Big Digital Energy

0:02 Hey BDE fans, welcome back. Happy New Year. We're doing this one remote because Mark, where are you Mark? I'm in Charlotte, North Carolina, Iranian freezing. Nice.

0:18 Anyway, and I am fresh back from London and ready to rock. So the big news, we did run a show this morning and we were sitting there going, there's literally nothing to freaking talk about in the

0:33 energy business that happened, a couple of little stories. I love all Justin Trudeau through about press conference and said, I'm out of here. So Mark, what does that mean for the energy business?

0:46 Well, as I understand it in reading some of the detail is he resigns as leader of the party, but he remains as Prime Minister.

0:60 Um, the,

1:03 the party is facing,

1:06 I think a mandatory election by October and all science point to his party getting crushed. So he will remain as prime minister, I guess, while all that sorts itself out So I don't know from a

1:24 practical standpoint how much changes, but I do think that, you know, the drivers of his collapse and popularity and support are embedded in things like out of control cost, housing shortages have

1:41 been a, a real dilemma for Canadians And I do think it pretends well for, you know, just have that coattail or draft effect that we've seen here in the US in some of the rollbacks of what have been

2:00 fairly obstructionist political decisions, whether that translates into an acceleration or re-acceleration of Canadian LNG, what that means for the participation of Canadian equities, oil and gas

2:17 stocks, in

2:20 terms of investor favor. I do think

2:24 that is the kind of the chief signal to energy markets.

2:30 How quickly all that manifests, I don't know, and what happens in the meantime between

2:38 a threat of tariffs with Trump's inauguration eminent, today is certification day, by the way, in Congress for the 2024 election, and obviously a notable day in history four years ago, there are

2:56 comparisons being made that, you know, we've. we're gonna have a much more peaceful situation today than we did four years ago. And I think some of the mainstream media that I've read bits and

3:12 pieces about the certification process today is that somewhat ironically, it's going to be peaceful and pointing back to January 6th of 2021

3:23 as a comparison or a precedent So, you know, I don't know that in the near term, much changes given the chaos in Canada, but I don't know what's your take.

3:36 You know, and I don't know, Canada that well, but one of the things we were talking about this morning at the coffee shop, you know, kind of with the old guys that I have coffee with each morning,

3:48 they were asking about with Trump and the drill baby drill, you know, what's going to happen there? We're going to see the market flooded with oil and oil prices drop. You know I kind of gave them

3:59 our take that you and I have talked about it much more and faster driven these days that investors want to see you know capital does plan they want their dividends paid they want if they're okay with

4:14 with flat production maybe a little better growth but not bred for growth sake and as so I said that I don't feel like the regulatory environment is and is necessarily that big an impediment to

4:30 drilling but what it is an impediment to what you were just talking about the big infrastructure type projects you know like LNG contracts construction of those plants and so if anything I would think

4:49 we're going to see potentially some Canadian us and projects coming together pipelines like I know that Keystone was a big deal to Trump and I don't even know where that stands in terms of can it be

5:09 revived or what's running what's not running but you would think that potentially and I don't mean this to be derogatory to the Canadians but you'd feel much more like Canada's part of the United

5:22 States when it comes to energy infrastructure particularly if the opposition party takes over in Canada and so it's more that kind of point we've been making on BDE is you know are we actually going

5:38 to build all this infrastructure so we can have these data centers and have energy not necessarily that we're gonna pump a whole lot more oil out of the ground. Yeah and is there you know some

5:54 magic inflection here that All of a sudden the institutions that really drive the investment, at least on the public side in oil and gas equities, is there going to be some aha moment as a result of

6:10 this Trudeau stepping down in a rightward shift, you would argue in the political profile of Canada is that all of a sudden going to clear up the ambiguity around the political risk premium and make

6:26 investment in Canadian energy and oil and gas,

6:31 all that, you know, is it a step change for institutional interests and equities and all you have to do is look at how the traditional equities in

6:42 the US and in the energy sector have kind of slogged along here. There's not been any great rotation outside of energy into US energy equities, is all of a sudden. you know, maybe a lift of some

6:58 of the political risk premium in inherent in the Canadian energy sector, is that going to create a big rotation catalyst? I don't think so. I was gonna say, all I remember is every time private

7:13 equity went up to Canada and saw low valuations and all this opportunity, it feels like we all stubbed our toe. You know, you get through the track record of every private equity oil and gas fund

