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Key Vote NO on H.R. 5376

August 12, 2022 by Leave a Comment

The American Energy Alliance urges all members to oppose H.R. 5376, the 2022 budget resolution reconciliation legislation.

The reconciliation package is filled with new taxes and spending that are bad policy at any time, but especially dangerous at a time of high inflation and with the economy tipping into recession. As multiple independent analyses show, this legislation will not reduce inflation despite the title adopted by its proponents. More government spending, more subsidies, and more taxes are hardly what a shaky economy, already reeling from excessive government spending, needs right now.

The energy taxes included in the package are especially foolish at a time when even the Biden White House, which has vowed to end oil and gas use, is begging for more domestic production in the face of high energy prices. The legislation would impose a new tax on methane, it would increase taxes on oil and gas production on federal lands, increases taxes on coal production, and reimposes a long-expired environmental tax on oil production. Every one of those tax increases will be passed on to consumers, and not just in the form of higher prices at the pump or costlier electricity bills. Everything in this country moved by trucks, running on more expensive diesel, will cost more. Groceries, clothing, appliances, and even Amazon deliveries — all more expensive. This legislation is irresponsible and should be opposed.

The AEA urges all members to support free markets and affordable energy by voting NO on H.R. 5376.  AEA will include this vote in its American Energy Scorecard.

Contact your representative with the tool below and tell them to ditch the Manchin/Schumer inflation acceleration act TODAY!

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Manchin Bill Attacks American Coal Miners While Doing Nothing About Inflation

August 8, 2022 by Leave a Comment

According to the University of Pennsylvania’s Wharton school, “The Inflation Reduction Act of 2022” championed by Senator Manchin and Senator Schumer likely would not reduce inflation at all. The study, from the Penn Wharton Budget Model, estimates the proposed bill would cause inflation to ‘very slightly’ rise until 2024 then possibly decline after that. Overall, the researchers indicate that there is “low confidence that the legislation will have any impact on inflation.” But, inflation is what voters are most worried about, which is why the bill’s pretentious name is “inflation reduction.” According to a recent Census Bureau survey, four in 10 Americans say it is somewhat or very difficult to cover usual household expenses. The Wall Street Journal reports that more and more Americans are shopping at dollar and discount stores to help cope with the high prices for food and sundry items, with average spending increasing 71 percent from October 2021 to June 2022 at discount chains. Further, Americans in coal-rich states, such as West Virginia, Senator Manchin’s state, will likely be hurt the most.

West Virginia is the nation’s second-leading coal producer and the state generates 88 percent of its electricity from coal. Previously, Senator Manchin told his constituents that we must “innovate not eliminate.” But, the deal Manchin crafted with Senate Majority Leader Charles Schumer will do the opposite. It will reduce coal-producing operations and do little to innovate coal assets, as the subsidies for renewables are so generous that more coal generators will be shuttered. By increasing the lofty incentives that already extend to renewable energy, the nation’s baseload, affordable and reliable coal electric generation assets will continue to be devalued and thrust into rapid decline.

In defiance of Manchin, West Virginia is taking its own action against banks and financial firms that have stopped supporting the coal industry. West Virginia’s Treasurer Riley Moore placed five companies on a state-mandated list of restricted financial institutions which engage in a “boycott of energy companies.” The five financial firms that practice environmental, social and governance (ESG) against traditional energy companies that are now ineligible for state banking contracts are BlackRock Inc., Goldman Sachs Group Inc., J.P. Morgan Chase & Co., Morgan Stanley and Wells Fargo & Co.

