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Costly Mandates From Biden Spiking Electricity Prices

April 21, 2022 by Leave a Comment

Americans can expect higher energy prices as U.S. electric utilities plan their biggest spending increases in decades to upgrade electric grids, preparing for increased demand from electric vehicles and making the transition to renewable energy. Utilities plan to spend tens of billions of dollars in the coming years to reduce carbon dioxide emissions, partly in response to state and federal mandates, and to replace infrastructure that cannot meet the needs of President Joe Biden’s energy transition. The Edison Electric Institute, an industry trade group, expects that utilities will invest about $140 billion each year in 2022 and 2023—substantially more than any year since 2000. The investments are needed to meet renewable-energy goals set by President Biden and some states and to bolster the reliability of the grid as outages become longer and more frequent mainly due to intermittent renewables that cannot always meet demand when required and aging infrastructure. Changing the grid and the generation sources from on-demand to intermittent sources with backup will be expensive. Europe is already experiencing this price spike.

Utilities must also prepare for higher electricity demand because of electric vehicle sales goals, homeowners needing the grid to charge them, and replacement of traditional furnaces and gas appliances with electric alternatives. The movement toward electrification is driven by cities, towns, and some states as part of a campaign led by the environmental group the Rocky Mountain Institute, to phase out natural gas for cooking and heating. Because utilities are allowed to recoup the cost of capital investments, and obtain a rate of return on them, Americans can expect higher electric bills.

This occurs as U.S. electricity customers face some of the largest bills in years as President Biden’s policies move the United States to renewable energy and electric vehicle adoption. Average retail electricity prices for residential customers increased 4.3 percent last year to 13.72 cents per kilowatt-hour, the largest annual increase since 2008, according to the Energy Information Administration. Biden is following in the shoes of California whose electricity prices have increased to record highs (70 percent higher than the national average) as it implements its renewable agenda and its electric vehicle goals. Recently, California has mandated 35 percent of new passenger vehicles sold in the state by 2026 to be powered by batteries or hydrogen.

California’s Dilemma

Southern California Edison, a unit of Edison International that serves about five million electricity customers, is planning to invest as much as $30 billion in its system between 2021 and 2025 to implement wildfire control methods and equipment, prepare the grid for greater electricity demand, and build large batteries to store wind and solar power and discharge it as needed. That equates to $6,000 per customer before return on capital investment. California plans to decarbonize its power grid by 2045, which will require the state’s utilities to procure an unprecedented amount of new renewable generation and battery storage. Electrification of California’s largest-in-the-nation vehicle fleet will exacerbate these problems.

The California Public Utilities Commission has ordered utilities to buy renewable energy and battery storage as the state phases out four natural-gas-fired power plants and retires Diablo Canyon, the state’s last two nuclear reactors, with a combined capacity of 2,250 megawatts, in 2024 and 2025, respectively. The order requires companies to bring more than 14,000 megawatts of power generation and storage capacity online in the coming years—an amount equal to about a third of the state’s forecast for peak summer demand.

The California Energy Commission and the state’s grid operator are concerned that the purchases may not be enough to prevent electricity shortages in coming summers. A drought has constrained the output of some of California’s most significant generating facilities, including the Hoover Dam. Neighboring states are closing their coal-fired power plants, reducing the amount of electricity California can import when high temperatures increase electricity demand. California’s closure of four gas-fired power plants on its southern coast will exasperate the problem as they supply more than 3,700 megawatts. Regulators moved to keep three of them on-line through 2023 because the state could face electricity shortages on hot days in the evening, when solar power production declines.

California’s grid operator called on residents to conserve power several times in the past and took emergency measures to buy additional supplies from regional producers to reduce the risk of blackouts. The state also added four temporary natural-gas generators at power plants to help alleviate shortages.

The California utilities commission in late 2019 ordered the state’s power companies to contract for 3,300 megawatts of new generation by 2023. The utilities commission last year ordered them to bring more than three times as much capacity online between 2023 and 2026. The procurement order, the largest the agency has ever issued, calls for 11,500 megawatts of wind and solar generation, battery storage and other carbon-free resources. It is expected to cost billions of dollars, much of which the state’s utilities will recoup from customers.

In 2019, Southern California Edison estimated that California’s goal to reach carbon neutrality by 2045 could require up to $250 billion in statewide investments in renewables and storage and grid enhancements. That pre-COVID number, however, may be well short of what it will take. According to a new report from LevelTen Energy, North American renewable energy developers are struggling to build solar and wind projects fast enough to keep up with demand because of the extremely difficult development landscape, which is leading to a shortage of power purchase agreements for corporations and other large energy buyers. This rapidly growing imbalance between supply and demand combined with skyrocketing development costs raised renewable costs by 28.5 percent in one year.

