Today’s Key Takeaways: Justice Breyer retires, replacement will face many decisions impacting resource development. Global oil benchmark hits $90 – first time since 2014. 9 weeks of inventory for 9 weeks of winter. Optimistic state of the state from Governor Dunleavy.
NEWS OF THE DAY:
Justice Stephen Breyer to retire from Supreme Court, paving way for Biden appointment
NBC News, January 26, 2022
Justice Stephen Breyer will step down from the Supreme Court at the end of the current term, according to people familiar with his thinking.
Breyer is one of the three remaining liberal justices, and his decision to retire after more than 27 years on the court allows President Joe Biden to appoint a successor who could serve for several decades and, in the short term, maintain the current 6-3 split between conservative and liberal justices.
At 83, Breyer is the court’s oldest member. Liberal activists have urged him for months to retire while Democrats hold both the White House and the Senate — a position that could change after the midterm elections in November. They contended that Justice Ruth Bader Ginsburg stayed too long despite her history of health problems and should have stepped down during the Obama administration.
Ginsburg’s death from cancer at 87 allowed former President Donald Trump to appoint her successor, Amy Coney Barrett, moving the court further to the right.
White House press secretary Jen Psaki tweeted a statement on Wednesday, saying, “It has always been the decision of any Supreme Court Justice if and when they decide to retire, and how they want to announce it, and that remains the case today.”
The White House has no additional details or information to share, she added.
Prof. Erwin Chemerinsky, dean of the law school at the University of California at Berkeley, wrote in a Washington Post op-ed in May urging Breyer to retire that there are times “when the stewards of our system must put the good of an institution they love, and of the country they love, above their own interests. They have to recognize that no one, not even a brilliant justice, is irreplaceable, and that the risks presented by remaining are more than hypothetical.”
The progressive group Demand Justice, meanwhile, hired a truck last year to drive around the Supreme Court’s neighborhood bearing this sign: “Breyer Retire. It’s time for a Black woman Supreme Court justice.”
Biden has pledged to make just such an appointment. Among likely contenders are U.S. Circuit Judge Ketanji Brown Jackson of the Court of Appeals for the District of Columbia, a former Breyer law clerk, and Leondra Kruger, a justice on California’s Supreme Court.
After serving as a district court judge in Washington, Jackson was nominated by Biden for a seat on the U.S. Circuit Court of Appeals for the District of Columbia and confirmed by the Senate in mid-June. She succeeded Merrick Garland, who left the appeals court to become Biden’s attorney general.
Despite calls from some Biden supporters to add more seats to the Supreme Court to counter its current conservative lean, Breyer said in March that such a move would risk undermining confidence in the court. Advocates of court packing, he said, should “think long and hard before embodying those changes in law.”
OIL:
Global oil benchmark tops $90 for the first time since 2014
Pippa Stevens, CNBC, January 26, 2022
Brent crude futures, the international oil benchmark, topped $90 on Wednesday for the first time since 2014, adding to oil’s blistering recovery since its pandemic-era lows in April 2020.
The leg higher comes amid growing geopolitical tensions between Russia and Ukraine, and as supply remains tight amid a rebound in demand.
The contract added more than 2%, hitting $90.07. West Texas Intermediate crude futures, the U.S. oil benchmark, also advanced more than 2% to $87.43 per barrel.
CIBC Private Wealth’s Rebecca Babin said the catalyst for higher crude prices is potential sanctions on Russia, which would be triggered by a Ukraine invasion.
″[E]ach day that passes without a de-escalation, we could see more of a supporting bid to crude,” she said.
Goldman Sachs said Wednesday that the firm’s base case is that supply disruptions are unlikely to occur, but that there could be upside for energy prices given an already tight market.
“Commodity markets are increasingly vulnerable to disruptions, after a couple years of historically low outages following the initial Covid shock,” the firm wrote in a note to clients. “Against the backdrop of the tightest inventory levels in decades, low spare capacity and a much less elastic shale sector, this points to the skew of large energy price moves shifting to the upside, reinforcing the case for a rising allocating to commodities in portfolios.”
Earlier this month, Goldman Sachs said that Brent can reach $100 per barrel by the third quarter, adding to a number of Wall Street firms calling for triple-digit oil.
Barclays noted that while prices may be reacting in part to a “geopolitical premium,” the underlying fundamentals are fueling the push higher.
