NEWS OF THE DAY:
ConocoPhillips: Willow court decision, FID & core Alaska biz
Petroleum News, August 31, 2021, Edition
On Aug. 30, ConocoPhillips released the following statement from its Alaska media office:
“We continue to review U.S. District Judge Sharon Gleason’s decision to vacate the Bureau of Land Management’s approval of the Willow project in order to determine the best course of action for advancing the Willow project. We strongly believe that the BLM and cooperating agencies performed a robust, thorough, and extensive review of the Willow project, but we will again engage with the relevant agencies to address the matters described in the Court’s decision.
“On a parallel path we will continue to perform engineering design work in anticipation of a future final investment decision (FID). However, given the recent Court decision, we do not expect to make the FID decision in 2021 and continue to be clear that we won’t make the FID until the legal risks are resolved.
“We, and many important stakeholders, remain committed to Willow as the next significant North Slope project. The merits of the project represent a strong example of environmentally responsible development that offers extensive public benefits, including significant employment of Alaskan skilled labor from union and non-union trade associations and financial payments to federal, state, borough, and community governments.
“The Willow decision on August 18 has no direct impact on the remainder of the company’s core business in Alaska.”
From the Washington Examiner, Daily on Energy:
MOVING QUICKLY ON LEASING OVERHAUL: House Democrats are driving to deliver on President Joe Biden’s calls to reform the federal oil and gas leasing program by raising costs on producers and imposing stricter regulatory requirements.
While we wait for the Interior Department’s delayed report on how it envisions the future of leasing, Democrats on the Natural Resources Committee are providing a blueprint with their portion of the $3.5 trillion reconciliation package released to the public last night.
The committee, which oversees energy production on federal lands, released its reconciliation bill ahead of a markup of the legislation scheduled for Thursday morning.
What’s in the bill: As expected, the sprawling bill contains a suite of provisions long-pursued by the committee’s Democrats led by Chairman Raul Grijalva to raise royalty rates, rental fees, and minimum bid amounts; strengthen bonding requirements on operators — meaning that when a company goes bankrupt, there is more assurance they could foot the bill to reclaim their wells; and assess a new royalty on all extracted methane from oil and gas operations on public lands and waters.
The bill would also end the practice of “uncompetitive leasing” that allows companies to secure leases unsold at auction without paying a bonus bid.
Committee Democrats say together the package of reforms would provide a fairer return to taxpayers and reorient the use of public lands away from fossil fuel production to other practices, such as clean energy development.
The royalty rates that companies pay to the government to drill on public onshore lands haven’t been raised since the 1920s, while minimum bid requirements set at $2 an acre have not been lifted in decades.
The big question: But Republicans and some Democrats from fossil fuel states (see Sen. Joe Manchin of West Virginia) are unlikely to go along with these, and it’s unclear if they will survive when the House and Senate merge their priorities into a final reconciliation product
“All of these reforms are good for West Virginia and are good for every place,” committee Democrat Rep. Jared Huffman of California told me in a phone call last night. “It’s only right these industries should pay their fair share and are beholden to high environmental and public health standards.”
Opponents pursue delay tactic: Committee Republicans and fossil fuel industry groups are arguing the timing is bad for pursuing these reforms.
Republican members led by top Republican Bruce Westerman of Arkansas last night issued a statement calling on the committee’s Democrats to postpone the markup on the reconciliation bill scheduled for Thursday, citing other “crises facing our nation that are unresolved.”
Erik Milito, president of the National Ocean Industries Association, the offshore energy trade group, warned in a statement provided to me that imposing “more restrictive and less competitive” lease terms for oil and gas operators in the Gulf of Mexico would especially harm companies and workers as they recover from Hurricane Ida in Louisiana.
Huffman, however, said he finds these arguments to delay the reconciliation process “less than convincing.”
“There is never a time when this [oil and gas] industry that has had nothing but subsidies and immunity for a century and beyond would ever say is the right time to see these reforms,” Huffman said.
