Today’s Key Takeaways: Exploration success near Icewine leases in Alaska bodes well for the 88 Energy project. Senate Energy and Natural Resources Chair Joe Manchin pitched North American fossil fuel during a visit to Canada. New modelling from Wood Mackenzie raises questions about longer-term viability of gas projects across Australia. Alaska leaders comment on use of Defense Production Act. Redistricting Board puts Eagle River with South Anchorage.
NEWS OF THE DAY:
Manchin slams Biden on Keystone XL, oil policy
Nico Portuondo, Energywire, April 13, 2022
As part of his “all of the above” energy pitch, Sen. Joe Manchin (D-W.Va.) left room for renewables and electric vehicles during remarks in energy-rich Alberta.
Senate Energy and Natural Resources Chair Joe Manchin pitched North American fossil fuel production as the key to stabilizing energy markets — and fighting climate change — during a visit to western Canada yesterday.
“Whether it be natural gas or whether it’s extracting oil, whatever we do is the cleanest in the world and whatever we replace will be the cleanest in the world,” the West Virginia Democrat said of U.S. and Canadian fossil fuel production. “If you want to help the climate, use North American energy.”
As part of a two-day visit to western Canada, Manchin joined Alberta Premier Jason Kenney for a press conference after touring oil sands reserves and speaking with Canadian energy industry leaders.
The politicians said there is significant room for greater oil and gas production collaboration between Canada and the U.S. to create a future North American energy powerhouse and exert greater control over oil prices.
But Manchin and Kenney, a conservative, said the Biden administration decisions aren’t helping, with the cancellation of the Keystone XL pipeline specifically panned. Manchin has repeatedly voiced his displeasure over the decision, calling it “something we should have never abandoned.”
Manchin also took a shot at President Joe Biden’s effort to get nations belonging to OPEC to increase oil production.
“We produce a tremendous amount of oil, we have more capacity, but they were turning to everybody but us. So, yeah, that rubbed me wrong,” said Manchin.
Manchin criticized the administration yesterday for enacting policies he blamed for high energy prices. Consumer prices rose 8.5 percent over the last year, the largest 12-month increase since 1981, according to data from the Bureau of Labor Statistics. Gasoline was a key driver.
The senator’s arguments in Alberta mirrored talking points from Republicans, who have turned rising inflation and gasoline prices into arguments for increasing domestic fossil fuel production. Taken together, Manchin’s fossil fuel push and inflation worries could further complicate the Democrats’ budget reconciliation hopes (Greenwire, April 12).
Keystone XL foes have said oil sands crude is more harmful to the environment than other oil reserves. And many Democrats blame energy companies, rather than their policies, for the slow production ramp-up.
As part of his “all of the above” energy pitch, Manchin left room for renewables and electric vehicles. But concerns over critical mineral supplies essential to clean energy technologies will have to be addressed, Manchin said.
“I’m an environmentalist because I’ve got a car here that was sourced through slave labor,” said Manchin. “Ridiculous. Totally ridiculous.”
88 Energy Shares Are Up After Optimistic Update on Icewine Project in Alaska
James Llinares Taboada, MarketWatch, April 8, 2022
Shares in 88 Energy Ltd. rose Friday after the company said that recent exploration success near its Icewine leases in Alaska bodes well for the project.
The oil-and-gas company said third-party mapping using available well information from neighboring explorer Pantheon Resources PLC suggests that three targets extend into the Project Icewine area.
Recent Pantheon well tests confirmed light, sweet oil from multiple reservoirs, which is positive for the prospectivity of Icewine, 88 Energy said.
The company expects to complete the mapping of the prospects this month which will form the basis for a new resource estimate for Icewine, expected to be released in the second quarter. 88 Energy is also in talks for a farm-out of the project.
New Australian gas projects facing ‘uncertain future’ (smh.com.au)
Nick Toscano, Mike Foley, The Sydney Morning Herald, April 13, 2022
Powerful investors will call on Australia’s gas producers to justify their future growth plans amid warnings new projects may face diminishing returns and risk becoming stranded by as early as next decade, as greener sources of energy take over.
