Today’s Key Takeaways: Judge Gleason allows Biden administration to “partially reevaluate” impacts of proposed Ambler Road. What is the future of the Healy Unit 1 Power Plant? Republican political advocacy group launches six-figure digital advertising campaign targeting the Federal Energy Regulatory Commission and Democrats in swing states.
NEWS OF THE DAY:
Biden administration’s pause on Ambler Road project gets court approval
Yereth Rosen, Alaska Beacon, May 18, 2022
A federal judge has granted the Biden administration permission to reconsider a controversial Trump administration-approved road that would cut through the Brooks Range foothills.
In an order issued Tuesday, U.S. District Court Judge Sharon Gleason approved the Department of the Interior’s plan to partially reevaluate the impacts of the proposed 211-mile Ambler Access Project while it keeps permits needed to build the road in suspension.
The proposed road would connect the isolated but copper-rich Ambler Mining District in northwestern Alaska to the state’s existing road system. Without such a road, Ambler mining companies say, it would be impossible to commercially develop any mines there. The Alaska Industrial Development and Export Authority is the entity seeking to build the road. Vancouver-based Triology Metals Inc. and its partner, South32 of Australia, would be the road users; the companies have formed a joint venture called Ambler Metals.
Gleason, in her order, noted that Interior has not yet concluded that permits approved in 2020 were issued in error, only that there were deficiencies in the analyses that led to those permits.
“The Court finds that remand is appropriate under these circumstances,” her order said.
The order was issued in two related lawsuits filed by road opponents. One was filed by a coalition of environmental groups, and the other by the Tanana Chiefs Conference and some of its member tribes.
Interior on Feb. 22 announced its plan to suspend the right-of-way authorizations that are needed for the road to cross federal land. The department and its agencies said in court documents then that there are valid complaints about the way the project’s environmental impacts were examined. In particular, Interior said, there were deficiencies concerning impacts to caribou, on which subsistence hunters depend, and to water bodies and to the fish within them, also important to subsistence users. Additionally, Interior said, there was insufficient consultation with tribal governments during the environmental study process.
Neither the pro-road nor anti-road groups in the debate were satisfied with Interior’s plan of suspension and re-evaluation.
Road opponents have argued in court briefs that the right-of-way approvals should be scrapped entirely and that Interior’s plans would revisit only some of the study deficiencies but leave others unaddressed.
Road supporters like AIDEA and Ambler Metals have argued that the suspension was unjustified, but that if Interior is to do more environmental review, the court should set deadlines to ensure speedy completion.
“Litigation delays have frustrated AIDEA’s work plans, as well as its retention of contractors, and hiring of equipment and personnel. Nevertheless, AIDEA is moving forward with necessary preconstruction work where possible, consistent with the suspension of the federal (right-of-ways),” AIDEA said in an April 15 motion.
Gleason did not set any deadlines for completion of the new analysis, but she ordered Interior to file status reports every 60 days.
USA Oil and Gas Employment Set to Rebound
Andreas Exarheas, Rigzone, May 19, 2022
Employment in the U.S. oil and gas industry is set to rebound in the coming years and surpass pre-Covid levels, according to new research by Rystad Energy.
The company noted that the total number of jobs in 2027 is expected to hit 1.09 million, which it highlighted was a “marginal increase” from the 1.07 million in the sector pre-Covid in 2019. U.S. oil and gas employment is set to expand by 12.5 percent this year, rising from around 863,000 to 971,000 total jobs by the end of 2022, according to Rystad.
The company pointed out that the U.S. oil and gas sector lost nearly 200,000 jobs during the pandemic, or 20 percent of the total workforce. Almost half of the jobs have already been recovered, however, on the back of high oil prices and bullish market sentiment, Rystad outlined.
“Fueled by a rapid rise in oil prices amid a better-than-expected demand recovery and the supply constraints brought on by Russia’s invasion of Ukraine, the U.S. labor market seems poised to benefit and continue on a growth trajectory,” Sumit Yadav, an analyst with Rystad Energy, said in a company statement.
