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Supply Chain Woes Pour Cold Water On Biden’s Green Dreams

June 21, 2022 by Leave a Comment

Over a dozen battery storage projects that were meant to support intermittent renewable energy supplies have been postponed, canceled or renegotiated due to labor and transport bottlenecks, soaring minerals prices, and competition from the electric vehicle industry. The delays, ranging from several months to a year, are in a number of states including California, Hawaii and Georgia, with battery providers Tesla and Fluence warning of disruptions to supply. The battery projects are needed to capture excess generation from solar and wind power to be used when there is no generation from these sources, that is when the wind does not blow and the sun is not shining, which occurs every evening. Frequently, electricity demand is highest when the sun goes down and people return home from work. Battery projects are expensive and not included in the cost of solar and wind power when determining what technologies should be built, i.e., in the “levelized cost” projections often used to estimate relative costs of generation sources. As a result, consumers are seeing and will continue to see higher electricity prices.

Battery storage makes up about 3 percent of U.S. electrical capacity. Installations increased 170 percent in the first quarter of 2022, totaling 758 megawatts. But the pace is slowing below forecasted amounts. According to Energy research firm Wood Mackenzie, its current forecast for battery storage installations of 5.9 gigawatts for 2022 may be revised down because of market disruptions and because 2021 installations came in at about two-thirds of what the company had expected.

Battery Prices

Prices for lithium-ion batteries, three-quarters of which are produced in China, have increased as much as 20 percent since last year due to rising lithium and nickel costs, disruptions to manufacturing from COVID lockdowns, and slow shipments from transport constraints. According to Bloomberg, the cost of metal necessary to make batteries increased by 280 percent last year. In the first quarter 2022, the prices of many metals more than doubled. Prices for lithium alone have increased 438 percent this year, according to Fortune. The United States has one active lithium mine in Nevada and it produces less than 2 percent of the global lithium supply. The United States has about 4 percent of the world’s lithium reserves.

New lithium mines in the United States are being held up by the Biden administration or by legal challenges. The Thacker Pass Lithium Mine in Nevada could produce a quarter of today’s global lithium demand but is being held up by a lawsuit. Ioneer Ltd.’s lithium mine also in Nevada could supply 22,000 metric tons of lithium annually (enough for about 400,000 electric cars), but is being held captive by environmentalists, who claim the mine threatens Tiehm’s buckwheat, a rare flowering plant, which the Biden administration has listed as endangered. The company still needs to obtain permits for the mine. In normal circumstances, the process of getting a mine to first production can take 7 to 10 years, but recalcitrant federal bureaucracies can extend that timeline, as has been the case for other mineral mines in the United States under the Biden administration.

Competition from Electric Vehicle Market

Battery manufacturers are favoring the EV market because their orders are more predictable compared to the much larger project-specific orders from power storage developers. Tesla Chief Executive Elon Musk acknowledged earlier this year that the company had prioritized EV battery supplies over stationary storage. Fluence issued force majeure notices on three contracts because its battery suppliers in China were not able to fulfill their obligations. It also raised prices on new contracts by 15 to 25 percent and would price future contracts based on raw material indices to guard against volatility.

Solar Projects Being Built with Associated Storage Projects

Storage projects are being constructed alongside solar farms, allowing the storage facilities to claim a federal tax credit that does not exist for standalone batteries. But, the ongoing investigation by the Commerce Department regarding China using other Southeast Asian countries to avoid tariffs has resulted in fewer solar projects than expected because of the uncertainty over potential tariffs on Asian imports. President Biden recently waived the tariffs for two years on panels from countries impacted by the Commerce Department investigation, which should encourage more solar construction with panels from Asia, and thus more storage facilities.

Storage Projects

There are supposedly about 14.7 gigawatts of battery storage in development, some of which state authorities had hoped would be in place to prevent blackouts this summer. According to Governor Gavin Newsom, California had been counting on new battery storage projects, many of which were procured following rolling blackouts in August 2020, to shore up summer reliability. Among recent delays is 535-megawatts of storage Ameresco Inc. is developing for Southern California Edison. The company expects only a portion of the project—about 300 megawatts—to be online by its August target.

Central Coast Community Energy (CCCE), which has 430,000 customers in five California counties, is also facing delays of six projects, including 122 megawatts of storage, needed to meet state-mandated requirements for “clean” energy. The projects, originally meant to come online this year and next, are experiencing delays of between six and 12 months. CCCE and Silicon Valley Clean Energy Authority, its partner in several projects, sued developer EDF Renewables over its termination of contracts for the Big Beau solar and storage project that started generating power last year. EDF in March asked to increase the price for the project’s energy storage component by $76.8 million—a 233 percent increase.

In Hawaii, utility Hawaiian Electric is seeing delays in solar and storage projects that are to replace the state’s only coal-fired power plant, which is supposed to retire in September. The developer of four projects, Canada’s Innergex Renewable Energy, is seeking to renegotiate the terms of the deals – including price and timing – after receiving force majeure notices from its battery supplier, Tesla, which as mentioned above, is concentrating on EV batteries. Hawaiian Electric expects just 39 megawatts of the 378.5 megawatts of solar and storage it procured to be in service prior to the coal plant retiring.

