News of the Day:
Alaska Senate approves budget with $2300 dividend – Senator Shower wants more taxes to pay for it
James Brooks, Anchorage Daily News, May 20, 2021
Alaskans could receive a Permanent Fund dividend of between $2,300 and $2,400 per person this year under a state budget approved Wednesday by the Senate. But that amount is not yet certain and comes with controversy because it requires the state to violate limits on sustainable spending from the Alaska Permanent Fund.
The Alaska Legislature ended its 2021 regular session in the last minute of Wednesday, though its work isn’t finished. Lawmakers still have to achieve a compromise between the Senate’s proposed $6.2 billion budget and a different plan approved by the House earlier this month.
In a 30-day special session beginning Thursday, three negotiators from the House and three from the Senate will write a compromise bill that picks construction projects across Alaska, decides services and sets the final amount of the dividend.
Entering the day, the dividend had been set at $1,000 by members of the Senate Finance Committee. But in an amendment from Sen. Mike Shower, R-Wasilla, senators voted 12-8 to increase it.
Shower initially argued in favor of a $3,400 dividend called for by a disused formula in state law, but after that was defeated he suggested an amount similar to one called for by a new, smaller formula proposed by Gov. Mike Dunleavy.
For years, Shower said, Alaska has balanced its budget by reducing the dividend from the traditional formula, an approach that amounts to a regressive tax because the dividend represents a larger share of the income of poorer Alaskans.
“Right now, we’re putting the burden on the poorest Alaskans and the middle class. That’s the burden of reducing the dividend,” he said.
The Alaska Permanent Fund stood at $78.6 billion as of Tuesday evening and has more than enough money to cover the cost of a larger dividend. But spending more from the fund now means less money to invest and lower earnings in the future.
The Senate-approved amount also violates a legal limit on spending from the Permanent Fund. In the fiscal year that starts July 1, the limit is $3.1 billion. The Senate budget calls for spending more than $4.6 billion.
“You can call it a run on the fund. You can call it raiding the fund, whatever you want to call it,” said Sen. Natasha von Imhof, R-Anchorage.
Sen. Jesse Kiehl, D-Juneau, compared the decision to the pillaging of Rome by Visigothic barbarians in the year 410.
The key votes on the higher dividend came from two Anchorage Democrats, Sens. Tom Begich and Elvi Gray-Jackson, who had voted against a $3,400 dividend.
Begich said afterward that his switch was part of a deal to ensure the passage of the state budget Wednesday night. He said nothing is final until the compromise version of the budget passes out of the Legislature.
Shower and Sen. Bill Wielechowski, D-Anchorage, argued that the state doesn’t have to overspend from the Permanent Fund to pay a larger dividend.
In a blistering speech, Wielechowski urged the Senate to approve higher oil taxes, saying the state has “allowed the oil industry to back their trucks up to the state treasury and cart away millions.”
Wielechowski, who supported a 2020 ballot measure calling for higher oil taxes, mockingly held up a sign published by opponents that said “Save the PFD, vote No on 1.” Because the measure failed and because the Legislature has failed act on oil taxes, the dividend has been punished, he said.
Shower passed out charts to fellow senators outlining scenarios in which a statewide sales tax and an increase in oil taxes could balance the budget — even with an increased dividend — in two years. (Neither proposal has been heard in the Senate to date.)
Energy Transition Creates $14 Trillion Cloud of Uncertainty for Oil and Gas
Emily Maher, Hart Energy.Com, May 20, 2021
Despite stark warnings made earlier this week by the IEA, analysts with consultancy Wood Mackenzie said even a rapidly transitioning world needs oil and gas supply for decades to come.
Already known as a risky business, the future of the upstream oil and gas industry has been further clouded by the accelerated pace of a global energy transition, according to a new report by Wood Mackenzie.
Analysts with the energy consultancy firm said the risks associated with oil and gas have been tempered over the years by a single tenet—that demand would continue to rise indefinitely. However, that belief has all but evaporated as the energy transition toward alternative energy sources gathers momentum.
Wood Mackenzie estimates the energy transition now represents $14 trillion worth of uncertainty for upstream oil and gas, the firm said in its report published May 20.
“The industry now finds itself having to supply oil and gas to a world in which future demand—and price—are highly uncertain,” Wood Mackenzie vice president Fraser McKay said in the report. “The range of possible outcomes is dizzying.”
