Today’s Key Takeaways: Alaska has no plans to sell assets in Russia. IEA Countries releasing 60 million barrels of oil to help market volatility. Russian invasion boosts viability of U.S. LNG projects. Chinese company removed as operator of cobalt mine in the Congo. Supreme court likely to constrain Biden on climate.
NEWS OF THE DAY:
As other investors leave Russia, Alaska has no plans to sell its $210 million in assets
James Brooks, Anchorage Daily News, February 28, 2022
Neither the Alaska Permanent Fund Corp. nor the Alaska Department of Revenue are planning to sell their investments in Russia, state and corporate officials said Monday. Their statements came as global investors and multiple American states announced plans to pull money out of Russia to punish the country for its invasion of Ukraine.
The Permanent Fund Corp. did not provide precise figures but said 0.2% of the $81.5 billion fund is invested in Russia. Based on the fund’s reported value on Friday, that amounts to $163 million, with about three-quarters of that figure invested in Russian stocks.
Alaska also has about $50.5 billion in other investment accounts. “About $50 million” of that money is invested in Russia, said Alaska Department of Revenue chief investment officer Zachary Hanna.
“We do not plan to take any action at this time, but will be monitoring the situation closely,” he said.
The Permanent Fund’s biggest Russian stock holdings are in the state-owned gas company Gazprom, the private oil and gas company Lukoil, and the state bank, Sberbank, according to a September listing. The remainder of the corporation’s holdings in Russia include corporate and governmental bonds and a small private-equity investment worth less than $1 million and not listed on public markets.
“APFC is not contemplating a divestment strategy at this time. We are closely monitoring the situation; and as always, will strive to do what is in the best interest of the Alaska Permanent Fund,” said Paulyn Swanson, the corporation’s communications officer.
Officials at Norway’s $1.35 trillion sovereign wealth fund said on Monday that they will freeze the fund’s Russian investments and sell them as soon as possible. As of the end of 2020, the fund held about $3.3 billion in Russian investments. BP and Shell have announced that they will pull out of deals involving Russian oil and gas companies.
State law and policy requires the Alaska Permanent Fund Corp. to make decisions based only on financial gain or loss. Corporation board chairman Craig Richards said divesting from Russia for political reasons would likely require an act of the Alaska Legislature, an executive order from Gov. Mike Dunleavy, or a regulatory change by the Alaska Department of Revenue.
“Do we disengage from Russia is really a political decision. But we’re not policymakers, we’re not elected, we’re not confirmed, we don’t answer to the people in that way,” Richards said of the corporation’s board of trustees.
“So, I think the board looks for direction on these types of issues to those that are policymakers,” he said.
No legislation has been proposed in the Alaska House or Senate to require divestment from Russia. The deadline for individual lawmakers to propose a bill was last week.
Legislators in several states, including Georgia and Pennsylvania, introduced divestment legislation on Monday, according to the Associated Press. The governors of Washington, Colorado and New York issued executive orders requiring divestment.
Democratic state senators here said that they intend to send a letters to Permanent Fund officials and to the governor asking them to sell Alaskan investments in Russia.
Senate Minority Leader Tom Begich, D-Anchorage, said he believes the state is required to divest, based on the language of a 1986 ballot measure that requires the state to do what it can to prevent nuclear war.
Given the threats of Russian President Vladimir Putin to use nuclear weapons, “now is the time to divest from companies that are threatening our very existence,” Begich said.
Dunleavy announced no action on Monday, and an official said none was planned.
“The administration does not plan to take any action at this time, but will be monitoring the situation closely,” said Jeff Turner, the governor’s deputy communications director.
“Investment policy for the Alaska Permanent Fund Corporation is determined by an independent Board of Trustees who are responsible for the fund’s investment strategy,” he said.
“The Alaska Legislature, which includes the Senate minority, has the ability to draft legislation requiring APFC and other state agencies to divest from a specific country,” Turner said.
