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State Department Issues New Guidance on Overseas Energy Projects

Last week, in a diplomatic cable sent to embassies around the world, the U.S. Department of State issued new guidance on the U.S. government’s (USG) support of overseas energy projects. This cable, entitled “Interim International Energy Engagement Guidance,” prohibits government staff from supporting new “carbon intensive” energy projects that do not meet certain criteria, thus provoking serious implications for U.S. companies’ overseas oil and natural gas projects.  

The 14-page memo defines “carbon intensive” projects with specific numeric emissions thresholds, including an extensive chart outlining the emissions levels of different types of energy technologies.

“‘Carbon-intensive’ international energy engagements are those that advance infrastructure directly related and dedicated to the production, transportation, or consumption of emissions-intensive fuels that would lead to additional greenhouse gas emissions with an emissions intensity above a threshold life cycle value of 250g CO2 / kWh. Carbon-intensive fossil fuels includes coal, oil, and natural gas.”

The cable explains the exemption process U.S. government officials must receive approval on to support to a project that is deemed “carbon intensive.” 

“Posts must seek an exemption before proceeding with new diplomatic support, technical assistance or direct financial support to carbon-intensive physical energy infrastructure if that engagement meets either of the two following criteria:

A) The engagement involves an expenditure of more than $250,000 in USG funds (salaries and staff time are not part of this assessment); or

B) The engagement directly enables new infrastructure that would not otherwise be built. Activities are considered to directly enable new infrastructure if they involve a dedicated effort to promote a specific project that is not part of a competitive tender or process to displace a competitor, and thus would not occur without U.S. government involvement.”

Exemptions may be granted to “carbon intensive” projects if they meet certain national security or energy access standards.  The exemption pathways include:

“Pathway A is related to geostrategic importance of the country or region where the engagement is located and whether the project will advance U.S. national security. Specific questions that must be answered affirmatively for the engagement to qualify for an exemption are:

  • Is the project located in a country of high geostrategic importance, and how is this defined?
  • And, will this project advance U.S. national security interests in a concrete, demonstrable and significant manner?”

“Pathway B is related to the engagements’ significant positive impact on energy access or development in the country or region. In particular, whether the engagement increases energy access to a substantial portion of a country’s population or promotes development. Specific questions that must be answered affirmatively for the engagement to qualify for an exemption are:

  • Does the project support development in International Development Association (IDA) eligible or IDA-blend countries, fragile and conflicted states, or small island developing states and have a significant positive impact on energy access.
  • And, does the project not delay the transition to clean energy or otherwise inhibit achievement of net-zero global emissions by 2050, the country’s decarbonization goals, or objectives of the country’s Paris Agreement commitments?”

The Biden Administration did not formally announce this shift in policy; it was only publicized when media outlets received a leaked copy of the cable, which is causing confusion on how these new protocols will be implemented and enforced. 

The Council is very concerned about the potential implications of this policy and plans to engage with Administration officials at relevant agencies, including the Department of State, for additional explanation on these directives and their effects on our global companies. 

If your company would like to be included in discussions on these new protocols or would like to join the Government Affairs Committee,  please contact SVP Government Affairs & Counsel Tim Tarpley.

Deidre Kohlrus, Director Government Affairs, writes about industry-specific policies for the Energy Workforce & Technology Council. Click here to subscribe to the Council’s newsletter, which highlights sector-specific issues, best practices, Council activities and more.


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