Today’s Key Takeaways: Oil tycoon plays in Alaska U.S. Senate race. 9 new gas pipelines in Q1, 2022 – lowest number since 2016. Doyon increases investment in Tectonic Metals. Windfall tax on oil and gas in UK includes incentives to drill more.
NEWS OF THE DAY:
We Need A Win-Win Energy Policy
Robert Rapier, Forbes, May 30, 2022
About a decade ago, a friend asked how high I thought gasoline prices might rise. I said “One day you will pay $10 a gallon for gasoline.” He replied that he would refuse to pay that much, and I asked what he would do if the price rose to $10 a gallon tomorrow. He finally conceded that he would, in fact, pay $10 a gallon for gasoline.
Then oil prices plummeted in 2014, and again in 2020. I am sure my prediction looked pretty stupid to him when gasoline fell under $2.00 a gallon.
Why did I make such a prediction? Because I had already seen gasoline prices approach that level when I was living in the Netherlands in 2008, and the roads were still packed with cars. Energy demand just isn’t that elastic in the short term, so people pay what they have to pay to get to work.
Here is how I saw things playing out. I imagined that energy demand would continue to grow, but supply would have a hard time keeping up. At times, there would be supply/demand imbalances that would spike prices higher and higher.
However, over the past decade supply has managed to keep pace most of the time. At times, the market was oversupplied, and prices crashed. There have also been periods of spiking prices, but then demand growth would slow down and supplies would catch up.
At the same time, alternatives like electric vehicles, and to some extent biofuels have helped mitigate oil demand growth. But it wasn’t enough. Oil demand kept growing (until the Covid-19 pandemic hit), albeit a bit slower than if there had been no alternatives.
The risk I always saw was that if policy makers believed alternatives would scale fast enough to replace oil demand growth — and they passed policies unfriendly to our domestic oil companies — they could be setting up a very nasty price shock in the future.
This is why I was so adamant that cancelling the Keystone XL Pipeline was the wrong decision. It’s not because I love fossil fuels, it’s because I recognize the risk of needing supplies and not having them. We have seen that it doesn’t take much of a shortfall in oil supply to have a disproportionate impact on the price.
Hence, what we are seeing right now is one of the possible consequences of the energy transition. When alternatives don’t scale up fast enough to fill the gap between oil supply and demand, oil prices skyrocket.
I know that many people who have opposed any additional fossil fuel development saw a different scenario unfolding. They believed that alternatives would scale up fast enough, and that we wouldn’t need the oil.
Here’s the thing, though. If we invest in fossil fuel development — and we don’t need the oil and gas because alternatives do scale up rapidly — that’s a loss the fossil fuel companies would take. That is the risk they are taking, for the potential reward that demand will be there in the future.
What’s the downside of continuing to support our domestic oil industry? That it will simply continue our addiction to fossil fuels?
That’s where we have to also make sure we are doing as much as possible to encourage alternatives. Today’s fossil fuel investments would be ready to supply the market if needed, but alternatives will be trying hard to make sure they aren’t needed.
That’s the win-win energy policy we need.
OIL:
UK tax raid on oil industry also breaks historic climate pledge
James Herron, Bloomberg, May 27, 2022
Rishi Sunak’s windfall tax on oil and gas includes a big incentive to drill more.
Just how the UK government finds itself mounting a tax raid on the oil and gas industry, while simultaneously breaking a promise not to offer fossil fuel producers incentives to drill more, shows how the invasion of Ukraine has turned the world of energy on its head.
A government that publicly shunned the oil industry when it hosted the COP26 climate conference in December has spent the last few months encouraging it to investment more. Today, the cost-of-living crisis forced another sharp turn in policy.
The UK Chancellor of the Exchequer announced 25% windfall tax on profits of oil and gas producers, earning the government an expected £5 billion ($6.3 billion) that will be used to help the poor deal with soaring energy costs.
Companies will be able to avoid some of this levy by making fresh investments in oil and gas extraction — offsetting as much as 80% of new spending. That runs against the COP26 agreement, which pledged to phase-out of inefficient fossil fuel subsidies.
