NEWS OF THE DAY:
Alaska lawmakers seek allies to save ANWR drilling
Emma Dumain, E & E Daily, September 23, 2021
Alaska’s Republican senators say they are actively exploring avenues to ensure the still-in-flux reconciliation bill does not restrict drilling in the Arctic National Wildlife Refuge.
Sens. Lisa Murkowski and Dan Sullivan are preparing to go on offense as House Democrats grow increasingly more vocal in their demands that the drilling prohibition, which was included in the House Natural Resources Committee’s portion of the reconciliation package, remains in play amid negotiations with the Senate.
Sullivan told E&E News yesterday that he and Murkowski’s teams “have been working on it,” while Murkowski said in a separate interview on Capitol Hill that she was “working to build our allies” on the issue.
Their most likely ally at this point is Sen. Joe Manchin, the moderate West Virginia Democrat and critical swing vote who chairs the Senate Energy and Natural Resources Committee, which has jurisdiction over the ANWR issue in the reconciliation process.
In 2017, the Republican-controlled Congress put language in the Tax Cuts and Jobs Act — which was passed and signed into law through the reconciliation process — to lift the ban on oil and gas drilling in ANWR’s coastal plain. Manchin supported it.
Asked specifically about Manchin, Sullivan said “those conversations are in the works.” Murkowski said earlier this week, “I’m talking to my friend Senator Manchin about everything, all the time, whatever it may be.”
While Manchin backed ANWR drilling four years ago, it’s not clear whether he would maintain this stance today as he prepares to negotiate over dozens of other provisions, large and small, especially the inclusion of the Clean Energy Payment Program. He’s also currently a holdout on the entire reconciliation bill as it currently stands (Energywire, Sept. 16).
He has not yet commented on this specific line item in the context of this political fight. Sullivan and Murkowski acknowledged they were skittish about the potential to see their 2017 victory dashed.
“I’m not sure what the fate of reconciliation is writ large,” said Murkowski, “but obviously I’m very concerned that our efforts to advance ANWR, as we’ve been able to do, could be really thwarted if reconciliation is advanced.”
Sullivan agreed, “I’m nervous.”
‘A terrible financial investment’
Murkowski and Sullivan are strategizing amid an escalating push from congressional Democrats — bolstered by powerful environmental groups — to keep the ANWR drilling repeal from falling to the wayside (E&E Daily, Aug. 25).
Yesterday, 60 House Democrats sent a letter to President Biden to press their case, led by Rep. Raúl Grijalva (D-Ariz.), chair of the House Natural Resources Committee; Rep. Jared Huffman (D-Calif.), chair of the House Natural Resources Subcommittee on Water, Oceans and Wildlife; and Rep. Diana DeGette (D-Colo.).
“It’s critical this provision be included in the final text that reaches your desk, and we ask for your leadership and assistance in ensuring it remains in the Build Back Better Act as negotiations between the House and Senate continue in the coming weeks,” the lawmakers wrote.
The House Natural Resources Committee’s reconciliation bill specifically stripped away the provision from the 2017 bill that authorized the Interior Department to conduct at least two lease sales of 400,000 acres each by the end of 2024. Republicans argued that the revenue would help offset the bill’s massive tax cuts.
At that time, the Congressional Budget Office estimated that opening ANWR to drilling would bring in roughly $1.1 billion over the next decade to the federal government after it split the revenue with Alaska. The nonpartisan agency based its estimates on an assumption that a total of $2.2 billion would come in between 2018 and 2027 from oil and gas drilling.
But critics have countered that the CBO’s study was flawed, and that the revenue collected from drilling in the area would, in fact, be significantly lower than the initial projections. They also continue to argue that the practice is unethical, in any case, to put a price on an activity that will destroy the environment.
Democratic signers of yesterday’s letter made these same arguments, adding that there were significant benefits to repealing the ANWR drilling allowance even though it would cost roughly $50 billion over the next decade to accomplish that goal.
“Allowing more leasing and drilling in the Arctic Refuge to move forward is a terrible financial investment for U.S. taxpayers but spending tens of millions of dollars to protect this region is a wise investment that would enormously benefit our nation,” the lawmakers asserted.
OIL:
Goldman Sachs: Here’s How Oil Prices Could Reach $90 This Winter
Julianne Geiger, OilPrice.Com, September 22, 2021
Brent could reach $90 per barrel if the weather in the northern hemisphere turns out to be colder than normal this winter, Goldman Sachs’ Jeff Currie said on Wednesday, according to Bloomberg.
