Today’s Key Takeaways: Russian and Chinese warplanes intercepted on AK coast. Oil market rollercoaster. The case for foreign investment in U.S. LNG. $10m to advance the Pebble project. Ranked choice voting repeal survives legal challenges in AK.
Flights reflect growing military and security cooperation between Moscow and Beijing
Russian and Chinese warplanes were intercepted off the coast of Alaska by U.S. and Canadian fighters Wednesday, marking the first time strategic bombers from the two U.S. adversaries have operated together near North America, a U.S. official said.
Two Russian TU-95 Bear and two Chinese H-6 bombers flew into the Alaska Air Defense Identification Zone, a buffer zone in international airspace, the North American Aerospace Defense Command said. The flights, which came as close as 200 miles off the Alaskan coast, were the most recent sign of growing military and security cooperation between Moscow and Beijing.
“It’s the first time that we’ve seen these two countries fly together like that [but] they didn’t enter our airspace,” Defense Secretary Lloyd Austin told reporters at a press conference Thursday.
The Russian and Chinese bombers all took off from a Russian air base, a development first reported by Air & Space Forces Magazine and confirmed by a second U.S. official.
Norad, a joint U.S. and Canadian command that protects against air threats to North America, said the Russian and Chinese planes didn’t enter U.S. or Canadian airspace and weren’t seen as a military threat.
The U.S. closely monitored and intercepted the aircraft, Austin said.
The Russian and Chinese planes were intercepted by U.S. F-16s and F-35s as well as Canadian CF-18s. “Norad will continue to monitor competitor activity near North America and meet presence with presence,” the command said.
The Pentagon chief said he is concerned about the evolving relationship between the two countries because Beijing is “providing support to Russia’s illegal and unnecessary war in Ukraine.”
In August last year, a combined Russian and Chinese naval force patrolled near the coast of Alaska in what experts said was the largest such flotilla to approach American shores.
Eleven Russian and Chinese ships steamed close to the Aleutian Islands. The ships, which were shadowed by U.S. destroyers and P-8 Poseidon aircraft, never entered U.S. territorial waters.
Oil Market Rollercoaster: A Week of Twists and Turns
The crude oil market experienced a turbulent week, with prices oscillating as traders weighed economic data, global events, and supply-demand shifts. The week began cautiously, saw a mid-week upturn, and then faced renewed pressure as various factors came into play. Despite the volatility, a key development emerged: traders demonstrated respect for technical support levels, particularly as positive U.S. economic news surfaced. This interplay of technical and fundamental factors allowed light crude oil to recoup most of its weekly losses, highlighting the market’s resilience and the importance of key price levels in shaping trading decisions.
U.S. Inventory Surprise: A Glimmer of Hope
The most positive factor of the week came from U.S. inventory data. The Energy Information Administration (EIA) reported a big decrease in crude and fuel stocks. Crude inventories fell by 3.7 million barrels, more than experts expected. Gasoline and distillate stockpiles also dropped significantly. This data showed strong U.S. oil demand, which usually pushes prices up. However, the market didn’t react much to this good news, showing that other factors were affecting traders’ decisions.
The China Conundrum: Demand Worries Persist
Ongoing concerns about weak oil demand from China, the world’s largest crude importer, continued to affect the market. China’s oil imports and refinery activity have been lower in 2024…
Woodside’s acquisition of Tellurian highlights the appeal of exporting American natural gas.
Australia’s Woodside Energy Group Ltd. made a bold leap into US liquefied natural gas with its agreement to acquire Tellurian Inc. for $900 million in cash.
Tellurian owns Driftwood, a proposed multibillion-dollar LNG export terminal in Louisiana. The takeover could make Woodside the second foreign entity to control such a facility after QatarEnergy, which holds a majority stake in the Golden Pass project.
Japanese electricity generator Jera Co. and French energy giant TotalEnergies SE hold minority stakes in other US sites.
The trend toward foreign investments is likely to continue as Woodside looks for partners to help it bear the cost of Driftwood. Saudi Aramco could be among those it courts as the petrostate looks to expand internationally.
Abu Dhabi’s state oil company and Woodside’s existing Japanese LNG buyers also may be contenders, said Saul Kavonic, an analyst at MST Financial Services Pty.
