Economy grows but misses expectations. Haaland accused of defying rules.

In News by wp_sysadmin

NEWS OF THE DAY:

U.S. economy grew at a 6.5% rate last quarter, missing expectations
Courtney Brown, Axios, July 29, 2021

The U.S. economy grew at an annualized 6.5% rate last quarter, the government said Thursday — slower than the 8.4% economists expected.

Why it matters: It came as the economy made strides toward further reopening, vaccinations rolled out and government stimulus bolstered spending. But supply crunches held the pace of growth back.

Worth noting: The economy is bigger now than it was before the pandemic, officially recovering from its pandemic-induced plunge. (But output is still less than where it could have been, had there been no pandemic.)

Details: A drop in inventory investment — what’s available for businesses to sell — weighed on growth. So did a drop-off in housing, a sign that supply shortages crimped construction.

  • Consumer spending soared 11.8%, helped by the infusion of pandemic aid. That’s one of the biggest surges on record, according to Bloomberg.
  • Economic growth picked up slightly from the 6.3% pace in the first quarter of 2021.

OIL:

Interior Secretary Accused of Defying Ruling to Resume Oil and Gas Leasing
Jennifer Dlouhy, Bloomberg, July 28, 2021

Six weeks after a federal judge ordered the Biden administration to resume selling oil and gas leases on federal land, there’s no sign it has and Interior Secretary Deb Haaland struggled Tuesday to explain why.

“We are evaluating our options,” Haaland told the Senate Energy and Natural Resources Committee amid sharp criticism from Republicans. “There’s a lot of work that goes into moving that forward.”

A Louisiana-based federal district judge issued a preliminary injunction June 15 against President Joe Biden’s order to pause lease sales on federal land and waters so it could be considered in light of its climate impacts. The judge ordered Interior to immediately restart leasing, but the agency hasn’t scheduled any auctions or rescheduled sales postponed earlier this year.

Haaland faced withering criticism from no fewer than seven of the 20 senators on the committee amid growing bipartisan frustration with the halt of new leasing in areas that provide roughly a quarter of U.S. oil production.

“The pause is effectively defying the federal judge’s order to continue,” Senator Bill Cassidy, a Republican from Louisiana, said.

Haaland conceded that “technically, I suppose, you could say the pause is still in place.” But she insisted the agency is complying with the court order and is moving forward on releasing an interim report to guide future leasing decisions. The report is expected to recommend boosting the royalty rates companies pay to extract fossil fuels, among other changes.

Oil industry advocates have said the Interior Department can swiftly schedule lease sales by relying on the government’s earlier environmental analysis, including assessments conducted by the Trump administration. However, conservationists argue that greater scrutiny is needed to ensure those auctions comply with federal laws, including of how oil and gas development from newly sold leases will affect climate change.

“It’s not a switch you can turn on,” Haaland said. “There’s a lot of work that goes into a lease sale.”

Senators James Lankford of Oklahoma and Cindy Hyde-Smith of Mississippi pushed unsuccessfully for a more definitive timetable.

“There’s just an expectation that when a court order stepped in and said, ‘hey this is not legal to just stop this indefinitely,’ that there’s actually going to be progress made toward this,” Lankford said.

Haaland’s repeated assurances that the report was coming “soon” provoked scoffing by Senator Lisa Murkowski, a Republican from Alaska.

“I’m not going to ask you when you think it’s going to be coming because I think I know what your answer is,” Murkowski said. “I hope you can sense the frustration that so many of us have in anticipating this and wondering when we will be able to expect that you’ll be in compliance with the judge’s order.”

The frustration crossed party lines. Chairman Joe Manchin, a Democrat from West Virginia, said that he “supported the administration’s desire to pause leases,” but “we are now well into the early summer timeline when we were told the review would be completed.”

“We need a plan to move forward with responsible oil and gas leasing, both onshore and offshore, to maintain our energy independence,” Manchin said.

GAS:

German-US pact on Nord Stream 2 ‘sensible, practical’ outcome: Shell CEO
Stuart Elliott, S & P Global Platts, July 29, 2021

Agreement removes uncertainty over gas link project

Pipeline gas provides ‘lowest-carbon’ supply to Europe

High gas prices point to need for ‘strong’ policy: CFO

The recent pact between Germany and the US on mitigating the impact of an operational Nord Stream 2 gas pipeline is a “sensible and practical” outcome that removes uncertainty around the project, Shell CEO Ben van Beurden said July 29.

Germany and the US agreed on July 21 a number of measures to protect Ukraine’s energy security and block any attempts by Russia to use energy as a “weapon” once the Nord Stream 2 gas pipeline starts up.

It paves the way for the completion and commissioning of the pipeline.

“I think it’s a sensible outcome, it’s a practical outcome, and it removes a certain degree of uncertainty that would also affect us,” van Beurden said during Shell’s Q2 results call.

“We are a financial participant in this project, and we would like to rely on the good operations of the project to get our debts serviced and ultimately repaid,” he said.

