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TENSIONS IN EU PLAN TO DROP RUSSIAN ENERGY: European Union leaders are struggling to form a consensus on the breakup with Russian energy.

The draft embargo put forth by European leaders yesterday calls for the bloc to phase out all Russian crude oil imports within six months, and refined products by the end of 2022.

But unlike the EU’s earlier sanctions package that banned coal imports from Moscow, phasing out Russian oil will be a much heavier lift. The EU imports 25% of its oil from Russia, compared to just 6% of coal.

More members seeking exemptions: News that the EU might exempt Hungary and Slovakia from the oil embargo has touched off requests from other countries in the bloc, who said yesterday that they need more time to secure alternative supplies.

Czech Prime Minister Petr Fiala said the country is also seeking an exemption period for the oil embargo, in an effort to gain time to increase capacity of the TAL pipeline, which runs between Italy and Germany.

"We are ready to support this decision [on the oil embargo], given the Czech Republic will have some postponement until capacity is increased in oil pipelines which can deliver oil to the Czech Republic," Fiala said.

He is slated to discuss the matter with German Chancellor Olaf Scholz today during his visit to Berlin.

And Bulgaria’s deputy prime minister said yesterday that his country will also seek an exemption from the embargo if such opt-outs are allowed, telling financial newspaper Capital that although his country can technically make do without Russian oil, the embargo would drive prices up “significantly.”

"Bulgaria, technologically, can do without Russian crude oil, but that would push up fuel prices significantly," Deputy Prime Minister Assen Vassilev said yesterday. "So, if the European Commission considers exemptions, we would like to take advantage of such exemptions as it will be in the best interest of the Bulgarian consumers, of the Bulgarian hauliers and the Bulgarian people as a whole.”

The country is looking to diversify its energy sources: A new Greece-Bulgaria gas pipeline is slated to open in July, which leaders said earlier this year will allow it to increase LNG imports from alternative suppliers. Bulgaria is also planning to increase gas imports from Azerbaijan.

But in the meantime, the country is feeling the squeeze.

More, on purchases of Russian natural gas, below…read on!

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

MORE ON THE EU AND RUSSIAN NATURAL GAS: EU leaders also have their work cut out to forge a clearer guidance and uniform agreement on Putin’s gas-for-ruble demand, as evidenced both by intra-EU — and in some cases, intra-national — disagreements about whether it violates gas supply agreements, and by the fact that some buyers have already reportedly acquiesced.

It comes down to the nuts and bolts of Putin’s decree, which requires buyers to open special accounts with Russia’s Gazprombank to pay for gas but technically still allows for them to transfer payment denominated in euros.

Interpreting the degree: Scholz and some in the Italian government got out in front of the matter after Putin went public with the demand in March and called it a breach of supply agreements.

Once the decree was put in writing, though, Italian ecology minister Roberto Cingolani expressed that “not a lot will change” (precisely the promise Putin himself had made to Scholz), and he said Putin “could show that the Europeans are paying in roubles and Europe could pay in euros.”

The Italians are now considering opening an account with Gazprombank and are demanding imminent guidance from the EU, Bloomberg reported this morning.

Separately, French ecology minister Barbara Pompili also said in early April of Putin’s decree, “[Since] companies pay in euros, the contracts are respected.”

Even still, Energy Commissioner Kadri Simson was unequivocal this week in calling Putin’s decree “a unilateral change to contracts.” She said “payments in rubles lead to a clear breach of sanctions” but promised further guidance on the issue.

Whatever the next interpretation and round of guidance entail, one source close to the Slovak diplomatic core emphasized that “solidarity, particularly in the gas segment” will be necessary for reducing dependence on Russia and serving the motivations behind Europe’s sanctions regime.

“We support a common approach and a Europe-wide solution to this issue,” the source told Jeremy. He said Slovakia intends to pay its forthcoming bill for gas in euros.

One final note: Scholars with the Oxford Institute for Energy Studies said in an analysis of the payment decree that the context of war and sanctions are “key” to understanding how to interpret it relative to existing supply agreements.

The terms of the decree themselves “could have been understood as a purely technical change to the payment mode” in ordinary circumstances, the analysis said, which could have been “agreed by the parties in negotiations for the sake of a good business relationship.”

