December 31, 2008
Neighborhood metamorphosis (5/5)
By Lowell Brown and Peggy Heinkel-Wolfe
Denton Record-Chronicle
December 31, 2008
EDITOR’S NOTE: Behind the Shale is a five-part series exploring urban gas drilling and one Argyle-area neighborhood’s struggle against it.
Opponents, backers of gas wells take up life-altering battle
Jennifer Cole stared at the letter in her hands. No matter how many times she read it, it didn’t make sense, she recalled. The letter, which appeared in her mailbox just after Thanksgiving 2007, said that a Houston company planned to conduct seismic testing so it could drill on the land behind her Argyle-area home.
Cole recalled feeling baffled. The company that was supposed to drill there, Reichmann Petroleum, was tied up in bankruptcy. Even if Reichmann had emerged from its financial hole, the city of Denton still had a pending lawsuit against the company — a lawsuit that demanded compliance with city codes before workers could move as much as an anthill. Prodded by Cole and her neighbors on Britt Drive, the city sued the would-be driller in 2006 for building a planned well site behind Cole’s home without approved plans, among other alleged violations.
But Reichmann never held the leases for that well. A Denton County lawyer, Tom McMurray, held them during Reichmann’s involvement with the site, which kept the well out of the court proceedings. McMurray pooled the leases and, on June 4, 2007, sold them to Carrizo Oil and Gas Inc., a Houston-based energy company with a multimillion-dollar budget and wells scattered throughout the Barnett Shale region.
Reading the letter, Cole said, she felt a familiar dread spread over her — the one that consumed her thoughts and stirred her prayers the day a bulldozer first moved earth behind her home. She recalled picturing the gas rig, how it would loom over her backyard — and the workers, who would see her over the fence when she was home alone. Her husband’s gas grill flashed through her mind — the grill where her boys sometimes roasted marshmallows. There it was, sitting by her backyard fence. Sometimes it sparks, she thought.
Cole and her next-door neighbor, Jana DeGrand, had led their neighborhood’s fight against the well site for two years. It was wearing on her — the hours of research and worry, days spent staring blurry-eyed at a computer screen, searching for one ordinance or state law that would stop the drilling — but Cole resolved to continue.
Not for her, but for her two boys.
“If this is where I’m called,” she said, “this is what I have to do.”
Many residents who never before felt a call to activism have been thrust to the front lines of the Barnett Shale fight. Kathy Chruscielski became concerned about her own well water when a southwestward flank of drilling rigs marched into Parker County two years ago.
After researching both hydraulic fracturing and underground injection disposal, she was asked by neighbors what she’d learned and where she’d learned it. She didn’t want the leadership role, she said, but people kept turning to her for help and she couldn’t walk away.
Fort Worth artist Don Young was willing to speak to radio, television and newspaper reporters on behalf of many neighbors who were privately alarmed when drilling rigs were set up in the city’s most pristine prairie. He pointed to long-standing problems where drilling began several years before, cautioning Tarrant County residents to look at Wise and Denton counties, likening them to canaries in the coal mine.
In Wise County, Sharon Wilson kept a diary of poor practices she saw around her home on her blog, titled Bluedaze. A Wise County neighbor who’d told her story to the Texas Observer had been threatened, so Wilson said she tried to stay anonymous. But her blog grew increasingly popular — its site meter showing that certain people inside the industry, the Texas Railroad Commission and elsewhere were logging on every day to read what she had to say. Determined, those readers who disagreed with her opinions eventually revealed her identity.
Two months ago, Chruscielski, Wilson and Young joined Dish Mayor Calvin Tillman in a site visit with several staff members of the Oil and Gas Accountability Project. The Colorado nonprofit was visiting Texas to learn more about the impact of urban drilling and, in turn, the other four were learning how to get more action out of state regulators.
OGAP had kept up public pressure until the Colorado Oil and Gas Conservation Commission rewrote rules to better protect human health and the environment — rules that were adopted in December.
OGAP executive director Gwen Lachelt said the group intends to write a manual for other communities trying to get ahead of shale development, including the Fayetteville Shale in Arkansas, the Marcellus Shale in upstate New York and Pennsylvania, the Haynesville Shale in Louisiana, the Woodford Shale in Oklahoma and others.
Yet, like Franz Kafka’s protagonist in The Metamorphosis, local critics are frequently marginalized by the industry, even called names, in an attempt to starve them of their role in the broader conversation.
“We at the Powell Barnett Shale Newsletter try not to pay much attention to radical opponents of urban gas drilling,” managing editor Will Brackett wrote in July. “After all, publicity is exactly what they want and they seem to get plenty of it from the mainstream media, often to our chagrin.”
In the November 2007 issue, Gene Powell, founder of the newsletter, awarded Young his publication’s first Biggest Turkey in the Barnett Shale Award. Young says he can’t remember all the names he’s been called.
In a poignant self-description on her blog, Wilson describes how, in her journey to get the best deal for her mineral rights, she learned how her land would be used — and possibly abused. As she became more vocal, others increasingly marginalized her — until, as she writes, “without changing my core political beliefs, I became known as a radical, far-left lunatic with a political agenda.”
“If you are frustrated, angry, depressed, apathetic, horrified or just generally concerned about natural gas drilling in North Texas, mark your calendar …” Jana DeGrand read the e-mail and chuckled. It was July 30, 2008, and over the past three years she’d felt most of those emotions.
The e-mail invited DeGrand to the “Just Say Whoa!” rally in Fort Worth organized by the Coalition for a Reformed Drilling Ordinance. It came by way of Don Young.
DeGrand, whose neighborhood ordeal had consumed so much of her time, was ready to branch out.
“Don,” she replied. “I do feel that it is past time for communities across Texas to unite their efforts to reform this out of control industry. Has anyone looked into joining forces? I am willing to help.”
For a while, the industry appeared ready to answer some of the nagging doubts first articulated by opponents of urban drilling. Devon, Chesapeake and others formed the Barnett Shale Energy Education Council, which provides basic information on its Web site, www.bseec.org.
This year, Chesapeake Energy also published and distributed a glossy, 72-page magazine about the shale. The company rolled out an intensive campaign of television and billboard advertisements in the spring, admonishing residents to “get behind the Barnett Shale.” The campaign has since scaled back, amid news reports that actor Tommy Lee Jones was no longer participating. After hiring local news anchor Tracy Rowlett and trumpeting its planned Shale.tv, Chesapeake abruptly abandoned its plans for the Web-only broadcast, citing budget concerns. The concept lost its backing before any segment ever aired.
Although Jana DeGrand continued to follow happenings in the industry, she didn’t lose sight of her main objective: stopping the well in her neighborhood. She and Jennifer Cole continued digging, poring through deeds, contracts, anything they could use to thwart Carrizo’s bid for drilling permits. “The whole neighborhood — they’ve spoiled us,” said Cynthia Greer, another Britt Drive neighbor. “They have done so much research. So much research.”
DeGrand tried all kinds of ways to stop the drilling. In May, she’d sent a letter to four neighborhood mineral owners whose leases were expiring, urging them not to sign extensions. “Signing bonuses now range from $3,000 to more than $20,000 per acre,” she wrote. “It would be mutually beneficial to all of us if we work together.” She later explained the letter as an appeal to the recipients’ greed, in order for her to buy more time.
Later, DeGrand noticed that Carrizo’s state permit application listed the Whitespot well, named for landowners Steve and Vanessa White, as a single lease. In fact, the site was a pooled unit, comprising multiple leases, and the company had failed to submit plans showing unpooled and unleased mineral interests. The Texas Railroad Commission, which had issued a drilling permit in July, revoked it Oct. 3 after the company failed to amend its plans on time.
Later that month, DeGrand claimed in a letter to a railroad commission attorney that most of the mineral leases associated with Whitespot had expired. What’s more, she wrote, many of those who had signed might not want to renew. The man who had secured many of the leases, Jerry Pratt, was in court defending his business methods.
A one-time business partner, Robert Dunlap of Fort Worth, sued Pratt in October 2006, claiming Pratt had violated the terms of their partnership by not disclosing all of his dealings, withholding certain financial records and failing to reimburse Dunlap’s investment. Dunlap also alleged that Pratt’s many business aliases — NASA Energy Corp., NASA Energy Co., NASA Exploration Co., Command Capital Corp., Royalty Reserve Corp. — were a “sham,” saying in the lawsuit that Pratt ran all of the businesses from his Lantana home. Pratt settled the case this October, agreeing to pay Dunlap $700,000.
An attorney for Pratt, Eric C. Freeby of the Fort Worth law firm Brown Pruitt Peterson & Wambsganss P.C., declined to comment on the case. But in a letter to the railroad commission, Freeby said the lawsuit was “of no consequence” to the Whitespot permit and called DeGrand’s allegations unfounded.
Not long after sending the letter invoking Dunlap’s lawsuit, DeGrand received a letter from another of Pratt’s attorneys. Pratt would sue, the letter said, if she did not “cease and desist” all communications regarding him.
Known as a “strategic lawsuit against public participation,” a SLAPP suit is meant to intimidate, exhaust and silence critics. Widely considered an affront to the First Amendment, 26 states and one U.S. territory have adopted some kind of statutory protection against SLAPP suits. Courts in two other states also adopted such protections. Texas is not among them, as Oprah Winfrey learned after criticizing the Texas beef industry.
Although Carrizo often faces opposition to urban drilling, the Britt Drive neighbors’ level of intervention is unusual, company spokesman Michael Grimes said. Efforts to reach out to the neighbors have foundered — a reality Grimes partly blamed on the tumult preceding Carrizo’s involvement.
“Carrizo inherited the circumstances there,” he said. “In other places, we’ve been able to work through these issues.”
As officials in Austin considered Carrizo’s permit for the Whitespot well, Denton city officials worked to process the company’s application for a gas well plat, which showed the potential for four wells on the pad site. On Nov. 4, the Britt Drive neighbors made a final appeal to the City Council to deny the company’s plans.
Since they first spoke before the council in September 2006, many key officials had turned over, including the mayor, the city manager, the planning and development director and Ed Snyder, the city attorney who initiated the Reichmann lawsuit. Most critically to the neighbors, Quentin Hix had left his job as the city’s gas well inspector in April 2007 to manage the town of Copper Canyon. Denton never filled Hix’s position, choosing instead to shift his duties to the fire marshal’s office and other city departments. The change left the city without a coordinator for the departments that deal with gas drilling.
To Jennifer Cole, Hix stood alone among all the government representatives she and Jana DeGrand had appealed to. He was the one who listened, who at least tried to enforce the rules. Without him, she felt like the momentum for their cause had vanished. “It’s like starting the process over,” she said.
Despite their pleas, the city did not demand a water flow study. City planner Chuck Russell, who was handling the case, told the Coles that the law didn’t require one because the pad site was outside of a flood plain. An engineering review predicted that rainwater runoff would be “minimal” from the site because workers had added a compost berm and reserve pits.
Months before, Russell had reviewed Carrizo’s application and expressed concern about the wells’ proximity to homes. The application shows multiple houses within a 500-foot radius, including the Whites’, which is about 300 feet from the closest wellhead. But the city could not legally enforce its 500-foot setback rule in the subdivision, which is outside the city limits and only loosely falls under Denton’s jurisdiction, Russell said.
After subjecting Carrizo’s application to two rounds of review, the city approved the company’s plans Nov. 14. Now only state approval stood in Carrizo’s path.
DeGrand could only express her dismay. “Obviously,” she wrote Russell, “there is a complete lack of concern for the health and safety of our neighborhood.”
Steve White stood on the edge of a gaping pit, skipping stones across shallow water left over from the last rainstorm. The rectangular crater, which consumes the center of White’s 12-acre home site, was supposed to be gone months ago, replaced by horse stables, a barn and freshly planted trees. That was the plan, anyway, before his neighbors on Britt Drive interfered.
The pit was a temporary evil, set up to collect sludge from a gas well White thought would be drilled long before he moved his family into a custom-built home here just before Christmas 2007. Now, a year later, the well still isn’t drilled. “This has taken way longer than it should have,” he said, scanning the landscape for another stone to chuck.
To White, the neighbors’ talk of flooding is unfounded. His property is the one with a berm and detention pond. If anyone’s land is likely to flood, he said, it’s his.
His wife, Vanessa, sees her neighbors as well-meaning but misinformed. “It’s easier for them to think of us as the evil people on the hill and not get to know us for who we are,” she said. In her view, the delays in drilling only made matters worse for everyone. Each holdup allowed the dispute to fester like an open sore.
Vanessa White envisions a time when the well is drilled, the workers are gone and grass is budding where the gravelly pad once stood — a time when emotions are no longer raw and she can invite her neighbors over for a crawfish boil. In her dream, the neighbors are all friends willing to write off the past three years. “Wow,” they might say, shaking their heads, grinning, she says. “What a crummy way to get to know each other.”
Steve White isn’t so sure. He cuts off talk of a crawfish boil with a curt “Maybe.”
Gene and Jennifer Cole, mindful of the well that seemed ever more likely to drill behind them, put their home up for sale this year. People liked the house, but the pad site was a deal-breaker. They took it off the market after 30 days. “It hasn’t even drilled, and there’s still a stigma,” Jennifer Cole said. Still, the couple plans to find somewhere else to live temporarily during the drilling. They won’t have their two boys so close to it.
For the DeGrands, it’s hard to even think about moving. Everything about their home reminds them of family.
Aaron, their eldest son, died in a car wreck in January 2006. Darrin’s father, “Papa” Charlie, died nine months later.
Both were there alongside Jana and Darrin, clearing brush from their acre site when they bought it 12 years ago.
The neighbors struggle to come to terms with the thought that their efforts may be in vain. Jana DeGrand has talked about starting a Web site to share the things she’s learned, one that would save people hours of legwork and give them a sense of direction in their own battles with backyard gas wells. “But sadly,” she said, “even with that information I can’t say that it will help them.”
The ordeal has darkened Jennifer Cole’s views of the institutions she thought would protect her. She feels naive to have ever thought that she, a housewife and PTA volunteer, could beat back the gas industry, she said. Recently, a friend lamented about landowners not bothering to research their rights. “Maybe they don’t care,” Cole said, “because it doesn’t make a difference.”
At times, Cole seems resigned to the well’s arrival. After three years of prayer, of writing to her elected officials, of digging for a silver-bullet ordinance, she’s done all she knows to do.
There is no one left to appeal to.
There is nowhere else to go.
Postscript
Carrizo’s drilling permit for Whitespot remained pending Wednesday.
According to railroad commission spokeswoman Ramona Nye, the commission is asking the company to clarify which tracts are part of the pooled unit and to what extent, if any, the tracts are not leased. “Carrizo has responded to this request in part,” Nye said by e-mail.
“If Carrizo can provide some additional information required by the commission, the permit may be approved administratively, and no hearing would occur. If these issues cannot be resolved administratively, then a hearing would be required.”
LOWELL BROWN can be reached at 940-566-6882. His e-mail address is lmbrown@dentonrc.com.
PEGGY HEINKEL-WOLFE can be reached at 940-566-6881. Her e-mail address is pheinkel-wolfe@dentonrc.com.
BEHIND THE SHALE: A story of urban drilling
Chapter 1: Neighbors along Britt Drive are approached by land men eager to drill in the Barnett Shale. Some are wary of the impact on their quality of life and question whether the amount of money offered is worth it.
Chapter 2: Urban drilling means these rough-and-tumble workplaces are closer to homes than ever. But its boom-or-bust nature creates a psychosocial environment for the Britt Drive neighborhood that fosters distrust of both sides.
Chapter 3: Cities are trying to preserve their authority to make rules for health, safety and welfare, but the industry is pushing back. Britt Drive neighbors watch one such battle unfold in their backyard.
Chapter 4: A doctrine of exemption allows the industry to develop oil and gas resources without having to study the environmental or health impacts of their work. Britt Drive neighbors worry about how drilling would affect their environment.
Chapter 5: Industry insiders sometimes marginalize gas drilling opponents, but the conversation about where to draw the line in urban drilling persists. The Britt Drive neighbors’ quest to keep drillers away grows increasingly desperate.
Voicing the silence (4/5)
By Peggy Heinkel-Wolfe and Lowell Brown
Denton Record-Chronicle
December 31, 2008
EDITOR’S NOTE: Behind the Shale is a five-part series exploring urban gas drilling and one Argyle-area neighborhood’s struggle against it.
Observations, studies show subtle, long-term effects of gas drilling
For a while, Kim Couch thought her children hadn’t noticed the effect of the natural gas drilling in their neighborhood along Britt Drive.
“You think they are just in their own little world, running around and carefree,” Couch said.
Her view changed when television news cameras descended on their Argyle-area neighborhood after the first well was drilled three years ago. Couch realized that she was the one running from home to car, busy with her life and unaware of the profound changes that had come to their neighborhood. Her 10-year-old daughter, Kristen, surprised her when she answered a question about what had changed the most.
“It’s like it scared all the birds away,” Kristen said. “I can’t hear the birds sing anymore.”
Forty-six years ago, biologist Rachel Carson opened her monumental book Silent Spring with the fable of a small town ravaged by the indiscriminate use of chemical pesticides. Historians credit the best-seller with inspiring both the modern environmental movement and President John F. Kennedy, who, in response, convened a scientific commission that would become the Environmental Protection Agency.
Carson cautioned readers that her fable was not true. No single community had suffered such an aggregate of losses. However, each loss — stream banks lined with dead fish, plagues of insects bursting forth and then dying, skeletal trees and their understory silent of birdsong — had occurred somewhere in the world.
Since 2005, some residents of Britt Drive have been fighting Whitespot, a proposed gas well planned for less than 250 feet from the back door of one home on their street.
For neighbors Jennifer Cole and Jana DeGrand, the cause became a full-time job. They check in with each other almost daily, keeping track of not only developments in their own neighborhood but also developments of the urban drilling paradigm.
Each new revelation of how the oil and gas industry is regulated, as well as the short-term and long-term impacts of drilling, convinced the two women that, despite pledges by the industry to be “good neighbors,” a high-pressure gas well, condensate tanks and pipelines don’t make good neighbors.
Since Carson’s book was published in 1962, a host of federal statutes have been passed to protect the public health by ensuring clean air and water, including the Clean Air Act of 1963; the Clean Water Act of 1972; the Safe Drinking Water Act of 1974; the Resource Conservation and Recovery Act of 1976; the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, known as “Superfund”; and the Emergency Planning and Community Right to Know Act of 1986, known as the Toxics Release Inventory.
Industry lobbyists made sure oil and gas exploration and production were exempted from key provisions in all of them (I).
And prior to the Barnett Shale boom, the industry also sought and received exemptions for hydraulic fracturing — the process that pumps sand, water and chemicals to crack layers of rock, releasing the gas (II).
The oil and gas industry, which generated a total production value of $65 billion in Texas for 2007, is considered among the state’s top moneymakers, pumping funds into the economy and creating an estimated 226,000 jobs, according to the Texas Alliance of Energy Producers.
Oil and gas exploration and employment comprises about 10 percent to 12 percent of the state’s economy and is estimated to account for more than 20 percent of all state taxes.
The estimated number of drilling permits for oil and gas wells issued statewide for the year as of October 2008 is estimated at 21,330, up 26.7 percent from the same time last year.
But with the economy slowing, many drillers are idling their drilling rigs.
A Baker Hughes report this month showed 646 active rigs in Texas last week. That was down 15 from just the week before.
With the economic outlook for 2009 indicating a continued downturn nationwide, the oil and gas industry could continue to see a mixed forecast with the question of consumer demand.
The up-and-down projections could cause a slowdown — a slowdown that might provide additional time for a closer review of regulations surrounding the urban drilling paradigm.
Barnett Shale producers point to oversight by the Texas Railroad Commission as sufficient (III). Even their permit fees pay, in part, to a shared cleanup fund for operations that go belly-up.
But a crescendo of criticism — including last year’s finding by the State Auditor’s Office that the Texas Railroad Commission failed to do basic, routine inspections — suggests some troubles may be a repetitious riff of history (IV).
At the beginning of the 20th century, the Texas Legislature authorized the Texas Railroad Commission to regulate oil and gas development.
The move came with the erratic development of the oil fields around Burkburnett in the 1910s and 1920s, which had triggered colossal waste of the oil and huge economic losses.
It took years for the agency to develop a working relationship with the industry, but its weak regulatory muscles barely survived the East Texas oil boom of the 1930s.
At one point, Gov. Ross Sterling sent in the National Guard to restore order (V).
While the latest paradigm shift covers a vast, urban drilling landscape, the railroad commissioners continue to view their public mission as one of conservation — not of ecology, but of economy for the state’s oil and gas reserves.
In December 2007, an appeals court judge ruled that the railroad commission did not consider the public interest when it permitted an injection well in a Wise County neighborhood.
Since the court’s decision, the railroad commission has not written any new rules or policies to address the public interest. Instead, the railroad commission, with industry backing, petitioned the Texas Supreme Court to consider the case, which remains pending.
Before the boom, the railroad commission permitted just 75 new gas wells in 1999. More than 14,800 Barnett Shale wells have been permitted since then. In September, the commissioners, noting that the agency was buckling under the workload, redirected about $750,000 of the cleanup money to hire more people.
The money functions like a mini “Superfund,” cleaning up and plugging abandoned oil and gas wells.
Because of the commission’s weak regulatory history, previously unmapped wells are still being discovered, sometimes plugged with everything from dirt and rocks to old oil field equipment.
Those wells become underground pathways for pollution when operators are working nearby, either drilling for more oil and gas or disposing of their production waste. The migrating saltwater and hydrocarbons cause a host of environmental problems, complicating the operation of active wells around them and contaminating drinking water supplies (VI).
Perhaps the biggest potential threat of that migration comes from the underground disposal of production waste.
The Texas Railroad Commission has the largest inventory of injection wells in the nation (VII). And nearly 60 percent of the state still relies on groundwater sources for drinking water (VIII). The same process that makes groundwater safe to drink — its slow movement through rocks and sand — also makes it nearly impossible to clean once it’s contaminated (IX).
Local EPA scientists Philip Dellinger and Ray Leissner watch over the railroad commission’s regulation of more than 50,700 injection wells. Their evaluation notes each year a small but persistent level of non-compliance by some operators, as well as some catastrophic failures.
Wise County residents predicted one such failure of a proposed injection well near Chico when protesting its permit. The railroad commission allowed Hydro-FX to inject until Devon Energy reported problems at a nearby production well in early 2007. That failure followed a string of shallow injection well failures in Wise County, often reported to the agency by others.
The railroad commission has 83 inspectors, one for every 3,259 of the 270,526 active wells in the state. Although the railroad commission closed the well until Hydro-FX fixed the problem, the failure prompted an intervention by the EPA scientists concerned about drinking water supplies in Wise County (X).
Railroad commission inspectors recently closed injection wells in Parker (XI) and Wise (XII) counties after nearby residents reported failures.
In December 2007, they closed a well in Greenwood after a resident filed a complaint just weeks after another inspector gave the site a passing grade.
Railroad commission spokeswoman Ramona Nye said that operators sometimes have problems that come up after the inspection. However, after this incident, the local office decided to assign one inspector just to disposal wells, and this has increased compliance, Nye said.
Dellinger and Leissner have pressed the railroad commission to stop permitting shallow injection wells for Barnett Shale wastes, insisting that the program would be safer if drilling waste is disposed at least 8,000 feet below the surface.
“We prefer they dispose into the Ellenburger Formation,” Dellinger said. The Ellenburger, a porous limestone layer saturated with salty water, lies below the shale, locked in by the impermeable Viola Formation.
But the federal agency has not launched a full-court press for another rule change, one that would widen the area of review.
Currently, operators can calculate for quantities and pressure based on quarter-mile radius, even though a group of EPA scientists found that injected waste — once it escapes its confinement zone — has traveled up to a mile away (XIII).
U.S. public health officials have depended on the broad rules of the Clean Air Act and the Clean Water Act to protect human health for many years, according to Dr. Roxana Witter of the Colorado School of Public Health. But the shift to urban drilling means the rules of the game have changed.
Witter and her colleagues recently published a research study and a white paper on the human health effects of oil and gas development.
Their study, which was a review of all relevant medical studies and funded by the National Resources Defense Council, found that people living in active drilling fields could be at risk for a host of adverse health effects, from reproductive and neurological problems to cancer as well as psycho-social ills.
Accustomed to dealing with human health in relation to mining in other countries, the World Health Organization advocates that regulators use health impact assessments to address risk (XIV).
This month, Colorado adopted new rules requiring the industry to consider risks to human health and wildlife before drilling in sensitive areas.
While more research is needed to assess those risks, Witter said volatile organic compounds churned into the atmosphere by the industry present risks that are well-known.
The Powder River Basin in Wyoming has a smog problem, not because of traffic, but because of intensive natural gas mining.
A new Southern Methodist University study found gas drilling and production in the Barnett Shale to be a significant source of air pollution, much greater than generated at area airports and by motor vehicles.
By 2009, residents can expect 620 tons of smog-forming compounds each day from the Barnett Shale, including 33 tons per day of toxic compounds like benzene and formaldehyde and 33,000 equivalent tons of greenhouse gases — all produced in order to mine and process clean-burning natural gas (XV).
As it bounced back from near extinction, the American bald eagle did not have nearly the public relations problem as some of Earth’s creatures have had in the political arena. Skeptics trot out the spotted owl, or the blind salamander, or the banana slug, for example, to get an easy laugh at environmentalists’ expense.
The soil, teeming with tiny life-forms, may be the least understood of Earth’s life-sustaining gifts. The soil nourishes and nurtures, particularly when fed with decaying organic matter.
But decaying inorganic materials are another matter. Radium-226 and radium-228 are the most likely radioactive daughters to stow away with natural gas and its condensate as it comes up the hole. And once allowed to contaminate the soil, they begin their deadly decay (XVI).
Jennifer Cole’s husband, Gene, with his crisp shirts, pressed pants and hair meticulously gelled and combed, fussed about the dirt in his pool from the gas pad behind his home strongly enough that the drilling company paid someone to come clean it out for him and his family.
But once the gas well is in, Gene Cole says he knows, deep down, that dirt settling at the bottom of his pool is the least of his problems.
LOWELL BROWN can be reached at 940-566-6882. His e-mail address is lmbrown@dentonrc.com.
PEGGY HEINKEL-WOLFE can be reached at 940-566-6881. Her e-mail address is pheinkel-wolfe@dentonrc.com.
FOR REFERENCE
I. “Exemption of Oil and Gas Exploration and Production Wastes from Federal Hazardous Waste Regulations,” a publication of the Environmental Protection Agency; and “Oil and Gas at Your Door? A Landowner’s Guide to Oil and Gas Development,” 2nd edition. Durango, Colo.: Oil and Gas Accountability Project, 2004.
II. “Evaluation of Impacts to Underground Sources June 2004 of Drinking Water by Hydraulic Fracturing of Coalbed Methane Reservoirs,” June 2004, EPA (Environmental Protection Agency) 816-R-04-003, www.epa.gov/OGWDW/uic/wells_coalbedmethanestudy.html.
III. Carrillo, Victor. “Riding the Shale Road,” in The Barnett Shale: The Official Magazine of Thriving on the Shale, published by Chesapeake Energy, summer 2008.
IV. Keel, John. “Inspection and Enforcement Activities in the Field Operations Section of the Railroad Commission,”Austin: State Auditor’s Office, August 2007.
V. Childs, William. “The Texas Railroad Commission: Understanding Regulation in America to the Mid-Twentieth Century,” College Station: Texas A&M University Press, 2005.
VI. “Drinking Water: Safeguards are not preventing contamination from injected oil and gas wastes,” General Accounting Office Report, July 1989.
VII. FY 2007 EPA Region 6 End-of-Year Evaluation of the Railroad Commission of Texas (RRC) Underground Injection Control (UIC) Program, Sept. 1, 2006–August 31, 2007.
VIII. Texas Water Development Board, Groundwater Resources Division, www.twdb.state.tx.us/GwRD/pages/gwrdindex.html.
IX. Ibid., “Drinking Water,” July 1989.
X. Ibid., FY 2007 EPA Region 6 End-of-Year Evaluation.
XI. Lee, Mike. “Saltwater disposal well shut down for spills, leaks,” in Fort Worth Star-Telegram, Oct. 31, 2008.
XII. Evans, Brandon. “Injection Well Shut Down,” in the Wise County Messenger, March 13, 2007.
XIII. “Does a fixed radius area of review meet the statutory mandate and regulatory requirements of being protective of USDWs (underground drinking water)?” Environmental Protection Agency, Region 10, Nov. 5, 2004.
XIV. Witter, Roxana, et al. “Potential Exposure-Related Human Health Effects of Oil and Gas Development: A White Paper.” Denver: Colorado School of Public Health, 2008; Witter, Roxana, et al. “Potential Exposure-Related Human Health Effects of Oil and Gas Development: A Literature Review (2003-2008).” Denver: Colorado School of Public Health, 2008
XV. Armendariz, Al. “Emissions from Natural Gas Production in the Barnett Shale Area and Opportunities for Cost-Effective Improvements: a peer-reviewed report.” Austin: The Environmental Defense Fund, 2008.
XVI. Otton, James K. et al. Effects of produced waters at oilfield production sites on the Osage Indian Reservation, northeastern Oklahoma, U.S. Geological Survey, open file report 97-28.
BEHIND THE SHALE: A story of urban drilling
Chapter 1: Neighbors along Britt Drive are approached by land men eager to drill in the Barnett Shale. Some are wary of the impact on their quality of life and question whether the amount of money offered is worth it.
Chapter 2: Urban drilling means these rough-and-tumble workplaces are closer to homes than ever. But its boom-or-bust nature creates a psychosocial environment for the Britt Drive neighborhood that fosters distrust of both sides.
Chapter 3: Cities are trying to preserve their authority to make rules for health, safety and welfare, but the industry is pushing back. Britt Drive neighbors watch one such battle unfold in their backyard.
Chapter 4: A doctrine of exemption allows the industry to develop oil and gas resources without having to study the environmental or health impacts of their work. Britt Drive neighbors worry about how drilling would affect their environment.
Chapter 5: Industry insiders sometimes marginalize gas drilling opponents, but the conversation about where to draw the line in urban drilling persists. The Britt Drive neighbors’ quest to keep drillers away grows increasingly desperate.
December 30, 2008
Culture clash (3/5)
By Lowell Brown and Peggy Heinkel-Wolfe
Denton Record-Chronicle
December 30, 2008
EDITOR’S NOTE: Behind the Shale is a five-part series exploring urban gas drilling and one Argyle-area neighborhood’s struggle against it.
Texas in tug-of-war between valuable resources underground and the people who live above
Gene and Jennifer Cole stood in the backyard of their Argyle-area home, staring up at the mountain of rocks behind their fence, and then turned to a stranger in a black pickup.
“What’s the problem?” the stranger asked.
It was not a simple question. For months, the Coles and their next-door neighbors, Jana and Darrin DeGrand, had fought a gas company’s plan to dig a gas well from the dirt-and-rock plateau where the stranger stood. They had a problem with how the pad site, more than 6 feet tall, could change the flow of rainwater in their flood-sensitive neighborhood. They had a problem with the recent explosions at other North Texas rigs. They had other problems, too, but the man’s tone on that day in 2006 made them think he wasn’t interested in hearing them.
The stranger was Tom McMurray, a Denton County lawyer working with an energy company to get a rig in the ground. Because of the Coles and DeGrands, McMurray’s work had been a headache. The city of Denton cited the energy company with code violations, and the neighbors’ griping attracted media attention. When McMurray drove up, the Coles and Jana DeGrand were talking with a company engineer about how to ease their flooding concerns. The tension rose as their gaze fixed on McMurray.
“Well,” Gene Cole answered, “you’re moving so much dirt that I’m afraid that it’s going to push over into my pool.” McMurray tried talking about mineral rights with the neighbors, but the tension was so thick, he gave up.
“Welcome to Texas, Mr. Cole,” McMurray said.
For more than 100 years, the relationship between Texas landowners and the energy companies had been cordial. Even though both pay the same taxes, Texas laws have always favored the mineral interest over the surface, particularly when the property rights are severed. But the Barnett Shale’s urban drilling paradigm has wrought a Texas-sized culture clash over the rights of property owners, their neighbors and corporations.
“Where do you draw the line?” McMurray said in an interview. “That’s being debated around kitchen tables all around the Barnett Shale.”
 Shari Skaggs, left, Jana DeGrand and Jennifer Cole, pictured in July 2006, helped organize their neighbors to urge the city of Denton to enforce its gas drilling rules in their neighborhood, which lies between Denton and Argyle. One proposed gas well is within 300 feet of the homes of DeGrand and Cole. (DRC file photo/Gary Payne) |
And all around its government board rooms. For want of better regulation, cities have been drawing lots of lines, in part because the Texas Railroad Commission persists in saying it satisfies its duty to the public interest by conserving the state’s oil and gas resources.
After well explosions in Brad in 2005 and Forest Hill in 2006, some cities increased their “setback rules.” Many required somewhere between 300 and 600 feet between wells and homes or other buildings. Some city councils, otherwise poised to require longer distances, buckled as mineral owners threatened to sue for taking their property rights. But several cities upped the requirement to 1,000 feet between a well and a home or building — 250 feet more than the width of the burning crater in Brad.
As other issues emerged — crushed roads and collapsed bridges; roaring compressors and obnoxious fumes; multiple, redundant pipelines that rendered prime, developable property useless — cities sought more rules to protect the health, safety and welfare of their residents.
After workers began moving dirt behind their homes on Britt Drive between Denton and Argyle, Jana DeGrand and Jennifer Cole quickly learned that the railroad commission would offer them little help. The commission has no setback requirement (I).
City setback rules don’t apply in unincorporated areas like Briarcreek Estates, the subdivision where the two families call home. In fact, the well pad site, now known as Whitespot for landowners Steve and Vanessa White, would be illegal in both Denton and Argyle without affected landowners’ permission because the Coles’ home is within 250 feet. Outside city limits, people are generally at the drillers’ mercy — a discovery that incensed the Briarcreek neighbors.
“Our lives and our safety are not any less valuable because we don’t live in a corporate limit,” Jana DeGrand said.
State law offered one glimmer of hope. Jana DeGrand learned that cities are charged — in limited cases — with protecting the safety of residents in their “extraterritorial jurisdiction,” areas just outside city limits. After several phone calls, she and Jennifer Cole learned their neighborhood fell under Denton’s jurisdiction. Better yet, Denton’s gas well inspector agreed to investigate their concerns.
“It was like the heavens opened,” Jennifer Cole said.
Quentin Hix joined the city of Denton staff in 2002, ready to help with the city’s new gas drilling rules. As a former 13-year employee of Lone Star Gas Co., now Atmos Energy, with a degree in city management, Hix was uniquely suited for the job of gas well inspector. City rules required all drillers, even those in the extraterritorial jurisdiction, to turn in their plans for review. Some drillers skipped this step — whether out of ignorance or arrogance, Hix wasn’t sure — but he’d never seen one refuse to comply after he sent out a violation notice.
In December 2005, at Jennifer Cole’s request, Hix inspected the Whitespot well site and found violations. Reichmann Petroleum of Grapevine hadn’t filed any plans, and Hix ordered the work stopped until they were turned over and approved. By month’s end, Hix discovered the company had drilled five other gas wells, bypassing city rules for erosion control, drainage, security and well maintenance. Reichmann had also failed to get the required development permits from Denton County for the same sites. The city had no idea where pipelines were being installed, meaning anyone with a backhoe, including city utility workers, might rupture them and spark an explosion.
In a Dec. 28 letter to Reichmann, Hix threatened “further enforcement action” if the company didn’t comply.
It wasn’t Hix’s first run-in with Reichmann. In early 2005, the company took over a well north of Country Club Road. Hix inspected the site and found violations. Reichmann then started on another well before it abruptly abandoned the platting process.
As Hix learned, Reichmann had a pattern of perplexing government regulators.
Reichmann started as Richman Petroleum Corp. in 1994, a creation of Dyke R. Ferrell and F. Erik Doughty. By 2006, as the company’s fight with Denton and the Britt Drive neighbors escalated, the railroad commission had fined the company twice for state drilling violations, and had five more enforcement cases pending in various counties.
“A good operator shouldn’t have any [cases] go to enforcement,” railroad commission spokeswoman Stacie Fowler said, “because we do try to give an operator an opportunity to come into compliance with our rules.”
In 2006, as spring gave way to summer, Denton leaders faced a crossroads. Reichmann questioned their power to enforce drilling rules outside the city limits, but city leaders believed state law was on their side. Sensing an impasse, the city sued Reichmann in state district court, saying the company’s refusal to follow city rules at seven pad sites was threatening public safety. “If they’re not willing to voluntarily comply, we have no choice but to take action to force them to comply,” City Attorney Ed Snyder said of the unprecedented lawsuit.
Reichmann executives wouldn’t say much publicly, but they denied the city’s claims.
Meanwhile, Whitespot sat silent. A wood fence, roughly 8 feet tall, now separated it from Jennifer Cole’s backyard. In mid-July 2006, she told a visitor she hadn’t seen a worker there in weeks. The pressure, she said, was starting to pay off. Besides contacting the gas well inspector, she and her neighbors also sent a petition with nearly three dozen signatures to the City Council warning that failure to crack down on Reichmann’s code violations would embolden other drillers.
The neighbors scored another concession when Hix said he would require a water-flow study for Whitespot. His inspections convinced him that the dirt work had changed the runoff. Not long after the pad site went up, a 2-inch rainfall left a stream of ankle-deep water between the Cole and DeGrand homes, Jana DeGrand recalled. The volume was unusual for that amount of rain, she said.
In late September 2006, the neighbors heard that Reichmann planned to settle the lawsuit out of court. On Sept. 25, the company filed maps for most of its sites, but not for Whitespot. Company officials told the city they weren’t sure what was required. “That leaves us flapping in the wind on the one that’s the biggest issue right now,” Hix vented.
The move also left city leaders unsure of how to handle the pending lawsuit. Snyder, the city attorney, said he still wanted to send a message to other drillers to ignore the rules at their peril.
Still, the neighbors sensed that Reichmann was slowly slipping off the hook.
Since construction on the pad site started in late 2005, landowners Steve and Vanessa White had experienced their own frustrations. Steve White told a dirt mover to preserve an ancient oak tree; the man bulldozed it before his eyes, he recalled. The pad site was only supposed to cover 3 acres; workers used 4. And then there was Reichmann. The code violations embarrassed them greatly. It was sloppy, inexcusable, Vanessa White said. But a deal was a deal. “The day you sign your name to that lease is the day you don’t really have any control either,” she said.
At the same time, the Whites believed their neighbors were harassing them. More than once they said they found trash dumped into their yard. Early on, someone apparently cut through the barbed-wire fence on the north end of their land and hauled off dirt in a wheelbarrow. One neighbor kept whacking golf balls into their yard, even after Steve White asked him to stop. Others threw things at their horses, they said.
The Whites believed they hadn’t done anything wrong and sometimes resented the neighbors’ meddling. Neighbors recalled some of the alleged occurrences but doubted the Whites were the targets of concerted harassment.
Any chance to settle the feud vanished on Sept. 26, 2006, when the Britt Drive neighbors went before the Denton City Council to urge the city not to ease pressure on the newly repentant Reichmann. Waiting in their seats to address the council, some of the neighbors blithely suggested suing the Whites, who were seated nearby and overheard the remark. The neighbors later claimed they didn’t know the Whites were there, but the damage was lasting. After the meeting, several neighbors offered to sit down, to talk things out, but the Whites refused. Everyone was too agitated, they thought.
Just before Christmas, Denton city leaders discovered Reichmann had filed for Chapter 11 bankruptcy, throwing the lawsuit into limbo. They’d have to wait until an automatic stay was removed before pressing on, the city attorney said.
Hearing the news, Jennifer Cole worried the bankruptcy would keep the neighbors from resolving their flooding concerns. “I just hope that … they are ultimately held responsible,” she said.
The following spring, the neighborhood’s fears were realized. On April 24, 2007, the heavens opened and relentless rain turned Briar Creek into a churning, rushing torrent, cutting off the neighborhood from Hickory Hill Road for hours. Uphill, the dirt-and-rock plateau for Whitespot helped push the runoff helter-skelter over Britt Drive.
When Renae Lorentz finally got home that night, after the water receded, her Suburban was gone.
Runoff washed the vehicle off her driveway and left it nose down in the creek bed, a jagged tree branch lodged through the windshield where a passenger’s head would be.
LOWELL BROWN can be reached at 940-566-6882. His e-mail address is lmbrown@dentonrc.com.
PEGGY HEINKEL-WOLFE can be reached at 940-566-6881. Her e-mail address is pheinkel-wolfe@dentonrc.com.
FOR REFERENCE
I. Despite a common perception that the Texas Railroad Commission has a 200-foot setback rule, the commission has no setback requirements. However, the misperception may come from a long-standing law in the Texas Government Code, Section 253.005(c), “A well may not be drilled in the thickly settled part of the municipality or within 200 feet of a private residence.”
BEHIND THE SHALE: A story of urban drilling
Chapter 1: Neighbors along Britt Drive are approached by land men eager to drill in the Barnett Shale. Some are wary of the impact on their quality of life and question whether the amount of money offered is worth it.
Chapter 2: Urban drilling means these rough-and-tumble workplaces are closer to homes than ever. But its boom-or-bust nature creates a psychosocial environment for the Britt Drive neighborhood that fosters distrust of both sides.
Chapter 3: Cities are trying to preserve their authority to make rules for health, safety and welfare, but the industry is pushing back. Britt Drive neighbors watch one such battle unfold in their backyard.
Chapter 4: A doctrine of exemption allows the industry to develop oil and gas resources without having to study the environmental or health impacts of their work. Britt Drive neighbors worry about how drilling would affect their environment.
Chapter 5: Industry insiders sometimes marginalize gas drilling opponents, but the conversation about where to draw the line in urban drilling persists. The Britt Drive neighbors’ quest to keep drillers away grows increasingly desperate.
December 29, 2008
Perils afoot (2/5)
By Peggy Heinkel-Wolfe and Lowell Brown
Denton Record-Chronicle
December 29, 2008
EDITOR’S NOTE: Behind the Shale is a five-part series exploring urban gas drilling and one Argyle-area neighborhood’s struggle against it.
Gas boom brings potential dangers closer to homes
Natural gas bubbled from the frostbitten ground around the well for several hours before the earth erupted about 1:45 a.m. on a December morning in 2005, tossing truck-sized boulders into the air. John Ritchie’s land erupted in a grassfire so large that a neighbor thought the sun was coming up over the scrub and cedar trees. A worker sitting in a vehicle nearby watched in horror as flames engulfed him.
Emergency workers scrambled to control the blaze near Brad, in Palo Pinto County, but soon discovered more gas leaking out of fissures in the ground on the other side of U.S. Highway 180. While the worst-case scenario never materialized — more explosions on both sides of a major thoroughfare and a much larger conflagration — the gas-fed fire burned uncontrollably for several days within a 750-foot-wide crater that ranged from 30 to 60 feet deep.
While blowouts and well control problems are uncommon, records with the Texas Railroad Commission show that they have occurred, and continue to occur, in the Barnett Shale.
Most have been in Palo Pinto County and, except for the Brad explosion, no one reported a gas blowout that also resulted in fire or injuries. Stoval Operating lost control of a well on June 18, 2002. Two other operators lost control just before the explosion in Brad. On Sept. 29, Jilpetco had drilling mud blow out and into the reserve pit.
 A Devon Energy worker fell about 90 feet from the top of this drilling platform off Hamilton Drive in Argyle in February 2007. He survived with broken bones. (DRC file photo/Gary Payne) |
A month later, McCown Engineering had a blowout during drilling. Palo Pinto County operators didn’t report any more problems to the commission until April 25, 2007, when Upham Oil & Gas lost control of a well while its employees were adding pipe.
Until December 2005, any problems operators had in this sparsely populated area of the Barnett Shale escaped the attention of city dwellers who still thought of natural gas drilling as a rural enterprise. Telesis Operating Co.’s loss of control in Brad injured only one worker, the man who was sitting in his vehicle at the time of the blast. He suffered only minor flash burns and returned to work that day.
The events coincided with energy companies trying to convince thousands of property owners in the Barnett Shale to sign on to their plans for urban drilling.
Jennifer Cole turned on her television and learned of the destruction in Brad, 100 miles away from her well kept home near Argyle. She gasped. The devastation confirmed her worst fears about urban drilling
For weeks, Cole and her next-door neighbor, Jana DeGrand, had been fighting a gas company’s plan to erect a rig less than 300 feet from their back doors. A bulldozer appeared in the empty lot behind them and started building a pad site, a scant few feet away from their back fences. Worried all the dirt moving would alter runoff in their flood-prone subdivision — an additional concern for the Britt Drive neighborhood — they called and wrote their elected officials but found little help. Government agencies lacked the power or the will to investigate their concerns.
Maybe the explosion in Brad would make a difference, DeGrand recalled thinking. Maybe now people would take her concerns seriously. After all, if the same explosion happened at the pad site behind her, creating the same 750-foot crater, she and her neighbors could be dead.
The effort was becoming a full-time job for DeGrand and Cole, leaving little time for leisure. Cole, a stay-at-home mom, and DeGrand, an event marketer, spent hours online and at the county courthouse, researching deeds, contracts, laws — anything that might help their cause. They also scanned the media for industry news, with each report of lax regulation, explosions or environmental harm hardening their opposition to urban drilling. They wondered if an industry that was accustomed to drilling in pastures should really be trusted in areas with no room for error.
“No one wants to live in fear that when the rig comes in, what if an explosion happens?” Cole said. “What if there is a gas leak? What if there is a blowout? It should not be put in the middle of a neighborhood where the homeowners have these issues to deal with.”
Four months after the Brad explosion, one Fort Worth neighborhood dealt with those very issues. An explosion at a Forest Hill wellhead on April 22, 2006, killed XTO employee Robert Gayan, 49, and forced nearby residents to evacuate their homes.
That incident, as with most other fires and explosions at drilling and disposal sites, tank batteries, pipelines and compression stations, was not the result of a blowout. But the problem underscored the difficult and dangerous work of prying the volatile matter from Earth’s grip and harnessing it into usable energy.
When compared with workers in other industries, oil and gas workers are hurt and killed on the job with disproportionate frequency. According to the Bureau of Labor Statistics from 2003 to 2006, the most recent data available, occupational fatalities occurred at a rate of 4 per 100,000 workers for all workers. Not only are oil and gas workers getting killed on the job at nearly eight times that rate, but the fatality rate has increased since the uptick in exploration and production nationwide: from 30.5 deaths per 100,000 workers in 2003 to 31.9 per 100,000 in 2006 (I). On July 2, 2003, employees of Felderhoff Brothers Drilling were setting up a rig west of Fort Worth when Terry Bressler, 43, was pinned between a housing section and the floor of the drilling rig. The others could only watch as he was crushed and killed (II).
On April 19, 2005, as a Patterson Drilling crew prepared to drill a new horizontal well near Decatur, Tab Stewart Dotson, 46, backed his forklift into the old well. The tire knocked off the well cap, igniting the gas into a flash fire that trapped him inside the cab. Fellow employees of Patterson Drilling extinguished the fire only to watch Dotson die (III).
On July 14, 2006, Charles Mannon, 38, died after falling 90 feet from the top of a Cheyenne Drilling Co. rig in Saginaw. As when Gayan was killed 14 months before in Forest Hill, local media reported that XTO Energy blamed the employee for the accident, claiming that the industry has strict safety procedures (IV).
In addition to a higher risk of dying on the job, oil and gas workers face risk of serious injury or illness at work. From 2003 to 2006, the nationwide incident rates for on-the-job injuries in the mining sector were worst for those involved in drilling, at a rate of 5.3 per 10,000 full-time employees. Those in well-servicing jobs face comparatively less risk, at 3.1 per 10,000, with 2 per 10,000 injured in extraction jobs. However, because of differences in reporting among different labor sectors, comparing oil and gas occupational injury and illness rates with rates in non-mining jobs is meaningless, according to a September 2008 report by the Colorado School of Public Health.
On Feb. 12, 2007, a Devon Energy employee working on a rig between Denton and Argyle fell 90 feet from the top of a drilling rig, a fall that is usually fatal. The employee, who was wearing a hard hat, managed to land on his feet on the metal platform below and survived with broken bones (V).
Argyle Fire Chief Mac Hohenberger noted that whenever paramedics are dispatched to help with injuries at a gas well site, “it’s always pretty bad.”
This physically risky work, born in a fiscally risky environment, foments a rough-and-tumble culture that frequently doesn’t play well to outsiders.
At the beginning of the boom, two employees killed a fellow worker Nov. 25, 2003, in an initiation prank at a rig near Argyle. Teddy Garland and Louis Goodman intended to string Shawn Davis up with a line used to move heavy pipe. Instead, the line became entangled in the machinery, dragging Davis headfirst through a door and slamming him around and around. The men unhooked the line from Davis’ belt, washed off the blood and concocted a story to cover their ill-fated prank. It was all a fluke, they’d told authorities; Davis entangled himself in the chain accidentally.
The next day, a co-worker went to the sheriff’s office and revealed the truth of what happened. At trial, Goodman testified that initiations and horseplay were simply part of the roughneck’s life. Davis “more or less played along with it,” Goodman testified. “He was laughing.”
A jury found Goodman guilty of manslaughter and sentenced him to 18 years behind bars. Four months later, Garland pleaded guilty to the same charge and accepted a five-year prison sentence.
The brutal episode so close to her home haunted the thoughts of Jennifer Cole. She tried not to picture the trailers and drilling equipment arriving just beyond her back fence. Trailers that would fill up with workers. Workers who would know when her husband left for work, when she was alone with her boys. She tried to bat the thoughts away, to believe that she was worrying too much. But they came anyway. What kind of people would do such a thing, she recalled wondering, replaying the details of Davis’ death in her mind. Is that what she should expect from them? These would-be neighbors?
LOWELL BROWN can be reached at 940-566-6882. His e-mail address is lmbrown@dentonrc.com.
PEGGY HEINKEL-WOLFE can be reached at 940-566-6881. Her e-mail address is pheinkel-wolfe@dentonrc.com.
FOR REFERENCE
I. Witter, Roxana, et al. “Potential Exposure-Related Human Health Effects of Oil and Gas Development: A Literature Review (2003-2008),” Denver: Colorado School of Public Health, August 2008.
II. Compiled from Tarrant County Medical Examiner and Occupational Safety and Health Administration records.
III. Compiled from court documents, Dotson vs. Encana Oil & Gas, Cause No. 06-05-357.
IV. Mosier, Jeff. “Gas firm blames worker for blast in Fort Worth,” in The Dallas Morning News, April 26, 2006.
V. Board, Jay. “Man injured in fall from rig in Argyle,” in the Argyle Messenger, Feb. 12, 2007.
RISKY WORK
A Colorado School of Public Health review found that the fatality rate among oil and gas workers was 31.9 per 100,000 workers in 2006. According to another report, differences in reporting among different labor sectors make it meaningless to compare oil and gas occupational injury rates with rates in non-mining jobs.
The Bureau of Labor Statistics released a preliminary analysis of on-the-job fatalities for 2007 in October. The agency will release final numbers for 2007 in April 2009. Listed are fatality rates per 100,000 workers.
TOP 10 MOST DANGEROUS JOBS
1. Fishers and related fishing workers, 111.8
2. Logging workers, 86.4
3. Aircraft pilots and flight engineers, 66.7
4. Structural iron and steel workers, 45.5
5. Farmers and ranchers, 38.4
6. Roofers, 29.4
7. Electrical power line installers and repairers, 29.1
8. Drivers/sales workers and truck drivers, 26.2
9. Refuse and recyclable material collectors, 22.8
10. Police and sheriff’s patrol officers, 21.4
BEHIND THE SHALE: A story of urban drilling
Chapter 1: Neighbors along Britt Drive are approached by land men eager to drill in the Barnett Shale. Some are wary of the impact on their quality of life and question whether the amount of money offered is worth it.
