Climate Initiatives

Hubris is Spelled N-E-T-Z-E-R-O

Posted on by Ron Clutz

William Watson explains in his Financial Post article  How does Ottawa spell hubris? N-E-T-Z-E-R-O.  Excerpts in italics with my bolds and added images.

Tough question: If you think central planning is disastrous for economies, and it is, do you want your central planners to be competent and efficient or do you want them to be jokers, engaged in barely concealed fraud?

The projections included in the government’s “2030 emissions reduction plan” released this week show that in the 14 years between 2005 and 2019 total Canadian emissions of carbon dioxide equivalents fell by just nine megatonnes (Mt), from 739 to 730. Yet from 2019 to 2030, the plan would have us believe, they will fall by 287 Mt — more than 30 times the 2005-19 change.

Take buildings. From 2005 to 2019 emissions from buildings actually rose by six Mt, from 84 to 91. But “where we could be in 2030,” according to Ottawa’s chart, is 53 Mt. The chart explains: “A whole-of-government and whole-of-economy effort focusing on regulatory, policy, investment and innovation levers is needed to drive decarbonization of the buildings sector. To this end, the Government will develop a national strategy for net-zero and resilient buildings …”

That load of yet-to-be-delivered national strategy supposedly will eliminate 38 Mt of emissions when all the housing efficiency programs from 2005-19, and there have been lots, enabled an “improvement” of minus seven Mt? You’ve got to know a “whole-of-government” effort to operate the “investment and innovation levers” will not be speedy or efficient.

And even more impressive 2020s miracles apparently are on order.

In the electricity sector, emissions fell 61 Mt from 2005-2019, thanks largely to the elimination of coal. From 2019-2030 they supposedly will fall another 47 Mt, even though coal can’t be eliminated again. In heavy industry, the reduction was 10 Mt; it’s now going to be another 25 Mt. In transportation, emissions actually rose 26 Mt over the last 14 years but by 2030 they supposedly will fall 43 Mt.

This page has no sympathy for central planners. Central planning does not work, whether of the Soviet or the Trudeau-Guilbeault kind. And it wouldn’t be a good idea even if it did. On the other hand, we have immense sympathy for central plan-ees — the people who are subject to central plans. Elsewhere on this page is a plea from Francis Bradley of Electricity Canada, an association of the people who run the country’s electricity grids. All net-zero plans involve a big expansion of electricity use: all those electric vehicles, including electric trucks not yet invented, have to be charged somehow. But, Bradley warns, the clock is ticking. If the government is serious, it needs to make critical decisions now about such things as whether it will allow generation with natural gas, how much financial assistance it will provide for re-fitting and new building of transmission lines and whether it will override burdensome and lengthy approvals processes.

What does this week’s “plan” provide in the way of detail?
Aspiration, aspiration, aspiration.

It is, as Elizabeth May noted, a lovely document, with attractively coloured charts and diagrams. But if you assumed an emissions reduction plan would provide a detailed checklist of policy actions the government would be taking, you assumed wrong.

Each of a series of chapters, one per major sector of the economy, is structured the same way: a few paragraphs outlining “Current sector emissions”; another few on “(Industry X) in context: key drivers”; even more on “What have we done so far?”; a word or two about “What was heard from the 2030 engagement process”; and, then, finally, “What’s next?” Apart from “What’s next?” it’s all filler.

I copied and pasted all the “What’s next?” passages into a single file. They total a little over 8,600 words, about 10 times the length of this column. Google tells me 8,600 words would take an average adult roughly half an hour to read. Yet this is a document that purports to plan major changes in how a 40-million person, $2.5-trillion economy operates.

The “What’s next?” section for electricity is just 482 words, which I doubt will satisfy Bradley’s plea for detail. And much of it is filler — for instance, 182 words describing the “clean electricity standard” consultations processes: “Establishing a net-zero-emitting electricity sector will require substantial effort from provinces and territories, and a CES will provide the regulatory signal to support decision-making at all levels of government to achieve this goal.” No doubt that’s all true. But tell us something that’s not obvious — like what the regulatory signal actually is going to be, not just that there will be one.

Apart from filler, the detailed actions are that the feds will provide $25 million for planning “regional strategic initiatives,” will “lead engagement” on the Atlantic electric loop, and will “support de-risking and accelerating the development of transformational nation-building inter-provincial transmission lines.”  All clear now? I doubt the grid people will think so.

An institution — the federal government — that has struggled for 15 years to replace just a few dozen obsolete fighter jets supposedly is going to oversee the radical transformation of a modern economy in just eight years.

It would be laughable if it weren’t also so frightening.

There is a big opening and an urgent need for a political party that would impose a meaningful carbon tax, use the revenues to reduce other taxes and then retire from the emissions business and let markets figure out what happens next.

 

Trudeau’s War on Canadian Energy

Posted on by Ron Clutz

David Staples reports on the latest Trudeau attack on Canadian energy in his Edmonton Journal article If Trudeau’s new climate plan is excellent, why does Rachel Notley blast it? Excerpts in italics with my bolds.

My own fear is that such policies will hammer Canada’s biggest energy sector
and hobble our most promising one.

The prime minister has now proposed a new direction on energy policy. Of particular concern is his government’s call for a 42 per cent emissions cut for Canada’s oil and gas sector by 2030 and its growing opposition to nuclear power.

But watching Trudeau in Vancouver on Tuesday promoting his new emissions policy, I also can’t help but fear the worst. Of course, feel free to write off my critique as a fear of change or as partisan blather. Even I question myself. I acknowledge I could be wrong. Things could turn out fine for all kinds of reasons I don’t now comprehend. Who can predict the future?

But I’m not the only Albertan with major reservations today. NDP Leader Rachel Notley (Alberta Premier 2015-2019) just gave a persuasive critique of Trudeau’s plan.

“Based on what we are hearing from folks in the oil and gas sector, the 42 per cent (emissions cut) by 2030 is not just ambitious, it’s beyond ambitious,” Notley said. “It’s a fantasy.”