According to the International Energy Agency IEA), battery storage needs to reach 585 gigawatts by 2030 to decarbonize the global power sector—a 35-fold increase from 2020. With supply chains as they are, lockdowns continuing over COVID in China, the huge price increases in critical metals and competition from electric vehicles for batteries, it is unlikely that IEA’s battery storage number will be achieved.

Conclusion

It seems unlikely that President Biden’s decarbonization of the electric sector will happen by 2035 since it is unlikely that the battery storage needed to support wind and solar power can be accomplished by then. With competing priorities, i.e., governments wanting 50 percent of cars sold in 2030 to be electric, it is putting a great deal of strain on available resources, particularly when obstacles are put in front of mine development in the United States. Many forecasters have predicted a metal shortage as companies are pursuing electric vehicles to meet Biden’s goal and the goals of European countries. Battery storage to back-up intermittent solar and wind power seems almost an afterthought, except to places like California where residents are used to rolling blackouts and increasingly high energy prices, so storage batteries are just another cost added to the state’s attempts at reliability combined with their focus on wind and solar.

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

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Watch Rep. Rho Khanna Backtrack on Domestic Oil Production

June 17, 2022 by Leave a Comment

Many leading Democrats in Congress, including Rep. Rho Khanna, ran for office promising to end domestic production of natural gas, oil, & coal. Back in October of last year, he praised oil companies for decreasing oil production in Europe and asked if they were embarrassed because they were increasing production in the United States. 

Now Rep. Rho Khanna is singing a different tune and wants to make sure everyone knows that he now wants to distinguish between the long-term and the short-term. In an interview on CNBC, Rep. Khanna said “Of course, we need short-term production to go up.”

Watch the interview here:

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Biden’s SPR Releases Help China Stockpile More Oil

June 17, 2022 by Leave a Comment

China is surpassing the United States this year as the world’s largest refiner as government climate goals and regulation cause U.S. refiners to close facilities. China is expected to have 18.81 million barrels per day of refining capacity while the United States has 17.7 million barrels per day of operating refinery capacity and about 0.4 million barrels per day of idled capacity. While additional refinery closures are expected in the United States, China is expected to add capacity, capping the country’s primary refining capacity at 20 million barrels per day by 2025 and boosting utilization rates of its refining facilities to above 80 percent.  Refining is the manufacturing of petroleum products from raw materials, producing gasoline, diesel and aviation fuel that Americans need and adding value, wealth and jobs via the processing.

Due to growing domestic demand, U.S. operating refineries are running all out with utilization rates averaging above 90 percent. But refined stockpiles are low, indicating a shortage that could result in rationing, particularly for diesel fuel on the East Coast. President Biden recently wrote a letter to energy executives, acknowledging a global refining capacity shortage, and asking for their help. He directed industry, “to work with my aAdministration to bring forward concrete, near-term solutions that address the crisis.” According to Biden, about 3.0 million barrels per day of global refining capacity has shuttered since the beginning of the COVID pandemic, 801,000 barrels per day in the United States.

In late May, Biden searched for spare refining capacity, but apparently found little to none. In his letter, he told refiners that “unprecedented” profit margins are unacceptable and called for “immediate action” to improve capacity as the price of gasoline keeps increasing, feeding record inflation and fears of a recession. Biden called on companies to provide an explanation of why they have cut capacity and what could be done to address gas prices that average more than $5 per gallon nationwide. Apparently, oil and gas companies and their investors have listened to policymakers’ calls for less investment in fossil fuels and have heeded those calls. For example, Shell operated 54 oil refineries in 2004, but cut the figure to 8 refineries to reduce the company’s climate footprint. By 2025, the company plans to operate 5 refineries.

While there is almost no ability for the U.S. refining industry to grow capacity domestically, significant spare capacity exists in China and Russia. As western energy companies cut capacity to meet politicians’ promised climate goals, China expanded its capacity as noted above. In 2016, China allowed independent oil refineries to export oil products for the first time, and the government was happy to meet the world’s demand for gasoline and diesel. But, in mid-2021, China cut petroleum product exports by more than half. Despite margins increasing and domestic demand falling as China is in continual lockdowns due to a zero-COVID policy, the country continues to export less gasoline and diesel, stockpiling the fuels instead.

China has also refused to play Biden’s game. Biden thought he had coordinated a global effort to release more than 1 million barrels per day of strategic oil reserves in order to reduce gasoline and diesel prices since he expected those reserves to be refined and sold to consumers. However, for every barrel of reserve the President has sold, China has taken a barrel off the global market, adding it to Chinese stockpiles. China’s stockpiling eliminated any benefit to U.S. consumers from the SPR release, instead reducing U.S. energy security while strengthening China’s energy security.

Source: Seeking Alpha

No new major oil refinery has been built in the United States since the Carter administration and Biden’s climate policies and regulations will ensure that none are built in the future. Due to the renewable fuel standard and tax credits, some of the refineries that have not shuttered are being converted to biofuel facilities. Those incentives, for example, resulted in renewable diesel obtaining a $3.70 a gallon premium over regular diesel in California in early 2022, benefiting from the $1 a gallon federal tax credit and regulatory credits under California’s low-carbon fuel standard. With over 1 million barrels per day of capacity being converted to bio-fuel processing, the U.S. refining industry’s ability to respond to rising petroleum prices is definitely handicapped.

