Oil Shrugging off Omicron. Is Gas Green? Healthy Ecosystem in Alaska seas.

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Today’s Key Takeaways:  Dunleavy moves to finish what Parnell started. Omicron effects on oil demand are below “mild.”  America’s rare earth vulnerability from a geopolitical perspective. Research cruise in the Bering & Chukchi finds variety of marine mammals, sea ice growth in real-time and evidence of a healthy ecosystem despite warmer water temperatures from the summer.


Dunleavy requests state funding so Alaska can take over wetlands permitting from feds
Elwood Brehmer, Alaska Journal of Commerce, January 5, 2022

Gov. Mike Dunleavy wants the state of Alaska to revisit the idea of taking over one of the most complex and contentious development authorizations in the country.

The governor included just more than $4.9 million in his 2023 fiscal year state budget proposal for the Department of Environmental Conservation to start work toward taking over Clean Water Act Section 404 permitting for development in wetlands and other water bodies with federal jurisdiction. Section 404 permitting, as it is often known, is currently administered by the U.S. Army Corps of Engineers, and overseen by the Environmental Protection Agency across the vast majority of the country.

Development-minded state officials have long insisted the national standards for wetlands impact avoidance and mitigation are too onerous in Alaska, which is more than 40% wetlands and contains more wetlands than all other states combined. More specifically, development advocates argue federal standards for compensatory mitigation widely used in the Lower 48 — restoring, enhancing, or preserving wetlands likely to be developed — aren’t practical in Alaska given the relative lack of damaged and at-risk wetlands in the state.

EPA leaders in the Trump administration urged Army Corps officials to develop Alaska-specific mitigation standards as a means to give permit reviewers more flexibility in approving wetlands mitigation plans for projects in the state.

Dunleavy noted during his budget rollout briefing that the state taking primacy of Section 404 permits doesn’t mean any federal standards or requirements will be waived and the EPA will retain oversight. But he claimed Alaska is the best in the nation at hitting permitting deadlines and said his administration is confident it can run the program “more efficiently” than the federal government.

Environmental impact statement reviews are often spurred by the need for a Section 404 wetlands permit, and for large development projects they typically take several years to complete.

“This will allow this (Section 404) permitting process to be under the umbrella of the state, which we believe will have better outcomes,” Dunleavy said.

To date, just three states have taken on wetlands permitting from the federal government: Michigan, New Jersey, and Florida.

Dunleavy spokesman Jeff Turner wrote in response to follow-up questions that state primacy over Section 404 permitting will produce faster decisions on permits that could make development projects more feasible. That should ultimately mean more job growth and improved revenue to the state, according to Turner.

Army Corps of Engineers Alaska District officials rejected the proposed Pebble mine’s development plan in November 2020 based on their belief the large project would have significant impacts on the aquatic ecosystem of the Bristol Bay region and could not meet Clean Water Act Section 404 mitigation standards. The Dunleavy administration attempted to appeal the corps’ decision last year on Pebble’s behalf before corps officials ruled the state lacked jurisdiction to do so.

Alaska most recently investigated taking over Section 404 permitting in 2013 under Republican Gov. Sean Parnell, when lawmakers passed a bill authorizing the state to pursue the program and providing $1.5 million to do it. However, the funding was cut the following year as the state’s financial situation worsened.

This time, the $4.9 million requested from the state’s general fund would cover 28 new full-time positions in the Department of Environmental Conservation to staff the state’s 404 program. An additional four positions would need to be added in 2024 to fully implement the program, according to an Office of Management and Budget report.

DEC officials say the Legislature’s 2013 Section 404 program approval is sufficient for today, so no additional legislation is needed beyond the budget request. They also acknowledge the plan is aggressive but hope to have the program implemented in fiscal year 2024.

While the plan is to fund it with general fund money to start, the state could shift to an applicant fee-for-service model similar to what is used by the corps or a hybrid of the two, DEC spokeswoman Laura Achee wrote via email.

