Today’s Key Takeaways: U.S./Iran deal could end the oil price rally. Limiting LNG exports for all the wrong reasons. Alaska mineral production value jumped 23% in 2021. Legislation introduced by Gov. Mike Dunleavy would make it easier for Alaska to explore micro-reactors, as an emissions-free energy source.
NEWS OF THE DAY:
German official: “Of course” Nord Stream 2 is an “existential threat” to Ukraine
Zachary Basu, Axios, February 7, 2022
A top German lawmaker representing Chancellor Olaf Scholz’s party told Axios that “of course” Ukraine is right to call Nord Stream 2 an “existential threat” to its security, and that past German governments were wrong to dub the pipeline a “purely commercial project.”
Why it matters: Nord Stream 2 has been a major headache for the Biden administration, which waived sanctions on the operator of the Russia-to-Germany pipeline in order to help repair relations with Berlin damaged during the Trump era.
Driving the news: Nils Schmid, the foreign policy spokesperson for the Social Democratic Party (SPD), spoke to Axios in a wide-ranging phone interview ahead of Scholz’s meeting with President Biden at the White House on Monday.
- Schmid said the visit will be a “huge opportunity” to showcase the strength of the trans-Atlantic alliance and dispel doubts about Germany’s position on Russia, which has come under fire as Moscow threatens to invade Ukraine.
- The German government has said “all options are on the table” for sanctions if Russia invades — including halting Nord Stream 2 — but has declined requests to provide Ukraine with defensive weaponry.
What they’re saying: Schmid told Axios that the German government had “for far too long” ignored the “political dimension” of Nord Stream 2, which would bypass Ukrainian territory and deprive Kyiv of billions of dollars in gas-transit fees.
- But he added that Ukraine had been “short-sighted” to continue to rely on this revenue for so many years, saying: “After all, there is no God-given right for Ukraine to have Russian gas transited through Ukrainian territory.”
- Schmid stressed that the SPD and the German government do not share the views of Gerhard Schröder, the former SPD chancellor of Germany who is chairman of the board of Nord Stream AG and a close friend of Vladimir Putin.
- Responding to Schröder’s recent accusation that Ukraine was engaging in “saber-rattling,” Schmid told Axios: “Many in the party feel uneasy about what he said. But still, there is no need to distance oneself from him every day, every morning, and every evening, because this gives too much weight to what he says.”
The big picture: Schmid said he believes “there’s a sense of understanding in Washington that Germany won’t deliver any weapons to Ukraine,” including German-origin Howitzers that Berlin has blocked NATO ally Estonia from sending to Kyiv.
- He cited Germany’s historical obligations not to send weapons to conflict zones, restrictive arms control policies and role as a mediator between Russia and Ukraine in the so-called Normandy Format.
- “There was some disappointment from Ukraine and some bullying of Germany by conservative governments within NATO, but I think that Biden and his administration know very well how important Germany can be in maintaining channels of communication with Russia,” Schmid said.
The bottom line: Schmid praised the Biden administration for its intensive consultations with European allies on the Ukraine crisis and said Scholz’s visit will show that the chancellor is a committed trans-Atlanticist: “He comes as a friend and will be received as a friend.”
OIL:
Possible Iran Nuclear Deal Could Reverse Oil Rally
Irina Slav, OilPrice.Com, February 7, 2022
- Talks between Washington and Tehran resume this week
- Expectations are that this would be the final round that would end with either a deal or a “nuclear crisis”
- Any progress on the talks would weigh on oil prices
U.S. and Iran may soon close a nuclear deal that could take the wind out of the latest oil rally’s sails, according to traders interviewed by Reuters.
The talks between Washington and Tehran resume this week, and expectations are that this would be the final round that would end with either a deal or a “nuclear crisis”, according to the U.S. side.
“This can’t go on forever because of Iran’s nuclear advances. This is not a prediction. It’s not a threat. It’s not an artificial deadline. It’s just a requirement…” said an unnamed official from the State Department who briefed media last week on the condition of anonymity.
“Given the pace of Iran’s advances, its nuclear advances, we only have a handful of weeks left to get a deal — after which point it will unfortunately be no longer possible to return to the JCPOA and to recapture the nonproliferation benefits that the deal provided for us,” the official also said.
