Today’s Key Takeaways: Read the fine print in the new infrastructure bill – bureaucrats are making it more difficult to build new highways. AKLNG project improvements have reduced cost of supply 43%, which competitively positions Alaska LNG ahead of U.S. Gulf Coast LNG projects. Key democrats agree that when it comes to climate change legislation “Manchin should have the pen, we should respect that whatever he wants to do will be reasonable and ultimately be historic.”
NEWS OF THE DAY:
Highway Funding Bait-and-Switch
The Editorial Board, The Wall Street Journal, January 31, 2022
The Biden DOT puts restrictions on new federal highways.
If you hoped President Biden’s infrastructure spending might bring a smoother drive to an area near you, it’s worth reading the latest fine print. Before funds are disbursed, bureaucrats are attaching strings that make it far more difficult to build new highways.
The restrictions come from a memo last month from the Federal Highway Administration (FHWA). The Transportation Department agency is fielding infrastructure project proposals from states and cities, and it has sway over regulatory approval. Deputy Administrator Stephanie Pollack advised staff on the types of projects they should give the red light.
According to the memo, proposals should be sent to the bottom of the pile if they “add new general purpose travel lanes serving single occupancy vehicles.” She means cars. That includes construction of new roads and highways, or expansions of existing ones. States and cities that need new capacity will take a back seat to those seeking upgrades.
This guidance is a bait-and-switch on Congressional Republicans who backed the infrastructure deal mainly because it would expand and improve surface transportation. House Democrats led by Transportation Committee Chairman Peter DeFazio wanted similar limits on new building in the version of the bill they passed, but Senate Republicans kept those limits out of the final draft. Rep. DeFazio staged a public tantrum, but he had to accept it.
Now highway skeptics in the Transportation Department are imposing restrictions like those that failed to pass Congress. Road construction will also be tied up by environmental reviews. Republicans tried to pre-empt the red tape by including the One Federal Decision framework in the infrastructure bill. The policy imposes a 90-day limit on approval for projects reviewed under the National Environmental Policy Act (NEPA).
But the FHWA is doubling down on other green restrictions. Its memo declares that any project requiring a new right of way is ineligible for a fast-tracked NEPA review. States planning to widen clogged highways using federal funds could face months or years of scrutiny. We warned that the bill’s permitting reforms were insufficient, and here we are.
The restrictions will likely fall hardest on red states. Fast-growing areas in the Sunbelt and Northwest need highway extensions to improve local commuting and commerce.
Take North Dakota, where traffic on the Highway 85 corridor has caused an increase in fatalities. The state transportation department plans to widen part of the two-lane route with new federal funds, but the new restrictions could jam up the process. Texas also needs new interstate highway capacity, especially north from Laredo and from the Rio Grande Valley to the Houston area.
Disdain for highways is common among progressive regulators, who see blocking road improvements as a virtue that will assist mass transit and climate-change goals. Upon her appointment as the interim highway administration leader, Ms. Pollack promised “an agency that supports people rather than a singular mode of transportation.” Her boss, Transportation Secretary Pete Buttigieg, has said that traditional highway designs are racist.
States and cities will continue to seek highway expansions, and some may secure funding. But don’t be surprised when federal agencies continue to steer “bipartisan” infrastructure funds toward progressive priorities.
Oil Groups Aren’t Happy with GOM Lease Sale Court Ruling
Andreas Exarheas, Rigzone, January 31, 2022
Oil groups reacted to a court ruling to annul the record of decision for Gulf of Mexico Lease Sale 257.
Oil groups have reacted to a court ruling to annul the record of decision for Gulf of Mexico Lease Sale 257, which was described in court papers as “the largest offshore oil and gas lease in U.S. history”.
“This ruling is yet another example of the increasing policy and legal uncertainty that is jeopardizing the future of American energy leadership and leading to greater dependence on foreign energy sources that result in higher emissions,” the American Petroleum Institute (API) SVP of policy, economics and regulatory affairs – Frank Macchiarola – told Rigzone.
“While we are disappointed by the court’s ruling to vacate the only federal oil and gas lease sale offered last year, we urge the administration to implement policies that encourage continued leasing and development in the Gulf of Mexico, which is critical for meeting demand for affordable energy while generating billions in government revenue for conservation programs,” Macchiarola added.
“At a time when demand is outpacing supply and energy costs are a top concern for Americans, we should be encouraging the development of our domestic energy resources, not sending signals that disincentivize U.S. production,” the API SVP continued.
