Energy Cyber Attack. Murkowski EV Earmarks. Alaska Special Election

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Today’s Key Takeaways:  DC prepares for cyber threat to energy sector.  Russian oil refiners cut back production. EPA targeting gas-fired power plants.  Murkowski brings home the bacon for EV ferry pilot program.   Special election set for Congressman Young’s seat. 


From the Washington Examiner, Daily on Energy:

UNDERSTANDING THE THREAT TO THE ENERGY SECTOR: A major question facing the Biden administration and the energy sector is what would constitute a Russian cyberattack.

Asked yesterday whether Russian cyberattacks were already underway, White House National Security Adviser Jake Sullivan sought to distinguish the administration’s view of “preparatory work” — in which hackers breach a system for purposes of intelligence collection, or as a precursor for a future attack — versus the actual “disruptive, destructive type of attack” seen in last year’s ransomware attacks on Colonial Pipeline and JBS foods.

“It’s really the latter thing that we have not yet seen,” and which would likely trigger a more robust response from the U.S. and its allies,” Sullivan said.

An attack on critical infrastructure would likely touch off an escalation: The 16 areas of critical infrastructure are overseen by DHS’s cyber agency, CISA, and include areas of energy, water, financial services, health care, defense, and transportation, among others. After traveling to Geneva in June last summer for his first bilateral meeting with Putin, President Joe Biden said he explicitly listed the 16 areas of critical infrastructure as “off limits, period” to cyberattacks.

Asked what the U.S. would do if Russia violated that designation, Biden said: “I pointed out to him we have significant cyber capabilities.”

The U.S. and its NATO allies have agreed that cyberattacks can be considered a military act, which could justify retaliation by the alliance under Article 5.

CISA director Jen Easterly told industry executives and state and local leaders in a call yesterday that the so-called “preparatory activity” by Russia is “not about espionage, it’s probably very likely about disruptive or destructive [cyber] activity,” CNN reports.

What Russia is already reportedly doing to the energy sector: The FBI issued an advisory to the U.S. energy sector earlier this month warning about “network scanning activity” being conducted from Russian IP addresses believed to be associated with previous hacks. It added that any activity from these IP addresses “likely indicates early stages of reconnaissance, scanning networks for vulnerabilities for use in potential future intrusions.”

The FBI advisory warned that Russian hackers have scanned at least five energy companies for vulnerabilities and told businesses to “examine current network traffic for these IP addresses and conduct follow-on investigations if observed.”

Last week, Energy Secretary Jennifer Granholm implored energy executives to “prepare to the highest possible level” for a Russian attack.

Russia has targeted the grid before: Russian hackers infiltrated the U.S. electric grid as recently as 2017, a breach that gave hackers key insight into operations at power plants, nuclear generators, and water facilities.

That’s especially important since hackers that can access U.S. critical infrastructure pose a “national security threat, an economic prosperity threat, a public health and a safety threat,” Michael Daniel, president and CEO of the Cyber Threat Alliance, who also served as the White House cyber coordinator under President Barack Obama, told Breanne ahead of last year’s Biden-Putin summit.

A joint FBI and DHS report released in wake of the 2017 breach said that Russian hackers had collected sensitive data — including passwords, logins, and information about U.S. energy supply — laying the groundwork for future attacks.

“What Russia has done is prepare the battlefield without pulling the trigger,” Robert Silvers, former assistant secretary for cyber policy at DHS, told CBS News.

“The grid is a sprawling target,” former FERC chairman Jon Wellinghoff said on “60 Minutes” late last month. The three major interconnections, he said, are supplanted by some 55,000 substations across the country, which house transformers that convert raw electricity to higher or lower voltages.

It wasn’t until his time at FERC, Wellinghoff said, that he realized just how vulnerable the grid system was — both to physical and online attacks.

“It was actually very shocking to us [that] there’s very few number of substations you need to take out in the entire United States to knock out the entire grid,” he said, later placing the number at “less than 20.”