Biden suspects “unlawful” oil and gas mergers are behind higher gasoline prices
Justin Sink, David McLaughlin, World Oil, August 31, 2021
The Federal Trade Commission is examining ways to crack down on mergers in the oil and gas industry and investigate whether gas station franchises are driving up gas prices as part of a Biden administration effort to combat higher costs at the pump.
FTC Chair Lina Khan is directing staff to identify new legal theories to challenge retail fuel station deals and investigate possible collusion by national chains to push up prices, she said in an Aug. 25 letter to White House economic adviser Brian Deese obtained by Bloomberg News.
“I will be taking steps to deter unlawful mergers in the oil and gas industry,” Khan said. “Over the last few decades, retail fuel station chains have repeatedly proposed illegal mergers, suggesting that the agency’s approach has not deterred firms from proposing anticompetitive transactions in the first place.”
The FTC is planning to ratchet up investigations into abuses in the retail fuel station franchise market, she added.
“We will need to determine whether the power imbalance favoring large national chains allows them to force their franchisees to sell gasoline at higher prices, benefitting the chain at the expense of the franchisee’s convenience store operations,” Khan said.
One pending deal that could be affected is HollyFrontier Corp.’s agreement to buy Sinclair Oil Corp. The acquisition would give the Dallas-based fuel producer Sinclair’s refineries, a renewable-diesel facility, and a network of over 300 distributors and 1,500 DINO-branded stations across 30 states. Holly Energy Partners LP, the company’s midstream business, will acquire Sinclair’s integrated crude and refined products pipelines and terminal assets.
Khan said the decision to toughen requirements was prompted by “significant consolidation” in the industry during recent years. But the decision also comes as oil prices have become a political liability for President Joe Biden, heightened by fresh concerns that Hurricane Ida could further push up prices at the pump.
The Gulf is home to 16% of U.S. crude production, 2% of its natural gas output, and 48% of the nation’s refining capacity. U.S. gasoline futures rose Monday as Ida disrupted refining. About 2.11 million barrels a day of refining capacity –about 12% of the U.S. total — was being shut or brought to reduced rates at plants along the Mississippi River on Sunday.
Oil was little changed as offshore production platforms may have escaped significant damage and the OPEC+ producers’ cartel is expected on Wednesday to endorse a planned supply increase.
U.S. gasoline prices have climbed 48% since Biden’s inauguration as president, largely due to a rebound in demand following the worst effects of the pandemic.
Khan’s stepped-up approach to gas-station deals comes after the FTC in June approved 7-Eleven Inc.’s purchase of the Speedway retail chain from Marathon Petroleum Corp. after the companies agreed to sell hundreds of store locations. 7-Eleven initially closed the deal without FTC approval, prompting the acting chair at the time to call the acquisition “illegal.” A month later, the commission voted 4-0 to approve the deal. Khan didn’t participate in the vote.
Exploring a uniquely Alaskan opportunity
Shane Lasley, North of 60 Mining News, August 27, 2021
A nearly half-a-million-ounce gold deposit sitting on a 7.5-mile trend of obvious yet underexplored mineralization just a few miles from the coast in Southcentral Alaska was hiding in plain sight for more than two decades before HighGold Mining Inc. began unlocking the rich potential of this high-grade gold project in 2019.
Owned by Cook Inlet Regional Inc., more widely known as CIRI, Johnson Tract is one of the many mineral-rich properties identified and selected by Alaska Native corporations following the passage of the Alaska Native Claims Settlement Act in 1971.
By the 1990s, an estimated 1.04 million metric tons of resource averaging 10.05 grams per metric ton gold, 7.63 g/t silver, 8.32% zinc, and 1.13% lead had been outlined in what is now known as the JT deposit at Johnson Tract.
Despite these high grades and the evident potential to grow this resource, weak precious metals prices at the end of the 20th century put a halt to plans to develop a mine at Johnson Tract, and the enticing project faded into obscurity.