This is $10 per barrel more than Goldman’s current forecast.
The call for higher oil prices would come on top of the already too-high natural gas prices, which have sunk some natural gas power providers in Europe.
The natural gas situation in Europe will have a spillover effect on the oil market, with natural gas in short supply and crude oil one of the only viable alternatives as wind and solar power prove insufficient at this time.
On Tuesday, commodity trader Vitol said that weather was the key to stopping the panic that currently exists in the market—with warmer winter weather the only hope for falling prices.
Unfortunately for power consumers and utilities that are already under the gun, but perhaps conveniently for OPEC and the oil industry in general, The Farmers’ Almanac is predicting a frosty flip-flop winter in the United States, with lots of whipsawing, with wintery weather spilling over into the end of March.
But a colder winter in Europe in Asia will have a profound effect on natural gas and oil demand. Earlier this week, Goldman Sachs predicted that a colder winter could lead to 900,000 bpd in additional oil demand.
Meanwhile, oil prices were trading roughly 2% on Wednesday, with WTI trading at $71.93 per barrel, and Brent crude trading at $75.83 per barrel—up $1.47 on the day. The price rise comes as crude oil inventories continue to draw down in the United States.
Dwindling inventories and projections for increased demand could add to today’s bullish sentiment for crude.
GAS:
FERC Accused of ‘Shirking’ Environmental Review for Alaska LNG Authorization
Caroline Evans, Natural Gas Intel, September 22, 2021
Environmental groups have asked a federal court to order FERC to vacate its authorization for the proposed Alaska liquefied natural gas (LNG) project, arguing the Commission did not adequately review the development’s environmental impacts.
In a petition filed last week in the U.S. Court of Appeals for the District of Columbia (DC), the Center for Biological Diversity (CBD) said the Federal Energy Regulatory Commission “shirked” its obligation “to take a hard look at the project’s harmful environmental impacts at nearly every turn” in compiling the environmental impact statement (EIS) that informed the 2020 authorization.
The CBD filed the petition on behalf of itself and other groups including the Sierra Club and Earthjustice.
The estimated $38.7 billion Alaska LNG project is being pursued by state-owned Alaska Gasline Development Corp. (AGDC). It would transport stranded North Slope natural gas via a new 807-mile pipeline to a liquefaction terminal on Alaska’s southern coast. It is authorized to export 20 million metric tons/year (2.55 Bcf/d).
AGDC spokesperson Tim Fitzpatrick told NGI the CBD’s request was misguided. “The environmental benefits of replacing coal, diesel and wood as energy and heat sources in Asia and Interior Alaska with clean natural gas are clear,” he said. “This request to FERC is misguided and counter to widely accepted climate priorities.”
In particular, the CBD said while FERC determined the project would increase Alaska’s annual greenhouse gas (GHG) emissions by 30-47%, the Commission failed to evaluate the potential impacts of the higher GHG levels. The CBD also said FERC “entirely ignored the indirect greenhouse gas emissions caused by the project’s commercialization of currently isolated Arctic gas,” which it said was a violation of the National Environmental Policy Act (NEPA).
In addition, the center said the commission did not consider in detail any alternatives to the project, including the impact of taking no action on the proposal.
“The EIS concludes that all alternatives to the project either would not fulfill the project’s purposes, would not be feasible, or would not offer significant environmental advantages over the corporation’s proposal,” according to the filing. “As a result, FERC analyzed only the project in detail. FERC also did not consider a no action alternative in detail.”
Rather, FERC claimed that if it selected the no action alternative, the Alaska LNG developer or other applicants would likely develop another project to transport gas from the North Slope for export and in-state delivery. Emissions from that project would likely be comparable to those from the Alaska LNG project, and thus, a no action decision would have provided no significant environmental advantage, FERC reasoned.
However, the plaintiffs argued that FERC’s reasoning was shaky, since such a project would be a massive undertaking and still subject to the commission’s evaluations anyway.
“There is no factual support for FERC’s conclusion that even if it were to choose the no action alternative for the project, a similar project featuring both export and in-state delivery would likely be developed,” it said.
Further, FERC did not properly consider the project’s impact on critically endangered Cook Inlet Beluga whales and on wetland habitats, the CBD said.
