Today’s Key Takeaways: Oil and gas permits approved under Biden at their lowest number. AGDC Board Chair highlights prudent process progressing pipeline. New whitepaper about strengthening U.S. mineral security – proposes a three-part framework to help the government get on track. Manchin says “no” to anti- fossil fuel fed nominee.
NEWS OF THE DAY:
Drilling permits spiked then plunged under Biden
Heather Richards, Energywire, March 14, 2022
The number of oil and gas permits approved by the Bureau of Land Management for drilling on public lands declined to its lowest number under the Biden administration in January.
Although the Biden administration last year approved more permits to drill oil and gas wells on public lands than the Trump administration in its first year, Interior Department data shows approvals have been more modest for months.
In fact, the Bureau of Land Management in January approved just 95 permits for oil and natural gas wells across federal lands in the United States, an 85 percent drop from a zenith of 643 issued last April, according to a review of permitting data by E&E News.
Many environmental groups have been frustrated with the rapid pace of approvals, which carved into the number of backlogged permits President Biden inherited by nearly 1,000 by year’s end, seeing it as a betrayal of Biden’s pledges to confront climate change.
But the output from BLM offices in states like New Mexico and Wyoming has gradually declined, and overall permit approvals have dropped after particularly high outputs in the spring and early summer of last year, according to the data.
Last month, permit approvals rallied from their January bottom to 186. But that was still the fourth lowest number of monthly approvals since Biden took office.
Melissa Schwartz, a spokesperson for the Interior Department, which oversees BLM, defended the agency’s efficiency, arguing that the amount of time it takes to approve federal wells has fallen by half over the last decade.
“The BLM continues to process applications for permit to drill in a timely manner,” she said in an email.
Schwartz also noted that the oil and gas industry holds significant drilling rights already. Many of the drilling permits held by industry — and 60 percent of the acreage leased to oil producers — sits unused, she said.
The Biden administration’s policies about oil and gas development on public lands and the industry’s war chest of existing oil and gas leases have become key talking points as energy prices have climbed in recent months. Both have come into sharper focus in recent weeks, as Russia’s invasion of Ukraine drove prices further up.
Just last week President Biden urged oil and gas companies to ramp up drilling to increase American energy production and hopefully help contain pump prices. He chastised companies for not doing so already and argued that nothing stands in their way on federal lands, the one segment of the U.S. oil and gas sector where the president has some influence.
“The oil and gas industry has millions of acres leased … they could be drilling right now, yesterday, last week, last year,” Biden said last week. “They are not using them for production now. That’s their decision.”
For its part, industry has not leapt to expand drilling.
The major public oil and gas companies that drive much of the United States’ activity are holding themselves back with uncharacteristically miserly capital expense plans, returning cash to investors instead of drilling new wells. Officials with some companies say they are also facing bottlenecks for equipment, rigs, and labor.
When it comes to public lands and waters, though, oil and gas companies have accused the White House of not truly supporting their industry and aiming to curb production.
Ryan McConnaughey, spokesperson for the Petroleum Association of Wyoming, said the Biden administration has a “playbook” for federal development: “delay, distract and deflect.”
“It doesn’t come as much of a surprise that the Biden Administration’s approval of APDs [applications for permit to drill] has plummeted,” he said.
Kathleen Sgamma, president of the Western Energy Alliance, said the political focus on the drilling permits and leases already held by industry is a red herring from the White House.
“Just because Acme O&G isn’t using a permit right away doesn’t mean that ABC O&G doesn’t need one for a well it’s planning to drill now,” she said. “If the federal permitting situation weren’t so inefficient and fraught with political interference, companies wouldn’t need to request a large inventory even years in advance.”
If the White House wants drilling to increase, they could ease regulatory requirements and speed up permitting, she said.
The permitting showdown is the latest of many disagreements over the federal oil program under Biden. When Biden came into office last year, he paused oil and gas leasing on federal lands and last fall published a report criticizing the program as antiquated and deferential to industry.