Chapter 2: Urban drilling means these rough-and-tumble workplaces are closer to homes than ever. But its boom-or-bust nature creates a psychosocial environment for the Britt Drive neighborhood that fosters distrust of both sides.
Chapter 3: Cities are trying to preserve their authority to make rules for health, safety and welfare, but the industry is pushing back. Britt Drive neighbors watch one such battle unfold in their backyard.
Chapter 4: A doctrine of exemption allows the industry to develop oil and gas resources without having to study the environmental or health impacts of their work. Britt Drive neighbors worry about how drilling would affect their environment.
Chapter 5: Industry insiders sometimes marginalize gas drilling opponents, but the conversation about where to draw the line in urban drilling persists. The Britt Drive neighbors’ quest to keep drillers away grows increasingly desperate.
December 28, 2008
Eminent dominance (1/5)
By Lowell Brown and Peggy Heinkel-Wolfe
Denton Record-Chronicle
December 28, 2008
EDITOR’S NOTE: Behind the Shale is a five-part series exploring urban gas drilling and one Argyle-area neighborhood’s struggle against it.
Expansion of natural gas industry into Barnett Shale leaves Argyle families little recourse
Jennifer Cole stepped across the parched ground of a North Texas autumn, past her dirt-caked backyard swimming pool, inching closer to a roaring machine. She watched it force its way through the earth, pushing dirt from side to side in waves like an ocean’s tide. Day by day, the bulldozer was remaking the lot behind her home on Britt Drive near Argyle, changing a sloped meadow dotted with oak trees and cattle into a flat and lifeless expanse. She shivered when she thought about what would fill the void.
Since the dirt-moving process began, dust clouds became so thick that her boys couldn’t make sense of them. “Mom, look! A sandstorm,” one said. Her sons didn’t understand why she wouldn’t let them use the pool or play outside after school. She looked down at the pool where a layer of grime clung to the bottom like black frosting, then back to the rolling bulldozer on the other side of the barbed-wire fence.
Cole didn’t know that what was happening behind that fence would consume the next three years of her life. She did know what the bulldozer meant, though. A gas rig was coming. It was Dec. 4, 2005 — a Sunday.
“Sunday,” she said above the roar, “is no day of rest.”
 Jennifer Cole makes bark candy with her boys Jared, 12, left, and Gentry, 9, for a Christmas party. Cole has struggled to maintain a normal home life for her sons amid her neighborhood’s ongoing battle against a pending gas well behind their Argyle-area home. (Denton Record-Chronicle/Barron Ludlum) |
Cole and her neighbors were among many visited that year by energy land men, deal-makers slowly blanketing North Texas after one company proved a decade ago that it could release the “sweet gas” — typically 95 percent methane, with small amounts of ethane and propane — of the Barnett Shale with a sand-and-water fracture.
But the thousands of natural gas wells and miles of high-pressure pipelines unfolding into a massive industrial zone would never be aggregated by government regulators. The latest federal rules continue the practice of exempting oil and gas that began in the 1970s.
In its publications, the Environmental Protection Agency details industry exclusions from federal environmental laws that touch nearly everyone else, from the neighborhood dry cleaner and the horse rancher to the gravel yard and the truck manufacturer.
Texas agencies flex few regulatory muscles over the industry, deferring to the Texas Railroad Commission, which, a century ago, assumed responsibility to maximize oil and gas production, not address the host of concerns that have come with the new urban drilling paradigm — a paradigm where once rural drilling has shifted into the heart of neighborhoods amid cities.
Faced with the eastward march of tank batteries and pipelines, cities of the Barnett Shale began exercising powers granted to them by the Legislature. The energy companies then resisted local rules meant to protect public health and safety, land use planning and economic development by filing a spate of lawsuits in the past year.
Meanwhile, the industry grabbed the biggest hammer in government’s exemption toolbox — the power of eminent domain — by forming their own utility companies. With it, they began connecting their gas wells like a giant dot-to-dot game across lawns and schoolyards.
Oil and natural gas are the decayed remains of organic matter that became trapped under layers of stone and sand long ago, said EPA scientist Philip Dellinger. In the case of the Barnett Shale, that decay took place more than 300 million years ago during the Mississippian Age, and the gas has been trapped ever since. Geologists found outcroppings of the black, organic-rich shale a century ago in San Saba County and named it after John W. Barnett, a settler there.
Some longtime residents knew of the shale’s potential in North Texas. Jana DeGrand, Cole’s next-door neighbor, remembers how her father, a tenant farmer, drilled for water, and natural gas would come up with it.
Energy speculators knew about it, too, but the tight rock held fast to its riches. As late as 1983, a Carrollton energy man resisted the urge to explore in Denton County.
“Every time I get the urge to look for gas, I just lay down until the urge passes,” Doug Durham said to a newspaper reporter then.
But another energy man, George Mitchell, believed decades ago that the shale could be broken. Energy workers speak emotionally, almost reverently, of Mitchell’s determination to unleash 26.7 trillion cubic feet of natural gas (I) bubbling beneath the feet of more than 3 million North Texas residents (II).
Once Mitchell’s company proved the work could be done with a solution that began with cheap, fresh water and sand, the drilling boom began. Thousands of vertical wells were dug between 1999 and 2005, primarily in Wise and western Denton counties.
Improvements in horizontal drilling followed. Operators turned their drill bits through the shale while watching a computer screen, like joy sticks on a video game, capturing gas thousands of feet from the well head and turning modest producers into multimillion-dollar holes.
With horizontal drilling under their command, the industry set its course for the more populated parts of Denton County and the mother lode of Tarrant County, where geologists believed some of the richest deposits lie. One Encana engineer, Jim Kramer, his eyes focused down the well holes as the company worked its way into Tarrant County through Keller, imagined out loud in 2006 about having the entire city of Fort Worth picked up and moved over so the company could drill.
The letters from land men in summer 2005 promised the Coles, the DeGrands and their Britt Drive neighbors a chance to cash in on the North Texas gas boom. Several rigs popped up near their Briarcreek Estates subdivision south of Denton that year — enough for some neighbors to question whether the towers of industry belonged so close by.
Earlier that year, Jana DeGrand and her husband, Darrin DeGrand, were driving home when they encountered a foot of mud on a road leading into the neighborhood. Trucks hauling dirt to a pad site on Fincher Road left a trail of debris, and heavy rains made the road nearly impassable. When the couple finally made it home, they recalled, mud clung to every inch of their car’s undercarriage.
Later, drilling at the same site rattled windows on Britt Drive a quarter-mile away. The noise continued nonstop for weeks. Darrin DeGrand recalled lying in bed at 3 a.m. many times, unable to sleep through the cacophony of mechanical grinding and squealing. His wife finally called the sheriff’s office to complain one day, remembering that a deputy once threatened to fine her daughter for playing her guitar too loudly.
“Can’t they stop between 10 and 6 so we can sleep?” she asked.
No, the answer came. It’s for the greater good.
In November 2005, a state inspector found oil-stained soil at a well site off Hickory Hill Road. Jana DeGrand, whose complaint spurred the inspection, said the stench was overpowering.
So the DeGrands were wary when a Lantana-based energy company started asking the Britt Drive neighbors to lease their mineral rights to allow more drilling in the area. The company, NASA Energy Corp., arranged an evening meeting to convince the neighbors to sign on. Huddled around a conference table inside a Denton bank, nearly a dozen neighbors peppered land man Jerry Pratt with questions.
“What happens if you damage our homes?” Darrin DeGrand asked, worried that vibrations from drilling or seismic testing would damage foundations. Where will the wellhead be? Others wanted to know.
The DeGrands believed that Pratt, who’d brought a jar of fracing sand for show and tell, initially tried to sidestep the questions. Pulling out a map, he pointed to spots where rigs might be. The DeGrands knew one of the spots instantly. It was right behind their house.
A few neighbors accepted Pratt’s offer of a $250 sign-on bonus (later increased to at least $500). But others asked to hold off until the DeGrands could research the matter.
“There’s always one crazy person in the neighborhood,” Darrin DeGrand recalled Pratt saying.
“Well,” he remembered replying, “I guess we’re it.”
Because the Energy Information Administration estimates the average well costs about $1.9 million to drill (III), land men know that acquiring the mineral rights from landowners can be the least expensive part of the deal. But media reports of payouts to landowners for signing the leases show the amounts can be highly variable. Similar to Pratt’s offer to the Britt Drive neighbors, residents of one Fort Worth neighborhood — primarily poor, black and elderly — received $200 checks to sign on the spot, in addition to a 20 percent royalty in 2006 (IV ). Two years later, residents in affluent areas of Johnson and Tarrant counties got more than 50 times that payout, with $25,000 to $30,000 per acre, averaging about $10,000 for each household simply to sign. Their agreements included royalty payments that varied from 25 percent to 25.5 percent (V).
Mineral rights run with the land in Texas, unless a previous owner retained them when selling, or has already leased them. In Dish, near the birth of the Barnett Shale boom, relationship problems between the landowner and the industry are like a family science study. Some landowners remain comfortable in their marriage to the industry as it goes into its second decade. Tiffany Pennington’s family negotiated a deal with Devon Energy that keeps them comfortable, she said, struggling to understand why others complain. Next door, Jim and Judy Caplinger bought their home on land with mineral rights already separated, leaving them without access to the underground riches. When the industry gets hungry — needing additional pipeline access or more land for another well — the couple watch as their nest egg shrivels, sometimes through eminent domain.
Their case is similar to many other families who, until recently, bought land in a Barnett Shale county not knowing that living in Texas, with its laws and rules covering mineral rights, can still pit neighbor against neighbor.
Some landowners negotiate more for the signing bonus than the royalty payout, which can last for three decades or more. One industry analysis found the average Barnett Shale homeowner would net about $775 per year for 30 years (VI). In their negotiations with landowners, energy companies went along with the splashy, upfront payouts for about a year. But after the credit meltdown this September, energy companies, including Chesapeake, Vantage, XTO and Titan, announced publicly that they would no longer be making those news-making payouts (VII).
The Briarcreek Estates subdivision, tucked into the Cross Timbers between Denton and Argyle, winds all the way along the creek that cuts through it, served only by a narrow, curving road off Hickory Hill Road that ends in a cul-de-sac. Britt Drive offers the only entrance and exit to the three dozen families who live in the neighborhood. They flocked here for the large lots — many are an acre or two — and the country feel. Hordes of birds, cardinals, finches and mockingbirds sing from the trees, and raccoons, opossums and armadillos search for food along the creek bed. Neighbors share fruits and vegetables from each other’s gardens and look after each other’s pets when they’re away. They gladly serve iced tea to guests, and strangers driving through are likely to be greeted with a wave and a nod.
Darrin and Jana DeGrand were among the first to build in the neighborhood. In 1996, the couple, with their three children and his parents, grabbed pickaxes and a lawn mower and cleared the acre lot themselves, beating back briars and underbrush. Darrin, a data technician for a telephone company, and Jana, an event marketer, designed the house on their home computer and built much of it themselves.
Gene and Jennifer Cole moved in next door to the DeGrands in 2002. Gene, a manager at a car dealership, and Jennifer, a stay-at-home mom and PTA volunteer, wanted their two young boys to grow up in the Argyle school district.
Like many of their neighbors, the Coles and DeGrands hurried to research their mineral rights once NASA Energy started dangling contracts in 2005. The DeGrands, who own adjoining lots and claim at least partial mineral ownership of one of them, refused to sign, hoping to keep any driller as far away as possible. The Coles dug out their house’s title policy, which shows they own three-fourths of the minerals on their lot, but they quickly learned that meant little.
Denton County lawyer Tom McMurray, who took over the area leases from land man Jerry Pratt, did his own title check and claimed the Coles owned no minerals. McMurray, through his CMC Exploration Co., was working with Grapevine-based Reichmann Petroleum to develop the well site behind the Cole and DeGrand homes. In a letter to the Coles in late 2005, McMurray offered a concession. The landowners decided to erect a wood fence along the property line to cut down on dust and noise and deter children from wandering into the site, he explained. “We do want to be good neighbors while also developing the assets of the mineral owners,” McMurray wrote. “Please understand that we follow the law and instruct our employees to do the same.”
Before the end of 2005, NASA Energy dropped a contract at the Coles’ door despite the disputed mineral rights. It went unsigned. Other neighbors joined the Coles and DeGrands in rejecting the land men’s offers. “We were told that it would work out to about $100 a month [in royalties] if things went really well,” neighbor Shari Skaggs said. “They told us we could get a free trip to Wal-Mart. No thank you. Definitely not worth that.”
The refusals would inconvenience future drillers, but the land men had already secured a deal with the mineral owners who mattered most: Steve and Vanessa White.
The four-wheeler zoomed across the field with a teenage boy and preteen girl behind the wheel. Gene and Jennifer Cole watched them through the barbed-wire fence from their backyard hot tub and waved when they caught the children’s attention. It was the summer of 2005, and the Coles had heard someone bought the 12-acre lot behind their home.
“Did you buy the property?” Gene Cole recalled asking, worried it might become a subdivision.
“Yes,” the children said. “We’re moving from Southlake.”
The Coles were relieved to hear the family planned to build a single house on the land.
Across the field, as their children met the Coles, Steve and Vanessa White sat on the bed of a pickup and popped the cork off a champagne bottle. They’d searched for a rural escape from Southlake and found it here, on an L-shaped lot with a creek running through it and plenty of space for their three kids and 12 horses to roam. “It had a nice marriage of wooded area and pasture for our animals,” Vanessa White recalled. “When we looked at building a home that would be comfortable and enjoyable for our children, it seemed like the optimal spot.”
The Whites said they didn’t buy the land with plans for a gas well, but they consented when the chance arose months later. Vanessa White is the president and chief operating officer of Discovery Geo Corp., an oil and gas exploration company based in Grapevine. Representatives of Reichmann Petroleum, a company with which she once shared office space, approached her about drilling on her family’s lot. The Whites agreed to allow a gas rig on three of their 12 acres. They assumed the drilling would be done by the time their house was built, but said they told the drillers to make the site as safe and unobtrusive as possible for their new neighbors.
Unaware of the Whites’ new plans, the Coles and DeGrands were perplexed, then increasingly alarmed when the bulldozer arrived to level the ground behind their homes. The pad site grew taller by the day. The workers arrived before dawn and left after dusk. Dirt hung in the air like a gritty fog.
As the sloped pasture behind them lost its shape, the neighbors started worrying about flooding. The neighborhood sits on the edge of a flood plain. Rainwater flowed downhill from the land behind them on its way to Briar Creek, which runs through the subdivision. Could the pad site reroute the runoff into our yards and homes? they wondered.
Jana DeGrand and Jennifer Cole called their elected officials to ask for help and were surprised to find little. Their county commissioner, Jim Carter, told them Denton County lacked the authority to get involved. The Texas Commission on Environmental Quality and Federal Emergency Management Agency passed them off to other agencies, they said. Their state senator, Jane Nelson, said they’d have to rely on the Texas Railroad Commission, which oversees the oil and gas industry. The commission’s then-chairwoman, Elizabeth Ames Jones, said she understood their concerns but had “very limited authority” over the location of gas rigs and other drilling equipment. DeGrand vented her frustrations in a column published in The Cross Timbers Gazette that fall. “There are no laws or ordinances in place to protect us,” she wrote.
The neighbors dealt with the stress of the looming problems in different ways. The DeGrands found time to work in their yard or on projects around the house — work that tired the body but enlivened the mind. Some nights, after they got their boys to bed, the Coles would sit on their bed and play Skip-Bo.
 Jennifer Cole wipes away a tear while discussing a gas well that is planned to go up within 250 feet of her home. The prospect of a well so close by is stealing her sense of security, she says. (DRC/Bj Lewis) |
In her darker moments, Jennifer Cole cried out to God to stop the drilling. Then, ashamed by her lack of faith, she repented because she knew her fear wasn’t from God.
“Lord,” she recalled praying instead, “I’m giving this to you. You can protect my children. I can’t.”
LOWELL BROWN can be reached at 940-566-6882. His e-mail address is lmbrown@dentonrc.com.
PEGGY HEINKEL-WOLFE can be reached at 940-566-6881. Her e-mail address is pheinkel-wolfe@dentonrc.com.
FOR REFERENCE
I. According to the U.S. Geological Survey, “Assessment of Undiscovered Oil and Gas Resources of the Bend Arch-Fort Worth Basin Province of North-Central Texas and Southwestern Oklahoma, 2003.”
II. Tabulated from North Central Texas Council of Governments 2008 county population estimates for Denton, Ellis, Erath, Hood, Johnson, Parker, Palo Pinto, Somervell, Tarrant and Wise counties.
III. Energy Information Administration, “Costs of Crude Oil and Natural Gas Wells Drilled, 1960-2006.”
IV. Pillar, Dan. “Leases give boost to an old neighborhood,” in the Fort Worth Star-Telegram, July 1, 2006.
V. Fuquay, Jim. “Lake Worth neighborhoods working on record gas lease,” in the Fort Worth Star-Telegram, Aug. 6, 2008.
VI. Powell, Gene. “OK, How much will my well pay?” in The Barnett Shale: The Official Magazine of Thriving on the Shale, published by Chesapeake Energy, summer 2008.
VII. Fuquay, Jim. “Another big neighborhood group sees its gas leasing put on hold,” in the Fort Worth Star-Telegram, Oct. 21, 2008.
BEHIND THE SHALE: A story of urban drilling
Chapter 1: Neighbors along Britt Drive are approached by land men eager to drill in the Barnett Shale. Some are wary of the impact on their quality of life and question whether the amount of money offered is worth it.
Chapter 2: Urban drilling means these rough-and-tumble workplaces are closer to homes than ever. But its boom-or-bust nature creates a psychosocial environment for the Britt Drive neighborhood that fosters distrust of both sides.
Chapter 3: Cities are trying to preserve their authority to make rules for health, safety and welfare, but the industry is pushing back. Britt Drive neighbors watch one such battle unfold in their backyard.
Chapter 4: A doctrine of exemption allows the industry to develop oil and gas resources without having to study the environmental or health impacts of their work. Britt Drive neighbors worry about how drilling would affect their environment.
Chapter 5: Industry insiders sometimes marginalize gas drilling opponents, but the conversation about where to draw the line in urban drilling persists. The Britt Drive neighbors’ quest to keep drillers away grows increasingly desperate.
December 26, 2008
The Nightmare in Fort Worth
Fort Worth is a city of 700,000 on the west side of the Dallas/Fort Worth Metroplex, with a combined population of over six million. It is sited on the Trinity River, which flows through northeast Texas to the Gulf of Mexico southeast of Houston.
A fort was built here in 1849, one of a line of forts proposed by General Worth to defend US territory from Mexicans and Indians. In Texas and American folklore, this is glorious history, a telling which avoids mention that the land was seized from Indians and Mexicans, and avoids talking about imperialism, arrogance, and racism.
Later cattle drives heading north to railheads in Kansas on the Chisholm Trail passed by Fort Worth. The railroad arrived in 1876, and Fort Worth became "cowtown", a major US stockyard centre. With the consequent economic and population growth, came corruption, crime and violence. The city had arrived.
Barnett Shale
Fast forward to the present. US energy policy and unprecedented energy prices have stimulated an intense North American hunt for more oil and gas. Natural gas is known to be in abundance in the Barnett Shale in north Texas, and also in shales in northeastern BC. Both places have experienced a phenomenal drilling and production boom.
 Click here for larger image. |
Same operators in BC
Wikipedia's entry on the Barnett Shale contains a variety of interesting maps and tables. The table listing the top ten operators shows company names like Devon, Encana and Burlington Resources. No surprise that these companies are also among the top producers in northeastern BC.
 Click here for larger image. |
Not like producing conventional gas
Shale is a more challenging host for natural gas than conventional plays. Production is more expensive and has greater environmental impacts than conventional gas. With conventional gas, gas is retained underground under considerable pressure, and once a well is drilled into the substrate, gas essentially shoots out of the ground. At times, production can be enhanced by stimulation - fracturing the substrate ("fraccing"), a process whereby muds or fluids are forced down the well and into the host geology to break it up and increase the release of the entrapped gas. Fraccing materials are highly suspect by critics of the industry - companies like Halliburton sell patented and secret mixtures of chemicals, in a mix either of diesel or nitrogen. Industry claims it is all benign. But fraccing fluids are toxic, the use of water competes with other water uses, and fraccing can contaminate groundwater.
Fraccing has come into its own with shales, as the shale doesn't give up its gas easily - as with coalbed methane. Nearly continuous fraccing takes place. Of course, this is a dreamy situation for companies like Halliburton. Like a pharmaceutical company getting a society hooked on flu shots or tranquilizers or beta-blockers, our addiction to oil and gas has created a dependency on fraccing fluids.
With shale gas, horizontal drilling has become the preferred production method. A single vertical well is drilled, and at the desired depth, a number of horizontal laterals are then drilled away from the centre.
Drilling and fraccing in shales are water and energy intensive activities. Water use and greenhouse gas emissions produced are significantly greater than emissions from conventional production.
Drilling in the middle of Fort Worth
In BC, most drilling activity is some distance removed from residential areas, although coalbed methane threatens a number of towns, including Campbell River, Princeton, and Telkwa. In fact, conventional and coalbed methane activity is already commonplace in Hudson's Hope.
But it's nothing like what's happening in Fort Worth. The city sits right on a desirable chunk of the Barnett Shale, and the city government has leased over 2400 acres of public land to drilling operators. As you would expect, the city is divided: on the one side, the companies (mainly Chesapeake Energy), those who argue the city will benefit from the revenues and those who directly benefit from deals with the company, versus residents who are concerned about the livability, ecology, and safety of their homes and city.
This from the New York Times: "Under golf courses, schools, parks, libraries, airports and dozens of neighborhoods, some of the nation’s leading independent energy companies are scouring the city in search of the best locations to recover one of the largest concentrations of natural gas in the United States."
 Drilling rig and the Fort Worth skyline, from the New York Times |
 Havenwood Apartment Complex, Fort Worth. |
 March 12, 2007 explosion west of downtown Fort Worth. |
 Tommy Lee Jones promotes gas drilling in Fort Worth. |
Related reading
Barnett Shale
Wikipedia
http://en.wikipedia.org/wiki/Barnett_Shale
Blum Shale Maps
http://blumtexas.blogspot.com/
Fort Worth, Texas
Wikipedia
http://en.wikipedia.org/wiki/Fort_Worth
Rigs on the Skyline and Gas Far Below
Clifford Krauss, New York Times, 27-Oct-2006
http://www.nytimes.com/2006/10/27/business/27drilling.html
Fort Worth Flatulence
Eyes on Texas
http://durangotexas.com/eyesontexas/fortworth/barnettshale.htm
December 23, 2008
LNG armada could revolutionize industry
COMMENT: Given recent news that the LNG "boom" is bust, none of these floating LNG factory ships will ever get built. That notion is expressed toward the end of this article, and it may be realistic.
There's an interesting context for BC. A second Kitimat LNG project crept into BC quietly this year. LNG Partners is proposing to take surplus BC gas, ship it through the Pacific Northern Gas (PNG) pipeline and liquify it on one of these floating LNG ships, which would be anchored near Kitimat in Douglas Channel. The LNG would then be offloaded to LNG tankers for shipment to Pacific Rim and perhaps other markets.
The company had a deal with PNG approved by the BCUC in November, and was going to secure capacity on the PNG system on December 15, 2008 with a $1.5 million option payment. The payment hasn't happened, and PNG's one reason for optimism in recent years appears to have leaked away, as yet another LNG project slinks out, as quietly as it came in.
See also:
LNG Partners does not make payment to PNG
LNG Partners books pipeline capacity with PNG
By Tom Bergin
Calgary Herald
December 23, 2008
Ships would produce gas while at sea
 A man looks as the world's biggest Liquefied Natural Gas (LNG) tanker DUHAIL as she crosses through the Suez Canal April 1, 2008. Photograph by: Herald Archive |
Oil and gas companies are racing to develop a new type of vessel they hope will revolutionize offshore gas production, but even if the untested technology works, its deployment could be blocked by resource holders who fear it will undermine development goals.
The industry hopes to build a fleet of ships or barges that can sail or be towed to offshore gas discoveries, extract gas, freeze it to liquefied natural gas (LNG) and off-load the LNG to tankers for shipping to lucrative Western and Asian markets.
Anglo-Dutch oil major Royal Dutch Shell PLC is leading the charge, but U. S. rivals ExxonMobil and Chevron and Australia's Woodside are also eyeing floating LNG, or FLNG.
Companies hope FLNG will be cheaper than building onshore liquefaction facilities, speed up the time it takes to bring fields on-stream, reduce projects' environmental footprints and make it economic to exploit small and remote offshore deposits.
Such deposits represent over a sixth of global gas reserves, builder Costain, which offers FLNG design services, says on its website.
Producing gas without touching the host nation's soil would also reduce security risks, which is why Shell wants to use the technology in Iraq --even though the reserves are onshore--and why several players want to use FLNG in Nigeria.
"FLNG has the potential to be a real revolution in the LNG industry," Stephen Craen, an energy banker at Societe Generale, told a conference last month.
FLNG could also be a boon for shipyards and equipment makers because the vessels may be the most expensive oceangoing craft ever built--even costlier than the U. S.'s latest Nimitz-class aircraft carriers, which cost around $4.5 billion US each, according to the U. S. navy's website.
"There's a lot of excitement about FLNG at the moment," Frank Harris head of global LNG at industry consultants Wood Mackenzie, said.
Plans for FLNG vessels vary from a ship-like design proposed by U. K.-based startup FlexLNG, that would produce 1.5 million tonnes per year (TPA), to barge-like structures being pursued by Shell and others, that could produce up to 5 million tonnes a year.
The larger vessels will likely cost about $1,000 per tonne per year to build, Harris said, suggesting costs of around $5 billion each.
This is in line with onshore costs but will avoid the need for separate offshore production platforms and up to hundreds of kilometres of piping --potentially saving billions.
FLNG vessels are also forecast to be quicker to build than onshore plants--3.5 years compared to eight to 10 years, analysts at Citigroup said in a research note earlier this year.
This is partly because offshore facilities can avoid the lengthy permitting processes associated with building onshore. FLNG has less impact on animal habitats and avoids the need to move communities, proponents say.
The permitting advantage has also led to plans to develop floating facilities for importing LNG. ExxonMobil wants to use a floating regasification terminal offshore New Jersey, but its experience is a note of caution to those who expect floating LNG production to offer big cost savings.
"It's more expensive but it may be the only way to do it environmentally or to get permitting," Neil Duffin, head of Exxon's project development unit said, of the New Jersey project.
Even if FLNG is proven to work and be cost effective, its deployment may be limited by resource holders' fears the technology means gas discoveries do not spur economic growth.
As FLNG vessels will likely be built in developed countries such as Korea, no construction jobs will be created locally.
Some less developed African and Asian countries also fear the use of floating LNG may discourage companies from piping gas ashore to provide energy for domestic industries.
However, analysts caution that even after more than a decade of research and the recent flurry of industry conferences and consultants' reports on floating LNG, it may still be years off anyone actually building a floating liquefaction vessel.
"We've yet to see anybody pull the trigger on an FLNG project yet,"Harris said.
© Copyright (c) The Calgary Herald
An Energy Solution in the (Compressed) Air?
COMMENT: Some interesting ideas here, making more productive use of intermittent wind energy, but there's an expectation and dependence on cheap nighttime coal-fired electricity, too, and the context is in eastern North America and the southern US, where summertime air conditioning is a huge power load. The compressed air concept finds its analogue in British Columbia in pumped water storage which the articles don't mention - matching wind energy with hydro reservoirs by pumping water back up into reservoirs when the wind is blowing but electricity demand is low.
By Kate Galbraith
New York Times
December 23, 2008
 Schematic of a compressed air storage system. (Image: Sandia National Laboratories) |
The wind doesn’t blow all the time, so the electricity it produces is also intermittent. A solution to this problem could be pulled from the air, literally, using a technology known as “compressed air energy storage,” or C.A.E.S.
Compressed air storage essentially involves using electricity to compact air and force it underground. Then, when the air is released and burned with natural gas, it expands, driving turbines and creating electricity.
The compressing is done when there is an excess of cheap electricity — at night, for example, when the wind is blowing but nobody has their lights on. Then it can be released when there is strong demand for electricity — in the middle of day, for example, when air conditioners are humming.
Compressed air is one of several innovative storage technologies — including ice — that my colleague Matthew Wald wrote about last year. (see below)
Several states are exploring it, including Iowa, Texas, Ohio and, as my colleague Ken Belson recently reported, New Jersey. The technology is already used at a power plant in Alabama, where compressed air is stored in a salt dome. Germany also has a compressed-air plant. Xcel Energy, a Western utility that uses substantial amounts of wind power, is also studying compressed-air storage in conjunction with the Electric Power Research Institute, according to Steve Roalstad, Xcel’s media-relations director.
Ontario’s Ministry of Natural Resources is evaluating the technology, too, as it adds wind turbines, according to a recent article in the Toronto Star. Andrew Hewitt, the ministry’s manager of the petroleum resources center, is especially interested in the compressed-air and wind combination as the province shutters coal plants, according to the paper.
So what’s the downside? Samir Succar, an energy analyst with the Natural Resources Defense Council, who co-authored this paper on compressed-air storage for Princeton University, said there are several reasons the technology has not caught on. These include what he described as a “culture of risk-aversion among utilities,” as well as complications in how electricity markets are structured.
The rise of wind power, however — which increases the need for storage — is helping spur new interest, Mr. Succar added.
Storing Sunshine
By Matthew L. WaldNew York Times
July 16, 2007
No matter how much scientists and engineers lower the cost of electricity produced from sunlight — or from the wind, the other widely available renewable source — the energy's value is less than electricity made from coal or natural gas, because it is less reliable and, in utility lingo, not "dispatchable," meaning a customer cannot order it turned on or off at will.
And neither resource is a good match to handle the load of a typical grid. Wind tends to be strongest at night and in the winter, while peak load is usually on summer afternoons. Solar production is strongest in the afternoon but ends long before the peak does, since high temperatures persist when the sun is very low in the sky or below the horizon.
Storage technologies are emerging, though none are in common use and all have disadvantages.
One method is batteries. They may use technology similar to car batteries, using chemicals that react either to absorb electrons or give them off. But these batteries are set up differently, with vastly larger quantities of those chemicals.
VRB Power Systems, of Vancouver, B.C., sells "flow batteries," with tanks to hold hundreds of gallons of the chemicals, called electrolytes. The company has sold one installation at a solar power farm in Germany, and has announced sales to Australia.
The battery system costs $500 to $600 to store a kilowatt-hour, the quantity of electricity that sells for an average of 10.5 cents in the United States. And the system has a "round-trip efficiency" of 65 to 75 percent, meaning that it loses 25 to 35 percent of the electricity put into it. At a solar thermal installation, that has the potential to raise the price per kilowatt-hour, already a multiple of the market price, by another 50 percent or more.
Still, said Simon Clark, a spokesman for the company, the technology can be useful if it makes the output of a wind or solar farm more steady. A battery can be a "shock absorber" for a system that is a mix of solar, wind and diesel, he said.
Two other storage systems are in use in the United States, although at first glance a visitor might not recognize the thing being stored as energy.
One is compressed air. In 1991 the Alabama Electric Cooperative opened a plant in McIntosh, Ala., consisting mostly of an underground cavern, created by using water to hollow out a natural salt formation, and a modified gas-fired power plant on the surface. At night, when power is cheap, the cooperative buys power to run compressors and pump up the cavern.
In the afternoon, the compression becomes an ingredient of making electricity. Conventional natural gas turbines, like jet engines on airplanes, work by burning gas under pressure, and they typically compress that gas by using some of the power they produce. If something else does the compression, the gas can produce far more energy.
Samir Succar, a researcher at Princeton University, said the McIntosh plant can make a kilowatt-hour of electricity on a peak day from two-thirds of a kilowatt-hour delivered the night before, plus 4,000 B.T.U. of natural gas. This is only about two-thirds as much natural gas as a conventional plant requires.
But the technology has not found wide commercial acceptance.
Another form of energy storage is ice, typically a 500-gallon block in the basement of a large building with a big cooling load. The idea, said Frank R. Ramirez, the chief executive of a company called Ice Energy, is that all air conditioners gather heat from within a building and dump it outside, but that moving it outside gets progressively harder as the outdoor temperature rises.
His company installs the ice storage system and runs it at night, when electricity is cheap and when making ice is easy, because the outdoor temperature is lower. Then during the day, the compressor in the building air conditioning system rejects its heat to the cold block, instead of to hot air, sharply lowering the electric demand on hot afternoons.
Unlike the battery, ice storage can break even, or better, Mr. Ramirez said. For every kilowatt-hour put in at night, the system will return a kilowatt-hour of savings the next day, assuming the nighttime temperature is at least 17 degrees cooler than the daytime. In many places, though, the daily temperature swing is larger; if the swing is 35 degrees, which is common in some climates, then three-quarters of a kilowatt-hour deposited will yield a full kilowatt-hour the next day.
Ice Energy markets the system in California, where electricity generated at night creates fewer smog-forming pollutants than electricity made during the day. But if the system saves electricity, it also saves greenhouse gases, he said, and it reduces peak-hour load on transmission and distribution systems.
"What we don't do is store electrons," he said. His system sells for $166 a kilowatt-hour, less than a third of the battery system.
Like the battery and the compressed air, the ice system does not care where the off-peak power comes from.
The compressed air system in Alabama runs on electricity from coal, according to officials of the cooperative. That has an ambiguous effect on carbon emissions. It could allow coal plants to run at night and substitute for conventional gas plants during the day. Since coal plants emit twice the carbon dioxide of natural gas plants for a given amount of power, greenhouse gas emissions could rise.
In California, the Ice Energy system runs on natural gas, and some of the nighttime production is more efficient than daytime production. In many parts of the country, wind is strongest at night, and could be used for storage, experts say.
Russia warns Europe it could face gas shortages
COMMENT: Russia and Ukraine have a long-running dispute over natural gas. Russia's biggest market is Europe, but all the pipelines that get it into Europe run through the Ukraine. The last time this row flared up was three years ago, sending at least two kinds of chill - economic and thermal - across Europe.
The other point of interest in this article is the conference being hosted by Russia, leading to a natural gas OPEC.
Three years ago we noted both these issues in two unconnected articles. Now they've come together in one article, from the Guardian.
Russia and Ukraine Reach Deal on Gas, Ending Dispute
Terry Macalister and David Gow
The Guardian
December 22, 2008
Britain was given a sharp reminder of the dangers to its energy supplies today when Gazprom warned western Europe could be hit by gas shortages. The Russian gas provider said a long-running row with Ukraine could disrupt supplies to Europe this winter.
The fears were raised just 24 hours before Russia hosts a meeting of the world's major gas suppliers to set up an Opec-style production cartel that could also push up the price of energy in the UK and elsewhere.
Energy experts warned that the two events demonstrated Russia was using energy as a political weapon and argued Britain should fast-track its switch to renewable power to reduce its dependence on unpredictable carbon fuel suppliers.
Russia first triggered fears of an energy "Cold War" two years ago and again last year when it threatened to cut off gas first to the Ukraine and then to Belarus.
This time Russia is threatening Ukraine over an alleged $2bn of arrears. Although Russia exports a relatively small amount of gas to Britain, such difficulties could push up prices for alternative supplies from Norway or elsewhere.
Viktor Zubkov, who is Russian first deputy minister as well as chairman of Gazprom, said: "We cannot rule out that the position of the Ukrainian side and certain steps, which are linked to gas transit through Ukrainian territory, could lead to a disruption of supply stability to Europe."
The Moscow company said it offered to let Kiev redeem its debt by allowing Gazprom to offset it against transit fees for next year. "So far no solution has been found because of the non-constructive position of the Ukrainian side," Zubkov said.
Some 80% of Russian gas exports to Europe flow through Ukraine, which insisted it would ensure the transit of supplies to European Union countries over 2009. "Ukraine is ready to give guarantees of uninterrupted gas supplies in 2009 to European gas consumers," said Oleksander Shlapak, chief economic aide to the Ukrainian president, Viktor Yushchenko.
The promise did little to reduce tensions. Andris Piebalgs, EU energy commissioner, indicated he was ready to travel to Moscow early in the new year for emergency talks with the Russians and said he was "very worried."
Meanwhile, a loose grouping of gas producers, known as the Gas Exporting Countries Forum, is to meet in Moscow tomorrow to sign a charter to formalise the organisation, officials at the Russian energy ministry said.
More than a dozen gas-exporting nations from around the world have been meeting since 2001, but the body has no formal membership or management. Experts from member states met last month to discuss the draft charter, and ministerial representatives are expected to sign it at the meeting, which has been driven by Russia in cooperation with Iran and Qatar.
The three countries, which together account for nearly a third of the world's natural gas exports, agreed this year to form a "gas troika" for joint exploration and production, in a move that sent shock waves through importing nations.
Russian deputy prime minister Igor Sechin said last week the forum would work along similar lines to Opec, but that it would be wrong to see it as an attempt to corner the market and to force up prices.
"The work that it does will be similar to that of Opec, but I want to stress that there is no talk now about any specific deals. It is simply a question of protecting the interests of producers and coordinating their work," said Sechin at the Opec ministerial meeting in Oran, Algeria, last week.
David Clark, a former UK government adviser and chairman of the Russia Foundation thinktank, said he was concerned Russia and its energy allies were trying to carve up the market and further develop the use of energy as a political weapon.
"Despite the downward trend of oil and gas currently the long-term supply-demand picture suggests that prices are going to rise and this is going to be a continuing problem," he said.
"Britain and the European Union need to collectively pressure Russia to stand by its existing commitments to act as a responsible energy partner.
"But it also points up the need for countries such as Britain and North America to work together to find the kind of scientific fixes that will enable them to build a post-carbon future."
December 16, 2008
Who's dishing real oilsands propaganda?
By David Schindler
Edmonton Journal
December 15, 2008
Gov't decries environmentalist agenda, but refuses to subject data to non-partisan scientific scrutiny
This week, Alberta Environment Minister Rob Renner is in Poland, expected to defend the oilsands from being considered as a source of "dirty oil." I don't envy him. In the past, international criticism has been largely based on the high emissions of greenhouse gases from mining the oilsands. This is changing rapidly in recent weeks.
In the past several days, two reports, one on losses of boreal birds as the result of habitat disturbance and another on seepage from tailings ponds, have been released by groups of scientists who are supported by environmental groups. A casual inspection of the reports' bibliographies reveals that many, if not all, of their claims are based on peer-reviewed papers in reputable scientific journals. Yet industry and Alberta government spokespeople have dismissed both reports as "environmentalist propaganda," although they have provided no real evidence to support their criticism. We are expected to be reassured by explanations that any seepage from toxic tailing ponds is caught in ditches and pumped back into the ponds (just who will pay for this after the companies leave?)
We are supposed to believe that industry-sponsored studies done by the Regional Aquatic Monitoring Program (RAMP) and the Cumulative Effects Management Association (CEMA). But neither of the latter organizations has issued any peer-reviewed publications or public reports that shed light on the state of the environment in the oilsands area. RAMP was the subject of a scathing peer review by three prominent federal scientists in late 2004, and has shown very little evidence of having taken corrective measures since then. Its data bases are considered to be proprietary, so they are not available for scientists at large to scrutinize. CEMA has been boycotted by most of the original members from aboriginal communities and NGOs, who resigned in protest that the group's decisions were dominated by industry and government. The expected report on the "instream flow needs" to maintain the Athabasca River that was promised in 2005 was not ready, and has been replaced by ad hoc measures for the next several years. In short, industry and government might claim that unfavourable reports are "propaganda" but their own lack of real evidence clearly shows that they are themselves in the propaganda business.
Another discouraging recent report calls into question the widely touted carbon capture techniques being promoted to justify continued expansion of the oilsands. This report is by recognized experts. Indeed, many of the greenhouse gas emissions from
oilands activity will emanate from monster trucks and other mobile emitters. One doesn't need to be an expert to know that such sources are not easily amenable to carbon capture. Perhaps a more reasonable solution would be to make the oilsands developers neutralize their greenhouse gas emissions by paying for carbon capture at stationary sources, such as coal-fired power plants.
More trouble for Renner is certainly ahead. Several peer-reviewed scientific papers and government reports already document serious declines in caribou and large carnivorous mammals in the oilsands area. It is only a matter of time until someone summarizes these in a public report. Papers on acid rain are in preparation. The claims of people living downstream of the oilsands that they are being poisoned by chemical releases from the oilsands mines are unresolved, with government and industry claiming that all of the pollutants in the river are "natural." The real answer certainly lies somewhere between thes polar positions, but no detailes study has been publicly released, only more assurances.
Fortunately, the veracity of propaganda claims from either side about environmental destruction in the oilsands is easy for citizens to check for themselves: Google Earth is accessible on most home computers. It is easy for anyone to see that enormous areas are being rapidly stripped of forest, mined, or covered by tailings ponds. It is also easy to tell that reclamation efforts are very small by comparison. In short, propaganda is not effective in the electronic world. Citizens should expect something better than hollow assurances from government. Both industry and green groups should be expected to back their claims with data and reviews by their scientific peers.
The Google Earth inspection makes it very clear that the stakes for Albertans are very high. What appears to be profitable now may not appear like such a good deal after the 20 per cent of the province underlain by bitumen deposits has been exploited, left with polluted waters and unrecoverable ecosystems. All Albertans should be worried about the state of the province that will be left for their grandchildren. Exploited carefully, the oilsands should provide a good living for at least three generations of Albertans. Google Earth reveals that recent expansions have not been careful.
There is an out for the minister. It is time for an inquiry into oilsands operations, done by a panel of experts independent of petroleum companies. RAMP, CEMA and other studies relevant to sorting out the real cost of development should be required to submit their data to the inquiry panel. The panel's report should analyze the long-term environmental and financial costs of several scenarios based on different rates and methods of development and reclamation, and spell out issues that must be addressed to protect and reclaim the environment before further expansions are approved. The report should be publicly released, so that all Albertans can view the issues for themselves. The stakes are simply too high to rely on the conflicting claims of polarized groups.
Dr. David Schindler is Killam Memorial Chair and professor of ecology at the University of Alberta.
© Copyright (c) The Edmonton Journal
December 15, 2008
End of the oil sands' building frenzy?
Claudia Cattaneo
Financial Post
Friday, December 12, 2008
 Oil sand is a mixture of bitumen (a thick, sticky form of crude oil), sand, water and clay.Courtesy of Suncor EnergyOil sand is a mixture of bitumen (a thick, sticky form of crude oil), sand, water and clay. |
CALGARY, Alberta -- Canadians have grown accustomed to the flow of multi-billion oil sands investments from all corners of the Earth, turning Canada's currency into a petro-dollar and pumping economic prosperity.
But as the sector struggles with its first downturn since the rush started 11 years ago, there's increasing discussion this is not a short-term pullback, but the end of the oil sands' building frenzy.
The economic crisis and collapse in oil prices have pushed the sector to the brink, resulting in the delay of some $40-billion in new projects, taking 800,000 barrels a day of expected production growth -- about half of what had been expected -- off the table, according to CIBC World Markets.
Meanwhile, existing projects are close to losing money at today's oil prices. According to a recent Merrill Lynch report, many oil sands projects need US$38 a barrel oil to break even. Oil prices settled at US$46.28 a barrel on Friday, keeping projects in the black for now, but curtailing developers' ability to fund expansion.
Industry watchers say companies that scaled back won't be rushing to jump back in, even if oil prices recover above US$90, the level many say is required to build new projects.
Other problems would have to be resolved: mounting costs, tight financing and, of course, environmental challenges. The oil sands' poor image could lead to even tougher environmental legislation.
The implications of a no-growth period for the oil sands are grim, not just for Alberta, but the entire country. The oil sands boom has been Canada's economic engine over the past decade. The country's rise as a major global oil producer would stall and the United States would see its energy security options reduced.
The effects of those cancellations are already being felt. Contracts are being cancelled. Construction jobs in Fort McMurray are drying up. The construction industry slashed its workforce requirements estimate by half for 2010 -- to 22,000 from 44,000 jobs -- in what was to be a peak building year. Workers in Calgary are being sent home.
Oil sands pioneer Jim Carter is clearly concerned for the sector's future. The mining engineer and former president and chief operating officer of Syncrude Canada Ltd., who retired in May, 2007, after nearly three decades in the business, sees two possible scenarios unfolding.
With a much-needed break from years of explosive growth, he says the oil sands would have the opportunity to "recalibrate" -- get inflation under control, lower everyone's expectations and integrate technologies to improve environmental performance.
The other is that development of the oil sands stalls.
Bob Dunbar, president of Strategy West, a Calgary oil sands consulting firm, says the risk of a no-growth period in the oil sands is high.
"If we have a prolonged financial economic crisis, then I think this industry is coming to a halt, other than startup and completion of projects that are already underway," says Mr. Dunbar, who was one of the oil sands' first regulators three decades ago with the Alberta government.
He sees oil sands production growing to 2-million barrels a day, from the current 1.3-million barrels a day, as projects under construction are completed by 2010-2011.
Then, the pipeline dries up. The industry's goal was to produce about 3.5-million barrels a day by 2015.
Not even a short-lived financial crisis greatly improves the picture, he adds. Growth may resume, but at a more moderate pace. "A lot of people in the industry will have received pretty serious body blows, and a lot of people are really going to lose the capability to turn around quickly."
It's not easy to restart projects that take years to plan and build, including obtaining regulatory approvals, assembling huge work forces and manufacturing complex pieces. Those best positioned, he says, would be the developers that have well-established operations. Those at earlier stages would be looking at a long road back.
He also points to U.S. president-elect Barack Obama as another possible impediment to growth. Canada's "dirty oil" could be in for a rougher ride if he takes a harder line on greenhouse gas emissions.
Peter Tertzakian, chief energy economist at ARC Financial Corp. and author of the best-seller A Thousand Barrels a Second says the oil sands frenzy of the last few years is history.
He says growth will moderate significantly from earlier projections. "Companies, when they make their investment decisions going forward, will weigh all the issues, including the cost inflation that arises from aggressive overinvestment in a province that only has three million people, in a remote area that has got a lot of environmental baggage."
Those deciding whether to expand in the business will be more sensitive to the potential for an oil crash, one of the lessons of the financial crisis, Mr. Tertzakian says.
And they will also be thinking harder about whether they want to be in a business with such a poor image.
"The environmental lobby has done a marvelous job of disadvantaging the oil sands from an environmental perspective," Mr. Tertzakian says. "That is the reality. It's damaged goods and it is a high-cost producer."
There is no question a slowdown in the oil sands would take the edge off Canada's economic growth, Mr. Tertzakian says. "Is that a bad thing? Maybe not, because the country was becoming excessively concentrated on resources."
While the Alberta government would be among the biggest losers if the oil sands stall, that possibility was not discussed in a provincial energy strategy announced Thursday. The strategy assumes growth will continue.
Alberta Energy Minister Mel Knight played up the silver lining of a slowdown in lowering costs and easing labour shortages.
"There are a number of issues, the global economic picture is one of the largest ones," Mr. Knight said. "We are certainly feeling that the price of the commodity is not conducive to any new investment at this point. But one of the major problems now, besides the economic issue, is the situation around regulatory uncertainty. They are looking for some alignment with respect to emissions regulations."
Mr. Knight acknowleges that if Alberta's projected revenue stream from the oil sands deteriorates, the provincial budget would be adjusted.
The attitude adjustment would have to include bringing back some of the conditions that kicked off the oil sands frenzy 11 years ago.
When Suncor announced its $2.2-billion Millennium expansion in 1997, and Syncrude followed with a $6-billion plan, the reaction in the markets and elsewhere was exuberance. At Suncor, executives ran a betting pool over how much the stock would rise. CEO Rick George bet $1. The stock jumped $7.
Canada's oil sands production at the time was about 300,000 b/d. Suncor had started its plant in 1967, Syncrude opened in 1978 and Imperial Oil Ltd.'s thermal operation at Cold Lake started in 1985.
The new investments were made possible by major changes: After years of trying, Suncor and Syncrude improved costs and productivity by adopting new technologies and phasing out bucketwheels and conveyor belts that were prone to breaking down in favour of trucks and shovels, the method that remains in use today.
Operating costs came down from as much as S$40 a barrel to about $11 to $12. Another change was convincing the investment community of the oil sands' potential; so little was known of the deposits that talk about their size was met with disbelief.
The most significant change, however, was an improvement in fiscal terms, the outcome of the 1995 National Oil Sands Task Force.
The initiative pulled together all levels of government, as well as developers, trade unions and suppliers, and got them to buy into the benefits of working together at a time of weak employment and economic growth.
"Because that process engaged so many people, it enabled us to set the table for success," Mr. Carter says. "And we began to see the investment happening. It made believers even out of those who might not have been."
Alberta, under Premier Ralph Klein, agreed to a generic royalty regime that reduced payments substantially, to a minimum 1% before project payout and 25% of net revenue after payout.
The federal government, under Liberal Prime Minister Jean Chretien and Natural Resources Minister Anne McLellan, pitched in with a fast write-off of capital investment through the Accelerated Capital Cost Allowance.
As it turned out, the task force underestimated how much spending would pour into oil sands development -- $21-billion to $25-billion over 25 years. Before oil prices collapsed, the oil sands were on course for $150-billion in spending.
But those diverse interests splintered in the ensuing years as oil prices soared and the oil sands became a target of oil multi-nationals shut out from other basins by governments nationalizing their oil industries.
The federal government, under Tory Prime Minister Stephen Harper, cancelled the Accelerated Capital Cost Allowance in 2007. The Alberta government, under Premier Ed Stelmach, is increasing oil sands royalties next month to a base rate of 1% when the oil price is $55 a barrel and 9% when oil is at $120 a barrel or higher. The post-payout rate starts at 25% when oil is at $55, increasing to 40% when oil is at $120 or higher.
Both levels of government have added further costs to mitigate greenhouse gas emissions. And more environmental costs are coming as the industry installs technology to capture and store carbon and clean up its tailings ponds.
Meanwhile, labour costs have skyrocketed, both as a result of union agreements and competition between developers for scarce staff. Service providers, from engineering firms to labour camp builders, have also increased their prices.
The result is that the cost of adding a barrel of capacity has risen from the $20,000 estimated by Suncor in 1997, to $180,000 this summer for Petro-Canada's Fort Hills project. Petro-Canada has cancelled part of the project and put the rest on hold, while trying to renegotiate contracts.
Mr. Carter is confident the sector is resilient enough that it will find an affordable way to reduce its environmental footprint. As the chairman of the Carbon Capture Council of Alberta, a team from industry and academia assembled by the province to guide carbon capture and storage projects with the help of $2-billion in provincial funding, Mr. Carter is keen to help the oil sands continue.
Still, he sees how fragile it all is. "Sometimes things are taken for granted after they have been so strong for so long," Mr. Carter says.
"We need to remember that this is expensive oil."
December 11, 2008
Rio wasn't the only loser in Alcan deal
KONRAD YAKABUSKI
Globe and Mail
December 11, 2008
MONTREAL -- Not long ago, Alcan chief executive Dick Evans hinted that he might have sold out too soon when he signed the record-setting, mid-2007 deal to surrender the Canadian icon to Rio Tinto PLC for $38.1-billion (U.S.). Only months later, he figured Alcan was already worth more than that.
It seemed overly optimistic, considering that BHP Billiton - which then still had an offer for Rio Tinto on the table - was pegging Alcan's worth at only $20-billion. Now, we know it was.
