NEWS OF THE DAY:
From the Washington Examiner, Daily on Energy:
NORWAY’S PM SAYS END TO DRILLING WOULD THWART GREEN TRANSITION: Jonas Store, the newly minted Norwegian prime minister, is warning against moving too aggressively to clip the nation’s oil and gas industry.
Store said in an interview published this morning that shutting down domestic drilling in the near term would threaten decarbonization goals, adding that the approach instead is “to develop and transit, not close down.”
A shutdown would “put a stop to an industrial transition that is needed to succeed in the momentum towards net zero,” he told the Financial Times.
Following Russia, Norway is the continent’s second largest provider of gas, and it is the largest producer of oil in western Europe.
OIL:
Alaska’s oil price over $85 a barrel, but industry watchers urge caution in the long term
Sean Maguire, KTUU, October 26, 2021
Alaska’s North Slope crude oil price has recently been at its highest level since October of 2014, a trend that could add hundreds of millions of dollars to the state treasury. But industry watchers are urging caution in the longer term.
For the past two weeks, North Slope crude has been hovering around $85 per barrel and tipped over $86 on Thursday. It was around those prices briefly in the fall of 2018, but it hasn’t been consistently at those levels for seven years.
Alexei Painter, head of the nonpartisan Legislative Finance Division, presented to a House of Representatives committee on Friday, showing how oil prices have averaging around $75 per barrel since the start of the fiscal year on July 1. His data shows that if oil prices stay high, the state could collect $500 million more in oil revenue over the fiscal year that starts next July than it projected in spring.
Over the fiscal year that ends on June 30, the state could see an additional $600 million in oil revenue than expected earlier.
Brad Keithley, managing director of Alaskans for Sustainable Budgets, said oil futures markets are the best way to predict which way prices are going as they show where big-money investors are putting their cash. He said that data shows this trend is transitory and a near-term phenomenon.
In the longer term, futures markets predict oil prices will drop below what the Alaska Department of Revenue forecast for the middle and end of the decade, Keithley said, meaning Alaska would be in a tougher spot for available revenue.
“You really have to look beyond that to understand the full situation,” Keithley said about recent high oil prices.
Larry Persily, a former deputy commissioner of the Department of Revenue, said these prices may be beneficial for state coffers, and tough for consumers, but they won’t help fix an unbalanced budget in the long term.
It relieves some of the pressure, the state doesn’t have to worry about checks bouncing as it would at $30-oil, but it doesn’t solve the fundamental problem that there’s not enough money to pay for all the services that people want plus a big dividend,” he added. “It’s a temporary respite which isn’t going to solve anything permanently.”
The state relies on Permanent Fund earnings to pay for over two-thirds of government spending and Alaska’s oil production has declined since peaking in the late 1980s. Oil prices are also highly volatile, Persily explained, and prices could drop for a number of reasons, including if U.S. shale oil production unexpectedly increases.
But the influx of unexpected revenue does pose questions for legislators who have been trying to end the Permanent Fund dividend debates. A bipartisan legislative working group called for a new 50-50 constitutional dividend formula, perhaps increasing to that figure over several years, and new revenues to pay for it and the budget.
There has been some committee work to discuss fiscal fixes following that framework during the ongoing fourth special session, but no progress in passing bills to make that plan a reality.
Higher oil prices make the fiscal picture look better, but Persily and Keithley say it increases the chances that lawmakers will delay making tough choices, like implementing new taxes, during next year’s regular legislative session that starts in January.
“There was already that risk because we’re in an election year next year, and they were looking for ways to kick the can down the road to avoid making a hard decision during an election year,” Keithley said. “But I think this will certainly add fuel to that fire.”
The Legislature will also have roughly $500 million in federal coronavirus funding to spend next year. When added with the anticipated extra oil revenue, lawmakers could be tempted to spend the next regular session discussing how to appropriate larger dividends or spend more in the annual budget.
“I think that’s what many legislators will be focused on doing,” Keithley said.
