Big Digital Energy

0:00 Hey, Collide, welcome in. How are you boys? What's up, Chuck? Mark, how are you doing boys? I'm down here in studio two. You know, we have two pod breaking off the fall wardrobe, Chuck. Uh,

0:16 yeah. No, fair enough. It was the next thing up, you know, as you go through the closet, the next shirt, you're either in the end, talk it with me, Chuck, or you're in Houston air

0:25 conditioning. And it's so cold. You're going to get it. Your nose is going to start running And that's probably fair. Before we get started, I have to shameless promotional plug by proxy for the

0:38 latest Chuck Yates needs a job or have you officially changed the name to Chuck Yates got a job or has a job? I think so. I think we pushed it through the RSS feed is Chuck Yates got a job. 53

0:50 minutes sit down with Colin talking about collide. And I think, as I mentioned in a repost that energy. Any energy pro looking to invest an hour in AI education could find no better place to spend

1:09 it. I thought that was just an excellent conversation. Oh, cool, appreciate that. Yeah, that was kind of fun to do. And I think kind of the next six months of Chuck got a job. It's gonna be a

1:22 lot of AI stuff. I'm gonna get John to sit down with me next week and we're gonna talk about data and I'm gonna get various folks out along the value chain of AI and what folks are doing. So I think

1:35 that's gonna be the focus. So how'd the move-in go, Kurt? I mean, it was great. I mean, they're like small colleges are great. They're so nice. Like they know that we have no idea what's going

1:49 on. They're everyone's super friendly, fantastic. So, and Dartmouth is just - I just did one of those. Darn, this is really cool, by the way. I mean, if you haven't been there, they're

1:59 really in the middle of nowhere. I

2:04 have rededicated myself as an environmentalist because you're out in the woods and you just love it. Nature's everywhere and I love it, so. And you did send it around something you encountered, I

2:18 think it was in Boston. Oh shit. Oh yeah, the eco warriors, I mean, the church is in Boston. Church of the earth. They're

2:30 basically telling you that, hey, climate change is something that we fight here at the church, like,

2:39 oh my goodness. I guess you're giving up the idea that God created the earth and maybe humans are destroying it. But hey, we don't care, it's all emotional anyway. Damn the environment, full

2:51 speed ahead

2:53 Something called a climate jubilee.

2:57 That's a, I'm gonna, I'll post the, we'll get the graphic up for the video all sent it to Jacob. So, you know, fight the man. That's what we should be doing, right? Absolutely. All right,

3:11 Mark, are you kicking us off on EQT or? Yeah, but I'm sure there's much more passionate and informed commentary from Kirk on this first one But Mora Healy, who is the governor of Massachusetts, I

3:27 guess it's what, January, Kirk was when she was inaugurated is in a wide ranging interview. Of course, one of the topics was offshore wind. And this was after news that the administration is

3:42 looking to looking into the permits for New England, wind one and two, I guess with the ultimate threat cancellation. And now, all of a sudden. these governors, particularly in the Northeast,

3:59 preceded by Kathy Hochl of New York, are basically battling just the inevitable rise in consumer electric costs and

4:14 diminishing reliability. And now the Fed should be working with states not against them, which I find to be delicious ironic. If you look at what has transpired in New York recently in terms of the

4:30 political back and forth, now all of a sudden Governor Hochl is willing to consider natural gas pipelines, which is probably something that should have been done 10, 15 years ago. I mean, it's

4:42 beautiful irony because the Democrats have blocked every pipeline, LNG terminal and nuclear plant for decades, and there's shock now that reliable energy is getting expensive, it's ridiculous. And

4:57 as someone that's paying 29 cents a kilowatt hour on Nintucket, I can tell you that her concern about electricity costs is about as genuine as a20 Rolex on the steamship authority. I mean, they're

5:10 politicians, what do you expect? So are we actually going to see pipelines being built from Pennsylvania and West Virginia, what would say you now Massachusetts residentnative? I

5:30 think it's not in my damn backyard. I mean, is the attitude. It is actually real interesting because you're talking about the EQT announcement as well, right, that they're heading down to Texas.

