Today’s Key Takeaways: CA asks residents to forgo EV charging. Iraq’s political turmoil poses risk to oil markets. BLM approves ExxonMobil’s carbon storage application. Rejecting EPA’s preemptive veto of Pebble Project impacts all Alaskans. Mixed message for mining in Manchin permitting deal.
NEWS OF THE DAY:
HEAT WAVE – CALIFORNIANS TO BE ASKED TO SET AC AT 78 AND FORGO EV CHARGING*: California grid operators warned residents to prepare for voluntary energy cuts and other emergency measures as the state braces for a heat wave expected to last through early next week.
Operators said they are taking measures to bring “all available resources” online ahead of the heat wave, which is expected to be the longest and most severe high-heat period to hit the state so far this year.
CAISO officials warned that residents may be asked to set thermostats to 78 degrees or higher, avoid large appliance use and EV charging, and to turn off unnecessary lights between 4 p.m. and 9 p.m, when the grid is the most stressed. Lowering electricity usage during that time will help prevent “more drastic measures, including rotating power outages,” officials said.
An excessive heat warning is in effect through much of Southern California, where meteorologists said “dangerously hot” conditions could climb as high as 115 degrees. Temperatures in Northern California, meanwhile, could climb up to 18 degrees above average.
*From the Washington Examiner, Daily on Energy
OIL:
Iraq’s ‘extraordinarily toxic’ turmoil is a considerable risk to the oil market, say analysts
Lee Ying Shan, CNBC, August 31, 2022
- Iraq’s political turmoil could bring about considerable risk to global oil markets, analysts told CNBC.
- “While Iraqi production is usually fairly resilient to unrest, the current political environment is extraordinarily toxic and poses a considerable risk to the oil sector,” said Fernando Ferreira, a director at Rapidan Energy Group.
- Those concerns come on the heels of escalated protests in Iraq on Tuesday, after powerful Shiite Muslim cleric Muqtada al-Sadr announced his resignation from politics.
Iraq’s political turmoil could pose a significant risk to global oil markets, analysts told CNBC.
“While Iraqi production is usually fairly resilient to unrest, the current political environment is extraordinarily toxic and poses a considerable risk to the oil sector,” said Fernando Ferreira, a director at Rapidan Energy Group.
Those concerns come on the heels of escalated protests in Iraq on Tuesday, after powerful Shiite Muslim cleric Muqtada al-Sadr announced his resignation from politics.
Recurring risk
While risks of disruption to oil supplies has subsided after Sadr called for calm, Ferreira cautioned that the power struggle between Shia factions in the country is far from resolved, and that civil unrest in Iraq will remain a recurring risk to oil markets.
“Prices could rally $5-10 on Iraqi disruptions, possibly more as low liquidity is driving bigger swings than usual,” he projected.
In a global oil market already strained by low oil inventories and key OPEC members failing to meet quota commitments, slips in Iraqi oil production could be significant, said Timothy France, a senior oil market analyst at Refinitiv.
“Even partial declines in Iraqi oil output and exports may have a significant upward impact on crude benchmark prices in Asia and Europe,” France said.
According to OPEC, global demand for oil is estimated to average 100.8 million barrels per day in 2022. Iraq produces around 4.5 thousand barrels of oil per day, and current export volumes represent approximately 3.5% of global demand, according to data from Refinitiv.
″The unrest we’ve seen in recent days has been mostly concentrated in Baghdad and southern Iraq, which exports 3.3 thousands to 3.4 thousand barrels of oil per day — a little over 3% of the global market,” France added.
China and India
Physical supplies of oil in the Chinese and Indian markets will be acutely affected by a decline in Iraqi crude oil exports, France told CNBC in an email.
“China and India are top importers of Iraqi crude oil, receiving an estimated 797,000 bpd and 817,000 bpd in August,” said France.
Ferreira added that growing unrest could also bring more caution to the OPEC+ decision-making processes. The group, whose members comprise OPEC, Russia, and allied producers, is set to meet on Sept. 5.
” [The unrest may] encourage ministers to defer making adjustments to production quotas until there’s more clarity on the direction of geopolitical risks threatening the oil market,” he said.
No major disruptions yet
Despite the cautionary figures, both analysts said there are no major disruptions to Iraqi oil output as yet. “Iraqi crude oil exports have averaged 3.53 million barrels per day. Weekly data export shows no sign of a slowdown,” said France. “Tankers are currently [still] loading at Basrah Oil Terminal.”
“Refinitiv’s historical export data shows no major export outages at the Basrah Oil Terminal dating back to 2014. During this time Iraq has arguably endured more severe security threats than it is today.”