The primary attractions of US LNG are the flexibility to ship to either Asia or Europe, and its cheapness compared with prices in those regions. Despite the market volatility, the arbitrage opportunities can make a huge investment in American export capacity worthwhile.
Northern Dynasty receives final installment of second $12M tranche, supporting advancement of the Pebble project amidst legal challenges.
Northern Dynasty Minerals Ltd. July 25 announced the receipt of a remaining $10 million payment, completing the second tranche of a $60 million royalty agreement to support the advancement of the Pebble project in Southwest Alaska.
Toward the end of July 2022, Northern Dynasty was pleasantly surprised by a $60 million investment from an unnamed royalty investor.
Under the terms of the agreement, this investment was structured in five tranches, beginning with an initial $12 million payment that granted the investor rights to 2% of the payable gold and 6% of the payable silver, contingent on the mine reaching production status.
This royalty is calculated after accounting for a notional payment from the investor of $1,500 per ounce of gold and $10 per oz of silver, respectively, for the life of the mine.
The second $12 million tranche, completed in six equal installments of $2 million each, increased the royalty holder’s entitlement by approximately 0.33% of the payable gold and 1% of the payable silver per installment.
With the final installment received, the investor’s rights now total 4% of the payable gold and 12% of the payable silver from Pebble.
The Pebble Mine advanced to the final step of the permitting process, would produce 320 million pounds of copper; 363,000 oz of gold; 15 million lb of molybdenum; 1.8 million oz of silver; and 26,000 lb of rhenium annually over the first 20 years of mining.
Given that a recent preliminary economic assessment indicates the Pebble deposit can support a mine of this scale for nearly a century, the potential royalties could be substantial.
“We are pleased that the investor has completed the second of five $12 million tranches,” said Northern Dynasty President and CEO Ron Thiessen. “As a result, the expiration date has been extended for one year, by which time we could receive the additional $36 million investment from the remaining three tranches contemplated in the original royalty agreement.”
Securing this crucial financing will certainly enable the company to continue navigating the significant legal and regulatory challenges it is currently facing.
Alaska voters are slated to have an opportunity this year to affirm or repeal the state’s use of ranked choice voting, Division of Elections officials confirmed on Wednesday.
The news comes after Superior Court Judge Christina Rankin disqualified some of the signatures gathered by a repeal effort on Friday because the gathering process was not carried out in accordance with state law.
Whether there would be enough total signatures was not in question, but rather whether there would be enough to meet the requirement for a certain number of signatures from at least 30 of 40 state House districts.
Former Alaska Attorney General Kevin Clarkson represented repeal supporters in the case and predicted the outcome would be favorable for the repeal initiative last Friday.
Attorney Scott Kendall wrote the 2020 ballot measure that led to the use of ranked choice voting and represented the plaintiffs in court. He said he expects to file an appeal with the state’s Supreme Court this week.
Today’s Key Takeaways: BLM backs down on promise to Alaska. Industry groups react to permitting legislation. Pipeline for importing natural gas to AK receives RCA approval. California green group “all in” for Harris.
Alaska state leaders say the Bureau of Land Management earlier this year abruptly broke a commitment to consider lifting land-use restrictions along a highway important to the state’s oil industry, sparking their latest rift with the federal agency over public land management policies.
The issue involves a public land order covering more than 2 million acres along a significant stretch of the Trans-Alaska Pipeline System and a highway used by the oil industry. The state wants those lands, which are critical to the future of its oil economy, turned over to Alaska as part of its ongoing efforts to gain title to millions of acres of land currently under federal ownership.
Until this spring, BLM Director Tracy Stone-Manning had assured representatives with the Alaska Department of Natural Resources that her agency was poised to launch an environmental review to potentially lift the land order, which would then open the possibility of transferring some land to the state, officials said.
U.S. Senators Joe Manchin and John Barrasso, the Chairman and Ranking Member of the Senate Energy and Natural Resources Committee (SENRC), respectively, recently launched the Energy Permitting Reform Act of 2024, a SENRC release posted on the organization’s website revealed.