5:45 I mean, I think, in fact, with their deal with next era, it's corporate speak I mean,

5:52 for will be. 'Cause next Sarah's saying they'll build it if the permitting God smile upon us and no one files a lawsuit. So I think we've got, what, how much gas do we have in the Northeast? Is

6:12 it the

6:20 most in the entire United States? Let's put it in comparison here. I'm gonna go with a really scientific turn. A buttload. A buttload. Yeah. I mean, we're sitting on the Marcella shell

6:21 literally swimming in cheap gas. But EQT has to diversify to Texas because the Atlantic coast is basically has zero liquefaction capacity. I mean, it's amazing. It's kind of like having the best

6:38 lobster trap on the east coast and having to ship your catch to California to find someone with a pot big enough to cook 'em. That's what we're doing here and they still the in oil heating use North

6:49 East.

6:54 Yeah. Heating oil. How do you look yourself in the mirror and say, look, heating oil, I'm saving the environment. I mean, that stuff is trash to burn. Well, at least the local churches are

7:08 eco-warriors, so maybe they'll figure it out. There you go. Yeah, and on the EQT deal, they've signed an agreement with next decade for Rio Grande Project Train 5, which has not been FID yet,

7:24 but we're talking about 15 MTPA, which I've always got to convert to

7:33 BCF a day, which is, it's a little under. 2 BCF a day. So this is a 15 or 20 year agreement at Henry Hub pricing. And I think what, you know, EQT, which obviously has,

7:50 it's dominant producing assets East Coast, Mid-Atlantic area is saying, and Toby's been saying this consistently for a number of years is, you know, his unleashing LNG mantra is,

8:07 we've, you know, we're not going to wait around for send out to play this game. We want our place in line in terms of being able to trade and supply LNG globally It's an FOB type of pricing

8:19 structure, so they're going to have the

8:22 flexibility to control their arrangements and ultimately the destination of that LNG. But they want to, you know, they want to be active players in the LNG market, despite the fact that

8:33 geographically they're constrained with which, as you point out,

8:39 no liquefaction capacity on the Atlantic side of the US, and as far as I can remember, there's been no discussions of conversions of I think they're what to facility. two facilities, regassed

8:54 facilities, Cove Point and Elbe Island. And if you remember way back in the early 2000s when we thought we were going to have to be importing a lot of LNG into the US, there were all these regassed

9:08 projects on the drawing boards and all of a sudden for the huge pivot into kind of

9:16 retrofitting those or recasting those as liquefaction and send out So I mean, this is something that Trump could give the oil and gas business is as part of this trade deal with India, you know,

9:32 hey, you gotta stop buying the Russian oil. Sorry guys, we can't keep funding Putin. But oh, by the way, we don't want you building coal either. So we're gonna give you billions of dollars to

9:44 build natural gas infrastructure And we're gonna let Toby produce as much as he can. liquify it and send it to you all day long. I mean,

9:56 this could be a win for an industry that needs a win these days. I mean, it's interesting, Toby is a, I mean, I guess one of our favorite billionaires, but he could have been a multi-billionaire

10:11 if the East Coast would have allowed him to move that gas. I mean, he's shipping this gas 1500 miles down to Texas I mean, that, I mean, it's really a triumph of politics over economics that

10:25 we've regulated ourselves into shipping our own resources halfway across the country,

10:30 of course, but it's the Northeast. It's not gonna change most likely, interesting, but good for Toby for doing it. I think it's pretty wise on his part. Yeah. Take the hostage out of the

10:43 equation I mean, could we ultimately see a federal situation? strategy unfold here in terms of what they're proposing to do on nuclear build out on federal lands. Is there enough

