Amid the cheery marketing (and expensive greenwashing) of carbon capture by the Great Plains Institute to Minnesota legislators, and its friends in other non-profits, we find reading news about the underlying energy sectors to be a bracing tonic.
As DeSmog Blog Laura Peterson recently noted in North Dakota’s Carbon Capture Project Tundra Another “Expensive Greenwashing” Attempt to Bail Out Coal Power:
Carbon capture technology has generated a lot of controversy–but little private investment–due to its lack of profitability and efficiency. So why is a proposal to retrofit an aging coal-powered plant in North Dakota with smokestack scrubbers receiving millions of federal taxpayer dollars?
Ask Senator John Hoeven (R-ND), who has directed more than $30 million in Department of Energy funding to Project Tundra.
The project would install a carbon capture system at the Milton R. Young Station, a two-unit plant that has run on lignite coal from the nearby Center Mine since it began operating in 1970. The captured carbon would then be piped to the Bakken region for injection into oil wells in a process known as Enhanced Oil Recovery. . . .
Ethanol plants are in the mix as well, so let's take a look at the energy markets for coal, petroleum and ethanol that public funding is supposed to underwrite.
The latest lump of coal
At Quartz, Michael Coren reports in Coronavirus is accelerating the demise of coal power in the US:
First, it was oil and gas. Now coal is facing a financial cataclysm.
As the coronavirus crushes energy demand around the world, the bottom has fallen out from under an already weak coal industry. Moody’s Investors Services recently warned coal firms are facing a wave of bankruptcies—with few ways out.
Declining coal use by utilities has reduced consumption by almost 40% since 2001. Exports, a rare bright spot, have risen only slightly. Adding to the sector’s woes, financial institutions’ new environmental, social, and governance policies (ESG) are restricting capital to high-emitting industries such as coal.
That combination, said Moody’s in a March 26 research report, “will likely push a significant amount of coal capacity into bankruptcies and lead to new closure announcements over the next year or two.” Since 2016, at least 11 coal companies have already declared bankruptcies.
As the virus dims the industry’s prospects, Moody’s gave three-quarters of US coal companies negative outlooks. Moody’s now believes its original forecast of a 15% to 20% drop in US coal production due to the virus was overly optimistic. It expects even steeper declines amid falling electricity demand.
Coal companies have not weathered the news well. Share prices of top coal firms have cratered. Their average market capitalization down 40% since January.
Michelle Bloodworth, president of coal industry group America’s Power, said to Quartz it was too soon to forecast the impact of the coronavirus pandemic on electricity demand. She noted in an email that US coal plants, which generate 24% of the US electricity mix, were listed as critical infrastructure by the US government.
But declining electricity demand has still put enormous pressure on companies without strong balance sheets. And with capital markets turning away from the industry, it’s unclear how many coal firms can survive the crisis.
Bakken oil field belly-up
A major player in the Bakken field has filed for bankruptcy. At the Bismarck Tribune, Amy R. Sisk reports in Bakken producer Whiting files for bankruptcy:
Whiting Petroleum Corp., a major Bakken oil producer, is filing for Chapter 11 bankruptcy.
The company cited the “severe downturn in oil and gas prices driven by uncertainty around the duration of the Saudi/Russia oil price war and the COVID-19 pandemic” in a statement about the bankruptcy proceedings.
Oil prices have fallen dramatically over the past month to around $20 per barrel, too low for companies to produce oil profitably. The price collapse is twofold: demand for oil is down as travel has come to a halt because of the coronavirus pandemic, and Russia and Saudi Arabia have opted to boost their own oil outputs, further contributing to the global glut of crude. . . .
Whiting is the first major U.S. oil producer to file for bankruptcy amid low prices during the pandemic. It operates wells in the Bakken and in Colorado. With the purchase of Kodiak Oil and Gas in 2014, Whiting became the largest oil producer in North Dakota, though it no longer holds that title.