GAS:
EIA forecasts U.S. winter natural gas bills will be 30% higher than last winter
Energy Information Administration, October 25, 2021
In our latest Winter Fuels Outlook, we forecast that U.S. households that primarily use natural gas for space heating will spend an average of $746 on heating this winter (October–March), which is $172, or 30%, more than last year.
Natural gas is the primary heating fuel for 48% of U.S. homes, according to the U.S. Census Bureau’s 2019 American Community Survey. Residential spending on winter natural gas bills is largely determined by the retail price of natural gas and the amount of natural gas consumed.
Higher retail natural gas prices are the primary driver for the expected increase in natural gas heating expenditures this winter. On average, retail natural gas prices in the United States are expected to rise from $10.17 per thousand cubic feet (Mcf) last winter to $12.93/Mcf this winter, the highest price since the 2005–06 winter average. We expect the largest increase in retail natural gas prices to occur in the Midwest, where prices rise to $11.28/Mcf, a 45% increase compared with last winter.
The increase in retail prices reflects rising natural gas spot prices over the past year. Changes in natural gas spot prices typically get passed along to retail rates over a period of months because of regulatory rate structures. Utilities generally cannot profit or lose money from natural gas commodity sales, whose costs are passed along directly to the consumer.
In addition to the steady rise in natural gas spot prices over the past year, many utilities had to raise prices for consumers following the February 2021 cold snap that affected most of the country, but particularly Texas and the Midwest. During the cold snap, many utilities had to purchase natural gas at spot prices that were higher than anticipated. However, because retail rates were already set for the month, utilities did not collect enough to cover the cost of the natural gas. To make up for this under collection, many utilities opted to raise prices in subsequent months to spread out the costs to consumers over several months.
Higher-than-expected natural gas expenditures this winter also result from slightly higher-than-expected consumption compared with last year. For households that use natural gas as their primary space heating fuel, we expect average consumption this winter to be 57.7 Mcf, a 2.4% increase from last winter. The higher consumption is driven by a 2.6% forecast increase in the number of heating degree days (a measure of heating demand) compared with last winter. In our October Short-Term Energy Outlook (STEO), we estimate that U.S. natural gas inventories ended September at 3,304 Bcf, which is 5.5% below the five-year average for this time of year.
MINING:
Resource nationalism on the rise in top mining countries — report
Mining.Com, October 25, 2021
The last year has seen a rise in resource nationalism — or the risk of thereof —in an extensive and fast-rising number of countries, including top mining countries, market analyst Fitch Solutions finds in its latest industry report.
While resource nationalism had been relatively contained geographically speaking in the past to Sub Saharan Africa, and localised countries such as Indonesia, it is spreading across the world and is now noticeable in SSA (the DRC, Mali, Zimbabwe, South Africa, Guinea), Latin America (Mexico, Peru, Chile), North America (the US), Europe (Russia) and Asia (Indonesia, Mongolia), Fitch reports.
The analyst has long argued that resource nationalism in the mining sector was going to remain a key feature of the sector. In the wake of covid-19, Fitch raised the probability of a rise in resource nationalism on a global basis.
Over the past 12 months, resource nationalism in top mining players has flared up around the world, mostly in emerging markets. Fitch expects this trend to continue over the coming few years, as underlying drivers of resource nationalism and government intervention will remain in play.
Resource nationalism can take several forms, including renegotiation of existing mining contracts to get better terms (currently witnessed in the DRC and Mongolia), increase in taxes or royalties on the mining sector (Chile, Peru, Russia), asset nationalization (forced equity transfers) or the threat of (Zambia, Mexico, Zimbabwe), in- country beneficiation (Indonesia), or export restrictions.
Drivers of resource nationalism remain in play in 2022
A number of factors will incentivise governments to consider intervening in the mining sector and tightening mining regulations, Fitch says, noting that several of those drivers have been clearly accentuated in recent quarters, mostly by the covid-19 pandemic.
The rally in mineral and metal prices in 2020-2021 has revived the interest in the mining and metals sector and boosted potential tax and royalty returns for governments. Fitch forecasts prices to remain elevated in 2022.