Still, according to McKay, even a rapidly transitioning world needs oil and gas supply for decades to come—contrary to stark warnings made earlier this week by the International Energy Agency (IEA) that called for a hard stop of funding to fossil fuel projects.
“The world will still need oil and gas supply for decades to come, and the scale of the industry will remain enormous,” he said.
Wood Mackenzie forecast gas demand and price to remain resilient in the long term. However, the firm’s two main scenarios for oil have a range of outcomes that depend on what strategy is chosen in order to acheive net-zero emissions.
The first scenario: demand for more oil will continue to grow for another decade or more. On the other hand, if the world heeds IEA warnings and acts decisively to limit emissions, Wood Mackenzie analysts said oil demand and prices would fall rapidly later this decade.
Still, either scenario leaves a huge amount of upstream value on the table for the oil and gas industry.
Wood Mackenzie modeling estimates the range of pre-tax future valuations for upstream is from $9 trillion to $23 trillion. On a post-tax basis, operators’ share of this economic rent ranges from $3 trillion to $9 trillion.
“Only exceptional, low-cost projects will work in all demand scenarios,” Wood Mackenzie research director Angus Rodger added in the report. “Inevitably, the cost of capital and the cost of doing business in oil and gas will increase.”
In order to survive, the industry will need to remain relentless in its push to improve efficiency, drive down costs and deliver projects flawlessly as well as improve their ESG credentials, the Wood Mackenzie analysts noted.
Though not an option for all, new energies will also play an increasing role for the largest players in the business.
“And business models must adapt to maximize value as the oil and gas sector matures,” McKay added.
As a result, specialists will carve out niches and consolidation to bolster margins will gather momentum over the next several years.
“Just a few more years of firm oil prices would strengthen balance sheets,” McKay said, “making transition strategies easier to execute.”
Biden’s Gift to Putin on Nord Stream 2
The Editorial Board, Wall Street Journal, May 19, 2021
He treats a Russian gas pipeline better than he does the Keystone XL in America.
President Biden has talked tough about Vladimir Putin, but his policy response has been mixed. This week’s sanctions decision on the Nord Stream 2 natural gas pipeline provides more reason for concern.
Axios reported Tuesday that the State Department will send a report to Congress listing entities that should face sanctions over their association with the $11 billion gas pipeline. Secretary of State Antony Blinken said at his confirmation hearing that he was “determined to do whatever we can” to stop the project. Turns out that’s not entirely true.
While the Biden Administration wants to target Russian ships working on the nearly complete pipeline, the company running the project and its CEO won’t face sanctions. State will recognize that Nord Stream 2 AG and its leader—a former East German intelligence officer—deserve to be sanctioned. Yet restrictions on a Putin crony will be waived in the name of “U.S. national interests.” This is the kind of move that prompted the media to assert that Donald Trump must be a Russian agent.
The decision suggests Mr. Biden doesn’t want to blow up his relationship with the German government, which strongly supports the pipeline. But this gets it backward. The project generates bipartisan opposition in the U.S., and in April the European Parliament called for it to be stopped. Germans have the responsibility to avoid damaging relations with Washington and the rest of the Continent.
The pipeline will provide cheap energy but deepen European dependence on Russian gas. This is geopolitical malpractice given the threat posed by Moscow’s revisionist foreign policy. It’s also an economic reward to Mr. Putin, who continues to crackdown on dissidents, imprison Alexei Navalny, and threaten his neighbors’ sovereignty. That’s why countries like Poland are willing to pay a premium to avoid Russian gas, even if they’re significantly less wealthy than Germany.
As one of his first official acts, Mr. Biden shut down the Keystone XL pipeline that would improve U.S. energy security. He is treating a pipeline that increases Russian influence and income better than one that enhances America’s.
The UK’s Brilliant Plan To Repurpose Abandoned Coal Mines
Felicity Bradstock, OilPrice.Com, May 14, 2021
A plan to convert Britain’s disused, flooded coal mines into geothermal power plants is now gaining traction as permission is granted for a testing phase. Abandoned and flooded underground coal mines are plentiful in the North of England, Britain’s industrial revolution hub.
In South Tyneside, in the northeast of England, the Council has approved plans to “draw geothermal energy from abandoned flooded mines in the former Hebburn Colliery.” The mine was shut down in 1932 and has been disused since.
