Today’s Key Takeaways: Biden’s newest release of oil from the Strategic Petroleum Reserve is the largest in it’s 45-year history – by a factor of 3.6x. LNG executives cautiously optimistic that the White House is an ally. Global copper industry needs $100 billion investment to build mines to close the gap. Former state Sen. John Coghill, R-North Pole, a constitutional conservative, filed to finish late Don Young’s term in Congress. 4.5 million barrels of Russian oil have gone missing…
President Biden is ordering the release from the Strategic Petroleum Reserve of 1 million barrels per day on average for the next six months, the White House said Thursday.
Why it matters: The historic release size underscores how much Russia’s war is causing havoc in energy markets — and how the White House hopes to limit political fallout from high gas prices.
Driving the news: The release is expected to “shore up global supplies,” per senior administration officials, who also say that it will lower gas prices.
“This record release will provide a historic amount of supply to serve as bridge until the end of the year when domestic production ramps up,” the White House said.
Biden, set to deliver remarks later on Thursday, is also expected to authorize the use of the Defense Production Act to support the production and processing of minerals and materials used for large capacity batteries, including lithium, nickel, cobalt, and graphite.
Biden on Thursday will also urge Congress to charge oil and gas companies if they are sitting on wells that are not producing oil and leases that they are not developing, per the White House.
What they’re saying: “It is hard to overstate the scale of this intervention if it bears out. It would be the largest drawdown volume announced in the 45-year history of the SPR by a factor of 3.6x,” the research firm ClearView Energy Partners said in a note.
Between the lines: Oil prices fell sharply Wednesday night after Bloomberg, Reuters and elsewhere reported on Biden’s expected announcement, with the U.S. benchmark WTI down more than 4% to $104.46 and Brent seeing a similar drop.
What we’re watching: The effect of the plan on the tight oil market, and potential new releases from other nations coordinated through the International Energy Agency.
The impacts are hard to tease out as international efforts to isolate Russia could lead to sharp declines in its exports that exceed the reported daily size of the SPR release.
Goldman Sachs, in a note, said the reported plan would ease, but not resolve, oil’s “structural deficit” and help the market rebalance.
“This would reduce the amount of necessary price-induced demand destruction, the sole oil rebalancing mechanism currently available in a world devoid of inventory buffers and supply elasticity,” Goldman Sachs noted.
“This would remain, however, a release of oil inventories, not a persistent source of supply for coming years.”
Catch up fast: It’s the latest of several Biden administration attempts to try and tame prices via the SPR.
In November, the White House announced 50 million barrels in releases, with another 30 million in early March, alongside 30 million from other nations.
The Energy Department, which manages the reserve, says it holds more than 568 million barrels of oil.
Since Russia invaded Ukraine, many Western oil companies as well as traders, shippers, and bankers have stayed away from Russian oil. But a new report by CNN indicates Russian crude may be seeing a resurgence in demand—in relative secret.
Russian tankers transporting oil and petroleum products have been disappearing from tracking systems. Dark activity, or when a ships’ transponders are turned off for at least a couple of hours, is up 600% compared to before the Ukraine War began, maritime risk management company Windward told CNN.
“We’re seeing a spike in Russian tankers turning off transmissions deliberately to circumvent sanctions,” Windward CEO Ami Daniel said in an interview with CNN, referring to oil import sanctions imposed by the U.S., U.K., and other countries. “The Russian fleet is starting to hide its whereabouts and its exports,” he added.
During the week of Mar. 12, there was 33 occurrences of dark activity by Russian oil tankers, according to Windward A.I. intelligence—a 236% jump from the same week a year ago.
Dark activity is seen by the U.S. government as a deceptive shipping practice used to evade sanctions. International regulation requires ships to always keep their transponders switched on, and the U.S. Treasury Department said in a sanctions advisory note to the maritime industry, energy, and metals sectors in May 2020, that any automatic identification system “manipulation and disruption may indicate potential illicit or sanctionable activities.”
“These vessels want to disappear from radar. From a compliance perspective, it’s a red flag,” Daniel said.
Who is buying the oil?
Energy research firm Rystad Energy estimated that 1.2 million to 1.5 million barrels per day of Russian crude oil exports vanished in the five weeks since the war against Ukraine began.
The destination of the remaining crude exports from Russia is “increasingly unknown,” Rystad Energy wrote in a report this week, estimating in total around 4.5 million barrels of oil have mysteriously gone missing.
Analysts say that refineries in China and India are buying up some of the Russian oil products. According to CNBC, there has been a “significant uptick” in Russian oil deliveries to New Delhi, and China is also being lured by the oil traded at a deep discount.
And while the U.S. and U.K. have both banned the import of Russian oil, the EU, which is far more reliant on Russian energy, has kept up its buying—only planning to slash natural gas imports by two-thirds within the next year, to avoid an energy crisis.
Russian Urals, the benchmark for Russian crude oil, is trading at an alluring $30 a barrel discount to Brent, the European benchmark. But despite the cheap prices, many Western traders have avoided buying Russian oil. “Russia’s oil has effectively become toxic,” one banker previously told the FT.
According to S&P Global, traders said that public perception caused many Western firms to stop buying Russian oil, even at a relative cheap price. Many do not want to be seen as funding the invasion of Ukraine.
“The ships are going dark because they are afraid if they take on Russian business, they will be blacklisted for a period of time and unable to get future business,” Andy Lipow, president of consulting firm Lipow Oil Associates, told CNN.
But as millions of barrels of oil keep going missing, analysts predict the spike in dark activity could be put down Western traders avoiding a PR crisis.
Since President Joe Biden came into office last year, Texas’s fast growing LNG industry has faced an uncertain future in the face of his administration’s historic push to fight climate change.
But Biden’s seeming antipathy toward natural gas appears to be shifting rapidly amid soaring energy prices and a war in Ukraine that threatens to upend global energy security.
After the president and officials from the European Union last week announced plans to expand U.S. LNG exports to Europe over the next eight years — in an effort to reduce reliance on Russian natural gas — LNG executives began to wonder if they might have an ally in the White House after all.
“The signals coming from the administration today are almost a 180 in direction,” said Charlie Riedl, executive director of the Center for Liquefied Natural Gas, a trade group. “We think we’re in a good position.”
Speaking to reporters last week, Jake Sullivan, Biden’s national security adviser, said that while the administration was still focused on transitioning to clean energy, natural gas remained “a substantial part of the energy mix.”
“We want to make sure that the Europeans do not have to source that gas from Russia,” he said.
How long this newfound allegiance will last remains to be seen.
Biden’s announcement Friday has already generated criticism from environmental groups, who argue that it threatens to increase harmful emissions and upend U.S. efforts to fight climate change.
So far, members of the Democratic Party’s environmental wing have held off similar criticism, giving Biden some cover. But it’s unclear how much longer that will last, said Kevin Book, managing director of the consulting firm Clearview Energy Partners.
If peace broke out (in Ukraine) tomorrow would Biden change his tune? If you look at the budget the White House proposed yesterday, it’s very closely aligned with the climate messaging you saw on the campaign trail,” he said. “The administration says they’re on war footing, and there’s few things that focus the mind more than a loss of energy supply.”
In the budget released Monday, Biden proposed ending tax breaks for oil and gas drilling, along with major funding expansions for clean energy.
