NEWS OF THE DAY:
California to Build Temporary Gas Plants to Avoid Blackouts
Mark Chediak, Naureen Malik, Bloomberg Green, August 19, 2021
- State has resisted efforts to expand natural gas-based power
- Governor declared state of emergency for grid last month
California, a state that has been aggressively weaning its power grid off of fossil fuels, is now working on adding several natural gas-fired plants in an effort to keep the lights on this summer.
The California Department of Water Resources is in the process of procuring five temporary gas-fueled generators that have individual capacities of 30 megawatts, said spokesman Ryan Endean. The units will be installed at existing power plants and are expected to be operating by the middle of September.
The move comes after California Governor Gavin Newsom declared a state of emergency for the power grid on concern about supply shortages during hot summer evenings when solar production wanes. The order, issued last month, aimed to free up energy supplies, and speed up power plant development to help avert blackouts. It also temporarily lifted air-quality rules.
Earlier this year, California regulators balked at ordering utilities to add new gas-fired generation after environmental groups said it would run counter to the state’s decarbonization goals. Officials have been scrambling to shore up power resources ever since brief blackouts hit in August 2020 during an extreme heat wave.
READ: California Expects Power Supply Shortfall to Worsen in 2022
The situation has become more dire this summer as a historic drought has reduced California’s hydroelectric supplies. The state has been retiring gas plants under a goal to have its grid carbon-neutral by 2045.
The California Energy Commission approved on Tuesday licenses for the emergency gas generators for up to five years.
“Governor Newsom’s emergency proclamation makes it very clear that all of our energy agencies have to act immediately to achieve energy stability during this emergency as well as accelerating plans for construction, procurement and rapid deployment of new clean-energy and storage projects,” Commissioner Karen Douglas said at the meeting.
OIL:
Oil jumps as much as 6%, snapping longest losing streak since 2019
Pippa Stevens, CNBC Business, August 23, 2021
Oil prices jumped Monday, snapping a seven-day losing streak that was crude’s worst since 2019, as the dollar pulled back and traders bet the recent selling was overdone.
“News of zero new cases in China has certainly provided a tailwind as it gives added light at the end of the Covid tunnel and a breath of fresh air to the demand landscape,” noted analysts at Blue Line Futures. “Additionally, the U.S. Dollar has retreated from recent highs, underpinning the commodity landscape broadly.”
West Texas Intermediate crude futures, the U.S. oil benchmark, last traded $3.22, or 5.2%, higher at $65.35. Earlier in the day it rose more than 6% to hit a session high of $66, at which point it was on track for its best day since November.
The sharp jump marks a turnaround from last week when the contract sank nearly 9% for its worst weekly performance since October and second negative week in three. WTI ended Friday at its lowest level since May 20.
International benchmark Brent crude advanced 5%, or $3.20, to $68.38 per barrel on Monday, after posting its worst week since October.
Oil’s tumble came amid fears of a demand slowdown as the delta variant of Covid-19 spreads, leading to new lockdowns in countries including Japan and New Zealand. Additionally, weak economic data out of China, which is the world’s largest crude importer, weighed on prices. The latest U.S. inventory report also showed a rise in gasoline stocks as well as an uptick in output from U.S. producers.
But some Wall Street firms said the selling looked overdone.
“We find this price weakness excessive and believe it has more to do with the psychology of market participants than with any deterioration of fundamental data,” noted analysts at Commerzbank.
Goldman Sachs, meanwhile, said that macro headwinds including the reflation unwind and Covid concerns in China are veiling the bullish backdrop for oil and commodities more generally.
“While liquidity will likely remain low and the trend is not our friend right now, we believe the micro — steadily tightening commodity fundamentals — will trump these macro trends as we move toward autumn, pushing many markets like oil and base metals to new highs for this cycle,” the firm wrote Monday in a note to clients.
Energy stocks jumped on the heels of oil’s rise, and the group was the top-performing S&P 500 sector, gaining more than 3%. Diamondback Energy and Occidental were among the top performers, rising more than 6%. APA gained more than 5%.
The SPDR Oil & Gas Exploration & Production ETF and VanEck Vectors Oil Services ETF were each up more than 4%.