Moreover, minerals necessary for a green transition have skyrocketed in price recently, with 500+ percent increases in the price for lithium carbonate used in batteries, with price spikes for copper and aluminum, along with other minerals. The price and availability of these will affect the prices of these new investments, and in turn, utility bills.

Conclusion

California’s energy dilemma underscores the difficulties of rapidly transitioning to renewable energy resources, as the leaders of the United States and many countries are now pledging to do. The transition will require large investments by electric utility companies in infrastructure, which will be tacked onto electric utility energy bills consumers pay. More renewable energy added to the grid means more transmission lines will be needed to reach wind and solar resources located farther and farther from demand centers. Greater demand for electricity from electric vehicles will require more solar and wind energy and battery storage requirements to discharge power when the wind is not blowing and the sun is not shining. The energy transition demanded by President Biden will cost Americans through much higher energy bills, as Americans are already seeing from his anti-oil and gas policies. It is just not clear how much the total package will be.

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

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Biden’s Lease Sales Account for Less Than 0.01% Of Federal Land

April 20, 2022 by Leave a Comment

On Friday, April 15, President Joe Biden announced 144,000 acres of the federal mineral estate opened for oil and gas leasing—just 0.00589 percent of the 2.46 billion acres the American people own. Along with this announcement, Biden increased the rents on leased land and the royalties companies must pay on every barrel of oil and every cubic foot of natural gas produced. Of course, those increases will raise the price of domestically produced oil and therefore gasoline, diesel, natural gas and propane. Biden and his administration are trying to make Americans believe they are doing everything they can to lower gasoline and energy prices, but their wider array of actions shows this to be untrue.

The latest announced lease sale is due to a court order in June that mandates the Biden administration to hold lease sales as they are congressionally mandated. The Biden administration held one offshore lease sale in November—the largest lease sale in history—but did nothing to appeal a decision by a court in January that vacated that lease sale. The court said the sale did not adequately address the potential greenhouse gas emissions from oil produced from the leases that is consumed abroad.

In the latest announcement, the Bureau of Land Management will offer around 173 parcels on 144,000 acres of federal land—an 80 percent reduction from the acreage originally being considered for leasing. According to the Interior Department, the reduced amount of land being offered was due to a “robust environmental review” and engagement with Native tribes and local communities. The department plans on offering new leases near existing oil and gas infrastructure and will report greenhouse gas emissions that would result from oil and gas drilling on federal lands.

The increased royalty rate is set at 18.75 percent, a 50 percent increase from the current 12.5 percent. An Interior Department report issued in November recommended that rates be increased because the federal rates are lower than those on state and private land. However, the federal rate has long been lower in recognition of the more onerous federal permitting process. The Biden administration took 182 days to issue a drilling permit last year compared with just a few days for the state of Texas. Time delays carry a monetary value. The leasing moratoria that Biden put in place when he first took office has increased the cost of new investment and this new proposal will also increase costs on American energy development and for consumers.

The Interior Department also recommended new restrictions on what lands are made available for oil and gas development—a shift from the current practice in which most federal lands are open. Federal lands are a major source of American energy, supplying about 25 percent of U.S. oil production and more than 10 percent of its natural gas production.

Biden’s ploy is to duck political responsibility for high energy prices so Americans will be fooled into believing that he is doing what he can to reduce gasoline prices. Americans should not be fooled. These changes are likely to further discourage oil and natural gas investment on federal lands.

Background

According to a report by the Congressional Research Service, numerous provisions in law affect revenue collection and disbursements from oil and natural gas leases. The Federal Land Policy Management Act establishes statutory authority for the Bureau of Land Management to manage the federal mineral estate. Onshore oil and natural gas are defined as leasable minerals, governed by the Mineral Leasing Act of 1920. Some key provisions in that law include a 12.5 percent minimum royalty rate; 40 percent of revenues arising from oil and gas leasing on federal lands in states other than Alaska are deposited into the Reclamation Fund; and states other than Alaska receive 50 percent of revenues from extraction operations in those states (Alaska receives 90 percent in lieu of reclamation funding). Disbursements to states are assessed a 2-percent administration fee, which is deposited in the Treasury. Leases are sold to the highest bidder (at or above the required minimum bid) during competitive auctions, or are obtained non-competitively if they fail to sell at auction.

Conclusion

On the Friday before a holiday, the Biden administration announced the leasing of 144,000 acres of federal land to oil and gas development—just 0.00589 percent of the mineral estate—as a ploy to make Americans believe he is doing all he can to lower gasoline prices. He also announced higher rents on leased land and 50 percent higher royalty rates on the oil produced, supposedly to help taxpayers get the true value of the leased land. Instead, it will do the opposite by reducing investment for more oil development on federal lands and by upping the cost to produce the oil. This is not the time to make upward cost changes to long-standing fair and reasonable lease terms that will only end up charging Americans more at the pump. Reducing investment to energy development on federal lands and increasing costs of production resulting from these Biden administration actions will reduce revenues that aid state and federal government budgets as well as local communities that also benefit from the fees. President Biden has been consistent in his attacks on U.S. energy production even while begging other nations to produce more energy to lessen the impacts of price increases on American consumers. His latest actions only confirm that he intends to abide by his campaign promise to “end fossil fuels.”