Last year the United States exported 22 billion cubic meters of LNG to Europe, and now Biden is saying the United States will increase that number to 50 billion cubic meters by 2030.
With gas prices soaring in Europe, the United States is already on track to meet that goal this year, according to analysis by the research firm IHS Markit. Gulf Coast LNG terminals including Cheniere Energy’s Sabine Pass and Venture Global’s Calciseau Pass are already sending more than 70 percent of their LNG to Europe.
But the future of that trend is uncertain. And should European gas prices fall, U.S. gas exports would likely shift to markets in Asia that typically run at a premium to Europe.
“U.S. LNG is its going to be driven by commercial motivations which means price,” said Gautam Sudhakar, a senior director at IHS Markit. “What’s been very clear about the market is it’s extremely unpredictable and we’ve seen an incredible amount of volatility in price.”
The uncertainity of the market presents an opportunity for U.S. LNG developers, who argue that the Biden administration needs to approve more export terminals if they are to meet the president’s 2030 goal.
Currently there are 17 LNG projects awaiting approval by the Federal Energy Regulatory Commission, representing more than 200 billion cubic meters of LNG exports a year, Riedl said.
“There’s going to have to be additional approvals,” he said. “That sends the signal that the U.S. is willing to stand shoulder to shoulder with Europe.”
The other hurdle is Europe, where LNG import facilities are already at capacity. Importing more LNG from the United States and its allies will require the construction of new import terminals and pipelines, something that could be a tough sell politically as Europe seeks to reduce its greenhouse gas emissions.
In their joint statement with the United States Friday, European officials only agreed to increased imports through 2030. But LNG exporters are typically looking for 20-year deals, presenting a potential stumbling block to the signing long-term contracts necessary to build exports terminals that cost billions of dollars to build.
“Europe is saying they want to be off gas in 20 years,” Book said. “LNG developers are going to want something more than through 2030 because the facilities won’t be built for 5 years. America’s got the molecules. What we don’t have is the certainty of long-term contracts.”
The global copper industry needs to spend more than $100 billion to build mines able to close what could be an annual supply deficit of 4.7 million tonnes by 2030, Erik Heimlich, head of base metals supply at CRU said this week.
Speaking at the 2022 CRU World Copper Conference held in Santiago, Chile, the analyst said the supply gap for the next decade is estimated in six million tonnes per year, as the clean power and electric vehicles sectors take off.
It means the world would need to build eight projects the size of BHP’s (ASX: BHP) Escondida in Chile, the world’s largest copper mine, in the next eight years. Such task, Heimlich said, seems questionable “possible” rather than “probable,” given the bigger scale developments required and the fact that about half the projects in the pipeline are greenfield projects.
“Historically, the completion rates of these projects have been low. A large share of the greenfield possible projects in 2012 remain under-developed so there are questions about the ability to respond to the supply gap in an efficient and timely manner,” he said, as reported by Mining Journal.
Some major copper mines have come online in the last three years. First Quatum’s (TSX: FM) Cobre Panama achieved commercial production in September 2019. The asset is estimated to hold 3.1 billion tonnes in proven and probable reserves and at full capacity can produce more than 300,000 tonnes of copper per year.
Anglo American (LON: AAL) mined first ore at its Quellaveco mine, located in the Moquegua region of Peru, in October 2021. The asset is expected to reach commercial production by mid-2022, generating between 120,000 and 160,000 tonnes of copper this year, and 300,000 tonnes annually for the first 10 years at full production.
Pipeline of hopes
While copper projects are in the pipeline, producers are wary of repeating oversupply mistakes of past cycles by speeding up plans at a time when mines are getting a lot trickier and pricier to build.
Prices for the metal have traded around decade highs, though they fell on Wednesday to $10,331 a tonne in London due to concerns over demand in top consumer China, which is grappling with the worst resurgence of covid-19 cases since early 2020.
Bank of America (BofA) Global Research’s latest report backs CRU’s forecast. According to the bank’s analysts, visibility over the near-term copper project pipeline is good, but activity increases will “come with a wrinkle.”
“Many of the projects currently developed have been in the making for almost three decades, and with exploration activity relatively limited in recent years, supply increases may fade from 2025,” the experts said.
A lump of next decade’s new supply will potentially come from the Reko Diq deposit in Pakistan, as Barrick Gold (TSX: ABX) (NYSE: GOLD) reached a deal last week that ended long-running dispute with the country’s government.
Alcantara Group’s Tampakan project in the Philippines is also expected to contribute closing the global supply gap and so is Seabridge Gold’s KSM project in British Columbia, Canada.
Rio Tinto (ASX, LON: RIO) is developing a $6.93 billion underground expansion of the giant Oyu Tolgoi copper-gold mine in Mongolia, which has been plagued by delays and costs overruns. First production has been deferred several times and it is now expected in the first half of 2023.
The market is also following closely what SolGold (TSX, LON: SOLG) is doing with its Alpala copper-gold project at the Cascabel property in Ecuador.
The company has yet to publish a pre-feasibility study (PFS) for the project, but it says that once developed, it would produce an average of 150,000 tonnes of copper, 245,000 ounces of gold and 913,000 ounces of silver in concentrate per year during its 55-year life-of-mine.
The 71-year-old is one of two hopefuls so far from the Fairbanks area as the list of candidates grows. The other local candidate is Bill Hibler, a left-of-center retired professor. The deadline to file for the special primary election for U.S. Representative is 5 p.m. Friday.
Multiple well-known Alaskans are pondering a run, according to media reports.
Republican Nick Begich, whose grandfather preceded Young in Congress, and Democrat Christopher Constant, who belongs to the Anchorage Borough Assembly, plan to run as candidates for the remaining term plus another full two-year term, according to the Associated Press.
The campaign of Al Gross, who was defeated in 2020 after challenging U.S. Sen. Dan Sullivan, R-Alaska, confirmed that he will also seek to replace Young, according to KINY radio.
Coghill is not committed to run for the full term in Congress but rather the remainder of the current term, which ends in January, he said.
Since leaving the Alaska Legislature in 2020 after being defeated in the Republican primary following 22 years of service, Coghill has sold a house, built a house, had two knees replaced and started a new job at the Fairbanks Rescue Mission, he said.
“You feel responsible for what you know, and I know Alaska well,” said the son of a constitutional convention delegate who grew up in Nenana.
Coghill wants to make sure the batch of candidates includes a constitutional conservative with extensive knowledge of Alaska.
“I am going to bet there will be a lot of people like me up there, but if not, I want to be there,” he said.
Hibler was also defeated in a primary election in 2020 after unsuccessfully seeking the Democratic party nomination to challenge Young. He has lived in Alaska for almost 50 years.
The self-identified Bernie Sanders Democrat and professor emeritus ran on climate change saying, “I believe we cannot conserve our way out of climate change; we must science our way out.”
According to the Alaska Division of Elections, the lineup so far also includes Gregg Brelsford, undeclared, of Anchorage; Bob Lyons, Republican, of Houston; J.R. Myers, Libertarian, whose address is listed in Cut Bank, Montana; and Stephen Wright, Republican, of Wasilla.
Today’s Key Takeaways: Biden invoking Defense Production Act to enable more critical minerals to be developed in the U.S. Banks are still funding fossil fuels – $741B in 2021. Gas rationing looms in Germany. Kentucky incentives for bitcoin miners bring mining rigs by the truckload. Alaska political recap.