While the U.S. refining industry has closed or converted much of its refining capacity in recent decades, the United States is still a net exporter of petroleum products. Analogous to the ban on oil exports from the United States that lasted for about 40 years, the Biden administration may look to implement a petroleum product export ban. It is unclear, however, what the ramifications of such a ban would be.

China Continues Its Refinery Production Drop

China’s refinery throughput in May fell 10.9 percent from the same month a year earlier in the steepest year-on-year drop in at least a decade. Oil throughput in May was about 12.7 million barrels per day, slightly more than the 12.61 million barrels per day throughput in April, which was the lowest in two years, and 1.55 million barrels per day below the year-earlier level. Processing volumes for the January to May period were down 5.3 percent at 13.4 million barrels per day. May trade data, however, showed a continued reduction in exports, down 40 percent year on year and about 15 percent month on month. Although reduced exports will impact profitability for state-owned refiners, the policy has the benefit of reducing costs for consumers and industry, allowing the government to stimulate the economy and export inflationary pressure to the rest of the world.

The data also showed a 3.6 percent increase in China’s oil production to 4.14 million barrels per day.

Conclusion

It is no wonder that China and Russia have excess refining capacity and that the United States has none. U.S. climate policy and regulatory policy under the Obama and Biden administrations will ensure no new refineries get built in the United States and will make it difficult for existing refineries to get operating permits from the EPA.   Increasing credit prices under the renewable fuel standard have driven some small, independent refineries out of business and many of those that seek a temporary exemption from the mandates by showing a “disproportionate economic hardship” have been denied. About 69 waiver requests have been recently denied by Biden’s EPA that has also increased biofuel blending volumes to “unachievable” levels, according to the refining industry.

The end result is that Americans can expect higher gasoline and diesel prices because there is simply a shortage of U.S. petroleum refineries and Biden’s only answer is to rebuke those that are operating for their profit margins that have resulted from government policies to “transition” from oil.  Oil and gas companies and their investors have listened to Biden’s calls for less investment in fossil fuels and have heeded those calls. Consumers and the economy are feeling the effects every day.

tensions.

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

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The Unregulated Podcast #88: The Performance of a Lifetime

June 17, 2022 by Leave a Comment

On this episode of The Unregulated Podcast Tom Pyle and Mike McKenna discuss the ever-expanding distance between the Biden administration’s talking points and reality. Plus see the return of a fan favorite: “By The Numbers.”

Links:

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Biden’s War On Coal Sends American Energy To China

June 16, 2022 by Leave a Comment

Together, China and India are planning to increase their domestic coal production by a total of 700 million tons per year. That increase is about 100 million tons more than the total coal production expected in the United States this year of 600 million tons. U.S. coal production today is about half of its high in 2008 of 1.17 billion tons. In 2021, however, coal production increased due to increased demand from rising natural gas prices and increased exports. U.S. coal exports increased 23 percent last year, with the largest buyers ironically being India and China, together representing a third of U.S. coal exports. U.S. coal exports to China skyrocketed from roughly 1.8 million tons in 2020 to 12.8 million tons in 2021—an increase of 616 percent. U.S. coal is being shipped overseas rather than to U.S. electric plants because of the negativity around the fuel due to its carbon emissions and because of the federal government announcements against its use.

Biden’s War on Coal

At the COP26 climate conference in Glasgow, Scotland, climate envoy John F. Kerry declared that the Biden administration plans to put the coal industry out of business within eight years. “By 2030 in the United States, we won’t have coal. We will not have coal plants,” Kerry said.

Biden’s forced transition to renewable energy will result in blackouts this summer because of the early shuttering of fossil-fuel plants—particularly coal—that are needed to meet increased summer electricity demand. Some of the coal plants that regulators assumed would keep running for another year or two are instead coming offline because plant operators are choosing to shutter them rather than invest in upgrades for coal plants that Biden won’t allow to operate in the coming years. When the government announces that it intends to drive an industry out of existence, companies will not invest in it. Because a renewable-energy infrastructure currently does not exist to replace it, the result will be shortages and blackouts.

According to the Energy Information Administration, the shuttering of coal-fired electric plants will make up 85 percent of all electric-generation capacity retirements this year, taking 12.6 gigawatts offline. According to NERC’s 2022 Summer Reliability Assessment, the remaining coal-fired plants are “having difficulty obtaining fuel,” because of “mine closures, rail shipping limitations, and increased coal exports” — further reducing the nation’s ability to generate power this summer. The result will be not only blackouts but also skyrocketing energy prices. The Federal Energy Regulatory Commission in its Summer Assessment indicates that electricity prices could be 77 percent to 233 percent higher than last summer’s power prices. That could dwarf the increase in gasoline prices that has taken place since Biden took office.

Source: U.S. Energy Information Administration

Biden in his usual late response will not be prepared. He could make provisions to keep the coal plants on stand-by as Germany is doing, but that means his staff must acknowledge the problem and alert him to possible solutions. His only answer so far is to import more solar panels from Chinese manufacturers in Asia, which he announced on June 6. Biden also indicated he would invoke the Defense Production Act to supposedly benefit U.S. solar panel manufacturers, although they have called his efforts “a pittance” and do not believe it will help much. Essentially, President Biden’s response to energy shortfalls in the United States is more solar panels.