Wanting to unlock the gold potential on its land, CIRI went on a search for a mineral exploration company known for not only its geological prowess but also an excellent environmental, social, and governance reputation – a search that eventually led to HighGold.
In the two years since leasing Johnson Tract from CIRI, HighGold has validated the high-grade resource at JT and is beginning to unlock the vast potential across this 20,942-acre project that lies only about six miles west of Cook Inlet and 125 miles southwest of Anchorage.
“Our exploration team’s mandate in 2021 includes both establishing critical mass at the JT deposit and making new discoveries,” said HighGold Mining President and CEO Darwin Green.
Uniquely Alaskan opportunity
With an already well-advanced gold-rich polymetallic project located on highly prospective lands owned by an ANCSA corporation, Johnson Tract offers a uniquely Alaskan opportunity for HighGold, which was spun out of Constantine Metal Resources Ltd. specifically to advance this project. This gold enriched project, however, offers another rare bonus – U.S. Congress and Alaska Legislature guaranteed road access to tidewater.
This assurance of easements for a road and port for delivering metal-rich concentrates produced at a Johnson Tract mine dates back to when CIRI claimed this metal-rich property in 1976.
At about the same time as CIRI selected Johnson Tract, the federal government created the Lake Clark National Park, isolating the gold property.
Relentlessly battling inside and outside of court, early CIRI leaders negotiated the Cook Inlet Land Exchange, one of the largest land swaps in U.S. history.
As part of this exchange, CIRI was granted special rights, ratified by U.S. Congress, and approved by the Alaska Legislature, that ensures transportation and port easements through Lake Clark National Park for the development of the rich mineral potential at Johnson Tract.
“CIRI enabled the creation of the park with an exchange of land originally outlined in ANCSA for the Johnson subsurface and surface rights on the south tract and subsurface rights on the north tract,” CIRI Corporate Affairs Director Ethan Tyler told North of 60 Mining News.
In 1981, Anaconda Mining signed a joint venture agreement with CIRI to evaluate the precious and base metals potential identified across these tracts of land.
Exploration under this JV led to the discovery of the JT deposit in 1982. The discovery hole cut 102.6 meters averaging 10.94 grams per metric ton gold, 8.01% zinc, 0.75% copper, 2.13% lead, and 8.5 g/t silver.
Mining this rich discovery nearly became a reality when Westmin Resources Ltd. optioned Johnson Tract in the 1990s.
Based on 88 holes, mostly drilled by Anaconda, Westmin calculated that Johnson Tract hosted 1.04 million metric tons of resource averaging 10.05 g/t gold, 7.63 g/t silver, 8.32% zinc and 1.13% lead.
Westmin contemplated shipping ore mined from the JT deposit to its then Premier Mine in British Columbia’s famed Golden Triangle. Both properties are near tidewater, which would have made shipping the high-grade ore to the already operating mill on the east side of the Gulf of Alaska fairly inexpensive.
Weak gold prices at the time, however, made the plan infeasible and Westmin’s lease on this highly prospective property expired.
After being lost to obscurity for two decades, Johnson Tract reemerged on the Alaska exploration scene with HighGold’s agreement with CIRI.
HighGold and CIRI have an initial 10-year term for the exploration and other studies needed to advance the gold-rich project to a mine construction decision, followed by a five-year development term, and then a production term that will continue for as long as mining continues.
Minimum exploration expenditure and annual lease payments are required to maintain the lease until production. Considering the large exploration programs already carried out by HighGold, however, the $10 million minimum exploration requirement is now moot.
“We already exceeded that,” said Green.
CIRI maintains certain net smelter return royalties and a back-in right for up to a 25% participating interest in Johnson Tract at the time a decision to develop a mine on the polymetallic gold project is reached.
