NEWS OF THE DAY:
Energy crisis tests Biden’s clean electricity agenda
Lesley Clark, ENERGYWIRE, October 14, 2021
The Biden administration called yesterday for continued use of natural gas, illustrating the challenging political spot facing the White House as it navigates between a global energy crisis, protesters on the left and a push for a major clean energy package on Capitol Hill.
Rising energy demand spurred by the pandemic recovery has sent natural gas and oil prices skyrocketing, raising fears about inflation and energy availability this winter. It’s also proving at least a temporary boom to fossil fuels, including coal, and is fueling Republican attacks as Biden’s efforts to tackle climate change remain at an impasse in Congress.
“The rapid but uneven economic recovery from last year’s Covid-induced recession is putting major strains on parts of today’s energy system, sparking sharp price rises in natural gas, coal and electricity markets,” the International Energy Agency said in a report yesterday, adding that “for all the advances being made by renewables and electric mobility, 2021 is seeing a large rebound in coal and oil use.”
Yet as climate activists protested outside the White House gates yesterday, calling on Biden to end fracking and stop all U.S. fossil fuel exports, White House spokesperson Jen Psaki said there was a “need for the United States to continue to export natural gas.”
Psaki’s comments came as she said Biden has asked his team “to continue to discuss what the options are that we can take to address these shortages.”
She suggested there is a “range of options” the administration can consider but declined to specify any.
The White House has also talked with U.S. oil and gas producers about helping to bring down prices, according to several news reports, but Psaki said she was unaware of any contact with oil and gas companies “around this particular issue.”
Energy Secretary Jennifer Granholm, who was reportedly part of White House talks this week on gas prices, said at a Financial Times virtual event last week that DOE was considering an emergency release from the Strategic Petroleum Reserve and reimposing a crude export ban.
The administration later said the steps were only among potential “tools” available for addressing the price increases. The Energy Department referred questions to the White House.
The White House has limited options to affect energy prices, according to analysts. It has already spoken with members of OPEC about increasing oil production, but the oil cartel has maintained limits on supply since the start of the pandemic.
The more costly energy comes as the U.S. faces rising prices on a bevy of consumer items from bacon to rent, along with supply chain bottlenecks that are slowing the delivery of goods.
It raises the stakes for Biden, who yesterday touted a deal with the Port of Los Angeles to operate around the clock to address the backlog. He said the disruption at U.S. ports illustrates why his infrastructure and climate change package need to be passed.
“We need to take a longer view and invest in building greater resilience to withstand the kinds of shocks we’ve seen over and over, year in and year out, whether it’s the pandemic, extreme weather, climate change, cyberattacks, or other disruptions,” Biden said.
The confluence of kitchen table issues, including high gas prices, have prompted criticism of Biden that some analysts said could stick if prices remain high.
“Supply chain problems, energy price spike, shakiness of certain pockets of post-pandemic economy are a problem,” said Julian Zelizer, a professor of history and public affairs at Princeton University. “Going into the midterms, Democrats want their party feeling good even if odds favor the GOP (historically). Right now people are concerned about their pocket books and these numbers will be problematic for the party of the president.”
Republicans have sought to blame Biden’s energy policies for rising gas prices, though they are largely unrelated.
“He does not want energy to be affordable,” Rep. Michael Burgess (R-Texas), said this week on Fox News. “The Green New Deal crowd that has his ear right now wants us to get our energy from starlight and the windmills.”
In a note, the Institute for Energy Economics & Financial Analysis said renewable energy isn’t to blame for the current energy crunch, noting that products like computer chips and copper also have seen shortages and price spikes.
The high prices also could provide an opportunity for Biden’s efforts to transition to greener energy, according to some analysts. The IEA report notes that in most markets, solar or wind now represents the cheapest available source of new electricity generation.
“The administration has got to be careful that consumer energy prices don’t get too high as a political matter, of course, that’s true of all administrations,” said Paul Bledsoe, a strategic adviser with the Progressive Policy Institute.
But Bledsoe argued that there are lower cost renewable alternatives at hand, unlike in 2012 when former President Obama faced the threat of rising gas prices as his reelection neared.
“The difference now is that we have low-cost alternatives, both for electricity and for transportation,” he said. “The current high oil and gas prices require the administration to articulate the mid- and long-term costs savings of clean energy more clearly. They have to show that not only will clean energy be better for the climate, it’s going to be cheaper.”
The U.S. Energy Information Administration, meanwhile, said yesterday that it expects U.S. households to spend more money on energy this winter than last, particularly homes that are heated with propane or heating oil. The forecast is based on the agency’s expectations of high retail energy prices, it wrote, noting that “many are already at multi-year highs.” The EIA also noted that many energy prices reached multiyear lows as a result of slumping demand amid the pandemic.
