Daily on Energy: Quote of the week, Drill Baby Drill update, and an SPR warning

WHAT’S HAPPENING TODAY: Good afternoon and happy Friday, readers! Fourth of July and America’s 250th celebrations are underway in the nation’s capital this weekend. The Great American State Fair has opened on the National Mall, featuring carnival rides, agricultural showcases, and exhibits from states across the country. Will you check it out the next time you’re in D.C.?

We’re kicking off today’s newsletter with an exclusive on a new report from the Government Accountability Office that warned Congress that the U.S. emergency oil reserves are at risk of operational failure, largely due to aging infrastructure. Keep reading for all the details.

Plus, we have the latest on the drone attacks on ships passing through the Strait of Hormuz, which the president said violates the U.S.-Iran ceasefire. Traders don’t appear too worried about escalation in the region, however, as domestic oil prices fell below $70 a barrel this afternoon. Read below for more.

Welcome to Daily on Energy, written by Washington Examiner energy and environment writers Callie Patteson (@CalliePatteson) and Maydeen Merino (@MaydeenMerino). Email cpatteson@washingtonexaminer dot com or mmerino@washingtonexaminer dot com 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.

QUOTE OF THE WEEK: Earlier this week, American Petroleum Institute CEO and president Mike Sommers indicated that there is interest from the industry in expanding the country’s Strategic Petroleum Reserve, and even building new facilities on the West Coast to store more emergency oil reserves.

“There are a lot of improvements that we can do from an engineering perspective,” Sommers said on Monday. “We should be thinking about whether the SPR is located in the right place, and whether we should be looking at other places as well…I think we should be looking at the entire West Coast. We should be looking at improving the infrastructure that we currently have in the, in the Gulf Coast, as well. And the East Coast should be a potential post that we should be considering.”

EXCLUSIVE, U.S. CRUDE INVENTORIES FACE OPERATIONAL FAILURE, WATCHDOG WARNS: The Government Accountability Office has found that the United States’ emergency stockpile of crude oil is facing significant risks to its ability to operate and meet future energy crises, according to a new report authored by the government watchdog obtained by Callie.

The report, which details the results of a performance audit of the Strategic Petroleum Reserve conducted between February 2024 and May 2026, was sent to the House Energy and Commerce Committee this week.

As the SPR is experiencing record lows (around 331.2 million barrels as of Monday) the GAO warned that the reserves’ operational capacity faces serious risks if significant changes are not made to upgrade out-of-date infrastructure, address inadequate maintenance of the reserves, and plan for future refills.

The big takeaway: In 2014, the Department of Energy first identified that a large portion of the SPR’s infrastructure had reached or exceeded its design life and needed to be replaced. By late 2016, the agency approved a $1.4 billion life-extension project expected to be completed between 2022 and 2024.

However, as of May of this year, the project had far exceeded its approved cost and schedule, forcing the agency to reduce its scope of repairs. Potential upgrades and repairs at one facility, West Hackberry in Louisiana, were removed from the project completely.

The watchdog said DOE officials have said SPR infrastructure is being held together with “Band-Aids” and officials aren’t sure “how long they will hold.” This includes not only pipelines and brine-disposal systems but also fire-suppression systems.

Read more from Callie on the report and what the GAO is urging the executive and Congress to do here.

TRUMP SAYS IRAN VIOLATED CEASEFIRE: President Donald Trump said that Iran violated the ceasefire by launching drone attacks at ships in the Strait of Hormuz.

A U.S. official said that the Islamic Revolutionary Guard Corps had “struck” a cargo ship “with a drone” yesterday. The attack on the vessel prompted the International Maritime Organization to halt its evacuation operations in the waterways.

Trump wrote on Truth Social that one of the drones hit an upper deck of a large cargo ship, adding that damage was done but the ship was able to proceed on its way. He noted that the U.S. was able to take down three other drones.

The attack on the ship highlights the fragility of the U.S. and Iran’s interim peace deal. Safety has been a major concern for those in the shipping and maritime industry, due to the threat of attacks and mines.

Read more by Washington Examiner’s Naomi Lim here.

LATEST ON OIL PRICES: Despite the drone strike on ships traversing the strait, oil continued to fall today, with domestic benchmarks even falling below $70 a barrel this afternoon.

Just before 3 p.m. EDT today, Brent crude had dropped by 4.42%, selling at $71.93 a barrel. West Texas Intermediate also fell by 3.77% and was priced at $69.21 a barrel.

There is more confidence among analysts that traffic levels will increase. Capital Economics estimates that half of the Gulf region’s shut-in production will be back online within the next month, with production hitting pre-war levels sometime in the fourth quarter of this year, according to the Wall Street Journal.

PLUS, A DRILL, BABY, DRILL UPDATE: This week, domestic oil and gas producers saw the most rigs added to the total U.S. drilling rig count in four years.

Data released by Baker Hughes this afternoon found that the total oil and gas rig count rose by 10 for the week ending today. This brings the total number of active rigs to 573, the highest since May of last year.

This week’s increase also puts the total rig count at about 26 more rigs than this time last year.

Broken down further, the number of oil rigs grew by seven, while the number of gas rigs increased by three.

