NEWS OF THE DAY:
Canada Escalates Michigan Pipeline Battle
Kait Bolangaro, Bloomberg/Rigzone, October 5, 2021
The Canadian government invoked oil and gas transit rights under a decades-old treaty with the U.S. to stop Michigan’s attempt to shut down an Enbridge Inc. pipeline under the Great Lakes.
A 1977 agreement states Canada and the U.S. must allow natural gas and crude oil to flow between the two countries, according to a statement Monday from Foreign Minister Marc Garneau. More than 540,000 barrels per day flow through Line 5, which provides half the oil and propane used in Ontario and the U.S. Midwest.
“In response to Michigan’s efforts to shut down Line 5, Canada has raised its significance for Canadian economic and energy security at the highest levels of the U.S. federal government,” Garneau said.
By using the treaty, Canada is seeking to delay court decisions on the pipeline while the two countries negotiate. Enbridge shares rose 1% in New York on Monday.
The move comes weeks after court-ordered mediation efforts between Enbridge and the Michigan Governor Gretchen Whitmer collapsed. The governor ordered the Calgary-based company to stop using the pipeline in May due to environmental concerns, but the oil continues to flow.
Whitmer argues the pipeline is particularly vulnerable to spills in the Straits of Mackinac as it was first built in 1953. Enbridge has proposed building a tunnel to house a new section of pipeline in an effort to reduce its environmental risk.
“Canada supports Enbridge’s plan to replace the existing pipeline with the proposed Great Lakes Tunnel Project, which will run far below the lakebed of the Straits of Mackinac, to further protect the Great Lakes,” Garneau said.
Whitmer said in a statement she was “profoundly disappointed” in Canada’s decision to use the treaty. “Rather than taking steps to diversify energy supply and ensure resilience, Canada has channeled its efforts into defending an oil company with an abysmal environmental track record,” she said.
OPEC+ Holds Both the Knife and the Cake
Andreas Exarheas, Rigzone, October 5, 2021
OPEC+ holds both the knife and the cake in the oil market, especially as the group boasts the lion’s share of the remaining unused supply capacity in the world.
That’s what Rystad Energy’s head of oil markets, Bjornar Tonhaugen, said in a statement sent to Rigzone following the latest OPEC+ meeting, which reconfirmed the group’s production adjustment plan and a decision to add 400,000 barrels per day to the market in November.
“The supply capacity control makes OPEC+ the only market player than can significantly redirect market conditions, apart from any unplanned outages or weather phenomena, justifying the extended bullish reaction after the meeting’s outcome became clear,” Tonhaugen said in the statement.
The outcome of the OPEC+ meeting was no surprise, Tonhaugen noted, but when prices are at above $80 per barrel, this is a level that makes customers uncomfortable and producers happy but cautious, the Rystad representative added.
“Most markets participants were expecting OPEC+ to stick to the plan but – amid high prices and a tight supply environment – it appears traders have been cautious, pricing in an element of surprise before the meeting,” Tonhaugen said.
“The decision by OPEC+ to add the expected 400,000 barrels per day in November triggered a market reaction, as traders are now more boldly coming out from their cautious positions and pricing in a confirmed, tighter supply market,” he added.
It’s not that OPEC+ does not recognize the coming supply shortage, Tonhaugen said, adding that the group is well aware of the global inventory draws, maintenance work and rising demand but chose to wait until later this year to adopt a bolder supply approach.
“With prices now sitting comfortably at high levels without the threat of extra OPEC+ supply – other than the planned one – we are entering a period when demand needs closer monitoring,” Tonhaugen said.
“The recovery of the economy, the potential of a cold winter and fuel switching from gas to oil in Asia suggest a rather quick demand increase to as much as 100 million barrels per day in December, but if prices keep on rising, the elasticity of oil demand may kick in as consumers, out of cost reasons, cut consumption,” he added.
“Producing nations, and namely OPEC+, have to be careful not to allow prices to inflate too much, otherwise we may see an adverse reaction that could negatively impact post-pandemic economic growth,” Tonhaugen continued.
In a separate statement sent to Rigzone on Monday prior to the OPEC+ meeting, Rystad’s senior oil markets analyst Louise Dickson outlined that the company expected that OPEC+ would stick to its plan to marginally bring back 400,000 barrels per day on a monthly basis and wait until December to make any larger market disruptions.
The 21st OPEC and non-OPEC ministerial meeting, which was held via videoconference, concluded on October 4. The meeting reiterated the “critical importance” of adhering to full conformity, OPEC highlighted. OPEC+’s 22nd OPEC and non-OPEC ministerial meeting is currently scheduled to be held on November 4.
Natural gas price surge puts new focus on LNG
Ben Geman, Axios, October 5, 2021
A new analysis argues U.S. domestic natural gas prices are no longer untethered from the growth of liquefied natural gas exports.
Driving the news: The Center for Strategic and International Studies’ Nikos Tsafos points out that for most of the five years since U.S. LNG exports began, there was basically no relation to prices.
- But that’s no longer true.
- “In Q3 2021, however, there was strong evidence that exports are the primary demand driver for U.S. gas and thus the increase in prices,” Tsafos writes.
How it works: U.S. gas demand has been largely flat, so has production, but exports have been climbing sharply this year and are a “main driver of higher natural gas prices in the United States as the country heads into winter.”
