Today’s Key Takeaways: FED say climate policy beyond its scope. Trouble refilling the SPR. New climate guidance for FERC could lead to stricter reviews of gas projects. Top 50 mining companies for 2022 – good for Alaska! Huber to head AOGCC
NEWS OF THE DAY:
POWELL SAYS FED WILL STAY OUT OF CLIMATE POLICY: Federal Reserve Chairman Jerome Powell pledged that the central bank will not be climate policymaker, saying climate policy lies outside its scope under current law.
“Without explicit congressional legislation, it would be inappropriate for us to use our monetary policy or supervisory tools to promote a greener economy or to achieve other climate-based goals,” Powell said this morning during a speech.
The comments from Powell, who took the reins during the Trump administration and was re-nominated by Biden, are a departure from the direction many Democrats want the Fed to go in. Sarah Bloom Raskin, for example, Biden’s failed pick for vice chairwoman of supervision, said climate change is happening and that “whether or not you believe in it, it’s the Fed’s job to be mitigating the impact of exogenous shock.”
The Biden administration has used other authorities to advance its climate policy via channels like Securities and Exchange Commission rulemakings that would mandate climate disclosures.
From the Washington Examiner, Daily on Energy
OIL:
Washington Has Trouble Refilling The SPR After 220 Million Barrel Draw
Charles Kennedy, OilPrice.Com, January 9, 2023
- The DoE has received several offers for February purchases to refill the SPR.
- For February, the plan was to purchase 3 million barrels, ideally when oil dropped to around $70 per barrel.
- The rejected bids are prompting speculation that refilling the SPR will be challenging, at best.
After drawing over 221 million barrels of oil from the Strategic Petroleum Reserve (SPR) in 2022, Washington is having a tough time refilling it in the New Year, with the Department of Energy (DoE) rejecting the first offers on the grounds that they failed to benefit taxpayers.
The DoE has by now received several offers for February purchases to refill the SPR, according to both Bloomberg and Reuters. However, those offers have been rejected as too expensive or failing to meet other requirements.
For February, the plan was to purchase 3 million barrels, ideally when oil dropped to around $70 per barrel. This 3-million-barrel pilot program would have given sellers a fixed price for future deliveries and is in contrast to the DoE’s normal operating procedure, which had seen it purchase oil for faster delivery without fixed-price contracts.
Right now, WTI is trading around $75/$76 per barrel, and new data from the Energy Information Administration (EIA) released on Monday shows another 0.8-million-barrel draw from the SPR.
According to Bloomberg, citing unnamed sources “familiar with the matter,” the DoE will now postpone its originally planned February purchases and embark on a new approach for fixed-price offers.
“DOE will only select bids that meet the required crude specifications and that are at a price that is a good deal for taxpayers,” the DoE said in a Friday statement carried by news agencies. “Following review of the initial submission, DOE will not be making any award selections for the February delivery window.”
The rejected bids are prompting speculation that refilling the SPR will be challenging, at best.
The plan to fill the SPR, which has reached its lowest level since 1984, might not be attractive enough to sellers, despite the DoE’s efforts at enticement.
Additionally, the Wall Street Journal speculates that the DoE may not have enough funding to refill the SPR completely. According to WSJ, the DoE has $.48 billion in purchasing power. At the desired $70 per barrel, that would give it enough funding to refill the SPR to 440 million barrels.
GAS:
White House climate guidance may shift FERC on gas
Miranda Wilson, Energywire, January 10, 2023
The plan could prompt the agency to conduct stricter reviews of energy projects.
New climate guidance from the White House may change how the Federal Energy Regulatory Commission assesses natural gas, a prospect that could dramatically affect emissions and split the bipartisan panel.
The White House Council on Environmental Quality last week issued guidance for federal agencies to analyze, quantify and mitigate greenhouse gas emissions “to the greatest extent possible” as part of the environmental review process. The framework also encourages agencies to evaluate whether proposed projects or other actions would disproportionately harm disadvantaged communities.
An independent agency led by a bipartisan commission, FERC is charged with permitting large natural gas pipelines and export terminals. To the frustration of environmental advocates, the agency has rarely assessed how much new gas projects would contribute to climate change aside from considering “direct” greenhouse gas emissions, such as those emitted during construction or operation of a pipeline.
The CEQ guidance may change that. Experts say they expect FERC to try to follow the guidelines when conducting new environmental reviews for energy projects under the National Environmental Policy Act.
“If you’ve been pressing FERC to do a better job of accounting for the climate impacts of natural gas infrastructure, then this is welcome guidance,” said Cale Jaffe, a law professor at the University of Virginia.
While the White House document is nonbinding and FERC is not obligated to respond to it, the commission has previously indicated that it follows CEQ guidance. The current guidance is “interim,” and CEQ is accepting comments on it through March.
FERC did not respond to requests for comment.
In last week’s plan, the White House outlined a path forFERC to quantify and analyze what are considered indirect climate change impacts stemming from proposed pipelines and other gas projects. Indirect emissions could include methane released during natural gas drilling and carbon dioxide emitted once natural gas is burned or consumed at the point of delivery.
According to the guidance, agencies should “quantify the reasonably foreseeable direct and indirect GHG emissions of their proposed actions” and consider “reasonable alternatives.” Alternatives should include a scenario in which the proposed action does not occur or a project is not approved, CEQ said.
Furthermore, if agencies don’t have necessary information to quantify projects’ greenhouse gas emissions, they should require applicants to provide those details or conduct their own assessment to make such a determination, the guidance said.
