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Obama Eyes Diplomacy as Iraq Erupts - Energy Edge Brought to You by Chevron


By Ben Geman (@ben_geman), Clare Foran (@ckmarie) and Jason Plautz (@jason_plautz)

OBAMA EYES OIL DIPLOMACY AS IRAQ ERUPTS. President Obama said Friday that he's prepared to work with Persian Gulf oil producers to pick up "slack" if the upheaval in Iraq disrupts production.


"One of our goals should be to make sure that in cooperation with other countries in the region not only are we creating some sort of backstop in terms of what's happening inside of Iraq, but if there do end up being disruptions inside of Iraq, that some of the other producers in the Gulf are able to pick up the slack. So that will be part of the consultations that will be taking place during the course of this week," Obama said Friday in comments from the South Lawn of the White House on the conflict.

Obama noted there has not been a major disruption in supplies, but acknowledged the threat. "So far at least we have not seen major disruptions in oil supplies. Obviously if, in fact, [Islamic State in Iraq and Syria] was able to obtain control over major output, significant refineries, that could be a source of concern," he said.

The International Energy Agency on Friday "played down fears over the possible loss of oil exports from Iraq," Reuters reports. "Concerning as the latest events in Iraq may be, they might not for now, if the conflict does not spread further, put additional Iraqi oil supplies immediately at risk," IEA said, according to the news service.


National Journal has much more on Obama's wider comments on Iraq here.

UNREST SHAKES OIL MARKETS. Oil prices kept rising Friday to a 10-month high, approaching $107 a barrel amid uncertainty about the region, reports the AP's Pablo Gorondi. But Time's Bryan Walsh writes that's to be expected: "Oil traders do not react well to geopolitical instability, and that goes double when there's an impending civil war in one of the world's biggest producers of crude."

FOREIGN OIL COMPANIES STAND TO GAIN IN IRAQ. Our sister website Quartz drills down into the Iraqi crisis. "An early apparent loser in the Iraq upheaval is Prime Minister Nuri al-Maliki, who seems certain to come out of the fighting substantially weaker. And among the early winners is the autonomous region of Kurdistan that encompasses northern Iraq—Kurdistan and international oil companies that have defied Baghdad to work there now appear to have a clearer shot at exporting their crude," he reports. (Steve LeVine, Quartz)

(LIKELY) HOUSE MAJORITY LEADER-TO-BE: KILL WIND TAX CREDITS. The Wall Street Journal caught up with presumed new House Majority Leader Kevin McCarthy, who said he doesn't support extending the production tax credit for wind-energy projects that lapsed at the end of 2013.


"I've always supported that in the past temporarily," the California Republican told The Journal. "But, look at where they are today. Are they at parity now that they can sustain themselves? I think that they are at this point."

McCarthy also told the Wall Street Journal that while he supports liquefied natural-gas exports, he's not yet ready to advocate for ending a decades-old ban on exporting crude oil. (Amy Harder, Wall Street Journal)

NOT SO FAST . . . National Journal's Tim Alberta reports here on Rep. Raul Labrador's decision to launch an uphill fight against McCarthy in next Thursday's special election to replace Eric Cantor as majority leader.

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THE GREAT OFFSHORE DRILLING BATTLE OF 2017 HAS BEGUN. Get ready for a slow-moving, high-stakes lobbying and political fight over which areas should be open for offshore oil and gas drilling.

The Interior Department, in a new notice, is formally seeking input on the next five-year offshore leasing plan, which will cover 2017-2022. Probably the biggest question is whether the plan developed over the next few years will allow development off the East Coast, where the oil industry says big deposits may lie.

Flashback: The Obama administration, in late March of 2010, announced plans to sell Atlantic Ocean drilling blocs off the coasts of mid-Atlantic and Southeastern states in its 2012-2017 plan. The proposal also envisioned leasing in previously closed regions of the eastern Gulf of Mexico. Three weeks later, the Deepwater Horizon rig that was drilling BP's Macondo well blew up in the Gulf of Mexico, and federal officials scaled back the plan to keep the East Coast off-limits and abandoned the push for expanded eastern Gulf development, too.

OIL INDUSTRY COMES OUT SWINGING. The American Petroleum Institute, a major industry lobbying group, on Friday called for creation of an "expansive" leasing plan that would open the East Coast and eastern Gulf to drilling.

