Today’s Key Takeaways: 10 million ounces of gold discovered by NovaMinerals in Mat Su. In response to WA fuel tax, AK legislator proposes a six-cents-per-pound tax on fish exports and a six-cent-per-foot mooring fee for any vessels that anchor in Alaska harbors. Germany halts certification process for Nord Stream 2 pipeline after Russia moves troops into Ukraine.
NEWS OF THE DAY:
More gold is found at prospective mine at the end of planned West Susitna access road
Tim Bradner, The Frontiersman, February 22, 2022
The Australian mining company exploring gold prospects in a remote area of the western Matanuska Susitna Borough has discovered almost 10 million ounces of gold in two separate deposits.
If a mine is ultimately developed it would be an economic anchor for a 100-mile industrial road planned to be built to the area, the West Susitna Access Project.
Tolls paid by the mining company will pay for the road, which is being developed by the Alaska Industrial Development and Export Authority, the state development corporation.
NovaMinerals Ltd. reported in early February that it is now working on a plan for a “starter pit,’ an initial mining area, at the RPM deposit, one of two major prospects being explored.
The second prospect, Korbel, is north of RPM and in a north-south corridor of about 35 miles.
Both prospects are west of Skwentna and about 130 miles northwest of Anchorage. The “Whiskey Bravo” airstrip is near the project area and is used for support for an all-year camp.
The prospects are also near the route of a proposed natural gas pipeline that could be built to the proposed Donlin Gold mine is near the NovaGold prospects, which means that natural gas could be used to generate power.
The area is highly mineralized, NovaMinerals said, with 21 identified gold deposits.
Most of the 9.6 million ounces discovered are what minerals geologists called “inferred,” meaning that the gold is known to be there, but more exploration is needed to confirm it.
However, 3 mlllion ounces are in what geologist’s label as the “indicated,” category, meaning more test drilling has been done to confirm the resources.
The three million ounces of indicated gold are at the RPL deposit at the southern end of the prospect area where NovaMinerals is planning its initial mining pit. The larger accumulation is in the Korbel deposit.
NovaMinerals said it will be publishing updated resource estimate based on 2021 drilling, so the numbers will increase. In addition, another prospect has been discovered in the nearby “Stony” prospect, which is “poly-metallic” in containing several metals, in this case gold, silver and copper.
The company is also now planning a “slurry” pipeline from RPL to the larger Korbel deposit where NovaMinerals would build its ore processing plant. Unlike a pipeline built mainly to transport liquid, like crude oil, a slurry pipeline moves solids typically mixed with water.
AIDEA’s plan for the road is modeled in the authority’s project in the late 1980s to build port and road infrastructure for the Red Dog Mine, which is now the world’s largest zinc mine.
The investment in the road and port have long since been paid off, and the continuing tolls paid by the Red Dog operator, Teck Alaska, are a major source of profits for the state authority.
If built, the NovaMinerals mine would similarly be a major economic boost, adding to the Matanuska Susitna Borough tax base. The borough needs new industrial property to help spread the local tax burden, which is now borne mostly by residential homeowners.
The mine would also be a source of employment as well as new sales for businesses in the borough, much like Kinross Gold’s Fort Knox Mine near Fairbanks is a major employer and the largest taxpayers in the Fairbanks North Star Borough.
Frackers Push Into Once-Dead Shale Patches as Oil Nears $100 a Barrel
Collin Eaton, The Wall Street Journal, February 21, 2022
Oil producers drill in less-desirable areas like Anadarko Basin of Oklahoma and DJ Basin of Colorado, where activity virtually stopped during pandemic
Spurred by the highest oil prices in years, shale companies are moving drilling rigs back into oil fields that were all but abandoned a few years ago.
Private oil producers are leading an industry return to places like the Anadarko Basin of Oklahoma and the DJ Basin in Colorado, where drilling had almost completely stopped in mid-2020 when those areas became unprofitable because of lower oil prices.
Oil production in these marginal regions isn’t expected to move the needle in the global market, which is facing tight supplies, but it could help some oil producers who have lost money in past years. Output in the contiguous U.S. by year-end is expected to increase almost solely from the Permian Basin of West Texas and New Mexico, offset by declines elsewhere, according to energy consultant Wood Mackenzie.
Some of the largest shale companies told investors this past week they plan to remain disciplined on capital spending and limit production growth. But with oil climbing above $90 a barrel, near the highest levels in more than seven years, some peripheral drilling, particularly by smaller companies, is now becoming more feasible even in places like Kansas and Utah, where wells produce far less oil than prolific fields in Texas and New Mexico. The regional revivals show the economic ripple effects when prices surge and mark a turnaround for companies hard-hit by the pandemic.