11:00 naval or federally controlled port capacity on the on the Atlantic coast that we'll go ahead and sanction some projects. I don't know if there's space or capability there or port configuration works,

11:15 but it just makes all the sense in the world to give that massive amount of Marcellus gas and outlets straight across the Atlantic to where it's much needed in Europe. We have a very progressive

11:30 Republican governor in Virginia. So we got we I don't know if he's got control of his legislature to be able to do something, but Yunken is sitting there in in Virginia. That wouldn't be a bad LNG

11:44 export facility I could see the Gulf Coast, whatever. organization that they give money to not being super supportive because the Gulf Coast wants to get all the lion's share of processing

12:00 capabilities. But it'd be interesting to see what happens who's fighting. But yeah, Virginia would be great. I mean, from a Toby perspective, from a Northeast perspective, man, if you could

12:13 just send gas into the Northeast and then send it off offshore to sell it. It's good for we good for them. I don't see the benefit necessarily to the Gulf Coast, but I see the benefit overall. And

12:26 because of the Jones Act, we wouldn't be able to shift LNG from Virginia to Massachusetts to the Everett receiving terminal. So I think Milton Freeman would call that regulatory capture What a mess.

12:42 What a mess.

12:44 I'd really like to hear, you know, some of the strategic thinking and. all the deliberations that EQT has been through as they think about this LNG strategy and kind of what they've encountered or

13:00 uncovered there as it relates to getting some send out built

13:06 closer to the most Ellis. You know, Mark, I'd be curious if we came back and did a little bit more math on what's the cost to ship the gas? Like what's the cost to pull gas out of the ground but

13:18 that the fully deliverable cost of gas from the Marcellus to the Gulf Coast versus Texas gas or local gas. I wonder what the price differential is. And we know that LNG, you can get a premium to

13:33 ship it into Europe as well as Asia. So clearly the math is gonna work but it'd be interesting for us to break it down and have that discussion. Yeah, look, I'm having to buy gas down in, you

13:45 know, in Texas, send it out through Rio Grande. and just the mere difference in shipping distance from the lower Texas Gulf Coast, all the way to wherever it's going in Europe, versus sending it

14:00 straight out from the Atlantic coast. Huge advantage there. Huge. I mean, shit, my flight from Boston to London was a morning and I got there the same day. So there's no overnight And in fact,

14:18 at five hours, it was just a mere five hour flight. I'm like, man, what do I do? It's like, it's actually further to fly from Boston to Los Angeles. I didn't know what to do with myself. After

14:29 17, you know, bottles of champagne, you can only, you know, you're stumbling off the airplane. So. That's funny. All right, well, Mark, why don't you just kick us on over into Europe and

14:41 Norway? Since the car did that I'm sure both of you did the pre-read. It was another Dünberg piece called Drowning Swimmers and they talk about really the history of not only Norway's kind of power

15:00 advantage and infrastructure, which is

15:04 virtually all hydro. And so

15:09 Norway did a couple of things very well. One was, you know, after the discovery of oil in or sea, they made sure that the surplus revenues at Stata oil now equinor primarily was generating went

15:26 into a sovereign wealth fund, which today is about19 trillion. And that makes Norway one of the wealthiest countries in the world. So, you know, kudos to them for not allowing these profligate

15:39 spending administrations that we've seen in Germany and the UK, for example, to put them in a. you know, in a financial bind, one and two, you know, again, Norway's got the natural endowment

15:54 of hydro. They've had very stable and cheap electricity until very recently, but the siphoning of all that started back in the late 70s when they laid the first undersea power cable to Denmark. And

16:12 that sense has been expanded from I think 700 megawatts to well over a gig, maybe 17 gigs. Compounding that issue over time in 2008, they laid another line to the Netherlands and then as recently

16:29 as 2021, a dual line one to Germany and one to the UK that are 14 gigawatts each. And lo and behold, not surprisingly what you've seen, look at the price curve for the historical