What Russia did to Ukraine: In 2015, Russian hackers used Ukraine as a testing ground for a sustained, years-long cyberattack. The country was roiled by blackouts that hit indiscriminately and without warning, leaving hundreds of thousands of people without power for hours at a time.

In 2016, then-Ukrainian president Petro Poroshenko said that e. He pointed the finger directly at the Kremlin, which he said, “have unleashed a cyberwar against our country.”


Russian oil refiners are cutting back production, Gunvor says
Archie Hunter, William Mathis, World Oil, March 23, 2022

 Russian refiners are trimming their output, threatening to exacerbate a European diesel market already in short supply, Gunvor Group Chief Executive Officer Torbjorn Tornqvist said.

“This is a global problem but for Europe it’s very hard because Europe is so short” of diesel, Tornqvist said at the Financial Times Commodities Global Summit.

Diesel is still flowing from Russian refineries to Europe, but the trade is becoming more problematical. Shipping companies, banks and buyers are shying away from dealing with Russian energy products in what is being termed “self-sanctioning,” following Russia’s invasion of Ukraine.

“That will force Russian refiners to cut back, in fact we already see that,” said Tornqvist. “What does that mean? It means more crude oil will need to be exported instead of the products, and we believe that is not possible and will lead to cutbacks in Russian production.”

European diesel stockpiles are expected to fall to the lowest level since 2018 this month, according to an Energy Aspects presentation. Some 500,000 tons of Russian diesel exports are at risk in March, the analyst said, leave “physical supply tighter than ever.”

Diesel prices in Europe have surged in recent weeks. Earlier in March, gasoil futures traded on the Intercontinental Exchange jumped to a record as fears of supply disruption from Russia, Europe’s largest supplier, compounded an already tight market. Heating oil prices in Germany were up more than 50% week-on-week through March 14, according to data compiled by Bloomberg. 


EPA eyes new rule for gas-fired power plants
Jean Chemnick, Climatewire, March 23, 2022

To do so, agency staff will have to navigate a thicket of legal and technological challenges.

 EPA Administrator Michael Regan confirmed earlier this month that his agency plans to focus on gas-fired power in its updated carbon rule for new power plants.

But how to do it raises a barrage of legal and technological questions that will have implications for how — and whether — the United States can decarbonize its power grid.

The forthcoming rule would replace a 2015 standard that’s still on the books and covers carbon from new coal and new gas power plants. While the Obama-era rule effectively mandates that new coal-fired units reduce emissions through partial carbon capture and storage, its requirements for gas are lax enough to be met easily by most new builds.

EPA data shows that the average existing gas combined cycle power plant in 2020 emitted 865 pounds of CO2 per megawatt-hour. The Obama-era rule allows it to emit 1,000 pounds of CO2 per MWh.

Now EPA is preparing to ask gas plants to do more.

Regan told an audience at CERAWeek by S&P Global in Houston two weeks ago that EPA would release a white paper this spring on “readily available” mitigation techniques for new natural gas combustion turbines, followed by a public comment period, final paper, and draft rule later this year.

Instead of laying out policy, he said, the paper “frames the public dialogue on approaches to reduce climate pollution from new gas-fired units.”

EPA told E&E News that the paper would be out in the next few weeks.

In starting with a white paper, EPA is adding at least one step to its usual rulemaking process. Typically, the agency would roll out a so-called advanced notice of proposed rulemaking to signal its intent to regulate and collect information on technologies and measures that should form the basis for a rule.

But EPA has started work on this as it awaits a Supreme Court decision that could make regulating for climate change harder, at least until Congress passes a new law. While the new power plant carbon rule isn’t the focus of West Virginia v. EPA, an expansive decision in that case could curtail the agency’s regulatory authority in ways that would affect it.

Kyle Danish, a partner with Van Ness Feldman LLP, said EPA might be hesitant to tip its hand on what it thinks its regulatory options are ahead of the decision, which is due in June.

“It may not want to antagonize the Supreme Court,” he said.

