NEWS OF THE DAY:
Interior Department postpones Haaland’s Alaska trip
Becky Bohrer, Associated Press, September 8, 2021
The Interior Department has postponed Secretary Deb Haaland’s planned visit to Alaska until later this year, a department spokesperson said.
Melissa Schwartz, in a statement Wednesday, said the decision was made out of “an abundance of caution given rising COVID rates and in consultation with Alaska Native, local and federal leaders.”
The Alaska health department shows most of the state is under high alert status, which is based on reported COVID-19 cases in the past seven days.
Schwartz previously said Haaland had planned to travel to Alaska, including the community of King Cove, in mid-September to meet with local officials, Alaska Native leaders and others.
King Cove is at the center of a dispute over a proposed land exchange aimed at building a road through a national wildlife refuge in Alaska. King Cove residents have long sought a land connection through Izembek National Wildlife Refuge to Cold Bay, which has an all-weather airport. Supporters of the effort see it as a life and safety issue.
In 2013, Interior Department officials declined a land exchange. Under the Trump administration, efforts to move forward with a land exchange faced legal challenges, including an ongoing case.
A Justice Department attorney last month told a federal appeals court panel that Haaland planned to review the record and visit King Cove before making a decision on what position she would take.
Schwartz, in her statement, called the Alaska visit “critically important to the Secretary and to the mission of the Department, and the kind of robust community engagement desired would not be possible given health and safety concerns throughout the regions.”
OIL:
World’s largest economies are surpassing pre-Covid oil demand
Oil & Gas 360, September 9, 2021
Some of the world’s biggest economies are seeing oil consumption turn the corner and even surpass pre-pandemic levels as falling Covid-19 infection rates drive a recovery in activity.
Oil demand in China, the world’s top energy consumer, will be 13% higher next quarter than in the same period in 2019 before the pandemic, according to SIA Energy. Indian fuel sales extended a rebound last month, while American consumption of petroleum products just hit a record high. Europe has also just had its best August for gasoline demand in 10 years, IHS Markit said.
The improvement in consumption across major economies is buoying oil prices that have rallied around 40% this year. Against this backdrop, the OPEC+ alliance decided to keep restoring crude supply earlier this month, citing tighter balances into year-end.
“The worst for Asian fuel demand is over and we see a soft recovery of oil demand in the coming months,” said Sengyick Tee, an analyst at Beijing-based SIA. China’s overall oil consumption will be led by a more than 20% jump in gasoline use next quarter from 2019, he said.
While motor fuel is powering the recovery as people take to the roads after months of lockdown, the situation for other oil products isn’t as positive. Jet fuel consumption is still languishing because of the lack of international air travel. Indian diesel use is down due seasonal factors, although SIA Energy sees demand for the fuel in China rising 4% next quarter from 2019.
Trucking and construction activities typically decline in India from June to September because of the monsoon. That weighs on demand for diesel, the country’s most popular fuel, before it rises again toward the end of the year amid crop harvesting and festivals.
“Sales volume of petrol has already crossed pre-Covid levels, with diesel likely to reach there in the next two to three months” said Shrikant Madhav Vaidya, chairman of Indian Oil Corp., the country’s biggest refiner.
Refining Ramp-Up
Indian processors will have “limited upside potential” for run rate increases this month as they struggle to cope with excess diesel that’s been produced from the process of making gasoline, said Senthil Kumaran, head of South Asia oil at industry consultant FGE. A turning point may come around October, with runs potentially rising above 5 million barrels a day by year-end, he said.
Chinese run rates have inched up with state-owned Sinopec refining the most crude in 11 months in August, data from local consultancy SCI99 show. However, activity at private refiners in Shandong province is only just over 70% amid a government-led clampdown on the sector.
Still, with some of Asia’s largest economies reporting tens of thousands of virus infections per day, some threats to energy demand remain even as the region races to vaccinate its people.