West Virginians know that if passed, the act will increase the prices that Americans pay for energy, make the United States less energy secure, and likely do nothing for the environment despite Democrat Senators buying into the argument that it will reduce carbon emissions by 40 percent by 2030. No matter what actions the United States takes, large emitters such as China and India will continue to consume coal to ensure reliable and affordable power for their citizens and their economies. In 2021, China, the world largest emitter of carbon dioxide, and India, the world’s third largest emitter of carbon dioxide, together were responsible for over 38 percent of the world’s carbon dioxide emissions. Oxford University’s Eyck Freymann, a reader of Chinese policy in Chinese, indicates: Beijing has already decided it makes more sense to live with rising carbon dioxide levels than combat them.

And, that is what they are doing. In April, China announced it will increase coal output by 300 million tons this year—that increase alone being about half of total U.S. coal production.  China already uses more coal for electrical generation than the rest of the world combined. China’s think tanks are expecting coal-fired power generation capacity to increase by 150 gigawatts over the 2021-2025 period. These plants easily operate for 4 or 5 decades. The new plants would put China’s known coal-fired generation capacity at 1,230 gigawatts—about 6 times the U.S. current coal-fired generating capacity. China’s carbon dioxide emissions in 2021 were over twice those of the United States and they are growing, exceeding 10,500 million metric tons in 2021. Between 2007 and 2021, the United States decreased its carbon dioxide emissions by 20 percent while China increased its carbon dioxide emissions by 46 percent.

Fossil energy accounted for 82 percent of global energy consumption last year, down from 85 percent in 2016, so in 5 years the world has made little progress to decrease their use, despite western countries providing massive incentives. Total energy consumption continues to grow, increasing last year by 5.8 percent, including a 6.0 percent increase in coal with China and India accounting for over 70 percent of its growth. Coal remained the dominant fuel for electricity generation with a 36 percent share. Non-hydroelectric renewable energy increased by 15 percent led by wind and solar power, which garnered 10 percent of the electricity market. The increase in non-hydro renewable energy only supplied 29 percent of the increase in total energy last year. With the demand for energy continuing to grow as a billion-plus humans seek to rise from poverty, it is unlikely that fossil fuels will disappear at the rate western countries have pushed for.

Conclusion

West Virginians know that the Manchin Schumer bill will increase energy prices and destroy their way of living. Inflation is skyrocketing and this bill will not reduce it despite the claims by these senators. Further, it will destroy the U.S. energy system, forcing Americans to rely on expensive and unreliable intermittent renewable energy with expensive batteries as back-up that cannot do the job.

*This article was adapted from content originally published by the Institute for Energy Research.

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The Unregulated Podcast #95: ShuManchin

August 5, 2022 by Leave a Comment

On this episode of The Unregulated Podcast, Tom Pyle and Mike McKenna discuss Joe Biden going back on his campaign promise on raising taxes and a granular breakdown of the Schumer/Manchin “climate” bill.

Links:

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Manchin’s Big Giveaway for EV Buyers in Conflict With Biden’s War on Mining

August 5, 2022 by Leave a Comment

The Manchin/Schumer ”Inflation Reduction Act“ keeps and extends the $7,500 tax credit on electric vehicles and removes the numerical cap but there are a number of stipulations related to obtaining the full credit, one of which is where the battery materials are made. To qualify for $3,750 of the credit, an increasing share of a vehicle’s battery minerals such as lithium and nickel must be extracted or processed in the United States or in a country with which the United States has a free-trade agreement, starting at 40 percent in 2023 and increasing to 80 percent in 2027. The other half of the credit will only be available for vehicles in which a majority of its battery components are made in North America, starting at 50 percent in 2023 and growing to 100 percent by 2029. The credit ends on December 31, 2032.

What makes these stipulations an issue for buyers and automakers is that most of the world’s critical minerals are mined in countries such as Russia, China, Indonesia and the Democratic Republic of Congo with which the United States does not have free-trade agreements. In fact, China dominates the world battery market and the processing of the materials needed to produce the battery. About 80 percent to 90 percent of battery components are made in China, which refines 68 percent of the world’s nickel, 73 percent of cobalt, 93 percent of manganese and 100 percent of the graphite in electric vehicle batteries. China dominates mineral refining and battery component production because it invested heavily in mineral extraction over the past several decades and because it is far more lenient on regulation than the United States and Europe.

