No logic trading clean N. Slope oil production for Yamal’s methane-spewing wells.

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News of the Day:

Wyoming backs coal with $1.2M threat to sue Colorado and other states
The Colorado Sun, May 2, 2021

While most states pursue ways to boost renewable energy, Wyoming is doing the opposite with a new program aimed at propping up the dwindling coal industry by suing other states that block exports of Wyoming coal and cause Wyoming coal-fired power plants to shut down.

The law signed April 6 by Republican Gov. Mark Gordon creates a $1.2 million fund for an initiative that marks the latest attempt by state leaders to help coal in the state that accounts for the bulk of U.S. coal production, which is down by half since 2008.

“Wyoming is sending a message that it is prepared to bring litigation to protect her interests,” Gordon spokesman Michael Pearlman said of the fund signed into law April 6.

The law puts West Coast states and Colorado on notice — all seek to get a large share of their electricity from renewables but still get juice from aging Wyoming coal-fired power plants. The approach may run into legal troubles, though, according to one constitutional expert.

Lawsuits between states aren’t unusual and often involve natural resources, such as water rights. Such cases can go directly to the U.S. Supreme Court if the justices agree to hear them.

Last year, Wyoming and Montana — another major coal state — asked the Supreme Court to override a decision by Washington state to deny a permit to build a coal export dock on the Columbia River. The interstate lawsuit followed years of unsuccessful attempts by the dock’s developer, Utah-based Lighthouse Resources, to contest the permit denial in federal court.

The Supreme Court hasn’t said yet if it will hear the case but the new legal fund approved resoundingly by the Wyoming Legislature and overseen by Gordon could help cover the cost of that litigation, Pearlman said.

All the while, prospects for Wyoming’s coal industry are as dim as ever, even after then-President Donald Trump rolled back regulations on mining and burning the fossil fuel.

Wyoming coal production, which accounts for about 40% of the nation’s total, has been in decline as utilities switch to gas, which is cheaper to burn to generate electricity. Solar and wind power also are on the rise as coal’s share of the U.S. power market shrinks from about half in the early 2000s to less than 20% now.

Hope that other countries will use more U.S. coal, meanwhile, are fading fast. Lighthouse Resources filed for bankruptcy in December, further setting back the coal dock proposal.

So can state vs. state lawsuits help the coal industry?


Exxon, Chevron Preach Prudence Even as Cash Waterfall Returns
Kevin Crowley, Yahoo! Finance, April 30, 2021

 Exxon Mobil Corp. and Chevron Corp. added momentum to a nascent recovery in the U.S. oil industry as they reported bumper cash flow, a dramatic improvement after a torrid 2020.

The energy giants generated enough cash to cover dividends, debt payments and project spending in the first quarter, the first time they’ve managed to do that in more than a year.

The results are especially significant for Exxon because they signal a turnaround from its most difficult period in at least four decades. The gains provides breathing room for Chief Executive Officer Darren Woods as he seeks to persuade skeptical shareholders that his fossil fuel-based strategy can profitably navigate the energy transition.

Chevron foreshadowed strong cash flow earlier in the week when it raised dividends above pre-pandemic levels, beating all its rivals. But investors signaled on Friday that they won’t be satisfied until the explorer also restores share buybacks, something Chief Financial Officer Pierre Breber was loathe to predict.

Noteworthy was the absence of a perennial feature of oil-price rallies: Plans to ramp up crude output. Instead, the biggest U.S. drillers held firm to austerity measures adopted during the darkest days of last year’s market crisis, easing concerns that gushing cash flow would spark another cycle of disastrous production growth.

“It’s really is a 180-degree turnaround from a year ago,” said Neal Dingmann, an analyst at Truist Securities. “What still resonates from both of these companies is the capital discipline.”

Exxon’s free cash flow, a key metric watched by Big Oil analysts, reached the highest since 2018, allowing the Texas oil titan not only to fund the S&P 500’s third-largest dividend but also invest in key projects in Guyana and the Permian Basin.