Improved prospects for the Green Energy Transition minerals such as copper, nickel, lithium, cobalt, among others, amidst the ongoing acceleration in decarbonisation efforts at multiple levels.
This is leading to a sharp rise in investment in new projects towards these materials, prompting governments to make sure their countries benefit from these trends, Fitch says.
Increased economic/fiscal hardships and rising social inequality in the wake of covid-19 are providing strong incentives for a rise in government intervention in the mining sector.
Another key driver of resource nationalism is political risk linked to elections, Fitch notes.
The recent election of left/ social-leaning governments, in the US and Peru for example is a factor behind potential changes to mining regulations in these countries. Sudden changes in governments, which have happened in some countries recently, also usually increase risks of a change in regulation. Mali for example, saw two coups in 2020-2021.
Finally, contested campaigns also increase nationalism rhetoric ahead of the elections in order to gain support, Fitch forecasts.
This happened in Zambia in 2020-2021 for example, when former President Lundu used a nationalistic rhetoric ahead of the August 2021 elections.
While elections happen on a regular basis, their convergence with economic hardships and social tensions over rising inequalities pose an increased risk of resource nationalism, the analyst asserts.
(Read the full report here)
POLITICS:
5 sticking points holding back Democrats’ spending package
Cristina Marcos, Scott Wong, The Hill, October 26, 2021
Democrats say they’re in striking distance of reaching a long-sought deal on expanding social safety net programs, but still need to resolve a handful of key sticking points.
Progressives and key centrist holdouts remain at odds over some top liberal priorities, such as ending America’s status as the only wealthy nation without a national paid parental leave policy and expanding Medicare coverage.
Senate Majority Leader Charles Schumer (D-N.Y.) said Monday that “a lot of the bill is written” but that a handful of items remained unsettled and they “first have to get some kind of agreement on those.”
Asked if Democrats will be able to unveil their plan before President Biden leaves for an international climate summit on Thursday, Schumer said: “That’s our goal.”
Here are five of the biggest issues Democrats would need to address between now and then:
Medicare and Medicaid expansions
Sen. Bernie Sanders (I-Vt.), the progressive Senate Budget Committee chairman, held firm over the weekend that his proposal to expand Medicare would be part of the final package.
“The expansion of Medicare to cover dental, hearing and vision is one of the most popular and important provisions in the entire reconciliation bill. It’s what the American people want. It’s not coming out,” Sanders tweeted
Democrats say they’re in striking distance of reaching a long-sought deal on expanding social safety net programs, but still need to resolve a handful of key sticking points.
Progressives and key centrist holdouts remain at odds over some top liberal priorities, such as ending America’s status as the only wealthy nation without a national paid parental leave policy and expanding Medicare coverage.
Senate Majority Leader Charles Schumer (D-N.Y.) said Monday that “a lot of the bill is written” but that a handful of items remained unsettled and they “first have to get some kind of agreement on those.”
Asked if Democrats will be able to unveil their plan before President Biden leaves for an international climate summit on Thursday, Schumer said: “That’s our goal.”
Here are five of the biggest issues Democrats would need to address between now and then:
West Virginia, most people around the country,” Manchin said. “You’ve got to stabilize that first before you look at basically expansion.”
Democrats say they’re in striking distance of reaching a long-sought deal on expanding social safety net programs, but still need to resolve a handful of key sticking points.
Progressives and key centrist holdouts remain at odds over some top liberal priorities, such as ending America’s status as the only wealthy nation without a national paid parental leave policy and expanding Medicare coverage.
Senate Majority Leader Charles Schumer (D-N.Y.) said Monday that “a lot of the bill is written” but that a handful of items remained unsettled and they “first have to get some kind of agreement on those.”
Asked if Democrats will be able to unveil their plan before President Biden leaves for an international climate summit on Thursday, Schumer said: “That’s our goal.”