NEWS OF THE DAY:
From the Washington Examiner, Daily on Energy:
BIDEN TO ACT ON DEFENSE PRODUCTION ACT CALLS: President Joe Biden is preparing to invoke the Defense Production Act to enable production of more critical minerals for EV batteries and other green tech, Bloombergreported this morning. Action could reportedly come as soon as this week.
Lawmakers and interest groups left and right have been pushing Biden to use the DPA in the face of high energy prices, both as a means of deploying more green energy and displacing foreign mineral imports.
Democrats and green groups in particular have asked for Biden to use it to build more renewables and energy efficiency technologies.
“Using the DPA and your other executive powers in this manner won’t just help Ukraine, the rest of Europe, and the U.S. in the short term,” more than 200 environmental and other organizations wrote Biden earlier this month. Doing so will “preempt future crises sparked by oligarchs, strongmen, and the climate emergency, and position the U.S. to be a global leader in the just and renewable energy transition that will leave no worker behind.”
Republican lawmakers have made their own requests, and on mineral production in particular. Sens. Lisa Murkowski, Jim Risch, and Bill Cassidy, joined by Sen. Joe Manchin, told Biden the “time is now” to grow mineral production and asked for the DPA to be used.
Still some lawmakers’ DPA requests have asked for it to be used for enabling more oil and gas production.
OIL:
60 banks provided $741B to fossil companies in 2021 Avery Ellfeldt, Climatewire, March 30, 2022
The world’s largest banks made groundbreaking commitments last year to zero out their contributions to climate change in less than three decades.
But their pledges didn’t stop them from putting more than $741 billion into fossil fuel companies over the course of the year, according to a report released today by a coalition of green groups. That dollar figure flies in the face of the banks’ splashy climate promises and the global fight against rising temperatures, the environmental groups argue.
“2021 was the year of net zero. And while long-term commitments and long-term affirmations of directions of travel are important as far as they go, what we’re seeing in the data is effectively a continuation of business as usual,” said Jason Disterhoft of Rainforest Action Network.
Each year, green groups including Rainforest Action Network, Reclaim Finance, the Sierra Club, and others release a widely cited report that uses data sourced primarily from Bloomberg Finance LP to track the relationship between the banking sector and the fossil fuel industry.
The latest version, dubbed “Banking on Climate Chaos,” found that fossil fuel financing by the world’s 60 largest banks actually dropped by about $8 billion, or 1 percent, in 2021 when compared to the year before. But that didn’t inject optimism into the report’s authors. They pointed to what they described as a small scale of change within the banks, and they concluded that the lending decrease was attributable to the “lagging recovery from the COVID-19 pandemic.”
“Technically speaking, there was a slight drop,” Disterhoft said. But ultimately, he added, “fossil financing was basically flat last year at a time when we need to be ramping way down as quickly as possible.”
The report said fossil fuel financing in 2021 was $33 billion more than in 2016, a year after world leaders adopted the Paris Agreement. In the time since, a growing swath of the global financial sector — and 44 out of the 60 banks included in the report — have said they would eliminate the planet-warming associated with their lending and underwriting portfolios by 2050.
In the run-up to the global climate conference in Glasgow, Scotland, last November, the six largest U.S. investment banks joined a new effort called the Net-Zero Banking Alliance, which aims to streamline finance-sector climate targets. To become members, they signed a letter pledging to eliminate their carbon emissions by 2050, publish their progress annually and set 2030 decarbonization targets (Climatewire, Oct. 27, 2021).
The report also found that the top four fossil fuel financiers since the adoption of the Paris Agreement were U.S.-based banks JPMorgan Chase & Co., Citigroup Inc., Wells Fargo & Co. and Bank of America Corp. Combined with Goldman Sachs Group Inc. and Morgan Stanley, which fell lower on the list, the six Wall Street giants pumped more than $220 billion into the fossil fuel industry in 2021 — nearly a third of all fossil financing derived from global banks.
Disterhoft said those numbers show that “fossil lending and underwriting is first and foremost a U.S. issue,” which he says is “just flatly incompatible with any aspirations the United States has to climate leadership.”
JPMorgan and Wells Fargo were among the banks that provided more money to the industry in 2021 than they did the year prior. JPMorgan, the world’s largest bank, gave the industry more than $61 billion in fossil fuel financing last year, up from roughly $51 billion in 2020, according to the report.
Wells Fargo saw an even larger jump, from $26 billion in 2020 to $46 billion last year. Neither of the two lenders responded to a request for comment.
The report also highlights the lenders’ role in the expansion of fossil fuel production, which, according to the International Energy Agency, is incompatible with achieving net-zero emissions by 2050.
The 60 banks examined in the report provided more than $185 billion in 2021 to 100 companies “doing the most” to expand the fossil fuel sector, the report said.
“This report makes it clear that banks must clean up their act and stop funding the expansion of dirty fossil fuel projects like fracked gas exports, tar sands pipelines and offshore drilling in order to align with what the science demands and what their own commitments require,” said Adele Shraiman, a Sierra Club campaigner.
Kremlin says rouble payments a good idea for other commodities
Kremlin says it will not immediately demand roubles for gas
Economic standoff raises risk of recession in Europe
Germany triggered an emergency plan to manage gas supplies on Wednesday that could see Europe’s largest economy ration power if a standoff over a Russian demand to pay for fuel with roubles disrupts or halts supplies.
Moscow’s insistence on rouble payments for the Russian gas that meets a third of Europe’s annual energy needs has galvanised others in Europe: Greece called an emergency meeting of suppliers, the Dutch government said it would urge consumers to use less gas and the French energy regulator told consumers not to panic. read more
Bitcoin mining rigs have been arriving in Kentucky by the truckload ever since Governor Andy Beshear passed two laws in March 2021 to incentivize bitcoin miners to establish roots in the southeastern state.
Senate Bill 255 extends the commonwealth’s clean energy-based incentives to miners who provide a minimum capital investment of $1 million, while Kentucky House Bill 230 provides miners a number of tax breaks.
In the year since their passage, Kentucky and mining-focused businesses alike have reaped benefits from the legislation. As of October 2021, Kentucky accounted for 18.7% of the United States’ total Bitcoin hash rate, second to 19.9% in New York, according to data from Foundry Digital, a subsidiary of the crypto giant Digital Currency Group.
Bitcoin mining is a decentralized computational process that allows miners to add new blocks of verified bitcoin transactions to the Bitcoin blockchain. Over the years, bitcoin mining has become more competitive and resulted in miners typically needing expensive equipment and low-cost electricity to profit from their efforts. Out of the 21 million total bitcoin supply, about 90% of bitcoin (about 19 million) has been mined in the past 13 years.
Blockware Solutions, a blockchain infrastructure and cryptocurrency mining firm, announced on Tuesday that it opened its flagship mining facility in Belfry, Kentucky, a town with fewer than 500 people right near the West Virginia border.
“It is my hope that a region known for mining coal will now benefit from this different type of mining,” Kentucky State Representative Angie Hatton said in a statement. “I also hope that its significant electricity needs will help stabilize our steep residential rates. It would mean the world if our families could save money while Blockware Solutions is literally creating it.”
Its Kentucky flagship location is comparable to the size of a Costco and is one of Blockware’s three planned sites in the state, Blockware CEO Mason Jappa told TechCrunch.