The leasing moratorium was overturned by a federal judge, but leasing has been slow to resume — and bogged down in continued legal wrangling. The outlook for new leasing in 2022 remains in limbo as Interior has said it will be difficult to move forward after a Louisiana federal judge blocked the use of an interim climate metric.
Meanwhile, Interior is developing regulations on oil and gas that will increase royalty rates and bonding requirements on federal leases, as well as impose new methane rules.
But the administration has also taken heat from environmental groups for focusing on these regulatory reforms rather than aggressively working to retire the oil and gas program.
Fossil fuels developed on federal lands, including coal, are responsible for as much as a quarter of the country’s downstream carbon dioxide emissions, according to the U.S. Geological Survey, a statistic that’s underscored criticism of continued drilling from environmental groups and climate activists.
Aaron Weiss, deputy director of the environmental group Center for Western Priorities, said the Biden administration has continued to “rubber stamp” drilling approvals.
“Even under Biden, 96 percent are getting approved versus 98 percent under Trump,” he said.
Weiss downplayed the impact of the permitting slowdown on industry, arguing that the number of permits issued doesn’t have an immediate correlation to industry’s ability to drill and that companies frequently allow permits to expire without being used. His organization counted 8,000 permits that oil companies had not used or had allowed to forfeit between 2016 and 2021.
“A slight dip in approvals makes no difference at all because APDs and available leases have never been a bottleneck,” he said.
With oil and gas companies exercising “fiscal discipline” to please investors, that’s even more the case, he said.
ConocoPhillips launches website tracking gas leak
Elizabeth Harball, Alaska’s Energy Desk, March 12, 2022
ConocoPhillips Alaska has launched a website to keep the public and stakeholders apprised of the ongoing natural gas leak at a North Slope drill site eight miles from the village of Nuiqsut.
“This site has been established to provide our stakeholders with the latest information on our response to the subsurface natural gas release at the CD1 pad near the Alpine Central Facility on Alaska’s North Slope,” the company said in a statement topping the website, www.alpineresponse.com.
ConocoPhillips reported that the leak was first detected March 4 at 3:30 a.m. as a “release of natural gas.” At that time, the company said it notified the Alaska Oil and Gas Conservation Commission and brought an emergency response crew on site.
OPINION: Following a prudent process gets Alaska closer to a gas line than ever before
Warren Christian, Anchorage Daily News, March 13, 2022
I’ve been in the oil field and construction business in Alaska since the early 1980s and I’ve worked on every Alaska gas line concept that’s been studied, from Denali to the Alaska Standalone Pipeline, to the current Alaska LNG Project.
I’ve also been on the Alaska Gasline Development Corp. board of directors since 2016, when I was appointed by former Gov. Bill Walker, and based on more than 30 years of experience, I can say without reservation that we are closer than we have ever been to monetizing our long-stranded natural gas on the North Slope.
When Gov. Mike Dunleavy took office in 2018, the Alaska LNG Project did not have its federal permits, its cost of supply was uneconomic, we had nothing to sell, and AGDC was running out of funds after taking over the project from the North Slope producers in 2017.
The state has an unfortunately long history of spending hundreds of millions on large projects and then having nothing to show for the money. This is the path we were on with the state in the lead of the largest infrastructure project in North America.
Having spent more than $250 million of state funds advancing the project and with the state running at a $1.6 billion deficit, it was projected in early 2019 that AGDC wouldn’t have enough money to finish the FERC permitting process.
We certainly didn’t have the money to pursue the full front-end engineering and design process, which was estimated to cost $1.2 billion or more.
At the urging of Gov. Dunleavy, BP and ExxonMobil stepped up with $10 million each, along with their technical expertise, to review costs and assist AGDC in completing the permitting process.
Under Gov. Dunleavy’s administration, AGDC received all of the federal permits for Alaska LNG, including the favorable FERC record of decision, and optimized the project design. We have export permits for both free trade and non-free trade countries, and have driven down the project cost to where it is now competitive with Gulf exports.