Big Bend Power Station

The Big Bend power station in Florida could not get all of its needed deliveries of coal, and its, owner, Tampa Electric, who had to curtail operations at the plant, blamed the railroad for insufficient coal shipments. According to the railroad, CSX, the issue is intermittent supply from the Sugar Camp mine in Illinois, which halted production from August 2021 to February 2022 because of a fire and has since resumed production at only 50 percent capacity. According to CSX, trains have encountered numerous instances where an arriving empty train is forced to wait extended durations because the mine is out of coal. The United States is not short of coal – and in fact, has the world’s largest proven reserves—but after years of government assaults against U.S. coal production and consumption, many mines have closed.

While the freight rail industry has experienced shipping shortfalls in the last year, they are largely outcomes of supply chain issues. Over the past two years, American railroads have set records at various points for volume levels of grain, chemicals and intermodal containers carrying consumer goods. In the latest American Society of Civil Engineers report card, U.S. freight rail is the top performing infrastructure and is the world’s most technologically advanced and energy-efficient.

While NERC believes the rail industry is causing some of the shipment problems, shipping by rail rather than truck reduces greenhouse gas emissions by 75 percent. The 1980 Staggers Act, which largely deregulated freight rail’s economic activities, resulted in an improved industry with doubling of goods shipped by rail, plummeting rates that shippers pay (it would have cost them $70 billion more to send the same freight via truck), and rail safety and environmental advancements, in part from rail infrastructure investment of $760 billion.

China and India Continue with Coal Deployment 

In April, China announced it will increase coal output by 300 million tons this year, and, India, last month, indicated it plans to increase domestic coal production by more than 400 million tons over the next two years. Adding the 700 million tons of new coal that China and India will be mining to the amount they are now producing leads to China producing about 4.4 billion tons of coal per year and India producing about 1.2 billion tons. Together, they will be producing 5.6 billion tons of coal, which is more than 9 times the amount of coal that will be mined in the United States this year. The incremental coal production in India and China is exceeding whatever coal-fired generation capacity was retired in the United States and Europe. The end result of U.S. and European actions is an increase in the cost of energy for their citizens since policymakers no longer allow markets to work economically.

In order for India to up its coal production, the government had to provide “special dispensation” to the Ministry of Coal which allows the agency to relax environmental controls and public consultations so mines can produce more coal. The action was a result of the government receiving “a request from the Ministry of Coal ‘stating that there is huge pressure on domestic coal supply in the country and all efforts are being made to meet the demand of coal for all sectors.’”

Conclusion

Energy choices should reflect consumers’ desires, which is not the case under the Biden administration, where they are literally picking winners and losers. America’s growing energy needs demand fuel from all domestic sources, but Biden is holding resources hostage and increasing regulatory activity making it harder to produce energy. The closures of coal plants and coal mines are part of the administration’s plan to “decarbonize” U.S. power generation. The problem is that renewables are not yet ready to make up for lost coal capacity, despite their increasing generation levels, which now make up 20 percent of U.S. electricity generation, when hydroelectric is included.

President Biden has been caught short on a number of pending issues such as baby formula, and the same result can occur with electricity blackouts if he just ignores the problem. Other leaders are responding. Germany has put idled coal plants on standby and India is allowing its miners to produce more coal.  Even Japan is using more coal for electricity generation. Even if blackouts do not occur, the projected shortages will result in higher prices as FERC has indicated. Americans are getting hit from all sides with massive energy price hikes, with much of it purposeful based upon policy choices in Washington, D.C.

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

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Biden Rolls Back Another Trump Era Reform

June 9, 2022 by Leave a Comment

President Biden’s Environmental Protection Agency (EPA) proposes to restore authority to states and tribes under Section 401 of the Clean Water Act to veto gas pipelines, coal terminals and other energy projects, reversing a Trump administration rule that had curtailed that power. Prior to 2020, the Clean Water Act gave states and tribes the ability to review federal permits for industrial facilities and block projects that they said might affect water quality within their borders. Without their certification, the federal government could not approve a project.

In 2020, President Trump’s EPA revised the regulation, resulting in a reduction of state and tribal authority under Section 401. This was part of his overall regulatory streamlining efforts designed to speed U.S. construction and infrastructure projects. Trump’s 2020 rule gave federal regulators one year to make permitting decisions, while this proposed EPA reversal will allow states and tribes unlimited time to gather information. In other words, states and tribes can delay needed projects. The proposal would counteract the well-defined timeline and review process enacted by Congress, increasing permitting delays and allowing states to go beyond their scope for water quality certifications.

EPA will provide a 60-day comment period after the rule is published in the Federal Register. The final rule is expected to go into effect sometime in 2023.

Background

Some states have used their authority under the Clean Water Act to stop or delay energy projects. In 2017, Governor Jay Inslee of Washington refused to certify a federal water permit for a coal export facility on the Columbia River, using as an excuse the risk of spills and effects on air quality. In truth, Inslee had stipulated his opposition to coal use well before this action. In 2020, Governor Andrew Cuomo of New York denied a permit for a pipeline that would have shipped natural gas into New York from Pennsylvania, based on the project’s supposed “inability to demonstrate” that it could comply with water quality standards. This was after Cuomo banned hydraulic fracturing in New York in 2014, despite President Obama’s EPA repeatedly stipulating that it could not find that hydraulic fracturing damaged groundwater.