Ahead of the final round of talks, Washington made a gesture of goodwill by restoring sanction waivers for foreign companies doing nuclear power business with Tehran to allow international cooperation in non-military nuclear energy utilization. The waiver, however, aims to also make it harder for Iran to use its nuclear sites for weapons development, Reuters noted in a report from last week.
Meanwhile, any progress on the talks would weigh on oil prices, with some noting that it was by design.
“There has been speculation that this rally was going to encourage some sanctions relief and get more Iranian oil on the market,” John Kilduff from Again Capital told Reuters.
A State Department official, however, said that nothing was certain yet, and the waiver did not mean that a deal was in the making. It was, the official said, necessary to launch technical discussions on the deal.
GAS:
Democrat Senators Are Trying To Limit U.S. LNG Exports For All The Wrong Reasons
David Blackmon, OilPrice.Com, February 6, 2022
- A group of Democrat Senators has just sent a letter pleading for the Biden Administration to limit U.S. LNG exports while the Department of Energy conducts a review of the exports and their impact on domestic prices.
- The appeal comes at a time when Europe is being crippled by sky-high energy prices, with U.S. LNG potentially providing a lifeline to help keep the lights on in the region.
- Many of the Senators which have signed off on this letter have campaigned against pipelines within their states, forcing them to import natural gas from abroad.
Just as U.S. exports of liquefied natural gas (LNG) serves as the main cog in helping keep the lights on and homes heated in Europe in this windless winter, a group of Democratic senators sends a letter to Energy Secretary Jennifer Granholm urging her and the Biden administration to take action to limit U.S. LNG exports.
In their letter, these 10 senators “…urge the Department to conduct a review of LNG exports and their impact on domestic prices and the public interest, and develop a plan to ensure natural gas remains affordable for American households. Until such a plan is completed, the Department should consider halting permit approvals of U.S. LNG export facilities.”
There are several problems with this approach. The first is that, as stated above, Europe is in desperate need of U.S. LNG this winter and likely beyond as its wind industry fails to deliver on its promises.
Second is the fact that, despite record levels of LNG exports in recent months, U.S. natural gas production continues to enjoy a steady surplus over demand for it. The U.S. price, currently standing at about $4.80 per Mmbtu at the Henry Hub, is not connected to prices for international natural gas, which in Europe is currently selling for upwards of 6 to 7 times the U.S. price.
The U.S. proven resource of natural gas is equal to hundreds of years of current consumption. Shouldn’t we as a nation should celebrate our ability to pitch in a small sliver of what we produce to help avoid a looming humanitarian catastrophe across the European continent? That crisis was brought on by the wrong-headed energy policies adopted by governments who share the general energy outlook of Granholm, Biden, and this group of senators.
Here is a list of the senators who signed this letter: Jack Reed (D-RI), Angus King (D-ME), Elizabeth Warren (D-MA), Ed Markey (D-MA), Debbie Stabenow (D-MI), Tina Smith (D-MN), Richard Blumenthal (D-CT), Patrick Leahy (D-VT), Gary Peters (D-MI), and Sheldon Whitehouse (D-RI).
Now, take a look at that list and notice the states they represent: Two of them are from Sec. Granholm’s home state of Michigan, obviously recruited by the others to elevate the priority of this letter with the Secretary, a former governor of that state. Then you have Tina Smith of Minnesota, who opposes anything the U.S. oil and gas industry does as a matter of course.
Where are the 7 other senators from? Maine, Connecticut, Massachusetts, Rhode Island, and Vermont. All New England states. This leads us to the second logical problem with this approach, where the senators get the question of the impacts of importing/exporting LNG to their constituents exactly backward.
Where high natural gas prices for utility consumers are concerned, what do all New England states have in common in recent years? They’ve all found themselves cut off from the massive natural gas supply provided by the Marcellus and Utica Shale formations of the Pennsylvania/West Virginia/Ohio and Michigan region. Why? Because their fellow Democrats in New York State, led by disgraced ex-Governor Andrew Cuomo, have refused to allow pipelines to be built across that state, which forms a land blockade from the Marcellus/Utica shale basins to New England.
