NEWS OF THE DAY:
What Norway’s Elections Mean For Its Oil And Gas Industry
Charles Kennedy, OilPrice.Com, September 13, 2021
Norway is voting today in parliamentary elections whose outcome will likely set the pace for the decarbonization of the country’s oil and gas industry.
Reuters reports that the most likely winner is the Labour Party, although it may need to form a coalition with at least two more parties to achieve a parliamentary majority.
“I believe that calling time on our oil and gas industry is the wrong industrial policy and the wrong climate policy,” said the most likely next prime minister of Europe’s largest oil and gas producer, Jonas Gahr Støre.
Yet he might have to compromise with potential coalition partners, including the Green Party, which wants to end oil production in Norway by 2035, and the Red Party, which pursues social reforms based on Marxist ideas.
Norway is one of the greenest countries in the world thanks to its abundant hydropower reserves and is also the car market with the highest uptake of electric vehicles. Yet the oil and gas industry remains an important revenue source to fuel economic growth.
The incumbent Conservative government believes Norway’s oil and gas companies could achieve net-zero status while keeping a large portion of the population employed in its operations. The country is also investing heavily in offshore wind and carbon capture.
“The petroleum sector will remain a significant factor in the Norwegian economy in the years to come, although not on the same scale as today. The government will facilitate long-term economic growth in the petroleum industry within the framework of our climate policy and our commitments under the Paris Agreement,” the government said earlier this year, following the release of the IEA’s “Roadmap to Net Zero” report.
The Norwegian Oil and Gas Association also commented on the IEA report, saying it “does not share the assumption that OPEC members alone should account for more than half of oil and gas production for the world market in a 2050 perspective. If demand does not decline as rapidly as the IEA assumes in its scenario, and the supply side is simultaneously choked off, global energy provision could be threatened and lead to very high energy prices.”
OIL:
Global Oil Demand to Exceed Pre-Pandemic Levels Next Year, OPEC Says
David Hodari, The Wall Street Journal, September 13, 2021
The world’s thirst for oil will exceed pre-pandemic levels next year, with improving vaccination rates and increasing public confidence in governments’ management of Covid-19 spurring a recovery in travel, the Organization of the Petroleum Exporting Countries said Monday.
In its closely watched monthly market report, OPEC raised its forecast for global oil demand for 2022 by just under a million barrels a day to 100.8 million barrels a day, higher than 2019’s demand level of 100.3 million barrels. OPEC had previously forecast a return to 2019 demand levels in the second half of next year, but Monday’s report was the first time the cartel said it expects demand to beat pre-Covid-19 levels for the full year.
OPEC’s forecast that oil demand next year will be even higher than before the pandemic comes despite efforts by governments and companies to slash fossil-fuel usage to hit net-zero emissions targets.
Combined with an unchanged supply-growth forecast for its non-cartel counterparts next year and a 200,000 barrel-a-day cut to the same forecast for this year—citing the impact of Hurricane Ida on U.S. oil production—OPEC’s estimates signal a tightening oil market. The pace of recovery in oil demand is now expected to be stronger than before and to mostly take place in 2022, after the emergence of the highly contagious Delta variant stymied recovery this year.
OPEC expects the variant’s impact to be felt in oil markets over the coming months. The cartel trimmed its demand forecast for the final quarter of this year.
While all of the world’s geographic regions are expected to contribute to the rebound in demand, oil consumption in the wealthy countries of the Organization for Economic Cooperation and Development is expected to remain below pre-pandemic levels, OPEC said. The cartel boosted its demand-rebound forecast for developing countries by twice as much—600,000 barrels a day—as that for OECD countries.
In addition to a steady economic recovery from the recessions brought about by the pandemic, “improvements in vaccination rates and a potential increase in public confidence in managing Covid-19 is anticipated to be more widespread in 2022, further supporting the recovery of oil demand, particularly transportation fuels,” the Vienna-based organization said in its report.
