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OIL AND GAS PUSH BACK: The oil and gas industry is pushing back against Democrats’ charges that companies are strategically sitting on federal land leases and drilling permits to keep fuel prices, and therefore revenues, up.
Biden administration officials and congressional Democrats have gone on offense against the industry during this period of record gasoline prices, accusing firms of price gouging while also insisting oil and gas companies have all they need to produce more oil, and now.
House Speaker Nancy Pelosi said industry players, who have insisted the administration needs to more consistently issue drilling permits and hold lease sales to show investors it’s safe to invest in fossil fuels, “don’t need to be upending our initiatives to save the planet from the climate crisis” and have all the parcels they need to produce oil.
“If they want to drill, they have places to drill. Use it or lose it,” Pelosi said last week. “Let somebody else drill there.”
Industry’s view: Erik Milito, president of the National Ocean Industries Association, suggested critics either misunderstand or misrepresent the mechanics of producing oil and gas on federal lands and waters.
“The law is ‘use it or lose it,’” Milito said of leasing and permitting, noting that the leases auctioned off to companies have fixed terms during which they can be developed. “If at the end of it you’re not producing oil or gas, it goes back to the government.”
He explained that companies pay royalties of tens to hundreds of thousands of dollars to the federal government each year and have every incentive to produce oil and gas once they receive permitting, particularly offshore operators, where projects are especially capital intensive. A deepwater project can cost up to $5 billion, Milito said.
“Companies are not in a position where they want to sit on leases when they’re not going to be able to advance them as part of their explorationary planning portfolio,” he said. “It’s a situation where they give them back at the end of the term or they give them back before then, because they spend time and money to analyze and review those leases and determine whether or not they truly have good prospects for economic commercial recovery of oil or natural gas.”
But it takes time: Milito said further that even once Interior issues initial drilling permits, it’s not as simple as setting up a rig to extract oil.
“If you find oil and gas and in quantities where you think you might be able to develop it, then you got to drill additional wells — delineation wells — to determine whether or not there’s a field there that will allow you to build on a project and produce oil or natural gas and in quantities that’ll make sense for you to bring it to market in an economic way,” he said.
Offshore also requires additional permitting for things like securing rights-of-way that can involve approvals from the additional federal agencies, including the defense, commerce, and transportation departments — all of which adds additional time to the process.
Offshore developments can end up being incredibly lucrative, which is why companies can finance them to the tune of billions of dollars, and why they are incentivized to start drilling, Milito said.
“These oil and gas companies are in the business of producing oil and natural gas,” he said. “They’re not in the business of hoarding acreage.”
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LEASING PROGRAM TO PICK BACK UP AFTER COST OF CARBON APPEAL: The Interior Department will pick back up its oil and gas leasing and permitting planning after it said such activities would be delayed due to a federal judge’s February decision enjoining the administration’s social cost of carbon metric.
A appellate court overturned that decision last week at the request of Justice Department representing the Biden administration, having determined that plaintiff red states lacked standing.
“With this ruling, the department continues its planning for responsible oil and gas development on America’s public lands and waters,” Interior spokesperson Melissa Schwartz said in a statement.
“Following the original ruling, Schwartz had said “delays are expected in permitting and leasing for the oil and gas programs,” and Justice Department lawyers said in a legal filing the decision would upend activities and rulemakings across agencies that had relied on the higher cost metric in their analyses.
EUROPEAN GAS CHEAPEST SINCE WAR STARTED: Natural gas on the European benchmark Dutch TTF fell to around $33 per metric million British thermal units today, its lowest price since Russia invaded Ukraine.
Pipeline exports from Norway to elsewhere in Europe are up from Friday, while flows of Russian gas to Western Europe are down compared to a week ago, per data from Rystad Energy.
Kaushal Ramesh, senior analyst for the firm, noted that the market situation is “as precarious as ever” with ceasefire talks showing little movement.
That still ain’t cheap: A $33 per mmBtu premium is likely more than welcome to buyers. TTF prices were twice that for a period earlier this month.
Meanwhile, gas prices in the U.S. are a fraction of those in Europe. Henry Hub gas is around $4.8 per mmBtu today, while gas on the northeastern benchmark Algonquin Citygate is around $4.02.
MARYLAND GAS TAX HOLIDAY TAKES EFFECT: Drivers who fill up in Maryland over the next month should be paying less for gasoline than they would have overwise.
Maryland Gov. Larry Hogan signed a bill on Friday to suspend the state’s 36.1-cent gasoline and 36.85-cent diesel taxes for 30 days after the proposal received unanimous support from both legislative chambers.
