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As the world tries to move away from fossil fuels, the oil supermajor acquires one of the Permian Basin’s biggest players. Here’s why.
ExxonMobil has long been considered by observers as something more akin to a state than a mere oil company. Its signature massive overseas projects, which can take over a decade to go from idea to getting oil out of the ground, require not just billions of dollars of investment, but the type of on-the-ground convincing and conniving typical of interstate diplomacy.
Exxon executives even got the awards typically reserved for statesman, as when the company’s former chief executive (and future secretary of state) Rex Tillerson received the Russian Order of Friendship as a commendation for the work ExxonMobil did with the Russian state oil company Rosneft in the Arctic.
But ExxonMobil now sees the future of the oil business in its relative backyard — namely, the Permian Basin, the massively productive oil field that stretches from western Texas to eastern New Mexico, and specifically its western stretch, the Midland basin. The move represents an acknowledgement that the world’s energy markets have changed and the ability to start — and stop — production quickly may be more valuable than securing massive new projects.
ExxonMobil and Pioneer Natural Resources announced a planned stitch-up on Wednesday, combining the supermajor with one of the Permian’s biggest players. The deal is worth almost $60 billion, making its ExxonMobil’s biggest deal since its purchase for, well, Mobil in 1999.
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The combined companies will, in less than five years, be producing 2 million barrels of oil per day in the Permian (out of over 5 million total), ExxonMobil’s chief executive Darren Woods said Wednesday morning. Today, merged production would represent some 1.3 million barrels per day, about half of Exxon Mobil’s total in 2022. Exxon will own some 1.4 million acres in the Permian, thanks to Pioneer’s 850,000.
The average cost of extracting the oil in territory controlled by Pioneer will be $35, Woods said, well below where oil prices have ranged in the last year.
Now, much of Exxon’s oil portfolio will be in so-called “short-cycle” oil, meaning that the time that elapses between deciding to drill and getting oil out of the ground is shorter.
“Where new, major conventional fields cost billions of dollars, take several years to begin, and a decade or more to produce from, a hydraulic fracturing well costs $10 million or less, takes a few months to set up, and produces the majority of its oil within a few years. It provides a flexible means by which investors can extract oil, distinct from the mainstream industry,” explained University of California geographer Gabe Eckhouse in 2021.
These investments can swing dramatically in response to oil prices. When ExxonMobil slammed the brakes on oil production in the early months of the pandemic, it even announced a 75% cut in its Permian rigs.
ExxonMobil is not positioning itself to a world where the fossil fuel business dries up, but one where demand becomes more unstable. When oil executives can forecast that demand will steadily grow over time, they can justify billion-dollar-investments in massive new oil projects.
“All that Big Oil needed was the geological acumen to find the next reservoir and the political skills to sign a contract with a government in a far-flung corner of the world. Its cash and prowess to build marvels of engineering mega-projects would do the rest for the next 50 years or so,” Bloomberg’s Javier Blas wrote when the deal first came into focus last week.
With a portfolio more heavily weighted towards domestic assets that are cheaper to operate, ExxonMobil can now more nimbly respond to wild swings in energy policy across the globe — whether it’s a major oil exporter disappearing from the legitimate Western market, or countries in the industrialized world deliberately reducing their oil consumption — and more precisely scale its investment to oil demand.
“When commodity markets have downcycles, the short-cycle assets provide additional capital flexibility as shale assets require less long-term capital commitments, compared to conventional operation,” Woods said, essentially explaining to investors that ExxonMobil would be able to conserve cash when oil prices dropped and return it to them when oil prices go back up.
ExxonMobil isn’t the only company buying in the Permian. Pioneer itself previously swallowed up DoublePoint Energy, which had almost 100,000 Midland Basin acres, as well as Parsley Energy. Occidental, which has been a leader in investing in carbon management, bought Andarko in a massive $55 billion deal in 2019. The Pioneer acquisition could be a sign that new wave of consolidation is upon the Permian.
While the deal is not at all consistent with a world without fossil fuels, it’s not entirely inconsistent with where we are today, where much of the rich world at least has some kind of climate policy. Earlier this year, ExxonMobil announced that it would buy Denbury Inc., which operates a massive set of pipelines for transporting carbon dioxide. They could be used in the oil giant’s emerging carbon-management business, which includes deals for carbon capture for its Louisiana ammonia plant, a Nucor steel plant, and a hydrogen plant it’s working on in Texas. Woods said Thursday morning on an investor call that the deal “strengthens our low-carbon solutions business by increasing the volume of low-cost and lower-carbon Permian feed into our planned Baytown low-carbon hydrogen and ammonia facilities,” and that it would use its technology to reduce emissions from its oil operations in the territory it acquired from Pioneer.
But ExxonMobil itself isn’t being reduced. It’s only getting bigger.