Notley isn’t in the habit of calling out Trudeau every day of the week. In the past, when she was Alberta premier, she worked well with Trudeau, coming together to push for carbon taxes, the phasing out of coal, and the federal government’s purchase of the TMX pipeline project.

But now comes this 42 per cent non-solution.

It’s clear that the Trudeau Liberals failed to listen to the oil and gas sector, Notley said, because this reductions plan simply can’t be done in just seven years. As she put it, “There are practical, physical limits on how quickly facilities can be constructed or upgraded, or projects even approved.” .

Notley also pointed out of the unfairness of Trudeau’s scheme, that while the oil and gas sector produces 26 per cent of emissions and the transportation sector produces 25 per cent, oil and gas have been hit with a 42 per cent cut while it’s just 11 per cent for transportation. “This is manifestly unfair and it will have serious economic consequences for Alberta and for Canada.”

In his own speech, Trudeau appeared to be gunning hard for oil and gas. It was the first thing out of his mouth that needed cutting. He then went on to say things that raised far more questions than they answered, such as: “Other elements of our plan include our plan to create jobs and keep air clean by making life more easier and affordable for the middle class.”

How are those things at all related? If we move away from oil and gas and nuclear — which create all kinds of well-paying jobs in Canada — how will importing solar panels from China and wind turbines from Europe and elsewhere create a windfall of great jobs in Canada?

And how does adding an ever-escalating carbon tax make life more affordable?

Does it not drive inflation? Does it not make us less competitive compared to countries without a carbon tax, like our neighbours in the United States?

Trudeau also talked about “mandatory” sales targets for zero-emission vehicles, 20 per cent fo 2026 and 60 per cent by 2030. But do we have the grid in place to power a nation of electric vehicles? And if we fail to get behind natural gas and nuclear, will we have a reliable supply of low carbon power?  And do we really want to force car dealers to sell us a product that may or may not work well for our needs?

Trudeau took a “not to worry” stance.  “Canadians,” he said with his customary wild-eyed certainty, “are united in knowing this is where the future is going and that we can get there together.”

But we’re not united. I say that with certainty. Trudeau has lost even Notley this time.

Once the high cost, economic hardship and heavy-handed government overreach of his new climate plan sinks in, I suspect he’ll lose many more.

ESG Funds Buy Russian Over Canadian Oil

Posted on by Ron Clutz

More evidence that ESG investing is poppycock is revealed in Jeff Lagerquist’s Yahoo Finance article Why ESG funds ‘shockingly’ buy Russian oil instead of Canadian crude.  Excerpts in italics with my bolds.

Russia’s war on Ukraine continues to expose uncomfortable realities for environmental, social and governance-focused (ESG) investments, prompting calls for the asset management industry to rethink the loosely-defined term as analysts point to “shocking” holdings within some funds.

A new report from CIBC Capital Markets shows many of the 10 largest energy holdings across ESG funds have pared down or exited investments in Canada’s oil sands, while half stayed invested in Russia. At the end of 2021, the bank found ESG funds owned twice as much Russian oil and gas as Canadian oil and gas.

“Perhaps most shockingly, the ratio of dollars held in Gazprom (a Russian state-owned energy firm) was six times that of Suncor,” the CIBC analysts wrote in research published on Monday.

According to the report, the big four Russian energy companies, NK Lukoil, Novatek, Gazprom and NK Rosneft, accounted for about 0.2 per cent of the global ESG holdings. That’s double the size of investments in Canada’s TC Energy (TRP.TO)(TRP), Suncor Energy (SU.TO)(SU) and Canadian Natural Resources (CNQ.TO)(CNQ), the bank said.

“Russia and Saudi Arabia may well emit less CO2 per produced barrel of oil equivalent than some North American firms, but they also invariably have less robust social and governance oversight,” the CIBC analysts wrote.

“This says nothing of the reality many of their energy entities are de-facto state controlled and often aligned (read: weaponized) with foreign policy objectives – many of which will be an affront to mainstream ESG investors.”

Several of the world’s largest companies and institutional investors have moved to cut ties to Russia in recent weeks, amid increasingly violent attacks on Ukraine’s population. ESG funds held at least US$8.3 billion in Russian assets before Russia invaded Ukraine, according to data compiled by Bloomberg.

Those include the country’s financial firms. Bloomberg News recently reported that Vanguard Group and Northern Trust upped their stakes in Russia’s leading bank through their respective index-based ESG funds in January, as Vladimir Putin’s forces amassed on Ukraine’s borders.

Vlad Tasevski, chief operating officer and head of product at Purpose Investments, says these examples show the need to rebalance the trio of ESG priorities. He says the environmental “E” in ESG is being over-emphasized, likely due to the greater challenge of measuring the social and governance variables, compared to hard carbon emissions data.

Tasevski isn’t overly surprised by the lack of enthusiasm for Canadian fossil fuel producers across ESG funds. He says Canadian producers have been “overwhelmingly negatively impacted by the ESG movement,” even as the industry has worked to shrink its carbon footprint, and invested in technology like carbon capture and storage.

CIBC says global flows into ESG funds were down more than 50 per cent through the first two months of this year, after setting records in 2020 and 2021. The bank says flows out of ESG funds have outpaced net outflows from other asset classes.

 

Oil Is Hero or Zero, Which Is It?

Posted on by Ron Clutz

United Arab Emirates’ Minister of Energy and Infrastructure Suhail Mohamed Al Mazrouei attends a session of the Russian Energy Week International Forum in Moscow, Russia October 14, 2021. REUTERS/Maxim Shemetov

David Blackmon explains at Forbes UAE Energy Minister Urges The World To Make Up Its Mind About Oil.  Excerpts in italics with my bolds and added images.

Speaking at the Global Energy Forum by the Atlantic Council in Dubai on Monday, United Arab Emirates (UAE) Energy Minister Suhail al-Mazrouei urged the public and global policymakers to make up their collective mind about whether they want more oil production, as quoted by Reuters.