In response to the introduction of the act, Independent Petroleum Association of America (IPAA) COO and EVP Dan Naatz said in a statement sent to Rigzone, “IPAA applauds Senate Energy and Natural Resources Chairman Manchin and Ranking Member Barrasso for their collaborative effort in producing the bipartisan Energy Permitting Reform Act of 2024”.
“After listening to the concerns and frustrations of users of multiple-use lands across the industry, Senators Manchin and Barrasso worked together to help reduce much of the unnecessary red tape that hampers independent producers operating on federal onshore and offshore lands,” Naatz added.
“They have put forward a permitting reform package that will improve coordination, reduce permitting wait times, remove the LNG export ban, and restore certainty to the Gulf of Mexico leasing process. This legislation increases American energy security and IPAA appreciates the Senators’ thoughtful approach to these important issues,” he continued.
In another statement sent to Rigzone commenting on the act, American Exploration & Production Council (AXPC) CEO Anne Bradbury said, “in order for the American economy to compete on the global stage in the twenty-first century, we need to develop infrastructure projects that support the rising demand for energy.”
Alaska regulators have conditionally approved a request by Southcentral Alaska’s natural gas utility to build a pipeline that could potentially import natural gas into Alaska, as future supplies of the resource wane in the Cook Inlet basin.
The decision by the Regulatory Commission of Alaska supports a request by Alaska Pipeline Co., an affiliate of Enstar Natural Gas, to expand its service area and extend a 16-mile pipeline to Port MacKenzie to receive the imported gas. Port MacKenzie is about 5 miles north of Anchorage, across Knik Arm.
The companies requested the $57 million extension in May, in a precautionary step in case imports are needed. The pipeline would extend from the Alaska Pipeline Co. network of pipes that moves Enstar gas.
CALIFORNIA GREEN GROUP GOES ALL IN FOR HARRIS: The first California green group has formally endorsed Vice President Kamala Harris’s presidential run, as she looks to cement support from environmental groups and beyond.
California Environmental Voters, or EnviroVoters, which had also endorsed President Joe Biden, issued a letter Monday touting Harris’ environmental work in California.
“Her track record in California proves exactly what kind of leader she will be, and, building on her unprecedented progress with President Biden nationally, it’s clear she is the right leader for our nation in the climate fight for our future,” Mary Creasman, the chief executive officer of the group, said in a statement.
The group highlighted Harris’ work going back as far as 2005, where she created the San Francisco District Attorney Office’s first environmental justice unit and sued the Southern California Gas Company over a large gas leak. The group also touted her work in opposing Chevron’s refinery expansion in Richmond and introducing the Climate Equity Act, which was meant to boost environmental justice efforts.
Who else is supporting her? The League of Conservation Voters Action Fund – EnviroVoters’ national organization – along with the National Resources Defense Council Action Fund, the Sierra Club, and the Clean Energy for America Action endorsed Harris on Monday.
Why this is important: Harris being able to secure support from climate groups – especially younger climate voters – will be crucial leading up to November. Biden received a lot of flak from younger climate groups for not bowing out of the race sooner, his support for Israel’s war on Gaza, and for boosting fossil fuels after promising to divest from the industry. But Harris does stand to the left of Biden on fossil fuels – which could mean shoring up support in ways that Biden could not. Be on the lookout if Harris is able to secure support from groups like Climate Defiance and the Sunrise movement.
Proud to work with @Sen_JoeManchin to introduce the Energy Permitting Reform Act. This bipartisan legislation is an urgent first step towards improving our nation’s broken permitting process and securing affordable, available, and reliable American energy.https://t.co/XYRCirhKSv
— Sen. John Barrasso (@SenJohnBarrasso) July 22, 2024
Today’s Key Takeaways: Harris tougher on oil industry than Biden. Mid-year earnings for oil and gas on deck. Next climate test for Supreme Court. Recalculating Alaska’s ranked choice voting repeal signatures.
