ConocoPhillips on Willow. CIRI’s “uniquely Alaskan mining opportunity”.

by wp_sysadmin | Aug 31, 2021 | News

NEWS OF THE DAY:

ConocoPhillips: Willow court decision, FID & core Alaska biz
Petroleum News, August 31, 2021, Edition

On Aug. 30, ConocoPhillips released the following statement from its Alaska media office:

“We continue to review U.S. District Judge Sharon Gleason’s decision to vacate the Bureau of Land Management’s approval of the Willow project in order to determine the best course of action for advancing the Willow project. We strongly believe that the BLM and cooperating agencies performed a robust, thorough, and extensive review of the Willow project, but we will again engage with the relevant agencies to address the matters described in the Court’s decision.

“On a parallel path we will continue to perform engineering design work in anticipation of a future final investment decision (FID). However, given the recent Court decision, we do not expect to make the FID decision in 2021 and continue to be clear that we won’t make the FID until the legal risks are resolved.

“We, and many important stakeholders, remain committed to Willow as the next significant North Slope project. The merits of the project represent a strong example of environmentally responsible development that offers extensive public benefits, including significant employment of Alaskan skilled labor from union and non-union trade associations and financial payments to federal, state, borough, and community governments.

“The Willow decision on August 18 has no direct impact on the remainder of the company’s core business in Alaska.”

OIL:

From the Washington Examiner, Daily on Energy:

MOVING QUICKLY ON LEASING OVERHAUL: House Democrats are driving to deliver on President Joe Biden’s calls to reform the federal oil and gas leasing program by raising costs on producers and imposing stricter regulatory requirements.

While we wait for the Interior Department’s delayed report on how it envisions the future of leasing, Democrats on the Natural Resources Committee are providing a blueprint with their portion of the $3.5 trillion reconciliation package released to the public last night.

The committee, which oversees energy production on federal lands, released its reconciliation bill ahead of a markup of the legislation scheduled for Thursday morning.

What’s in the bill: As expected, the sprawling bill contains a suite of provisions long-pursued by the committee’s Democrats led by Chairman Raul Grijalva to raise royalty rates, rental fees, and minimum bid amounts; strengthen bonding requirements on operators — meaning that when a company goes bankrupt, there is more assurance they could foot the bill to reclaim their wells; and assess a new royalty on all extracted methane from oil and gas operations on public lands and waters.

The bill would also end the practice of “uncompetitive leasing” that allows companies to secure leases unsold at auction without paying a bonus bid.

Committee Democrats say together the package of reforms would provide a fairer return to taxpayers and reorient the use of public lands away from fossil fuel production to other practices, such as clean energy development.

The royalty rates that companies pay to the government to drill on public onshore lands haven’t been raised since the 1920s, while minimum bid requirements set at $2 an acre have not been lifted in decades.

The big question: But Republicans and some Democrats from fossil fuel states (see Sen. Joe Manchin of West Virginia) are unlikely to go along with these, and it’s unclear if they will survive when the House and Senate merge their priorities into a final reconciliation product

“All of these reforms are good for West Virginia and are good for every place,” committee Democrat Rep. Jared Huffman of California told me in a phone call last night. “It’s only right these industries should pay their fair share and are beholden to high environmental and public health standards.”

Opponents pursue delay tactic: Committee Republicans and fossil fuel industry groups are arguing the timing is bad for pursuing these reforms.

Republican members led by top Republican Bruce Westerman of Arkansas last night issued a statement calling on the committee’s Democrats to postpone the markup on the reconciliation bill scheduled for Thursday, citing other “crises facing our nation that are unresolved.”

Erik Milito, president of the National Ocean Industries Association, the offshore energy trade group, warned in a statement provided to me that imposing “more restrictive and less competitive” lease terms for oil and gas operators in the Gulf of Mexico would especially harm companies and workers as they recover from Hurricane Ida in Louisiana.

Huffman, however, said he finds these arguments to delay the reconciliation process “less than convincing.”

“There is never a time when this [oil and gas] industry that has had nothing but subsidies and immunity for a century and beyond would ever say is the right time to see these reforms,” Huffman said.

GAS:

Biden suspects “unlawful” oil and gas mergers are behind higher gasoline prices
Justin Sink, David McLaughlin, World Oil, August 31, 2021

The Federal Trade Commission is examining ways to crack down on mergers in the oil and gas industry and investigate whether gas station franchises are driving up gas prices as part of a Biden administration effort to combat higher costs at the pump.

FTC Chair Lina Khan is directing staff to identify new legal theories to challenge retail fuel station deals and investigate possible collusion by national chains to push up prices, she said in an Aug. 25 letter to White House economic adviser Brian Deese obtained by Bloomberg News.