OPEC and its oil-producing allies have been returning oil to the market, but the group’s been unable to ramp up production to hit its targets. Meanwhile U.S. shale oil growth has been low, and omicron hasn’t been the demand hit that was initially expected. Additionally, inventory levels remain depleted.
The Energy Information Administration said Wednesday that crude oil inventories rose by 2.4 million barrels during the week ending Jan. 21. The Street was expecting a build of 150,000 barrels, according to estimates compiled by FactSet.
“Immediately it becomes a question how long we’ll be waiting for triple figures,” said Oanda’s Craig Erlam. “It’s still unlikely that oil and gas will be used as a weapon any time soon but if it was, it could lead to a serious surge in prices given how tight the markets are.”
GAS:
Nine weeks of gas inventory left for nine weeks of European winter
Neil Hunter, Daniel Lalor, January 26, 2022
Europe has nine weeks of natural gas storage reserves at the current rate of withdrawal, with nine weeks of the winter delivery period remaining, an analysis by S&P Global Platts found, even amid the deluge of LNG being received.
With Russian exports to Europe’s key trading hubs still constrained year on year, there is an emerging risk of localized supply issues and regionalized price spikes later in the winter which could spread to other parts of the continent.
According to data from Platts Analytics and Gas Infrastructure Europe, inventory at Platts-assessed markets totaled 36.99 billion cu m on Jan. 23, with net withdrawal in the Jan. 17-23 period amounting to 3.95 Bcm.
In terms of individual countries, Austria, Germany, and the UK were among the most susceptible countries and could potentially see reserves fully depleted before the end of winter. The UK has just five weeks of inventory left if current withdrawal rates are sustained.
Moreover, a comparison of the latest stock level against the drawdown of previous balance-of-winter periods showed Austria in particular would run out of inventory should last winter be repeated. That is even before lower Russian exports to Europe are taken into account.
By the same measure, Germany would have enough in reserve if the balance-of-winter for the past two years was replicated, but without supply from the Yamal pipeline, it too is at risk of exhausting its stocks.
All-in-all, Europe would have 13.45 Bcm in storage by March 31 should last winter be repeated. As things stand, that would be reduced to 4.43 Bcm when missing Russian exports this year are considered.
January-to-date, the Yamal pipeline terminating in Germany has been in reverse-flow mode and has experienced an average swing of 95.94 million cu m/d year on year. Also, exports via Ukraine to Slovakia at Velke Kapusany have been 38.65 million cu m/d lower on average on the year.
In the totality of winter, Europe withdraw 68.1 Bcm during Winter 2020 delivery, which if repeated this year would leave 10.1 Bcm in stock by March 31.
Decisive management?
With traders fully aware of the situation with Russian exports for some time, extensive efforts to replenish stock over the summer have been followed up by careful management of inventory during the winter.
The analysis found that while the Netherlands would be at risk of full drawdown if last year was repeated, it has 13 weeks of reserves left at the most recent rate of withdrawal.
Such a shift in management can be down to tactically injecting or reducing withdrawals at the most opportune times to maximize inventory.
That is preferable at times of comparatively low demand or low prices and could in part explain volatility on the spot market as shippers would need a strong incentive to unwind an already profitable withdrawal profile.
Indeed, such a system could arguably be in place within Russia as well and could serve as a possible explanation for lower exports should it be seeking to keep domestic storage fully topped up. Russia has filled just a fraction of its space in European storage this year, however.
France and Italy, who both legislate for gas storage regulation, should both have a weeks’ worth of aggregate demand in reserve by the end of winter despite high French net withdrawals at present and Italy’s partial exposure to lower Russian exports.
The UK has relatively tiny storage space compared to its annual gas demand and is more accustomed to managing stocks in such a way. The majority of the 1.5 Bcm space it has is owned by utilities who would not need to enter the spot market to replenish.
However, the lack of strategic reserves in the UK was a key contributing factor to the former spot price record set by the ‘Beast from the East’ weather system on March 1, 2018. While originating in the UK, an acute need to source imports from, or at the expense of, other countries spiked neighboring hub prices too.
While the analysis found the UK could have enough stock by March 31 should previous winters be repeated, it did not rule out a full depletion before this time.
Weather or not?
Many market participants have argued that a comparatively mild winter, such as experienced this year, would be enough to prevent inventory being fully depleted.