Here are five of the biggest issues Democrats would need to address between now and then:
Medicare and Medicaid expansions
Sen. Bernie Sanders (I-Vt.), the progressive Senate Budget Committee chairman, held firm over the weekend that his proposal to expand Medicare would be part of the final package.
“The expansion of Medicare to cover dental, hearing and vision is one of the most popular and important provisions in the entire reconciliation bill. It’s what the American people want. It’s not coming out,” Sanders tweeted on Saturday.
But on Monday, Sen. Joe Manchin (D-W.Va.) shut down that push and argued it wasn’t financially feasible given that Medicare’s board of trustees has warned that its hospital insurance trust fund is estimated to be depleted in 2026.
“My big concern right now is the 2026 deadline [for] Medicare insolvency and if no one’s concerned about that, I’ve got people — that’s a lifeline. Medicare and Social Security is a lifeline for people back in West Virginia, most people around the country,” Manchin said. “You’ve got to stabilize that first before you look at basically expansion.”
Manchin also expressed reservations about a proposal from Georgia Democratic Sens. Raphael Warnock and Jon Ossoff to extend health insurance benefits to low-income people in states that didn’t expand Medicaid under the 2010 health care law. He argued it wasn’t fair for states that previously expanded Medicaid to pay more to prop up states that didn’t.
“I’m trying to understand that better,” Manchin said.
Paid family leave
Democrats’ original proposal would have ensured workers had up to 12 weeks of paid family and medical leave with their usual wages replaced on a sliding scale.
That’s in line with the 12 weeks of paid family leave granted to federal employees, as well as the amount of time allotted for unpaid leave under the Family and Medical Leave Act for certain workers.
Democrats say they’re in striking distance of reaching a long-sought deal on expanding social safety net programs, but still need to resolve a handful of key sticking points.
Progressives and key centrist holdouts remain at odds over some top liberal priorities, such as ending America’s status as the only wealthy nation without a national paid parental leave policy and expanding Medicare coverage.
Senate Majority Leader Charles Schumer (D-N.Y.) said Monday that “a lot of the bill is written” but that a handful of items remained unsettled and they “first have to get some kind of agreement on those.”
Asked if Democrats will be able to unveil their plan before President Biden leaves for an international climate summit on Thursday, Schumer said: “That’s our goal.”
Here are five of the biggest issues Democrats would need to address between now and then:
Medicare and Medicaid expansions
Sen. Bernie Sanders (I-Vt.), the progressive Senate Budget Committee chairman, held firm over the weekend that his proposal to expand Medicare would be part of the final package.
“The expansion of Medicare to cover dental, hearing and vision is one of the most popular and important provisions in the entire reconciliation bill. It’s what the American people want. It’s not coming out,” Sanders tweeted on Saturday.
But on Monday, Sen. Joe Manchin (D-W.Va.) shut down that push and argued it wasn’t financially feasible given that Medicare’s board of trustees has warned that its hospital insurance trust fund is estimated to be depleted in 2026.
“My big concern right now is the 2026 deadline [for] Medicare insolvency and if no one’s concerned about that, I’ve got people — that’s a lifeline. Medicare and Social Security is a lifeline for people back in West Virginia, most people around the country,” Manchin said. “You’ve got to stabilize that first before you look at basically expansion.”
Manchin also expressed reservations about a proposal from Georgia Democratic Sens. Raphael Warnock and Jon Ossoff to extend health insurance benefits to low-income people in states that didn’t expand Medicaid under the 2010 health care law. He argued it wasn’t fair for states that previously expanded Medicaid to pay more to prop up states that didn’t.
“I’m trying to understand that better,” Manchin said.
Paid family leave
Democrats’ original proposal would have ensured workers had up to 12 weeks of paid family and medical leave with their usual wages replaced on a sliding scale.
That’s in line with the 12 weeks of paid family leave granted to federal employees, as well as the amount of time allotted for unpaid leave under the Family and Medical Leave Act for certain workers.