7:26 that went up there and they just all stubbed their toes. So maybe everybody will forget and go back. I think probably one of the more interesting, structural plays to watch is, you know, how do

7:39 they position themselves, they being in Canada? And particularly as it relates to natural gas on the data center, power demand growth, build out. And as we talked about, I think a couple of

7:53 shows ago, inherent advantages that you have. up near the Arctic in terms of how

8:01 CPUs and GPUs and certainly compressors and turbines operate in colder climates. And Canada has a tremendous endowment of natural gas. Will there be a renaissance related to data center power demand

8:19 that we've been fixated on here in the US? Yeah, it'll be interesting to see. It'll also,

8:26 it's also kind of another thing that we're seeing with Trump's not even president yet, but he seems to be impacting world events. And

8:40 it'll be interesting watching just, you know, how far does rhetoric go and kind of beating the drums for, you know, all this stuff. Can he put Ukraine to bed? Ah the war there can he get the

8:57 hostages freed out of the out of Gaza Excedrin cause UH it does feel it does feel kind of as unstable a world as I think we've seen and call it the last I dunno since nine eleven maybe and maybe

9:19 that's just you know New Orleans and the Guy the terrorists they're banned from Houston that's just kind of got me on edge but it definitely feels like there's a lot going on in the world now be

9:32 interesting to see you know how the incoming administration handles up well and we we do have to keep in mind really two things one this is definitely a one term situation four of the political

9:50 revolution that the second trump term brings Is obviously limited to this term. And two, you've seen what's happened with the last Friday's speaker election and the lead up to that and just the

10:10 reality of the thin congressional majority in both houses that the Republicans have. And there were comments made by the Senate majority leader, the new Senate majority leader, John Thune of

10:24 Montana, basically alluding to, I think mainly, the cabinet appointment confirmations and that this is going to be, it's a lot more complicated than kind of greasing the

10:40 skids here and we've got a full force mandate. I think there's gonna be some

10:47 quite a bit of political wrangling over a few of the nominees So the inertia that.

10:54 You just look at it on the surface. Well, we have control of both houses in the hands of Republicans plus the executive administration. You've got a Supreme Court that's dominated by

11:08 recent Trump appointees and the notion that you've got

11:14 kind of clear unobstructed straight line path to getting the agenda passed. Maybe I'm being a little cynical here I just look at some of the signs that have come through, although I was encouraged

11:27 by the fact that they didn't mess around with the speaker vote and go through what they went through when

11:35 McCarthy was displaced, which certainly would have motivated quite a bit of opposition pushback and attack. And I think created a lot

11:50 of here we go again among the electorate.

11:53 but the reality is we do have a pretty thin legislative majority with the party in power so Yeah at this point we had we had what three or four de factors on the Speaker vote and trump got on the

12:09 phone with them and lawn ball they fell in line and we got it down on and I'd say we the Republicans got it done on a on two votes definitely not the shit show that the McCarthy era was and so be

12:26 interesting watching them try to try to hold that in line and so one item that popped up that was pretty interesting and the new Senate over in the runners share this morning is Biden basically taking

12:43 at Taking federal lands out of play and I've seen a lot of stuff on acts going back and forth about you know how can a president just do that so tell us what's gone on there while there was a under

12:59 the LCS lands act basically put a perpetual ban or Moratorium on new offshore leasing and development on I think six hundred and twenty five million acres predominantly Atlantic and pacific coasts

13:17 some bering straits or bering sea and then the Eastern Gulf of Mexico doesn't affect any of the and I went looked Yesterday at what what is the what is the active LCS lease cap today that totals about

13:32 twelve little over twelve million acres and so we're talking about multiples obviously of what is theoretically or had been available for showing up and oh seriously sales by the Bureau of Energy

13:48 Management but if if you look over the last couple of decades, you know, there was a there was a spurt of a push to get some things done in the eastern Gulf of Mexico. You had Dustin Dohm, you had

14:04 some other things that were going on in ultra deep water and certainly offshore of the Canadian Atlantic coast longer ago than that. And my, you know, just my general assessment and thinking back

14:21 on all that, there was a lot of rhetoric and hope and enthusiasm around those efforts from an exploratory development standpoint. I would say that, you know, generously that the history of success

14:38 has been mediocre And we've got plenty to do elsewhere, not the least of which is if we're talking about frontier or remote exploration, we've got plenty to do. i been around the north slope of

