Today’s Key Takeaways: DOI using “sue and settle” to suspend oil and gas leases. Manchin turns to oil CEOs for support of permitting reform bill. More natural gas rigs operating in U.S. than before pandemic. Kinross provides more detail on ore hauling plan. Patagonia pretends to support green cause while avoiding huge tax bill.
NEWS OF THE DAY:
Biden Freezes Oil and Gas Leases
The Wall Street Journal Editorial Board, September 14, 2022
Calling Joe Manchin: Interior uses ‘sue and settle’ to suspend Trump-era approvals.
Joe Manchin’s deal with Democratic Senate leader Chuck Schumer isn’t looking so good for the West Virginian, and the latest evidence is a Biden Administration settlement with green groups that stops previously approved oil and gas leases.
The Interior Department last week agreed to conduct additional climate reviews for five federal oil and gas lease sales held in 2019 and 2020 that were challenged by environmental groups. Activists claimed the Trump Administration didn’t sufficiently study the climate impact of the leases under the National Environmental Policy Act (NEPA).
Rather than defend the earlier environmental reviews, the Biden Administration surrendered to their progressive friends. According to last week’s legal settlement, the climate reviews will incorporate the “social cost” of greenhouse gas emissions that could result from the leases. This takes into account indirect global costs of emissions such as property damage from natural disasters, risk of conflict over resources, reduced agricultural productivity from drought, and more.
By including the social cost in the NEPA reviews, the Administration will be able to claim the leases have a significant negative environmental impact even when they don’t and then seek to cancel them. Alternatively, the Administration could try to force oil and gas producers to mitigate their emissions by helping fund its climate agenda.
While the settlement doesn’t outright cancel the leases, it will effectively freeze their development. Interior has agreed not to approve new drilling permits or rights-of-way on the leases until it completes the climate reviews. Even after those reviews are done and if Interior allows development, green groups will still be able to challenge the reviews and leases afresh in court.
In sum, oil and gas producers that bought leases years ago and have invested in developing them will be in limbo for months or years. The settlement also may render toothless a provision in the Manchin-Schumer bill that prohibits Interior from granting rights-of-way for solar and wind projects on federal land unless the government has offered oil-and-gas leases during the prior four months. Nor can it issue offshore wind leases unless an offshore oil-and-gas sale has been held in the past year.
While the Biden Administration may still hold oil and gas lease sales, they could be challenged in court. Then the Administration could agree to suspend them in a legal settlement and go ahead with new solar or wind leases. Obama-era regulators often used such collusive settlements with greens to circumvent Congress. Biden officials are taking this “sue and settle” strategy to a new level by unwinding their predecessors’ approvals.
During Mr. Biden’s first 19 months, the government has leased a mere 126,228 acres for oil-and-gas production, the least under any President since at least World War II. Mr. Manchin promised his constituents that his deal with the White House and Chuck Schumer would change that. Watch what the Biden Administration does, not what Mr. Manchin says.
OIL:
Manchin enlisting oil CEOs to get GOP support for permitting bill
Ari Natter, World Oil.Com, September 14, 2022
Democratic Senator Joe Manchin is enlisting the help of energy-industry executives to marshal Republican support for his plan to speed up the process of getting federal approvals for energy projects, according to people familiar with the matter.
The outreach, which has included companies in the mining, utilities, and oil-and-gas industry, underscores the fraught political path for his permitting-overhaul bill. Passing the legislation would mark a big win for the industry and its long-sought efforts to accelerate permitting and scale back environmental reviews that can take years.
Among projects that could benefit is a stalled $6.6 billion Mountain Valley natural gas pipeline — which would help to unlock more supplies of the fuel from the Marcellus shale. Reform could also expedite the approval of new clean energy projects spurred by the climate package enacted last month.
Manchin has said privately he thinks he needs more than 10 Republicans in the Senate to support the measure, which is still being drafted, the people said. He is also concerned that a separate GOP permitting-reform bill, introduced Monday by his Republican West Virginia colleague Senator Shelley Moore Capito, and backed by 38 of her GOP colleagues, could strip needed Republican support for his version, according to the people. Manchin’s office didn’t immediately respond to a request for comment.
Manchin is set to address chief executive officers at the Washington-based Business Roundtable’s quarterly meeting later this week, one person said.
The legislation is slated for inclusion in a must-pass government funding bill, as part of a deal that Manchin and the Democratic leadership made in exchange for his pivotal vote last month for President Joe Biden’s slimmed-down economic and climate agenda.
If passed, the legislation is expected to deliver speedier approval for Equitrans Midstream Corp.’s Mountain Valley gas pipeline, which runs from West Virginia to Virginia.