Despite the war in Ukraine exacerbating a global energy crunch and brightening the outlook for exporters of liquefied natural gas (LNG), new modelling from resources consultancy Wood Mackenzie has raised questions about the longer-term viability of new and recently sanctioned gas projects across Australia.
In new analysis due to be released on Wednesday, Wood Mackenzie tested the outlook for several projects including Woodside’s Scarborough field off the coast of Western Australia and Origin Energy’s possible future development of the Northern Territory’s Beetaloo Basin against two hypothetical scenarios of increasing global efforts to limit the planet’s heating to 1.5 degrees above pre-Industrial Revolution levels.
The modelling found investment returns were lower across all projects under both scenarios of “progressive” and “accelerated” renewable energy uptake, even though some projects remained cash-flow positive.
“Some projects may struggle to maintain positive cash flow after 2030 and face a higher risk of becoming stranded assets,” it said.
Using Defense Production Act for mineral security ‘a start,’ Alaska leaders say
Elwood Brehmer, Alaska Journal of Commerce, April 13, 2022
Late last month, President Joe Biden invoked the Defense Production Act to increase domestic production and supply of five minerals deemed critical primarily for their use in large batteries.
To many Republicans and development advocates, the move is a significant acknowledgment that production of numerous metals will have to drastically increase for countless renewable energy targets across the country to be met. The crux of the argument is that full electrification requires untold numbers of big batteries that currently each require large amounts of minerals predominantly sourced from oversees, often from China.
Sen. Lisa Murkowski said in a statement from her office that invoking the Defense Production Act to secure domestic critical mineral supply chains is an overdue and important step that should complement a host of other actions the administration should take to spur exploration and eventual mine development for graphite, manganese, cobalt, lithium, and nickel.
“My hope is that this decision marks the start of a much more serious emphasis on our nation’s mineral security, and that real projects, especially mines, in states like Alaska, result from it. It is also critical that the five minerals addressed under this decision are just the start, not the end, of federal efforts to rebuild our domestic supply chains,” she said.
Federal permitting reform to decrease pre-construction time and costs for mine developers is high on the list of other issues that the Biden administration should tackle in that realm, according to Murkowski.
Murkowski, Energy and Natural Resources Committee chair Sen. Joe Manchin, D-West Virginia, and other senators urged Biden to use the Defense Production Act to spur supply chain development for those minerals in a March 11 letter.
Gov. Mike Dunleavy said he’s happy with the move by the Biden administration but stressed that it goes against other actions the administration has taken related to mining in Alaska, most notably the decisions in February and March to reopen the environmental impact statement for the Ambler Mining District access road and subsequently suspend the right-of-way approved across federal lands for the 200-plus mile industrial road.
“Stalling development of the road to the Ambler Mining District is preventing access to the cobalt for the lithium batteries and the copper for the wires for charging stations. Beyond (electric vehicles), the Biden administration ignores the gallium and germanium also at the Ambler Mining District that will be needed for the solar panels, smartphones, and computer chips of tomorrow,” Dunleavy said. “An emergency call for critical minerals makes it timely to reverse the recent and contradictory federal decisions on Ambler.”
Passed in 1950 in response to the Korean War, the Defense Production Act has been used dozens of times by presidents since, most recently by Biden and former President Donald Trump to ramp up production of medical supplies and vaccines to fight COVID-19.
The bipartisan group of senators highlighted the effectiveness of DPA in expanding production of supplies to combat the pandemic in their letter to the president.
When it comes to mineral supply chains, the law can help provide financing for projects backed by the federal government via the Defense Production Act fund, which holds up to $750 million to ensure the country maintains an industrial base of important materials for wartime capabilities. Among other things, the money could underwrite feasibility studies for mine projects or productivity improvements at existing operations, as opposed to simply buying more minerals, according to congressional delegation staff. The designation also adds a national security component to projects in federal permitting, which could help prioritize a mine or processing facility amongst other projects being evaluated.
