plan to maintain communities’ permission to operate long past construction, even as activists and their allies in government increasingly use every means available to them to reduce and restrict fossil fuel infrastructure to hasten their desired energy transition.

Local Coalitions Are Targeting Regulatory Reversals And Officials Are Listening – And Taking Unprecedented Actions. While DAPL, Line 5 and Line 3 have all received significant national attention, in Brooklyn NY, a local coalition is working to stop construction of National Grid’s Metropolitan Reliability Infrastructure Project. These groups have been able to generate significant opposition from local politicians, including Mayor Bill de Blasio, in calling on National Grid to cancel construction or the Cuomo Administration to pull National Grid’s permits. In Louisiana, local activists have generated significant attention, as well as the support of national groups like the Sierra Club and Earthjustice, in their opposition to permits issued to Formosa Plastics. With technical and legal support from large national environmental groups, these Gulf Coast organizations are actively challenging an existing federal permit in hopes of killing the proposed plant.In Weymouth, Massachusetts, years of local activism led FERC to open an unprecedented “paper briefing” review of the Weymouth Compressor Station’s service authorization order. Following the announcement of the examination, an activist with the Sustainable FERC Project noted she couldn’t “think of a time when commissioners have signaled as strongly that they’re willing — if not outright interested — in reexamining a project that was already in service.” As FERC Commissioner Danly noted in his dissent to the order, “Intended or not, the message from this order is clear: even if a pipeline has its certificate, a court upholds that certificate, and that pipeline is in compliance, the Commission can now find a way to modify, or even possibly revoke, the certificate.”

Colonial Pipeline Hack Brings Simmering Cybersecurity Debate to a Boil, but Will It Last?

Recent Ransomware Attacks Prompted Renewed Legislative Interest, But Action Is More Likely From Federal Regulators. The recent  ransomware attacks, including on the Colonial Pipeline, has brought back to the forefront the long running debate over cybersecurity measures for our nation’s critical infrastructure. The renewed interest on Capitol Hill includes proposed legislation, to require more reporting and disclosures, and proposed legislation from senior members of the Energy and Commerce Committee “would put the Energy Department (DOE) in charge of pipeline security, rather than the Transportation Security Administration.” As industry engages with Congress on what legislation might look like, the question is, will Congress’s efforts be sustained, or will interest wane before progress is made? While bipartisan legislation is possible, regulatory action seems more likely. With pipeline cybersecurity oversight from the historically underfunded and understaffed TSA, rather than DOE, it is incumbent on industry to proactively work with regulators to ensure questions regarding disclosure and standard setting are answered productively, through an effective public-private partnership, rather than becoming a source of reputational risk and regulatory burden.

The Colonial Attack Showed How Critical Pipelines Are To Americans’ Daily Lives – Providing Evidence For Both Industry And Environmentalists To Make Their Case. The Colonial Pipeline hacking brought pipeline security and safety to the forefront of public discussion and provides a reminder that that companies must be thinking about how they are shaping brand awareness before a crisis hits. While Colonial is a “vital artery” for fuel throughout the eastern U.S., prior to the hack it had “little name recognition among the general public.” Now, Colonial is a household name, and for most outside the energy industry, the hacking is all they may know about the company. Meanwhile, industry opponents, including the Environmental Defense Fund, have seized on the hack to argue “traditional strategies for producing and delivering energy are under threat by climate and by cyberterrorists,” and therefore lack the necessary resilience for our future energy security. However, the hack and the panic buying that followed also provides industry an opportunity to remind the public why pipelines are so crucial.

Informational Purposes Only. The competitive intelligence (CI) produced by Delve, LLC is for general background informational purposes only. It does not constitute advice on any particular investment or commercial issue or matter. No part of the CI constitutes investment or legal advice and is not to be relied upon as such. Delve, LLC hereby disclaims all warranties of any nature, express, implied or otherwise, including, without limitation, any warranties of completeness or accuracy to the fullest extent permitted by applicable laws, neither Delve, LLC nor its members, officers, directors, employees, representatives, or contractors shall be liable for any losses, expenses, or damages of any nature, including, without limitation, special, incidental, punitive, direct, indirect, or consequential damages or lost income or profits, resulting from or arising out of use of the CI, whether arising in tort, contract, statute, or otherwise, even if advised of the possibility of such damages. The CI may contain information that is confidential, privileged, or otherwise protected from disclosure.

