Today’s Key Takeaways: Producing carbon-free energy from Diablo Canyon critical to CA. India and China lead the way in buying Russian oil. Biden considers emergency powers to increase refinery output. AK DNR Commission Feige resigns. Minerals Security Partnership formed.
NEWS OF THE DAY:
Dianne Feinstein: Why I changed my mind about California’s Diablo Canyon nuclear plant
The Sacramento Bee, June 15, 2022
California is a global model in the fight against climate change, but the balance necessary to achieve carbon neutrality is delicate and the obstacles many. Longer, hotter summers mean more electricity use, while worsening droughts limit hydropower. With the Diablo Canyon nuclear power plant scheduled to close, state regulators project years of electricity shortfalls.
As these challenges converge, Pacific Gas and Electric Co. should reconsider its decision to close Diablo Canyon by 2025. The utility should get the plant relicensed instead, retiring it once the state can replace its production with clean sources.
When PG&E announced the planned closure in 2016, I supported the decision. I remain concerned about the lack of long-term storage for spent nuclear fuel and am working to develop better solutions.
But at this point, keeping Diablo Canyon open and producing carbon-free energy is more important.
California has some of the most ambitious clean-energy goals in the world, including decreasing carbon emissions to 40% below 1990 levels by 2030 and achieving 100% clean electricity by 2045. That will require energy alternatives that can provide power around the clock in addition to solar and wind.
Shutting down the state’s single largest power producer under these circumstances would make little sense. Closing Diablo Canyon would remove 18,000 gigawatt-hours from the grid, nearly 10% of the state’s electricity generation. This is an extraordinary amount of power for a grid facing reliability concerns amid heat waves and wildfires.
When the power goes out, lives are endangered. Moreover, the plant generates 15% of the state’s carbon-free electricity. At least in the short term, that would have to be replaced with fossil fuel generation.
I continue to advocate for renewable energy. It is clearly the future for not only California but also the country and the world. But while California is leading the way on renewables, we aren’t there yet.
The recent bipartisan infrastructure bill invested heavily in wind, solar and other forms of clean energy, an acknowledgment that renewable energy is the future. But the law also provided funds to help defray the costs of extending the life of Diablo Canyon and ensuring it’s safe.
A report last year by Stanford University and the Massachusetts Institute of Technology found that if PG&E extends operations at Diablo Canyon until 2035, California could reduce power sector carbon emissions by over 10% below 2017 levels, saving $2.6 billion and significantly reducing natural gas use.
The report also highlighted the reliability issues the state could face without Diablo. State and grid officials recently issued similar warnings about reliability, warning that peak summer demand may cause significant blackouts. In August 2020, extreme heat led to rolling blackouts and electricity shortages in California. If Diablo had not been running, the shortage could have been three times worse.
In November, two former U.S. energy secretaries, Steven Chu, and Ernest Moniz, urged Californians to rethink decommissioning Diablo. Unless the plant is kept open, they noted, California will need to rely more on fossil fuels at a time when we need all the carbon-free power we can get.
Last month, the Energy Information Agency noted the repercussions of drought for hydropower, underscoring the need for diverse means of generation, including solar and nuclear. Drought could force California to significantly increase natural gas generation and power purchases from neighboring states.
If California is to lead the clean energy transition, as state law mandates, Diablo must keep operating, at least for the time being. California is facing an immediate climate change crisis. We’re already confronting rising temperatures, devastating droughts, deadly wildfires, and destructive sea-level rise.
The window for meaningful action to slow those effects is closing, and we must consider every measure to counter the coming onslaught. That includes extending the life of Diablo Canyon.
OIL:
India, China growing markets for shunned Russian oil
Associated Press, June 14, 2022
Such sales are boosting Russia’s export revenues at a time when Washington and allies are trying to limit financial flows supporting Moscow’s war effort after the Russian invasion of Ukraine.