Not only that, AGDC commissioned a study that established Alaska LNG’s dramatic environmental benefits which reduce global carbon emissions that are the equivalent of replacing 19 coal-fired power plants, or taking nearly 17 million cars off the road.
In sum, we now have a project that private sector developers are keenly interested in and LNG customers who continue to see the benefits of LNG from Alaska. The crisis in Ukraine has expanded the world’s need for reliable LNG to meet allied needs. This week at the nation’s premier energy conference, CERA Week in Houston, attendees were buzzing with interest in natural gas. Market forces will drive this project and Alaska is primed to turn our opportunity into a reality, providing critical energy for decades.
Once we have economically viable, well-capitalized investors and developers who are willing to build the project, we can then credibly pursue customers with deals based on real numbers.
AGDC leadership has maintained an ongoing dialogue with U.S. allies on the Pacific Rim who are prospective Alaska LNG customers. AGDC shares regular project updates to keep nurturing the relationships that will be required for commercial success.
Buyers need certainty in cost of supply. Developers need certainty that producers are willing to sell gas into the project. These are the deliberate, prudent steps known as the “stage-gate” process that was favored by the North Slope producers who know far more about how to complete a mega project on the scale of Alaska LNG than we do. These pieces are coming into alignment right now.
This is the approach AGDC has taken since Gov. Dunleavy took office, and it is the one we as a board will continue to pursue.
Warren Christian of North Pole is the chair of the Alaska Gasline Development Corp. board of directors. He was appointed to the board in 2016.
From the Washington Examiner, Daily on Energy:
NEW WHITE PAPER ON STRENGTHENING US MINERAL SECURITY: A new white paper released this morning by right-of-center environmental group ConservAmerica examines the shortage of critical minerals supply in the U.S. and proposes a three-part framework to help the government reverse what it describes as “one of the nation’s most persistent and pervasive national security and economic challenges.”
“We appreciate the administration’s recognition that federal policy is key to solving America’s deepening dependence on foreign countries, particularly China, for minerals essential to our economy. China will not and has not been playing the slow game. We cannot afford to either. Our vulnerability in this area is largely a problem of our own making,” ConservAmerica President Jeff Kupfer said. Read the report in full here.
Manchin says he can’t support Biden’s Fed nominee Sarah Bloom Raskin
Jacob Knutson, Neil Irwin, Axios, March 14, 2022
Sen. Joe Manchin (D-W.Va) said Monday he can’t support Sarah Bloom Raskin, President Biden’s nominee for the Federal Reserve’s vice chair of supervision.
Why it matters: Without Manchin’s support, Raskin’s confirmation is thrown into doubt. She wanted financial regulators to better understand climate change-related risks to the financial system and possibly incentivize more spending away from fossil fuels.
What they’re saying: “Now more than ever, the United States must have policy leaders and economic experts who are focused on the most pressing issues facing the American people and our nation – specifically rising inflation and energy cost,” Manchin said in a statement.
- “I have carefully reviewed Sarah Bloom Raskin’s qualifications and previous public statements. Her previous public statements have failed to satisfactorily address my concerns about the critical importance of financing an all-of-the-above energy policy to meet our nation’s critical energy needs,” he added.
Our thought bubble: Manchin is reminding his party — and his president — that he’s not done wielding his veto pen, per Axios’ Hans Nichols.
- First he took out Neera Tanden to lead the Office of Management and Budget, and then he killed the president’s signature domestic agenda. Now he’s forcing Biden back to the drawing board on how he’s going to regulate big banks.
The big picture: Raskin had argued in the past that financial regulators should use their powers to try to constrain the flow of capital to the fossil fuel sector, attracting the ire of the oil and gas industries and their allies on Capitol Hill.
- She also served on the board of a financial technology company, Reserve Trust, that obtained a “master account” with the Federal Reserve, giving it a competitive edge over rivals.
- Raskin told the Senate Banking Committee she did not recall making a phone call to a former Fed colleague to help obtain the account, a claim Republicans found disingenuous.