“In the economy and region, we’re in, the fact that an energy grid exists is awesome, but there aren’t many energy consumers like us in the region, so if we can take down large amounts of energy, we’re adding stability to the grid,” Jappa said.
The data center is repurposing a coal mining site that has been abandoned for decades and will launch with 20 megawatts, which is equivalent to powering a small rural town of 5,000 people annually, he added.
“We found the perfect cocktail of everything we needed: political sustainability, low-cost energy and support in the local economy, as well as it being in an environmentally safe, sound and cool environment,” Jappa said.
Abandoned coal mines aren’t the only locations getting a face-lift. Empty real estate across the country, from steel mills in Illinois to forgotten warehouses in Oklahoma and parts of the Midwest, is being utilized, Nick Hansen, CEO of a Bitcoin hashrate management platform Luxor, told TechCrunch.
Alaska’s political scene has been busy. TheAlaska Supreme Court ruled on redistricting last week, the House plans to take up the budget in a few days — and there’s yet another conflict about mask-wearing on the House floor. Alaska Public Media and KTOO’s Andrew Kitchenman spoke to Alaska Public Media news director Lori Townsend about the latest developments and what happens next.
Andrew Kitchenman: So first, the biggest consequence is that the court upheld Anchorage Superior Court Judge Thomas Matthews’ finding that the redistricting board had violated the state constitution in how it paired a House district that includes most of Eagle River with a House district that includes the south Muldoon neighborhood to make up one Senate district.
On the other hand, the court rejected Matthews’ finding that there was a problem with the House district Skagway was placed in. Skagway had wanted to be in a district with downtown Juneau, but it will be with Juneau’s Mendenhall Valley area instead.
The only other change is that the court found a problem with which district the community of Cantwell was placed in. It basically said that Cantwell should be in the same House district as the rest of the Denali Borough, and not with the Ahtna villages. The court said that the board’s map for Cantwell wasn’t compact and that the board hadn’t justified it adequately.
So now Judge Matthews will have to give the board an order. The board may have to decide how many Senate districts it wants to rearrange to correct for the issue in Eagle River and south Muldoon. If all of Eagle River is kept in the same Senate district and both major pieces of Muldoon are kept in a Senate district, then at least four Senate districts will have to be rearranged.
The upshot of all of this could increase the number of competitive Anchorage Senate seats. Under the original map, both Eagle River Senate districts were heavily Republican.
Lori Townsend: When will we have a clearer idea about those Senate districts?
AK: First, Judge Matthews has to issue that order to the board. The board will have to meet and take action. And at that point, there could be one or more new lawsuits. But if there aren’t more lawsuits, then all of this could be resolved well ahead of the June 1 deadline for candidates to file for the election.
LT: Andrew, given the fact that a number of other Senate districts could be affected, if lawsuits do come and push past the first of June, what would that mean for candidates who want to get into these races?
AK: Based on what’s happened in the past, the Senate would use the map that was current at that time — that is, the time of the lawsuits. And if there has to be changes to the map later, those will go into effect for the next general election in 2024.
LT: What other state political news has happened recently that people should know about?
AK: Another piece of news is the Anchorage Democratic Representative Ivy Spohnholz has tested positive for COVID-19. Certainly not the first legislator to be in this position. The timing is a little awkward because the House majority only has a one-vote majority, and so any time a member is out, that does affect the House floor sessions. She tested positive on Friday, and she’s isolating and expects to be clear to be back on Thursday of this week. Since the House majority doesn’t have any votes to spare, that’s also when the floor debate on the budget is expected to pick up. House Speaker Louise Stutes reinstituted a mask requirement on the floor on Monday, but some members wouldn’t comply, so she ended the floor session. We’ll see what happens on Tuesday.
Today’s Key Takeaways: Oil price windfall for Alaska creates debate over how best to spend the surplus. Good for AKLNG: Natural gas industry and its investors are bullish over Biden’s EU energy plan. Persistent oil demand weakness in March. Young’s house race a gauge of Murkowski’s re-election chances?
Soaring oil prices have been a boon to the state of Alaska.
The increase in revenue has created a debate in the state over how best to spend the unexpected surplus.
“The more money you put in the hands of people, the better they would spend it than the state would.”
Thanks to skyrocketing oil prices, Alaska is reaping billions of U.S. dollars more than expected. As crude oil surged in recent months, the state where oil revenues account for a large part of the budget, general fund revenues, and state revenue from business is now considering the best ways to spend all the windfall from oil. Just before Russia invaded Ukraine and sent oil prices surging, Alaska’s Department of Revenue started developing a monthly revenue outlook for the current and next fiscal years, to ensure that policymakers have the most accurate and up-to-date information when making decisions that impact the fiscal condition of the state.
As of mid-February, oil prices were exceeding the state’s own estimates for revenue made in the autumn of 2021 by around $10 per barrel.
At that time, however, oil prices were still in the mid-$80s to $90 a barrel. A month and a half later, crude is well above $100 per barrel, with spikes to $120 and even $130 on some days.
The soaring oil prices are a boon to the state of Alaska, which relies very much on oil revenues for its budget needs. The price of the Alaska North Slope (ANS) crude spiked from $90.56 at the beginning of February to $114.93 a barrel as of March 24.
The windfall for Alaska’s coffers has created a debate in the state over how best to spend the unexpected surplus revenue, considering the runaway inflation eating into household income and the highly unpredictable nature of oil revenues, which Alaska saw firsthand just two years ago when crude prices plummeted at the onset of the pandemic.
Alaska’s Governor Mike Dunleavy wants as much as possible of the huge oil revenues these days to go to rainy-day savings, to insulate the state budget from future oil price slumps as much as possible. Some Democrats in the Alaska legislature, however, seek to pre-fund school budgets to lock in funding while oil revenues are soaring.
Earlier this month, Governor Dunleavy said that he wants to prioritize the replenishment of the Permanent Fund Dividend (PFD) and provide immediate relief to Alaskans who are facing the highest inflation in 40 years and high fuel costs.
According to the Alaska Department of Revenue’s Spring 2022 Revenue Forecast, unexpected oil revenue to the state has created a projected $3.6 billion increase in the revenue forecast over this year and the next.
“Rising oil prices are benefiting government finances and hurting Alaskans,” Governor Dunleavy said in the middle of March.
“I’m asking the Legislature to help alleviate economic hardship for Alaskans now, by paying every eligible resident a PFD this year of at least $3,700. We must get funds into the hands of Alaskans now when the bills are due, not in a month’s time,” he added.
Alaska sends a check to every resident from the fund’s revenue. The checks that went out last year were $1,114 each.
Deputy Commissioner of Revenue Brian Fechter said: “Due to current market conditions, we are presented with a tremendous opportunity to use this additional revenue to provide relief to Alaskans currently grappling with high inflation all while putting billions into savings to deal with future price volatility.”
“Under the 10-year outlook, we can have surpluses while paying the PFD,” Governor Dunleavy said. “We can also rebuild our savings with these surpluses in the range of $11 billion over ten years, based on a conservative forecast of $70 plus per barrel to 2031.”
Commenting on the unexpected bonanza to Alaska’s finances, Governor Dunleavy told The Wall Street Journal in an interview:
“The more money you put in the hands of people, the better they would spend it than the state would.”
State Rep. Neal Foster, a Democrat, told the Journal that the oil revenue bonanza should be used to fund education in the state for the next school year, but Governor Dunleavy disagrees.
