NEWS OF THE DAY:
Gambling will be among options to close future state budget gap, Alaska revenue commissioner says
Andrew Kitchenman, Alaska Public Media & KTOO, June 9, 2021
Gov. Mike Dunleavy’s administration plans to present lawmakers with a few revenue options during the second special session later this summer.
State Revenue Commissioner Lucinda Mahoney told the House Finance Committee on Tuesday that the options would include the governor’s proposal to expand gambling in the state. She said the administration is seeking more detailed analysis of how much money it would raise.
“What is more important about that initiative is the economic impact of that industry on our economy,” she said. “And the potential to diversify the economy.”
Mahoney said there will be “a few more” revenue measures presented to legislators. But she only hinted at what they would be.
“These new revenue measures are very different than any tax that we’ve seen in Alaska,” she said. “They’re more modern. But we are still fleshing them out.”
Mahoney said the administration is working on an update to how much money different revenue proposals would raise.
The Department of Revenue presented estimates a year ago that ranged from $2.3 million from legalizing gambling on card games to $1.2 billion if the state were to adopt a sales and use tax similar to one in South Dakota.
Nonpartisan experts estimate the gap between what the state would raise and what it would spend under Dunleavy’s Permanent Fund dividend proposal to be $1 billion per year over the next decade. The administration estimates it to be smaller, equaling $300 million by the end of the decade. The governor also has proposed taking $3 billion from the Permanent Fund’s earnings to cover budget gaps over the next five years.
There are 10 days left in the first special session.
OIL:
Without options in Congress, Murkowski urges lawsuit over ANWR
Elwood Brehmer, Alaska Journal of Commerce, June 9, 2021
It took nearly four decades to get a bill opening the Arctic National Wildlife Refuge coastal plain for oil exploration to the desk of a president who would sign it, but several months after the first lease sale the state’s congressional leaders are mostly relegated to the sidelines as the Biden administration has suspended the highly contentious program.
When Interior Department officials announced June 1, they would be suspending the ANWR oil and gas leasing program, they were making a common bureaucratic move to review actions by the prior administration for legality’s sake.
In that regard, suspending the leasing program finalized in the last months of the Trump administration is akin to Interior under Biden reviewing the environmental impact statement for ConocoPhillips’ $6 billion Willow oil project on the North Slope. However, with the Willow review Interior leaders ultimately decided to back the Trump administration’s approval of the development in lawsuits challenging its adequacy in late May court filings.
For that, Rep. Don Young and Sens. Lisa Murkowski and Dan Sullivan lauded Interior Secretary Deb Haaland for supporting the oil project because of the potential jobs and revenue it could provide the state.
A similar outcome is much less likely in the case of the ANWR leasing suspension, as it would also be an initial step towards making good on a campaign promise to reverse the prospect of energy exploration in the uniquely positioned refuge.
And despite the rider hitched to the 2017 Tax Cut and Jobs Act by the delegation requiring Interior to develop and conduct an oil and gas leasing program in the coastal plain, there appears to be little they can do about it.
Murkowski said in a lengthy statement provided by her office that she wasn’t surprised when the administration suspended the lease program, but she was “incredibly disappointed” Interior did so to leases that have already been issued and patented. She also asked for help from state officials.
“I don’t understand how Interior can take that position. Through the natural resources title that I authored in the Tax Cut and Jobs Act of 2017, Congress mandated in statute the establishment of an oil and gas leasing program in the non-wilderness coastal plain of ANWR. The department doesn’t get to pick and choose which laws to follow,” Murkowski said in the statement.
“Since the federal land manager is choosing not to follow the law, unfortunately the only option to uphold Congress’ explicit direction is to use the court system. Consequently, I urge the State of Alaska and other leaseholders to sue the Biden administration to implement the law.”
When asked about options to counter the administrative move, Alaska Oil and Gas Association representatives declined to comment, citing an ongoing lawsuit the trade group is a party to. AOGA intervened as a defendant in a suit by national environmental groups challenging the Trump administration’s environmental considerations in the ANWR leasing plan.
Nate Adams, a spokesman for Sullivan, wrote via email that the senator is considering “all options at his disposal to counter the Biden administration’s misguided decision to suspend leases in the (coastal plain).”
A second lease sale in which at least 400,000 acres are offered must be held before December 2027 to comply with the schedule laid out in the tax bill.
