Energy enters the US culture wars

Two things to start: Joe Biden’s climate agenda is running into trouble.

1. The president’s efforts to pass climate legislation via a bipartisan infrastructure package are flagging — and there are doubts key elements can survive if Democrats go it alone.

2. And a federal judge this week granted an injunction against his suspension of oil and gas leasing on public lands, clearing the way for the process to resume.

Welcome back to another Energy Source.

We’ve reported extensively on Joe Biden’s wish to reshape America’s energy system to fight climate change, interviewing legislators, chief executives, lawyers, and others about the big plan.

But few of the folks who live and work in the country’s energy-producing heartlands voted for this energy transition. In April and May, I went on a 3,100-mile road trip across America’s oil, gas, and coal-producing regions, driving from North Dakota to the Gulf Coast, to hear from people whose voices don’t often make it into the FT — but have a lot at stake in what happens. The magazine piece on it all has just been published. Today’s first note offers some reflections on the trip.

Meanwhile, Charif Souki, America’s most famous natural gas tycoon, had some words this week about day traders and short sellers targeting his company, Tellurian. Read on to find out what he said.

Thanks for reading — Derek

On the road in America’s energy heartlands: three takeaways

1. The political divide between producer and consumer states is widening

Rising shale oil and gas production in recent years allowed Donald Trump to proclaim American energy “independence”.

Now oilfield workers feel they are being “villainised” for that achievement by people on the coasts — policymakers, environmentalists, Democrats — who don’t really understand how their “fuel and food” is made and prioritise climate above energy security.

In deeply conservative areas, the fossil fuel workers I met do not seem to fear climate change. They fear climate policy, which they think threatens their jobs, communities, and way of life.

Misinformation is rife. Natural gas’s supply failures were a chief culprit of the deadly winter freeze that hit Texas in February. But several people I spoke to blamed renewables, saying the freeze showed the state needed more fossil fuel power.

It feels like energy is now fully part of America’s culture wars.

In the oil-producing core of west Texas, even cheap electricity can meet opposition if it isn’t mined from the ground, according to Art Barrera, a salesman for Solar Point, a rooftop panel installer in Midland.

“Out here you’ve got an abundance of sun and no trees and the mesquite trees grow to only about five foot in height, max,” he said. “The biggest thing we have to battle is a lot of folks think, well you’re taking away from the oil. You say, ‘green’ or ‘energy efficient’ and they automatically think ‘you’re gonna take my job’.”

2. Wyoming is a real frontline in this energy transition

Half of Wyoming’s spending is sourced from taxation on oil, gas, and coal, so the state has lots to lose in a shift away from fossil fuels. Still, the governor, Mark Gordon, said this year that Wyoming would go emissions free, though the timeline and method are vague. In Cheyenne, I met Glen Murrell, head of the Wyoming Energy Authority, who was given the job of drawing up the plan. It does not involve ditching fossil fuels.

“You hear a lot right now about this transition being a transition from hydrocarbons to renewables,” Murrell told me in Cheyenne. “And I think that is a little misplaced. There is more of a transformation from hydrocarbons to decarbonised energy, so that’s where the opportunity for Wyoming really exists.”

Crucial to Wyoming’s plan is technology: hydrogen, new uses for coal (graphene, carbon-fibre, etc), and carbon capture and storage (CCS). To deal with its scope 3 emissions — those from all the Powder River Basin coal burnt to make electricity in states like Texas — Wyoming will need its customers to install (costly) CCS units at their plants.

Meanwhile, Wyoming’s clean energy developers are pushing ahead. I visited the starkly beautiful ranchland on the Sierra Madre range above the city of Rawlins, where privately backed Power Company of Wyoming is building a huge new $8bn wind project to supply electricity to parched customers in the US south-west.

The problem? Many locals — including politicians — are suspicious of these kinds of developments, arguing that clean energy can’t replace jobs lost in fossil fuels. PCW’s project will employ just over a hundred people when it is online in a few years. About 4,000 still work in the Powder River Basin’s shrinking mining sector.

“The jobs aren’t one for one, they don’t pay the same,” Governor Gordon told me. “Taking somebody who is incredibly skilled at driving a truck, and telling them now that they’re going to be a computer programmer . . . these people — they built communities.”

