NEWS OF THE DAY:
Rise in oil prices could add $1.2B in state revenue for Alaska, preliminary forecast says – Alaska Public Media
Andrew Kitchenman, Alaska Public Media, October 31, 2021
The recent increase in oil prices could lead to the state government receiving $1.2 billion more than expected this year.
That’s according to a preliminary revenue forecast released by the state Department of Revenue on Friday. The final forecast will be made in December.
While the state forecast in March that oil would average $61 per barrel this year, the update forecasts it at $81.31. The current price is $85.50 per barrel.
The preliminary report also forecasts an increase in daily North Slope oil production of nearly 30,000 barrels this year, compared with the spring forecast.
But it forecasts a slight decline in production for the rest of the decade, compared with the spring. The state says that’s due to “increased uncertainty for large projects caused by federal litigation and financing issues.”
OIL:
U.S. Interior to weigh greenhouse gas emissions of proposed 2022 oil lease sales | Reuters
Valerie Volcovici, Reuters, October 29, 2021
The U.S. Interior Department’s Bureau of Land Management on Friday said it will analyze the climate impacts of proposed oil and gas lease sales that have been scheduled for early 2022 and seek public feedback.
The BLM, which manages 245 million acres of public land in 12 western states, said its state offices will issue for the first-time environmental assessments that factor in the social cost of greenhouse gases associated with the development of those acres.
These reports could lead to some leases being removed from consideration or deferred depending on the public comments received.
“The BLM is committed to responsible development on public lands, including ensuring that our environmental reviews consider the climate impacts of energy development on lands and communities,” said BLM Director Tracy Stone-Manning, who was recently confirmed by the Senate.
The agency will issue the environmental assessments for Colorado, Eastern States, Montana and the Dakotas, Nevada, New Mexico, Utah and Wyoming in the coming days.
During the administration of former President Donald Trump, the BLM did not weigh the greenhouse gas emissions impacts of proposed lease sales, leading environmental groups to launch lawsuits that halted some lease sales.
The BLM said it has deferred a number of nominated leases from the 2022 lease sales because there was insufficient environmental analysis in pre-existing supporting documents submitted under the previous administration.
Environmental groups said the announcement was a good first step in addressing the climate impact of federal oil leasing but more needs to be done to overhaul the program.
“The Bureau of Land Management must exercise its authority to refrain from leasing lands and focus on making long-overdue reforms in order to protect our multiple uses and our communities’ access to the outdoors,” said Angel Pena, executive director of New Mexico environmental group Nuestra Tierra.
GAS:
North Dakota leaders eye trans-state natural gas pipeline with federal coronavirus aid money
Adam Willis, INFORUM, November 1, 2021
As North Dakota lawmakers prepare to distribute hundreds of millions of dollars in federal coronavirus aid next week, a proposal to facilitate the construction of a trans-state natural gas pipeline has emerged as a top priority for Republican leaders.
Specifics of the project, which would roughly track Highway 2 from the Bakken oil fields to Grand Forks, are still being hashed out, but a plan to put $150 million out of the state’s federal American Rescue Plan funding into trans-state natural gas delivery has the backing of Gov. Doug Burgum and leading lawmakers in both legislative chambers.
North Dakota has long struggled to find capacity for the large volumes of natural gas that come up alongside oil in the Bakken. Right now, the state lacks the infrastructure to capture, process and export all of that gas, leaving many companies in western North Dakota to burn off the excess, a wasteful practice that contributes to climate change.
As Bakken wells continue to mature, North Dakota gas production is expected to climb higher and higher compared to its oil output.
Historically, companies might have responded to that trend by flaring off more gas. But today’s tightened regulations and the environmental policies of some producers mean shifting oil and gas ratios could force a different kind of reaction:to leave more oil in the ground. By one state regulator’s modelling, oil producers in North Dakota will have to begin curtailing output in two to four years without more solutions for natural gas.
“It seems that folks are looking at this as (maybe) a now or never,” North Dakota Pipeline Authority Director Justin Kringstad told state leaders at a recent meeting of the Industrial Commission, the three-member business regulatory panel chaired by Burgum.