An Interior spokesman wrote in response to questions about complying with the 2017 tax law that the department had nothing more to offer beyond the June 1 press statement announcing it would “initiate a comprehensive environmental analysis to review the potential impacts of the program and to address legal deficiencies in the current leasing program’s environmental review under (the National Environmental Policy Act).”
The Alaska Industrial Development and Export Authority dominated bidding in the Jan. 6 lease sale, collecting nine of the 11 awarded lease tracts. Small firms won the two other leases and no major oil companies bid in the first ANWR sale.
Many industry insiders now believe the 23 million-acre National Petroleum Reserve-Alaska covering much of the western North Slope, and where Willow is located, is a much more attractive development region for its geology and political considerations.
The state-owned development bank also intervened as in the lawsuit to defend the leasing program and attorneys representing AIDEA from the national firm Holland and Hart roundly denied all the claims in the suit in their initial answer brief.
GAS:
Three independent oil and gas companies acquire rights to new Cook Inlet offshore tracts in state lease sale held Wednesday
Tim Bradner, The Frontiersman, June 9, 2021
Three small independent petroleum companies submitted bids in Wednesday’s Cook Inlet state lease sale, winning rights on eight oil and gas tracts covering 21,268 acres.
The state received $451,495 in bonus bids offered by Furie Operating Alaska, LLC; HEX LLC; and Strong Energy Resources LLC.
Furie is the operator of the Kitchen Lights unit in northern Cook Inlet and is a current natural gas producer. Acreage acquired by the company is near leases currently held and that are producing gas.
Hex recently acquired majority working interest in Furie and bid separately in the sale on other prospects, including onshore Kenai Peninsula tracts. Strong Energy is new entrant in the Cook Inlet region, but its owners have previously been engaged in exploration the Inlet, according to knowledgeable sources.
“It is gratifying to see this renewed bid activity in Cook Inlet lease sales from both established operators and new entrants,” said Sara Longan, Deputy Commissioner for oil and gas at the Department of Natural Resources.
“This is further evidence the (state’s) division is doing a good job at conducting regular, predictable lease sales, and that the industry is responding well.”
All the lease sale tracts receiving bids had been leased in the past and are located near existing oil and gas development, Longan said. Existing information and proximity to infrastructure will enhance new exploration and development potential for these tracts, she said.
In a statement, Gov. Mike Dunleavy said, “Natural gas from Cook Inlet plays an important role in keeping Alaskans’ homes and businesses warm, and keeping Alaskans employed and productive,” said Governor Mike Dunleavy.
“The success of this lease sale demonstrates the continued contribution of the energy industry to Alaska’s economy and way of life,” the governor said.
MINING:
All the copper from giant new Congo mine destined for China
Cecelia Jamasmie, Mining.Com, June 9, 2021
Canada’s Ivanhoe Mines (TSX: IVN) has inked deals with China’s Zijin Mining’s subsidiary and trader Citic Metal to sell each 50% of the copper production from the recently-launched first phase of its Kamoa-Kakula mine in the Democratic Republic of Congo (DRC).
The copper concentrate and blister copper off-take agreements will see wholly-owned Zijin unit Gold Mountains (H.K.) International Mining Co Ltd and Citic Metal split the initial offtake from Kakula, Ivanhoe’s first of the two mines at the concession.
Ivanhoe said it won’t have any issues holding its end of the bargain as the DRC government has fully authorized it to export blister copper and concentrate to international markets.Top of Form
The permit came as Ivanhoe inked a 10-year agreement with the Lualaba Copper Smelter, located outside the town of Kolwezi, for the processing of a portion of Kamoa’s copper concentrate production.
The miner delivered its first copper concentrates to Lualaba on June 1 and will receive first blister copper ingots within 30 days of delivery, it said.
Congo, the world’s no.1 cobalt producer and Africa’s biggest copper miner, reinstated a ban on exports of concentrates last month to encourage miners to process and refine the ore locally.
It said at the time it would grant exceptions on a case-by-case basis following an application by an interested party.
Ivanhoe said buyers will be responsible for arranging freight and shipment of the copper to its final destination, initially via the port of Durban, South Africa.
Citic Metal and the Zijin unit will each provide an advance payment of up to $150 million, which can be drawn on by Kamoa Copper from June 10 this year until May 31, 2023.
“The facility will bear an annual interest rate of 8% and will be offset against provisional payments due to Kamoa Copper from product deliveries,” the miner said.