“I will be taking steps to deter unlawful mergers in the oil and gas industry,” Khan said. “Over the last few decades, retail fuel station chains have repeatedly proposed illegal mergers, suggesting that the agency’s approach has not deterred firms from proposing anticompetitive transactions in the first place.”

The FTC is planning to ratchet up investigations into abuses in the retail fuel station franchise market, she added.

“We will need to determine whether the power imbalance favoring large national chains allows them to force their franchisees to sell gasoline at higher prices, benefitting the chain at the expense of the franchisee’s convenience store operations,” Khan said.

One pending deal that could be affected is HollyFrontier Corp.’s agreement to buy Sinclair Oil Corp. The acquisition would give the Dallas-based fuel producer Sinclair’s refineries, a renewable-diesel facility, and a network of over 300 distributors and 1,500 DINO-branded stations across 30 states. Holly Energy Partners LP, the company’s midstream business, will acquire Sinclair’s integrated crude and refined products pipelines and terminal assets.

Khan said the decision to toughen requirements was prompted by “significant consolidation” in the industry during recent years. But the decision also comes as oil prices have become a political liability for President Joe Biden, heightened by fresh concerns that Hurricane Ida could further push up prices at the pump.

The Gulf is home to 16% of U.S. crude production, 2% of its natural gas output, and 48% of the nation’s refining capacity. U.S. gasoline futures rose Monday as Ida disrupted refining. About 2.11 million barrels a day of refining capacity –about 12% of the U.S. total — was being shut or brought to reduced rates at plants along the Mississippi River on Sunday.

Oil was little changed as offshore production platforms may have escaped significant damage and the OPEC+ producers’ cartel is expected on Wednesday to endorse a planned supply increase.

U.S. gasoline prices have climbed 48% since Biden’s inauguration as president, largely due to a rebound in demand following the worst effects of the pandemic.

Khan’s stepped-up approach to gas-station deals comes after the FTC in June approved 7-Eleven Inc.’s purchase of the Speedway retail chain from Marathon Petroleum Corp. after the companies agreed to sell hundreds of store locations. 7-Eleven initially closed the deal without FTC approval, prompting the acting chair at the time to call the acquisition “illegal.” A month later, the commission voted 4-0 to approve the deal. Khan didn’t participate in the vote.

MINING:

Exploring a uniquely Alaskan opportunity
Shane Lasley, North of 60 Mining News, August 27, 2021

A nearly half-a-million-ounce gold deposit sitting on a 7.5-mile trend of obvious yet underexplored mineralization just a few miles from the coast in Southcentral Alaska was hiding in plain sight for more than two decades before HighGold Mining Inc. began unlocking the rich potential of this high-grade gold project in 2019.

Owned by Cook Inlet Regional Inc., more widely known as CIRI, Johnson Tract is one of the many mineral-rich properties identified and selected by Alaska Native corporations following the passage of the Alaska Native Claims Settlement Act in 1971.

By the 1990s, an estimated 1.04 million metric tons of resource averaging 10.05 grams per metric ton gold, 7.63 g/t silver, 8.32% zinc, and 1.13% lead had been outlined in what is now known as the JT deposit at Johnson Tract.

Despite these high grades and the evident potential to grow this resource, weak precious metals prices at the end of the 20th century put a halt to plans to develop a mine at Johnson Tract, and the enticing project faded into obscurity.

Wanting to unlock the gold potential on its land, CIRI went on a search for a mineral exploration company known for not only its geological prowess but also an excellent environmental, social, and governance reputation – a search that eventually led to HighGold.

In the two years since leasing Johnson Tract from CIRI, HighGold has validated the high-grade resource at JT and is beginning to unlock the vast potential across this 20,942-acre project that lies only about six miles west of Cook Inlet and 125 miles southwest of Anchorage.

“Our exploration team’s mandate in 2021 includes both establishing critical mass at the JT deposit and making new discoveries,” said HighGold Mining President and CEO Darwin Green.

Uniquely Alaskan opportunity

With an already well-advanced gold-rich polymetallic project located on highly prospective lands owned by an ANCSA corporation, Johnson Tract offers a uniquely Alaskan opportunity for HighGold, which was spun out of Constantine Metal Resources Ltd. specifically to advance this project. This gold enriched project, however, offers another rare bonus – U.S. Congress and Alaska Legislature guaranteed road access to tidewater.

This assurance of easements for a road and port for delivering metal-rich concentrates produced at a Johnson Tract mine dates back to when CIRI claimed this metal-rich property in 1976.

At about the same time as CIRI selected Johnson Tract, the federal government created the Lake Clark National Park, isolating the gold property.

Relentlessly battling inside and outside of court, early CIRI leaders negotiated the Cook Inlet Land Exchange, one of the largest land swaps in U.S. history.