The energy sector fell more than 7% last week and has yet to reclaim its spot as the top-performing group this year. Energy was the best sector for the first half of the year but has been hit hard in recent weeks and is now the fourth-best sector for 2021, trailing financials, real estate, and communication services.
GAS:
Biden and natural gas: It’s complicated
Ben Geman, Axios, August 23, 2021
The Biden administration has filled in more blanks on its approach to natural gas, but the overall picture remains murky.
Catch up fast: The Treasury Department is pressing multilateral development banks (MDBs) not to fund natural gas exploration and production.
- But the new policy still backs projects further down the development chain, like pipelines, if certain criteria are met.
- “Guidance” last week to MDBs like the World Bank also opposes finance for new coal and oil projects.
Why it matters: It’s a concrete way that Biden hopes to use Treasury to steer investment away from fossil fuels and toward climate-friendly sources.
- Stephanie Segal, of the Center for Strategic and International Studies, notes the U.S. has leverage with the MDBs.
- It’s the largest shareholder at the Inter-American Development Bank, the World Bank and the European Bank for Reconstruction and Development, and near the top in some others.
- The U.S. position “translates into voting power and an outsize role in setting the institutions’ agendas and lending programs,” Segal writes.
The intrigue: Treasury’s split decision on gas financing reflects the wider nuances and uncertainties around the White House approach to natural gas.
- The Interior Department has temporarily paused oil-and-gas leasing on federal lands, but the future scope of lease sales remains unknown.
- Energy Secretary Jennifer Granholm has voiced qualified support for U.S. liquefied natural gas exports.
- White House climate adviser Gina McCarthy, asked last week about gas’ role in administration policy, said they support an “all of the above” policy on energy, per the San Diego Union-Tribune.
- The big picture: Gas is tricky! It produces far less CO2 when burned than coal.
- But methane leaks in gas production, transport, and so forth erode some of that advantage.
- And pathways to meeting the Paris Agreement goals require movement away from all fossil fuels.
MINING:
Dunleavy talks Ambler District cooperation
Shane Lasley, North of 60 Mining News, August 23, 2021
Alaska Gov. Mike Dunleavy highlighted the importance of cooperation between Alaska Native Claims Settlement Act (ANCSA) corporations and their shareholders, state organizations, and mining companies during a recent visit to the Ambler Mining District in Northwest Alaska.
“Collaboration begins with trust,” he said. “When we work together and develop our state’s resources responsibly, we can achieve incredible outcomes for all Alaskans.”
Having spent nearly two decades as a teacher, principal, and superintendent in the Northwest Arctic School District where the Red Dog zinc mine is located, Dunleavy has seen firsthand the economic benefits a world-class mine can bring to rural regions of Alaska.
The development of this mine was the result of the mining company Teck Resources Ltd., then Cominco, and NANA, the ANCSA regional corporation for Northwest Alaska, setting aside their differences to negotiate a deal that allowed for the development of Red Dog. This spirit of cooperation was further extended to the state when the Alaska Industrial Development and Export Authority (AIDEA) agreed to build the Delong Mountain Transportation System, a road and port facility that provided a way to deliver zinc and lead concentrates from Red Dog to world markets.
The quasi-state-owned development authority worked with private investors to finance construction of the DMTS, and the costs of road and port construction were paid back through tolls paid by the mine for use of the road. No state general funds were used to construct the DMTS.
Over the years, AIDEA has recouped the US$267 million it invested in building and maintaining DMTS and pays a dividend to state coffers from the profits it gets from ongoing tolls. Thanks to a successful project like DMTS, AIDEA has been responsible for directing more than $3 billion in economic development in Alaska since 1967 and has paid $439.7 million in dividends to Alaska since 1997.
DMTS is serving as the model for funding, building, and operating the Ambler Access Project, a proposed 211-mile industrial access road that will be vital to unlocking the rich mineral potential of the Ambler Mining District, a world-class copper-zinc belt with extensive deposits of gold and silver as well as a domestic resource for the critical minerals required by our nation’s tech-focused economy.
“The Red Dog Mine has now provided three generations of high-skilled, good-paying jobs for local
residents,” said AIDEA Chairman Dana Pruhs. “Our goal is to provide access to help responsibly develop economic opportunities for local communities and families in the region along the access route with the development of the Ambler Access Project.”