The news comes amid heightened scrutiny of the environmental impacts of LNG projects in the United States. In July, the Department of Energy said it would prepare a supplemental EIS for Alaska LNG. The analysis would evaluate potential environmental impacts associated with natural gas production on the North Slope and a life-cycle analysis calculating the GHG emissions for LNG exported from the proposed project.
And last month, the DC appeals court ordered FERC to review its authorizations for two planned LNG export facilities in Texas. Circuit Judge Robert Wilkins wrote in the court’s decision that FERC’s environmental analyses for the developments had been deficient. The facilities in question, NextDecade Corp.’s Rio Grande LNG and an associated pipeline, and the privately owned Texas LNG development, received FERC authorization in 2019. Neither has reached a final investment decision.
MINING:
Mining company looks for precious metals in southeast Alaska
Associated Press, September 22, 2021
A Canadian mining company has been looking for precious metals on Chichagof Island in southeast Alaska.
Millrock Resources, a Vancouver, British Columbia-based company, several years ago applied to the U.S. Forest Service for drilling permits to renew exploration on claims that once made up the historic Apex and El Nido gold mines.
However, the exploration never happened. CEO Gregory Beischer said the company wasn’t able to secure financing.
The mines produced precious metals in the early 20th Century. Some exploration resumed in the 1980s.
“But it really has been dormant since the mining activity took place in the ’20s and ’30s,” Beischer told CoastAlaska.
Millrock has formed a partnership with another company, which has allowed it to take soil samples on claims less than three miles from Pelican, a community with fewer than 100 year-round residents.
The operator of Kensington Mine north of Juneau, which is a subsidiary of Coeur Mining, invested about $200,000 for a small team of geologists based in Pelican.
Bleicher said soil sample results are pending. But he said geologists hope they will show that gold-bearing quartz veins continue down the mountain. Taking soil samples doesn’t require permits, according to state and federal regulators.
“And it will hopefully be encouraging enough for our partner to finance drilling,” he said, “to test the quartz veins at lower elevations to see if the gold continues.”
If they do, the company could apply for renewed permission to drill next year. But Beischer noted not many projects result in the discovery of a deposit that can be mined for profit.
Some of the public land claims were staked by Millrock. But the bulk of the area is on claims held by Apex El Nido Gold Mines, an Alaska company whose primary shareholder is Anchorage attorney Joseph Henri, a former state Department of Administration commissioner.
POLITICS:
Repeal of fossil fuel breaks ‘still subject to discussion’
Geoff Koss, E & E Daily, September 23, 2021
The top House and Senate tax-writers said yesterday that repealing a host of fossil fuel tax incentives is still on the table in budget reconciliation negotiations, despite their omission from the House’s clean energy tax package.
Senate Finance Chair Ron Wyden (D-Ore.) reiterated that he’s pushing to repeal multiple fossil fuel breaks as outlined in the “Clean Energy for America Act,” S. 1298, which his committee advanced earlier this year.
“That package, I think, is going to be front and center in this effort,” Wyden told E&E News yesterday when asked about the fossil fuel repeals. “We continue to have discussions, with the White House in particular.”
He recalled President Biden’s calls as a presidential candidate to eliminate “special breaks” for the fossil fuel sector. “That’s in compliance with what the Finance Committee did,” Wyden said of his bill, which aims to consolidate multiple clean energy breaks into technology-neutral incentives aimed at producing cleaner electricity and transportation fuels, as well as encourage energy efficiency.
Among the fossil fuel incentives Wyden’s bill would strip from the code are the expensing of intangible drilling costs, the percentage depletion allowance and master limited partnership treatment for certain fossil fuel projects.
“Fossil fuel people will get all the same breaks as other businesses,” he said yesterday. “And by the way, I’ve gone to considerable lengths in every appearance to say that if fossil companies are actually reducing carbon emissions … I’m gonna find a way to get them into this architecture.”
But the $235 billion clean energy tax plan advanced by the House Ways and Means Committee last week is silent on domestic fossil fuel breaks — a fact that has drawn the ire of advocacy groups and liberal Democrats.
“We were dismayed to see that the current version of the Build Back Better Act in the House is missing most of the domestic fossil fuel subsidies repeal passed by the Senate Finance Committee earlier this year,” wrote the leadership of the Congressional Progressive Caucus to House leaders yesterday. “There is no reason that the fossil fuel industry deserves special privileges over other businesses.”