OIL:
IEA countries agree to release 60 million barrels of oil
Jacob Knutson, Axios, March 1, 2022
The International Energy Agency said Tuesday that member countries have agreed to release 60 million barrels of oil to help volatility in global oil markets set off by Russia’s invasion of Ukraine.
Why it matters: Oil prices, which were already increasing before Russia’s invasion as the demand revival from the pandemic tightened markets, have recently surged to over $100 a barrel in response to the war.
- The IEA condemned Russia’s “appalling and unprovoked violation of Ukraine’s sovereignty and territorial integrity.”
What they’re saying: U.S. Secretary of Energy Jennifer Granholm said after an IEA ministerial meeting Tuesday that 30 million barrels of the released oil will come from the Strategic Petroleum Reserve and that the U.S. is “prepared to take additional measures if conditions warrant.”
- “We will continue advancing ongoing efforts to accelerate Europe’s diversification of energy supplies away from Russia and to secure the world from Putin’s attempts to weaponize energy supplies,” Granholm added.
- White House press secretary Jen Psaki said the “announcement is another example of partners around the world condemning Russia’s unprovoked and unjustified invasion of Ukraine and working together to address the impact of President Putin’s war of choice.”
- “It is heartening to see how quickly the global community has united to condemn Russia’s actions and respond decisively,” IEA Executive Director Fatih Birol said in a statement.
- “I am pleased that the IEA has also come together today to take action. The situation in energy markets is very serious and demands our full attention. Global energy security is under threat, putting the world economy at risk during a fragile stage of the recovery,” he added.
The big picture: Vladimir Putin’s decision to invade Ukraine has also led to major shakeups between Western companies involved in the country’s oil industry, as both BP and Shell have announced they intend to divest from Russian companies and energy projects.
- Western sanctions have thus far avoided taking direct aim at Russia’s oil and gas sectors directly, though the sanctions on Russian banks could disrupt the country’s energy exports.
- The rest of the released oil will come from IEA members in Europe and Asia, according to Bloomberg.
Thought bubble, via Axios’ Ben Geman: While the global oil market is roughly 100 million barrels per day, even the addition of 2 million barrels a day on a temporary basis is likely to at least help slow the upward price momentum.
- IEA noted that the “initial” 60-million-barrel release is 4% of members’ combined stockpiles and would represent 2 million barrels per day for 30 days. Russia currently exports about 5 million barrels daily, with over half going to Europe, IEA said.
GAS:
New LNG Projects in US, Europe to Be Supported by Russian Gas Fears — Market Insight
Adam Clark, Dow Jones, March 1, 2022
Russia’s invasion of Ukraine is prompting a spike in natural gas prices which should boost U.S. production of liquefied natural gas but could also revive European plans for LNG terminals. While Russian exports of gas –which normally account for 30% of European demand– haven’t yet been blocked, the possibility of disruption caused by conflict or financial sanctions are exacerbating the energy crisis in Europe. Dutch TTF gas prices, the European benchmark, are around 100 euros a megawatt hour, up from EUR16/mwh a year ago.
U.S. gas producers such as Cheniere Energy and Range Resources are likely to be short-term beneficiaries as Europe imports gas from alternative sources. Both stocks are up more than 25% in 2022 to date. While currently U.S. LNG exports are running at almost full capacity, analysts at consultancy Wood Mackenzie note European buyers are now likely to be more willing to sign long-term contracts which will support new U.S. production facilities.
Over the longer term, European companies will have a stronger incentive to build LNG import terminals, as they scrap deals with Russia such as Shell’s exit from joint ventures with Gazprom, including its stake in the Sakhalin 2 LNG project. S&P Global Platts reported Monday that Germany’s Uniper is considering restarting work on a floating LNG import terminal at Wilhelmshaven in northern Germany, having previously shelved the plan due to a lack of long-term booking interest.
MINING:
Chinese Company Removed as Operator of Cobalt Mine in Congo
Eric Lipton, Dionne Searcy, The New York Times, February 28, 2022
A court has given the Congolese control of one of the world’s largest sources of cobalt while allegations against the mine’s Chinese owners are investigated.