But then Biden said last week that the paid leave plan would likely be cut down to just four weeks. And now, as Democrats try to whittle down the size of their overall package, it’s possible the proposal could be axed altogether.
Manchin declined to specify his concerns about paid family leave on Monday but said broadly that he was concerned about how various programs in the package would be paid for.
Speaker Nancy Pelosi (D-Calif.) isn’t making an ironclad guarantee about paid leave making the cut. Asked on CNN’s “State of the Union” on Sunday if it would make the final bill, Pelosi said: “That’s our hope, yes.”
If the paid leave proposal does survive the negotiations, there’s also the question of how long it would last. Paid leave advocates argue that a temporary program that would need to be renewed by lawmakers three to five years from now is insufficient. But leaving the task of extending it to future sessions of Congress could help bring down the price tag of the overall package.
Taxes on the wealthy and corporations
Democrats appear to be coalescing around a tax plan to pay for their sweeping social spending and climate package, but Senate negotiators were still huddling Monday to hammer out the fine print.
The two centrist Senate holdouts, Sen. Kyrsten Sinema (D-Ariz.) and Manchin, have signaled they’re open to a tax targeting billionaires, which would affect about 700 of the wealthiest Americans and raise hundreds of billions of dollars in revenue.
The Senate proposal would impose an annual tax on the unrealized capital gains for people with $1 billion in assets or who earn $100 million or more for three consecutive years.
Another big tax question is whether Biden and the Democrats use the reconciliation package to lift a cap that would allow more wealthy families in high-taxing states like New York and New Jersey to deduct their state and local taxes, or SALT.
Rep. Josh Gottheimer (D-N.J.), who met with Biden on Monday as the president touted his infrastructure and social spending packages in New Jersey, has said he’s bullish that changes to SALT will be included.
Child tax credit
Manchin successfully pressured the White House and fellow Democrats to whittle down expanded child tax credits to just a one-year extension.
Now the fiscally conservative West Virginian is trying to require means testing and work requirements to further cut costs.
Manchin’s demands are infuriating Sanders and his liberal allies on the Hill given that they originally wanted to make the child tax credit permanent, with few restrictions, to help defray the high costs of raising children and help reduce child poverty.
A Democratic aide predicted Manchin would not get his way on mandating work requirements, as it would spark “massive opposition” from progressive lawmakers.
But tweaking means testing for the tax credit is a real possibility. Means testing is already in place for the tax credits that were expanded through Biden’s $1.9 trillion COVID-19 relief package earlier this year. The full child tax credit is available to couples who make $150,000 or less a year or individuals who make $112,500 or less.
Manchin has proposed limiting the child tax credit extension to families making under $60,000, something The Washington Post pointed out would cause tens of thousands of West Virginia households to be dropped from the program.
Climate change
Biden’s upcoming climate summit is helping inject urgency into the negotiations that have dragged for months. But Democrats are still struggling to finalize the specific climate change mitigation proposals that Biden can tout in Scotland.
Manchin last week dealt a blow to a $150 billion clean electricity program that was meant to be a centerpiece of Biden’s climate agenda. Democrats are now looking for other ways to still deliver on their campaign promises to address climate change.
A spokesperson for Senate Environment and Public Works Committee Chairman Tom Carper (D-Del.) pushed back on a Reuters report on Monday that a proposal to tax oil and gas producers for methane emissions likely wouldn’t make it into the final bill.
Carper “is working to get robust as possible climate provisions in the reconciliation bill and is in active negotiations trying to ensure that the bill meaningfully reduces greenhouse gas emissions, including with a methane fee,” the spokesperson said.
CLIMATE CHANGE:
Oil to geothermal: Renewable game changer?
Ester Wells, ENERGYWIRE, October 25, 2021
Geothermal power is expected to surge to record levels in the next four years, with the annual number of new wells more than doubling, energy analysts say.
Rystad Energy predicts global investment in geothermal activity to exceed $1 billion in 2021 before spiking to $3 billion in 2026 as oil and gas companies take a renewed interest in geothermal drilling, the consultancy said in an analysis this fall. The number of wells drilled globally for power generation will surpass 200 this year for the first time and rise to around 500 annually in 2025, it said.
