NEWS OF THE DAY:
ConocoPhillips Says USA Regulations Hold Back Supply
A. Steel, G. Johnson, S. Casey, Bloomberg/Rigzone, December 8, 2021
An increasingly bitter war of words has developed between the Biden administration and the U.S. oil and gas sector.
In the debate over why U.S. oil producers haven’t added additional supply, the boss of ConocoPhillips lays the blame squarely with the government.
An increasingly bitter war of words has developed between the Biden administration, which has called for more production to alleviate high energy prices, and an U.S. oil and gas sector that has kept output relatively flat while criticizing White House regulatory moves.
“There’s no fast way to return supply,” ConocoPhillips Chief Executive Officer Ryan Lance said Tuesday in a Bloomberg Television interview from the World Petroleum Congress in Houston. “But if you get a stable, transparent system here in the U.S., and manage through the uncertainties, then we will invest to grow, not at the expense of returns, but there is some growth that can come out of U.S.”
President Joe Biden campaigned on a pledge to ban new fracking on federal lands, and more recently his administration has focused on clamping down on the industry’s emissions of methane, a far more potent greenhouse gas than carbon dioxide.
The House Science Committee last week requested that Houston-based ConocoPhillips and nine other leading U.S. producers share data on methane leaks. Lance said that’s another example of unnecessary regulatory burden, and that in his view the industry is already making strides in self-regulating when it comes to methane.
ConocoPhillips on Monday announced a $1 billion variable dividend as part of efforts to return more cash to investors. U.S. oil and gas drillers are prioritizing returns to shareholders over increasing production. Investors have backed that approach after several years of poor returns, a period Lance said had been “miserable” for the industry.
OIL:
A new warning on oil investment
Ben Geman, Axios, December 8, 2021
A new report concludes that global spending on oil-and-gas exploration and production needs to increase greatly in coming years to ensure adequate supplies, even as demand growth slows.
Driving the news: The Saudi Arabia-based International Energy Forum and the consultancy IHS Markit say investment should reach nearly $525 billion in 2030 to enable market balance.
The big picture: “Cumulatively, we see the need for $4.7 trillion of upstream capex over 2021-2030 to meet market needs and prevent a supply shortfall, even if demand growth slows toward a plateau,” they conclude.
- “The next two years…are critical for sanctioning and allocating capital toward new projects to ensure adequate oil and gas supply comes online within the next 5-6 years.”
The intrigue: The amount of new development needed depends on the trajectory of climate policy.
- An International Energy Agency analysis of pathways to net-zero emissions in 2050 finds that with policies enabling aggressive movement away from fossil fuels, no new oil-and-gas fields need approval.
- Under their net-zero pathway, the average annual upstream investment in 2021-2030 would be around $365 billion annually, with the bulk in existing fields but some in new fields that were already approved.
Yes, but: Nations’ current clean energy and climate policies are nowhere in the universe of what would enable that net-zero pathway.
- Under current policies and announced policy scenarios, IEA also envisions vastly larger investment, including in new fields.
GAS:
US HAS GERMAN ASSURANCES ON NS2: PRESS
Daniel Graeber, Natural Gs World, December 8, 2021
A US congressional aide told the Reuters news service December 7 that Germany could intervene on behalf of Western interests on the Nord Stream 2 natural gas pipeline should tensions over Ukraine escalate.
Russia annexed the Crimean Peninsula of Ukraine in 2014 after pro-Western protests in the capital, Kyiv. Western powers are now concerned that the Russian military build-up on the Ukrainian border is a sign of an imminent invasion of the former Soviet Republic.
A congressional aide told the news service that the German government said Nord Stream 2 would be shut down in such an event, though “it was unclear if the two sides had agreed on a definition of invasion,” Reuters reported.
The original strings of Nord Stream were inaugurated in 2012. The network runs from Russia through the Baltic Sea to Germany and, for all intents and purposes, the second leg is already completed.
Commercial gas flows, however, have yet to move through Nord Stream 2. US national security advisory Jake Sullivan told reporters this week that Washington had spoke with both former German chancellor Angela Merkel and her successor, Olaf Scholz, about the broader situation concerning Ukraine.