The Biden administration’s proposed rule change would essentially restore the conditions that existed before the Trump administration changes that stopped the projects above. The needless red tape being added is clearly not going to help improve oil and gas production that President Biden claims he wants increased. The new regulation could easily block infrastructure needed to meet both domestic demand and exports that President Biden promised Europe.

For instance, U.S. natural gas production needs to increase and gas pipelines need to be constructed to supply the promised LNG to Europe and to meet domestic demand. LNG exports were 674 billion cubic feet higher (187 percent) in the first three months of 2022 compared with the same period in 2019, while domestic production increased by only 433 billion cubic feet (5 percent). As a result, LNG exports have grown to around 12 percent of domestic gas production, up from 4 percent in 2019, and is expected to increase further. Net exports of LNG and pipeline natural gas hit a record of 377 billion cubic feet in March 2022, up from 121 billion in March 2019—over a 200 percent increase.

The growth in LNG exports, in excess of domestic production, has drained natural gas inventories and increased prices. At the end of March, working stocks in underground storage were 318 billion cubic feet below the pre-pandemic five-year average. Reflecting the anticipated shortage of gas, futures for June delivery ended at $8.908 per million Btu, down from a high of $9.401. July futures were at $8.895 per million Btu toward the end of May. Natural gas prices between 2015 and 2020 were $4 or less.

Source: Wall Street Journal

Court Action

Lawsuits were filed by 20 states, the District of Columbia, three tribes and six conservation organizations to the Trump administration’s 2020 rule. In 2021, Biden’s EPA planned to revise the 2020 rule, and a district court agreed with the agency that the case should be remanded and the 2020 rule vacated. Louisiana and seven other states joined with the American Petroleum Institute and other industry groups to reinstate the Trump administration rule. After both a federal judge and the Ninth Circuit denied them a stay in December, the states sought relief from the U.S. Supreme Court, which sided with them in an emergency ruling to reinstate the Trump administration policy.

Conclusion

Oil and gas producing states are concerned that the EPA proposed rule change will veer from the intent that Congress had when authorizing the Clean Water Act and allow some states to delay and increase costs for essential energy infrastructure to meet domestic demand and supply the Biden-promised LNG to Europe. States have used Section 401 in the past to stop or delay projects, which in effect restricts commerce of other states. Despite Biden telling the American public that he wants companies to increase oil and gas production, his actions continue to demonstrate the exact opposite.

The United States is entering the summer travel season, where cars and planes fueled by petroleum products will be taking families on much needed vacations, and homes and offices will need air conditioning fueled by electricity where over one-third is generated by natural gas, not to mention that natural gas heats half of U.S. households that will be purchasing the fuel this fall and winter. Unless production is increased, Americans can expect shortages that will adversely affect their lifestyle. The administration’s non-stop assaults on the supply chain of conventional energy supplies in the United States is beginning to have a real impact.

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

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Biden Weaponizes EPA To Attack Miners & Make Ensure Dependency On China

June 8, 2022 by Leave a Comment

The Pebble copper and gold mine, 100 miles from Bristol Bay, Alaska, is being dealt a death blow by President Biden’s Environmental Protection Agency (EPA). Citing its authority under the 1972 Clean Water Act, EPA proposed a legal determination that would ban the disposal of mining waste rock in the Bristol Bay watershed. The proposal would create permanent protections for the waters and wildlife of Bristol Bay—about 200 miles southwest of Anchorage. It would prohibit disposing mine-related waste within 308 square miles around the site of the proposed Pebble Mine project—an area about four times as large as Washington, D.C. EPA will be accepting public comments on this proposal until July 5 before publishing a final legal determination later this year.

President Biden pledged during his campaign for the Presidency to “listen to the scientists and protect Bristol Bay.” The irony of the situation is that this block of the Pebble mine is coming despite President Biden recently invoking the Defense Production Act to increase domestic production of minerals used in making electric vehicles and non-carbon energy technologies. When he invoked the Defense Production Act, Biden said that the country depended on unreliable foreign sources for many materials necessary for transitioning to the use of renewable energy—a dependence that has been stressed in reports for years. But, this EPA proposal will just further that dependence.

Background

The Pebble mine holds world-class resources of copper, gold, silver, rhenium and more. The Pebble deposit was originally discovered in 1988, and has been described by its current developer as “one of the greatest stores of mineral wealth ever discovered, and the world’s largest undeveloped copper and gold resource”. The resource estimate includes 57 billion pounds of copper, 71 million ounces of gold, 3.4 billion pounds of molybdenum and 345 million ounces of silver in the measured and indicated categories, while inferred resources include an additional 25 billion pounds of copper, 36 million ounces of gold, 2.2 billion pounds of molybdenum and 170 million ounces of silver. The deposit also contains 4.2 million kilograms of rhenium across the measured, indicated and inferred categories. Rhenium is listed as a critical mineral by the US Department of the Interior, essential to the country’s “security and economic prosperity”, with dependence on foreign imports for these minerals considered a “strategic vulnerability for both its economy and military.” It is critical in high performance jet engines, aerospace and other military applications.