As part of this exchange, CIRI was granted special rights, ratified by U.S. Congress, and approved by the Alaska Legislature, that ensures transportation and port easements through Lake Clark National Park for the development of the rich mineral potential at Johnson Tract.

“CIRI enabled the creation of the park with an exchange of land originally outlined in ANCSA for the Johnson subsurface and surface rights on the south tract and subsurface rights on the north tract,” CIRI Corporate Affairs Director Ethan Tyler told North of 60 Mining News.

In 1981, Anaconda Mining signed a joint venture agreement with CIRI to evaluate the precious and base metals potential identified across these tracts of land.

Exploration under this JV led to the discovery of the JT deposit in 1982. The discovery hole cut 102.6 meters averaging 10.94 grams per metric ton gold, 8.01% zinc, 0.75% copper, 2.13% lead, and 8.5 g/t silver.

Mining this rich discovery nearly became a reality when Westmin Resources Ltd. optioned Johnson Tract in the 1990s.

Based on 88 holes, mostly drilled by Anaconda, Westmin calculated that Johnson Tract hosted 1.04 million metric tons of resource averaging 10.05 g/t gold, 7.63 g/t silver, 8.32% zinc and 1.13% lead.

Westmin contemplated shipping ore mined from the JT deposit to its then Premier Mine in British Columbia’s famed Golden Triangle. Both properties are near tidewater, which would have made shipping the high-grade ore to the already operating mill on the east side of the Gulf of Alaska fairly inexpensive.

Weak gold prices at the time, however, made the plan infeasible and Westmin’s lease on this highly prospective property expired.

After being lost to obscurity for two decades, Johnson Tract reemerged on the Alaska exploration scene with HighGold’s agreement with CIRI.

HighGold and CIRI have an initial 10-year term for the exploration and other studies needed to advance the gold-rich project to a mine construction decision, followed by a five-year development term, and then a production term that will continue for as long as mining continues.

Minimum exploration expenditure and annual lease payments are required to maintain the lease until production. Considering the large exploration programs already carried out by HighGold, however, the $10 million minimum exploration requirement is now moot.

“We already exceeded that,” said Green.

CIRI maintains certain net smelter return royalties and a back-in right for up to a 25% participating interest in Johnson Tract at the time a decision to develop a mine on the polymetallic gold project is reached.

Larger potential emerges

With a strong partnership with CIRI, a head start on exploration, and an already established camp to work out of, it did not take HighGold long to build momentum and excitement at Johnson tract.

Nine holes drilled by HighGold during 2019 both confirmed and expanded the historical JT deposit.

Based on this and the earlier drilling, an industry-compliant 2.14 million metric tons of indicated resource averaging 6.07 g/t (417,000 oz) gold, 5.8 g/t (397,000 oz) silver, 5.85% (275.3 million pounds) zinc, 0.71% (37.6 million lb) lead, and 0.57% (26.8 million lb) copper; plus 581,000 metric tons of inferred resource averaging 2.05 g/t (38,000 oz) gold, 6.67% (85.5 million lb) zinc, 0.33% (4.2 million lb) lead, and 0.54% (6.9 million lb) copper was established for JT.

This deposit and the wider potential of the Johnson Tract property attracted prominent resource investors such as Franklin Gold Fund, Sprott Asset Management, and Rob McEwen to participate in a C$13.8 million financing that closed in mid-2020. Agnico Eagle Gold Mines Ltd., a senior gold producer that was anonymous at the time, also participated in the financing and maintains a roughly 7% stake in HighGold.

“With the closing of the financing, HighGold has C$23 million in working capital, placing us in a strong position to materially advance our flagship Johnson Tract gold project in Alaska,” Green said at the time. “HighGold now looks forward to putting these funds to work.”

The exploration company did just that, completing 16,418 meters of drilling during the 2020 season, roughly double what the company planned at the beginning of the year.

Unlocking the potential

The 32-hole drill program completed in 2020 focused primarily on resource expansion targets at and around the JT deposit.

Highlights from 2020 drill intercepts on the margins of the JT deposit mineral resource area include:

• 74.1 meters averaging 17.89 g/t gold, 7.1 g/t silver, 0.48% copper, 7.28% zinc, and 1.31% lead in hole JT20-092.

• 75.1 meters averaging 10.01 g/t gold, 6 g/t silver, 0.57% copper, 9.36% zinc, and 1.11% lead in JT20-093.

• 20.1 meters averaging 11.5 g/t gold, 4 g/t silver, 0.5% copper, and 3.1% zinc in JT20-096.

• 22.8 meters averaging 3.2 g/t gold, 4 g/t silver, 0.4% copper, and 6% zinc in JT20-106.

• 58.6 meters averaging 1% copper and 21 g/t silver, including 12 meters averaging 2.8% copper and 51 g/t silver in JT20-110.

