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THE SANCTIONS ARE HAVING A BIG EFFECT: The Russian economy is showing signs of wear in the face of international sanctions and the global realignment of energy markets, and it is expected to deteriorate once Europe’s embargoes on coal and oil imports take full effect.

Revenues from fossil fuel exports have fallen each month since March, according to an analysis from the Center for Research on Energy and Clean Air.

Other analyses show the toll that sanctions and the gradual commercial blacklisting are having on Russia. Many western businesses packed up shop and left after the invasion of Ukraine, triggering an “unprecedented simultaneous capital and population flight,” Yale University researchers concluded in a recent paper.

With the exodus went companies, including oil and gas supermajors Shell and BP, that represent around 40% of national GDP, the paper said.

Defining ‘toll’: The high prices of oil and gas, driven higher by the war and associated volatility, have at one level advantaged Russia, complicating the picture of whether sanctions are really working. The Russians have still been earning big on oil since the war began, and that’s even as they take $30-plus per barrel of Urals off the top, relative to Brent, for their Asian customers.

Importantly, the Europeans have continued to buy overall and still represent the vast majority of Russia’s export revenues. But, they’re buying less, and Russia is incrementally losing its top customers in EU member states while there are limits on its ability to simply sell elsewhere.

The European Union and the United Kingdom were buying some 600 million euros per day of Russia fossil commodity exports in March, according to CREA’s estimates based on public and private data. In mid-July, that number was down closer to 200 million euros per day.

Andrei Ilas, an analyst at CREA, said the medium- and longer-term outlooks for Russia show revenues falling significantly.

“It helps Russia that prices are higher than last year, but their volumes are declining, and that cannot compensate — high prices cannot compensate fully for the decline in volumes,” Ilas told Jeremy.

Sanctioning and self-sanctioning: This changing economic picture is a consequence of the process of sanctioning from the EU and other governments, as well as Russia’s own “self-sanctioning” by cutting off natural gas customers, Ilas also said.

European refiners are getting more crude oil from the Middle East in the “shadow” of sanctions as overall volumes from Russia simultaneously fall ahead of December, when the EU’s partial embargo takes effect.

“People are trying to get ready before and trying to avoid the Russian crude, even if they could buy it,” Ilas said.

At the same time, Russia’s Gazprom has restricted natural gas flows through the Nord Stream pipeline and shut out a number of gas European gas customers, which also has contributed to the decline in revenues.

To this point, the Yale researchers posit that Russian dependence on European buyers is far greater than vice versa, as measured by import and export percentages. Where Russia has been responsible for more than a third of EU gas imports, Europe’s purchases have amounted to upwards of 80% of Russia’s exports.

Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writers Jeremy Beaman (@jeremywbeaman) and Breanne Deppisch (@breanne_dep). 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.

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EMERGENCY OIL STOCKPILE AT LOWEST POINT SINCE 1985 FOLLOWING BIDEN SALES: The U.S. emergency crude oil stockpile fell to its lowest point since 1985 last week, dropping to more than 469.9 million barrels, according to data from the U.S. Department of Energy.

The low levels come after President Joe Biden in March authorized the historic sale of 1 million barrels of oil per day from the Strategic Petroleum Reserve in an effort to combat gas prices, which soared earlier this summer to a record-high national average of more than $5 a gallon.

Senior White House officials told reporters last week that the drawdowns have reduced gasoline prices in the United States by up to roughly 40 cents per gallon compared to what they would have been otherwise.

The Biden administration also announced steps last week to allow the purchase of oil under fixed-price contracts to help encourage stability and replenish near-term supply. That plan will likely take effect after fiscal year 2023, the White House said in a statement.

Since May, releases have averaged 880,000 barrels per day.

INTERIOR DEPARTMENT SETS RULES FOR FOSSIL COLLECTION ON FEDERAL LAND: The Interior Department finalized a rule yesterday aimed at governing the collection of fossils from National Park Service and other federal lands, delivering welcome guidance on the issue after some 13 years of bureaucratic back-and-forth.

The new rule is a follow-up to the Paleontological Resources Protection Act passed in 2009, and will apply to federal sites managed by the National Park Service, the Fish and Wildlife Service, the Bureau of Land Management, and the Bureau of Reclamation.

“This collaboration among the four bureaus and partnerships between museums and avocational paleontology groups will allow the Interior Department to fulfill its mission to preserve paleontological resources and share these discoveries with the public,” Interior Secretary Deb Haaland said in a statement.

The rules, which are slated to be published today, will specify prohibited acts, outline when permits are required, and establish penalties for certain resource violations.

JAPAN INVESTORS TAKE BILLION-DOLLAR-PLUS HIT ON RUSSIAN GAS ASSETS: Two big Japanese energy investors said today that the value of their stakes in a Russian natural gas project have fallen by more than half, after Russian President Vladimir Putin in June issued a decree that handed control of the Sakhalin-2 project to a new Russian entity.

The Wall Street Journal reported that the decree effectively gives the Kremlin say over which foreign investors would be allowed to keep their stakes. Mitsui and Mitsubishi each said they hoped to win permission to stay on the project but “didn’t know where the review stood.”