NEWS OF THE DAY:
Kamala Harris seen as tougher oil industry opponent than Biden. Bloomberg. As California attorney general, Kamala Harris brought lawsuits against fossil fuel companies, prosecuted a pipeline company over an oil leak and investigated Exxon Mobil Corp. for misleading the public about climate change. Now, with the vice president suddenly in contention for the Democratic nomination after President Joe Biden abandoned his reelection bid Sunday, that track record is of deep interest to both the US energy industry and climate activists alike. E&E News also reports. Energy In Depth, Morning News, July 22, 2024
OIL:
Big Oil gears up for mid-year earnings Reuters, July 22, 2024
Leading oil and gas companies report second quarter results over the next two weeks. Profits are forecast to be significantly lower than the record gains that followed Russia’s 2022 invasion of Ukraine, when oil and gas prices shot up, but are still set to be well above pre-pandemic levels. Several of the majors, including Exxon Mobil, Shell and BP warned in trading updates ahead of the mid-year results that earnings would be hit by weaker refining margins, reflecting reduced demand for fuels, in particular diesel, in the United States, China and other markets. Diesel, used in trucks, plants and machinery, is one of the best gauges for industrial and agricultural activity. The lower downstream earnings, however, will probably be offset by continued strength in oil prices, supported by supply cuts from the OPEC+ group of producing nations, as well as strong liquefied natural gas prices in the quarter due to unplanned outages. Another trend that has emerged is the weakness of the biofuels market. Both BP and Shell suspended biofuel plants under development and took hefty impairments due to thinning margins as a result of high feedstock costs and the rolling back of government mandates. Chevron earlier this year also mothballed two U.S. Midwest biodiesel facilities. Investors expect the companies to maintain the high rate of share repurchases that grew steadily in recent quarters. One to watch is whether Exxon will increase its buybacks after completing its $60 billion acquisition of Pioneer Natural Resources in May. France’s TotalEnergies reports its results on July 25, BP on July 30, Shell on Aug 1 while Exxon Mobil and Chevron both report on Aug 2.
MINING:
The Next Scotus Climate Test Ben Geman, Axios, July 22, 2024
Energy and mining industry groups say they’ll ask the Supreme Court to stay EPA’s recent carbon emissions standards for power plants.
Why it matters: It’s the next test of the high court’s willingness to freeze major regulations, following a late June ruling that stayed an EPA rule on interstate smog-forming pollution.
State of play: The U.S. Court of Appeals for the D.C. Circuit on Friday declined motions to stay the climate rule. Various opponents didn’t show they would face “irreparable harm” because compliance doesn’t begin until 2030, the judges wrote.
What’s next: At least two groups — the National Mining Association and the National Rural Electric Cooperative Association — quickly vowed appeals to SCOTUS.
The bottom line: Regardless of what happens with the appeals, the fight over EPA’s rules could wind up before the high court eventually, based on rulings in 2022 and last month that constrain what agencies can do without explicit congressional blessings.
A state court judge on Friday disqualified numerous booklets used to gather signatures for an initiative that aims to repeal Alaska’s ranked choice voting system and gave elections officials a deadline to determine if the measure still had sufficient signatures to qualify for the November ballot.
The decision by Superior Court Judge Christina Rankin in Anchorage comes in a lawsuit brought by three voters that seeks to disqualify the repeal measure from the ballot. Rankin previously ruled the Division of Elections acted within its authority when it earlier this year allowed sponsors of the measure to fix errors with petition booklets after they were turned in and found the agency had complied with deadlines.
Her new ruling Friday focused on challenges to the sponsors’ signature-collecting methods that were the subject of a recent trial. Rankin set a Wednesday deadline for the division to remove the signatures and booklets she found should be disqualified and for the division to determine if the measure still has sufficient signatures to qualify for the ballot.
Today’s Key Takeaways: Alaska celebrates 67 years of the Swanson Oilfield discovery. Just another temporary delay to responsible resource development by Judge Gleason. AK’s first commercial use of a drone in oil and gas industry. U.S. has second-longest mine development time in the world.
NEWS OF THE DAY:
In 1955 the southern California-based Richfield Oil (which in 1966 merged with east coast Atlantic Refining to become Atlantic Richfield Company, or ARCO) sent geologists Bill Bishop and Ray Arnett to explore for oil on the 50,000 acres it had leased on, what was then the Kenai National Moose Range, now the Kenai National Wildlife Refuge. At that point, oil companies had drilled 165 consecutive unsuccessful oil wells in the state.
This discovery of oil north of Sterling at Swanson River provided, according to Alaska’s first governor William Egan, “the economic justification for statehood for Alaska.”