• 18.3 meters averaging 5.9% zinc, 64 g/t silver, and 0.1% copper in JT20-121.

While the drills were turning, HighGold geologists carried out a large-scale regional reconnaissance exploration that has identified exciting targets that are being tested with an expansive drill program carried out this year.

This year’s program includes a planned 20,000 meters of drilling that will further test both expansion targets at JT and some of the exciting prospects extending to the north.

The JT deposit area targets include:

• JT Deposit Expansion – Step-out holes along strike and down-plunge from the current resource.

• Revised Fault Offset Target – Which is testing a new interpretation of the JT deposit fault displacement.

• GAP Target – This includes widely-spaced fans of holes to test a poorly drilled area immediately along strike to the northeast of JT deposit.

• Footwall Copper Zone – Step-outs at depth from the copper-rich zone discovered in 2019, where hole JT19-089 cut 20.7 meters averaging 2.4% copper, 4.9% zinc, and 32 g/t silver.

• 2020 VMS Zone – Follow-up on the 7.8 meters at 6.1% zinc, 1.6% lead, 0.2% copper, 0.7 g/t gold, 36 g/t silver encountered in JT20-114, a hole drilled last year.

The Johnson Tract regional prospects being tested this year include:

• DC Prospect –Previously known as Difficult Creek, DC hosts large gossan alteration zones reminiscent of JT deposit, which is about 2.5 miles (four kilometers) to the southwest. These zones include a 500- by 1,000-meter area of silver-rich veins, vein swarms, and siliceous breccias discovered by HighGold geologists last season.

• Milkbone Prospect – Located 400 meters west of the silver-rich vein field, Milkbone is defined by a strong soil anomaly with samples of 70 to 4,390 parts per billion gold that coincide with boulders and subcrop samples that have returned grades as high as 184 g/t gold.

• Kona Prospect – A large-scale alteration zone about 1,000 meters west of Milkbone that is associated with a strong induced polarization geophysical anomaly.

HighGold is roughly 8,000 meters into the planned 20,000-meter drill program testing these targets. Assays are pending from all the drilling completed this year.

POLITICS:

With deadline looming, Alaska lawmakers still disagree over PFD amount (ktoo.org)
Andrew Kitchenman, KTOO, August 30, 2021

Alaska Permanent Fund dividends will be delayed after the Legislature failed to agree on funding in time for the usual early October payments.

The House of Representatives plans to vote Tuesday on a bill that would pay dividends of up to $1,100. The House of Representatives defeated amendments on Monday that would have paid a PFD this year of roughly $2,350 or $3,800.

The state’s Permanent Fund Dividend Division said if dividends were to be paid as normal in the first week of October, lawmakers would have until Tuesday to decide on the amount.  It is not possible for both chambers to pass the funding in time.

If the funding amount is finalized later, dividends would be paid roughly 30 days after that

The two sides of the PFD debate are split over which state law to follow. Most members of the Republican House minority say the state should pay dividends based on the formula of a 1982 law. But the mostly Democratic majority opposes drawing more from the permanent fund than is outlined in a 2018 law.

The state hasn’t paid a dividend that follows the formula since 2015, after oil prices fell. Supporters of the higher PFD amount say recent growth in the permanent fund means the state can afford it. 

But opponents say drawing more than planned would threaten tens of billions of dollars of permanent fund earnings in the long term. They point to the state’s history of spending down savings. 

Lawmakers have been debating the amount of the 2021 PFD for months.

In July, Dunleavy vetoed a $525 PFD, saying it was an insult to Alaskans. 

Earlier this month, he added proposed $2,350 PFDs to the Legislature’s agenda for its third special session of the year.

House members also introduced bills on Monday that are intended to balance the state budget in the long term.

Rep. Geran Tarr, D-Anchorage, introduced bills to raise oil and gas taxes and introduce a 2% statewide sales tax. 

The House Special Committee on Ways and Means introduced a bill to raise revenue by lowering the tax credits oil and gas companies receive. The committee also introduced a bill that would change the formula in state law to pay permanent fund dividends. The PFD would equal 25% of the annual draw from the permanent fund. The current amount of the dividend under the new formula would be roughly $1,200.

The House is scheduled to resume its floor session Monday evening.

CLIMATE CHANGE:

Biden is caught between political worlds on climate change
Ben Geman, Axios, August 31, 2021

These two things both happened Monday: The Health and Human Services Department unveiled its climate office, and the White House promoted efforts to keep gasoline prices in check.

Why it matters: The two moves show how the White House is now operating simultaneously in the old and new world of energy and climate policy.