OIL:
Former Brooks Range executives seek second shot at Mustang
Elwood Brehmer, Alaska Journal of Commerce, October 12, 2021
Some of the players in a failed North Slope oil project want to revive the state-backed field under a new name.
Alaska Division of Oil and Gas officials in mid-September approved the transfer of state leases from Brooks Range Petroleum Corp. to Finnex LLC, according to documents recently published on the division’s website.
Finnex is led by CEO Majid Jourabchi and Chief Operating Officer Harry Bockmeulen, who previously held the same positions at Brooks Range. Finnex was formed in June 2020 and is located in the same South Anchorage offices as Brooks Range, according to records filed with the state Division of Corporations, Business and Professional Licensing.
Brooks Range was the Anchorage-based oil junior that, under a prior management team, first attempted to produce oil from the small Mustang project with $70 million of help from the Alaska Industrial Development and Export Authority, the state-owned development bank.
AIDEA took control of the Mustang project in December 2020 following years of fits and starts by Brooks Range that ultimately led the authority to foreclose on the project assets in an attempt to recoup the $70 million authority officials invested in the Mustang development between 2012 and 2014.
Division of Oil and Gas officials also issued a notice to Brooks Range on Sept. 9 that they had terminated two of the company’s North Slope leases for failing to pay rent on the acreage that was due Sept. 1.
AIDEA officials have said they are working to eventually sell its share of Mustang assets. The authority has a 90 percent working interest ownership in the Southern Miluveach Unit that contains the oil prospect.
The tipping point was when Brooks Range’s majority owner, Singapore-based Alpha Energy Holdings, failed to make good on loan payments to AIDEA stemming from a prior refinancing of the investment firm’s obligations to the authority.
Jourabchi is also president of Houston-based Thyssen Petroleum, once a minority owner in Anchorage-based Brooks Range. Jourabchi told the Journal in May 2019 that he was part of a team of investors attempting to buy a majority stake in Mustang from Caracol Petroleum, a subsidiary of Alpha Energy.
The Mustang field is adjacent to the southern portion of ConocoPhillips’ large Kuparuk River field and also near the Pikka oil project being developed by Oil Search. The field is estimated to hold about 22 million barrels of oil and could peak at production rates of about 12,000 barrels per day when fully developed.
Brooks Range drilled test wells at Mustang in 2011 and 2012 that led AIDEA in December 2012 to take a stake in Mustang.
The state oil lease interests approved for transfer to Finnex by TP North Slope Development, Brooks Range and Caracol are outside of the Southern Miluveach Unit, which holds the Mustang facilities, but Jourabchi said in an Oct. 12 interview with the Journal that Thyssen Petroleum submitted a proposal to AIDEA to purchase the Mustang assets with the intent of producing from the field quickly. Thyssen owns 85 percent of Finnex.
“We feel it’s very credible,” Jourabchi said of the proposal.
He also said Finnex has secured $35 million in financing to restart development of Mustang.
“We feel we can get (Mustang) to production very quickly, but if it doesn’t happen, we have other ideas that clearly will take much longer,” Jourabchi said.
Brooks Range briefly produced oil from Mustang in 2019 but a lack of funding prevented sustained production operations.
A spokeswoman for AIDEA did not respond to questions about Mustang in time for this story.
Full development of the field was initially estimated to cost about $580 million and included drilling 11 production and 20 more gas and water injection wells, according to AIDEA’s project documents. Brooks Range later changed its plans to utilize smaller, modular production facilities to spur development.
Brooks Range leaders said when AIDEA made its first investment that they hoped to have Mustang in production by late 2014 and said when AIDEA made its second payment to the project oil would start flowing in late 2015.
Thyssen has producing assets in Louisiana.
GAS:
California appellate court overturns fracking ban in Monterey
Matthew Renda, Courthouse News Service, October 12, 2021
A California appeals court ruled Tuesday that a Monterey County measure banning oil and gas extraction was preempted by state law, meaning oil and gas companies can continue fracking in the region.
“If a local regulation conflicts with a state law, the local regulation exceeds the local entity’s power,” wrote Justice Franklin Elia on behalf of the unanimous panel in the Sixth Appellate District of the California Court of Appeals.
The judgment effectively dooms Measure Z, which was passed in 2016 with 56% of Monterey County voters approving of the ballot measure. The policy sought to ban fracking, a method of oil and gas extraction where liquid is injected into the substrate of the earth to create enough pressure to withdraw fossil fuels from the rock layers.
The method of extraction has proved controversial around the United States, but took on an added dimension in Monterey County due to the local drought. Protect Monterey County, the organization that appealed a trial court’s earlier decision to revoke Measure Z due to preemption, said it was necessary to protect the county’s water supply, which is diminished in part due to new regulations that limit the region’s ability to take surface water from the Carmel River.