The analysis showed, however, that historically this could only account for 3.825 Bcm in the Jan. 23 to March 31 period, for around 24-25 Bcm over the entirety of winter delivery, and the effect of lower Russian exports to Europe may not be fully offset in either case.
Therefore, whether full drawdown occurs and price spikes ensue is likely to depend on where countries in need source gas from, and at what expense.
For all its connectivity as Europe’s benchmark, the TTF could be under enormous strain should problems develop in Germany, Austria or the UK, and the rest of Europe is likely to feel it.
MINING:
Pebble mine developer does away with Washington lobbyists
Timothy Cam, Jael Holzman, E & E Greenwire, January 24, 2022
The company behind the proposed Pebble mine in Alaska has been saying goodbye — for now — to its lobbyists in Washington.
Pebble LP once had a large team of lobbyists fighting to guarantee development of an enormous copper and gold development near southwest Alaska’s Bristol Bay, home to the nation’s strongest salmon fishery.
That was before the company lost a key fight during the Trump administration, when the Army Corps of Engineers in 2020 rejected Pebble’s application to build the mine. And the Biden administration has since restarted a Clean Water Act veto process that could prevent any large-scale mining near Bristol Bay (Greenwire, Sept. 9, 2021).
Pebble didn’t lobby Congress or agencies on any issues during the last six months of last year and spent no money on federal lobbying efforts during that period, according to disclosures filed last week by firms the company had retained.
In the last year, Pebble has terminated contracts with BGR Government Affairs, Ballard Partners, Buchanan Ingersoll & Rooney, and Windward Strategies, disclosures show. Some big names were representing Pebble through those firms, including former Mississippi Gov. Haley Barbour (R) at BGR and Brian Ballard, a major ally and fundraiser for former President Trump.
Pebble’s sole in-house lobbyist, Peter Robertson, left the company in August, according to his LinkedIn profile. Robertson, who now works at the firm Squire Patton Boggs, did not respond to a request for comment.
The company was, until recently, spending much more on lobbying — with $360,000 in the third quarter of 2020 and $460,000 during the fourth quarter — Pebble said in required filings with Congress.
Pebble’s exodus from K Street “makes sense,” said Tim Bristol, director of SalmonState, a nonprofit that advocates for protecting Alaskan fisheries and opposes the project. He said Pebble’s defeat under the Trump administration has left the company with few options to maneuver.
“All they really have left is, hopefully, they can pull off some legal tricks. I think that’s about it,” Bristol told E&E News. “Maybe they just realized that the political winds are totally in their face on this one.”
Pebble last week said it had filed a formal request to appeal the Army Corps’ record of decision. Beyond the appeal, “legal options [are] also being considered,” Pebble said in a Jan. 19 presentation to investors.
Asked about the lobbying drop-off, Pebble spokesperson Mike Heatwole said the company is currently focused on fighting the Army Corps permit denial.
As Pebble fought skepticism of the mine from many lawmakers, regulators and some Alaska Native tribes, the company became a Washington lobbying juggernaut.
It reported spending more than $1.5 million on lobbying in both 2019 and 2020. It had previously hired major firms, including Akin Gump Strauss Hauer & Feld; Squire Patton Boggs; Gavel Resources; and BGR.
Other lobbyists have included House Science Chair Lamar Smith (R-Texas), former House Natural Resources Chair Richard Pombo (R-Calif.) and former House Transportation and Infrastructure Chair Bill Shuster (R-Pa.).
As of the fourth quarter of last year, Akin Gump, Gavel and Squire Patton Boggs were all on retainer for Pebble but reported no lobbying.
The last time Pebble spent money on federal lobbying was in the second quarter of 2021, when Robertson, the in-house lobbyist, reported expenditures of $15,000 on “All legislative and regulatory matters affecting the proposed Pebble Project in Alaska.”
POLITICS:
Alaska governor lays out optimistic vision in annual speech
Becky Bohrer, Associated Press, January 26, 2022
Alaska Gov. Mike Dunleavy laid out an optimistic vision of the state’s future Tuesday during an election year address to lawmakers that comes amid a period of higher oil prices and follows a year that was marked by drawn-out, bruising legislative sessions.