“I think in COP 26 all the producers felt they were uninvited and unwanted but now we are again superheroes, it’s not going to work like that,” he said in reference to last year’s UN-sponsored COP 26 global climate conference, at which representatives from the oil and gas industry were disinvited to attend. Obviously, a short-sighted decision by the organizers, given recent developments.

Al-Mazrouei emphasized the need for long-term planning related to energy needs, and pointed to the reality that the recent pattern of governments and investors alternatively forcing under-investment in finding new oil resources and then demanding more oil production whenever prices rise is not sustainable. He pointed out that the OPEC+ cartel as a group must invest the capital needed to replace 5 to 8 million barrels of oil per day of production each year just to maintain a steady level of global supply.

“We as a country are trying to do our best. We are investing and raising our capacity to 5 million barrels,” he said. “But that does not mean that we will leave OPEC+ or do something unilateral. We will work with this group to ensure that the market is stable.“

Oil company leaders who have seen their industry derided for years by the climate change lobby and globalist politicians in the U.S. and other Western democracies who have pumped the energy transition narrative can be excused for seeing more than a little irony in the suddenly urgent calls from the same policymakers for them to now rapidly raise their production levels. Indeed, expecting a major supply response from the U.S. industry in the current economic environment seems not just ironic, but unrealistic.

The point is that the days of the U.S. industry being able to increase production by an amazing 2 million barrels per day, as it did across one 12-month period during 2018-19, are no longer with us. The industry simply lacks the investor capital support and supply chain efficiency to run the 1,000+ active drilling rigs required to accomplish that in the current environment.

That doesn’t mean, however, that U.S. domestic production will not rise during 2022. In fact, the Dallas Federal Reserve Office recently reported results of a survey that indicate that the corporate U.S. producers plan to increase their year-over-year production by 6% in the current year, while privately held companies plan a more robust 15% increase. If those plans combine to produce, say, an 8% increase overall, it would mean an increase in U.S. daily production of almost 1 million barrels per day during the 2022 calendar year.

Given the successful efforts by both government and ESG investors to limit the domestic industry in recent years, that would be a pretty extraordinary achievement. So, Minister al-Mazrouei is right in saying that oil producers shouldn’t be treated as superheroes, but their companies are still capable of doing some big things despite the best efforts of their opposition.

 

SEC Agency Aims to Legislate US Climate Policy

Posted on by Ron Clutz

Jay Clayton and Patrick McHenry explain in their Wall Street Journal article The SEC’s Climate-Change Overreach.  Excerpts in italics with my bolds and added images.

Congress shouldn’t palm off its responsibility for social and economic policy
on financial regulators.

The Securities and Exchange Commission will propose sweeping new rules this week requiring publicly traded, and perhaps even private, companies to disclose extensive climate-related data and additional “climate risks.”

Setting climate policy is the job of lawmakers, not the SEC, whose role is to facilitate the investment decision-making process.

Companies choose how best to comply and thrive under those polices, and investors decide which business strategies to back. That approach addresses many societal issues—think vaccines—and enhances global welfare. Taking a new, activist approach to climate policy—an area far outside the SEC’s authority, jurisdiction and expertise—will deservedly draw legal challenges.

What’s worse, it puts our time-tested approach to capital allocation, as well as the agency’s independence and credibility, at risk.

Understanding and addressing global climate change is one of the most complex and significant issues of our time. Some predict we face inevitable catastrophe, while others say the costs of the transition to a “net-zero world” outweigh the benefits  We know four things for sure.

♦  First, implementing an economywide emissions-reduction policy will have a profound impact on the domestic energy, labor, transportation and housing markets, among others. Many jobs will be destroyed while others are created. Some businesses will close while others will flourish. Even if the long-term benefits outweigh the costs, near-term stresses on working Americans are inevitable and will be distributed unequally.

♦  Second, leaving policy decisions this significant to a single regulator—or even a patchwork of regulators—has failed time and again. Tellingly, there is no indication that the SEC has meaningfully coordinated with any of the other relevant federal agencies and departments on the policy choices embedded in its proposed rules.

♦  Third, Russia’s war against Ukraine demonstrates again the clear and longstanding links between energy policy, global stability and competing national interests. America’s ability to lead on the global stage depends on our economic and military strength, and energy policy is a key to both. These issues are far outside a financial regulator’s depth and mandate.

♦  Fourth, the body that the Constitution prescribes for weighing the relevant trade-offs in this area is Congress. Congress, duly elected by and responsible to the people, is precisely where climate policy, in all its complexities and consequences, should be resolved. Yet over decades, elected leaders have pushed hard policy questions to federal agencies staffed by unelected bureaucrats, whose decisions are reviewed only by unelected judges.

This is at best bad for democracy and at worst unconstitutional.

Demanding that the SEC “act on climate change” allows politicians to say that they are working on their constituents’ behalf without accepting responsibility for the hard choices involved in crafting policy.

Executive branch and independent agencies, including the Environmental Protection Agency; the Transportation, Labor, State and Treasury departments; and other financial regulators, have a role to play. They should work to inform Congress during the policy-making process and then implement legislative mandates in their respective areas of expertise.

Unfortunately, because the SEC has decided to move forward unilaterally, the debate will shift not to Congress, where it belongs, but to the courts. The commission’s chosen path will allow the political buck-passing to continue and delay thoughtful, appropriate and democratically accountable policy.

If and until Congress acts on climate policy, the message to regulators must be clear: Stay in your lane.

Mr. Clayton served as SEC chairman, 2017-20. Mr. McHenry, a North Carolina Republican, is ranking member of the House Financial Services Committee.

See Background Post SEC Warned Off Climate Disclosures

Biden’s War on American Energy

Posted on by Ron Clutz

From  zerohedge America’s energy policies, specifically those centered around oil and gas, are “bat shit crazy” and the Biden administration is doing nothing but creating “turmoil” in the oil markets, according to geologist and fossil fuel expert Dr. Marc J. Defant. More on Dr. Defant’s credentials at the end.  Excerpts in italics with my bolds and added images.