If North Dakota leaders can facilitate the construction of a trans-state natural gas pipeline, proponents believe it would kill two birds with one stone. They argue that boosting capacity to take gas out of western North Dakota would help ameliorate concerns of scaled-back oil production while also attracting industrial businesses in need of natural gas hookups to the eastern part of the state.
While draw-downs in oil production would come with a substantial blow to state coffers, Kringstad estimated construction of even a narrow pipeline system would yield between $180 million and $200 million in annual oil and gas taxes for the state.
Still, some conservatives in the Legislature have questioned whether the state should put its thumb on the scale for an industry or for any specific companies.
Williston Republican Sen. Brad Bekkedahl said he trusts industry leaders to come up with solutions for the natural gas problem, especially since no company will want to scale back oil production at today’s high prices. A longtime resident of the Oil Patch, Bekkedahl said oil and gas companies have been discussing a host of different market-driven fixes.
“My issue wasn’t whether this was the best (solution) or not,” Bekkedahl said. “It was that this was being promoted as the only one, and there’s other solutions out there.”
The trans-state pipeline idea isn’t new, but there previously was little urgency or political will to bring a project to fruition. Kringstad said there were at least two similar private-sector proposals in recent years that fell through because of lack of industry backing.
Though many lawmakers are looking to write a $150 million check for the pipeline when they convene for their special session next week, Senate Majority Leader Rich Wardner, R-Dickinson, said the Legislature will need to match that sum in a future session to put together the $300 million total that pipeline companies said they need to incentivize the project.
Several companies expressed interest in taking on the pipeline this time, Wardner said, including the Tulsa, Oklahoma-based Oneok and Bismarck-based WBI Energy.
Whatever proposed pipeline investment might come out of the upcoming special session, none would be near enough to cover the full cost of the job, which Kringstad estimated between $800 million and $1.2 billion.
Some in competing energy sectors expressed worries about what the ambitious pipeline development could mean for their own industries.
Mike Rud, the executive director of the North Dakota Propane Gas Association, said providers in the state’s much smaller propane industry, which provides gas to around 50,000 mostly rural North Dakota homes and businesses, expect a trans-state pipeline would leave their businesses fighting to stay afloat.
“If natural gas folks want to put a line across the state, that’s no problem,” as long as it’s not done with taxpayer money, he said.
While Rud expressed concern for the future of his industry, he also questioned whether natural gas delivery would bring the long-term economic boost to the state that leaders have touted.
“I’ve heard that story before,” said Rud, “and it’s not really what’s happened” in the state’s rural communities.
Lawmakers have until 2026 to burn through their $1.1 billion in federal coronavirus relief funding, but some backers of the pipeline proposal, including Burgum, are eager to push it forward as soon as possible. If the state doesn’t act quickly to help get the pipeline into the ground, proponents argue that North Dakota risks losing out to Midwestern rivals.
At the recent Industrial Commission meeting, Burgum raised the possibility of Iowa, which already receives Bakken natural gas, beating out North Dakota for a prospective, lucrative agribusiness contract, “all because we can’t get a big enough pipe into Grand Forks.”
MINING:
COP26 will be a colossal mining cop-out
Erik Els, Mining.Com, October 28, 2021
“The International Energy Agency’s annual World Energy Outlook [..] is probably the closest thing to a bible in the energy world,” says a Bloomberg article following the publication of the 2021 edition.
Released earlier than usual in time for the Conference of Parties (COP26) starting in Glasgow next week, this edition – the 44th – “has been designed, exceptionally, as a guidebook to COP26”.
At 386 pages IEA WEO 2021 is quite the tome (download here). Under Section 6.3.1, you’ll find the energy bible’s take on “critical minerals”. It is six pages in total.
Those six pages may be headlined critical minerals, but it’s hard to detect a sense of urgency in Section 6.3.1:
“The rapid deployment of low-carbon technologies as part of clean energy transitions implies a significant increase in demand for critical minerals.”
