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REACTION TO LEASE SALE ANNOUNCEMENT: The Interior Department’s announcement Friday that it will hold onshore oil and gas lease sales delivered a major blow to environmentalists’ hopes for ending the program, and it makes the prospects of President Joe Biden being able to keep his “no more drilling” promise look even slimmer.
The department said it will move forward with lease sales of 173 federal parcels associated with sales planned during the Trump administration, but it scaled down the acreage by 80% and will charge a higher royalty of 18.75%.
Interior emphasized in its first line it was moving forward “in compliance with an injunction from the Western District of Louisiana,” namely the injunction which stopped Biden’s pause on the leasing program and which the administration had pointed to in defending its holding now-defunct Lease Sale 257.
The reforms weren’t enough to placate a number of green groups, which have been campaigning hard for Biden to keep at work to get his energy and climate agenda through Congress and to sidestep fossil fuels in his response to high energy prices.
Earthjustice President Abigail Dillen called the oil and gas leasing program “obsolete” and said while she appreciates the reduction in acreage and the royalty reforms, the administration’s decision to make more land available is “incompatible with meeting our climate obligations.”
“The best available science already shows that we cannot continue leasing on our public lands and meet President Biden’s stated climate goals,” Dillen said.
Collin Rees, U.S. program manager at Oil Change International, called it a “disastrous choice.”
“There’s no amount of regulation that can change the facts — ‘significantly reformed’ oil and gas lease sales will still result in selling off our public lands for deadly extraction that’s hurting communities and driving the climate crisis,” he said.
A line of disappointments: The review of the leasing program, which Biden ordered in concert with the pause, was itself a letdown for environmental groups and some in Congress, who said it wasn’t aggressive enough.
When the administration introduced the review after Thanksgiving, it had already frustrated many in its green constituency by going ahead with the Gulf lease sale days before.
Biden’s urging domestic oil producers to bring more oil to market and his joint task force for delivering more natural gas to Europe have further incensed green advocates, despite his emphasis that green energy is ultimately what can solve volatile energy prices.
Oil and gas players not happy, either: Oil and gas interests responded to the announcement on the sales with some version of “about time,” but were none too happy about the reduction in acreage or royalty changes.
Western Energy Alliance President Kathleen Sgamma said the reduction is “unwarranted and does nothing to show that the administration takes high energy prices seriously,” while she vented the higher royalty rate “increases the costs of production on federal lands, which already carry a higher cost than nonfederal lands.”
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TEXAS PIPELINE LEAK RENEWS HEATED METHANE DEBATE: A leaky, 41-centimeter pipe in Texas has been identified as the source of last month’s massive methane gas leak, which, according to one estimate, unleashed in one hour the same amount of harmful gas as the combined annual output of 16,000 U.S vehicles.
Details of the staggering leak—also known as an “ultra-emitter” event, emerged after the pipeline operator, Energy Transfer LP, last month reported a line break on an “unregulated gathering line” on its Big Cowboy pipe.
That line is part of a large, interconnected web of unregulated pipelines that span the U.S., linking production fields to larger gas transmission lines across the country.
Energy Transfer officials said they are conducting an investigation into the cause of the leak. Separately, the Texas Railroad Commission—which oversees the line—confirmed it is independently investigating the Big Cowboy incident, though it declined to elaborate further.
In total, the Big Cowboy leak released 52,100 thousand standard cubic feet of natural gas into the atmosphere, as well as an estimated 900 metric tons of methane gas, according to an estimate from the nonprofit Environmental Defense Fund.
According to Bloomberg, which first reported the news of the leak, that amount of methane will trap “about as much heat as 75,600 tons of carbon dioxide during its first two decades in the atmosphere.”
Why it matters: Though these ultra-emitter events are fairly infrequent and short, they have a lasting, outsized emissions impact. According to a February study published in the research journal Science, ultra-emitters account for as much as 12% of global methane emissions in the oil and gas sector.
And now, some say the damage caused by Big Cowboy leak serves as a harbinger for future “super-emissions” events, as the U.S. struggles to identify and fix its aging system of pipelines.
The IEA has urged oil and gas operators to adopt a “zero-tolerance approach” when it comes to methane releases, arguing that the potential consequences for the environment are too high.
Bill Caram, executive director at the Pipeline Safety Trust, told Bloomberg that often, there are ways to “significantly” minimize methane releases from pipelines. But these techniques have yet to be realized in the U.S., he said.
Since pipeline operators in the U.S. are reimbursed for “lost or unaccounted gas” through negotiated rates, the operators have “no financial incentive” to keep the gas in the pipe: “Ultimately, the consumer is paying for all of this climate-wrecking methane being released into the atmosphere,’’ Caram said
NATURAL GAS HIGH AND RISING: Natural gas is trading up again today at its highest price point in well over a decade.
NYMEX futures opened this morning at $7.37/mmBtu and have since tracked above $7.50. Prices have been steadily increasing all month, now standing more than 25% higher than when April began.
Gas demand has remained high largely due to relatively cool temperatures, the American Gas Association’s latest market report, released on Friday, noted.
Factors other analysts have noted, as we went over Friday, include lower storage levels and high demand for U.S. LNG in Europe, where prices in the $30/mmBtu range continue to support lots of LNG shipments.