The Pebble Limited Partnership plans to dig an open-pit mine about a mile square and one-third of a mile deep where it would extract and process metals estimated to be worth at least $300 billion. The project would include the construction of a 270-megawatt power plant, 165-mile natural-gas pipeline, an 82-mile road and ponds for the tailings. The project is located on lands owned by the State of Alaska.

The fight over the Pebble Mine has lasted for more than a decade. In November 2020, the Army Corps of Engineers denied a permit for the project that was critical for it to proceed. In January 2021, the Pebble Limited Partnership requested the Army Corps of Engineers to reverse its denial of the proposed mine’s Clean Water Act dredge and fill permit. At that time, the EPA indicated that, depending on the outcome in the courts, it would reopen a proposed veto of the Pebble mine, which, if finalized, would effectively block its development on state-owned lands. That process, started under the Obama administration, culminated in a proposed veto of the mine in 2015, before Pebble had even filed a permit application with the Army Corps of Engineers. This was the first time a U.S. mine had been stopped before it could apply for a permit based upon its scientific findings.

The Pebble Limited Partnership is expected to challenge the legality of the Biden administration’s new proposal regarding Bristol Bay. According to the company, “the Army Corps of Engineers published an Environmental Impact Statement for Pebble in 2020 with input from many agencies including the EPA that states that the project can be done without harm to the region’s fisheries. The EIS further notes the tremendous economic opportunity the project represents for the communities around Iliamna Lake where year-round jobs are scarce, and the cost of living is very high.” The company also indicated, “The Pebble Project remains an important domestic source for the minerals necessary for the Biden administration to reach its green energy goals and if it blocks Pebble it will have to seek minerals to meet its goals from foreign sources which simply do not have the same environmental standards as we do.”

China’s Dominance of the Mineral Market

China is the world’s leading producer of rare earth minerals, producing 500 percent more output than the United States. According to the U.S. Geological Survey, the United States gets around 80 percent of its rare earth imports from China, and even the rare earths that are mined in the United States must be sent to China for processing. According to the International Energy Agency, China dominates the processing of all the major minerals needed for electric vehicles and renewable technologies. Biden’s policies and this EPA proposal will make the United States even more reliant on China for minerals—a country that has considerably lower environmental standards than the United States. This is because “green energy” is mining intensive and will require much more minerals than current energy sources. China has been working on building its level of critical minerals at home and abroad for decades. This U.S. dependence on China for critical minerals will significantly exceed the dependence the United States ever had on the Middle East for oil.

Conclusion

Despite invoking the Defense Production Act, the Biden administration is joining environmentalists in their goal of limiting or even banning domestic mining growth, looking instead to countries with considerably lower environmental standards to reach emissions targets by importing minerals from them. The Pebble mine is just one mine that the Biden administration is blocking. Others include the Twin Metals mine and the Polymet copper and nickel mine in Minnesota, Ioneer Ltd.’s lithium mine in Nevada, and the Resolution and Rosemont copper mines in Arizona. Biden’s energy policies are making it harder for energy companies to succeed in the United States, despite our wealth of resources, which will make these companies invest in offshore resources rather than investing in the United States. There is an opportunity cost associated with stopping mines in the United States while at the same time pushing for policies requiring much more minerals. Apparently, the Biden administration thinks Americans will pay it.

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

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AEA Launches Digital Advocacy Campaign Against A New National Energy Tax

June 6, 2022 by Leave a Comment

A bipartisan group of senators is promoting a new national tax on energy while Americans are struggling with record-high energy prices.

WASHINGTON DC (06/06/2022) – This week, American Energy Alliance (AEA), the country’s premier pro-consumer, pro-taxpayer, and free-market energy organization, launched a five-figure digital advocacy initiative pushing back against efforts by a small group of U.S. Senators to enact a new national energy tax.

Despite the fact that inflation is the highest it’s been in forty years and the U.S. economy contracted in the first quarter of 2022, a small group of Senators, including Republicans Kevin Cramer and Bill Cassidy, are proposing a new national energy tax in the form of a “carbon border adjustment”.

That’s bad news for energy consumers and household budgets. This so-called “adjustment” is a tax on energy – like natural gas, oil, and coal – and other imports, like fertilizer, steel, aluminum, and concrete. It will drive up the cost of pretty much everything made or transported, including household goods, cars, and food.

The theory behind this tax is that we should make countries like China and India put strict limits on their emissions. The reality is this “adjustment” will only serve to make energy, gasoline, and most other goods even more expensive.

AEA President Thomas Pyle issued the following statement:

“It’s never a good time to tax our energy. It makes even less sense when American families are paying record breaking prices at the pump and at the grocery store. Senator Cramer and Senator Cassidy, who both hail from critical energy states, need to think seriously about the political and economic consequences of raising taxes on American energy consumers at a time of runaway inflation. A carbon border adjustment is nothing more than a tax on energy, which will only make our current situation worse, especially for seniors, those on fixed incomes, the poor, and local institutions like schools and hospitals. Instead of taxing energy, we need to be putting the American people first and focusing our efforts on clearing barriers to domestic energy production.”

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Biden’s Latest PR Stunt Only Worsens Gas Prices

June 6, 2022 by Leave a Comment

Both oil and gasoline prices increased after each and every time President Biden announced the release of oil from the Strategic Petroleum Reserve. Biden clearly does not understand the oil industry, as his actions have resulted in price increases rather than the decreases he predicted. He continually blames the increases on everyone else but his administration is following his own executive orders. By now, it would seem he would realize that he needs expertise from someone knowledgeable about the industry, but instead he seems to relish throwing up his hands and telling the American public that he is doing all he can. He clearly is not, because all he needs to do is start reversing the executive orders he put in place beginning day one of his Presidency that have attacked the oil and gas industry.