16:46 a day forward or however they measure it in southern Norway, the domestic electricity prices have been both rising and volatile. And so you've developed this dependency on Norway serving as a

17:00 battery in a situation that is being aggravated by the energy policy decisions that UK, German, and other EU governments have made over the course of the last 10 to 15 years. And despite the fact

17:15 that Norway is not a participant or is not a member of the EU itself, it is a member of the European economic area, which then gets them aligned with the climate goals of the EU in principle and in

17:31 practice. And so you've created this

17:35 growing dependency problem, which is directly and negatively impacting the citizens of Norway, because Norway is just serving as a great big battery for a number of really struggling EU countries?

17:47 Yeah, I mean, having spent a lot of time in Norway, it's real interesting to me because they have all this just incredible, it's just incredibly cheap energy and it's good for the environment.

18:04 So it's interesting that they created this sovereign wealth fund to navigate what I forget the author's name, so apologize, but what he called the petro curse or and to try to regulate the economy

18:23 from going to boom to bust. So instead of you throwing all that money into the economy, you siphon it off so that the economy doesn't go through these wild swings of hyperinflation. People get a

18:36 lot of money, they spend it all, inflation hits, economies crash, repeat. So good for that. But now you have an economy that is basically 100 electric vehicles and they have this incredible

18:54 resource that's offshore of the North Sea of oil and gas, but they're living off hydro. But the fact that they built these subsea cables is, I mean, they basically became Europe's offshore

19:06 extension cord, but I mean, their domestic prices are spiking because I mean, it's kind of like, you know, as a surfer, we always like give our people borrow my boards, but it's like basically

19:19 borrowing on giving everyone out every one of my surfboards when a good swell comes in. Like they have no power left for themselves. And there's nothing that destroys relationship faster than Chuck

19:32 Yates drinking too much. But what's even just as bad is when you're fighting over who pays the electricity bill.

19:40 And when you're used to paying cheap bills and then someone comes around and says, Your bills twice as much, that's really bad. And the fact that when you subsidize your neighbors, bad decisions,

19:53 which is basically what Norway is doing, don't be surprised when they keep making up. So Germany, bad policy, UK bad policy, can't speak for Denmark, but they're subsidizing bad decisions

20:10 They're just going to continue to make bad decisions. Well, did we ever think we'd get to a point in history where you would sit the Germans down and say, Dude, you're now Norway and France's

20:23 bitch, you know? And that's where we're headed with this. I mean, literally the most powerful economy in Europe is being decimated by faulty energy policy and good God. I mean, what are the

20:38 Germans going to do? Well, let's bring it closer to home. I mean, it's basically you, the three of us, basically subsidizing California for their stupid policies. That's basically what's

20:50 happening. Yeah, we're not paying California's electricity bills, but if we had to, I'd be angry too. So I don't blame Norway for being upset. Yeah, classic movie poll. Did we quit when the

21:03 Germans bombed Pearl Harbor? Yeah, exactly. So good Find that one, Jacob. Was it over

21:11 with the

21:14 Germans bombed Pearl Harbor? Hell no! German? Forget it, he's rolling. He's rolling. That's such a good line. The one of my favorite stories about that is, you know, Harold Remus wrote that

21:23 when he was at Harvard.

21:27 And yeah, he was 21 and, you know, wildly successful, right? And they asked him, they said, Did you think it was gonna be that successful And? he said, Absolutely I had no idea till later in

21:38 life what a f - freak that was and what a wild occurrence of it. But I was like, sure, this is hysterical. It's gonna be great. The Rest in Peace Herald Remus. I mean, if you go back and look

21:51 at all the great Bill Murray movies and I mean, Herald Remus wrote all those. Ghost Buster, Stripes, Animal House, tick on down the list. So.