“If you start going down that road, you could future fund everything,” Dunleavy told the WSJ.
Alaska’s governor prefers to provide immediate relief to households and to future-proof the state’s fund in the face of volatile oil prices and high uncertainty over their future course.
Global oil demand has been showing signs of weakness in March and this weakness is expected to persist through April and May due to the impact of high oil prices, the negative effects of sanctions and war in Russia and Ukraine, and the consequences of increasing lockdowns in China.
That’s according to Rystad Energy’s Senior Vice President of Analysis, Claudio Galimberti, who noted that, amid the weakening in oil demand, the supply of oil products remains tight.
“The ICE Gasoil-Brent crack in Europe has been trading around unprecedented levels of $25-30 per barrel for the past couple of weeks, higher than even the memorable gasoil crack spike in 2008,” Galimberti said in a Rystad market note sent to Rigzone late Monday.
“Russia currently exports around 800,000 barrels per day of diesel/gasoil to Europe. As Europe imports between 1.6 to 2.0 million barrels per day of diesel/gasoil, an effective ban on Russia’s oil product exports could increase the gasoil crack further,” Galimberti added.
In the note, Galimberti highlighted that road transport demand has been weakening throughout March. The Rystad analyst outlined that this was driven primarily by OECD countries and less so by China, at least so far, despite news of short-lived, Covid-related lockdowns in some provinces over the past couple of months.
“However, Shanghai’s two-week-long, intermittent lockdown launched on 27 March will be amongst the most significant in China thus far this year, due to the size of the population involved (more than 25 million people), with the potential to lower demand by up to 200,000 barrels per day for the duration of the restrictions,” Galimberti said.
“Shanghai’s lockdown will give us an indication on the success of China’s zero-Covid policy and whether it will be maintained or abandoned,” Galimberti added.
According to the latest data from the World Health Organization (WHO), confirmed Covid-19 cases in China have dropped for the past three consecutive weeks, coming in at 46,962 in the week commencing March 21. Deaths have dropped for the last two consecutive weeks and stood at 1,453 in the week commencing March 21, WHO data showed.
As of March 28, 6.23pm CEST, there have been 480.1 million confirmed cases of Covid-19 globally, with 6.1 million deaths, according to the latest WHO figures. As of March 27, a total of 11 billion vaccine doses had been administered, WHO data showed.
The dust is settling on the new U.S.-European Commission energy plan, so let’s explore some big themes that have emerged since President Biden unveiled it.
Catch up fast: U.S. and European officials on Friday announced new joint efforts to help cut the continent’s reliance on Russian fossil fuels.
One big effort is to boost the already expanding U.S. LNG exports to Europe, with a goal of an additional 50 billion cubic meters annually through at least 2030.
It also vows cooperation to help cut EU gas demand via the faster deployment of heat pumps, smart thermostats, faster renewables additions and more.
Zoom in: Here’s six takeaways on the rollout and its aftermath.
American LNG can help but it’s far from a silver bullet. Russian gas exports to Europe last year were roughly 155 bcm.
It puts a bright spotlight on infrastructure. Reaching the target will require more export and import facilities. Part of the plan calls for faster EU project reviews.
The U.S. export infrastructure ramifications depend on who you ask. The White House, in a statement, tells Axios the 50 bcm target “could be met with already permitted expansions to existing facilities and completing of already permitted and under construction facilities.”
But Europe is only one destination, and Asia has historically been the largest cumulative destination for U.S. LNG, even as more shipments head to Europe now.
“The reality is additional infrastructure currently pending before FERC and DOE will also need to be authorized in order to meet the requirements and also meet existing contractional obligations for the facilities already in operation,” Charlie Riedl, executive director of the Center for Liquefied Natural Gas, an industry group, said via email.
4. Climate activists are worried about the White House’s posture. “Allowing for the expansion of new and expanded gas export facilities would lock in decades of reliance on risky, volatile fossil fuels and spell disaster for our climate and already overburdened Gulf Coast communities,” Kelly Sheehan, the Sierra Club’s director of energy campaigns, said in a statement.
5. Another thing to watch: how it affects battles over U.S. pipelines. Dustin Meyer, the VP of natural gas markets for the American Petroleum Institute, stressed that pipeline capacity is needed to move more onshore gas to export terminals.
“That’s the sort of area where you need clear and consistent permitting. In many ways, it’s just as important as what the clear consistent permitting is for the export facilities themselves,” he said in an interview.
6. The natural gas industry and its investors see bullish signs.The Wall Street Journal reports that the share prices of big U.S. natural gas producers and exporters jumped on Friday in the wake of the news.
How Biden is selling the plan
The weekend showed how the White House is trying to strike a balance between aiding Europe’s fossil fuel needs while arguing that zero-carbon sources are ultimately the best answer.
“Over the long term, as a matter of economic security and national security and for the survivability of the planet, we all need to move as quickly as possible to clean, renewable energy,” Biden said during his speech in Warsaw, Poland, on Saturday.
He said that’s how to ensure that “any nation being subject to the whims of a tyrant for its energy needs are over.”
Freegold Ventures Ltd. reported additional strong gold mineralization from 2021 holes drilled in both the Cleary Vein and Dolphin zones on its Golden Summit exploration project about 25 miles north of Fairbanks, Alaska.
Located about 25 miles north of Fairbanks, Alaska, and adjacent to Kinross Gold Corp.’s Fort Knox Mine, Golden Summit hosts 61.5 million metric tons of indicated resource averaging 0.69 grams per metric ton (1.36 million ounces) gold; and 71.5 million metric tons of inferred resource averaging 0.69 g/t (1.58 million oz) gold.
During 2021, Freegold completed more than 38,000 meters of drilling in 68 holes in the Dolphin intrusive, which hosts this resource and the adjacent Cleary Hill Vein System, which hosts the historic Cleary Hill Mine that produced 281,000 oz of gold from ore averaging 1.3 oz per ton before the operation was shuttered during World War II.
The latest batch of results is from 12 holes drilled in both the Dolphin and Cleary Vein zones.
Highlights from these holes include:
• 10.1 meters averaging 10.7 g/t gold from a depth of 279.2 meters in hole GS2112 (Cleary).
• 54.5 meters averaging 1.46 g/t gold from a depth of 335.9 meters in hole GS2123 (Cleary).
• 221.9 meters averaging 0.95 g/t gold from a depth of 302.1 meters in hole GS2124 (Dolphin).
• 249.5 meters averaging 1.05 g/t gold from a depth of 296 meters in hole GS2128 (Dolphin).
• 99.4 meters averaging 1.45 g/t gold from a depth of 395 meters in hole GS2133 (Dolphin).
• 51.5 meters averaging 2.05 /g t gold from a depth of 477.6 meters in hole GS2144 (Cleary).
Hole GS2123 was collared 25 meters west of GS2017, a 2020 hole that cut 1.7 meters averaging 588 g/t within a 98.2-meter zone averaging 3.07 g/t gold. GS2123 also intersected a broad zone of higher-grade mineralization from 335.9 to 390.4 meters grading 1.46 g/t gold over 54.5 meters which included a high-grade intercept of 17.1 g/t gold over 0.7 meters.
Freegold says the intercept in hole GS2144 continues to demonstrate the broadening of high-grade gold zones at depth in the Cleary zone.