Oil prices added to early gains following the release of OPEC’s report, with Brent crude—the global benchmark—up 1.2% at $73.77 a barrel. U.S. crude futures were last up 1.4% at $70.71 a barrel, with around half of Gulf of Mexico oil-and-gas production still out of action following Hurricane Ida and with U.S. data released last week signaling strong gasoline demand over the Labor Day weekend. Analysts expect the resurgence in travel to continue.
“Once mature economies get vaccinations above a certain threshold and avoid lockdowns, people will be more willing to travel on the road and be in the air despite high Delta case levels,” said Helge André Martinsen, senior oil market analyst at DNB Markets. “This will push through to emerging markets next year so you can easily see demand back to pre-pandemic levels.”
OPEC’s increase to its world oil-demand forecast for 2022 follows estimates put out in recent weeks by the cartel’s Joint Technical Committee, which forecast a similar rise in 2022 demand. That came the same week as the cartel and its allies agreed to continue increasing oil production in measured steps in the coming months.
Still, Monday’s report might surprise analysts who had widely expected OPEC to cut its 2022 demand forecast, rather than raising it.
The report’s forecast of rising oil demand comes as surging energy prices in Europe showed that even some of the world’s wealthiest countries remain dependent on fossil fuels to make up for shortfalls in renewable energy. A particularly cold winter this year could drive up global oil demand by a further 1 million to 2 million barrels a day, forcing Brent prices up to $100 a barrel in the first half of 2022, said Francisco Blanch, a commodities strategist at Bank of America.
GAS:
The high stakes of the natural gas branding battle
Ben Geman, Axios, September 10, 2021
The future of natural gas could rest at least partly on whether the widely used fuel keeps going by that name, a new study finds.
Driving the news: Yale University researchers, in a survey, found lower support for several other titles. Those included “natural methane gas,” “methane,” “fossil gas” and “fracked gas.”
The big picture: “Persistent use of the term ‘natural gas’ in public discourse may lead the public to continue to underestimate the climate risks and harms associated with this energy source,” states the paper in the Journal of Environmental Psychology.
- It notes that prior polling shows favorable public attitudes toward natural gas.
How it works: Part of the study involved asking over 2,900 adults if they had positive or negative feelings for different names, and then to what general degree.
- Other options all fared worse than the fuel’s common name. However, there are also partisan differences, with Republicans more supportive than Democrats of all names, and among Democrats, only “natural gas” is viewed favorably on average.
- Lower ratings for names other than “natural gas” are present among both parties. But Democrats were even more negative on “fossil gas” and “fracked gas” than “methane,” while in contrast, Republicans favorably view “fossil gas” and “fracked gas,” albeit less than “natural gas.”
Why it matters: Gas, the largest U.S. electricity source, produces far less CO2 than coal when burned. It’s a key reason why U.S. power sector emissions fell over the last decade as it displaced coal.
- But leaks and releases of the potent greenhouse gas methane during production, pipeline transport and other parts of the development and distribution chain erode some of those benefits.
- And pathways to meeting the Paris Agreement temperature goal require movement away from all fossil fuels.
What we’re watching: How much alternatives to the fuel’s common name, which the industry prefers, might catch on. Already, some activists and experts have been avoiding the term “natural.”
MINING:
EPA revisits Bristol Bay restrictions
A.J. Roan, North of 60 Mining News, September 10, 2021
The Environmental Protection Agency Sept. 9 announced its intention to reinitiate the process of making a Clean Water Act Section 404(c) determination to protect certain waters in the Bristol Bay region of Southwest Alaska. Providing such a determination is finalized, it would purportedly protect waters that are essential to commercial, subsistence, and recreational fisheries. Such stringent protections, however, would make advancing the nearby Pebble mine nearly impossible.
Section 404(c) of the Clean Water Act would allow the EPA to deny or restrict how much wetlands or streams may be affected during a project like the proposed Pebble mine, if the agency determines the project would have unacceptable adverse effects on fish, wildlife, or recreation, among other things.