• On the new front, the new Office of Climate Change and Health Equity shows how the Biden administration is seeking to stitch efforts to address the causes and effects of climate change into agencies government wide.
• But Monday the White House also made public that the Federal Trade Commission is probing (among other things) gas stations mergers to avert potentially anti-competitive behavior that could drive up pump prices.

Our thought bubble: President Biden’s administration is looking to accelerate the transition from fossil fuels, but it’s also not going to abandon what a long string of administrations have viewed as the political imperative to show they want to constrain fuel costs.

Catch up fast: The New York Times reports here on the “first federal program aimed specifically at understanding how planet-warming greenhouse gas emissions from burning fossil fuels also affect human health.”

• “, experts said, more needs to be done to understand how extreme weather affects older people as well as communities of color, where families are more likely to live in areas hardest hit by disasters,” Lisa Friedman reports.

Ida takes 800k barrels offline today. Oil Sector Labor Shortages. PFD Delay?

by wp_sysadmin | Aug 30, 2021 | News

NEWS OF THE DAY:

Louisiana refineries slammed by Hurricane Ida
Argus Media, August 30, 2021

More than 800,000 b/d of US Gulf coast refining capacity is offline today as Hurricane Ida swept ashore in Louisiana.

The storm brought 150mph (240km/h) winds and nine-foot storm surge to areas near New Orleans, coastal Louisiana and stretches of the Mississippi River, home to nearly 1mn b/d of refining capacity, key facilities for offshore oil and gas support work, as well as ports and docks that handle a wide range of other commodities.

Most refinery operators with facilities in the storm’s path said they shut down ahead of its arrival, but the extent of damage and potential re-start times may not be known for several days.

Valero’s 215,000 b/d St Charles, Louisiana, refinery and 135,000 b/d Meraux refinery were both shut as the hurricane made landfall, the company said. ExxonMobil’s 500,000 b/d Baton Rouge facility — located west of where the heaviest winds and rain are expected — also shut “some units and equipment.” Exxon said it continued to meet contractual commitments at the site and that it was maintaining service at the Baton Rouge fuel terminal, servicing fuel distributors throughout southeast Louisiana.

Phillips 66’s 250,000 b/d Alliance refinery in Belle Chasse and Shell’s 225,000 b/d refinery in Norco began shutdown operations on 27 August in preparation for the storm.

Nearly 700,000 customers in Louisiana were without power as evening fell and winds battered power lines, according to local power utility Entergy. Category 4 hurricanes such as Ida can cause power outages that may take up to three weeks to restore, the company said. The company was bringing in workers from other parts of its service region, which stretches from east Texas to Oklahoma, to begin work on lines once the storm passes.

The storm comes as US peak summer gasoline demand begins to wane. US gasoline demand was up by 3pc to 9.6mn b/d on the week ended 23 August and was up 4pc from year-earlier levels. US diesel demand was down by 5pc to 4.1mn b/d in the same week, a 4pc gain from the same time in 2020.

More than 45pc of US refining capacity is located along the Gulf coast.

OIL:

Ex-Fracker at Walmart Reveals One Risk to U.S. Oil Supply Growth
David Wethe, Sheela Tobben, Josyana Joshua, Bloomberg, August 26, 2021

For more than a year, Kristopher Guidry crisscrossed the Texas oil patch, fixing up electrical equipment on drilling rigs. Today, he’s studying to become a home appraiser. Abhinav Mishra was an oil engineer in some of the same fields. In January, he started an internship in Silicon Valley. And Andrew Crum, who ran digital operations for fracking outfits, headed to Kansas City, Missouri, where he joined Walmart Inc.’s supply-chain management team.

All three men say they’ve probably left the industry for good.

After three oil busts in the past seven years alone, they’re fed up with the stomach-churning volatility of it all. The boom years may be wonderful, but the trips to the unemployment line that follow are devastating. Besides, some workers say, the industry is on the decline now as the government and corporate America pivot to a greener future. Who wants to be part of a dying business?

“I would have to be pretty desperate to consider going back,” said Crum, who had followed three earlier generations of his family into the oil fields. 

Of all the labor shortages that are wreaking havoc on the U.S. economy — from cashiers to chefs — few are as thorny or potentially as permanent as the one that has a grip on the oil sector. Thousands of roughnecks and engineers are, like Guidry, Mishra, and Crum, wary of returning to jobs like the ones they lost when the pandemic sent the price of crude oil crashing last year.

It doesn’t help that oil producers, trying to display a newfound financial discipline to their frustrated Wall Street backers, are hesitant to offer the signing bonuses and double-digit pay hikes that have become commonplace in other industries. Average pay in the Permian shale basin of West Texas and New Mexico remains below pre-Covid levels. All of which, analysts say, could add up to a cap on production in the Permian and other shale formations that collectively pump out more than two-thirds of all U.S. oil. Drillers may be promising to avoid rushing back into expansion mode — as part of that same pledge to Wall Street — but the lack of workers frankly gives them no choice.

