NEWS OF THE DAY:
A Cleaner Oil Industry: Driven by Data and Common Sense
Paul Steidler, Real Clear Energy, September 1, 2021
The West’s largest oil companies – Exxon Mobil, BP, and Chevron – have made pledges to significantly reduce their greenhouse gas emissions soon and will remain under strong pressure from environmentalists and investors to do so.
By combining the engineering prowess at these companies and other U.S. producers with far-ranging applications of data analytics, dramatic changes can be instituted to make their operations cleaner. This includes significantly reducing methane emissions, increasing the success of drilling operations, and improving refining processes so that they are more environmentally friendly and more efficient, thereby producing cleaner fuels.
Those championing climate change prevention should embrace these steps from Big Oil, while tracking the progress on these innovations and assessing plans to further cut emissions by 2050. BP has already said it will be a net-zero emitter by then. Attempts by some environmentalists to use the industry’s posture to bludgeon and drive it out of business are not only highly counterproductive, but not likely to work.
Simply put, the world needs large quantities of oil and will still need much of it in 2050. This was made clear on August 11, when President Biden called on OPEC to increase oil production to promote economic recovery and ease high prices for Americans. The U.S. Energy Information Administration also projects that the world will need 50% more energy by 2050, with most of that driven by higher demand in Asia, particularly China and India.
Since at least the 1970s, it has been fashionable for America’s left to bash oil companies and call for their demise. While this may work for some politically, it is bad economics and ultimately bad public policy.
The U.S. is in a formidable position to lead the world on the transformation of the oil industry. On July 26, the U.S. Energy Information Administration reported that the U.S. is the world’s largest producer of oil, at 18.6 million barrels per day, or 20% of the world’s total. The world’s second largest producer, Saudia Arabia, is far behind at 10.8 million barrels a day.
China, our main economic competitor, produces just 4.9 million barrels a day and consumes 13.9 million barrels, a 9.0 million barrel a day deficit. The U.S. has been selling oil to China and we should aim to sell a lot more.
But decimating the U.S. industry will not curtail China’s appetite for oil. In fact, China will buy it from producers who have less stringent environmental practices, like Iran and Russia.
Furthermore, there are going to be large amounts of gasoline-powered vehicles for a long time. President Biden’s August 5 executive order calls for 50% of the new vehicles sold by 2030 to be emission-free. Most vehicles operating in 2030, though, will still be gasoline-powered. The improved quality of cars and trucks being made today and in the coming years means that many of them will last 10-15 years, into 2040 and beyond.
The world will benefit by having these vehicles powered with cleaner fossil fuels produced with less disruption to the environment, steps which engineering and data analytics, working together, will ensure.
Environmental and climate change activists are in a strong position with oil companies, which they can embrace and use to the advantage of transforming oil and gas into cleaner industries.
Push too hard, though, and things can quickly unravel to the point where we will be asking on foreign governments, with inferior environmental standards, to produce more oil. Just ask President Biden and the tens of millions of Americans who are frustrated with today’s high gas prices.
OIL:
WTI Oil Jumps Above $70 On Bullish U.S. Demand Data
Tsvetana Paraskova, OilPrice.Com, September 2, 2021
Oil prices rose by more than 2 percent early on Thursday, with WTI Crude trading above $70 a barrel for the first time in a month, driven by bullish U.S. inventory and demand data and a weaker dollar.
As of 11:13 a.m. EDT on Thursday, the front-month WTI Crude contract was up by 2.71% at $70.44, trading above the $70 a barrel mark for the first time since August 3. Brent Crude had risen by 2.43% at $73.30.
Oil prices traded higher on Thursday, as a weakening U.S. dollar made crude buying cheaper for the holder of other currencies. It was not only the weaker greenback that pushed oil higher.
The EIA reported on Wednesday a major crude draw in U.S. inventories and a record implied American fuel demand. The Energy Information Administration reported inventories had declined by 7.2 million barrels in the week to August 27. This compared with a crude oil inventory draw of 3 million barrels estimated by the EIA for the previous week and analyst expectations for a draw of 2.83 million barrels.
“Implied demand is reported to have hit a record high of 22.8MMbbls/d over the week, eclipsing the previous record of 22.4MMbbls/d seen in 2018. This stronger implied demand number likely reflects some downstream inventory build ahead of Hurricane Ida,” ING strategists Warren Patterson and Wenyu Yao said early on Thursday.