The pilot project will involve the drilling of two wells to transport water from the flooded mines, with drilling and testing for viability expected to be completed by Q3 2021. Dunelm Geotechnical and Environmental Ltd hope to extract the water via vertical boreholes at a depth of 300-400 meters. A heat pump will be used to extract heat from the water, which will be compressed to a higher temperature.
A powerplant on the mining site will distribute the energy to heat local buildings, such as residential tower blocks. The plan is to use solar panels and a combined heat and power unit to generate electricity to power the system.
The leader of South Tyneside Council, Tracey Dixon, stated, “The Minewater scheme is expected to deliver a reduction of 319 tonnes of carbon emissions a year, which will make a significant contribution to our ambition for carbon neutrality by 2030.”
In 2015, the U.K. government vowed to end coal production completely within a decade. For a country that pioneered the world’s coal production, and still generated enough energy from coal in 2013 to power 3 million U.K. homes, this marked a distinct shift in the government’s energy strategy.
The U.K.’s coal mining towns were hit hard by the closures of hundreds of mines from the 1980s onwards, sending unemployment in local communities soaring. New renewable energy projects such as this could rejuvenate towns, encouraging alternative energy developments and bringing much-needed jobs back to the north of England.
The European Regional Development Fund has pledged £3.9 million ($5.4 million) for the ground-breaking renewable energy project, which will be developed in partnership with the Coal Authority and Durham University.
This is just one of several mines that have the potential to thrust the U.K.’s geothermal energy production in action, as the country’s industrial past has the potential to fuel Britain’s renewable future.
Jeremy Crooks, head of innovation at the Coal Authority, believes that converting existing coal mines into geothermal power generators is “an asset of strategic importance to the U.K.”
In 2020, the Coal Authority had about 30 different projects that aimed to produce around 2.2 GWh of geothermal energy from disused mines every year. Assuming the Hebburn Colliery goes to plan, it is likely that several more conversion projects will go ahead across the U.K.
An added cost saver for the conversion projects is the U.K. abandonment policy, which requires mine operators to have documentation outlining the exact areas in which they mined. The area and heat of the abandoned mines can be more easily determined from this existing information to mitigate the risks of developing a geothermal project using the mines.
A similar project won public approval last year after researchers at the University of Strathclyde won early-stage funding to develop abandoned mines in Scotland through their project HotScot. The group believes that the development of geothermal power from mine water across Scotland could deliver economic growth of around £303 million ($424 million) and as well as 9,800 jobs.
Should the pilot project be successful, this could lead the way for the conversion of disused coal mines around the world to geothermal energy plants to power our future.
From the Washington Examiner, Daily on Energy:
KEY DEMOCRAT REBUKES BIDEN FOR WAIVING NORD STREAM 2 SANCTIONS: Hawkish Democrats joined Republicans in accusing Biden of violating congressionally mandated sanctions by waiving penalties on the company and CEO in charge of building the Russian Nord Stream 2 natural gas pipeline into Germany.
“I urge the administration to rip off the Band-Aid, lift these waivers and move forward with the congressionally mandated sanctions,” said Democratic Sen. Bob Menendez of New Jersey, the chairman of the Foreign Relations Committee, who added he “fails to see how today’s decision will advance U.S. efforts to counter Russian aggression in Europe.”
The State Department officially submitted a 90-day mandatory report to Congress yesterday that said the corporate entity in charge of the project (Nord Stream 2 AG) and its CEO (Matthias Warnig) are engaged in sanctionable activities. But it will waive applying sanctions to them, citing U.S. national security. Instead, the administration is sanctioning four ships and four companies — all of them Russian in origin — involved in the building of Nord Stream 2.
What it means: But in choosing not to sanction the Russian-owned Swiss company overseeing construction and its CEO, the Biden administration invited criticism that it is being soft on Russia as it looks to rehab relations with Germany and Europe. It also means Nord Stream 2, already 95% complete, will be finished with construction soon.
“We see today’s light sanctions touch as a de factostand-down, paving the way for eventual NS2 completion,” said ClearView Energy, a research group, in a note.