If implemented, these Obama-era Clean Water Act restrictions could reduce the size of any future mine developed at the world-class Pebble copper-gold-molybdenum deposit, thus making it economically unviable.
“Today’s announcement reinforces once again EPA’s commitment to making science-based decisions to protect our natural environment,” said EPA Administrator Michael Regan. “What’s at stake is preventing the pollution that would disproportionately impact Alaska Natives and protecting a sustainable future for the most productive salmon fishery in North America.”
This announcement, however, comes directly after the recent preliminary economic assessment reported by Northern Dynasty Minerals Ltd., owner of the proposed Pebble Mine, showcasing the incredible volume of resources that would not only strongly benefit the local Bristol Bay area but also Alaska and the greater United States as a whole.
Under the recently proposed 20-year scenario, the Pebble Mine would pay an estimated US$1.74 billion in fees, royalties, and taxes to the state of Alaska; US$490 million in taxes to the Lake & Peninsula Borough; and US$1.4 billion in federal taxes.
More information on the recent preliminary economic assessment and the benefits Pebble would provide can be read at PEA reveals Pebble economics and benefits in this edition of North of 60 Mining News.
In July 2019, the Trump administration EPA withdrew the proposed Section 404(c), sparking controversy and outrage among activists, yet in late 2020 denied key permits that would have allowed the mine to begin development.
Nevertheless, the U.S. Department of Justice, in a filing in the district court, announced the EPA’s intent to request that the 2019 withdrawal notice be remanded and vacated. If the court grants the motion, remand and vacatur would automatically reinitiate the EPA’s 404(c) review process and the agency would announce a schedule for resuming a process to protect certain waters in the Bristol Bay watershed – including opportunities for public input.
In response to this announcement, Alaska Gov. Mike Dunleavy was joined by five representatives of the state’s leading resource development organizations to call out the Biden administration for this latest attempt to snuff out Alaska’s natural resource-based economy.
“The Biden administration is clearly demonstrating what it has planned for Alaska. The consequences for Alaskan families and the future of our state are dire,” said Dunleavy. “Alaska is the energy storehouse for the entire nation, we have abundant reserves of oil and gas to power the economy and the necessary minerals to transform the nation’s economy with electric vehicles and digital technology.”
In addition to Dunleavy’s statements regarding the stifling of Alaska’s resources, in light of the zero-carbon transition, the reinstatement of pursuing to lock out a potential resource provider such as Pebble would only damper progress in the long-term.
“Today’s announcement by the EPA to initiate ‘protections in Bristol Bay’ is just one more piece of evidence that the Biden administration doesn’t want Alaska to have its own sustainable economy,” said Alaska Miners Association Executive Director Deantha Skibinski. “This decision is under the guise that mining cannot be done responsibly at Pebble, which directly contradicts the environmental impact statement done last year that concluded the project can be done without harm to the region’s fisheries or water resources.”
With the Biden administration’s campaign to “Build Back Better,” approving such a policy is seemingly contradictory to the sustainable, self-sufficient agenda it has claimed to spearhead.
“And to add insult to injury, it’s inconsistent with the administration’s goals for green energy, which requires a significant increase in copper production. Seeking minerals needed from foreign sources while denying their development [in] Alaska is unacceptable,” added Skibinski.
While many Pebble opponents find relief and security in learning about a Bristol Bay restriction that could potentially put a halt to the enormous copper-gold-molybdenum-rhenium project, America needs those resources. Ultimately, the resources for carbon-free electric vehicles, solar panels, wind turbines and the like must come from somewhere, and with the straining relations between the east and west, it is becoming more precarious to rely fully on foreign nations for our critically important minerals, metals, and rare earth elements.
“Americans need to ask themselves a question. Does the Biden administration believe that by stopping job creation and economic opportunity in Alaska that it will stop foreign actors from taking advantage of opportunities when they are pushed overseas? There is no doubt in my mind the Biden administration is focused on bringing Alaska to its economic knees and would like nothing more than to take Alaska back into receivership under the U.S. Department of the Interior,” said Dunleavy.