Brian Litmans, legal director for the Anchorage-based environmental law firm Trustees for Alaska, said he believes the effort will prove too costly once again. Trustees attorneys regularly challenge permit approvals for development projects in court.

“It’s an incredibly expensive program to administer,” Litmans said. “As a result, there are only three states that have primacy over the program.”

He added that he would have concerns with the adequacy of the Section 404 permits if the state does take over given the volume of work it entails.

“Ensuring that each project that is looking to get authorization to fill wetlands — there’s quite a bit that goes into showing that they comply with the Clean Water Act’s requirements, and the Army Corps of Engineers has always been running the program and is familiar with what is required. It is asking quite a bit of the state of Alaska,” Litmans said. “There’s no indication right now the state is able to take on a program of this size and nature.”


Crude oil is shrugging off Omicron
Ben Geman, Axios, January 5, 2022

The OPEC+ decision Tuesday to press ahead with another production boost next month signals confidence that spreading COVID-19 cases won’t become a huge drag on demand.

Catch up fast: The coalition of OPEC, Russia, and allied producers, as expected, stuck with plans to continue the monthly increases of 400,000 barrels per day.

The big picture: “The additional supply is a signal … that there is continued cohesion within the producer group that oil demand will continue to grow despite the recent Omicron variant causing some restrictions,” Third Bridge analyst Peter McNally said in a note.

Zoom in: Barclays’ Amarpreet Singh said the demand effects of Omicron are below even the “mild” scenario, one of three they modeled.

  • “The mild scenario assumed that the high level of protection against severe outcomes would be largely preserved, which has been the case so far,” Singh writes.
  • The note predicts a full-year demand hit of around 100,000-200,000 barrels per day, concentrated mostly in Q1.
  • In addition, prices are boosted by other forces tightening the market, with unplanned outages in Libya and disruptions and operational problems in Nigeria, he writes.

Go deeper … Biggest recovery winner: energy prices


A question embroils Europe: Is gas green?
Sara Schonhardt, CLIMATEWIRE, January 5, 2022

A proposal by the European Commission to classify some natural gas and nuclear projects as green investments has become a flashpoint in the debate over reducing carbon emissions.

The move could reverberate into other countries as the European Union sets far-reaching standards for sustainable investment labels.

The green labeling system establishes a list, or taxonomy, of climate-friendly investments. Its purpose is to encourage private investments in activities aimed at decarbonizing the economy by providing transparency and preventing green washing.

It’s supposed to help countries meet their climate targets by ensuring money goes toward low-carbon investments. But environmental advocates say the plan by the European Commission circulated Dec. 31 doesn’t align with those objectives.

“Classifying fossil fuels and nuclear energy as green is an important precedent and sends signals to the market and other jurisdictions,” said Tsvetelina Kuzmanova, a sustainable finance policy adviser at E3G.

“On one hand, if it encourages such investments, this could hamper the deployment of capital for renewable sources, which was the purpose of the taxonomy to begin with. Similarly, with other countries developing their own taxonomies, this precedent is used as an excuse for their own weak criteria,” she added.

The proposal has sparked an uproar across Europe, highlighting divisions over nuclear energy between France, which supports it, and Germany, which doesn’t, and drawing threats from Austria to pursue legal action if the proposal goes unchanged.

Both nuclear and gas projects must meet certain conditions to be considered sustainable.

For example, countries must ensure that nuclear plants cause no significant harm to the environment. Gas projects must emit low levels of carbon dioxide and switch over to cleaner fuels by 2035. They would receive the green label temporarily as a “transitional” activity, meaning they would be green only if no better alternatives are available.

The taxonomy doesn’t tell anyone what they should or shouldn’t invest in, said Rebecca Vaughan, an analyst at InfluenceMap, a nonprofit think tank that produced a report on how industry lobbying was working to shape the E.U. taxonomy.

“It’s simply a piece of disclosure regulation that says that companies and investors need to disclose what proportion of their activities or products comply with the E.U.’s list of green activities,” she added.