14:52 Alaska you know California has been pretty much a n a no fly zone for decades you did have some limited development offshore but I I know the magnitude of of the ban six hundred and twenty five

15:11 million acres I went and asked Chat GP to you What's the what's the what's the aerial extent of lower forty eight this is slightly less than one third of the land area of the entire lower forty eight

15:26 region it's a lot i forget how many federal associates least blocks that would be but from a kind of an exploration and capital allocation priority do these areas present from a practical standpoint

15:42 all that much opportunity that is going to make the capital budget over the next you know five ten fifteen years for companies looking to explore the

15:57 federal offshore areas that that are theoretically perspective we've got a lot to do in existing central Gulf of Mexico as it relates to more deep water and particularly the high pressure high

16:10 temperature or high temperature deep water that that has been talked about recently so it's a lot of acreage and you know how much does that limit the energy prosperity and energy security of the U S

16:27 for the foreseeable future don't know the other aspect of this as well you know Trump can come in on day one and immediately reverse that and my rate of it is that he he can't without getting a can

16:43 congressional approval and as I spoke about earlier with a thin majority I particularly in states that both Democrat and Republican that have

16:55 coastal impacted areas or coastal affected areas are you going to you know see a strong swell of support for rolling back something that you know their home constituents from a public perception

17:09 standpoint may largely be in favor of and I think back in two thousand and nineteen trump hadn't actually put a similar moratorium in place in the Eastern Gulf of Mexico particularly off the coast of

17:22 Florida that was in place set to expire by I think it was twenty thirty two or twenty thirty three this biden ban has no expiration date as I as I understand it a purely you know just and in my view

17:40 purely a political can a parting shot or signal in In In the larger context of of the Biden Administration's climate Agenda and even as I understand it the remarks on announcing the Ban Reference

17:58 Macondo basically said the payoff is not worth the risk and using Macondo as a as the most recent example of what can happen when those black Swan events occur so Yeah the the Thing I didn't like

18:15 about it is I mean this would have been a really good campaign issue for the United States stabbed thoughtful discussion about energy policy and what we should be done cause you're right at the end of

18:28 the day it's probably not changing any great exploration area we need to be gone after it's it's you know nuisance type stuff but we could have had that discussion And again, it's like everything

18:45 else, you know, let's just hide it so we can get elected. And then we're going to go do the stuff we want. And I hope the electorate will remember this. So the next time, you know, they come

19:01 out and say, somebody comes out and says, hey, we're for this. You can really challenge them on, hey, did you vote yes or no when we tried to remove this offshore ban? So

19:14 anyway, just kind of more of the same. And again, can we have a thoughtful discussion about energy policy? It's so important. Higher energy prices, lack of energy. Tell me about the trains in

19:28 Colorado. I love this story. Yeah, it caught my eye. I've been following trains a little bit, former colleague and good friend, Ryan Zorn, who is the director of energy additions, really

19:41 policy focused and has been. I really love front and center to a lot of the energy and and particularly power conversation in Colorado but Doom Berg put out a piece called freight hopping a few days

19:59 ago last week I believe and the latest idea is basically around a VC startup called Sun train and the concept is you at least in the demonstration project you load up a bunch of Railcars twenty in

20:22 this case with a demonstration lithium or excuse me a lithium iron phosphate batteries which reduces the the explosion and the flame of ability risk but you're basically going to take advantage of

20:38 these low power prices and charge these

20:44 Transmission trains got on the planes in Pueblo where you have a lot of solar generation capacity and then I believe the route that this demonstration train will follow you so you charge up literally

21:02 the battery cars which way a bunch and then you deliver them or you you pull the train by diesel by the way to the Cherokee power station in denver to take advantage of of a gap periods in I saw One

21:21 analysis that basically likened the or frame the the market in which this concept this battery by rail concept is essentially participating in the and in the segment of the market the net natural gas

21:36 Peaker plants operate and last year the nine hundred and ninety nine peaker plants in the US operated with a 6 capacity factor, which is a very, very tough market, especially if you're trying to

21:54 time not only the charging of the batteries, but also delivering that power via rail to capture the arbitrage of, you know, tight period and deficient supply periods to the metropolitan area in

22:10 Denver The other part, which was central to the Doomburg analysis and freight hopping was a comparison of coal by rail. And essentially the energy density superiority of coal in a hundred ton hopper

22:30 car is about 10x what the energy density delivered by this sun-trained concept So the economics in. In both trying to participate in a picker market and then delivering that power to take advantage