It was instead unilaterally imposed by Russia with the promised, and now demonstrated, consequence of shut-offs.

VOLKSWAGEN PROLONGING COAL USE: Volkswagen CEO Herbert Diess said yesterday that his company is prolonging its use of coal-fired boilers due to the threat of Russia abruptly shutting off its gas supplies.

Asked on CNBC about the threat of a possible gas shutoff, Diess said: “That’s actually really a threat … because it’s very hard to predict what’s going to happen.”

“Here in Wolfsburg we still have coal-fired power plants which we wanted to — and we are — converting into gas,” he added. VW had been planning to replace its coal-fired boilers with gas and steam pipes, a move it has since held off on following Russia’s invasion of Ukraine.

“It’s all prepared but now we are a little bit hesitating, and we will look and see how the situation is going to develop,” Diess said yesterday. “We can [adapt] ... to the situation. We can, [for] a little bit, prolong our coal-fired plants — hopefully it’s not for too long. Then we would like to change to gas once the supply is secured.”

UTILITY EXPECTS LONGER LIFE FOR COAL DUE TO SOLAR PROBE: An Indiana utility said yesterday it expects to keep two coal plants online longer than planned and pointed to “uncertainty and delays” relating to its planned rollout of new solar energy capacity because of the Commerce Department’s circumvention inquiry.

NiSource made the announcement in its quarterly earnings report, saying it anticipates that most of its solar projects scheduled for completion this year and next will be delayed by approximately 6 to 18 months.

For that, NiSource now expects to retire two coal units by the end of 2025 rather than by 2023 as had been planned.

It’s possible that the solar industry wields this announcement as a kind of vindication of its campaign against Commerce’s investigation.

Trade groups, especially the Solar Energy Industries Association and American Clean Power Association, have been lobbying Congress and the Biden administration to help bring an end to the probe, and solar executives have spoken plainly that the possibility of new tariffs on Asian solar imports is harming business and interrupting the deployment of renewable energy.

SENATE MOTION DISCOURAGES DECLARATION OF ‘CLIMATE EMERGENCY’: The Senate passed a motion last night designed to pressure Biden against declaring a “climate emergency” as liberal lawmakers asked him to do in March.

The motion directs conferees of the United States Innovation and Competition Act, which would provide funding for semiconductor manufacturing and R&D, to include language in the conference report emphasizing that Biden cannot declare a national emergency on the basis of climate change.

Democrats Mark Kelly and Joe Manchin joined all voting Republicans in supporting the motion.

Environment and Public Works Ranking Member Shelley Moore Capito, who introduced the motion, said on the Senate floor “progressives in Congress” are asking Biden “to claim powers he doesn’t have and make it harder to produce energy domestically and export it abroad.”

Capito and other Senate Republicans introduced the Real Emergencies Act last month with the same goal of preempting a climate emergency declaration.

OPEC PROMISES MORE OIL AMID EMBARGO TALK: OPEC+ approved another 432,000 barrel per day production boost today, but the oil market is still bullish.

Brent crude opened up this morning and is trading in $113-114 per barrel territory, prices not seen since March.

Analysts marked the rise in prices yesterday and today with reference to the EU’s oil embargo plan, suggesting OPEC+’s commitment of additional barrels are not expected to alleviate effects of the prospective embargo in traders’ eyes.

“The oil market has not fully priced in the potential of an EU oil embargo, so higher crude prices are to be expected in the summer months if it's voted into law,” Rystad Energy’s Bjornar Tonhaugen said in a market note yesterday afternoon.

Falling short: Traders also likely have OPEC’s recent performance record in mind.

The cartel added a mere 10,000 barrels per day in April after having approved an additional 400,000 per day of production for the month, Bloomberg reported this week.

The Rundown

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10 a.m. Plymouth, Mass. The Senate Environment and Public Works Committee will hold a field hearing at the Plymouth Town Hall on decommissioning nuclear plants in the U.S.


10 a.m. 406 Dirksen The Senate Environment and Public Works Committee will hold a hearing on oversight of the Council on Environmental Quality.