“If reported labor shortages continue, it would be impossible to grow production,” said Elisabeth Murphy, an analyst at research firm ESAI Energy.

Not What They Used To Be

Oilfield wages in Permian yet to recover from pre-pandemic levels in 2020.

Spending in the oil basins of U.S. and Canada will drop 7% in 2021 from a year earlier, according to Evercore ISI, even though crude prices have surged by more than a third this year to trade above $65 a barrel. That’s after U.S. oilfield service workers lost an estimated $8.7 billion in annual wages to Covid-19, according to the Energy Workforce & Technology Council trade group.

“I am just waiting on better offers at the moment,” said Tremayne Tryels, who has worked in the Permian since oil prices were $100 a barrel in 2014. Though Tryels has held jobs ranging from roustabout — an all-purpose oilfield maintenance worker — to chemical specialist, “most of the salary offers for jobs are way too low for someone that has the experience level I have.”

While oilfield pay is growing at about 3% month-over-month, the median salary for a roustabout remains roughly 10% below pre-Covid levels, according to energy data and consulting firm Enverus.

Canadian rig contractor Precision Drilling Corp. estimates it managed to recruit roughly half of the 1,000 or so former workers on its call-back list, a drop from previous recoveries when it could rehire as many as two-thirds.

“They found jobs that have a more stable lifestyle,” said Kevin Neveu, Precision’s chief executive officer. “I really can’t recall a period where it was this tricky and this challenging to attract people to the industry.”

Chris Wright, CEO of Liberty Oilfield Services Inc., has encountered similar hiring challenges. America’s second-biggest provider of frack work has amassed a larger army of recruiters to fill open posts.

“We laid off about a thousand people last year in April,” he said. “We’ve hired back maybe two-thirds of those people. And I would say the other third have left the industry.”

GAS:

Russian Oil Giant Rosneft Seeks Approval To Export Natural Gas
Tsvetana Paraskova, OilPrice.Com, August 30, 2021

State-controlled Rosneft, the largest oil producer in Russia, has asked Russian President Vladimir Putin to be allowed to export natural gas with giant Gazprom acting as an export agent, Russian newspaper Kommersant reports, citing a letter which Rosneft’s boss has sent to Putin.

Gazprom is the sole exporter of natural gas in Russia.

Rosneft’s chief executive office Igor Sechin wrote a letter to Putin dated August 13, asking the Russian oil producer to be allowed to export 10 billion cubic meters of gas to Europe per year, Kommersant says.

Rosneft proposes to sign an agreement with Gazprom, in which the gas monopoly will act as the export agent for the gas Rosneft plans to ship to Europe, according to Sechin’s letter seen by Kommersant.

Such an agreement would not affect Gazprom’s monopoly in Russian exports, Sechin notes in the letter. Rosneft’s key argument for being allowed to export natural gas is that increased exports will raise the budget revenues for Russia at a time when gas prices in Europe are hitting records due to high demand and insufficient supply, including from Gazprom.

Additional revenues could bring Russia as much as US$502 million (37 billion Russian rubles) annually, Sechin’s letter says, as per Kommersant.

Rosneft did not indicate in the letter which pipeline route the company would use if it was allowed to export gas. However, gas exports from Rosneft could help lift the EU restrictions on Nord Stream 1 and Nord Stream 2 pipelines, according to the letter.

Back in 2017, Rosneft and its 20 percent shareholder BP agreed to cooperate in the gas business, including with delivering gas to Europe.

Meanwhile, a German court ruled last week that the Nord Stream 2 gas pipeline from Russia to Germany would have to obey European Union regulations that separate owners of the pipelines from suppliers of gas, dealing a blow to Russian gas giant Gazprom who had sought to have EU rules waived for the controversial pipeline.  

MINING:

Tesla needs to perform delicate balancing act when it comes to lithium mining – expert
Valentina Ruiz Leotaud, MINING.COM, August 29, 2021

Tesla’s promise to slash battery costs by 50% has led the carmaker to dabble into a whole new field of making its own battery cells and, therefore, looking into manufacturing cathodes and extracting associated raw materials.

But the risks linked to this new line of work mean that Tesla has to perform a delicate balancing act where it tends the increasing demand for electric vehicles and the fact that activists, car buyers, and investors want every step of the process of making an EV to be respectful towards the environment and affected communities. 

“Tesla will need to demonstrate that its new approach to lithium mining does in fact have a lower environmental impact than other methods. Transparency — providing plenty of information in a timely and accurate way — will be critical to winning support,” Robin Bolton, executive head of sustainability at IsoMetrix, told MINING.COM.