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

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Biden Exacerbates Auto Prices With New Mandates

April 14, 2022 by Leave a Comment

Last week, the U.S. Department of Transportation (DOT) released stricter fuel economy standards for automobiles, known as the Corporate Average Fuel Economy CAFE) Standards. The new CAFE standards require that the average new vehicle in the United States get 49 miles per gallon of gasoline by 2026. The new standards will require an increase in fuel efficiency of 8 percent annually for model years 2024 to 2025 and 10 percent annually for model year 2026. They will increase the estimated fleet-wide average by nearly 10 miles per gallon for model year 2026 compared to model year 2021. The National Highway Traffic Safety Administration (NHTSA) estimates the rule’s total costs for automakers at over $200 billion through 2029 and it will increase the average cost of a vehicle industry-wide by $1,087. The total cost for Detroit’s Big Three automakers is estimated at more than $100 billion for General Motors Co, Ford Motor Co, and Chrysler-parent Stellantis.

This CAFE standard is a slight variation to the proposed new standards released by NHTSA last August that would increase fuel efficiency by 8 percent annually for vehicle model years 2024 to 2025 and increase the estimated fleet-wide average by 12 miles per gallon for model year 2026 compared to model year 2021.

Prior to the Biden administration taking office, DOT and the Environmental Protection Agency (EPA) released a single set of standards for CAFE. However, last year, in a set of parallel rules, EPA released standards that would require passenger vehicles to achieve an average of 55 miles per gallon of gasoline by 2026—an increase over the 38-mile per gallon rule that is currently in place. Under President Trump’s standard, called the SAFE rule, President Obama’s standards were reduced to ensure safer and more affordable vehicles by reducing automakers’ costs for lighter and more expensive technology.

The Push for Electric Vehicles

The Biden administration’s efficiency standards for vehicles are designed to promote electric vehicles. By increasing the required mileage of new vehicles sold, the standards require that more and more electric vehicles be sold as well, or manufacturers will be in violation of the law. There are about 280 million cars and trucks on the road today, of which only 3 percent are electric. Americans typically buy 16 to 17 million cars every year. So, it would take 16 to 17 years of electric vehicle-only sales to completely replace all of the gasoline cars currently on the road if gasoline cars were banned by federal authorities or if automakers no longer produced gasoline vehicles.

Last year, President Biden signed an executive order directing the federal government to spend billions of dollars to purchase electric vehicles and recently he invoked the Defense Production Act to increase domestic production of minerals used in making electric vehicles, such as nickel, lithium and cobalt. Currently, the United States is 100 percent dependent on imports of 17 key minerals and over 50 percent dependent on imports of another 29 minerals. China is a significant source for half of those 29 minerals and it dominates the supply chain for electric vehicle batteries. Chinese chemical companies accounted for 80 percent of the world’s total output of raw materials for advanced batteries in 2019.

The irony of the situation is that President Biden has done everything he can to not promote domestic mining. Last June, he indicated that he wants to import these critical metals instead of producing them domestically. And, in January, the Biden administration revoked the federal leases for the Twin Metals mine in Minnesota that contains copper, nickel, cobalt, and platinum-group elements. There are numerous other examples of the Biden administration hampering the development of critical metal mines in the United States.

An electric car includes huge amounts of graphite, copper, nickel, manganese, cobalt and lithium compared to conventional cars. For example, a typical electric car requires six times the mineral inputs of a conventional car.  Since most developed countries are trying to transition to renewable energy and electric vehicles, most of the world will be competing for those minerals.

To replace all of the United Kingdom’s nearly 32 million cars with electric vehicles would use about twice the cobalt, nearly all the neodymium, 75 percent of the lithium, and 50 percent of the copper produced in the entire world in 2018. Clearly, those numbers point out that there is not enough cobalt, neodymium, or lithium being mined and refined in the entire world today for Britain to meet its green transition goals in the next generation. Given that Britain has 67 million people—one-fifth of the population in the United States—and the world has nearly 8 billion, it is unlikely that the minerals needed will be insufficient supply to meet the goals of the politicians that rule these countries. This is especially true in light of the long lead times it takes to develop mining and processing facilities and opposition by Greens to these projects.

The World Bank estimates that, over the next 25 years, the world would need to mine the same amount of copper mined over the past 5,000 years, largely because of the push for renewable energy and electric vehicles. The International Energy Agency sees demand in 2040 for lithium soaring 4,200 percent, graphite 2,500 percent, nickel 1,900 percent, and rare earths 700 percent.

