Analysis by Energy Workforce SVP Government Affairs & Counsel Tim Tarpley
Talks between Senate Majority Leader Chuck Schumer and Sen. Joe Manchin (D-W.Va.) are beginning to yield concrete results on a potential climate, tax and prescription drugs package, which is often referred to simply as “reconciliation.” Sen. Schumer has reportedly told Senate Democrats that if he can reach a deal with Manchin, the bill could be on the floor as soon as this month.
Reports indicate that Sen. Manchin and Sen. Schumer are working towards legislation that provides $1 trillion in new revenues — half of which would go toward deficit reduction and half of which would go toward energy and health spending.
Perhaps the most relevant aspect of this potential deal to our sector is that Sen. Manchin has long supported a methane fee, and reports hint this idea is still on the table. In short, if structured as expected, this fee would be applied to oil and gas operators based on a per basin average. It is possible the language could include a carve out for small operators, but details remain murky.
How this fee will work in terms of the pending methane regulation is also unclear. Industry has generally argued that a fee on top of a regulation is excessive, so some have suggested the fee only be applicable until the regulation goes into effect. Sen. Manchin is close with many smaller oil and gas operators in West Virginia, and it appears unlikely that he would support language that does not contain some sort of carve out or protection for their operations.
Despite the fact that Sen. Manchin is clearly in the driver’s seat in the Senate on this package, it is not yet a done deal that the fee would be included at all. The House also has extremely close margins, and pro-energy Texas Democrats have pushed back on new taxes and fees on energy production in the past, ultimately being successful and keeping them out of prior packages. It is possible they will be successful again.
Energy Workforce will be working closely with this issue over the next few weeks and will be meeting with multiple members of the House and Senate on this and other potential issues in the reconciliation package.
Europe Faces Energy Security Shock; Nordstream 1 Shuts Down
On July 11, Russia took down the Nordstream 1 Pipeline for “repairs.” This pipeline moves Russian gas into Europe through Germany. Officially, this downtime is only supposed to last 10 days, however fears are growing in Europe that Russia might not turn it back on. Russia already slowed shipments to Germany by 60% last month, in a move that they blamed on the West’s sanctions on gas turbines. Some fear taking down the pipeline was a warning shot, and that further escalation is possible. This decrease in gas supplies has forced Germany to declare a “gas crisis.” Concern has spread throughout Europe, with the whole continent on edge.
The move by Russia could not come at a worse time. Europe receives about 45% of its gas from Russia and countries are working to fill up storage capacity in anticipation of winter. Germany is already taking the initial steps towards rationing, and the Euro has fallen in value to be on par with the dollar due to uncertainty surrounding the move.
This situation could escalate significantly in the coming days. Ukraine is expected to launch a large counter-offensive into Russian-controlled areas with heavy fighting expected. Significant volatility in the energy markets should be expected through the rest of the year.
If you would like to get involved with Energy Workforce advocacy efforts or the Government Affairs Committee, contact SVP Government Affairs Tim Tarpley.
Tim Tarpley, SVP Government Affairs & Counsel, analyzes federal policy for the Energy Workforce & Technology Council. Click here to subscribe to the Energy Workforce newsletter, which highlights sector-specific issues, best practices, activities and more.