Today’s Key Takeaway: Just another roadblock to American energy production. Industry sues BOEM over Gulf of Mexico lease restrictions. Myth-busting Sierra Club, Center for Biological Diversity claims on stopping AKLNG. Nickel project in Alaska staked. A win for nuclear in California.
NEWS OF THE DAY:
RICE RICE BABY: The Biden administration’s new proposed restrictions on oil and gas companies operating in the Gulf of Mexico has sparked condemnation from industry officials, who view it as an unjustified and targeted blow to fossil fuel producers that threatens to restrict U.S. energy production.
How it happened: The proposed restrictions were borne out of a settlement agreement struck quietly last month between the National Marine Fisheries Service and a coalition of environmental groups led by the Sierra Club, which had sued the administration in 2020 over what it argued were inadequate protections for the Rice’s whale, an endangered species that habitates and traffics in the eastern Gulf of Mexico.
The Interior Department’s new proposal essentially extends existing vessel restrictions from the eastern Gulf to oil and gas producers operating offshore in the western Gulf as well — where nearly all of oil and gas activity exists and where “there’s little to no data that this whale actually transits or lives,” one official told the Washington Examiner.
After reaching a settlement with the groups, the Bureau of Ocean Energy Management, which was not party to the suit, went a step further — proposing new restrictions on oil and gas companies operating in a 11-million-acre zone in the Gulf of Mexico, including imposing speed requirements on oil and gas ships, expanding protected zones, and limiting the hours the vessels can operate.
The response: The proposed restrictions have sparked ire from industry groups, which argue they are unjustified by current data on Rice’s whale activity in the western Gulf and that they unfairly single out oil and gas producers despite the fact that the area is one of the most heavily trafficked commercial vessel waterways in the United States.
They’re also outraged by the quiet way in which the deal was struck. “It was really just a closed-door negotiation between the Biden administration and environmental groups,” one industry official told the Washington Examiner of the settlement and subsequent restrictions. “It bypasses career staff at Interior. It bypasses Congress and bypasses other stakeholders. It’s just a one-on-one agreement with people who don’t want domestic production.”
Next steps: Several officials with knowledge of the operations told the Washington Examiner they’re waiting to see whether Interior will include the new restrictions in Lease Sale 261, the second of two congressionally mandated lease sales included in the Inflation Reduction Act, which is slated to take place in September.
Already, Interior said this week it will reduce Lease Sale 261’s acreage by 10 million acres, as detailed in its Notice of Sale, and any acreage will be “incredibly difficult” to develop with such stipulations in place, an industry official with knowledge of the proposed requirements said.
“We’ve seen a dramatic fall in leasing, both offshore and onshore,” in recent years, the official said. “And so we’re again seeing new restrictions to access, which, again, eventually will likely continue to impact production.”
Why it matters: The Gulf of Mexico is a strategic energy asset that provides nearly 2 million barrels of oil per day, is home to most of the country’s refining and processing capacity — 47% for petroleum, 51% for gas — and is recognized as providing among the lowest carbon-intensive barrels in the world. Estimates suggest that the proposed restrictions could impact vessel traffic by as much as 50%.
But industry advocates say the proposed restrictions are the latest in a line of frustrating mixed messaging from the Biden administration, making it harder for them to produce even after the president urged them to ramp up activity following Russia’s invasion of Ukraine.
The Biden administration “continues to throw up roadblock after roadblock to American energy production,” Holly Hopkins, API’s vice president of upstream policy, said this week.
From the Washington Examiner, Daily on Energy.
OIL:
API Sues BOEM over Gulf of Mexico Restrictions
Rocky Teodoro, Rigzone, August 28, 2023
The state of Louisiana, Chevron USA Inc., and the American Petroleum Institute (API) have filed a legal challenge regarding the Department of the Interior Bureau of Ocean Energy Management’s (BOEM) Final Notice of Sale for Lease Sale 261 announced last week, complaining about “severe restrictions on oil and natural gas vessel traffic” and “significantly reduced acreage”, the API said in a statement.
According to the filing with the District Court for the Western District of Louisiana dated August 24, the “BOEM changed the rules and dramatically altered the terms of Lease Sale 261” in its Final Notice of Sale and Record of Decision. Specifically, the BOEM imposed a new lease stipulation “containing burdensome operating restrictions across a newly defined and vastly enlarged ‘expanded Rice’s Whale area’ that more than doubled the size of the former Rice’s whale area and extended it across the entire stretch of the Gulf”, the filing said. Furthermore, the BOEM “withdrew from Lease Sale 261 all the acreage falling within this expanded area”, the filing continued.