DOE SAYS 2024 BUILDING CODES COULD INCREASE HOUSING CONSTRUCTION COSTS: The Department of Energy released a new analysis finding that the adoption of the 2024 International Energy Conservation Code would increase costs for building houses.

Specifically, DOE said the codes would increase residential construction costs by more than $9.2 billion annually compared to the 2006 code levels.

The Energy Conservation and Production Act requires DOE to consider new energy efficiency codes published by IECC and to update federal building codes if needed. States could also adopt or use some variation of the codes.

DOE said if states choose to update their energy codes to the 2024 IECC, construction costs increase as much as $14,000 for a single-family home.

CHEVRON CONSIDERING MORE DEALS TO POWER DATA CENTERS: Just days after striking an agreement with Microsoft to power one of its massive data centers for 20 years, Chevron is considering similar deals in the Midwest, Rockies, and Gulf Coast, according to Reuters.

Jeff Gustavson, president of new energies at Chevron, told the outlet that not only is the oil major considering other deals with Microsoft, but with other tech firms as well.

“If we can put the right pieces together to meet our return thresholds, you can see more announcements over time,” he said.

In addition to the regions mentioned above, Chevron sees potential in West Texas and Utah. These deals could result in the use of natural gas or hydrogen to power projects.

FEDERAL COURT REJECTS EPA BID TO WITHDRAW BIDEN COAL-FIRED POWER PLANTS RULE: A federal court rejected the Environmental Protection Agency’s bid to overturn a Biden administration rule on soot pollution from power plants, Reuters reports.

The EPA last year asked a federal court to overturn a Biden rule limiting soot pollution, also known as fine particulate matter, to 9 micrograms per cubic meter from power plants. Fine particulate matter has been associated with health risks, including premature deaths and heart attacks.

However, the Trump EPA argued that the Biden administration failed to consider the cost while setting the rule. The agency requested to restore the standards to the Obama administration’s standards of 12 micrograms per cubic meter.

“After initially defending the new rule, the EPA ​now moves to vacate the rule on the grounds that it exceeded its statutory authority and acted unreasonably by failing to consider costs. Because these arguments lack merit, we ​deny the petitions for review and the motion for vacatur,” the ​ruling said.

JUDGE DECLARES MISTRIAL ON PALISADES FIRE CASE: A federal judge in Los Angeles declared a mistrial after jurors deadlocked in the case against Jonathan Rinderknecht, who was accused of starting the Palisades Fire.

U.S. District Judge Anne Hwang declared a mistrial because the jury was deadlocked, with 10 jurors set to enter a not-guilty verdict for Rinderknecht, while the other two were set to convict him. Prosecutors plan to retry the case.

As a reminder, Rinderknecht was accused of starting the most destructive fires in the state’s history, burning more than 23,000 acres. He pleaded not guilty to three federal arson-related charges.

Read more by Washington Examiner’s Kalean Deese here.

EUROPEAN UNION WON’T RECONSIDER METHANE RULES, AS OVER A DOZEN COUNTRIES PUSH TO DELAY: Energy ministers from 27 members countries of the European Union met in Luxembourg today, where they discussed a proposal to delay the bloc’s strict methane emission reporting regulations.

The Trump administration has repeatedly lambasted the climate-related rules set to take effect next year, which will require foreign producers to comply with methane monitoring and reporting rules equivalent to those in Europe. U.S. officials claim it will limit their ability to export oil and gas to Europe, calling the rules “regulatory overreach.” The administration has even threatened to send gas elsewhere if the rules go into effect as written.

In the wake of the energy crisis caused by the war in Iran, more than a dozen EU countries are now on board with delaying the implementation of the rule. Andrew Puzder, the U.S. ambassador to the EU, revealed today that 17 member states showed support in today’s meeting for delaying the methane rules by three years.

This includes Germany, Italy, Poland, and the Netherlands.

“Reducing methane emissions and ensuring affordable, secure energy should go hand in hand,” Puzder said. “The regulation’s objectives are widely shared but the implementation timeline needs to be workable.”

EU leaders, however, appear less inclined to alter the rules.

During a press conference this afternoon, EU energy commissioner Dan Jørgensen told reporters that while he was working on recommendations regarding implementation for member states, he is firm in not reopening the legislation.

“We think the legislation is extremely important for our clean transition in Europe and we work on the basis of creating a level playing field where everybody has to fulfill their role obviously,” he said, adding, “We are taking concerns on implementation into our analysis and I will be putting forward recommendations quite soon.”

CRES PRESIDENT AND CEO STEPS DOWN: Citizens for Responsible Energy Solutions president and CEO Heather Reams left the organization yesterday after nearly a decade.

CRES is an organization focused on working with Republicans on clean energy issues. Reams joined CRES in 2016 as managing director and became executive director in 2019. She supported Republican lawmakers who embraced an “all of the above” approach to energy policy.

During her time at the group, she launched several initiatives and events, including National Clean Energy Week, CRES Academy, CRES Energy Leadership Summit, CRES Clean Energy Champions, and C6WC.

“Over the past decade, it’s been immensely rewarding to have built a first-of-a-kind conservative energy advocacy organization that is respected inside and outside of the Beltway,” Reams said in a statement.

The board at CRES plans to begin an executive search process and noted that operations would be led by board chair and founder James Dozier.

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