Hogan said the legislation is “not a cure-all” and noted that volatility in the oil market would continue to affect prices for fuel.
A warning to retailers: Maryland Comptroller Peter Franchot, who is also running for governor, said “the hammer” would come down on any gas stations that don’t lower prices now that they’re not required to remit the per-gallon tax.
HOUTHIS ATTACK SAUDI OIL AND GAS INFRASTRUCTURE: Yemeni Houthis over the weekend launched multiple drone attacks on a Saudi petroleum distribution terminal, as well as a natural gas plant and a refinery, according to the Saudi energy ministry.
The ministry said in a statement yesterday that the attacks have led to a temporary reduction in output from the refinery.
National Security Adviser Jake Sullivan condemned the attacks and implicated Iran for supplying the Houthis with missiles and drones.
Meanwhile, the Saudi foreign ministry acknowledged that the attacks and more like them could have serious consequences for the already volatile global oil market. An unnamed official also said the Saudis would not accept responsibility for such additional attack-related supply disruptions, an ostensible knock on the Biden administration’s policy with regard to Yemen, Reuters reports.
UN CHIEF SAYS WORLD IS ‘SLEEPWALKING’ TO CLIMATE CATASTROPHE: UN Secretary-General António Guterres pleaded with world leaders to take urgent action on climate change, warning this morning that the global climate change target is “on life support” as countries scramble to secure energy supplies amid Russia’s ongoing war in Ukraine.
“As major economies pursue an ‘all-of-the-above’ strategy to replace Russian fossil fuels, short-term measures might create long-term fossil fuel dependence and close the window to 1.5 degrees,” Guterres told attendees of the Economist Sustainability Summit, referencing one of the most ambitious goals set in the 2015 Paris climate accord. That 1.5-degree goal “is on life support. It is in intensive care,” he said.
And as Russia’s war in Ukraine intensifies, he added, countries “could become so consumed by the immediate fossil fuel supply gap that they neglect or knee-cap policies to cut fossil fuel use.”
“The science is clear and so is the math,” Guterres said. “We are sleepwalking to climate catastrophe.”
IAEA CONFIRMS ‘PARTIAL’ ROTATION OF CHERNOBYL STAFF: Some 64 employees at the Chernobyl nuclear power plant were allowed to rotate out yesterday for the first time since Russian troops seized control of the facility more than three weeks ago, according to a statement from the plant. Ukraine’s nuclear regulator confirmed the move to IAEA, and confirmed they were replaced by other Ukrainian staff.
The move comes following reports that the facility’s 200 employees had been forced to do their jobs at Russian gunpoint for 600 hours under conditions of extreme fatigue, hunger, and stress.
IAEA Director General Rafael Mariano Grossi called it a “positive — albeit long overdue — development.”
“They deserve our full respect and admiration for having worked in these extremely difficult circumstances,” Grossi said of the staff who were allowed to return to their families. “They were there for far too long. I sincerely hope that remaining staff from this shift can also rotate soon.”
MEANWHILE, A NEW THREAT EMERGES: Ukraine’s state nuclear operator said today that they are unable to monitor radiation levels around Chernobyl––which it warned could cause radiation to rise “significantly” both at the Exclusion Zone and in nearby countries.
“There is no data on the current state of radiation pollution of the exclusion zone’s environment, which makes it impossible to adequately respond to threats,” state operator Energoatom said in a post this morning.
Energoatom added that seasonal wildfires, which occur most frequently in spring and summer, could also worsen the situation––especially since the city’s firefighting service has been unable to work amid the Russian occupation. “There is a high probability that in the spring and summer the intensity of forest fires in the Exclusion Zone may reach the maximum possible limits, which will lead … to almost complete burning of radioactively contaminated forests in the Exclusion Zone and, consequently, to significant deterioration of radiation in Ukraine and throughout Europe,” it said.
The Rundown
AP Hydropower eyes bigger energy role, less environmental harm
Euractiv LNG projects in the Gulf of Mexico boosted as Russian gas alternative
Washington Post As it enters a third year, California’s drought is strangling the farming industry
Wall Street Journal Oil market’s big winners: ‘Little guys’ who are eager to drill
Calendar
MONDAY | MARCH 21
11:00 a.m. The Securities and Exchange Commission will hold a meeting and vote on whether to propose amendments that would enhance and standardize registrants’ climate-related disclosures for investors.
WEDNESDAY | MARCH 23
10:00 a.m. The Senate Environment and Public Works Committee will hold a hearing to discuss U.S. energy security and investments in climate solutions.