The explorer also reduced debt by 6% in just three months. It was a stark contrast to the prior two years during which Exxon’s cash generation fell short of payouts and expenditures, forcing it to borrow heavily.


Renewable Natural Gas Emerging as Serious Decarbonized Gas Contender
Sonal Patel, Power, May 3, 2021

Last December, two giant Virginia-headquartered firms—energy company Dominion Energy and food manufacturer Smithfield Foods—announced completion of a novel renewable natural gas (RNG) facility in Milford, southwestern Utah. While the Milford facility is the first of four similar projects that Align Renewable Natural Gas—a joint venture formed in November 2018 between Dominion and Smithfield—is spearheading, it is just one of a string of new, notable developments that suggest RNG is quickly gaining ground as the energy transition unfolds.

RNG is essentially a gaseous fuel derived from biogenic or other renewable sources, which can be “upgraded” and processed to pipeline-compatible, near-pure methane. According to the World Resources Institute (WRI), landfills account for the bulk of current RNG production, mainly because they already have methane collection mechanisms. A smaller share of RNG is derived via anaerobic digestion (AD) of solid organic matter removed in the wastewater treatment process at municipal water resource recovery plants, animal manure at livestock farms, and food waste at other facilities. RNG can also come from gasification of “dry” organic wastes, such as agricultural and forestry residues.

A Low-Carbon Natural Gas 

As Karen Crippen, Research and Development director at GTI’s Energy Supply & Conversion division, explained during a recent webinar, RNG differs from natural gas in that it’s “nearly all methane, none of the extra hydrocarbon seen in natural gas. It also contains some small amounts of trace constituents, depending on the biogas source. Great strides have been made in the past decade with numerous testing programs, so we now have a good understanding of what the trace constituents in RNG are,” she said. Modern biogas “upgrading” technologies typically used to achieve pipeline-quality standards include membranes, pressure swing adsorption, solvent scrubbing, and water scrubbing. While these can add to production costs, the resulting RNG can be a form of gas that combines low to negative lifecycle carbon emissions with the high energy density, storage capability, and transportability of natural gas.

These environmental attributes are attractive to both policymakers and investors alike because they offer both a pathway for the natural gas industry to meet energy sector decarbonization goals, as well as future resilience of the energy system by providing a locally sourced supply of clean energy. According to David Cox, founder and chief financial officer at the RNG Coalition, a member-led nonprofit organization dedicated to RNG advancement, the recent drive for decarbonization is fueling a boom in the production of RNG. “RNG has had a fairly consistent 30% growth rate (by volume) in recent years,” he said. “Ten years ago, there were 30 RNG facilities in North America. Today we have 157 operating facilities—with another 76 under construction.”

Investors are bullish on the low-carbon gas because it is economic today, said Stifel Equity Research in a recent white paper. “In 2020, dairy and landfill gas projects earned average price realizations of $100/MMBtu and $30/MMBtu, respectively, well above their respective average cost of supply. Based on our assessment of over 20 projects across the primary RNG feedstocks (landfill, animal manure, wastewater), we estimate the industry generates project-level [internal rate of returns (IRRs)] in the 10% to 65% range assuming strip prices, and current federal and state programs. We expect returns to improve as operators advance anaerobic digestion technology, improve operating efficiency, and better integrate digestate sales into their operations.”

Berkshire Hathaway Defends $8 Billion Proposal to Build Natural Gas Plants in Texas
Jonathan Stempel, Reuters, May 3, 2021

Berkshire Hathaway Inc. on May 1 defended its $8 billion proposal to build natural gas plants in Texas to help reduce the threat of devastating blackouts such as those in February.

“When you look at the power sector [in Texas], it fundamentally let the citizens down,” Greg Abel, a Berkshire vice chairman and previous CEO of Berkshire Hathaway Energy, said at the conglomerate’s annual shareholder meeting.

