Today’s Key Takeaways: G7 moves to reverse pledge to stop financing fossil fuels projects. Lack of EIA data frustrates markets. 9th Circuit Court of Appeals allows land swap deal for copper mine to progress. DOE criticized for hiring oil industry public relations firm. European countries need to make every molecule of gas count as potential decreases in flows and maintenance of critical infrastructure heighten the supply shortage.
NEWS OF THE DAY:
G-7 Edges Closer to Ditching Pledge to End Fossil-Fuel Financing
Chiara Albanese, Alberto Nardelli and Samy Adghirni, Bloomberg Investing News, June 27, 2022
The Group of Seven is moving toward reversing a commitment to halt the financing of overseas fossil-fuel projects by year’s end, a proposal now viewed favorably by most members, according to people familiar with the matter.
G-7 leaders meeting in the Bavarian Alps are converging on a reference to the increased role of gas projects, a consequence of Russia’s invasion of Ukraine straining their energy supply.
French President Emmanuel Macron was among those who supported financing of new fossil-fuel projects during a meeting with the leaders of African nations on Monday, according to a person with knowledge of the talks.
“In the present situation we’ll have short-term needs that will require large investments in gas infrastructure in developing countries and elsewhere,” Italian Prime Minister Mario Draghi said Sunday.
The aim should be to convert such infrastructure to hydrogen, to reconcile “short term needs with long term climate needs,” Draghi added.
Germany Pushes for G-7 Reversal on Fossil Fuels in Climate Blow
An updated text of the leaders’ statement shared with Bloomberg News refers to “the important role that increased deliveries of liquefied natural gas (LNG) can play in mitigating potential supply disruptions of pipeline gas, especially to European markets.”
Leaders “acknowledge that publicly supported investment in the gas sector is necessary as a temporary response to the current energy crisis, if implemented in a manner consistent with our climate objectives and without creating lock-in effects,” the text says.
The draft wording in the summit communique, initially backed by host Germany, is gaining traction as Europe races to secure alternatives to Russian gas. The German government has warned that Russia’s moves to limit supply risk a Lehman-like collapse in the energy markets, and Italy has rushed to sign new energy deals with African countries.
A senior official at the French presidency told reporters that it was envisaged gas investments would be permitted in the short-to-medium term on an exceptional basis given the circumstances, while the overall climate objectives as laid out at the UN COP26 summit are maintained.
A shift away from the commitment to end funding fossil-fuel projects – firmed up as a recently as May despite the energy shock caused by the war – would still represent a setback to global efforts to fight climate change. Such a move would make it harder to rally the rest of the world around more stringent targets and to direct investments toward cleaner sources of energy.
In the May commitment, G-7 nations acknowledged for the first time that fossil-fuel subsidies were incompatible with the Paris Agreement but acknowledged that investment in the LNG sector was a necessary response to the current crisis “in a manner consistent with our climate objectives and without creating lock-in effects.”
In a separate G-7 declaration issued Monday and backed by partner nations including India, South Africa and Indonesia, leaders reaffirmed their commitments to keep the average temperature increase above pre-industrial levels to well below 2°C and resolved to pursue efforts to limit it to 1.5°C, the same levels agreed to in Paris, and again at COP26 in November.
Critical EIA Oil Inventory Data Sees Further Delays
Julianne Geiger, OilPrice.Com, June 28, 2022
The Energy Information Administration will not release any further data, the agency said in an update on the heavily anticipated inventory figures that were due to be released last Wednesday.
The data was not published last week after the EIA discovered “a voltage irregularity, which caused hardware failures on two of our main processing servers.”
This failure prevented the EIA from processing and releasing multiple reports last week—including its highly sought-after Weekly Petroleum Status Report, which publishes not only U.S. crude oil inventory data, but gasoline and diesel inventories, as well as refinery utilization figures. Also missing last week was weekly U.S. crude oil production figures.
The EIA did not provide a timeframe for when the data will be released, nor did they comment on whether their systems would be up and running to publish this week’s Petroleum Status Report.
Last week, the oil industry had to rely on inventory figures from the American Petroleum Institute, which surveys the same companies and uses the same form to collect the data. But because of the way in which this data is modeled, there are differences in the final output.
“We will continue to provide timely updates as we bring our systems back online and will share a schedule for our product releases as soon as possible,” the EIA said in its statement on its website.
Last Tuesday, the API reported a build in crude oil inventories of 5.607 million barrels and a build in gasoline inventories of 1.216 million barrels. Distillates saw a decrease of 1.656 million bpd.
The delay caused a flurry of angry Twitter responses following today’s update as the market tries to assess the state of the market as gasoline prices remain uncomfortably high for consumers and for the current administration in the run-up to midterm elections.
Europe Needs to Make Every Gas Molecule Count
Andreas Exarheas, Rigzone, June 28, 2022
European countries need to make every molecule of gas count in the coming weeks as potential decreases in flows and maintenance of critical infrastructure will only heighten the supply shortage, Rystad Energy analyst Lu Ming Pang said in a market note sent to Rigzone.
