Today’s Key Takeaways: Santos proceeds with $2.6 billion investment in Alaska- more oil, more jobs, more state revenue. FERC approves Marathon’s (Trans Foreland Pipeline unit) request for an extension on their Kenai LNG import project. Biden’s freeze on public land leases reinstated – for now. Mineral sourcing requirements lead to messy roll-out of EV credits. Peltola leads U.S. House race – Palin may win with Ranked Choice Voting.
NEWS OF THE DAY:
Santos Investing $2.6Bn In Pikka Oil Project In Alaska
Bojan Lepic, Rigzone, August 17, 2022
Australian oil and gas major Santos has made a final investment decision (FID) to proceed with the $2.6 billion Pikka Phase 1 oil project on the Alaskan North Slope.
Pikka Phase 1 is expected to produce 80,000 barrels a day of oil gross with first oil anticipated in 2026. The project has strong fundamentals and is in a world-class oil-producing province with significant existing infrastructure, has low unabated emissions intensity, and is supported by key stakeholders, including the State of Alaska, the North Slope Borough, the landowner company Kuukpik Corporation and the Arctic Slope Regional Corporation.
Taking FID on Pikka Phase 1 is consistent with Santos’ goal of achieving net-zero by 2040. Santos said that it was committed to delivering a net-zero project and has entered into a Memorandums of Understanding with Alaska Native Corporations to deliver carbon offset projects.
As such, Pikka Phase 1 represents one of the lowest-cost and lowest unabated emissions intensity new oil projects in the region. It is worth noting that Santos has a 51 percent interest and is the operator of Pikka while Repsol holds the remaining interest.
Santos is focused on local procurement and local employment as part of the project, with 98 percent of current employees living in Alaska. Phase 1 of the project is expected to create more than 500 jobs and the construction of the project will deliver approximately 2,600 jobs.
The Pikka Phase 1 project represents compelling value for Santos’ shareholders given its robust economics and strong local stakeholder support.
Santos Managing Director and Chief Executive Officer Kevin Gallagher said Pikka Phase 1 is the right project at the right time in the right location.
“Global oil and gas markets are seeing increased volatility and countries are looking to diversify their supply sources away from Russia, which according to the International Energy Agency, currently produces 18 percent of the world’s gas and 12 percent of its oil.”
“Low-carbon oil projects like Pikka Phase 1 respond to new demand for OECD supply and are critical for global and United States energy security, that has been highlighted since the Russian invasion of Ukraine.”
“Santos has emission reduction plans to achieve scope 1 and 2 net-zero emissions by 2040 and in line with that commitment, Pikka will be a net-zero project. The project will add further diversification to our portfolio and reduces geographic concentration risk. Pikka Phase 1 will execute a responsible development plan with a small surface footprint and utilize existing infrastructure, including the Kuparuk transportation pipeline and the Trans-Alaska pipeline system.”
“We have a world-class team with a rich history of successfully carrying out work on the North Slope. With approximately 90 percent of project spend within North America minimizing supply chain risk and civils work already completed, the project is well positioned for execution,” Gallagher said.
OIL:
Biden’s Freeze on Oil, Gas Leases on Public Land Is Reinstated — for Now
Laurel Brubaker Calkins, Jennifer A Dlouhy, Reuters, August 17, 2022
President Joe Biden won temporary permission to once again pause energy leasing on federal lands and waters, after a US appeals court found a trial judge’s order against the moratorium too vague to review.
The court on Wednesday threw out the judge’s nationwide injunction forcing a restart of the leasing from the Gulf of Mexico to Alaska and ordered the judge to revisit the issue. In the meantime, Biden’s pause stands.
It isn’t clear what immediate effect the ruling will have. Under the just-enacted Inflation Reduction Act, which provides hundreds of billions of dollars to fight climate change, the Interior Department is required to hold two auctions of oil and gas leases in the Gulf of Mexico.
The law also makes future renewable energy projects on federal lands and waters contingent on the leasing. The government can issue new wind and solar rights only if it has recently sold new drilling rights too — a requirement designed to spur more fossil fuel leasing despite Biden’s campaign pledge to stop permitting such projects on public lands.
The ruling came in a dispute between the administration and 13 energy-producing states that sued to force Biden to resume the leasing he paused a week after taking office. After the lower court last year issued its preliminary injunction against the leasing moratorium, the government appealed.