We have questions
The word “significant” used here contains multitudes (lithium “100 times current levels” according to the IEA’s own calculations) and the Paris-based firm has some questions:
“The prospect of a rapid increase in demand for critical minerals – well above anything seen previously in most cases – raises questions about the availability and reliability of supply.”
With only six pages to work with, the IEA has to be succinct in its appraisal of the mining industry:
“The [supply] challenges are compounded by long lead times for the development of new projects, declining resource quality, growing scrutiny of environmental and social performance and a lack of geographical diversity in extraction and processing operations.”
Questions raised. Challenges compounded. Take that global warming!
Mining ghost protocol
Edinburgh-based Wood Mackenzie has also been doing some research ahead of COP26.
Woodmac, which beat the IEA by four years, releasing its first oil report in 1973, is expanding its mining and metals practice, most recently with the acquisition of London-based Roskill.
A new report by Julian Kettle, SVP of Woodmac’s metals and mining division, and senior analyst Kamil Wlazly, answers the questions about the availability of supply in the very title:
Mission impossible: supplying the base metals for accelerated decarbonisation
Woodmac is refreshingly blunt in its assessment of mining’s role in fighting climate change:
“The energy transition starts and ends with metals.”
“Achieving global net zero is inexorably linked to base metals supply.”
“Base metals capex needs to quadruple to about $2 trillion to achieve an accelerated energy transition.”
Whoomp, there it is.
The hidden ones
There are many eye-popping graphs in Mission impossible (download here) but this one perfectly illustrates why the decarbonisation goals of the Conference of Parties, without plans for new mines, only add hot air to the warming planet.
Woodmac gets straight to the point: “delivering the base metals to meet [net zero 2050] pathways strains project delivery beyond breaking point from people and plant to financing and permitting.”
Copper, which Woodmac emphasizes “sits at the nexus of the energy transition” stands out particularly.
The 19 million tonnes of additional copper that need to be delivered for net-zero 2050 implies a new La Escondida must be discovered and enter production every year for the next 20 years.
Even if you focus on just one of the obstacles bringing new copper supply online – the time it takes to build a new mine – and leave aside all other factors, net-zero 2050 has zero chance.
Great grandfathered in
Consider that among the world’s largest copper mines, La Escondida is a relative newcomer – it was discovered in 1981, and only hit 1 million tonnes 20 years later. (MINING.COM’s official measure of copper production is the escondida which equals one million tonnes.)
The weighted average discovery year of the planet’s top 20 biggest copper mines is 1928. US number one mine Morenci (less than half an escondida in 2020) was discovered in 1870. Chile and the world’s number two copper mine Collahuasi (O.63 escondida) dates back to 1880.
When Congo’s Kamoa-Kakula went into production in May this year it was the biggest new mine to do so since Escondida. By 2028 it will produce 840,000 tonnes a year. Kamoa-Kakula is a poster child for rapid mine development, yet Robert Friedland’s exploration team discovered the deposit back in 2003.
Let it be resolved
With ample reserves, the US has a number of uncommitted projects that would support the Conference of Parties and their wannabe cheerleader, the Biden administration, advancing its climate goals.
A top contender is the Resolution project in Arizona, near the town of Superior in the area known as the Copper Triangle.
Contained copper tops 10 million tonnes making it the sixth-largest measured deposit in the world. It’s an underground high-grade mine that shrinks its environmental footprint.
The world’s number one and two mining companies, BHP and Rio Tinto, have already spent $2 billion on it, including reclamation of a historical mine. The deposit was discovered in 1995 and 26 years later remains stuck in permitting hell.
Looks like a perfect candidate for fast-track approval to help with those lofty climate goals and create those millions of promised green jobs.
Right? Trump – five days before leaving office – publishes a pivotal environmental report on the project.
Wrong. Biden rescinds the study and Democrats add specific wording to the $X.X trillion infrastructure bill that would block Resolution from going ahead.
Perhaps not surprising then, the news that BHP and others are looking at the previously shunned African copperbelt.