Senator Joe Manchin insisted on these requirements to ensure that a critical mineral mining industry develops in the United States. Since President Biden has been in office, a number of mining projects that have been under development for years or even decades have been turned down for permits or have had them revoked. In January, the Biden administration revoked federal leases for the Twin Metals mine in Minnesota that contains copper, nickel and cobalt. In June, the U.S. Forest Service recommended a region-wide ban on mineral mining in the Superior National Forest. In Minnesota, legal challenges and permitting issues are holding up the PolyMet copper and nickel mine, which has undergone over a decade of environmental review. Environmental groups have sued to block a lithium mining project in Nevada and two copper mines in Arizona (Rosemont and Resolution) are under federal environmental review and legal suits from environmentalists. Copper producers are worried about the opposition to building new mines, with major projects stuck in limbo from the United States to Peru. California recently imposed a tax on in-state lithium production, which could make projects unprofitable.

Regulators suspended a right-of-way for a road in Alaska, which provided access to one of the world’s largest mineral deposits including zinc and copper. On March 11, the Bureau of Land Management notified the Alaska Industrial Development and Export Authority that it suspended a previously issued 50-year right-of-way that covers 25 miles of a proposed 211-mile road connecting the Ambler Mining District to Alaska’s highway system. Biden’s Department of Interior determined that the effects the proposed Ambler Road might have on subsistence uses were not properly evaluated and that tribes were not adequately consulted prior to issuing the right-of-way, despite seven years of such evaluations and consultations. Further, BLM’s right-of-way suspension notice did not identify any specific deficiencies or corrective action plan, which leaves the development authority at a federal roadblock without any indications of what needs to be done or how long it will take to gain access to the Ambler Mining District.

Other Electric Vehicle Tax Credit Stipulations

The bill would change the credit from an electric vehicle credit to a “clean” vehicle credit, allowing fuel cell vehicles to qualify. To qualify for the credit, the vehicle must undergo final assembly in North America (i.e., United States, Mexico or Canada).

The bill removes the current cap of 200,000 electric vehicles per manufacturer that can receive the credits.  In the past, the cap had been established to ensure the commercialization of the new technology.  Now it is a direct subsidy in pursuit of Biden’s net zero carbon dioxide emission dream. Tesla and General Motors have used up their quotas, and companies such as Ford Motor and Toyota will soon lose access to the credits.

The bill imposes an income limit with phase out based on the taxpayer’s modified adjusted gross income. The phase out starts if the adjusted gross income exceeds $300,000 for a married couple filing jointly, $225,000 for a head of household, and $150,000 otherwise. The bill also establishes a price limit to qualify for vans, SUVs and pickups ($80,000) and sedans ($55,000).

The bill would also create a used electric vehicle credit through 2032, capped at the lessor of $4,000 or 30 percent of the sales price. The credit amount begins to phase out if the taxpayer’s adjusted gross income is above certain thresholds: $150,000 for married couples filing jointly, $112,500 for head of household, and $75,000 otherwise.

The bill would create a new up-to 30 percent credit (not to exceed $40,000) for the cost of commercial electric vehicles and fuel cell vehicles through 2032.

The bill also extends the 30 percent credit for charging/refueling stations through 2032. It would provide a base rate of 6 percent of expenses up to $100,000 and a bonus rate of 30 percent of expenses up to $100,000. To qualify for the bonus rate, taxpayers must meet labor requirements.

Conclusion

Electric vehicle automakers received a tax credit extension and the removal of the cap on the number of vehicles sold in the proposed bill, but the stipulations on the battery component and minerals needed may result in no tax credit at all if the Biden administration continues with the barriers to mining that it has so far instituted. The Biden administration has revoked leases and withheld permits on several critical mineral mines in the United States, many of which have spent a decade or more getting permits and holding consultations with tribes and communities. Biden’s electric vehicle goals are dependent on the tax credit, but those goals will not be met if Biden’s war on mining continues.