More questions: Menendez, in his statement, asked what the administration expects to receive in return from Germany “after having made this significant concession to exercise the waiver.” German Chancellor Angela Merkel has bristled at U.S. sanctions as interfering with its sovereignty and considers the pipeline to be a commercial project despite opponents who say it would increase Europe’s reliance on Russia for energy.
“This decision has created uncertainty in many corners of Europe and I expect to hear very soon from the administration on its plans moving forward,” Menendez said.
California’s next climate challenge: Replacing its last nuclear power plant
Sammy Roth, The Los Angeles Times, May 18, 2021
The twin reactors along California’s Central Coast were nearing completion, and tens of thousands of people had gathered to protest. It was 1979, just months after a partial nuclear meltdown at Pennsylvania’s Three Mile Island, and a young Jerry Brown — serving his first stint as California governor — earned a standing ovation when he declared, “No on Diablo Canyon.”
Four decades later, Pacific Gas & Electric is finally preparing to shut the nuclear power plant. It sits near several seismic fault lines and has long stirred fears that an earthquake-driven meltdown could spread deadly radiation across the state.
But if Diablo Canyon is the devil Californians know, the devil they don’t know is what happens when it closes.
The plant is California’s largest power source, generating nearly 6% of the state’s electricity in 2019. That energy is emissions-free, meaning it doesn’t produce planet-warming greenhouse gases or lung-scarring air pollutants.
And unlike solar panels and wind turbines, Diablo Canyon can make electricity around the clock, regardless of the weather — a key attribute for a state that suffered brief rolling blackouts last summer.
But with just three years until the plant begins to power down, California has no plan to directly replace it.
That’s despite a state law, overwhelmingly approved by the Legislature and signed by Brown, ordering regulators to “avoid any increase in emissions of greenhouse gases” as a result of Diablo’s closure.
It’s common for nuclear shutdowns to be followed by a jump in pollution as fossil fueled power plants fire up more often.
California’s planet-warming emissions rose by 2% after the San Onofre generating station in San Diego County malfunctioned, eventually leading to its permanent closure. That wasn’t the only reason emissions rose, but it was almost certainly a factor.
Similarly, the share of New York state’s electricity coming from natural gas, a fossil fuel, rose by 4 percentage points after one of two reactors at the Indian Point nuclear plant closed last year. The other reactor produced its final electrons last month.
It doesn’t have to be that way, and Diablo Canyon was supposed to be a model of how to retire a nuclear plant without worsening the climate crisis. But critics say Gov. Gavin Newsom’s Public Utilities Commission is failing in that mission.
“Diablo’s retirement is going to increase greenhouse gas emissions. And their planning is not doing anything to prevent that,” said Mark Specht, an energy analyst at the Union of Concerned Scientists. “We should have figured this out by now.”
The future of nuclear power is a key question not only for California, but nationally. America has 93 nuclear reactors across 28 states. They generate one-fifth of the country’s electricity — as much as all other climate-friendly power sources combined.
President Biden’s ambitious goal of 100% clean energy by 2035 — a decade ahead of California’s current target — would be much easier to meet if those plants kept operating. But many could be forced to close in coming years, as their operators struggle to compete with increasingly cheap electricity from natural gas plants as well as solar and wind farms.
Should government toss an economic lifeline to those nuclear reactors? There are fervent advocates on both sides of the debate.
One of the best-known pro-nuclear figures is Michael Shellenberger, who ran for California governor in 2018 and more recently has decried “climate alarmism” and made appearances on Fox News. Other nuclear proponents include the distinguished climate scientist James Hansen, who in 1988 famously warned Congress that “the greenhouse effect is here,” as well as Bill Gates, who has invested in what he hopes will be next-generation nuclear technologies.
On the other side are old-school environmentalists shaped by the Chernobyl disaster and the cancer-causing radiation it spread, as well as younger activists who remember the Fukushima Daiichi meltdowns and see uranium as just another dangerous fuel to be thrown on the scrap heap with coal, oil and gas.
Groups including the Natural Resources Defense Council have staked a middle ground, opposing construction of new reactors while sometimes supporting policies that would prop up existing plants, at least in places with relatively low safety risks.
The Biden administration, too, wants to see existing plants keep running. Energy Secretary Jennifer Granholm told Congress this month that the administration is “eager” to work with lawmakers on subsidies for economically struggling reactors.
“We’re not going to be able to achieve our climate goals if our nuclear power plants shut down,” Granholm said.