22:04 That's awesome. Anyway, do we have anything left on run a show? My phone What did we do? What was that? Another topic that's near and dear to Kirk's heart. In fact, I'm enjoying just watching

22:19 you guys this week. This is awesome. So, Shell announced earlier this week that it was not going to resume construction at its Rotterdam sustainable aviation fuels plant that it broke ground on, I

22:35 think back in 2022. that project was active during your time there? Yeah, I mean, Saf in general was an area, even my team was all over. It's like, people are paying a premium for sustainable

22:54 aviation fuel. We know it costs two, three, four, five times more to make it. But there was a market for it, albeit small, but you talk to all the airlines and there's demand, like if we can

23:09 get sustainable aviation fuel. So there was a market, but you still needed subsidies to make it work. Now, as we've talked about YL, smart guys, he is the same. No, we gotta run this business

23:22 on economics. And Saf, that Rotterdam facility did not make any sense without heavy subsidies

23:33 And I can tell you something that's even more funny because you've got sort of like Shell, and then you've got the trading guys. And the traders, I mean, we need some shell traders and that have

23:46 been around since Coral and some of the old days, but they don't give a fuck about anyone else's shell. They don't. So what's funny is shell traded 10 billion liters of biofuels in 2024, that's 10

24:02 times their own production. Proving it's better to be the middleman than the manufacturer So the traders know exactly like where to make money. And they're like, we'll trade this shed 'cause we're

24:13 one of the biggest traders of anything energy. But when it comes to actually making it and trying to make money as a manufacturing, it just doesn't make any sense. And so that's why the project

24:25 didn't reach its full potential. Well, and I think that dovetails, whether they're related or not, I tend to think that they are somewhat, there was a rumor that popped up this week that Exxon is

24:39 looking to exit via sale of its European pet chem assets. And not been confirmed by the company, but it was all over the wire this week. And, you know, the - Oh, so maybe Shell Capital's being

24:55 allocated over to a better project. That's the one thing I do love about Shell, is if I have a project, I'm fighting against everyone else in the company to get it funded, not just my one

25:07 organization, but it's, they're gonna look at every project on its own merit, so good for that. I like how the company has run from that perspective. So maybe Shell's gonna be in the market for

25:19 that. Is that what you're saying, Mark? Well, they're not gonna be in the market for Exxon's pet chem, you wouldn't think. You don't wanna increase your capital intensity on downstream and

25:29 chemicals in the European theater, right? You know, one of the, I love the, unnamed sources who were not authorized to speak on the discussions, as always. I think it was an FT article

25:44 originally citing a couple of sources, and it'll be really interesting like the California Refinery shutdowns or mothballing that are imminent is to see whether ultimately there are any actual buyers

26:01 for these these assets because the macro or the kind of external stuff makes you think twice about building an operating pet chem in anywhere in Europe. Tariffs was kind of a main theme as to

26:18 motivations to sell, but I think fundamentally, if you look at the other factor that was cited is that there's cheaper Asian supply and a lot of these key pet chem components, it's coming quickly.

26:32 And so I think that's just a structural reality for the European market that's compounded by the things that we've been talking about, particularly as it relates to Norway and its dilemma with power,

26:45 et cetera, is that it's just really, really hard to tolerate the risk calculus around building fixed assets that are under a

26:58 lot of pressure from regulatory and political standpoint in Europe right now and be able to compete globally on a returns basis. So I'll give a shout out to a friend of the program, Brad Olson,

27:11 who's been on Chuck Jobs a few times over at Recurrent. He says, everybody keeps talking about LNG operators and fighting for this really small LNG market in Europe. He said, The big fight is what

27:27 about their massive refining market? export opportunity for replacing EU refineries is way bigger than replacing Russian gas. So, a lot to be said for that. I thought they were all gonna be

27:42 driving BYD. Yes, sports cars. So let's go back to, let's put this in perspective. So going back to sustainable aviation fuel,

27:54 it's economically unfeasible So you're starting to see these non-sovereign energy companies starting to play the economics game, which 10 years ago, of course, when this SAF project got green-lit