*This article was adapted from content originally published by the Institute for Energy Research.

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Key Vote YES on S.J. Res. 55

August 4, 2022 by Leave a Comment

The American Energy Alliance urges all Senators to support S.J. Res. 55, the Congressional Review Act resolution of disapproval for the Council on Environmental Quality revisions to implementation rules for the National Environmental Policy Act.

Construction of infrastructure of all types takes far too long, and costs far too much, in the United States. One of the primary reasons for this excessive time and expense is the tangled mess of the NEPA review process. This costly and lengthy process, large parts of which are unnecessary for environmental protection, is in desperate need of reform. The reforms undertaken under the Trump administration were small and incremental changes. An improvement, but hardly a true fix.

Unfortunately, the Biden administration has chosen to reverse even these minor changes to the NEPA process. This reversal mean that even more of the money authorized by last year’s bipartisan infrastructure legislation will end up wasted on NEPA bureaucracy. The Biden administration’s action to increase the costs and slow infrastructure development will add to already high inflationary pressure and weigh on an economy entering recession. It is harmful policy and should be opposed.

The AEA urges all members to support free markets and affordable energy by voting YES on S.J. Res. 55.  AEA will include this vote in its American Energy Scorecard.

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Manchin Gives Away Billions To Left Wing Interests Via Inflation Act

August 4, 2022 by Leave a Comment

The Federal government has already spent well over $100 billion on renewable credits for electricity production since their enactment three decades ago, and the “Inflation Reduction Act” will cost taxpayers another $98 billion. The proposed bill is full of incentives for renewable energy technologies, chief among an extension of wind and solar tax credits significantly increasing subsidies for them, provided additional criteria are met during construction. It also offers new tax credits for domestic manufacturing of solar panels and wind turbine parts as well as energy storage projects sited separately from renewable generation facilities. Wind and solar projects would effectively get an extension on tax credits for production and investment, as would stand-alone energy storage projects. If Senator Joe Manchin wanted to handicap natural gas and coal generators and force more retirements, this is certainly a way to do it. The United States would be forcing renewable energy in the same fashion as Europe has been doing.

The Renewable Tax Credits

The Production Tax Credit (PTC) and the Investment Tax Credit (ITC) are modified as follows:

  • The tax credit qualification for wind, solar and several other types of electricity-producing facilities would be extended to those starting construction before Jan. 1, 2025 (previously January 1, 2022).
  • The base production tax credit amount would be decreased to $0.003 per kilowatt hour (previously $0.015 per kilowatt hour). If the facility meets prevailing wage and apprenticeship requirements, the base production tax credit amount is multiplied by five (back to $0.015 per kilowatt hour). The base credit is also adjusted for inflation.
  • The phase out clause which reduced wind project PTC over time has been removed (previously 40 percent reduction to the base PTC rate). The removal of the phase out is not retroactive.
  • The base Investment Tax Credit (ITC) amount has been decreased to 6 percent (previously 30 percent). If the facility meets prevailing wage and apprenticeship requirements, the base ITC is multiplied by five (back to 30 percent).
  • The solar ITC phase out clause is removed (previously 26 percent going to 22 percent). The removal of the phase out is not retroactive.
  • There are new PTC and ITC uplift bonuses added to the calculated base rate based on domestic content (steel, iron, or manufactured product that is part of the project at the time of completion must be produced in the United States), energy community (a brownfield site, an area with significant fossil fuel employment, or a census tract or any immediately adjacent census tract in which, after December 31, 1999, a coal mine has closed, or, after December 31, 2009, a coal-fired electric generating unit has been retired), and low-income community requirements. These credits can be stacked (10 percent uplift each).
  • Solar projects have the option to claim the PTC in lieu of the ITC.
  • Stand-alone energy storage projects qualify for the ITC, which was not available previously. The ITC is available at the base 6 percent rate for projects starting construction before January 1, 2033. Afterwards, it starts phasing out (5.2 percent before January 1, 2034 and 4.4 percent before January 1, 2035).
  • Direct pay options for renewable developers would be limited to tax-exempt entities in the case of wind, solar and storage.  This is direct subsidies instead of tax treatments.
  • There are new manufacturing tax credits offered to companies that make crucial foreign-sourced equipment, including battery anodes, solar cells and wind turbine blades.
  • Domestic manufacturers could earn new production tax credits that vary depending on the precise item, such as polysilicon and inverters, along with processing of dozens of critical minerals.
  • The credit could also be claimed for offshore wind vessels, looking forward to the demand for vessels to construct and service offshore wind farms planned on the Atlantic seaboard.  The U.S. taxpayer would now be subsidizing ships.