The purpose is to avoid misleading investors and consumers. In a statement, the European Commission said it plans to introduce new disclosure requirements for companies and financial market participants.

The challenge, said Vaughan, is that while the gas exceptions in the E.U. proposal could potentially be narrow, it could have larger significance if other countries believe the European Union is labeling all gas as green.

‘Path out of gas’

The green labeling concept originated with green bond standards and led to the International Platform on Sustainable Finance, a forum aimed at creating regulatory measures that help investors put money toward sustainable projects.

The European Union launched the platform in 2019 alongside Argentina, Canada, Chile, China, India, Kenya, and Morocco. Ten countries or territories have since joined, accounting for more than half of the world’s greenhouse gas emissions.

Together, those members agreed to develop comparable definitions, disclosures, standards and labels for sustainable finance.

Already some countries are following Europe’s lead.

Take South Korea, which also released a statement on its green classifications last week that includes gas, but not nuclear, for a temporary period. It said the guideline was developed in comparison with international standards, such as those from the European Union.

Taxonomies are currently being developed in Canada, the United Kingdom and Indonesia, which is host to the Group of 20 summit this year.

That’s where specifics will matter.

The role of natural gas in the energy transition is sector- and location-specific, and that makes it difficult to speak about gas broadly, said Nikos Tsafos, who focuses on energy and geopolitics at the Center for Strategic and International Studies.

“The reality is that we know that for certain countries using more gas can reduce emissions. The real question is: Do you have a credible path out of gas at some point? That is what the E.U. has tried to square,” Tsafos said.

He worries that the green or non-green label tries to oversimplify gas.

“It is impossible to label gas as good or bad in a blanket statement that applies to the whole world,” Tsafos said.

“We have to get used to talking about gas in a much more nuanced way because it’s not like the other fuels present relatively clear yes-or-no characteristics.”

E.U. member states and the Platform on Sustainable Finance have until Jan. 12 to provide their input on the proposal. Once the European Commission adopts it, the European Parliament and Council have four months to respond.


America’s rare earth vulnerability deepens – CGTN
Azhar Azam, CGTN, January 4, 2022

Rare-earth elements (REEs), categorized as light and heavy subsets, are the necessary components of our everyday products. The critical minerals and materials have downstream applications in petroleum refineries, hard disk drives, TV and computer screens, wind turbines, electric vehicles (EVs), medical technologies as well as precision guided munitions and a range of military systems.

Over the next two decades, global demand for many rare-earth metals is projected to grow as the world moves to cut down carbon emissions. For example, international demand for lithium and graphite, key elements for EV batteries, is expected to surge by more than 4,000 percent and 2,500 percent in 2040, respectively. According to Reuters, around 70 percent of graphite used in lithium-ion batteries comes from China and it is the only country that can provide the quantity of graphite the U.S. industry needs.

The global trade of REEs is just over 1 percent of $1 trillion world oil trade, according to an article by ChinaPower under the Center for Strategic and International Studies, but the value of goods they generate could be assessed from Apple’s strong reliance of these metals to sell iPhones worth over $142 billion a year, or mere $613 million of the U.S. REE imports that unlock roughly $496 billion of economic activity in vital civilian sectors, such as petroleum refining, automotive, electro medical devices and aeronautical instruments.

According to a report by the official website of the Government of Canada, China is the world’s largest producer of 15 elements referred to as lanthanide series in the periodic table of elements alongside scandium and yttrium, accounting for 62 percent of global 213,000-tonne production. Even as the U.S. (12.2 percent), Myanmar (10.3 percent) and Australia (9.9 percent) produce these materials, Beijing is also the only producer of the valued heavy REEs used in high-technology and clean energy applications. 

Between 2008 and 2018, 42.3 percent of the REE exports came from Beijing. In 2019, about 87.8 percent of these supplies were exported to the world’s major economic and technological powerhouses, which shows how the developed countries greatly benefited from the low-cost Chinese REEs, according to ChinaPower. 