Clean Energy’s Purity Test

Here’s What You Need To Know

For decades, environmental activists have waged a pressure campaign to shift the energy sector from fossil fuels to alternative resources. Now that transition has become a reality, with renewables’ share of energy production increasing as they become more cost competitive (even without subsidies) and clean tech innovation takes hold across industry incumbents and would-be disrupters alike.

From carbon capture to hydrogen to solar and wind farms and beyond, the “green energy” future imagined by environmentalists is emerging from the lab and showing promise in the marketplace. Even oil and gas firms are committing to the energy transition. As we note in our mid-year Trends in Energy Infrastructure Report, due out this month (click here to subscribe), “The oil industry is working with White House Climate Adviser Gina McCarthy, energy trade groups are supporting methane regulations, and oil majors are making climate and net-zero pledges.”

These developments should give green energy activists abundant cause for celebration, but they’re not ready to enjoy their victories just yet. Instead, for many activist groups, it has become less about meeting their stated goal of reducing emissions and reaching net zero carbon than how we get there and who makes it happen. That shift in activist expectations has significant implications for industry leaders working towards a lower carbon future, as well as the investors and financial institutions helping them get there. Here’s what you need to know:

The Energy Transition Is Here, and Environmentalists Are Already Against It

Is Carbon Capture A “Filthy And False Solution”? Even as industryscientists, and government officials point to carbon capture, utilization and storage (CCUS) as a key component of reaching a net zero carbon future, many green groups are vocally opposing CCUS plans, with one coalition of more than 650 environmental organizations referring to the practice as a “filthy and false solution.” Other environmentalists have argued “the government shouldn’t be boosting the fossil fuel industry” by investing in CCUS technology. Indeed, while The White House includes carbon capture in its plan to reach key climate goals, President Biden’s own Environmental Justice Advisory Council (WHEJAC) recently designated CCUS as a type of project “that will not benefit a community.” Citing the high cost of the technology and the “uncertainties” regarding “waste streams, CO2 sequestration and emissions of criteria pollutants that can’t be captured by CCS systems,” WHEJAC’s Co-Chair Peggy Shepard, who leads a New York-based environmental activist group, pledged “to ensure that these projects are not happening in communities of color.” Her comments indicate how CCUS and other renewables initiatives could be subsumed by the Administration’s focus on environmental justice.

Green Hydrogen Or “Greenwashing”? The International Energy Agency touts hydrogen for its “potential to support clean energy transitions,” and many in the gas sector – and at DOE – see hydrogen as an opportunity to convert existing transport and power generation facilities to hydrogen as the technology matures, avoiding stranded assets and lost jobs. However, skeptical activists condemn this path as “greenwashing” and argue a hydrogen future “risks locking in dependency on fossil fuels.” Some environmentalists even see “green hydrogen,” which is created by renewable sources, as a “false solution.”

Not-So-Green Batteries? While environmental activists have long touted solar and wind power as the key to a green future, these intermittent energy sources need advanced, affordable battery options to continue to increase their market share. So, too, do electric vehicles. Yet, even as it becomes clearer how crucial investments in battery technologies are to the energy transition, there is growing scrutiny on the environmental impacts and sustainability of the mining of rare materials, like lithium, required to produce batteries. In reality, all technological advances come with tradeoffs as well as improvements. However, as companies and investors work towards cleaner power and transportation sectors, they can expect more scrutiny and questions about how green their investments truly are.

That’s A Lot Of Land. Wind and solar developers also face activist concerns over the amount of land needed for utility scale development. According to the Brookings Institution, “Wind and solar generation require at least 10 times as much land per unit of power produced than coal- or natural gas-fired power plants, including land disturbed to produce and transport the fossil fuels.” As we’ve previously observed, “the same activists who once advocated vociferously for more renewables now frequently mobilize opposition to the kind of utility-scale renewable projects necessary to meet the activists’ net zero carbon demands.” Their mobilization has the potential to create unique coalitions of opposition to projects, including local landowners, farmers, and ranchers concerned about taking away agricultural lands, as well as Republican officials and grassroots activists who oppose the subsidies for such developments.