Biden announced he was releasing oil from the Strategic Petroleum Reserve (SPR) on November 23, 2021; March 1, 2022; and March 31, 2022. The first SPR release was a 50-million-barrel release, the second was a 30-million-barrel release and the third was a 180-million-barrel release. On May 31, national average gasoline prices reached an all-time high of $4.62 per gallon, according to AAA data, while domestic oil prices topped $120 a barrel, far higher than their 2015-2021 average of $53.15 per barrel and 2021 average of $68.14 a barrel, according to Federal Reserve data. As shown by the graph below, oil prices have more than doubled since Biden took over the Presidency. They have pretty steadily increased.

Source: Research Department at the Federal Reserve Bank of St. Louis

Gasoline prices are 52 percent higher than they were a year ago, but almost double what they were when Biden took office. While he likes to blame the high prices on the Russian invasion of Ukraine, the unused leases that the oil companies rent on federal land, and a myriad of other excuses, the truth of the matter is that he campaigned on ending oil and gas drilling and he and his administration are working toward that goal without regard to the American people and their needs. Besides that, he keeps promising American oil and gas to Europe in their time of need but does nothing to increase oil and gas production at home. Oil and gas exploration and production is expensive and no company is going to invest those funds if the policies from the Presidency are anti-oil and gas.

Source: Energy Information Administration

SPR Releases

On November 23, 2021, Biden announced that the Department of Energy would accelerate the congressionally-mandated SPR release of 18 million barrels of oil and release an additional 32 million barrels. He said other nations including China, India, Japan, South Korea and the U.K. also agreed to release oil from their strategic reserves. At that time, the oil price was $76.75 a barrel and the gasoline price was $3.40 per gallon—43 percent higher than when Biden took office.

On March 1, 2022, Biden announced a second SPR release of 30 million barrels that was in conjunction with 30 other International Energy Agency member nations. Together the global release was to total 60-million-barrels. The oil price was $95.72 a barrel on February 28 and increased to $103.41 per barrel on March 1 and $123.70 a barrel on March 8—the highest oil price since the 2008 recession. The average price of gasoline increased from $3.61 a gallon on February 28 to $4.10 per gallon a week later—72 percent higher than when Biden took office. According to the Energy Information Administration, the gasoline price has not dipped below $4 a gallon since the March 1 release.

On March 31, 2022, Biden announced the largest release to date, ordering the Department of Energy to release 180 million barrels of oil from the SPR between April and September. Biden predicted it would lower gasoline prices by 10 to 35 cents per gallon. The price of oil was $107.82 a barrel on March 30 and while it dropped a bit on March 31, remaining around $100 per barrel through April, it increased to $114.20 per barrel on May 16. In mid-May, gasoline prices hit multiple all-time highs and the price was $4.62 a gallon on May 31—the day after Memorial Day.

Lack of Refineries

A shortage of refining facilities is pushing U.S. gasoline and diesel prices to record levels. Gasoline prices topped $4 a gallon in all 50 U.S. states in May for the first time, even though global crude oil prices have pulled back from highs reached during the early days of Russia’s invasion of Ukraine. U.S. oil prices are hovering around $115 a barrel, down from over $120 a barrel in March. Because of the COVID lockdowns and the decreasing demand for petroleum products, some U.S. refineries shuttered and or are converting to biofuels in line with Biden’s preferences and massive subsidies favoring biofuels. The situation could worsen because there are no plans to add significant refining capacity due to the severe regulations governing them. In fact, by the end of 2023, an additional 1.69 million barrels of U.S. refining capacity is expected to close.

Around 3 million barrels a day of global refining capacity have already closed during the COVID pandemic and about 1 million barrels a day of that was in the United States. Besides the closures and retooling to biofuels, some U.S. refineries near the Gulf of Mexico were damaged due to hurricanes last year and some are undergoing maintenance, keeping even more capacity offline. The utilization rate for U.S. refineries is at about 90 percent, at the top of the five-year range. Refinery margins have been pushed to record levels, meaning that the refineries still operating will produce as much as they can.

Conclusion

President Biden needs an education in the oil and gas industry and he should seek out the appropriate expertise if he is at all serious about lowering gasoline prices for the American public. Blaming others will not help Americans struggling with historically high energy prices. The situation is dire and expectations are that they will get worse. There is insufficient refining capacity to meet gasoline and diesel demand to the point that Biden is considering restarting idle refineries, but that would produce opposite results from what Biden’s goals are with respect to the oil and gas industry and his administration’s assaults against fossil fuels. Americans should expect higher gasoline prices to come if Biden’s current policies continue.