“Resurgence risk is a concern that we have built into our outlook, particularly for populous countries such as India and Indonesia,” said Qiaoling Chen, an analyst at energy consultancy firm Wood Mackenzie Ltd. “For now, the worst for Asia oil demand is over, but the downside risks remain.”
GAS:
California natural gas prices hit highest since Texas crisis
Sergio Chapa, Naureen S. Malik, Bloomberg, September 9, 2021
California’s record heat is sending natural gas prices in the region to the highest since February as electricity demand surges at a time when supplies needed by power plants have been tight.
Spot prices for natural gas sold on the SoCal City Gate trading hub jumped more than 60% on Wednesday. Gas sold on the hub was trading in the low US$20 range, after settling at US$13.519 per million British thermal units on Tuesday, traders told Bloomberg. The last time the hub saw US$20 gas was during a February freeze in Texas that simultaneously cut supplies and caused a spike in demand, sending prices soaring across the country.
Demand for air conditioning is surging under oppressive temperatures in much of southern California, with part of the Lower Colorado River Valley under an excessive heat warning and thermometers expected to climb to as high as 110 degrees Fahrenheit (43 Celsius). Meanwhile, Kinder Morgan’s El Paso Natural Gas Pipeline, a key supplier to the market, has only been able to deliver limited supplies following a deadly explosion along one of the Houston-based company’s transmission pipelines in Arizona.
That means spot power on the grid managed by California Independent System Operator, or CAISO, could hit the state’s US$1,000 price cap, after getting close to that level on Tuesday, said Charlotte Caldwell, a research analyst with the global firm Wood Mackenzie.
“I think US$1,000 prices are definitely a possibility,” Caldwell said.
With the heat wave expected through the end of the week, high gas and power prices could persist into Thursday and potentially Friday before demand drops off over the weekend. CAISO has warned that power supplies may be tight this week.
The state grid operator has asked consumers to conserve energy and owners of transmission lines and power plants to restrict maintenance on Wednesday and Thursday.
Severe drought across the West has slashed hydropower generation while a battery storage project owned by Vistra Corp. experienced heat-related problems, boosting demand for natural gas-fired power generation this summer.
MINING:
Judge deals blow to Obama fossil fuel royalty rule
James Marshall, Pamela King, ENERGYWIRE, September 9, 2021
A federal judge yesterday struck down Obama-era regulations on royalty valuations for coal mined from public lands but kept parts of the rule related to oil and gas payments.
The 2016 rule by the Interior Department’s Office of Natural Resources Revenue aimed to rein in mining companies’ practice of selling coal at a discounted rate to their own subsidiaries, deflating the royalty fees owed to taxpayers for developing publicly owned fossil fuels.
The rule placed the royalty valuation on the first “arm’s length” sale of coal, or when the mining company sells it to an unaffiliated organization.
Sometimes companies or cooperatives both produce the coal and sell it to an affiliate that burns it at a power plant — meaning arm’s-length transactions don’t exist.
In those cases, the Obama rule proposed basing the value of the coal on the sale of electricity. Chief Judge Scott Skavdahl of the U.S. District Court for the District of Wyoming disagreed with that methodology.
“Trying to value coal based on the sale of electricity is akin to valuing wheat based on the sale of a cake; there may be a relationship between the two, but it is weak and several other factors potentially play a much larger role in determining the sales price of the end product,” Skavdahl wrote in his opinion yesterday.
Parts of the rule dealing with ONRR’s method for valuing oil and gas, however, were “sufficiently supported,” Skavdahl wrote.
The judge, an Obama appointee, upheld the oil and gas provisions of the 2016 rule, including the discontinuation of a “Deep Water Policy” that defined the movement of oil and gas from the seafloor to an offshore platform as deductible “transportation,” instead of nondeductible “gathering” when calculating royalty fees.
“ONRR explained why it decided it was better to cancel the Deep Water Policy,” Skavdahl wrote. “ONRR concluded the policy has largely served its original purpose of incentivizing deepwater leasing and development.”