That point is particularly relevant for FERC, which has previously said that it could not ask natural gas pipeline companies to provide information about the origin of gas transported by their projects, ClearView Energy Partners said in a research note over the weekend.
“So, we read the Interim Guidance to indicate that if stakeholders (or EPA) challenge an agency (including FERC) to provide more detail and the agency doesn’t at least ask for it, a resulting order could be rather vulnerable on judicial review,” Christi Tezak, a managing director at ClearView, said in an email.
The guidance also recommends that agencies use the social cost of carbon to put emissions impacts in an “appropriate context.” The metric estimates the economic damages that would result from emitting 1 ton of carbon dioxide.
FERC has not previously used the social cost of carbon in its environmental reviews, although advocates have called on the commission to do so.
“FERC staff have more support for doing a deep dive on climate impacts with this guidance and, in particular, using the best available science on social cost of carbon calculus,” Jaffe said.
From Trump to Glick
FERC’s process for reviewing natural gas projects’ greenhouse gas emissions has shifted over the years.
During the Trump administration, for example, FERC took the position that it could not assess whether gas pipelines and export projects would significantly worsen climate change. That approach was criticized by then-Commissioner Richard Glick, a Democrat who became chair of the commission shortly after President Joe Biden took office.
Glick, who left his position at the end of last year, attempted to establish a first-ever threshold delineating whether gas projects’ emissions would be “significant.” But the resulting greenhouse gas policy issued in February of 2022 drew political backlash from Sen. Joe Manchin (D-W.Va.) and critics who saw it as an overreach. The commission rescinded it the following month (Energywire, March 25).
Since then, FERC has largely attempted to quantify projects’ greenhouse gas emissions without characterizing them as significant or insignificant — an approach some scholars and environmental advocates say is legally deficient.
From now on, FERC will need to not just consider, but “contextualize” how its decisions contribute to climate change in order to follow the CEQ guidance, said Jennifer Danis, a senior attorney at the Niskanen Center, a think tank that has often criticized FERC’s review process for natural gas pipelines.
“In light of this guidance, which is effective immediately, perhaps one of the biggest changes should be that it eliminates FERC’s practice of ducking climate analyses, which it currently tries to justify by referencing its forsaken draft GHG policy,” Danis said in an email.
Still, it’s unclear how or when the commission will respond to the White House guidance or implement potential changes in its environmental review processes.
FERC currently has two Republican members and two Democratic members, including acting Chair Willie Phillips, who assumed the role last week to replace Glick.
The Republican commissioners have rejected, on various grounds, the notion that FERC should determine whether individual projects’ indirect greenhouse gas emissions would significantly contribute to climate change. Republican Commissioner Mark Christie, for example, has said that FERC cannot conduct extensive climate change reviews without an explicit directive from Congress.
Phillips voted for the now-rescinded greenhouse gas policy last year, but he has signaled that he may try to reach consensus on natural gas pipeline reviews and other issues with other commissioners in the future (Energywire, Jan. 6).
In addition, given the controversy over last year’s policy, it’s likely that the commission will be more cautious and look for “new approaches” to reviewing climate change impacts in response to the CEQ guidance, said James Coleman, a professor of law at Southern Methodist University.
“It’s a huge embarrassment to put out some new rules and then immediately have to withdraw them. I would be a little bit surprised if they were to get themselves in the same situation again,” Coleman said.
Sweeping changes to FERC’s natural gas review process could also draw backlash from the pipeline and gas industries. In a statement on CEQ’s guidance, the American Gas Association’s chief regulatory counsel for energy, Matthew Agen, said he was concerned that the guidance could harm “the reliability and resilience of the natural gas system.”
“CEQ’s guidance will expand the timeline for the review of needed natural gas pipeline projects and create uncertainty regarding what metrics are used to evaluate energy infrastructure projects,” Agen said in a statement.
MINING:
Top 50 mining companies in 2022: coal, lithium win big, China investors lose out
Erik Els, Mining.Com, January 10, 2023
Commodity prices are always volatile, but in 2022 metal and mining markets reached new levels of turbulence, as the pandemic played out in China, inflation plagued the developed world and the Ukraine war upended global energy.
Copper ended the year more than 20% below the all-time record hit in March, the gold market’s highs and lows during the year were more than $400 apart, lithium prices continued their exponential run, tin prices collapsed, against all odds coal prices surged to never-seen levels, potash advanced to 14-year peaks, uranium enjoyed the best market since Fukushima and nickel made good on its reputation as the devil’s metal.
The MINING.COM TOP 50* ranking of the world’s most valuable miners added $165 billion over the course of the fourth quarter erasing steep losses suffered since their March highs.
Collectively, the world’s biggest mining companies are now worth $1.39 trillion, just a shade below the combined market cap at the end of 2021. That compares to a 9% drop in the Dow Jones Industrial Average and a nearly 20% decline in the S&P500.
POLITICS:
Dunleavy appoints former aide to Alaska oil, gas commission
AP, January 9, 2023
Alaska Gov. Mike Dunleavy has appointed a former aide as chair of a commission that oversees oil and gas drilling in the state.
Dunleavy’s office Monday announced the appointment of Brett Huber Sr. to the Alaska Oil and Gas Conservation Commission. The appointment is subject to legislative confirmation.
Huber, in the statement released by Dunleavy’s office, said he was “humbled and excited” to be appointed to the role.
Huber managed Dunleavy’s successful 2018 gubernatorial campaign and became an aide to Dunleavy during his first term. Huber left state employment to work on an unsuccessful campaign against a 2020 elections-related voter initiative. He returned to the administration in 2021 as a senior policy advisor for “statehood defense” issues but left the following year.