Andy Radford, a senior policy adviser with the group, said that industry and regulators had both made "great strides" in improving safety since the BP catastrophe. "Opening new areas like the Atlantic and eastern Gulf of Mexico would send a signal to the markets and to the world that America's oil and natural-gas renaissance is here to stay," he said.

GREENS DO TOO. "This could be the first step in opening the Atlantic to offshore drilling, industrializing our coasts, and leading to a very real chance of an oil disaster like BP's Deepwater Horizon in many coastal towns along the East Coast that depend on their spectacular beaches and thriving tourism economies," said Claire Douglass, campaign manager with the environmental group Oceana, one of several green groups to weigh in with anti-drilling comments.

HOW SILICON VALLEY SEES OBAMA'S CLIMATE PLAN. The New York Times reports that Silicon Valley is an "X Factor" in the White House carbon-cutting goals.

"Success will depend, many analysts think, on whether the policy will spur entrepreneurs to come up with new technologies and create a clean-energy economy," states a piece in the paper's "Upshot" section that features an interview with high-profile green energy investor Vinod Khosla. (Clare Cain Miller, New York Times)

CAP AND TRADE TO FUND CALIF. HIGH-SPEED TRAINS. A deal between California Gov. Jerry Brown and lawmakers would allow the use of $250 million from the state's cap-and-trade program to pay for a $68 billion rail project, with 25 percent of the carbon reduction funds going to the trains annually in the future. (Jim Miller and David Siders, Sacramento Bee)

IS MEXICO TOO VIOLENT TO FRACK? Bloomberg explains why Mexico faces a huge barrier in trying to replicate the shale oil and gas boom occurring across the border in Texas. "As thousands of troops battle a recent surge of violence by drug traffickers and fuel thieves, lawmakers 450 miles away in Mexico City are preparing rules to allow foreign companies to drill for the first time since 1938. Drilling in Mexico would seem a natural next move for the thousands of wildcatters who have brought a boom to Texas, yet until the violence abates that's not likely to happen," their story states. (Nacha Cattan and Adam Williams, Bloomberg)

AMID BOOM, PAST BUST HAUNTS INDUSTRY. When oil prices plummeted in the 1980s, companies responded with hiring freezes and layoffs, creating a lost generation in the industry. And now as older workers head for the doors, there's a shortage of managers and experienced employees to take their place—right as the industry needs them the most. (Jason Plautz, National Journal)

RAILROADS PUSH BACK ON SAFEGUARDS. Representatives from major railroad carriers, including companies like BNSF, Union Pacific, and CSX, told Office of Management and Budget and Transportation Department officials that tighter safety standards such as slowing train speeds to 30 miles per hour and improved brake technology could lead to major delays on the tracks. DOT has sent a rulemaking aimed at improving crude-by-rail safety to OMB, but has not yet disclosed the details of the rule. (Kathryn Wolfe, Politico)

BAD NEWS FOR CLEAN ENERGY. Republican Governor John Kasich of Ohio signed a bill on Friday that freezes the state's renewable-power and energy-efficiency mandate for two years. Environmentalists were quick to protest the action, saying that a roll back of the policy would make it difficult for the state to meet targets laid out in the EPA's regulation to curb carbon emissions from existing power plants. (Tom Knox, Columbus Business First)

OIL CONTINUES TO WASH UP ON GULF SHORES. Four years after an explosion on a BP-operated Deepwater Horizon drilling rig spewed 210 million gallons of oil into the water, the substance continues to wash ashore of the Gulf of Mexico the form of oil-soaked sand patties. (Marina Koren, National Journal)


WILL THE CLIMATE RULE BE A POLITICAL LIABILITY? The administration is moving forward with regulations to cap carbon emissions from power plants. But where does that leave moderate Democrats facing tough reelection fights?

"In some pockets of the country there continues to be short-term political risk in even discussing climate change. But in the long term, the question is whether candidates seeking national office can build broad support if they continue to avoid an issue that so many voters see as not just an environmental issue, but an issue of risk to our economy and way of life.." —Roger Platt, senior vice president of global policy and law, U.S. Green Building Council


OCEANS CONFERENCE. The State Department hosts the "Our Ocean" conference, which will focus on sustainable fishing, marine pollution, and ocean acidification.

ARCTIC DISCUSSION. The Center for Strategic and International Studies hosts a discussion on the global implications of warming in the Arctic.

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