JUNEAU, Alaska (AP) — An environmental review underpinning a 2022 oil and gas lease sale in Alaska failed to properly analyze the potential impacts on endangered Cook Inlet beluga whales, a federal judge has ruled in suspending the lone lease stemming from that sale.
U.S. District Court Judge Sharon Gleason, in a decision Tuesday, found the U.S. Bureau of Ocean Energy Management failed in its analysis of the impact of ship noise on Cook Inlet beluga whales, which are listed as protected under the Endangered Species Act.
She also found problematic the agency’s lumping together of the beluga whales and other marine mammals when weighing cumulative impacts, noting that the Cook Inlet belugas “have been impacted differently than other marine mammals in Cook Inlet by past actions” and that the agency should have considered cumulative impacts of leasing activities on them separately.
Gleason, who is based in Alaska, declined to vacate the lease sale, as the conservation groups who sued over the sale had requested. Instead, she suspended the lease issued in the sale pending a supplemental environmental review that addresses the issues she identified.
The drone could perform deliveries to and from Cook Inlet platforms
Spectators gathered at Furie Operating Alaska’s central processing facility in Nikiski last week, on July 10, to witness a test flight for what engineers called the first commercial use of a drone by the oil and gas industry in Alaska. The aircraft flew beyond visual line of sight from Nikiski to a platform in Cook Inlet and returned with cargo.
Furie says the technology may allow for routine deliveries to and from the platforms at reduced cost and increased human safety.
The drone has a wingspan of a few feet, weighs about 55 pounds and flies around 60-70 miles per hour. It performs vertical takeoff and landing using propellers before converting in the air to a fixed-wing aircraft.
The test flight tasked the aircraft with flying around 17 miles, taking around 30 minutes in both directions.
JR Ancheta, project manager at the University of Alaska Fairbanks’ Alaska Center for Unmanned Aircraft Systems Integration, said the drone can fly for around five to seven hours powered by both battery and gas tank. To accommodate Alaska’s cold temperatures, it charges its battery while flying.
“It’s a pretty neat machine,” he said.
Furie is owned by HEX Cook Inlet. The company’s facility in Nikiski is connected by a 15-mile pipeline to a platform in the inlet. At the facility, natural gas is taken in via the pipeline and is processed by removing water vapor. Then, it’s sold to utilities on the Kenai Peninsula and Alaska’s Railbelt.
From our friends at the National Mining Association:
A recent report by S&P Global reveals that the U.S. has the second longest mine development time in the world, at almost 29 years on average from first discovery to first production. Only Zambia takes longer (34 years). In contrast, Canada and Australia, America’s main peers in terms of mineral resources and mining regulations, take 27 and 20 years, respectively.
What you need to know:
S&P Global developed a report that compares mine development times in America to that of Canada, Australia, and other nations. The results do not paint a positive picture of the U.S.
At 29 years on average, the U.S. now has the second longest mine development time in the world – with only Zambia taking longer.
The U.S. has more than enough minerals to secure our supply chains and help us – and the world – meet our mineral needs, but we must streamline our circuitous permitting process to allow us to access them.
Today’s Key Takeaways: Chevron doctrine ruling plays in Alaska’s favor. BP’s latest energy outlook: fossil fuel’s are here to stay. AK gold project gets funding. Trump vows to boost U.S. oil production.
News-Miner opinion: With the overturning of the Chevron deference in a 6-3 ruling, the Supreme Court has sharply cut back the power of federal agencies to interpret the laws they administer. The June 28 ruling, which shifts the power of interpreting ambiguous laws away from agencies and back to the courts, is sure to have far-reaching consequences for Alaska and the rest of the nation.
The 1984 decision in Chevron USA v. National Resources Defense Council instructed lower courts to defer to federal agencies when laws passed by Congress were not clear. That opened the spigot for myriad alphabet agencies to pour their own interpretations of onerous regulations onto the populace. “Perhaps most fundamentally, Chevron’s presumption is misguided because agencies have no special competence in resolving statutory ambiguities,” Chief Justice John Roberts wrote in the majority opinion overturning the 40-year-old doctrine. “Courts do.”
