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TROUBLE FOR OIL PRICE CAP: Cracks are emerging in the G-7 Russian oil price cap plan, as leaders struggle to build out a global coalition and face renewed questions over its implementation and enforcement mechanisms.

These obstacles were on display at this week’s Asia Pacific Petroleum Conference (APPEC) in Singapore, as traders and consultants indicated deep skepticism about an oil price cap.

“We need buy-in from governments, and governments to guide us because it’s a bit of a minefield,” Russell Hardy, the CEO of Vitol, a Dutch energy and commodity company, told reporters.

The chairman of the energy consultancy FGE, Fereidun Fesharaki, labeled the plan “impractical, unnecessary, and a bad idea,” adding that it is unclear how the plan would be implemented: “I cannot, after being in this business for 50 years, work out how to do it,” he said, according to Bloomberg.

That’s because little is known about the price cap plan, including what mechanism leaders will use to enforce it, or the price. (Officials said they hope to make that number as close as possible to the marginal production cost of Russia's oil—though slightly higher, as not to disincentivize production.)

Catherine Wolfram, deputy assistant secretary for climate and energy economics at the U.S. Treasury Department, told reporters in Singapore today that authorities will release “full guidance” on the price cap and its implementation before Dec. 5. That’s when leaders hope to begin enforcing the cap, in tandem with the EU’s ban on Russian seaborne crude, in a bid to maximize impact.

EU leaders struggle to reach unanimity: Fresh off the heels of lengthy negotiations in Brussels this weekend, EU leaders appeared unlikely to include the price cap mechanism in their seventh sanctions package against Russia, diplomats said, the text of which is expected to be finalized this week.

Members remain divided over two key provisions targeting Russian energy exports: the oil price cap plan and sanctions on nuclear energy; a critical source of power for countries such as France and Bulgaria.

Meanwhile, southern members, including Cyprus and Hungary, remain opposed to the price cap. Since all 27 member states must unanimously vote to approve the sanctions, neither provision is expected to make it into the final text of the package.

Bigger picture: Two larger problems that threaten the overall success of the price cap are the lack of global buy-in, and leaders’ decision not to include a secondary sanctions component for any entities that purchase, insure, or finance Russian oil above the capped price— considered by some to be a key enforcement mechanism to ensure the plan has teeth.

Wolfram told reporters today that China and India—which have each benefited heavily from discounted Russian crude—are not expected to formally join the coalition. Instead, she reiterated the administration’s view that many purchasers of Russian crude will be naturally motivated to use G-7 trade services once the price cap takes effect.

That’s because most buyers currently rely on Western service providers, such as maritime insurance companies, for their shipments. Once they cease providing those services, buyers will be forced to purchase Russian insurance or to foot the bill themselves—naturally driving up the cost of doing business with Moscow.

"We don't think secondary sanctions are needed," Wolfram told reporters this morning at the APPEC 2022 conference. "We have all the service providers that are part of the coalition and each country kind of brings in some sanctions.”

"We have talked to some Indian importers who view using Russian insurance as more costly than using UK or Norwegian insurance," Wolfram added.

But not everyone is as optimistic as the Biden administration: Sens. Chris Van Hollen (D-Md.) and Pat Toomey (R-Pa.) released a new framework last week for legislation that would place secondary sanctions on any foreign firms that fail to comply with the capped price—a step they say is necessary to ensure the plan is uniformly applied.

Daniel Vajdich, a top lobbyist for Ukraine in D.C., told Breanne that “asking countries nicely to voluntarily abide by these sorts of things isn't going to work.”

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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MANCHIN MAKING FINAL APPEALS FOR PERMITTING DEAL: Sen. Joe Manchin is trying to rally support behind his permitting reform bill as the Sep. 30 deadline, provided in his deal with Majority Leader Chuck Schumer, closes in.

“We can't build anything in America. It takes five to 10 years. The developed world takes one to three years,” Manchin told Fox News Sunday host Shannon Bream yesterday.

The bill, which he released last week, hasn’t gotten a whole lot of glowing support from either party, as few seem interested in serving his and Schumer’s “side deal.”

Some Senate Democrats have said permitting reform is necessary, although eight members followed some 80 House Democrats late last week to ask Schumer to separate Manchin’s bill from the government funding bill to which the majority leader intends to attach it.

“Changes to the permitting process should strengthen—not steamroll—public participation,” Sen. Jeff Merkley said in a tweet Thursday. Expediting fossil fuel permitting “will further harm the health of frontline communities already overburdened by pollution,” he said.

Merkley, along with Sens. Cory Booker, Elizabeth Warren, Bernie Sanders, Ben Cardin, Tammy Duckworth, Chris Van Hollen, and Ed Markey, has asked Schumer to separate the permitting bill from the government funding bill.

