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Archive for the ‘energy policy’ Category

Three years ago, the Colorado Oil and Gas Association brought smiles to our faces by recognizing North Face for their hypocrisy in refusing to sell jackets to an oil industry service company.

North Face, whose products are dependent on oil and gas, was given the Association’s first ever Customer Appreciation Award to draw attention to the company’s hypocrisy and chutzpah.

Fast forward three years and Chris Wright, the man behind the North Face award, has been nominated to be Secretary of Energy! BOE enthusiastically endorses this nomination!

Chris Wright’s bio: MIT engineer, shale gas innovator, entrepreneur, and more

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The EIA reports an 8% increase in 2023 US associated gas production as crude oil production rose to record levels.  The Permian Basin, the dominant US crude oil producer, is unsurprisingly the leading associated gas producer.

EIA’s analysis inexplicably ignores the Gulf of Mexico OCS. The Gulf produced an average of 1.64 bcf/d of casinghead (associated) gas in 2023, ranking the GoM just behind the Eagle Ford and significantly above the Niobrara and Anadarko regions (see chart above). It’s also noteworthy that most production from the regions on the EIA chart is from private land, and is not constrained by 5 year leasing plans and other restrictive Federal policies.

80% of GoM gas production is from deepwater leases. The % of associated gas produced on deepwater leases is even higher. The 2 leading GoM gas producers, Shell and bp, only operate deepwater leases. The % of their 2023 gas production that was associated gas was 93% for Shell and 100% for bp.

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Exxon CEO Darren Woods’ is concerned that US withdrawal from the Paris climate agreement would threaten carbon capture and sequestration (CCS), the foundation for which is government mandates and generous taxpayer subsidies.

Exxon projected a $4 trillion carbon capture and sequestration (CCS) market by 2050. The company was a primary driver behind the late additions to the 2021 Infrastructure Bill. That bill authorized carbon disposal on the OCS, exempted such disposal from the Ocean Dumping Act, and authorized $2.5 billion for commercial CCS projects.

Exxon sought an edge over CCS competitors by improperly acquiring 163 OCS oil and gas leases (map below) for carbon disposal purposes. Conversion of these leases is not authorized, which means they will expire at the end of their primary (5 year) term absent legislative or regulatory action.

The only solid support for CCS is from companies hoping to benefit from subsidies and charges to industries and individual energy consumers. It’s time to end the Federal government’s CCS programs.

199 oil and gas leases were wrongfully acquired at Sales 257, 259, and 261 with the intent of developing these leases for carbon disposal purposes. Repsol was the sole bidder at Sale 261 for 36 nearshore Texas tracts in the Mustang Island and Matagorda Island areas (red blocks at the western end of the map above). Exxon acquired 163 nearshore Texas tracts (blue in map above) at Sales 257 (94) and 259 (69).

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Ballot Question 7: Shall the State Representative from this district be instructed to vote in favor of legislation that would support the development of SouthCoast Wind and Commonwealth Wind and other possible future offshore and onshore wind power developments in Massachusetts?

This nonbinding initiative, which was reportedly the work of an individual wind advocate, was a surprise addition to the ballot for residents of the 4th Barnstable District of the Massachusetts House. That district includes the Outer Cape towns of Chatham, Eastham, Harwich, Orleans, Provincetown, Truro, and Wellfleet (see map above).

While nonbinding, the ballot initiative was intended to demonstrate support among Outer Cape residents for offshore wind development. However, perhaps unexpectedly, the initiative failed with 52.4% voting against (graphic below). It’s noteworthy that 82% of South Shore (Massachusetts) voters supported offshore wind development when a similar initiative was on the ballot in 2008. That’s a massive decline in support albeit in a different coastal area of the state.

The opinion of Outer Cape residents is important because their towns are the closest to 3 of the 4 leases (0564, 0567, and 0568 in the graphic below) receiving bids at the Gulf of Maine sale. Those leases are directly offshore from the Cape Cod National Seashore.

Interest in the Gulf of Maine sale was weak. All bids were for the minimum allowable amount of only $50/acre.

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The Santa Barbara County Planning Commission has approved the transfer of the onshore pipeline from Exxon to Sable Offshore. Although the Environmental Defense Center (EDC) is appealing that decision to the Board of Supervisors, the Board’s vote will likely be a 2-2 tie. Supervisor Hartmann’s property is close to the pipeline and she has recused herself from votes on the matter. A 2-2 vote would be a win for Sable, because a tie vote means the planning commission decision stands.

As an investment, Sable is a “pure California permitting play,” which means the risks are high. The company’s chances for success are almost entirely dependent on receiving the necessary approvals from State and local agencies.

If Sable is able to navigate the permitting gauntlet, the company’s prospects are good. The Santa Ynez Unit, Sable’s only asset, has substantial oil and gas resources and well-maintained production facilities.

Sable’s share price soared to $23.43 on 9/3 after the company reached agreement with Santa Barbara on the installation of required pipeline valves. The price bounced further to $28.30 on 9/19 before falling sharply to $19.43 on 10/9 after being cited for failing to get California Coastal Commission approval to install the required valves. The price rebounded to $24 following the County Planning Commission’s approval of the transfer from Exxon to Sable before settling at $23 on Friday, the date of the EDC appeal.

Expect the financial and psychological roller coaster ride to continue.

