AK Oil Patch Hardest Hit. Slippery Slope on Pipelines. EV affordability threatened.

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AK Oil Industry Hit Hardest With Job Loss
Elwood Brehmer, Alaska Journal of Commerce, April 14, 2021

Alaska’s economy isn’t getting worse, but it could also be a long way from substantial improvement.

University of Alaska Anchorage Institute for Social and Economic Research economist Mouchine Guettabi said many of the indicators showing improvements in recent months are more tied to the normal seasonality of the state’s economy and less about a recovery from the forces of the pandemic.

“Our losses ballooned over the summer and then shrunk back down in fall and the winter. That doesn’t mean things are getting better; it just means that we’re losing, or had, fewer jobs in the economy,” Guettabi told a virtual audience during a presentation hosted April 9 by the Alaska policy think-tank Commonwealth North.

“I’ll summarize with a very technical term and say the labor market is incredibly ugly and really there are no great signs of an organic recovery or things getting back to normal.

“That’s kind of the worrisome part.”

According to the latest data available from the state Labor Department, Alaska remained down 22,300 jobs in February, or about 7 percent fewer wage and salary jobs than at the start of the pandemic.

The situation is worse when looking strictly at the private sector, which had shrunk by 8.6 percent year-over-year as of February. The oil industry has been hardest hit, having lost 3,900 jobs — nearly 40 percent — over the past year.

Alaska’s job losses peaked in June when there were roughly 47,000 fewer jobs than a year prior.

The state added 7,000 jobs in February, according to preliminary data from the Labor Department, which is very consistent with a longstanding trend of job growth to start the year.

Initial unemployment claims have fallen from a peak of 33,312 last April to 2,195 in February, which is in-line with pre-pandemic levels. However, continuing claims have stabilized at approximately 31,000 to 33,000 in recent months, which is still three times greater than pre-pandemic levels, according to the Labor Department.

Alaska’s gross product, or GDP, also fell by approximately $4.1 billion, or 7.5 percent, to $50.2 billion last year, according to figures from the Federal Reserve Bank of St. Louis.

“We are nowhere near a return to normalcy,” Guettabi said of Alaska’s unemployment numbers, later adding “It’s important to remember the economy was not humming before this.”

State Labor economist Neal Fried also said in an interview that some economists are predicting the Lower 48 economy will “roar” back in the second half of the year and nearly return to pre-pandemic levels, but such a scenario is unlikely here.

“How long it takes us to get back to the 2015 (employment) high — that’s so far into the future I refuse to even take a guess,” Fried said, referencing the state’s prior recession that ended with very modest growth in 2019.

Despite the job losses in 2020, Alaskans have on the whole, seen their collective income increase by roughly $1.4 billion over the past year thanks to the federal funds, mostly in the form of direct stimulus payments and greatly expanded unemployment assistance, he noted.

“As bad as things are the majority of people have kept their jobs and are in a better financial situation than a year ago,” he said.

Guettabi also highlighted that while some individuals receiving the initial federal unemployment boost of $600 per week on top of state benefits saw a several-month increase in their income over their prior wages, approximately a dozen subsequent research papers were unable to identify any broad link between the higher level of unemployment income and job hunting.

“Because of the pandemic there is very little association at the aggregate level between the boost of (unemployment) payments and the decision to seek employment,” he said.

The contradictory nature of widespread job losses and overall income growth exposes the need for continued aid that is highly targeted in an effort to make it as effective as possible, according to Guettabi.

“Dollars that are coming in, when they go to households that don’t need them right now, are not necessarily making it into the economy, so things like boosting unemployment insurance for people that need it or helping local governments or helping local businesses makes more sense when you identify exactly that need,” Guettabi said. “Business failure can cripple a recovery.”

By the end of the year, he expects Alaska’s economy to grow very slightly versus 2020, with most of the improvement coming in the service sector from the kind of spending many folks have largely given up over the past year.