Wood Mackenzie, an energy research and consulting firm, estimates that electric vehicles will make up 18 percent of new car sales by 2030—far less than Biden’s goal of 50 percent—but a large enough percentage that the demand for batteries would increase by about eight times as much as factories can produce today. To achieve such sales estimates, industry needs to make batteries cheaper, and those factories must be built and funded. Batteries for a midsize electric car cost around $15,000—about double the price they need to be for electric cars to achieve mass acceptance. Growing demand, however, could push up prices for raw materials like lithium, cobalt and nickel and cancel out some of the efficiency gains that can be gained. Further, the auto industry is competing for batteries with electric utilities and other energy companies that need them to store intermittent wind and solar power which are also being pushed by promoters of electric vehicles, which will further increase demand.

Conclusion

President Biden’s goal that 50 percent of new car sales by 2030 be electric is not likely to be achieved, but nonetheless, his administration is pushing CAFE standards to a level to ensure that electric vehicles be abundantly produced. Unfortunately, the push for electric vehicles means that the United States will be dependent on unreliable foreign nations for the critical minerals needed to produce these vehicles. In fact, U.S. dependency will be much greater than it ever was upon the Middle East for oil imports. And, studies show that the level of production and availability of the critical metals needed are unlikely to be available, which will push their costs up as is typical of supply and demand economics when shortages exist. Americans should realize that the Biden administration’s policies are increasing costs, not making them less expensive as his administration tries to tell us when they quote savings that are to come from lower fuel costs for electric vehicles.

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

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The Latest Stunt From The White House Won’t Help Gas Prices

April 13, 2022 by Leave a Comment

President Joe Biden plans to extend the availability of higher biofuels-blended gasoline during the summer to lower gasoline costs and to reduce reliance on foreign energy sources. The measure will allow Americans to buy E15, a gasoline blend that contains 15 percent ethanol from June 1 to September 15. E15 is cheaper on average than gasoline but it is less energy efficient, requiring drivers to buy more fuel. The shift could result in a modest effect on gasoline prices at the pump given that in areas where it is available, E15 sells at a 5- to 10-cents-per-gallon discount to regular E10 gasoline. According to Biden administration officials, however, this action would reduce gasoline prices at the pump by 10 cents per gallon. There are many factors that could affect that estimate. One of those factors is corn used in making ethanol whose prices may increase due to the Russian invasion of Ukraine—two countries that under normal circumstances export wheat, corn and barley—and as drought hit some U.S. growing regions. Corn futures recently touched their highest level since 2012.

The summertime ban on E15 was imposed because it is believed to contribute to smog in hot weather, at least more than E10—a blend of 10 percent ethanol with gasoline. About 2,300 of the nation’s more than 150,000 stations now sell E15, and despite its availability in about 30 states, the fuel is most widely purchased in the Midwest where the ethanol is produced.

To make the change, the Environmental Protection Agency (EPA) is planning to issue a national emergency waiver, closer to June, regarding anti-pollution restrictions that effectively block warm-weather sales of E15 gasoline in areas where smog is a problem. According to the EPA, waivers can be used in limited instances, such as supply emergencies, but cannot be put in place to address price concerns.

The agency may also consider additional action to allow for the use of E15 year-round. In 2019, under former President Donald Trump, the EPA issued an order allowing permanent year-round sales of the biofuel blend, but the order was overturned last year by the US Court of Appeals for the DC Circuit. According to a senior administration official, this action “is distinct from” the Trump administration’s efforts to expand ethanol sales in that it is “based on the current circumstance, which is a fuel supply emergency.” The Biden administration plans to use a different “approach” and “authority” than the Trump administration did to avoid court action against it.

The EPA also plans to work with states so that that there would be no “significant” negative impact on summer air quality due to the extended sale of E15, and it is proposing a change that would allow canola-based biofuels to qualify for credits under a federal program that requires refiners to blend plant-based alternatives into gasoline and diesel. Notably missing from arguing against President Biden’s plan to increase volatility of gasoline by increasing allowable ethanol are the national environmental groups who are typically vocal in their opposition to any possible reduction in air quality by regulators.

Oil refiners are required to blend some ethanol into gasoline under a pair of laws, passed in 2005 and 2007, known as the Renewable Fuels Program, intended to lower the use of oil and greenhouse gas emissions and reduce dependency on foreign oil by mandating increased levels of ethanol in the nation’s fuel mix every year. However, since passage of the 2007 law, the mandate has been met with criticism that it has contributed to increased fuel prices and has done little to lower greenhouse gas emissions. Moreover, the combination of horizontal drilling and hydraulic fracturing turned the United States into the world’s largest producer of oil and natural gas and led to net energy independence in 2019 under President Trump.

