Today’s Key Takeaways: Pension firms sued for selling fossil fuel holdings. Oil up over economic concerns. Gas prices set to decline. Alaska loses favor in annual mining survey. Another budget stalemate in Juneau.
NEWS OF THE DAY:
NYC PENSION FIRMS SUED FOR SELLING BILLIONS IN FOSSIL FUEL HOLDINGS: Three New York City pension funds were sued this week for allegedly breaching their fiduciary duty by divesting billions of dollars in fossil fuel assets.
Plaintiffs, all municipal employees, filed their complaint yesterday in New York state court. They argued that the New York City Employees’ Retirement System, the Teachers’ Retirement System, and the Board of Education Retirement System acted unlawfully and violated their obligations to participants when they agreed to divest from fossil fuel holdings in 2021.
They also alleged the decision was a “misguided and ineffectual gesture to address climate change,” made without “regard for whether those assets would produce a superior return for the plans.”
The lawsuit comes as a growing number of Republican-led states have moved to pass anti-ESG legislation, including some who have restricted doing business with firms that use ESG factors when making investment decisions.
New York City Comptroller Brad Lander, who oversees the city’s pension plans, has long urged fund managers, including BlackRock, to implement more aggressive policies to limit oil and gas financing. Read more on the lawsuit here.
From the Washington Examiner, Daily on Energy, May 12, 2023
OIL:
Oil prices rise as tight supplies compete with economic concerns
Noah Brown, Reuters, May 15, 2015
Oil prices edged up on Monday as the prospect of tightening supplies due to OPEC+ production cuts and a resumption in U.S. buying for reserves outweighed concerns about fuel demand in top global oil consumers the United States and China.
Brent crude futures were up 36 cents or 0.5% to $74.53 a barrel at 1240 GMT, while U.S. West Texas Intermediate crude was at $70.41 a barrel, up 37 cents or 0.5%.
Last week, both benchmarks fell for a fourth consecutive week, the longest streak of weekly declines since September 2022, over concerns the United States could enter a recession amid risks of an historic default at the beginning of June.
GAS:
U.S. Gasoline Prices Are Set For A Significant Decline
Charles Kennedy, OilPrice.Com, May 15, 2023
Gasoline prices in the U.S. ticked higher today, according to the AAA, though overall, national averages are down by around $1 from this time last year, according to GasBuddy.
“Overall, gasoline prices continue to see significant relief from year-ago levels,” GasBuddy head petroleum analyst Patrick De Haan, said on Monday, noting that while some states have seen higher prices due to West Texas Intermediate (WTI) prices rebounding to over $70 from the mid-60s range earlier this month, “the natural average has seen little change as a result”.
The national average price of gasoline in the U.S. rose 0.4 cents per gallon, sitting at $3.51 per gallon on Monday, according to GasBuddy estimates and $3.535 according to AAA estimates.
The Monday national average is nearly $1 lower than this time last year when AAA put the national average at $4.47.
Going forward, De Haan sees prices at the pump falling further.
“We’re likely to soon see gasoline prices slip to their largest year on year deficit since Covid hit, when prices fell over $1 per gallon from 2019- so the relief at the pump as been significant, and even though the gas price decline hit pause last week, it’s looking more likely that barring a major hurricane or series of refinery outages, the national average may not end up hitting the $4 per gallon mark- something that will make most motorists very happy,” he said.
Over the weekend, AAA spokesperson Andrew Gross noted: “Increasing demand for gasoline would usually drive pump prices higher, but the cost for oil has remained low lately, so drivers should benefit from stable pump prices as Memorial Day draws near.”
MINING:
Alaska Loses Favor in Mining Survey Score
Shane Lasley, North of 60 Mining News, May 12, 2023
Mining execs rank Alaska, Yukon, BC, NWT and Nunavut high on mineral potential; policy issues weigh on Fraser mining survey scores.
Falling AK mineral potential
Coming in at No. 11, Alaska was the highest ranked North of 60 jurisdiction on Fraser’s investment attractiveness index, the first time in more than five years the northern U.S. state did not make the top 10 in this metric. Interestingly, it was not mining policy that sent the Last Frontier’s global ranking falling seven positions from No. 4 a year ago. Instead, it was a less favorable view of the Far North State’s mineral potential that weighed on the state.
Federal policies, however, may have tainted the views of some when ranking Alaska.
Each year, the Fraser Institute asks mining executives to set aside any policy considerations when providing their views of pure geological endowment of global mining jurisdictions. The answers are compiled into the “Best Practices Mineral Potential Index.”
Tectonic shifts in perceived mineral potential, however, defy the geological timescales involved with minerals enrichment.
Alaska is a prime example of how quickly the perceptions of a region’s mineral potential can change. In the latest survey, mining execs ranked the 49th State at 15 on the Best Practices Mineral Potential Index, which is a drop of 13 positions from the No. 2 spot held last year.
While Alaska held its No. 13 position on the “Policy Perception Index,” which is the compilation of responses to 15 mining policy questions, mining executives noted some troubling regulatory moves out of Washington, DC, that may have dulled their enthusiasm for the state’s mineral potential.
This includes the Environmental Protection Agency’s decision to put in place discharge prohibitions that would essentially make it impossible to permit, develop, and operate a mine at the world-class Pebble copper deposit in Southwest Alaska.
“The EPA is attempting to preemptively veto the exploration permit process, which is unfair to proponents but also sends a terrible message to companies that might want to invest in Alaska,” the president of an exploration company commented in his response to the Fraser Survey.
Alaska Gov. Mike Dunleavy and his administration have vowed to challenge EPA’s Pebble determination in court.
“EPA’s veto sets a dangerous precedent. Alarmingly, it lays the foundation to stop any development project, mining or non-mining, in any area of Alaska with wetlands and fish-bearing streams,” he said. “My administration will stand up for the rights of Alaskans, Alaska property owners, and Alaska’s future.”
Alaska Attorney General Treg Taylor said EPA’s “legally indefensible” preemptive Pebble veto sets a precedent that “should alarm all permit applicants, investors, and states who wish to retain their traditional land- and resource-management authority.”
Despite the concerns about EPA’s preemptive Pebble veto, the international mining sector ranks Alaska No. 16 on the topic of administration of existing regulations and No. 27 (around the middle of the pack) when it comes to uncertainty concerning environmental regulations.
Alaska budget stalled with special session all but inevitable
Sean McGuire, Iris Samuels, Anchorage Daily News, May 15, 2023
A final budget deal appeared unlikely before the end of the legislative session as Alaska House and Senate leadership met behind closed doors in an attempt to break the logjam Saturday — four days before the session is set to end.
The biggest impediment to passing an operating budget is, again, the size of the Permanent Fund dividend, which has been part of the annual budget-making process since 2017. The House approved a budget in April with a $2,700 dividend that was projected to create an $800 million deficit. The Senate, meanwhile, has moved ahead with a $1,300 dividend and a spending plan that does not require drawing from savings.
The House and Senate typically pass different versions of the operating budget, and then appoint a joint conference committee to reconcile those differences, so a single budget bill can pass through both legislative chambers. The House last approved the Senate’s budget without a conference committee — which is known as concurrence — in 1982.