Wages, Inflation Impact
Operators are feeling the impact of inflation on their bottom lines, meaning wages are unlikely to grow significantly this year, according to Rystad, which stated that wage growth across the industry is expected to be a “relatively meager” 2.9 percent in 2022.
The average wage across the industry increased by nearly 6.3 percent in 2021, compared to a 2.9 percent increase in 2020, Rystad highlighted. The wage growth in 2021 was primarily concentrated in low-skilled trades with a lower starting salary, however, Rystad revealed. Wage growth remained “elusive” for highly skilled oil and gas roles, such as petroleum engineers and geoscientists, Rystad said.
The outlook towards the middle of the decade is said to be “rosier,” with wage growth in 2024 projected to approach 10 percent.
Rystad highlighted that its employment forecast is based on its oil price scenario in which the WTI oil price averages $106 per barrel this year, $70 per barrel in 2023 and $50 per barrel towards 2025.
At the time of writing, the price of WTI stood at $110.03 per barrel. This time last year, the WTI price stood at $63.36 per barrel. The U.S. Energy Information Administration’s (EIA) latest short term energy outlook, which was published on May 5, projects that the WTI spot price will average $98.20 per barrel this year and $93.24 per barrel in 2023.
Soaring Gasoline Prices Won’t Stop Summer Travel
Julianne Geiger, OilPrice.Com, May 19, 2022
GasBuddy released its annual summer travel survey on Thursday, suggesting that the percentage of Americans planning on road trips this summer has increased over last year, indicating that crude oil demand destruction—at least from the transportation sector—isn’t on the horizon even at today’s high gasoline prices.
According to the survey results, 58% of Americans plan on road-tripping this summer – that is an increase over last summer when gasoline prices were $1.50 less per gallon.
The GasBuddy survey, polling nearly 2,000 GasBuddy members between April 28 and May 2, cautioned that nearly two-thirds of those polled had yet to confirm their travel plans, with 38% reporting that inflation is adding difficulty in planning summer travel.
Higher gasoline prices have affected the summer travel plans of 70% of the respondents—a 24% increase over last year—and 65% of those polled are taking just one or two road trips, the survey showed.
Memorial Day weekend will be the most popular travel weekend (47%), with Independence Day (33%) and Labor Day (31%) filling the number two and three spots.
“Against a backdrop of gas prices that have continued to set new records ahead of Memorial Day, Americans have been resilient in their desire to hit the road, but we’re certainly seeing increased hesitancy due to rising prices at the pump. Soaring inflation has led to uncertainty over rising costs,” said Patrick De Haan, head of petroleum analysis for GasBuddy in a Thursday press release on the report. “The Covid factor is still present but has been dwarfed this year by Americans’ concern over high gas prices and dwindling affordable travel options to make use of the best months of the year.”
The national average price of a gallon of gasoline rose to $4.589 on Thursday – another new high and a $.17 per gallon increase from a week ago according to AAA.
Fairbanks residents split on Healy plant’s future
Jack Barnwell, Fairbanks Daily News Miner, May 19, 2022
Fairbanks residents weighed in on the future of the Healy Unit 1 Power Plant during a public meeting at the Westmark Hotel Wednesday night.
Golden Valley Electric Association’s board of directors faces a decision on the 55-year-old, 28-megawatt plant: Close it by the end of 2024 or upgrade its environmental control systems to meet Clean Air Act standards. Upgrades are estimated to cost $30 million.
GVEA held a meeting in Healy Monday night, where locals overwhelmingly supported the plant’s continued operation despite the costs. Attendees at the Fairbanks meeting were more split. Some advocated for GVEA to close the plant; others saw it as the most reliable source in GVEA’s portfolio.
“Coal is the dirtiest fuel out there, even with scrubbers,” Fairbanks resident Sean McGuire said. “It’s killing the planet, and I would love to see Golden Valley work as hard as it can to get off coal.”