Shell, along with Austria’s OMV, France’s Engie, and Germany’s Uniper and Wintershall Dea, each initially committed Eur950 million ($1.13 billion) to the project, representing around 50% of the cost.

According to S&P Global Platts Analytics, Nord Stream 2 is expected to begin commercial flows in October this year, giving Russia’s Gazprom a new direct supply link to Germany.

Gazprom could choose to divert some of the gas it currently transits via Ukraine into Nord Stream 2. Ukraine remains strongly opposed to the pipeline’s completion, which is expected by the end of August.

‘Lowest-carbon’ supply

Van Beurden said there were “multiple ways” to look at the agreement between Germany and the US from a political perspective.

“But the agreement that Germany has struck with the US — with all the aspects of it including quite a few components to do with Ukraine — is a very strong, sensible, pragmatic, and balanced way of looking at it,” he said.

“And let’s be honest, Europe does need a significant amount of gas for some time to come. And the lowest-carbon supplies of natural gas are going to be pipeline gas, whether we like it or not. That’s the reality. The continent simply needs that supply as well.”

Europe is currently seeing record high gas prices, with S&P Global Platts assessing the day-ahead TTF contract at Eur39.80/MWh on July 28, while the day-ahead NBP price topped Eur40/MWh.

High European gas prices, Shell CFO Jessica Uhl said, point to the need for “strong energy policy in ensuring sufficient supplies to support Europe’s energy needs.”

 MINING:

One Of The World’s Biggest Miners Is Throwing Billions At Lithium
Jose Rodriguez, Jr., Jalopnik, July 29, 2021

Rio Tinto Group is building a lithium mine in Serbia, and the company is going to spend a whopping $2.4 billion on its development. Rio’s Jadar project marks the first big move into lithium by a mining major, according to Bloomberg. You might recall the company, due to its destructive mining practices in Australia.

Rio Tinto is the world’s second biggest miner, behind only BHP, which partially explains the scope of the project and how much Rio is spending. For contrast, another company trying to mine lithium in Nevada planned to invest $400 million, or about $2 billion less than Rio. Jadar is a big project, set to produce almost 64,000 tons of lithium per year when it reaches full production capacity in 2029. For more contrast, one of the largest lithium miners operating right now, Ganfeng, is opening a mine in Argentina that will produce just over 22,000 tons per year. Big difference.

Except there are serious environmental concerns about the extraction of lithium that underscore the importance of being mindful of the environment, even as these megacorps start mining. And it’s really not clear that Rio Tinto will do so responsibly; they don’t have the best track record when it comes to dealing with the local environment and its stewards.

The company has been at odds with Aboriginal groups in Australia after reportedly destroying historical artifacts — among other acts of environmental destruction — so those skeptical of the company’s environmental good-will have every reason to doubt Rio’s commitment to the environment.

Rio knows this and it’s trying to head off these concerns with its own information campaign about myths and facts pertaining to the mine. A Rio Tinto researcher and geologist, Nenad Grubin, also addressed the issues in a statement:

We know there are concerns about the project, and the future of the mine. And we’re listening to the people raising these concerns with us. We take our obligations to the environment very seriously. We’re investing over $100 million on environmental protections. The future mine needs to be safe for people and the environment, or there will be no mine. It just isn’t good business not to address both the local environmental concerns and peoples’ safety.

Rio is adamant this is a net win for the environment, but we should be wary of the caveats in the green transition. The only thing certain is that the shift away from fossil fuels to renewables is going to be lucrative, per Bloomberg:

It also comes at a time when the biggest miners are looking to shift away from fossil fuels, increasingly shunned by investors. Rio sold its last coal mine in 2019 and is the only major miner to be fossil-fuel free. And its peers are slowly following. Anglo American Plc has agreed to sell its last thermal coal mines, while BHP is in the process of exiting thermal coal and is considering getting out of oil and gas.

Following the money, $2 billion worth, will easily point us to projects on the scale of Jadar, but we should be just as concerned about how these companies conduct their so-called green business.

POLITICS:

Alaska legislative leaders ask governor to delay Monday’s special session by at least a week
Sean McGuire, Anchorage Daily News, July 28, 2021

The leaders of the Alaska Legislature’s majority and minority caucuses have written to Gov. Mike Dunleavy, asking him to delay the upcoming special session by at least a week.

Dunleavy called the upcoming special session in May to resolve debates about the Permanent Fund dividend and to forge a long-term fiscal plan. He introduced his own 50-50 dividend plan, but fiscal experts say new statewide revenues will be needed to pay for it.

The session is set to start on Monday, but the caucus leaders say more time is needed for the Comprehensive Fiscal Plan Working Group to finalize its recommendations. The group was created as part of a deal to pass an effective budget and avert a state government shutdown.

The House majority coalition wants the session delayed until Aug. 9 while the Senate and House Republicans want the session to begin on Aug. 16. Jeff Turner, a spokesperson for the governor’s office, said the letter has just been received and a decision had not been made about the timing of the special session.