Responding to the ruling, the Independent Petroleum Association of America’s (IPAA) EVP Dan Naatz told Rigzone, “IPAA is disappointed with the court’s decision and hopes the Biden Administration will appeal this misguided ruling,”.
“Offshore oil and natural gas production plays an important role in America’s energy picture and is done in a safe manner that protects the environment. At a time when the world needs the United States to continue to be an energy superpower … [this] decision only clouds the energy picture at home and abroad,” Naatz added.
The Louisiana Oil & Gas Association (LOGA) President, Mike Moncla, said, “Judge Contreras’ decision to ‘throw out’ the last lease sale is disappointing for industry, but even a bigger blow to the American consumer”.
“This administration continues to make decisions that increase energy costs on Americans. In just one year in office, President Biden’s energy policies (or lack thereof) have more than doubled oil, natural gas and gasoline prices,” Moncla added in the statement.
“LOGA will continue to fight for actual policy that puts Americans to work while also providing affordable, reliable, and abundant energy to our nation,” Moncla continued.
Also commenting on the court decision, National Ocean Industries Association (NOIA) President Erik Milito said, “at a time of geopolitical uncertainty and rapidly rising energy prices, U.S. oil and gas production is more important than ever to curb inflation and to fortify our national security”
“The U.S. offshore region is vital to American energy security and continued leases are essential in keeping energy flowing from this strategic national asset. Uncertainty around the future of the U.S. federal offshore leasing program may only strengthen the geopolitical influence of higher emitting – and adversarial – nations, such as Russia,” Milito added.
“American investment, jobs, and infrastructure development continue to suffer because of the continued expansion of the bounds of the National Environmental Policy Act by the judiciary. It will be incumbent on the Administration to defend responsible U.S. offshore production and to take the necessary steps, including the development of a new U.S. offshore oil and gas leasing program, to ensure continued leasing and energy production from the U.S. Gulf of Mexico, for the benefit of all Americans,” Milito went on to say.
When the Department of the Interior (DOI) was asked to comment on the court ruling, Melissa Schwartz, a communications director at the DOI, told Rigzone, “as the Department has stated previously, to comply with the injunction imposed in the District Court of Louisiana litigation we were compelled to proceed with Lease Sale 257 based on the previous administration’s environmental analysis and its decision to approve the lease sale”.
“We are reviewing the court’s decision concerning deficiencies in that record … Our public lands and waters must be protected for generations to come. We have documented serious deficiencies in the federal oil and gas program,” Schwartz added.
“Especially in the face of the climate crisis, we need to take the time to make significant and long overdue programmatic reforms. Our work will be guided by the law, science and sound policy. That’s why the President called for a pause on leasing in his Executive Order, and why we are appealing the decision enjoining implementation of the pause,” Schwartz went on to say.
NEW REPORT: ALASKA LNG COST BEATS ASIAN MARKET LNG COMPETITORS
Independent Analysis Confirms 43% Cost Reduction Positions Alaska LNG Ahead of U.S. Gulf Coast LNG Providers
Today the Alaska Gasline Development Corporation (AGDC) released a new report by the respected global research firm Wood Mackenzie concluding that project improvements have enabled Alaska LNG to reduce the cost of supply by 43%, which competitively positions Alaska LNG ahead of U.S. Gulf Coast LNG projects. The report, “Alaska LNG Competitiveness Analysis,” is available online at AGDC.us.
During the past five years AGDC obtained Federal project authorization, reduced project construction costs by 12%, and implemented a new project finance structure utilizing third-party tolling. Wood Mackenzie calculates that these changes, along with a reduction in the expected natural gas purchase cost, reduce Alaska LNG’s cost of supply to Asia to $6.70 per Metric Million British Thermal Unit (MMBtu), a 43% reduction, while delivering a market-rate return. This new potential cost of supply falls below the expected price from Gulf Coast projects targeting the same Asian markets.
Alaska Governor Mike Dunleavy said, “Alaska LNG holds tremendous economic development and environmental promise. Natural gas will be a reliable and responsible energy keystone for decades to come, and Alaska LNG is well positioned for success. We are closer now, more than ever, to realizing the decades-old dream of bringing our natural gas off the North Slope for the benefit of Alaskans and worldwide markets.”