How did Biden’s policies impact the lower production of oil and gas?

By 2019, due primarily to fracking, the US became the number one producer of oil and gas in the world. In fact, we became a net exporter of oil and gas.

Prior to Biden entering office, oil production of oil shales reached over 12 million B/D. but fell more than 1 million B/D during 2021. During this time, Russia became the world’s largest exporter of oil which helped fund their war effort in the Ukraine.

Social Cost of Carbon

Under Obama, the government came up with a dollar value called the social cost of carbon. It is supposedly an estimate by the government as to the environmental damage from everything from rising sea level to wildfires and floods from the release of one ton of carbon dioxide via fossil fuel burning. But scientists are still completely uncertain about the direct impact the burning of fossils fuels may have on the environment. I hope this causes you to suspect the number may be related to magic.

But that never stopped the Obama administration from coming up with a solid amount of $57. Trump reduced the number to $7, but Biden revised the number to $51. The number is important because it gave the Biden administration the leverage to restrict oil and gas production based on supposed environmental and economic threats from greenhouse gasses (i.e., reduce permitting on federal lands).

As might be expected, gas-producing states fought back by challenging the social cost of carbon in court, and a judge issued an injunction preventing the administration from using the metric. But rather than submit to the judge’s ruling, the Biden administration simply decided to stop new permits on federal lands blaming the judge for the action – sigh. But Biden has been slow-walking permitting since he became President. He is the only President in 20 years not to have an onshore lease sale in a given year (2021).

Intentional Destruction of American Energy Production

We should not be surprised by Biden’s actions. During his campaign he promised to end drilling on federal lands to fight climate change. As much as 25% of oil and gas production comes from federal lands.

Finally in November of last year, the Department of the Interior, which is required by law to have quarterly lease sales, opened its first Gulf of Mexico oil lease auction which generated $190 million from oil companies. But alas, a green Obama-appointed judge vacated the auction after [environmentalists] Earthjustice out of San Francisco sued.

The ruling effectively ended new drilling in the Gulf, where some of the world’s environmentally friendly oil resides.

There are some state representatives that claim the Biden administration went ahead with the auction knowing full well it would be vacated. As you might imagine, the Department of the Interior will need a great deal of time to review the environmental impact of drilling in the Gulf (wink wink).

Bloomberg reported that an oil executive mused:

“Biden is signaling that his environmental goals trump energy security and consumer prices… that’s not lost on public companies or banks they rely on.”

Ultimately, investment in the oil industry increases when roadblocks to making a return on investment are removed. Biden’s actions have scared off many potential investors further reducing oil production. Press Secretary Jen Psaki’s oft repeated statement that 9.000 leases have been permitted is at the very least disingenuous considering the impediments to drilling the Biden administration has created.

Intentional Constriction of American Energy Supply

Psaki frequently claims that the Keystone XL Pipeline has no impact on oil prices because it will take two years to complete (only one year now if they had not shut it down). But Psaki is undermining (purposely in my opinion) the importance of the supply chain.

For example, the oil that would come through the pipeline has to be shipped by train. Recent train crashes demonstrate the danger of transporting oil via this method. And it obviously costs a lot more to ship via rail. But in a real head scratcher, Biden waved sanctions on the Nord Stream 2 pipeline from Russia to Germany. Why is this acceptable, but the XL is not? Russian oil is notoriously dirty (high sulfur content).

One would think Biden would be doing everything he could to send American oil and gas to Europe rather than making them more dependent on Russian oil.

Ultimately, the Biden administration has intentionally raised significant barriers in permitting supply of oil to the US. Infrastructure is extremely important to the supply of cheap and clean oil to the American economy.

The production of oil and gas in America is highly regulated – it’s the cleanest in the world both in lack of contaminants like sulfur which pollute and the way the industry protects against leaks.

The invasion of Ukraine by Russia created fears about the future of oil supplies which, in turn, pushed oil prices to record highs. And although the US buys less than 10 percent of its oil from Russia, Biden’s decision to stop buying oil from Russia, created more turmoil in the markets.

But perhaps the most irrational decision ever made by a President is Biden’s pursuit of [the] Iranian (and Venezuelan) nuclear deal to get access to Iran’s oil. They are the foremost sponsor of terrorism in the world and yet we are willing to sign a very one-sided treaty with them to gain oil which is extremely dirty (high sulfur).

We will pay them just as Obama did, with the helicopter carrying billions of dollars. And those payments will make it easier to develop delivery systems once they finally develop a nuclear bomb. On top of this, we are helping them build an nuclear power plant that will give them clean energy but not us.

Finally, I ask you to remember, gasoline prices were rising quickly way before the war in Ukraine broke out not only due to Biden’s interference in our oil production but also the inflation caused by his huge spending bills. Now we are going to buy oil from Iran instead of enabling our own industry to supply America’s needs. It is the very definition of “bat-shit crazy.”

Dr. Marc J. Defant is a professor of geology/geochemistry at the University of South Florida. He worked for Schlumberger Well Services and Shell Oil for three years, with two years at Shell working as an exploration geologist.  He has also been Editor of Geology and an Associate Editor of the Journal of Geophysical Research. Dr. Defant was also invited by the Chinese Government to be a keynote speaker at a symposium on the continental crust and has given invited talks at Massachusetts Institute of Technology, Columbia University, Universitè de Bretagne (Brest, France), University of California at Los Angeles, University of Georgia and Tennessee, and Woods Hole Oceanographic Institution, as well as many others.

 

 

‘C’mon Man’ Stop Sabotaging American Energy

Posted on by Ron Clutz

Kevin Mooney writes at Real Clear Energy ‘C’mon Man’ Stop Sabotaging American Energy. Excerpts in italics with my bolds and added images.