Ivanhoe anticipates Kamoa-Kakula’s first-phase output to be about 200,000 tonnes of copper per year.
World’s no.2, and the greenest
Operations at Kamoa-Kakula are set to ramp up this year to reach between 80,000 and 95,000 tonnes of copper in concentrate. After several phases of expansion, the mine’s peak annual copper production will be more than 800,000 tonnes.
Ivanhoe’s co-chairperson Robert Friedland believes the project will become the world’s second-largest copper mine and also the one with the highest grades among major operations. The concentrator is slated to produce concentrate grading around 57% copper.
“If we came from Mars and we were sent in our flying saucer to orbit the Earth to find copper, we would definitely go to Katanga in the southern part of the Democratic Republic of the Congo as the richest place on the planet for copper,” Friedland said in a Bloomberg interview on Tuesday.
Ivanhoe has also vowed to produce the industry’s “greenest” copper, as it works to become the first net-zero operational carbon emitter among the world’s top-tier copper producers. Friedland has not set a target date for achieving that goal.
Kamoa-Kakula is a strategic partnership between Ivanhoe Mines (39.6%), Zijin Mining Group (39.6%), Crystal River Global Limited (0.8%) and the DRC government (20%).
The Lualaba smelter, which began operations in early 2020, is 60%-owned by Beijing-based China Nonferrous Metal Mining Group (CNMC). Yunnan Copper, based in Kunming, China, owns the remaining 40%.
POLITICS:
From the Washington Examiner, Daily on Energy:
KEYSTONE XL IS DEAD: TC Energy, the developer of the long-contested Keystone XL oil pipeline, is pulling the plug on the project, the company announced after Josh first reported the decision yesterday afternoon.
The decision by the Canadian company to cancel the $8 billion project comes after Biden canceled a permit for the 1,200-mile pipeline that would have delivered crude from Canada’s Alberta oil sands to refineries on the Gulf Coast.
The move, part of a day-one climate change executive order, drew backlash from Republican lawmakers, some Democrats, and Biden’s union allies who said the cancellation would kill thousands of construction jobs.
Republican Sen. Steve Daines of Montana, in a statement, called the end of the project “devastating” and “entirely President Biden’sfault.”
But TC Energy’s official decision to deem the project unviable delivers a major win for environmentalists, given that Keystone XL was their most symbolic target representing their argument that fossil fuels must be kept in the ground in order to combat climate change.
BUSINESS GROUPS ARE ANGRY: Big business groups that have sought to tread softly around Biden’s environmental agenda blamed him for Keystone XL’s demise.
“TC Energy’s decision to terminate the Keystone XL pipeline project is understandable, but necessary only because of the policy errors of the administration,” said Marty Durbin, president of the U.S. Chamber of Commerce’s Global Energy Institute.
Robin Rorick, vice president of midstream and industry operations at the American Petroleum Institute, said that “political obstructionism” led to the termination of the Keystone XL Pipeline.
BIDEN PRESSURED TO STOP MORE PIPELINES: Environmental groups are pressing the Biden administration to intervene in other oil pipeline disputes after celebrating the victory of Keystone XL’s death.
Protesters gathered in northern Minnesota where a Canadian company is poised to replace an aging pipeline that would carry oil through the state’s watersheds and tribal lands, the Washington Examiner’s Mica Soellner reports.
The latest on Line 3: Over the weekend and into this week, demonstrators took part in drum circles and prayer gatherings to express their opposition to the $9 billion Enbridge pipeline expansion, dubbed Line 3. Others took more disruptive action geared toward blocking the construction efforts, leading to law enforcement action. Activists estimate that more than 160 people have been arrested.
About 60% of the Minnesota portion of the pipeline has been built.
Once completed, the pipeline would be able to carry 760,000 barrels of oil a day from Canada and across northern Minnesota and Wisconsin through 340 miles of the network. It is scheduled to be finished by the end of 2021.
Biden mum so far: The pipeline received final approval under former President Donald Trump, but protesters are lobbying the Biden administration to weigh in on their grievances and offer an eleventh-hour suspension on the project, along with stopping the Dakota Access oil pipeline. The Biden administration has thus far declined to act on either.
“These projects are dangerous and unnecessary for all the same reasons Keystone XL was, and they must be halted for Biden and climate advisor Gina McCarthy to keep their commitments on climate change and Indigenous rights,” said David Turnbull, strategic communications director with Oil Change International.