The missive, which follows a similar letter sent by dozens of House members last month, comes as the Progressive Caucus is increasingly flexing its muscles in the budget reconciliation talks (E&E Daily, Sept. 22). Caucus leaders were among several groups of Democrats slated to huddle with Biden at the White House yesterday.
Asked about the fate of fossil breaks, Ways and Means Chair Richard Neal (D-Mass.) said he opted to leave them out of the reconciliation markup because “I thought that there was a long way to go here and it’s still subject to discussion.”
“Right now, we’ll have to wait to see what the Senate does,” he said in an interview yesterday. “We’ll have to wait and see what the administration does and all of that.”
The House bill does make changes to the manner in which overseas oil and gas drilling profits are taxed — modifications that would help raise an estimated $106 billion over the course of a decade (E&E Daily, Sept. 14).
Those provisions — which target so-called foreign oil and gas extraction income (FOGEI) — were among the “offshore tax loopholes” benefiting the oil and gas industry that were highlighted in a new report by Friends of the Earth and other advocacy groups yesterday.
Observers see the repeal of domestic fossil breaks as an uphill fight in both chambers, given the razor-thin margins in both chambers and a number of Democrats who represent fossil fuel-producing states — including Senate Energy and Natural Resources Chair Joe Manchin (D-W.Va.), who has chafed at some of the climate provisions under consideration for reconciliation.
Wyden declined to discuss his conversations with Manchin but said the two do speak regularly. Still, he acknowledged the dilemma his colleague faces.
“He has a really unique challenge in that Donald Trump won the state by like 40 percentage points,” Wyden said. “We all have challenges in our states, his especially so.”
CLIMATE CHANGE:
Automakers look to hedge against China’s rare earth dominance
Mining.Com, September 22, 2021
European automakers are in discussions with Australian rare earths explorer Arafura Resources Ltd. about sourcing elements that help power electric cars from outside China, which dominates global supply.
The miner is developing the A$1 billion ($728 million) Nolans project in Australia’s Northern Territory that will cover as much as 10% of global demand for the type of rare earths used in permanent magnets for electric motors. Crucially, Arafura plans to process ores close to its site, ensuring direct oversight of the treatment of toxic waste products at the project it bought in 2001.
“We have engagement with European manufacturers to directly supply them with material,” Chief Financial Officer Peter Sherrington said in an interview, adding that he expects to ink deals before the end of the year because talks are advancing to volumes and price. New rules on sustainability and traceability “have opened carmakers’ minds up to the need of this.”
Rare earths are emerging as another source of concern in the transformation to electric cars. They’ll require vast amounts of battery raw materials like lithium, nickel and cobalt, which is leading automakers like BMW AG, Volkswagen AG and Tesla Inc. to go directly to miners. China, which controls two-thirds of mining and 85% of refining of rare earths, according to BloombergNEF, is expected to put much of its production to use domestically in future.
Simmering tensions that previously made the elements — also important for applications in defense — a political pawn are spurring efforts to procure from outside China. Last year, the U.S. Department of Defense committed funding for Australian producer Lynas Corp. to set up a processing plant in Texas that will cost an estimated $30 million initially. Other companies advancing projects include Hastings Technology Metals Ltd. and Peak Resources Ltd.
While carmakers including BMW and General Motors Co. have sought to reduce the amount of rare earths — a vehicle uses an average of 3 kilograms (6.6 pounds) — switching to alternatives tends to make motors less efficient. Tesla initially used induction motors that didn’t need magnets to power its electric cars, but switched gears with the Model 3.
“To have future safety of supply, you need to create your own,” said Joanne Jia, a vice president at China’s Hangzhou Permanent Magnet Group Ltd., which has developed magnets that can switch between two types of rare earths depending on price. “The material is critical but very small in quantity.”
A new law in Germany on supply chain responsibility has also spurred interest, said Arafura’s Sherrington. Starting from 2023, companies will be held accountable on social standards across their entire supplier network and including waste products, or face fines.
Efforts to establish supply are also underway in Europe, which is now the top region for EVs and is on course to become the biggest consumer of the elements. The European Union last year set up the European Raw Materials Alliance to help ensure there’s enough supply of critical raw materials fueling the world’s most ambitious plan to fight climate change. In rare earths, the alliance has identified 14 projects in Europe for investment of 1.7 billion euros ($2 billion).
“There’s always been awareness about the dependency, but availability, at a price, was fine,” said ERMA Chief Executive Officer Bernd Schaefer. “That’s now changing to a mindset of the tremendous cost of not having the material.”