Almost every independent observer now concedes Rio Tinto overpaid for Alcan when it put up $101 a share in cash, a 66-per-cent premium over the price the stock was trading at before it had been put in play by an earlier, hostile bid from Alcoa Inc.
The price was a windfall beyond all contemplation for Alcan's shareholders, including top management, who rightly took advantage of multiple suitors' willingness to outbid each other for the company.
But the $39-billion in debt (almost all of it from that deal) on Rio Tinto's balance sheet - an amount that now surpasses Rio's own market capitalization - will now force Alcan to cut jobs, production and capital spending in Canada. Rio unveiled the bad news yesterday.
It means a host of long-promised projects - from Kitimat, B.C., to Saguenay, Que. - are in limbo.
Alcan says "it remains committed" to the expansion of its Kitimat smelter and will "honour all the obligations" of an agreement with the Quebec government that grandfather the company's vast and lucrative hydro operations in the province in exchange for jobs and investment. We just don't know when we'll ever see the money.
"Whenever anyone says 'we commit' it doesn't mean 'we've spent,' " notes one long-time Alcan observer in British Columbia. "They can change their minds, and they have many times in the past." So far, Alcan has "committed" only $500-million to the Kitimat modernization - a project expected to cost upwards of $2.5-billion. Should the overhaul be delayed much longer, the new smelter likely would not be up and running before the current 54-year-old facility dies of old age.
Many in Kitimat and on Bay Street alike think that would suit Alcan - and Rio, if it manages to hang on to its aluminum division - just fine. Alcan owns its own hydro generating facilities in B.C., and produces far more power than it needs to make metal. It sells the surpluses to BC Hydro. Even at lofty aluminum prices, its margins on energy sales surpass those earned in smelting.
As in Quebec, Alcan was initially granted the water rights by the B.C. government to produce power in exchange for building smelters that provide hundreds of jobs. But though you might make the case that Alcan has a moral obligation to proceed with the Kitimat expansion, B.C. courts have established that it has no legal one.
So, if it hasn't done so in the first quarter century since a new smelter was promised, what are the odds it will do so in the next?
As long as Rio Tinto is rationing capital, if not fighting for its life, the odds aren't high. Besides, instead of fetching the $4,000-a-tonne Mr. Evans was projecting just last spring that aluminum could command in the near term, the price of the lightweight metal is currently hovering at a five-year low of about $1,500.
Cheap hydro power makes Canada a great place to make aluminum, since, globally, energy accounts on average for about one-third of smelting costs. The near-free electricity Alcan produces for itself here means that it has an unbeatable advantage over competitors. But if Alcan can sell electricity to government-owned utilities, why, with capital already scarce, would Rio tie up new funds in more smelter capacity?
There are constraints on power sales - transmission capacity is restricted in B.C. (for now) and a more vigilant provincial government in Quebec seeks to protect the 6,000 Alcan jobs in the Saguenay region. But Rio Tinto's dire straits have given Alcan an excuse to buy time with governments.
In Quebec, that means the $3.5-billion (Canadian) that Alcan touts in slick TV ads that it is investing in the province will now be spent at a snail's pace, if at all. Premier Jean Charest can be thankful Rio Tinto waited until two days after the provincial election to drop the news. The government has extended advantages to the company that sell well in the Saguenay, but which are heavily criticized by economists in Montreal and beyond.
The Alcan deal remains the biggest corporate takeover the country has seen. It was a boon for the hundreds of lawyers and investment bankers working for Rio Tinto, Alcan, Alcoa and four other would-be buyers who kicked the tires. Shareholders were obviously winners. But as we're now finding out, there were losers, too.
First Nations band claims oilsands land
BOB WEBER
Edmonton Sun
11 December 2008
Says permits province sold to Shell are invalid
An aboriginal band has threatened the very basis of Alberta's oilsands industry by filing a court challenge to the province's system of granting land tenure.
A notice filed yesterday in Edmonton Court of Queen's Bench by the Athabasca Chipewyan First Nation claims that a series of oilsands permits the provincial government sold to Shell Canada and other companies are invalid.
Selling off rights to explore the land without consulting area aboriginals breached the Crown's duty to consult, say legal documents prepared by the First Nation.
"(Alberta) breached the duty to consult the (Athabasca Chipewyan First Nation) by failing to consult the ACFN, adequately or at all, prior to granting the challenged tenures," the document reads.
CALL FOR CONSULTATION
The First Nation is asking the court to either quash the permits or order the companies to stop further development until consultation has occurred.
"It's a big question," said Monique Ross, a researcher at the University of Calgary's Institute of Resource Law. "(The government) would have to revisit the way they deal with the industry."
The Alberta government has long argued that, because no actual development occurs when an exploration permit is sold, no consultation is necessary. Alberta Energy regulations specifically state that consultation does not take place before such rights are granted.
But the notice argues that when permits are sold, companies are obliged to begin work on them within a certain time or risk losing them.
The tenures were sold in 2007 and 2006 to Shell Canada, Standard Land Company, Saskatoon Assets Inc. and Canadian Coastal Resources. All are within 20 kilometres of the band's reserve.
Ross points out that the Supreme Court has compelled British Columbia to consult with aboriginal groups before allocating forestry tenure.
"It's not enough to consult at the stage when forestry activities are occurring," she said.
The First Nation points out that the land in question is extensively hunted, trapped and fished by the members of the band.
LANDS CHANGED
"Parts of our traditional lands have been completely changed by industry," Chief Allan Adam said in an affidavit. "These lands were once hunting and trapping grounds, but now they are covered by oil and gas wells and blanketed by seismic lines roads and pipelines."
Adam said the band is particularly concerned about an area near the reserve called the Richardson backcountry, which is important for both hunting and spiritual practices. He wrote the provincial government has repeatedly granted oilsands exploration permits in the area despite the band's concerns.
"It is deeply troubling to our First Nation that Alberta has granted these tenures within our traditional lands and set the stage for exploration and potentially massive oilsands production without any consultation with our First Nation before the grants of tenure."
A preliminary date for the first hearing on the motion has been set for Jan. 13 in Edmonton.
Good intentions gone wrong with city fuel order
JOHN BARBER
Globe and Mail
December 11, 2008
'The tar sands is one of the greatest ecological crimes in North American history," declares Councillor Gord Perks, a veteran environmental activist now serving as the uncompromising green conscience of Mayor David Miller's city hall.
So why did the City of Toronto just go out of its way, following the strictest environmental protocols, to buy $17-million worth of tar-sands oil to run its large, allegedly green fleet of vehicles?
The answer is a parable of good intentions gone, if not awry, certainly wide of the intended mark - one that keeps moving as industry, activists and government wrestle over the meaning of green.
Everybody wants to do the right thing, says Matt Price of Environmental Defence Canada, which protested against what it considers to be a dirty-oil deal.
"But it's unhelpful when you have people with good intentions coming up with unfortunate results."
Good intentions in this case date back almost a decade, when the city decided to specify low-sulphur diesel fuel, then a rare commodity in Canada, in its tenders.
Since then, new federal regulations have come into effect, phasing out more polluting fuel.
"Once again, the City of Toronto set a benchmark and all the other governments ran to catch up," Mr. Perks boasts.
Then the city ran even further ahead, demanding its supplier deliver diesel fuel laced with maximum amounts of vegetable oil, called biodiesel, and gasoline diluted with the maximum amount of ethanol, which is also derived from vegetable sources.
The stated aim is to reduce airborne pollution and lower greenhouse gas emissions relative to unblended fossil fuels.
While the federal government has promised to mandate a minimum 5-per-cent ethanol content in gasoline, the city specified a blend containing 10 per cent.
Put your latest good intentions out to tender and what do you get? A single bidder for the 2009 fleet fuel contract, Suncor Energy Products Inc., a company that describes itself as "strategically focused on developing Canada's Athabasca oil sands."
It also so happens that Suncor is Canada's leading producer of ethanol, having opened a $220-million plant near Sarnia two years ago, with more than $30-million in provincial assistance.
This summer it announced a $120-million expansion that will boost the plant's production to 400 million litres a year.
But the problem here, according to environmentalists, is not just a matter of accepting some bad with the good. Current opinion says that there is nothing green about biofuels, and indeed that no fuel could be more destructive to climate than that harvested from farm fields and tar sands
- the very blend our green-minded city just ordered a vast amount of.
The truth of the ethanol debate depends on which factors one includes in the "life-cycle analysis" of its use as fuel.
Previously unaccounted-for deforestation caused by ethanol demand has tipped the balance, according to Mr. Price, with the latest models now predicting that using the fuel will lead to higher emissions than straight fossil fuels.
"Arguably you could get a better carbon outcome simply by going with Shell instead of Suncor at this point," Mr. Price said.
The climate argument doesn't even consider the effect of widespread ethanol production on food prices - a concern that inspired Ontario Premier Dalton McGuinty this summer to abandon a promise to mandate provincewide use of the same 10-per-cent ethanol blend the city just ordered.
But what really queers the deal is the origin of the main ingredient:
According to the same life-cycle analyses that now condemn biofuels, tar-sands oil has three times the carbon impact of conventional oil.
Less conscientious cities will hardly burn any of the stuff. But do-gooding Toronto will be swimming in it.
December 08, 2008
'Killing the pipeline' with delays
NORVAL SCOTT
Globe and Mail
December 8, 2008
'High degree of incompetence' of government-appointed joint review panel is putting Arctic jobs, exploration in jeopardy, critics say
CALGARY The fate of the $16.2-billion Mackenzie gas pipeline, which would open up Arctic gas reserves for development and provide a huge economic boost for Canada's North, is hanging by a thread as a new set of regulatory delays could mean the project never gets built.
"I'm really quite concerned," Northwest Territories Premier Floyd Roland said in an interview. "It's a delay on another delay, and we've not got a clear answer as to why. ... It's shaken the confidence of the business community."
The government-appointed joint review panel (JRP) last week said it would release its environmental impact report on the pipeline in December, 2009, instead of spring, 2009, as previously expected. While project operator Imperial Oil Ltd. hasn't yet said how the new setback could impact its construction schedule, the pipeline's expected completion date of 2014 could now be pushed back even further.
The setback is the latest in a series of unexplained delays by the JRP, which was formed in 2004 to evaluate the potential impact of the Mackenzie project. The pipeline, if constructed, would connect gas fields in the Arctic to North American markets.
The line would open up a new production region and breath life into Arctic economies.
The seven-member JRP, headed by federal civil servant Robert Hornal, was originally supposed to make its report by November, 2007, but has said it has too much information to analyze.
Stakeholders say the new delays would have an enormous effect on activity in the North, creating a loss of pipeline construction work and dissuading Arctic gas exploration.
"It's devastating. It's incomprehensible that a process like this would take so long," said Nellie Cournoyea, chairwoman of the Inuvialuit Regional Corp. "The jobs and contracting opportunities will come to a total standstill. ... Everyone is shaking their heads."
"Indirectly, they are probably killing the pipeline and the activity that is taking place in our region," she added. "There's certainly quite a high degree of incompetence in [the JRP]."
Brendan Bell, former NWT Industry Minister, said the mood in the region was one of "disappointment and outrage" and that people increasingly believe the JRP "is incapable or uninterested in ever producing a final report."
"At a time when many are crying for more infrastructure projects, this project is a natural fit [for Canada]," he said. "We need fiscal stimuli for the country, but this regulatory distress is jeopardizing the whole thing."
Imperial Oil had once planned to finish building the Mackenzie pipeline by 2009, but has been hit with a series of frustrating hurdles that have set back its plans to bring Arctic gas to North American markets. Even as the JRP process has ground on, Imperial has yet to resolve aboriginal land-access issues or the financial terms for constructing the pipeline with the government.
"The report needs to be brought to a conclusion and given to the parties so that they can get on with their side of the work," Mr. Roland said. "We need clarity from [the JRP]. This is a project that industry is willing to make a huge investment in that benefits the rest of Canada."
December 02, 2008
Talk of Alaska: Oil Spills and the Culture of Law
From Alaska Public Radio Network
Oil Spills and the Culture of Law
December 2, 2008
Audio track here:
www.sqwalk.com/media/APRN_TalkOfAlaska_RikiOtt_20081202.mp3
(Big file, 27 mb, if it won't stream for you, it's a heck of a download.)
Nice irony, this program is sponsored in part by BP Alaska "where training Alaska's future work force is a priority."
In addition to the Exxon Valdez, two other oil spills were mentioned on the program:
Exxon Valdez, 22-Mar-1989, Prince William Sound, Alaska,
- carrying 191,000 tonnes (1,264,000 barrels) of crude oil, spilled 38,800 tonnes (257,000 barrels or 11 million gallons)
- en.wikipedia.org/wiki/Exxon_Valdez_oil_spill
Hebei Spirit, 07-Sep-2007, east coast of South Korea,
- carrying 260,000 tonnes of crude oil, spilled 10,800 tonnes
- en.wikipedia.org/wiki/Hebei_Spirit_oil_spill
Selendang Ayu, 08-Dec-2004, Unalaska Island, Alaska
- carrying soybeans from Seattle to China
- spilled 1100 tonnes (8333 barrels, 350,000 gallons) - 80% of the Bunker C and diesel fuel oils on board
- en.wikipedia.org/wiki/Selendang_Ayu
One caller makes this point: "That guy that shot the holes in the pipeline. How much time is he doing? How much of a fine did he get?"
Daniel Lewis is his name. He's from Livengood, Alaska, believe it or not. He was drunk on October 4, 2001 (as was Joseph Hazelwood when last in command of the Exxon Valdez). "A jury found him guilty of criminal mischief, assault and drunk driving, all felonies, and the misdemeanor counts of oil pollution and misconduct involving a weapon, and causing 285,000 gallons of crude to coat a forested area has been ordered to pay over $17 million in restitution for the act." Lewis is in jail in Fairbanks serving a 16-year sentence. In 1978, about 670,000 gallons of oil spilled after a hole was blasted with explosives near Fairbanks. No one has ever been arrested or charged for that incident.
www.solcomhouse.com/trans.htm
Talk of Alaska: Exxon ‘Valdez’ Oil Spill of 1989
Tue, December 2, 2008
Are we on guard against another major oil spill? As the checks finally go out to those damaged by the Exxon Valdez oil spill — nearly 20 years after it happened — “Talk of Alaska” will take a look at lessons learned, and lessons still UN-learned, from that event and its aftermath.
HOST: Steve Heimel, APRN
GUESTS:
Dr. Riki Ott, author of Sound Truth & Corporate Myth$: The Legacy of the Exxon Valdez Oil Spill and Not One Drop: Betrayal and Courage in the Wake of the Exxon Valdez Oil Spill
Marc Galanter, Professor of Law emeritus, University of Wisconsin and author of Lowering the Bar: Lawyer Jokes and Legal Culture
Edison's rooftop solar project powers up
COMMENT: The "consumer activists" critical of this program are not critical of this program. Their criticism is of who is expected to pay for it. Their argument is that Edison, a for-profit utility corporation, should be footing the capital bill, not expecting its ratepayers to pay the cost. But won't all costs ultimately be recouped from ratepayers?
Edison estimates power from the rooftops project will cost 27 cents a kilowatt hour, compared with an average of 8 cents a kilowatt hour from conventional generation.
 Solar panels atop ProLogis’ warehouse in Fontana can power about 1,300 homes. The building is the first of 150 that Edison hopes to outfit with panels. (Gina Ferazzi / Los Angeles Times) |
The utility's ratepayer-financed plan to outfit 150 buildings with the panels is cheered by business owners but criticized by consumer activists.
By Marla Dickerson
LA Times
December 2, 2008
Southern California Edison on Monday unveiled its newest power plant: 33,700 solar panels atop a warehouse in Fontana that will feed green energy directly into the grid.
It's the first piece of what the utility says could become the largest rooftop solar installation in the world, a swath of photovoltaic panels spanning two square miles.
The 600,000-square-foot warehouse rooftop, owned by logistics firm ProLogis Inc., is the first of 150 commercial buildings that Edison is looking to outfit with solar panels over the next five years. Collectively, solar panels on all those roofs would provide 250 megawatts of electricity, enough by Edison's reckoning to power more than 160,000 homes when the sun is shining.
Gov. Arnold Schwarzenegger was on hand to flip a mock switch on the 2-megawatt Fontana system, which cost $10 million and can light about 1,300 homes.
"I am a fanatic about renewable energy, and I have been trying to push the power companies . . . to create more," said Schwarzenegger, who urged Edison to move even faster on its proposed plan.
If approved by state regulators, Edison's photovoltaic project would be the largest ever attempted by a U.S. utility; 250 megawatts roughly equals the capacity of all the solar panels manufactured in the United States last year.
The massive size reflects the pressure California's investor-owned power companies are under to meet state mandates requiring them to boost the use of clean energy. It also underscores an evolution in solar financing. Rather than pay for their own panels, companies such as ProLogis are increasingly leasing out their roofs to utilities or striking long-term power contracts with third parties, which own, install and maintain the panels.
The approach is a hit with business owners who are finding their roofs to be unexpectedly valuable real estate. Urban solar is also popular with environmentalists because it can be linked to existing transmission lines and it transforms barren industrial space into platforms for clean power.
"This is exactly what all the energy companies should be doing," said Terry Weiner, conservation coordinator for the San Diego-based Desert Protective Council. She said the solution to global warming "is right there on the roof."
But not everyone is enamored of Edison's plan. The Rosemead-based utility, a subsidiary of Edison International, wants its customers to pick up the nearly $1-billion tab for the proposed 150-roof project.
Consumer activists object. They say Edison should be looking to cheaper sources of renewable power, such as large solar and wind farms and geothermal plants. They contend that Edison International shareholders, not utility ratepayers, should finance the company's huge bet on photovoltaic rooftop solar, one of the most expensive forms of clean energy.
Edison used so-called thin-film panels on its first rooftop project. Supplied by Tempe, Ariz.-based First Solar Inc., that technology is significantly cheaper than traditional silicon-based solar cells. Still, Edison estimates that electricity from the Fontana facility costs about 27 cents a kilowatt hour, compared with an average of 8 cents a kilowatt hour from conventional generation.
"This is not the most cost-effective renewable they could invest in," said Sepideh Khosrowjah, policy advisor for the Division of Ratepayer Advocates of the California Public Utilities Commission. The independent advocacy operation has asked the commission to reject the ratepayer-financed plan. Others fear that Edison would drive up the cost of solar panels by gobbling a limited supply and that the utility would have an unfair advantage over private-sector solar providers, which don't have a captive group of ratepayers to fund their operations.
"This is a solar monopoly that will eliminate its competition," said Michael Boyd, president of the nonprofit Californians for Renewable Energy Inc., in a filing with utility regulators.
Edison executives said their entry into the market would help to lower solar panel prices for everyone because of economies of scale. The company's big orders would help manufacturers improve designs, increase efficiency and ultimately cut prices, said Ted Craver, chief executive of Edison International.
Edison is complementing, not competing, he said, with the private-sector firms that are thriving under California's existing Million Solar Roofs Initiative. That program provides hefty state incentives to homeowners and businesses that install systems less than 1 megawatt in size.
Craver said Edison's photovoltaic project aimed to install systems ranging from 1 megawatt to 2 megawatts on commercial rooftops.
"It fills a gap," Craver said.
California law requires Edison, PG&E Corp.'s Pacific Gas & Electric Co. and Sempra Energy's San Diego Gas & Electric Co. to procure at least 20% of their electricity from renewable sources by 2010. Schwarzenegger wants to boost that minimum to 33% by 2020. Edison is currently at 16%.
Edison already is the nation's largest purchaser of solar power with 354 megawatts under contract. Much of that comes from large-scale solar projects located in remote desert areas, which take years to permit and build.
Craver said Edison wanted to add urban rooftop solar to the mix because it can be rolled out rapidly, getting more clean megawatts online sooner. The Fontana project was completed in a few months.
Edison on Monday announced its second rooftop project atop a 458,000-square-foot industrial building in Chino that is slated for completion in early 2009. Craver said it would probably be Edison's last if the state Public Utilities Commission didn't approve its proposal.
Dickerson is a Times staff writer.
marla.dickerson@latimes.com
Alaska marine biologist makes an impassioned case
against oil at all costs
By SILJA J.A. TALVI
Seattle Post Intelligencer
December 1, 2008
Dr. Riki Ott has a special response to Alaska Gov. Sarah Palin's ardent push for oil drilling in the Arctic National Wildlife Refuge.
From her hometown in Cordova, Ott is sending the former vice presidential nominee a copy of her book, "Not One Drop: Betrayal and Courage in the Wake of the Exxon Valdez Oil Spill" (Chelsea Green Publishing, 327 pages, $21.95).
In the same package, Ott will include several rocks from Prince William Sound. Rocks covered with oil. The same oil that bled out of the Exxon Valdez tanker in 1989, gushing its black poison into a pristine Alaskan landscape. Although nearly 20 years have passed since the largest oil spill in U.S. history, there are still at least 55 tons of oil buried in Prince William Sound, but there's a noticeable absence of political sloganeering on this front.
That's why Ott, a marine biologist who earned her doctorate at the University of Washington, has come up with the "Why It's Not OK To Drill, Baby, Drill Tour," celebrating the release of her book. The visionary environmental leader and self-described "fisherm'am" talked to the P-I.
 Dr. Riki Ott a marine biologist who earned her doctorate at the University of Washington, is celebrating the release of her book "Not One Drop" with a "Why It’s Not OK To Drill, Baby, Drill Tour," and sending a message to Alaska Gov. Sarah Palin. |
OTT: Anybody who lives on such a beautiful shoreline should have the same heart- and soul-level connection to the environment around you. ... Up in Cordova, we feel a strong connection to the Puget Sound. ... We are very linked as the fishermen, native people, recreational users of water bodies. We are the ones who bear the brunt of these industrial accidents.
What were you doing when you first realized that Exxon Valdez had begun to spill into Prince William Sound?
I had been asked the night before to give a teleconference to the community of Valdez ... on the positive and negative effects of the oil industry they depend on for their livelihoods. This was 1989, and (the local government in) Valdez was beginning to realize that an oil spill was possible despite what the corporations said, and that such a spill would be devastating. ... I was talking to them on behalf of fishermen, on behalf of people who made a living from the land and the water ... (Ott was a leader of Cordova District Fishermen United).
At 9:16 p.m., in the middle of my talk, Exxon Valdez -- fully loaded with 53 million gallons of crude oil -- took off from the tanker terminal. After the talk, I went home ... and went to sleep.
By 5:30 a.m., over 10 million gallons had already escaped into the sea. At 7 a.m., Jack (Lamb, the acting president of CDFU), came to my door to tell me we had had "the Big One." We just scrambled into disaster mode.
This summer, the U.S. Supreme Court slashed the initial $5 billion that Exxon was to pay to $507 million. How do the oil spill survivors feel about this?
This is a crucial question for our times right now, and not just for us in Cordova and Alaska, but for the world. What is environmentally sound development? We've got to get to the point where our human rights count, our lives count, and our little communities count more than corporate profits. How is it that corporations like Exxon, using our land and labor, are still able to shove injured communities under the carpet and roll right on with their profit-making machine while we're committing suicide, going out of business, watching our fish die, and losing our homes?
You write in "Not One Drop" that the damage and loss caused by the oil spill was far more toxic than the obvious damage to the environment and the local economy. You write of "invisible losses." Can you elaborate?
The truth is that Cordova gutted itself after the spill, especially after our fish runs collapsed in '92 and '93. The stress manifested itself in all manner of horrible things, including substance abuse, alcohol abuse, domestic abuse, depression, PTSD, isolation, divorce and suicide.
Do you feel like you're finally recovering?
Yes. We've made amazing progress in rebuilding and helping each other. ... Also, we, like other people, were duped too long into believing that it's all about making money. ... What corporations are doing, the way they're doing it, (trashes) lifestyles, cultures and ecosystems around this planet ... (and) we the people can make it stop. We have to believe in that.
sisu@well.com
You might also be interested in this article about Riki Ott:
"Fisherma'am" Proposes 28th Amendment:
Separation Of Corporation And State
November 27, 2008
Shell delays [another] Alberta oil sands project
Reuters
Globe and Mail
November 27, 2008
CALGARY — Royal Dutch Shell Plc is delaying another Canadian oil sands project, saying Thursday it has withdrawn a regulatory application for its 100,000 barrel per day Carmon Creek thermal project as it looks to shave costs by revamping the project.
The delay is the latest blow to what had been an ambitious schedule of projects for Canada's oil sands. The oil sands region of northern Alberta contains the largest oil reserves outside the Middle East, but they are technically challenging and expensive to extract.
Shell, one of the biggest players in the oil sands, last month delayed an expansion of its oil sands mining operation when costs rose and oil prices fell.
Adrienne Lamb, a spokeswoman for the company, said Shell is reviewing and redesigning the Carmon Creek project and plans to submit a new application to regulators. The company hasn't yet decided when that will take place.
“The review is looking at opportunities to reduce costs and improve the profitability of the project,” Ms. Lamb said. “As a result of that we expect there will be some changes ... Rather than update the application we decided the best path forward is to submit a new application.”
Shell had been expected to make an investment decision on Carmon Creek in 2010. However Ms. Lamb said that will now be delayed because of the changes and the company hasn't decided on a new schedule.
Shell had not released a cost estimate for the project, which was to have been built in two 50,000 barrel per day tranches.
Unlike the company's mining operations, Carmon Creek would use thermal techniques to produce the reserves, pumping steam into the ground to liquefy the tar-like bitumen so that it can be pumped to the surface.
Along with Shell, Suncor Energy Inc., Nexen Inc., Petro-Canada, Canadian Natural Resources Ltd. and others have said they'll delay or defer projects in the region because falling oil prices have squeezed profits while costs stay high.
A shortage of skilled labour in the remote region has helped push up costs as companies compete for a small pool of tradesmen and contractors.
See also:
Shell halts Canadian sands development
November 25, 2008
Pipeline unsafety - notes from New Orleans
COMMENT: In 1999, a gasoline pipeline running through a park in Bellingham, blew up, killing three young people. The legal settlement included a court-ordered creation of a $4 million trust, the Pipeline Safety Trust. The Trust concerns itself with improving safety regulations, oversight and performance of pipelines and other methods of moving oil and gas, including liquified natural gas (LNG).
Californian Michael Holmstrom was at the Trust's annual conference in New Orleans last week. His observations are trenchant. While the stats and the data are from the US, there is less transparency, less regulation, and less oversight of pipelines in Canada, and especially in BC.
This builds on data that the pipeline industry finds very convenient, and hides behind at every opportunity: that many incidents ("incident" meaning "unintended loss of contents", and which range from a pinhole corrosion leak to a blast that kills) are caused by third parties. But as Holmstrom's notes reveal, pipeline operators are responsible for a great many incidents themselves. Their hands are far from clean.
But to get industry and government to say, "it'll never happen again" is impossible. Blame avoidance, misdirection, obfuscation, and wheedling sometimes seem like the sole preoccupation of these two after an accident. Who got called first? A first responder? Or a lawyer?
A case in point is Kinder Morgan's Trans Mountain Pipeline oil rupture in Burnaby in 2007. The actual puncture was caused by a machine operator working for Cusano Contracting, hired by the City of Burnaby. Regulations required the operator to hand-dig and expose the pipe if he had any doubt as to the location of the pipeline. He didn't do that. Great alibi for Kinder Morgan. But either Kinder Morgan's maps were incorrect, or the directions the operator received from Kinder Morgan were incorrect or misunderstood. In the finger-pointing, which at last look involves Cusano, Burnaby, and Kinder Morgan, and in the claims for damages from residents, Shell and Chevron, lawyers will enrich themselves, and justice will not be served.
Canada's Transportation Safety Board, whose job it is to determine what did happen and who was at fault, will probably take yet another year before issuing its gently worded report on the cause of the incident and what should be done so it won't happen again.
PPTS = Pipeline Performance Tracking Systems
API/AOPL = American Petroleum Institute / Association of Oil Pipe Lines
A presentation of note from New Orleans
Mike Holmstrom
24 November 2008
I guess I'll start off about New Orleans.
Beyond the beignets & Cajun burgers, I found the info from Cheryl Trench, from Allegro Energy Consulting, to be very interesting. This was Excavation damage info that was mined from API/AOPL reports. This can be found here:
PPTS Operator Advisory: More To Do on Excavation Damage
Excavation Damage Basics
What: Excavation encompasses a range of types of damage resulting from a range of activities, not all of which may strictly be considered to be "excavation." The damage is generally caused by a foreign object such as a backhoe, auger, or plow hitting and damaging the pipeline. It does not include damage caused by earth movement such as subsidence or a landslide.
Who: As used in PPTS, excavation damage can be caused by first, second, or third parties. PPTS defines them as the following:
First Party – Employee(s) of the operator.
Second Party – The operator's contractor.
Third Party – Person or persons not involved with operating or maintaining the pipeline. Third parties can be farmers, landowners, developers, excavators, road crews, other pipeline operators, or utility workers not related to the pipeline, among other types of entities.
OK, seems like routine past info, BUT;
The chart on page 6 shows that 16% of the excavation damage to liquid pipelines is from that pipeline's employees or their contractors!!!
In Medicine I think it's called Malpractice. Sounds like a bunch of refresher training is needed.
Almost as bad is the amount of damage done by other pipelines (!!!), or by other One Call entities, cable, water, phone, etc. Another 27% there.
"Do as we say about One Call, but not as we do"??
-Mike Holmstrom
November 21, 2008
Scientists assail easing of rules for natural gas exploration
Mike De Souza
Vancouver Sun
November 21, 2008
Planned changes cited as path to ecological crisis in boreal forests
OTTAWA -- The Harper government's plans to ease regulations on environmental assessments for natural gas exploration will lead to an ecological crisis in the Canadian Arctic, a group of leading international scientists said Thursday.
The scientists, who are promoting a massive expansion of protected areas in the boreal forest as part of a campaign for Pew Charitable Trusts, compared the proposal to the measures that led to the current global economic crisis.
"The shining example of deregulation is the present free-fall of the world's developed economies," said Jeremy Kerr, a biology professor from the University of Ottawa.
"You can apply exactly the same analogy to natural systems. Deregulating development in natural systems is likely to do ecologically, exactly what deregulation did economically. There is not a defensible position to be made there on any scientific grounds that I'm aware of or have ever heard of."
In its throne speech, the government pledged to "reduce regulatory and other barriers to extend the pipeline network into the North" and increase exploration of natural gas in the north to meet energy needs in southern Canada and the rest of the world.
But the scientists, who are serving as expert advisers for Pew's International Boreal Conservation campaign, said this would put Canada at odds with a new administration in the U.S. led by Barack Obama, that would likely call for more stringent environmental protection and assessments.
They also praised the Ontario and Quebec governments for pledging to protect large areas of the boreal forest, one of the largest intact forests remaining on earth.
"When you're talking about global warming, plants and animals are moving north in the northern hemisphere," said Terry Root, a biology professor from Stanford University in California. "What's up north is going to be this wonderful forest that's going to act as a buffer for all these species in North America."
It's estimated that the boreal forest stores about 27 years worth of global carbon dioxide emissions in its trees and soil across a territory that is estimated to cover 5.7 million square kilometres. The scientists met on Thursday with a senior official from Ontario Premier Dalton McGuinty's office, and they are hoping other jurisdictions in Canada follow up on the measures promised by the two central Canadian provinces.
"It is one of the last places on earth where there remains an opportunity to conserve something that is still really big, and that still works just fine," said Kerr.
The group also noted that development in the Alberta oilsands is a particular danger, not only because of high energy consumption in the oil extraction process, but also because of greenhouse gas emissions generated through land use changes in the forests that are being used for production.
The markets have put an end to the oilsands boom
Gary Lamphier
Vancouver Sun
Thursday, November 20, 2008
Welcome to the oilsands moratorium. No one will call it that, of course. Not officially, anyway. There's been no Alberta government edict, and no sweeping regulatory ruling requiring a slowdown in the pace of new projects around Fort McMurray.
Still, it's a moratorium just the same. Yesterday's oilsands boom is gone. It's not a bust, but the post-boom era has clearly arrived. Last week's announcement by Petro-Canada and its partners that they'll delay a final decision on whether to proceed with the proposed $24-billion Fort Hills oilsands megaproject pretty much seals the deal.
Whether the pause lasts 12 months, two years or five years, no one knows. Somewhere, Maude Barlow must be celebrating.
Although former Alberta premier Peter Lougheed has lobbied long and hard for such a slowdown -- his campaign was the subject of a recent cover story in one national business magazine -- he can't take credit for this, either.
With oil prices at $55 US -- $92 below July's peak price of $147 -- and financial markets in turmoil as a global recession hits, producers are heading to the exits en masse, putting their expansion plans on hold.
In just a few weeks, the markets have accomplished what Lougheed, the Pembina Institute and others have demanded for years. Just as the bull market triggered a boom, the bear market has taken it all away.
Let me be clear. I believe this is a good thing, despite the short-term pain that will be inflicted on some as projects are deferred. So do many oil-and-gas industry execs.
As I've said repeatedly, the frenetic pace of expansion in the oilsands over the past five years caused a lot of harm.
Project costs skyrocketed, infrastructure pressures soared, labour shortages were rampant, worker health/safety issues mushroomed, housing costs went through the roof, and overpaid twentysomethings spent like drunken sailors.
Many thought the boom would never end. But booms always end. That's why they're called booms.
Employers outside the oilpatch had to pay big bucks to attract workers, even though they didn't generate the same fat profits as energy firms.
High school kids dropped out to earn big bucks in the 'patch. Real estate speculators flipped condos like hamburgers.
None of this was sustainable, or healthy. Melcor CEO Ralph Young has seen many real estate cycles come and go, and this one had all the earmarks of a classic bubble, he says.
"Looking back, 2006 and especially 2007 were years where very, very foolish decisions were being made. We saw it in the real estate market, and we probably got caught up in it as well," he says.
"Prices -- particularly in the residential markets, for raw land and housing, were just rising at too rapid a rate. There was rampant speculation. It became cocktail circuit talk, how much your house price was rising, and how people were [flipping] condos. That was a pretty clear sign that we'd hit an unsustainable level."
Environmental concerns also mounted. The Stelmach government's $2-billion plan to develop an integrated carbon capture and storage network -- while laudable -- came late in the game, and has been largely ignored outside Alberta.
That's just one reason why the noisy "green" lobby has been so successful in demonizing the oilsands, which generate less than 10 per cent of Canada's carbon emissions, and a fraction of one per cent of global emissions.
Petro-Canada's announcement doesn't come as a surprise, mind you. The Calgary-based integrated oil company and its partners at Fort Hills -- mining giant Teck Cominco, of Vancouver, and UTS Energy, of Calgary -- signalled their growing concerns well in advance.
A few weeks ago, the partners indicated a decision on the upgrader portion of the project might have to wait indefinitely, while they pondered whether to proceed with the mine alone, which accounts for more than half the total cost of the project.
The partners previously revealed that cost estimates for the project had ballooned by more than 50 per cent, from $14 billion to roughly $24 billion.
With oil prices down to $55, and most analysts saying Fort Hills requires $90 oil to be viable, the writing was on the wall. Petro-Canada now joins a growing list of key oilsands producers that have announced project delays in recent weeks, including Suncor, Canadian Natural Resources and Royal Dutch Shell.
The good news? Project costs are already falling rapidly, as costs for steel and other materials sink, and demand for labour eases.
Like other players, Petro-Canada says it will go back to the drawing board and re-examine every aspect of its costs before any final decision on Fort Hills is made.
Ironically, the oilsands giants only have themselves to blame for pushing project costs to sky-high levels. With so many producers trying to squeeze through the same narrow door at once, the result was entirely predictable. The wild speculation that drove oil prices to $147 only made the situation worse.
Now, the pendulum has swung the other way. Sanity is slowly returning, and the seeds of the next up cycle in the oilsands are being sown.
© The Vancouver Sun 2008
November 20, 2008
CBC Centre Stage: Is Alberta's oil dirty?
Wild Rose Country
CBC Edmonton
Thursday, November 20, 2008
 Alberta's oilsands: Black gold or black eye?
One in six Albertans are directly and indirectly employed in the energy sector, generating 30% of the province's revenues. But are the oilsands' social, health and environmental impacts giving it a bad name? Wild Rose explores the top five reasons Alberta's oilsands are considered dirty and asks if it's really black gold or just Alberta's black eye. More ...
(Photo: Jeff McIntosh/CP) |
"Is Alberta's oil dirty?" To answer that question, we're joined by Andrew Nikiforuk, author of Tar Sands: Dirty Oil and the Future of a Continent, Preston MacEachern, a scientist with Alberta Environment, and Jim Carter, past president of Syncrude.
Click here to download the discussion. (It's a 30 mb MP3 file. If it doesn't stream for you, it's a lengthy download.)
Wild Rose Country is a provincial program heard weekdays from 12:00 to 2:00 p.m. on CBC Radio One (1010 AM in Calgary and 740 AM in Edmonton). Wild Rose Country connects urban and rural Albertans by exploring the environmental, agricultural, educational and political issues affecting everyone from the far north to the deep south of the province.
Wild Rose Dirty Oil series, here.
Nikiforuk's, Tar Sands: Dirty Oil and the Future of a Continent, here.
November 19, 2008
Palin's Pipeline at Risk as Economy Slows
By RUSSELL GOLD
Wall Street Journal
November 19, 2008
The troubled economy that helped sink Alaska Gov. Sarah Palin's hopes of becoming U.S. vice president now is undermining prospects for building the $30 billion natural-gas pipeline she touts as her administration's signal achievement.
The state faces an increasingly gloomy future if construction is delayed, since the majority of the state's unrestricted revenue comes from energy-production taxes and royalties -- a situation unlike any other state. Without a gas pipeline, the annual dividend checks Alaskans get would eventually dwindle and residents could face their first income tax.
As Gov. Palin returns from the campaign trail, she is finding a very different landscape than when she left Juneau in August. Shortly before she was selected as Sen. John McCain's running mate, the Alaska legislature passed a bill to jump-start preliminary work on the pipeline. Not long afterward, the state began handing out record-high annual checks to every Alaskan, sharing the state's windfall from high oil prices.
Today, the global economic slowdown is making it harder to maintain momentum behind the project. At the same time, the combination of falling oil production and falling oil prices has left state officials wondering if they can balance their budgets in the current or coming fiscal years.
There is growing pessimism in Alaska that the pipeline will be built anytime soon. Mike Chenault, the incoming Republican speaker of the state House of Representatives, said he believes the odds of it moving forward in the next couple of years are less than 50-50. "In the end, it is going to be economics that drive this process and not how much we want it to happen," he said.
The economics of building a pipeline are deteriorating as demand for cleaner-burning natural gas slows and prices fall. "Current economic conditions are not good for the Alaska gas line, and I expect considerable delays in the initiation of its construction," predicts Pedro van Meurs, an energy consultant who worked on the project under previous Alaska governors.
Still, for the time being, preliminary work on two rival pipeline projects is moving ahead. ConocoPhillips and BP PLC have committed $600 million for a detailed assessment of building a pipeline. And in August, the state gave $500 million of incentives to TransCanada Corp. to do similar work on a competing plan. The projects have begun hiring employees and signing engineering contracts. But this work could end abruptly in 2010 if energy producers decide there isn't enough demand for gas to justify the investment.
One big hurdle is the growing success of gas producers in the continental U.S. Either pipeline would bring more than four billion cubic feet of the fuel from northern Alaska down to Chicago to feed an under-supplied market. But booming natural-gas production in the U.S. is outpacing demand. In August, wells produced 5.4 billion cubic feet a day more than a year earlier, according to federal data.
For Alaskans, a pipeline would bring a financial bonanza -- and help replenish dwindling revenue from oil production.
Gov. Palin focused on passing the $500 million incentive package and selecting Calgary-based TransCanada to develop the 1,700-mile pipeline. But TransCanada needs commitments from the three big producers controlling the gas on Alaska's North Slope before it can secure financing for the project. And those companies are balking. Exxon Mobil Corp. has so far refused to participate. BP and ConocoPhillips are backing their own pipeline and have expressed reservations about joining the state-backed pipeline.
If West Coast oil prices average about $60 a barrel from today through the end of the fiscal year in June -- which would require Alaskan North Slope oil to rise above the current $49.89 -- the state would end its budget cycle with a small surplus. But another year of $60 prices would mean a $1 billion deficit, says David Teal, head of Alaska's legislative finance division.
Write to Russell Gold at russell.gold@wsj.com
Obama: A new chapter
President-elect Obama promises “new chapter” on climate change
Change.gov
Tuesday, November 18, 2008
More than 600 climate change leaders from across the country and around the world convened in Los Angeles today for the opening sessions of the Global Climate Summit, a 2-day event arranged by California Governor Arnold Schwarzenegger to break gridlock on the issue ahead of next month's United Nations Climate Change Conference in Poznan, Poland.
In a short video addressed to the Summit's attendees, President-elect Obama emphasized his enthusiasm for the Poznan Conference and promised that his administration would mark a "new chapter in American leadership on climate change."
"Few challenges facing America -- and the world -- are more urgent than combating climate change," he said. "Many of you are working to confront this challenge....but too often, Washington has failed to show the same kind of leadership. That will change when I take office."
President-elect Obama is committed to engaging vigorously with the international community to find solutions and help lead the world toward a new era of global cooperation on climate change.
"Let me also say a special word to the delegates from around the world who will gather in Poland next month: your work is vital to the planet," he said. "While I won’t be President at the time of your meeting and while the United States has only one President at a time, I’ve asked Members of Congress who are attending the conference as observers to report back to me on what they learn there."
Watch the full video of Barack's remarks below, or visit the Global Climate Summit home page to learn more.
COMMENT: The Los Angeles Governors' Summit includes representatives from other national and regional governments around the world. It's an international conference. Canada appears to have sent no-one. British Columbia has sent ... Barry Penner.
Governors' Global Climate Summit, 18-19 Nov 2008
Summit Overview
Summit Agenda
November 17, 2008
Wall Street Journal Editors Put Brakes on BP Story
Corporate Crime Reporter
November 15, 2008
The editors of the Wall Street Journal last week slammed the brakes on a story detailing how the Justice Department shut down a major environmental crimes investigation of BP Alaska.
That's according to Scott West, the now retired lead criminal investigator on the case.
West was leading an 15-month investigation into the March 2006 oil spill on the North Slope when in August 2007 he was told that BP would be allowed to plead to a misdemeanor.
In October 2007, BP did in fact plead guilty to a misdemeanor and was fined $20 million.
West was with the Environmental Protection Agency's Criminal Investigation Division (CID) until he resigned on October 29, 2008.
West says that on October 30, he had a detailed interview with the Journal's Jim Carlton about how the BP investigation was abruptly shut down.
"The agreement I had with Jim Carlton was that the Wall Street Journal was going to publish an article about this case on Monday, November 3, the day before the election," West told Corporate Crime Reporter last week. "I had also spoken with KING5 News, the NBC affiliate here in Seattle. They had me on camera. But I had them under embargo until Monday morning. Then late on Sunday, I was told that the Wall Street Journal editors decided not to go with the story, that they were going to push it off. The Wall Street Journal reneged its promise to me. But KING5 ran it."
Why did Wall Street Journal not run the story?
"I don't know," West said. "I have my suspicions. I understand that the Justice Department was putting a lot of pressure on the Journal. And the Wall Street Journal attorneys were concerned."
During a phone interview with Corporate Crime Reporter last week, West again reiterated that he was told by Karen Loeffler, the lead criminal prosecutor at the U.S. Attorney's office in Alaska, that the prosecutors in Alaska were "just following orders" from Washington to shut down the investigation into BP and to accept the plea to a misdemeanor.
"I hate dragging Karen Loeffler into this," West said. "She is a career prosecutor. A very decent person. Nevertheless, this occurred. Karen took me aside. We were in the hallway at the U.S. Attorney's office. And she directed me into an office off the hallway and she shut the door. And she said look, I'm sympathetic to how you are feeling. And she said you need to know, the decision was made by Ron Tenpas back at Main Justice. And we here are just following orders. I think she said this to try to calm me down. I had no reason to disbelieve Karen. When she told me it was Ron Tenpas, I didn't ask how she knew it was Ron Tenpas. But that's what the woman told me."
Tenpas is the Acting Assistant Attorney General for the Environment and Natural Resources Division at Main Justice.
When West was told last year that his case was being settled for a mere misdemeanor and a $20 million fine, he asked the prosecutors why the rush to settlement?
"Why are we doing this?" he asked. "Look at all of the investment we have in this case. I kept getting back from the senior prosecutors at the Justice Department well, BP wants to wrap this up. We don't want to waste our resources any more. They are willing to plead now. That could save us the expense of a lengthy trial."
"I was screaming bloody murder," West said. "I said I have at least a year to go give me one more year. No, Scott, we are done. Give me six more months. No we are done. Give me three more months, to at least chip away at some of the stuff. No, Scott, BP wants to wrap up this case, Texas City, and the propane trading investigation out of Chicago by October."
West says that BP's lead outside lawyer Vinson & Elkins partner Carol Dinkins tried to get the case dropped altogether, but she was rebuffed early in the negotiations.
When he learned that prosecutors would settle for a misdemeanor plea, West said he called for "an astronomical fine."
He then had a CID lawyer draw up a sentencing memo with three alternative fines topping out at $300 million. But prosecutors opened negotiations with the basement fine $20 million. BP accepted.
[For a complete transcript of the Interview with Scott West, see 22
Corporate Crime Reporter 44(10-16), print edition only
http://www.corporatecrimereporter.com/aboutccr.html
November 16, 2008
Auburn Dam may really be dead this time
By Nancy Vogel
LA Times
November 16, 2008
If California rescinds the water rights it granted to the federal government, the troubled project might never be revived.
 The Auburn Dam may never be built at this site on the American River, 35 miles northeast of Sacramento. Construction has been a local issue since Congress authorized it in 1965. (Auburn Journal) |
Reporting from Sacramento -- Use it or lose it is the rule of California water rights, and after 43 years, the would-be Auburn Dam -- subject of one of the state's bitterest water feuds -- is about to lose it.
The proposed plug on the gold-sprinkled American River northeast of Sacramento has been declared dead many times since Congress authorized it in 1965, and there may be no reviving it now. The state is poised to take back the legal right it granted to the federal government to store water behind the dam. Without that right, the federal government cannot build a reservoir, and the state has never been inclined to build one itself.
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"Auburn Dam" are fighting words in Northern California, pitting river rafters and other nature lovers against those who say that California's thirst and the Sacramento area's vulnerability to floods demand the trapping and storing of more Sierra snowmelt.
Money is at the heart of the fight. Dam opponents argue that the multibillion-dollar price of an Auburn Dam would outweigh its benefits, while backers say a dam would eventually pay for itself and save untold lives. The struggle has played out for decades in Congress and in the halls of Sacramento and Placer County governments.
The nation's taxpayers have sunk $325 million into the project, with little to show beyond stacks of reports and a scarred canyon where construction was halted in 1975. So the state Water Resources Control Board is expected soon to finalize a draft decision to revoke the federal government's rights.
At the same time, the Auburn Dam's most powerful advocate prepares to retire from Congress. Republican Rep. John T. Doolittle of Roseville, who garnered tens of millions of federal dollars for study of a big dam at Auburn during his 18-year congressional career, decided this year not to run for reelection. He faces federal scrutiny of his ties to convicted lobbyist Jack Abramoff.
Doolittle will leave Congress in January. The race to replace him was so tight that elections officials aren't sure yet whether the winner is Republican state Sen. Tom McClintock, who vows to keep pushing for a dam, or Democrat and Air Force veteran Charlie Brown, who opposes it.
If McClintock wins, his quest for construction of an Auburn Dam would face steep odds that would be even higher after a revocation of water rights. The project would have to be reauthorized by Congress, because costs have grown tremendously since 1965, and the agencies most likely to buy water and power from the dam project have shown little interest in sharing construction costs. And the federal government would have to apply anew for state water rights.
"You'll never get the water rights back" once they are revoked, Doolittle said in a recent interview.
He predicted that an Auburn dam would be built some day, but not the kind he sought, with a big lake to provide water, electricity, recreation and flood control.
Sacramento will eventually require a dam to guard against floods, Doolittle said. But without water rights, the federal government would be limited to building a "dry" dam -- a concrete wall with a big hole in it to let the American River flow unimpeded most of the time and hold back water temporarily only in the event of a gigantic flood.
Dry dams were proposed by Sacramento flood-control officials twice in the 1990s but not funded by Congress.
"For heaven's sake, we ought to be storing water," said Doolittle. "We're the ones who supply Southern California with their water."
A dam at Auburn was long planned as part of the U.S. Bureau of Reclamation's Central Valley Project, an audacious network of dams and canals that provides subsidized water to farmers from Redding to Bakersfield. But construction at Auburn stalled after an earthquake made federal engineers rethink the seismic safety of a thin-arch concrete dam.
Work was not resumed amid concerns about cost and the submersion of nearly 50 miles of river canyon.
Various incarnations of the dam have been touted by federal dam builders, valley farmers and Sacramento flood control officials for decades, all of them attacked by local river enthusiasts and national environmental groups.
Doolittle faulted "conniving environmentalists" for persuading the State Water Resources Board last month to revoke the Auburn Dam water rights under a state law that requires rights holders to exercise "due diligence" in putting their water to good use.
Last month, in the draft revocation order, the water board noted that the federal government was supposed to finish the dam by 1975 and put all the water to "beneficial use" by 2000.
"Reclamation has failed to meet these deadlines and subsequently failed to diligently pursue a request for an extension of time," the board wrote. "Accordingly, cause for revocation exists."
The water board rejected the federal argument that California should let Washington keep the water rights out of deference to Congress, which has not undone its 1965 dam authorization.
Still, dam backers do not concede defeat.
Earlier this month, 18 persistent members of the Auburn Dam Council met, as they do the first Monday of every month, at a Coco's coffee shop in suburban Sacramento. Mostly white-haired retired engineers and water board directors, they resumed an ongoing discussion about winning over reluctant city and county officials to the merits of the dam.
"They should have this right on the wall in [Sacramento] City Hall," said Joe Sullivan, who held up a newspaper graphic showing where hundreds of people perished in the 2005 Hurricane Katrina flooding of New Orleans.
After the meeting, Sullivan, president of the Sacramento County Taxpayers League, called the expected water rights revocation "temporarily the end."
"They'll build Auburn Dam," he said, "right after Sacramento is flooded to 7 feet and people have died."
And defenders of the North Fork of the American River are not claiming victory. They figure the fight will continue as long as inundation threatens Sacramento and Southern California needs water.
Ron Stork has argued against the dam for 21 years at the nonprofit group Friends of the River. The controversy, he said, "will never go away."
Vogel is a Times staff writer.
Nancy.vogel@latimes.com
November 15, 2008
Has the sun set on clean tech?
ERIC REGULY
Globe and Mail
November 13, 2008
Once a booming industry thanks to sky-high oil prices, the feel-good trend, carbon reduction and subsidies, the financial crisis has pushed investors to give up on green energies, and like the dot-com bubble of 2000, some analysts say it's about to burst
ROME - The executives of Canadian solar-energy company Arise Technologies knew hours before yesterday's conference call that their shares were probably doomed. They could thank Germany's Solon, one of their two biggest customers, for the dark forewarning.
As they were preparing for the call, their Solon counterparts in Berlin - six hours ahead - shocked investors with the news that expected growth rates would fall by about half. The shares of Solon, the first solar-equipment company to list on the German stock market, closed down 18.3-per-cent, taking the decline to more than 75 per cent since January and not far above the 1998 initial public offering price.
In Toronto, Arise's already depressed shares slumped by 33 per cent, to close at 49 cents. The announcement of relatively minor technical problems at its new German photovoltaic (PV) factory, near Dresden, and lower-than-expected PV cell shipments in the second half of this year didn't help.