“We’ve gone to Texas with what we believe is a good solution,” he added. “The health and welfare of Texas was at risk, and we needed to effectively have an insurance policy in place for them.”


From the Washington Examiner, Daily on Energy:

LITHIUM MINE COULD UNLOCK BIDEN CLEAN ENERGY GOALS: President Joe Biden’s clean energy goals will get a massive boost from a lithium mine sitting above a prehistoric volcano on the northern edge of Nevada that received final federal permitting approval at the end of the Trump administration.

Lithium is a key ingredient in batteries, including ones used for powering electric cars and storing renewable energy, but almost none of it is produced in the United States.

“We are the most advanced, shovel-ready, largest lithium asset in the U.S., probably in North America,” Jon Evans, president and CEO of Lithium Americas, a Canada-based company developing the project, told Josh in an interview for a story this morning.

Over a lifetime of 45 years, the mine would produce 60,000 tons of lithium carbon equivalent a year, or about 1 million electric vehicles worth, the company said.

Thacker Pass, located on 5,500 acres of federal land near the border with Oregon, was one of several mining and energy projects the Trump administration expedited for review during the pandemic. New Interior Secretary Deb Haaland has not weighed in on the project publicly, but the mine would be compatible with the clean energy agenda of the Biden administration, which includes a prioritization of boosting U.S. development of critical minerals.

As Thacker Pass awaits final state permits, environmental activists have protested at the proposed site.

The mine is expected to move forward anyway: It has bipartisan support from Nevada’s political leaders, who are eager to diversify the state’s tourism-dependent economy, including Gov. Steve Sisolak, a Democrat, and his Republican predecessor Brian Sandoval, along with Sen. Catherine Cortez Masto, a Democrat who has visited a pilot version of the project. The site could be operational by late 2022 or early 2023.


Alaska House puts off final debate on state budget after testy Sunday floor session
Andrew Kitchenman, KTOO & Alaska Public Media, May 3, 2021

The Alaska House of Representatives will take more time before beginning the final debate on its version of the state budget.

House Speaker Louise Stutes deferred action on the budget on Sunday, after minority-caucus Republicans protested not having dozens of their amendments heard.

Stutes, a Kodiak Republican who caucuses with the mostly Democratic majority said she wanted to send two bills — one dealing with the operating budget and one dealing with the mental health trust budget — back to the House Rules Committee to allow for additional time for the majority and minority caucuses to discuss them.

The current version of the House operating budget would spend $4.2 billion in state funding, more than $200 million less than the previous budget. But it doesn’t address permanent fund dividends.

House Republicans had proposed dozens of amendments that hadn’t been heard. They said they met the deadline set by Stutes. But they lost a key vote early Sunday afternoon, which prevented the amendments from being heard.

Several minority-caucus Republicans wanted to speak about their concerns about how debate on amendments was cut off. This led Stutes to repeatedly tell them to stick to the budget itself.

Big Lake Republican Rep. Kevin McCabe said the decision to stop hearing amendments disenfranchised the constituents of his caucus members.

With tempers flaring on the floor, the House took a four-hour break before Stutes called for delaying action on the budget.

The dispute came a day after the two sides repeatedly haggled over legislative rules, including what language they could use to talk about other members and the executive branch of government.

After both the House and Senate pass their versions of the budget, there will be a committee with members from both chambers that will work out their differences.

The constitutional deadline to end the session is May 19. A key date between now and then is May 10, when the federal government is expected to provide guidance on how states can spend their share of American Rescue Plan Act money. For Alaska, that is $1 billion over two and a half years.

Depending on the federal guidance, that money could be used to support state spending, potentially freeing up state revenue for PFDs. Lawmakers have also suggested that a state savings account — the Constitutional Budget Reserve — could also support dividends, without forcing the state to draw more than planned from the permanent fund’s earnings reserve.