Thus, we see the spectacle every winter of LNG being imported into Boston Harbor by tanker after tanker coming not from U.S. exporters, but from thousands of miles across the ocean from other exporting nations, including from 4,000 miles distant in Vladimir Putin’s Russia.
If lowering natural gas costs for their constituents were really the goal of these senators, their best, most effective approach would be advocating for the building of a few hundred miles of new pipelines across New York from Pennsylvania, rather than invoking bans that ensure the continuation of the illogical, carbon-intensive practice of bringing natural gas into Boston Harbor from 4,000 miles away in Russia.
At the end of the day, this letter to Sec. Granholm only demonstrates that these 10 senators either have no understanding of the true potential benefits involved in the import/export equation for LNG, or that they intentionally misrepresent these benefits for the U.S. and the world for purely political reasons. Neither option is especially flattering.
MINING:
Alaska mine output continues to rise
Shane Lasley, North of 60 Mining News, February 3, 2022
Mineral production value jumps 23% in 2021, expected to continue upward in 2022; Red Dog poised to be critical mine.
Alaska mines produced roughly $3.89 billion worth of nonfuel minerals last year, a 23% increase over the estimated $3.16 billion produced in the 49th State during 2020, according to Mineral Commodity Summaries 2022 published by the United States Geological Survey on Jan. 31.
The rise in Alaska mine production value is largely due to increased zinc and gold production, along with strong metals prices last year.
According to early estimates by the Alaska Division of Geological & Geophysical Surveys, Alaska mines produced roughly 1.25 billion pounds of zinc, 254 million lb of lead, 630,000 ounces of gold and 15.2 million oz silver.
“Zinc and gold continue to be close rivals for the honor of being Alaska’s most valuable mineral commodity,” Evan Twelker, senior resource geologist at Alaska DGGS, said during a Jan. 31 presentation at AME Roundup in Vancouver.
Alaska gold production, however, is expected to trend higher during 2022 due to anticipated increased output at Kinross Gold Corp.’s Fort Knox and Northern Star Resources Ltd.’s Pogo, the two highest producing gold operations in the state.
With increasing production values during 2021, Alaska edged out Florida to move up to the sixth-highest mineral producing state – behind Arizona, Nevada, Texas, California, and Minnesota.
Arizona, the top mining state in the nation, produced US$9.96 billion worth of nonfuel minerals during 2021. This output was dominated by cement, copper, molybdenum, and aggregates.
Roughly $90.4 billion of nonfuel minerals were produced in the United States last year, which is nearly a 10% jump over the $82.3 billion produced in the U.S. during 2020.
USGS says this increased output from U.S. mines reflects a bounce back in commercial construction, steel production, and the automotive industry following the COVID-related economic slowdown in 2020.
“For the metals sector, the copper, iron ore, steel, and zinc industries were particularly affected by increased demand from manufacturing,” USGS penned in its report. “For the industrial minerals sector, the largest increases in production were in cement, crushed stone, sand and gravel, and soda ash, commodities that are closely tied to the performance of the construction industry.”
American industries such as steel, aerospace, automotive and electronics that use nonfuel mineral materials created an estimated $3.32 trillion in value-added products during 2021, an 8% increase over 2020.
U.S. metal mine production in 2021 was estimated to be valued at $33.8 billion, or 23% higher than that in 2020. The principal contributors to the total value of metal mine production in 2021 were copper (35%), gold (31%), iron ore (13%), and zinc (7%).
There were 14 mineral commodities produced in the U.S. valued at more than $1 billion each. These commodities were, in order of value, crushed stone, copper, cement, gold, construction sand and gravel, iron ore, salt, lime, industrial sand and gravel, zinc, soda ash, phosphate rock, palladium and molybdenum.
USGS’ annual Mineral Commodity Summaries report is the earliest comprehensive source of mineral production data for the world. The 2022 report includes information on the domestic mining sector, government programs, tariffs, and five-year statistics on more than 90 mineral commodities that are important to the U.S. economy and national security.
“Decision-makers and leaders in both the private and public sectors rely on the crucial, unbiased statistics and data provided in the Mineral Commodity Summaries to make business decisions and determine national policy,” said USGS National Minerals Information Center Director Steven Fortier.