A document on the official website of the U.S. Geological Survey indicates that the U.S. became almost completely dependent on REE imports from China in late 1990s. Washington was particularly concerned about overreliance on Beijing for metals critical for defense applications, including jet fighter engines, missile guidance systems and electronic countermeasures. About 20 years on, the U.S. defense contractors still can’t find any alternative REE source to keep its F-35 aircraft airborne, according to ABC News. 

Reports by the United States International Trade Commission suggest that in 2019, America emerged as the top global exporter of REEs by volume in wake of its inability to process the materials, forcing Washington to export 100 percent of domestic production. In 2017, China became the world’s largest REE importer by volume as worldwide states continued to ship the newly mined materials to Beijing for processing.

Over the years, Washington has been increasingly dependent on Beijing for processed REEs. The reports also point out that having exported 98 percent of its unmined production to China in 2019, 75 percent of U.S.’s predominantly processed rare earth imports were from China. America also secured materials from Malaysia, Estonia, and Japan. These countries exported materials to the U.S. after importing semi-processed products from China. Estimated at 98 percent, America’s imports of processed supplies from Beijing reflect the former’s reliance on China and the latter’s crucial role in global REE processing.

The drive to end the U.S. economic and military dependence on Chinese REEs in 2017 emboldened then-President Donald Trump to issue an executive order, and the country’s Interior Department in 2018 added these elements to items deemed critical to the economic and national security. The Biden administration is doubling down on these efforts through its $2-trillion infrastructure bill; the push may stymie for it faces awkward challenges and China isn’t ruled out either.

In recent years, the U.S. Defense and Energy Departments gave a myriad of grants and contracts to Las-Vegas headquartered MP Materials to ramp up the domestic REE supply chain from mine to magnet and Australia’s Lynas to build a heavy REE facility in Texas. While heavy elements like dysprosium and terbium used in defense, technology and EVs are harder to find and their prices have risen by 50 percent in 2021, demand for light REEs such as neodymium and praseodymium has shot up with tech growth.

Washington’s new plan would run into difficulties as Chinese REE processing and refining firm, Shenghe Resources, owns a stake in MP and is one of the largest company’s customers. Through Shenghe, also a shareholder in the Australian Greenland Minerals, concentrate produced at the sole U.S. commercial Mountain Pass facility in California is distributed to refiners in Asia because the West simply lags behind in these capabilities.

As the journalist John Koetsier analyzed in his commentary for Forbes, the U.S. needs 10 times the amount of REEs to meet Biden’s ambitious goal of selling 50 percent zero-emission EVs by 2030 in addition to 20 to 25 times more to satisfy the ever-growing requirements of the green economy. These grandiose objectives can’t be achieved given Washington lacks an “apparatus” like that of Beijing and will rather consume another couple of decades.

An aggressive approach and fraying relations with China is doing an uncontrollable damage to the U.S. economic, industrial, and technological future. It won’t be wise on the part of Washington to expose its vulnerability to the world and waste the next twenty years in seeking “rare earth sovereignty.” Only a truce and cooperation between the two major economies across all domains can fix many of America’s predicaments including the REE nuisance and would allow the economic duo make progress on bilateral and global prosperity.


From the Washington Examiner, Daily on Energy:

AN AGENDA ON HOLD: Democrats’ Build Back Better Act has traveled a long way to get to nowhere, leaving President Joe Biden’s energy and climate agenda very much “up in the air” going into his second year.

After Democratic Sen. Joe Manchin made clear ahead of Christmas he wouldn’t support Biden’s social and green energy spending bill, the White House signaled that despite its displeasure, it would keep talking to Manchin — something he says isn’t happening.

“There’s no negotiations going on at this time,” Manchin told reporters yesterday, and he seemed to put a cap on any chance he would support a reconciliation bill at all.

“I think that for us to go it alone, no matter what side does it, ends up coming back at you pretty hard,” he said.

