NEWS OF THE DAY:
Los Angeles County Bans Oil And Gas Drilling
Charles Kennedy, OilPrice.Com, September 16, 2021
In a unanimous vote, Los Angeles County backed a ban on oil and gas drilling, which means some 1,600 active and inactive wells would be shut down, the AP reported, adding the timeline for the shut-down has yet to be determined.
“The goal is to provide direction to county departments to begin addressing the variety of issues, environmental and climate impacts created by these active and inactive oil and gas wells,” said LA County Supervisor Holly J. Mitchell. She represents the district that houses most of the Inglewood oilfield—one of the largest urban oilfields in the country.
The California Independent Petroleum Association was against the vote, saying it would lead to hundreds of job losses, raise prices at the pump, and increase California’s dependency on foreign oil.
The state imports about 70 percent of the oil it needs. It is also the largest jet fuel and gasoline consumer in the States. California accounted for 17 percent of U.S. jet fuel consumption and 11 percent of motor gasoline consumption in 2019, the last “normal” year of fuel demand, according to EIA data.
California was also the third-largest U.S. state by refining capacity as of early 2020, while foreign oil suppliers, led by Saudi Arabia, Iraq, Ecuador, and Colombia, provided more than half of the crude oil refined in California in 2019.
Meanwhile, California is the state with perhaps the most ambitious decarbonization targets and has been the most active in trying to achieve them. Earlier this year, Governor Gavin Newsom, who recently beat a recall vote, told the Department of Conservation’s Geologic Energy Management (CalGEM) Division to initiate regulatory action to end the issuance of new fracking permits by January 2024.
What’s more, he asked the California Air Resources Board to start thinking of ways to phase out all oil production in the state altogether.
“As we move to swiftly decarbonize our transportation sector and create a healthier future for our children, I’ve made it clear I don’t see a role for fracking in that future and, similarly, believe that California needs to move beyond oil,” Newsom said in April.
OIL:
Oil Slips to $75 as U.S. Storm Threat Wanes
Pipeline & Gas Journal, September 16, 2021
Oil slipped to about $75 a barrel on Thursday, falling from a multi-week high a day earlier, as the threat to U.S. Gulf production from Hurricane Nicholas receded.
U.S. Gulf energy companies have been able to restore pipeline service and electricity quickly after Hurricane Nicholas passed through Texas, allowing them to focus on efforts to repair the damage caused weeks earlier by Hurricane Ida.
Brent crude was down 39 cents, or 0.5%, at $75.07 a barrel by 1342 GMT. On Wednesday Brent touched $76.13, its highest since July 30. U.S. West Texas Intermediate (WTI) slipped by 19 cents, or 0.3%, to $72.42.
“As Nicholas spared U.S. production from further disruptions, it is difficult to see how oil prices can increase further in the near term,” said Rystad Energy analyst Nishant Bhushan. “Ida-affected oil production capacity continues to recover in the U.S.”
Oil jumped on Wednesday, supported by figures showing U.S. crude inventories fell by a bigger than expected 6.4 million barrels last week, with offshore oil facilities still recovering from the impact of Hurricane Ida.
Brent has rallied 45% this year, supported by supply cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, plus some recovery from last year’s pandemic-related collapse in demand.
Oil is also finding support from a surge in European power prices, which have soared because of factors including low gas inventories and lower than normal gas supply from Russia.
Benchmark European gas prices at the Dutch TTF hub have risen by more than 250% since January.
The price surge and impact on oil “is a situation that I believe will get much worse before it gets better”, said Jeffrey Halley, analyst at brokerage OANDA.
Adding to signs of oil demand recovery, closely watched reports this week said global oil use would rise above 100 million barrels per day, a level last reached in 2019, as soon as next year’s second quarter.
GAS:
Goldman Warns of Blackout Risk for European Industry This Winter
Elena Mazneva and Javier Blas, BNN Bloomberg, September 15, 2021
Europe’s soaring energy markets are exposing the risk of power blackouts this winter, especially if freezing weather worsens the region’s already exceptionally low natural gas inventories, according to Goldman Sachs Group Inc.
While higher gas prices can trigger supply and demand adjustments to offset the tight market, these are largely already priced in, Goldman analysts including Samantha Dart said in a note. As a result, a colder-than-average winter would mean Europe needing to compete with Asia for supplies of liquefied natural gas, driving prices even higher.
And there’s a “non-negligible risk” that LNG directed to Europe won’t be enough to prevent a depletion of gas inventories by the end of winter, especially if weather is cold in both Europe and Asia, the analysts said.
“Under such an outcome, the only balancing mechanism would be a significant further rally in European gas and power prices reflective of the need to destroy demand, with curtailed power demand in the industrial sector through blackouts,” they said.
This scenario from the bank adds to mounting concerns about an energy crisis in Europe, just as economies recover from the pandemic.