As one policy expert stated, “This is still very, very small compared with the strategic petroleum reserve release. This one is much more of a transparently political move.” The strategic petroleum reserve release referred to is Biden’s announcement at the end of last month to release one million barrels of oil a day from the U.S. Strategic Petroleum Reserve (SPR) over the next six months for a total of 180 million barrels.

Biden’s Strategic Petroleum Reserve Releases

In November, Biden released 50 million barrels from the petroleum reserve and on March 1, Biden announced the release of a further 30 million barrels, in coordination with a release of an additional 30 million barrels from other countries around the world. The International Energy Agency (IEA) is coordinating the 60-million-barrel release of oil, announced on March 1, from about two dozen other countries. Earlier this month, the IEA announced it would supply the oil market with 60 million additional barrels of crude from its emergency stockpiles.

Source: Bloomberg

Mr. Biden’s release of 50 million barrels in November barely dented oil prices on the global market as the world consumes 100 million barrels per day. The November release was well before the war in Ukraine, which began on February 24, 2022, but Biden was trying to offset the political damage of some of his anti-oil policies that had increased gasoline prices by $1 a gallon last year.

The latest Biden release is not big enough to offset the potential loss of Russian oil exports, which is about 3 million barrels per day. While the release will lower the oil prices a little in the short term, lower prices generally encourage more demand. Further, a large discharge from the reserve could cause “congestion” on the Gulf Coast, keeping new oil production from fields in West Texas out of pipelines and storage tanks. The move could also discourage Saudi Arabia and other global producers from increasing supply to reduce prices.

The U.S. strategic petroleum reserve (SPR) currently holds 568.3 million barrels—its lowest level since May 2002. (SPR has a total capacity of 714 million barrels.) The 180-million barrel release would increase supplies and help the market rebalance, but it does not resolve the structural supply deficit that is caused by Biden’s anti-oil and gas policies that include cancellation of the Keystone XL pipeline, placing a moratorium on oil and gas leasing on federal lands, banning oil production in the Arctic National Wildlife Refuge and the National Petroleum Reserve—Alaska, slowing down approvals for drilling permits, and using a climate metric to increase the cost of hydrocarbons when making decisions, among other negative actions.

Conclusion

President Biden is grasping at straws to make Americans believe that he is doing all he can to lower oil and gasoline prices by releasing oil from the strategic petroleum reserve and by having EPA issue a waiver on higher ethanol blended gasoline for summer use. Americans should not be misled by these actions which will only lower prices a very little bit in the short term. These actions are all a ploy to hide the fact that the Biden administration is hurting the domestic oil and gas industry by its anti-oil and gas policies, just as he promised while running for office. U.S. oil companies will not invest in new oil fields or drilling if the long-term situation is to get rid of the industry, which Biden and his administration have been spouting.

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

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The Unregulated Podcast #79: Prostitutes and Possibilities

April 13, 2022 by Leave a Comment

On this episode of The Unregulated Podcast, Tom Pyle and Mike McKenna make predictions for his year’s baseball season, talk price increases, and check in on things at the White House.

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E15 Waivers Do Nothing to Solve High Energy Prices

April 12, 2022 by Leave a Comment

WASHINGTON D.C. (April 12, 2022)  Today, President Biden announced an emergency waiver that will allow E15 gasoline to be sold on a temporary basis from June 1 to September 15.  The White House estimates that the E15 blend will save consumers 10 cents per gallon compared to the E10 blend, however, this does not account for the lower energy content of the fuel.  Additionally, E15 is only sold at about 2,300 gas stations nationwide, which is less than 2 percent of the total gas stations in the U.S.
 
Thomas Pyle, President of the American Energy Alliance, issued the following statement:

Much like last week’s announced drawdowns of the SPR, this is yet another effort by the Biden administration to distract Americans from the inflation and higher energy prices that are the direct result of the administration’s policies. This action will also have no noticeable impact on gas prices, but lets the administration pretend they are acting. However, real action to lower oil prices, and thus prices at the pump, is well within the administration’s power if they would simply get out of the way of domestic energy production.  

It’s no surprise that on the same day the Bureau of Labor Statistics released its estimate of the consumer price index for March that showed an increase of 8.5 percent, the largest increase in 41 years, President Biden is once again resorting to symbolic gestures rather than meaningful actions that can help American energy consumers. As American drivers continue to pay record-high prices at the pump, it is time for the president to end his war on domestic energy production.

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The Unregulated Podcast #78: Uncharted Waters

April 7, 2022 by Leave a Comment

On this episode of The Unregulated Podcast Tom Pyle and Mike McKenna discuss the murky path forward for those advocating for the 25th Amendment and go through some highlights from Capitol Hill over the last week.

