Today’s Key Takeaways: Biden give and take in Alaska. How much difference can one mine make? The numbers don’t lie – is ESG profitable? World Bank may finance natural gas projects.
NEWS OF THE DAY:
Biden administration approves development of Alaska’s Willow oil project
Alex DeMarban, Riley Rogerson, Anchorage Daily News, March 13, 2023
The Biden administration on Monday approved a massive oil development project on Alaska’s North Slope.
ConocoPhillips’ $8 billion Willow prospect in the National Petroleum Reserve-Alaska is expected to be one of the largest oil fields developed in Alaska in decades, and would produce oil for three decades, including 180,000 barrels of oil daily at its peak.
The administration approved three drill sites, which the ConocoPhillips has said is economically viable.
The White House’s decision bucked intense pressure from environmental groups, which have called the project a “carbon bomb” and said it contradicts President Joe Biden’s goal of cutting greenhouse gas emissions in half by 2030.
Many Alaska Native leaders, politicians and business groups have lobbied intensely for approval of the massive oil field, saying it would provide badly needed revenues to support North Slope villages and help Alaska’s struggling economy — though the mayor the Inupiaq village closest to the project had opposed it.
The decision comes a day after the Biden administration announced it will limit oil drilling on 16 million acres in the NPR-A and the Arctic Ocean in an apparent nod to environmental groups that have fought the project.
OIL:
Biden to Limit Arctic Oil Drilling Ahead of Willow Approval
Jennifer Dlouhy, Bloomberg, March 13, 2023
President Joe Biden is limiting oil leasing in Arctic waters and sensitive areas of Alaska, taking steps to expand conservation as his administration prepares to approve a mammoth ConocoPhillips oil development in the region.
Biden is expanding an Obama-era ban on new oil and gas leasing in US Arctic waters and will write new rules barring the sale of new drilling rights across much of the National Petroleum Reserve-Alaska, where ConocoPhillips’s 600 million-barrel Willow venture is planned, the Interior Department said in a news release.
Environmentalists have been imploring the administration to go further and reject the ConocoPhillips project, citing International Energy Agency warnings that the world must forsake developing new oil and gas fields to avoid the worst consequences of global warming and shift to net zero emissions by 2050.
Senior Biden advisers have signed off on the Willow approval — one of the most significant environmental decisions yet for Biden, who campaigned on promises to shift away from fossil fuels. He also enacted the Inflation Reduction Act, a sweeping climate law that dedicates more than $360 billion to clean energy and advanced manufacturing.
New restrictions intended for the National Petroleum Reserve-Alaska could thwart future oil and gas leasing across more than 13 million acres (52,600 square kilometers) in the 23 million-acre site, which is roughly the size of Indiana.
GAS:
The World Bank May Return To Financing Natural Gas Projects
Tsvetana Paraskova, OilPrice.Com, March 13, 2023
- In 2017, the World Bank pledged that it would stop funding upstream oil and gas projects after 2019.
- On Monday, a World Bank official said that it could be open to funding natural gas projects in Mozambique to ensure the cheapest energy possible.
- World Bank data showed that only 30.6% of Mozambique’s population had access to electricity in 2020.
The World Bank could be open to funding gas projects in Mozambique to ensure greater energy access if the costs are the cheapest among energy sources, Victoria Kwakwa, World Bank Vice President for Eastern and Southern Africa, told Bloomberg in an interview published on Monday.
Back in 2017, the World Bank Group said it would no longer finance upstream oil and gas after 2019. But the group noted that “In exceptional circumstances, consideration will be given to financing upstream gas in the poorest countries where there is a clear benefit in terms of energy access for the poor and the project fits within the countries’ Paris Agreement commitments.”
In low-income Mozambique, one of the poorest countries globally, 30.6% of the population of around 32 million people had access to electricity in 2020, per World Bank data.
Kwakwa told Bloomberg that the World Bank could support Mozambique’s upstream gas development if that is the lowest-cost resource to have more people gain access to electricity and help other countries, via exports, to cut back on more polluting energy sources such as coal.
MINING:
Low-Energy Fridays: How big a difference can one mine make?
R Street Institute, March 10, 2023
Last week, R Street released new research that highlights the enormous gap between political clean energy rhetoric and the hard truth that the United States would need far more minerals to satisfy energy demand than we can feasibly produce. Feel free to dive into the study here, but one key point is that the United States needs massive quantities of minerals from new sources to satisfy clean energy demand and targets, and a relatively small number of mines end up making a big difference.
With talk of permitting reform in the news and its potential impact on mining, the ecological impact of taking massive amounts of rock out of the ground and converting it into a useful state is front and center in the public debate. But notions that all middle-America neighborhoods are going to look like a scene out of “October Sky” are out of place. There are only around a dozen major mining projects relevant for clean energy currently planned in the United States, but even one can make a big difference in mineral supply.
What is becoming clearer is that policymakers are going to have to weigh the tradeoffs of their policy decisions. No endeavor is costless and going fully green is going to require a lot more minerals.
Take the recent news about Thacker Pass, which is North America’s largest lithium deposit. The massive lithium project could supply, we estimate, 25 percent of the United States’ total demand for lithium under a net-zero emission scenario. The mine was held up by the courts after litigation against the quality of the mine’s environmental reviews, and last month the courts sided with the permitting agencies saying their documents were acceptable, and construction on the mine has just begun.
POLITICS:
Is ESG Profitable? The Numbers Don’t Lie
Mike Edleson and Andy Puzder, The Wall Street Journal, March 10, 2023
Corporations that remain neutral on social and political issues outperform companies that lean left.
Capitalists invest money, and manage companies, to do well financially. Proponents of so-called woke capitalism claim that companies can do “well” financially by doing “good” politically. The idea is that advancing a political agenda will also enhance profits and shareholder returns. Whether this does good is a matter of opinion, but whether it does well can be measured.
Woke capitalism makes its way into financial markets through an ill-defined concept known as environmental, social and governance investing. Huge investment managers use their ownership of shares to pressure companies to jump on the ESG train. But while individual investors are free to support whatever causes they wish with their dollars, those who invest other peoples’ money have a fiduciary duty to focus solely on clients’ financial interests. Thus it’s important to know whether politically focused companies actually do produce superior financial results.
To answer this question, we used research from 2ndVote Analytics Inc., a company that scores U.S. large-cap and midcap companies on their social and political engagement on five-point scale. Analytics evaluates company data on six social/political issues—the environment, education, abortion, Second Amendment rights, other basic constitutional freedoms and support for a safe civil society—and also generates a composite score. Company scores, updated quarterly, range from 1 (most liberal) to 5 (most conservative), with 3 meaning neutral or unengaged.
On average, roughly a quarter (or 221) of the S&P 900 large/mid-cap companies studied scored 3—taking no political or social stance on any of these six issues—during the period from June 30, 2021 (when the data was first available), through Jan. 31, 2023. Of the remaining companies, the political tilt was strongly to the left. More than 59% scored liberal, and under 15% conservative (with only one company higher than 4).