Example of the Old and New PTC Credit

Assuming an average qualified facility produced 84,000,000 kilowatt hours per year, under the old rules for the production tax credit, it would be allowed a credit up to $1,512,000 (84,000,000 x .018 cents) each year for ten years as the phase-out was in effect. Under the proposed changes, provided the wage and apprenticeship requirements plus the domestic content usage are met, the credit would increase to $2,772,000 per year (84,000,000 x .03 x 1.10 percent) each year—83 percent higher—for ten years, resulting in an increase of over $12.6 million over a ten-year period. Note the base factors are inflation adjusted. Also, note that there are other up-lift factors not included in this example that could apply if the project qualifies.

Conclusion

The Senate’s proposed Inflation bill is full of investments and tax credits that encourage Biden’s transition to renewable energy, which is just force-feeding inefficient and expensive alternatives using taxpayer funds that elbow out reliable, affordable American natural gas and coal and raise electricity prices for consumers. Average electricity prices in the United States increased 7 percent from 2009 to 2017 despite the relative cost of coal and natural gas having declined and little new generating capacity being built, except for wind and solar power that were mandated by certain states. Several states with major increases in wind and solar power saw electricity prices increase by 18 to 36 percent during that period. Clearly, the political and media hype that wind and solar power are cheaper forms of energy is not true, based upon the results and the fact that the bill lards subsidies across most aspects of the Green New Deal’s vision of how to redesign the U.S. energy system.

Yet, Senator Manchin claims the bill specifically brings down energy prices. The only way that could be the case is if battery storage is free for it is not factored into the price of wind and solar power that need it for backup. In fact, it is very, very expensive. And the Inflation Reduction Act’s incentives do not make it free to consumers so his constituents, West Virginians, will see higher energy prices, heavily subsidized by taxpayers.

With all the spending on incentives and state mandates for wind and solar power, they together produced just 12 percent of our electricity and 5 percent of our primary energy last year.

*This article was adapted from content originally published by the Institute for Energy Research.

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Joe Manchin’s Economy-Wrecking Inflation and Tax Increase Act

August 3, 2022 by Leave a Comment

Last week, the day before the latest GDP data release showed the US economy tipped into recession in the first half of 2022, Senators Joe Manchin and Chuck Schumer announced a deal on a legislative package to be passed through the budget reconciliation process. That process allows the Senate to pass certain types of legislation with a simple majority vote, meaning that Democrats alone can pass partisan priorities. This deal represents an about-face from Manchin, given that just a couple of weeks ago he had pronounced any reconciliation bill on hold until the July inflation statistics were released. No one knows what prompted Manchin to suddenly stop caring about inflation, but just because Manchin may be done with inflation doesn’t mean that inflation is done with him, or with the American economy. 