Bloomberg's Joe Carroll and Jeremy Hill report in Shale Titan Whiting Petroleum Files for Bankruptcy:
The unprecedented collapse in global oil markets brought another driller to its knees, forcing a champion of what was once the premier U.S. shale field to seek protection from creditors.
Whiting Petroleum Corp., facing more than a quarter-billion dollar debt maturity, filed for bankruptcy Wednesday, perhaps the most illustrious of the shale explorers thus far humbled by an unforgiving rout in every corner of the oil business.
American crude has surrendered two-thirds of its value this year and just closed out its worst-ever quarterly performance. As many as 70% of the nation’s 6,000 oil explorers eventually may go under, according to Mizuho Securites USA LLC analyst Paul Sankey, as the twin blows of Covid-19 and a Russia-Saudi price war destroy producers like Whiting.
Once the largest oil producer in North Dakota’s Bakken shale region, Whiting lost money in four of the last five years and spiraled deeper into debt just as the Covid-19 outbreak crushed energy demand. The company’s Bakken primacy won it little praise because the region was already falling out of favor as drillers shifted to lower-cost prospects in the Permian Basin.
Touted as one of the “comeback kids” of U.S. shale by Canaccord Genuity in late 2015, Whiting said Wednesday that it’s agreed to hand most of its ownership to noteholders in exchange for erasing more than $2.2 billion in debt, according to a statement.
$262 Million Maturity
As many as 40% of U.S. oil and gas companies could crater into bankruptcy or distress over the next two years as they grapple with a market crash and the coronavirus outbreak, according to asset manager Pickering Energy Partners LP. . . . .
Read the rest at Rigzone. CNBC has more with Market Insider's Patti Domm in U.S. oil industry pumps near record volumes even as demand and prices collapse:
The U.S. continues to pump near record amounts of oil, but U.S gasoline demand continues to drop as the whole world sees less need for fuel.
The latest weekly data from the Energy Information Administration showed the U.S. oil industry was still pumping 13 million barrels of crude oil per day, just under record production highs.
At the same time, demand for gasoline fell to 6.7 million barrels a day from 8.8 million the week earlier. This time last year, drivers were using about 9.2 million barrels a day of gasoline. U.S. gasoline demand translates to the equivalent of 10% of global oil demand. . . .
In the past week, the U.S. also added another 13.8 million barrels of oil to inventories, a record amount, which only exacerbates the global struggle with a lack of storage space. U.S. gasoline inventories rose by 7.5 million barrels last week. West Texas Intermediate was down 1.3% Wednesday, at just over $20 per barrel.
This has come even as many in the U.S. industry struggle to stay solvent. Whiting Petroleum this week became the first high-profile shale bankruptcy of the latest downturn. In response to the falloff in gasoline and jet fuel demand, the refining industry has cut output by an estimated 20% and could cut back much deeper. . . .
BNN Bloomberg echoes the story in Oil near US$20 with bloated U.S. supplies hinting at storage limit.
That leads us to news from the ethanol sector.
Corn & ethanol
At Brownfield Ag News, John Perkins reports in Ethanol production drops, supply up sharply:
Ethanol production hit a six and a half year low last week, the first week truly reflecting the impact of COVID-19 related stay at home and social distancing orders on the industry.
The U.S. Energy Information Administration says production averaged 840,000 barrels a day, a drop of 165,000 on the week, the largest weekly decline on record.
The slowing demand for blending pushed stocks to a record high of 25.707 million barrels, a week to week increase of more 1.577 million barrels.
The USDA’s next corn for ethanol use estimate is currently scheduled for April 9th.
Fastmarkets AgriCensus's Tim Worledge reports in US ethanol production falls 16%, biggest drop in history: EIA:
US daily ethanol production fell by 165,000 barrels a day in the week to March 27, to record its biggest fall since the Energy Information Administration started recording data in June 2010, and the first six-figure fall in production ever recorded.