Critical minerals shift
The USGS Mineral Commodity Summaries continues to highlight America’s dependence on foreign countries for most of the minerals, metals, and groups of elements critical to the nation’s economy and security.
For 2020, the U.S. was dependent on imports for more than half its supply of 47 nonfuel mineral commodities and was 100% import-reliant for 17 of those.
Of the 35 minerals and groups of elements on the current critical minerals list, the U.S. is reliant on imports from more than half its supply of 29, including 100% import-reliant for 14.
The U.S. critical mineral list, however, is expected to be updated early this year.
In November, the USGS unveiled a proposed list of 50 critical minerals and metals.
While this seems to be a major jump over the 35 critical minerals on the original list published in 2018, most of the increase is from a much-needed breakdown of the rare earth elements and platinum group metals.
Listed as a single commodity on the 2018 critical minerals list, rare earths are a group of 15 individual elements, each with its own properties, uses, and markets.
The new draft list of U.S. critical minerals names 14 individual rare earths – cerium, dysprosium, erbium, europium, gadolinium, holmium, lanthanum, lutetium, neodymium, praseodymium, samarium, terbium, thulium, and ytterbium – as critical to the U.S.
This list of critical REEs includes all 15 of the lanthanides that make up the second row from the bottom on the periodic table except for promethium, which is an unstable element with a naturally occurring abundance in Earth’s crust estimated to be less than 600 grams at any given time.
Scandium and yttrium, which are often considered rare earths due to similar properties and geological affinities to the 15 lanthanides, are listed separately on both the 2018 and draft 2021 critical minerals lists.
The 2018 USGS critical minerals list also considered the group of six platinum group metals as one commodity.
The new draft list names five – iridium, platinum, palladium, rhodium, and ruthenium – as critical to the U.S.
Critical Red Dog?
While breaking up the rare earth elements and platinum group metals account for most of the U.S. critical minerals list expansion, there are two major additions – nickel and zinc.
Due to its importance to lithium-ion batteries, it is no surprise that nickel made the list.
The International Energy Agency forecasts that under a scenario where low-carbon energy generation and electric vehicles are adopted at a pace to meet the climate objectives of the Paris Agreement, nickel demand will rocket from roughly 2.4 million metric tons this year to 4.6 million metric tons by 2030 and continue climbing to 6.3 million metric tons by 2040.
This massive rise in the demand for the nickel needed for lithium-ion batteries grabbed headlines when Tesla CEO Elon Musk implored the mining sector to “please mine more nickel” during the EV manufacturer’s 2020 Battery Day event.
While not as high-profile as nickel, zinc is an important ingredient to the renewable energy revolution, as well as the Biden administration’s $1.2 trillion infrastructure bill.
An oft-overlooked industrial metal, zinc plays a central role in the low-carbon future due to its use in galvanizing renewable energy infrastructure against weathering. Zinc is particularly demanded by wind power generation, which needs about five metric tons of the galvanizing metal for every megawatt of power generating capacity, according to the IEA.
These same galvanizing qualities will be needed for the bridges, culverts, guardrails, light poles, 5G network towers, and other upgrades to be funded by the massive infrastructure bill signed into law by President Joe Biden in November.
Interestingly, the addition of zinc to the critical minerals list would make Teck Resources Ltd.’s Red Dog Mine in Northwest Alaska the largest critical minerals mine in the U.S.
Red Dog is the second-largest zinc producer in the world, and the largest in the U.S. The mine is also a significant source of germanium, a metal that is on both the 2018 and proposed 2022 critical minerals lists.
If zinc makes the final 2022 list, Red Dog would be the largest producer of critical minerals in the U.S. in terms of both quantity and value.
Following public comments on the proposed list, USGS anticipates publishing its final updated critical minerals list by the end of February.
POLITICS:
Crossing lines, Manchin endorses Murkowski’s Senate campaign
Hope Yen, Associated Press, February 6, 2022
Democratic Sen. Joe Manchin on Sunday endorsed Republican colleague Lisa Murkowski for reelection, crossing party lines to back the incumbent from Alaska who faces a primary challenger supported by former President Donald Trump.
The conservative West Virginia lawmaker said he has teamed well with Murkowski in the 50-50 Senate to build bipartisan support for legislation such as President Joe Biden’s infrastructure law. He said Alaska and the Senate are well-served with her in office.