At least one GOP ‘yes': Manchin said earlier this month that “about 20 Republicans” may need to get on board for his measure to pass because of Democratic opposition. Nowhere near that number has come out in favor of the measure, and Republicans’ overwhelming support for reform is leading to speculation about whether the GOP is holding out because they’re mad about the Inflation Reduction Act.

“Shannon, this is not about me,” Manchin said yesterday when asked about distrust from Republicans over his legislative deal with Democrats to back the Inflation Reduction Act. “My Republican friends, I've been working for 12 years with them, and I know their No. 1 item that they've had, the No. 1 priority they've had is permitting reform.”

Republican Sen. Shelley Moore Capito, Manchin’s fellow West Virginian, has backed his proposal, and support for a home-state pipeline looks to be a deciding factor.

“He got the Mountain Valley Pipeline in there,” Capito said, “so, I’m very happy about that.” The bill is very similar to hers, she said, adding that she will support it.

It’s unclear yet how widely support extends among other Republicans.

The vote shakeout is “going to be senator by senator,” one Senate GOP aide told Jeremy.

PETROLEUM EXPORTS HIT NEW RECORD IN FIRST HALF: The U.S. exported a record amount of petroleum products in the first half of the year as high demand and disruptions associated with the war in Ukraine drove tightness in global energy markets.

Exports averaged nearly 6 million barrels per day between January and June, representing an 11% increase in average daily exports compared to the same period last year, according to the Energy Information Administration.

EIA notes that Europe brought in more U.S. propane during the first six months (+ by 51%). But imports of distillate, which is among the products to be subject to the EU’s impending partial Russian petroleum embargo, were down.

“Because these sanctions have not yet gone into effect, we have not seen the expected increase in U.S. exports to Europe, and instead exports to Europe decreased to 71,000 [barrels per day] in the first half of 2022,” EIA said, “while U.S. distillate exports to Latin America increased to more than 1 million b/d.”

Strong exports bode well for industry and politicos who want to strengthen the United States’ position as a reliable and relatively cleaner supplier of oil and gas to the global market.

At the same time, they pose a certain challenge for Biden, who has committed to pursue aggressively a transition away from fossil fuels, while also pledging help in the form of fossil energy exports to European allies who are splitting up with Russian energy.

MCCARTHY AMONG GUESTS TO ADDRESS CLEAN ENERGY FORUM: House Republican Leader Kevin McCarthy is among many members of Congress scheduled to participate in National Clean Energy Week events this week.

McCarthy will deliver remarks at the NCEW Policy Makers Symposium tomorrow at around 10:00 a.m. Other members who will address the symposium, which runs tomorrow through Thursday, include Sens. Bill Cassidy and Kyrsten Sinema, as well as Reps. Sean Casten, John Curtis, and Debbie Dingell (See the program schedule here).

Awards to be given: Citizens for Responsible Energy Solutions, whose president Heather Reams is chair of NCEW, has announced recipients of its annual CRES Clean Energy Champions awards. Sens. Dan Sullivan and Kevin Cramer and Reps. Dan Newhouse and Mariannette Miller-Meeks will be recognized at a reception tomorrow evening for their work on “all-of-the-above” energy legislation this Congress.

RESEARCHERS EXAMINING HOW TO ENSURE WIND-BAT COEXISTENCE: The Biden administration is doling out dollars to fund research into how wind energy developers can ensure that their massive turbines can coexist with bats.

The Department of Energy and its National Renewable Energy Laboratory have awarded a series of grants in the last several months to track bat activity around wind installments in order to inform strategies to mitigate displacement and fatalities.

DOE’s most recent award was given to the Electric Power Resource Institute, which will investigate what kind of environmental conditions, if any at all, are likely to attract bat activity in possible offshore wind areas off the West Coast.

EPRI's team will use the $1.6 million in funding to deploy acoustic bat detectors, designed to capture echolocated frequencies produced by the bats, on different structures up and down the coast to record activity, explained lead researcher Christian Newman.

"As the offshore wind industry starts to get going, trying to get a better understanding of whether, where, and when bats might be going offshore" are the main questions that need answering, Newman said.

The Rundown

Bloomberg Putin’s Ukraine war forces ugly bargains on food and fuel

Financial Times France struggles to overcome its resistance to wind farms

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Calendar

MONDAY | SEPTEMBER 26

The 6th annual, five-day National Clean Energy Week kicks off in Washington, D.C.

TUESDAY | SEPTEMBER 27

2:00 p.m. The Federalist Society for Law and Public Policy Studies will hold a virtual discussion titled, "Sackett v. EPA: How Will the U.S. Supreme Court Define 'Waters of the United States'?" Learn more and register here.

THURSDAY | SEPTEMBER 29

1:30 p.m. 210 Cannon The House Select Climate Crisis Committee will hold a hearing examining the various climate provisions included in the Inflation Reduction Act.