The reconciliation deal is a collection of tax increases and subsidies for various special interests that will not reduce inflation, despite being titled the “Inflation Reduction Act.” Indeed, according to Manchin’s own preferred academic modelers at Wharton, the legislation will slightly increase inflation over the next several years. That should be obvious, given that the legislation would spend several hundred billion new dollars of federal money, adding to the inflationary pressure driven by the 2021 spending binge. Manchin claims that the tax increases in the legislation will offset that inflationary pressure, but the legislation mainly increases corporate taxes and taxes on energy production. Does he think that corporations will not pass on those tax increases to consumers in the form of higher prices? Does he think increasing taxes on energy will not increase the cost of energy? The reconciliation deal is practically designed to increase inflation.

The timing of the announcement of the deal was quite on the nose as well. The following day, GDP figures for the second quarter were released showing a contraction of 0.9%, which combined with the first quarter decline of 1.6% shows the US economy in a recession. In the teeth of this recession, Manchin and his fellow Democrats are proposing a massive tax hike. If someone wrote this in a movie script no one would believe it. Joe Manchin’s “cure” for an economy in recession with the highest inflation in a generation is spending more and increasing taxes.

The energy taxes included in the package are especially foolish at a time when even the Biden White House, which has vowed to end oil and gas use, is begging for more domestic production in the face of high energy prices. The legislation would impose a new tax on methane, it would increase taxes on oil and gas production on federal lands, increases taxes on coal production, and reimposes a long-expired environmental tax on oil production. Every one of those tax increases will be passed on to consumers, and not just in the form of higher prices at the pump or costlier electricity bills. Everything in this country moved by trucks, running on more expensive diesel, will cost more. Groceries, clothing, appliances, and even Amazon deliveries — all more expensive.

So this legislation is not an “inflation reduction act,” it is a good old-fashioned tax-and-spend bill. The legislation is an inflation-increasing act. In good economic times, it would be a harmful policy. But in today’s uncertain economy, with simultaneous recession and inflation harking back to the worst of the 1970’s stagflation, this legislation is downright dangerous. Raising taxes on businesses when they have already been forced to increase prices because of inflation. Raising taxes on energy in the middle of a global energy crisis. Increasing government spending on top of the trillions of dollars in overspending already forced into an inflationary economy. It’s as if the legislation is designed to turn a struggling economy into a crashing economy.

The Joe Manchin of three weeks ago was right: inflation is a big problem, and new federal spending should be contingent on inflation easing. Maybe this week’s Joe Manchin should take his own advice. Increasing taxes on energy is perhaps the worst possible policy action that could be taken in this economic climate, not to mention the current global geopolitical situation with Russia’s ongoing war. But sure, this legislation includes subsidies for electric vehicles, which definitely will make up for rocketing inflation and economic collapse. Just trust Joe, not your lying eyes.

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The Unregulated Podcast #94: The Best of Times, the Worst of Times

July 29, 2022 by Leave a Comment

On this episode of The Unregulated Podcast, Tom Pyle and Mike McKenna discuss shifting definitions, Joe Manchin’s betrayal of West Virginia, and get into just how much damage the recent Senate bills could do to American families.

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Inflation Fueled Recession Causes Drop In Gas Prices

July 28, 2022 by Leave a Comment

Inflation and demand destruction have slashed gasoline demand to the point that gasoline prices have dropped radically from their $5.016 a gallon high. AAA reported that as of July 26, gasoline prices in the United States were averaging $4.327 per gallon, which is still 37 percent higher than a year ago and over 70 percent higher than when President Biden took office.  Driving those lower prices that President Biden wants to take credit for is primarily demand destruction, which refers to persistently high prices or tight supplies that eventually lead to a drop in demand. In the week through July 8, gasoline consumption dropped by 9.7 percent to 8.73 million barrels per day, according to data from the Energy Information Administration. Aside from 2020, when the pandemic sent the world into lockdown, it marks the lowest seasonal demand in 21 years and the steepest decline this year. People can no longer afford it. The spike in gasoline prices made Americans go on a buyers’ strike. As a result, the West Texas Intermediate oil price dropped below $100 per barrel and is at its widest price gap with Brent oil.