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

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Supply Chain Reality Crashes Biden’s EV Agenda

June 3, 2022 by 1 Comment

Automakers are raising prices on their electric vehicles due to rising commodity costs, specifically for key materials needed for EV batteries. According to the International Energy Agency, while battery costs have been declining for a decade, EV battery costs are expected to increase 14 percent this year to $150 per kilowatt hour. Another firm expects the demand for battery minerals over the next four years to increase the price of EV battery cells by more than 20 percent on top of already-rising prices for battery-related raw materials. Korean battery makers are talking about a 30 to 40 percent rise in prices soon. Prices have been rising because of supply-chain disruptions related to the COVID lockdowns, Russia’s invasion of Ukraine as Russia is a major nickel exporter, and not enough mineral supply to meet demand.

Source: International Energy Agency

Tesla

Tesla had to raise its prices several times over the last year, including twice in March after Elon Musk warned that Tesla was “seeing significant recent inflation pressure” in raw materials prices and transportation costs. Most Tesla models are significantly more expensive than they were at the beginning of 2021. The cheapest “Standard Range” version of the Model 3, Tesla’s most affordable vehicle, now starts at $46,990 in the United States, up 23 percent from $38,190 in February 2021.

Rivian

Rivian indicated on March 1 that both of its consumer models, the R1T pickup and R1S SUV, would get large price increases. The R1T would increase 18 percent to $79,500, and the R1S would increase 21 percent to $84,500. At the same time, the automaker announced new lower-cost versions of both models, with fewer standard features and two electric motors instead of four, priced at $67,500 and $72,500 respectively, close to the original prices of its four-motor vehicles.

Lucid

Lucid Group indicated that it will raise the prices of all but one version of its Air luxury sedan by about 10 percent to 12 percent for U.S. customers who place their reservations on or after June 1. Customers making reservations for a Lucid Air on June 1 or later will pay $154,000 for the Grand Touring version, up from $139,000; $107,400 for an Air in Touring trim, up from $95,000; or $87,400 for the least expensive version, called Air Pure, up from $77,400. The Air Grand Touring Performance, a new top-level trim announced in April with a 446-mile range, is unchanged at $179,000, but it is $10,000 more than the limited-run Air Dream Edition it replaced.

General Motors

GM increased the starting price of its Cadillac Lyriq crossover EV, raising new orders by $3,000 to $62,990. The increase excludes sales of an initial debut version. The price increase puts it closer to the price of the Tesla Model Y, which GM wants the Lyriq to compete against. The company is also including a $1,500 offer for owners to install at-home chargers. GM expects its overall commodity costs in 2022 to come in at $5 billion, double what the automaker previously forecast.

GM’s 2022 Bolt EV starts at $31,500, up $500 from earlier in the model-year, but down about $5,000 compared with the previous model year and roughly $6,000 cheaper than when the vehicle was first introduced for the 2017 model-year.

Ford Motor

Ford plans to maintain the pricing on its new electric F-150 Lightning pickup, which recently started shipping to dealers, at $39,974. Ford expects $4 billion in raw materials this year, up from a previous forecast of $1.5 billion to $2 billion. If the Lightning does see a price increase, the 200,000 existing reservation holders would be exempt.

Nissan

Nissan indicated an updated version of its electric Leaf, which has been on sale in the United States since 2010, would maintain similar starting pricing for the vehicle’s upcoming 2023 models. The current models start at $27,400 and $35,400. Nissan Americas plans to absorb as much of the external price increases as possible, including for future vehicles such as its upcoming Ariya EV. The 2023 Ariya will start at $45,950 when it arrives in the United States later this year.

The Electric Car Market

Gasoline prices have increased 93 percent since Joe Biden became President, with American families now having to spend $5,000 on gasoline—a huge increase from a year ago when it cost American families about $2800 for gasoline. While Secretaries of Transportation and Energy Buttigieg and Granholm expect those prices to make Americans purchase electric cars that are more expensive than gasoline cars, they may want to think twice given the price increases in most EVs mentioned above. The electric car sales in the United States have not put a dent in the demand for gasoline, which is still growing.

As noted above, all-electric manufacturers are raising prices more steeply than mixed-fleet manufacturers, because mixed-fleet manufacturers can shift costs to buyers of internal combustion engines. For example, GM was reportedly losing $9000 per Chevy Bolt in 2017, although battery costs have declined since then. Those losses are absorbed by purchasers of Chevy trucks and other vehicles with internal combustion engines. This helps make the cars most Americans buy increase in price while solely electric companies must raise prices across the board. It also means that Americans indirectly subsidize the cost of electric vehicles when they buy a car, truck, or SUV with an internal combustion engine.

Electric vehicles currently make up less than 1 percent of the U.S. car fleet, about 3 percent of new car sales. While EV sales in China and Europe are higher than those in the United States, it will still take decades to replace the ~1,300 million oil-based cars around the world since there are only ~13 million electric cars globally, particularly since most of the developing world isn’t purchasing electric vehicles.

Conclusion

While President Biden wants EVs to garner 50 percent of the new car market by 2030, that doesn’t look likely. With EV prices increasing due to a mineral shortage that is raising the cost of batteries, EVs are being priced out of the range of most American families. Further, Biden’s energy price increases are not just with gasoline and oil, they extend to natural gas and coal, which generate 60 some percent of U.S. electricity. Since Biden became President, natural gas prices to electric utilities have almost doubled and residential electricity prices have increased by almost 10 percent, according to EIA data through February. Natural gas futures for June delivery rose to $9.30 per million British thermal units having tripled over the past year. Americans can expect to see further electricity price increases, which will impact the cost of operating EVs.

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

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