“The subject of the future of Nord Stream 2 in the context of an invasion of Ukraine by Russia in the coming weeks is a topic of utmost priority,” he said. “It has been discussed thoroughly.”
MINING:
Northern Dynasty stands firm behind FEIS
A.J.Roan, North of 60 Mining News, December 8, 2021
Northern Dynasty Minerals Ltd. Dec. 1 announced its statement regarding the Nov. 17 press release by the U.S. Environmental Protection Agency, in which the governmental agency extended the deadline regarding its intention to implement Section 404(c) of the Clean Water Act.
“While it is not yet known what action, if any, the EPA will finally take, we are cautiously optimistic about their commitment to consider new information that has become available since the 2014 Proposed Determination and to make science-based decisions,” said Northern Dynasty President and CEO Ron Thiessen.
Reported mid-last month, the EPA stated it had set a timeframe for considering new information available to determine the next steps in the Bristol Bay Clean Water Act Section 404(c) process for the Pebble copper mine project in Southwest Alaska.
“We do not know which new information they may use in their decision, but we believe that the strong administrative record of the overwhelmingly positive Final Environmental Impact Statement of 2020 that was prepared by the U.S. Army Corps of Engineers should be an important part of it,” Thiessen added.
As for its final purpose, the EPA has said the finalized CWA 404(c) determination would help protect the waters of the Bristol Bay region for the long term, which have been essential to commercial, subsistence, and recreational fisheries, as well as other activities that support Alaska Natives and communities in the area.
With the largest sockeye salmon fishery in the world, concerns regarding potential damages to the habitat, and ultimately, the fishing industry of which Bristol Bay hinges its economy upon could be harmed by Pebble.
In a statement communicated with media, the Pebble Limited Partnership wrote:
“The EPA’s announcement that it wants to ‘consider new information available’ essentially recognizes the fact that we submitted an actual detailed mine plan and initiated the NEPA (National Environmental Policy Act) review process with the U.S. Army Corps of Engineers. This resulted in the publication of an EIS (Environmental Impact Statement) for the Pebble Project that shows it can be developed without harm to the Bristol Bay fishery while providing substantial benefits to the communities closest to the project. It is also worth noting that the EPA did not have this significant volume of detailed technical information when it took unprecedented action against the project. We will work to ensure this is fully understood by the EPA especially at a time when the nation will need the minerals Pebble could provide to help the country utilize more sources of renewable energy and is in line with the administration’s climate change agenda.”
Setting the politics aside, the Pebble Mine project advanced to the final stage of permitting would produce an estimated 320 million pounds of copper; 363,000 ounces of gold; 15 million lb of molybdenum; 1.8 million oz of silver; and 12,000 kilograms of rhenium annually over the first 20 years of mining.
Under the proposed 20-year mine scenario, the Pebble Mine would pay an estimated US$1.74 billion in fees, royalties, and taxes to the state of Alaska; US$490 million in taxes to the Lake & Peninsula Borough; and US$1.4 billion in federal taxes.
Under the expansion scenarios, this operation would pay roughly US$22 billion to the state; US$4 billion to the borough; and US$19 billion to the federal government over roughly a century.
“We echo recent comments from BHP and others that the global markets will need double the amount of copper in the next 30 years than it did in the past 30 years to facilitate a decarbonized economy. The U.S. has significant copper resources within its borders, all it needs to do is develop them,” finished Thiessen.
POLITICS:
Biden unveils “Building a Better America” branding
Mike Allen, Axios, December 8, 2021
President Biden today launched a new website and unveiled bold new branding as part of a nationwide tour to sell the benefits of his infrastructure package.
Why it matters: The White House says passage of the new law shows the ability to “forge bipartisan consensus and prove our democracy can deliver big wins” even in these toxic times.
The “Building a Better America” branding above will be unveiled today during a Biden trip to Kansas City, Missouri. He’ll highlight provisions to rebuild roads and bridges, upgrade public transit, replace water infrastructure, and create union jobs.