Ask Joe Biden a question about rising energy costs and he’ll be quick to fix the blame on Russian dictator Vladimir Putin while sidestepping any responsibility for his own policy failures.

But Putin’s authoritarian regime has only accelerated a process that was already in motion prior to the Russian invasion of Ukraine. After mismanaging the U.S. economy for the past year, Biden’s incessant “C’mon Man” routine is not playing well with the public. A broad cross section of polls shows Biden’s job approval ratings remain underwater.

The soaring inflation and rising gas prices that have been evident to American consumers long before the Russian invasion are at least partly responsible for Biden’s negative numbers. As a career politician who has been in Washington D.C. for more than 50 years, Biden has always stood on the wrong side of history exercising poor judgment at every turn. America would be in a stronger position today to resist Putin’s aggression if the Biden administration has not advanced heavy handed regulatory policies that discourage oil and gas development. The same is true of European leaders who have made themselves overly dependent on Russian energy.

That was one of the central messages Tom Pyle, president of the Institute for Energy Research, delivered during his March 8 testimony before the House Committee on Energy and Commerce.

“Unfortunately, but not surprisingly, in the wake of the 2020 election, President Biden made it clear that he intended to be an energetic advocate against the oil, coal, and natural gas that makes modern life possible,” Pyle said in his testimony. “Oil markets, now faced with an existential threat, responded as one might expect. The price of oil went up. In response, Mr. Biden inexplicably asked Russia and OPEC for more oil. National Security Advisor Jake Sullivan issued a statement calling on OPEC Plus (the most important part of the “Plus” is Russia) to produce more oil.”

From here, Team Biden’s self-inflicted wounds only became worse, Pyle explained, as the administration took “numerous actions designed to reduce the enthusiasm of energy companies to find, produce, and transport, domestic oil and natural gas.”

Pyle also expressed concern about the “propaganda” attached to the utility of so called “renewable energy” such as wind and solar. Despite several decades of subsidies and mandates aimed at increasing their use, renewables produced just 12.4% of American energy consumed, Pyle told lawmakers.

“A significant part of our current problem is the endless repetition of the propaganda about the utility of alternative sources of energy, the possibility of net zero greenhouse gas emissions, and the inevitability of an energy transition,” Pyle said. “These foundational myths have led directly to higher energy prices for Americans.”

But the policy missteps are not limited to the Biden administration. The European Union has also failed to sufficiently invest in oil and natural gas while chasing after renewable energy, Pyle observed in his testimony. He cited figures showing that in the past 15 years, natural gas production in Europe has fallen by 30% while natural gas consumption has only declined by 13%.

“This was driven by government policy, not market forces,” Pyle said. “Consequently, Russian natural gas has become more critical to European energy security. At the moment, the EU consumes about 540 billion cubic meters of natural gas a year.Over 40% of that originates in Russia. It is no surprise, therefore, that the European and the American governments have hesitated to impose strong sanctions against Russian-sourced energy and Russian energy companies either before or after the invasion.”

Then there’s China, which dominates the market for the mining, production, and processing of critical minerals that help power electric cars. These include: copper, lithium, nickel, and cobalt.

That’s a problem since Biden’s EPA is hot to trot for implementing new rules crafted with an eye toward coercing Americans into buying electric cars. During his testimony, Pyle discussed the EPA’s new greenhouse gas emission standards for passenger cars and light trucks through model year 2026. “This rule essentially mandates that 17% of new vehicles in model year 2026 be fully electric or plug-in hybrids,” he said.

As electrification grows, so will reliance on China.

“It is challenging to believe that Americans would be in favor of trading energy independence – which we currently enjoy despite the best efforts of some in the Administration – for dependence on a genocidal regime (and identified as such by both the current and previous Administrations) marked by international hooliganism,” Pyle said.

Even if a future administration were to abruptly reverse course from the damage done under Biden’s watch, there’s an opportunity cost associated with current efforts to discourage domestic and oil and gas development.

Energy executives and their investors are understandably hesitant to begin exploratory efforts in an environment where federal officials from Biden on down have expressed hostility toward their products. Never mind Putin.

The problem is not just one of poor judgment at the Biden White House, but also a fundamental misunderstanding of what it takes to reinvigorate American energy. That’s why American Petroleum Institute President and CEO Mike Sommers recently took White House Press Secretary Jen Psaki to school when she said there are 9,000 approved oil leases that the oil companies are not currently tapping into. Psaki was responding to media questions about Biden’s ban on new oil and natural gas leases on public lands.

“Just because you have a lease doesn’t mean there’s actually oil and gas in that lease, and there has to be a lot of development that occurs between the leasing and then ultimately permitting for that acreage to be productive,” Sommers told Bloomberg News.

“I think that they’re purposefully misusing the facts here to advantage their position.”
C’mon Lady.

As IER points out in a blog post, the oil industry has to pay the government fees for renting leases whether or not oil and gas is ultimately found and produced. Moreover, it takes anywhere from 7 to 10 years for oil companies to know if a lease will become productive. It’s not hard to understand why they aren’t rushing in at a time when the clown act that is the Biden White House is pressuring banks to refrain from investing in the oil and gas industry

A paid agent of either China or Russia could not do a better job of sabotaging American energy at a time when it’s needed most.

Big Oil Embraces Its Demise for the Honor of Saving the Planet.

Posted on by Ron Clutz

Robert Romano asks and answers the pressing energy question in his Daily Torch article Why aren’t oil companies drilling more? Look no further than the ESG goals in their corporate annual reports. Excerpts in italics with my bolds and added images.  H/T John Ray

The largest oil producers in the U.S. do not appear to have major plans to increase production through 2025, a review of U.S. Energy Information Agency (EIA) data and corporate reports of U.S.-based oil companies reveals, despite oil prices being over $100 per barrel and inflation raging at 7.9 percent the last twelve months.

According to EIA, U.S. oil production will reach 12 million barrels per day in 2022 and 12.6 million barrels per day in 2023, a return to pre-Covid production levels that peaked at 12.9 million barrels per day in Nov. 2019.