Ashley Burke, spokesperson for the National Mining Association industry group, applauded the decision. “Returning to the pre-2016 rule valuation restores much-needed clarity and business certainty,” she said in an email.
Lawyers for environmental groups involved in the litigation were not immediately available for comment. Interior did not respond to a request for comment.
The Obama-era valuation rule has been the subject of litigation since it was finalized in 2016. But lawsuits challenging the initial rule were voluntarily dismissed after the Trump administration gutted the regulation.
In 2019, the U.S. District Court for the Northern District of California struck down the Trump-era repeal on the grounds that ONRR had violated the Administrative Procedure Act, which governs federal rulemaking. Oil, gas and coal companies and energy-rich states quickly revived their challenges to the Obama rule.
The Trump administration went on to propose its own fossil fuel royalty valuation rule. But President Biden’s Interior axed the measure in June (Greenwire, June 10).
POLITICS :
Biden taps D.C. utility regulator Phillips for FERC
Catherine Morehouse, Politico, September 9, 2021
President Joe Biden said on Thursday he would nominate Washington, D.C., utility regulator Willie Phillips to the Federal Energy Regulatory Commission, a move that could boost Chair Richard Glick’s efforts to speed deployment of renewable energy, fight climate change and addressenvironmental threats to low-income areas and communities of color.
If confirmed by the Senate, Phillips, who has been on the D.C. Public Service Commission since 2014 and served aschair since 2018, would give Democrats a 3-2 majority on FERC as thecommission takes a fresh look at some of its most consequential decisions on greenhouse gas emissions,environmental justice, and efforts to ease the rollout of wind and solar power.
Phillips would replace Republican Neil Chatterjee, a former staffer for Senate Minority Leader Mitch McConnell who had increasingly advocated for policies that lowered market barriers to renewable energy during his four-year stint at FERC. But he often stuck with Republicans at FERC in approving fossil fuel infrastructure, even in cases where Democrats felt a more thorough analysis was needed to determine how the emissions from such projects could contribute to climate change.
Environmental groups have long accused FERCof “rubber-stamping” newgas pipelines and other fossil fuel infrastructure projects, although Glick and fellow Democratic Commissioner Allison Clements have sought to examine both the climate effects and the consumer need for such projects. A third Democrat could give Glick and Clements a critical swing vote as the commission revisits its 1999 gas certification policy governing pipeline approvals, mulls the impact of recent court rulings, and weighs new projects.
Recent court decisions largely rejecting the commission’s current approach to gas projects have put the commission under greater scrutiny when it comes to environmental justice and climate change. AnAugust ruling from the D.C. Circuit ordered the commission to redo its permits for two LNG facilities to better account for climate and impacts on nearby communities, and a June decision found the commission had ignored evidence of self-dealing by a company that received an approval for a St. Louis pipeline.
Meanwhile, FERC began a proceeding in July intended to overhaul current transmission permitting and cost allocation policy, a process Glick hopes will lead to increased deployment of renewable energy. The commission will also soon consider proposals from grid operators under its landmark Order 2222 that has the potential to make it easier for distributed energy resources, such as rooftop solar, battery storage and electric vehicles, to be deployed more widely.
During a FERC technical conference in April, Phillips advocated for using electric school buses as a grid resource, as well asdemand response and energy efficiency to help make the grid cheaper. And he will likely join with Glick in changing the implementations of the controversial Minimum Offer Price Rule in power markets to ensure that theyalign with state clean energy goals. The MOPR, as created by then-chair Chatterjee in 2019, was intended to undermine state subsidies of clean energy in their capacity markets.
“I believe that we have an opportunity here,” Phillips said at the conference. “We have an opportunity that we should not miss to harmonize and align some of the state’s policies regarding clean energy.”
Phillips’ nomination had received support from the solar industry. In a July letter to the White House obtained by POLITICO, the Solar Energy Industries Association said the D.C. regulator would be an advocate for wholesale power market reforms that could accelerate the growth of the clean energy technology on the U.S. grid.