“We cannot reach the merits of the government’s challenge when we cannot ascertain from the record what conduct — an unwritten agency policy, a written policy outside the executive order, or the executive order itself — is enjoined,” the appeals court wrote.
Representatives of the Interior Department and the office of Texas Attorney General Ken Paxton didn’t immediately respond to a request for comment on Wednesday’s ruling.
The case is Louisiana v. Biden, 21-30505, 5th US Circuit Court of Appeals (New Orleans).
GAS:
Marathon gets more time to build LNG import project in Alaska
Reuters, August 16, 2022
Marathon Petroleum Corp’s Trans-Foreland Pipeline Co unit received more time to convert the Kenai liquefied natural gas (LNG) export plant in Alaska into an import terminal, U.S. energy regulators said on Tuesday.
The U.S. Federal Energy Regulatory Commission (FERC) approved Trans-Foreland’s request for an extension to complete the project until December 2025.
FERC first approved Trans-Foreland’s request to build the plant in December 2020 and gave the company until December 2022 to place it into service.
Trans-Foreland said it has yet to make a final investment decision (FID) to build the project because the COVID-19 pandemic and the war in Ukraine have worsened economic and logistical conditions.
“Uncertainty and volatility in the global LNG market have made it difficult for Trans-Foreland to secure a suitable supply arrangement that would provide the financial certainty necessary for the project,” Trans-Foreland said in an earlier filing.
Trans-Foreland, however, said the project “remains commercially viable.” The company said it “is actively seeking suitable supplies and monitoring LNG markets.”
Once Trans-Foreland makes commercial arrangements for suitable supply, the company said it anticipates making its FID and moving forward with the project.
Trans-Foreland has said the facility would import up to four tanker loads of LNG per year and use its boil-off gas management system to deliver imported gas to the adjacent Kenai refinery.
The Kenai LNG export plant entered service in 1969. It has not exported LNG since 2015.
The plant was the only big LNG export facility in North America until Cheniere Energy Inc’s Sabine Pass export terminal in Louisiana entered service in February 2016. Nearly all of the LNG from Kenai went to Japan.
MINING:
From the Washington Examiner, Daily on Energy:
ADMINISTRATION SCRAMBLES TO GET READY FOR EV CREDITS: The Biden administration is trying to get out ahead of what’s expected to be a messy start to the rollout of the new electric vehicle tax credit.
Some foreign-assembled vehicles (such as Kia and Hyundai models) that were eligible for the credit as it stood yesterday, before President Joe Biden signed the Inflation Reduction Act into law, are no longer eligible as of today.
The Biden administration introduced a new frequently asked questions webpage laying out the most immediate changes to the credit. It is also directing buyers to the Department of Transportation’s vehicle identification number tool, which allows them to find manufacturing information, including location of assembly, to double-check a model’s eligibility before making the purchase.
The Department of Energy also just published its own list of eligible 2022 and 2023 EVs, based on its most up-to-date manufacture information: 21 models are immediately eligible, while another 10 Tesla and GM models will be once the existing cap lifts on Jan. 1.
But the list is going to be fluid. A Treasury Department official emphasized yesterday that it provides “a general sense” of what vehicles are eligible as of this summer.
Other things that will change: How purchasers can actually receive the credit will also change. For now, they’ll have to wait until they file their next tax return, but starting in 2024, it will be made available at the point of sale to reduce the purchase prices.
When the novel battery component sourcing requirements start to take effect in 2024, purchasers will also have to negotiate new eligibility requirements.
The assembly requirement and materials qualifications will be challenging for some automakers, who jumped at the chance to lock in contracts before the new rules take place.
“This next three months will be confusing,” said Jesse Jenkins, a professor of engineering at Princeton University. He expects 2023 to be better for some leading automakers, especially Tesla and GM, whose models will be eligible again after the 200k-unit cap is lifted.
“Where things get tricky again then is in ‘24 and ‘25,” he said, referring to the battery and mineral sourcing requirements.
POLITICS:
Democratic candidate Peltola leads U.S. House race early, but Palin may win in final count
James Brooks, Alaska Beacon, August 17, 2022
Democratic candidate Mary Peltola left election day leading Alaska’s special election for U.S. House, but the state’s new ranked choice voting system may leave Republican candidate and former governor Sarah Palin the ultimate winner.