Anchorage Economic Development Corp. forecasted in January that Alaska’s largest city would add approximately 4,000 jobs this year, but that was before Canadian government officials extended their prohibition on large cruise ships in the country’s ports through the coming summer, leaving the foundational element of Alaska’s tourism industry — which reaches Anchorage — in-limbo again.

For much of Southeast the prospect of any level of rebound is likely to depend on whether or not large cruise ships sail the Inside Passage at all this year, Guettabi noted.


Interior further delays Trump rule that would make drillers pay less to feds
Rachel Frazin, The Hill, April 14, 2021

The Biden administration is adding an additional delay to a rule that is expected to lessen the amount companies that drill on public lands and in public waters pay in fees to the federal government.

The rule, which was finalized in January and previously delayed until this Friday, will now be halted until Nov. 1, according to a department spokesperson. 

During the delay period, the department’s Office of Natural Resources Revenue will weigh whether to revise or withdraw the prior rule, and possibly propose a new one in its place. 

“In its final days, the previous administration sought to shortchange American taxpayers for the resources that oil and gas companies extract from public lands,” an Interior spokesperson said in a statement. 

“The Department of the Interior is delaying the rule’s effective date in order to provide the Office of Natural Resources Revenue with needed time to consider whether it will revise or withdraw the 2020 rule and, if so, publish a proposed rule and invite further public comment,” the spokesperson added. 

The rule changed the way that royalties companies pay to the government for drilling on federal property is calculated and was expected to decrease how much the government collects by $28.9 million each year. 

This amounts to less than 0.5 percent of the total federal oil and gas royalties it collected in 2018, the rule notes. 

When he proposed the rule in August, then-Interior Secretary David Bernhardt said in a statement that it would provide “regulatory certainty and clarity to States, Tribes and stakeholders, removing unnecessary and burdensome regulations for domestic energy production.”

The rule’s promulgation followed a request from a leading industry lobbying group, the American Petroleum Institute, for changes to how royalties are calculated. 

In February, the department put an initial delay on the rule and started a 30-day comment period to allow for “additional engagement.” The spokesperson said that this comment period spurred 1,300 pages worth of documents.


Republicans warn about slippery slope on pipelines
Jeremy Dillon, E & E News, April 14, 2021

House Republicans warned yesterday that motivations behind the White House’s action to cancel the controversial Keystone XL pipeline have the potential to affect other pipeline networks caught in the midst of environmental backlash.

During a virtual forum yesterday, Energy and Commerce Republicans pointed to Enbridge Inc.’s Line 5, which crosses under the Straits of Mackinac in the Great Lakes.

“Remember, Keystone is but one of many pipeline projects under the microscope,” said Rep. David McKinley (R-W.Va.), ranking member of the Environment and Climate Change Subcommittee. “Others like the Dakota Access pipeline, Mountain Valley pipeline and Line 5 in Michigan also face an uncertain future.”

Line 5 carries up to 23 million gallons of oil and natural gas liquids per day from Superior, Wis., to Sarnia, Ontario, and has operated for decades. But a structural problem last year made it vulnerable to critics.

Line 5 drew heightened attention after the company discovered an anchor support had shifted deep below the water surface. The pipeline was shut down while Enbridge ensured its integrity.

Michigan Democratic Gov. Gretchen Whitmer directed Enbridge to shut down the pipeline by the middle of May over alleged failures to meet public easement permit requirements.

The company has denied any wrongdoing and plans to continue operations, saying the Pipeline and Hazardous Materials Safety Administration has allowed the conduit to stay online.

Rep. Tim Walberg (R-Mich.) was among 14 House Republicans who pressed the White House last month against giving in to pressure from environmental groups. They pointed to the pipeline’s economic contributions (E&E News PM, March 10).

“It’s important to let the American people know what’s at stake here,” Walberg said yesterday. “This isn’t politics. This is life.”

The Biden administration has not weighed in on the Line 5 controversy and has largely avoided further pipeline skirmishes like the Keystone XL decision.

Last week, it opted to let the Dakota Access pipeline continue to run despite a court ruling finding deficiencies in the Trump administration environmental review.