There is no longer any doubt: As far as investors are concerned, the sun has set on solar power, one of the hottest growth industries of the past decade.
"We are trading below book value even though we're quite pleased with what we've built," said Arise founder and vice-chairman Ian MacLellan. "This market is numbing."
Jim Buckee, the former CEO of Canada's Talisman Energy, thinks the clean-tech industry will revert to fringe status because it can't seem to thrive without government subsidies and because the wind doesn't always blow and the sun doesn't always shine, meaning the technologies can never fully replace coal, oil and nuclear plants.
"I think economic reality will kill the green industry," said Mr. Buckee, who now lives in Britain and lectures on climate change.
Solar energy isn't alone in its woes. Wind, biomass, biofuel and other "clean-tech" companies are getting pasted too as the financial crisis sends investors fleeing from technology names, dries up credit and freezes the IPO market. The moribund equity markets are especially bad news for the green-energy players, who depend on a steady stream of equity from growth-obsessed investors to keep moving.
"We are very fast growing companies and we need a lot of financings," said Therese Raatz, Solon's investor relations manager. "We can't turn to the capital markets now."
The price collapse has been so brutal that industry and corporate finance executives predict a shake-out as some of the weaker clean-tech companies burn through precious cash. "Bankruptcies are a real risk," said Brent Goldman, a corporate finance partner in London at BDO Stoy Hayward.
They have already started. Two weeks ago, VeraSun Energy, the second-biggest ethanol producer in the United States, filed for Chapter 11 bankruptcy protection. While no solar or wind company has gone under, failures are inevitable, Mr. Goldman and others said.
But the picture isn't entirely bleak. While the shredded share prices make comparisons to the bursting of the dot-com bubble in 2000 inevitable, some clean-tech newbies are still attracting venture-capital money, and the green agendas of president-elect Barack Obama and European Union governments offer some hope. But no one is willing to say the worst is over.
The clean-tech industry was propelled by soaring oil prices, the feel-good investment trend, Kyoto-inspired carbon-reduction efforts and a stream of government subsidies. Its growth has been phenomenal.
Take solar energy. The end product requires an expensive process that uses highly-refined silicon to make PV cells which, in turn, form part of the solar-module systems that generate electricity when the sun shines (Arise makes both silicon and PV cells; Solon buys Arise's cells to make the modules).
In the mid-1990s the solar industry was pretty much non-existent. But since 1996 or so, the compound annual industry growth has been 40 per cent. Last year PV cells collectively capable of generating 4 gigawatts (or 4 billion watts) of electricity were delivered. That's the equivalent of a couple of nuclear plants.
Solar-industry sales last year were about $30-billion (U.S.) globally, up from $2-billion in 2000, Mr. MacLellan said. Wind power experienced even greater growth rates, though solar growth is now outpacing it. When you drive along the highways in Germany, which has created 250,000 alternative-energy jobs, you're almost never out of sight of a wind turbine. Solar- and wind-power sales are still climbing, though the growth curve is going from the near vertical to the gently sloping. The fear that companies will be incapable of raising money while the financial crisis persists has accelerated the investor exodus.
There are other problems. Ms. Raatz, of Solon, said falling government subsidies are rattling investors. Germany had been cutting its "feed-in" tariff - the highly inflated price it pays to generators of clean energy - by about 5 per cent a year. But a new law lifts the phase-out rate to 8 to 10 per cent a year. Spain, whose feed-in tariffs were more generous than Germany's, is also taking the axe to subsidies. "Spain's support led to enormous developments and they had the best [clean-tech] returns in the world," she said.
Growth rates and project developments are now crumbling everywhere. Earlier this year, T. Boone Pickens, the Texas oilman turned green-energy guru, announced plans to build the world's biggest wind farm. He has since put the plans on hold because oil prices have declined by well more than half since their July peak of $147 a barrel.
Solon cut its growth forecast rate next year to about 25 per cent from 50 per cent. The prices of PV cells are expected to fall between 7 and 11 per cent next year and shares of almost all clean-tech companies are sinking. Vestas Wind Systems of Denmark is off two-thirds from its peak. The same is true of Gamesa, a Spanish wind turbine maker. The major solar companies have had similar declines, though Arise's fall - more than 80 per cent from its April high - has been harder than most.
Mr. Goldman, the BDO corporate finance partner, said the number of renewable energy initial public offerings on London's junior Alternative Investment Market (AIM) has fallen off a cliff. There has been exactly one - an Irish company called Kedco, in October - this year compared to 13 in 2007 and 21 the year before. The pace of mergers and acquisitions has also declined.
Mr. MacLellan and Mr. Goldman buy the doomsday scenario outlined by Mr. Buckee, the former Talisman chief. Mr. Obama has promised to "strategically invest" some $150-billion over 10 years to develop a clean-energy economy. The United Nations and governments in many developed countries are calling for "green deals" to reduce carbon dioxide output and create tech jobs. Germany's goal is to generate 20 per cent of its electricity from renewable energy sources by 2020 and it's already halfway there. "It's going through a hard time now, but clean tech will bounce back," Mr. Goldman said.
ARISE TECHNOLOGIES (APV)
Close: 49 cents, down 24 cents
*****
Clean energy
ARISE TECHNOLOGIES (APV-TSX)
Company based in Waterloo, Ont., makes photovoltaic cells, which produce solar energy. Recently opened a plant in Bischofswerda, Germany. Stock has fallen 84 per cent from its 52-week high in April.
VESTAS WIND SYSTEMS (VWS-Copenhagen)
Wind turbine maker, based in Randers, Denmark, is the world's No. 1 manufacturer of wind power systems. Operates in a dozen countries and has annual revenue of more than $5-billion. Stock has fallen 62 per cent from its 52-week high.
GAMESA (GAM-MADRID)
Spanish wind-energy firm, based in Vitoria-Gasteiz, is the second-largest company in the sector. Also involved in the construction of photovoltaic power stations. Stock has fallen 33 per cent from its 52-week high.
WATERFURNACE RENEWABLE ENERGY (WFI-TORONTO)
Makes heating systems using geothermal energy, based in Fort Wayne, Ind. Stock has fallen 14 per cent from its 52-week high in September.
November 14, 2008
Nuclear deal would allow AECL to renew Indian business ties
SHAWN MCCARTHY
Globe and Mail
November 14, 2008
OTTAWA — Federally owned AECL Ltd. is looking to re-enter the Indian market some 35 years after the south Asian giant shocked the world and brought about its own nuclear isolation by using Candu technology to build a bomb.
The federal government is currently negotiating a nuclear co-operation agreement with India that would allow AECL to re-establish business ties, despite concerns that India has not signed the international nuclear Non-Proliferation Treaty.
The negotiations come after Canada backed a decision by the international Nuclear Suppliers Group to provide an exemption for India that would allow it to develop civilian nuclear power even as it maintains its right to develop weapons without international scrutiny.
The United States lobbied hard to exempt India from the kinds of sanctions it imposes on Iran and North Korea, and has concluded its own nuclear co-operation agreement with India. France has also completed a nuclear co-operation agreement, and both countries are now openly competing with Russia to sell reactors there.
Critics complain that the West's special treatment of India will spark a new arms race with Pakistan and undermine the Non-Proliferation Treaty, and argue Canada should hold out for stringent conditions in any bilateral accord.
In an interview from India, AECL chief executive Hugh MacDiarmid said the Crown-owned company is hopeful of getting major service work on the country's aging fleet of heavy-water reactors, and potentially even the sale of a new reactor.
The AECL group met with senior officials from India's Department of Atomic Energy, and from the Nuclear Power Corporation of India Ltd., which has said it intends to build or buy up to 20 reactors over the next 12 years.
"We've been greeted very warmly," Mr. MacDiarmid said, concluding a six-day visit to India and China. He said Indian heavy-water reactor technology has not kept pace with Western companies, and AECL - one of the few companies that also deal in heavy-water reactors - could help modernize it.
"They feel there is a mutual benefit to be had. We do believe there is potential for us to be marketing our reactor technology in this country," he said.
AECL's own future remains very much in doubt as the federal government is reviewing its ownership and considering selling off the 60-year-old Crown corporation, either entirely or to a minority partner. Yesterday, Finance Minister Jim Flaherty said the government is looking at selling some Crown corporations - without mentioning names - in order to balance the federal books.
Whether it sells AECL or keeps it, Ottawa is keen to put the company on a stronger commercial footing, and that means ensuring it has access to growing emerging markets such as India's.
In addition to AECL's interest, Canada's broader nuclear industry is eager to see the Indian market open up to them, as is Cameco Corp., the Saskatchewan-based uranium producer that has been prevented from selling fuel to India.
Activist Ernie Regehr of Project Ploughshares said the Indian exemptions undermine the international Non-Proliferation Treaty by sending the message that countries can flout the rules and still co-operate on civilian nuclear uses. He worries the decision by the Nuclear Suppliers Group in September may reignite an arms race with Pakistan, which has reacted angrily to the move.
A spokeswoman for Foreign Affairs confirmed the two sides had "informal" discussions last month and expect to schedule formal sessions soon. She said Canada signalled its support for India's re-engagement with the broader nuclear-energy community when it backed the suppliers' group decision.
"India is a responsible democracy that shares with Canada the fundamental values of freedom, democracy, human rights and respect for the rule of law," government spokesman Lisa Monette said. "India has made substantial non-proliferation and disarmament commitments to achieve the trust of the Nuclear Suppliers Group, which were reiterated in a political statement on Sept. 5."
Mr. Regehr said India has made political commitments, such as agreeing not to test nuclear weapons, but has refused to sign the Comprehensive Nuclear Test Ban Treaty. It has also insisted on the right to stockpile uranium, which Mr. Regehr says would provide it with an assured fuel supply should it again run afoul of the international suppliers group.
Australia, which along with Canada is one of the world's major uranium miners, is refusing to sell the fuel to India unless it signs the Non-Proliferation Treaty. Mr. Regehr said Canada should do likewise.
November 13, 2008
BURIED SECRETS -
is natural gas drilling endangering US water supplies
by Abrahm Lustgarten
Pro Publica
November 13, 2008
 A drill rig near the town of Pinedale, Wyo. (Credit: Abrahm Lustgarten/ProPublica) |
In July, a hydrologist dropped a plastic sampling pipe 300 feet down a water well in rural Sublette County, Wyo., and pulled up a load of brown oily water with a foul smell. Tests showed it contained benzene, a chemical believed to cause aplastic anemia and leukemia, in a concentration 1,500 times the level safe for people.
The results sent shockwaves through the energy industry and state and federal regulatory agencies.
Sublette County is the home of one of the nation's largest natural gas fields, and many of its 6,000 wells have undergone a process pioneered by Halliburton called hydraulic fracturing, which shoots vast amounts of water, sand and chemicals several miles underground to break apart rock and release the gas. The process has been considered safe since a 2004 study (PDF) by the Environmental Protection Agency found that it posed no risk to drinking water. After that study, Congress even exempted hydraulic fracturing from the Safe Drinking Water Act. Today fracturing is used in nine out of 10 natural gas wells in the United States.
Over the last few years, however, a series of contamination incidents have raised questions about that EPA study and ignited a debate over whether the chemicals used in hydraulic fracturing may threaten the nation's increasingly precious drinking water supply.
An investigation by ProPublica, which visited Sublette County and six other contamination sites, found that water contamination in drilling areas around the country is far more prevalent than the EPA asserts. Our investigation also found that the 2004 EPA study was not as conclusive as it claimed to be. A close review shows that the body of the study contains damaging information that wasn't mentioned in the conclusion. In fact, the study foreshadowed many of the problems now being reported across the country.
The contamination in Sublette County is significant because it is the first to be documented by a federal agency, the U.S. Bureau of Land Management. But more than 1,000 other cases of contamination have been documented by courts and state and local governments in Colorado, New Mexico, Alabama, Ohio and Pennsylvania. In one case, a house exploded after hydraulic fracturing created underground passageways and methane seeped into the residential water supply. In other cases, the contamination occurred not from actual drilling below ground, but on the surface, where accidental spills and leaky tanks, trucks and waste pits allowed benzene and other chemicals to leach into streams, springs and water wells
It is difficult to pinpoint the exact cause of each contamination, or measure its spread across the environment accurately, because the precise nature and concentrations of the chemicals used by industry are considered trade secrets. Not even the EPA knows exactly what's in the drilling fluids. And that, EPA scientists say, makes it impossible to vouch for the safety of the drilling process or precisely track its effects.
"I am looking more and more at water quality issues…because of a growing concern," said Joyel Dhieux, a drilling field inspector who handles environmental review at the EPA’s regional offices in Denver. “But if you don't know what's in it I don't think it’s possible."
Of the 300-odd compounds that private researchers and the Bureau of Land Management suspect are being used, 65 are listed as hazardous by the federal government. Many of the rest are unstudied and unregulated, leaving a gaping hole in the nation's scientific understanding of how widespread drilling might affect water resources.
 Abrahm Lustgarten/ProPublica |
"Halliburton's proprietary fluids are the result of years of extensive research, development testing," said Diana Gabriel, a company spokeswoman, in an e-mail response. "We have gone to great lengths to ensure that we are able to protect the fruits of the company's research…. We could lose our competitive advantage."
"It is like Coke protecting its syrup formula for many of these service companies," said Scott Rotruck, vice president of corporate development at Chesapeake Energy, the nation’s largest gas driller, which has been asked by New York State regulators to disclose the chemicals it uses.
Thanks in large part to hydraulic fracturing, natural gas drilling has vastly expanded across the United States. In 2007, there were 449,000 gas wells in 32 states, thirty percent more than in 2000. By 2012 the nation could be drilling 32,000 new wells a year, including some in the watershed that provides drinking water to New York City and Philadelphia, some five percent of the nation's population.
The rush to drill comes in part because newly identified gas reserves offer the nation an opportunity to wean itself from oil.
Natural gas, as T. Boone Pickens said recently, is "cleaner, cheaper… abundant, and ours." Burning gas, used primarily to heat homes and make electricity, emits 23 percent less carbon dioxide than burning oil. Gas is the country's second-largest domestic energy resource, after coal.
The debate over water arises at a critical time. In his last days in office President George W. Bush has pushed through lease sales and permits for new drilling on thousands of acres of federal land. President-elect Barak Obama has identified the leasing rush as one of his first pressing matters and is already examining whether to try to reverse Bush's expansion of drilling in Utah.
State regulators and environmentalists have also begun pressing the gas industry to disclose the chemicals they use and urging Congress to revisit the environmental exemptions hydraulic fracturing currently enjoys.
But in the meantime, the drilling continues.
In September, the Bureau of Land Management approved plans for 4,400 new wells in Sublette County, despite the unresolved water issues. Tests there showed contamination in 88 of the 220 wells examined, and the plume stretched over 28 miles. When researchers returned to take more samples, they couldn’t even open the water wells; monitors showed they contained so much flammable gas that they were likely to explode.
'Big Wyoming'
News that water in Sublette County was contaminated was especially shocking because the area is so rural that until a few years ago cattle were still run down Main Street in Pinedale, the nearest town to the gas field. The county is roughly the size of the state of Connecticut but has fewer people than many New York City blocks. With so little industry, there was little besides drilling that people could blame for the contamination.
"When you just look at the data…the aerial extent of the benzene contamination, you just say...This is huge,” says Oberley, who is charged with water study in the area. “You’ve got benzene in a usable aquifer and nobody is able to verbalize well, using factual information, how the benzene got there.”
 Sublette County, Wyo. (Credit: Abrahm Lustgarten/ProPublica) |
"We need the gas now more than ever," says Fred Sanchez, whose water well is among those with high levels of fluoride. But gazing off his deck at the prized trout waters of the New Fork River, he wonders whether drilling has gone too far. "You just can't helter skelter go drilling just because you have the right to do it. It's not morally right to do it. There should be some checks and balances."
Further east, in the town of Clark, the Wyoming Department of Environmental Quality found benzene in a residential well after an underground well casing cracked. In Pavilion, another small town, a series of drinking water wells began running with dark, smelly water, a problem a state official speculated might be linked to drilling nearby.
"There is no direct evidence that the gas drilling has impacted it," says Mark Thiesse, a groundwater supervisor for the Wyoming DEQ. "But it sure makes you wonder. It just seems pretty circumstantial that it’s happening."
On federal land, which is where most of the Sublette County wells are located, the BLM governs leasing and permitting for gas development, with secondary oversight from the state and only advisory input from the EPA. When the contaminated water results were first reported, both the BLM and the state downplayed their significance.
The EPA’s regional office in Denver sharply disagreed. But because it has only an advisory role in the federal review process, and hydraulic fracturing is exempted from the Safe Drinking Water Act, there was little the EPA could do. It rebuked the BLM in a strongly worded letter and gave the development plans in Sublette County a rare "unsatisfactory" rating. It also recommended that the project be stopped until further scientific study could be done.
The BLM, backed by a powerful business lobby, ignored that recommendation. Why do a study if you can’t prove something is wrong, industry argued.
Drilling operators said the benzene came from leaky equipment on the trucks that haul water and waste to and from the drill sites -- and in one or two cases, EPA scientists say that was likely. One theory put forth by the BLM blamed the benzene contamination on malicious environmentalists "hostile to gas production," an accusation the agency later said it had no evidence of.
Thiesse, the DEQ supervisor, recounted a meeting where the debate dwindled down to semantics: "I called it contamination, and somebody said is it really contamination? What if it's naturally occurring?"
Leaky equipment on trucks was one reason put forth by drilling operators for benzene contamination. Above, trucks are seen hauling water and waste to and from drilling sites. (Credit: Abrahm Lustgarten/ProPublica) |
"You have intervening rock in between the area that you are fracturing and the areas that provide water supplies. The notion that fractures are going to migrate up to those shallow formations -- there is just no evidence of that happening," says Ken Wonstolen, an attorney representing the Colorado Oil and Gas Association who has worked with the petroleum industry for two decades. "I think fracturing has been given a clean bill of health."
A flurry of mail from industry representatives to the BLM said the sort of study the EPA wanted would needlessly slow production. "BLM's restrictions on drilling in the Intermountain west have seriously reduced the supply of natural gas reaching consumers," wrote the American Gas Association.
Washington leaned down on Pinedale too. The message, according to Chuck Otto, field manager for the BLM: Make this happen by November. The 4,400 new wells were approved in September without any deadline for cleaning up the contamination or further research. State regulators told ProPublica that hydraulic fracturing was not even considered as a possible cause.
"The BLM looks at it more as a business-driven process," Otto said. "It's not like I have Vice President Cheney calling me up and saying you need to get this done. But there definitely is that unspoken pressure…mostly from the companies, to develop their resources as they'd like to see fit…to get things done and get them done pretty fast."
A Compromised Study
The 2004 EPA study (PDF) is routinely used to dismiss complaints that hydraulic fracturing fluids might be responsible for the water problems in places like Pinedale. The study concluded that hydraulic fracturing posed "no threat" to underground drinking water because fracturing fluids aren't necessarily hazardous, can’t travel far underground, and that there is "no unequivocal evidence" of a health risk.
But documents obtained by ProPublica show that the EPA negotiated directly with the gas industry before finalizing those conclusions, and then ignored evidence that fracking might cause exactly the kinds of water problems now being recorded in drilling states.
Buried deep within the 424-page report are statements explaining that fluids migrated unpredictably -- through different rock layers, and to greater distances than previously thought -- in as many as half the cases studied in the United States. The EPA identified some of the chemicals as biocides and lubricants that “can cause kidney, liver, heart, blood, and brain damage through prolonged or repeated exposure." It found that as much as a third of injected fluids, benzene in particular, remains in the ground after drilling and is “likely to be transported by groundwater."
The EPA began preparing its report on hydraulic fracturing in 2000, after an Alabama court forced the agency to investigate fracturing-related water contamination there under the Safe Drinking Water Act. Political pressures were also mounting for the agency to clarify its position on fracturing. The 2001 Energy Policy, drafted in part by the office of Vice President Dick Cheney, a former Halliburton CEO, noted that “the gas flow rate may be increased as much as 20-fold by hydraulic fracturing.” While the EPA was still working on its report, legislation was being crafted to exempt hydraulic fracturing from the Safe Drinking Water Act.
Before that happened, however, the EPA sought an agreement with the three largest hydraulic fracturing companies, including Halliburton, to stop using diesel fuel in fracturing fluids. Diesel fuel contains benzene, and such a move would help justify the report’s conclusion that no further studies were needed.
 Signs put in all directions to drilling sites in Wyoming. (Credit: Abrahm Lustgarten) |
In a subsequent meeting, an EPA official’s handwritten notes show that a Halliburton attorney asked federal officials, "Are we willing to entertain regulatory relief in other areas; eg: fewer inspections?"
"Willing…," was the reply from Tracy Mehan, then the EPA’s assistant administrator for water.
A Halliburton spokesperson declined to comment on this exchange.
The diesel agreement (PDF) was signed. But according to the EPA, it isn't legally enforceable and the agency hasn't checked to see if diesel is still being used. Furthermore, the agreement applies only to fluids used in a specific kind of gas drilling, not all drilling across the United States.
Mehan did not return calls for comment about his negotiations. Roy Simon, associate chief of the Drinking Water Protection Division's Prevention Branch at EPA headquarters in Washington says the "EPA still stands by the findings outlined in the (2004) report."
But one of the report’s three main authors, Jeffrey Jollie, an EPA hydrogeologist, now cautions that the research has been misconstrued by industry. The study focused solely on the effect hydraulic fracturing has on drinking water in coal bed methane deposits, typically shallow formations where gas is embedded in coal. It didn’t consider the impact of above-ground drilling or of drilling in geologic formations deep underground, where many of the large new gas reserves are being developed today.
"It was never intended to be a broad, sweeping study," Jollie says. "I don’t think we ever characterized it that way."
Nevertheless, a few months after the report’s release, the sweeping 2005 Energy Policy Act was passed. Almost no attention was paid to the three paragraphs that stripped the federal government of most of its authority to monitor and regulate hydraulic fracturing’s impact on the environment. By default, that responsibility would now fall to the states.
“That pretty much closed the door,” said Greg Oberley, an EPA groundwater specialist working in the western drilling states. “So we absolutely do not look at fracking...under the Safe Drinking Water Act. It’s not done.”
Waste Hazards
On April 30, 2001 a small drilling company now owned by the Canadian gas company Encana fractured a well at the top of Dry Hollow, a burgeoning field in western Colorado that has seen one of the fastest rates of energy development in the nation.
The well sat at the end of a dirt drive among pinion pines and juniper at the crest of a small mesa overlooking the Colorado River. It was also less than 1,000 feet from the log farmhouse where Larry and Laura Amos lived.
As usual that day, water trucks lined up like toy soldiers on the three acre dirt pad cleared for drilling just across the Amos’ property line. They pumped 82,000 gallons of fluids at 3,600 pounds of pressure thousands of feet into the drill hole.
Suddenly the Amos' drinking water well exploded like a Yellowstone geyser, firing its lid into the air and spewing mud and gray fizzing water high into the sky. State inspectors tested the Amos well for methane and found lots of it. They did not find benzene or gasoline derivatives and they did not test fracking fluids, state records show, because they didn't know what to test for.
The Amoses were told that methane occurs naturally and is harmless. Inspectors warned them to keep the windows open and vent the basement, but they were never advised to protect themselves or their infant daughter from the water. It wasn't until three years later, when Laura Amos was diagnosed with a rare adrenal tumor, that she started challenging the state about the mysterious chemicals that might have been in her well.
 Misted waste fluid rises from waste pits at a Wyoming well site. (Credit: Abrahm Lustgarten/ProPublica) |
Spurred by reports of water contamination in Colorado, Colborn painstakingly gathered the names of chemicals from shipping manifests that trucks must carry when they haul hazardous materials for oil and gas servicing companies. Whenever an accident occurred -- a well spill in Colorado, or an explosion at a drilling site in Wyoming – she took water and soil samples and tested them for contaminants, adding the results to her list.
Industry officials say they use such tiny amounts of chemicals in the drilling – of the million or so gallons of liquid pumped into a well, only a fraction of one percent are chemicals – that they are diluted beyond harmful levels. But on some fracturing sites that tiny percentage translates to more than 10,000 gallons of chemicals, and Colborn believes even very low doses of some of the compounds can damage kidney and immune systems and affect reproductive development.
In Garfield County, there were signs this was already happening. Animals that had produced offspring like clockwork each spring stopped delivering healthy calves, according to Liz Chandler, a veterinarian in Rifle, Co. A bull went sterile, and a herd of beef cows stopped going into heat, as did pigs. In the most striking case, sheep bred on an organic dairy farm had a rash of inexplicable still births -- all in close proximity to drilling waste pits, where wastewater that includes fracturing fluids is misted into the air for evaporation.
Among Colborn’s list of nearly 300 chemicals -- some known to be cancer-causing -- is a clear, odorless surfactant called 2-BE, used in foaming agents to lubricate the flow of fracking fluids down in the well. Colborn told Congress in 2007 that it can cause adrenal tumors.
Laura Amos, who suffered from such a tumor, pressed Encana on whether the compound had been used to fracture the well near her house. For months the company denied 2-BE had been used. But Amos persisted, arguing her case on TV and radio. In January 2005, her lawyers obtained documents from Encana showing that 2-BE had, in fact, been used in at least one adjacent well.
"Our daughter was only six months old when fracturing blew up our water well," Amos wrote in a letter to the Oil and Gas Accountability Project, an anti-drilling group. "I bathed her in that water every day. I also continued breast-feeding her for 18 more months...If there was a chemical in my body causing my tumor, she was exposed to it as well."
In 2006, Amos stopped talking to the media after she accepted a reported multi-million settlement from Encana. The company was fined $266,000 for "failure to protect water-bearing formations and…to contain a release of (gas production) waste." Yet investigators also concluded, without further explanation, that hydraulic fracturing was not to blame.
Asked about the Amos case and the rash of complaints in the area, an Encana spokesman said the company disagreed with the state's judgment on the Amos case and emphasized that there was no proof that fracturing had caused the explosion. Environmentalists had created a climate of fear in the community, he added.
"The concerns residents have expressed -- and some of them are legitimate and heartfelt concerns -- a lot of them are out of misinformation," said Doug Hock. "Just because chemicals are used at a site does not create risk. We have a proven process that helps us ensure that there are no pathways."
'The Tipping Point'
In the past 12 months a flurry of documented incidents has made such reports harder to dismiss.
"We've kind of reached the tipping point," says Dhieux, the EPA inspector in Denver. "The impacts are there."
In December 2007, a house in Bainbridge, Ohio exploded in a fiery ball. Investigators discovered that the neighborhood’s tap water contained so much methane that the house ignited. A study released this month concluded that pressure caused by hydraulic fracturing pushed the gas, which is found naturally thousands of feet below, through a system of cracks into the groundwater aquifer.
 The raised platform used by Encana at some of its drill sites helps to protect the underlying landscape. (Credit: Abrahm Lustgarten/ProPublica) |
As more contamination cases are documented, state governments and Washington are being pressured to toughen oversight. One aim is to institutionalize the precautionary measures some companies are already experimenting with.
When ProPublica visited an Encana drilling operation in Pinedale, for example, the company was placing its drill rigs on raised platforms to protect the underlying landscape and using rubber pools to catch spilled fluids before they could seep into the soil. Drilling companies in New Mexico have begun storing waste in enclosed steel tanks rather than open pits.
Such efforts can add 10 percent to drilling costs, but they also dramatically lessen the environmental risks, an Encana employee said.
State regulators and Washington lawmakers though are increasingly impatient with voluntary measures and are seeking to toughen their oversight. In September, U.S. Congresswoman Diana DeGette and Congressman John Salazar, from Colorado, and Congressman Maurice Hinchey, from New York, introduced a bill that would undo the exemptions in the 2005 Energy Policy Act. Wyoming, widely known for supporting energy development, has begun updating its regulations at a local level, as have parts of Texas.
New Mexico has placed a one-year moratorium on drilling around Santa Fe, after a survey found hundreds of cases of water contamination from unlined pits where fracking fluids and other drilling wastes are stored. "Every rule that we have improved...industry has taken us to court on," said Joanna Prukop, New Mexico’s cabinet secretary for Energy Minerals and Natural Resources. "It’s industry that is fighting us on every front as we try to improve our government enforcement, protection, and compliance…We wear Kevlar these days.”
The most stringent reforms are being pursued in Colorado. Last year it began a top-to-bottom re-write of its regulations, including a proposal to require companies to disclose the exact makeup of their fracking fluids -- the toughest such rule in the nation.
 Cathy Behr (Credit: Abrahm Lustgarten/ProPublica) |
Her doctors searched for details that could save their patient. The substance was a drill stimulation fluid called ZetaFlow, but the only information the rig workers provided was a vague Material Safety Data Sheet, a form required by OSHA. Doctors wanted to know precisely what chemicals make up ZetaFlow and in what concentration. But the MSDS listed that information as proprietary. Behr’s doctor learned, weeks later, after Behr had begun to recuperate, what ZetaFlow was made of, but he was sworn to secrecy by the chemical’s manufacturer and couldn’t even share the information with his patient.
News of Behr’s case spread to New York and Pennsylvania, amplifying the cry for disclosure of drilling fluids. The energy industry braced for a fight.
"A disclosure to members of the public of detailed information…would result in an unconstitutional taking of [Halliburton’s] property," the company told Colorado’s Oil and Gas Conservation Commission. "A number of studies have concluded there are no confirmed incidents of contamination of drinking water aquifers due to stimulation operations…EPA reached precisely this conclusion after undertaking an extensive study."
Then Halliburton fired a major salvo: If lawmakers forced the company to disclose its recipes, the letter stated, it "will have little choice but to pull its proprietary products out of Colorado." The company’s attorneys warned that if the three big fracking companies left, they would take some $29 billion in future gas-related tax and royalty revenue with them over the next decade.
In August, the industry struck a compromise by agreeing to reveal the chemicals in fracturing fluids to health officials and regulators -- but the agreement applies only to chemicals stored in 50 gallon drums or larger. As a practical matter, drilling workers in Colorado and Wyoming said in interviews that the fluids are often kept in smaller quantities. That means at least some of the ingredients won’t be disclosed.
"They’ll never get it," says Bruce Baizel, a Colorado attorney with the Oil and Gas Accountability Project, about the states’ quest for information. "Not unless they are willing to go through a lawsuit. When push comes to shove, Halliburton is there with its attorneys."
Asked for comment, Halliburton would only say that its business depended on protecting such information. Schlumberger and BJ Services, the two other largest fracturing companies, did not return calls for comment.
Lee Fuller, vice-president for government relations at The Independent Petroleum Association of America, said the oil and gas industry’s reluctance to release information about drilling chemicals is to be expected. "These operations are ones where companies have spent millions of dollars," he says. "They are not going to want to give up that competitive advantage. So I would fully expect that they will try to protect that right as long as they possibly can."
Allison Battey, Kristin Jones and Jonathan Sidhu contributed to this report.
A version of this story first appeared on Business Week's Web site and is included in the magazine's print edition.
Investigation: Natural Gas Rush
Fractured Relations -- New York City Sees Drilling as Threat to Its Water Supply
by Abrahm Lustgarten - Aug. 6, 2008 8:30 am
Despite New York's Order for Environmental Review, Gas Drilling May Proceed
by Abrahm Lustgarten - July 24, 2008 11:02 am
Governor Signs Drilling Bill But Orders Environmental Update
by Abrahm Lustgarten - July 23, 2008 5:57 pm
New York's Gas Rush Poses Environmental Threat
by Abrahm Lustgarten - July 22, 2008 2:42 pm
Graphics
Graphic: What is Hydraulic Fracturing?
Other Gas Drilling Coverage
"A Toxic Spew? Officials Worry About Impact of 'Fracking' of Oil and Gas"
by Jim Moscou, Newsweek, Aug. 20, 2008
"Natural Gas Could Transform Sullivan County"
by Ilya Marritz, WNYC, April 9, 2008
Chemical Used in Natural Gas Development and Delivery, The Endocrine Disruption Exchange
Document Dive
Halliburton Celebrates 50-Year Anniversary of Process That 'Energized' Oil and Gas Industry (PDF)
Halliburton's Web site, June 21, 1999
Elimination of Diesel Fuel in Hydraulic Fracturing Fluids Injected into Underground Sources of Drinking Water During Hydraulic Fracturing of Coalbed Methane Wells (PDF),
A Memorandum of Agreement Between the United States Environmental Protection Agency and BJ Services Company, Halliburton Energy Services, Inc., and Schlumberger Technology Corporation, Dec. 12, 2003
A White Paper Describing Produced Water from Production of Crude Oil, Natural Gas, and Coal Bed Methane (PDF),
prepared by the Argonne National Laboratory, January 2004
Evaluation of Impacts to Underground Sources of Drinking Water by Hydraulic Fracturing of Coalbed Methane Reservoirs (PDF),
Environmental Protection Agency, June 2004
New Mexico Gas Pit Sampling Results (PDF),
May 23, 2007
Written Testimony by Theo Colburn, Ph.D. (PDF),
before the House Committee on Oversight and Government Reform, Oct. 25, 2007
Report on the Investigation of the Natural Gas Invasion of Aquifers in Bainbridge Township of Geauga County, Ohio (PDF),
Ohio Department of Natural Resources, Division of Mineral Resources Management, Sept. 1, 2008
© Copyright 2008 Pro Publica Inc. The original content on this site is licensed under
a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License.
November 12, 2008
From credit crunch to energy crisis?
SHAWN MCCARTHY
Globe and Mail
November 12, 2008
OTTAWA — Global oil companies are sowing the seeds of a new supply crisis and a return to record-high prices by cutting back on current investments in response to the global slowdown, the International Energy Agency warns.
Four months ago, economists warned of “demand destruction” as record prices and a slumping economy slowed the growth of global crude consumption. But now, the IEA is worried about “supply destruction” as producers delay expensive projects, including some in Canada's oil sands, that would bring much-needed supplies to market.
“We think that the investment decisions that are being made now are of crucial importance, not only to meet future growth in demand, but to compensate for the decline in existing fields,” the agency's chief economist, Fatih Birol, said in an interview.
“If the investments are postponed, which is happening now, [then] when the demand rebounds we will see a supply crunch which may exceed the situation we saw this summer.”
Mr. Birol noted that producers across the globe – from multinationals tapping Canada's oil sands to national oil companies operating in the Middle East – have been cutting back their capital budgets as oil prices slumped from record highs this summer to a 20-month low Tuesday of $59.33 (U.S.) a barrel.
In a report released Wednesday, the Paris-based agency – which advises rich countries on energy policies – warned that the world's energy system is on an unsustainable path that could lead to both oil shortages and, eventually, in “catastrophic and irreversible damage” to the planet's climate.
To meet rising energy demand over the next 22 years, the industry would have to invest a minimum of $26-trillion – half of which is needed just to maintain current levels by replacing declining oil fields and aging power plants.
The IEA projects oil demand will climb to 106 million barrels a day in 2030, from 85 million barrels today. Despite concerns raised by some economists that the world has reached peak oil production, the agency said there is plenty of oil available to meet that rising demand, so long as the investments are made to boost productive capacity.
It expects prices to rebound from their current level of about $60 a barrel to average more than $100 between 2008 and 2015, rising to $200 by 2030.
That longer-term bullish outlook is widely shared in the industry. In Calgary yesterday, an executive at Canadian Natural Resources Ltd. agreed that prices will rebound once the economy turns around. “I'm quite optimistic that once we get over the current financial crisis we will get back to having healthy demand,” said Réal Cusson, the company's senior vice-president for marketing.
Still, Canadian Natural has slashed its investment budget by nearly half in response to slumping crude prices, notably by delaying planned expansions in the oil sands.
“There's definitely capital expenditure cutbacks happening among oil and gas companies of all sizes,” said Peter Tertzakian, chief energy economist at ARC Financial Corp. in Calgary. Mr. Tertzakian said companies are proceeding with projects that are near completion, but are postponing any new developments.
“We may take comfort in the low prices we are seeing today but the lower the prices go, the less expenditure you are going to see. And then two years from now, when we're out of this [economic] mess, that is when you'll see the problems on the supply side.”
Virtually all the growth in oil consumption will occur outside the leading industrialized countries of the 30-member Organization for Economic Co-operation and Development.
With files from reporter Norval Scott in Calgary
AGENCY CALLS FOR ‘ENERGY REVOLUTION'
The world is hurtling down an energy path that will lead to “catastrophic and irreversible” damage to the planet's climate unless the United States and China lead in a “major de-carbonization” of global energy supplies, the International Energy Agency says.
In a report to be released today, the IEA says that under a “business as usual” scenario, greenhouse gas emissions will rise 35 per cent between 2005 and 2030, a track that would lead to a 6 degree Celsius increase in average global temperatures by the end of the century.
“What is needed is nothing short of an energy revolution,” said the agency, which advises rich nations on energy policy.
The United States and China are the leading emitters of greenhouse gases in the world – with the U.S. as the largest source per capita and China representing the fastest growth in emissions. As a result, both will have to show a leadership role when countries meet in Copenhagen a year from now to negotiate a climate change deal for the post-2012 period. (The Kyoto Protocol contained no commitments beyond that year.) The IEA said the world will need to spend some $4-trillion (U.S.) over the next 22 years for conservation and energy-efficient technologies, such as low-carbon sources of energy and carbon capture and storage. But the resulting reduction in energy use could actually save $7-trillion, it added.
Shawn McCarthy
Clean Coal - The Devil Lies in the Details
GLOBE-Net
06-Nov-2008
GLOBE-Net (November 6, 2008) - There was a lot of talk about "Clean coal technology" during the election campaign in the United States. Both the Democratic and Republican nominees wanted to place it at the forefront of their energy independence strategy. John McCain pledged to speed up its development with a $2 billion a year investment until 2024. Barack Obama wanted to build "five ’first-of-a-kind’ commercial scale coal-fired plants with carbon capture and sequestration."
Essentially, McCain and Obama want power station smokestacks to grab the carbon dioxide (CO2) they emit when they burn coal. The CO2 would be transported to a storage site via pipelines, ships, rail or trucks. There it would be injected into rock formations deep below the Earth’s surface. Since the U.S. is the world’s second largest emitter of CO2 emissions after China, the technology would reduce air pollution substantially.
Yet both candidates slid over the details that make their proposals more complicated than meets the eye. First, there is question of cost. The technology exists to capture and store CO2 - the oil industry has been doing it for years -- but it has never been applied in a large-scale commercial project.
"There’s no such thing as clean coal. It’s non-existent."
Former U.S. Vice-President Al Gore
In 2003 President George W. Bush hailed a public-private partnership to build a near-zero emission coal plant - FutureGen -- by 2012. But the plant never left the development stage and astronomical cost overruns convinced the federal government to pull the plug in January 2008.
Second, the pumping of carbon gas into the ground has cause for concern for both the industry and environmentalists. What worries plant owners is the risk that lawyers pose to their investment. "Without clear rules and guidelines on the question of liability at the state and federal level,
the industry would probably be reluctant to deploy this technology," says Michael Catanzaro of energy firm PPL Corp. during an interview with the Wall Street Journal.
Environmentalists wonder if the underground deposits of carbon dioxide will stay leak proof. The gas could migrate sideways into groundwater or upwards to the surface. "Undetected fractures in cap rocks or those created by injecting CO2 at too high a pressure can provide another avenue for CO2 to escape. Improper design and construction of wells can also create opportunities for leakage," explains a Greenpeace report on carbon capture.
There is also a concern that the technology will not get to the market until too late. The industry’s own predictions do not foresee carbon capture and storage becoming viable before 2020 at the earliest. But to avoid the worst excesses of climate change, global greenhouse gas emissions must peak by 2015 and start falling to at least 50 percent by 2050.
Finally, there needs to be a huge processing and transportation infrastructure in place to make a meaningful dent in climate change. According to the Union of Concerned Scientists, the infrastructure would have to handle a volume of liquefied carbon dioxide rivaling that of the oil consumed by the United States. The annual storage space needed for the emissions of a typical 600-megawatt plant would be about four times the volume of the Empire State Building.
"Even if carbon capture and storage works on a commercial scale, coal will still be dirty," says Steve Clemmer UCS Clean Energy Program research director and co-author of the report Coal Power in a Warming World. "The technology doesn’t address the environmental threat posed by mining, transporting and disposing of coal."
The Union of Concerned Scientists thinks the U.S. federal government should first fund five to 10 full-scale demonstration projects. These would allow experts to determine if carbon dioxide can be stored indefinitely and in what type of underground geological formations.
One solution may come from India and China. These two countries, according to the The Wall Street Journal, have been at the forefront of new research into underground coal gasification. This technology, pioneered by the Soviet Union during the 1930s, involves drilling a borehole into a coal seam which is then ignited. The gases produced by the combustion are forced to the surface through a second borehole where they are harnessed to feed turbines. The Wall Street Journal says 30 such projects - at various stages of preparation -- currently exist in China.
Regardless, coal will remain an essential part of the world economy for years to come. The International Energy Agency predicts that there will be a 73 percent increase in global demand for coal by 2030. Clean coal technology might provide a solution to climate change, but even with massive governmental support, it is not likely to make a significant difference in the near future.
For more information:
Carbon capture and storage - Reality or illusion (GLOBE-Net)
Carbon capture and storage - Reality or illusion
GLOBE-Net23-Mar-2008
VANCOUVER, March 23, 2008 (GLOBE-Net) -Carbon capture and storage has become a hot topic in the business press recently, touted by some as the emission reducing key to continued use of fossil fuels, and panned by others as a great green scam perpetrated by the oil and gas industry. The truth is carbon capture and storage is anything but an illusion; but making it a commercial scale reality - at least in Canada - will require a great deal more than what has been put on the table so far.
Many countries are relying on CCS as one of the main technological fixes to the seemingly intractable problem of meeting their emission reduction commitments while continuing to source their energy needs from fossil fuels.
CCS is at the core of the recently announced federal strategy to reduce greenhouse gas emissions. The proposed regulatory regime will require that carbon capture and storage (CCS) be built into all new coal-fired power plants and oil sands facilities beginning in 2012, and be fully operating by 2018.
The Government of Alberta has committed to a 14-per-cent cut in emissions over 2005 levels by 2050 and has struck an industry-government council to develop a "made-in-Alberta plan" for the immediate advancement of carbon capture and storage technology.
Leaving aside the vagueness of both the Alberta and federal government strategy statements, the hard reality is that the technologies upon which CCS is based are still in their early stages and the likely costs for their full deployment on a scale that would actually make a difference in reducing CO2 emissions are astronomical.
Conceptually, there is nothing particularly new in capturing and storing carbon. The technology to capture CO2 and to pump it underground is commercially available and fairly well developed. Although CO2 has been injected into geological formations for various purposes such as enhancing oil recovery from near depleted oil reservoirs, the long term storage of CO2 is a relatively untried concept. No large scale power plant in the world operates with a full carbon capture and storage system.
 Click for larger image |
Canada is among the world’s leaders in terms of research in this area. EnCana Corporation, one of North America’s leading natural gas producers, manages the world’s largest greenhouse gas sequestration project at its Weyburn Saskatchewan oilfield operation.
EnCana purchases CO2 from a coal gasification plant in North Dakota and ships it to Weyburn via pipeline. Apart from giving new life to an old field, the Weyburn sequestration project, a world-scale research initiative operated under the auspices of the International Energy Agency, has confirmed that Weyburn is a suitable reservoir for the long-term geological storage of CO2.
As noted by Rhona DelFrari, EnCana’s Media Relations Advisor, the first phase of the IEA research project is already complete and the results suggest that more than 99% of the CO2 sequestered at Weyburn will safely remain in the ground for at least 5,000 years.
CCS in geological formations involves injecting CO2 into rock layers, usually depleted or near-depleted oil or gas fields, deep saline aquifers (porous rock layers containing salty water deep underground, or coal seams that cannot be mined.
A joint Alberta - Federal Government Task Force Report (Canada’s Fossil Energy Future: The Way Forward on Carbon Capture and Storage) released in January 2008, cites the stable sedimentary rock formations of the Western Canadian Sedimentary Basin (WCSB) as Canada’s biggest advantage for CO2 storage.
"The reservoirs that securely held Canada’s vast oil and gas reserves for hundreds of millions of years can be used to store CO2, and the deep saline aquifers underlying these rock units hold several magnitudes more storage potential," cites the report, which also notes that the co-location of large industrial GHG sources with this storage opportunity makes the WCSB a world-class location for CCS.
The Task Force report optimistically posits that CCS is unique in that it can be built on the technical and institutional base of the existing fossil energy infrastructure and can be implemented quickly (within a decade) using existing technology as the world develops next-generation, longer-term energy solutions.
The report’s observation with respect to the time line for CCS deployment is roughly consistent with other estimates. According to the Office of Technology Assessment at the German Parliament (TAB), CO2 capture will become available for large scale use in 2020 at the earliest.
Where the problem arises, as pointed out by Bruce Cox, executive director of Greenpeace Canada in a March 18, 2008 Globe and mail commentary (Why Carbon Capture is an Illusion), even if CCS works it will kick in too late to avoid the worst excesses of climate change. Cox notes the international consensus is that global greenhouse gas emissions must peak by 2015 then start falling to at least 50 per cent by 2050.
Industry’s own predictions don’t foresee carbon capture and storage becoming commercially viable before 2020 or 2030, and that will miss the critical threshold for turning things around, notes Cox.
He may be right, but that does not obviate the need to start the ball rolling now.
"By opposing CCS, environmental groups are gambling that we can make the huge cuts in CO2 emissions we need simply by improving our energy efficiency and using renewables like solar and wind power. They may be right. But if they’re wrong, they could cripple action against climate change - the greatest environmental threat of our age. It’s a dangerous, and seriously imprudent, gamble." - Thomas Homer-Dixon.
Canada’s efforts to date are promising, but not nearly enough. The recent federal budget provided $240 million in trust for a full-scale commercial demonstration of carbon capture and storage in the coal-fired electricity sector. This is based on the premise that reducing carbon emissions from coal-fired power plants will make a significant contribution to achieving Canada’s greenhouse gas emission reduction objectives.
Budget 2008 also provided $5 million to the Institute for Sustainable Energy, Environment and Economy at the University of Calgary to work with a broad range of stakeholders to resolve "a number of regulatory, economic, and technological issues that need to be resolved to accelerate deployment of carbon capture and storage technologies."
As noted in a recent GLOBE-Net editorial (Budget 2008 - More Blue than Green), the jury is still out as to how effective the measures announced in Budget 2008 will be in terms of stimulating the development and commercialization of the technologies needed to cope with the inevitable impacts of climate change. But with respect to carbon capture and storage, a great deal more that $240 million will be required.
Alberta’s plan for reducing greenhouse gas emissions involves fines for companies that exceed per-barrel emissions limits. Such fines are expected to put upwards of $177 million a year into the government’s Climate Change and Emissions Management Fund, proceeds from which will help pay for projects that reduce the cost of separating carbon dioxide from other emissions or support carbon capture and storage.
It still won’t be enough to make serious inroads into changing industry behaviour or to bring on line a network of carbon capture pipelines and sequestration facilities.
The European Union is well aware of this fact. In January 2008 the EU Commission set out a Directive to enable environmentally-safe capture and geological storage of carbon dioxide in the EU as part of a major legislative package designed to balance the need for urgent action to tackle climate change with the need to ensure security of energy supply. The plan calls for a suite of technologies that would ensure the carbon dioxide emitted by industrial processes can be captured and stored underground and financial aid to enable member governments to support CCS demonstration plants.
Canadian governments, Canadian industry and Canadian consumers will have to spend a great deal more than what is already on the table to finance proving the technological and commercial feasibility of CCS and to deploy that technology on a scale sufficient to make a real difference.
It is the prospect of big money and big profits that has caused some environmental groups to pan CCS as "a public relations smokescreen for the tar sands and coal-fired electricity generation" industries.
As noted by David Keith at the University of Calgary and Thomas Homer-Dixon at the University of Toronto CCS will be a big-industry technology that will require huge outlays of capital, armies of scientists, engineers and construction workers, and will also generate huge profits.
"So when environmental groups saw that industry representatives dominated the blue-ribbon panel, they assumed that the energy industry was once again positioning itself to line its pockets, and attacked its recommendations", the two note in a recent Globe and Mail article entitled A Win-Win-Win Situation.
They point out that "It’s time that Canada’s environmental groups freed themselves of this ideological straitjacket. They need to acknowledge that modern capitalism is the most dynamic, innovative and adaptive economic system human beings have ever invented."
They note also that while capitalism has fuelled our climate problem and that many big businesses have lobbied hard to block serious action, the world is not going to solve the problem without capitalism’s help, "albeit capitalism that’s ultimately guided by strong government imposed constraints."
This point was made very clear during the recently concluded GLOBE 2008 Conference in a Special Session on Carbon Capture and Storage. The assembled group of experts noted that CCS is proven, safe and Canada’s best option for reducing greenhouse gas emissions, but the technology will not become commercially viable without government assistance.
The unanimous opinion of each panelist was that CCS technology was ready for further development and deployment, but without proper climate change regulation and a realistic price on carbon, large scale projects were too risky and potentially uneconomical. (See GLOBE-Net article GLOBE 2008 Session Update: Carbon Capture and Storage)
The same point was made in a recent report from the Massachusetts Institute of Technology (MIT) that stressed CCS was the critical enabling technology that would help reduce CO2 emissions significantly while also allowing coal to meet the world’s pressing energy needs. The two key factors needed to ensure its deployment were a significant charge for GHG emissions (a ‘carbon price’), and "large-scale demonstration projects of the technical, economic and environmental performance of CCS", said the expert panel behind the report. (See GLOBE-Net article: Is ’Clean’ Coal Possible?)
Carbon capture and storage is definitely not an illusion; but making it a commercial scale reality - at least in Canada - will require a great deal more than what has been put on the table to date. The Weyburn Saskatchewan project is a start; but much, much more will be required.
Information Sources
IPCC Special Report Carbon Dioxide Capture and Storage
Canada’s Fossil Energy Future: The Way Forward on Carbon Capture and Storage
IEA GHG Weyburn-Midale CO2 Monitoring and Storage Project
The Canadian CO2 Capture and Storage Technology Network
Publication Date: 3/25/2008
For More Information: GLOBE-Net
Teck plumbs depths on black day for coal
Peter Koven,
Financial Post
Tuesday, November 11, 2008
 A Teck Cominco coal mine in British Columbia. Courtesy of Teck Cominco |
Faced with tumbling commodity prices, a free-falling stock price and an over-levered balance sheet, Teck Cominco Ltd. unveiled a wide-ranging plan Tuesday to conserve capital and pay back debt amid a rapidly-deteriorating metals sector.
Without providing details, the Vancouver-based company said it is taking steps to slash capital spending, contain costs, defer projects and pursue asset sales. They are measures that many of its larger and smaller rivals are also forced to take.
"It's quite a disciplined, comprehensive plan we're working on and things will be announced in due course," chief executive Don Lindsay said in an interview.
The announcement came on a day when Teck's stock price plummeted 20% to $8.75 on concerns that coal prices will drop next year, and false speculation that it was planning an equity offering. The stock is now down 83% from its peak in the late spring, a gut-wrenching drop for one of the country's premier miners.
While the entire mining industry is struggling due to weak commodity prices and credit conditions, Teck's position is especially tenuous because it just took on US$9.8-billion in debt to buy the assets of Fording Canadian Coal Trust, its former partner on the Elk Valley coal projects. Teck's total market value is now just $4.2-billion.
"It wasn't too long ago that the biggest investor criticism of Teck is that they had too much cash," said Rick de los Reyes, an investment analyst with T. Rowe Price. "They couldn't have picked a worse time to lever up."