Larger potential emerges
With a strong partnership with CIRI, a head start on exploration, and an already established camp to work out of, it did not take HighGold long to build momentum and excitement at Johnson tract.
Nine holes drilled by HighGold during 2019 both confirmed and expanded the historical JT deposit.
Based on this and the earlier drilling, an industry-compliant 2.14 million metric tons of indicated resource averaging 6.07 g/t (417,000 oz) gold, 5.8 g/t (397,000 oz) silver, 5.85% (275.3 million pounds) zinc, 0.71% (37.6 million lb) lead, and 0.57% (26.8 million lb) copper; plus 581,000 metric tons of inferred resource averaging 2.05 g/t (38,000 oz) gold, 6.67% (85.5 million lb) zinc, 0.33% (4.2 million lb) lead, and 0.54% (6.9 million lb) copper was established for JT.
This deposit and the wider potential of the Johnson Tract property attracted prominent resource investors such as Franklin Gold Fund, Sprott Asset Management, and Rob McEwen to participate in a C$13.8 million financing that closed in mid-2020. Agnico Eagle Gold Mines Ltd., a senior gold producer that was anonymous at the time, also participated in the financing and maintains a roughly 7% stake in HighGold.
“With the closing of the financing, HighGold has C$23 million in working capital, placing us in a strong position to materially advance our flagship Johnson Tract gold project in Alaska,” Green said at the time. “HighGold now looks forward to putting these funds to work.”
The exploration company did just that, completing 16,418 meters of drilling during the 2020 season, roughly double what the company planned at the beginning of the year.
Unlocking the potential
The 32-hole drill program completed in 2020 focused primarily on resource expansion targets at and around the JT deposit.
Highlights from 2020 drill intercepts on the margins of the JT deposit mineral resource area include:
• 74.1 meters averaging 17.89 g/t gold, 7.1 g/t silver, 0.48% copper, 7.28% zinc, and 1.31% lead in hole JT20-092.
• 75.1 meters averaging 10.01 g/t gold, 6 g/t silver, 0.57% copper, 9.36% zinc, and 1.11% lead in JT20-093.
• 20.1 meters averaging 11.5 g/t gold, 4 g/t silver, 0.5% copper, and 3.1% zinc in JT20-096.
• 22.8 meters averaging 3.2 g/t gold, 4 g/t silver, 0.4% copper, and 6% zinc in JT20-106.
• 58.6 meters averaging 1% copper and 21 g/t silver, including 12 meters averaging 2.8% copper and 51 g/t silver in JT20-110.
• 18.3 meters averaging 5.9% zinc, 64 g/t silver, and 0.1% copper in JT20-121.
While the drills were turning, HighGold geologists carried out a large-scale regional reconnaissance exploration that has identified exciting targets that are being tested with an expansive drill program carried out this year.
This year’s program includes a planned 20,000 meters of drilling that will further test both expansion targets at JT and some of the exciting prospects extending to the north.
The JT deposit area targets include:
• JT Deposit Expansion – Step-out holes along strike and down-plunge from the current resource.
• Revised Fault Offset Target – Which is testing a new interpretation of the JT deposit fault displacement.
• GAP Target – This includes widely-spaced fans of holes to test a poorly drilled area immediately along strike to the northeast of JT deposit.
• Footwall Copper Zone – Step-outs at depth from the copper-rich zone discovered in 2019, where hole JT19-089 cut 20.7 meters averaging 2.4% copper, 4.9% zinc, and 32 g/t silver.
• 2020 VMS Zone – Follow-up on the 7.8 meters at 6.1% zinc, 1.6% lead, 0.2% copper, 0.7 g/t gold, 36 g/t silver encountered in JT20-114, a hole drilled last year.
The Johnson Tract regional prospects being tested this year include:
• DC Prospect –Previously known as Difficult Creek, DC hosts large gossan alteration zones reminiscent of JT deposit, which is about 2.5 miles (four kilometers) to the southwest. These zones include a 500- by 1,000-meter area of silver-rich veins, vein swarms, and siliceous breccias discovered by HighGold geologists last season.