The Keystone XL cancellation was a day one campaign promise for President Biden as part of his broader agenda to combat climate change.

The move undid a Trump-era executive order directing the State Department to grant the needed cross-border permit. That order contradicted an earlier Obama administration decision to reject KXL.

Republicans have attempted to paint the project’s cancellation as hurting the economy, national security, and the environment.

“Killing the Keystone XL pipeline doesn’t stop the oil; it just means that it will be transported by rail and truck, increasing emissions,” said Rep. Kelly Armstrong (R-N.D.).


Skyrocketing metal prices threaten to hinder EV affordability
Bloomberg News, April 14, 2021

A surge in demand for electric vehicles is sending the price of raw materials soaring, threatening to slow the push toward making cheaper batteries that are key to more widespread adoption.

Lithium, the mainstay for rechargeable power packs used in EVs, is roaring back after a three-year slump in prices, while cobalt surged about 57% last quarter. Nickel jumped to a more-than six-year high earlier this year on optimism about the clean energy transition, though fell in March on plans by a top Chinese producer to beef up its battery business.

China is the biggest player in EV batteries, with the majority of the world’s capacity, and has a stranglehold over the processing of crucial battery materials. With demand building, producers are striving to make cheaper batteries — the most expensive components of EVs, accounting for about 30% of the total cost.

“If lithium and other high-cost inputs, such as cobalt and nickel, enter periods of sustained higher pricing, this would eventually take its toll on the ability of battery producers to keep lowering costs,” according to Cameron Perks, a senior analyst at Benchmark Mineral Intelligence.

The average price of a lithium-ion battery pack dropped to $137/kWh in 2020, according to a BloombergNEF survey last year. A decade ago, they were sold for over $1,000. EVs are expected to start reaching price parity with internal combustion cars when the price touches $100/kWh.

“If raw material prices were to rise to 2018 levels, we expect it would only delay the point at which battery pack prices reach below $100/kWh by around two years, meaning it will be delayed from 2024 to 2026,” according to James Frith, an analyst at BloombergNEF.

The urgency is being felt out in the market. Gotion High-Tech Co. Ltd., China’s fifth-biggest battery producer, said it has been seeking to secure upstream lithium supply to stabilize raw material costs and was also improving production processes and technology to counter the impact of higher input costs. “While a surge in lithium will not derail electrification, it may create resistance to lowering battery prices in the near term,” it said.

Input costs

A wholesale shift away from lithium and other high-cost materials would not be realistic in the short term, “but efforts to thrift or develop alternative chemistries may accelerate,” Benchmark Mineral’s Perks said.

The battery sector has already tried to raise the energy density of cathodes and change the composition so that it uses fewer expensive materials. Some cars in China have returned to lithium-iron-phosphate (LFP) batteries, which are simpler to manufacture and use lower-cost ingredients. Others might eye investing up along the EV supply chain or ultimately, passing on the costs to consumers.

For Ezgo Technologies Ltd., a Chinese electric-bike firm, production costs have been pushed higher on the back of elevated raw material prices since last year, according to Ye Jianhui, chief executive officer of the U.S.-listed company. Prices of its electric bikes have climbed on average about 5% to 10%, Ye said in an interview last month.

Lithium shortfall

Demand for lithium-ion batteries is expected to surge tenfold by 2030, according to BloombergNEF. Meanwhile, Benchmark Mineral expects a structural deficit for lithium could emerge as soon as late 2021 and increase to 120,000 tons in 2022, according to Perks.

Macquarie Group Ltd. said its bullish view for global electric vehicle demand had transformed the outlook for the lithium market. The supply response to surging demand for lithium “is likely to disappoint”, limited by rising product-quality requirements, the bank said in a note Monday, and lifted its lithium price forecasts through 2025.

Underinvestment in new mines and refineries amid the price downturn has contributed to an expected shortfall in lithium. Still, any project developments might not immediately translate to availability in supply, meaning the tightness in the market may see more upswing.