As of 2 a.m. Wednesday morning, with 323 of 402 precincts reporting, Peltola had earned 38.4% of first-choice vote in a race that will determine who fills Alaska’s lone U.S. House seat until January, completing the term left unfinished by the death of Congressman Don Young earlier this year.
Trailing Peltola, with 32.6% of first-choice votes, was Palin. Republican candidate Nick Begich III was in third with 29% of first-choice votes.
Many ballots remain to be counted, and some can arrive as late as Aug. 31 and still be added to the total.
Under Alaska’s new ranked choice election system, the candidate in third place on Aug. 31, the last date for ballots to arrive from overseas, will be eliminated.
Voters were given a chance to select a second choice, and anyone who had the eliminated candidate as their first choice will have their votes go to their second choice instead.
The winner is the candidate with the most votes after that process.
Before the initial results were announced, Peltola said she felt good.
“We’ve reached out to 80,000 Alaskans over the last few days — Republicans, nonpartisan, Democrat — and we’re getting very positive feedback about the positive campaign that we’ve run and staying on message and keeping it on what Alaskans want and Alaskans’ needs,” she said Tuesday night.
But if Begich stays in third, political commentators have said they expect many of his voters may have Palin, a fellow Republican, as their second choice. If that’s the case — which won’t be known until the 31st — Palin will win.
The alternatives are leaving their second choice blank, picking a write-in or picking Peltola herself. If enough Begich voters have picked those alternatives, Peltola will win.
During her campaign for House, Palin denounced the ranked choice voting system, which was installed by voters in a 2020 ballot measure. Now, she’s likely to be its first beneficiary.
Pam Purvis, voting at Rogers Park Elementary School in Anchorage, said she picked Mary Peltola first and wants to see her in Congress as soon as possible.
“For four months, let’s make history,” she said, referring to the fact that, if elected, Peltola would be the first Alaska Native member of Congress.
She said Palin was her least favorite of the candidates, behind Tara Sweeney, a Republican who missed the cutoff for Tuesday’s special general election.
“I think Alaska deserves better,” Purvis said.
Brooke Cusack, who held signs for both Palin and U.S. Senate candidate Kelly Tshibaka at an Anchorage street corner, said, “I’ve always trusted Sarah and I think that she would lead us a great way in Congress. It’s a choice I didn’t see coming, but I fully support it. I also support Nick as well,” she said.
She does not like ranked choice voting and declined to say if she used that option.
Peltola said she’s hopeful that many conservative and Republican voters will have ranked her second.
“I’ve been asking people directly – like I was at the Fairbanks Golden Days parade and when I’d see somebody with a sign either Sarah or Nick, I’d ask them, ‘Hey, would you consider me as your second-choice vote?’” she said. “And it was very favorable, the reactions that I got: a lot of laughter, a lot of thumbs up, a lot of positivity.”
Turnout was the highest for a primary election since at least 2014. With 80% of precincts reporting and thousands of absentee ballots still outstanding, turnout was at 26% of registered voters. (Turnout in 2014, boosted by a referendum on an oil tax proposal, hit 39%)
Top four primary adds Sweeney to general election options
In addition to Tuesday’s special U.S. House race, voters were asked to vote in the primary election that will pick four candidates for Nov. 8’s general U.S. House election.
The winner of that vote will serve in Congress for a full two-year term.
As of Tuesday night, Peltola, Palin and Begich were running in first, second and third, followed by Sweeney, who missed the cutoff for the special U.S. House election.
With 323 of 402 precincts reporting, Peltola had 35.1% of the vote, followed by Palin at 31.4%, Begich at 27% and Sweeney at 3.6%.
Anton McParland, Peltola’s campaign manager, said her campaign doesn’t plan to let down its energy while it waits for results on the 31st. Instead, it’ll be turning its attention to the Nov. 8 general election.
“That part of the campaign is going to continue for the next two weeks while we wait, because we’re just going to keep it up for the general,” he said.
Sweeney, who joined supporters to wave signs on an Anchorage streetcorner, said, “I’m really focused on the general election and the longer-term seat,” she said. “My goal has always been to get into the top four in either election. And my focus now is on the general.”