While demand for gasoline has rebounded a bit, it remains below where it was two years ago as historically high prices keep more drivers off the road than COVID lockdowns did in the summer of 2020. The stagnating demand this summer suggests that the recent drop in gasoline prices has not been enough to entice drivers back on the road. It appears that more people are not taking road trips in the summer of 2022 as daily life has become costlier with high gasoline prices helping to push inflation to 9.1 percent in June. Gasoline demand tends to be more elastic during the summer months than the rest of the year.  People simply forego trips and family visits when gasoline prices spike.

Source: Bloomberg

The lower U.S. gasoline demand has widened the gap between the West Texas Intermediate and Brent oil prices to levels not seen since 2019. The $8.50 per barrel premium of Brent oil to U.S. West Texas Intermediate is the widest since June 2019, excluding spikes related to contract-expiry dates. Brent prices are stronger due to tight supply resulting from the loss of Russian barrels after the country’s invasion of Ukraine and persistent underproduction from OPEC+, the Organization of the Petroleum Exporting Countries and their allies such as Russia. Buyers are concerned that OPEC is close to running out of spare capacity, limiting its ability to raise output further.

Lower global gasoline prices in the past two weeks has reduced refiners’ profits, pushing up inventories around the world while exports from China and India are also adding pressure on growing stockpiles. As a result, refiners will be forced to cut gasoline production to protect themselves against losses and switch to producing more profitable fuels.

Conclusion

Demand destruction has caused gasoline prices to drop this month in the United States. Gasoline accounts for half of total U.S. oil consumption so the demand drop has also impacted West Texas Intermediate oil prices, causing the largest increase in the gap with Brent oil of $8.50 a barrel since mid-2019. The reduced gasoline consumption is lowering margins for refineries, causing them to switch production to more profitable fuels.

Nonetheless, refinery constraints due to lost capacity from reduced demand during COVID lockdowns will likely keep refined product prices up compared with oil prices. Environmental concerns about fossil fuels’ carbon dioxide emissions have discouraged new investment in refineries that take years to construct. Analysts do not expect new refineries to be built in the United States.

*This article was adapted from content originally published by the Institute for Energy Research.

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Europe Looking For Options After Destroying Domestic Energy Production

July 26, 2022 by Leave a Comment

Europeans are learning slowly. The Nord Stream 1 scare that Russia would not restart natural gas flowing in the pipeline after its planned annual maintenance has put Europeans, and particularly Germans who heat half their homes with gas and use it for electricity generation and in critical industrial applications, on edge. Russia is clearly using natural gas as a weapon due to the European Union’s military involvement and issuing sanctions against Russia due to its invasion of Ukraine. Now, Europeans are turning to Africa for oil and natural gas they had shunned due to costs and climate change concerns. Energy firms are considering projects worth $100 billion. African countries that currently have little or no oil and gas output could see billions in energy investments, including Namibia, South Africa, Uganda, Kenya, Mozambique, and Tanzania. Namibia, for example, could provide about half a million barrels per day in new oil production. According to the International Energy Agency (IEA), Africa could replace as much as one-fifth of Russian gas exports (30 billion cubic meters) to Europe by 2030.

Russia Restarts Nord Stream 1, But for How Long

Russia is counting on energy uncertainty to impose heavy economic and political costs on European leaders, who are under political pressure to bring down energy prices and avoid gas rationing. Some nations, like Spain and Greece, are not in favor of a European Union plan to have every member country cut its gas use by 15 percent, arguing that they are much less reliant on Russian gas than Germany, which is 55 percent dependent on it. Spain said it would encourage but not require its citizens to cut gas use. Although Greece relies on Russia to meet 40 percent of its gas needs, its supplies have not been cut. Russia’s strategy of cutting off gas deliveries through pipelines that cross Ukraine and Poland while limiting the volume of natural gas flowing under the Baltic Sea through the 760-mile Nord Stream 1 pipeline is causing divisions across Europe. The stability of those gas supplies is in question. Europe, and Germany in particular, could remain on edge for months about whether there will be enough energy to carry them through next winter.