“Giving these firms even bigger tax breaks to extract more oil and gas will lock in greater dependence on fossil fuels,” said Luke Murphy, associate director for energy and climate at the Institute for Public Policy Research, a left-leaning think tank. “This is bad for future energy bills, our energy security, and our environment.”
GAS:
Energy Matters, Volume 8, Series 12, May 31, 2022
In Q1 2022, 9 new natural gas pipeline projects received FERC approval or were completed, which will provide 0.43 Bcf/d of pipeline capacity. This was the lowest quarterly addition since 2016. (Insert below: a map of the recently approved or completed LNG pipelines.)
MINING:
Doyon upping its stake in Tectonic Metals
Shane Lasley, North of 60 Mining News, May 27, 2022
Doyon Ltd., the Alaska Native Claims Settlement Act regional corporation for Interior Alaska, is strengthening its partnership with Tectonic Metals Inc. with another investment into the equity of the company exploring for gold on Doyon and state lands in Alaska.
“Working on Native Owned Land is one thing, but being funded by Alaska Natives to explore on their land is something completely different,” said Tectonic Metals President and CEO Tony Reda. “It is truly an honour, a privilege and a vote of confidence by our single largest shareholder, Doyon, one of Alaska’s leading Native Regional Corporations, to entrust us with their capital to explore on their traditional territory and work alongside them,”
The Doyon region blankets a mineral-rich swath of Alaska’s Interior that is nearly the size of Texas. The Alaska Native corporation owns 12.5 million acres of land within this vast region, making it the largest private landholder in Alaska and one of the largest in North America.
Following the passage of ANCSA in 1971, ANCSA selected much of these lands for their mineral potential, including the Seventymile, Carrie Creek, and Flat gold properties being explored by Tectonic.
Doyon and Tectonic first began forging a partnership in 2018, when the new mineral exploration company and Interior Alaska ANCSA corporation signed discovery-to-production agreements for Doyon properties.
Currently, Tectonic is exploring several Doyon properties – Seventymile, Carrie Creek, Maple Leaf, Mount Harper, and Flat – and the Tibbs gold project on state lands in the Goodpaster Mining District where Carrie Creek, Maple Leaf, and Mount Harper are located.
In addition to the land agreements, Doyon has already invested in two Tectonic financings and currently holds a 15% equity interest in the explorer – a stake that will increase with its participation in Tectonic’s current non-brokered private placement.
“2022 marks the 50th anniversary of the Alaska Native Claims Settlement Act and the formation of Doyon, Ltd. Since that day, our mission has been clear: continually enhance our position as a financially strong Native corporation in order to promote the economic and social well-being of our shareholders and future shareholders, to strengthen our Native way of life, and to protect and enhance our land and resources. Our investment in Tectonic is our mission in action,” said Doyon President and CEO Aaron Schutt.
Originally announced in April, Tectonic is raising C$3 million through a non-brokered private placement led by Crescat Capital LLC, in association with renowned geologist Quinton Hennigh.
“Tectonic has assembled an enviable portfolio of high-quality gold projects in Alaska, all ready for drilling,” said Hennigh, the geological and technical adviser at Crescat. “They have a very strong technical team able to execute on multiple exploration campaigns, and importantly, they have a drill available for the 2022 season.”
Under the financing, Tectonic plans to issue up to 50 million units at C6 cents each. Each unit consists of one share and half a warrant, with each whole warrant exercisable into an additional share for C10 cents for two years, subject to early expiry conditions.
While the exact amount of units being purchased by Doyon has not been disclosed, the investment is expected to be significant and will increase the ANCSA corporation’s already substantial Tectonic share ownership.
“As Tectonic Metals’ single largest shareholder since 2020, Doyon recognizes that the company shares our core values – values that today are embraced as ‘ESG’ principles but which our people have adhered to for thousands of years,” said Schutt. “We welcome the opportunity to reinforce our support for Tectonic and are confident that their professional, diligent, and respectful exploration process will prove successful.”