It could also make changes to bedrock environmental laws, by putting two-year time limits on project reviews and limiting the power of states in Clean Water Act approvals.
While the changes align with many long-held energy-industry priorities, it’s faced opposition from some senior Republicans who are angry that Democrats jammed a massive climate spending bill through the Senate on party lines with Manchin’s support. Others have been lukewarm to the package out of concern it won’t make the more sweeping reforms they feel are needed.
Progressive Democrats have also voiced opposition to the package, which has enraged environmentalists who see it as a betrayal.
Senator Bernie Sanders said last week he’d vote against the stopgap government-funding bill if Democratic leaders added the permitting plan, and more than 70 Democratic lawmakers wrote to House leadership in opposition to the package, hinting they’d be willing to shut down the government over it.
House Majority Leader Steny Hoyer said he is waiting to see the final text of the Manchin measures before drumming up votes for the overall legislation.
“We will have to convince our members if it is included,” Hoyer said in an interview with Bloomberg Television. He added that the plan is for the Senate to vote first on a bill combining stopgap funding and the permits measure, then send it to the House.
For its part, the White House continues to support the agreement made with Manchin, which enabled “the biggest step forward ever on climate,” according to Press Secretary Karine Jean-Pierre.
“We support that deal and that vote, and we will work with Congress to determine the best pathway forward” Jean-Pierre said Monday when asked about threats to sink the government-funding bill.
GAS:
More natural gas rigs are now operating in the United States than before the pandemic
U.S. Energy Information Administration, September 15, 2022
U.S. natural gas producers are operating more drilling rigs now than at the beginning of the COVID-19 pandemic in early 2020. Before the pandemic, the number of operating rigs in the United States had generally been declining. On January 31, 2020—when the U.S. Department of Health and Human Services first declared a public health emergency related to COVID-19—the Baker Hughes Company reported that 112 natural gas rigs were operating in the United States. The number of natural gas-directed rigs continued to fall in the first half of 2020, reaching a low of 68 rigs on July 24, 2020, the fewest in Baker Hughes’s historical data, dating back to 1987. Since then, the natural gas rig count has generally been increasing, returning to pre-pandemic levels in January 2022. On September 9, Baker Hughes reported that 166 natural gas rigs were operating in the United States, 54 more than at the outset of the pandemic in the United States.
MINING:
Kinross, highway advocacy group testify on ore hauling plan
Jack Barnwell, Fairbanks Daily News Miner, September 15, 2022
Kinross Alaska selected the Fairbanks-based trucking company Black Gold Express as its ore hauler for the Manh Choh gold mine project in Tetlin, which will start operations in mid-2024, according to Anna Atchison, the company’s external communications director.
Atchison announced the decision Monday at a Fairbanks City Council work session, saying Black Gold Express was selected “following an extensive search.”
The trucking company, Atchison said, formed a new division called Black Gold Transport, “for the sole purpose of safely moving rock on Alaska’s highways.”
“We chose Black Gold because we share values, including safety and a commitment to doing things right,” Atchison said. “The company has a sterling safety record, and we are beyond delighted to partner with a local company that focuses on hiring local people and has so many years of driving in Alaska’s extreme weather.”
The company operates in the Interior and on the North Slope, she added.
Updates to the trucking plan
The work session served to hear information from both Kinross and the advocacy group Advocates for Safe Alaska Highways (ASAH), who oppose the mining company’s plan to haul ore on the state’s highways for up to five years once mining starts.
The council postponed a resolution opposing the haul plan, citing a need to hear more information from the Alaska Department of Transportation, Tetlin residents and Alaska Native organizations.
Kinross plans to haul the ore using custom-built 95-foot-long tractors pulling two side-dump trailers. The original estimate was up to 96 trips per day, with an average of around 60 trips per day, according to Tyler Bruce, the Manh Choh project’s transportation coordinator — in other words, a truck heading direction every 10 to 15 minutes.
Truck traffic will increase by about 10%, Bruce said.
Bruce said Kinross will use a route that includes Peger Road but will be looking at a possible bypass at Squeak Gulch and “are in full engineering mode to see how to make that route possible.” He added it’s still an exploratory option at the moment.
“We would not be doing this if we did not think we could do it safely,” Bruce said. He added that drivers hired will be required to have experience driving tandem trailer trucks in Alaska, on top of additional training.
To combat driver fatigue, schedules will be broken down into route segments between Tetlin and Fort Knox.
“What we know is that no one can leave Manh Choh, go all the way to Fort Knox and back in one shift,” Bruce said. Around the clock dispatch and vehicle cabin cameras will also be utilized.