Gazprom, Russia’s state-owned energy monopoly, had reduced flows through the pipeline to 40 percent of its capacity prior to its planned maintenance, which will not be enough to prevent an energy crisis next winter in Europe. Hours before the flow of gas resumed on July 21, Gazprom still had not received documents from Siemens for a turbine that was sent to Canada for repairs. The papers are necessary for the part to be returned, the company indicated, adding that the engine, and others like it, had “a direct influence on the operational safety of the Nord Stream pipeline.” Putin appears to be drawing out the uncertainty about whether and for how long the gas will keep flowing to Germany to try to maximize his leverage as long as he can.

Nord Stream 1 Flows

Source: New York Times

Oil and Gas Projects in Africa

Last month, Tanzania signed a liquefied natural gas (LNG) framework agreement with Norwegian state energy giant Equinor and Anglo-Dutch oil major Shell that accelerates development of a $30 billion export terminal. The French oil giant Total Energies plans to restart a $20 billion LNG project in Mozambique that was halted by militancy, if security improves. More than half of Italian oil major ENI’s production comes from Africa and over half its investment in the last four years was there. The company has agreements to increase exports with Algeria, Gabon, and Angola. Germany has offered to help tap gas resources in Senegal, though no concrete project has been agreed to. Mauritania, which shares a vast gas field with neighboring Senegal that is due online next year, wants to export gas to Germany and elsewhere in Europe.

In February, Shell hit a supply of light oil in Namibia. Almost two months later, Shell launched a “back-to-back” exploration well at the site for the first time in the company’s nearly 150-year history. According to Shell, the quick progress followed the “promising” results of the first well but cautioned that, due to its climate commitments, it would only advance projects “with a credible path to early development … (that are) resilient and competitive in low- as well as high-price scenarios.” In March, Total Energies completed an exploration well in a nearby Venus prospect, with a more advanced appraisal well due in the third quarter. Shell estimated it will take around $11 billion to develop the two companies’ blocs. Preliminary estimates have the discoveries at half a million barrels per day. The country hopes to begin production from the Shell project by 2026.

According to consultancy Rystad, African output of natural gas could peak at nearly 500 billion cubic meters by the late 2030s–—up from 260 billion cubic meters in 2022. The IEA, however, projects a peak of under 300 billion cubic meters of natural gas output in its “sustainable Africa scenario” in 2024. It forecasts oil output will peak this decade at around 6 million barrels per day in 2022 — down from over 10 million in 2010.

Conclusion

Russia is using energy as a weapon against Europe’s involvement in helping Ukraine. European companies are now looking into investing in oil and gas projects in Africa, which they had previously shunned due to climate change posturing. European countries are learning that dependence on Russia for energy was not advantageous and that rushing headlong into intermittent renewable energy has not panned out in providing their own energy independence.

President Biden and his administration need to learn from Europe’s experience because they are trading U.S. energy independence for an 80 percent dependence on China for critical minerals needed for the renewable and electric vehicle transition by forcing their anti-oil and gas policies on the American public and proceeding helter-skelter into renewable energy, raising energy prices for Americans. Biden needs to be told that a recent poll shows that nearly 70 percent of American voters support an expansion in natural gas production, more than 50 percent believe gas can help curb emissions, and over 70 percent favored building new gas pipelines. The United States has plenty of natural gas resources if only Biden would let it be accessed and delivered.

Europe is flashing warning signals about deliberate dependency on others for energy, rather than ensuring secure domestic and international suppliers. The question is, will the Biden Administration recognize them?

*This article was adapted from content originally published by the Institute for Energy Research.

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