“The critical factor in respect to lithium is also the ability to refine this new, or flexible capacity, to battery-grade specifications,” said Perks. “This isn’t something the industry has a strong track record of delivering on.”


U.S. imposes sweeping sanctions targeting Russian economy
Zachary Basu, Dave Lawler, Axios, April 15, 2021

The Biden administration announced it will sanction dozens of Russian officials and entities, expel 10 diplomats from the U.S., and set new restrictions on buying Russian sovereign debt in response to the massive SolarWinds hack of federal agencies and interference in the 2020 election.

Why it matters: The sweeping acts of retaliation are aimed at imposing heavy economic costs on Russia, after years of sanctions that have failed to deter an increasingly aggressive and authoritarian President Vladimir Putin.

Details: The administration formally accused Russia’s Foreign Intelligence Service (SVR) of carrying out the SolarWinds hack, which Microsoft President Brad Smith has called “the largest and most sophisticated attack the world has ever seen.” The intelligence community said it has “high confidence” in the assessment.

  • The package of sanctions will bar U.S. banks from buying Russian government bonds directly from the country’s central bank, sovereign wealth fund and ministry of finance beginning June 14, complicating Russia’s ability to raise money in international capital markets.
  • A senior administration official told reporters the move would create a “broader chilling effect” that will weaken the ruble and have negative implications for inflation and economic growth.
  • Six Russian technology companies will be sanctioned for providing support for Russian intelligence’s cyber activities, while 32 entities and individuals will be designated for their role in the Kremlin’s election interference campaign.
  • Ten Russian officials will also be expelled from the U.S. A senior administration official said their activities in the U.S. had been “inconsistent” with their diplomatic status, in a signal that they were suspected spies.
  • Another senior administration official noted that the U.S. was taking additional steps which would “remain unseen.”

In partnership with the European Union, the United Kingdom, Australia, and Canada, the U.S. will also sanction eight individuals and entities for their role in Russia’s ongoing occupation of Crimea.

  • Thursday’s sanctions will not be tied to allegations that Russia paid Afghan militants to attack U.S. troops. A senior administration official said U.S. intelligence had only “low to moderate confidence” that Russia had made such payments because of the “challenging operating environment” in Afghanistan.
  • The administration said that “given the sensitivity of the matter,” it would be “handled through diplomatic, military and intelligence channels.”

The big picture: On his second day in office, Biden ordered the intelligence community to conduct a review into Russia’s “reckless and adversarial actions” spanning four areas: election interference, the SolarWinds hack, the poisoning and jailing of opposition leader Alexei Navalny, and reports of Russian bounties on U.S. troops in Afghanistan.

  • The U.S. sanctioned seven senior Russian officials in March after assessing “with high confidence” that Federal Security Service (FSB) officers poisoned Navalny using the nerve agent Novichok.
  • Two weeks later, U.S. intelligence released a report assessing that Putin authorized election influence operations aimed at denigrating Biden’s candidacy.

Driving the news: The announcement comes two days after President Biden held a phone call with Putin and proposed a summit “in a third country in the coming months.”

  • Biden also warned Putin against further “cyber intrusions and election interference” and raised concerns over Russia’s massing of forces on the border with eastern Ukraine, which CIA Director William Burns said Wednesday is now large enough for a “limited military incursion.”
  • A senior administration official said it was unclear whether Putin would accept Biden’s summit proposal, but that it was “vital” for the two to meet in the coming months “to find a stable and predictable way forward.”
  • “We have no desire to be in an escalatory cycle with Russia,” the official said, while adding that the U.S. reserved the right to respond to any Russian reaction to Thursday’s moves.

The other side: “We condemn any sanction aspirations. We believe they are illegal. In any case, the principle of reciprocity applies in this case. Reciprocity will meet our interests in the best possible way,” Kremlin spokesman Dmitry Peskov said Thursday.

  • U.S. Ambassador to Moscow John Sullivan was summoned to the Russian foreign ministry, spokeswoman Maria Zakharova said at a briefing Thursday.