A court in the Democratic Republic of Congo has sidelined the Chinese owner of one of the world’s largest copper and cobalt mines, a major victory for the Congolese government as it seeks to become a bigger player in the global clean energy revolution.
The ruling, which removes Chinese leadership of the mine for at least six months, stems from a dispute over billions of dollars in payments the Congolese government says it is owed by the Chinese owner, China Molybdenum.
Backed by Chinese government financing, the company bought the Tenke Fungurume mine in 2016 from an Arizona-based mining company. The mine figures prominently in the Chinese government’s effort to dominate major supply chains for minerals and metals needed in the production of batteries for electric vehicles.
Cobalt is essential for electric vehicles because it extends battery range. It is now trading at a three-year high.
The New York Times reported in November that employees at the mine had complained about a dramatic decline in worker safety under the Chinese ownership, including claims by safety inspectors that workers had been assaulted after raising concerns and been offered bribes to cover up accidents. The company disputed those claims, suggesting they were part of a broader effort to discredit it.
Congo’s president, Felix Tshisekedi, last year named a commission to investigate allegations that China Molybdenum might have cheated the Congolese government out of royalty payments from the mine. The legal action on Monday, by the Commercial Court of Lubumbashi, came after the country’s state-owned mining enterprise had sought the removal of the mine’s Chinese management.
The court ruling, reviewed by The Times, leaves a third-party administrator in charge of the mine for at least six months, as auditors evaluate the allegations against the company. The state mining enterprise, known as Gécamines, asserts that China Molybdenum failed to declare hundreds of thousands of tons of copper and cobalt reserves buried at the site, depriving the agency of significant annual payments required when new reserves are found and verified.
During the review period, Gécamines will retain its 20 percent stake in the mine, which was the world’s second-largest source of cobalt in 2020. Congo last year produced 70 percent of the world’s cobalt.
President Tshisekedi’s office declined on Monday to comment on the ruling. China Molybdenum did not respond to a request for comment, but in the past, it has denied that it concealed reserves or owed any additional royalties.
POLITICS:
Supreme Court hints at constraining Biden on climate
Ben Geman, Axios, March 1, 2022
The Supreme Court looks likely to limit the executive authority to issue sweeping climate rules without new legislation, but it’s unclear if they’ll unite around broader limits on regulatory power.
Catch up fast: The high court held arguments Monday in related cases about now-defunct regulations to curb carbon emissions from the electricity sector, the second-largest U.S. source of heat-trapping gases.
A few takeaways:
1. New limits appear likely. Harvard Law professor Richard Lazarus said there appear to be six votes to “align” the case with recent rulings against the federal eviction moratorium and vaccine mandates.
- That would prompt the court to “sharply cut back on EPA’s authority to reduce greenhouse gas emissions from existing coal-fired power plants,” he said via email.
2. The appetite to go big is unclear. A huge question is whether the court’s 6-3 conservative majority will set a precedent that broadly cuts executive power to regulate on “major questions” absent explicit congressional blessing.
- “While some warned this case could be a Waterloo for the administrative state, most of the oral argument focused narrowly on how to interpret the relevant provisions of the Clean Air Act,” Case Western Reserve University law professor Jonathan Adler said in a post yesterday.
- “The major questions doctrine was raised repeatedly throughout the argument, largely as an input to the statutory interpretation inquiry, rather than as a stalking horse for the nondelegation doctrine.”
3. Timing is everything. The argument occurred just hours after United Nations-convened scientists issued a massive report that finds global warming is reshaping the world more rapidly and severely than was known several years ago.
- The case is unfolding as President Biden’s push for massive new federal investments in clean energy has stalled in Congress. That puts a heavier burden on the federal agencies to act via regulation, even as their authority is now in doubt.
4. There’s probably no escape hatch. The majority seems ready to weigh in, despite Biden officials’ argument that the case isn’t ready for action because there are currently no power plant CO2 regulations in place.
- “Chief Justice Roberts made it clear that he thinks the case is justiciable even though the government made a strong argument that any ruling would be only an advisory opinion,” University of Maryland law professor Robert Percival tells Axios via email.