Energy prices are breaking records daily. Gas and coal reserves are well below normal weeks before the heating season begins, while limited gas supplies from Russia, lower North Sea production and competition with Asia for LNG are also stoking the rally. On top of that, a fire shut a key U.K.-France electricity subsea cable Wednesday, worsening Britain’s energy crunch.
Read: U.K.’s Record-Breaking Energy Crunch Explained in Five Charts
“If you get a windy mild winter we can sail through fine,” said Arran Train, general manager of Energy24, the trading business of PX Group, which handles more than 30% of the U.K.’s gas supply. “Winter really starts after Christmas. You can use a lot of gas in the fourth quarter but prices in Asia may change and you may or may not not get LNG.”
MIING:
PEA reveals Pebble economics, benefits
Shane Lasley, North of 60 Mining News, September 9, 2021
he Pebble Mine project advanced to the final step of the permitting process would produce 320 million pounds of copper; 363,000 ounces of gold; 15 million pounds of molybdenum; 1.8 million oz of silver; and 12,000 kilograms of rhenium annually over the first 20 years of mining, according to the results of a new preliminary economic assessment published by Northern Dynasty Minerals Ltd. on Sept. 9.
In addition to the proposed 20-year-mine submitted for permitting, the PEA considers the economics of alternatives that could extend mining at the world-class deposit in Southwest Alaska out to around 100 years and the potential for secondary recovery later in the life of the mine.
“The 2021 PEA forecasts robust economics for the proposed project and also future potential developments,” said Northern Dynasty Minerals President and CEO Ron Thiessen. “It is a project that can be designed, built and operated with industry-leading environmental safeguards while generating significant financial returns over multiple decades.”
At a processing rate of 180,000 tons per day, the initial 20-year mine considered in the PEA is forecast to generate a post-tax internal rate of return of 15.8% and a net present value (7% discount) of US$2.3 billion.
At today’s metal prices, the IRR for this operation would be 23.8%, and the NPV would more than double to US$4.8 billion.
This operation is projected to pay back the initial US$6 billion to build the mine, which includes $1.7 billion in estimated costs for transportation infrastructure and power supply, in 4.8 years.
The three expansion scenarios considered in the PEA would extend the life of the Pebble Mine out to 90, 91, or 101 years.
The first such scenario would expand the Pebble process plant from 180,000 to 250,000 tpd following the first 20 years of mining. The second and third evaluated scenarios would expand the plant to 270,000 tpd in years 10 and five of the proposed initial 20-year mine, respectively.
The PEA also considers the option of establishing a secondary gold recovery circuit at the project in year-five. The current mine plan only considers capturing gold in the concentrates and in a gravity circuit.
Each of the three expansion alternatives process the same amount of ore – 8.6 billion metric tons. Under all three alternatives, the mine would produce 60.4 billion lb of copper, 65 million oz gold, 289 million oz silver, 2.9 billion lb molybdenum, and 2 million kilograms of rhenium over around a century of mining.
“The significant metal production forecasts and robust financial estimates we’re releasing today clearly suggest that Pebble is potentially more than just one of the greatest accumulations of copper and other strategic metals ever discovered on American soil,” said Thiessen. “It’s also a mineral resource that has the potential to sustain an environmentally sound and financially rewarding mining operation in the near-term and become one of America’s most important metals producers for decades to come.”
At forecast long-term metals prices, these expansion scenarios generate an IRR of 18.9 to 22.7% and an NPV of US$6.7 to US$9.8 billion.
At today’s metals prices, the IRR jumps to 26.3% to 30.8%, and the NPV increases to US$10.9 to US$15.4 billion.
In terms of economics, the best performing operation is the 90-year alternative, which considers increasing production to 270,000 tpd and adding a gold recovery circuit in year-five.
Under the proposed 20-year mine 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.
Under the expansion scenarios, this operation would pay roughly US$22 billion to the state; US$4 billion to the borough; and US$19 billion to the federal government over roughly a century.
“Pebble has the potential to become an economic engine for Southwest Alaska, a region that is currently one of the most economically challenged in all of the U.S.,” said Thiessen. “The ability of Pebble to produce copper at a low cash-cost and generate many millions in annual taxes and other government revenues in Alaska, while setting aside appropriate closure funding, could propel this region of Alaska into prosperity and opportunity.”
In addition to these financial benefits, the operation will distribute a percentage of the revenue generated from the proposed Pebble Mine to year-round residents of Bristol Bay that enroll for the Pebble Performance Fund.
Once fully operational and profitable, Pebble Performance Dividend will distribute 3% of the net profits from the mine to registered Bristol Bay residents.
As the first several years of development will not yield profits, Pebble Partnership will contribute US$3 million annually for distribution to all registered participants. Thus, if 3,000 residents register, the dividend will distribute US$1,000 to qualified participants once construction begins.
“Incorporating the Pebble Performance Fund into the development options will ensure that residents of the region participate directly in the economic outcomes of Pebble development and operations,” said Thiessen.