Paula Getzelman, a vineyard owner who helped found Protect Monterey County, said fracking endangered the two most important industries that also depend on water — agriculture and tourism.
“We would like protections for agriculture, tourism and the health and well-being of our residents,” she told Monterey County Weekly in 2016. “If we weren’t able to get those from state regulatory agencies and our board of supervisors, we felt the people deserve to have the opportunity to deal with it at the voter level.”
The appellate court made it clear that Protect Monterey County will have to take their argument against fracking to Sacramento, where the oil industry and its extraction methods are regulated by the state legislature.
Local entities have the right to pass land use and zoning laws that regulate or restrict certain commercial activities, including oil and gas extraction, but it has no power to regulate the manner in which the oil is extracted, due to preemption rules, the court said.
“The fact that state law leaves room for some local regulation of oil drilling, such as zoning regulations identifying where oil drilling will be permitted in a locality, does not mean that the county has the authority to ban all new wells and all wastewater injection under Measure Z,” Elia wrote.
After the measure passed, Chevron, which is the largest oil extraction operator on the San Ardo Field, sued with another plaintiff, Aera Energy.
San Ardo Field is located in south Monterey County, about 30 miles north of Paso Robles and 20 miles south of King City.
The San Ardo Field was discovered in 1947. It is the 13th largest oil field in California and the 46th largest in the United States. The oil is “heavy” and has the consistency of ketchup, but steam injections heat the oil, making for easier extraction.
Chevron is the largest operator on the site, producing about 11,000 barrels of oil per day. An oil well at the San Ardo Field typically draws about 10 to 20 times as much water as oil, and in 2006 Chevron built a reverse osmosis facility to purify 45,000 barrels of water a day.
About 75 percent of the water is sent to recharge basins, where it slowly drains back into the aquifer through a series of constructed wetlands. The remaining water is concentrated brine and is pumped deep underground.
Not all entities were in favor of the fracking ban, including the San Ardo Union Elementary School District, which collects proceeds from the oil extracted in the region and uses it to supplement its budget.
“There’s a lot of poverty in the area,” superintendent Catherine Reimer told Courthouse News in 2016 when the lawsuit was filed.
For now, opponents of Measure Z will not have to worry about its implementation in the near term.
MINING:
Copper price tops $10,000 as energy crisis hits supply
Mining.Com, October 14, 2021
Copper price continued to rally on Thursday amid a global energy crisis that’s knocking supply offline and heaping pressure on fabricators scrambling for metal.
Copper for delivery in December rose sharply for a second day in a row on the Comex market in New York, touching $4.6365 per pound ($10,200 per tonne), the highest since the start of June.
Copper climbed as much as 3.6% to $9,994 a tonne in London. The cash-to-three-month spread was trading at the biggest gap since 2012, as global exchange inventories plummet. Five out of the six base-metal contracts on the LME are now in backwardation (prompt delivery metal pricier than futures), signalling broad pressure on spot supply.
The rally fed through to producers with shares in BHP Group up 3.8%, Glencore plc up 3.3%, Freeport-McMoRan up 5.2%, KGHM up 4.8% and Southern Copper up 4.4%. First Quantum Minerals rose more than 6% on the day.
Metal supply cuts are spreading from China to Europe, as energy shortages drive up costs for electricity and natural gas, threatening more inflationary pressure from rising commodity prices.
On Wednesday, the world’s second largest zinc producer Nyrstar said it will cut output at three European smelters by up to 50%, making the metal price surge to its highest price since 2007.
China growth concerns
The rebound in copper prices also comes despite concerns surrounding China and its debt-addled property sector.
“In the short term there are some headwinds, mainly due to concerns about China’s economy,” Jay Tatum, portfolio manager at New York-based Valent Asset Management, recently told Bloomberg.
“But once the world gets back to normal growth rates, evenly spread across the economy, we still think there’s a strong case to be made for metals like copper.”
Not everyone is convinced that copper’s outlook is rosy.
The International Monetary Fund has expressed concern that the world’s economic recovery, which drove copper’s blistering rally in May, has lost momentum and become increasingly divided.
Citigroup — one of the biggest cheerleaders for copper earlier this year — recently warned Bloomberg that prices could fall another 10%, with demand shrinking over the next three months.
POLITICS:
To woo Manchin, Dems could OK climate funds for coal and gas plants – POLITICO
Zach Colman, Politico, October 14, 2021
Lawmakers and the White House may soften a major clean energy component of Democrats’ climate change and social spending legislation in a bid to overcome objections from Sen. Joe Manchin, two people familiar with the discussions said on Wednesday.
The changes under consideration could make it easier for coal and natural gas power plants to receive billions of dollars in financial incentives for clean energy, a potential boon for fossil fuel producers in Manchin’s home state.