Even as Financial and Political Shareholder Activism Merge to Advance Clean Energy, a Dividing Line Remains

Time and time again, as new technologies emerge and industry adapts to address societal and governmental demands, what was once new, green, and clean becomes just another industry investment subjected to scrutiny by the media and pressure by activists. As the costs and benefits of these investments become clearer, activists push for more and better.

The recent installation of three green-friendly independent directors to Exxon’s governing board via shareholder activists at Engine No. 1 exemplifies this phenomenon. As we describe in our mid-year Trends in Energy Infrastructure Report, forthcoming later this month, Engine No. 1’s victory was the result of an unusual alliance between politically motivated shareholder activists and hedge funds who have determined that profitability is directly tied to investing in sustainable, clean technology. However, while the financially motivated investors take credit for Exxon’s “sudden enthusiasm” for investing in clean technology like carbon capture and expect the firm to invest wisely in continuing to meet the world’s oil and gas demand, their politically motivated allies expect nothing less than Exxon’s complete departure from fossil fuels and already oppose Exxon’s proposed $100 billion carbon capture project. Even as these two types of activist shareholders push for more green, it is important to remember that both groups are not always focused on the same kind of green.

Navigating the Clean Energy Purity Test Requires Actionable Insights

As energy producers invest in technology to better protect our environment – a goal purportedly shared by green groups – they face a clean energy purity test by well-funded and well-organized activists who refuse to accept that every technology that advances emissions reductions and other climate goals will have its own tradeoffs and challenges. This gap between demands and reality leaves energy producers and even ESG-minded investors chasing a moving target. To advance their initiatives toward a cleaner planet, they must build a strategy informed by actionable intelligence that ensures their public affairs professionals can anticipate these shifts in sentiment and help business leaders and investors make better decisions about how to respond.

Want the full story? Be sure to check out our soon-to-be released Trends in Energy Infrastructure Report hitting inboxes soon.

Trends in Energy Infrastructure: End of Q1 2021

This report is brought to you by the competitive intelligence analysts at Delve as an overview of key trends we have identified to help energy professionals better prepare for what happens next.

What the Texas Freeze Illuminates About the Nation’s Energy Debate

In Texas Blackouts, Partisans Freeze Out Inconvenient Facts. In February, millions across Texas lost power during a historic freeze, but well before the state and federal government began to investigate what led to the grid’s failures, partisans had already drawn their battlelines. Pundits quickly took to the media to argue for their preferred energy sources and highlighted the data that supported their pre-determined view on energy policy. While those on the right argued the blackouts in Texas were the fault of Texas’s over reliance on wind and renewable energy,  those on the left claimed “Texas is making the case for the Green New Deal,” and argued ERCOT should “rethink” its “go it alone approach” with loose regulation of industry. The reality is, there is enough blame to go around, which “gives easy fodder for instant experts trying to confirm their priors.” While it remains to be seen what caused or didn’t cause the grid’s failure in Texas, it is increasingly clear that as such crises occur, the national discourse can be expected to rapidly become about laying blame and supporting pre-determined positions, rather than analyzing challenging problems and coming together to prevent their reoccurrence.

Frozen Dialogue Highlights Difficulty In Achieving Progress. As the national dialogue further enforces preconceived biases, it becomes increasingly difficult to agree on how to achieve shared goals. Americans want a cleaner, more reliable grid, and yet, there are broad disagreements about which policies to pursue to achieve those shared goals and what is an acceptable cost to pursue them. To realize the grid we all want, substantive, fact-based conversations that acknowledge tradeoffs need to be had.