But what about over the long term? A look at top U.S. oil producers reveals that these companies have been pivoting away from carbon-based energy for years. In short, they’re going green.

[ExxonMobil and Chevron are two examples where] explicit Environmental, Social and Governance (ESG) goals are being pursued by the largest oil companies in the U.S., particularly goals to support the Paris Climate Accords and to reduce carbon emissions to zero.

In both companies’ cases, the strategies short-term include deploying carbon capture technologies as well as reducing onsite carbon emissions on existing production facilities, and more investment in green energies.

Long term, however, they are sealing the fate of carbon-based energies, by embracing an investment model that calls for their extinction.

Ultimately, that will mean almost no oil production or consumption, a goal that would be contrary to an oil company’s continued existence and profitability.

ESG investing has increased dramatically the past decade via private retirement funds regulated under the Employment Retirement Income Security Act (ERISA) thanks to a regulation by the Obama Labor Department in 2015.

In addition, the $762 billion federal Thrift Savings Plan (TSP) for federal employee retirees will begin investing in ESG funds in 2022, following state government employee retirement funds in California, New York, Colorado, Connecticut, Maine, Maryland and Oregon.

The combination of these incentives and subsidies has led to an unprecedented rise of ESG investment: $38 trillion out more than $100 trillion global assets under management, will grow to $53 trillion by 2025, according to Bloomberg News. That’s about one-third of all assets under management, not necessarily seeking profitability, but to save the world.

BlackRock, a hedge fund with more than $9 trillion of assets under management, have placed green activists onto the board of Exxon to make it a “not-oil” company, thanks to ESG. Other hedge funds like Vanguard also make significant ESG investments.

But it has led to catastrophe. Besides making Europe and the West increasingly dependent on energy from adversaries like Russia, inflation is on fire. Thanks to the energy crisis, even major ESG beneficiaries like Tesla CEO Elon Musk are calling for an increase in oil and gas production in a bid to offset Russia, writing on Twitter on March 8: “Hate to say it, but we need to increase oil & gas output immediately. Extraordinary times demand extraordinary measures.”

Musk is right. It’s time to expand production dramatically. But ESG won’t let us. That’s a big problem.

The net result of these policies incentivizing and subsidizing ESG investments has been to restrict capitalization and financing to carbon-based oil, coal and natural gas energies in favor of green energies such as solar, wind and electric vehicles — and endangering the West.

As it turns out, energy security is national security, and with ESG, we do not have energy security.

See also Wake Up and Smell the Fossil Fuel Insanity

Wake Up and Smell the Fossil Fuel Insanity

Posted on by Ron Clutz

Terry Etam writes a BOE Report Column: The world faces both a hydrocarbon shortage and a divest fossil fuels movement. What next, oil patch? Excerpts in italics with my bolds and added images.

Today’s question is one only the hydrocarbon crowd can answer:  What’s your game plan from here forward?

 There are a thousand occupations and situations, each with its own decision tree.  Despite the potential variance, it’s still a valid question, because we globally we are at a crossroads of some major significance. The well-being of much of the world’s population depends on what the hydrocarbon industry does over the next few years. At the same time, the pressure is building for the hydrocarbon industry to shrink and wither (as in the wildly successful divest fossil fuels campaign, or banks cutting back on oil/gas loans to curry favour with Those That Matter).

The question is not an easy one given the dramatic reframing of the hydrocarbon industry over the past few years. We used to be the good guys, the world’s fuel providers, a dynamic and entrepreneurial and fast-moving assembly of doers.

Then the narrative changed, and the industry went from relative obscurity to Public Enemy Number One. By 2019, public animosity towards it reached a peak, with orchestrated mass protests around the globe. 2020 brought a near-death experience as Russia and OPEC decided to decimate prices in a battle for market control, and all the anti-hydrocarbon protesters switched from protesting to cheering, famously claiming that “oil was dead”, that oil prices would never recover because EVs were causing rapid demand destruction, and that the humane thing to do now was to justly transition all hydrocarbon workers to other industries.

Even typing that stuff now sounds like an alien experience, like walking around in a crowd without a mask.

The reason those conversations feel so outdated is because, today, it is clear that oil is about as dead as the internet. Some will of course say that high oil prices will hasten a transition to renewables, and that is true that it will make renewables more cost competitive (though still no match on the reliability front).

But consider that a rapid transition to renewables is impossible from a mining perspective alone.

The IEA has said that a global Net Zero 2050 transition would require four times the number of critical mineral mines by 2040 (a virtual impossibility when governments are making mining harder everywhere).  And the Geological Society of Finland calculated that a full transition via renewables/EVs would require more critical metals and minerals than there are known global reserves.

If you are still on the fence as to whether hydrocarbons’ days are numbered, consider that Germany, the world’s most advanced energy-transition country, just days ago mused that drilling for new oil/gas deposits in the arctic sounds like a pretty good idea.

Consider also that this is the new-ish Green-led government saying this. Keep in mind also that any arctic development takes years at a minimum, so these developments have nothing to do with this immediate crisis. If Germany is plotting decade-length oil/gas developments, that tells you all you need to know about the demise of hydrocarbons. There isn’t one.

But that doesn’t answer the question at hand. What will people in the industry do? Will they bolt and get retrained in something else? There are a variety of situations of course, but one is far more ominous than the others. Here’s a bit of a dissection.

Process people will most likely keep processing; any occupations that are in perpetual flow states will likely not stop because of a lack of employees. If you are a gas marketer or pipeline scheduler or refinery manager, there isn’t a visible break point in the continuity of business.

But producers are different. Much different. Next year’s barrel of production won’t necessarily and automatically appear as part of a continuous flow. A lot of very capable brain power needs to be enacted, crews hired and managed, etc. Finding and developing new oil/gas flows is a choice.

If no one chooses to find and produce more petroleum, the flow slows, then stops. If geological talent dries up/retires/moves on, new production doesn’t just happen. Same with drilling crews or completions experts or – dare I say it – truckers.