Teck's debt load includes a US$5.8-billion bridge loan that expires in less than a year. Despite falling metal prices, Mr. Lindsay said Teck will slash that debt over the next two quarters through its fixed coal revenues, copper hedges, and tax refunds. That means the amount it will have to refinance will be much smaller than US$5.8-billion, and he noted that the bond market is starting to open up.
When the Fording deal was announced in the summer, it was celebrated as a big win for Teck because of record-high metallurgical coal prices for 2008. They were settled at around US$300 a tonne, triple last year's levels, and the outlook for 2009 was excellent as well.
But that changed rapidly in recent weeks, as many of the world's biggest steelmakers unveiled huge production cuts in response to a slowing global economy. That means that they are using less coal to fire their blast furnaces, and they will push for much lower prices next year.
The fragile coal market received more bad news this week, as reports surfaced that major Indian steel companies are asking suppliers to renegotiate contracts back to 2007 pricing levels of around US$100 a tonne, rather than wait for the 12-month agreements to expire in March.
"I can't see the suppliers willing to renegotiate, but nevertheless it does not bode well for pricing next year," said one industry insider, who asked not to be named. "Obviously the demand situation has changed considerably in the last couple of months."
John Hughes, an analyst at Desjardins Securities, is forecasting metallurgical coal prices of US$175 a tonne for next year, which would allow Teck to reduce its debt load to a "much more comfortable level." But if prices fall all the way back to 2007 levels, the company would likely have to take more serious action such as asset sales to shore up its balance sheet, he said.
Mr. Lindsay said he has no regrets about the price paid for the Fording assets, and noted that Teck's long-term price assumptions for metallurgical coal are well below current levels. He also pointed out that if prices fall too much, supply will be cut back.
"These products are going to be needed. And they're relatively scarce," he said.
Caribbean now known for oil as well as beaches
David Pett
Financial Post
Wednesday, November 12, 2008
The Next Big Thing?
 Canadian Superior Energy's well off the shore of Trinidad in the Caribbean Sea. Handout photo |
The Caribbean Basin could well be the next big thing in the world of oil and gas, but investors should be warned; the opportunity to cash in on the area's new and exciting potential discoveries comes with a host of uncertainties and will require a great deal of patience.
The area of the Caribbean garnering the lion's share of interest by oil and gas explorers is off the northeast coast of South America. Not only is this part of the tropical island region well known for its oil and gas assets, with discoveries dating back more than 100 years, it is also within close proximity to Venezuala and Colombia, two of the most successful oil and gas nations.
According to a recent Canaccord Adams report authored by analyst Frederick Kozak, "up and coming players" are concentrating much of their efforts near Trindad and Tobago and further south, near Guyana and Suriname.
Included in the list of those vying for a piece of the pie on and offshore from these countries are several Canadian-listed companies including Canadian Superior Energy Inc. (SNG/TSX), Challenger Energy Inc. (CHA/TSX-V) and CGX Energy Inc. (OYL/TSX-V).
Canadian Superior Energy has production operations in Western Canada, offshore Nova Scotia and Libya, but the company's future value is linked predominantly to its gross undeveloped holdings of 135,041 acres in Trinidad and Tobago. Its offshore operations, at a site 86 kilometres off the east coast of Trinidad, have determined three large separate potential hydrocarbon structures named the Victory, Bounty and Endeavour prospects. According to Mr. Kozak, these could contain as much as 3.7 trillion cubic feet of natural gas.
The company is a joint venture partner with the Petroleum Company of Trinidad and Tobago in the Mayaro/Guayaguayare Block, which claims reserve estimates of 10 billion to 30 billion barrels of oil. Mr. Kozak's estimated value for the Trinidad assets equals $3.65 per share, based on the recoverable resources from the offshore operations in question.
When combined with the value of Canadian Superior's Canadian assets, he derives a 12-month price target of $4.50. The analyst has a "speculative buy" rating on the stock, however, telling clients that capital requirements and liquidity risks associated with development and production of the property remain high, including the problem of bringing the gas onstream.
The first option being contemplated by Canadian Superior and its partners is to build a pipeline from the site to the mainland and construct a new fifth liquid natural gas (LNG) train to accommodate the new gas. The second option is to liquefy the gas offshore and then transport the LNG to a sales point.
"Management has stated that both options have roughly the same economics and the decision depends on agreement from other stakeholders [including government] and joint venture partners, as well as the success of the Endeavour well," the analsyt wrote.
Mr. Kozak also slapped Challenger Energy with a "speculative buy" rating, pricing the company's 12-month share value at $5.25. CGX is one of Canadian Superior's partners in the area off the Trinidad coast, but, unlike Canadian Superior, Challenger is a pure play on Trinidad exploration and does not have other operations to fall back on.
CGX Energy Inc., meanwhile, was initiated with a "speculative buy" and $1.80 price target. CGX is focusd on oil exploration in the "unproved, high-risk" Guyana-Suriname Basin, with offshore holdings that amount to 7.2 million acres. Mr. Kozak's target price is based on CGX being able to develop successfully a 50-million-barrel offshore discovery.
According to the U. S. Geological Survey, Guyana-Suriname has one of the largest unexplored oil basins in the world, with estimated recoverable oil reserves of 15.2 billion barrels and gas reserves of 42 trillion cubic feet. However, a dry hole drilled recently off Suriname raises questions about the commercial viability of the basin.
"While a success would have been favourable for companies such as CGX, that dry hole does not mean the basin is uneconomic, as the targeted play type was different than what CGX is focusing on," the Canaccord Adams analyst said.
dpett@nationalpost.com
Misunderstood oil sands
Editorial
Globe and Mail
November 12, 2008
Alberta Premier Ed Stelmach's $25-million provincial rebranding campaign is well under way; the Premier himself is in Europe right now explaining why the environmentalists have got it wrong about Alberta's oil sands. While his strategy - to turn the massive environmental impact into a misunderstanding - is well chosen, the question remains whether a mere fraction of a billion dollars is going to be enough.
Canada has recently enjoyed some rebranding success. The Canadian Tourism Commission spent $10-million for a new slogan ("Canada: Keep exploring") and a media campaign to dispel the misconception that this country is beautiful but boring. According to a recent annual survey of a few thousand business travellers, Canada's brand is now second only to Australia's, having in the past two years climbed from 12th to second place on the Country Brand Index.
Still, Canada simply had to emphasize the sexy red parts of the flag, overcoming its wholesome snowy white background. Alberta, meanwhile, has to make black the new green.
How to turn 29.5 megatonnes of carbon emissions into a positive global contribution? What about "Nature to burn"?
What should the province do about the death of hundreds of migrating birds who land on toxic tailings ponds? How about a bird-offset program?
Then there are the Fort Chipewyan cancer cluster concerns that may be immune to the persuasive powers of a provincially commissioned peer-reviewed study. How about a cancer centre, with a Canadian Association of Petroleum Producers wing?
Maude Barlow compares the oil sands to J.R.R. Tolkien's Mordor; perhaps Mr. Stelmach could lure Hollywood producers to Alberta. Surely there will be many more projects requiring desolate landscapes.
In the meantime, a poll commissioned by the province found that only 16 per cent of Albertans and just 3 per cent of all Canadians believe Alberta's government is a good environmental steward. Though 69 per cent of Albertans believe that the province is leading Canada to a positive future, only 40 per cent of all Canadians agree. And yet the oil sands enjoy the support of almost half the 1,249 Canadians polled. It seems that many Canadians see progress in Alberta's oil production, while they know it will take a toll on the environment.
Unless Mr. Stelmach is willing to settle for the limited support that currently exists - those who favour development of the oil sands despite the environmental degradation it will cause - he will have to spend much, much more.
November 11, 2008
"Fisherma'am" Proposes 28th Amendment:
Separation Of Corporation And State
from Chelsea Green
Huffington Post
November 10, 2008
Every so often an idea comes along that rings with such clarity and purpose that it ignites the imaginations of millions of people. That spark of excitement becomes hope, hope becomes action, action becomes community, and that community grows to become a movement. Marine biologist, author, fisherma'am, and Exxon Valdez survivor, Dr. Riki Ott has such an idea.
Exxon's recently reported record profits marks a new height of American corporate corruption and influence over our federal government--corporations find more protection under the law than American citizens, health and safety regulations are stripped away to serve profits ahead of people, politicians serve only their corporate backers, and our environment is falling victim to the lustful greed of this disaster capitalism. How did it come to this?
Dr. Riki Ott is launching the movement for the 28th Amendment to the Constitution: Separation of Corporation and State. In the video above, she explains what a 28th Amendment will accomplish, how it is possible, why it is necessary for our democracy.
In Riki's own words:
As survivors of the Exxon Valdez spill and 20-year lawsuit, practically everyone in town has first-hand experience with a legal system that failed to deliver justice and Exxon's promise to make us whole.
In researching our nation's legal history, I found the answer. In this 4-minute video, I explain the solution--passing the 28th amendment to the U.S. Constitution: separation of corporation and state.
Please listen. Then ask others to listen. In Not One Drop, I explain this idea more fully. Together we can build a movement to restore government of, for, and by the people.
There's even a Facebook group dedicated to the movement.
TRANSCRIPT OF VIDEO:
I am a survivor and witness of the Exxon Valdez oil spill. It happened in my backyard, Prince William Sound, Alaska.
We have been in a lawsuit now for nearly two decades, and Exxon has managed to drag this out while it has managed to increase its profits to, basically, obscene levels: over $40 billion in net profits now. How did things get this bad?
The conclusion that I came to in Not One Drop is that we need the 28th Amendment to the United States Constitution: the separation of corporation and state.
Starting in 1886, judges started recognizing corporations had rights accorded to people. The first one was the 14th Amendment. And nowhere in the Constitution, nowhere in the Bill of Rights, do we find the word "corporation." This is totally judicial fiat. What this has done is allow a consolidation of wealth and power to the corporations that now threatens to destroy the republic. We want separated church and state—we now need to separate corporation and state.
On March 24, 1989—which is when [the] Exxon [Valdez] grounded and spilled 11–38 million gallons of oil in Prince William Sound, I was commercial fishing. I held a commercial fishing permit, and I fished salmon. I also held a Masters and a PhD in marine toxicology. Exxon came to Cordova, Alaska, stood in our high school gym, and promised us, "We will make you whole." Instead, Exxon worked behind the scenes to eliminate thousands of business claims. Exxon threw an army of attorneys at this case. And it's not just the Exxons of the world, it's any of these big transnational corporations have the ability, because of their wealth and power, to completely overwhelm small communities that get in their way.
If we had had the 28th Amendment to the Constitution, Exxon would not have been able to use the 5th Amendment and the 7th Amendment.
The 7th Amendment is that facts tried by a jury cannot be undermined or revisited by higher courts. So in this case, a jury of peers, ordinary people, determined that the price that Exxon had to pay was one year's net profit. Exxon challenged the amount, and also that punitive damages should be held at all.
Exxon also used, in a related lawsuit, the 5th Amendment. The 5th Amendment is a takings—takings of property. After the Exxon Valdez oil spill, there was a federal law passed (the Oil Pollution Act of 1990) that essentially banned the Exxon Valdez from Prince William Sound. It banned any tanker that has spilled over a million gallons from transporting oil in Prince William Sound. Exxon said, that is a takings of our future profit: that's illegal under the 5th Amendment. If Exxon was not a person, Exxon would not have been able to apply the 5th Amendment.
Five years after the Exxon Valdez ran aground, we had our hearing, and the jury awarded us—the fishermen, the natives—$5 billion in punitive damages and $287 million in compensatory damages. Exxon appealed that $5 billion for over fourteen years, and ultimately, the Ninth Circuit Court of Appeals finally threw its hands in the air and cut the 5 billion in half. The Supreme Court, in June of 2008, slashed the $2.5 billion to $507 million.
If we're planning on passing a livable planet onto future generations, the democracy debate needs to be entwined with the sustainable future debate, and I believe now that the best way to do that is to pass the 28th Amendment to the Constitution—separation of corporation and state—and strip corporations of their personhood.
November 03, 2008
Shell halts Canadian sands development
COMMENT: When Royal Dutch Shell absorbed Shell Canada into the mother ship in 2007, it was acquiring a tremendous set of assets, but many observers believed the pearl in the shell was Shell's interest in the tar sands. Whoops. When oil gets down in the $65 a barrel range, the paradigm shifts again. $40 billion in tar sands projects have been put on hold in October alone. A lot of pipeline proposals may also shrivel up, notably the most speculative of them - Enbridge's Gateway to the west coast - and the plethora of them to the continental US. It may not bode well for renewables, either, where high oil prices drive some energy investment money.
Robin Pagnamenta
Energy and Environment Editor
The Times, London
October 31, 2008
Royal Dutch Shell has become the latest oil company to halt development of Canada's formerly booming tar sands industry, amid soaring costs and plunging oil prices.
The Anglo-Dutch oil group said that it was deferring indefinitely an investment decision on the second expansion of its oil sands project near Fort McMurray, in Northern Alberta.
The announcement was made as Shell unveiled a 22 per cent surge in third-quarter profits to $8.45 billion (£5.13 billion), despite a fall in production, thanks to record oil prices during the three months to September 30.
Extracting crude from the bitumen-rich Athabasca sands of northern Canada is an energy-hungry, costly and environmentally controversial process that pays off only with high crude oil prices. Environmentalists welcomed the delays. Charlie Kronick, of Greenpeace, said the industry was risky not only because it requires high oil prices but because of a risk of international regulation of carbon emissions, which could undermine its rationale.
Although Shell said that it remains committed to the industry and continues to build operations able to produce 250,000 barrels of crude a day by 2010, it has chosen to delay a secondary expansion that would increase the total to 350,000 barrels per day.
Shell would not comment on the expansion's projected total cost, but Justin Bouchard, of the Raymond James brokerage in Calgary, estimated that it would cost C$13 billion to C$16 billion (up to £8 billion), to build new pipelines, new extraction plants and an enlarged bitumen upgrader in Scotford.
Jeroen van der Veer, Shell's chief executive, said that the decision had been taken because of “significant industry inflation and a tight labour market” in the Alberta region. “This final investment decision was originally planned for 2009, but we wait for costs to cool down before any new investment decision is made,” he said.
Shell's earlier, 100,000 barrels-a-day expansion phase was expected to cost at least £6.2 billion. Last year, the group spent £1.2 billion on oil sands projects. Shell has a 60 per cent stake in the project. Its partners, Marathon Oil and Chevron, have 20 per cent each.
Compounding concern about investment in the industry, Total, the French oil giant, said this week that its Surmont and Joslyn projects were economically attractive only with oil above $90 a barrel. Although Total insists that it remains committed to current projects, its spokesman would not rule out future delays.
Richard Savage, of Mirabaud, the Swiss bank, said: “It's a dilemma for the whole industry. People are having to re-evaluate their investments. The move in the oil price is creating a big cost squeeze.”
Banks were increasingly reluctant to lend to projects whose profitability relied on high oil prices, adding to debt-market pressure, Mr Savage said.
At an estimated 173 billion barrels, Alberta's oil sands are the world's second-largest oil reserve, behind Saudi Arabia, but producing oil from them requires complex production facilities and vast amounts of energy.
As oil plunged this week to a 17-month low of $61.30 a barrel, from a record high of $147.27 in July, mainly because of slumping demand as the global economy weakens, the industry's economics are looking strained.
Shell's bumper results were aided by one-off gains of $2.06 billion, mostly from sale of operations, but production figures were weaker than expected. Total production fell to 2.93 million barrels of oil and equivalents per day, from 3.14 million barrels a year earlier.
Shell's results were beaten by ExxonMobil, the world's biggest oil group, which unveiled a 58 per cent surge in third-quarter profits on soaring oil prices. Net income hit a quarterly record of $14.8 billion, but Exxon's oil production had its biggest fall in at least a decade. Liquids production was 2.29 million barrels a day, down 5 per cent from the same period last year.
Shifting sands
— Canada's oil sands industry is under pressure as high costs, plunging oil prices and turmoil in global financial markets trigger a wave of project delays
— This month alone, projects worth more than C$40 billion (£20 billion) have been postponed
— Petro-Canada, one of the largest players, is deferring a C$10 billion investment decision on a new bitumen processing plant
— Suncor Energy, another big player, is postponing by one year the construction of a C$20 billion upgrader plant, which turns bitumen into a more easily refinable, synthetic crude
October 28, 2008
A kick in the shins for Gulf states
SONIA VERMA
Globe and Mail
October 28, 2008
Oil-fuelled wealth proves to be only thin insulation against the effects of the global credit crunch
DUBAI — For British soccer fans, it seemed too good to be true: Zabeel Investments, a Dubai-based sovereign wealth fund, was looking to buy Charlton Athletic, a struggling soccer club mired in more than $30-million (U.S.) of debt.
But late last week, Zabeel suddenly pulled out, blaming the toxic economic climate in the West. The company had decided to focus on "domestic opportunities" instead.
If soccer fans in Britain were shattered, the mood in Dubai was shock. The deal's collapse was one of the most striking signs the party in this oil-rich region was over: State-owned investment vehicles had sobered up, suddenly shunning trophy assets like Charlton.
In the past few weeks, Persian Gulf states have been jolted by the realization that they are not immune to the financial turmoil gripping the globe. Oil-fuelled wealth proved to be only thin insulation against the effects of the credit crunch.
 Real estate agents and analysts say demand remains strong for completed projects in Dubai, but interest in those that are incomplete or not yet built is shaky. Here, a man examines a graphic map of Dubai showing new developments.
Photo: Kamran Jebreili/AP
Sources: Reuters, The Associated Press
© Copyright 2008 CTVglobemedia publishing Inc. All Rights Reserved. |
 The Gulf region is being hit by the spreading global crisis. Known for its phenomenal oil wealth, stocks are plunging, governments are moving to support their financial systems and real estate projects are feeling the pinch. Here, a man looks at a model for a kilometer-high tower during a real estate exposition in Dubai's financial district.
Photo: Kamran Jebreili/AP
© Copyright 2008 CTVglobemedia publishing Inc. All Rights Reserved.
|
More than $50-billion of foreign deposits has fled the region's banks in recent weeks as investors pulled back.
The price of oil - this region's main export and source of income - plunged, and local stock markets sank to new lows.
Gulf states have had to retrench, with Kuwait moving to prop up its central bank and Saudi Arabia extending special credit to its neediest citizens over the weekend.
The United Arab Emirates has already acted to guarantee bank deposits, and injected billions of dollars into its domestic money markets to encourage interbank lending. Qatar and Kuwait have used their sovereign wealth to buy up stakes in ailing banks and slumping stock.
"It feels a little like we've all woken up in the Twilight Zone," said Jason Goff, head of treasury sales at Emirates NBD.
"People are scared. Nobody in a million years predicted this would happen here," he added.
Economists are scaling back growth forecasts, and the Gulf's once-giddy property market is showing signs of shakiness, with developers now openly talking about construction delays and cancellations as fear spreads, paralyzing buyers.
Property developers have scaled back recruitment, with some companies imposing unprecedented hiring freezes until the economy stabilizes. Credit Suisse said market turmoil and negative sentiment would likely dent property demand in Dubai and Abu Dhabi, while Morgan Stanley predicts a market downturn of at least 10 per cent by 2010.
"These economies are no longer islands unto themselves," said Dr. Henry Azzam, chief executive officer of Deutsche Bank, Middle East and North Africa, and a former economics professor at Beirut University.
"Economic integration with the West brings with it a level of exposure. It forces a certain degree of reflection on how to move forward."
For the region's rulers, the need to take drastic steps to stabilize markets is unprecedented. Gulf leaders tend to view themselves as mavericks, building skyscrapers in the middle of the desert and man-made islands in the middle of the ocean, all in an effort to attract foreign investment and diversify their economies away from oil wealth.
The strategy has so far worked in countries like the United Arab Emirates, which has boasted double-digit growth in the past five years. Only in the past month have the hidden costs of that progress been revealed.
As Gulf states refocus their resources domestically, there is dwindling interest in acquiring assets in the West, even at fire sale prices.
"Anything in the West is seen as toxic," Dr. Azzam said. "They are not going to be the ones to bail out the banks any more. It's just not worth it," he said.
Foreign assets of Gulf Co-operation Council states were estimated to top $1-trillion last year. Some funds have seen their existing investments suffer massive losses.
The Kuwait Investment Authority's investment in Citigroup last January shows a $270-million loss.
To be sure, Gulf states are in a far better position to survive financial turbulence than the West.
Even though oil prices have dropped, countries including Saudi Arabia, Abu Dhabi and gas-rich Qatar have deep reserves of savings to cushion their countries from any real devastation.
Dubai is still viewed as a refuge for worried professionals, whose jobs are quickly evaporating in Western financial capitals. Some recruitment companies have reported a tenfold jump in applications in the past two months with bankers and estate agents leading the charge.
Gulf leaders and central bankers remain self-assured, arguing that their economies are fundamentally sound and able to withstand the current turmoil.
Echoing the optimistic outlook of other leaders, Sultan Nasser al-Suweidi, the UAE's central bank governor, said yesterday that the liquidity crunch in the region's banking system was easing and soon the region's economies would return to normal. "Things are getting better and stabilizing," he said.
But confidence alone won't calm markets, analysts say, and some suggest a co-ordinated action plan among Gulf states is needed to address the region's problems.
For now, leaders appear to be waiting to see if things get worse.
"If there is a need, we will do more," Mr. al-Suweidi said.
Special to The Globe and Mail
*****
Gimme shelter
As the financial crisis creeps into the Middle East, here's what others countries did yesterday to shore up battered markets.
The U.S. Treasury Department started moving $125-billion (U.S.) to nine major banks by buying ownership stakes, the first big transfer since the $700-billion bailout was passed this month.
Australia's central bank took the rare step of buying Australian dollars twice in the past few days to limit their plunge.
Crisis-hit Iceland said it needs another $4-billion in loans on top of the $2-billion it wants from the IMF .
Japan's Prime Minister Taro Aso told senior officials to draw up steps to calm volatile markets and to fend off further fallout.
News services
Oil price threatens to incinerate jobs
NORVAL SCOTT
Globe and Mail
October 28, 2008
10,000 construction positions at risk as oil sands companies defer projects, look for ways to cut costs
CALGARY -- The plummeting price of oil threatens to derail so many projects in Alberta's oil sands that as many as 10,000 construction jobs could be lost over the next year, stalling the engine that has long driven the province's economy.
Many energy companies are now seeking cheaper ways to build their projects or even deferring their plans altogether. These changes will likely slash the number of construction jobs in the oil sands by almost one-third, industry observers say.
"There's still billions of dollars of expenditure, but the frenzied pace of development is slowing down," said Richard Cooper, leader of Deloitte Inc.'s Canadian energy department. "The pent-up heat that was in the system is being driven out, and things are returning to some sort of equilibrium."
Just three months ago, record oil prices of $147 (U.S.) a barrel meant it was full speed ahead to develop the oil sands, despite the upward pressure that put on the price of labour, materials and services.
Now, the price of oil is just over $63 a barrel, as fears that the financial panic will cause lower oil demand. But with construction in Alberta continuing and costs still through the roof, only a few new projects will be viable if prices stay at that level.
Oil sands projects that include a mine and an upgrader, which processes the bitumen produced by a mine so that it can be processed by more refineries, need a long-term oil price of $100 a barrel, according to UBS Securities analyst Andrew Potter. Those that use steam injection to extract crude and don't include an upgrader require $70 a barrel.
Without certainty that prices will hit those levels, some companies have already cut back their multibillion-dollar oil sands plans. Suncor Energy Inc., Petro-Canada, Nexen Inc./OPTI Canada Inc. and BA Energy Inc. have already said they'll slow, remodel or postpone their projects, and others could follow.
Those deferrals mean that while the oil sands was expected to need 44,000 construction workers in 2009 and 2010, the region will now need only 26,000, Mr. Potter said. The oil sands now employ about 36,000 construction workers.
Producers are now likely to delay or cancel their Alberta upgraders and instead pursue what appears to be the most cost-effective solution for the oil sands - getting bitumen to an existing refinery in the United States that's been adapted to take heavy crude. That path appears viable at $50 a barrel or over, and has already been taken by EnCana Corp. and Husky Energy Inc.
Oil services companies, many of which have been stretched by the pace of oil sands development, are already feeling the slowdown. Flint Energy Services Inc., a major oil sands contractor, said it has recently scaled back its recruitment efforts as it no longer desperately needs new workers.
"Some of the gold rush mentality has gone," Flint spokesman Guy Cocquyt said. "If one project falls through, there's lots of other work to go around - but we'll see less expense on things like overtime. Some of the pressure [on the sector] will come off."
Even so, wages in the oil sands aren't expected to fall much. Most construction jobs are unionized, and Alberta's unions and employers agreed to a new three-year pay deal last year. Employers instead hope that Alberta's productivity will improve as workers find their jobs are no longer guaranteed.
"Companies know how much they are supposed to pay an [Albertan worker], but they've long missed how productive he'll be," said Neil Earnest, vice-president of Dallas-based energy consultancy Muse Stancil. "Now, some of the boom mentality is being set aside, and that should feed back into the marketplace."
October 27, 2008
Renewable power firms weather the storm
SHAWN MCCARTHY
Globe and Mail
October 27, 2008
Hit hard by the credit crunch and tumbling oil prices, strong green energy companies remain optimistic about growth
VANCOUVER -- Renewable power developer John Keating surveys the credit markets in crisis and heaves a sigh of relief, knowing how close he came to becoming another victim of the financial storm that has raged since early September.
In June, the TSX-listed, Calgary-based Canadian Hydro Developers Inc. closed two debt financings worth more than $700-million, money that is needed to complete construction of three wind energy projects that will add 500 megawatts of capacity to the company's portfolio.
"If I'm not losing sleep now, it's because we moved when we did to get our financing in place," Mr. Keating, Canadian Hydro's chief executive officer, said in an interview. "If we had waited two or three months, we would have had $750-million in projects not proceeding."
The financial crisis is rocking the capital-intensive renewable energy sector, driving up borrowing costs - where credit can be obtained - and threatening project profitability. At the same time, the slumping price for crude oil and natural gas has eroded the competitive position of alternative energy sources, in both the power and transportation sectors.
As a result, the global clean-tech sector has seen its share prices drop even more dramatically than the overall market. Analysts and company executives in the renewable energy industry expect a wholesale consolidation as weaker firms drop by the wayside, and the stronger ones take advantage of strong balance sheets to make acquisitions.
Still, many investors remain optimistic that the renewable energy sector will continue its long-term growth path, driven by public concerns about climate change and energy security, and by oil and natural-gas prices that are expected to climb again when the economic recovery takes hold.
"As the financial markets stabilize, many climate-change sectors should recover early, both in public and private markets, as they have regulatory support and strong long-term growth prospects," Mark Fulton, head of climate-change investment research at Deutsche Bank, said in a report last week.
In the meantime, however, there will be casualties as companies are squeezed by tighter credit or shrinking demand, Mr. Fulton wrote.
Well-established firms are still concluding debt and equity deals, particularly private placements that rely on pension funds, private-equity funds and other financial institutions that have specific allocations for clean-tech investments, said Sasha Jacob, chief executive officer at Jacob & Co. Securities Inc.
But in many cases, the cost of capital has risen sharply, undermining the rates of return expected by the developer, and demanded by their financiers.
However, the Canadian market offers clear advantages to both domestic and international renewable-power companies.
That's because most provincial utilities sign long-term power purchase agreements with developers, while renewable projects in the U.S. - and in Alberta - must compete to sell power to the utilities under a system known as the merchant model. The guarantee of cash flow from a financially solid government agency makes financing easier for companies than it would be if they were operating in a purely competitive marketplace.
Even as credit markets were tightening this summer, Mr. Keating managed to raise financing for wind projects that have guaranteed contracts with the Ontario Power Authority, including the $450-million Wolfe Island development near Kingston, and the $285-million Melancthon II near Shelburne, Ont.
It helped, Mr. Keating said, that the company has a portfolio of some 20 projects generating cash.
Like other industry executives attending the Canadian Wind Energy Association meeting in Vancouver last week, Mr. Keating remains optimistic about the longer-term prospects for the wind industry.
Provincial governments - spurred by commitments to reduce greenhouse gas emissions - are accelerating the expansion of renewable power supply.
Canada has increased its wind power capacity from 137 megawatts in 2000 to the current 2,400 megawatts, with another 1,000 megawatts expected to come online next year.
At last week's meeting in Vancouver, energy ministers from Ontario, British Columbia, New Brunswick and Prince Edward Island re-affirmed their commitments to renewable power - including wind, small-scale hydro and biomass.
However, the provinces have yet to assess the impact that the current economic downturn will have on future electricity demand, and therefore, how much additional power supply they will need.
Increasingly, international giants like French-based GDF Suez, FPL Energy LLC - a division of Florida Power and Light - and General Electric Co. are targeting Canada.
"This is a good market for companies like Suez to participate in," said Jeff Jenner, senior vice-president for the company's North American division. "The opportunities are bountiful and there are fewer potential barriers."
He expects to see a spate of mergers and acquisitions as smaller and medium-sized firms struggle with the capital-market fallout.
October 26, 2008
Canada's nuclear power play
Diane Francis,
Financial Post
October 25, 2008
Ontario must build at least $15-billion worth of nuclear plants to back out of dirty coal and better meet power growth requirements for the next few generations.
This major contract is to be awarded in March and three rivals are in the running: Atomic Energy of Canada Limited (AECL), which is 100% owned by Ottawa, Toshiba (formerly the nuclear division of Westinghouse) and Areva, the world's biggest nuclear company, 90% owned by France.
All three are in the process of responding to a Request for Proposals from Infrastructure Ontario and the decision-making is supposed to be based on technology, price, track record and safety --not politics.
But nuclear power is very political. AECL has built all of Canada's reactors so far and many feel it should get the nod because it's Canadian and really needs this contract. This is not unusual. All 59 reactors in France were built by Areva.
My own bias is that whatever happens, Canada must remain a nuclear industry player. I know nothing about the technology but I do know that Canadians deserve to have two policy goals met: a) creation of nuclear power that is the most efficient and safe in the world and b) participation in the world's nuclear industry by Canadians.
Since the 1950s, AECL has built 29 reactors worldwide and 14 reactors in Canada (12 in Ontario). Its designs have been incorporated into other reactors and it also produces valuable byproducts such as radioisotopes used in medical diagnostic procedures and cancer treatments, with a 60% worldwide market share.
Areva has become the world's largest nuclear player. It has built 98 plants worldwide, has two under construction and three more ordered and provides 20% of all nuclear power generated in the United States.
It is also vertically integrated and involved in uranium mining, processing and waste management. So why has France's national corporation done so much better than AECL?
One reason is that AECL cannot get leverage from its government, like U. S., Japanese or French players do, by promising and delivering geopolitical and other offsets to customer-countries.
But what Canada can do now is leverage the fact that Ontario is going to buy $15-billion worth of nuclear technology, plus possibly more in the oil sands. Canadians should want their industry to prosper as well as to get the cheapest and safest power for the future. There are currently 435 reactors worldwide and another 100 to be built within a decade or so. Canada should get a slice of this industrial activity.
Best solution is a joint venture, or a publicly listed merged entity, so I asked both AECL and world giant Areva about this idea.
Areva Canada President Armand Laferrere said in a telephone interview yesterday: "Canada should protect the industry, rather than the [AECL] technology, and pick a solution which will give more jobs to Canadians. We do a lot of joint ventures, with Mitsubishi, in the U. S., in China. We are very flexible in adapting to local markets."
AECL's CEO, Hugh MacDiarmid, when asked yesterday about a partnership, said: "Our mandate at AECL is to be a top-tier global competitor in the nuclear business and we believe we have the knowledge and skills to do that. We believe we can compete with the best in the world."
October 25, 2008
Palin pipeline terms curbed bids
By JUSTIN PRITCHARD and GARANCE BURKE
Associated Press
Washington Post
26 October 2008
AP INVESTIGATION
ADVANCE FOR OCTOBER 26; map locates TransCanada proposed pipeline project that will run from Alaska to Alberta, Canada;
(Siobhan Dooley - AP) |
Beginning at the Republican National Convention in August, the McCain-Palin ticket has touted the pipeline as an example of how it would help America achieve energy independence.
"We're building a nearly $40 billion natural gas pipeline, which is North America's largest and most expensive infrastructure project ever, to flow those sources of energy into hungry markets," Palin said during the Oct. 2 vice presidential debate.
Despite Palin's boast of a smart and fair bidding process, the AP found that her team crafted terms that favored only a few independent pipeline companies and ultimately benefited the winner, TransCanada Corp.
And contrary to the ballyhoo, there's no guarantee the pipeline will ever be built; at a minimum, any project is years away, as TransCanada must first overcome major financial and regulatory hurdles.
In interviews and a review of records, the AP found:
-Instead of creating a process that would attract many potential builders, Palin slanted the terms away from an important group - the global energy giants that own the rights to the gas.
-Despite promises and legal guidance not to talk directly with potential bidders, Palin had meetings or phone calls with nearly every major candidate, including TransCanada.
-The leader of Palin's pipeline team had been a partner at a lobbying firm where she worked on behalf of a TransCanada subsidiary. Also, that woman's former business partner at the lobbying firm was TransCanada's lead private lobbyist on the pipeline deal, interacting with legislators in the weeks before the vote to grant TransCanada the contract. Plus, a former TransCanada executive served as an outside consultant to Palin's pipeline team.
-Under a different set of rules four years earlier, TransCanada had offered to build the pipeline without a state subsidy; under Palin, the company could receive a maximum $500 million.
"Governor Palin held firmly to her fundamental belief that Alaska could best serve Alaskans and the nation's interests by pursuing a competitive approach to building a natural gas pipeline," said McCain-Palin spokesman Taylor Griffin. "There was an open and transparent process that subjected the decision to extensive public scrutiny and due diligence."
ONLY ONE VIABLE BIDDER
There were never more than a few players that could execute such a complex undertaking - at least a million tons of steel stretching across some of Earth's most hostile and remote terrain.
TransCanada estimates it will cost $26 billion; Palin's consultants estimate nearly $40 billion.
The pipeline would run from Alaska's North Slope to Alberta in Canada; secondary supply lines would take the gas to various points in the United States and Canada. The pipeline would carry 4.5 billion cubic feet of natural gas daily, about 8 percent of the present U.S. market.
Building such a pipeline had been a dream for decades. The rising cost and demand for energy injected new urgency into the proposal.
So too did the depletion of Alaska's long-reliable reserves of oil, which are trapped in the same Arctic Circle reservoirs as clean-burning natural gas. Not only does that oil provide jobs, it pays for an annual dividend check to nearly every Alaska resident. This year's payment was $2,069, 25 percent higher than 2007 - plus a $1,200 bonus rebate to help offset higher energy costs.
Palin was elected as governor two years ago in part because of her populist appeal. Promising "New Energy for Alaska," she vowed to take on Exxon Mobil Corp., ConocoPhillips and BP, the multinational energy companies that long dominated the state's biggest industry.
Oil interests were particularly unpopular at that moment: Federal agents had recently raided the offices of six lawmakers in a Justice Department investigation into whether an Alaska oil services company paid bribes in exchange for promoting a new taxing formula that would ultimately further the multinationals' pipeline plans.
Palin ousted fellow Republican Gov. Frank Murkowski, who pushed a pipeline deal he negotiated in secret with the "Big Three" energy companies. That deal went nowhere.
With Alaskans eager for progress and sour on Big Oil, Palin tackled the pipeline issue with gusto, meeting with representatives from all sides and assembling her own team of experts to draw up terms.
Palin invited bidders to submit applications and offered the multimillion-dollar subsidy. Members of Palin's team say that without the incentive, it might not have received any bids for the risky undertaking.
TIES THAT BIND
Palin's team was led by Marty Rutherford, a widely respected energy specialist who entered the upper levels of state government nearly 20 years ago. Rutherford solidified her status when, in 2005, she joined an exodus of Department of Natural Resources staff who felt Murkowski was selling out to the oil giants.
What the Palin administration didn't tell legislators - and neglected to mention in its announcement of Rutherford's appointment - was that in 2003, Rutherford left public service and worked for 10 months at the Anchorage-based Jade North lobbying firm. There she did $40,200 worth of work for Foothills Pipe Lines Alaska, Inc., a subsidiary of TransCanada.
Foothills Pipe Lines Alaska Inc. paid Rutherford for expertise on topics including state legislation and funding related to gas commercialization, according to her 2003 lobbyist registration statement.
Palin has said she wasn't bothered by that past work because it had occurred several years before. But Rutherford wouldn't have passed her new boss' own standards: Under ethics reforms the governor pushed through, Rutherford would have had to wait a year to jump from government service to a lobbying firm.
Rutherford also has downplayed her work for Foothills.
"I did a couple of projects for them, small projects," she told a state Senate committee examining the TransCanada bid earlier this year. While a partner, Rutherford said, she "realized that my heart was not in the private sector, it was in the public sector, and I sold out for the same amount of money I bought in for."
At one point, Palin's pipeline team debated Rutherford's role, but concluded there was no problem.
"We were looking at it in terms of is this an actual conflict or is there the appearance of impropriety of Marty's participation," said Pat Galvin, the commissioner of the Revenue Department and another top team member. "It was determined that there was none, and so we moved forward."
Patricia Bielawski, Rutherford's former partner at Jade North, spent last summer in Juneau, the state capital, serving as TransCanada's lead private lobbyist on the pipeline deal. While the Legislature debated - and ultimately approved - the TransCanada deal, Bielawski met with lawmakers and sat in on the public proceedings, several legislators said.
Bielawski told AP earlier this month that Rutherford's employment at her firm was irrelevant. She said Rutherford never directly lobbied the Legislature for Foothills, and that Rutherford broke no rules based on 2003 state ethics guidelines.
"There's no statutory or regulatory prohibition that extends to things that many years ago," Bielawski said. "So there's no issue."
But others say it's a legitimate question.
"I'm not saying someone's getting paid off for a sweetheart contract, but it's very hard to ignore that this is your former partner and your former client standing there before you," said Republican Sen. Lyda Green, a Palin critic who in August was among the handful of lawmakers who voted against awarding TransCanada the license. "Every time it was mentioned to the governor or to the commission, it was like, 'How could you question such a wonderful person?'"
Tony Palmer, the TransCanada vice president who leads the company's Alaska gas pipeline effort, rejects the suggestion that his company benefited.
"We have gained clearly no advantage from anything that Ms. Rutherford did for Foothills some five years ago on a very much unrelated topic," he said.
Rutherford did not respond to interview requests made directly to her and through the governor's office. But Griffin, the spokesman for the McCain-Palin campaign, said Rutherford "had no decision-making role or authority," and contended that such matters were handled by others on the Palin pipeline team.
TransCanada also had a connection to the team hired by the Palin administration to analyze the bid. Patrick Anderson, a former TransCanada executive, served as an outside consultant and ultimately helped the state conclude that TransCanada's technical solution for shipping gas through freezing temperatures would work.
NARROW SET OF RULES
In January 2007, Palin spoke the first of at least two times to Vice President Dick Cheney, the Bush administration's point person on energy issues, according to calendars obtained by the AP through a public records request. Cheney's staff pressed the Palin administration to draw in the energy companies, said current and former state officials involved in those discussions.
As the governor's approach unfolded in the spring of 2007, there were signs it was skewed in a different direction.
Palin said she saw problems if the firms that own the gas also owned the pipeline. They could manipulate the market or charge prohibitive fees to smaller exploration firms, discouraging competition.
Several important requirements in the legislation were unpalatable to the big oil companies. In the talks under Murkowski, the firms asked that the rates for the gas production tax and royalties be fixed for 45 years; Palin refused to consider setting rates for that long.
Under the Palin process, the pipeline firms had an advantage because they simply pass along taxes paid by oil and gas producers.
Oil company officials warned lawmakers they wouldn't participate under those terms. Still, in a near unanimous vote, the Legislature passed the Alaska Gasline Inducement Act in May 2007, generally as written by Palin's pipeline team.
Once the state issued its request for proposals on July 2, 2007, the level of communication between the government and potential bidders was supposed to decrease drastically, so that no one would be accused of gaining unfair advantage. State lawyers advised public officials to keep their distance, and bidders were told to submit questions on a Web site where answers could be seen by all.
Several of the state's gas line team members interviewed by AP said they had no contact with possible bidders. But Palin had conversations with executives at most of the major potential bidders during that period, according to her calendars.
While the calendars don't detail what was discussed, the documents indicate that the pipeline was the subject of the discussions, or that the conversations occurred immediately after a briefing with Palin's pipeline team.
When she was in Michigan for a National Governors Association summit in late July 2007, Palin and her team met executives from Williams Co., a pipeline builder that ended up not bidding.
"The purpose of the meeting was to more fully understand the details of the project, which we were still evaluating at the time," company spokeswoman Julie Gentz said in a statement.
TransCanada's Palmer described communication with state officials as nonexistent.
According to the governor's official schedule, however, Palin called TransCanada President and CEO Hal Kvisle on Aug. 8, 2007. Asked about that call, Palmer said it was to clarify the bidding process.
Griffin said that in keeping with legal guidance, Palin never spoke in any of the meetings about the competitive bidding process.
By the Nov. 30 submission deadline, there were five applications. But the state disqualified four for failing to satisfy the bill's requirements.
That left TransCanada.
The Canadian giant had been pursuing an Alaska pipeline since at least 2004, when the company negotiated a deal with Rutherford that the state ended up shelving. While the details remain confidential, six people familiar with the terms told the AP that TransCanada was willing to do the work then without the large state subsidy.
In testimony this July before the state Senate, Rutherford herself confirmed such a willingness, but described the 2004 deal as presenting a different set of trade-offs. A state lawyer warned her not to say more, lest she violate a confidentiality agreement.
Others who reviewed the deal think much of the $500 million will be wasted money.
"Most definitely TransCanada got a sweetheart deal this time," said Republican Sen. Bert Stedman, who voted against the TransCanada license. "Where else could you get a $500 million reimbursement when you don't even have the financing to build the pipeline?"
Associated Press writer Brett J. Blackledge contributed to this report.
October 24, 2008
Warning issued on carbon capture
Scott Simpson
Vancouver Sun
October 24, 2008
Underground storage of carbon dioxide has been hailed as the ultimate solution to climate change, but there's no evidence it can actually avert a global warming disaster.
Across the world, the private sector and governments are spending "nowhere near" the amount of time and resources necessary to develop technology for capturing and disposing of carbon emissions, the International Energy Agency is warning in a new report.
The IEA warns of "major impacts on the environment and human activity" unless there is a massive surge in research and development of clean coal technology and carbon capture and storage.
Almost 70 per cent of all carbon dioxide emissions globally are energy-related, and the IEA warns that they will increase 130 per cent by 2050 in the absence of new technology and policies to curtail them.
The IEA says the next 20 years are critical to development of technology to capture the carbon dioxide emitted by energy generation and industrial processes and pipe it underground.
The IEA notes that the G8 group earlier this year endorsed an IEA proposal to embark on at least 20 large-scale carbon capture and storage research projects by 2010. Missing that deadline could be devastating. A failure to curtail emissions from the energy sector in particular could double the pace of global warming in this century, it says, citing a 2007 report from the Intergovernmental Panel on Climate Change.
Without those projects to lead the way, it's unlikely a target of 10,000 carbon capture and clean coal projects will be in place by 2050.
"Current spending and activity levels are nowhere near enough to achieve these deployment goals," the IEA says, noting rapid escalation of technology costs over the past five years, lack of public and private funding for demonstration projects, and an absence of regulatory support and incentives.
Canada is home to one of the world's largest carbon storage projects, in Weyburn, Sask., while Spectra Energy is in the early stages of another world-class project at the Fort Nelson gas processing plant in northeast British Columbia.
Gary Weilinger, Spectra's vice-president for strategic development and external affairs, said in a telephone interview that many of the delays for large-scale projects relate to an absence of government policy.
Spectra is proceeding with its project, the proposed containment of 1.2 million tonnes per year of carbon dioxide emissions at Fort Nelson in a deep underground saline reservoir.
Weilinger noted that the storage project, when realized, will add significantly to the production costs of natural gas at the plant -- but if governments make it cheaper for a less-motivated producer to buy carbon credits and just keep polluting the atmosphere, then there's no incentive for investing in the new technology.
As well, there are unresolved issues about long-term liability for stored carbon. If an unrelated gas exploration company breaches the periphery of an underground containment field, it's not clear who would be at fault, Weilinger said.
Nor are there any specific government policies in place around carbon containment infrastructure such as pipelines, access to Crown and private land and aboriginal rights and title.
Weilinger compared the development of a carbon capture sector to the development of any large-scale public infrastructure project, the latter typically requiring several years worth of regulatory work before any substantial development takes place.
ssimpson@vancouversun.com
Cap-and-trade, carbon tax not much different, report says
James Cowan
Vancouver Sun
October 24, 2008
TORONTO -- Canadian politicians overstate the differences between carbon taxes and cap-and-trade programs as tools to reduce greenhouse gases, a new report suggests.
A study prepared by the Pembina Institute, an energy think-tank suggests neither approach will effectively cut emissions on its own. Furthermore, the two have more in common than politicians in the recent election would admit.
Both the Conservatives and the NDP advocated variations of the cap-and-trade model, which imposes a limit on the emissions that a company can produce and then allows corporations that do not meet the targets to buy further credits.
The Liberals' much-maligned Green Shift proposed a tax on fossil fuels that would fund cuts to income and corporate taxes.
Either method would result in price hikes for consumers, according to Don Drummond, TD's chief economist. "The ones supporting a cap-and-trade never mentioned the impact on households, pretending, I guess, that there wasn't going to be any impact, which of course is not true."
While either system could increase the cost of living, either is also a viable way to cut emissions, according to Matthew Bramley of the Pembina Institute.
"The debate we've seen publicly between carbon taxes and cap-and-trade has exaggerated the differences between the two ways to do things," said Matthew Bramley, one of the report's authors. "The more you look at them, the more similar they appear."
Both systems can be designed to offer flexibility for different industries, to minimize administrative complexity and to conform with the Kyoto Protocol and other international reduction regimes, according to the report.
"From an environmental perspective, the more important question is how stringent is the policy," Bramley said. "Those questions are more fundamental than the ones we've been hearing about one versus the other."
Choosing Greenhouse Gas Emission Reduction Policies in Canada
Pembina Institute, 24-Oct-2008
October 23, 2008
Canada needs to kick its dirty-oil habit
Tar Sands: Dirty Oil and the Future of a Continent
by Andrew Nikiforuk
Declaration of a Political Emergency, an excerpt.
Canada needs to kick its dirty-oil habit
Barbara YaffeVancouver Sun
November 11, 2008
Canada has become an oil junkie, hooked on the tarsands and in desperate need of detox.
That's a perspective put forward in a new book by Alberta journalist Andrew Nikiforuk in Tar Sands: Dirty Oil and the Future of a Continent.
The book is likely to be lauded by environmentalists and pilloried by folks in Canada's oil patch.
The author argues for a reopening of the North American Free Trade Agreement to enable Canada to reclaim its resource from a ravenous customer and partner in crime, the U.S.
Writes Nikiforuk: "Canada has adopted a new geodestiny: Providing the U.S. with bitumen."
He notes that while Canada furnishes the Americans with 20 to 30 per cent of their oil, half of this country's own citizens, in Quebec and Atlantic Canada, continue to rely on insecure supplies from the Middle East.
Accordingly, a vast network of north-south pipelines and electricity corridors are being built across the continent -- to serve U.S. interests.
Nikiforuk disapprovingly cites NAFTA provisions that guarantee the U.S. unlimited access to Canadian oil and natural gas, and reasonable access during times of shortages.
These guarantees, he says, need to be renegotiated to allow Canadians to safeguard their domestic energy security.
Canada's official policy, of course, is quite different. Alberta's government regularly lobbies Washington to ensure its oil exports remain unimpeded.
When the U.S. Energy Independence and Security Act became law last December, limiting dirty oil imports, Edmonton and Ottawa immediately began lobbying for a tarsands exemption.
The Harper government has signalled it hopes to use American reliance on tarsands oil as a way of conveying to the new Obama administration Canada's strategic importance.
Nikiforuk believes the tarsands should be developed gradually and with far greater environmental sensitivity, a view that has been supported by former Alberta premier Peter Lougheed.
Nikiforuk paints a picture of the current development as an environmental cesspool.
In fact, every barrel of bitumen from the tarsands produces on average three times more C02 emissions than a regular barrel of oil.
The tarsands are Canada's single largest growing source of carbon dioxide, and by 2020 will account for no less than 16 per cent of the nation's total emissions.
Meanwhile, "no comprehensive assessment of the megaproject's environmental, economic or social impact has been done."
Approvals are granted enthusiastically as part of a process that seeks to maximize potential profit, says the author.
And there's where the rubber hits the road; the tarsands have been wildly profitable. How can we realistically expect the politicians to voluntarily turn off the spigot?
Between 2000 and 2020, it's estimated that corporate taxes from the tarsands will yield $44 billion for Alberta and $51 billion for Ottawa.
The Alberta Energy Department website describes the tarsands -- which it more benignly refers to as 'oil sands' -- as "a triumph of technological innovation," covering an area the size of the state of Florida and accounting for nearly half Canada's oil output and 62 per cent of Alberta's output.
Just as impressively, some 145,000 Albertans are employed in the mining and oil and gas extraction industry. And thousands more work in the services sector that supports energy exploration and production. Jobs are going to people as far away as Newfoundland.
In the face of such facts, it would run counter to human nature to curtail the tarsands or even scale back development.
Nikiforuk argues convincingly that we have been both quick and somewhat reckless when it comes to the tarry goo, but democracies are run according to the wishes of their people.
And the main overseer of the tar sands, Alberta's Conservative governments, keep getting re-elected with hearty mandates.
Meanwhile, the feds are thrilled by the revenue take from the tarsands and other provinces are grateful for the job opportunities.
As much as scientists keep predicting global doom resulting from greenhouse gases, Canadians still love their cars and continue running their dishwashers.
The tarsands has a lifespan of about 40 years and to date only about two per cent of the resource has been produced. This is a topic that will continue to fuel heated debate.
byaffe@vancouversun.com
Author Andrew Nikiforuk fears tar sands undermine democracy
By Charlie SmithGeorgia Straight
23-Oct-2008
A Calgary author and journalist says most Canadians don’t understand that we’re living in a “petrostate” that could undermine our democracy. Andrew Nikiforuk, author of Tar Sands: Dirty Oil and the Future of a Continent (Greystone Books, $20), told the Georgia Straight in a phone interview that Canada needs a national debate on the topic. “I think the tar sands has created a political emergency for the country,” he said.
In his book, Nikiforuk describes the Alberta tar-sands developments as the world’s largest construction project, the world’s largest capital project, and the world’s largest energy project—one that uses as much water in a year as a city with a population of two million.
“We need reporters from our national daily newspapers living in Fort McMurray and writing about this nation-changing event,” Nikiforuk said. “This is an event much greater than the building of the national railway. This is an event much greater than the Apollo moon project.”
Canada, which has approximately 175 billion barrels of recoverable oil, is the largest supplier of oil to the United States, having surpassed Saudi Arabia. “We have become a petrostate without any of the safeguards that a petrostate should have,” Nikiforuk said.
He noted that there is a vast amount of political-science research demonstrating that oil wealth hinders democracy. He said this is true regardless of whether the petrostate is in the Middle East, and whether it’s a large or small country.
Nikiforuk pointed out that Canada has ignored recommendations from the International Monetary Fund and the Organisation for Economic Co-operation and Development calling on countries that generate a great deal of oil wealth to put those revenues into a separate fund that cannot be touched by politicians.
“Canadians need to start thinking of themselves as a petrostate, and they need to start thinking of the kinds of controls needed to protect the country from the excesses of oil,” he said. “We also need to think about the pace, and where we want to go with it. It is out of control.”