AGDC President Frank Richards added, “As our work continues to transition Alaska LNG to a privately led project team, this economic analysis demonstrates that Alaska LNG can deliver LNG at competitive prices. This report comes on the heels of the recent climate study that determined Alaska LNG will reduce Greenhouse Gas Emissions by 77 million metric tons of carbon, a fifty percent reduction for a typical coal energy supply chain and adds further momentum to our progress.”
Wood Mackenzie forecasts that LNG demand growth remains robust beyond 2050, driving LNG prices higher. The report cites expected Japanese spot prices of $8 per unit, above Alaska LNG’s cost of supply. LNG demand will outstrip available supply within six years, strengthening the need for new projects like Alaska LNG, according to the firm.
Wood Mackenzie’s analysis identifies opportunities for further Alaska LNG cost reductions, including the $26 billion Alaska LNG federal loan guarantee included in the infrastructure legislation signed into law in November 2021, and implementing tax reforms that bring Alaska in line with other U.S. jurisdictions.
Alaska LNG sponsors commissioned a similar Wood Mackenzie analysis in 2016 which concluded that Alaska LNG required changes like those listed in the new report to become competitive.
Millrock generates Alaska gold projects
Shane Lasley, North of 60 Mining News, January 27, 2022
As a project-generating exploration company, Millrock Resources Inc. identifies and secures grassroots mineral projects and brings on partners to fund the high-risk early stages of exploration. In recent years, many of these have been with Australian companies intrigued by Alaska’s rich and underexplored mineral potential.
During 2021, Millrock was actively working with two such Aussie explorers on Alaska gold projects – Felix Gold Ltd. in the Fairbanks Mining District and Resolution Minerals Ltd. in the Goodpaster Mining District.
Newly formed Felix Gold entered into a strategic alliance with Millrock on several projects – Treasure Creek and Ester Dome near the Interior Alaska city of Fairbanks, plus the Liberty Bell project about 70 miles to the southwest.
Situated about 13 miles west of Kinross Gold Corp.’s Fort Knox Mine, Treasure Creek hosts numerous prospects with interesting drill intersections reported by prior workers. Roughly 2,000 soil samples were collected to further delineate drill targets at four prospects – NW Array, Big Birch, Old Dog, and Pipeline.
Located about five miles south of Treasure Creek, the Ester Dome property is home to the past-producing Grant gold mine.
According to a calculation completed in 2008, Ester Dome hosts 613,600 tons of indicated resource averaging 0.21 oz per ton (126,000 oz) gold; and 2.55 million metric tons of inferred resource averaging 0.08 oz/t (214,100) gold.
Felix is evaluating this resource to determine what, if anything, needs to be done to bring the estimate up to date and in compliance with the Australian Joint Ore Resources Commission (JORC) standards for resource calculations.
Over the course of the 2021 season, the partners expanded Felix Gold‘s already large landholdings in the Fairbanks District with agreements on two additional properties – GST and Bank.
Millrock says GST appears to cover the eastern strike extent of geological structures that control gold mineralization on Freegold Venture Ltd.’s Golden Summit project.
Bank, which includes the Treasury and Vault claims that border the Golden Summit and Fort Knox properties, hosts a number of interesting gold occurrences.
While Felix and Millrock evaluate the very large land package they have accumulated in the Fairbanks district, Resolution is drilling targets at 64North, a roughly 160,000-acre land package surrounding Northern Star Resources Ltd.’s Pogo gold mine in the Goodpaster district.
Under a deal signed at the end of 2019, Resolution has the option to earn up to a 60% interest in this large land package by investing US$20 million in exploration spending over four years.
Upon earning a 60% interest on the entire 64North project, Resolution will have the option to increase its interest on one of nine claim blocks that make up the larger project – West Pogo, Shaw, Eagle, LMS-X, South Pogo, East Pogo, North Pogo, Last Chance, and Divide – by funding a feasibility study and Millrock’s portion of mine development on the selected block.
By mid-2021, Resolution had invested enough to earn a 42% interest in 64North.
In addition to attracting Aussie explorers, Millrock cut a deal with Coeur Mining Inc. for exploration of the Apex gold project in Southeast Alaska.
Located about 70 miles southwest of Juneau, Apex is home to the historical Apex and El Nido mines, which produced at least 34,000 oz of gold from ore averaging around 1 oz/t gold during sporadic operations between 1922 and 1940.
Surface exploration was done by WGM Inc. in the 1980s, but no drilling was conducted, and the property has been dormant until Millrock secured an option on the core claim group in 2016.