CLIMATE CHANGE:
America’s Energy Gift to Dictators
Editorial Board, The Wall Street Journal, June 9, 2021
China, Russia, and Iran will exploit the U.S. retreat on fossil fuels.
The U.S. is barreling toward one of the greatest self-inflicted wounds in its history. This came into sharper focus last week when President Biden suspended oil leases in Alaska’s Arctic National Wildlife Refuge (ANWR), even as Russia and the Organization of the Petroleum Exporting Countries (OPEC) announced production increases.
Mr. Biden’s anti-carbon fusillade will have no effect on the climate as global demand for fossil fuels will continue to increase for decades no matter what the U.S. does. Meantime, Russia, China, and Iran will take advantage of America’s astonishing fossil-fuel retreat.
Not long ago, the U.S. depended on OPEC for much of its oil supply. But hydraulic fracturing and horizontal drilling enabled producers to extract oil and natural gas once believed unrecoverable. Shale frackers from North Dakota to Texas unleashed a surge of oil and gas onto global markets, breaking OPEC’s dominance on supply. OPEC tried to break U.S. producers by flooding markets, but frackers became more efficient. By 2019 the U.S. was producing nearly two-and-a-half times as much crude as in 2008. OPEC and Russia have had to limit their production to lift prices to shore up budgets that depend on petrodollars.
U.S. producers reduced investment during the pandemic as demand plunged. While prices have since recovered to a two-year high, a larger U.S. retrenchment driven by government and progressive investors is on the way.
Two weeks ago the hedge fund Engine No. 1 allied with big asset managers, government pension funds and proxy advisers ousted three Exxon Mobil board members in a climate proxy battle. Shareholders also passed a resolution requiring Chevron to reduce its downstream emissions. The latter is a de facto mandate to withdraw from oil and gas.
America’s big banks have red-lined U.S. coal companies and refused to finance oil projects in ANWR, which the 2017 GOP tax reform opened up to development. Now the Biden Administration is trying to wall off the Arctic again as it launches a regulatory assault on fossil fuels—from tighter emission rules to endangered-species protections.
The anti-carbon left says the U.S. must banish fossil fuels to meet the Paris goal of limiting global warming to 1.5 degrees Celsius relative to pre-industrial temperatures. This is incompatible with a worldwide population that is expected to grow by two billion by 2050. It would require an enormous reorganization of the global economy that would keep billions in poverty.
Electric vehicles would have to make up 60% of worldwide car sales by 2030, according to a recent International Energy Agency report. “You have 800 million people who do not have access to electricity. You can’t say that they have to go to net zero [carbon]. They have to develop,” Indian Minister of New and Renewable Energy Raj Kumar Singh said in March.
Unless there is some technology breakthrough, demand for fossil fuels will continue to grow for decades. And Russia and China will take advantage of U.S. energy disarmament. Russian oil giant Rosneft warned last fall that retrenchment by U.S. and European companies would result in higher prices and shortages. “Someone will need to step in,” Rosneft senior executive Didier Casimiro said.
In November Rosneft announced a $170 billion oil and gas project in Russia’s north, which it claims can supply the entire world’s oil demand for a year. It says the project will become the world’s largest liquefied natural gas producer by 2030. Russia is also laying down thousands of miles of oil and gas pipelines to supply Europe and Asia.
Vladimir Putin is gloating that Russia’s Nord Stream 2 gas pipeline to Germany will soon be finished, as Mr. Biden has refused to sanction Russian companies running the project. But he didn’t care about upsetting Canada when he killed the Keystone XL pipeline. Nor Alaskans when he suspended the ANWR leases. Mr. Biden wants to curtail North American energy development while he stands by as Russia uses its natural resources for strategic gain.
That includes coal, by the way. Russia is spending more than $10 billion on railroad upgrades to boost its coal exports. According to a new report by the Global Energy Monitor, coal producers—in Australia, China, India, Russia, and South Africa—are planning mining projects that would increase global output by 30%. China has 112 coal mines under construction. It is also developing shale.
Progressives want to surrender one of America’s major strategic economic advantages in the name of saving the climate. But banishing fossil fuels in the U.S. won’t eliminate carbon emissions, which will be produced somewhere else. So will the jobs, economic growth, and geopolitical leverage.