Daily on Energy: Canada and Mexico pose obstacle to Biden’s union-built electric vehicle plans

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CANADA AND MEXICO AGAINST BIDEN PLAN: President Joe Biden has a difficult task today handling opposition from Canada and Mexico, America’s two largest trading partners, to his push to promote U.S. manufacturing of electric vehicles.

Senior officials in Canada and Mexico have suggested Biden and Democrats’ made-in-America rules and enhanced electric-vehicle credits for union-built U.S. made vehicles in their spending bill violate international trade rules. They could retaliate with tariffs or other trade restrictions under the USMCA, the updated North American trade agreement.

“It’s not clear those are legal under trade law,” Kevin Book, managing director of ClearView Energy Partners, told Josh. “Some questions on discriminaton could come up.”

Biden’s priorities are clear: The president is unlikely to back down from his push to give U.S. automakers and their workers an inside track at taking the burgeoning EV market from China, despite the risk that it could threaten the integrated North American supply chain that has defined the traditional auto manufacturing sector. Vehicle parts exported to Canada and Mexico typically return to the U.S. to be used in finished vehicles.

“We’re going to make sure that these jobs end up in Michigan, not halfway around the world,” Biden said yesterday while visiting a General Motors plant retooled to manufacture electric trucks and SUVs.

“Biden’s priorities right now are the domestic economy,” said Paul Bledsoe, a former Clinton White House climate change adviser, now with the Progressive Policy Institute.

“That may end up conflicting with international relations goals, especially around Made in America provisions in the reconciliation bill. He’s got to sell the clean energy transition as benefiting American workers,” Bledsoe told Josh.

Consumer-based incentives: David Goldwyn, an international energy consultant who served as the State Department’s special envoy and coordinator for international energy affairs, contended Biden will be open to “creative suggestions” on achieving his domestic goals without doing “serious damage” to Canadian or Mexican automobile manufacturing base.

He noted that Biden’s attempt to prop up U.S. automakers GM, Ford, and Stellantis, are largely consumer-focused rather than manufacturing-based. It should be noted that U.S.-based Tesla, which dominates the domestic EV market, has criticized the Biden approach because the company is nonunion.

The Build Back Better Act contains a proposal to offer a tax credit of $7,500 for purchasers of electric vehicles made in the U.S., with another $4,500 of tax credits available for those made with union labor.

“Canadian companies can certainly invest in the U.S. and use union labor and can compete on price, as can Tesla on vehicles made without union labor,” Goldwyn told Josh. “These provisions don’t prohibit them from selling here. Everyone can fix this problem by manufacturing components in their country and paying prevailing wages.”

Risk remains: Nonetheless, a rupture in North American supply chain for automobiles could hamper the transition to EVs, particularly as the U.S. will depend on critical minerals needed to produce batteries from Canada.

“They have a tough needle to thread,” Goldwyn said of the Biden administration.

Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writers Josh Siegel (@SiegelScribe) and Jeremy Beaman (@jeremywbeaman). Email [email protected] or [email protected] for tips, suggestions, calendar items, and anything else. If a friend sent this to you and you’d like to sign up, click here. If signing up doesn’t work, shoot us an email, and we’ll add you to our list.

STABENOW DEFENDS UNION-MADE CREDIT FROM TOYOTA: The union-made credit’s chief sponsor in the Senate, Democrat Debbie Stabenow of Michigan, lashed out at GM competitor Toyota for opposing the credit, which the Japan-based manufacturer has been doing with ads that urge Congress to “treat all American autoworkers fairly.”

“It takes a lot of nerve for them to fight our effort to have a consumer bonus for buying vehicles made by the United Auto Workers,” Stabenow said yesterday, calling the union-made credit a means of “leveling the playing field” and “supporting the home team.”

But Toyota, whose American workforce is not unionized, isn’t alone in opposing the credit. Stabenow’s colleague, Democratic Sen. Joe Manchin of West Virginia — where Toyota just announced $240 million in new investment in one of its plants — came out against the provision last week, saying it amounts to using taxpayer dollars “to pick winners and losers.”