A note on Europe: “While Europe retains some unused capacity for regasification, most of that capacity is located in the Iberian peninsula and the UK, providing little relief for some of the most energy starved countries in Central and Eastern Europe,” AGA said.
As for oil: Crude oil prices are also trading up today, coinciding with the end of Maryland’s gas tax holiday, which expired yesterday.
WTI is above $107 per barrel as of this writing, and Brent is trading around $112.
TURKEY: TOP US LNG RECIPIENT: The Turks were the top customers for shipments of U.S. LNG for the month of February, according to Energy Department data.
LNG Allies charted the data in a Friday tweet, which shows that Turkey brought in more than 40 billion cubic feet of gas that month.
France and Spain were nos. 2 and 3 respectively, and the top Asian customer was South Korea.
Europe is acquiring an increasing share of U.S. LNG shipments as it struggles with extremely high prices, and increasing even further the volume of LNG to Europe now has Biden’s backing.
SCOTUS TURNS DOWN SPIRE: The Supreme Court declined to take up an appeal by the operators of the Spire STL gas pipeline, who asked the court to toss the D.C. Circuit’s vacatur and remand of the pipeline’s FERC-issued certificate.
The denial was announced among others in an order list issued this morning.
Spire argued the D.C. Circuit’s decision, which was handed down in June 2021, shouldn’t have vacated FERC’s certificate for the operating pipeline in addition to remanding it back to the commission and asked the court to chime in on when “remand without vacatur, rather than vacatur, the appropriate remedy for an agency’s erroneous decisionmaking.”
Its petition also said the D.C. Circuit’s decision “imperils the supply of natural gas to hundreds of thousands of households and businesses in the St. Louis region.”
Spire made the same case to FERC in recent months in requesting a temporary operating certificate, which FERC granted.
The larger story: The Spire certificate, approved in 2018 by a majority Republican commission, was thrown out after the court determined it failed to adequately consider the project’s adverse effects to the environment.
Its fate is just the kind of thing that led the now Democrat-controlled commission to develop its controversial policy statements guiding pipeline approvals, which were introduced in February and have since been pulled back after an uproar from the gas industry and many Republicans.
EV BATTERY SHORTAGE IS ‘LOOMING,’ SAYS RIVIAN CEO: Rivian CEO RJ Scaringe is warning of a “looming” shortage of EV battery supplies in the U.S.—a challenge he believes will pose one of the biggest hurdles for U.S. automakers, who have scrambled to boost production of the battery powered vehicles.
There’s a huge supply-demand imbalance: EV demand has surged—both with the addition of more affordable models, and the recent uptick in fuel prices. But unlike traditional vehicles, Scaringe noted, most of the supply chain for EVs has not yet been built. Manufacturers need supplies such as cobalt, lithium and nickel for battery production. Some car companies are even constructing their own battery plants in a bid to procure as much of the supply as possible, he said, according to the Wall Street Journal.
The scale of the problem: “Put very simply, all the world’s cell production combined represents well under 10% of what we will need in 10 years,” he said, “Meaning, 90% to 95% of the supply chain does not exist,” he said.
Scaringe said he expects to see shortages “everywhere from the mining of raw materials, to processing them, to building the battery cells themselves,” he said.
OKLAHOMA GOVERNOR TALKS GREEN JOBS: Oklahoma Gov. Kevin Stitt is courting green technology companies to diversify his state’s fossil fuel-centric economy, the Washington Examiner’s Kaelan Deese reports.
“People have a misconception of Oklahoma, that we’re just oil and gas — which, we love our oil and gas, and we’ll have an honest conversation with you about how that’s so important. But we’re leaning into alternatives as well,” Stitt said.
He also spoke about his pledging of $15 million in incentives over the next four years to Los Angeles-based electric vehicle manufacturer Canoo, which chose the city of Pryor to house its planned 1,500-employee manufacturing facility, and said the state is “leaning heavily into hydrogen” and carbon management technologies.
“We’ve got tremendous universities here that focus on the energy transition. So we’ve had honest conversations for decades about what does that look like? How do we let the free market work? And at the same time, having a robust reliable electricity grid,” he said.
Oklahoma is a top oil producing state and its storage capacity in Cushing, the delivery point for WTI crude oil, is among the largest in the world.
PRUITT JUMPS INTO OK SENATE RACE: Former EPA head Scott Pruitt is running for U.S. Senate in Oklahoma.
Pruitt, who served as the Trump EPA’s administrator for a year and some change before resigning amid several scandals, paving the way for Andrew Wheeler to take over in 2019, filed to run Friday and faces 12 other Republican candidates in the primary for retiring Sen. Jim Inhofe’s seat.
The Rundown
Wall Street Journal Utilities plan huge electric grid upgrades, adding to power bills
Associated Press Congress seeks compromise to boost computer chip industry
Calendar
THURSDAY | APRIL 21
10:00 a.m. The Federal Energy Regulatory Commission will hold its monthly open meeting.
11:00 a.m. Woodridge, Ill. The House House Science, Space, and Technology Subcommittee on Investigations and Oversight will hold a field hearing in Illinois on electric vehicle batteries and U.S. critical minerals supply.
THURSDAY | APRIL 28
The House Science, Space and Technology Committee will hold a hearing on the findings of an intergovernmental panel report, titled, “Climate Change 2022: Mitigation of Climate Change.” Location and time TBA.