Despite calls at the fringes for moving away from fossil fuels immediately, as even the United Nations observes, the conversation should be much more nuanced, and the U.S. Department of Energy notes fossil fuels remain critical to ensuring reliability and resilience of the grid. Similarly, despite criticism that the sun does not always shine and the wind does not always blow, renewables are increasingly becoming more affordable as they make up a larger part of the nation’s energy mix. As industry looks to engage in the type of nuanced debate needed to make progress, the lack of a substantive, responsible dialogue means industry’s contributions may never be “nearly enough.”

As Biden’s Whole of Government Approach to Climate Change Comes Into Focus, Environmental Justice Is at Its Center

As Biden Administration Unfolds, Environmental Justice Is Taking Center Stage In His Domestic Policy Agenda. In January, we noted the Biden Administration believes “there is literally something for every agency to do” on climate change. Now, nearly eight weeks into the new administration, what that means and how agencies will approach the issue has become clearer. Across agencies, as the Biden Administration focuses on addressing climate change, it is doing so through the lens of environmental justice.

Advocates for such considerations secured their first victory of the Biden era even before the President’s inauguration with the selection of Michael Regan over Mary Nichols as Administrator of the U.S. Environmental Protection Agency. On Biden’s first day in office, Biden signed an executive order addressing climate change that directed the federal government to “advance environmental justice” and “seek input from … environmental justice organizations” in assessing Trump era energy and environmental rules. The order also directed agencies to incorporate environmental justice into the methodologies used to assess the “social cost” of various greenhouse gases.

In a separate executive order a week later, Biden created an interagency council on environmental justice, established an “office of health and climate equity at” the Department of Health and Human Services, and created an environmental justice office at the Justice Department. At the Department of Transportation (DOT), Secretary Pete Buttigieg has already made environmental justice a central issue, and in February, DOT, for the first time, included environmental justice as a specific factor in  the Infrastructure for Rebuilding America Grant Program. This focus by the Administration will reframe debates over infrastructure projects, and companies will need to adjust their approach to stakeholder and policymaker engagement to ensure projects can proceed.

Focus On Environmental Justice Goes Beyond Federal Government, Bringing Heightened Scrutiny To State And Local Permitting Of Projects Near Fenceline Communities. In January we wrote about the how activists were citing environmental justice concerns in permitting fights across the country and pushing for codification of environmental justice provisions in state law. Since then, FERC has indicated it intends to “better incorporate environmental justice and equity concerns into the Commission’s decision-making process,” while state legislatures from Georgia to New York to Washington are considering new provisions for such concerns in state and local rulemakings and permits.

As policymakers increasingly engage on environmental justice issues, activists opposing permitting continue to highlight this issue in their lawsuits and public comments as well. In Colorado, green groups recently sued the Colorado Air Pollution Control Division over a general air pollution permit for oil and gas wells across the state, claiming the permit “runs directly counter to any hope of obtaining environmental justice.” In Virginia, nearly 100 environmental groups recently wrote to state permitting boards urging them to oppose the Mountain Valley Pipeline they claim would “perpetuate environmental injustice.” In Louisiana, opponents of petrochemical development in the state have highlighted a recent United Nations report calling for an end to “environmental racism in ‘Cancer Alley,’” a pejorative term activists use to refer to an area in the state that contains a number of petrochemical and other industrial plants.

From plastics to pipelines to power plants, infrastructure developers need to be aware, as they seek new, expanded, or renewed permits, that opponents will increasingly seek to frame the debate through environmental justice lenses, and they will have a more sympathetic audience in Washington and some state capitals for at least the next four years.

Obama-era Environmental Activists Wanted To Get “Beyond Coal.” Now in the Biden Era They Are Focused “Beyond Carbon.”

In The Past Decade, Environmental Activism Has Evolved From Obama-Era “Beyond Coal,” To “Beyond Carbon.” In 2010, as then-President Obama began to advance a slew of regulations targeting the coal industry, the Sierra Club launched the Beyond Coal Campaign with significant financial support from Michael Bloomberg. Only five years later, in 2015, the campaign was called “the most extensive, expensive and effective campaign in the Club’s 123-year history, and maybe the history of the environmental movement.”