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The Rivian R1S’s sprawling touchscreen delivered the good news: After 40-plus minutes of charging at the halfway-point pit stop between San Francisco and L.A., we could easily make it the 220 miles home. Sure, fate might dictate an extra pit stop if the toddler collapsed into an inconsolable meltdown or one of the adults needed a bathroom break. But the math was clear: At a 95% charge, the big electric SUV’s battery could go an estimated 350 miles in Conserve Mode — more than enough to get home from Coalinga in one shot.
And then it happened. The baby held it together, thanks in part to the soothing power of pop song covers by a singing cat. We blew through the last leg of the journey over the mountains into greater Los Angeles.
For a fossil fuel vehicle, this would have been no big achievement; just about any old gas-burner could make a 400-mile highway trip with a single stop. In an EV, it’s a picture of what’s becoming possible as batteries get bigger and better, and more EVs have ranges that top 300 miles. Because believe me, if you want to road trip in an electric vehicle, you should buy all the range you can afford.
When my wife and I got a Tesla Model 3 six years ago, our simple single-motor edition came with a nominal 240 miles of Environmental Protection Agency-rated range. Pretty good, we thought. That’s nearly the distance to Las Vegas, and certainly enough to make the trip of 350 miles or so to San Francisco on one recharging stop.
How young I was. Range, remember, is a relative thing; an EPA miles rating doesn’t mean you’ll go that far. Compared to driving 50 miles per hour on some lonesome highway, range dips noticeably when you’re ignoring the 70 mile-per-hour speed limit on Interstate 5, just trying to get home. It is also impractical to use a battery’s entire capacity. Once you’ve passed 80% to 85% capacity, recharging slows dramatically, so much so that it’s annoying to sit there and accumulate a few extra miles unless you really need them. And when you’re driving, the miles below 10% aren’t usable unless you’re totally comfortable arriving at the next charger with just a percent or two left on the battery.
Because of these limitations, my little Tesla can’t really travel more than 140 to 150 real miles at freeway speed. As the battery has gotten older and its range has dwindled, the journey to San Francisco can be accomplished in two charging stops only if we begin with a full battery, carefully plan our stops, and don’t have to waste energy running the A/C on full blast because it’s obscenely hot. More commonly, the trip takes three full charging stops.
To be clear, this is not the worst thing in the world. It adds travel time, certainly, when compared to the Cannonball Run my wife used to make in college, stopping just once at the halfway point to get some gas. But with a baby in the back, we’re taking at least a couple breaks no matter what. The real problem driving long distances in an EV with low or fading range is that the trip becomes an exercise in logistics. You’re constantly aware of the car’s estimate for how much range will remain when you reach your destination — and alarmed if that number starts to decline. You also rarely stop just because you want to when there are so many stops you have to make.
To get a taste of the better life to come, I borrowed an R1S Tri Max Ascend for a long weekend trip to the Bay Area. A triple-motor, absurdly overpowered version of Rivian’s SUV, the Tri Max is a $105,000, nearly 7,000-pound behemoth that can outrace sports cars on a drag strip. Yet because of its enormous battery pack, the giant EV can still deliver more than 300 real-world miles on a charge, enough to fulfill my long-held fantasy of charging only once on the way to San Francisco.
The difference was apparent within the first two hours. As we crept through heavy traffic leaving Los Angeles on U.S. 101, the baby threw a fit. In my shorter-range EV, I would’ve powered through the ear-piercing misery for as long as it took to reach a Supercharger in Santa Barbara, then eaten whatever happened to be around. In the R1S, we knew we could make it comfortably all the way to Rivian’s fast charger in Pismo Beach, about halfway to S.F. So we pulled off in one of our favorite seaside towns, Carpinteria, for happy hour crab cakes to give the child a break from her seat.
It took a lengthy stop in Pismo to refill the Rivian’s gigantic battery, one we spent buying baby clothes at the outlet mall. But that got us to the Bay Area, where a quick pit stop at one of the Tesla Superchargers now open to non-Tesla cars provided plenty of electricity to bum around town all weekend. The only hitch in road-tripping in the Rivian is where you choose to stay — our hotel had one compatible slow-charging bay for overnight energy, but I never could snag it.
No, long range can’t duplicate the mad dash experience for the kind of drivers who want to stop only five minutes every four hours in order to “make good time.” And EV driving still requires more mental math than the old ways, where you would notice the fuel gauge is getting close to E and pull off at any of America’s multitude of gas stations. But extended range does give the EV driver more of the classic road trip experience, where stops are determined by life — bathroom breaks, coffee refills, backseat tantrums — and not solely by charging needs. And there’s nothing like having enough range to just get home when everybody in the family needs the trip to end.