He said that oil wealth undermines democracy in several ways. Governments enriched by petroleum revenues reduce taxes, which makes the public feel good about politicians who make these decisions. Oil money is also used to buy votes, he alleged.
“Then, those parties tend to stay in power for long periods of time,” Nikiforuk said, noting that Conservatives have governed Alberta for 37 years. “Parties that stay in power for long, long periods of time tend to become more authoritarian in nature.”
Alberta has the lowest provincial voter turnout in the country. Nikiforuk said governments that remain in power for decades tend to make more appointments based on patronage rather than merit.
“So you end up with all kinds of people being appointed to positions they should not be in,” he claimed.
He estimated that $200 billion has been spent developing the Alberta tar sands if the cost of pipelines, refinery expansions, and upgraders is included.
“It has brought 700,000 people into Alberta since 1996,” Nikiforuk said. “It is almost like the invasion of Iraq, but in this case, it’s a petroboom.”
According to the Alberta-based Pembina Institute, two tonnes of the bituminous sands, otherwise known as tar sands, and two tonnes of overburden must be excavated to create a single barrel of oil. Nikiforuk writes that producing each barrel generates three times as much greenhouse gas as a barrel of conventional oil because of the work involved.
He noted that the tar-sands developments are playing a role in preventing Canada from meeting its climate-change goals. But the impact goes beyond that, affecting cross-Canada labour mobility and causing politicians to amend immigration legislation to allow more temporary foreign workers. “The tar sands has changed Canada in the same way the fur trade has changed Canada,” Nikiforuk said.
He said that Canadian provincial and federal governments have generated $60 billion from tar-sands development, but claimed that Canadians have little to show for it. In his book, he notes that Ottawa will have collected at least $50 billion from tar-sands developments by 2020. “True to the First Law of Petropolitics,” Nikiforuk writes, “government has used this windfall so far to reduce corporate taxes and slash 2 per cent off the federal sales tax. While Norway has kept the resource curse largely at bay with clear accounting and its dedicated oil/pension fund, Ottawa has spent the cash to win friends and influence elections.”
Nikiforuk said that Canada has no strategy for ensuring self-sufficiency in energy over the long term, even though it appears that conventional oil production has peaked around the world. He also said that no Alberta politician ever expected that environmentally concerned Americans would start asking questions about degradation wrought by tar-sands developments. “What we’re seeing is a complete vacuum here in terms of political direction, political policy, political strategy,” he claimed. “It’s dangerous for Alberta. It’s dangerous for Canada. It’s dangerous for North America.”
Refinery expansion, pipeline to be good for area
By Scott Cousins
Granite City Press-Record
Sunday, October 19, 2008
Rotary talk centers on energy, oil
A multi-billion dollar expansion of ConocoPhillips' Wood River Refinery will be a major benefit for the entire region, according to a company official speaking in Granite City Wednesday.
Tim Peterson, manager of technical services at the plant, was the speaker at this month's Granite City Rotary Action Prayer Breakfast.
Although the formal presentation was about energy security and climate change, much of the group's interest centered on the development.
The company recently received the final environmental permits for a $3 billion expansion coupled with the construction of a pipeline from Alberta, Canada, to deliver oil for processing.
He said the pipeline is expected to be finished in 2010, with the refinery expansion coming on line in 2011.
The refinery, originally built in 1917, is the 10th largest in the U.S., according to Peterson.
It processes about 300,000 barrels of oil per day. Of that, 160,000 barrels is turned into gasoline, 90,000 into diesel or jet fuel, and the remainder into asphalt and other petroleum products.
When completed, the expansion will allow the refinery to produce an addition 70,000 barrels of crude oil per day.
In addition, the expansion will double the amount of heavy crude oil the refinery is able to process.
The oil coming from Albert is primarily heavy crude oil.
"You need some special facilities in your plant (to process the heavier oil)," Peterson said.
The refinery expansion and construction of the pipeline will employ between 2,000-3,000 workers in this area, and when completed will add between 50-100 permanent jobs in the refinery.
"It's a great project for the (economic) security of the refinery," he said.
In talking about the general subject of oil, gasoline and the environment, he said there are "significant challenges" in producing energy and dealing with climate and environmental issues.
"They're very interrelated," he said. "You can't solve one without the other."
Peterson noted that current projections call for energy use to 25 percent over the next 20 years or so, and that oil, natural gas and coal will provide about 80 percent of U.S. energy at least through 2030.
For future energy demands, he said there needs to be energy diversity, including ethanol, nuclear and other sources.
"We basically need it all to keep up with the demand," he said.
There also needs to be an increased emphasis on energy efficiency, along with a concern for the environment
October 21, 2008
Requiem for a moratorium
Big Oil and enviros agree:
Surging prices were nail in coffin for offshore-drilling ban
Grist
20-Oct-2008
The 110th Congress achieved some notable victories for the environmental community. The Democratic majorities secured the first major increase in automobile fuel-economy standards in nearly three decades, along with tougher efficiency rules for household appliances. They extended tax credits for solar and other renewable energy sources. Serious discussion of climate legislation got underway in the Senate, while the House approved an energy bill with the first national renewable electricity standard (though the Senate didn't pass it). Democratic leaders set an example for the nation with a plan to green the U.S. Capitol.
But for many enviros, the legacy of the 110th Congress will be its failure to renew the 27-year-old moratorium on drilling for oil and gas on the outer continental shelf (OCS) -- one of the largest concessions on environmental protection in decades.
Republican leaders and former elected officials like Newt Gingrich spent the summer of 2008 demanding that the country "drill here, drill now." In the waning hours of Congress, they finally got at least a partial win on the issue: The moratorium expired on Oct. 1, opening more than 600 million acres of coastal waters to leasing and potentially allowing oil and gas drilling as close as three miles to shore. The expiration clearly demonstrated the persistent power of the fossil-fuel lobby in Washington.
"This is the biggest reversal of conservation and protection in the history of this country," said Richard Charter, a government relations consultant for Defenders of Wildlife Action Fund and a long-time opponent of offshore drilling. "This could be just the first step to losing what people in this country who are now alive took for granted as they were growing up ... If anything is going to be fair game to be destroyed in the quest for oil, then this is probably not the end. This is probably just the first step."
For the moratorium on offshore drilling to expire under a Democratic Congress might strike some observers as ironic, given the party's longtime ties to various environmental groups. But that would overlook the fact that the moratorium has for decades had backing from both sides of the aisle, with particularly vocal support from Republican leaders in key states like Florida and California.
"The moratorium has always been a bipartisan product, and could not have survived as many years as it did without Republican support," Charter said.
But that all changed when the price of oil went soaring.
"It's safe to say the whole country went crazy when gas hit $4 a gallon," said Athan Manuel, Sierra Club public lands program director. "At that point you saw people across the country calling for immediate action. Congress tried to do everything they could on energy -- do more efficiency, do more renewables, do more nukes, and do more drilling. Whether it was the right solution or not, people just started calling for action, and you saw people like Newt Gingrich and the Republican leadership really exploiting that."
The nearly three-decades-old bipartisan coalition built to support the moratorium was simply no match for oil selling during the peak summer months at well over $100 a barrel, say enviros.
"People vote with their right foot, on the gas pedal," Charter said. "There is no more powerful lobbying tool, in the environmental movement or anywhere else, than that little dial spinning around on a gas pump."
A captive audience
Representatives of the oil industry, who have long campaigned for the end of the OCS moratorium, confirmed that it was the high price of gasoline this year that helped them finally get their wish.
"I think that people were listening this summer when they saw gas prices going higher, so that had a lot to do with the public sentiment," said Denise McCourt, industry relations director for the American Petroleum Institute. "We're pleased to see that, because people are recognizing that we have some tremendous opportunities out here and that Congress needed to act."
McCourt said API ramped up its advertising and outreach campaigns on the issue, in part because the high price of gasoline had more people tuned in on the issue.
Lee Fuller, vice president of government relations for the Independent Petroleum Association of America, said national security concerns also helped change public opinion on drilling, but high prices were the main factor.
"We were looking at the impacts of the price of oil moving U.S. money into the hands of foreign countries, which in many cases weren't that supportive of the United States," said Fuller -- echoing a point made by both Barack Obama and John McCain during the presidential campaign. But Fuller said it was the spike in oil prices that "drove energy into the front line debate" for much of the summer.
Even though new offshore drilling wouldn't lower prices for at least a decade, according to everyone from the Energy Information Administration to API, the oil industry and its friends in Congress were able to convince the American public otherwise. Through expanded marketing tactics and sheer repetition, they drove home the notion that drilling could be done in a "safe, environmentally friendly" way, and gave the impression that it would only be "deep-sea" drilling -- far from the public's favorite beaches.
In the first six months of 2008, Big Oil spent $289.6 million on political contributions, lobbying expenditures, and paid media, according to a recent report [PDF] from the campaign finance watchdog group Public Campaign Action Fund. The Center for Responsive Politics reports that Gingrich's 527 group, American Solutions for Winning the Future, has on its own spent $15.6 million this year, most of it on pushing the "drill here, drill now" message.
"Big Oil has just been able to wage a major effort to convince both the public and decision makers that there's merit to drilling," said Margie Alt, executive director of Environment America.
The P.R. effort had an impact, as the summer saw growing public demand for drilling, which in turn put pressure on lawmakers to do something. The demand for drilling came despite the fact that, according to other survey data, there is far more public support for investing in renewable energy sources as a way to bring down energy prices.
And as poll numbers in favor of drilling crept up, so did congressional support, even among lawmakers who recognize that it isn't a real solution to energy concerns.
"I don't think the [congressional] leadership was as strong as they should have been," said Corry Westbrook, legislative director for the National Wildlife Federation. "I don't think they were good about messaging and getting out to the public that there is a better solution than drilling."
A long time coming
The demise of the moratorium on offshore drilling didn't happen suddenly. It has had opponents throughout its history, and the legislation to support its continuation, which usually came as part of the regular Interior Department spending legislation, was seeing its support in the key appropriations committees slide year after year.
But it was John McCain who kick-started this year's big political debate over the issue. For years he had supported the federal OCS drilling ban, but in June he reversed course and called for lifting it. President Bush quickly jumped on board, calling on Congress to lift its ban and then repealing the executive ban, which had originally been imposed by his father in 1990. In order for drilling to proceed, both the congressional and executive bans needed to be ended.
While the drilling debate was still raging in Congress, the Bush administration started putting together a new five-year plan that would allow OCS lease sales as soon as 2010.
"Areas that were considered too expensive to develop a year ago are no longer necessarily out of reach based on improvements to technology and safety," Interior Secretary Dirk Kempthorne said in July. "The American people and [President Bush] want action and this initiative can accelerate an offshore exploration and development program that can increase production from additional domestic energy resources."
Though Kempthorne won't be able to complete the new plan before the end of this administration, he will have set in motion a plan that the next president could carry out.
"It just happened to take almost to the end of the administration, but you know that the White House will get it as far down the runway as they can before they leave," said Charter.
Green around the gills?
Lawmakers and groups committed to preserving protections for the outer continental shelf were also thwarted by the enormity of the financial crisis that confronted Congress in its final weeks. The House managed to pass an energy bill that included at least some protections for the OCS, but with all attention turned to the Wall Street bailout plan, the protections were never considered in the Senate. Many assume that the Senate wouldn't have been able to pass them anyway, and Bush made clear he would veto any bill that included them.
But some believe the financial crisis could have given the Democratic leadership some bargaining power to force the president's hand on a measure to protect the coasts.
"[The Bush administration] came, hat in hand, asking for the $700 billion bailout, so you would presume that Democrats would have some leverage," said Charter. "I think the reason that the Democrats blinked in this giant game of cataclysmic chicken ... is they didn't want to further complicate the Bush economic crisis."
Others think the financial crisis simply sucked all the air out of the room in the final weeks of Congress. "With everything else going on in Congress, and with Big Oil putting all their weight behind this idea that we need to drill more, the environmental perspective just wasn't able to prevail," said Alt.
Some in Congress fault environmental groups for not doing enough to help keep the moratorium in place. Rep. George Miller (D-Calif.), speaking at a public forum on "The Politics of Green" at the Democratic National Convention in August, accused the environmental community of being "entirely absent" during this summer's debate over drilling. "Nobody heard from them in their district office, nobody heard from them during that discussion," said Miller.
Environmentalists, of course, buck at that suggestion, pointing to a litany of advertisements, email campaigns, phone calls, op-eds, and press releases from the summer.
Sierra Club's Manuel is a bit sick of people asking where enviros were during the heated drilling debate. "I have answered that question millions of times on the Hill," said. "They asked us why we were so silent. We weren't. We were yelling like crazy, but we weren't yelling as loud as the other guys because they had a bigger bullhorn than we did."
But even if they were drowned out by the oil industry and their allies in Congress, Manuel acknowledged that some things could have been done better this year. He said there is a definite need to reactivate the long-standing coalitions between enviros, tourism organizations, and the fishing industry that have previously stepped up to protect the coasts.
"We just need to do a better job of making those voices louder, because those voices were definitely crowded out," he said. "We need to get those guys reactivated again. That's always been an important part of this fight, and we didn't do as good of a job activating that crowd."
NWF's Westbrook also noted that while green groups could have improved their messaging on the OCS issue, they were in fact very active on Capitol Hill over the summer, focusing a lot of their efforts on the Lieberman-Warner Climate Security Act and the seemingly never-ending battle to extend the renewable-energy tax credits.
"Most of the community was very focused on the Climate Security Act, and that is completely tied to investments in more fuel-efficient cars and more fuel-efficient buildings, and getting global warming and carbon dioxide gases down," said Westbrook. But still, she added, "I wish that we had articulated our message and our concerns more clearly to the public about the fact that [drilling] is just a short-term, and not a real, solution."
The victors aren't feeling victorious
While the outcome this year was far from ideal for environmentalists, it wasn't exactly what Big Oil was asking for either.
The industry wanted a bill explicitly endorsing offshore drilling (like the "All of the Above" bill from the House Republicans), but all it got was a passive expiration of the ban. Drilling advocates wanted a portion of the revenues from leasing to be given to states, in order to give them more incentive to allow drilling off their coasts. They wanted to open up more areas of the Gulf Coast (which are currently protected by legislation separate from the OCS moratorium), and they wanted to include language to significantly limit lawsuits challenging new leasing. Sen. Jim DeMint (R-S.C.) tried to slip these provisions into other legislation in the final hours of Congress, to no avail.
So Oct. 1, though it was dubbed Energy Freedom Day by the pro-drilling contingent, did not represent a dramatic change in energy policy. Instead, it marked a draw on offshore drilling. Drilling supporters will keep pressing their agenda next year, and opponents will push to have the ban reinstated.
"While today we celebrate the offshore drilling ban being lifted, remember there is still a lot more work to be done to move America toward energy independence," said a post on the American Solutions blog on Oct. 1.
API's McCourt said the industry needs more assurance that Congress won't reinstate the moratorium before it can move forward on plans to drill offshore.
"There's talk about what's going to happen in 2009, so of course nobody can make any sort of commitment to look for more resources, even to try to look for more resources, unless there's some kind of long-term assurance from Congress that this moratorium will remain lifted," she said. "I think we all have to see how this all plays out in 2009."
Said Charter, "The outcome this year is not an outcome. I think that leaves the issue unresolved and ripe for resolution next year. Even states that were relatively amenable to drilling, this outcome is not something they're going to want to leave to stand."
And while some coastal states are more favorable to drilling than others, many are outright opposed, and state legislators, governors, and congressional representatives in those states will use every tool at their disposal to fight it.
Rep. Ed Markey (D-Mass.) has already introduced legislation [PDF] to protect Georges Bank, an area off the Massachusetts coast that may be targeted for new drilling. Other anti-drilling lawmakers are likely to follow suit and try to protect their states' coastlines.
Now what?
It's pretty much inevitable that the offshore drilling debate will resurface early in 2009.
"Congress will revisit the OCS issue in March with a new president," Drew Hammill, spokesperson for House Speaker Nancy Pelosi (D-Calif.), told Grist. March is when the continuing resolution that's currently funding the government is set to expire.
"Democrats know that the Republican 'drill only' policy will not make our country energy independent," Hammill said. "The speaker will continue to promote comprehensive energy policies that create green jobs, protect our environment, and make our nation more secure."
But if environmental champions in the House and Senate are to press aggressively for a renewal of the ban or for other offshore protections, they'll need to hear stronger support from greens, congressional insiders say. "Congress is going to need a push come March," said one Democratic aide. "Democrats have lots of great ideas, but they weren't being heard among the 'drill here, drill now,' 'drill, baby, drill.'"
Enviros say they recognize they'll need to put out a strong message to both the public and politicians on energy issues -- not just lobbying against drilling, but lobbying for better alternatives. "We've got to engage the public on our positive message early on in the process," said Manuel. "Probably the most important thing is to go out and sell the public on what we are for -- economy, efficiency, clean energy solutions."
But the real determining factor on offshore drilling may be the nation's choice of its next president. John McCain now wholeheartedly supports drilling on the OCS. Barack Obama maintained his opposition for much of the summer, but in August said he'd be "willing to consider" offshore drilling if it could help get a comprehensive and otherwise good energy bill passed. Still, Obama repeatedly stresses that the nation can't drill its way out of its energy problems.
All of the big green groups that endorse presidential candidates have endorsed Obama: Sierra Club, the League of Conservation Voters, Friends of the Earth Action, Environment America, and Defenders of Wildlife Action Fund.
But if Obama doesn't win, then what?
"Maybe [McCain will] flip-flop back to where he was before when he understood that drilling wasn't the solution," Manuel said. "But it's hard to assume that would happen with Sarah Palin as his vice president ... That would be a terrible step backward for the country on energy policy if it was McCain and Palin in the White House."
Grist: Environmental News and Commentary
©2007. Grist Magazine, Inc. All rights reserved.
Gloom and doom with a sense of humor®.
October 18, 2008
20bn barrel oil discovery puts Cuba in the big league
• Self-reliance beckons for communist state
• Estimate means reserves are on a par with US
Rory Carroll, Latin America correspondent
The Guardian,
Saturday October 18 2008
A worker walks at an oil rig in Havana, Cuba.
Photograph: Enrique De La Osa/Reuters |
Friends and foes have called Cuba many things - a progressive beacon, a quixotic underdog, an oppressive tyranny - but no one has called it lucky, until now .
Mother nature, it emerged this week, appears to have blessed the island with enough oil reserves to vault it into the ranks of energy powers. The government announced there may be more than 20bn barrels of recoverable oil in offshore fields in Cuba's share of the Gulf of Mexico, more than twice the previous estimate.
If confirmed, it puts Cuba's reserves on par with those of the US and into the world's top 20. Drilling is expected to start next year by Cuba's state oil company Cubapetroleo, or Cupet.
"It would change their whole equation. The government would have more money and no longer be dependent on foreign oil," said Kirby Jones, founder of the Washington-based US-Cuba Trade Association. "It could join the club of oil exporting nations."
"We have more data. I'm almost certain that if they ask for all the data we have, (their estimate) is going to grow considerably," said Cupet's exploration manager, Rafael Tenreyro Perez.
Havana based its dramatically higher estimate mainly on comparisons with oil output from similar geological structures off the coasts of Mexico and the US. Cuba's undersea geology was "very similar" to Mexico's giant Cantarell oil field in the Bay of Campeche, said Tenreyro.
A consortium of companies led by Spain's Repsol had tested wells and were expected to begin drilling the first production well in mid-2009, and possibly several more later in the year, he said.
Cuba currently produces about 60,000 barrels of oil daily, covering almost half of its needs, and imports the rest from Venezuela in return for Cuban doctors and sports instructors. Even that barter system puts a strain on an impoverished economy in which Cubans earn an average monthly salary of $20.
Subsidised grocery staples, health care and education help make ends meet but an old joke - that the three biggest failings of the revolution are breakfast, lunch and dinner - still does the rounds. Last month hardships were compounded by tropical storms that shredded crops and devastated coastal towns.
"This news about the oil reserves could not have come at a better time for the regime," said Jonathan Benjamin-Alvarado, a Cuba energy specialist at the University of Nebraska.
However there is little prospect of Cuba becoming a communist version of Kuwait. Its oil is more than a mile deep under the ocean and difficult and expensive to extract. The four-decade-old US economic embargo prevents several of Cuba's potential oil partners - notably Brazil, Norway and Spain - from using valuable first-generation technology.
"You're looking at three to five years minimum before any meaningful returns," said Benjamin-Alvarado.
Even so, Cuba is a master at stretching resources. President Raul Castro, who took over from brother Fidel, has promised to deliver improvements to daily life to shore up the legitimacy of the revolution as it approaches its 50th anniversary.
Cuba's unexpected arrival into the big oil league could increase pressure on the next administration to loosen the embargo to let US oil companies participate in the bonanza and reduce US dependency on the middle east, said Jones. "Up until now the embargo did not really impact on us in a substantive, strategic way. Oil is different. It's something we need and want."
guardian.co.uk © Guardian News and Media Limited 2008
October 15, 2008
Lineup for LNG project adds a competitor
by Ted Sickinger
The Oregonian
Monday October 13, 2008
Steven Nehl/The OregonianPeter Hansen, chief executive of Oregon LNG, has spent nearly five years pushing a proposal to build a liquefied natural gas terminal on the Skipanon peninsula, just west of Astoria (in background). His company filed a formal application Friday with federal energy regulators. |
Most controversy over liquefied natural gas in Oregon has focused on proposals to build an import terminal 20 miles east of Astoria on the Columbia River and on a competing project in Coos Bay.
With little fanfare Friday, however, backers of a third LNG project delivered 21 binders to federal energy regulators containing their application to build a terminal on a spit of sand and blackberry brambles that juts into the Columbia River from Warrenton.
Oregon LNG, as the company is called, isn't exactly new. The project was launched in 2004 by Calpine Corp., which went into bankruptcy a year later. Managers of the project kept pushing local land-use approvals for the terminal, and later bought out Calpine with backing from a New York-based holding company, Leucadia National Corp., that specializes in distressed investments.
Their plan is to erect three mammoth gas-storage tanks on the Skipanon peninsula, each 17 stories tall, almost as wide as a football field and highly visible from Astoria, which is directly across Young's Bay from the project site.
The gas-receiving terminal would be coupled to a pier sticking 2,100 feet into the Columbia, where a new generation of LNG supertankers would dock in a dredged basin to unload their cargoes.
 |
The $1 billion terminal would be capable of importing a billion cubic feet of natural gas a day - almost twice Oregon's daily consumption. The gas would be shipped to markets throughout the Northwest and California via "the Oregon pipeline." The 36-inch, high-pressure line is slated to arc through 121 miles of farm- and forestland in Clatsop, Tillamook, Washington, Yamhill, Marion and Clackamas counties to a gas hub in Molalla.
Oregon LNG's application comes as the U.S. market for gas appears to have temporarily collapsed. Domestically produced gas is cheap and abundant. Asian countries are willing to pay such eye-popping premiums for LNG cargoes that many industry experts doubt it makes sense to import LNG to the United States.
Industry giants are sending the same message. British Petroleum recently backed out of a proposed terminal on the Delaware River, citing lousy industry conditions, while several terminals are applying for permission to export U.S. and Canadian gas to take advantage of the Asian bonanza.
Moreover, just as the Houston-based backers of the Bradwood Landing LNG proposal have met vehement opposition, local landowners, environmentalists and tribal groups could put up a stiff fight against Oregon LNG.
"We're opposed," said Brent Foster, executive director of Columbia Riverkeeper. "It would have a massive impact on the Columbia estuary. It comes with a significant pipeline that would impact farms, forestlands and rivers. And it's right in the middle of the flight path to the Astoria airport.
"There's no way you can call this a good site."
Oregon LNG executives obviously disagree. They figure their chances of commercial success are good enough to justify investing tens of millions of dollars in a labyrinthine permitting process.
Oregon LNG Chief Executive Peter Hansen said his aim is to build collaborative relationships and open dialogues - even with his opponents. The approach has built credibility and some good will among state regulators, tribal groups and environmental opponents.
Julie Carter, a lawyer with the Columbia River Intertribal Fish Commission, said the jury is still out on how the tribes will react to the project, which they still consider a huge industrial development on the river. But she said the company's approach has been refreshing.
"We've been pleased with the way they've been treating our interests and concerns, and how they've carried on this process," Carter said.
Hansen said Oregon LNG has spent $20 million and will continue spending $1.5 million a month to resolve myriad environmental, engineering and safety questions. This summer, for example, the company had biologists in the Tillamook forest hooting like spotted owls to determine whether its pipeline would harm owl habitat. It has done similar surveys for marbled murrelets and rare native plants.
"You can give agencies what they want today or fight them for two years, then give them what they want," Hansen said. "In the end, the issues are what they are, and you're the only one in any kind of a hurry."
As far as gas supply goes, Hansen says producers will more than double the supply of LNG on world markets by 2015, freeing up cargoes to come to the United States at competitive prices.
"There's a lot of interest in having a bridgehead to the U.S. market on the West Coast," he said. "From a producer's perspective, this is a pretty cheap option."
Hansen, a Dane who has traipsed around the globe as an energy industry engineer, has spent the past five years on the Oregon LNG project, first as an executive with Calpine Corp. When that company went bankrupt, he continued pursuing the project and later led a management buyout from Calpine.
Lately, his quest has become something of a knife fight with the backers of the Bradwood Landing LNG project, upriver from Astoria. Backers of the projects always have been competitive, but that competition has become more hostile recently, with each trying to scuttle or at least slow the other's regulatory approvals.
Hansen contends his Warrenton site is far superior to Bradwood. From an environmental standpoint, there's simply far less fish habitat to harm off the Skipanon peninsula, he contends. And he pulls no punches in discussing what he perceives as Bradwood's major flaw.
"Why would you bring an LNG tanker under the Astoria bridge?" Hansen said. "A pool fire is like a nuclear meltdown. The likelihood of such an accident is remote, but the consequence is enormous. ... It would burn Astoria."
If it's OK to bring LNG to Bradwood, Hansen asked, then why not put a terminal much farther upriver - say, in Kalama or Portland? The answer, he said, is plain common sense: "Let's not take that risk," he said.
Bradwood's backer, Houston-based NorthernStar Natural Gas Inc., counters that Oregon LNG sits on an unstable sand spit in the middle of earthquake and tsunami zones. The site is too close to Astoria's airport, NorthernStar executives say — one reason they rejected it in their early research.
Moreover, NorthernStar contends it has acquired an ownership interest in the Skipanon peninsula site. It has asked regulators to stop processing Oregon LNG's application and has indicated that it intends to take a spoiler role in any land-use changes that Oregon LNG seeks.
The back and forth between the companies is likely to continue. Both have invested heavily in their projects, and both say only one terminal ever will be built. Though NorthernStar already has federal approval and is seeking to win state permits sometime in early 2009, Hansen said that's wildly optimistic and that he still thinks he can beat his rival to the regulatory finish line.
Ted Sickinger; tedsickinger@news.oregonian.com
October 13, 2008
Gas well emissions drawing scrutiny
COMMENT: It would be interesting to compare the results from Colorado and Texas with northeast BC. The similarities are likely greater than the differences.
By MIKE LEE
Fort Worth Star-Telegram
12-Oct-2008
In the daylight, the storage tank looks innocuous. It’s the same sort of tank that can be found next to any oil or gas well in the West, and there are hundreds like it in Fort Worth.
But in infrared light, a plume of vapor can be seen escaping from the tank’s vent.
The video, taken by the Environmental Protection Agency at a site in Colorado, is a vivid illustration of a problem that’s beginning to draw attention: the amount of air pollution produced by natural gas extraction in the Barnett Shale field.
Researchers are only beginning to wrap their hands around the issue, but the early findings indicate that natural gas production is a significant part of North Texas’ air pollution problem. And it could be growing. At the least, it’s worth studying to determine the scope of the problem, the researchers said.
There has been extensive research on emissions from cars and trucks, which account for much of the air pollution in North Texas. There’s also been research into pollution from electric and cement plants.
"All those other sources have seen a lot of regulation," said Al Armendariz, an engineering professor at Southern Methodist University who has studied air quality issues for several years. "The oil and gas sector kind of snuck by."
Industry officials question whether some of the research is valid. But they also said there are cost-effective ways to reduce emissions from gas well sites.
Ground-level ozone
A study by the Texas Commission on Environmental Quality in 2006 estimated that storage tanks alone account for about 38 tons of volatile organic compounds a day, or 7 to 8 percent of the volatile organic compounds in the air in North Texas. Those chemicals are a key ingredient in ground-level ozone, the area’s major pollution problem.
The storage tanks are a permanent part of most Barnett Shale gas wells. The wells produce not only gas but also water and a light form of crude oil commonly known as condensate. The tanks continue to fill up as long as the well is producing, and the water and condensate have to be trucked away.
The condensate, high in volatile organic compounds, evaporates easily. The environmental quality commission requires operators to get a permit for each tank, but the tanks can still release vapor through pressure valves.
To calculate the amount of chemicals released, researchers commissioned by the Houston Advanced Research Center hooked up a gauge to several storage tanks and calculated the average amount of chemicals released for each barrel of condensate. Then they multiplied the average by the number of barrels of condensate produced in the region.
David Templet, manager of environmental health and safety for Devon Energy, the largest producer in the Barnett Shale, said the measurement may not be accurate. The researchers took their samples in July, when the heat would have created more vapor.
"You really need to sample for 12 months" to figure a true average, he said.
Also, the amount of condensate that a well produces varies widely from place to place. Many of Devon’s wells produce almost no condensate, said Steve O’Connell, a Devon manager in North Texas.
However, Barnett Shale wells produce a lot of condensate in Wise, Denton and Parker counties, Armendariz said, citing Texas Railroad Commission data.
There are several ways to control emissions from wells that do produce condensate. One is to pipe the full stream of gas, including the condensate, to a processing plant. Another is to capture the vapor at the storage tank and pipe it to a processing plant.
There’s an upside for the producer — the less vapor that escapes, the more condensate there is to sell.
'Running 24-7’
Another source of pollution is the compressors used to move natural gas through pipelines. The compressors are usually powered by large engines — often running on natural gas from the same pipeline — and some of them have no emission controls.
Armendariz said he’s still finalizing the study, but he estimates that the compressors in the Barnett Shale field have a combined 2 million horsepower. That’s the equivalent of about 10,000 full-size pickup engines — in a region with 4.5 million people.
But unlike cars and trucks, "these engines are out there running 24-7," Armendariz said. "The newer ones are pretty clean, but they’re still not as clean as the newest automobiles."
The environmental quality commission began phasing in pollution control rules for compressor engines last year. Commission officials said in a statement that those controls "will have benefit toward reducing" the ozone problem by 2009.
But Armendariz said the commission is focusing only on some of the counties and on some of the engines that are producing oil and gas. And, he said, the state may have underestimated the number of compressors in the Barnett Shale. He is preparing a study that calculates the amount of pollution from compressors and other sources.
Templet, with Devon, said the company is sharing information with Armendariz and the environmental quality commission to ensure that the study is accurate.
Methane emissions
Methane, the primary ingredient in natural gas, is also one of the gases linked to global warming. Scientists theorize that methane, carbon dioxide and other gases have formed a layer around the Earth’s atmosphere that traps heat and has contributed to the rise in world temperatures.
The EPA lists natural gas systems — from production to distribution — as the second-leading cause of methane emissions and has started a voluntary program to encourage producers to reduce what they release.
It’s common, for instance, for producers to simply release the gas into the atmosphere when they’re completing a well. That’s the phase right after a well is fractured and water is being pumped out of it.
Devon and other producers are trying to capture the gas during completion. Timing is a factor, Templet said, since the well has to be hooked up to a pipeline for a "green completion." But Devon has recovered an estimated 80 tons of methane using the method.
"It costs us a significant amount of money to put that equipment in place, but we also get some money from the sale of the gas," Templet said.
The EPA is also pushing "low-bleed pneumatics." Gas producers often use pressure from their own pipelines to power gauges, valves and other equipment. On older sites, the gas is often vented into the atmosphere.
Low-bleed systems channel most of that gas back into a pipeline. Retrofitting a storage tank can cost a few hundred to a few thousand dollars, but the EPA estimates that the changes pay for themselves within a year.
'Many, many sources’
Judging the cumulative effect of the entire industry is difficult.
"From an air pollution standpoint, the problem has been that the oil and gas industry consists of many, many small sources that are individually small yet collectively add up to large sources of air pollution," said Jeremy Nichols, climate and energy program director for Denver-based WildEarth Guardians.
But a study by University of Colorado public-health doctors concluded that more research is needed on how the industry affects the health of people in energy-producing regions. The study was funded by the Natural Resources Defense Council, an environmental group.
The researchers concentrated on Garfield County, Colo., a largely rural area that had 4,521 oil and gas wells at the end of 2007. The report found ozone spikes that exceeded the EPA’s health standard, although they didn’t last long enough for the government to take action.
The study also found unsafe levels of benzene and other chemicals linked to cancer. However, there’s not enough information to show whether cancer or other illnesses have increased. And it’s not clear how prevalent the chemical levels are.
"There is no way of knowing whether the samples were minimum, maximum or somewhere in between," the report said.
It’s also not clear whether the chemicals are coming from the wells themselves, from truck traffic or from other sources, said Roxana Witter, a doctor and the study’s lead author.
"All the causes should be investigated," she said.
MIKE LEE mikelee@star-telegram.com
October 06, 2008
Investigation: Ike environmental toll apparent
COMMENT: >Hurricane Ike was an intense weather event, and the oil spilled during its pass through the Gulf of Mexico and across the southern states was significant. Most of it came from oil infrastructure - oil platforms, storage tanks, pipelines. Ships got out of the way, or stayed in harbour, so shipping incidents were minimal.
One ship, the Antalina, carrying a cargo of petroleum coke and a crew of 22, tried to avoid the storm, but lost power. Weather conditions were so fierce that crew evacuation was not possible, and as luck would have it, the vessel was able to ride out the storm. Despite the huge number of shipping disasters, the number of near misses is much greater.
Over half a million gallons of crude oil (about 12,000 barrels) was spilled in multiple events. That's perhaps eight times the oil spilled in the Kinder Morgan pipeline release in Burnaby, and eight times the volume of fuels carried on the Queen of the North. Small by comparison with Hurricane Katrina (6.5 million gallons, 142,000 barrels) and the Exxon Valdes (11 million gallons, 284,000 barrels), perhaps.
But a little oil goes a long way when released into the environment. Its effects are toxic, deadly, and persistent. Here's a photo taken on Smith Island in Prince William Sound on July 1, 2008. The headline from the Anchorage Daily News refers to the US Supreme Court decision reducing Exxon Mobil's liability to fishers and Alaska Natives to $500 million from $2.5 billion. The oil has been there for 19 years now.
It's NOT done. The Exxon Valdes spilled its oil in 1989. This photo was taken on Smith Island in Prince William Sound, on July 1, 2008. Photo courtesy David Janka (www.auklet.com)
Oil rigs and oil tankers in northern BC waters would be a scenario similar to the Gulf of Mexico, although reduced in number of both rigs and tankers. But winter weather conditions along the northern BC coast are invariably, persistently, and mercilessly fierce, often approaching hurricane forces.
Investigation: Ike environmental toll apparent
Dina Cappiello, Frank Bass and Cain BurdeauWWLTV.com, New Orleans
Sunday, October 5, 2008
WASHINGTON -- Hurricane Ike's winds and massive waves destroyed oil platforms, tossed storage tanks and punctured pipelines. The environmental damage only now is becoming apparent: At least a half million gallons of crude oil spilled into the Gulf of Mexico and the marshes, bayous and bays of Louisiana and Texas, according to an analysis of federal data by The Associated Press.
 AP Photo / Louisana Department of Environmental Quality In this photograph provided by the Louisana Department of Environmental Quality, an oil sheen can been seen floating on waters covering an oilfield in Cameron Parish in southwest Louisana Set. 15, 2008. The oil production field was flooded when Hurricane Ike made landfall. |
In the days before and after the deadly storm, companies and residents reported at least 448 releases of oil, gasoline and dozens of other substances into the air and water and onto the ground in Louisiana and Texas. The hardest hit places were industrial centers near Houston and Port Arthur, Texas, as well as oil production facilities off Louisiana's coast, according to the AP's analysis.
"We are dealing with a multitude of different types of pollution here ... everything from diesel in the water to gasoline to things like household chemicals," said Larry Chambers, a petty officer with the U.S. Coast Guard Command Center in Pasadena, Texas.
The Coast Guard, with the Environmental Protection Agency and state agencies, has responded to more than 3,000 pollution reports associated with the storm and its surge along the upper Texas coast. Most callers complain about abandoned propane tanks, paint cans and other hazardous materials containers turning up in marshes, backyards and other places.
No major oil spills or hazardous materials releases have been identified, but nearly 1,500 sites still need to be cleaned up.
The Coast Guard's National Response Center in Washington collects information on oil spills and chemical and biological releases and passes it to agencies working on the ground. The AP analyzed all reports received by the center from Sept. 11 through Sept. 18 for Louisiana and Texas, providing an early snapshot of Ike's environmental toll.
With the storm approaching, refineries and chemical plants shut down as a precaution, burning off hundreds of thousands of pounds of organic compounds and toxic chemicals. In other cases, power failures sent chemicals such as ammonia directly into the atmosphere. Such accidental releases probably will not result in penalties by regulators because the releases are being blamed onthe storm.
Texas Gov. Rick Perry also suspended all rules, including environmental ones, that would inhibit or prevent companies preparing for or responding to Ike.
Power outages also caused sewage pipes to stop flowing. Elsewhere, the storm's surge dredged up smelly and oxygen-deprived marsh mud, which killed fish and caused residents to complain of nausea and headaches from the odor.
At times, a new spill or release was reported to the Coast Guard every five minutes to 10 minutes. Some were extremely detailed, such as this report from Sept. 14: "Caller is making a report of a 6-by-4-foot container that was found floating in the Houston Ship Channel. Caller states the container was also labeled 'UM 3264,' which is a corrosive material." The caller most likely meant UN3264, an industrial coding that refers to a variety of different acids.
State and federal officials have collected thousands of abandoned drums, paint cans and other containers.
Other reports were more vague. One caller reported a sheen from an underwater pipeline and said the substance was "spewing" from the pipe.
The AP's analysis found that, by far, the most common contaminant left in Ike's wake was crude oil -- the lifeblood and main industry of both Texas and Louisiana. In the week of reports analyzed, enough crude oil was spilled nearly to fill an Olympic-sized swimming pool, and more could be released, officials said, as platforms and pipelines were turned back on.
The Minerals Management Service, which oversees oil production in federal waters offshore, said the storm destroyed at least 52 oil platforms of roughly 3,800 in the Gulf of Mexico. Thirty-two more were severely damaged. But there was only one confirmed report of an oil spill -- a leak of 8,400 gallons that officials said left no trace because it dissipated with the winds and currents.
Air contaminants were the second-most common release, mostly from the chemical plants and refineries along the coast.
About half the crude oil was reported spilled at a facility operated by St. Mary Land and Exploration Co. on Goat Island, Texas, a spit of uninhabited land north of the heavily damaged Bolivar Peninsula. The surge from the storm flooded the plant, leveling its dirt containment wall and snapping off the pipes connecting its eight storage tanks, which held the oil and water produced from two wells in Galveston Bay.
By the time the company reached the wreckage by boat more than 24 hours after Ike's landfall, the tanks were empty. Only a spattering of the roughly 266,000 gallons of oil spilled was left, and that is already cleaned up, according to Greg Leyendecker, the company's regional manager. The rest vanished, likely into the Gulf of Mexico.
Ike's fury might have helped prevent worse environmental damage. Its rough water, heavy rains and wind helped disperse pollution.
Air quality tests by Texas environmental regulators found no problems even in communities near industrial complexes, where power outages and high winds in some cases knocked out emergency devices that safely burn off chemicals. But the storm also zapped many of the state's permanent air pollution monitors in the region.
"We came out of this a lot better than we could have been, especially thinking where the storm hit," said Kelly Cook, the homeland security coordinator for the Texas Commission on Environmental Quality.
Katrina ranked as among the worst environmental disasters in U.S. history, with about 9 million gallons of oil spilled. But Ike's storm surge was less severe than feared -- 12 feet rather than 20-feet plus -- and the dikes, levees and bulkheads built around the region's heavy industry mostly held.
Much of that infrastructure is protected by a 1960s-era Army Corps of Engineers system of 15-foot levees similar to the one around New Orleans that failed catastrophically during Katrina. In that storm, floodwaters dislodged an oil tank at a Murphy Oil Corp. refinery in Meraux, La., spilling more than 1 million gallons of oil into the surrounding neighborhoods, canals and playgrounds.
Ike's toll on wildlife is still unfolding. Only a few pelicans and osprey turned up oiled, but the storm upended nature. Winds blew more than 1,000 baby squirrels from their nests. The storm's surge pushed saltwater into freshwater marshes and bayous, killing grasses where cattle graze and displacing alligators. Flooding also stranded cows.
The storm also may mangle migration. The Texas coast is a pit stop for birds heading south for the winter. But Ike wiped out many of their food sources, stripping berries from trees and nectar-producing flowers from plants, said Gina Donovan, executive director of the Houston Audubon Society, which operates 17 bird sanctuaries in Texas.
"It is going to cause wildlife to suffer for awhile," she said.
Along the Houston Ship Channel, a tanker truck floating in 12-feet-high flood waters slammed into a storage tank at the largest biodiesel refinery in the country, causing a leak of roughly 2,100 gallons of vegetable oil. The plant, owned by GreenHunter Energy Inc., uses chicken fat and beef tallow to make biodiesel shipped overseas. It opened just months earlier.
Oneal Galloway of Slidell, La., called to report oil in his neighborhood. The town, north of Lake Pontchartrain, was flooded with Ike's surge. He said oil had washed down the streets.
"It looked like a rainbow in the water," Galloway told the AP. "The residue of the oil is all over our fences, there were brown spots in the yard where it killed the grass."
The likely culprit was not a refinery or oil well, according to Shannon Davis, the director of the parish's public works department, but a neighbor brewing biodiesel in his backyard with used cooking grease.
Cain Burdeau reported from Texas.
(Copyright 2008 by The Associated Press. All Rights Reserved.)
September 27, 2008
'Dirty oil' bill all bark and no bite
Charles Frank
Calgary Herald
Saturday, September 27, 2008
If you didn't know better, you'd think all the high-fiving by environmentalists this week over the apparent enshrinement of Section 526 in the U.S. Energy and Independence Security Act will: (a) bring the development of Alberta's oilsands to a grinding halt or (b) keep our so-called "dirty oil" from being shipped into the United States.
We're here to tell you not to panic. It won't do either.
Nor, for that matter, is it the "symbolic victory" Liz Barratt-Brown, a senior attorney with the Natural Resources Defense Council, a U.S. environmental group, claimed after the U.S. Congress passed the legislation in spite of intense lobbying from Canadian and Alberta government officials.
That effort, you might recall, also included a hasty trip to Washington by Premier Ed Stelmach, who was hoping some personal contact might help convince American lawmakers that the contents of Section 526 were not only ill-conceived, but wrong-headed.
Obviously, the premier's pleas fell on deaf ears. So where does that leave us?
Yes, the legislation itself is aimed at restricting the kind of gasoline used by the vehicles belonging to certain government agencies, with an eye to circumventing fuel from sources whose production processes release undue amounts of greenhouse gases.
Like the oilsands.
But there's a catch. Actually there are a couple of important snags in the plan that was implemented specifically to "punish" intransigent oilsands producers for what the environmentalists believe is their cavalier attitude toward greenhouse gas emissions.
While nobody can say for certain how many vehicles may or may not come under the restrictions enshrined in the new legislation, it's safe to assume that it will not apply to the vast majority -- let's say 99 per cent -- of U.S. gasoline consumers.
That's right. It doesn't apply to truckers, commuters, casual drivers, RVers, driving-school owners, school bus operators, corporate fleet managers or just about anyone else who will need to fill up at a gas pump to get around.
More to the point -- even if the new legislation did apply to the aforementioned users -- there is virtually no way to prove which litre of gasoline at a particular gas station had its gestation in the oilsands and is, as a result, the end product of our so-called "dirty oil".
Enforcement would be a nightmare to say the least. Kinda makes you wonder what all the fuss has been about, doesn't it?
Perhaps that's why even as lawmakers were passing the U.S. Energy and Independence Security Act, Calgary-based EnCana and U.S. energy giant ConocoPhillips were announcing they would spend $3.6 billion to start construction on an expansion of their jointly owned Wood River refinery in Roxana, Ill.
When complete, the expansion will more than double the refinery's ability to take oil from the oilsands and turn it into gasoline and diesel fuel, which will in turn be shipped into what the companies describe as "the heart of one of North America's largest consumer markets."
That, of course, is good news. It reaffirms that the multinational corporations that have been lining up to get a piece of our oilsands -- and bring the billions of dollars worth of oil contained therein to market -- are not being intimidated by the egregious attempts of the environmental lobby to short-circuit those developments using any means at their disposal.
Three years ago, when the oilsands were officially endorsed as being the second-largest pool of recoverable oil in the world (the 171 billion barrels they contain are second only to Saudi Arabia's reserves) by the International Energy Agency, we predicted that Alberta would find itself under unprecedented scrutiny with respect to oilsands-related environmental issues.
Not only has that come to pass -- our oilsands are now routinely the subject of protests in far-off places such as Washington and London -- but the worldwide surge in concern over climate-change issues has raised tough questions about all industries that generate large amounts of greenhouse gases.
Fair enough. The harsh truth is that the oilpatch and the Alberta government have been blindsided by the "dirty oil" tag that has been hung on the oilsands by the environmental lobby. And they have been painfully slow to find a way to tell their side of the story at a time when their harshest critics are using every medium and forum available to make their case.
At a time when separating truth from fiction has never been more important -- as all the fuss over Section 526 illustrates -- the province and the industry have to get their game together and energetically defend and explain the oilsands to interested parties around the globe.
That they will need help with that assignment is self-evident.
cfrank@theherald.canwest.com
© The Calgary Herald 2008
Alberta blindsided by U.S. fuel law
Ottawa, province must work together to protect our interests on Capitol HillPaula Simons
Edmonton Journal
September 16, 2008
The U.S. Energy Independence and Security Act passed last December, without a fuss on this side of the border.
Yet Section 526 of the 822-page piece of legislation should have set Canadian alarm bells ringing. The section forbids any federal agency -- such as the Defense Department or the U.S. Postal Service -- from buying "synthetic" fuel from non-conventional sources for any "mobility-related" uses.
The section was authored by Congressman Henry Waxman, a California Democrat, and chair of the House of Representatives committee on oversight and government reform.
In a letter to the U.S. Department of Defense, Waxman made the law's intent clear:
"This provision ensures that federal agencies are not spending taxpayer dollars on new fuel sources that will exacerbate global warming," Waxman wrote. "This provision is also applicable to fuel derived from tar sands, which also produce signficantly higher greenhouse gas emissions than are produced by comparable fuel from conventional petroleum sources."
How practical the law is remains unclear -- after all, it's not as if you can buy special oil or gasoline derived exclusively from oilsands. The crude we export comes from a mix of conventional and non-conventional oil. (Right now, Alberta produces about 1.2 million barrel of synthetic crude a day, versus 586,000 barrels a day of conventional oil.) It's hard to fathom how the U.S. Postal Service or Defense Department could ever prove to Congress that they weren't buying gas or jet fuel derived, in part, from synthetic crude.
Still, neither the Alberta government, nor the federal Department of Foreign Affairs and International Trade seems to have realized the potential impact of the Energy Independence and Security Act before it passed.
As my Journal colleague Archie McLean first revealed last week, the Alberta government only learned the details of section 526 when the Globe and Mail broke the story last Jan. 15, a month after it became law.
It does seem outrageous. The Alberta government has a special trade office in Washington, with a budget of $1.4 million a year and a staff of four, headed by former Alberta cabinet minister Gary Mar, whose job it is to promote and protect this province's economic interests.
Mar admits his office missed the importance of the section -- but he blames the mix-up on the convoluted American legislative process.
"Section 526 wasn't in the original text of the act. It was an amendment that came late in the stages of debate," he says.
"But even if someone had seen it, given the context, they might not have been concerned."
Mar says Waxman originally framed his amendment to focus on technology to turn coal into liquid fuel and sold it that way to the House. No one, he says, including the petroleum industry, understood that Section 526 would ban the use of synthetic fuels.
Still, if the Globe could see that the Energy Independence and Security Act might be a problem, why couldn't the Alberta trade office? It's embarrassing to think that a matter of this much importance to our province's economy somehow flew under our provincial radar.
It's not fair to put all the blame on Mar and his tiny staff, though. It's not actually a provincial responsibility to monitor and lobby American legislators. That's the job of the federal government, specifically the Department of Foreign Affairs and International Trade. On Monday, no one at Foreign Affairs could tell me exactly when the department first became aware of the implications of the Energy Independence and Security Act.
But it's clear that Ottawa dropped the ball -- failing to head this legislation off at the pass, failing to give the Alberta government any warning it was coming.
With the U.S. economy sliding into recession, protectionist sentiment south of the border is heating up. No matter who wins the presidency, we'll likely see a more protectionist Congress when the American elections are over.
At the same time, the international public relations campaign against the oilsands -- or tar sands -- grows louder all the time. Even if a law like the U.S. Energy Independence and Security Act poses little practical risk to our oil exports, it poses a significant political threat, by singling out and demonizing, as it does, synthetic crude as a particular environmental threat. Whether the criticism is justified or not, our oilsands have become a most convenient international whipping boy for green activists.
All told, there's never been a more crucial time for the province and the federal government to be working together to protect our interests on Capitol Hill. It's no easy task to outlobby the lobbyists, especially in a cutthroat political culture like Washington's. But at the very least, we should be able to rely on our politicians, diplomats and civil servants to be vigilant when it comes to proposed legislation that could have a major influence on national economic and political interests.
Section 526, U.S. Energy and Independence Security Act
Text of H.R. 6: Energy Independence and Security Act of 2007SEC. 526. PROCUREMENT AND ACQUISITION OF ALTERNATIVE FUELS.
No Federal agency shall enter into a contract for procurement of an alternative or synthetic fuel, including a fuel produced from nonconventional petroleum sources, for any mobility-related use, other than for research or testing, unless the contract specifies that the lifecycle greenhouse gas emissions associated with the production and combustion of the fuel supplied under the contract must, on an ongoing basis, be less than or equal to such emissions from the equivalent conventional fuel produced from conventional petroleum sources.
Harper export bombshell leaves oilpatch puzzled
Industry eager to study policy details
Shaun Polczer
Calgary Herald
Saturday, September 27, 2008
Prime Minister Stephen Harper said in Calgary on Friday he wants to make Canada
a clean energy superpower. Part of his plan to do so includes restricting bitumen
and oilsands exports to countries that don't limit greenhouse gas emissions.
CREDIT: Ted Jacob, Calgary Herald
Oilpatch insiders are taking a wait-and-see approach to Prime Minister Stephen Harper's bombshell announcement his government would move to restrict bitumen and oilsands exports to countries that don't limit greenhouse gases.
During an election stop-over in Calgary on Friday, Harper said a re-elected Conservative government would prohibit bitumen exports to countries that don't have emission reduction targets equivalent to Canada's.
"More than just an energy provider, Canada must be a clean energy superpower," he said.
The Harper government has pledged to reduce Canada's emissions of greenhouse gases linked to global warming 20 per cent by 2020, far less than the targets agreed to by the previous Liberal government under the Kyoto Accord.
Environmentalists have complained rampant development of Alberta's oilsands -- the world's second-largest oil reserves -- is largely responsible for Canada's surging carbon footprint.