After securing access to 10,000 acres of lithium-rich clay deposits in Nevada a year ago, Elon Musk’s company filed this year a new patent for the “selective extraction of lithium from clay minerals.” 

The patent states that extracting lithium from ore using sodium chloride is an environmentally friendlier way to obtain the metal, compared to currently used techniques such as acid leaching. According to Tesla, it also allows for higher recoveries.  

In parallel to these developments, the company signed a five-year raw materials pact with Piedmont Lithium (ASX: PLL), which should start supplying spodumene concentrate sometime between July 2022 and July 2023 from a North Carolina lithium mine and processing facilities under development. Tesla is to transform the chemical into lithium hydroxide – a key building block for EV batteries – at a plant it is building in Texas.

Manage, educate, get buy-in

But all these mining-related developments mean that Tesla needs to manage, educate, and get buy-in from all the stakeholders while broadening the scope of what is considered efficient and environmentally friendly in mining by looking at its entire supply chain.

For Robin Bolton, such a global yet detailed view at each stage of its production process is particularly important taking into account that one mining operation in Nevada – Lithium America’s Thacker Pass project – is already experiencing opposition due to environmental concerns.

“While this is a separate mining operation with a different technology than Tesla is talking about using, it’s important for Tesla to recognize that it faces the same risks,” Bolton said. “All mining operations should take the appropriate measures to ensure transparency from the start and engage communities and stakeholders throughout the process.”

In the executive’s view, the main ESG issues for lithium mines have to do with collecting, managing, and reporting information about environmental impacts. This means that if local communities, environmental action groups, and local legislators are not persuaded that the mining operation is a responsible one, their objections can easily shut down the project.

“Other considerations include community relations: identifying local stakeholders and engaging them in conversation,” Bolton said. “Building a process for providing transparency and accountability. Creating a central management system where data about ESG issues can be stored securely, accessed, and actioned easily is very important. Being willing to listen to and engage with various stakeholder concerns and expectations will also help to build trust.” 

Given that Musk is also securing access to raw materials outside the US – for example, through a deal with the Goro mine in New Caledonia -, Bolton says that it is important that Tesla adapts the details of its ESG strategy to the reality of each area where it has interests. 

“Local communities have different priorities and demographics, and depending on the type of mining being done, they will be affected in different ways. It’s critical for Tesla’s approach to be tailored to the local, regional, and national conditions where each of its mines are located,” IsoMetrix’s head of sustainability said. “ESG software solutions often have seamless integrations with regulatory content databases that will highlight the relevant mining regulations in each applicable region to help companies like Tesla ensure their mines are operating in compliance with local laws.”

For Bolton, however, the best universal strategy to build confidence in any mining operation is to build a process for providing transparency and accountability for internal and external stakeholders, adhering to global international best practices.

POLITICS:

With Alaska’s legislature and governor deadlocked, the 2021 PFD will be delayed
James Brooks, Anchorage Daily News, August 30, 2021

 Two weeks into their third special session of 2021, members of the Alaska Legislature say they do not know when this year’s Permanent Fund dividend will be paid, do not know how much it will be, and don’t know whether they can come up with a formula for future payments.

The dividend is ordinarily paid in October, but that almost certainly will not happen this year.

“If the Legislature would like a traditional October distribution, we will need to know by Aug. 31,” said Genevieve Wojutsik, an employee of the Alaska Department of Revenue, speaking on behalf of the Permanent Fund Dividend division.

It’s virtually impossible for the Legislature to meet that deadline.

Earlier this year, Gov. Mike Dunleavy vetoed a dividend that passed the House and Senate, and though the governor has asked legislators to come up with a replacement, they haven’t been able to do so.

Dunleavy and some legislators even disagree about the size of the vetoed dividend. The governor’s office said at the time that it was $525, but after a subsequent legal ruling, legislative budget officials said it was $1,025.

The 2020 dividend was $992. Right now, there is zero dividend for 2021.

The Alaska House is so divided that it hasn’t held a full meeting since Aug. 20, and the Alaska Senate has been stymied by discord between rank-and-file members and the leaders of its finance committee.

While lawmakers say they are still optimistic about resolving their disagreements, there is a rising chance that this year will be the first year since 1982 without a Permanent Fund dividend.

“It’s a distinct possibility, is what I’ve been saying,” said Speaker of the House Louise Stutes, R-Kodiak.

“It is not the direction that the House majority would like to go,” she said.

How much should be spent from the Permanent Fund?

There isn’t a dividend amount right now because legislators disagree about whether they should spend extra money from the Alaska Permanent Fund.

The Permanent Fund’s investment earnings account for two-thirds of the state’s unrestricted revenue in the current fiscal year. Oil, long the state’s most important revenue source, accounts for only about a quarter, following years of low prices and falling production.