When central Africa is a friendlier jurisdiction for miners than the US, there may be something wrong with your strat… For more see above and below.
We process, you dig
The White House’s policy is one of relying on other countries to supply metals to the US because “it’s not that hard to dig a hole. What’s hard is getting that stuff out and getting it to processing facilities.”
A strategy that worked so well for the US with rare earths.
Perhaps the White House got the idea from Indonesia, which insists miners build processing plants and refineries to own the entire battery metal supply chain and by extension huge chunks of electric vehicle manufacture.
Tiny difference though: the grand design of Jakarta, like Beijing, Santiago, et al, includes the first link in the supply chain.
And when things go wrong in metals supply for automaking, they go really wrong, as the EU found out this month.
Overburdening overburden
Biden desperately wants a deal before COP26 to brag about all the ways it fights emissions by subsidizing American electric cars, windmills and solar panels overseas lithium, nickel, cobalt, copper, silver, and rare earth mining companies.
As if the permitting process isn’t torture enough, there’s more in Biden’s bill that’ll make miners and explorers gnash their teeth and pull their hair out.
Also included in the reconciliation spending measure is an 8% gross – yes, gross isn’t it – royalty on existing mines and 4% on new ones. New ones? Ha!
There would also be a 7-cent fee for every tonne of rock moved.
This is a particularly stupefying proposal. Not easy to find anything in the tax code that shows this kind of ignorance of how an industry operates, but it would not be dissimilar to taxing farmers for every acre ploughed (multiplied by the length of the blades just to make sure you precisely measure the displaced dirt), regardless of any harvest.
What’s another year?
It was two years ago almost to the day on the occasion of a Greta Thunberg protest in MINING.COM’s hometown of Vancouver, that this paper declared Thunberg and Alexandria Ocasio-Cortez as the mining industry’s unlikely heroines.
We urged miners to embrace the goals of the environmental movement and initiatives like the Green New Deal.
With all the glaring holes drilled into COP26’s decarbonisation plans, it sure feels like it was Greta and AOC that copped out of this embrace, not mining.
POLITICS:
From the Washington Examiner, Daily on Energy:
SPOTTING A METHANE FEE LOOPHOLE: Democrats’ compromise version of their methane fee as part of their climate and social spending bill includes a potential loophole that might limit its effectiveness.
Arvind Ravikumar, a professor in the petroleum engineering department at the University of Texas, noted an exemption written into the updated language for methane emissions “caused by unreasonable delay in environmental permitting of gathering infrastructure.”
Ravikumar told Josh that provision is “basically a carve out” for producers in the Permian, the largest U.S. oil and gas basin, where gathering pipelines and offtake infrastructure is lacking.
Companies generally resort to flaring, which is a source of methane emissions when done improperly, if there is insufficient pipeline or other infrastructure to transport the natural gas for use. That lack of transport infrastructure could enable operators to seek an exemption to the fee.
“It’s not clear to me how ‘unreasonable delay’ is defined, but it could potentially be a big loophole for Permian operators,” Ravikumar said.
Democrats have modified the methane fee to accommodate concerns from centrist members, providing $775 million in subsidies to help oil and gas operators install methane monitoring equipment so they can better comply with the fee. It’s unclear if the new version will make it into final language that can pass the Senate.
CLIMATE CHANGE:
What the Supreme Court’s move means for EPA climate rules
Nina H. Farah, Pamela King, ENERGY WIRE, November 1, 2021
The Supreme Court may be poised to put new guardrails on the Biden administration’s climate agenda after justices agreed last week to consider the extent of EPA’s authority to regulate carbon emissions.
The court sent shock waves through the legal world when it agreed Friday to consider a consolidated challenge from Republican-led states and coal companies. The challenge stemmed from a federal court ruling that struck down a Trump-era regulation gutting EPA’s climate rule for power plants (E&E News PM, Oct. 29).
When the justices issue their ruling in the EPA case, which is expected by next summer, the decision could provide the first indication of how the court’s new 6-3 conservative majority will approach questions of the federal government’s role in curbing global climate change.