Atchison and Bruce noted the hauling option remains the only economically feasible option; building an onsite mill in Tetlin would cost millions in permitting and construction fees.
The Manh Choh mine, Atchison added, will create hundreds of new jobs in both Fairbanks and Southeast Fairbanks Census Area, open up new economic opportunities for the Native Village of Tetlin and inject millions more dollars into the regional economy.
Continued opposition
Gary Wilken, a Fairbanks resident, and former state senator, spoke on behalf of ASAH and continued to voice opposition to the ore hauling plan while reiterating that the organization “isn’t against mining.”
Wilken said the “silence by the developer has been deafening and frustrating,” adding that Monday’s announcement was the first time the group heard about the trucking contractor.
“This haul plan is as enormous as it is unprecedented,” Wilken said.
Wilken said ASAH’s concerns revolve chiefly around safety, in addition to the impact the increased heavy traffic would have on the Interior’s public roads.
Wilken said safety issues include about 180 bus stops along the proposed route, though Bruce said Kinross continues to engage with school districts. Then there are military convoys in the winter months and RVs in the summer.
He added that the transportation plan sets a new standard, as Kinross Alaska plans to explore a 300-mile radius for future mining projects.
Atchison, during her testimony, didn’t discount exploratory efforts.
“We’re miners, it’s what we do, but this is not Fort Knox, nor will it ever be,” she said.
Another concern was the potential impact the increased traffic will have on air quality in the borough’s non-attainment area. Bruce said additional trucks would contribute to less than 0.25% increase in PM2.5 levels, though Wilken added it would be unhealthy to have so many trucks and vehicles idling at a stop light.
Council deliberations, public testimony
Several local residents spoke up during public comments, both in opposition to and in support of the transportation plan.
Some said allowing the increased number of trucks would compete with or deter tourism — or that the project should remain in Tetlin. Residents supporting Kinross said a resolution just sends the wrong message or promotes an anti-business sentiment.
Jomo Stewart, president of the Fairbanks Economic Development Corp., said the council should delay any vote until a DOT-initiated independent corridor analysis concludes.
“To have the best information available when considering this resolution, you should await the results of that enterprise,” Stewart said.
Stewart added he has his personal concerns about increased truck traffic but added that “as we look at strategic opportunities, this could be very good for our community in the future if we could get to a yes.”
“I would encourage the parties to take a step back and see if they can work together more fruitfully,” Stewart said.
The council, during its regular meeting, agreed to postpone the opposition resolution with a motion from its sponsor Valerie Therrien. Therrien expressed a desire to hear additional information from the Department of Transportation, Tetlin officials and Alaska Native groups.
Councilmember Jerry Cleworth agreed about needing additional conversation.
“This isn’t a black and white issue … I think we need to be fully educated before we make a final decision,” he said. “There is a lot of good that could come from his project, but also a lot of concerns.”
POLITICS:
PATAGONIA OWNERSHIP TRANSFER TO GIVE REVENUES TO GREEN CAUSE: Patagonia, the $3 billion outdoor clothing and accessory company, is being “reimagined” into an environmental financier.
Owner Yvon Chouinard announced in a post on the company site that ownership will be transferred to a public trust and a nonprofit group, where earnings will be used for environmental activism.
“Instead of extracting value from nature and transforming it into wealth for investors, we’ll use the wealth Patagonia creates to protect the source of all wealth,” Chouinard said in the post, which was headlined, “Earth is now our only shareholder.”
Stock will be distributed to Patagonia Purpose Trust and the Holdfast Collective, a 501(c)(4) nonprofit group.
Daniel Hemel, a professor of tax law at NYU, noted that the transaction is allowing the Choinards to avoid paying capital gains taxes as well as gift taxes – which would normally be $1.2 billion on a $3 billion gift, he wrote on Twitter.
In a recent similar maneuver, Barry Seid donated his $1.6 billion Chicago electrical device manufacturing company Tripp Lite to a 501(c)(4) controlled by prominent conservative activist Leonard Leo.
“By making almost exactly the same move as Seid, the Chouinards are reducing their gift tax liability by >98% & avoiding income tax on any capital gains/dividends from Patagonia that flow into the (c)(4),” Hemel wrote.
In comparison: The roughly $100 million a year in profits that will now be available to the Holdfast Collective, per a New York Times report, could make it instantly one of the largest nonprofit political entities, which are commonly referred to as “dark money” because they do not have the same disclosure requirements as political parties.
For comparison, the largest GOP-aligned political nonprofit, spent $196 million in 2020, according to a New York Times analysis.
From the Washington Examiner Daily on Energy