The good news is that range is getting better across the board. A half-decade ago, a lot of pure EVs came with ranges that were barely above 200. Now, many more come with at least 240 to 250 miles in their entry-level versions, with battery upgrades available that take the figure north of 300.
The bad news is that range costs. No, you don’t have to splurge for a six-figure vehicle like the R1S Tri Max to get a big battery. Even with more affordable EVs, though, it costs thousands of dollars extra to get the larger battery, and with it, road trip peace of mind. An ideal solution to this problem is leasing, which gets people into better EVs for a lower monthly payment (and doesn’t leave them worrying about a battery’s long-term health as they would if they bought the car). But a lot of great lease deals are going to get a bit worse if the current government succeeds in undoing electric vehicle incentives.
For plenty of drivers, the extra cost won’t be practical or worthwhile — they could spend much less to stick with a hybrid vehicle, or settle for making a few extra road trip stops in a less expensive EV. But if I’m being honest, long range is a life-changer for anybody who loves the open road. EVs are already better than combustion cars in the city. Once driving range reaches well above 300 miles, they’re just about as good on the interstate, too.
On heat pumps, a coal mine approval, and the UN Ocean Summit.
Current conditions: Tropical Storm Barbara is strengthening off the Pacific coast of Mexico and could become the first hurricane of the season • Smoke from wildfires in Canada’s Manitoba province brought orange skies to the United Kingdom • Pittsburgh, Pennsylvania is recovering after heavy rains brought flash flooding over the weekend.
Facing the threat of legal challenges from the Trump administration, California’s South Coast Air Quality Management District, a regional agency that regulates pollution, voted on Friday to reject proposed rules to reduce sales of gas-fired furnaces and water heaters. The rules would have required manufacturers to gradually increase the proportion of zero-emissions appliances like heat pumps that they sell to 90% by 2036, and put surcharges on gas equipment. The standard took two years to draft and bring to a vote but was fiercely attacked by the gas lobby, which labeled it a “gas ban.”
The Department of the Interior approved the expansion of the Bull Mountains coal mine in Montana on Friday, cutting short its environmental review process and allowing the mine to operate for nine more years. Interior Secretary Doug Burgum cited Trump’s energy emergency declaration, saying that it “is allowing us to act decisively, cut bureaucratic delays and secure America’s future through energy independence and strategic exports.” The mine exports its coal to Japan and South Korea. My colleague Jael Holzman has covered the administration’s efforts to speed mining approvals, including for projects that may not be economically viable.
Trump signs executive orders related to nuclear in May.in McNamee/Getty Images
In an interview published Sunday, Dan Sumner, the CEO of Westinghouse, told the Financial Times that the company is talking to the Trump administration about building 10 new AP1000 nuclear reactors. The news follows an executive order Trump issued in May setting a goal of starting construction on 10 such large, conventional reactors in the next five years. The last AP1000 built in the U.S., at the Vogtle Electric Generating Plant in Georgia, took 15 years to complete. As my colleagues Matthew Zeitlin and Katie Brigham explained in a recent piece, however, between the complex licensing process and an underdeveloped workforce and supply chain, it will be tough to speed things up.
The third United Nations ocean conference kicks off today in Nice, in the South of France, and the U.S. is not in attendance. Delegates, scientists, and environmental advocates from around the world are gathering to advance global cooperation to protect the ocean from global warming, plastic pollution, and overfishing. During a pre-conference event on Sunday, French prime minister Emmanual Macron called for global moratorium on deep-sea mining, and said 30 countries were ready to commit to it. “I want us to reach an agreement for the entire planet,” he said. “It’s completely crazy to go and exploit, to go and drill in a place we don’t know. It’s frenzied madness.”
A raft of provisions for Trump’s budget bill put out by the Senate Commerce Committee last week included a rollback of the Corporate Average Fuel Economy Standards. The proposal would eviscerate “one of the federal government’s longest-running programs to manage gasoline prices and air pollution,” writes Heatmap’s Robinson Meyer, by setting all fines levied on noncompliant automakers under the program to zero dollars. But Ann Carlson, a UCLA law professor who led the National Highway Traffic Safety Administration from 2022 to 2023, told Robinson that she doubted the change would make it through the Senate’s strict rules that enable it to pass the budget with a simple majority.
Senators Bill Cassidy, Shelley Moore Capito, and Susan Collins are among the more than four dozen members of Congress who have stayed at a Lake Como villa owned by the Rockefeller Foundation to talk climate change and energy policy — on the nonprofit Aspen Institute’s dime, reports NOTUS.
Here’s what will happen if the company you signed with goes under.
The version of Trump’s budget bill that passed the House late last month would be devastating to the rooftop solar industry. Not only would it end a tax credit for homeowners who invest in rooftop solar, it would also end subsidies for companies that lease these systems to families.