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Biden Attacks Oil Producers To Shift Blame On Gas Prices

April 7, 2022 by Leave a Comment

President Joe Biden is expected to call on Congress to pass legislation enacting “use it or lose it” fines on wells that oil companies have leased from the federal government but have not used in years and “on acres of public lands that they are hoarding without producing…Companies that are producing from their leased acres and existing wells will not face higher fees.” The extra fees on federal leased land are on top of rents that the oil companies pay to hold the leases, “bonus bids” paid by the winning bidder at lease sales and the fact that 66 percent of federal leases are currently producing oil.

The Biden administration is clearly continuing its attacks against the oil and gas industry without the appearance of any understanding of its procedures and steps to activate drilling operations. Currently, there are 37,496 onshore leases in effect and 12,068 nonproducing leases. Not all the nonproducing leases will be developed because exploratory work may find that there is insufficient oil and natural gas on them to make them economic.

Once enough oil has been identified, a number of steps must be undertaken. Companies must put together a complete leasehold, particularly with the long horizontal wells that can cut across multiple leases. Sometimes a new lease is needed to combine with existing leases to make a full unit. Since the leasing ban remains in effect with no onshore lease sales held since 2020, some leases are held up, waiting for new leases or for the government to combine them into a formal operational unit. Also, before allowing development on leases, the government conducts environmental analysis under the National Environmental Policy Act, which often takes years to complete, holding up many leases from becoming productive.

Further, many leases are held up in litigation by environmental groups. For example, Western Energy Alliance is in court defending over 2,200 leases, most of which cannot be developed while those cases are ongoing. Some leases are awaiting other government approvals. There are 4,766 permits to drill awaiting approval by the Department of the Interior’s Bureau of Land Management that Biden administration appointees could approve, enabling companies to move forward with development. However, the Biden administration has stalled on its rate of approving drilling permits, cutting back by 75 percent between April and August 2021, and continuing at a much lower level than in the first half of the year. Currently, there are 8,825 outstanding approved permits, but there are factors that cause companies to wait to drill those wells.

First, because rigs are very expensive, companies must build up a sufficient inventory of permits before rigs can be contracted to ensure the permits stay ahead of the rigs. This is a logistical challenge since these are large facilities that must be moved at great difficulty. Besides obtaining drilling permits to drill on federal lands, rights of way must be acquired to access the lease and for natural gas gathering systems, which can take years to acquire. With the pressure against natural gas flaring from regulators, most companies cannot drill before the gathering lines are in place. Pipelines also need to be in place to ship the oil and natural gas, which the Biden administration has worked against, slowing or stopping pipeline infrastructure. The Keystone XL pipeline that President Biden nixed on his first day in office is a case in point. But, there are many other pipelines that are in limbo, waiting permits to proceed from the federal government.

Further, capital must be acquired. Many companies, particularly the small independents who drill the majority of federal wells, are having difficulty acquiring the credit and capital needed. Anti-oil and gas investors, encouraged by the Biden administration’s nominations for key financial positions, have worked to de-bank and de-capitalize the industry. The financiers and investors are saying no to credit because they see the current oil price hike as a short-term problem. In the long-term, they say the Biden administration does not want the oil and gas business, so they have been reluctant to extend credit to an industry President Biden has said he does not want to continue.

Lastly, the regulatory uncertainty from the Biden administration is having the industry prioritize nonfederal leases over federal leases because there is less regulatory and political risk. The Biden administration has an agenda of regulatory overreach with extensive new regulations in the works. The uncertainty of all the new red tape puts a damper on new investment and development on federal lands.

Other Impediments to More Oil Production

There are other issues holding back production. Along with the difficulty of obtaining capital, there are not enough workers to expand rapidly, longer wait times for parts to be fabricated and supplies shipped, steel shortages for tubes that line the well holes, increased costs for the sand needed for hydraulic fracking and worries that the high prices will not last since there has been so much volatility in the oil price range over the past several months.

Sand used for hydraulic fracturing is made of silica crystals processed from pure sandstone, with a small grain size and round shape that allows natural fluids like oil and water to pass between them. At a drilling site, sand is mixed with water and other materials, then injected into the ground at high pressure to break up shale to release and pump out the oil. The sand becomes a proppant through which hydrocarbons flow. That sand now costs between $40 and $45 per ton, nearly 185 percent higher than last year, reflecting among other things increased transportation costs. Two years ago, sand prices were in the teens. While some of the sand used by drillers in Texas and New Mexico is sourced locally, a lot of the sand is shipped in from Wisconsin via rail. Shortages of labor and transportation capacity have complicated drillers’ efforts since at least early February.