Yet liberal Democrats are still maintaining they’ll have to do things on their own, with Congressional Progressive Caucus Chairwoman Pramila Jayapal writing in a recent op-ed, “People of color, women and young people helped deliver the White House and Congress to Democrats, but their needs were consistently delayed in search of bipartisanship.”

Jayapal further urged Biden to use the executive pen to enact policies within the bill, and while he has been able to push through some energy and climate-related priorities via order, his actions would be no replacement for the legislation Democrats have treated as the heart of their agenda on climate change.

Just weeks ago, House Speaker Nancy Pelosi delivered a speech at COP26, the premise of which was the United States was making its contributions to climate change mitigation via Build Back Better, even as it was still being negotiated.

While Majority Leader Chuck Schumer is overseeing a shift in focus for the chamber, Manchin did give environmentalists and fellow Democrats supporting the bill some reason for hope, saying yesterday that “the climate thing is one that we probably can come to an agreement [on] much easier than anything else.”

But how Democrats could reasonably get there remains to be seen, with the vehicle for authorizing more funding in peril, reinforced by Manchin’s stated trepidation on reconciliation.


Research cruise gets rare chance to study Bering and Chukchi seas
Davis Hovey, KNOM, January 4, 2022

The final research cruise of 2021 in the Bering and Chukchi seas came through the region in November. Scientists on board observed a variety of marine mammals, saw sea ice growth in real-time and found evidence of a healthy ecosystem despite warmer water temperatures from the summer.

Seth Danielson, a professor with the University of Alaska Fairbanks College of Fisheries and Ocean Science, led the cruise as chief scientist. The first-time measurements were recorded from the Bering Strait in November was in 1960, according to Danielson.

“After 1960 there weren’t any other cruises that I’m aware of, in the month of November, until 2011. And that was a cruise that Karen Ashton led. Since Karen’s cruise in 2011, there have been a couple more that have gone north in November,” Danielson said. “A couple of them did manage to sample some stations on the shelf (of the Chukchi Sea), the way we did. They did that in pretty warm years.”

This cruise saw a much colder November in much of the Bering Strait and better sea ice conditions than in recent years.

Danielson presented his initial findings during a Strait Science presentation on Dec. 2 hosted by UAF’s Northwest campus. He was joined on board the Sikuliaq by many other researchers, including Catherine Berchok of the Alaska Fisheries Science Center Marine Mammal Lab.

“I was surprised by how few bowheads and how many gray whales and humpbacks there were out there,” Berchok said.

Alaska Sea Grant’s Gay Sheffield remarked that local observations from across the region supported Berchok’s assessment too.

Berchok was observing marine mammals from the bridge of the ship on a regular basis throughout the nine-day voyage. The research team headed north from Seward on Nov. 7 and stopped through Nome on their return around Nov. 16.

They witnessed roughly a 20% or more increase in sea ice extent while in the Chukchi Sea during their trip, according to Danielson.

“Why we ever got a situation like this where it’s near freezing at the surface and warm near the bottom (of the sea). And the only thing I can think of is that it was the advection, the currents carrying ice over this region. And so ice did not form in place, but it must have been carried in,” Danielson said.

Other scientists on board the Sikuliaq were taking measurements from the Bering and Chukchi Seas to study water temperature, salinity, and oxygen levels.

Southwest of St. Lawrence Island, there was a healthy amount of productivity for this late in the season happening in the Bering Sea ecosystem, according to Jackie Grebmeier, a researcher with the University of Maryland Center for Environmental Sciences.

“So there is still Chlorophyll,” Grebmeier said. “This is viable Chlorophyll on the bottom (of the seafloor) that can provide both food for consumption as well for microbial and carbon cycling. So it’s still going on into November although the values are about 50% less than what we have during the real productive times in July.”

Grebmeier, Danielson and other scientists from the Sikuliaq are still compiling their final observations. The research team will publish more formal findings sometime in the next couple of years.