Republicans are also opposing the credit proposal.

“Union-made vehicles are no better for the environment than vehicles made in other factories,” Sen. John Barrasso of Wyoming said during Tuesday’s Energy and Natural Resources Committee hearing on energy prices.

Republicans are expected to ask the Senate parliamentarian to strip the pro-union tax incentives from Democrats’ spending bill, arguing that they violate Senate rules requiring spending to have a fiscal impact that is more than ‘merely incidental’ to the policy proposal, according to the Wall Street Journal.

PELOSI SIGNALS VOTE TODAY ON SPENDING BILL: House Speaker Nancy Pelosi said she is aiming for a vote today on the $1.85 trillion social and climate spending bill that lawmakers began debating this morning. Pelosi said lawmakers would vote after receiving a cost analysis from the Congressional Budget Office.

“Those votes hopefully will take place later this afternoon,” she told reporters.

BIDEN SEEKS MULTILATERAL OIL RESERVE RELEASE: The Biden administration is asking a group of Asian countries, including Japan, South Korea, India, and China, to release oil from their own national stockpiles as it searches for an immediate solution to high gasoline prices, Reuters reported this morning.

How willing countries are to participate remains an open question. China plans to release crude from its strategic reserves, according to multiple reports. But there is some measure of resistance among the others.

“We are thoroughly reviewing the U.S. request, however, we do not release oil reserve because of rising oil prices,” a South Korean official said. “We could release oil reserve in case of supply imbalance, but not to respond to rising oil prices.”

The requests themselves suggest the administration is more and more ready for the world’s oil consumers to lean on their reserves as OPEC+ holds off on a big production boost.

ClearView Energy Partners, in a note, said the success of the effort in lowering prices would depend on how broad the coalition ends up being.

“One country selling single-digit millions of barrels seems unlikely to move markets, but multiple countries selling together could spur a currently reluctant OPEC+ to dislodge additional monthly volume increases,” ClearView said.

FEELING THE HEAT: Energy Secretary Jennifer Granholm and other Biden administration officials are convening Democratic governors and industry leaders this afternoon to discuss federal government efforts to mitigate rising home heating costs expected this winter because of high natural gas prices.

As part of the pandemic relief bill this year, the Biden administration and Congress provided $4.5 billion to expand the Low Income Home Energy Assistance Program – more than double normal annual funding – as well as billions in Emergency Rental Assistance and other funds that can be used to pay utility bills.

The administration is touting the remote event as an opportunity to share best practices, highlight innovations, and improve coordination in helping consumers with utility bills.

FIRST IN DAILY ON ENERGY — CLEARPATH ANNOUNCES 2022 ENDORSEMENTS: ClearPath Action Fund is planning to run ad campaigns supporting 13 Republicans in the 2022 election cycle.

Most notably, the advocacy arm of the conservative clean energy group is pledging $500,000 to help re-elect Sen. Lisa Murkowski, the former Energy Committee chairman who faces a contested fight to hold her seat in Alaska. This week, ClearPath Action Fund launched a $250,000 ad campaign in Alaska supporting Murkowski, recognizing her for being the “driving force” behind a massive bipartisan clean energy bill passed at the end of last Congress.

ClearPath Action Fund has earmarked $2 million to spend on its full roster of candidates, whose names are being reported here for the first time.

Along with Murkowski, they are: Sens. Mike Crapo of Idaho, Tim Scott of South Carolina, John Hoeven of North Dakota, and John Kennedy of Louisiana, and Reps. Dan Crenshaw of Texas; John Curtis of Utah; Cathy McMorris Rodgers, Dan Newhouse, and Jaime Herrera Beutler of Washington; David Schweikert of Arizona; Fred Upton of Michigan; and David Valadao of California.

GULF DRILLING AUCTION NOT THE ‘BLOCKBUSTER’ IT SEEMED: The Biden administration’s splashy (pun intended) offshore oil and gas lease sale yesterday in the Gulf of Mexico might have attracted less interest than meets the eye.