28:09 originally, it was during the regime of Save the Planet. Now it's under the regime of economics runs. I mean, it kind of is like trying to run a Nantucket restaurant on locally sourced, organic,

28:22 gluten-free lobster rolls for 75 bucks I mean, technically possible that you'll go bankrupt faster than a day trippers. daily sunscreen budget, it just doesn't make sense. And speaking up, going

28:35 back to Norway, I was on a board with an executive from North Kydro. And if you know North Kydro, they're

28:49 big, actually they run a big aluminum smelting business, which most of their smelters are in Norway because of the cheap, almost free energy because aluminum smelters are so energy intensive. Now,

29:06 the fact that those energy prices are going up hurts their business in a massive way. So they're in oil and gas to some degree, but their primary business is utilities, running some of these hydro

29:20 facilities, as well as some of the downstream impacts like running an aluminum smelters as well.

29:28 the Norway is going to be an interesting hurt now that they're giving up their cheap, free, economically affordable energy to other people. So Europe's once again, you're seeing some dumb impacts

29:43 of Europe. So Norway, they're going to have to figure out what to do. And you're seeing some smart impacts such as shell shutting down south, which was probably a little bit late on the decision,

29:56 but glad they did it Shot, thoughts, none, just sure. But we can laugh from the United States, but we've got EQT trying to, like they're going to have to ship our cheap gas all the way to

30:10 another side of the country just to process it. The owner of our energy policy in various pockets as well as the Jones Act, I mean, we can't talk much.

30:25 Thou shalt not throw a stone if thine live in glass houses. So.

30:32 Well, cool. Anybody got anything fun coming up? 'Cause I do. Not this weekend, but next weekend. Tell your odd blues and brews festival. Nice. Nice. Lucas Nelson is headlining Saturday night,

30:47 Sunday night, the black crows. And I've always found the brothers animosity in the black crows either leads to magic or just a shit show. So I'll report back on which one it is. You're fantastic.

31:02 Yeah. I'm doing a little cast in blast this weekend. More casting than blasting, but as I mentioned before we got started, I did, it wasn't a keeper, but I did land an eight spot redfish

31:17 yesterday down here on the Texas Gulf Coast But gonna go see if there any white wing flying this afternoon. We're in the south zone where I am currently and you're limited. The rest of the state

31:32 above the south zone opens September 1st, but we get a bit of an early start with a white wing, but not looking too promising out there right now. That's awesome, Mark. What's, yeah, what, so

31:44 what is the overall forecast this year? For, for white wing?

31:52 I don't know, I think some of the other areas are pretty good, but I don't know how, you know, some of these heavy rain events that have happened on the Gulf Coast here recently have affected it.

32:08 Haven't shot in a couple of years, but was itching to do so. It just doesn't look like the conditions are going to cooperate. Safest place for an animal is about 10 feet in front of me when I have

32:20 a shotgun

32:23 I can't.

32:36 While I'm here in the no gun zone, there is a story locally on the Antucket because we have a huge population of illegal immigrants, by the way, 'cause we're one of these.

32:42 And they don't have affordable food because they live on the most expensive island in the United States. So you go do that math, but we have a bunch of deer that keep running in front of cars at

32:53 night because we have an overpopulation So someone's like, Hey, what if we feed everybody by allowing more people to hunt on the island? So I'm like, well, I mean, hand up. Let's

33:08 go send in the cage and army. That's right. We get

33:13 sausage for everybody. Sausage for everybody. All right, guys. Michelle,

33:20 good seeing you, man. Good seeing you. Yeah. Likewise. We've got send pictures of the fish and the birds. Absolutely. Watch this. Watch the latest Chuck. It's needs job. Thank you.

33:34 Fantastic. Thank you. Appreciate that. Yeah. Colin did a nice job on that one. Alright boys. Peace out. See you later. Take care.