Borough Assembly member Savannah Fletcher spoke in her personal capacity. “We need to close Healy 1,” Fletcher said. “It is reliable — it reliably fails to meet our environmental standards. We had time to brainstorm alternatives.”
Fletcher added there are long-term costs associated with climate change.
“We are seeing so many costs when it comes to climate changes, more and more climate change experiences to make any energy source renewable,” Fletcher said.
Commenter Patrice Lee asked if GVEA is admitting defeat to spend $30 million on a old plant.
“Is there not a financial way to produce 25 megawatts with renewable or alternatives with that $30 million or other sources?” she asked.
Some said renewable energy, while ideal, isn’t inherently reliable.
“I speak with members and never heard anyone being more concerned about adding more renewable energy than having reliable, affordable energy,” said ratepayer and GVEA employee Brad Vanderplast. He added that GVEA’s Eva Creek wind farm can be unreliable. It has “not produced 25 megawatts of power since last December … and wind turbines have a 20-life expectancy.”
The $30 million price tag didn’t phase some people.
Doug Smith, who oversaw the installation of a temporary environmental control, said he wanted to see a stable power system in the Interior. The $30 million, he said, would be a drop in the bucket compared to finding other solutions.
Badger Road resident Chris Wilson said he liked the redundancy of the system.
“The cost of coal hasn’t really gone up compared to other fuel sources,” Wilson said.
Healy resident Andy DeBar said it was “a proven provider and will continue to run for a long time.”
“Alternative energy has its place, but we need time to hammer it out,” DeBar said. “Healy 1 is an essential piece of the bridge to get there.”
GVEA conducted more than 100 model scenarios over 18 months that will help determine a final decision in June. The model scenarios included energy generation, fuel prices, plant performance, capital project costs and the cost of purchased energy.
“We will be guided by our mission to provide safe and reliable power to customers at an affordable price,” board president Tom DeLong said. “The decisions must be grounded in reality.”
He added “no decision has been made about Healy 1 and will be decided in a highly-noticed public meeting.”
“It is a complicated process … and will be made in the best interest of all GVEA members,” DeLong said.
John Burns, GVEA’s CEO said the “utility needs to balance several variables.
Some of the factors include reliability and source of renewable energy, debt on its current existing source, impacts on the political scale, and “an ever-evolving regulatory environment.”
“Renewables are not without challenges,” Burns said. “We must have backup powers that come online immediately if the wind stops blowing or the sun stops shining.”
“This will impact the interior of Alaska well into the future,” said John Kelly. “The electrical costs of Interior Alaska are some of the highest in the nation.”
Naomi Knight, GVEA’s environmental officer, said challenges will include “will include the necessity to replace it with something safe and reliable.”
That could include purchasing natural gas from southern Alaska, but its availability has come into question. Switching to diesel would be expensive given current market volatility.
Power transmission from the Alaska Intertie and the Bradley Lake hydroelectric facility are also limited, Knight said.
Reliable energy requires a parallel backup, she added, whether geothermal short-term and long-term energy storage backups.
“Battery technologies are rapidly advancing and improving,” Knight said. “We recognize from a regulatory standpoint there will be more regulations over coal and similar power sources.”
2012 consent decree and upgrades
GVEA and the US Environmental Protection Agency made a consent decree in 2012 to settle claims that the Healy No. 1 violated Clean Air Act provisions and potential increase when talks began about restarting Healy Plant 2.
GVEA did not admit liability to the violation claims included excessive emissions of nitrogen and sulfur oxides and by extension high particulate matter, as well as impacting visibility around Denali National State Park.
The decree stipulates GVEA must either retire the plant by the end of 2024 or replace its environmental control systems. The utility estimates the upgrades will cost at least $30 million and would include the installation of a Selective Catalytic Reduction (or SCR).
An SCR system converts nitrogen oxides into diatomic nitrogen and water. Another chemical, such as ammonia, is added into the process to further reduce nitrogen oxides and finalize the breakdown.