Utility experts say a new gas plant rule that seeks to limit carbon beyond what could be accomplished through simple heat-rate improvements on-site likely would be based either on co-firing of gas with a lower-carbon fuel like hydrogen or on carbon capture and storage, called CCS.

Both options present their own challenges. And experts say that a rule based on them might have broader implications for the power system if they make new gas plants less competitive and shift the industry toward reliance on older gas and new renewables.

Co-firing with hydrogen

“There’s actually a reasonable amount of experience with hydrogen burning in gas turbines,” said John Larsen, who leads energy and climate research at the Rhodium Group.

In fact, General Electric Co.’s website says hydrogen is currently burning in more than 100 of its gas-fired units worldwide. Los Angeles is converting four gas-fired power plants to burn 100 percent hydrogen over the next few years.

Burning hydrogen doesn’t release CO2. So, the higher the percentage of bonded hydrogen, or H2, in a fuel mix relative to gas, the lower its carbon intensity.

But co-firing hydrogen presents some challenges that could offset the climate benefit of cleaner combustion at a gas plant and others that threaten the environmental justice objectives at the heart of the Biden administration’s climate agenda.

Burning hydrogen produces a lot less energy per volume than burning gas. So, blends with a lower percentage of H2 relative to gas will still derive more energy from burning gas than from burning hydrogen. That means the emissions impact would be relatively modest.

Another question is how the H2 is made. If fossil fuels-based power or methane is used in its production, the fuel’s upstream emissions could be high even if it has no emissions when burned on-site at the gas plant.

“If all they’re considering is the emissions at the power plant, then in terms of the life cycle emissions you’re not making any progress at all,” said Michael O’Boyle, director of electricity policy Energy Innovation.

Hydrogen also can be produced using renewable energy — earning the moniker “green hydrogen.” Green hydrogen is seen as a key to eventually weaning the grid off fossil fuels altogether, said O’Boyle.

But “green, or blue, or pink or whatever color of the rainbow,” he said, hydrogen has another molecular property that presents a problem: It burns very hot. That means more nitrogen oxides producing more air pollution to affect the health of people who live and work near the power plant.

And since power generation is frequently located in low-income and minority communities, the increased smog could create more burdens for the same communities the Biden EPA has promised would see the benefit of its investments and rulemakings.

Both the life cycle emissions and NOx problems could have regulatory fixes if EPA implements them, and the courts allow it.

Larsen said the agency in the past generally has not considered life cycle emissions from upstream fossil fuels use when constructing rules under Section 111 of the Clean Air Act, which will be used again for new power plant carbon. But EPA signaled in a past rulemaking that considered biomass co-firing at coal plants that rules based on co-firing might be an exception, he said.

Another issue is that hydrogen production is now stretched to capacity, and an EPA standard based on H2 would encourage the industry to expand. But Larsen said a rule that steered production toward green hydrogen might pay dividends in driving down life cycle emissions for hydrogen used in steel production and other industrial uses.

EPA also sets standards for NOx at new gas plants and could lower those limits as part of this rulemaking. The agency has said it is exploring ways to account for the cumulative impact of pollution on front-line communities.

Sequestering carbon

EPA could opt to base its new source performance standard not on a cleaner fuel mix at gas plants but on an assumption that power companies will capture and store a share of emissions from combustion.

The Obama EPA considered partial CCS in its 2015 rule for new gas plants but determined that it was cost-prohibitive and not readily available.

That calculus might have changed in the intervening years. Net Power LLC last year delivered emissions-free power from natural gas for the first time at its plant in La Porte, Texas (Energywire, Nov. 17, 2021).

It still isn’t widely deployed. But Carrie Jenks, executive director of the Environmental & Energy Law Program at Harvard Law School, noted that Clean Air Act rules are designed to push the envelope by relying on new technology.

“I think there’s a tendency to say, ‘It’s not ready yet,'” she said. “But at some point, these rules are supposed to be technology forcing.”

