API endorses a carbon price

The American Petroleum Institute (API) has reversed its long-held opposition to putting a price on carbon emissions, endorsing the approach among other measures that the leading US oil and natural gas industry group says will address the risks of climate change while meeting global energy needs.

The API released its climate action framework, which includes advocating a carbon price, less than an hour before the Interior Department convened a virtual forum today to gather information from the industry and environmental activists before it finalizes changes to the federal oil and gas development program it has largely put on pause.

While not directly tied to the forum, the API's seemingly revolutionary advocacy reveals the dilemma for the US energy industry as President Joe Biden's administration is pushing oil and gas companies to toe the line on accelerating energy transition and achieving net zero emissions. Environmental activists are hoping the Interior pause on new oil and gas leases on federal lands would become permanent. But some industry officials hope the forum presents an opportunity to make the case for restarting development and have offered to meet the administration halfway on its climate goals.

"What we are advocating for here is that the API and our member companies will continue to make significant investments to make our future cleaner," API president Mike Sommers said. "And second, we know that government is going to have to play a role on these important programs," including carbon capture and sequestration, he said.

The API says it is not advocating a specific price on carbon or a mechanism. "What we are advocating for is a market based approach," Sommers said. "It could encompass an economy-wide transparent price, like a carbon tax, or it could include a cap on emissions, like a cap-and-trade program."

Supporting a carbon price is a remarkable reversal for the US' main oil lobbying group, which has torpedoed past attempts at climate legislation. But US majors ExxonMobil and Chevron endorsed a carbon price years ago, following on the heels of their European peers. And for environmental activists, the proposal may no longer be enough.

Short on votes, technology

Democrats stung by the failure of a 2010 emissions cap-and-trade bill are wary of giving Republican critics, who see carbon pricing as a federal tax hike, ammunition as they defend thin majorities in Congress. "The votes are just not there for a price on carbon," House of Representatives Energy and Commerce Committee chairman Frank Pallone (D-New Jersey) said earlier this month.

Sommers conceded that lawmakers from both parties might push back against the carbon price proposal, but added that "what we are pursuing here is what we think is a policy that is in the middle, and the one that harnesses the power of markets to drive innovation, and to drive emissions ever lower."

Biden's net zero pitch is not feasible "without technologies that are not currently in the marketplace today," Sommers said. "We think that the best way to do that is through a market based carbon pricing mechanism that is not picking winners and losers in the marketplace and that makes investments in lower carbon technologies more economic," he said.

The White House earlier this week hosted a virtual meeting with the API and leading oil and gas producers to urge them to "share information about their commitments and ideas for addressing the climate crisis and reducing emissions."

But not everyone in the oil industry is in a conciliatory mode, and their supporters in Congress and state governments are honing arguments on job and economic losses and preparing to challenge Biden's agenda in courts. The Interior's leasing pause is being challenged by 14 oil and gas producing states.

"Production of oil and natural gas from these areas are an important part of the nation's energy portfolio and will be key to ensuring the US remains a key player in the worldwide energy picture," Independent Petroleum Association of America president Barry Russell said at the Interior forum today.

Rescinding federal permits for TC Energy's 830,000 b/d Keystone XL pipeline project resulted in thousands of pipelayers being laid off, according to Republican critics, who contend that even more jobs are at risk. But "oil and gas jobs are not going anywhere", the White House says, and Biden's efforts to accelerate the energy transition is "where the industry is largely going anyway."

By Haik Gugarats