Resource Development Council for Alaska Executive Director Leila Kimbrell called the announcement “a step in the right direction” but said she hopes there is still a broader look at what needs to be done to improve domestic supplies of the minerals in question.
“We’re encourage to hear the administration wants to focus on that domestic production but we’re cautious in seeing how that will actually benefit Alaska,” Kimbrell said.
State officials also said that while the president’s memo accompanying the order highlights the need for certain minerals to support the nation’s energy transition, using the DPA puts the Department of Defense in charge of procuring those minerals for national defense purposes, a likely nod to the broader need for reliable, domestic supplies of the minerals listed and others.
Department of Natural Resources Commissioner Corri Feige, who is in Washington, D.C. this week for talks about Alaska’s role in national mineral security, wrote via email that the procurement and funding opportunities could be significant for Alaska. She added that the Procurement Technical Assistance Center within the University of Alaska is available to companies looking for funding or procurement help.
“There will be funding available to companies for things like new facilities to process ores with different metallurgy, rework tailings at existing mines to recover what has already been mined and not captured and purchase updated equipment like automated mining equipment that improve safety of mining operations,” Feige wrote. “With their funding, DOD seeks to improve safety in the industry and drive broader applications of technology that can assist DOD in other areas.”
Feige has been meeting with staff from Alaska’s congressional delegation and other members of Congress; officials from DOD and Department of Energy sub-agencies; mining industry leaders; and representatives from General Motors’ supply chain division.
Alaska is also home to the Graphite Creek flake graphite deposit on the Seward Peninsula north of Nome, which the U.S. Geological Survey recently recognized as the largest graphite deposit in the country. High-quality flake graphite is a primary component of lithium-ion batteries, and the U.S. currently imports all of its graphite. China is the world’s major producer.
Leaders of Graphite One, the Vancouver-based junior mining firm that owns the Graphite Creek deposit, have said they expect to release a pre-feasibility study for the mine project in the first half of this year. The company is also investigating graphite processing and recycling facilities in Washington.
Graphite One CEO Anthony Huston said the Biden administration’s action validates the company’s plan to develop a full graphite supply chain, something companies exploring for rare earth metals and other minerals elsewhere in Alaska have advanced as well.
“With this new defense designation under U.S. law, graphite joins a select group of ‘super-critical minerals’ that are essential to commercial technology and national security applications,” Huston said.
Acting Director of the Offices of Manufacturing and Energy Supply Chains and Vehicle Technology in the Department of Energy David Howell testified in April 7 Senate Energy and Natural Resources Committee hearing that the USGS Critical Mineral List — including those in Biden’s Defense Production Act order — “are key building blocks for a transition to a (carbon) net-zero energy future.”
Howell noted that Russia’s invasion of Ukraine caused prices for platinum group metals, which Russia supplies to the world, and other important commodities to spike over fears of supply disruptions.
“The supply chain assessments found that the United States has appreciable resources of many critical elements, but domestic production is frequently limited by a dated and often unclear legal and regulatory structure for mining coupled with a lack of midstream capacity to process and refine the raw materials, even in cases where it has active mining,” Howell testified. “As a result, U.S. ores frequently are shipped to other countries for refinement, relegating mid-stream profits to others and making the U.S. vulnerable to supply disruptions.”
However, longtime Alaska energy industry attorney and analyst Brad Keithley said the federal government’s financial involvement in highly competitive markets such as mineral commodities invariably leads to the government “picking winners and losers” and adds inefficiencies to those markets.
“If we thought China was an insecure source (for critical minerals), what might be appropriate would be to either raise tariffs to where we sort of hit the threshold where people develop domestic resources or just ban the imports from China,” Keithley said.
He referenced the domestic natural gas shortage of the late 1970s and 1980s that led to the Defense Production Act being invoked and eventual government purchases from the Synfuels coal gasification plant in central North Dakota for national defense.