• Milkbone Prospect – Located 400 meters west of the silver-rich vein field, Milkbone is defined by a strong soil anomaly with samples of 70 to 4,390 parts per billion gold that coincide with boulders and subcrop samples that have returned grades as high as 184 g/t gold.
• Kona Prospect – A large-scale alteration zone about 1,000 meters west of Milkbone that is associated with a strong induced polarization geophysical anomaly.
HighGold is roughly 8,000 meters into the planned 20,000-meter drill program testing these targets. Assays are pending from all the drilling completed this year.
With deadline looming, Alaska lawmakers still disagree over PFD amount (ktoo.org)
Andrew Kitchenman, KTOO, August 30, 2021
Alaska Permanent Fund dividends will be delayed after the Legislature failed to agree on funding in time for the usual early October payments.
The House of Representatives plans to vote Tuesday on a bill that would pay dividends of up to $1,100. The House of Representatives defeated amendments on Monday that would have paid a PFD this year of roughly $2,350 or $3,800.
The state’s Permanent Fund Dividend Division said if dividends were to be paid as normal in the first week of October, lawmakers would have until Tuesday to decide on the amount. It is not possible for both chambers to pass the funding in time.
If the funding amount is finalized later, dividends would be paid roughly 30 days after that
The two sides of the PFD debate are split over which state law to follow. Most members of the Republican House minority say the state should pay dividends based on the formula of a 1982 law. But the mostly Democratic majority opposes drawing more from the permanent fund than is outlined in a 2018 law.
The state hasn’t paid a dividend that follows the formula since 2015, after oil prices fell. Supporters of the higher PFD amount say recent growth in the permanent fund means the state can afford it.
But opponents say drawing more than planned would threaten tens of billions of dollars of permanent fund earnings in the long term. They point to the state’s history of spending down savings.
Lawmakers have been debating the amount of the 2021 PFD for months.
In July, Dunleavy vetoed a $525 PFD, saying it was an insult to Alaskans.
Earlier this month, he added proposed $2,350 PFDs to the Legislature’s agenda for its third special session of the year.
House members also introduced bills on Monday that are intended to balance the state budget in the long term.
Rep. Geran Tarr, D-Anchorage, introduced bills to raise oil and gas taxes and introduce a 2% statewide sales tax.
The House Special Committee on Ways and Means introduced a bill to raise revenue by lowering the tax credits oil and gas companies receive. The committee also introduced a bill that would change the formula in state law to pay permanent fund dividends. The PFD would equal 25% of the annual draw from the permanent fund. The current amount of the dividend under the new formula would be roughly $1,200.
The House is scheduled to resume its floor session Monday evening.
Biden is caught between political worlds on climate change
Ben Geman, Axios, August 31, 2021
These two things both happened Monday: The Health and Human Services Department unveiled its climate office, and the White House promoted efforts to keep gasoline prices in check.
Why it matters: The two moves show how the White House is now operating simultaneously in the old and new world of energy and climate policy.
- On the new front, the new Office of Climate Change and Health Equity shows how the Biden administration is seeking to stitch efforts to address the causes and effects of climate change into agencies government wide.
- But Monday the White House also made public that the Federal Trade Commission is probing (among other things) gas stations mergers to avert potentially anti-competitive behavior that could drive up pump prices.
Our thought bubble: President Biden’s administration is looking to accelerate the transition from fossil fuels, but it’s also not going to abandon what a long string of administrations have viewed as the political imperative to show they want to constrain fuel costs.
Catch up fast: The New York Times reports here on the “first federal program aimed specifically at understanding how planet-warming greenhouse gas emissions from burning fossil fuels also affect human health.”
- “, experts said, more needs to be done to understand how extreme weather affects older people as well as communities of color, where families are more likely to live in areas hardest hit by disasters,” Lisa Friedman reports.