The company also says the 2021 drilling clearly cut intrusive at depth on the Cleary side, further strengthening its interpretation that the Dolphin intrusive may underlie Cleary at depth. It is believed that Cleary may have dropped down along a fault on the east side of Bedrock Creek, potentially further expanding the footprint of the Dolphin intrusive.
Hosted within a structurally complex environment, the interpreted Cleary Vein System is a zone of veins, veinlets, and stockwork zones hosted within the surrounding schist, which is interpreted to be the down-dip extent of the high-grade vein zones found within the historical high-grade Cleary, Colorado, Wackwitz, and Wyoming veins. Together with their broader enveloping stockwork zones, these veins have the potential to significantly expand the existing resource through both increased tonnage and grade.
Assays are pending for 36 holes drilled last year and will be reported over the coming weeks. Once the assays are in, the 2020-2021 drill results will be incorporated into an updated mineral resource estimate for Golden Summit.
As 2021 assays slowly roll in, the roughly 20,000-meter initial phase of the 2022 program continues to further delineate the area to the south of the Cleary Vein Swarm and the area between the Dolphin and the Cleary where previous high-grade intercepts were reported.
Freegold reports that significant veining, quartz breccia, and visible gold has been encountered in an area with no previous drilling south of Cleary.
The election to replace the late Rep. Don Young will put a new person in Alaska’s lone House seat for the first time in nearly half a century. It’ll also test a pioneering new voting system — and the re-election prospects of Sen. Lisa Murkowski.
The general election will be ranked-choice: the candidate with the fewest first-choice votes will be eliminated and their votes reallocated to their voters’ second choices. The process will repeat — with trailing candidates’ votes reallocated to the other candidates — until one wins an outright majority.
Gov. Mike Dunleavy set the special primary for June 11 and the general election for Aug. 16 — the same date as Alaska’s regular primary election.
In one more change, the special election primary will be entirely conducted by mail. The state faces a challenge in recruiting poll workers on such short notice, especially in a state with so many isolated communities, officials said this month.
The candidate who wins Young’s seat, if they want to seek a full congressional term, will have to immediately turn around and run again in the regular election in November.
The special election is viewed as a bellwether for Murkowski because the ranked-choice system is specifically designed to elect consensus candidates rather than party extremists.
Jeff Landfield, the editor-in-chief of the Alaska Landmine, said it would bode well for Murkowski “if a moderate upsets a much more conservative person,” although he cautioned the makeup of the new voting system creates many unknowns.
A spokesperson for Murkowski’s campaign did not respond to a request for comment.
Murkowski, one of the most moderate members of the Republican caucus, is facing a more conservative, Trump-endorsed challenge from Republican Kelly Tshibaka.
She’s the former commissioner of the Alaska Department of Administration.
“In a lot of ways, this will be the best poll we have going into the fall elections,” said Jason Grenn, executive director of Alaskans for Better Elections, a group behind the state’s new election system.
Grenn, a former independent state legislator, said the ranked-choice system encourages politicians to “work across the aisle, to find solutions, to compromise.”
The backstory: Young, the longest-serving member of the House, died March 18.
He was first elected to Congress in 1973 and was known for his brash style.
Because of his lengthy tenure and Alaska’s limited seats in Congress, a backlog has developed that could create a large field in the special election to replace him.
Former Gov. Sarah Palin is among those teasing a run.
State of play: Two major candidates are already in the race to succeed Young: Republican Nick Begich III — the scion of a prominent Democratic political family that includes Young’s predecessor — and Democrat Chris Constant.
Today’s Key Takeaways: What counted as the right thing to do before Russia invaded has suddenly switched. “Since the war, carbon emissions are suddenly much less of a concern, while energy-price-induced poverty is more of a worry.”
The public mood keeps changing, and what counted as the right thing to do before Russia invaded has suddenly switched
Russia’s invasion of Ukraine has upended geopolitics and, for many in the West, provoked moral righteousness. For investors who prided themselves on trying to do the right thing with their money, it has revealed fundamental flaws in the booming business of environmental, social and governance investing, known by the acronym ESG.
Here’s the problem: ESG is trying to gauge the sensitivity of companies to the public mood, either for moral reasons or because the public matter as customers, suppliers, and employees of the companies. But the public mood keeps changing, and what counted as the right thing to do before Russia invaded has suddenly switched.
Before the invasion, the focus of most in ESG was on carbon emissions, with many also excluding defense stocks, especially makers of “controversial” weapons such as nuclear and cluster bombs and land mines.
Since the invasion, Western governments have put their efforts to cut carbon on hold and become major suppliers of weapons to Ukraine, cheered on by their voters. Nuclear deterrence is a topic of conversation again in the face of Russian threats, and it’s not obvious that ESG investors really want to ditch nukes. Yet, what’s the point of refusing to invest in nuclear-weapons suppliers unless you want them to shut down? It’s like eating meat but refusing to finance an abattoir on moral grounds.
This about-face has left ESG investors in a bind. At least one fund manager who had excluded weapons manufacturers on moral grounds has added them back in, and plenty of others are considering whether to change.
“There are a number of discussions with investors who, in light of events with Russia in the Ukraine, are considering how they approach investment towards defense companies,” said Baer Pettit, president and chief operating officer of MSCI, which sells ESG ratings and indexes.
ESG ratings didn’t pick up the risks around Russia. European companies with big operations in Russia before it invaded Ukraine had significantly higher overall ESG scores and human-rights scores than those that stayed away, according to analysis by academics Elizabeth Demers, Jurian Hendrikse, Philip Joos and Baruch Lev.
The ESG score gave no guide to the company response, either. In the first 12 days of the war—before sanctions forced action—lower-rated companies on Refinitiv’s combined ESG score did more to suspend or divest their Russian operations than those with higher ratings.
This isn’t just a temporary problem for ESG caused by Russia. The defects the war exposed run through both the main approaches to investing on supposedly “sustainable” grounds.
Whose morals? The first approach to ESG is to try to do good with your money, and almost every ESG fund tries to imply it does this, at a minimum excluding producers of controversial weapons and the most-polluting forms of coal. Marketing materials are filled with pictures of sunflowers and green fields.
But what counts as acceptable behavior changes rapidly. Russia’s invasion of Ukraine has shown ESG investors what should have been obvious, that a country can’t defend itself without weapons, and that means funding weapon manufacturers. Even nuclear weapons—banned by almost every ESG fund—suddenly seem a lot more attractive as a deterrent against Russia.
Soaring oil and natural-gas prices as a result of Russia’s invasion and sanctions have prompted about-turns from Western governments, too. Just five months after hosting the Glasgow climate summit at which world leaders agreed to phase out fossil-fuel subsidies, the U.K. is cutting taxes on road fuel and trying to shield households from energy costs, while encouraging Gulf states to drill more oil. The U.S. is calling on frackers to pump more, and some European countries want price controls.
Decisions about how much to give up now to prevent global warming in future should be made by society as a whole through governments, not by a bunch of well-meaning rich people. The same goes for whether companies should sell alcohol, cigarettes, or lottery tickets, or supply elected governments with unpleasant weapons.
Which risks? While investors in ESG funds mostly think they are trying to do the right thing, many funds use ESG scores purely to spot risks to the share price. Under this approach, followed by both MSCI and Morningstar’s Sustainalytics, if a company can do bad things without any effect on its stock, it should not lower the ESG score.