GAS:
BLM Approves 1st Application for Permanent Carbon Storage on Public Lands
Andreas Exarheas, Rigzone, August 31, 2022
The Bureau of Land Management (BLM) has announced that it has approved the first application for permanent underground storage of carbon dioxide on public lands.
BLM revealed that it had greenlit ExxonMobil Corporation’s proposal to sequester carbon deep underground in Lincoln and Sweetwater counties, Wyoming, a development the organization described as a “significant milestone in the Biden-Harris administration’s efforts to combat the climate crisis”.
The proposal includes a carbon dioxide disposal well pad and pipeline, which once completed will provide the opportunity for permanent underground storage of carbon dioxide produced along with natural gas at the existing Exxon Mobil Shute Creek Plant, BLM noted. Currently, ExxonMobil sells the carbon dioxide for commercial uses and excess carbon dioxide is vented into the atmosphere under a permit approved by the Wyoming Department of Environmental Quality, BLM highlighted.
The disposal well will sequester approximately 60 million cubic feet of carbon dioxide daily at a depth of approximately 18,000 feet in the water leg of the Madison formation, which is an approved disposal zone, BLM outlined, adding that the injection of carbon dioxide into underground geologic formations offers safe, secure, and permanent disposal.
“This project is a prime example of how the BLM can work together with industry leaders to combat climate change,” BLM Wyoming State Director Andrew Archuleta said in a BLM statement.
“Projects like this will allow the BLM to play a part in reducing carbon dioxide levels in the atmosphere,” Archuleta added in the statement.
Back in June, the BLM announced that it had issued a new policy relating to geologic sequestration of carbon dioxide on public lands “as part of a comprehensive strategy to combat climate change and reduce carbon dioxide levels in the atmosphere”. The policy allowed for the permanent underground storage of carbon dioxide.
In the announcement, BLM highlighted that carbon dioxide has been injected underground in the U.S. since the 1940s, but typically as a temporary measure to produce more oil. The new policy marked the first time BLM issued such an action to allow for the permanent underground storage of carbon dioxide, BLM revealed at the time.
“This policy is an important tool to help the BLM combat the climate crisis and supports the Biden-Harris Administration’s goal of reaching net zero emissions economy-wide by no later than 2050,” BLM Director Tracy Stone-Manning said back in June.
BLM highlighted in June that it had no approved carbon sequestration projects on BLM-managed lands, but added that it was processing two applications, one in Wyoming and one in Montana, and noted that it had received inquiries related to other potential projects in several states.
BLM manages the Federal government’s onshore subsurface mineral estate for the benefit of the American public, the organization’s website notes. It also manages some aspects of the oil and gas development for Indian tribes from the Tribal mineral estate.
MINING:
The Pebble Deposit is an Alaska Asset and Economic Driver
The Environmental Protection Agency’s proposed action against the Pebble Project is not just a veto of the current Pebble permit application, it is also a preemptive veto of any future proposals in the area fully blocking any development actions across 309 square miles of Alaska land. It is a permanent economic closure: Full Stop.
- The EPA action is clear in its intent to preclude any activity in the watershed around the Pebble site (these are the watershed boundaries of the North Fork Koktuli, South Fork Koktuli, and Upper Talarik Creek) regardless of action by the U.S. Army Corps of Engineers.
- The justification for Pebble action could be applied to any watershed in Alaska including the Copper River, Yukon River, or Kuskokwim River.
The EPA has made no attempt at establishing context with its action against Pebble and is using the immediate and local impacts of the development footprint as its justification for taking action against the Project. By this logic and standard, there will be no future development in Alaska bringing the state’s economic future to a screeching halt.
Don’t be fooled – once the preemptive veto and its justifications are successfully utilized it will become easier for regional administrators to use this tactic to stop development across the nation. The arguments used against Pebble could become the norm for stopping development across the United States.
Pebble could provide thousands of jobs, generate hundreds of millions of dollars in economic activity, and make important contributions to the state and local governments in Alaska; more than $150 million according to the Final Environmental Impact Statement for Pebble. The Project is also positioned to make a significant contribution to the domestic mineral supply needed to fulfill a transition to more renewable energy sources and support the future mineral independence of the U.S.
The Proposed Determination should be rejected, and the agency should return to its proper regulatory role of a fair and transparent process unhindered by politics.
Say No to the EPA’s Preemptive Veto of the Pebble Project
Please comment before Sept. 6, 2022
- Read the Partnership statement
- Review corresponding information to help inform your personal commentary
- Submit your comments to the EPA via an online form
Submit comments by email or direct mail
POLITICS:
Manchin permitting deal offers mixed bag for mining
Jael Holzman, Energywire, August 29, 2022
Mining companies have longed to get a fix for their federal permitting problems. But some legal experts say they shouldn’t hold out hope that those issues will go away with a new permitting reform proposal making its way through Congress.