Modeling shows that once the cost of CCS comes down slightly its deployment will increase, she said. But there are other considerations EPA would need to grapple with before basing its rule on CCS, she said — including whether utilities would have access to geological sequestration for carbon and around legal liability for sequestration.

Danish of Van Ness Feldman said EPA would need to show that whatever technology it bases its gas plant rule on met cost and demonstration considerations laid out in the Clean Air Act. Either CCS or hydrogen could present challenges in the short term, he said.

But EPA might consider taking the rule in stages, he said, setting a laxer requirement in the earlier years and tightening it at a later date when control technologies such as CCS or hydrogen co-firing are more mature.

The bigger picture

If EPA writes a rule that makes it harder or more costly for utilities to bring new gas plants online, that’s likely to have implications for the whole power grid.

The Obama rule stayed on the books throughout the Trump administration — despite a proposal to repeal it — because it set meaningful requirements only for new coal-fired power. Utilities aren’t planning to build any of those anyway.

But there is new gas-fired power in the construction pipeline. A 2021 Rhodium Group analysis showed that anywhere from 42 to 158 gigawatts of new gas capacity is projected to be built through 2030 depending on fuel prices and renewable energy costs.

While new gas can compete with renewable power, gas capacity also plays a backup role when the wind isn’t blowing or the sun isn’t shining.

“I don’t know that EPA can or should think about gas plants separately from how it effects the whole resource mix,” said Dallas Bertram, a senior fellow at Resources for the Future. The energy system, he said, “is a system.”

Danish said EPA could introduce subcategories in its rule that set less stringent standards for peaking units that only run when needed to ensure grid reliability.

“If they’re not running all the time, maybe they’re not emitting as much,” he said. “Maybe we’re not as concerned about slapping carbon capture on those plants.”

O’Boyle said part of the new source standard’s contribution to decarbonizing the power grid would be creating a price hurdle that might dissuade some utilities from building new gas-fired units at all.

“I think there would be positive emissions benefits associated with the standard based on either H2 blending or CCS, not because you would see a lot more of these technologies coming online necessarily, but also because the cost of new natural gas would increase,” he said. “It would push them towards more deployment of renewables and storage and leaning on the existing gas fleet for whatever services they need from dispatchable power, at least in the near term.”

An Energy Innovation analysis for 2030 shows that it would be possible to retire all existing coal-fired power by that year and power the grid with renewable energy and batteries — with today’s gas-fired power plants supplying 20 percent of U.S. electricity.

Older gas-fired power plants are slightly more carbon-intensive on average than newer models. But a rule that slows investment in new gas-fired power likely would lessen the number of legacy fossil fuels plants that would be running in future decades, when the United States and the rest of the world must cut CO2 emissions to zero to avoid the worst impacts of climate change.

Whatever EPA does with its new source rule for gas plants, the move is unlikely on its own to deliver President Biden’s promise of decarbonizing the grid by 2035.

That still demands long-term incentives for renewable power and other policies that only can be delivered legislatively.

“I think Congress needs to act,” O’Boyle said. “There’s really no way around it.”


Earmarks:   These lawmakers secured millions for EV projects
Arianna Skibell, Thomas Frank, Climatewire, March 23, 2022

Of the $64 million in spending for electric vehicle projects, about 60 percent went to electric buses and related infrastructure.

Federal lawmakers used earmarks to steer more than $64 million toward electric vehicle projects in the spending package that President Biden signed into law last week, according to an E&E News analysis.

The $1.5 trillion package is the first spending bill in more than a decade to contain congressionally directed spending, also known as earmarks. Lawmakers revived earmarks under tight rules, including new disclosure requirements and strict limits on who can receive them.

Of the $64 million in spending for EV projects, about 60 percent went to electric buses and related infrastructure, according to E&E News’ analysis. Other requests will help fund technical training, charging ports and electric ferries.

The transportation sector is the single-largest source of greenhouse gas emissions in the country, and President Biden has pledged to decarbonize the sector by midcentury to help combat climate change.