Companies Mitsui and Mitsubishi own 12.5% and 10% of the Sakhalin-2 project, respectively. The other non-Russian investor is Shell, which announced it plans to exit the project days after Russia’s invasion of Ukraine in February. (Russian-owned gas giant, Gazprom, owns a 50% plus one share in the venture.)

Mitsui slashed the investment value of its stake by roughly 136.6 billion yen to 90.2 billion yen, while Mitsubishi lowered the value by 81.1 billion yen to 62.3 billion yen, the companies announced separately today.

NRC GREENLIGHTS FIRST SMALL MODULAR REACTOR: The U.S. Nuclear Regulatory Commission approved the first-ever small modular reactor from NuScale.

NRC said Friday that it has directed its staff to approve the design of NuScale’s generation-IV nuclear reactor for certification. The certification will take effect 30 days after NRC staff publish the rule in the Federal Register.

The reactor’s approval is a major milestone for NuScale, which applied in Dec. 2016 to certify its small modular reactor design for use in the U.S.

It is also a major step for the NRC, which has only authorized six reactor design certificates previously.

NuScale is currently working with the Carbon Free Power Project, a wholly owned subsidiary of Utah Associated Municipal Power Systems, to deploy the first-of-its-kind plant at the Department of Energy’s National Laboratory in Idaho Falls. It hopes to begin operations as early as 2029.

"The affirmation of NuScale's design and strong safety case could not have come at a more crucial time—when around the world, people are struggling from the compounding crises of volatile energy prices and climate change-driven extreme weather events,” NuScale president and CEO John Hopkins said in a statement shared on Twitter yesterday.

“We are pleased with this continued recognition of our technology's inherent safety design and our potential as a timely, carbon-free energy solution to meet our global community's needs,” Hopkins added.

SENATE REPUBLICANS’ PERMITTING COUNTER PROGRAMMING: Senate Republicans are posing a “test” to their Democratic colleagues to gauge where they fall on reforming federal permitting processes for infrastructure projects, one of Sen. Joe Manchin’s conditions for supporting the new reconciliation deal.

Several Republicans were out this morning marketing Sen. Dan Sullivan’s Congressional Review Act resolution to formally oppose the Council on Environmental Quality’s rollback of Trump NEPA reforms.

The White House issued the final rule in April, which in part directs agencies overseeing environmental reviews to consider the direct, indirect, and cumulative impacts of a given project on the environment, whereas the Trump rule limited the scope to “reasonably foreseeable” impacts.

The Republican members criticized the rule changes, arguing they will slow the permitting and construction of projects of all types, from roads to renewable energy projects and power transmission lines.

Sullivan said the White House is “at war with itself” between its environmental regulations and its support for more project building.

“The president touts as one of his biggest achievements the bipartisan infrastructure bill that a number of us supported last fall, and then they come up with a NEPA rule that undoubtedly will make it harder to deploy the capital to build infrastructure,” Sullivan said.

The infrastructure law included language of its own to reform permitting, including a provision establishing a goal for agencies to complete environmental impact statements within two years and environmental assessments within one year. CEQ’s rule runs counter to those reform provisions, the Republican members said.

On the other hand: The White House maintains that its reforms will lead to faster project completion. When the rule was announced, CEQ Chair Brenda Mallory said it would ensure that projects “get built right the first time.”

A number of projects have been delayed and held up in the courts where judges rule that agencies failed NEPA obligations by failing to sweep widely enough when considering the impacts of a given action.

At the Federal Energy Regulatory Commission, Chairman Richard Glick made note of this fact in March while defending FERC’s decision to more rigorously consider the effects on climate change when contemplating a given gas pipeline infrastructure. Doing so would help avoid time-consuming litigation, he said.

“I think developers of energy infrastructure would agree that when regulatory agencies ignore traditional directives or cut corners, the courts typically vacate the permits and send the agencies back to the drawing board,” Glick told the Senate Energy and Natural Resources Committee at the time. “This often adds a significant amount of time and hundreds of millions, if not billions, of dollars of additional cost onto a project.”

The Manchin deal: Manchin, a major critic of lengthy permitting, put out a list of provisions yesterday that are up for consideration in the permitting deal that is expected to follow votes on the Democrats’ reconciliation deal.

That list includes imposition of a statute of limitations for litigation against projects and a hard, two-year maximum timeline on EIS’s.

The list also contemplates requiring all relevant agencies “to take all necessary actions to permit the construction and operation of the Mountain Valley Pipeline,” a priority of Manchin’s. The pipeline is already largely built and would export natural gas out of Manchin’s state of West Virginia.

The Rundown

Financial Times Why famine in Madagascar is an alarm bell for the planet

Washington Post It’s been a slow start to hurricane season — but it’s still early

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Calendar

THURSDAY | AUGUST 4

10:00 a.m. 538 Dirksen The Senate Banking, Housing, and Urban Affairs Committee will hold a hearing on the economic costs of climate change.