In the note, Pang stated that disruption over the past couple of weeks for the European gas market has dragged on, adding that the Nord Stream 1 facility continued to export about 60 million cubic meters per day of gas over the weekend of June 25 and 26.
“This has been a marked reduction from the levels of 150 million cubic meters per day before the Nord Stream 1 pipeline reportedly experienced compressor issues, forcing Russian state-controlled operator Gazprom to stop operations at one of the three compressor units, bringing down the effective pipeline capacity,” Pang said in the note.
“Impending annual maintenance for Nord Stream 1 from July 11 to 21 remains on the cards, which would reduce Russian gas supply – already down 40 percent – to zero for some time, with no guarantee of a start-up date,” Pang added in the note.
“Such a move would have significant implications for the European and global market and push prices even higher,” Pang continued.
The Rystad analyst noted that Europe can remain upbeat that Norwegian gas supplies continue to hold steady at 300 million cubic meters per day but warned that this may still not be sufficient as storage inventory levels rose by only 8.2 terawatt-hours in the previous week, “bringing the European gas storage level up to about 51.2 percent”.
“This is a far cry from the average of about 43 terawatt-hours of weekly storage injections for the past two months. An 80 percent storage level target by November would be out of sight if this injection rate continues,” Pang said in the note.
“Germany has, as a consequence, declared an ‘alarm phase’ second stage of its emergency gas plan, aimed at managing supplies and supporting its storage requirement of 90 percent by December. Phase 2 involves Germany restarting old coal-fired plants, as well as introducing incentives – such as a credit line of €15 billion ($15.86 billion) – that rely on market fundamentals to cushion the loss in gas supply,” Pang added.
“Austria and the Netherlands are setting out plans to rely more on coal-powered plants, while France and Italy are likely to follow suit in the coming days, aided by a slew of measures to manage gas consumption and storage,” Pang went on to say.
In a separate market note sent to Rigzone on June 23, Rystad’s senior vice president, Carlos Torres Diaz, highlighted that European power prices had jumped as a result of lower gas supplies and renewed concerns for the winter balance.
“Spot power prices have increased in tandem with European gas prices as supply disruptions are creating a tighter European balance,” Diaz said in the market note.
In a market note sent to Rigzone sent to Rigzone on June 22, Rystad analyst Zongqiang Luo outlined that Europe was looking to coal as Russia curbed gas supplies.
US court upholds Arizona land swap deal for Rio Tinto copper mine
Reuters, June 25, 2022
A US appeals court has ruled that the federal government may give thousands of acres in Arizona to Rio Tinto Plc for a copper mine, upholding a lower court’s ruling and rejecting a request from Native Americans who said the land has religious and cultural import.
The 2-1 ruling from the San Francisco-based 9th US Circuit Court of Appeals, issued late Friday night, essentially defers to a 2014 decision made by the US Congress and then-President Barack Obama to give the land to Rio for its Resolution Copper project as part of a complex land swap deal.
Apache Stronghold, a nonprofit group comprised of members of the San Carlos Apache tribe and others, said it would appeal to the US Supreme Court.
The Arizona dispute centers on the federally owned Oak Flat Campground, which some Apache consider home to deities and which sits atop a reserve of more than 40 billion pounds of copper. If a mine is built, it would create a crater 2 miles (3 km) wide and 1,000 feet (304 m) deep that would destroy that worship site.
Rio and minority partner BHP Group Plc have already spent more than $1 billion on the project without producing any copper.
While two judges said they were sensitive to Apaches’ religious concerns, they stressed their ruling was narrowly tailored to the question about whether the government can do what it wants with its own land and whether the land transfer would prevent Apaches from practicing their religion.
“As we reach this conclusion, we do not rejoice. Rather, we recognize the deep ties that the Apache have to Oak Flat,” the court said it its 58-page ruling. “This dispute must be resolved as are most others in our pluralistic nation: through the political process.”
The dissenting judge said it was “absurd” and “illogical” to think the land swap would not impede Apaches’ religious rights.
A bill under consideration in the US Congress would undo the 2014 land swap, though its fate is unclear. President Joe Biden took steps to pause the land swap last year, though he has few options to delay it indefinitely.
“All the evidence suggests that the land exchange was meant to facilitate mineral exploration activities – nothing more and nothing less,” the court said in the ruling. The proposed mine project comes as demand jumps for copper to make electric vehicles (EVs) and other electronic devices.
Wendsler Nosie, one of the leaders of Apache Stronghold, denounced the decision. “My children, grandchildren, and the generations after them deserve to practice our traditions at Oak Flat,” he said.
Rio, which is based in Australia and Britain, said it would continue to talk with Apaches and others opposed to the mine. “There is significant local support for the project, however, we respect the views of groups who oppose it and will continue our efforts to understand, address and mitigate these concerns,” said Rio spokesperson Simon Letendre.
Mila Besich, the Democratic mayor of Superior, the town closest to the campground, and a supporter of the mine, said she was relieved by the ruling. “The 9th Circuit ruling provides further confirmation that the permitting must continue,” Besich said.