The governor is requesting additional money for the Alaska Statehood Defense legal fund to preserve Alaska’s land and water rights. He says these funds will be used to take the Biden administration to court to defend Alaska’s ability to support itself with responsible and safe natural resource development.
POLITICS:
Alaska dividend unsettled as special session nears end (apnews.com)
Becky Bohrer, Associated Press, September 13, 2021
Alaska lawmakers have yet to agree on a dividend payout to residents this year though legislative leaders say they hope to do so by the end of this special session, which is Tuesday.
“I’d like to see that. I think that’s fair to Alaskans,” House Speaker Louise Stutes said. “We want to make sure that Alaskans can count on something and then we keep moving forward, towards a sustainable resolution on a PFD and a solid fiscal plan.”
PFD refers to permanent fund dividend, the annual check traditionally paid to residents from the state’s oil wealth. For years, the dividend was based on a formula. But in recent years, as Alaska has struggled with deficits, the amount has been set by state political leaders.
Gov. Mike Dunleavy and many lawmakers have said they want a long-term solution to the dividend debate, which has consumed considerable legislative attention and time and distracted from other issues.
Legislators have spent most of this year in regular or special legislative sessions, with this year’s payout unresolved. A budget proposal earlier this year called for a roughly $1,100 dividend, using in part funds that required three-fourths support in each the House and Senate. Those votes failed, leaving the dividend at what was estimated to be $525. Dunleavy vetoed that. He has advocated for a check around $2,350.
“We’re trying to get something that both bodies can support,” Senate Finance Committee Co-chair Bert Stedman said of the Senate and House. The Sitka Republican said Sunday that the target is to do that “by midnight Tuesday.”
Another special session could be possible if those efforts fail.
The Alaska House late last month passed legislation calling for an $1,100 dividend this year. There have been different interpretations as to whether much of the money that would be used for the checks is available without a three-quarter vote.
The debate over this year’s check comes against the backdrop of discussions over the future of the dividend program and a fiscal plan for a state that has come to rely on earnings from the oil-wealth permanent fund to also help pay for government. Those discussions are expected to stretch past this special session.
Permanent fund earnings traditionally have been used to pay dividends.
A working group, created earlier this year, was tasked with making fiscal plan recommendations. The group was composed of members from each legislative caucus, representing positions across the political spectrum. In a report last month, the group proposed as part of a solution elements including constitutional certainty for a dividend, new revenues of up to $775 million, budget cuts and spending cap revisions. It said a comprehensive approach should be negotiated and “agreed to as whole,” not taken up piecemeal.
The caucuses were not bound by the recommendations, and there has been resistance to some pieces even as committees have begun hearing bills on related topics, such as taxes.
During a news conference called by Dunleavy to assail actions taken by the federal government affecting resource development, Kara Moriarty, president and CEO of the Alaska Oil and Gas Association, also called out possible oil-tax revisions by the Legislature as problematic.
She said the state should be doing “everything it can… to keep all of our industries stable and competitive.”
Sen. Natasha von Imhof, an Anchorage Republican, during a hearing Thursday on an omnibus tax bill said she thought tax talk was premature until the dividend issue was settled.
There are differing opinions among legislators, too, on what the dividend should be and whether it should be in the state Constitution.
The work group said its members had different ideas on a formula, but it recommended the Legislature “work towards” one in which half of what’s drawn from the fund annually goes toward dividends as part of a comprehensive solution.
Sen. Mike Shower, a Wasilla Republican who was part of the group as an alternate, said lawmakers face a math problem and a political one. He said he also worries some Alaskans aren’t seeing the bigger picture.
“You have people out there that are seeing only their part of it, and they’re in their little echo chamber and their bubble, and we’re not breaking those echo chambers up enough for people to see the whole picture,” he said Sunday, adding later: “Stop, everybody, stop. Stop what you’re doing. Take your blinders off and let’s solve the problem.”
Senate Minority Leader Tom Begich, in a floor speech Friday, asked his colleagues if they had the “will” to move forward on a broader fiscal plan.