Anti-hydrocarbon sentiment rums deep in academic institutions, yet it is those very institutions new employees will have to navigate if they are to land in the oil patch. It is no longer “just another option”. There is stigma attached to petroleum programs.

There is venom coming your way from complete strangers. It should then be no surprise that students are acting accordingly; they are going elsewhere. In one US study, from 2016-19, the US petroleum engineering student count fell by 60 percent, and no doubt has fallen further since. Even here in the heart of the Canadian oil patch, the University of Calgary has suspended the petroleum engineering program after the student count fell to an all time low of 10 – and that’s over a two year period.

What if no one chooses to look for oil anymore? Yes, ten thousand western elites will cheer wildly, but billions of trucker-grade people around the world that need that fuel for survival will say WTF, or some such local equivalent.

Those ten thousand western elites will tell all the global plebeians Hey, don’t worry! Solar panels are on the way. And the billions will say Yeah…but can I get a fridge that has power for more than six hours a day? And western elites will say Nope! But don’t worry batteries are on the way. And billions of those plebeians will say Great! When? And western elites will say Battery storage is cheaper than its ever been! And the plebes will say Great! When? And western elites will say Death to fossil fuels! And the plebes will ponder in awe the presumed mysticism and superiority of elite non-sequiturs, little conversational re-directs that the great unwashed masses simply aren’t worthy of comprehending, and then they will starve to death.

And the hydrocarbon producers will be sitting there wondering what to do next. They’ll answer the phone and second cousin Moonbeam from Toronto or San Francisco will be shrieking about how you’re killing the planet.  But you’ll turn on the news and hear that it is a moral imperative to produce more oil since all you oil guys are rolling in money which will be true.  But then the politicians will be saying ‘We’ll take that windfall money btw and then whatever is left better be going into green projects.  But yes you had better increase production right now and we mean right now but only for this year and then everyone should divest fossil fuels.  And we’ll see you in court for all the emissions you’ve unilaterally created over the past century, and maybe the fines will be deductible from the windfall tax and maybe not.  We’ll let you know when we’re good and ready.’.

If this sounds melodramatic it isn’t. In fact, the situation is far more critical than it sounds, in terms of global impact: there is a multi-trillion dollar behemoth of a fuel system that keeps humanity alive. It is 80 per cent hydrocarbon-based. There is at present no substitute. Most parts of that system function conditionally – they require a non-stop flow of hydrocarbons.

The various components of this huge system have “something to do” because, and only because, a relatively small group of people and entities at the origin of that system, the upstream, choose to keep it full. This small group looks at seismic, looks at well logs, drills wells, does production plans, builds small scale infrastructure to bring this energy life-blood on stream. Without those few people the system withers just as does a plant pulled from the ground.

A lack of expertise and/or interest in bringing new hydrocarbons to market will mean that the world’s supply dries up. Good, the ten thousand activists will say. Good, you might say, let’s see who needs who. But these other seven-plus billion won’t be too thrilled at all. No fuel, no fertilizer, no food. All because of choices we’ve made here in the west.

So? Will you continue to power the world or not? A lot of hungry mouths are desperate to hear a yes. Those in power here in the west, the ones that control your economic destiny, have a crazed and volatile look in their eyes as they try to figure it all out, but are publicly unable to support you because they’ve been kicking you in the ribs for a long time and it’s kind of hard at that point to stop and call all the other kickers bullies.

Don’t look at me, I have no idea what happens next. All I can say is that at the point it becomes optional, I will choose not to put my head in the vise any longer. I suspect I am not alone.

Postscript on Petroleum Companies \Outlook and Viability

Outlook 2022: Oil Industry from Proshare

Chart 22: Global oil demand (mb/d) 2019 -2022

Source: OPEC, Proshare Research * OPEC’s Predictions

In the OECD countries, there were larger-than-expected oil demands in H1 2021. However, oil demand struggled to recover to the pre-pandemic level due to lower demand for industrial and transportation fuels for the rest of the year. Oil demand within the OECD for 2021 mirrored the slow phase of economic growth due to supply chain disruptions and the uptick in COVID-19 cases.

Meanwhile, non-OECD’s oil demand in 2021 fluctuated for the better part of the year on demand swings from China and India. China’s crude imports started the year relatively high but fell to an average of 8.9 mb/d in October, the lowest since February, as refiners lacked import quotas and mobility remained limited on the back of the Zero-Covid-19 policy implemented in the country. India’s crude imports also fell to an average of 4.0 mb/d in October, following 2 months of successive gains. Thus, the Covid-19 and supply chain induced soft patches in H2 2021 across Asia impacted considerably on the global oil demand in 2021.

Illustration 30: Determinants of Crude Demand in 2021

Oil Supply

The global oil supply for the year 2021 was driven mainly by the decision of OPEC+, which strived to achieve balance in the oil market.

The share of OPEC in global oil production stood at about 27.7% in 2021, with an average production of about 26.32 mb/d (see chart 24 below).

Chart 24: Global Oil Supply (mb/d) 2019 – 2022

Source: OPEC, Proshare Research * OPEC’s Predictions

Oil Prices

The tightness in the market kept oil prices elevated in 2021. Despite the lingering Covid-19 pandemic, demand had more robust fundamentals while supply was constrained by underinvestment, low spare capacity, and outages. The global oil market began the new year 2021 with a price rally above the 2020 average, and both benchmark contracts reached their 2021 highest in October, with Brent at US$86.70 and WTI at US$85.41 per barrel. Brent price averaged US$71.2 per barrel in 2021, up by 63.3% Y-o-Y above the US$43.6 per barrel average in 2020. Brent increased from about US$51 per barrel in January 2021 to about US$79 per barrel in December 2021, representing a gain of about +55% YTD (see chart 25 below).