In 2018, lawmakers voted to cap the amount of money that can be spent annually from the Permanent Fund and set up a regular transfer from the fund to the state treasury.

With that transfer, oil taxes and other taxes, Alaska has a small surplus after paying for all budgeted state services. But that doesn’t account for the Permanent Fund dividend.

Members of the predominantly Democratic coalition that controls the state House have proposed spending $400 million of the surplus, plus another $330 million from a state savings account, on a dividend of about $1,100 per person.

Members of the House’s Republican minority previously proposed breaking the 2018 cap in order to pay a larger dividend, as did the governor.

The fund has gained almost 30% in value over the past 12 months and now stands at more than $82 billion.

Members of the majority and some members of the minority disagree. They say those gains must be saved and reinvested, so the state has more money to spend in the future.

Complicating the situation, Dunleavy spokesman Jeff Turner said the governor’s administration believes the House majority’s preferred savings account has been drained and is unavailable for spending.

Members of the House majority said a recent court ruling may imply otherwise, and a lawsuit could be in the offing if the disagreement continues.

In the Senate, top members of the powerful Senate Finance Committee also oppose spending additional money from the Permanent Fund.

Their position matters, because any dividend proposal must be approved by their committee before it receives a vote of the full Senate.

Sen. Bert Stedman, R-Sitka, and the co-chair of the committee, said a larger dividend requires additional revenue to pay for it, and he hasn’t seen a serious revenue proposal to date.

Future dividends also are a factor

In both the House and Senate, the dispute over this year’s amount is entangled with negotiations over a formula that could be used to set dividends in 2023 and beyond.

In May, Dunleavy proposed a new formula that would constitutionally guarantee dividend payments, if voters approve the change in the 2022 general election.

On its own, the formula creates a significant deficit, and lawmakers have been thus far unwilling to advance it. New formulae proposed by individual lawmakers also have not advanced.

An eight-member bipartisan, bicameral legislative working group concluded at the start of this month that the Legislature should work toward a formula similar to the one proposed by the governor, but only under certain conditions.

Sen. Shelley Hughes, R-Palmer, and a member of the working group, said she sees “five components” to the fix: a 2021 dividend amount, some kind of new revenue measures, a change to the state’s existing spending cap, some kind of constitutional amendment on the dividend, and a change to the existing formula in state law.

Senate Minority Leader Tom Begich, D-Anchorage, and Rep. Geran Tarr, D-Anchorage, are planning to introduce new tax legislation with an eye toward satisfying one of the five components.

Begich is proposing to eliminate a corporate income tax exemption that applies to large companies like Hilcorp, he said.

Tarr is planning to propose a statewide sales tax and the reduction of an oil tax credit, which would have the effect of increasing oil taxes.

But because the House has lacked a quorum for more than a week, she hasn’t been able to formally introduce her legislation.

Stedman noted that Democratic-proposed legislation could encounter resistance from Republican lawmakers, but other lawmakers said that if there is true interest in progress on the dividend, that resistance will be minimal.

Legislators on both sides of the political aisle said it would be helpful if Dunleavy introduced a tax bill of his own. Right now, said Hughes, Republicans are at political risk if they support a tax bill but it later fails to pass.

In addition, said fellow working group member Sen. Jesse Kiehl, D-Juneau, it would be a sign that the governor may not veto a particular piece of legislation.

“It builds trust,” he said.

There’s no guarantee that Dunleavy’s support would help matters. Lawmakers previously said that if the governor introduced a bill allowing consideration of a 2021 dividend, it would allow progress on future payments.

So far, that hasn’t happened.

With the special session almost halfway over, lawmakers generally agree that any new formula will not be completed soon.

Some suggest the work can be finished next year when the Legislature convenes in January for its regular session. Others say a fourth special session, sometime later this fall, could be necessary.

CLIMATE CHANGE:

The state of renewables in the first half of 2021, by the numbers (note: 1 megawatt of capacity ≈ electricity consumed by 400 to 900 homes in a year, depending on location):

• 9,915 megawatts of capacity came online in the first half of this year — a 17% increase over the first half of 2020; 
• On a quarterly basis, new solar installations in April-June were 2,226 megawatts of capacity, a 73% jump over the first quarter;
• Q2 wind capacity installations were 2,824 megawatts, similar to Q1 and above the same period last year;
• New battery storage capacity is growing even faster, albeit from a much smaller base, with Q2 installations of 570 megawatts compared to roughly 100 in Q1;
• Total storage added this year so far almost matches 2020’s full-year.  

– A potential market within the circular economy? About 13 million tons of EV lithium-ion batteries will go offline between 2021 and 2030; in the same time frame, about 10.35 million tons of lithium, cobalt, nickel, and manganese will be mined to manufacture new lithium-ion batteries.