The Republican, giving his fourth State of the State speech since taking office in late 2018, said he envisioned a state that is a leader in renewable energy, with energy costs among the lowest in the U.S. He also wants Alaska to finally develop its vast stores of natural gas on the North Slope — something policy makers have pursued for decades only to have plans scrapped, stalled or hit dead ends.
He did not go into great detail on how those could be realized. But he told lawmakers there was a “great obligation” to come together around policies that would solve long-standing issues and create opportunities for generations.
Dunleavy has had an at-times rocky tenure, marked by fights with lawmakers over the budget and the annual check paid to residents from the earnings of the state’s oil-wealth permanent fund. He called for settling the dividend issue.
Debate over the size of the check has overshadowed other issues in recent years. Legislative leaders have said they want a long-term resolution to the debate, too, but an agreement so far has been elusive.
Under a redistricting plan that is the subject of litigation, 59 of the Legislature’s 60 members face election this year. Dunleavy faces reelection too.
In his speech, Dunleavy touted his administration’s handling of the pandemic, citing such things as testing and vaccine distribution efforts and efforts to help shore up the healthcare workforce. He has long said that vaccination is a personal decision.
“My administration’s job is to make sure our healthcare system is strong, and you have the tools available for you to take care of yourself,” he said.
The administration has joined efforts nationally to fight federal vaccine mandates.
Dunleavy has faced criticism on both sides for his approach to the pandemic — by some who say he hasn’t done or said enough and from others who have accused the administration of pushing vaccines. Republican Rep. Christopher Kurka, who is running for governor, has posted a petition calling for the state’s chief medical officer, Dr. Anne Zink, to be fired, citing in part her support of vaccines. Dunleavy last week said he stood by Zink.
Oil prices in recent months have been at among their highest levels during Dunleavy’s administration. Prices have been in the upper $80-a-barrel range; this time last year, they were around $55 a barrel.
But Senate Minority Leader Tom Begich, an Anchorage Democrat, said building a budget “on the stock market and the volatile price of oil is not a sustainable plan for our next generation.” Begich has argued the state needs new revenues.
Begich, in a statement, also took issue with Dunleavy’s criticism of the Biden administration.
Dunleavy has been at odds with the federal administration on some resource development issues and, in his speech, Dunleavy said the administration had shown “hostility” toward the state.
Begich said Dunleavy failed to acknowledge “the impact of the billions of dollars brought in by the Biden Administration, which has assisted in our ability to address the pandemic, rebuild our infrastructure, and frankly, address our deficit.”
Senate President Peter Micciche, a Soldotna Republican, said a message he heard in the speech was that “an election year is not an excuse for inaction.” Dunleavy urged lawmakers to prove wrong Alaskans who think nothing will get done because this is an election year.
Micciche told reporters he hopes to see “more of a team effort” this year between lawmakers and the Dunleavy administration.
“I perhaps wear a pair of rose-colored glasses, that when someone stands in front of a mic and talks about a vision, that they mean it,” he said. “The test is going to be, how serious is that vision and is the administration going to put the work in on being here in this building for the next 90 days, guiding us through and working with us. Those big pieces don’t move by themselves. You can’t drop a bill and have it magically pass.”
CLIMATE CHANGE:
Startup seeking “truth” in carbon offsets raises $33M
Ben Geman, Axios, January 26, 2022
Sylvera, a London-based startup that aims to provide accurate and independent information about carbon offsets, raised $32.6 million in a Series A funding round co-led by Index Ventures and Insight Partners.
Why it matters: Offsets, like forest planting and preservation, can help businesses become more climate-friendly. But the carbon credit market is notoriously saddled with integrity and verification problems.
How it works: Sylvera says the funding will help its mission to become a “source of truth” in the carbon offset market via accurate ratings information.
- The company says it uses proprietary data and machine learning to provide “the most comprehensive and accessible insights and market intelligence.”
- Customers thus far include Salesforce, which is also an investor, Delta Airlines, Shell and Cargill, the company said.
What’s next: The company hopes to become the equivalent to Moody’s for the carbon credits market, and says its team has expertise in artificial intelligence, geospatial technology and other relevant fields.
What they’re saying: CEO Allister Furey, in a blog post on the funding, said better data and transparency can make offsets a more effective tool against climate change.
- “If weaker credits are removed from the market or discounted, supply tightens,” he writes.
- “When buyer confidence in quality increases, demand, and willingness to pay, grows.”