Nearly seven years of production growth were wiped out in the space of a week, as the 840,000 b/d figure was the lowest since the week of April 12, 2013 according to EIA data.
The figure equates to around 88.2 million bushels of corn (2.24 million mt) pulled into the grind over the course of the week, some 600,000 mt below the weekly average to date this year and comes as the sector shuts down in the face of cataclysmic demand outlooks.
In a double blow, the sector also reported its biggest-ever stock levels in history, with inventories rising to 25.7 million barrels – up 1.5 million barrels on the previous week.
Analysts had looked for production to drop 75,000 b/d, which would itself have been the biggest fall ever recorded, and a 304,000 barrel increase in stocks.
Margins have turned negative in recent weeks as ethanol prices have collapsed, but the fear gripping the industry is the impact of lockdowns and working from home advice, as state’s look to curb the spread of Covid-19.
Some have said road fuel demand could fall by up to 50%, with ethanol suffering along with conventional oil, as it contributes up to 10% of the total road fuel mix.
The Midwest shouldered the burden of the cuts, with production falling to 778,000 b/d, with the heavy cuts contributing to a 328,000 barrel draw on stock levels.
However, all other regions saw stocks surge led by the US Gulf where stocks increased by over 1.17 million barrels.
Late last week, one of the country’s main biofuel lobby groups, the Renewable Fuels Association, estimated that up to 2 billion gallons of US ethanol production – around 20% of the country’s entire capacity – would be idled by the end of March on poor margins.
That spells a potentially huge return of corn to the US stockpiles and further pressure on US corn futures ahead.
Worledge also reports in Brazil may face additional corn supply as ethanol sector mulls force majeure:
Brazil, one of the world's largest corn exporters, could face a greater-than-expected surplus of the grain over the coming weeks as reports emerge that ethanol producers are turning away feedstock supplies due to negative margins.
The global outlook for biofuels has rapidly deteriorated over the past month, with dozens of countries declaring transport restrictions in a bid to stop the spread of the coronavirus Covid-19.
And with many new facilities in Brazil contracting domestic corn as a feedstock, reports are surfacing that some are shedding inventories and may declare force majeure on future supplies.
“Some of the ethanol plants are calling force majeure on purchased corn due to the reduction on demand because of the corona lockdown,” one Brazil-based market source said, with a second confirming that rumours are sweeping the domestic market.
The rumours, if true, would follow similar steps already taken by some players in the country’s largely sugarcane-based ethanol sector, as well as US-based ethanol producers, all of whom are wrestling with an unprecedented collapse in fuel demand. . . .
We are reminded of the populist axiom that farmers should "raise less corn and more hell," inaccurately reported as the words of Kansas firebrand Mary Elizabeth Lease.
Granted, the fossil fuel industry will not always be in the dumps--but the complications highlight why an expensive rescue of the coal industy (with a bonus to fracking) may not be the bouquet of roses its boosters promise.
If Minnesota wants to support clean energy first, perhaps those sources should be clean, affordable and sustainable.
Related posts:
- Farm Journal/Agweb: Ethanol plants could soon start producing DDGs for livestock, not ethanol
- DeSmogBlog on Project Tundra: expensive greenwashing for fossil fuel
- Project Tundra's clean coal; or, does Petra Nova project's tech really reduce carbon emissions?
- Will ethanol industry go the way of oil? It's going to be ugly, Al-Corn Clean Fuel CEO Doyal says
- Bismarck Tribune: North Dakota oil industry gets roughed up by brutally low petroleum prices
Photo: MinnKota's Milton Young power plant.
If you appreciate our posts and original analysis, you can mail contributions (payable to Sally Jo Sorensen, 600 Maple Street, Summit SD 57266) or use the paypal button in the upper right hand corner of this post. Those wishing to make a small ongoing monthly contribution should click on the paypal subscription button.
Or you can contribute via this link to paypal; use email [email protected] as recipient.
Comments