Ambler Metals, a 50-50 joint venture partnership between Trilogy Metals Inc. and South32 Ltd., is advancing the permitting and development of mines in the Ambler District in partnership with NANA, the Northwest Alaska Native regional corporation.
According to a 2020 feasibility study, a mine at the Arctic deposit in the Ambler District would produce 1.9 billion pounds of copper, 2.3 billion lb of zinc, 388 million lb of lead, 386,000 ounces of gold, and 40.6 million oz of silver over an initial 12-year mine life.
Ambler Metals’ UKMP also hosts Bornite, a world-class copper-cobalt deposit about 16 miles southwest of the proposed Arctic Mine, as well as a series of volcanogenic massive sulfide deposits and occurrences along a 70-mile (100 kilometers) belt that runs across the Ambler Mining District.
Mines at Arctic, Bornite, and other deposits developed in the district would produce concentrates that need to be shipped to refineries. The ability to truck these concentrates to the Alaska railhead at Fairbanks is the primary reason the Ambler Road is needed.
The route involves five landowners, including the Northwest Arctic Borough and two ANCSA regional corporations – Doyon Ltd. and NANA.
AIDEA, which is leading the permitting and potential development of the Ambler Road, says active and continuous collaboration between the Alaska Native landowners, tribal leaders, village elders, the private sector, and state and federal entities led to a joint record of decision issued by the U.S. Army Corps of Engineers and Bureau of Land Management in July that approves development of the access road.
To best preserve and protect the rights of subsistence users along the route, a Subsistence Advisory Committee Working Group is being established amongst the regional stakeholders. This working group will establish the framework and composition of a committee that will help identify road crossing locations used for subsistence and other local travel, in addition to providing input into road operations to minimize the potential for adverse effects on subsistence access.
“I look forward to seeing the resources, experience, and relationships within the region come together to listen and share their valuable perspectives from the Subsistence Advisory Committee to see this project provide a sustainable economic base for families in the region,” said Dunleavy.
POLITICS:
From the Washington Examiner, Daily on Energy:
CENTRISTS UNDER PRESSURE: Democratic leaders and their allies are escalating attacks on centrists withholding support for the party’s plans for a $3.5 trillion, party-line spending bill, which they view as a once-in-a-decade opportunity to attack climate change.
The House returns from a short recess tonight to take a procedural vote that will enable the chamber to proceed on the infrastructure deal and budget framework, and it’s anyone’s guess how it will go.
Over the weekend, Speaker Nancy Pelosi released her latest threat to centrist holdouts, writing in a letter to members that “any delay to passing the budget resolution threatens the timetable for delivering the historic progress and the transformative vision that Democrats share.”
Evergreen Action, a liberal environmental group, released a statement Friday targeting centrist Democrats by name who say they will oppose the party’s budget resolution until the House passes the bipartisan infrastructure bill.
“These nine Democratic members are threatening to stand in the way of Joe Biden’s climate plan, while their own constituents are losing their lives, jobs and homes to climate disasters,” said Evergreen Action Executive Director Jamal Raad. “Whether it’s the rapidly warming Gulf of Maine in Rep. Jared Golden’s district or flooding and severe storms in Rep. Josh Gottheimer’s district, Americans need their representatives to take action to protect them from the devastation of the climate crisis.”
The League of Conservation Voters and Climate Power launched new digital ads in the nine districts represented by the centrist House members, sending the message that passing the budget resolution through the House this week is an “imperative, once-in-a-generation opportunity to fight climate change and secure middle class tax cuts, create clean energy jobs, and lower costs for working families.”
Falling on deaf ears? But the full-court press doesn’t appear to be prompting centrists to fold.
The House centrists penned a Washington Post op-ed posted last night reiterating they are “firmly opposed to holding the president’s infrastructure legislation hostage to reconciliation, risking its passage and the bipartisan support behind it.”
Key vote Sen. Joe Manchin of West Virginia issued a statement this morning allying with moderate colleagues in the House (his tweet linked to his previous statement “raising concerns” about passing a party-line $3.5 trillion budget).