“The amount of technical know-how going into the industry now is unmatched in the history of geothermal,” Daniel Holmedal, energy service research analyst at Rystad Energy, said in an emailed statement. “We have seen a strong increase in interest from the industry over the last couple of years, both from startups and companies who historically have had a focus on oil and gas.”
Giorgia Bettin, a geothermal researcher at Sandia National Laboratories in New Mexico, said participation by oil and gas is particularly important in accelerating geothermal.
“The oil and gas industries have a very competent workforce, they have all the tools, and they now have the potential of being more profitable in geothermal,” she said. “It’s an obvious pivot for them. It would benefit their wallet and our energy security.”
Progress in geothermal technology, namely, advanced geothermal systems (AGS) and enhanced geothermal systems (EGS), are expanding opportunities for the technology. Because they use human-made rather than naturally occurring geothermal reservoirs, AGS and EGS are not limited by location and are therefore more accessible and can cut costs, according to the U.S. Department of Energy.
Bettin added that ambitious climate goals from governments, including geothermal targets, and price decreases in adopting new technology are encouraging companies to invest in additional research and development.
“People are very interested in climate change and the effect it has on our planet, and the oil and gas industries are ready to pivot,” she said. “Geothermal seems like the perfect solution because it requires very similar expertise in drilling and developing the installation for these projects.”
According to Rystad, developments in geothermal technology will make it possible to scale up the number of active wells to more than 10,000 globally by the end of the decade and support a total installed capacity of 36 gigawatts in 2030 — more than double the capacity in 2021.
In the U.S., the world’s leading producer of geothermal electricity, generation could increase by 26-fold by 2050 if restricting factors are addressed, according to a 2019 DOE report. The agency said that although geothermal offers “enormous untapped potential” as a renewable energy solution, growth in the industry has been constrained both by conventional technology and by the lack of public support for developing geothermal resources.
Conventional hydrothermal well systems, which extract heat from underground reservoirs of pressurized hot water, are primarily located at sites where those reservoirs are manifested above ground through visible formations such as geysers and hot springs, the report said (Energywire, May 31, 2019).
But the U.S. Geological Survey estimates that there are still 30 gigawatts of undiscovered hydrothermal systems that do not have those visible manifestations —although pre-drilling and exploring new areas to find them can be costly and not always successful. Researchers say that technology advances are helping alleviate that traditional obstacle.
Rystad Energy noted that the geographic conditions required by traditional technologies — reservoir temperatures of more than 400 degrees Fahrenheit located at depths of around 2,000 meters — have also bottlenecked geothermal’s scalability in the past “as the number of countries that have high-temperature reservoirs located at 2,000 meters or below is limited.”
Rystad Energy’s geothermal dashboard tracks more than 1,700 geothermal power generation and direct use projects globally, with their forecast including both announced and unannounced projects. For unannounced projects, the firm predicts the number of wells that countries likely need to drill to achieve government targets on geothermal installed capacity.
Holmedal said whether geothermal targets will be met depends on how actively countries pursue the advancement of geothermal system technology like AGS and EGS. In June, DOE announced $14.5 million to support active field testing of EGS within existing wells through their Wells of Opportunity funding program.
Globally, about 500 megawatts of geothermal capacity were added each year between 2015 and 2020, according to the International Energy Agency — a pace still not fast enough to achieve the agency’s “sustainable development scenario,” which has global carbon dioxide emissions from the energy sector and industrial processes at net zero by 2070.
But given the increase in drilling activity in the last six years and the potential to repurpose some existing oil and gas infrastructure for geothermal power generation, Holmedal said the likelihood of actually meeting those goals is “promising.”
“There is an incredible amount of human know-how and machinery in the drilling industry,” Holmedal said. “With some segments of the oil and gas industry expected to be more stagnant in the decades ahead, spaces like the geothermal industry could provide both workplaces and contribute to solving energy challenges.”