Last year, Biden set a goal that half of all new vehicles be electric by 2030. To meet that target, automakers, states, and localities are pouring billions of dollars into the burgeoning industry.

States also are crafting blueprints for how to spend the more than $5 billion for EV charging infrastructure secured through Biden’s $1.2 trillion bipartisan package passed last November.

While the bulk of earmarked spending for EVs will go to Democratic-led states, a number of Republican lawmakers also scored funding for electric projects.

Sen. Lisa Murkowski (R-Alaska), a senior appropriator, locked in an additional $2 million for an EV ferry pilot program. Murkowski last year won $250 million for the program in the bipartisan infrastructure deal.

“In Alaska, we don’t all connect by road,” Murkowski said during a press conference last year. “Some of us have to connect by ferry.”

Sen. Shelley Moore Capito (R-W.Va.), ranking member of the Environment and Public Works Committee and staunch opponent of EV tax credits, got $1 million to help fund an EV associate’s degree at West Virginia University.

Toyota Motor Corp. announced last month that it would expand production of EV parts at its plant in Buffalo, W.Va., which will create demand for skilled workers in the area.

“Toyota is moving quickly toward an electrified future, and West Virginia will play a critical role in that journey,” David Rosier, president of Toyota Motor Manufacturing. West Virginia Inc., said in a statement.

Democratic Sen. Kyrsten Sinema of Arizona, whose opposition to spending in Biden’s “Build Back Better Act” tanked significant climate policy, scored $2.7 million for electric buses for the city of Phoenix.

Securing one of the largest EV earmarks, Sen. Dick Durbin (D-Ill.) got $8.3 million for Illinois’ electric bus and charging infrastructure program and an additional $2 million for the Chicago Transit Authority to upgrade its 103rd St. facility to accommodate electric buses and chargers.

Sens. Jeff Merkley and Ron Wyden, both Oregon Democrats, steered $6.3 million toward a project to electrify Salem Area Mass Transit District. And Georgia Democratic Sens. Jon Ossoff and Raphael Warnock locked in $3.9 million for Metropolitan Atlanta Rapid Transit Authority electric buses in Atlanta.

Ossoff said the new electric buses would help expand services and cut air pollution.

“We have to reduce the air pollution that’s dangerous for children’s health,” he said in a statement


Alaska sets special election to replace late Rep. Don Young
Red Wilson, The Hill, March 23, 2022

Alaska officials are moving to hold a special election to fill the seat of the late Rep. Don Young (R) by August, the first in state history to be conducted almost entirely by mail.

Gov. Mike Dunleavy (R) told reporters Tuesday he will sign a proclamation declaring Young’s seat vacant and ordering a new election as soon as Wednesday, setting a special all-party primary election to be held June 11.

The four top candidates will face off in an August 16 general election. In that runoff, voters will be allowed to rank their preferred candidates, the first election to be held under Alaska’s new ranked-choice voting system.

Holding such a quick primary election — just 80 days after Dunleavy’s proclamation — will allow the state to avoid the costs of holding yet another election, said Gail Fenumiai, the director of Alaska’s Division of Elections. To mount an election so quickly, Alaska will rely on mail-in ballots, though voters will still be allowed to vote in person at regional elections offices, according to Alaska Public Media.

“The vote-by-mail option is pretty much the only way we can go and still have a successful primary special election,” said Lt. Gov. Kevin Meyer (R), whose office oversees election administration.

But voters may face confusion at the polls: The August 16 general election coincides with the state’s primary, meaning voters will have two chances to vote for Young’s replacement. The winner of the special election would fill out the remainder of his term, through the end of 2022. Those who advance in the primary on the same day will move to a November election, in which voters will be electing a new member of Congress to begin serving in January 2023.

Candidates seeking to replace Young, who served as Alaska’s lone member of the House of Representatives for 49 years, must file for office by April 1.

Young, the longest-serving member of Congress, died Friday on board a flight between Los Angeles and Seattle as he made his way home. During his long career in Washington, he served stints as chairman of the House Transportation Committee and the House Resources Committee.