Citing inconsistencies in the Army Corps’ findings and unprecedented mitigation requirements, Pebble Partnership has appealed the Army Corps’ decision to deny the Clean Water Act Section 404 permit for the proposed Pebble Mine.
“In order to achieve its vision for global leadership in transitioning to a low-carbon future, the U.S. simply must develop its own domestic sources of copper and other critical metals,” the Northern Dynasty CEO added. “In doing so, it should also demonstrate to the rest of the world what environmentally sound and socially responsible mining looks like. That’s precisely what we’ve undertaken to do at Pebble, and through the project designs evaluated in this PEA.”
POLITICS:
From the Washington Examiner, Daily on Energy:
DIFFERENCES BETWEEN HOUSE AND SENATE: The House Ways and Means Committee advanced its sweeping green energy tax plan yesterday as part of what Democrats called the single most important piece of climate legislation Congress has had the chance of passing.
But stakeholders are bracing for a “long path to enactment,” as Abigail Ross Hopper, CEO of the Solar Energy Industries Association, noted in one of a hail of statements supporting the package.
That’s because the House and Senate still need to work out, or reconcile, their differences, which are pretty vast when it comes to doling out clean energy tax subsidies.
Ron Wyden, chairman of the Senate Finance Committee, reiterated yesterday he plans to proceed with an overhaul of the energy tax code that would replace 44 energy tax breaks and incentives with three emissions-based incentives: clean power, clean fuels, and energy efficiency. These technology-neutral incentives wouldn’t favor a particular technology so long as it reduces carbon emissions. Technologies prompting greater reductions would receive a higher credit.
House on a different track: The Ways and Means Committee, however, has a more straightforward approach, extending renewable energy tax credits already on the books and expanding them to new technologies, while offering a direct-pay option for several tax breaks and providing higher payments to projects that are made in America by union workers.
Their proposal does not tie the credits to actual emissions reductions, and it keeps in place tax breaks for the fossil fuel industry that Wyden is determined to nix.
Wyden, speaking at a digital happy hour hosted by Evergreen Action yesterday, described the 44 tax breaks that currently exist for energy as a “monument of doing business as usual,” taking specific aim at “fossil fuel relics.”
“It’s time to say no more special breaks for the fossil fuel industry,” Wyden said. “That is in line with what President Biden said during the campaign.”
Wyden tried to minimize differences, adding the House “is moving in our direction on these issues.”
But he also continued to stress his committee’s interest in including carbon pricing in its bill, which would represent a meaningful addition that House Democrats are keen to avoid.
“If you are going to change behavior that really drives our problem that underly climate change, you need to change prices, you need to change taxes,” Wyden said.
CLIMATE CHANGE:
Climate Change Saves More Lives Than You’d Think
Bjorn Lomborg, The Wall Street Journal, September 16, 2021
Eight times as many people die from cold as heat, and the fix for both is access to cheap fuel.
Editor’s note: As November’s global climate conference in Glasgow draws near, important facts about climate change don’t always make it into the dominant media coverage. We’re here to help. Each Thursday contributor Bjorn Lomborg will provide some important background so readers can have a better understanding of the true effects of climate change and the real costs of climate policy.
In their call for “emergency action” on climate change last week, editors of the world’s leading medical journals relied in large part on a misleading claim that heat deaths are rising rapidly.
Global warming does cause more heat deaths, but the editors’ statistic is deceptive. They say global heat deaths have gone up by 54% among old people in the past 20 years, but they fail to mention that the number of old people has risen by almost as much. Demographics drove most of the rise, not climate change.
They also leave out that climate change has saved more lives from temperature-related deaths than it has taken. Heat deaths make up about 1% of global fatalities a year—almost 600,000 deaths—but cold kills eight times as many people, totaling 4.5 million deaths annually. As temperatures have risen since 2000, heat deaths have increased 0.21%, while cold deaths have dropped 0.51%. Today about 116,000 more people die from heat each year, but 283,000 fewer die from cold. Global warming now prevents more than 166,000 temperature-related fatalities annually.
Heat is typically easier to mitigate than cold. Heat advisories, drinking fluids and access to shaded, cooler areas help protect people from the hottest days of the year. Heat deaths in rich countries have generally declined in recent decades because of air conditioning.
Cold is much harder to deal with. Heating a home well all through the winter can be prohibitively expensive for poorer households, even in developed nations. Fracking drove down American natural gas prices. One study estimates that the resulting cheaper heat saved more than 11,000 lives annually by 2010.
The best way to protect people from heat or cold is access to plentiful, cheap energy, though that often means fossil fuels. Funny, that didn’t make it into the editors’ recommendations.
Mr. Lomborg is president of the Copenhagen Consensus and a visiting fellow at the Hoover Institution. His latest book is “False Alarm: How Climate Change Panic Costs Us Trillions, Hurts the Poor, and Fails to Fix the Planet.”