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Offshore oil and gas:

  • The current 5 year OCS oil and gas leasing plan, which provided for the fewest sales in history, will be rewritten.
  • The new program will include at least one Gulf of Mexico lease sale annually.
  • Where there is State support (e.g. Alaska), other offshore areas may be added to the program.
  • Reversal of the Beaufort Sea Presidential withdrawals, either by executive order or, if necessary, by congressional action, is a distinct possibility.
  • A Gulf of Mexico oil and gas sale will be held during the first half of 2025. This can be accomplished under the Biden administration’s 5 year plan.
  • Judge Boardman’s ruling requiring a new biological opinion under the Endangered Species Act (ESA) has created some uncertainty regarding the timing of a GoM sale. Her decision is being litigated and the effective date of her ruling is now 5/21/2024 (see attached). Congressional action could also reverse this decision.
  • Expect other litigation on NEPA and ESA grounds with the intent of stalling oil and gas leasing. Congressional action could reverse or limit such litigation.

Offshore wind:

  • Expect offshore wind leasing to be “paused.”
  • Current leaseholders are contractually entitled to continue developing and operating their leases. Expect construction and operation plans to be more closely scrutinized.
  • Expect BSEE’s report on the Vineyard Wind turbine blade failure to receive added attention and publicity.
  • Expect considerable tension between North Atlantic governors, strong supporters of offshore wind, and the new administration.

Expect less babble about absurd topics like “petro-masculinity.” 😉

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Mike Werth’s response to Jim Kramer’s question about US production leadership is spot-on (see the clip below).

Kudos to Kramer for visiting Chevron’s Anchor platform in the Gulf of Mexico. More business/energy reporters and government officials with energy responsibilities need to (1) learn more about offshore oil and gas exploration and development and (2) visit offshore facilities.

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As the table below illustrates, Denmark’s highly publicized oil and gas exploration ban is more pragmatic than has been reported in the media. The expansion of production from existing fields is not restricted.

12/4/2020 policy announcement10/29/2024 discovery announcement
Denmark has brought an immediate end to new oil and gas exploration in the Danish North Sea as part of a plan to phase out fossil fuel extraction by 2050. TotalEnergies announces that the Harald East Middle Jurassic nearby exploration well (HEMJ-1X) has discovered additional gas condensate resources in the Harald field, in the Danish North Sea.“The success of the Harald East Middle Jurassic well, nearby our Harald facilities in Denmark, demonstrates the strength of our Exploration strategy.” 

As a result of new exploration, Danish gas production is on the rise (graphic below) after two decades of decline. August 2024 production (165.8 MMCFD) was 21% higher than August 2023 production (136.9 MMCFD)

While Total has proven to be resourceful in sustaining North Sea gas production, Denmark’s refusal to hold new licensing rounds dooms their production over the longer term. This is consistent with Denmark’s intent to cease domestic production by 2050. (Those of you who are young enough can report on whether that deadline is met 😉).

The demand for fossil fuels, which has yet to peak, will still be strong in 2050 and beyond. Phasing out domestic production may be Denmark’s choice, but it’s not a good choice for much of the world.

Denmark is a lovely country, but their rather smug commitment to “lead a global campaign on the role of fossil-fuel producing countries” is not universally welcome. Similarly, companies like Orsted (50.1% Danish govt ownership) are not always the best ambassadors for exporting Danish energy policy.

Other governments, including the US, are quite capable of risking their economic growth and energy security without Denmark’s help.

Related posts:

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This year’s presidential race features an oddity: a discussion about a ban on fracking. What’s striking is that such a conversation is happening at all. This talk takes participants through the Wayback Machine to the first two decades of this century, when hydraulic fracturing and horizontal drilling—together known as fracking—came to public attention. The U.S. was then the world’s largest importer of oil. Today it is energy-independent with, S&P Global estimates, more than 70% of its oil and more than 80% of its natural gas produced through fracking. The process has become essential to the nation’s energy supply and can’t be eliminated.

Not long ago the prospect of U.S. energy independence seemed fanciful. For more than four decades every president aspired to it, but their goal seemed unattainable. Many observers considered the U.S. destined to grow more dependent on imports. In recent years, however, America has achieved energy independence on a net basis. U.S. output is closing in on 13.5 million barrels of crude oil a day, exceeding that of perennial big producers Saudi Arabia and Russia by several million barrels per day. Add what are called natural-gas liquids, and the U.S. produces around 20 million barrels per day.

WSJ article

More from Dan Yergin

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As promised, Ocean City, Maryland, neighboring towns, counties, fishing groups, the Save Right Whales Coalition, and a long list of commercial entities have sued BOEM for approving the Construction and Operations Plan (COP) for the Maryland Offshore Wind project. The complete filing is attached.

The plaintiffs’ discussion of BOEM’s failure to consider true alternatives (begins on p. 43) is particularly interesting. They contend that “BOEM rejected out-of-hand all true alternatives, and selected alternatives with only minor differences in number of turbines and the route for the power cables from the proposed action.

The plaintiffs also assert (p. 44) that “BOEM flatly rejected the option of not authorizing the Maryland Offshore Wind Project—as though approval were foreordained, with only the details to be determined.

The plaintiffs’ argue further (p. 46) that BOEM failed to analyze the 3 phases of the project, particularly the third phase which is open-ended at this time.

Blade failure concerns are discussed beginning on p. 49. Excerpt:

Missing from BOEM’s Final EIS is any discussion or analysis of the environmental impacts in the event of blade and turbine failure and the degradation of Project components, which are known and foreseeable possibilities that should have been reviewed and analyzed by BOEM. Risks of blade and turbine failure and component degradation are not hypothetical. Rather, they pose real dangers to the water quality of the ocean, fish and essential fish habitats, marine mammals, benthic resources, and recreational and commercial boaters.”

As previously recommended, wind leasing and plan approvals should be paused until BSEE’s investigation of the Vineyard Wind blade failure and the associated environmental damage study have been completed.

There is much more in this filing for those who want to take a closer look.

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