The U.S. price for steel, known as oil-country tubular goods hit $2,400 per ton this month, 100 percent higher than a year ago. The price increase is due to increased demand and concern that Russia’s invasion of Ukraine will stop pipe and tube imports from the region. Russia and Ukraine combined provide about 15 percent of all of the imported metal to the United States. Russia also supplies a key ingredient for welded goods, known as coupling stock. Drillers now have less than 4 months of steel supply left for their wells—levels that were last seen in 2008, in the early days of shale drilling.

Source: Bloomberg

The Bakken field in North Dakota could supply as much as 100,000 barrels of additional oil to help ease domestic supply crunches, according to North Dakota’s top oil and gas regulator. Producers have been holding production flat in the Bakken due to ESG pressures and labor shortages. Rig counts have also remained flat due to workforce issues that have made adding rigs difficult.

Economists at the Dallas Federal Reserve project that whatever additional capacity U.S. producers can develop will take a minimum of six months, and that is if everything works perfectly.

Conclusion

President Biden says he wants more domestic oil production but he is doing nothing positive to make that happen. His latest ploy is to place a “use it or lose it” fine on unused oil leases that take years to develop and millions of dollars. A shale well, for example, could cost about $7 million to drill. Oil and gas producers also have to boost wages to find and retain workers. Those higher expenses, along with Biden administration’s tough environmental policy and investors’ pressure to keep costs under control, make producers reluctant to ramp up output. The oil and gas industry is also running into issues with supply chain bottlenecks, as have other industries. As one of America’s most important industries, the oil and gas industry is essential to our economy and—as has been shown with Russia’s invasion of Ukraine—to our national security. While words alone may provide solace for some, it is the continuing negative actions of the Biden administration towards their product that are being heard by the men and women in the oil industry.

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

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Biden Tries To Hide Hypocrisy On Mining With Defense Production Act

April 6, 2022 by Leave a Comment

Last week, President Biden invoked the Defense Production Act to increase domestic production of minerals used in making electric vehicles, such as nickel, lithium and cobalt. The president said that the country depended on unreliable foreign sources for many materials necessary for transitioning to the use of renewable energy and reports have stressed this for years. The irony of the situation is that in January, the Biden administration revoked the federal leases for the Twin Metals mine in Minnesota that contains copper, nickel, cobalt, and platinum-group elements. Instead of producing these metals domestically, last June, President Biden indicated that he wants to import them. Yet, now he supposedly changed course, claiming he wants to produce them in the United States.

Biden Administration Attacks Mining Projects

Twin Metals is not the only mine where conflicts to development and production exist. The PolyMet copper and nickel mine is located within Minnesota’s Mesabi Iron Range and would be the first copper-nickel open-pit mine in Minnesota. Besides holding significant deposits, the project has existing rail, roads, utilities and an established supplier network in a traditional mining area but is being held up by court and regulatory action despite having undergone more than a decade of thorough, public environmental reviews.

Ioneer Ltd.’s lithium mine in Nevada, which could supply 22,000 metric tons of lithium annually—enough for about 400,000 electric cars, is being held captive by environmentalists, who claim the mine threatens Tiehm’s buckwheat, a rare flowering plant. The Trump Interior Department had refuted that after an extensive analysis, indicating that the culprit of the buckwheat was hungry squirrels. Despite that analysis, environmentalists asked the Biden administration to list the buckwheat as an endangered species, and Biden regulators subsequently proposed a listing to that effect, placing the mine in limbo.

The Resolution copper mine in Oak Flat, Arizona, which can meet about 25 percent of U.S. copper demand, is currently under federal environmental review. In September 2021, the House Natural Resources committee voted to include language in the reconciliation package to block the building of the Resolution copper mine. The Rosemont copper mine in the northern Santa Rita Mountains in Arizona received a setback when Federal regulators rejected its mining company’s request to reduce critical habitat for jaguars deemed endangered on land that overlaps the footprint of the proposed mine. Hudbay Minerals Inc. has been working for more than a decade to get permission to open the mine that could create thousands of jobs and bring billions in economic development to the region. The mine only needed about 6 percent of the land that had been excluded for the jaguars.

The Pebble copper and gold mine, 100 miles from Bristol Bay, Alaska had its permit application rejected in November 2020 by the U.S. Army Corps of Engineers. In January 2021, the Pebble Partnership requested the Army Corps of Engineers to reverse its denial of the proposed mine’s Clean Water Act dredge and fill permit. According to Northern Dynasty Minerals, the decision is receiving new oversight and is likely to take a year or longer. However, the Environmental Protection Agency 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.

Recently, regulators suspended a right-of-way for a road in Alaska, previously granted by the Trump administration, which provided access to one of the world’s largest mineral deposits including zinc and copper. On March 11, the Bureau of Land Management (BLM) 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.

The Defense Production Act

The Defense Production Act gives the president significant emergency authority to control domestic industries for the purpose of national defense. By invoking the Act, Biden is asking the private sector to develop a local supply chain around renewable energy by ensuring the government will pay for some of the costs, such as feasibility studies for new mines. The move supposedly could speed up several new and proposed mining and extracting projects that are in various stages of development. As noted above, however, many of those projects are facing opposition from environmental groups and are further held in limbo by Biden regulators.