Why it matters: Tsafos argues that the political impact of the new landscape depends on how much domestic production responds to higher prices at a time when investors want restraint from drillers.
- The Wall Street Journal notes that domestic industrial users are already upset and calling on the Department of Energy to curb LNG export levels.
Go deeper: What’s behind the rising energy prices
The hearing was held on Tuesday, October 5, 2021, at 10:00 am in Room 366 of the Dirksen Senate Office Building in Washington, DC.
The purpose of this hearing was to examine and consider updates to the Mining Law of 1872.
Witness Panel 1
- Mr. Chris Wood
President and CEO
- Ms. Katie Sweeney
Executive Vice President and General Counsel
National Mining Association
- Ms. Autumn Hanna
Taxpayers for Common Sense
- Mr. Rich Haddock
Barrick Gold Corporation
- Mr. David Brown
President and CEO
Legislature should follow example of cooperation and compromise set by bipartisan fiscal working group, House Minority Leader Cathy Tilton says
Tim Bradner, The Frontiersman, October 5, 2021
Frustrated by stalemate – so far – on a durable state fiscal plan for Alaska and the annual squabbles over the Permanent Fund Dividend that, House Republican Minority Leader Rep. Cathy Tilton, R-Palmer, thinks the Legislature can build on the success of a special bipartisan task force that met extensively this summer and actually forged a consensus on a least a conceptual plan, as well as agreement on underlying numbers to support it.
“I’m optimistic after conversations with Speaker (Louise) Stutes of her commitment to move toward a stable fiscal plan. Admittedly, the lack of progress by the entire Legislature, thus far, suggests that any confidence in progress during the upcoming special session, must be quite reserved,” said Rep. Cathy Tilton, R-Palmer, the House Republican Minority Leader.
There are still signs of progress, however.
“Everyone was impressed with the results of the bipartisan working group, which included representatives from all four caucuses in the Legislature. It showed people can work together. The entire Legislature should take lessons from the group,” Tilton said.
Eight members of the group spent seventy-plus hours in meetings in July and August getting a handle on complex problems in state finances and ideas for stabilizing the PFD, the annual payment to citizens from Permanent Fund earnings.
“An opportunity missed in the third special session (in August) was to have members of the group present it to the full Legislature at one time so that all 60 members get the same information. This wouldn’t have been for debate but to have members of the working group explain their reasoning in coming to the conclusions they did. I think this could have helped bring people together,” Tilton said.
There is precedent for the Legislature meeting as a group, a “committee of the whole,” to hear presentations on critical topics, and all 60 legislators now gather to hear the governor’s annual state-of-the-state address as well as yearly presentation by the congressional delegation. The Senate and House have also met as a whole to hear presentations on important topics.
The Republican group Tilton leads in the House has considerable cloud. Given its numbers, which include almost half of the 40-member state House, the House Republican Minority has a major influence in decisions, particularly on constitutional amendments where Minority House Republicans are needed to get the required three-quarters majority. A
Among points at issue in the fiscal debate, is the idea of “stair stepping” the PFD from its current amount to a larger amount under the governor’s “50-50” plan (this is in SB 53, currently in Senate Rules Committee).
Tilton said there are two decisions to be made, one in coming down to the PFD amount paid under the 50-50 plan, about $2,300 in 2021, from the amount specified in the current statute that guides calculation of the dividend, which would be about $3,000 in 2021).
The governor has accepted the 50-50 PFD as well as some members, but not all, of the House Republican Minority.
“It’s a big step for people to come down to the 50-50 amount, much less agree to a graduated stairstep up to 50-50 from the current amount of $1,100,” Tilton said.
There appears to be more unity, Tilton said, among House Republicans on a constitutional amendment to merge the protected Permanent Fund principle with the unprotected Earnings Reserve Account, so that the Fund would operate like other large endowment.
Members of the House Minority also appear open to the idea of moving the Power Cost Equalization Fund (which supports rural residential power price support) to the protected Permanent Fund principle, she said. “Some members questioned this but may wind up in support if it is needed to get the large fiscal package,” she said.
There is also unity on including the Permanent Fund Dividend in a constitutional amendment, but just how this is done is still open, Tilton said.
The key decision here is whether the constitutional amendment should just allow for a PFD, with the amount to be calculated in a formula (such as 50-50) set in statute or whether the formula itself should be in the constitutional amendment.
Tilton said the need for a revised spending cap, in another constitutional amendment, is also something the House Minority is agreed on, along with other legislators, although details have to be worked out.
From the Washington Examiner, Daily on Energy:
CONSERVATIVE GROUP CAMPAIGN FOR NATURAL CLIMATE SOLUTIONS: The Conservation Coalition, the advocacy arm of the American Conservation Coalition, is launching an ad campaign to highlight the importance of natural climate solutions, including planting trees, restoring wetlands, and using sustainable farming practices.
The Rooted in America campaign by the conservative youth environmental group includes a $125,000 digital advertising buy.
The group argues natural solutions are the most popular climate policy in America, with 90% of people supporting planting 1 trillion trees.
The National Academy of Sciences has estimated that natural climate solutions can account for 37% of emissions reductions through 2030 needed to keep global warming below 2 degrees Celsius.