India and other Asian nations are becoming an increasingly vital source of oil revenues for Moscow despite strong pressure from the U.S. not to increase their purchases, as the European Union and other allies cut off energy imports from Russia in line with sanctions over its war on Ukraine.
Such sales are boosting Russian export revenues at a time when Washington and allies are trying to limit financial flows supporting Moscow’s war effort.
A report released yesterday by the Helsinki, Finland-based Centre for Research on Energy and Clean Air, an independent think tank, said Russia earned €93 billion ($97.4 billion) in revenue from fossil fuel exports in the first 100 days of the country’s invasion of Ukraine, despite a fall in export volumes in May.
“Revenue from fossil fuel exports is the key enabler of Russia’s military buildup and aggression, providing 40% of federal budget revenue,” it said.
India, an oil-hungry country of 1.4 billion people, has guzzled nearly 60 million barrels of Russian oil in 2022 so far, compared with 12 million barrels in all of 2021, according to commodity data firm Kpler. Shipments to other Asian countries, like China, have also increased in recent months but to a lesser extent.
In an interview with the Associated Press, Sri Lanka’s prime minister said he may be compelled to buy more oil from Russia as he hunts desperately for fuel to keep the country running amid a dire economic crisis.
Prime Minister Ranil Wickremesinghe said Saturday that he would first look to other sources but would be open to buying more crude from Moscow. In late May, Sri Lanka bought a 90,000-metric-ton shipment of Russian crude to restart its only refinery.
Russia is moving to diversify its exports. Russian Ambassador Marat Pavlov met with Philippine President-elect Ferdinand Marcos Jr. yesterday and offered Moscow’s help to provide oil and gas. He did not specify the terms.
Marcos Jr., whose six-year term is set to begin June 30, did not say if he was considering the offer.
Since Russia’s invasion of Ukraine in late February, global oil prices have soared, giving refiners in India and other countries an added incentive to tap oil Moscow is offering them at steep discounts of $30 to $35, compared with Brent crude and other international oil now trading at about $120 per barrel.
Their importance to Russia rose after the 27-nation European Union, the main market for fossil fuels that supply most of Moscow’s foreign income, agreed to stop most oil purchases by the end of this year.
“It seems a distinct trend is becoming ingrained now,” said Matt Smith, lead analyst at Kpler tracking Russian oil flows. As shipments of Urals oil to much of Europe are cut, crude is instead flowing to Asia, where India has become the top buyer, followed by China. Ship tracking reports show Turkey is another key destination.
“People are realizing that India is such a refining hub, taking it at such a cheap price, refining it and sending it out as clean products because they can make such strong margins on that,” Smith said.
In May, some 30 Russian tankers loaded with crude made their way to Indian shores, unloading about 430,000 barrels per day. An average of just 60,000 barrels per day arrived in January through March, according to the Centre for Research on Energy and Clean Air.
Chinese state-owned and independent refiners also have stepped up purchases. In 2021, China was the largest single buyer of Russian oil, taking 1.6 million barrels per day on average, equally divided between pipeline and seaborne routes, according to the International Energy Agency.
While India’s imports are still only about a quarter of that, the sharp increase since the war began is a potential source of friction between Washington and New Delhi.
The U.S. recognizes India’s need for affordable energy, but “we’re looking to allies and partners not to increase their purchases of Russian energy,” Secretary of State Antony Blinken said after a meeting of U.S. and Indian foreign and defense ministers in April.
Meanwhile, the U.S. and its European allies are engaged in “extremely active” discussions on coordinating measures, perhaps forming a cartel, to try to set a price cap on Russian oil, Treasury Secretary Janet Yellen told a Senate Finance Committee meeting on Tuesday.
The aim would be to keep Russian oil flowing into the global market to prevent crude oil prices, already up 60 percent this year, from surging still higher, she said.
“Absolutely, the objective is to limit the revenue going to Russia,” Yellen said, indicating that the exact strategy had not yet been decided on.