The law has been used recently both by President Trump and President Biden. President Trump invoked the act in 2020 to help clear up supply-chain issues encountered in the manufacturing of ventilators and to ensure the production of additional N95 face masks due to the coronavirus pandemic. Biden invoked the act last year to speed up COVID vaccination and testing.

Critical Minerals Security Program

The United States and the 30 other O.E.C.D. member nations of the International Energy Agency recently launched a critical minerals security program that could eventually include steps such as the stockpiling of metals needed for electric vehicles and other renewable energy applications. It is envisioned similar to the commitment by IEA nations since the 1970s to hold strategic stockpiles of oil, which they are now liquidating in response to price increases in world oil markets.

The U.S. Mineral Situation

The United States Geological Survey (USGS) under Biden expanded the list of critical minerals from 35 to 50 by breaking out rare earth minerals and precious group metals into separate entities and adding nickel and zinc to the list. Of the original 35 mineral commodities considered critical to the economic and national security of the country, the United States lacks any domestic production of 14 and is more than 50 percent import-reliant for 31. This import dependence is a problem because it can put supply chains and U.S. companies and mineral users at risk, particularly when China dominates the mineral supply chains, including most of the processing.

Most mining is done in countries with low environmental and labor standards such as cobalt mining in the Republic of the Congo where child labor is used. Half of the Congo’s largest mines are owned by China. China has used its critical mineral resources for political advantage when in 2010, it restricted exports of rare-earth minerals to Japan during a standoff over the Senkaku Islands. China has also encouraged investment in foreign mining projects as part of its Belt and Road initiative to lock up critical minerals, which has enabled China to dominate mineral processing. (See chart below.)

Conclusion

Government climate policies are driving up demand for critical minerals. An electric car includes huge amounts of graphite, copper, nickel, manganese, cobalt and lithium compared to conventional cars. Solar and wind also require more critical minerals than do fossil-fuel plants. For example, a typical electric car requires six times the mineral inputs of a conventional car, and an onshore wind plant requires nine times more mineral resources than a gas-fired power plant. Since 2010, the average amount of minerals needed for a new unit of power generation capacity has increased by 50 percent as the share of renewables has risen.

Last year, President Biden said he wanted to import these critical minerals instead of mining them domestically, despite the United States having the most stringent environmental and labor standards. In his usual contradictory fashion, however, Biden has invoked the Defense Production Act to encourage domestic mining of these critical minerals. However, unless his administration starts approving leases and permits, nothing is going to change. It is just more rhetoric for voters to believe he is accomplishing something.

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

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American Energy Alliance Launches Five Figure Digital Campaign to Support American Energy Production

April 5, 2022 by Leave a Comment

The Time is Now for the Administration to Act to Ease the Pain at the Pump

WASHINGTON D.C. (April 5, 2022) This week, American Energy Alliance (AEA), the country’s premier pro-consumer, pro-taxpayer, and free-market energy organization, launched an advocacy initiative calling on President Biden and his administration to stop sending mixed signals when it comes to energy production in America.

American drivers have been paying record-high prices at the pump, but President Biden and the Democrats on Capitol Hill have been sending mixed signals on American energy production – calling for greater oil production only after a year of bashing American oil and natural gas producers. That’s not getting the job done. Now is the time for President Biden to act to support greater domestic energy production here at home to lower the price of gasoline at the pump.

AEA is calling on the Biden Administration and the Democrats in Congress to give American energy consumers a chance to actually lower energy prices for hard-working American families. Our message is clear: it’s time to get out of the way and allow American energy workers to provide the reliable and affordable energy consumers need.

Thomas Pyle, president of the American Energy Alliance, issued the following statement:

“If the Biden administration is serious about lowering energy prices, then it’s time for them to reverse their flawed policies, which have strangled domestic energy production since day one of this presidency.

Instead of stifling investment in oil and gas production, the Biden Administration and Congress needs to encourage financial institutions to invest in new projects.

Instead of banning drilling on federal lands and waters, President Biden needs to encourage new investment in American oil and gas development and approve the over 4,000 drilling permits that his Administration is sitting on.

Instead of promoting policies that prevent the construction of new pipelines, the Biden Administration and Congress needs to clamp down on unelected bureaucrats who are putting up roadblocks to new projects.

Instead of shutting down production in Alaska, the Biden Administration needs to follow the law and offer new leases in ANWR and the Naval Petroleum Reserve-Alaska.

Talk is cheap. Actions speak louder than words. President Biden and Democrats in Congress, it’s time to end your war on American energy. American families are suffering under your policies. It’s time to reverse course.”

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