Canada produces more than a million barrels of ultra-heavy oil and bitumen a day, a figure that is expected to triple over the next decade.
To diversify export markets, companies such as Calgary-based Enbridge Inc. have proposed projects such as the $4-billion Gateway pipeline, which would move half a million barrels a day to the West Coast where it could then be shipped to places such as China.
Harper said the policy wouldn't affect current contracts with U.S. refiners but said it could "absolutely" jeopardize future exports to Asia.
Enbridge spokeswoman Gina Jordan said the company is seeking more clarity before making a formal reaction. "We were certainly surprised by today's announcement and we're looking at the details."
In past interviews, CEO Pat Daniel has said the Gateway would ship oil to Asian countries other than China, as well as American states such as California, which currently has some of the toughest greenhouse gas standards in the world.
But the U.S. itself is a patchwork of conflicting legislation and standards that may or may not be equivalent even to Canada's watered down commitments.
Joseph Doucet, a professor of energy policy and director of the Centre for Applied Business Research on Energy and the Environment at the University of Alberta, agreed most U.S. action to curb emissions is at the state level.
He said it's not clear how a Conservative government would restrict bitumen exports or whether it would be possible under deals such as the North American Free Trade Agreement.
The provinces have control over resources, but the federal government is responsible for international treaties and trade agreements.
Although it's uncommon for Ottawa to restrict certain types of exports, it's also not without precedent, Doucet said. Canada imposed trade sanctions on South Africa in the 1980s to protest apartheid and participates in efforts to curtail certain types of technology that could be used for military purposes.
In addition, countries such as the U.S., for example, have long lists of countries they won't do business with, including Cuba and Iran.
But Doucet said it's unclear how much weight Harper's proposed policy carries in the context of the ongoing campaign.
"My feeling is that it's politics . . . electioneering," he said. "I'm not sure how they would do this, or even if they can. It's likely a source of irritation for the provincial government."
Intergovernmental Affairs Minister and Deputy Premier Ron Stevens discounted the announcement, describing it as "incredibly speculative." While the province has taken steps to mandate emissions reductions for big industrial polluters, Stevens noted the federal targets haven't been formally legislated.
"Alberta's bitumen belongs to the people of Alberta and when people outside of Alberta start talking about impacting in some fashion the ability of Albertans to sell our resource, it's of interest to us," he said.
"It's not a policy. It's a statement. What it does is it just lends additional uncertainty to the matter."
Adam Sparkes, the Canadian Association of Petroleum Producers' manager of intergovernmental affairs, said the announcement came out of the blue, but said his group will work with whichever government comes to power on Oct. 14.
"We're surprised, but I wouldn't say dismayed. We're in the middle of an election and we'll stay focused on working with whichever government Canadians choose to elect."
Other points in the Harper plan included a pledge to support a Mackenzie Valley pipeline, which Canadian Energy Pipeline Association president Brenda Kenny said is positive for Canada's energy transportation companies.
Her group has more than $40 billion worth of proposed capital projects on the books, a figure that rises to $80 billion when it includes two Arctic pipelines from Alaska and the Northwest Territories.
Although she agreed the government needs to create certainty for investors, Kenny said she's not about to draw too many conclusions from Friday's announcement.
"Everybody understands that in an election campaign certain platforms are put forward that need to be fleshed out over time. I don't think it causes undue uncertainty."
Enbridge shares gained 22 cents on the Toronto Stock Exchange Friday to close at $40.50.
spolczer@theherald.canwest.com
© The Calgary Herald 2008
September 10, 2008
Two US LNG importers seek permission to export LNG
Two filings with the Department of Energy reveal important information: two LNG import terminal companies (Cheniere Energy & Freeport) are seeking permission to EXPORT LNG, because, as the Cheniere Energy filing points out, "due to global LNG market conditions, U.S. natural gas demand and prices do not currently support the importation of LNG into the U.S."
http://edocket.access.gpo.gov/2008/pdf/E8-21059.pdf
http://edocket.access.gpo.gov/2008/pdf/E8-20991.pdf
Gotta love it. But investors in WestPac LNG may not sleep so well at night!
August 26, 2008
Harris upbeat on Gateway
Kitimat Sentinel
August 20, 2008
Public consultation on Enbridge’s Gateway pipeline project is set to begin in September.
The 1,150 km pipeline would run from Kitimat to Strathcona Country, just outside Edmonton.
The twin pipeline would transport oil to Kitimat to be loaded in oil tankers heading to California and Asia.
Condensate, used to dilute the heavy oil so it can be piped, would be imported through here and piped to customers in the oil sands.
Ex-Skeena MLA Roger Harris is Enbridge’s vice-president of communications and aboriginal partnerships and last week he outlined progress on the project at a Prince George Chamber of Commerce meeting.
He explained the proposed route for the project would follow Highway 37 North from Kitimat before veering east and passing just north of Burns Lake, south of Fort St. James, north of Bear Lake, south of Grand Prairie, south of Mayerthorpe and into Strathcona Country.
The project involves driving three tunnels totaling 12 kilometres in length through the Telkwa Pass.
Harris said his focus is making sure the project benefits Northern BC.
In 2005, Enbridge estimated the project would cost $4 billion. “It’s safe to say that number has changed significantly,” Harris acknowledged, saying current estimates were in the $6 billion to $8 billion range.
“We’re working to finalize that number now.” he said, adding, “This will be one of the largest and most complex pipeline projects in North America.”
The project is estimated to employ about 5,000 people over 12 construction sites and see $2.7 billion in wages spent in Northern BC.
Enbridge shelved the project in 2005 because of a lack of commercial support, Harris said. This time Enbridge has secured 10 commercial partners interested in using the pipeline to ship to international markets.
Condensate is currently imported at Kitimat by Encana and is sent by rail tankers to Edmonton, he added.
Harris said six teams in BC and Alberta are working with 50 First Nations along the route to sign consultation agreements.
And by the end of August Enbridge will have signed 10 agreements to fund research and consultation capacity with First Nations.
“We are going to be offering an equity package to First Nations. We’re thinking 10 per cent,” Harris said.
“That would make First Nations owners in this project and meet their long-term benefits. We’re bringing an entirely new approach.”
Harris said Enbridge is urging the federal government to begin its consultation process with First Nations groups like the Carrier Sekani Tribal Council.
Open houses on the project will run September to November. Enbridge anticipates going to regulatory review in 2009, completing that process by 2012 and finishing construction by 2015.
August 16, 2008
Moscow transforms real-world game of RISK
SHAWN MCCARTHY AND MATTHEW CAMPBELL
Globe and Mail
August 15, 2008
In early 2002, some 200 U.S. Special Forces soldiers landed in the former Soviet republic of Georgia to train the Georgian army in anti-terrorism techniques, including how to protect a planned oil pipeline from secessionist or anti-Western saboteurs.
With strong encouragement from Washington, Georgia was finalizing a deal with its neighbours, Azerbaijan and Turkey, and Britain's BP PLC [BP-N] to build a $3.9-billion (U.S.) pipeline from the oil-rich Caspian region to the Turkish port of Ceyhan on the Mediterranean Sea.
The 1,768-kilometre, somewhat-circuitous route bypassed major U.S. rivals in the region, Russia and Iran, as well as Armenia, the traditional enemy of Turkey and Azerbaijan.
The Baku-Tbilisi-Ceyhan (BTC) project, completed in 2005, entailed tremendous commercial risk because the three participants were involved in violent struggles with neighbours or internal separatist groups, and the pipeline would be vulnerable to sabotage. Under the agreement with BP, each country was to provide security within its borders and be responsible for losses should the pipeline be shut down as a result of political violence.
It was part of the United States' effort to reduce Russia's dominance of the region's booming oil trade, and by doing so to encourage the development of independent-minded states on its rival's southern flank.
Now, with its invasion of Georgia, Moscow has dramatically transformed the real-world game of Risk that is being played out in the region.
For more than a decade, Russia watched while the U.S. and Europe played the new “great game” of energy geopolitics in its own backyard. It was 10 years ago this weekend that Russia plunged into financial crisis by devaluing the ruble and defaulting on its mounting debt.
With the Georgian invasion, the Kremlin has sent notice that it now controls the Risk board. And that it is willing to use its armed forces to back up what it regards as its national interest in neighbouring states.
At stake is control over one of the world's most promising new sources of crude oil – one that could rival the impact of the North Sea a generation ago. The U.S., in particular, has worked strenuously to minimize Russia's influence over this energy development.
“While it is early days to say what the security situation is going to look like in Georgia longer term, the events of the past few days deal a blow to the U.S.'s plans to support existing and new oil and gas routes that bypass Russia,” Tanya Costello, Eurasian director with the political risk consultancy, Eurasia Group, said yesterday.
For BP, the Russian invasion of Georgia could turn into a nightmare if it forces it to keep closed two oil pipelines that pump more than a million barrels a day of high-quality oil into world markets. They represent an overall revenue stream of $100-million (U.S.) a day among the oil company and its partners.
But then, BP recognized the risks before going into the project and insured against losses with host governments and export credit agencies. David Kirsch, an analyst with Washington-based PFC Energy Group, said multinationals like BP have no choice but to operate in extremely risky areas. “You go where the oil is,” he said.
However, the Russian economy may also pay a price over the conflict, which further tarnishes its reputation as a safe, reliable economic partner and has provoked confrontation with the United States.
Ms. Costello said the Georgian war – which was motivated by political rather than energy concerns – has added to the nervousness of foreign investors, who dominate the Russian stock market.
In recent months, Russian markets have been rattled by the battle between BP and its Russian partners, who received government support for control over joint venture TNK-BP, as well as government threats to prosecute companies that raise prices too aggressively.
“What happened in Georgia has come on the back of other events in Russia that have increased market concerns,” she said. “Together, these are increasing the risk perception around the Russian market.”
Moscow's aggressiveness and lawlessness has clearly turned off some Western investors. “Take all the money you want to lose to Russia and you won't be disappointed,” quipped Toronto business leader Seymour Schulich, who has spent a lifetime in global businesses.
But the country's vast energy and mineral wealth, and its booming construction and retail sector, amount to a lure that is too enticing for many to pass up, regardless of the widespread criticism.
Inbound direct investment in Russia totalled $45-billion in 2007, and is not expected to be dramatically affected by domestic squabbles or Russia's foreign adventure.
“I don't think direct investors will be so easily deterred and they will still be seeking opportunities across all different sectors of the Russian economy, including energy,” Ms. Costello said.
Despite setbacks, most of the international oil companies continue to operate profitably in Russia. BP has made enormous returns from its TNK-BP partnership, even as its battle with its Russian billionaire partners heated up and its executives either fled the country or were expelled for overstaying their visas. Fadel Gheit, an analyst with Oppenheimer & Co. in New York, said BP has already earned back its investment in the joint venture, though it may still lose out if forced to unload its interest in a fire sale.
PUTIN'S HAND
Western governments and producers regard the Caspian-Central Asian region as they had viewed Russia not so long ago – an important source of production growth outside the cartel of the Organization of Petroleum Exporting Countries, and an attractive area for investment by their multinationals.
But as the West has had to reconsider Russia's role in the global energy picture over the past five years, it will now have to recalibrate its assessment of the security of supply from the former Soviet states.
Moscow's aggressive energy policy in seeking to dominate energy trade in its “near abroad” – as it calls the former Soviet republics – is consistent with the approach taken to the oil and gas industry by former president Vladimir Putin. In bare-knuckle fashion, Mr. Putin reversed a decade of wide-open capitalism to reassert the dominant role of the Russian state, heavily dependent on oil and gas for revenue.
Mr. Putin “intended to reorganize the Russian oil and gas industry to enhance the power of the Russian state,” says Martha Brill Olcott, an expert on Russia with the Carnegie Endowment for International Peace. “Only then, after the reorganization was complete and the state's capacity to protect the national interests in this strategic sector was reaffirmed, would Western firms be invited to participate in the Russian market.”
As rising oil prices strengthened the Kremlin's hand, the former president, who still wields considerable power as Prime Minister, acted to correct what he viewed as the unacceptable status quo in the energy sector.
His government reined in the freewheeling Russian businessmen known as oligarchs, most famously through the controversial prosecution of OAO Yukos chief executive officer Mikhail Khodorkovsky. Yukos' assets were later sold at bargain prices to state-owned companies.
He changed the advantageous terms for Western companies operating in his country, annulling exploration licences won by Exxon Mobil Corp. and Chevron Corp. in the Sakhalin offshore, and then forced Royal Dutch Shell PLC to sell its Sakhalin holdings to state-owned OAO Gazprom.
He unilaterally raised previously subsidized natural gas prices to former Soviet republics such as Ukraine and Belarus, raising the threat of disruptions to gas exports that flow through those states to Europe.
Mr. Putin's assertiveness was fuelled by Russia's growing economic clout, which resulted from rising oil and gas prices. Russia remains the world's second-largest producer of oil, at close to 10 million barrels a day, and the largest producer of natural gas.
When he took power in 1999, crude prices averaged $10 a barrel and Russia was virtually bankrupt. Since then, Russia has averaged 7-per-cent economic growth a year – 8 per cent in 2007 – and has run a string of budget surpluses that last year topped 3 per cent of gross domestic product.
As a result, its foreign reserves grew from $12-billion in 1999 to $470-billion at the end of last year, a measure of economic strength equalled only by countries such as China, India and the oil producers of the Middle East.
The added riches stoked Russia's ambitions to be an energy superpower. To bolster its presence in energy markets, Moscow not only boosted the government's role domestically but has also sought to dominate the export of oil and, especially, natural gas, from its southern neighbours.
The transportation issue is both economic and political: Russia reaps huge revenues and more control over export prices by having its state-owned firms deliver crude and gas from competitors in the Caucasus and Central Asia. At the same time, control of those exports gives the Kremlin massive political leverage over Europe.
“Russia knows they are providing huge amounts to natural gas to Europe – that they have a stranglehold on Europe,” said Oppenheimer's Mr. Gheit. “There is no question in my mind that Russia is going to play its energy card as much as it can.”
Few analysts believe this week's invasion of Georgia was motivated by Russia's energy ambitions, but it clearly supports the Kremlin's goal of exercising more clout in the broader region.
As a result of the invasion, Georgia's reputation as a safe alternative for transporting crude oil and natural gas is threatened, and Central Asian producers will have to reconsider the risk involved in their various plans for getting their oil and natural gas to Western markets.
“There are certainly very strong parallels between the development of Russia's domestic policy and its projection of influence over the other former Soviet countries,” Julian Lee, a senior analyst with London-based Centre for Global Energy Studies, said in an interview. “Russia has always felt it would like to exert a high degree of control over the development of the oil and gas industries of both Central Asia and the Caucasus, as well as its own.”
Stephen Blank, a professor of national security affairs at the U.S. Army War College in Carlisle, Pa., highlights the American distrust of Russia's energy policy in the region, though he added those energy goals were of secondary importance in the current crisis. “Russia's energy objective is to monopolize all Caspian energy flows to Europe, so that it can then blackmail Europe and force political changes to European policy,” Prof. Blank said.
It can then play that energy card to block further NATO expansion to its borders, to prevent criticism of its anti-democratic government, and to win support for the foreign ambitions of its state-owned companies, he added.
PIPELINE POLITICS
The United States has long viewed the Georgian energy corridor as the linchpin of its policy of encouraging independent, pro-Western states to develop in the former Soviet states in the Caspian and Central Asian regions.
At a meeting of the Organization for Security and Co-operation in Europe in Istanbul in 1999, then-U.S. president Bill Clinton lobbied hard and won agreement from Azerbaijan, Georgia and Turkey to proceed with the Baku-Tbilisi-Ceyhan (BTC) pipeline project.
The deal represented a major victory for U.S. foreign policy.
The high stakes in the “new pipeline politics” had been clearly spelled out two years earlier – somewhat undiplomatically – by Sheila Heslin, who had earlier served on Mr. Clinton's National Security Council as director of Russian, Ukrainian and Eurasian affairs.
At the time, Western oil firms were making major investments in the energy-producing states of Azerbaijan, Kazakhstan and Turkmenistan, but export routes were still under discussion.
Washington's fear was that the former Soviet producers would be forced to market their oil and gas through Russia and Iran, thereby conferring both economic and political clout on America's rivals. (Even then, the U.S. was enforcing sanctions against Iran over its nuclear program.) In a New York Times opinion piece, Ms. Heslin wrote that “the consequences would be dire” if Russia and Iran locked up the main pipeline routes for the Caspian and Central Asian resources.) At the time, Shell was planning to build a $2.5-billion natural gas pipeline from Turkmenistan through Iran to Turkey. An oil pipeline was already under construction that would move crude from Kazakhstan's rich Tengiz field to Russia's Black Sea port of Novorossiysk.
A second oil pipeline was being considered, and it would be routed either directly through Iran, or by a more circuitous path through Georgia. Ms. Heslin said vital American interests required Washington to ensure the Georgian route won out.
Washington's staunchest ally for the Georgian route – in addition to Tbilisi itself – was Azerbaijan, which was already sending crude exports through a Russian-controlled pipeline but wanted to diversify and did not trust Iran.
When the agreement was struck in 2003, the BTC pipeline had generous backing from Western governments, including the World Bank's International Finance Corp., the European Bank for Reconstruction and Development and seven national export credit agencies.
The BTC pipeline opened in 2005, complementing the smaller Baku-Supsa line that BP also operates and the Russian line that ends in Novorossiysk.
This week, BP was forced to shut down the Baku-Supsa line, which delivers 100,000 barrels a day of oil from Azerbaijan to the Black Sea port of Supsa. The company said it was planning to reopen the line as soon as possible.
The larger BTC pipeline had been shut down last week as a result of apparent sabotage by a Kurdish separatist group. BP is hoping to reopen the line after Turkish officials complete repairs next week, assuming the situation in Georgia has stabilized.
Georgian officials – backed up by Western press reports – claimed Russian bombers had targeted the buried BTC pipeline, but BP said it saw no evidence to support those allegations. Analysts said they did not expect Russia to deliberately target the Georgian pipelines, noting that the Kremlin is eager to bolster its claim that it is a reliable energy partner.
NO TEARS IN MOSCOW
Fallout from this week's Georgian war may, however, affect future decisions regarding pipeline routes, and persuade Central Asian states – which have better relations with Moscow than either Georgia or Azerbaijan – that the risks of partnering with those U.S.-friendly states is too great.
Those decisions will not only affect Europe's dependence on Russia for its gas supplies, but will directly affect the return on investment of international oil companies that are operating in Azerbaijan, Kazakhstan and Turkmenistan.
Those states are expected to contribute major growth in non-OPEC global oil and gas production. Azerbaijan and Kazakhstan are expected to boost crude production from 11/2 million barrels a day two years ago to 21/2 million currently, to up to six million barrels a day within the next 15 years.
“What is really at stake is the unrestricted access of Caspian oil to world markets,” said the Centre for Global Energy Studies' Mr. Lee. “If, as a byproduct of the conflict in Georgia, people become more wary in the future of expanding the capacity of the export corridor through Georgia, then there will be no tears shed in Moscow.”
Eurasia Group's Ms. Costello said the key to future projects through Georgia will be the degree to which the country returns to normal after the Russia occupation of up to a third of its territory. Serious and continuing instability in Georgia could force producers like Kazakhstan and Azerbaijan to rely more heavily on Russian export routes.
Russian President Dmitry Medvedev said Russia's sole motivation for its incursion was to defend the residents of separatist Georgian enclaves, South Ossetia and Abkhazia, from Tbilisi's aggression. The Kremlin has long denied it covets “energy superpower” status or that it uses energy as a political weapon. It insists it remains a dependable supplier of energy to world markets.
By yesterday, a de facto ceasefire was in effect, though Russian troops remained in Georgian territory beyond the disgruntled enclaves where they had previously maintained a peacekeeping force. With U.S. Secretary of State Condoleezza Rice at his side, Georgian President Mikheil Saakashvili signed a ceasefire that would require Russian forces to withdraw to South Ossetia and Abkhazia, though not out of the country completely.
Short of a continuing crisis, the regional oil producers are likely to continue developing non-Russian export routes to reduce their dependence on their aggressive northern neighbour.
Kazakhstan already exports 60 per cent of its oil through Russian pipelines, but Moscow is blocking expansion of a line owned by a broad consortium that delivers Kazakh oil directly to Russian terminals on the Black Sea. Instead, it would force Kazakhstan to blend its high-quality crude with lower-grade Russian oil in the line controlled by state-owned Transneft.
There has been some speculation about building a pipeline across the Caspian Sea to link Kazakh production with an expanded BTC line, but both Iran and Russia – which have sea coasts on the Caspian – would have veto rights over those plans.
Instead, Kazakhstan is likely to ship the oil across the sea by tanker, and then feed it into pipelines leaving Azerbaijan.
European consumers are also hungrily eyeing Turkmenistan's growing natural gas production, as a way to reduce reliance of Russian exports, which account for 25 per cent of European demand and much greater than that in key markets like Germany.
But natural gas is more difficult than oil to transport because it cannot be loaded on tankers or rail cars. There are proposals to build a sub-Caspian pipeline and then ship the gas into central Europe, a project known as Nabucco.
Analysts say the Nabucco project faces commercial obstacles that are more problematic than the political resistances of Russia, largely because Russia and even China would provide greater prices – net of transportation – on gas sales from Turkmenistan than the Central Europe market could offer.
So while oil producers may succeed in diversifying their export routes, natural gas suppliers will remain beholden to Russian and its monopolist, state-owned Gazprom.
It is largely about oil pipelines
EDITORIAL
Globe and Mail
12-Aug-2008
As Russia's unnecessary, immoral and illegal military campaign in Georgia grinds onward, the world should not be fooled by President Dmitri Medvedev's claim that his troops are fighting "to restore peace to South Ossetia."
The Russian assault has very little to do with Georgian President Mikheil Saakashvili's ill-advised decision to send troops into that troubled region, and owes much more to Moscow's determination to control energy supplies in the Caucasus and strengthen its position as a near-monopoly supplier to Europe.
Georgia is a crucial transit point for oil and gas. Three major pipelines connecting energy sources in the Caucasus and Central Asia to European markets pass through its territory. One of these, the South Caucasus pipeline, is an important part of the plan for the Nabucco pipeline to Austria, which would deliver natural gas directly to the European Union, bypassing Russia entirely, if built.
The Russian government, which controls Gazprom, the world's largest gas company, has tried frantically to cajole its European customers into ignoring Nabucco and investing instead in its own new pipelines.
That arm-twisting has been unsuccessful in blocking the Nabucco plan, which has firm backing from the EU and could vastly reduce its dependence on Moscow for energy. But even if the result of the war in Georgia is not the overthrow of the Saakashvili government, it is likely to make pipeline investments there look very risky indeed. The outsized Russian response to Mr. Saakashvili's provocation, which is beginning to look like a full-scale invasion, must be understood in this context.
To suggest that Russia would ignite a regional war for the sake of controlling energy supplies might seem fanciful, were it not for the extraordinary connections between the Kremlin and the energy industry, and the centrality of its operations to Russian policy.
Mr. Medvedev was the chairman of Gazprom's board until late 2007. The current chair is also Russia's deputy prime minister.
About a tenth of Russia's tax revenue comes directly from Gazprom, which is one of the world's largest corporations. The company also has a habit of cutting supplies to states with which the Kremlin has disagreements in the dead of winter, as it has to Georgia and Ukraine.
The stakes of the Georgian conflict for energy security, to say nothing of the suffering it has caused, make it imperative that the West find a way to respond, although it is not clear how.
European governments, dependent on Russian energy supplies, are wary of antagonizing Moscow by protesting too loudly. In Washington, meanwhile, one of the most unilaterally minded administrations in recent history can hardly expect that pieties about maintaining international order will be taken seriously by Russia. And a military intervention is, obviously, out of the question.
Aside from putting what little pressure it can on Russia to stop its operations in Georgia, the West's only recourse may be to redouble its efforts to find new ways of getting energy to Europe in the medium term, and reducing oil and gas dependence in the long term.
In attacking Georgia, Russia has crossed a line. Rewarding its transgression by acceding to the Kremlin's plans for an energy monopoly in Europe would encourage even worse behaviour in the future.
True lies and foreign wars
RICK SALUTIN
Globe and Mail
August 15, 2008
Since the Second World War, the "good war," people seem to demand unambiguously just wars. So each new conflict provokes attempts to find parallels to Hitler and the Nazis. In the Persian Gulf war, Bush the elder called Saddam Hussein worse than Hitler. The Bosnian war had camps, emaciated prisoners and alleged genocide. Now, in Georgia, President Mikhail Saakashvili says Russian troops are "pushing people into concentration camps" with "World War II-type and Baltic-type ethnic cleansing." He told Katie Couric the Russians are "an insult to humanity." In other words, inhuman monsters like guess who. Russia replies that Georgia attacked first with a "blitzkrieg."
It doesn't really work since the Nazis were pretty much sui generis in their technologized savagery and racist justification. Ethnic cleansing, for instance, used to be called population transfer and was common. It is cruel and despicable, but it's not Auschwitz. Such acts are frequent in foreign policy, routinely cloaked by attempts to claim moral status that are obviously hypocritical. Take the Georgia conflict. Russia supports autonomy in the ethnic regions of South Ossetia and Abkhazia, but denies it for Chechnya. The U.S. backs separation for Kosovo, but rejects it in the Georgia cases. It praises democracy in Georgia, but in Iraq ignores a democratically elected government's call for it to leave. And Georgia's President is a democrat who suppresses protest in his streets. The claims about fighting the good fight are fig leaves, even Hitler mouthed them. South Ossetia's beleaguered 70,000 people? Barely table stakes for some real politics. What are the true stakes?
These tend to appear lower down in the stories and press releases. Georgia's leader, says Reagan-era official Paul Craig Roberts, is a "U.S. puppet." He studied in the U.S. on State Department fellowships, worked at a New York law firm, his government's election was subsidized by the U.S. National Endowment for Democracy and George Soros's Open Society Institute. He put a George W. Bush Boulevard in his capital. He admits this "is not about Georgia ... It is about America, its values." The U.S.? It wants to ring Russia militarily and move Caspian oil through Georgia so as to bypass Iran and Russia. Russia wants to assert itself in the 'hood, like any great power. It uses autonomy movements in Georgia as "daggers" to threaten the U.S. oil strategy, says energy expert Michael Klare. It differs from the U.S. mainly in that the U.S. considers the Caucasus, the Mideast and the rest of the world all as its "sphere" of "national interest." None of this involves confronting a new Hitler, it might as well be the Boer War or the Indian mutiny. Welcome to the 19th century.
When it comes to foreign policy, Noam Chomsky says, the rule is, all governments lie. There may be exceptions, but not among big powers. Does this mean a nasty retreat to cynicism? It seems counterintuitive to never trust anyone. But governments aren't individuals, they're institutions. You aren't giving up on "people," you're adopting a stand toward public bodies. Start from honest skepticism, and you might get somewhere.
Even the Second World War wasn't so unambiguous. It was hardly "good," in its barbaric course and deathly results. It had to be fought at that point, but it could have been avoided if the West had acted earlier - far earlier than Munich. Instead, Hitler was indulged, in the hope that he'd destroy the "contagious" example of Soviet communism. When the Allied powers did go to war, it was mainly for traditional geopolitical reasons -- Hitler had overreached -- although war was justified by pointing at Nazi atrocities, much as the Kaiser was vilified in the First World War. Hitler was bad but they weren't so good. It was another foreign-policy lie, although in Hitler's case, a true one.
August 06, 2008
The Stakes Could Not Be Higher. Everything Hinges on Stopping Coal
COMMENT: George Monbiot is a writer of urgency. But this essay may be one of his most urgent yet. His thesis: burning coal for electricity generation in a business-as-usual world either stops, or the apocalypse is upon us. "I no longer care whether or not the answer is nuclear."
Coal's panacea is carbon capture and sequestration (CCS), but Monbiot calls it "alchemical dust," and says a House of Commons environmental audit committee examined the proposition that carbon prices will rise sufficiently to pay for CCS - "and found that it was nonsense."
Politicians are in the pockets of industry, says Monbiot, and "won’t stand up to business, even when the future prospects of mankind are at stake. If fear is the only thing that moves them, we must present them with a greater threat than the companies planning new coal plants. We must show that this issue has become a political flashpoint; that the public revulsion towards new coal could help to eject them from office. You could do no better than joining us at Kingsnorth [site of a new coal-fired plant] this week."
[More about Kingsnorth here: http://www.guardian.co.uk/global/2008/aug/01/kingsnorthclimatecamp.activists]
Here in British Columbia, nobody is building a new coal-fired plant. We're so virtuous, we don't have anything to blockade, like Monbiot has Kingsnorth. Sure.
BC continues to purchase a lot of electricity generated from coal. I haven't been very sympathetic to arguments that we should stop doing that, because it is so much cheaper than the renewable alternative. But I get the point. In 2004, Powerex, BC Hydro's energy trading subsidiary, contracted for all the power from a new coal-fired generation plant in Hardin, Montana. As far as I know, we're still doing that. BC energy policy wouldn't allow that plant to operate in BC. Gee, that's so California of us. Or it was.
The BC climate action initiatives are focussed on the 66 megatonnes (MT) of greenhouse gases we produce every year in the province. But the carbon tax doesn't apply if you buy your jet fuel or Bunker C here in BC, but burn it over the Prairies or the Pacific. Now here's the big deception, or if you think that's too strong a word, here's the big avoidance of responsibility:
Natural gas - BC produces and exports a lot of natural gas, about 1.1 trillion cubic feet per year. When that is all burned, and it is almost all burned, some in BC, mostly in the US, it produces almost as much greenhouse gas as that 66 MT that the government has its/our eyes on.
Coal - BC produces and exports a lot of coal, about 27 million tonnes of it each year. When that is all burned, and it is all burned, virtually all of it beyond BC's borders, it produces almost as much greenhouse gas again.
So, the government has us looking at just one-third of our global contribution to global warming. We shouldn't be talking about 66 MT, we should be talking about 200 MT.
(Oh, gosh. We haven't even talked about the import economy, where all of the plastic widgets we buy in WalmartHomeDepotCanadianTireCostcoFutureShopSuperstoreRona are shipped in from Asia, with a carbon footprint that even Premier Campbell's Pacific Gateway project would blush about.)
Let me see if I can rescue this from an aimless rant and bring it back to a point. Monbiot is out on a protest blockade at Kingsnorth. He says this may be the bottom line that will terrify politicians to do the right thing. We have no Kingsnorth. But we have Deltaport, which is half coal exports, and half container imports. We have the TeckCominco acquisition of Fording last week, and the statement that there's 100 years of continuing coal production in the asset. We have Harding, WestPac LNG, Kitimat LNG, and the provincial government raking in billions in unprecedented sales of gas rights in northeast BC. It's business-as-usual happening all around us. I fear we're distracted, arguing about the carbon tax and cap'n'trade. Angels. Head of pin...
Arthur
The Stakes Could Not Be Higher. Everything Hinges on Stopping Coal
The climate camp must succeed. In the absence of political backbone, our only hope is an avalanche of public revulsion
by George Monbiot
The Guardian
August 5, 2008
As soon as I have finished this column I will jump on the train to Kent. Last year Al Gore remarked: “I can’t understand why there aren’t rings of young people blocking bulldozers and preventing them from constructing coal-fired power plants.” Like hundreds of honorary young people, I am casting my Zimmer frame aside to answer the call.
Everything now hinges on stopping coal. Whether we prevent runaway climate change largely depends on whether we keep using the most carbon-intensive fossil fuel. Unless we either leave it - or the carbon dioxide it produces - in the ground, human development will start spiralling backwards. The more coal is burnt, the smaller are our chances of future comfort and prosperity. The industrial revolution has gone into reverse.
It is not because of polar bears that I will be joining the climate camp outside the coal plant at Kingsnorth. It is not because of butterflies or frogs or penguins or rainforests, much as I love them all. It is because everything I have fought for and that all campaigners for social justice have ever fought for - food, clean water, shelter, security - is jeopardised by climate change. Those who claim to identify a conflict between environmentalism and humanitarianism have either failed to read the science or have refused to understand it.
Our government could lead the world in one of two directions. Roughly one third of our power stations will come to the end of their lives by 2020. It could replace them with low-carbon plants or it could repeat - this time in full knowledge of the consequences - the disastrous decisions of the past. E.ON’s application to build a new coal-burning power station at Kingsnorth is the first for many years. At least five other such proposals hang on the outcome. Between them they would account for 54 million tonnes of carbon emissions a year: as much as the entire economy would produce if the UK, in line with current science, were to cut its emissions by 90%.
The government seems determined to make the wrong decision. It has inherited the party’s traditional love for coal, but, being New Labour, now supports the bosses instead of the workers, and has colluded with them to make the case for a new generation of power stations. It has one justification for this policy: that one day dirty coal will be transformed into clean coal by means of carbon capture and storage (CCS). All that is needed to effect this transformation is a sprinkling of alchemical dust, in the form of the future price of carbon. The market, it claims, will automatically ensure that coal plants bury their carbon dioxide, as this will be cheaper than buying pollution permits.
Last month the House of Commons environmental audit committee examined this proposition and found that it was nonsense. It cited studies by the UK Energy Research Centre and Climate Change Capital which estimate that capturing carbon from existing coal plants will cost €90-155 (£71-£122) per tonne of CO2. Yet the government predicts that the likely price of carbon between 2013 to 2020 will be around €39 (£31) per tonne. Even E.ON believes that it won’t rise above €50. “The gap between the carbon price and the cost of CCS,” the committee finds, “is enormous.” The energy minister, Malcolm Wicks, confessed to MPs: “I hope that the strengthening of carbon markets … will bring forward a sufficiently good price for carbon that it will provide some of the financial incentive for CCS. Will it be enough? I do not know.”
This is the sum of government policy: to cross its fingers and hope the market delivers. If it approves a new coal plant at Kingsnorth, it will do so on the grounds that the power station will be “CCS-ready”. CCS-ready seems to mean nothing more than this: that there is enough space on the site for a carbon capture plant, should the developer deign one day to build it. The committee warns that this meaningless promise could be used “as a fig leaf to give unabated coal-fired power stations an appearance of environmental acceptability”.
The government has already shown us what it wants to do. In January, Gary Mohammed, a civil servant at the Department for Business, emailed E.ON to ask whether he should include CCS as a condition for approving its new coal plant. (This gives a fascinating insight into how government works: companies are asked to write their own rules.) E.ON replied that the government “has no right to withhold approval for a conventional plant”. Six minutes later Mohammed answered thus: “Thanks. I won’t include. Hope to get the set of draft conditions out today or tomorrow.”
There is a simple means by which the government could ensure that our future electricity supplies would not commit the UK to stoking runaway climate change. It would do as California has done and set, by a certain date, a maximum level for carbon pollution per megawatt-hour of electricity production. This would have to be a low one: perhaps 80kg of CO2. Then, in line with the government’s precious principles (or absence thereof), it could leave the rest to the market. I have now reached the point at which I no longer care whether or not the answer is nuclear. Let it happen - as long as its total emissions are taken into account, we know exactly how and where the waste is to be buried, how much this will cost and who will pay, and there is a legal guarantee that no civil nuclear materials will be used by the military. We can no longer afford any rigid principle but one: that the harm done to people living now and in the future must be minimised by the most effective means, whatever they might be.
But I believe the likely response would be more interesting than this. Several recent studies have shown how, through maximising the diversity of renewable generators and by spreading them as far apart as possible, by using new techniques for balancing demand with supply and clever schemes for storing energy, between 80% and 100% of our electricity could be produced by renewables, without any loss in the reliability of power supplies. Unlike CCS, wind, wave, tidal, solar, hydro and geothermal power are proven technologies. Unlike nuclear power, they can be safely decommissioned as soon as they become redundant.
A policy like this requires both courage and vision. So look at the current cabinet - Brown, Straw, Darling, Hutton, Blears, Kelly, Hoon - and weep. Every man and woman with backbone was purged from this government years ago, leaving those who know how to appease the interests that might threaten them. These people won’t stand up to business, even when the future prospects of mankind are at stake.
If fear is the only thing that moves them, we must present them with a greater threat than the companies planning new coal plants. We must show that this issue has become a political flashpoint; that the public revulsion towards new coal could help to eject them from office. You could do no better than joining us at Kingsnorth this week.
© Guardian News and Media Limited 20
August 02, 2008
Gas pipeline gigantism
By Robert M Cutler
Asia Times
Jul 17, 2008
MONTREAL - Ground was broken in Kazakhstan last week for construction of that country's segment of a natural gas pipeline from Turkmenistan to China, set to be the longest and most expensive such pipeline in the world - its length is usually given as 7,000 kilometers, and although this looks like a rounding-up of a distance exceeding 6,500 km it may when work is finished be a more accurate figure than the most recent construction estimate of US$26 billion.
Skeptics about this pipeline remained even after groundbreaking for the Turkmenistan segment in August last year. However, with the Kazakhstan ceremony following by a scant two weeks a similar groundbreaking in Uzbekistan, the conclusion seems unavoidable that this pipeline will be built.
The idea for the pipeline was first sketched on maps as early as 1993 when Western companies began to survey possibilities for energy development in Central Asia following the disintegration of the Soviet Union. However, the sheer scale of the project, together with the self-imposed isolation of Turkmenistan under its former president Saparmurat Niyazov, who died in December 2006, made it for a long time a non-starter.
Nevertheless, it was Niyazov who in April 2006 signed a framework cooperation agreement in Beijing with Chinese President Hu Jintao. By July last year, an agreement was signed between the Chinese National Petroleum Company (CNPC) and the responsible state agency of Turkmenistan, this time witnessed by Niyazov's successor, Gurbanguly Berdimuhammedov (sometimes spelt "Berdymukhammedov" in English-language media).
The Turkmenistani segment is projected to run 188 km from the Bagtiyarlyk cluster in the eastern part of the country, on the right bank of the Amu Darya River, to Malai on the border with Uzbekistan, then 525 km across Uzbekistan and another 1,293 km through Kazakhstan, before passing into China, where it will run "at least 4,500 km" to Shanghai and Guangdong province.
Inside China, this would almost certainly entail construction of a second West-East Pipeline, parallel to one opened several years ago from Xinjiang to Shanghai.
The contract between Turkmengaz and CNPC is not a public document, so the price agreed is not precisely known, nor are terms for its adjustment over time. However, well-connected foreign journalists in Ashgabat (neither Russian nor Chinese) have reported that this price is said to be "over $100" per thousand cubic meters.
According to press reports, the Chinese side will conduct the geological exploration and development of the gas fields that will supply the pipeline. Chinese experts have already told the press that the Bagtiyarlyk fields together hold 1.6 trillion cubic meters of gas. A first phase will be opened for up to 10 billion cubic meters per year (bcm/y) from the already-operating Bagtiyarlyk fields of Samantepe and Altyn Asyr, which are together expected to supply 13 bcm/y to the completed project.
After this quantity reaches 10 bcm/y, the second phase will be inaugurated, adding 17 bcm/y from deposits that the two countries will develop under the terms of the July 2007 production sharing agreement.
The precise pipeline route has not been made public, but the most reasonable scheme involves expanding the volume of the Bukhara-Tashkent pipeline within Uzbekistan then taking it through Almaty, Kazakhstan, to Alashankou on the border, where an existing Kazakhstan-China oil pipeline from Atasu also crosses into China.
This new gas pipeline, originally projected to carry 30 bcm/y, will be constructed to carry 40 bcm/y, if not still more in subsequent stages, although China is set to receive only 30 bcm/y. The other 10 bcm/y will be generated and at least partly consumed in Kazakhstan.
At first glance, this may look like a concession that Kazakhstan was able to extract in return for granting transit rights, but that is not the case. CNPC had earlier started negotiations to import gas from Kazakhstan with the country's national energy trust, KazMunaiGaz.
The first phase of that project was assigned the figure of 10 bcm/y, and the Turkmenistan pipeline is, formally speaking, an extension or add-on to the Kazakhstan-China negotiations. A second stage of the Kazakhstan-China pipeline was to have increased Kazakhstan's own exports to China to 30 bcm/y. Possibly some of this will now be consumed in the already populous and still-growing province of South Kazakhstan.
That is why Kazakhstani sources have been speaking of the possibility of China constructing feeder lines "from western Kazakhstan". The supplementary Kazakhstani gas could likely come either from the Karachaganak deposit, where production has been in thrall to Russian limitations on volumes receivable by the transborder Orenburg processing plant in southern Siberia; or it could come from the associated gas in the offshore Kashagan deposit, where China was rebuffed a few years ago when it tried to purchase a share of the Agip KCO consortium to be directly involved in Kashagan's development.
Most likely, at least in the beginning, it will come from Chelkar, in the Aktobe region in western Kazakhstan, where CNPC has been already active for nearly a decade. From there, a feeder pipeline would logically descend southwards to Kzyl-Orda and then to the major city of Shymkent (South Kazakhstan province), thereafter rejoining the extension of the Bukhara-Tashkent pipeline to Almaty and beyond.
Importantly, China has explicitly linked this geo-economic investment to its geopolitical aims, by eliciting from Turkmenistan the statement at the time of the 2007 signing that Chinese interests would not be threatened from its territory by third parties. This represents a promise that Ashgabat will think hard and long before allowing a US military presence in the country under the new Berdimuhammedov regime.
Robert M Cutler is senior research fellow, Institute of European, Russian and Eurasian Studies, Carleton University, Canada.
(Copyright 2008 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)
Russia takes control of Turkmen (world?) gas
By M K Bhadrakumar
Asia Times
July 29, 2008
From the details coming out of Ashgabat in Turkmenistan and Moscow over the weekend, it is apparent that the great game over Caspian energy has taken a dramatic turn. In the geopolitics of energy security, nothing like this has happened before. The United States has suffered a huge defeat in the race for Caspian gas. The question now is how much longer Washington could afford to keep Iran out of the energy market.
Gazprom, Russia's energy leviathan, signed two major agreements in Ashgabat on Friday outlining a new scheme for purchase of Turkmen gas. The first one elaborates the price formation principles that will be guiding the Russian gas purchase from Turkmenistan during the next 20-year period. The second
agreement is a unique one, making Gazprom the donor for local Turkmen energy projects. In essence, the two agreements ensure that Russia will keep control over Turkmen gas exports.
The new pricing principle lays out that starting from next year, Russia has agreed to pay to Turkmenistan a base gas purchasing price that is a mix of the average wholesale price in Europe and Ukraine. In effect, as compared to the current price of US$140 per thousand cubic meters of Turkmen gas, from 2009 onward Russia will be paying $225-295 under the new formula. This works out to an additional annual payment of something like $9.4 billion to $12.4 billion. But the transition to market principles of pricing will take place within the framework of a long-term contract running up to the year 2028.
The second agreement stipulates that Gazprom will finance and build gas transportation facilities and develop gas fields in Turkmenistan. Experts have estimated that Gazprom will finance Turkmen projects costing $4-6 billion. Gazprom chief Alexei Miller said, "We have reached agreement regarding Gazprom financing and building the new main gas pipelines from the east of the country, developing gas fields and boosting the capacity of the Turkmen sector of the Caspian gas pipeline to 30 billion cubic meters." Interestingly, Gazprom will provide financing in the form of 0% credits for these local projects. The net gain for Turkmenistan is estimated to be in the region of $240-480 million.
From all appearance, Gazprom, which was headed by Russian President Dmitry Medvedev for eight years from 2000 to May 2008, has taken an audacious initiative. It could only have happened thanks to a strategic decision taken at the highest level in the Kremlin. In fact, Medvedev had traveled to Ashgabat on July 4-5 en route to the Group of Eight summit meeting in Hokkaido, Japan.
Curiously, the agreements reached in Ashgabat on Friday are unlikely to enable Gazprom to make revenue from reselling Turkmen gas. Quite possibly, Gazprom may now have to concede similar terms to Kazakhstan and Uzbekistan, the two other major gas producing countries in Central Asia. In other words, plain money-making was not the motivation for Gazprom. The Kremlin has a grand strategy.
Coincidence or not, Russian Deputy Prime Minister Igor Sechin traveled to Beijing at the weekend to launch with his Chinese counterpart, Vice Premier Wang Oishan, an energy initiative - a so-called "energy negotiation mechanism". The first round of negotiations within this framework took place on Saturday in Beijing. There has been an inexplicable media blackout of the event, but Beijing finally decided to break the news. The government-owned China Daily admitted on Monday, "Both China and Russia kept silent on the details of the consensus they reached on energy cooperation in the first round of their negotiation in Beijing on the weekend."
Without getting into details, China Daily merely took note of the talks as "a good beginning" and commented, "It seems that a shift of Russia's energy export policy is under way. Russia might turn its eyes from the Western countries to the Asia-Pacific region ... The cooperation in the energy sector is an issue of great significance for Sino-Russian relations ... the political and geographic closeness of the two countries would put their energy cooperation under a safe umbrella and make it a win-win deal. China-Russia ties are at their best times ... The two sides settled their lingering border disputes, held joint military exercises, and enjoyed rapidly increasing bilateral trade."
It is unclear whether Gazprom's agreements in Ashgabat and Sechin's talks in Beijing were inter-related. Conceivably, they overlapped in so far as China had signed a long-term agreement with Turkmenistan whereby the latter would supply 30 billion cubic meters of gas to China annually for the 30-year period starting from 2009. The construction work on the gas pipeline leading from Turkmenistan to China's Xinjiang Autonomous region has already begun. China had agreed on the price for Turkmen gas at $195 per thousand cubic meters. Now, the agreement in Ashgabat on Friday puts Gazprom in the driving seat for handling all of Turkmenistan's gas exports, including to China.
Russia and China have a heavy agenda to discuss in energy cooperation far beyond the price of Turkmen gas supplies. But suffice it to say that Gazprom's new stature as the sole buyer of Turkmen gas strengthens Russia's hands in setting the price in the world gas (and oil) market. And that has implications for China. Moscow would be keen to ensure that Russian and Chinese interests are harmonized in Central Asia.
Besides, Russia is taking a renewed interest in the idea of a "gas cartel". Medvedev referred to the idea during the visit of Venezuelan President Hugo Chavez to Moscow last week. The Russian newspaper Nezavisimaya Gazeta reported on Friday that "Moscow finds the idea of coordination of gas production and pricing policy with other gas exporters to be too tempting to abandon". The daily quoted Miller as saying, "This forum of gas exporters will set up the global gas balance. It will give answers to the questions concerning when, where and how much gas should be produced."
Until fairly recently Moscow was sensitive about the European Union's opposition to the idea of a gas cartel. (Washington has openly warned that it would legislate against countries that lined up behind a gas cartel). But high gas prices have weakened the European Union's negotiating position.
The agreements with Turkmenistan further consolidate Russia's control of Central Asia's gas exports. Gazprom recently offered to buy all of Azerbaijan's gas at European prices. (Medvedev visited Baku on July 3-4.) Baku will study with keen interest the agreements signed in Ashgabat on Friday. The overall implications of these Russian moves are very serious for the US and EU campaign to get the Nabucco gas pipeline project going.
Nabucco, which would run from Turkey to Austria via Bulgaria, Rumania and Hungary, was hoping to tap Turkmen gas by linking Turkmenistan and Azerbaijan via a pipeline across the Caspian Sea that would be connected to the pipeline networks through the Caucasus to Turkey already existing, such as the Baku-Tbilisi-Ceyhan pipeline.
But with access denied to Turkmen gas, Nabucco's viability becomes doubtful. And, without Nabucco, the entire US strategy of reducing Europe's dependence on Russian energy supplies makes no sense. Therefore, Washington is faced with Hobson's choice. Friday's agreements in Ashgabat mean that Nabucco's realization will now critically depend on gas supplies from the Middle East - Iran, in particular. Turkey is pursuing the idea of Iran supplying gas to Europe and has offered to mediate in the US-Iran standoff.
The geopolitics of energy makes strange bedfellows. Russia will be watching with anxiety the Turkish-Iranian-US tango. An understanding with Iran on gas pricing, production and market-sharing is vital for the success of Russia's overall gas export strategy. But Tehran visualizes the Nabucco as its passport for integration with Europe. Again, Russia's control of Turkmen gas cannot be to Tehran's liking. Tehran had keenly pursed with Ashgabat the idea of evacuation of Turkmen gas to the world market via Iranian territory.
There must be deep frustration in Washington. In sum, Russia has greatly strengthened its standing as the principal gas supplier to Europe. It not only controls Central Asia's gas exports but has ensured that gas from the region passes across Russia and not through the alternative trans-Caspian pipelines mooted by the US and EU. Also, a defining moment has come. The era of cheap gas is ending. Other gas exporters will cite the precedent of the price for Turkmen gas. European companies cannot match Gazprom's muscle. Azerbaijan becomes a test case. Equally, Russia places itself in a commanding position to influence the price of gas in the world market. A gas cartel is surely in the making. The geopolitical implications are simply profound for the US.
Moreover, Russian oil and gas companies are now spreading their wings into Latin America, which has been the US's traditional backyard. During Chavez's visit to Moscow on July 22, three Russian energy companies - Gazprom, LUKoil and TNK-BP - signed agreements with the Venezuelan state-owned petroleum company PDVSA. They will replace the American oil giants ExxonMobil and ConocoPhillips in Venezuela.
At the signing ceremony, Medvedev said, "We have not only approved these agreements but have also decided to supervise their implementation." Chavez responded, "I look forward to seeing all of you in Venezuela."
Ambassador M K Bhadrakumar was a career diplomat in the Indian Foreign Service. His assignments included the Soviet Union, South Korea, Sri Lanka, Germany, Afghanistan, Pakistan, Uzbekistan, Kuwait and Turkey.
(Copyright 2008 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)
Life cycle GHG emissions from LNG equal to coal: study
Figure 1: Fuel Combustion and Life-Cycle GHG Emissions for Current Power Plants. (Click chart for larger version)
A study published by Carnegie Mellon University compared the greenhouse gas emissions from the full life-cycle of coal, natural gas, liquefied natural gas, and synthetic natural gas produced from coal. The chart above summarized the study conclusions. In particular, the full life cycle of LNG, which includes liquefaction, transportation, and regasification, compares with the full life cycle of domestically sourced coal.
You can read the study here.
Comparative Life-Cycle Air Emissions of Coal, Domestic Natural Gas, LNG, and SNG for Electricity Generation
by Paulina Jaramillo, W. Michael Griffin, and H. Scott Matthews
Civil and Environmental Engineering Department, Tepper School of Business, and Department of Engineering and Public Policy, Carnegie Mellon University, 5000 Forbes Avenue, Pittsburgh, Pennsylvania 15213-3890
Published in ENVIRONMENTAL SCIENCE & TECHNOLOGY / VOL. 41, NO. 17, 2007
July 29, 2008
Betting on carbon capture
Betting on carbon capture CO2 storage could solve most of Alta.'s emissions problems -- if it works
Archie McLean
The Edmonton Journal
Monday, July 28, 2008
CREDIT: CNS This is the pipe that brings in the co2 gas from 320 miles away in North Dakota, ending at the EnCana Weyburn facility.
Alberta's climate change policy is under increasing global scrutiny.
With oilsands companies ramping up production and the province still heavily reliant on burning coal for power, greenhouse gas emissions will almost double from 2005 levels by 2050 without aggressive action.
To solve this problem, the Stelmach government is betting heavily on carbon capture and storage (CCS), a promising but largely undeveloped technology.
They are counting on CCS delivering a staggering 70 per cent of the province's greenhouse gas reductions by 2050. That amounts to 139 megatonnes a year, roughly as much as the entire country of Argentina put into the atmosphere in 2004.
To kick-start investment, the provincial government recently pledged $2 billion to develop the technology. But questions still linger and critics charge the plan may be too pricey, too slow and too uncertain to deal with the problem.