The Constitutional Budget Reserve has roughly $900 million, but state officials have said at least $500 million is needed to manage the monthly flow of money in and out of state coffers.

The House rejected a proposed amendment on Saturday that would have paid dividends according to the formula in a 1982 state law. The formula hasn’t been used the past five years. Including permanent fund earnings through March, dividends would be nearly $3,400 this year under the formula.

But they would also draw more than $2 billion more than planned from the permanent fund’s earnings reserve. House majority lawmakers have said draws of that size threaten the future of both the permanent fund and PFDs.

The House Special Committee on Ways and Means introduced a bill on Friday that would fund $500 dividends this year. Dividends at roughly that level would allow the state budget to be balanced over the next decade without new taxes or spending cuts. But it would be the smallest PFD level since 1985 and the lowest ever when adjusted for inflation.


Alaska’s Energy Industry Is as Clean as It Gets
Governor Mike Dunleavy, The Wall Street Journal, April 30, 2021

President Biden Zoomed with world leaders last week to announce his plan to reduce greenhouse-gas emissions. Unfortunately, his proposal will almost certainly have the opposite effect by transferring relatively clean U.S. energy production to dirty producers overseas.

As children, we learn that objects continue to exist even when they can’t be seen. Energy production is no exception. By canceling American projects, resource extraction and jobs are shifting to environmentally damaging operations in Russia, China and elsewhere.

The evidence is everywhere. On Russia’s Yamal Peninsula, construction of a mammoth $27 billion natural-gas plant was recently completed in support of the region’s 1,500 gas-flaring production sites. In China, the world’s leading polluter is producing more low-quality coal, methane emissions, and CO2 with each passing year.

So why has the Biden administration chosen to target Alaska’s highly regulated energy industry? What logic is there in trading clean North Slope oil production for Yamal’s methane-spewing wells? Alaska’s oil and gas producers don’t flare their gas—they pump it back into the ground. State-of-the-art horizontal-drilling technology limits their development footprint. And caribou herds are larger now than they were when exploration in Prudhoe Bay began.

Maybe the president considers the demands made by his green allies a matter of principle. But canceling responsible energy development in Alaska directly finances the destruction of the environment by those who take up our market share. Mr. Biden’s decisions transfer production and jobs away from clean Alaskan oil fields, impoverishing the rural Alaskans who call the North Slope home.

As governor of Alaska, and a resident of rural Alaska for nearly 20 years, I’ve seen the tragedy that results when government steals opportunity from hurting communities. As the Iñupiat tribal administrator of the only village within ANWR told Congress in April, the input of those who live in Kaktovik has been entirely ignored. Not only that—they’ve been denied the right to explore for resources on their own land. Under the Biden administration, if you don’t support the false narratives, you’re canceled.

The president’s willingness to sacrifice the livelihoods and futures of Americans to promote Russian interests unwittingly is shameful. The administration’s new emissions-target promises were more of the same: America commits to destroying economic opportunity while bad actors overseas make promises they have no intention of keeping. Russia wins. Americans, Alaskans and the environment lose.

And that’s not the only way the Biden administration’s decisions are harming the environment and the economy. While the president and I disagree on the future of fossil fuels, it’s indisputable that a transition to renewables can’t happen overnight. Efforts to increase the use of renewables will put a significant demand on the core components needed for wind turbines, photovoltaics, and electric vehicles, including copper, rare earth minerals and yes, even oil.

Experts predict a nearly 500% increase in mineral demand created by the push to decarbonize the world. Alaska is the place to find a responsible way to meet this demand. No major mining accident has occurred in Alaska, yet the U.S. continues to source its minerals from the Congo, South Africa, and China while Washington regulators deny permits to projects on state of Alaska lands designated for mining.

Whether it’s fossil fuels or the minerals needed to power the future, protecting the environment requires sourcing the necessary raw materials from responsible jurisdictions. Nowhere is better suited for that than Alaska.