With the funds raised during the current financing, Tectonic plans to carry out drilling at its Tibbs gold project about 22 miles (35 kilometers) southeast of Northern Star Resources Ltd.’s Pogo Mine in the Goodpaster Mining District; and Seventymile, a roughly 150,000-acre land package between Yukon’s Klondike and Alaska’s Circle Mining District.
The drilling at Tibbs will focus on Michigan, a zone where previous drilling has encountered high-grade gold, including 28.95 meters averaging 6.03 grams per metric ton gold; one meter of 104.5 g/t gold; 6.12 meters of 7.69 g/t gold; and 1.52 meters of 57.1 g/t gold.
Oriented drilling carried out last year identified an interpreted steep structure that controls high-grade mineralization at Michigan. Testing this structure will be one of the primary targets for the 2022 drill program at Tibbs.
At Seventymile, drilling will step out from high-grade gold mineralization, such as the 1.1 meters of 205.89 g/t gold previously drilled in tension veins at Flanders and 1.07 meters of 29.3 g/t gold in shear veins at Flume.
In addition to drilling, the company plans to carry out metallurgical work and surface exploration at Flat, an exciting gold property leased from Doyon in September.
Located in the Kuskokwim Mineral Belt about 25 miles (40 kilometers) north of the 39-million-ounce Donlin Gold project, Flat hosts intrusive-hosted, sheeted quartz vein gold mineralization above two creeks – Flat and Otter – that are estimated to have produced more than 830,000 oz of placer gold since 1908. When you add in other streams draining Chicken Mountain on the property, this total is more than 1.3 million oz of alluvial gold.
There have been 6,907 meters of historical drilling in 55 holes at Chicken Mountain, the primary exploration target at Flat. This drilling has cut long sections of 0.5 to 1 g/t gold mineralization, with shorter sections of high-grade gold. The historical drilling, along with soil and rock sampling, has outlined a roughly 4,000-meter-long mineralized zone with gold to the 200-meter depth of the previous drilling.
The metallurgical work at Flat is being carried out to confirm previous testing that shows the gold is not refractory and to test for the potential for heap leach extraction of the mineralization.
“Flat also has the potential for free-milling gold, implying a simpler, less energy-intensive extraction process upon mining,” said Reda. “This, in combination with historically mined placer gold deposits in creeks draining the property, points to an opportunity with a low-cost path forward.”
POLITICS:
Oil tycoon Harold Hamm backs Murkowski challenger
E & E Daily, Timothy Cama, May 27, 2022
The chair of Continental Resources Inc. released a statement supporting Kelly Tshibaka, a Trump-backed candidate who he said will “fight for American energy independence.”
Oil and natural gas mogul Harold Hamm is backing one of Sen. Lisa Murkowski’s main opponents in the Alaska primary.
Hamm said yesterday that Kelly Tshibaka, the former commissioner of the Alaska Department of Administration, will stand up for the state’s energy industry. Tshibaka has billed herself as a conservative to the right of Murkowski, a Republican who is the former chair of the Senate Energy and Natural Resources Committee.
“Kelly understands that American-made energy is the driving force of our economy, creating thousands of jobs in Alaska, and is essential to our national security,” Hamm, the chair of Continental Resources Inc., said in a statement via Tshibaka’s campaign.
“As U.S. Senator, Kelly will stand up for the people of Alaska and fight for American energy independence,” he said. “Kelly Tshibaka knows what’s good for Alaska is good for the rest of the country.”
Hamm did not mention Murkowski in his statement.
Tshibaka is former President Donald Trump’s pick to challenge Murkowski in this year’s elections (E&E Daily, June 21, 2021). Trump pledged to work to unseat Murkowski due to a number of perceived slights against him, like her vote to convict him in his second impeachment trial and her opposition to the nomination of Brett Kavanaugh to the Supreme Court.
Tshibaka is at least Hamm’s third endorsement of the 2022 campaign cycle. He’s also backed Mehmet Oz in the Pennsylvania Senate race and Markwayne Mullin in Oklahoma’s Senate race.
Under Alaska’s new election system, all candidates for the Senate seat will participate in a nonpartisan primary on Aug. 16. The top four finishers will advance to a ranked-choice general election.