Measured in terms of the amount of acres bid, the latest sale surpassed every Gulf auction since 2017, with 33 companies participating, making 317 bids for 308 tracts spanning 1.7 million acres.

But a closer look shows industry paid the lowest in dollars per acre since 2003, falling to just $622,366 per lease, despite higher oil prices (hat tip to Sam Ori of the University Chicago’s Energy Policy Institute for flagging).

“For much of the past 20 years, the per acre bid price has been pretty closely correlated with oil prices. But that relationship is breaking down,” Ori tweeted.

Ori linked that development to lingering uncertainty from the pandemic, but also industry’s appetite for such long-lived assets — which could produce crude oil for decades — could be decreasing amid a stricter climate policy environment.

“Usually when prices are up you expect a bigger sale. When compared to the ceiling on what a high price can raise today, this looks like a moderate result, not a blockbuster,” Book of ClearView told Josh.

CONTROVERSIAL BANKING NOMINEE FACES SKEPTICISM FROM DEMOCRATS: Key Democratic lawmakers expressed concern over Biden’s nominee for a key banking position during a confirmation hearing this morning, indicating that confirmation will be difficult, the Washington Examiner’s Zachary Halaschak reports.

Sen. Jon Tester of Montana, a must-have vote for Democrats, said during a Banking Committee hearing for comptroller of the currency nominee Saule Omarova that he has worries about her views.

Democrats can’t afford to lose even one vote, as it would tank her nomination in the evenly divided Senate.

Among other controversial statements, Omarova has said “we want” oil and gas companies to go bankrupt in order to fight climate change.

HYDRO EXECUTIVE ON ‘NECESSARY EVIL’ OF TRANSMISSION PROJECTS: An executive with Hydro-Quebec, the firm behind the hydroelectric transmission project that Maine voters just rejected, offered a blunt assessment about the dynamic of completing such projects after local opposition to forest land use changes prevailed over clean electricity ambitions.

“Let’s be honest, nobody likes to see a transmission line in their backyard,” Gary Sutherland, Hydro-Quebec’s director of stakeholder relations for Northeast Markets, said yesterday during a forum on the U.S.-Canada energy relationship.

But, he said, new infrastructure supporting carbon-free electricity is a “necessary evil” for states, utilities, and the U.S. at large to move away from fossil fuel-generated power and that “there are going to have to be compromises.”

GLICK PLANNING ACTION ON SPIRE CERTIFICATE: FERC held its monthly meeting this morning, and while the commissioners didn’t vote on any item closing or extending authorization of Missouri’s embattled Spire STL natural gas pipeline, Chairman Richard Glick said he intends for the commission to take action on the pipeline’s temporary certificate before it expires on Dec. 13.

The D.C. Circuit Court of Appeals vacated the FERC’s approval of the Spire pipeline in June, faulting the commission’s approach for determining the need of the project, and the commission subsequently approved a temporary certificate in September to keep the operative pipeline up and running.

Glick, a Democratic nominee who opposed approval of Spire’s initial certificate, tempered concerns during FERC’s monthly meeting this morning that local customers are under threat of losing their natural gas service this winter, saying that Spire and others making such claims are engaged in “fear mongering.”

But Republican-nominated Commissioners Mark Christie and James Danly asserted that the worries are legitimate and agreed with the decision to take up the soon-to-expire certificate.

“If I read in the newspaper one day, the federal court revoked the permit for my gas supplier to supply my home with gas, I’d be very worried,” Christie said, adding, “And I would not assume that some agency in D.C. would just take care of it.”

ClearView Energy Partners assessed in a note following the meeting that commissioners’ statements suggest “that FERC does not intend to allow service to be interrupted this winter, but has not yet provided it in a formal order extending the emergency authorization through the end of the winter as many parties requested.”

The Rundown

Bloomberg Exxon bids for Gulf of Mexico leases ahead of carbon-capture plans

Wall Street Journal Big winners from natural-gas crunch: coal power plants in Europe

Politico How the West tried to shift China on climate

Calendar

THURSDAY | NOV. 18

The House is planning to vote on the Build Back Better Act.

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