Federal mine reviews have been moving at a snail’s pace for a long time. Even as President Joe Biden calls for a new U.S. mineral supply chain for electric vehicles and solar panels, his administration has approved relatively few new mines and slowed some projects.
On paper, it would seem Washington is poised this fall to wrestle with the industry’s woes, as Congress prepares to debate a permitting deal that Democratic leadership struck with Senate Energy and Natural Resources Chair Joe Manchin (D-W.Va.) as a condition for his vote on a landmark package of climate, health, and tax legislation.
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Although the text of the proposal has not been introduced, an outline Manchin released promises on paper what mining companies eager to start digging have long asked for: a faster permitting process.
Yet legal experts who reviewed the outline said mining companies really shouldn’t expect too much from Manchin’s deal.
According to the outline, the proposal would set one- to two-year mandatory timelines for completing environmental reviews under the National Environmental Policy Act and require the president to designate and prioritize reviewing projects of “strategic national importance” — including mining projects.
It would also set a one-year deadline for issuing permits related to Clean Water Act compliance and a statute of limitations for legal challenges against permits (Energywire, Aug. 4).
These provisions are vehemently opposed by many environmental groups that say they would wipe away regulations local communities can use to try to stop projects they oppose. Earthworks, a nongovernmental organization that advocates on behalf of people impacted by mining, said in a recent blog post the deal “is an attempt to stymie opportunities for communities to voice their opinion on projects that will directly impact them.”
Attorneys who work on federal permitting for mines described the outline in interviews as a mixed bag: Tighter deadlines to complete reviews, they said, won’t end the bureaucratic hurdles that cause delays to construction (Greenwire, Aug. 9).
“It would be misleading if we suggested that this is going to open up a lot of mines,” said Karen Bennett, a partner and co-chair of the environmental and administrative law practice at Washington firm Lewis Brisbois Bisgaard & Smith LLP.
Bennett said the changes to water permitting and a statute of limitations would certainly be beneficial for mining projects. As the Biden administration progresses on regulatory changes that could create new obstacles for projects on wetlands, for example, a legislative endeavor to simplify construction on water-heavy lands with federal Clean Water Act protections would benefit mine development.
But the deal’s primary focus on timelines on environmental reviews — instead of substantive changes to the factors actually considered by the government — could wind up adding a complication for mine approvals.
“I’m always cautious about things that say, ‘Do stuff faster. Prioritize,’” said Michael Drysdale, an attorney based in Minneapolis, Minn., who is of counsel to law firm Dorsey & Whitney LLP.
Arbitrary constraints on the environmental review process have a history of creating new legal vulnerabilities for the government’s analysis. It’s a wrinkle similar to when the Interior Department created a page limit for documents related to the government’s analysis of a project’s impacts.
As a result, Drysdale could only conclude that the total sum of Manchin’s deal “can’t hurt.”
“I don’t see it making things worse,” he said. “[But] it’s not changing the obligations the agencies must satisfy. There’s only so much you can do with, ‘Work harder, work faster.’”
Ellie Dawson, an attorney with Crowell & Moring LLP, echoed the sentiment there were some positive qualities in the deal for mining companies, but was skeptical of the time constraints.
“If quality is sacrificed in the effort to complete something by a timeline and then it’s litigated, [and] if the preparation of the documents hasn’t been sufficient because they didn’t have enough time, that might not make things go faster,” Dawson said. “You could just be mired in litigation, fighting about the completeness of a [mine] plan or a review.”
Dawson concluded the deal could hypothetically speed up the pace permits are issued, but “that might not necessarily speed along the time to start a project.”
An easier way for Congress to resolve the mine plan backlog, Drysdale said, would be for lawmakers to fund new staffing at permitting agencies.
Democrats recently did this in their climate law, known as the Inflation Reduction Act, which provided $150 million to the Interior Department for hiring and training employees so they can hand ample funding to agencies that complete environmental analyses (Greenwire, Aug. 25).
The National Mining Association, a trade group that represents coal and hardrock mining companies, sees the permitting deal as a step in the right direction that could help shore up investor certainty in the U.S. as a future mining destination.
At the same time, Katie Sweeney, executive vice president and general counsel for NMA, said she too “understood where” attorneys concerned about the time frames were “coming from.”
In the end, she sees this proposal as “incremental progress.”
“We would like to see any progress happen. We’ve been waiting a long time. Does it do everything that probably needs to be done? No,” Sweeney said, “[but] we see this as one piece of the puzzle.”