While Europe could find alternative sources for its purchases of about 60 percent of Russia’s crude exports, Russia also has options.
India’s foreign minister, Subrahmanyam Jaishankar, has emphasized his country’s intention to do what is in its best interests, bristling at criticism over its imports of Russian oil.
“If India funding Russian oil is funding the war … tell me, then buying Russian gas is not funding the war? Let’s be a little evenhanded,” he said at a recent forum in Slovakia, referring to Europe’s imports of Russian natural gas.
India’s imports of crude from Russia rose from 100,000 barrels per day in February to 370,000 a day in April to 870,000 a day in May.
A growing share of those shipments displaced oil from Iraq and Saudi Arabia, most of it going to refineries in Sika and Jamnagar on India’s western coast. Up until April, Russian oil accounted for less than 5 percent of the crude processed at the Jamnagar oil refinery run by Reliance Industries. In May, it accounted for more than a quarter, according to Centre for Research on Energy and Clean Air.
India’s exports of oil products like diesel have risen to 685,000 barrels per day from 580,000 barrels per day before the invasion of Ukraine. Much of its diesel exports are sold in Asia, but about 20 percent was shipped via the Suez Canal, headed for the Mediterranean or Atlantic, essentially Europe or the U.S., said Lauri Myllyvirta, a lead analyst at CREA.
It’s impossible to quantify the exact amount of Russian crude in refined products being shipped out of India, he said. Still, “India is providing an outlet for Russian crude oil to get through the market,” he said.
China’s imports also have risen further this year, helping Russian President Vladimir Putin’s government record a current account surplus, the broadest measure of trade, of $96 billion for the four months ending in April.
It’s unclear if such exports might eventually be subject to sanctions meant to cut the cash flowing to Russia.
Regarding the sanctions, “Are those measures effective? And if not, how is the oil market working around them?” Myllyvirta said.
GAS:
Biden warns Big Oil over gas output
Ben Geman, Andrew Freedman, Axios, June 15, 2022
President Biden will warn CEOs of the nation’s largest oil companies on Wednesday that he’s considering invoking emergency powers to boost U.S. refinery output, according to a letter obtained by Axios.
Why it matters: Biden’s direct engagement with the oil giants is part of an ongoing White House effort to tame fuel prices despite limited options — and cast oil companies as responsible for consumers’ higher bills.
- The letter, which calls on the companies to boost output, signals how gasoline and diesel prices have become both an economic and political shock reaching the highest levels of the administration.
What he’s saying: Biden tells seven big refiners and fuel companies that he’s “prepared to use all reasonable and appropriate Federal Government tools and emergency authorities to increase refinery capacity and output in the near term.”
- “I understand that many factors contributed to the business decisions to reduce refinery capacity, which occurred before I took office,” he writes. “But at a time of war, refinery profit margins well above normal being passed directly onto American families are not acceptable.”
Adding an olive branch, the letter — sent to the heads of ExxonMobil, Chevron, BP America, Shell USA, Phillips 66, Marathon, and Valero — calls for them to offer “concrete, near-term solutions.”
- Biden says he wants ideas to address inventory, price, and refinery capacity issues in the coming months, as well as transportation measures to bring fuel to market.
- “The crunch that families are facing deserves immediate action,” Biden writes.
Between the lines: In seeking help from the oil industry, Biden is walking a political tightrope, eager to lower the cost at the pump without alienating his base, which backs policies to combat climate change.
Zoom out: Average U.S. gasoline prices have risen above $5 per gallon — fueling wider inflation, hitting consumers and creating political peril for Democrats ahead of the midterm elections.
- “With prices for your product where they are today, you have ample market incentive to take these actions, and I recognize that some of you have already begun to do so,” he writes in calling for increased supplies of gasoline, diesel, and other refined products.
What’s next: Biden said Energy Secretary Jennifer Granholm will convene an “emergency meeting on this topic.”