- The White House says the new branding will be used on the administration’s digital platforms — and at events, press conferences, tours and listening sessions as Biden, Vice President Kamala Harris and the Cabinet travel the country.
- The White House today launched Build.gov as a hub for governors, mayors, tribal leaders, business owners, union members and others to track implementation of the $1 trillion Bipartisan Infrastructure Law.
CLIMATE CHANGE:
Elon Musk doubles down on ending ‘subsidies’ for EV’s
Matt McFarland, CNN Business, December 8, 2021
Elon Musk has described electric cars as critical to fighting climate change, which he’s said he believescould cause more displacement and destruction than all the wars in history combined. So, you might think he’d support the federal government funding electric vehicle charging stations.
But that’s not the case, at least rightnow. A sometimes-combative Musk spoke at the Wall Street Journal’s CEO Summit Monday and suggested scrapping the Biden infrastructure package. Musk said that Tesla didn’t need the $7,500 tax credit for electric vehicles, which provides a tax credit of up to that amount to individuals purchasing plug-in electric vehicles, to drive demand for its vehicles. He also called federal support for charging infrastructure unnecessary.
“Do we need support for gas stations? We don’t,” Musk said. “There’s no need for support for a charging network. I would delete it. Delete.”
Today there are about 45,000 charging stations in the US. The infrastructure bill allocates $7.5 billion for charging infrastructure, which the Biden administration hopes will reach its goal of 500,000 charging stations. Tesla’s charging stations in the US can currently only be used by Tesla vehicles. The company has said it will open them to all automakers, but non-Tesla owners will likely need to purchase an adapter, as Tesla uses a distinct plug. New charging stations will likely be immediately more accessible and affordable for non-Tesla owners.
The comments are a shift, as Musk’s companies have previously embraced government spending.
Tesla received a $465 million loan from the Department of Energy in January 2010, before its initial public offering that summer. Tesla also benefits from selling regulatory credits to other automakers, which help it be profitable. Many state governments require automakers to sell some zero emission vehicles. Automakers that don’t meet the requirements can purchase credits from Tesla, which has a surplus given that it only sells electric vehicles. These government programs are designed to encourage the transition to electric vehicles.
And Nevada gave Tesla $1.3 billion in subsidies to build its “Gigafactory,” where it makes batteries, in Sparks, Nevada.
But Tesla has grown from an unproven startup to the world’s most valuable automaker, a trillion-dollar companyrun by the world’s richest man, with a fortune of $267 billion largely derived from his ownership stake. Tesla today may be better positioned than anyone to compete on a level playing field. Tesla has more than 30,000 fast-charging stations worldwide. Its vehicles are so popular that some current vehicle models are backordereduntil next summer, despite Tesla raising prices this year.
Tesla is in many ways an American success story, but it wasn’t included when the Biden Administration held an electric vehicle summit at the White House this summer. Tesla sells most of the electric vehicles in the United States.
Tesla and the Biden administration disagree on union labor. Biden supports union labor, calling it the creator of the middle class. Tesla doesn’t rely on union workers, although Musk has claimed that on average his workers may make more money than the unionized workers at General Motors. Tesla’s worker safety record has at times been criticized as being worse than the rest of the auto manufacturing industry, which generally uses union labor. Tesla said last year that its injury rate per vehicle produced had fallen by 50% from 2019.
Biden’s Build Back Better legislation that passed in the House gives $4,500 in additional subsidy to electric vehicles that are made by union labor. Tesla won’t qualify for those subsidies.
While Tesla and Musk have accepted government subsidies in the past, he’s also criticized subsidies, and at times called for getting rid of all of them.
“It has always been Tesla’s view that all subsidies should be eliminated, but that must include the massive subsidies for oil & gas,” Musk tweeted last month.
The world spends $423 billion subsidizing fossil fuels, according to the United Nations. US subsidies are roughly $20 billion a year.
Musk, despite his call for scrapping the infrastructure bill, did say he felt America needed better airports and highways. He didn’t explain how they should be funded.
Tesla, which generally does not engage with the professional news media, did not respond to a request for comment.