Brent, the global oil benchmark, rose to $95.39 a barrel Monday, up almost 2%.
Charter Oak Production Co. is planning to bring one drilling rig back to the Anadarko Basin this month and contract a larger rig to work there until late 2022, in hopes of doubling or tripling its output from about 1,000 barrels a day. Though oil-field costs have climbed sharply amid new activity and inflation, Charter founder Joe Brevetti said the clock is ticking for his drilling plans because, at some point, high commodity prices will dent demand and lead to lower prices.
Germany halts Nord Stream 2 certification over Russia’s actions
Zachary Basu, Axios, February 22, 2022
German Chancellor Olaf Scholz announced Tuesday that the certification process for the Nord Stream 2 pipeline will be halted, saying that “the situation has fundamentally changed” after the Kremlin ordered troops into eastern Ukraine.
Why it matters: It’s a stunning turn of events for the $10 billion, Russia-to-Germany natural gas pipeline, which Scholz had long resisted naming as a potential sanctions target if Russia invaded Ukraine.
Between the lines: Ukraine views the Putin-backed project as an existential threat to its security, as it would deprive the country of billions of dollars in gas-transit fees and allow Russia to deliver gas directly to the heart of Europe.
- The U.S. has long held the position that Nord Stream 2 is a malign Kremlin geopolitical influence project that would increase Europe’s reliance on Russian gas, but President Biden allowed construction to proceed last year in order to repair relations with Germany.
- Germany’s economy is highly reliant on Russian gas, which had raised questions about Berlin’s willingness to stand up to Moscow with the harsh sanctions that the U.S. and other European allies had promised.
What they’re saying: “I welcome Germany’s move to suspend the certification of Nord Stream 2. This is a morally, politically, and practically correct step in the current circumstances. True leadership means tough decisions in difficult times. Germany’s move proves just that,” Ukraine’s foreign minister tweeted.
The big picture: Russian President Vladimir Putin announced Monday that he would recognize two pro-Russian separatist “republics” in eastern Ukraine and ordered Russian “peacekeepers” into the territory where Kremlin proxies have been waging a rebellion against the Ukrainian government since 2014.
- The move drew widespread international condemnation, but questions arose over whether it would trigger the “massive” sanctions that the U.S. and its allies had pledged in response to a full-scale invasion.
- Biden said at a press conference with Scholz earlier this month that “there will no longer be a Nord Stream 2” if Russian troops cross Ukraine’s border, but the German chancellor declined to affirmatively make that commitment.
- A senior U.S. official also hesitated on Monday night to characterize Putin’s actions as a “new step,” noting that Russian forces had been in eastern Ukraine covertly for the past eight years.
What to watch: The U.S., U.K. and European Union have said more sanctions are forthcoming. But halting Nord Stream 2 as an initial step is by far the toughest action the West has taken against Russia thus far.
China signals coal reliance to continue with three new mines
Bloomberg/Mining.Com, February 21, 2022
China’s top planning agency approved three different billion-dollar coal mine projects on Monday as the country continues to support the fuel that much of the rest of the world is shunning.
The National Development and Reform Commission gave the go ahead to two mines in the northwestern province of Shaanxi and another in Inner Mongolia. The three projects will require a total investment of 24.1 billion yuan ($3.8 billion) and produce 19 million tons of coal a year.
The approvals follow a massive surge in mine activity late last year as China boosted production to record levels after fears of an energy shortage sent prices skyrocketing. Each of the projects plans to rely on bank financing for about 70% of the capital involved, a sharp difference from most of the rest of the world where lenders have promised to stop funding new coal mines.
China has ambitious long-term climate goals and world-leading renewable energy industries, but its leaders have placed top priority on energy security and have vowed to continue supporting coal, which still generates about 60% of the country’s electricity. While benchmark coal futures in the country have fallen by more than half from an all-time peak in October, they’re still 40% higher than they were a year ago.
Washington state lawmakers advance tax on fuel shipped to Alaska, prompting an Alaska legislator to propose countermeasures
Iris Samuels, Anchorage Daily News, February 22, 2022
An Alaska lawmaker is proposing retaliatory taxes on fish and oil exported from Alaska to Washington State after Washington lawmakers unveiled a plan to levy a 6-cent-per-gallon tax on fuel refined in Washington and exported to neighboring states.
“Frankly, I’m tired of being thought of as a Washington colony,” Rep. Kevin McCabe, R-Big Lake, said on the House floor last week. “I’m tired of them depending on us and taxing us for their needs and ignoring ours.”