The OPEC+ decision from Wednesday to proceed with the plans to continue easing cuts by another 400,000 bpd in October also supported oil prices, despite lingering fears about the surge in COVID cases.
“Agreeing to another increase while the world is still battling various virus variants highlights the group’s confidence in rising demand, but also that they see $70 as an acceptable price level for now,” Saxo Bank said in a daily commentary today.
“In the US total oil products supplied, a proxy for demand, hit the highest level since at least 1990. Together with soaring gas prices leading to more fuel burns in Asia as well as production lost from hurricane Ida we believe prices may soon find support,” the bank’s strategy team added.
GAS:
U.S. NatGas Firms on Supply Woes as Focus Turns to Storage Report
Pipeline & Gas Journal, September 2, 2021
U.S. natural gas futures were near their highest in about three years on Thursday, buoyed by overall projections for lower supply as investors prepared for a federal report expected to show a smaller-than-normal storage build.
Front-month gas futures for October delivery were last up 2.8 cents, or 0.6%, at $4.643 per million British thermal units (mmBtu) by 9:32 a.m. EDT (1332 GMT), in choppy trading that saw prices flip from negative territory to as much as 0.8% higher.
On Wednesday, prices touched their highest since late November 2018 after Hurricane Ida knocked out most of supply from the Gulf of Mexico.
“It is a season of tight supply – the shoulder month’s weaker demand is overshadowed by supply concerns. This perhaps explains why each time, prices move higher after taking some breath on the way upward,” said Zhen Zhu, economist at Oklahoma City-based C.H. Guernsey. “With this storage report, we may see the same pattern, unless we witness a much larger than expected injection.”
U.S. utilities likely injected a lower-than-normal 25 billion cubic feet (bcf) of natural gas into storage last week as unusually warm weather increased demand for fuel to keep air conditioners humming, a Reuters poll of analysts showed on Wednesday.
Data provider Refinitiv said total U.S. production has averaged 88.4 billion cubic feet per day (bcfd) so far in September, down from 92.0 bcfd in August. The all-time monthly high is 95.4 bcfd set in November 2019.
“This morning’s weather models are predicting higher near-term demand on account of the weather, but this has so far only had a moderate effect on the price,” said John Abeln, an analyst at Refinitiv.
U.S. pipeline exports to Mexico climbed to an average of 6.5 bcfd this month so far, from 6.2 bcfd in August, but were slightly lower than June’s monthly record of 6.7 bcfd.
With European and Asian gas both trading over $17 per mmBtu, compared with just under $5 for the U.S. fuel, analysts have said buyers around the world would keep purchasing all the liquefied natural gas (LNG) the United States can produce.
MINING:
Tongass holds wealth of resources in renewables, mineral exploration
Robert Venables and Bill Jeffress, Alaska Journal of Commerce, September 1, 2021
Southeast Alaska is at a unique crossroads in its management of the Tongass National Forest.
How will reimposition of the 2001 Roadless Rule impact development of natural resources like geothermal, hydroelectric, and mineral resources? As stewards of these public lands, we need deliberative and balanced Forest Service consideration of the best use of and access to these resources to protect and sustain Southeast communities, and their economic future.
The Forest Service needs to carefully consider the serious ramifications that reimposition of the Roadless Rule will have on our nation’s efforts to increase local, high paying jobs and reduce our dependence on fossil fuels.
Currently, mines operating within the Tongass National Forest occupy a footprint of roughly 320 acres. Even if there were a dozen more mines their size scattered throughout the Tongass, they would only occupy 3,840 acres in the 16.9-million-acre forest.
Yet the future potential for the Tongass to help power America is enormous. For example, the Bokan Mountain Project is a rare earth prospect that would produce the minerals needed for batteries to power electric cars.
The final environmental impact statement, or FEIS, for the 2008 Tongass Land and Resource Management Plan pointed out that the U.S. Bureau of Mines had identified 148 locatable mineral deposits in the Tongass. Of these, 52 were ranked as having the highest mineral potential. Seven were ranked as having the next highest potential and at least one “critical” and “strategic” mineral.
In addition to the 148 Identified Mineral Deposits, the 2008 FEIS described 930 “Undiscovered Mineral Resource” tracts. However, no mine can be developed unless it: 1) meets the strict environmental requirements of 36 C.F.R. Part 228 as analyzed under the National Environmental Policy Act process and 2) survives the inevitable litigation testing whether the analysis complies with NEPA.