“From historic documents, we know that high-grade gold ore was previously mined, but there has never been a single exploratory hole drilled,” said Millrock Resources President and CEO Greg Beischer. “It seems likely that the known high-grade gold-bearing quartz veins will continue along strike and in the down-dip direction.”
Under the agreement, Coeur will be responsible for making cash payments and funding exploration expenditures to keep an option agreement with the underlying landowner, Apex El Nido Gold Mines, in good standing.
Millrock is carrying out the exploration on the Apex property under a services agreement with Coeur.
Soil sampling carried out last year focused on tracing the mineralized structure and refining vein locations in anticipation of a 2022 drilling program at the high-grade gold project.
Millrock’s Alaska portfolio also includes Liberty Bell, a road-accessible project about 70 miles southwest of Fairbanks that is prospective for copper-gold porphyry and associated gold deposits; and Chisna, a gold-copper-silver project about 75 miles southeast of Goodpaster.
From the Washington Examiner, Daily on Energy:
DEMOCRATS SOUND INCREASINGLY WILLING TO TAKE WHAT MANCHIN GIVES: A number of liberal Democrats quoted in the Wall Street Journal yesterday seem to be making their peace with the fact that the party cannot pass major climate legislation without Sen. Joe Manchin’s assent.
“Manchin should have the pen, we should respect that whatever he wants to do will be reasonable and ultimately be historic,” said Congressional Progressive Caucus member Ro Khanna of California.
Manchin has signaled support for roughly $550 billion in clean energy incentives. It would be other major Democratic initiatives that would be most likely to be left out of whatever the West Virginian supports.
Alaska kids’ climate case rejected by state Supreme Court
Lesley Clark, CLIMATEWIRE, January 31, 2022
The Alaska Supreme Court last week rejected a lawsuit by 16 young Alaskans who charged that the state’s support for fossil fuel production has contributed to climate change and is violating their constitutional rights.
In a 3-2 decision, the Supreme Court said Friday that the lawsuit raised “compelling concerns about climate change, resource development, and Alaska’s future.”
But it said the Anchorage Superior Court got it right when it dismissed the lawsuit in 2018, finding that it raised “political questions” better left to the executive branch and state Legislature.
The lawsuit, the decision says, asks the court “to jettison the constitutional mandate that the legislature manage natural resources in the public interest and for the maximum benefit to Alaskans collectively.”
It was signed by Chief Justice Daniel Winfree, along with Justices Joel Bolger and Craig Stowers, who are both retired and no longer on the bench. The court heard oral arguments in the case in October 2019 (Climatewire, Oct. 10, 2019).
Justice Peter Maassen dissented, along with Justice Susan Carney, who dissented in part, arguing that the state’s constitution includes recognition of a healthy climate.
“A balanced consideration of prudential doctrines requires that we explicitly recognize a constitutional right to a livable climate — arguably the bare minimum when it comes to the inherent human rights to which the Alaska Constitution is dedicated,” Maassen wrote in the dissent.
The case is one of several state-level climate cases supported by Our Children’s Trust, an Oregon-based public-interest law firm that has brought similar suits across the country. One of its main arguments is that state governments have a duty to protect the climate.
Julia Olson, chief legal counsel for Our Children’s Trust and lead counsel in its highest-profile case, Juliana v. United States, called the split Alaska decision a “2-1 win” from the sitting justices on the court — given that two of the justices in the majority opinion have stepped down from the court.
“And one day soon, it will be the majority opinion,” Olson said. “More and more judges around the country and the world are finally embracing their constitutional role to be a check on the political branches of government that are destroying the planet and lives of children.”
The 9th U.S. Circuit Court of Appeals last February declined to reconsider Juliana after a three-judge panel of the circuit dismissed it in 2020 — finding that the case raised questions for the “political branches” of government, rather than the courts. Our Children’s Trust is now arguing for the chance to revise the original complaint and get the case to trial. (Climatewire, Dec. 1, 2021).
Andrew Welle, lead counsel for the Alaska youths, who include Alaska Natives, said his clients are “resolute in their quest for climate justice” and plan to evaluate their next steps.
The two dissenting justices wrote that “litigation over the government’s role in addressing climate change is still in its infancy, and more challenges to state action based on its potential for worsening the crisis are not just likely but certain, regardless of how we resolve this case.”
The plaintiffs —16 children and young adults aged 5 to 20 — filed the case in October 2017. It argued that climate change has had a negative effect on the state and threatens their existence.
The case is Sinnok v. Alaska.