“We’re focused on the material environmental and social issues that we think might have a financial impact on the company,” Michael Jantzi, founder of Sustainalytics, said recently. Sustainalytics plans separate “impact” ratings later this year to assess companies on their effect on the environment and social issues, even where they pose no threat to investors.
The approach makes intuitive sense. Investors should try to anticipate policy shifts by governments, since new taxes, regulations and sanctions have huge business impact. They need to pay attention to changing consumer priorities; customers worried about carbon emissions might change eating habits, travel, and shopping behavior. And boycotts of companies that say or do the wrong thing are becoming more common.
But there are two fundamental problems with using ESG scores to spot risks. First, it’s hard to tell in advance which issues will matter to the stock price, and ESG scores move slowly.
Public mood keeps changing, and what counted as the right thing to do before Russia invaded has suddenly switched.
Since the war, carbon emissions are suddenly much less of a concern, while energy-price-induced poverty is more of a worry.Equally, investing in or trading with Russia is widely regarded as a moral outrage, even where it remains legal. Oil major Shell even apologized for buying a cheap shipment of Russian crude, something explicitly excluded from sanctions at the time.
Second, even if the scores perfectly captured nonfinancial risks, it makes no sense simply to buy stocks with higher ESG scores, as ESG index funds do. Risk alone is no basis for investment because it has to be compared with the stock price.
Sure, riskier stocks should have a lower price, and less-risky stocks a higher price. But if the price already reflects all the risks, and more, a dirty and immoral company should be a solid buy on this approach.
At least one ESG fund manager who had excluded weapons manufacturers on moral grounds has added them back in. The site where a shopping mall had been in Kyiv, Ukraine.
Today’s Key Takeaways: Growing demand for oil influences banking view of funding. Russia wants rubles for gas from “unfriendly countries.” Miners welcome new SEC rule? OPEC expresses concern about Russian oil ban. Redistricting winners and losers.
The banking industry, unlike many others, has not been subjected to a lot of shareholder pressure with regard to funding oil and gas industry activities.
Wells Fargo, JPMorgan Chase and RBC Capital markets were some of the biggest funders to the oil industry last year.
A growing thirst for oil and an even faster-growing appetite for affordable energy make energy funding an even more important topic.
Banks have gone from oil industry backers to some of the loudest critics of the industry and the most ambitious target-setters in a few short years. Some of the biggest lenders in the world have joined the Net Zero Banking Alliance and have made pledges to limit their business with oil and gas. Some, however, are fine doing business with the “dirty” pariah industry.
Bloomberg reported this week that Wells Fargo provided $28 billion in funding to oil and gas companies last year. This made the Wall Street major the biggest oil lender for the year, followed by JP Morgan Chase with $27.9 billion in financing for oil and gas projects, and RBC Capital Markets, which provided $20.3 billion to the industry.
All three banks—along with all other lenders to oil and gas—have made net-zero commitments and outlined some specific steps they will be taking to get there. But Wells Fargo was late to the net-zero party. In fact, it took its time before it joined it.
This is quite uncharacteristic in today’s reputation-ruled, social media-vulnerable corporate world. Yet Wells Fargo’s energy team appears quite unconcerned about targets and pledges for one simple reason: the transition that everyone seems to be so enthusiastic about in the banking world is not happening overnight.
“There’s this idea or dynamic that it’s a light switch,” Scott Warrender, head of the energy and power team at Wells Fargo told Bloomberg. The green revolution? “Our view — and in reality — it will play out over a much longer time frame.”
Wells Fargo is by no means alone in this view, judging by the latest data from nonprofit organization Reclaim Finance. The organization says on its website that its purpose for existence is to “publicly expose financial institutions who hinder climate-related regulations, and whose practices violate human rights and destroy the environment.” It also has an oil and gas policy tracker “to detect greenwashing by the finance sector.”
Using this tool and with the help of other transition-focused organizations, Reclaim Finance found that less than half of the 150 banks and other financial institutions that dominate the global financial industry have actually implemented policies that exclude funding for oil and gas projects.
The revelation echoes an earlier one made by ShareAction, another nonprofit organization, which promotes “responsible investment”. According to ShareAction’s data, European banks led by HSBC, Barclays, and BNP Paribas continue to provide financing for oil and gas exploration despite government efforts to reduce economies’ reliance on fossil fuels.
The nonprofit slammed lenders for this behavior, saying that either way, it will end badly for them: “If oil and gas demand decreases in line with 1.5C scenarios, prices will fall and assets will become stranded,” ShareAction senior research manager Xavier Lerin said in February as quoted by the BBC. “On the other hand, if demand does not fall enough to limit global warming to 1.5C, the economy will suffer from severe physical climate impacts.”
Judging by banks’ continued business with oil and gas, the threats listed by Lerin are not exactly top of the agenda. And there is a good reason for this. Despite a much-publicized scientific consensus on climate change and a sense of urgency continuously fed by various organizations and their officials, bankers like Wells Fargo’s energy team seem to be aware of the more immediate realities.
These realities include a growing thirst for oil and an even faster-growing appetite for affordable energy. These are things that need to be responded to right now, and even the International Energy Agency recognized this when it called on OPEC to increase investment in new oil and gas production just months after saying new investment in oil and gas would not be needed because of the net-zero transition.
Noting that global spare oil production capacity was dwindling, the IEA said in its October 2021 Oil Market Report that “Shrinking global spare capacity underscores the need for increased investments to meet demand further down the road.”
Such a statement considerably undermines arguments about stranded assets that the environmentalist lobby is putting forward as a means of spurring shareholders into action to green-up the companies they participate in.
Even with threats about catastrophic climate change effects, it has proven impossible to reduce the world’s need for energy. Since the most readily—and continuously—available energy continues to be that derived from fossil fuels, it is only natural for banks to continue financing its production.
According to the Bloomberg report, the banking industry, unlike many others, has not been subjected to a lot of shareholder pressure with regard to funding oil and gas industry activities. Yet this could change: environmentalists are pushing increasingly harder against banks’ continued business with the oil and gas industry.
Many U.S. oil and gas independents are already struggling with finding the money they need to keep drilling because of some banks’ newfangled aversion to the industry. Large lenders are making pledges that include shrinking their exposure to oil and gas. Just how well this will end remains to be seen.
OPEC officials believe a possible European Union ban on oil from its partner Russia would hurt consumers and the group has conveyed its concerns to Brussels, OPEC sources said.
Major OPEC members, such as Saudi Arabia and the United Arab Emirates, have tried to navigate a neutral course between the West and Moscow, while OPEC+, a grouping that includes Russia, has steered clear of the Ukraine issue in its policy meetings.
The EU, which relies heavily on Russian crude, has already imposed tough sanctions on Russia, including freezing its central bank’s assets. The bloc has been discussing whether and how to put sanctions on Russia’s energy industry.
OPEC officials including Secretary General Mohammad Barkindo met EU Energy Commissioner Kadri Simson on March 16 to discuss the “extraordinary times” for the energy market, Simson said on Twitter.
One of the OPEC sources said the group’s concerns were made clear to the EU. “They are very well informed,” said the source, declining to be identified.
Asked for comment on the March 16 meeting, an EU official said: “OPEC presented their analysis of the oil market situation and informed us of their plans in terms of oil production.”
“As we have consistently said, nothing is off the table in terms of future sanctions,” the EU official said.