Worth noting: Despite the fact that the U.S. is itself highly active in cyber espionage, a senior administration official said it was appropriate to respond to the SolarWinds attack because of its “broad scope and scale,” the possibility that networks could be degraded “in the blink of an eye,” and because the burden fell largely on the private sector.


Big business seeks unified, market-based approaches ahead of climate summit
Ross Kerber, Simon Jessop, Reuters, April 14, 2021

Corporate executives and investors say they want world leaders at next week’s climate summit to embrace a unified and market-based approach to slashing their carbon emissions.

The request reflects the business world’s growing acceptance that the world needs to sharply reduce global greenhouse gas emissions, as well as its fear that doing so too quickly could lead governments to set heavy-handed or fragmented rules that choke international trade and hurt profits.

The United States is hoping to reclaim its leadership in combating climate change when it hosts the April 22-23 Leaders Summit on Climate.

Key to that effort will be pledging to cut U.S. emissions by at least half by 2030, as well as securing agreements from allies to do the same.

“Climate change is a global problem, and what companies are looking to avoid is a fragmented approach where the U.S., China and the E.U. each does its own thing, and you wind up with a myriad of different methodologies,” said Tim Adams, chief executive of the Institute of International Finance, a Washington-based trade association.

He said he hopes U.S. President Joe Biden and the 40 other world leaders invited to the virtual summit will move toward adopting common, private-sector solutions to reaching their climate goals, such as setting up new carbon markets, or funding technologies like carbon-capture systems.

Private investors have increasingly been supportive of ambitious climate action, pouring record amounts of cash into funds that pick investments using environmental and social criteria.

That in turn has helped shift the rhetoric of industries that once minimized the risks of climate change.

The American Petroleum Institute, which represents oil companies, for example, said last month it supported steps to reduce emissions such as putting a price on carbon and accelerating the development of carbon capture and other technologies.

API Senior Vice President Frank Macchiarola said that in developing a new U.S. carbon cutting target, the United States should balance environmental goals with maintaining U.S. competitiveness.

“Over the long-term, the world is going to demand more energy, not less, and any target should reflect that reality and account for the significant technological advancements that will be required to accelerate the pace of emissions reductions,” Macchiarola said.

Labor groups like the AFL-CIO, the largest federation of U.S. labor unions, meanwhile, back steps to protect U.S. jobs like taxing goods made in countries that have less onerous emissions regulations.

AFL-CIO spokesman Tim Schlittner said the group hopes the summit will produce “a clear signal that carbon border adjustments are on the table to protect energy-intensive sectors.”


Automakers, whose vehicles make up a big chunk of global emissions, are under pressure to phase out petroleum-fueled internal combustion engines. Industry leaders General Motors Co and Volkswagen have already declared ambitious plans to move toward selling only electric vehicles.

But to ease the transition to electric vehicles, U.S. and European automakers say they want subsidies to expand charging infrastructure and encourage sales.

The National Mining Association, the U.S. industry trade group for miners, said it supports carbon capture technology to reduce the industry’s climate footprint. It also wants leaders to understand that lithium, copper, and other metals are needed to manufacture electric vehicles.

“We hope that the summit brings new attention to the mineral supply chains that underpin the deployment of advanced energy technologies, such as electric vehicles,” said Ashley Burke, the NMA’s spokeswoman.

The agriculture industry, meanwhile, is looking for market-based programs to help it cut its emissions, which stack up to around 25% of the global total.

Industry giants such as Bayer AG and Cargill Inc have launched programs encouraging farming techniques that keep carbon in the soil.

Biden’s Department of Agriculture is looking to expand such programs and has suggested creating a “carbon bank” that could pay farmers for carbon capture on their farms.

For their part, money managers and banks want policymakers to help standardize accounting rules for how companies report environmental and other sustainability-related risks, something that could help them avoid laggards on climate change.

“Our industry has an important role to play in supporting companies’ transition to a more sustainable future, but to do so it is vital we have clear and consistent data on the climate-related risks faced by companies,” said Chris Cummings, CEO of the Investment Association in London.