“It’s hypocritical to basically work with a person day in and day out and then, when they’re in cycle, you’re supposed to be against them because they have an R or D by their name,” said Manchin, who appeared with Murkowski on CNN’s “State of the Union” to promote the values of bipartisanship.
“Alaska could only be so lucky to have her continue to serve them,” he said.
Murkowski faces GOP primary challenger Kelly Tshibaka, who has support from Trump and Alaska Republican party leaders but who significantly trails the incumbent in fundraising. A Democrat has yet to enter the race; the state’s last Democratic senator, Mark Begich, lost reelection in 2014.
CLIMATE CHANGE:
Small nuclear power plants promoted under governor’s bill
Linda F. Hersey, Fairbanks Daily News Miner, February 7, 2022
Will Alaska lead the nation in the adoption of small nuclear reactors?
Legislation introduced by Gov. Mike Dunleavy would make it easier for Alaska municipalities to explore small nuclear reactors, known as micro-reactors, as an emissions-free energy source.
In addition, the Copper Valley Electric Association is looking into developing a 30-megawatt micro-reactor in Valdez.
Advanced nuclear technology for the micro-reactors is under development in the United States. The Alaska Center for Energy and Power at the University of Fairbanks is leading national research into the challenges and potential opportunities of micro-reactors.
The U.S. Air Force has announced plans for a five-megawatt micro-reactor at Eielson Air Force Base, with construction to start in 2025. The micro-reactor at Eielson is expected to be fully operational in 2027. It will be the first nuclear micro-reactor at a U.S. Air Force Base.
Nuclear power will supplement heat and power now generated by the base’s 70-year-old coal plant. Eielson does not have a back-up source for steam heat.
The proposed micro-reactor would be commercially owned and licensed by the Nuclear Regulatory Commission.
The governor’s office said that modern micro-reactors operate more like a battery than a traditional power plant and can be delivered by truck to remote communities.
According to the U.S. Office of Nuclear Energy, the small portable reactors are factory-made, easy to transport and self-adjusting.
The 2019 National Defense Authorization Act required the Defense Department to build a micro-reactor and ensure it’s operational by 2027.
The U.S. military has interest in the potential of nuclear power to assure that military installations can continue operating after losing their main source of electricity.
Under Senate bill 177, introduced by the governor, Alaska communities would have greater leeway in exploring the adoption of micro-reactors.
The compact reactors have up to 5% of the power output of traditional nuclear power plants.
“For communities seeking more options to end their dependence on diesel and heating oil, we want to ensure that our statutes give them the opportunity to explore what many experts believe may be a generational leap forward in terms of clean, reliable, and cost-effective off-grid power,” Dunleavy said when he introduced the legislation.
Communities would still have jurisdiction over approving micro-reactors. The governor’s bill would:
• Define a micro-reactor based on language contained in the Infrastructure Investment and Jobs Act. Under federal definition, reactors produce no more than 50 megawatts of power and meet the standards for advanced nuclear reactor defined in federal code.
• Waive a requirement that the Legislature must approve all micro-reactor sitings. “Unlike legacy reactors which can potentially impact an entire state, a micro-reactor is a local concern whose potential impact is measured in acres, not miles,” according to a statement from the governor’s office.
Less hands-on maintenance, more automation
Developers in the U.S. are focused on gas and heat-pipe cooled designs for the micro-reactors, according to the U.S. Office of Nuclear Energy.
The modern reactors require less hands-on maintenance and fewer operators.
One early vendor based in Silicon Valley recently was turned down for licensing by the Nuclear Regulatory Commission.
A miniature nuclear reactor called Aurora was planned for Idaho by the private company called Oklo.
Since its licensing denial, the company has the opportunity to resubmit its proposal with additional information to address NRC concerns. The company has generated more than $25 million in private investment.
In Alaska, the governor’s office noted there is a long regulatory process for micro-reactors, which means that it takes several years for the plants to come online.
“The best way to describe this bill is that it ensures we’re keeping the door open to these new opportunities and indicates our willingness to work with stakeholders as this potentially game-changing technology continues to develop,” according to a statement from the governor’s office.