But that shift could bring objections from progressive Democrats who want to see the incentives hasten the nation’s transition to greener sources. Under the proposed change, as long as coal and gas plants were equipped with technology to capture their greenhouse gas emissions, they could qualify for a plan that would pay power companies to deploy more renewable power and impose fines on those that don’t.
Climate advocates consider that effort, called the Clean Electricity Performance Program, one of the core elements of Democrats’ effort to speed the transition toward solar and wind power and slash greenhouse gas emissions. But Manchin (D-W.Va.) has raised issues with the concept both publicly and privately, putting its inclusion in any final compromise reconciliation bill in doubt.
The people familiar with the discussions said lawmakers and the White House could raise the program’s carbon emissions factor, a figure that determines which power plants would qualify as clean energy. Increasing that figure from the level of 0.1 metric ton of carbon dioxide equivalent per megawatt-hour that was approved by the House Energy and Commerce Committee could enable natural gas and coal-fired power plants outfitted with carbon capture equipment to qualify for payments, which could help win over Manchin.
“That number is movable,” one of the people said.
The other person said the conversation is linked with a separate discussion that would change eligibility requirements for a tax credit that would offer incentives to carbon capture and storage technology. The person said changes to that tax credit, known as 45Q, would not on their own be enough to convince companies to launch new projects — unless the CEPP was altered to make it easier for coal power plants outfitted with carbon capture to participate
President Joe Biden has pledged to put the country on a path to reduce its greenhouse gas emissions 50 to 52 percent below 2005 levels by 2030. He also wants to reach net-zero emissions on the power grid by 2035.
Biden’s climate platform allowed for the deployment of carbon capture and storage technology, which proponents say would prevent heat-trapping gases from reaching the atmosphere. While that technology is not yet economically viable on its own for the U.S. power sector without subsidies, labor unions connected to the energy industry favor the technology, saying it could provide jobs even as the nation transitions to cleaner fuel sources.
Several of those unions sent a letter on Friday that was obtained by POLITICO to House Speaker Nancy Pelosi and Majority Leader Chuck Schumer, calling for the CEPP to better accommodate carbon capture technology.
But some environmental groups dismiss carbon capture as a false solution for fighting climate change, complaining that it would prolong the use of fossil fuels that would still cause local pollution problems from extracting oil, coal, and natural gas.
“We’ve been very clear that we need to hold it” at current levels, said Lauren Maunus, advocacy director with the Sunrise Movement.
A spokesperson for the House Energy committee did not comment on the whether the carbon emissions factor was the topic of discussions.
“Chairman (Frank) Pallone is focused on enacting the most robust clean energy investment program possible, and he is continuing to work with other congressional leaders to make that happen,” the spokesperson told POLITICO in a statement.
Along with the CEPP, Democrats in the House are seeking to expand tax credits for renewable power, upgrade the nation’s network of electric transmission lines to better accommodate new solar and wind farms, and spend billions of dollars to grow the charging infrastructure for electric vehicles.
Democrats are also calling for imposing a fee on methane emitted by the oil and gas industry as well as new money to launch a Climate Conservation Corps, provide grants for environmental justice and expand home energy efficiency and appliance electrification rebates.
CLIMATE CHANGE:
NOAA is raising its climate profile, its head says
Andrew Freedman, Axios, October 14, 2021
Richard W. Spinrad is the first Senate-confirmed administrator of NOAA in five years, which has its advantages in Washington.
What they’re saying: “That immediately gets doors open and gets me access,” Spinrad told Axios in an interview following an interagency climate and equity roundtable in Detroit on Tuesday.
What’s happening: Spinrad, who previously served as the agency’s chief scientist, said he’s been quietly working to raise his agency’s profile in the Biden administration, which has an all-hands-on-deck approach to climate change and other topics of interest to the agency.
- “I have had in the last three months close to 30 meaningful meetings with the heads of probably 20 different agencies,” he said.
- “You may not be seeing that immediately in the public eye. But we are positioning NOAA for a much, much more visible and influential role in the federal government.”
Context: Spinrad is also organizing multiple offices within his agency that touch on climate to form a NOAA Climate Council.
- The goal is to avoid information getting stove-piped within the National Ocean Service, Office of Atmospheric and Oceanic Research and other entities, each of which has its own functions and subcultures.
The intrigue: NOAA is just one of at least 13 federal agencies dealing with climate science from NASA to the Energy Department.
- Spinrad said since he took the helm in June, he’s become convinced that the federal government should determine which agency has the lead role in providing certain types of climate information.
- “Our nation needs some clarity on who’s got the con, who is responsible, who is that authoritative source for climate information?” he said.
Go deeper: NOAA sailed a drone into the strongest storm on Earth