“GVEA receives dry pelleted Urea (essentially fertilizer) which is mixed with water to create a 50% urea solution,” said Meadow Bailey, GVEA Director of External Affairs & Public Relations. “This solution is injected into the SCR system where it is decomposed into ammonia.”
Healy Plant No. 2 uses the same system.
The overall result is a massive reduction in emissions. The EPA estimates the improvements, when completed, would reduce annual emission rates by 72%.
The consent decree also required improvements be made to the 50-megawatt coal-fired Healy No. 2, formerly known as the Clean Coal Project. GVEA purchased Healy No. 2 from the Alaska Industrial Development and Export Authority in 2013, ending a lawsuit between the two parties
The consent decree also requires GVEA to comply with annual tonnage limitations for nitrogen oxides and sulfur dioxide and continuously monitor emissions.
GVEA was fined $115,000 in civil penalties and required to fund $250,000 worth of environmental mitigation projects.
“It’s very large and would be built next to the plant,” said Chris Forrest, GVEA’s acting director of power supply.
Bailey said if GVEA decides to upgrade Healy No. 1, it will impact ratepayers down the road.
“As with any operational or capital cost incurred by GVEA, those costs would ultimately be passed onto our members,” Bailey said.
The cost, she said, was originally estimated at $70 million but has been planning since the consent decree was established in 2012.
“GVEA conferred with industry professionals, equipment vendors, and consultants, to identify a cost estimate specific to the Healy Unit 1 plant,” Bailey said. “Late in 2021, to ensure accurate pricing information was used in our analysis in the event GVEA’s board ultimately chose to install the SCR, GVEA issued a Request for Proposal for the SCR and received bids consistent with the $30 million estimate.”
If closed, Bailey said it would be hard to determine how it will impact employees. GVEA has 68 at both Healy sites and work interchangeably between the two plants.
“GVEA recognizes the value and importance of our employees, and we will always work to identify opportunities for our employees, regardless of the decision ultimately made,” Bailey said.
‘What the FERC!’ Republican group drags agency into campaign
Miranda Wilson, Energywire, May 18, 2022
A six-figure advertising campaign targeting U.S. senators reflects increased politicization of the Federal Energy Regulatory Commission, analysts say.
A Republican-aligned political advocacy group has launched a six-figure digital advertising campaign targeting the Federal Energy Regulatory Commission and Democrats in swing states, thrusting an agency that has traditionally been reserved for policy debates further into the political spotlight.
Paid for by the Common Sense Leadership Fund, the ads represent the first phase in a “sustained six-month” campaign to draw attention to policies from FERC and the Biden administration that the group says have contributed to high energy costs. Critics say the group’s messaging is misleading.
A national version of the ads, with images of Biden, House Speaker Nancy Pelosi (D-Calif.) and Rep. Alexandria Ocasio-Cortez (D-N.Y.), are running on Google, Facebook and YouTube in Washington, D.C., the group said. Similar ads featuring images of Sens. Maggie Hassan (D-N.H.) and Catherine Cortez Masto (D-Nev.) are running on the same platforms in New Hampshire and Nevada, respectively.
“What the FERC! Biden’s bureaucrats are intentionally raising your energy prices. Tell Democrats you’re sick of high gas prices,” reads the ad text, alongside a picture of a gasoline pump.
The campaign seems to reflect the increased political focus directed at FERC, said former Republican FERC Commissioner Neil Chatterjee.
“I’ve never seen FERC in a political campaign ad before, so it’s fascinating,” Chatterjee said. “This is about FERC being more on the radar.”
The agency is tasked with approving large energy projects, such as interstate natural gas pipelines and hydroelectric dams. It also oversees the bulk power system, but it does not have oversight of gasoline prices.
Members of Congress cannot be responsible for the actions of FERC, given its status as an independent agency, Tyson Slocum, director of the energy program at Public Citizen, said in response to the ads. He called the campaign “ridiculous.”