In the years since Beyond Coal’s launch, Sierra Club claims nearly 340 coal plants have been retired or proposed to retire. In 2019, the group rebranded their efforts, with a new headline proposing, “America, Let’s Move Beyond Coal and Gas.” As Sierra Club’s efforts evolved, Bloomberg Philanthropies invested $500 million to support the Sierra Club and other groups in launching “Beyond Carbon” to “close 100% of all U.S. coal plants by 2030, stop the construction of proposed gas plants; and help win key state and local climate policy changes.”

Now, Biden Is Applying The Obama Coal Playbook To The New “Beyond Carbon” Era. At the end of President Obama’s time in office, the Sierra Club celebrated all they were able to accomplish with an ally in The White House. Now, environmental activists again have an ally in The White House, and President Biden seems set to follow the Obama coal playbook as he joins their “Beyond Carbon” efforts. Like Obama did, Biden is promoting enormous investments in renewables and green infrastructure, and like Obama’s coal leasing moratorium, Biden has placed a moratorium on oil and gas leasing on federal lands.

Additionally, Biden is telegraphing significant regulatory hurdles lay ahead for the industry. In January, the Trump Administration’s Clean Power Plan replacement, the Affordable Clean Energy Rule (ACE) was vacated by federal courts, seemingly creating a “blank slate” for the  new administration, (which will not renew CPP,) to pursue Biden’s goal of a 100% clean energy economy. Biden also seems set to aggressively target natural gas through new methane regulations.

While much of Biden’s agenda may take time to work through the regulatory process and in some cases the courts, he is also showing a willingness to target projects at the individual level. From Keystone XL to potentially the Dakota Access Pipeline, Biden appears set to target fossil fuels at the macro level through regulatory action, and at the micro level through various permitting, review, and approval processes.

With a More Supportive Federal Administration in Office, State and Local Efforts Targeting Fossil Fuels Are Accelerating While Jobs and Economic Arguments Become Less Persuasive.

As Biden’s Administration Takes Aim At Carbon, Fossil Fuel Fights Accelerate At The State Level. At the beginning of the year we wrote that natural gas’s opponents have growing momentum as gas ban and electrification efforts swept across the nation. As the Biden Administration targets fossil fuels at the federal level, at the state level, fights over fossil fuels have already accelerated in the new year. In January, the city of Denver advanced electrification efforts, and in February, Seattle Mayor Jenny Durkan signed a law “effectively banning natural gas space and water heating in new apartments, hotels, and commercial buildings.”

In New York City, Scott Stringer, “an early front runner” for mayor, “pledged to completely phase out fossil fuels, drive private utility companies out of the nation’s largest metropolis, and ‘electrify everything,’” if elected. In January, Washington State became the first state to consider legislation to ban natural gas infrastructure in new residential and commercial construction. Despite the progress by anti-gas activists, lawmakers in KansasMississippi, and Georgia are now considering legislation to prohibit municipalities from limiting energy choices in construction.

As fights over natural gas bans continue to spread across the country, in California, where the gas ban movement scored its first win in 2019, a new trend is beginning to emerge: outlawing new gas stations. On March 1, 2021, Petaluma, California became the first city to pass such an ordinance, but as we’ve seen with the gas ban fights, ideas that start at the local level in California can often spread across the country.

Jobs And Economic Arguments No Longer Persuasive, As The Public Sentiment Shifts On Climate Action. In 2009, “cap and trade was the policy of choice for tackling climate change.” By 2010, the concept was “in wide disrepute,” following opponents labeling the policy “cap-and-tax,” and over concerns the policy would be a job killer. Today, jobs and economic arguments no longer seem to hold the weight they once did. Environmentalists beat out jobs when President Biden cancelled Keystone XL, despite a lack of clarity about where  displaced workers can go to get the “green jobs,” promised by Biden’s top climate official, John Kerry. Polls show Americans believe “stricter environmental regulations are worth the cost,” (though that may be as long as someone else pays the cost.) Additionally, among many Americans who support a transition to a “100% clean energy within a decade,” there is a belief that such policies “would on balance ‘create new jobs and growth’ instead of ‘hurt jobs and the economy.’” As industry considers the policy fights taking place at the local, state and federal level, it must seriously consider how effective jobs and cost messaging remain amongst policymakers and the public.