22:52 of those arbitrage periods is hugely disadvantage when used the just the inherent energy density in what power can be generated from a hopper car of coal versus a battery car

23:11 and so the other the other aspect of it is once you discharge the batteries and denver you Gotta Haul the quote unquote empty train which weighs the same you know the battery is discharging there or

23:26 electric the stored power away the same going back to then be recharged at the solar facility out in Pueblo which again is about think one hundred and ten mile trip and so Basically the math doesn't

23:42 work very well

23:45 and one of the things that I attached along with the Colorado Sun article describing the the the Sun trained concept is

23:56 I mentioned reins on earlier he had done some months ago an analysis of the sky train that runs between Denver and Winter Park and What you Know what the equivalent family of four costs the carbon

24:09 savings and what the implied gasoline price that you would have to be willing to pay to really get to the point of indifference of taking a family of four on the sky train from Denver to work on her

24:21 part but it just shows the difficulty of getting over these cost and economic hurdles in essentially this untrained concept is I Dunno if you want to call it a stop gap but it's something that in Lieu

24:36 of Building I think it's called the Power Pathway which is Multi Billion Dollar at Transmission project you Gotta have get more transmission capability and capacity to get this planes base generation

24:51 to where the demand is and so in the meantime let's let's run a bunch of diesel powered expensive trains with batteries back and forth to test the concept and and I do know that that the governor and

25:06 in the legislature have said you know we're we're going to make this contention upon getting some ten million dollar federal grant to get this twenty car was twenty battery car demonstration project

25:19 fired up and running but you do have Pueblo has got you know why Plump Pueblo that there's a lot of solar generation capacity it's popped up others an old coal station that excel at I believe

25:37 decommissioned but you still have the the power infrastructure so you We've got a big charging station in effect out there that is that is fed by it by solar power that's in the area that is somewhat

25:48 remote from where the demand is and this is this is just a an alternative transmission

25:57 concept you know I actually like everything I think the thought process is Great I think one of the things we forget about in the energy business is that it's the incremental cost of everything that

26:12 actually matters it's the last barrel it's the last MCF that that prices staff and so if you've got it doesn't matter what the fixed cost is if you've got a ton of solar out there already if you've

26:26 got railroad lines are already bill you know OK let's at least play around with could this work the thing I hated that you said is the ten million federal grant because I just have Government money

26:40 distorting the economics of the energy business but I do like the the the experimentation on it you know it's kind of my mind was going to the potentially being to put solar panels out on the ocean

26:56 and have ships going back and forth with batteries I mean the economics probably don't work on that but at least thinking about it and can be some cool stuff to do Yeah stationary storage as a as a

27:11 distinct advantage because you can cycle those multiple times in a twenty four hour period or a multi -day period where you know all my power load to Denver discharge it I've got to make the trip back

27:29 and then recharge and then wait for you know the appropriate market opportunity to run the train back to Denver and discharge but I think a single car will the discharge from a single battery car will

27:44 power twenty thousand homes for an hour or a thousand homes for a day or something like that then another thing I hate when we think about this is this is probably only necessary because of the

27:59 regulatory burden of being able to just build a power line from Pueblo to denver you know you would thank you if you know you would think we ought to be able to build those transmission lines a lot

28:14 easier a lot quicker and you know at the end of the day it's we've talked about at on all year about how just a big amass it is because of the blunt nose leopard lizard is here and we can't do this

28:30 and etc the the the analogy or the comparative case what we talked about a few months ago was around this grain belt transmission line that was I think three four maybe five states involved and you're

28:46 you're basically taking renewable power under this grain belt express transmission line from power generation wind and solar in the midwest and delivering it to high demand centers are high youth

29:01 centers defined as Illinois and particularly Chicago in Illinois I ended up blocking and it was the piece that couldn't get it's act together politically to get the last link of of the transmission

29:16 right of way approve so you just don't build the line right Yeah so Yeah that being said interesting thing to to watch so are we doing protections for twenty twenty five geology kicked off add chicken

29:40 I actually think we're going to have you know there was I I forget who said it but one of the one of the famous foreign policy things I don't think it was Nixon but one of the the famous foreign

29:58 policy people always said that you know it's always darkest before the dawn in the Middle East that things are always feel really bad right before you have a major breakthrough of peace and so I'm

30:12 going to take this as a thanks just feel really bad in the in the Middle East So I'm Gonna Say there's going to be some breakthroughs in the Middle East this year we're going to pick up on the Abraham