Overturning the ruling likely plays heavily in Alaska’s favor. It’s a limit on future federal overreach, from resource development to fisheries; it returns control to the state over issues traditionally managed by federal agencies, which could result in policies better tailored to the needs of Alaska; and with less federal red tape, industries vital to the Alaska economy (think oil, gas, and fish) could see an economic growth spurt.
BP’s latest energy outlook forecasts oil demand to peak in 2025, but the decline will be gradual, with consumption remaining high in 2035.
The energy transition is losing momentum due to slowing EV sales, insufficient renewable capacity expansion, and rising electricity costs.
The developing world’s growing energy needs are a major factor in the continued reliance on oil and gas, even as developed nations attempt to reduce consumption.
The energy transition is showing signs of losing momentum over the past few months. EV sales are slowing, wind and solar capacity additions are not expanding fast enough, and electricity is getting more instead of less expensive.
With those signs, others have been flashing red, too. Despite the push against oil and gas, these are here to stay for the long haul—and demand won’t even decline that much after peaking, according to the latest energy outlook of BP.
The supermajor, which used to compile the Statistical Review of World Energy, now does its own review. And according to its latest edition, oil demand will peak next year. And it’s not the first time it’s called the peak for oil demand.
The last time its statistical review said that demand growth had peaked—in 2019—it turned out to be very wrong. In reality, oil demand soared after the end of the pandemic lockdowns to reach new all-time highs.
Now, BP has noted that over the past five years, oil demand has been growing at an average of half a million barrels daily since 2019, but that is about to end, with demand on the decline over the next couple of decades. But here’s the thing. Before, BP forecast that this decline would be quite substantial. Now, it expects that in 2035, the world will still consume 97.8 million barrels of oil per day in 2035, which would be a relatively minor decline from the current rate of consumption, which is about 100 million barrels daily, which may rise above that this year if demand strengthens in the second half.
In other words, BP acknowledges that the human civilization’s dependence on hydrocarbons will not be so easy to shake simply by embracing alternative energy sources. What’s more, primary energy demand is still on an upward trajectory, and hydrocarbons will be the energy sources to respond to much of that—until we start needing less energy.
Tectonic Metals (TSXV: TECT) has secured C$3 million ($2.2m) to support its 2024 drilling at its Flat gold project in Alaska. The financing is led by Crescat Capital, a mining industry investor and a strategic shareholder in the company.
The financing consists of 50 million units priced at C$0.06 per unit. A majority of the units — totalling C$2.5 million in proceeds — will be freely tradeable under the listed issuer financing exemption of NI-45-106.
Tectonic Metals traded at nearly 20 times its daily average volume on Monday and closed the session at C$0.065 apiece for a market capitalization of C$20 million ($14.6m).
“Tectonic is one of our top ten holdings in the Crescat portfolio. Our support for Tectonic and their Flat project is underscored by us doubling our ownership level to 22.3% in the company last year,” Crescat Capital chief investment officer Kevin Smith said in Monday’s press release.
Donald Trump has pledged to ramp up U.S. domestic oil production and undo some regulations to make that happen, the Republican presidential candidate told Bloomberg Businessweek in an exclusive interview published on Wednesday.
The interview with the former U.S. president took place at Mar-a-Lago in late June, two days before the first presidential debate and two weeks prior to the assassination attempt on Trump this weekend.
In a wide-ranging interview on many domestic and global issues, Trump said that energy costs will need to go down and America has the energy resources to help that happen.
“We have more liquid gold than anybody,” Trump told Bloomberg Businessweek.
“We need energy at low prices. The advantage we have all over almost every country including the very large ones is that we have more energy than anybody. We have more of the real energy, the energy that works,” the former president vying for another term in office said.
“Wind does not work. It’s too expensive,” said Trump, claiming that solar and wind farms are neither too good for the environment, nor too suitable to provide energy at low costs and prices.
Although Trump was light on details regarding domestic U.S. energy issues, it became clear that he would continue to support American oil and gas production if elected president.
If he wins in November, Trump is set to overturn or at least try to dismantle many of President Biden’s energy and climate policies, including methane rules, the pause on new LNG export permits, EV mandates, federal oil and gas leasing, and even parts of the Inflation Reduction Act.