Mines making it through this process are not going to end hunting, fishing, and tourism on the Tongass, yet they will provide opportunities and jobs for citizens.
The benefits of mining are evidenced by the Greens Creek and Kensington Mines which, which combined provide more than 800 jobs with average annual wages over $115,000. Mining provides high-paying, year-round employment on the Tongass.
The potential for many more high-paying mining jobs on the Tongass is enormous. A 1991 United States Geologic Survey study estimated a value for discovered minerals of $37.1 billion, and a value for undiscovered minerals of $28.3 billion. Obviously, the escalation in metals prices that has taken place since has dramatically increased these numbers. So, clearly the Forest Service should be concerned about how reimposition of the Roadless Rule would affect mining.
The Response to Comments in the 2001 Roadless Rule interpret Section 294.14(d) in a way that creates uncertainty about the construction of roads to access future hydropower and support facilities in Inventoried Roadless Areas.
Some respondents were concerned about the impact of the rule on special uses and requested clarification regarding the ability to construct or maintain roads in inventoried roadless areas to access electric power lines or telephone lines, pipelines, hydropower facilities, and reservoirs.
The response was the proposed rule stated that the rule would not suspend or modify any existing permit, contract, or other legal instrument authorizing the use and occupancy of the National Forest System lands. Existing authorized uses would be allowed to maintain and operate within the parameters of their current authorization, including any provisions regarding access.
The 2020 FEIS identified 19 geothermal resources in Southeast Alaska.
“Because of the potentially significant environmental impacts that road construction could cause to inventoried roadless areas” the Final 2001 Roadless Rule denies access to new leases for geothermal resources (along with other minerals subject to the Mineral Leasing Act of 1920).
The Final Rule contained no discussion of the impact of the loss of geothermal energy to rural Southeast Alaska communities.
For these reasons the Forest Service (and public) should work toward a management result that acknowledges the opportunities provided by the vast wealth of multiple resources that surround us.
Work to solve real needs and access to critical resources, and not be swayed by the red herring of “large-scale old growth” clear-cutting which has not occurred for decades and still would not even with a full exemption.
Access for mineral exploration and renewable energy is essential to developing and maintaining vibrant communities, strong economies, and a healthy environment in Southeast Alaska.
Robert Venables is the executive director for Southeast Conference, the Economic Development District for Southeast Alaska. Southeast Conference plans for the success for each economic sector in Southeast Alaska. Bill Jeffress is a Mining Consultant and president of the Alaska Miners Association, a professional membership organization representing miners from across Alaska.
POLITICS:
First movement on bills to deal with state’s financial ills including PFD
Tim Bradner, The Frontiersman, September 1, 2021
Legislators in Juneau have taken the first steps toward addressing the state’s structural fiscal problems and the Permanent Fund Dividend, or PFD.
On Wednesday the Senate Judiciary committee moved bills changing the PFD funding formula to the so-called “50-50” plan, dividing equally the annual payment to the state from Permanent Fund earnings between support for the budget and funding the dividend.
Three bills were also introduced to raise new revenues. Two would raise taxes on the oil and gas industry while a third would enact a statewide sales tax.
The PFD funding change in the Senate is contingent on the Legislature also approving a Constitutional amendment for the PFD, raising $160 million in new revenues, and implementing other elements of a bipartisan working group that met for several weeks prior to the Aug. 16 start of the special legislative session now underway.
Most legislators feel it’s high time for movement in a long-term resolution of the PFD issue. Most lawmakers and the governor want to settle the question because it is diverting too much time and attention from other state business.
Sen. Shelley Hughes, R-MatSu, the Senate Majority Leader, vented her frustration in a recent briefing to Commonwealth North, an Anchorage business group that focuses on public policy.
Hughes said her efforts on state education initiatives, along with Sen. Tom Begich, D-Anch., the Senate Minority Leader, are stymied with the dividend taking up so much attention. Hughes also wants to work on legislation related to sex trafficking, but there’s little time for that, either.
Meanwhile, the state House is now moving bills, too. The House passed a revised budget blll Tuesday, Aug. 31, that set the dividend at $1,100, although the vote was contentious.
There’s still a catch on HB 3003, the bill that passed, however. It is that the dividend is funded about half from state general funds with the remainder from the “Statutory Budget Reserve,” or SBR, a savings account.
There are questions, however, as to whether there is enough money is left in the SBR to help pay the dividends. There was a complex set of budget maneuvers including vetoes by the governor, the end result being that there’s still uncertainty about the status of funds in the account.