The plant “never made economic sense but we just kept turning the gas out,” Keithley said, adding that the government-financed project indirectly impacted the ability for some of his clients to get financing for gas projects elsewhere. “To the extent that we were producing from that coal mine, we were disincentivizing the production of gas — not huge, but it was there.”
According to Dakota Gasification Co., which owns the Beulah, North Dakota plant, it remains the only commercial-scale facility producing synthetic natural gas in the country.
Alaska redistricting board links South Anchorage and south Eagle River in Senate, reviving accusations of gerrymandering
James Brooks, Anchorage Daily News, April 13, 2022
The Alaska Redistricting Board has approved a new map of state Senate districts in Anchorage over the vehement objections of two board members who called the plan blatant gerrymandering and urged a state judge to overturn it.
“Draw the boundaries yourself. This board will continue to gerrymander. Don’t send it back. We are defunct, we are derelict in our duties,” said board member Nicole Borromeo.
A prior map, which created a Senate district linking south Eagle River and south Muldoon, was ruled an “unconstitutional political gerrymander” by the Alaska Supreme Court in March, and the board had been ordered to redo its work.
The new map approved Wednesday is subject to judicial review, and Borromeo’s comment was directed at the judge or judges who will review it.
Alaska’s state Senate districts are each made of two contiguous House districts, and entering Wednesday, the board had been considering two options to fix the issue in East Anchorage. Both link the two Muldoon state House districts together, but each concept did so in different ways.
The first, known as Option 2, would have joined Eagle River’s two House districts together. The second, known as Option 3B, would join south Eagle River to South Anchorage and Girdwood. It would also tie north Eagle River to Joint Base Elmendorf-Richardson and Government Hill.
After three hours of debate Wednesday, the board voted 3-2 in favor of Option 3B. That decision drew criticism, with the two members on the losing side of the vote saying that it improperly gives Eagle River greater representation in the state Senate.
In February, Superior Court Judge Thomas Matthews noted that the redistricting board exhibited “regional partisanship” when its first map divided Eagle River across two Senate districts with the goal of giving it more representation.
Eagle River has a strong Republican lean and dividing its votes between two districts could make those districts more firmly Republican.
“This is still gerrymandering, just in a different way, in my mind,” said board member Melanie Bahnke.
If upheld, Wednesday’s vote puts incumbent Sens. Lora Reinbold, R-Eagle River, and Roger Holland, R-Anchorage, into the same district. Former Sen. Cathy Giessel, R-Anchorage, has already registered a run for office and is also in the district.
Two Senate districts have no incumbent — the Eagle River-JBER district, and a district running from Bayshore north to Taku/Campbell.
Legislative candidates have until June 1 to register for this fall’s election.
The members of the five-person redistricting board are political appointees, and the vote on both options fell along political lines.
Voting in favor of Option 3B were board members Budd Simpson and Bethany Marcum, appointed by Gov. Mike Dunleavy, and board chairman John Binkley, appointed by Giessel.
Voting against that option were board members Bahnke, appointed by former Chief Justice Joel Bolger, and Borromeo, appointed by former House Speaker Bryce Edgmon, I-Dillingham).
Simpson, Marcum, and Binkley are registered Republicans. Bahnke and Borromeo are registered as undeclared. (Binkley is the father of the owners of the Daily News.)
Explaining his vote, Simpson said that with Muldoon’s two House districts joined together, it made more sense to join JBER to northern Eagle River than to join JBER and downtown Anchorage.
“I think pairing the military bases with the downtown overlooks JBER as a significant community of interest. I think that in itself could expose us to a constitutional challenge from that constituency,” he said.
That decision left south Eagle River with “no place else to go” except South Anchorage, he said.
In a week of public testimony, some residents argued against that linkage. The border between the two districts runs through the Chugach Mountains and driving from one House district to the other can take more than 30 minutes.
Simpson said the transportation argument is irrelevant under the language of the Alaska Constitution.
“It doesn’t matter,” he said.
Binkley described the South Anchorage and south Eagle River districts as “large, more rural,” and said they share that commonality as well as a border.