If the bill were to become law, the tax credits for new installations would terminate abruptly at the end of this year, giving companies no time to adjust to the new market reality. Rooftop solar as it exists today will cease to make financial sense in many places, and the customer base could run dry. Building owners with existing leases or power purchase agreements for rooftop solar may be wondering what will happen if the company they signed with goes under.
The first thing to understand is that many of these companies, like Sunrun and Trinity Solar, bundle their leases and PPAs and sell them to banks or other financial institutions. That upfront cash helps them expand and invest in new installations without taking on more debt. But even though they no longer own the lease, the solar company typically retains the responsibility to maintain the system and ensure it is working properly.
The biggest risk if the solar company ceases to exist is that maintenance will fall through the cracks, Roger Horowitz, the director of Go Solar Programs at the nonprofit Solar United Neighbors, told me. There may no longer be anyone monitoring your installation. Unless you’re actively keeping an eye on it, such as through a phone app, you might not notice if an inverter goes down. And then if something like that does happen, or if a bad storm causes damage, the leaseholders, aka the bank, may be unresponsive.
The good news is that as long as the system is installed correctly, rooftop solar doesn’t typically require much maintenance. “In general, the whole thing with solar is that there aren’t any moving parts,” Horowitz said.
I reached out to several solar companies to ask whether they were still signing new contracts and how their lease terms addressed the possibility of the company going out of business. Sunrun, the biggest installer in the country, did not respond.
I did get on the phone with Ed Merrick, the corporate vice president at Trinity Solar, which is the largest privately held residential solar company in the U.S. Merrick said that ever since interest rates went up, making loans less attractive, the majority of Trinity’s business has been in solar leases and PPAs. For now, the company is still moving forward with business as usual, enrolling customers in new contracts.
When I asked whether Trinity could still offer financially attractive leases and PPAs if the tax credit went away, the line went silent for a few seconds. “Doubtful,” Merrick eventually responded. “It would be very hard.” That’s especially true in states like Pennsylvania and Maryland that have low electricity rates. “Those states probably won’t have any viability for any kind of solar system for homeowners unless they just really want to be green, which is a very small subset, and those people have probably already got it,” said Merrick. But even in states with higher electricity costs like Massachusetts and Connecticut, he said it would be questionable whether they could make an attractive offer to homeowners.
Merrick agreed that the primary risk to existing customers is maintenance. “We have a huge service department,” he said. “If something were to happen to us and we can’t continue, then obviously our service department would fall in, too. I don’t think that’s gonna happen with us, but I do see a material impact to our business over the next couple of years if this bill goes through as is.”
He noted that if Trinity’s not around, the third party financial institutions who own the leases have a legal obligation to service the systems, so homeowners should still be okay, although there will likely be more hiccups in the process.
I also spoke with Tom Neyhart, the founder of PosiGen Solar, which exclusively offers solar leases and retains ownership over them. After the Inflation Reduction Act passed, the company thought it would have continuity on the tax credits through 2032, he said. The solar tax credits had been around for nearly two decades, but the IRA also made solar leases more attractive by offering a higher subsidy for projects that used domestically manufactured materials and were built in low-income neighborhoods or in so-called “energy communities” — places that have long depended on fossil fuel industries to support the local economy. Posigen raised $150 million in equity and borrowed a bunch of money to expand its footprint, Neyhart told me. It also engaged with its suppliers, asking them to move their manufacturing to the U.S.
“We went from only having basically two factories that built anything we used on the roof in the U.S. now to 20 factories that we buy from,” he said, and began listing all of the factories that arrived in the last three years — SolarEdge built projects in Texas, Florida, and Utah. Silfab, a Canadian company, is expanding in South Carolina, and moved its headquarters there. “It’s huge, it’s tens of thousands of jobs.”
Neyhart told me that PosiGen’s customers should not be worried about maintenance. “We guarantee it performs, and if it doesn’t perform, then you’re going to get a credit against your bill,” he said. “Whoever owns the lease knows that if they don’t service the account, then they’re going to lose the revenue from it.”
But Neyhart is hopeful that Congress will reverse course. He said he’s spent more time in Washington, D.C., over the last few months, lobbying for the tax credits, than he has at home in Louisiana. “I think that they realize that, if nothing else, we need a transition time,” he said. When Louisiana ended its state solar tax credit several years ago, it phased the program out over three and a half years. That gave PosiGen enough time to adjust its business model and continue to operate there. Neyhart said the company could find a way to work without the federal tax credits with a similar transition period.
“Every time I talk to a senator, especially Republican senators, they talk about business surety and ‘people have to understand what the rules of the game are.’” he said. “You just can’t pull the rug out. Senators, please don’t pull the rug out on us.”
Merrick had a similar message. “We do understand the need to eliminate subsidies on solar,” he said. “What we’d like to see is a phase down, not a cliff.”