“This is likely to result in one of the most significant environmental rulings the court has ever reached,” said Robert Percival, director of the Environmental Law Program at the University of Maryland’s law school.
The court’s decision could place new limits on how expansively EPA can interpret its authority to use the Clean Air Act to address climate change.
Friday’s order coincided with the beginning of global climate negotiations at the 26th Conference of the Parties, or COP, in Glasgow, Scotland. It also comes as Congress is negotiating a Democratic spending package that would pump more than $500 billion into addressing climate change. The Biden administration’s goal is to cut U.S. greenhouse gas emissions in half by 2030 and put the electricity sector on a path to zeroing out carbon emissions by 2035.
West Virginia Attorney General Patrick Morrisey (R) praised the justices’ decision to review the ruling earlier this year by the U.S. Court of Appeals for the District of Columbia Circuit, which scrapped the Trump administration’s Affordable Clean Energy rule and handed the Biden team a clean slate to draft a new regulation for coal-fired power plant emissions (Greenwire, Jan. 19).
“This is a tremendous victory for West Virginia and our nation. We are extremely grateful for the Supreme Court’s willingness to hear our case,” Morrisey said in a statement Friday.
“This shows the Court realizes the seriousness of this case and shares our concern that the D.C. Circuit granted EPA too much authority,” he continued. “Given the insurmountable costs of President Biden’s proposals, our team is eager to present West Virginia’s case as to why the Supreme Court should define the reach of EPA’s authority once and for all.”
White House national climate adviser Gina McCarthy said yesterday that the administration believes the high court will uphold EPA’s ability to regulate carbon emissions across the electricity sector.
“The courts have repeatedly upheld the EPA’s authority to regulate dangerous power plant pollution,” she told reporters on a call. She noted that the appeals court had struck down the Trump-era rule that would have weakened power plant regulations.
McCarthy said the White House is confident that the Supreme Court will rule in a way that affirms that “EPA has not just the right but the authority and responsibility to keep our families and communities safe from pollution.”
Critics of the Supreme Court decision to hear the case said that in most instances, federal courts wait for an agency to enact a rule before they weigh in on a legal controversy around the agency’s power to regulate.
“In that sense, this seems like a power grab. But we don’t know yet,” said Bethany Davis Noll, executive director of the State Energy & Environmental Impact Center at New York University School of Law.
Instead of reinstating the Obama-era Clean Power Plan — which interpreted the “best system of emission reduction” to include emissions trading or shifting generation to renewable energy — EPA under Biden opted to start from scratch. The power sector has already surpassed the 2015 Clean Power Plan’s emissions reductions target a decade early.
The agency under Biden has yet to publish a draft proposal, and observers says it may now choose to wait for the Supreme Court’s decision before writing a new carbon rule.
EPA did not respond to a request for comment on the Supreme Court’s order but agency Administrator Michael Regan defended the agency’s authority Friday on Twitter.
“Power plant carbon pollution hurts families and communities, and threatens businesses and workers,” he tweeted. “The Courts have repeatedly upheld EPA’s authority to regulate dangerous power plant carbon pollution.”
Agency powers
Several observers said the Supreme Court’s eventual ruling in the case could be limited to power plants, while others predicted a bigger blow to emissions regulation for other sectors.
“The issue just gets dumped back in Congress’ lap,” said Jeff Holmstead, a partner at the law and lobbying firm Bracewell LLP, of the possible consequences of the court’s limiting EPA’s power.
“Any kind of meaningful regulatory program could be well off the table,” he said.
A more concerning — but less likely — possibility would be if the high court used the case to more broadly undermine the regulatory authority of federal agencies.
“It’s possible that what the court is seeking to review here is Section 111(d) itself,” said Michael Burger, executive director of Columbia Law School’s Sabin Center for Climate Change Law.
He referred to the part of the Clean Air Act that EPA used to regulate carbon emissions from existing power plants under former presidents Obama and Trump.