His selection comes despite a campaign by a coalition of hundreds of environmental groups for the White House to select a FERC candidate who is focused on environmental justice and climate change. The coalition expressed worries that Phillips has been too deferential to the utility industry during his time as a regulator and won’t fight for the public interest.
“It’s tone deaf to be … appointing people who have who have very close relationships with the fossil fuel industry and utilities,” said Jean Su, senior attorney, and director of the Energy Justice Program at the Center for Biological Diversity, who led the petition alongside environmental group WE ACT. “It’s completely anathema to what we need right now to address the climate emergency.”
If confirmed, Phillips would be first Black man to serve as a commissioner in 40 years.He has drawnsupport from the Black Economic Alliance, the Joint Center for Political and Economic Studies and the American Association of Blacks in Energy.
Phillips is a board member for the National Association of Regulatory Utility Commissioners, a trade association for state regulators, and was a lawyer for the North American Electric Regulatory Corp. prior to joining the PSC. He began his career as deputy press secretary for former Trump Attorney General and Alabama Sen. Jeff Sessions from 2000 to 2002 and spent six months interning in the Office of General Counsel for President George W. Bush while attending Howard Law School. He worked at several law firms before joining NERC.
His nomination will now head to the Senate Energy and Natural Resources Committee for consideration.
CLIMATE CHANGE :
From the Washington Examiner, Daily on Energy:
INDUSTRY CLAIMS SUCCESS: The oil and gas industry is touting voluntary efforts of companies to cut emissions of methane and declaring progress on reducing flaring as the EPA gets set to issue new regulations for the potent greenhouse gas.
The American Petroleum Institute released its third progress report today on a voluntary program it started with 26 oil and gas companies in 2017 called the Environmental Partnership, which it created to limit leaks of methane and reduce emissions of related pollutants called volatile organic compounds.
The report showed how the partnership, which has grown to more than 90 members, including large and small operators in every major U.S. oil and gas basin, has implemented a methane leak detection and repair program. Not all companies participating in the partnership are API members.
Participating companies conducted more 430,000 leak surveys in 2020 across more than 85,000 production sites, reporting a “leak occurrence rate” of 0.04%, or less than 1 leak in 2,000 components.
The leak rate is lower than the 0.08% the partnership reported the year before.
API also announced the results of a new component of the program launched last year encouraging companies to curb flaring, the practice of intentionally burning natural gas, which has become a significant contributor to greenhouse gas emissions.
Participants in the partnership’s flare management program reported a 50% reduction in flare volumes from 2019 to 2020, even as oil and natural gas production remained consistent among participating companies.
These companies reduced the gas flare intensity of their operations from 3.04% in 2019 to 1.49% in 2020.
Fewer companies participated in this portion of the program (only 34), owing to challenges of smaller operators implementing it, according to Matthew Todd, director of the Environmental Partnership.
What about regulations? API’s CEO Mike Sommers, in a press call this morning, touted the “strong results” of the flaring program and said the industry’s efforts to limit methane leaks represent “incredible progress.”
Sommers reiterated that API supports “cost-effective” regulation of methane from the EPA, which he said would “build on the progress” the industry is already making, while continuing to push back on Democrats’ proposed methane fee — a policy he called “a tax on American energy production.”
EPA Administrator Michael Regan recently said methane regulations his agency plans to issue this month on new and existing oil and gas sources would be “something that’s never been done as aggressively as we plan to do it.”
A coalition of 72 environmental and public health groups sent a letter to Regan today asking him to impose tough rules that apply to smaller production wells that are responsible for an outsized share of methane emissions. The groups also urge EPA to require the use of zero-emitting pneumatic devices to curb emissions and to mandate the end of gas flaring all together.
Sommers said API is encouraging companies to stop routine flaring by a specific date and hopes EPA “will take into account new technologies and best practices” implemented in its voluntary program as the agency rolls out new regulations.