Legislators are “elected to lead” and provide guidance to their communities, not “respond to every whim of every single constituent or every political backer but to actually look at what the future needs to entail and then to act on that,” the Anchorage Democrat said.
Senate President Peter Micciche, a Soldotna Republican, said he shared Begich’s sentiments.
“We really need to think about what happens to Alaska if we don’t solve the problem. I think what happens to Alaska if we don’t deliver a fiscal plan will be felt for a very, very long time,” he said.
The Senate Finance Committee released a draft plan Sunday that would keep in place a limit on withdrawals from earnings and propose a stair-step approach to dividends that would build toward allowing for a 50/50 split between what goes to dividends and government. But that 50/50 split would only happen if by Dec. 15, 2024, the state Revenue commissioner and Legislative Finance Division director agree that measures expected to generate at least $700 million in new annually recurring revenues had been enacted.
Otherwise, the dividend at the top end would be $1,300, growing with inflation. The committee did not immediately act on the bill.
Other approaches have been proposed, too, including from Dunleavy.
Dunleavy has pushed a constitutional amendment that calls for restructuring the permanent fund, limiting what can be withdrawn from it and evenly splitting withdrawals between dividends and government costs. Constitutional amendments call for two-thirds support in each the House and Senate to advance. Some legislative leaders have said they don’t see the support for that proposal at this time.
CLIMATE CHANGE:
Ad wars intensify as Democrats’ green energy plans take shape
Ben Geman, Axios, September 13, 2021
Environmentalists and industry groups are launching fresh media buys as congressional Democrats craft plans to expand green energy incentives and spending while imposing new or higher fees on oil companies.
Driving the news: The League of Conservation and Climate Power has begun $6 million in new TV and digital ad spending that try to bolster four Senate Democrats and around 20 House members.
- The ads (like this one) aim to show that Democrats supporting the plans, several in competitive districts or states, help boost jobs and cut pollution.
- Separately, the American Clean Power Association — a renewables and battery storage industry group — this morning announced the next phase of its ad campaign with TV and digital spots in seven states and Washington, D.C., that together cost seven figures.
- The American Petroleum Institute (API) is beginning the latest installment of its own seven-figure campaign. The industry group is fighting plans it says will erode U.S. energy security and raise costs, including a new fee on methane emissions and repeal of longstanding tax deductions.
The big picture: The latest ads arrive amid wider advocacy battles and efforts to sway politically vulnerable lawmakers as Democrats look to move a multitrillion-dollar package of major health care, social safety net, and energy and climate measures.
- It is, as Bloomberg notes, a “lobbying frenzy” as key votes loom in coming weeks. The contours of Democrats’ plans will come into greater focus this week with votes in multiple House committees.
- The political path this fall is extremely fraught as Democrats look to move the package on razor-thin party-line votes in concert with the smaller bipartisan infrastructure package.
- But Politico has some interesting reporting on how liberal interest groups have been more than holding their own in recent weeks in the ad wars over the Democratic legislation.
Why it matters: Energy pieces of the Democrats’ brewing legislation — and to a lesser degree the bipartisan plan — are vital to the White House goal of cutting U.S. greenhouse gas emissions in half by 2030.
- The fate of the effort will influence the success or failure of a critical United Nations climate summit this fall.
Zoom in: The new, jobs-focused American Clean Power Association TV ads backing the two bills are launching in seven states including West Virginia and Arizona.
- Sens. Joe Manchin (D-W.Va.) and Kyrsten Sinema (D-Ariz.) likely hold the fate of the Democrats’ efforts in their hands, and the ads say the legislation will create jobs in their states.
- One reason the path is so dicey is that Manchin has signaled he’ll only support a much smaller price tag for the overall bill.
The other side: The latest API ads look to rally opposition in Pennsylvania and Arizona to the Democratic legislation. This looks to sway Rep.
- Tom O’Halleran, a swing district Democrat in Arizona. “As prices on everything rise, politicians D.C. want to increase the cost of American-made energy,” it states.