If SBR money isn’t available there’s enough general fund support for a $600 PFD.
HB 3003 is in the state Senate now and senators will have their own views on the dividend and how to fund it. In late June the Senate and the House approved a $1,100 dividend, but that bill required a withdrawal from the Constitutional Budget Reserve, a different reserve account than the SBR now being considered as a PFD fund source.
The difference between the two is that taking money from the CBR requires a three-quarters legislative vote with 30 of the 40 state House members are needed. In late June the Republican Minority in the House, which numbers 19, blocked the use of the CBR as part of a push to get the Democrat-led House Majority to consider the governor’s 50-50 plan and his constitutional amendments.
An SBR withdrawal only needs a majority of the House members, or 21. There were sufficient votes for that on Tuesday, although barely. There were knife-edge tight House floor votes on amendments raising the PFD as HB 3003 passed last Tuesday, Aug. 31.
Gov. Mike Dunleavy will still weigh in, too. He vetoed funds for a $525 PFD in early July, the amount of general funds left after the House Minority blocked the CBR as a fund source.
Dunleavy may veto it again, which would mean either no dividend this year or the governor’s hauling the Legislature back to a fourth special session after the current one ends Sept. 15.
What has tied things up is that people have different ideas on a grand bargain on the dividend question. The governor’s idea is a constitutional amendment, in HJR 6 (the House version) and SJR 7 (the Senate version) that would constitutionally guarantee a PFD along with its funding using the new 50-50 funding formula.
There’s sharp disagreement, however, on whether it is appropriate to put a spending program, and a spending amount, in the constitution. The Legislature now directs all spending though appropriation bills.
However, differences of opinion are so strong on the issue that some feel only way to really settle it is to put the PFD in the Constitution.
The governor’s plan is one of many ideas being tossed around and most, including Dunlevy’s plan, would create budget deficits and require new revenues.
To that end, the first revenue bills were introduced in the House Monday, Aug. 30. One is a bill altering the state oil and gas production tax and raising the minimum tax North Slope producers pay so more revenue is generated. Another enacts a 2 percent statewide sales tax.
House Bill 3005, the oil tax, was introduced by Rep. Geron Tarr, D-Anch. with Rep. Harriet Drummond, D-Anch. as cosponsor. HB 3006, the sales tax, was introduced by the House Ways and Means Committee.
A revenue bill was also introduced in the Senate that would indirectly raise petroleum taxes as well as state fuel taxes. Senators Tom Begich of Anchorage; Elvi Grey-Jackson, also of Anchorage, and Donny Olson of Golovin, near Nome, sponsored the bill. All are Democrats.
Senate Bill 3002 will increase the motor fuel tax from $0.08 per gallon – the lowest in the nation – to $0.16 per gallon, which would then rank Alaska 43rd in the nation for its fuel tax, Begich said.
The bill would also decrease the oil and gas per barrel tax credit from $8 to $5 and change the state corporate income tax law by requiring companies organized as “S” corporations to pay a tax equivalent to the 9.4 percent state corporate income tax rate paid by ordinary “C” corporation. Only one major Alaska oil producer – Hilcorp Energy – is an S corporation. The other major producers are C corporations.
Combined, these revenue measures would begin generating approximately $250 million next year for the state, Begich said. Given that no Republican has introduced a revenue bill, not has the governor, the future of these seems uncertain.
CLIMATE CHANGE:
Global fossil fuel decline won’t be fast enough to meet Paris climate goals
Ben Geman, Axios, September 2, 2021
A multidecade energy outlook from the consultancy DNV finds that COVID has not been a turning point on climate.
Why it matters: “[F]rom an energy transition perspective, the pandemic has been a lost opportunity,” they write.
“Recovery packages have largely focused on protecting rather than transforming existing industries.”
The big picture: The projection sees surging clean energy and a long-term decline in fossil fuels, but not enough to meet Paris Agreement goals.
- They conclude coal use has peaked. Oil is rebounding and reaches pre-pandemic levels around 2025, but then declines to 55% of current levels by 2050.
- Natural gas will grow this decade, stay flat in the 2030s and then decline only slowly.
The bottom line: There’s a “very short window to close the gap” between current trajectories and Paris, which aims to limit temperature rise to under 2°C above preindustrial levels and ideally 1.5°C.
Absent stronger action, they project the increase to reach 2.3˚C by 2100 — far below worst-case outcomes, but a level slated to bring highly destructive effects.