OPEC’s headquarters in Vienna did not immediately respond to a request for comment.
European gas prices jumped on Wednesday after Russian President Vladimir Putin said “unfriendly” countries must pay for gas in rubles.
Some European countries, such as the United Kingdom and the Netherlands, saw their wholesale gas prices go up 30 percent, Reuters reported.
The ruble also went up to 97.7 against the dollar, although it is still 22 percent below its value before the war.
These actions occurred after Putin announced gas needed to be paid in rubles in retaliation for the sanctions the West have put on Russia.
“Unfriendly countries” include the U.S., members of the European Union, Britain, Japan, Canada, Norway, Singapore, South Korea, Switzerland and Ukraine.
Putin said these countries have made “illegitimate decisions on the so-called freezing of the Russian assets” and it “made no sense” to give goods and not receive payment in rubles.
Europe gets 40 percent of its natural gas from Russia, while the U.S. has already announced it would be halting imports of Russian oil.
Thousands have died and millions have fled to escape the fighting that began in Ukraine on Feb. 24.
The U.S. on Wednesday said it found Russian troops had committed war crimes in Ukraine as Russian forces have targeted residential buildings and hospitals.
Oil prices have surged to their highest levels since 2008 on supply concerns arising from events in Ukraine, boosting fuel prices for consumers that were already facing higher inflation as economies recover from the COVID-19 pandemic.
Russia is an ally of the Organization of the Petroleum Exporting Countries and co-chairs the OPEC+ group of producers which since 2017 has cooperated on oil supply to support oil markets.
While the United States and Britain have targeted Russian oil, this is a divisive choice for the EU, which relies on Russia for 40% of its gas.
EU foreign ministers disagreed on Monday on whether and how to impose sanctions on Russian energy.
Stopping short of a ban on Russian oil would indicate EU members were “persuaded by their energy realities not their wishes”, the OPEC source said.
Some of the requirements might be challenging for smaller publicly-traded miners to comply with, however.
This week’s proposal by the U.S. Securities and Exchange Commission (SEC) for publicly traded companies to report information on greenhouse-gas emissions and risks related to climate change seem like they could be major challenges for energy-intensive crypto mining firms. However, several in the industry say they’re not that concerned about the potential new rules and even welcome them.
The SEC’s proposal would require publicly traded companies to report greenhouse-gas emissions from their operations and from the energy they consume, and some to obtain independent certification of their estimates. Among crypto-linked companies, digital asset miners would be the most affected by such rules, given their demand for large amounts of energy to run their operations.
“We welcome it,” said Fred Thiel, CEO of Marathon Digital (MARA), one of the largest publicly traded bitcoin mining companies, which aims to make its operations 100% carbon neutral by the end of 2022. “We don’t think as a miner, complying with the reporting requirements is going to be necessarily onerous,” he said, adding that the report would add transparency for Marathon’s “shareholders and to the community that we serve.”
The bill will also highlight the miners that use more renewable energy and help investors decide which companies will fit their environmental, social and governance (ESG) mandate, noted Ethan Vera, co-founder and chief operating officer of crypto mining and data firm Luxor Technologies.
“The latest proposed bill by the SEC for public companies to disclose the amount of emissions that they produce will shed light on the miners that aren’t using renewable energy,” Vera told CoinDesk. “A growing [number] of public investors have strict ESG guidelines that guide their investment decisions and make them prioritize bitcoin miners that fit in that category,” he added.
With the U.S. becoming the digital asset mining capital of the world, after China’s sweeping ban on the crypto sector, the impact of crypto mining on the environment has become a big debate both in the U.S. and around the world. Most recently, the Environmental Conservation Committee of the New York State Assembly voted on Tuesday afternoon to move along a proposed law that would ban so-called proof-of-work (PoW) cryptocurrency mining for two years. Earlier this month, a similar PoW ban narrowly failed to pass in a European Union Parliament committee vote.
These efforts to regulate the mining industry may not have come into effect yet, but it shows that lawmakers around the world and U.S. are taking a hard look at the environmental impact of crypto mining. “The SEC’s agenda isn’t startling, given Gary Gensler’s past statements and the Biden administration’s goal to tackle perceived climate risks,” said Will Foxley, content director at bitcoin mining service provider Compass Mining, as well as co-host of CoinDesk TV’s “The Hash.”
The SEC’s proposal will be open for public comment for at least two months before the agency will begin its work on a final rule. However, if the proposal requires companies to report more detailed emission disclosures, it may be challenging to comply with, said Zach Bradford, CEO of CleanSpark (CLSK), a Nasdaq-listed bitcoin miner that uses renewable energy sources.
Overall, the bill would require firms to disclose their governance of climate-related risk; the material impact, if any, of those risks on a firm’s business, strategy, or outlook; and how these risks might affect its financial statements. Bradford thinks this part will be easily handled by miners.
However, the proposed bill would also require companies to disclose varying levels of information about their own emissions. Scope 1 pertains to direct greenhouse (GHG) emissions that occur from sources that are controlled or owned by an organization – for example emissions associated with fuel combustion in boilers, furnaces and vehicles, according to the Environmental Protection Agency (EPA). Scope 2 emissions are indirect GHG emissions associated with the purchase of electricity, steam, heat, or cooling. Finally, the bill would also require some companies to report Scope 3 details, which include the emission disclosures of its supply chain and customers.
This level of detail might take a long time for miners and other companies to comply with. “I would expect that reporting of level 1 and level 2 emissions in a mandatory fashion will encounter an uphill battle,” Bradford said, adding that complying with them will be “fairly heavy and expensive lift, especially for smaller filers.”
Compass’s Foxley agreed. “The difficulty for miners comes in terms of reporting. More regulation means more paperwork, which increases overhead,” he said. “We’ve seen this story before in other industries: large-capital backed miners will benefit at the expense of smaller players.”
Large companies may not be completely spared either, however, if they are required to include independent assurance of their Scope 3 emission disclosures, Bradford said, noting that “if this portion does pass, I would expect a fairly long adoption period being added to a final rule.”
Either way, Bradford said he expects CleanSpark will not be impacted significantly by the proposed new rules. “At CleanSpark, we are always aiming to be ahead of the regulatory environment so we anticipate a minimal impact to our reporting and operational efforts should any of these rules be adopted,” Bradford said.
Moreover, implementation of this new regulation by the miners will likely incentivize more adoption of renewable energy. “If this ends up raising the cost of capital for carbon-heavy miners, in the absence of any subsidies put in place to counter the effect at local or state levels, it will merely incentivize a shift in hash power away from the most carbon intensive parts of the U.S. and into the more renewables dominated regions,” said Chris Bendiksen, bitcoin research lead for digital asset manager CoinShares.
In fact, a fourth-quarter survey by the Bitcoin Mining Council estimated that bitcoin miners globally are now utilizing a 58.5% mix of sustainable energy for their mining operations, up one percentage point from the third quarter.
The SEC’s proposed new regulation could raise the adoption of more sustainable energy sources for crypto miners even further. “By asking public companies to report their carbon footprint, I think, it only pushes people towards more use of renewable energy, which only helps the deployment of renewable energy and speeds our transition from legacy fuel types to renewables,” Marathon’s Thiel said.
Copper can be recycled over and over again. Learn how companies like @RioTinto are using this to help contribute to the circular economy. https://t.co/MtQ3HHbJWU