Representatives for BHP were not immediately available to comment. Terry Rambler, chairman of the San Carlos Apache tribe, was not immediately available to comment.
DOE keeps hiring oil industry public relations firm
Kelsey Brugger, Climatewire, June 27, 2022
“Edelman is really leading the charge on protecting old energy at the same time they are promoting new energy,” according to one critic.
The Department of Energy retained a global public relations firm with longstanding fossil fuel ties, continuing a practice that ramped up during the Trump administration.
The global firm Edelman in April signed a $500,000 contract to promote the new Office of Clean Energy Demonstrations, which the administration established with infrastructure law funding and billed as “a turbocharger of our net-zero future.”
The Edelman deal has drawn scrutiny from critics who have long been skeptical of the prominent firm. DOE has paid the PR firm more than $14 million since 2018, according to USAspending.gov, a public database.
Edelman, meanwhile, has long trumpeted its commitment to climate action.
“Edelman works with a broad range of clients in many industries and global markets, including clients across the energy sector,” said a company spokesperson in 2015. “As previously reported, we do not accept client assignments that aim to deny climate change.”
Such statements have made the firm a target of watchdogs and activists, who don’t hesitate to point out when they see Edelman being hypocritical. Working for the trade group American Fuel & Petrochemical Manufacturers was one of the company’s recent infractions in the view of critics.
“Edelman is really leading the charge on protecting old energy at the same time they are promoting new energy,” said Duncan Meisel, director at Clean Creatives, a group that has petitioned public relations firms and ad agencies to cut ties with oil companies and their trade groups.
USA spending shows Edelman will promote the DOE office’s accomplishments to the media, Congress and “the American public.”
The firm will help plan events, design graphics, write copy, develop web content, and help with rapid response during times of heightened need, according to a DOE official, who said the tasks would be supervised and require approval.
The new clean energy demonstrations office will help encourage clean hydrogen, carbon capture, grid-scale energy storage, small modular reactors, and other emerging technologies.
Its launch has been slow-going. The office has to hire numerous employees and lacks a Senate-confirmed administrator.
The recent Edelman contract was completed under an existing deal between the firm and DOE, which accelerated the process.
David Mayorga, DOE’s public affairs director, said the department conducts “a transparent, fair, and competitive procurement process when seeking external support services that deliver the best product and value for the American taxpayer.”
“We will do the same when seeking new communications support in the future,” he wrote in an email.
In 2015, Edelman said it was parting ways with a proposed coal export terminal project (Greenwire, July 24, 2015).
Earlier this year, Edelman, still under fire, said it had reviewed hundreds of clients, including a closer look at 20 “emissions-intensive” companies. It said the analysis led the company to at least rethink its relationship with some interests.
“We found examples where Edelman has played a key role in helping organizations acknowledge the significance of climate change and start their journey towards action. This is the type of work we want to do, we should do, and will do more of in the future,” said a post summarizing comments from CEO Richard Edelman and Robert Casamento, the company’s climate chair.
Meisel at Clean Creatives claimed nothing has come of it — at least nothing publicly known. “They haven’t dropped any of their clients,” he said. “It appears they are sort of doing business as usual.”
In response to several questions, company spokesperson Kate Meissner wrote in an email, “We believe our industry and our firm have an essential role to play in fighting climate change.”
She declined to reveal their current clients, citing confidentiality agreements.
Meisel said Edelman’s lack of disclosure about company policies “is really hurting them and is essentially the opposite of the advice they give clients on crisis management, which is to get ahead of the story by showing how you’re changing.”
Even though the criticism goes back a decade, he said the firm has never given clear public commitments to what they are going to do differently.
“At this point there’s no reason to trust this kind of vague, secretive approach,” Meisel said.
History with DOE
During the Trump administration, Edelman was the preferred public relations outfit for DOE.
When a reporter on at least one occasion called DOE’s press office, they got a call back from the firm, which at the time had been hired to promote nuclear energy events targeted at millennials (Energywire, June 24, 2019).
DOE has since scaled back its use of Edelman, albeit only slightly, records show.
In fiscal 2022, DOE paid the firm $2.3 million. The prior fiscal years, the contracts amounted to somewhere between $1 million and $3 million. DOE spent $5.4 million in fiscal 2019.
DOE is not alone. The Department of Health and Human Services has paid Edelman $20 million since 2018 for a national education campaign and outreach.
Executives Casamento; Deanna Tallon, climate and sustainability managing director; and John Edelman, who spearheads the company’s corporate responsibility work, said in another post they were having conversations with clients “about our principles, the commitments we have made and the actions we are taking.”
They said the company incorporated climate principles into the client acceptance process and “have decided not to pursue certain new opportunities.”
American Fuel & Petrochemical Manufacturers may have been one of the casualties of Edelman’s review.
When Buzzfeed last year reported Edelman had $4 million in contracts with AFPM, critics pointed to the group’s opposition to certain climate action on Capitol Hill.
AFPM spokesperson Ericka Perryman told E&E News last month it “decided to let our Edelman contract expire at the end of last year.”
“We’re grateful for the support we received from Edelman over many years of work together and we wish them all the best,” she wrote.