When the Legislature does convene, lawmakers will also need to pass a new dividend for 2021 after the governor vetoed the amount approved in June. A vote is also required to fund scholarships for Alaskan college students and to make power cost equalization payments, but that issue is also in court.

The Comprehensive Fiscal Plan Working Group has been meeting since early July to make recommendations to the Legislature for how to forge a fiscal plan. It is set to meet every day through Aug. 2.

Alaskans can provide public testimony on the dividend and the state’s fiscal situation starting on Thursday:

Anchorage – The Anchorage Legislative Information Office from 6-9 p.m. on Thursday.

Wasilla – The Mat-Su Legislative Information Office from 6-9 p.m. on Friday

Fairbanks – The Fairbanks Legislative Information Office from 1-4 p.m. on Saturday.

Juneau – The Alaska State Capitol Senate Finance Committee Room 532 from 6-9 p.m. on Monday

The Alaska House Coalition published telephone numbers for Alaskans who can’t make it in person. They’re asked to call into Monday’s evening session or send an email to [email protected].

Juneau residents can call 907-586-9085, Anchorage residents can call 907-563-9085, and other Alaskans can call 844-586-9085 on Monday from 6-9 p.m.

CLIMATE CHANGE: 

From the Washington Examiner, Daily on Energy:

CLIMATE DOWNPAYMENT: The Senate voted yesterday to advance a $1.2 trillion infrastructure package ($550 billion in new spending) after weeks of stalled efforts to reach a bipartisan deal, with 17 Republicans supporting the agreement.

Democrats and climate activists hope Senate passage of the infrastructure measure — which could happen as soon as next week — will serve as a springboard to approve a second and larger spending package unilaterally through reconciliation.

Democratic climate hawk Sen. Sheldon Whitehouse of Rhode Island, speaking at an event hosted by C2ES, said the bipartisan infrastructure agreement “doesn’t accomplish much on climate, but opens the gateway” to a reconciliation package that “does accomplish much on climate.”

There is a bunch of climate stuff though. President Joe Biden is touting the bipartisan infrastructure agreement as a significant down payment on his aggressive pledges to combat climate change.

While we are still awaiting bill text, a summary of the deal posted by Politico contains clean energy and climate measures that largely mirror a framework the bipartisan negotiating group agreed to a month ago.

The bipartisan bill would spend $7.5 billion on the first federal effort to build a network of EV chargers across the country, about half of what Biden originally asked for to build 500,000 electric vehicle charging stations nationwide.

The spending on charging falls way short of the $174 billion Biden’s American Jobs Plan promise to “win the EV market” from China, including by providing rebates for consumers (those will likely be targeted for the reconciliation bill).

The bipartisan bill would fully fund more than a dozen clean energy demonstration projects originally authorized under the Energy Act of 2020 approved at the end of last year, including for energy storage, advanced nuclear reactors, carbon capture, direct air capture, and renewables.

It also creates a $5 billion program to combat methane emissions by employing oil workers to plug leaking “orphan” oil and gas wells and establishes a $6 billion five-year credit program providing subsidies to help financially struggling nuclear plants stay alive. Both of these ideas are key Biden priorities.

The bipartisan bill provides funding for pipelines to transport captured carbon dioxide, and to support the creation of hydrogen and direct air capture infrastructure hubs.

Going big on transmission: The legislation includes $73 billion toward improving and modernizing the country’s electricity grid, enabling “the building of thousands of miles” of electric transmission lines, critical to expanding the use of renewable energy.

It would set up a new “Grid Authority” within the Energy Department to speed the approval process, which can take up to a decade, and also gives leeway for DOE to designate corridors of national interest, permitting quicker construction. Under the bill, FERC could also issue construction permits for some interstate transmission if states deny applications.

Where it falls short: The new agreement appeared to cut spending in a few areas compared to the original framework, including reducing money for public transit to $39 billion from $49 billion, and eliminating a $20 billion “infrastructure bank.”

Liberal climate activist group Evergreen Action noted the agreement allocated $2.5 billion for electric buses, short of the $7.5 billion negotiators had previously committed to invest.

Manchin gets his: The clean energy provisions in the deal are based on infrastructure legislation authored by key centrist Democratic Sen. Joe Manchin of West Virginia that was recently approved by the Energy Committee he chairs.

Manchin successfully got the bipartisan agreement to include an expansion of the 48C tax credit to retool manufacturing plants to build clean energy products, including a $4 billion carveout for use in areas where coal mines or plants have closed (i.e. West Virginia).

“Growing climate change impacts in the U.S. helped motivate moderate Democrats and a surprising number of Republicans alike to support smart grid and EV infrastructure funding in the package,” Paul Bledsoe of the Progressive Policy Institute told me. “The bipartisan deal seems to lay the policy and political ground for ambitious measures in the fall, with Biden creating trust with moderates like Manchin and Synema for more far-reaching clean energy incentives.”