“It would send a terrible message to the American people if this bipartisan bill is held hostage,” Manchin tweeted. “I urge my colleagues in the House to move swiftly to get this once in a generation legislation to the President’s desk for his signature.”
Fellow Centrist Sen. Kyrsten Sinema of Arizona is also reiterating that there are limits on the additional spending she’ll support, as House Democratic leaders hold back the passage of the bipartisan infrastructure bill she helped write.
The bipartisan infrastructure bill “is a historic win for our nation’s everyday families and employers and, like every proposal, should be considered on its own merits,” Sinema spokesperson John LaBombard told Politico. “Proceedings in the U.S. House will have no impact on Kyrsten’s views about what is best for our country – including the fact that she will not support a budget reconciliation bill that costs $3.5 trillion.”
CLIMATE CHANGE:
CCUS: A key technology for a lower carbon future
International Association of Oil and Gas Producers
Carbon Capture Utilization and Storage (CCUS) plays a vital role in moving towards a lower carbon emissions future. According to the Sustainable Development Scenario of the IEA’s World Energy Outlook 2019, CCUS could provide 9% of the cumulative emissions reduction between now and 2050. For this reason, there has been a steady increase in the number of CCS and CCUS projects in the last few years. As the Global CCS Institute reports, between 2017 and 2019, there was a 34% growth in total carbon and storage capacity for large scale facilities (Global CCS Institute, 2019, The 2019 Global Status of CCS).
As we can see in the IOGP Global CCS/CCUS Project map above (see also IOGP Factsheet Map of Global CCS Project for more details), there are currently 20 large-scale CCS projects in operation in the world for a total capacity of around 34 Mtpa (million tonnes per annum), with the highest concentration in North America. In addition, there are 42 projects either under development (four under construction, eight in advanced development, nine in early development, and one commissioned) or under different stages of evaluation (20) that might come onstream in the next decade, with the potential to provide roughly 75 Mtpa of new capacity. North America and Asia Pacific lead the way in terms of future projects, while Europe – with the highest number of feasibility studies underway – follows.
CCUS reduces emissions from industrial processes which are vital to the global economy, like steel, cement, and chemicals production. Paired with bioenergy used for power generation or biofuel production, it is one of the few technologies that can deliver negative emissions crucial to achieving the Paris Agreement targets. Moreover, the versatility of CCUS and its ability to reduce both the flow and stock of CO2 makes it a strategic risk management tool for climate mitigation (Global CCS Institute, The value of carbon capture and storage, 2020).
CCUS is an emission reduction process developed to prevent large amounts of CO2 from being released into the atmosphere. As shown in the graphic below, the process of CCS consists of capturing CO2 produced by large industrial plants (such as power plants, refineries, steel mills, still and cement plants, and hydrogen production plants), compressing it for transportation via pipeline or ship, and then injecting it into underground rock formations at carefully selected sites. The CO2 can be stored in dedicated storage sites such as depleted oil and gas reservoirs or deep saline formations, or it it can be injected underground for Enhanced Oil Recovery (EOR) purposes.
Captured CO2 can be used for industrial purposes, in practices known as Carbon Capture Utilization CCU. The process of CCU contributes to a lower carbon emissions future by recycling CO2. By using captured CO2 in areas such as mineralization, biological, chemical, as well as food processing and packaging, CCUcontributes to circular economy.
CCUS is not a new technology: the capture process has been around since the 1930s and has been used to purify natural gas, hydrogen, and other gas streams in industrial settings. Commercial scale underground injections of CO2 have been used in the oil and gas industry since the 1970s. The oil and gas industry is the main player in this industry. Of the 35 Mt CO2 captured in 2019 today from industrial activities in large-scale CCUS facilities, nearly 80% is captured from oil and gas operations (IEA, The Oil and Gas Industry in Energy Transitions, 2020).
Governments also have a pivotal role to play in facilitating the growth of CCUS by providing a clear, stable, and favorable policy framework for CCS. This can be achieved with regulatory levers, market-based frameworks, public procurement, low-carbon product incentives, tax credits, or grant funding. Governments can also play a role in facilitating the growth of multi-user transport and storage networks that industrial facilities can access (IEA, The Oil and Gas Industry in Energy Transitions, 2020).