“[FERC has] very limited rate jurisdiction over oil pipelines — but no ability to impose environmental standards on oil pipelines (like they do for natural gas), so this attempted link of gasoline prices and FERC is simply fraudulent,” Slocum said in an email.
In response to the criticism, Colin Reed, founding partner of South & Hill Strategies, a consulting firm working with the political fund, said the gas pumps represent energy to Americans “who are suffering record high prices across the board.”
“If this is the best argument for defending the Biden Administration’s anti-energy policies, we look forward to the debate,” Reed said in an email.
Hassan and Cortez Masto are both first-term senators running for reelection in what political analysts say could be a tough year for Democrats. POLITICO predicted last month that the November Senate race in New Hampshire “leans Democratic,” while the race for Cortez Masto’s Senate seat is a “toss-up.”
Hassan’s campaign did not respond to a request for comment. A spokesperson for Cortez Masto’s campaign said the senator has “consistently fought to lower gas prices for Nevada families.”
“[Cortez Masto] will continue to call out Big Oil corporations and hold them accountable for rising costs,” Sigalle Reshef, the campaign’s spokesperson, said in an email.
FERC and the ‘green agenda’?
FERC declined to comment on the new ads, but they come as the five-person commission has already been in the political spotlight.
Last year, for example, Rep. Sean Casten (D-Ill.) launched a campaign focused on FERC’s role in setting policies that affect renewable energy and climate change (Energywire, July 29, 2021).
More recently, the commission issued a pair of policies in Februarythat would modify the process for approving new natural gas projects, adding new considerations for climate change, environmental justice communities and landowners affected by pipelines. Part of the intention was to ensure that FERC would weigh all benefits and costs before permitting new natural gas pipelines, as well as to make FERC permits more legally durable, according to Democratic Chair Richard Glick (Energywire, Feb. 18).
But two weeks after FERC’s Democratic majority approved the policies, the Senate Energy and Natural Resources Committee held a hearing on the issue. Committee Chair Joe Manchin (D-W.Va.) called the decisions “a shortsighted attack on fossil fuel resources.”
The following month, FERC turned the policies into “drafts” for further consideration (Energywire, March 25).
According to Reed, the proposed policies were an impetus behind the ads. Largely, the Biden administration has relied on FERC “to stop energy projects and fulfill the green agenda that has been stymied by fellow Democrats in Congress,” noting Manchin’s criticisms.
Travis Fisher, president, and CEO of the Electricity Consumers Resource Council, who also served as an adviser to former Republican FERC Commissioner Bernard McNamee, said he is concerned about the impacts of FERC’s proposed pipeline policies on electricity prices and reliability. But those policy debates should be addressed in “the relevant FERC docket,” not through political ads, Fisher said.
Still, Chatterjee — a former aide to Sen. Mitch McConnell (R-Ky.) — said the point of the ads may be to show that FERC’s actions “are tied to high energy prices.”
“I think people think it’s an effective political argument to make right now that it’s policy decisions that have contributed to high energy prices,” Chatterjee said. “It’s likely to be a potent argument this fall on the campaign trail, because energy prices sadly are going to remain high for the foreseeable future.”
As a tax-exempt social welfare organization, the Common Sense Leadership Fund is not required to disclose its funding sources or its spending. It has previously run ads against the “Build Back Better Act,” and it is spending “multiple six figures” on the latest round of ads, Reed said.
Jared Leopold, a Democratic consultant, and co-founder of Evergreen Action, said the ads will be ineffective, given their use of the FERC acronym, with which many voters are unfamiliar.
“The facts are clear: gas prices are increasing because of [Russian President] Vladimir Putin and greedy fossil fuel corporations, not a non-binding proposed rule at FERC,” Leopold said in an email. “Senators Hassan and Cortez-Masto have taken strong stands in support of the Build Back Better Act’s climate investments, which would save Americans average of $500 in energy costs and reduce our reliance on petrostates like Russia. That’s a great record to run on.”