“If that’s the case, the broadest threat here is not just about climate change, or about EPA’s authority, but it’s about the power of the court to review congressional authorizations of agency action,” he said.
In a worst-case scenario, the high court could give itself authority to tell Congress “In almost any instance” that it has to be more specific about delegating authority to agencies, Burger added.
In their petitions to the Supreme Court, the coal companies and states targeting EPA’s power to regulate raised concerns about whether Congress had clearly given the agency the authority to address utility emissions on a broad, systemwide basis.
The challengers also asked the justices to weigh in on whether Congress could lawfully allow EPA to act on emissions under Section 111(d) of the Clean Air Act under the non-delegation doctrine, which says that lawmakers cannot hand off their legislative authority to executive agencies. The Supreme Court’s conservative wing has expressed interest in reviving the long-dormant legal doctrine.
That argument could threaten not only Biden’s rule proposals, but also existing regulations.
The challengers have also cited the major questions doctrine to argue that Congress did not give EPA enough specific guidance under the Clean Air Act to craft a rule that allowed it to impose regulations beyond technological fixes that could be applied to an individual power plant.
D.C. Circuit Judge Justin Walker, a Trump appointee, cited the doctrine — which says that the nation’s most significant economic and political questions should be addressed by Congress, not the executive branch — in his dissent from the court’s ruling this year that struck down the Affordable Clean Energy rule.
The Trump regulation championed power plant upgrades “inside the fence line” of existing facilities and argued that broader strategies like generation shifting and emissions trading regimes were not permitted under the Clean Air Act.
Biden’s options
The Supreme Court had initially said in its Friday order that it would consider whether EPA could regulate carbon emissions in one part of the Clean Air Act, if it was already regulating the sector under a separate provision of the statute.
A short time later, the court quietly changed its order to remove that question.
The Supreme Court’s change took “the killer issue off the table for Section 111,” but the major questions doctrine issue still leaves “a lot at stake,” said Vermont Law School professor Pat Parenteau.
“If [the court] adopts the most restrictive view of EPA’s authority, namely that any rule with major economic consequences requires explicit unmistakable delegation of power from Congress with clear limiting principles to prevent abuse, that could have very broad implications for public health and environmental regulations across the board,” he said.
In its initial order, the court had agreed to a coal company’s request to consider whether EPA could regulate power plants at all under Clean Air Act Section 111(d) if the sector is already controlled under Section 112, which requires EPA to set maximum hazardous air pollutant emissions thresholds for major sources.
Opponents of the Obama-era Clean Power Plan have maintained that the “best system of emission reduction” applies only at the facility level.
“EPA cannot use that to force one facility to shut down in favor of a different type of facility (which may not even exist yet) that EPA likes more,” Devin Watkins, an attorney for the Competitive Enterprise Institute, said in an email.
“The Clean Power Plan interpretation gives EPA a massive amount of power to reshape the entire economy as it sees fit, rather than focus on just ensuring the best technology available is used at the existing facilities,” he added.
Yet despite the Supreme Court showdown, some legal analysts were optimistic that the Biden administration could impose carbon regulations on the electricity sector.
“I do think it probably complicates EPA’s job and potentially disrupts the momentum that the administration is trying to build around their climate regulation and climate policy efforts,” said Hana Vizcarra, a staff attorney at Harvard Law School’s Environmental & Energy Law Program.
She noted that EPA was already thinking about how to craft a rule that is likely to survive a challenge before the conservative-dominated Supreme Court. The agency will now need to consider whether it should move forward with a proposed rule as planned or wait to see how the Supreme Court comes down in the case.
“They probably were trying to move relatively quickly, knowing that the administration has some very aggressive goals they want to show action on,” she said.
Legal experts had expected the Supreme Court to rule at some point on the extent of EPA’s authority to regulate greenhouse gases.
One silver lining for EPA may be that the agency will get an answer about the court’s views sooner rather than later, said Holmstead of Bracewell.
“This is unusual, but it actually probably saves EPA a lot of time and effort,” he said. “I think they just have to put pens down until June.”