The market dynamic puts the shale oil and gas industry in a position to make some changes and start spending more on production growth, Ben Cahill of the Center for Strategic and International Studies told Jeremy.

Cahill assessed the sector to have spent the last year in a “defensive posture,” working especially hard to please investors after struggling through 2020.

He added that companies are still “toeing the line of capital discipline” — paying debts, giving back to shareholders, and holding off on lots of new drilling — but that conditions are changing.

“It’s safer for companies to contemplate growth this year. Not a ton of growth — it’s going to be controlled, moderated growth, but the market is signaling that we need this supply,” said Cahill, who is a senior fellow in CSIS’s Energy Security and Climate Change Program.

Prices for crude oil and natural gas on various benchmarks are helping drive that change of conditions.

Brent crude has been tracking up and closed above $80 all week. West Texas Intermediate crude is also up around that mark.

“With higher oil prices, you can achieve a lot of things at the same time. You can meet your investor demands and still contemplate a bit of growth,” Cahill said.

Benchmark gas futures in Europe showed extreme volatility at the end of last year before falling, but contracts for February have closed in the 80-96 euro per megawatt hour range all week.

Those kinds of pricing conditions are the opposite of what producers faced during 2020 and its aftermath, which reached into 2021.

“They had to worry about weak demand. They had to cut spending, and so they had to shift to a lower gear. But naturally, that meant that at some point, you have to start worrying about depletion — depletion of well inventories or new targets,” Cahill said. “You can only do that for so long before you start to sacrifice future production growth and cash flow.”

Fossil politics: Cahill estimated that some firms could raise production between 10% to 15%, something the Biden administration would be sure to welcome after Energy Secretary Jennifer Granholm’s exhortation to the industry last month to “hire workers” and to “get your rig count up” after holding out on such calls.

The administration’s other strategies to affect the higher prices, i.e., prodding OPEC, urging the FTC to investigate malpractice among oil firms, and opening the Strategic Petroleum Reserve, all would more or less mesh with its clean energy goals in a way that boosting domestic production does not, but they have otherwise yielded little to no demonstrable results.

The turn now to domestic producers for more output is basically what industry groups and Republicans have said the administration should do all along, even if producers weren’t prepared financially or operationally to plow ahead with additional production as Cahill assesses they are now.

Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writer Jeremy Beaman (@jeremywbeaman). Email [email protected] for tips, suggestions, calendar items, and anything else. If a friend sent this to you and you’d like to sign up, click here. If signing up doesn’t work, shoot us an email, and we’ll add you to our list.

BLM PROPOSES CHACO CANYON LANDS WITHDRAWAL: The Bureau of Land Management yesterday proposed to withdraw some 351,000 acres of public lands surrounding Chaco Culture National Historical Park from eligibility for new oil and gas leasing.

The Biden administration announced its intention to withdraw the lands back in November and seeks a 20-year ban on new leasing, which covers a 10-mile radius around the park. Now begins a two-year segregation period as Interior takes public comment and evaluates the application.

BLM said the proposed withdrawal “builds on years of efforts by Pueblos and Tribes, local communities, advocates, and elected officials to protect the greater Chaco Canyon area,” and the proposal was generally well-received by environmental groups when it was announced, but some expressed displeasure that the administration hasn’t done more to restrict drilling.

“Until the Biden administration ends fossil fuel extraction on federal lands and cuts Big Oil’s stranglehold on our energy future, New Mexico will serve as one more reminder of Biden’s failure to protect the country’s climate and communities from profiteering corporations,” Food & Water Watch Policy Director Jim Walsh, whose organization is part of the Greater Chaco Coalition opposing drilling on federal lands, said in a statement yesterday.

Separately, members of the Navajo Nation’s leadership have altogether opposed the 10-mile buffer, having criticized the administration for cutting off mineral access to lands to which their people are entitled and failing to consult the tribe adequately.

UK NUCLEAR PLANT SHUTDOWN: Operators of the Hunterston B nuclear power facility in western Scotland will shut down the plant today after 46 years of service.

French multinational utility Electricite de France SA, which runs the plant, calculates that since it began operations in 1976, Hunterston B has produced electricity equivalent to power every home in Scotland for nearly 31 years.

The plant’s closure takes a major source of carbon emissions-avoiding power out of the energy mix, and EDF says the emissions avoidance enabled during the plant’s life, compared to gas-generated power, is like taking every car off Scotland’s roads for 19 years.

Nuclear in Europe: Hunterston B’s shuttering comes during something of a volatile time for nuclear power in Europe. Leading economy Germany just shuttered three reactors at the end of last month, and the European Commission’s proposed inclusion of nuclear power in its green energy taxonomy has prompted significant pushback from opponent governments in Germany and Austria, as Jeremy writes in our latest magazine.

That pushback contrasts with the energy plans of other leading economies such as France (currently suffering grid strains due to several nuclear plants being offline) and the United Kingdom, which are pursuing advanced nuclear technologies, and smaller ones such as Romania, Poland, and Ukraine, which are doing the same.

NRC DENIES OKLO LICENSING APPLICATION: The Nuclear Regulatory Commission announced yesterday it had denied Oklo Power’s application to construct and operate its Aurora compact fast reactor plant in Idaho.

Andrea Veil, NRC’s director of the Office of Nuclear Reactor Regulation, said in a statement the application “continues to contain significant information gaps in its description of Aurora’s potential accidents” and that the commission, therefore, cannot continue with its review.

Oklo told Power magazine its application, submitted nearly two years ago, was the first for an advanced plant and that “there are many new things for all to learn from and work through to support a successful review.”

The company has 30 days to request a hearing on the denial.

IEA PROPOSES DROPPING DATA PAYWALL: The International Energy Agency’s executive board late last year approved removing the paywall from its data sets, Quantum Commodity Intelligence reported.

IEA member countries must still approve the decision and commit to increasing contributions to the organization to make up for lost revenue.

Executive Director Fatih Birol, in a December email reviewed by QCI, expressed hope that the agency could find a solution “in the interests of boosting market transparency and promoting good energy/climate decision making.”

WHITE HOUSE RELEASES DETAILED LIHEAP ALLOCATIONS: The White House released a list this morning detailing how much each state will receive under the Low Income Home Energy Assistance Program, which got $4.5 billion in additional funding via the Democrats’ American Rescue Plan.

The announcement also said seven utilities, most of which are located in the D.C. area, agreed to terms laid out in an earlier request by the administration urging them to avoid power shut-offs.

The Rundown

Bloomberg ‘Crazy’ carbon offsets market prompts calls for regulation

Wall Street Journal Kazakhstan unrest pushes up uranium and oil prices

E&E News Shareholder climate activists aim for ‘watershed year’ 

Calendar

WEDNESDAY | JAN. 12

10 a.m. The American Petroleum Institute and Energy Citizens will host the 13th annual 2022 “State of Energy” forum.

THURSDAY | JAN. 20

12 p.m. The National EV Charging Initiative will host a first-of-its-kind electric vehicle summit.