Still, the idea that communities can rely on coal is an illusion, says Lynne Huskinson, who was the Democratic candidate for Wyoming House of Representatives in District 32. Huskinson was a coal miner for 39 years, and now urges fellow workers in Gillette to prepare for coal’s demise.

“They make you believe you can count on 10 or 15 years of employment,” she said. “It’s just B.S.”

And waiting for technology like CCS to become cheap enough doesn’t appreciate the urgency of the crisis for Wyoming, she added.

“We don’t have time to study . . . The hospitals, they’re going to lose their revenue. It’s already happening, they’re making cuts. It’s happening right now.”

3. But Texas will win either way

Outside the Permian and the Gulf Coast’s refining hub, you’d be forgiven for thinking Texas was more of a clean energy state than an oil and gas superpower. Wind farms are now part of the landscape. Solar arrays and other clean energy projects are sprouting, even in the shale heartlands around Odessa.

If the energy transition is causing anxiety in the oil-producing parts of the state though, it’s the opposite in Houston. There, the buzz is about clean tech. A wave of oil and gas professionals are leaving the sector for jobs in clean energy, according to people who have made the shift or are helping others do the same. “They don’t like having to explain to their kids what they do,” said Kay McCall, a former private equity energy investor who now heads the non-profit Renewable Energy Alliance.

Buc’ees, the state’s famed convenience store and gas station chain, is the place to watch to see if this mood spreads statewide. If any store is primed for electric vehicle chargers, it’s Buc’ees, where the entire business model is about getting drivers to spend time buying burritos, Western memorabilia, meat smokers, fudge, or pretty much anything else. You could even do some (responsible) wine tasting while your battery replenished — yes, drinking and driving laws still apply in Texas. Yet so far, the company told me, there are no plans to install EV charging points. (Derek Brower)

The Tellurian CEO’s appeal to the meme-stock crowd

Charif Souki, a pioneer of America’s liquefied natural gas (LNG) industry and chief executive of Tellurian, is courting the meme-stock crowd to counter short sellers betting against his new $17bn export venture.

In a YouTube video this week, Souki cheered on the company’s growing retail shareholder base, tapping into interest the company has garnered throughout the pandemic in forums like the influential r/WallStreetBets Reddit message board, which fuelled the rise of stocks like GameStop.

Retail investors “have been accused of being day traders, gamblers and stupid money,” said Souki in the video. “In my experience with this retail market in the past 15 months, I found it anything but true.”

Laying on the charm after reading a letter he said was from one of these new retail investors, Souki added: “I have had an opportunity to review some of the YouTube postings that some of your retail colleagues have posted, and I am always very impressed with the depth of the knowledge.”

Tellurian, a new venture Souki set up after an acrimonious exit from LNG exporter Cheniere Energy in 2015, hopes to build a new $17bn export plant called Driftwood LNG on the Louisiana coast.

But as the pandemic hit last year, the future of that project was thrown into doubt. Short sellers piled into Tellurian’s stock, which Souki blamed for driving the company’s share price to a low of $0.75 a share in October last year — down more than 90 per cent from a year earlier.

Souki credited the company’s new retail investors with helping to fend off Wall Street short sellers:

“You are our faithful investors and you have also helped us get rid of this scourge of — or at least counter the scourge of — the short sellers who are the real day traders,” he said. “You made it very dangerous and very uncomfortable for them to be short the stock.”

Can a merry band of retail traders carry Tellurian across the finish line as the company tries to build an LNG megaproject? So far, they’ve been rewarded. The company’s share price is up more than 200 per cent this year, buoyed by new sales agreements and hopes construction on the new plant might be able to start this year.

Nobody has more riding on it than Souki himself, whose personal finances are entwined with the project’s success. He is Tellurian’s largest shareholder, holding around 7 per cent of the company’s outstanding shares. (Justin Jacobs)

Data Drill

US fuel demand is on the rebound as the country’s return to normal pushes up jet fuel and petrol consumption. Demand shot up 16 per cent in the second week of June, putting it just shy of pre-pandemic levels.

Power Points

• The world’s top commodity traders have forecast a return to $100-a-barrel oil amid slowing investment in new supply.

• Commodity trader Mercuria said it will direct half its investments into energy transition projects as it plots an aggressive shift away from fossil fuels. 

• The correction in renewable energy stocks is not a retreat but rather a pause to regroup, Lex argues.

• An oil-price boom is imminent, but may not last long, say Jamie Webster and other BCG colleagues.