The filing states that the BOEM’s “last-minute changes are unlawful several times over” because the new stipulation and acreage withdrawal contravene “the letter and spirit of Congress’ command in the Inflation Reduction Act, which explicitly directed BOEM to conduct Lease Sale 261 in accordance with BOEM’s previously adopted Five-Year Plan for oil and gas leasing—not to introduce substantial new conditions and complications, let alone withdraw millions of acres, at the last minute”.
Further, the challenged provisions also “contravene the Outer Continental Shelf Lands Act’s procedural requirements and implementing regulations, which instruct BOEM to provide notice of the terms of the lease sale in the Proposed Notice of Sale, not radically change them in the Final Notice”, the filing alleges.
Also, the challenged provisions “contravene the Administrative Procedure Act, as they are a wholly arbitrary and capricious departure from BOEM’s prior position without adequate explanation for the change, and otherwise exceed BOEM’s statutory and regulatory authority”, according to the filing.
GAS:
OPINION: Don’t be fooled — Alaska needs to develop its natural gas
Paul Fuhs, August 27, 2023, Anchorage Daily News
The recent ADN opinion piece by Andrea Feniger of the Sierra Club and Arleigh Hitchcock of the Fairbanks Climate Action group against the Alaska LNG project, as well as the recent associated lawsuit against the project by the Sierra Club and the Center for Biological Diversity, show a deep ignorance or intentional denial of energy reality.
Particularly without basis are the arguments that stopping the project will reduce carbon emissions worldwide. Stopping the project wouldn’t mean even one fewer drop of oil or one fewer molecule of natural gas being burned. It would just be produced somewhere else.
In fact, the world is awash in oil and gas, with the International Energy Agency estimating that known reserves represent another 49 years of gas and 57 years of oil remaining. And that is just known reserves. For at least the next two generations, reducing carbon will be a consumption issue, not a production issue.
And, in fact, the export of Alaska’s LNG to Asia would represent a substantial reduction in carbon emissions. Japan is still heavily reliant on coal and oil for its energy, especially after the reduction in nuclear energy following the Fukushima nuclear disaster. Natural gas produces 50% less carbon than coal and 25% less carbon than oil.
MINING:
Resolution stakes Alaska nickel project
Shane Lasley, North of 60 Mining News, August 24, 2023
Resolution Minerals Ltd. Aug. 21 announced that it staked a 114-square-mile land package in an area of Alaska prospective for nickel with associated copper, cobalt, and platinum group metals.
Australia-based Resolution is best known in Alaska for its exploration of the 64North gold project near Northern Star Resources Ltd.’s Pogo mine. Over the past year, however, the company has also been acquiring and exploring projects that could offer future supplies of the metals needed for the clean energy transition.
Resolution’s new Allegra nickel-copper-cobalt-PGM project is part of that expanded focus.
“The Allegra nickel project is an exciting addition to RML’s portfolio of new energy metals projects,” said Resolution Minerals Managing Director Chris McFadden.
This project includes one block of claims that wraps around the south and east sides of Alaska Energy Metals Corp.’s Nikolai project and a separate block across the Richardson Highway to the southeast.
POLITICS:
CALI JUDGE RULES TO KEEP DIABLO CANYON PLANT OPEN: A California judge dismissed an environmental group’s lawsuit that looked to block the state’s largest utility from seeking to extend the operating life of the nuclear Diablo Canyon Power Plant.
Friends of the Earth filed a lawsuit in the state Superior Court in April, hoping to derail a state-supported proposal that would keep the power plant running for another five years. The environmental group was part of a 2016 agreement with operator Pacific Gas and Electric to shutter the state’s nuclear power plant by 2025.
However, Gov. Gavin Newsom (D-CA) and the state legislature gave a way for PG&E to extend their operations for longer last year. The environmental group argued the 2016 deal to close the reactors was still valid and that the utility would break a binding contract if federal regulators extended the operating licenses.
In an 18-page ruling, Judge Ethan P. Schulman rejected the complaint, agreeing with PG&E that Friends of the Earth was asking that the court “impermissibly hinder or interfere” with state regulatory oversight of the power plant located midway between San Francisco and Los Angeles. More from Nancy here.
From the Washington Examiner, Daily on Energy