The big picture: Very high oil prices thanks in part to Russia’s unprovoked war on Ukraine, global fuel demand bouncing back from COVID-19 and constrained refinery capacity are pushing gas prices up.
- Biden’s letter focuses on the drop in U.S. refinery capacity in recent years. It has dropped by about 1 million barrels per day compared to pre-COVID levels, according to the industry and federal data.
The other side: Before seeing the letter, industry officials said they hope to work with the Biden administration and that discussions are already occurring.
- “We’re encouraged by the administration reaching out and asking refiners what they can do to help resolve the situation from a policy standpoint,” Frank Macchiarola, a senior vice president at the American Petroleum Institute, told reporters on a call Tuesday.
Oil and gas producers have criticized the administration for not issuing new drilling leases on public lands, canceling the Keystone Pipeline, and emphasizing its net zero carbon emissions climate agenda.
MINING:
US, Canada, and partners enter pact to secure critical minerals
Mining.Com, June 15, 2022
The United States, Canada and other countries have established a new partnership aimed at securing the supply of critical minerals, which are essential for clean energy and other technologies, as global demand for them rises, the State Department said on Tuesday.
Demand for the minerals, such as nickel, lithium, and cobalt, is projected to expand significantly in the coming decades.
Massive amounts of these minerals will be needed to meet the United States’ emissions reduction goals, Jose Fernandez, undersecretary for economic growth, energy, and the environment at the State Department, said in a telephone interview.
“You will need six times more lithium by 2050 than you use today in order to meet the clean energy goals,” Fernandez said, speaking from Toronto. Canada “is an important supplier of critical minerals,” he added.
The minerals are key inputs in batteries, electric vehicles, wind turbines, and solar panels, and are also used in products ranging from computers to household appliances.
The Minerals Security Partnership will aim to help “catalyze investment from governments and the private sector for strategic opportunities … that adhere to the highest environmental, social, and governance standards,” the State Department said in a statement.
The U.S. government has been working with Canada to boost regional supply chains to counter China’s dominance in the sector.
Critical minerals are “a generational economic opportunity for Canada if we get it right,” Canada’s natural resources minister, Jonathan Wilkinson, said in a phone interview. He spoke from Toronto’s annual mining gathering, called the Prospectors & Developers Association of Canada conference.
Canada has large deposits of nickel and cobalt, while the United States does not, Wilkinson said.
The Minerals Security Partnership, in addition to Canada and the United States, includes Australia, Finland, France, Germany, Japan, South Korea, Sweden, the United Kingdom and the European Commission.
POLITICS:
Alaska’s natural resources commissioner resigns
Alex DeMarban, Anchorage Daily News, June 15, 2022
The commissioner for the Alaska Department of Natural Resources will step down June 30, the governor’s office said.
Corri Feige was appointed in 2018 at the start of Gov. Mike Dunleavy’s administration. She had previously served as director of Alaska’s Division of Oil and Gas under former Gov. Bill Walker.
As commissioner, Feige supported the governor’s resource development agenda, including by speaking out against the Biden administration’s actions to limit oil and gas development in the Arctic National Wildlife Refuge and mineral projects in the Ambler region in Northwest Alaska. Feige also played a key oversight role in the state’s approval of the sale of the Prudhoe Bay oil field, Alaska’s largest, to Hilcorp by BP in 2020.
Dunleavy announced Feige’s resignation on Tuesday in a statement from his office. He plans to appoint an interim commissioner by June 30.
Dunleavy also highlighted Feige’s role in the state’s efforts to assert its ownership of rivers and lakes over the federal government following a 2019 Supreme Court decision and her leadership of the department through the pandemic. The governor said her “legacy will be with Alaska for many years to come.”
Feige’s two-page resignation letter to Dunleavy said “recent developments” she did not describe prompted a need to focus on her family, leading to her leaving from the position.
Feige declined to be interviewed for this article.