McCabe said in an interview on Friday that he is proposing two bills to counteract the Washington measure. The bills are expected to be formally introduced in the House on Tuesday. One measure would create a six-cents-per-pound tax on fish exports and a six-cent-per-foot mooring fee for any vessels that anchor or moor in Alaska harbors. Alaskans could apply for a tax credit.
Another measure would impose a $15-per-barrel surcharge on Alaska crude oil going to refineries in Washington.
The Washington fuel export tax is part of a 16-year transportation plan unveiled earlier this month. The tax is expected to raise $2 billion over the course of 16 years from fuel exported to states including Alaska, Oregon, and Idaho. That money will then be spent on Washington projects including hybrid electric ferry construction and high-speed rail.
Washington lawmakers say the tax makes up for the environmental impacts of the fuel refined in the state.
“This is really related to being fair with respect to climate impacts,” Rep. Jake Fey, D-Tacoma, Chair of the Washington House Transportation Committee, has said in a press conference. “In terms of fairness, I think it’s only appropriate since we produce the fuels for (other states’) use that they support our climate activities and our overall activities in the package.”
The Washington bill has already passed the state Senate and is expected to be considered by the House this week. If the bill is signed into law, the tax measure will take effect in February 2023.
Much of Alaska’s oil is refined outside of the state and transported back to Alaska by barge. Many rural communities rely on diesel electric generators for power, and Alaska ranks second only to Hawaii in the share of its electricity —16% in 2020— generated from petroleum, according to the U.S. Energy Information Administration.
Villages require millions of gallons of fuel per year to meet their electricity needs. Alaska consumed 39 million barrels of petroleum in 2019.
McCabe said the Washington proposal may violate the commerce clause in the U.S. Constitution, which prohibits states from passing legislation that excessively burdens interstate commerce.
“We know that it’s a violation of the commerce clause. I mean, anybody that has read a little bit of the Constitution understands that. But apparently the Washington lawmakers don’t,” said McCabe.
But Washington lawmakers point to several other states that levy a tax on fuel exported to other states, including Texas, Florida, and Tennessee.
Oregon Gov. Kate Brown, a Democrat, and Idaho Gov. Brad Little, a Republican, also publicly vented their frustrations over the measure.
Brown wrote on Twitter that she spoke directly with Inslee, saying that “Washington taking unilateral action to increase gas prices for Oregon families and businesses is unacceptable.”
Little wrote in a letter to Inslee that the Washington Legislature “is venturing into new, uncertain territory” and called on Inslee to veto the legislation if it reaches his desk.
This is not the first time Alaska lawmakers have proposed a retaliatory tax in response to Washington tax proposal. In 2009, Alaska lawmakers proposed imposing a $16 a barrel surcharge on North Slope crude destined for Washington state in response to a Washington bill that would tax fuel that’s refined in Washington and exported to other states, including Alaska. After Alaska lawmakers proposed the retaliatory tax in 2009, the Washington proposal failed to pass.
“Washington State tried this before and we had the same exact response,” McCabe said. But he added that it’s hard to say if the measures he is proposing will have the same effect this year.
Republican Gov. Mike Dunleavy called out the measure, writing on Twitter that Washington’s “view of Alaska as a colony is reflected on a tax on all of us.” Dunleavy asked Alaska residents to call the office of Democratic Washington Gov. Jay Inslee to voice their concern.
When contacted Monday, Dunleavy spokesman Jeff Turner declined to say whether the governor would support the retaliatory taxes proposed by McCabe but said Dunleavy “certainly support efforts to defeat the proposed fuel tax.”
The push for a domestic mineral supply chain in the U.S.
Ben Geman, Axios, February 22, 2022
The White House announced new moves Tuesday morning aimed at bolstering U.S. development and processing of key minerals used in electric cars and other energy applications.
Why it matters: Demand for materials like lithium, cobalt, rare earth minerals and more is slated to soar in coming years and decades, and the U.S. is dependent on China and other nations for raw materials.
Driving the news: The White House is touting a mix of new federal aid and private sector efforts, including…
- The Defense Department is providing MP Materials $35 million to process rare earth elements from its mining site in Mountain Pass, California. The company will announce a $700 million investment in its magnet supply chain, a White House summary states.
- Berkshire Hathaway Energy Renewables plans to break ground on a demonstration project in Imperial County, California, to test sustainable lithium extraction from geothermal brine. The region includes the Salton Sea, where California Gov. Gavin Newsom hopes to enable lithium development.
- Federal agencies are also taking steps to emphasize critical minerals more broadly, such as Defense, Energy and State Department coordination on stockpiling.
Yes, but: “Even as he works to boost U.S. minerals production, the president has blocked several proposed U.S. mines,” Reuters reports.