Chart 25: Brent Crude Price in 2021 (US$/barrel)

Source: Oilprice, Proshare Research

 

 

 

 

 

Federal Climatists Target US Personal Pension Funds

Posted on by Ron Clutz

The green tentacles of global warming/climate change activism are closing in on personal retirement funds. Rupert Darwall writes at Tennessee Star The Biden Administration’s ERISA Work-Around. Excerpts in italics with my bolds and added images.

Rising inflation threatens the value of Americans’ retirement savings. Now the Biden administration is finalizing a rule to loosen safeguards under the Employee Retirement Income Security Act of 1974 (“ERISA”) that protect private retirement savings. The new rule, “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights,” stems from President Biden’s May 20, 2021, Executive Order on Climate-Related Financial Risk, which directed senior White House advisers to develop a strategy for financing the administration’s net-zero climate goals, including the use of private savings.

Predictably, Wall Street is cheering the prospect of undoing ERISA safeguards. According to one analysis, 97% of comment letters support the proposal. But as I show in my RealClear Foundation report The Biden Administration’s ERISA Work-Around, it’s the remaining three percent that should give the Department of Labor (DOL) cause to rethink its deeply flawed approach.

Under ERISA, retirement savings must be invested for the exclusive purpose of providing retirement benefits.

The May 2021 executive order illustrates the very danger that ERISA’s exclusive-purpose rule is designed to guard against. To achieve the goals set out in the order, DOL is instructed to “suspend, revise or rescind” two Trump-era rules designed to uphold ERISA’s exclusive-purpose rule.

The stratagem adopted by DOL to carry this out is breathtaking in its audacity. The effect of the rule—if finalized as proposed—is to embed ESG investing in retirement plans and nullify the clear, unambiguous intent of ERISA’s exclusive-purpose rule. It’s audacious—and it’s high risk. In December, GOP senators Pat Toomey, Mike Crapo, Richard Burr, and Tim Scott warned the Secretary of Labor, Martin Walsh, against the proposed rule’s use of “inchoate” ESG terminology and reminded him that in 2020, DOL had been convinced by its review of public comments that the term is “not a clear or helpful lexicon for a regulatory standard.”

ESG—environmental, social, and governance—investing embodies two incompatible propositions.

The first is that investing should be about more than financial returns and have regard to wider societal concerns. In a January 2022 interview with Barron’s, Amy Domini, who cofounded KLD Research & Analytics in 1984, objected to rules that require investing based solely on economic value. “We have got to get rid of this concept of economic value,” Domini told Barron’s. “I don’t care if I’ve got an extra 50 bucks in my pocket if it’s dangerous to walk down the sidewalk, or if my grandson has leukemia because the water system is so polluted.”

The second ESG proposition contradicts the first. Far from sacrificing financial returns, ESG investing boosts them. “Our investment conviction,” BlackRock states in its comment letter to DOL, “is that incorporating sustainability-related factors—which are often characterized and grouped into ESG categories—can provide better risk-adjusted returns to investors over the long-term” (emphasis added).

BlackRock’s corporate strategy is to market ESG-style investment products to millennials, who, BlackRock believes, are less interested in financial returns than boomers. In his 2019 letter to CEOs, BlackRock CEO Larry Fink cited a survey of millennials. When asked what the primary purpose of businesses should be, 63% more said “improving society” than said “generating profit.” Three years later, in his 2022 letter to CEOs, Fink was pivoting away from ESG and undercutting BlackRock’s special pleading to DOL. “Make no mistake,” Fink wrote, “the fair pursuit of profit is still what animates markets; and long-term profitability is the measure by which markets will ultimately determine your company’s success.”

According to Jonathan Berry, DOL’s former Acting Assistant Secretary for Policy under the previous administration, career staff at DOL’s Employee Benefits Security Administration (EBSA) initiated secretive private meetings after the November 2020 election to build support and find cause to overturn the 2020 rules. Who were these parties? In its comment letter on the proposed rule, BlackRock lets the cat out of the bag in praising DOL for its “thoughtful analysis of the challenges presented by the 2020 rules” and for incorporating feedback from a “wide range of stakeholders.”

The outcome was a DOL press release on March 10, 2021, announcing the nonenforcement of the two 2020 rules. “These rules have created a perception that fiduciaries are at risk if they include any environmental, social and governance factors in the financial evaluation of plan investments,” said Ali Khawar, EBSA Principal Deputy Assistant Secretary. In fact, references to ESG had been removed from the text of the 2020 Financial Factors rule. Far from ruling out consideration of any ESG factor, its preamble accepted that “ESG considerations may present issues of material business risk or opportunities.” Why hasn’t DOL issued a FAQ and held a public meeting to dispel misperceptions about the 2020 rule?

Because the White House has instructed DOL to nix the rule.

The proposal also seeks to rewrite the December 2020 DOL rule on proxy voting in order to push fiduciaries to outsource their voting to the proxy-advisory duopoly of Institutional Shareholder Services and Glass, Lewis and their bias in support of ESG-type goals in proxy votes. Furthermore, the proposed replacement rule doesn’t tackle the vexed issue of “empty voting,” when, for example, the likes of three big index-tracker providers vote proxies in respect of shares that they don’t have an economic interest in. Shouldn’t DOL be clarifying that ERISA fiduciaries have a duty to investigate the voting policies of firms to which they delegate voting authority?, asks RealClear Foundation senior fellow Bernard Sharfman and Manhattan Institute’s James Copland.

Failure to do so, they suggest, could constitute grounds for a legal challenge under the Administrative Procedure Act.

In their letter to Secretary Walsh, the four GOP senators also invoke the specter of the rule having its fate decided by the courts. “The use of such [ESG] terminology in the proposal is arbitrary and capricious under the Administrative Procedure Act,” the senators warn. As drafted, the proposed rule would invert the primacy of statute law over executive-agency rulemaking.

It would also fundamentally alter the nature of American capitalism, corralling capital for political ends, enabled by multitrillion-dollar investment advisers eyeing the prospect of higher fees.

Will the rule of law prevail?