30:26 Accords I'M going to say that the Saudis and the Israel and Israel before the end of the year sign an accord for a for peace so that it's Kinda my Big Big take for twenty Twenty five minus much more

30:45 at least Micros are relates to

30:49 the oil and gas Sector I think we're going to see quite a bit of strategic announcements at at least and maybe it amounts to no more than investor relations slide slides but I do think there's going

31:03 to be a bit if not a significant amount of me to do follow on to what diamondback and exxon have announced in finally getting on board and following the the chuck mantra of learning how to sell not

31:22 gas molecules but electrons I I just you know I I think the coincidence or the alignment of the incoming administration the fact that it seems like every week we're seeing you know Some data center

31:39 headline the most recent of which and I think the highest profile of which is what what meta is doing in Louisiana which is just inherently going to be in concert with entergy but also going to be

31:53 decidedly natural gas powered with our the kind of creative offsets get them to renewables etc but I I do think that that those things are going to start to show up in the thinking and and how while

32:14 and gas companies certainly the the more gas lever names are position positioning themselves no longer board discussions actually action on the ground

32:28 at least deadly at least and you know maybe a smattering of announcements of a lot exxon or I follow on the diamond back where there's actually an agreement at play in place to start may be breaking

32:43 ground on on some of these projects here the next three to five years Yeah Nah I think that's good well happy New Year Mark get a happy face safely back to to use than a world record in person next

33:01 week I think my video got a lot better when I switched wifi networks over here so that may have been my Bad I do have to ask would you think about the that the Titans trolling Yesterday wearing

33:16 wearing the powder blues the the love you blue playing the Texans and Tennessee Yeah We're Oilers Yeah Now I You Know and I was always a cowboys fan so it didn't break my heart when the oilers laughed

33:33 like it did some other ones but I definitely lived through it

33:38 And I still think it's really douchey that the NFL sends a letter to the University of Houston and says you can't wear the powder blue. I think they did the same thing to rice when rice were the

33:50 powder blue. And then to let the Titans do that, it's a little crappy NFL. Yeah. You know, little tone depth, I would think. So, but you know, at the end of the day, the Texans are going to

34:05 the playoffs and the Titans aren't So, take that. Yeah. And

34:12 we'll see how the offseason drama unfolds with your favorite team. Oh, good God. I'm actually at the point where I might keep McCarthy. I think the guys played a lot more. I think they got a vote

34:24 of confidence.

34:26 You know, it's weird. The, you know, he did not, he has not been run out of town yet. And all I think the players played hard for him. The thing I don't like about McCarthy is it feels like

34:39 we're running an offense from 20 years ago that people have figured out, you know? So I think we get outcoached during games, but at

34:52 the end of the day the players seem to like him and that's kind of half the battle. So I don't know. My buddy Fred and I were going back and forth that Jerry Jones is going through later stage, Al

35:04 Davis stuff and we just don't like it. Hey, I don't know if you guys recorded

35:14 episode 9 recap or plans to do that. No, we're gonna do eight and nine tomorrow morning. I was on a flight last night that actually offered actual streaming. Really? Yeah, and - Where'd you go

35:30 on? You know, I was trying to like, how old to get - Paramount close to work but I Get Getting fatal Errors I switched over to and watch some netflix movie

35:44 but not nine was good i say

35:49 Well I won't I will run it for you Better you're Gonna Wanna Watch it

35:54 Yeah I think he has been doing a great job on the recaps of their fun entertaining to Watch Yeah They're They're Fun and I mean like a guy came up to me at Coffee today who's not in the energy

36:05 business is local fireman down enrage me as I am watching the recap with the onlay A man My wife liked it the era was fun by the way one of the things from the obliviously the upset eight Rica that

36:22 you Guys did right for the holidays you know the the Cartel scene showing up and then the crew Pulls Right His numbers on them with all the with all the weapons are actually thought Gates a story from

36:38 South Texas and the Ghillie suit and the and the laser blooms the laser sight showing up that that would have been a better actual scene

36:51 there might have been that's right then the script they followed in that in that upset yeah that's a that's kind of a some harrowing stuff in real life anyway great job I look forward to more and

37:06 January January fifteenth we're going to do alive take for the season finale we're going to graduate like you and I did BD Semi we already there counter that that'll be Graf we are we are alright make

37:21 it back safe pace we'll see Soon