It's easy to see why politicians and business leaders love carbon capture and storage. For a price, it allows industrial expansion to continue, but emissions to fall.
If it succeeds, the technology could be exported around the world.
It is also pretty simple for the public to understand -- capture industrial carbon dioxide emissions at their source, liquefy and compress them, and pipe them underground, where they can sit in depleted oil reserves or saline aquifers.
"These are things we already know how to do in Alberta," says Jim Carter, the former CEO of Syncrude, who heads a provincial government task force on the technology.
According to a 2005 report by the International Panel on Climate Change, CCS has the potential to reduce emissions by 80 to 90 per cent at a plant compared to a similar facility without the technology.
It's happening on a small scale all over the world, including projects in Norway, Algeria and Weyburn, Sask.
The same report claims the risks of carbon dioxide seeping to the surface are minimal, with retention in underground reservoirs likely to exceed 99 per cent over 1,000 years.
Large point releases are possible, but could be dealt with using current well blowout techniques.
David Keith, the Canada research chair in energy and the environment at the University of Calgary and one of the world's top experts in carbon capture and storage, is confident the risks can be managed.
"If you want a technology with no risk, you better choose no technology," he says. "Any of the large-scale things we're going to do for climate change, including wind power, hydro power or nuclear power, have significant environmental consequences."
Given the right market incentives, Keith believes carbon-capture technology could be built right away.
The obstacles have more to do with cost than technology.
"If you ask me why isn't there technology to make blue elephants, the answer is there's no financial incentive for making blue elephants.
"So essentially world governments have not seriously regulated the emissions of carbon dioxide, so of course technologies for avoiding such emissions are not big winners right now."
Who will pay?
Premier Ed Stelmach and Saskatchewan Premier Brad Wall often make their case for CCS in opposition to other climate change policies such as a carbon tax or cap-and-trade system.
In meetings this month with western U.S. governors and Canadian premiers, they carried a clear and co-ordinated message -- no carbon tax, no North American cap-and-trade system.
Stelmach says both ideas are little more than a money transfer from the West to the rest of the country.
"There is one inter-regional transfer of wealth in this country, it's called equalization, and there won't be another one from the province of Alberta," Stelmach said at the premiers conference in Quebec.
But experts say they are confusing the end with the means. Carbon-capture technology has plenty of potential, but industry has no reason to invest in it without a strong price on carbon.
"We're not regulating the CO2 emissions in a serious way, so why would anybody do it?" Keith says.
Mary Griffiths, a senior policy analyst at the Pembina Institute, says Stelmach and Wall are being disingenuous with their arguments. "If you have a higher price on carbon, then it will be economical to do the carbon capture. Those two are separate issues and it's a red herring to connect the two."
Norway's Statoil, for example, developed its CCS technology after the government there introduced a $60 carbon tax in 1991.
Former deputy prime minister Anne McLellan, who praised carbon capture in a speech last week, also said a carbon tax or cap-and-trade system are not "mutually exclusive" with CCS.
Right now, Alberta charges businesses $15 per tonne of carbon dioxide they put into the atmosphere above their limit (the money goes into a technology fund).
The federal government will likely put a slightly higher price on carbon in the coming months.
According to Carter, the current cost of CCS is between $85 to $100 a tonne.
"There's a big gap there," Carter says.
Enhanced oil recovery may cut costs somewhat, but that still leaves a $25 to $40 gap between simply paying the fine and investing in technologies to save money.
That's where the government's $2-billion development plan comes in.
The July 8 announcement won lots of praise, but was also criticized from both the right (potential boondoggle, government getting in the business of business) and the left (why is government paying private business to clean up their mess?).
The government will issue a request for proposals in the coming months and is hoping for projects that are innovative and fast.
Carter believes the money will help bridge the gap for companies that want to get in the game, but need some help with the initial investment.
"Once we get going here, two things will hopefully happen. One will be to reduce the costs of capture and storage as we learn more about it. And secondly, we'll have a better understanding in Canada and society in general what the price of carbon will be."
Already a number of companies -- including Epcor and a Calgary-based company partly owned by former premier Don Getty -- have expressed interest in applying for money from the fund.
Can we afford to wait for all this?
Carter estimates the five demonstration projects will be up and running by 2015. It sounds like a long time from now, but industry will be pressed to get things done by then.
"These are big capital investments and it takes that long to get them in place," Carter says.
Even if those projects get built, they will only capture and store roughly five million tonnes of carbon dioxide annually, a small fraction of Alberta's overall emissions. It will take decades more before enough CCS is in place to make real greenhouse gas reductions.
The plan simply doesn't reflect the urgency of the problem, says local Greenpeace campaigner Mike Hudema.
"The next 10 years are the critical years," he says.
"Carbon capture is being used more as a greenwashing technique than a way to make real reductions."
Hudema wants more investment in renewable energy and a stronger focus in reducing, not storing, emissions.
But not all environmental groups see things the same way. The Pembina Institute believes CCS is one of many areas the government needs to move on.
"It's not as if we have the luxury of the status quo," Griffiths says.
"We feel that we need to move very, very rapidly on a number of fronts."
Keith believes those who oppose CCS are either using faulty reasoning or haven't decided what they're fighting.
"We have to cut emissions to zero or below zero within 50 years, and if you say you're going to do that only with small renewable and efficiencies, you're effectively saying you're not going to do it," he says.
amclean@thejournal.canwest.com
© The Edmonton Journal 2008
July 25, 2008
Wind: The Power. The Promise. The Business
A partial answer to America's energy crisis is springing up. But the struggle to harness the winds of Kansas shows the difficulty in building an industry that threatens the status quo
Wind evangelist: Pete Ferrell on his 7,000-acre ranch in southeastern Kansas Bob Stefko
by Steve Hamm
Business Week
3 July 2008
It's an ordinary day on Pete Ferrell's 7,000-acre ranch in the Flint Hills of southeastern Kansas. Meaning, it's really windy. When he drives his silver Toyota Tundra out of the canyon where the ranch buildings nestle, the truck rocks from the gusts. Up on top of a ridge, surrounded by a sweeping vista of low hills, rippling grass, and towering wind turbines that make you feel like a mouse scampering underfoot, Ferrell carefully navigates into a spot where the wind won't damage the doors when they're opened. Then he points to an old-style windmill, used for pumping water, which was erected by his father decades earlier when the ranch was in the throes of a drought. "That's the windmill that saved us in the '30s," he explains, his voice growing husky with emotion.
Windmills on the high plains have raised
the ire of prairie preservationists Bob Stefko
Ferrell, 55, is a fourth-generation Kansan who looks the part. He's slim with gray hair, squint-lines, and a cowboy hat. His great-grandfather established Ferrell Ranch on the high plains east of Wichita in 1888, and it has nearly failed several times over the years. Ferrell has held the place together through cattle grazing, oil wells, and, now, wind. He owns the land under 50 of the 100 turbines of the Elk River Wind Project, a 150-megawatt wind farm that opened in 2005.
Ferrell is one of the fathers of Kansas wind farming. He ran through three different developers before getting the operation going on his land. There was stiff opposition to wind farming in the Flint Hills from preservationists concerned about marring the landscape and from politicians tied to the coal industry, but, finally, Ferrell had his way. He now travels the state as an evangelist. "He has been a great spokesman for wind in Kansas," says Mark Lawlor, project manager in the state for Horizon Wind Energy, a wind farm developer. "He has lived off the land, and he's found something new he can tap into."
For centuries, the wind has been the enemy of the farmer. It blows away soil, dries out crops, and the howling makes some people crazy. So it's a twist of fate that wind is now emerging as an ally. Some call the vast American prairie the Saudi Arabia of wind, capable of producing enough electricity to meet the entire country's needs—assuming there's the will to harness it.
Wind power, while still just a speck in America's total energy mix, is no longer some fantasy of the Birkenstock set. In the U.S., more than 25,000 turbines produce 17 gigawatts of electricity-generating capacity, enough to power 4.5 million homes. Total capacity rose 45% last year and is forecast to nearly triple by 2012. Right now, only 1% of the country's electricity comes from wind, but government and industry leaders want to see that share hit 20% by 2030, both to boost the supply of carbon-free energy and to create green-collar jobs.
Such a transformation won't come easily. While much of America's wind energy is in the Midwest, demand for electricity is on the coasts. And the electrical grid, designed decades ago, can't move large quantities of electricity thousands of miles. There's plenty of wind off the coasts, but it's both expensive to harness and controversial; not-in-my-backyard sentiment has slowed some of the most high-profile projects.
Kansas, in the middle of the wind belt, has become a battleground for the wind revolution. Advocates of alternative energy are pitted against defenders of the status quo, which in Kansas means coal. The flash point: a proposal by Sunflower Electric Power to build two 700-megawatt, coal-fired power plants in western Kansas. State regulators denied permits on the basis of CO2 emissions, the Republican-controlled legislature passed bills to overturn the ruling, Democratic Governor Kathleen Sebelius vetoed the bills, and the legislature has narrowly sustained her vetoes. So ferocious is this fight that Sunflower and its allies placed ads in newspapers suggesting that because Sebelius is against their coal project she's playing into the hands of Iranian President Mahmoud Ahmadinejad. The poisoned atmosphere helps explain why Kansas has only 364megawatts of wind power capacity from about 300 turbines, despite having some of the hardest-blowing wind in the country, while Texas produces more than 10 times as much.
ELECTRICITY HIGHWAY
Making matters worse, Kansas has a poor electrical transmission grid. Most of the coal-fired plants are clustered around Kansas City in the east, yet most of the wind energy is on the thinly populated plains to the west. Now, emboldened by Sebelius' interest in wind energy, independent transmission outfits are lining up to build high-capacity lines from the windy west to consumers not only within the state but also beyond its borders. The U.S. Energy Dept., among others, would like to build the equivalent of an interstate highway system for transporting electricity around the country—if it could only find a budget for it.
The part of the project targeting wind alone would cost about $20 billion. Another hang-up: Major new transmission projects take up to four years to get approval from municipalities and state utility authorities. "The process just doesn't work," says Joseph L. Welch, chief executive of ITC Holdings, a Michigan-based transmission company that hopes to build a major line through wind country.
Ferrell, in trying to save his family spread,
became an early advocate of wind farming
Bob Stefko
The struggles to get wind projects going weigh on Ferrell's mind as he drives west on Route 96 through Wichita, Hutchinson, Great Bend, and the smaller towns of Albert, Timken, and Rush Center. Ferrell is on his way to tiny Bazine, a community in Ness County 208 miles from his home, to talk to landowners who have banded together to attract a wind farm developer. This is his new gig. He travels the state advising locals on how to get projects going, sometimes collecting consulting fees from landowners. He also is working with partners who have money to develop his own projects. "I learned my lessons in the Flint Hills. [Wind opponents] beat me up good. Now I know how to get things done," says Ferrell.
In Great Bend, Ferrell passes a gas-fired power plant operated by Sunflower. Running a utility company isn't simple. Since electricity can't be stored cheaply, you have to match supply and demand. Typically, that's done with a combination of low-cost coal and nuclear power, gas plants like this one that can be started quickly, and wind and other alternatives. Wind blows harder at some times than others, so you can't depend on a steady supply—though that may change in a few years if there are enough wind farms in different places.
Coal, for the most part, is a cheaper alternative. It costs Sunflower about 1.5 cents per kilowatt-hour to produce electricity at coal plants, 10 cents to 14 cents in gas plants, and 4.5 cents for the electricity it buys from wind farms. But the economics of energy are changing fast. Coal prices have doubled in a year. And if you compare the costs of coal from new plants with wind energy from new wind farms, taking into account capital costs, they're roughly comparable, according to the National Renewable Energy Laboratory, which is funded by the Energy Dept.
"BATTLEGROUND" FOR THE NATION
Sunflower’'s Watkins has met stiff opposition
trying to build two giant coal plants
Bob Stefko
Still, Sunflower hopes to forge ahead with its new coal plants, with a victory either in the legislature or the courts. Earl Watkins, its chief executive, complains that Kansas didn't have the right to deny permits because CO2 emissions are not specifically cited in the regulations. "It's like being pulled over and ticketed by a policeman for running a stop sign—and there's no stop sign there," he says.
This point will be debated in legislatures and courtrooms across the land over the coming years. "We have become a battleground for the whole nation," says Lieutenant Governor Mark Parkinson, a Democrat, who has spearheaded Kansas' energy initiatives. CO2, which has been linked to global warming, is not covered by most environmental rules. Yet other states are turning down coal plant permits for the same reasons Kansas did. In fact, wind power advocates argue that if the cost to the environment and the economy of CO2 emissions were included when comparing the expense of running coal plants vs. wind farms, wind would be cheaper.
In Bazine, a town with a smattering of houses, Ferrell pulls up in front of the Golden Years Senior Center. It's a single-story metal building on the edge of a cornfield. Inside, he helps rough-handed farmers set up folding chairs, and soon most seats are filled. Ferrell gives a primer on wind. Landowners typically get about $2,000 per turbine per year, but he advises them to stick together to gain negotiating strength on price. Also, they should own a piece of the project, not just collect lease royalties. He adds he'd be willing to develop their project or be a consultant.
Meetings like this are happening all over Kansas. More than a dozen projects are on the drawing board, and a slew of wind farm developers are aggressively mapping out the plains and ridgelines looking for the best locations for turbines. In some cases, they attempt to cut secret deals, giving different landowners different prices. That tends to anger the locals and is why the folks in Ness County decided to unite. "There's a wind rush going on out here," says Terry Antenen, who is one of the organizers. "Instead of being picked off, we're going out and picking our developer." He says he trusts Ferrell for advice more than he would an outsider.
On Ferrell's drive home from Bazine, the night sky is lit up with Kansas fireworks—huge lightning strikes. Thanks to the wind farm fees, he says, he has been paying off mortgages on his land. Now he has tied up with Tom Rinehart, a natural gas entrepreneur, to develop wind farms. In time, he hopes to hand off the Ferrell Ranch to his two children, now in college. And if things go really well, he says, he'll set up a foundation dedicated to community development within the Flint Hills.
HELP FROM WASHINGTON
He's sensitive about prairie protection issues. Some former friends in the Flint Hills who oppose putting turbines there don't speak to him anymore. "It's sad what he's doing," says Susan Barnes, owner of the Grand Central Hotel in Cottonwood Falls. "I'm sure wind helped save his ranch, but there are other ways."
Kansas Governor Sibelius has emerged as a
vocal proponent of wind energy
Chuck France /AP Photo
The era of the small-time wind developer may already be passing, anyway. Ferrell says it's tough to compete with big outfits with economies of scale and easier access to capital. It costs roughly $225 million to build a 150-megawatt wind plant. Horizon, the big wind developer, has 11,000 megawatts of projects in the works and is hoping to add Ness County to the list. A few days after the meeting in Bazine, Ferrell calls Antenen to say he won't bid on the project. There's a shortage of good transmission lines in the area, and it could take several years to upgrade them.
Even the big players need government help to get major wind projects off the ground. Twenty-five states require their utilities to use a percentage of renewable energy, and in all of them, alternative-energy projects rely on the federal government's production tax credit. That expires at the end of this year, so wind advocates are pressing Congress to renew it. In the past, every time it was allowed to expire, wind development plummeted the following year.
It's morning at the Ferrell Ranch. In the house the family built in 1923, Ferrell's mother, 95-year-old Isabelle, sits in the living room while Pete helps her put on support stockings. A tiny woman with a shock of white hair, she says she likes to look at the wind turbines outlined against the blue sky. Her favorite memories, she says, are of riding the range on horseback in the old days with her late husband, Jack. "He'd say we're just stewards of the land," she says. "It's Pete's feeling and mine. You've got to take care of the land."
Hamm is a senior writer for BusinessWeek in New York.
http://www.businessweek.com/magazine/content/08_27/b4091046392398.htm
Is the EU Turning its Back on Biofuels?
'WE NEED MORE RESEARCH'
By Charles Hawley
Der Spiegel
7 July 2008
The storm of critique against biofuels may finally be having some effect. Even as the European Commission remains true to its goal of increasing the use of biofuels, others aren't so sure. The European Parliament is trying to put on the brakes.
In January, the European Union's policy on biofuels seemed clear. By 2020, the European Commission decided, 10 percent of the fuel used by cars and trucks on roads in the EU should come from biofuels and other renewable energy sources. It was a far-reaching plan, hammered out in 2007, that aimed at cutting the emission of harmful greenhouse gases from European exhaust pipes.
Rapeseed in bloom in Germany. The European Union may be considering a move away from biofuels.
Now, though, the European Union may be considering taking its first baby steps away from the once-touted environmental elixir. Over the weekend, French Ecology Minister Jean-Louis Borloo, at an informal meeting in Paris with his colleagues from other EU member states, suddenly remembered that not all of the 10 percent cut needed to come from biofuels.
"We reminded ourselves that the (Climate Action and Renewable Energy Package) also makes reference to powering vehicles with gas, electricity or hydrogen," Borloo said. "Renewable doesn't just mean biofuels."
Jochen Homann, a deputy in Germany's Economics Ministry, went even further. "We have to decide if the quota can be kept," he told reporters. "It might be changed."
At the Doorstep of Biofuels
The apparent shift comes as the storm of criticism against biofuels continues unabated. For months, many environmentalists have been criticizing the fuel -- made from plants and grains grown on farmland -- for providing only a marginal benefit to the environment. The big business of biofuels, say many, encourages farmers in the developing world to cut down rainforests and drain peat bogs, thus destroying areas valuable for their capacity to absorb CO2 from the atmosphere.
Furthermore, biofuels may be significantly contributing to the ongoing dramatic rise in food prices. An internal World Bank report, leaked to the Guardian last week, even claims that up to 75 percent of the rise in food prices can be laid at the doorstep of biofuels.
But is the European Union really considering an about-face? According to Ferran Tarradellas Espuny, the European energy commissioner's spokesperson, nothing has changed. In response to Borloo's sudden epiphany, Espuny told SPIEGEL ONLINE: "We never wanted to focus on biofuels to the exclusion of other technologies." Given the complexity of other technologies -- electric automobiles, hydrogen-powered cars and others -- biofuels is still likely to remain on the top of the list of renewable energies when it comes to vehicles in Europe, he said.
"It is true that we are under a lot of criticism," he went on, "but at this point in time the evidence is not that we should revisit our policy on biofuels."
There are many who would disagree. Environmental groups began attacking the EU commitment to biofuels even before the ink on the January agreement had dried. When one takes into account the fertilizer used for many biofuels crops, the destruction of rainforests and other carbon sinks for biofuel crop plantations and the costs of transport, so goes the argument, biofuels aren't carbon neutral at all, and may even do more harm than traditional fossil fuels do.
Slow Down
Soon, though, it wasn't just environmentalists going after plant power. In April, officials with both the Organization for Economic Trade and Development (OECD) and the European Union's own scientific advisory body told SPIEGEL ONLINE that the EU should reverse its stance on biofuels. United Nations Special Rapporteur for the Right to Food Jean Ziegler, with an eye on food prices soaring worldwide, even blasted biofuels as a "crime against humanity."
But even if the European Commission may not be listening for the moment, the European Parliament certainly is. On Monday evening, the parliament's Committee on the Environment is considering a proposed revision to the EU's biofuels targets. The primary aim of the draft opinion, written by member of parliament Anders Wijkman -- who is also the committee's biofuels expert -- is to encourage the European Commission to slow down on biofuels.
"There are many unknowns," Wijkman told SPIEGEL ONLINE on Monday. "We need more research... I think there is a feeling that what was decided in 2007 was not based on a thorough analysis of the pros and cons. We have to slow down the pace and tread with more caution so as to avoid a clash with food production."
Wijkman and his committee members would like to see a series of intermediate targets. By 2015, he said, the EU-wide fuel mixture should be made up of 4 percent biofuels, and then a major review should be carried out to see if the mixture should be raised.
He also would like to see a more ambitious goal when it comes to the amount of CO2 emissions saved by biofuels as compared with fossil fuels. The European Commission adopted a goal of 35 percent savings whereas Wijkman's parliamentary committee, should his proposal be adopted on Monday evening, would argue in favor of a 45 percent minimum, which would then rise to 60 percent in 2015.
In addition, the committee is looking into a certification program, to ensure that fields repurposed to grow biofuels crops were not just recently carved out of the rainforest. His proposal foresees the EU importing biofuels from developing countries -- primarily, he says, because weather conditions there mean more energy production per hectare -- but tries to ensure that such imports are sustainable.
'Get them Unstuck'
He told SPIEGEL ONLINE that biofuel crops harvested from fields created after the 2005 cut-off date would not be certified. Those currently producing biofuel crops below the 45 percent efficiency minimum would have until 2013 to improve, he said. Should the proposals be adopted on Monday evening, it would not change European policy. It would, however, adjust the European Parliament's position on biofuels when it comes to negotiations with the Commission.
"I am absolutely convinced that biofuels can be done right, but there are a number of factors that have to be looked at," Wijkman, who is an MEP from Sweden, says. "The Council seems to be stuck, and hopefully this will get them unstuck."
Judging from the message being sent by the European Commission, Wijkman is likely to be disappointed. At least when it comes to the recent criticism that biofuels are driving up food prices, spokesman Espuny is clear.
"To reach our 10 percent target, we need 4 million tons of agricultural commodities. Total production of cereals, though, is 2.2 billion tons," he said. "I am not an economist, but if you could tell me how 4 million tons could have a large impact on cereal prices at all, I'd be happy to listen."
http://www.spiegel.de/international/europe/0,1518,564409,00.html
Why the Gulf Is Switching to Coal
OIL PRICE SIDE-EFFECT
By Wolfgang Reuter
Der Spiegel
02-Jul-2008
The Persian Gulf may be sitting atop massive oil reserves. But with prices for crude skyrocketing, it makes more sense to sell it than to burn it. Instead, the Gulf is turning to coal for its energy needs -- to the detriment of the climate.
A coal-fired plant belonging to Evonik Steag in Turkey. The company is currently
expanding in the Gulf.
For Alfred Tacke, CEO of the Essen energy giant Evonik Steag, it's the yellowish-brown pall below that tells him the plane he's on is approaching the Persian Gulf. Beneath the haze, he knows, is Kuwait, which has five large-scale gas- and oil-fired power plants in operation. The power they generate provide around-the-clock electricity for Kuwait's gigantic seawater desalination plants and the country's enormous air-conditioning needs.
"Here, you only need to stick your finger in the sand and you're likely to strike oil or gas," says Tacke, whose energy group ranks fifth among Germany's electricity producers. But Tacke has his own ideas about how to make money in the region. And they center on a different kind of black gold: coal-fired power plants. "We're currently in the process of discussing the conditions for projects of this kind," he says.
As odd as the idea may seem, coal power in the gulf is just one more outcome of skyrocketing oil prices. In a world with dramatically disparate ideas on how or even whether to address the risks of global warming, demand for coal plants across the globe is growing rapidly to the detriment of efforts to increase the production of renewable energies such as solar, hydro and wind.
Nowhere is that demand more paradoxical than in the oil-rich Middle East. At the end of April, for example, the state-owned Oman Oil Company signed a memorandum of understanding with two Korean companies on the construction and operation of several coal-fired power plants. Dubai, for its part, is initially planning to build at least four large facilities with a cumulative output of 4,000 megawatts. Abu Dhabi also wants to get into the act. Even Egypt is thinking of constructing its first coal-fired plant on the shores of the Red Sea.
Two-Hundred More Years of Coal
Other regions in the world are fuelling the trend as well. Oil-rich Russia is planning the construction of more than thirty new coal-fired power plants by 2011. In China a new facility is connected to the grid about once every 10 days. Greenpeace estimates that around five thousand coal-fired power plants will be in operation worldwide by 2030.
The economics behind the coal fad are clear. To produce a megawatt hour of electricity using Australian coal, it costs just €11. Using natural gas, on the other hand, ups that price to €26 while oil-fired power plants swallow up €50.50 per megawatt hour of electricity.
Plus, coal is likely to be available for quite some time to come. Global coal reserves will last an estimated 100 more years and possibly even twice that long. As a result, coal is relatively cheap and in some cases can even be gleaned from open pit mines as in Australia, but also in the US, South Africa, China and Russia. The difference between the prices of natural gas and oil on the one hand, and coal on the other is growing increasingly large.
For the Gulf, the development is turning into a highly lucrative business model. They are currently able to sell their oil at record prices on the global market (currently over $140 a barrel). At the same time, they are able to satisfy their own energy needs at a much lower cost with coal shipped in from overseas.
From an environmental standpoint, of course, this trend is devastating. The Gulf states, first and foremost the United Arab Emirates, are among the world's boom regions. It is predicted that by 2015 the population of Dubai will double to a total of 2.6 million. Per capita energy consumption in the Emirates is six times higher than the global average and a third more than even the US average.
Deserts Devoid of Solar Power
Should coal play a major role in satisfying such a growing energy demand in Dubai and elsewhere, prospects for the global climate are dim. Even a modern anthracite-fired power plant emits 750 grams of CO2 per kilowatt hour of electricity produced, twice as much as a gas-fired power plant and around 50 percent more than an oil-fired power plant. The amount of CO2 emitted by lignite-fired power plants is much greater, further aggravating the greenhouse effect.
The situation is one which shows the limitation of climate protection policies developed and implemented on the national rather than the international level. Germany has committed to reduce its CO2 emissions by 20 percent by 2020 relative to 1990 levels and is striving to achieve double that reduction figure. Many Gulf States, on the other hand, including the United Arab Emirates, are classified as developing countries -- meaning that even though they've ratified the Kyoto Protocol, they have no obligation to reduce their CO2 emissions.
A quick look at the potential of solar power in the region shows the absurdity of this situation. In the sun-baked Gulf, one square meter of solar cells produces at least 2,200 kilowatt hours of electricity per year. In Germany annual output for a square meter is less than half that amount. In the Gulf States, though, solar energy is much too expensive when compared with coal. In contrast to Germany, there are no subsidies for those who invest in solar collectors.
In Germany last year, solar power facilities with an output of 1,300 megawatts were installed. In Saudi Arabia the other Gulf States, it was just 36 megawatts. Even if only a fraction of the solar electricity subsidies available in Germany were available in the Gulf, the positive effect for the global climate would be many times greater.
For the moment, though, there is currently not enough political support for solutions of this kind, neither in the oil-producing countries nor in the industrialized nations. Which means that Alfred Tacke of Evonik Steag is hoping for tidy profits in the future. "The Gulf," he says hopefully, "is a growth region for us."
Translated from the German by Larry Fischer
http://www.spiegel.de/international/business/0,1518,563502,00.html
Skyward oil stokes a coal-fired future
NEIL REYNOLDS
Globe and Mail
July 18, 2008
Der Spiegel, the German newsmagazine, explained earlier this month why the Persian Gulf states are switching to coal. “[They] may be sitting atop massive oil reserves,” the magazine said. “But with prices for crude skyrocketing, it makes more sense to sell it than to use it. Instead, the Gulf states are turning to coal for their own energy needs – to the detriment of the climate.” And these states are not alone. “Demand for coal plants,” the magazine says, “is growing rapidly across the globe.”
Abu Dhabi (largest of the seven UAE emirates) has announced that it will switch to coal-fired power plants. Dubai (the second largest) is already building four of them – with a combined output of 4,000 megawatts – as a first-phase investment in coal. Apart from the United Arab Emirates, Oman (widely regarded as “the next Dubai”) has signed a contract with South Korea for the construction of several coal-fired plants. Beyond the Gulf, Egypt proposes to build its first coal-fired plant on the shores of the Red Sea. Russia has announced plans to build more than 30 coal-fired plants by 2011.
As almost everyone now knows, China connects a new coal-fired plant to its electrical grid every 10 days – and intends to keep doing so for several years. Less known is China's decision to construct a massive coal-fired plant in Inner Mongolia that will convert the region's vast coal reserves into oil. With 10,000 people now engaged in the construction, the plant will be completed by the end of the year. The coal-to-liquid process used by this plant will consume twice as much coal and produce twice the CO{-2} emissions as the simple burning of coal in a conventional power plant.
The Kyoto Protocol, incidentally, classifies the Gulf states as developing countries – meaning that they are under no obligation, oil revenues notwithstanding, to reduce CO{-2} emissions. They have opted for coal for a single compelling reason: cost. They can produce a megawatt-hour of electricity using Australian coal, Der Spiegel calculates, for $17.49 (U.S.). Using natural gas, the cost rises to $41.34. Using oil, the cost rises further to $79.50. At the same time, they can sell their oil on the global market for something approaching (or occasionally exceeding) $140 a barrel.
One of the ironic differences between Germany and the Gulf states, Der Spiegel observes, is the absence of solar energy investment “in the sun-baked Gulf states.” Germany produced 1,300 megawatts from solar installations in 2007; the Gulf states combined produced 36 megawatts. As impressive as its commitment to solar power appears, though, Germany has its work cut out. It has promised to generate most of its electricity by renewable energies (largely wind and solar) by 2020 – when it will phase out its nuclear power. Germany has thus opted for the world's most expensive electrical power even as other countries simultaneously opt for the cheapest.
For an assessment of Germany's chances, check out CanadianEnergyIssues.com, the website of Steve Aplin, the perceptive Ottawa-based energy and environment consultant. “Germany must bring at least 12,000 megawatts of base-load electricity into service by 2020, the year in which the nuclear phase-out will begin,” Mr. Aplin writes. “German politicians are beginning to realize the difficulty, if not the impossibility, of plugging the gap left by the departure of nuclear.”
It appears that German environmentalists are making it harder for the country to reach its aggressive objective – and are driving up the country's CO{-2} emissions, too. Some German Greens are blocking construction of power lines needed to connect wind power to the grid in a bid to prevent despoiling of the countryside. Mr. Aplin notes that emissions from German power generation rose by 12 million tonnes between 2005 and 2007. “In their zeal to admonish the rest of the world,” he says, “German Greens are making sure that their own emissions will continue to rise.”
Other German Greens are championing – you are ready for this, right? – coal. “The more strident of the anti-nuclear politicians in Germany are now advocating new coal and gas plants to ward off a certain electricity supply crisis,” Mr. Aplin says. “Why is coal in this mix? It is cheap and domestically available.”
Cheap, reliable power apparently still has its practical uses – and its political appeal. The Germans are now operating a showcase 40-megawatt solar power plant near Leipzig (which, in its experimental startup phase, will operate as a 24-megawatt plant). But 40 megawatts are a long way from 12,000 megawatts. “Hence,” Mr. Aplin says, “the new enthusiasm [in Germany] for coal and gas.”
The bizarre debate still rages on here and there in the developed countries. What limits on carbon emissions must be imposed? What taxes levied? Two days ago, though, Germany's Finance Ministry issued a remarkably candid public statement. It conceded that Europe's proposals for reductions in greenhouse gases – without the participation of all major contributors worldwide – will be pointless.
Precisely.
http://www.theglobeandmail.com/servlet/story/RTGAM.20080717.wreynolds0718/BNStory/Business/
Suncor's coke solution? Ahoy, Port Alberta
PATRICK BRETHOUR
Globe and Mail
July 25, 2008
PRINCE RUPERT -- The massive pyramids of coal on Prince Rupert's Ridley Island are anonymous, but one has a story to tell.
The coal pile in question belongs to oil sands giant Suncor Energy Inc., which is already shipping a half-million tonnes a year through Prince Rupert to Asian and Mexican ports. Suncor hasn't decided to branch out into the coal mining business. The coal - to be more precise, petroleum coke - comes from its upgrading operations in Fort McMurray, Alta.
Although it looks and feels like coal, petroleum coke is literally the dregs of the (oil) barrel, the leftovers after crude oil and other liquids have been extracted from gooey bitumen. Until recently, petroleum coke has been something only a step above industrial waste: worth little, but a potentially big environmental headache for oil sands firms that are far from any sizable market.
Suncor alone stockpiles three million tonnes of the stuff in a year; it burns a million tonnes to power its upgrading operations, but that amount is not likely to rise because of coke's heavy carbon footprint. So, every year, the stockpile in Fort McMurray grows ever bigger, with just a trickle dribbling out to the West Coast. Without an outlet, the best use of petroleum coke will be as landfill - far from an ideal material, if the seemingly eternal underground coal fires of West Virginia are any guide.
But a confluence of tectonic shifts in the energy market, and a somewhat obscure short-line railway, are radically altering the economics of petroleum coke. Oil sands production, propelled by soaring prices, is on a rocket ride. That will drive up the volume of petroleum coke, particularly at Suncor, which will be producing close to nine million tonnes by 2012, making it one of the largest sources of coal in Canada.
Rising coal prices are key. Even though petroleum coke sells at a discount to thermal coal, its price increased fivefold in the middle part of this decade, and has continued to rise since. What had been a problem for the oil sands could now be transformed into profits - if it can be brought to market.
And that is where Prince Rupert, and a little heralded acquisition by Canadian National Railway Co., come in. Last December, just before Christmas, CN issued a press release detailing its purchase of the line running from Fort McMurray to Boyle, Alta., a dilapidated line bought for a bargain $25-million, plus a vow to spend more than five times that amount on upgrades. Long-term volume guarantees from Suncor, and two other oil sands producers, OPTI Canada Inc. and Nexen Inc., were a cornerstone of that acquisition, according to CN.
By the time Suncor is pumping out nine million tonnes of petroleum coke in 2012, those upgrades will be long completed, opening the path for the export of an enormous volume of petroleum coke from Fort McMurray, through the Rocky Mountains, to Prince Rupert and Ridley Island - and on to Asia. At today's prices, that amount of petroleum coke would top $1-billion a year - even for an oil sands company, that is serious money.
For Don Krusel, chief executive officer of the Prince Rupert Port Authority, the prospect of handling mass volumes of petroleum coke, along with other Prairies commodities, is part of his vision of turning the shipping route in northern B.C. waters into a transit corridor snaking back into the middle of Canada. He's hoping that the upgrades to the port, including the new container ship facility, will shift the mindset in landlocked provinces, opening their eyes to the possibility of Asian exports, and to thinking of Edmonton, Lloydminster and Fort McMurray as part of one export system that leads to the open waters of the Pacific. Mr. Krusel has a phrase that sums up that shift in thinking: Port Alberta.
Petroleum coke is part of Port Alberta. Sulphur - another formerly unwanted byproduct of the oil sands - could be as well, if Ridley Terminals is successful in finally getting its specialized facility up and running. Canpotex's recent announcement that it will build a potash facility on Ridley Island is also part of the picture. Mr. Krusel sees a day, not too far away, when grain, sulphur, even beef and poultry, are flowing from the Prairies through to Asia.
Ahoy, Port Alberta.
July 24, 2008
Natural gas, oil abound in the Arctic, study says
Northern countries vie for control of areas that contain vast deposits
Andrew Mayeda
Canwest News Service
July 24, 2008
OTTAWA -- Nearly a quarter of the world's undiscovered petroleum resources lie in the Arctic, confirms a U.S. study that should only intensify pressure on countries such as Canada to stake their claims to the Far North.
The U.S. Geological Survey has previously offered a rough estimate of the Arctic's vast oil and gas resources. On Wednesday, the state-funded agency released a study that refines its estimates for the entire Arctic region.
According to the new assessment, the Arctic holds an estimated 90 billion barrels of undiscovered oil. That accounts for 13 per cent of the world's total undiscovered reserves. By comparison, the Alberta oilsands are estimated to hold about 173 billion barrels that can be extracted economically.
The Arctic actually appears to be far richer in natural gas than oil. There are about 1,670 trillion cubic feet of natural gas in the Arctic, according to the U.S. assessment. That accounts for about 30 per cent of the world's untapped reserves, and is nearly as much as the proven reserves of the world's most natural-gas endowed country, Russia. Combined, oil and gas account for 22 per cent of the world's undiscovered petroleum resources.
"For a number of reasons, the possibility of oil and gas exploration in the Arctic has become a subject that's much less hypothetical than it once was," said U.S. Geological Survey geologist Don Gautier.
The new assessment comes as Canada jockeys with other Arctic nations to determine how far their national boundaries extend --and who will cash in on the oil and gas that experts expect to become increasingly enticing as climate change accelerates the rate of ice melt.
In a summary of the results, the U.S. Geological Survey says the "extensive Arctic continental shelves may constitute the geographically largest unexplored prospective area for petroleum remaining on Earth."
Under a U.N. treaty called the Convention on the Law of the Sea, countries can claim offshore territory to the edge of their continental shelf.
Canadian scientists have been mapping the seabed in preparation for Canada's claim, which must be submitted by 2013.
Some of the oil and gas deposits are believed to be located in territory under dispute between Canada and its Arctic neighbours.
For example, Canada and the United States disagree over who controls a portion of the Beaufort Sea. According to the new estimate, the biggest undiscovered Arctic oil reserves are off the coast of Alaska.
Imperial Oil, a subsidiary of energy giant Exxon Mobil, has earmarked more than half a billion dollars to explore for offshore petroleum in the Beaufort Sea, and the federal government recently closed a call for bids to explore five more offshore parcels.
Another big potential source of oil and gas are the waters between Greenland and the northeast Canadian Arctic. However, Canada and Denmark have clashed over control of Hans Island, a speck on the map between Greenland and Ellesmere Island.
Because conventional seismic and drilling data is not available, the U.S. Geological Survey used a probability model based on factors such the composition and age of rock samples.
Industry experts believe the price of oil and gas would have to increase considerably before it would be cost-effective to recover much of the Arctic reserves --84 per cent of which are offshore, according to the assessment.
July 23, 2008
Canadian energy policy "Made in USA"
The window may be closing on what's left of Canadian decision-making power over our own energy.
by Linda McQuaig
www.StraightGoods.ca
July 22, 2008
When Americans want something that lies in another country, the consequences for that other country can be severe.
Even if they don't actually invade, they put a lot of pressure on lesser countries to behave as they want.
The future of the oil sands is one of the most important and contentious issues facing Canada.
Canada, for instance, hasn't been invaded by the United States since 1812, but Ottawa has proved highly co-operative with Washington's desire to have access to our oil. We are America's Number 1 supplier.
Pressure for Canadian acquiescence in servicing America's apparently bottomless energy appetite is only going to get more intense, as fresh panic sweeps across America over skyrocketing oil prices and supply insecurity. Oddly, the Bush administration continues to flirt with the idea of making oil supplies even more insecure by launching a military strike against Iran.
All this turns the spotlight ever more on Canada as America's energy dream, nestled conveniently on top of the homeland, far from the roiling waters of the Persian Gulf.
Typical was a commentary on CNN's American Morning last week in which business correspondent Ali Velshi gushed about how Alberta's oil sands have more oil than Saudi Arabia, and most of it goes to the US. Velshi said that if daily oil-sands production were to rise from 1.5 million barrels to 4 or 5 million barrels, that would amount to "about a third of all the oil that the US imports."
He noted that this Canadian treasure trove of oil could service US needs for the next 70 years, possibly the next 150.
As American audiences are increasingly titillated by the idea that the oil sands could solve their energy dilemma, the window may be closing on what's left of Canadian decision-making power over our own energy.
Noticeably absent from the CNN report was any mention of the fact that the oil sands produce extraordinarily large greenhouse gas emissions, and plans to triple current output would be environmentally disastrous.
The future of the oil sands is one of the most important and contentious issues facing Canada, pitting concerns over global warming and the need to meet our international Kyoto obligations against the desire to make huge profits selling oil and to accommodate American interests.
There's an acute need for some sort of coherent national policy to deal with all this, to avert the looming environmental disaster while minimizing regional divisions and tensions with the United States.
Canada's policy vacuum only encourages the Americans to assume they can count on Canadian acquiescence to their energy dreams.
Of course, for years Ottawa has stubbornly refused to develop any sort of national energy policy, after Pierre Trudeau's efforts to increase Canadian energy independence and self-sufficiency were soundly defeated by US oil companies and the Alberta government.
(Trudeau also created a publicly owned oil company in 1975, but unfortunately Petro-Canada was privatized in 1991. Imagine if we had the option as consumers today of directing the exorbitant amounts we're obliged to spend on gas into the public treasury, rather than the coffers of Exxon or Shell.)
Now, with the urgent new realities of global warming, a strong government in Ottawa might have worked up the courage to take another run at developing a national energy policy. Sadly, however, at the helm these days is the Harper government, which clearly won't do anything that might annoy its base in Alberta or Washington.
Actually, the truth is we do have a national energy policy - it's just that Canada isn't the nation that designed it.
Journalist and best-selling author Linda McQuaig has developed a reputation for challenging the establishment. As a reporter for The Globe and Mail, she won a National Newspaper Award in 1989 for writing a series of articles, which sparked a public inquiry into the activities of Ontario political lobbyist Patti Starr, and eventually led to Starr's imprisonment.
In 1991, she was awarded an Atkinson Fellowship for Journalism in Public Policy to study the social welfare systems in Europe and North America.
She is author of seven books on politics and economics - all national bestsellers - including Shooting the Hippo (short-listed for the Governor General's Award for Non-Fiction), The Cult of Impotence, All You Can Eat and It's the Crude, Dude: War, Big Oil and the Fight for the Planet. Her most recent book is Holding the Bully's Coat: Canada and the US Empire.
Since 2002, McQuaig has written an op-ed column for the Toronto Star. This article, which appears here with permission, previously appeared in The Star.
Email: lmcquaig@sympatico.ca
Website: http://www.lindamcquaig.com
http://www.straightgoods.ca/ViewFeature8.cfm?REF=406
Calgary upstart to turn coal into liquid fuel
COMMENT: What kind of bunkum is this? "... the project would produce carbon dioxide that could be used in mature oil fields to increase production." Carbon dioxide rebranded from global warming pariah to a useful byproduct of coal gasification!
Alter NRG plans to build $4.5-billion coal-to-liquids plant that would produce 40,000 barrels a day of fuel by 2014
NORVAL SCOTT
Globe and Mail
July 23, 2008
CALGARY - For most energy companies, figuring how to best turn Alberta's vast oil sands into lucrative gasoline is challenging enough. But Alter NRG Corp. is looking to go one better.
The Calgary-based upstart said yesterday that it's seeking to develop a project in Alberta that would turn coal into liquid petroleum fuels. The $4.5-billion plant, which will produce 40,000 barrels a day of fuel by 2014, would be the first of its kind in Canada.
"Local market conditions make producing diesel and naphtha [from coal] most attractive," Alter NRG chief executive officer Mark Montemurro said in an interview. "We'd be producing a very high-quality product."
Alter NRG, which is listed on the TSX Venture Exchange, plans to build its plant at the coal reserves it owns near Fox Creek, northwest of Edmonton.
In addition to producing diesel and naphtha - a heavy oil product used for paving roads, as well as for diluting bitumen from the oil sands - the project would produce carbon dioxide that could be used in mature oil fields to increase production.
Turning coal into liquid fuel is a technology that was first developed in the 1920s, and was used by coal-rich Germany to produce synthetic diesel during the Second World War.
South Africa, shunned during its apartheid years by potential trading partners, has also long used coal-to-liquids methods (CTL) to produce domestic fuel.
Although the technology, which involves gasifying the coal and then turning that product into a liquid, produces both a low level of emissions and a product that's effectively sulphur-free, the capital costs of development are expensive.
Each flowing barrel of CTL production would cost Alter NRG $110,000 to bring on stream, an amount comparable to the most expensive oil sands projects.
While Mr. Montemurro acknowledged that the upfront construction costs are steep, the operating costs of the CTL plant would be one-quarter of an oil sands mine and upgrader, creating a project with strong cash flows, he said, adding that the company expects to make announcements on operating and financial partners later this year.
ALTER NRG CORP. (NRG) Close: $4.68, up 29Ct
www.theglobeandmail.com
www.alternrg.ca
July 22, 2008
Unimak Pass rescue vessels far in future
SPILLS: First comes a study of ways to cut risks.
By ELIZABETH BLUEMINK
Anchorage Daily News
July 18, 2008
Click here for larger map
Ship traffic through the Aleutian Islands is growing significantly and, along with it, the risk of accidents, according to a scientific report published Thursday.
Carrying cargo from Toyotas to sneakers, thousands of ships pass through the remote, stormy archipelago each year, transiting the Great Circle shipping route between Asian and U.S. ports.
The traffic through Unimak Pass, a 28-mile-long corridor through the Aleutian chain, is roughly double the amount of vessel traffic to all Alaska ports combined, according to the 185-page report, published by the Washington, D.C.-based Transportation Research Board, an arm of the National Research Council.
Unlike the boats that arrive in Alaska ports, many of the ships traveling through the Aleutians are minimally regulated. In recent years, thousands of gallons of fuel have spilled near Unalaska Island, one of the country's top seafood ports, the report said.
In 20 years of Aleutian spills, almost no oil has been recovered, and in many cases, bad weather and other problems have prevented any response at all, according to the report.
Federal and state decisions about big steps that might be taken to reduce harm from a shipping accident or spill in the Aleutians are some years off. The report published Thursday is a precursor to a two-year, joint state and federal study of how to reduce those risks.
That seems like too long for some people who live in the region.
"I have some impatience," said Pete Hendrickson, an Unalaska fisherman who says he lost fishing time due to the massive fuel oil spill from a Malaysian cargo ship that broke apart near the island in 2004.
The Selendang Ayu accident led to six deaths when a Coast Guard rescue helicopter went down. Fuel from the ship contaminated 34 miles of beach and cost roughly $100 million to clean up.
Last March, Hendrickson said, he and other Unalaska residents were petrified when a 443-foot freighter, the Spanish-flagged Salica Frigo, temporarily lost power and drifted within 500 yards of Unalaska Island.
"We need to get something in place so we don't lose another ship," he said.
Rick Steiner, a marine activist and University of Alaska Anchorage professor, spoke at a meeting held Thursday in downtown Anchorage to present the report's findings to the public.
Government officials need to deploy an "interim" rescue tug in the Aleutians now, instead of waiting for the end of the study, Steiner said.
If it takes five years to fund any rescue vessels, there will be "40,000 possible disasters out there," he said.
"We understand the sense of urgency," said Keith Michel, one of the authors of the report.
He said deploying a rescue tug requires an extensive review -- what kind and how big a tug, for example. "We were not prepared to make a recommendation on that," he said.
"I think everyone would like to have a rescue tug out there," said Gary Folley, an on-scene spill coordinator for the Alaska Department of Environmental Conservation.
Yet rescue tugs are costly to operate and funding is a sticking point, according to Coast Guard officials at Thursday's meeting.
A rescue tug recently deployed to the Juan de Fuca Strait in Washington state has a $3 million annual budget, said Coast Guard Cmdr. James Robertson, the 17th District's Juneau-based chief of inspections and investigations.
A rescue tug deployed in the remote Aleutians could cost three times that amount, Robertson said.
The Coast Guard is not closed to the idea of deploying a rescue tug, he added. The study will figure out the pros and cons, he said.
The report suggested that the Coast Guard and the state should investigate funding levels for a rescue tug stationed in the Aleutian chain while the two-year study is in progress.
The $3 million study will begin this year. State and federal officials said Thursday they soon will start appointing people to serve on the study's advisory panel.
The study is being paid for by the operator of the Selendang Ayu as part of its $10 million plea agreement in federal court in 2007.
Find Elizabeth Bluemink online at adn.com/contact/ebluemink or call 257-4317.
July 16, 2008
Matt Simmons and the Five Psychological Stage of Grief
CNBC Fast Money
June 30, 2008
Watch the Fast Money show on YouTube
http://www.youtube.com/watch?v=rkzETN8qfzw
This is a wonderful clip. Matt Simmons is the author of ‘Twighlight in the Desert’, is a leading US investment banker, and a long-term advocate of the peak oil argument. When he was asked to go on CNBC’s ‘Fast Money’ to discuss the high oil prices, he clearly stunned the presenters with his forthright analysis of society’s current perilous situation. When asked if $147 a barrel is a ‘wake up call’ he replied “yes, but we’re not having a wake up call, we’re having a witch hunt for who got us here”, a succinct analysis of the current world situation. What was especially fascinating to watch was when he was asked for his prognosis of the near future.
The nub of his argument is that oil is still actually very cheap, and that the biggest danger the world faces at the moment is those people who argue that the current high prices are a blip, a bubble, a speculators spike. When asked for his scenario of the next year or two, he replied that the US would keep dropping its inventories (of oil) and feeling good about it, which would be followed by a shortage, which would, in turn, lead to “a run on the banks so fast your eyes would spin. This is when everyone tops up their tank. We haven’t run out of oil, but we could literally run out of usable diesel and gasoline and then we would have the Great American Disaster, because within a week we’d have run out of food”.
At this point the looks on the faces of the presenters is priceless. Yet Simmons isn’t finished yet. What can we do now, he is asked. We need to retreat from our oil addiction, “start living in villages again, eliminate long distance communiting by liberating the workforce and paying by productivity and growing food locally, and starting to embrace an enormous amount of R&D into things we’re not really doing anything about today, likek ocean energy, geothermal, then within 5-7 we could get ourselves out of a very deep hole, but we have to do it real quick”.
The programme’s oil analyst then quickly goes straight off back into business-as-usual, and the discomfort evident in those in the studio subsides. In Richard Heinberg’s ‘Peak Everything’, he cites Elizabeth Kubler-Ross’s five psychological stages people go through when told they have a terminal illness, denial, anger, bargaining, depression, acceptance. I am increasingly finding these a useful scale by which to measure where people are at in the peak oil debate. While Simmons appears to have moved, in this piece, to acceptance, the presenters are still in the bargaining phase, as if we can somehow haggle and trade our way out of this.
When I look around at UK society today, we see the denial about peak oil in the tabloids arguing that high oil prices are all the governments fault, and in the conspiracy loons who argue there is still hundreds of years worth of supplies which some mythical ‘they’ are hiding from us, the anger in the striking hauliers and other fuel protesters, the denial in government circles who still argue that oil will cost $67 a barrel in 2020, the bargaining in the debates around the 2p duty on fuel, the depression about it seems to be pretty common in writers on the subject, and then the acceptance, which I guess is what Transition work is trying to do, to look at the practicalities of where to go once people accept what is happening. It is fascinating to see what happens as people move through these stages, and I see lots of people moving through them quite quickly these days!
What is so fascinating about this clip, is that it is somehow a microcosm of what happens when people in denial and in bargaining meet someone from the acceptance stage. Now all we need is for Simmons (and others) to really integrate climate change into his thinking, and then that acceptance would be even more powerful! These exchanges are happening more and more these days, and what is important, I think, is not to take any of these 5 stages as being somehow superior to any of the others, there is no moral high ground here, rather they are all perfectly natural responses to a bewildering situation, although ultimately, the faster we can move towards acceptance, the faster we can actually start in earnest our preparations for life after oil.
http://transitionculture.org/2008/07/15/matt-simmons-and-the-five-psychological-stage-of-grief/
Undersea volcanic rocks offer vast repository for GHGs
Public Release
Earth Institute at Columbia University
14-Jul-2008
Drilling, experiments, target huge formations off West Coast
Deep-sea basalt region for CO2 burial. Red outline shows where water depth
exceeds 2,700 meters and sediment thickness exceeds 200 meters; hatched
areas show where sediment thickness exceeds 300 meters....
Palisades, N.Y., July 14, 2008—A group of scientists has used deep ocean-floor drilling and experiments to show that volcanic rocks off the West Coast and elsewhere might be used to securely imprison huge amounts of globe-warming carbon dioxide captured from power plants or other sources. In particular, they say that natural chemical reactions under 78,000 square kilometers (30,000 square miles) of ocean floor off California, Oregon, Washington and British Columbia could lock in as much as 150 years of U.S. CO2 production. The findings are published today in the Proceedings of the National Academy of Sciences.
Interest in so-called carbon sequestration is growing worldwide. However, no large-scale projects are yet off the ground, and other geological settings could be problematic. For instance, the petroleum industry has been pumping CO2 into voids left by old oil wells on a small scale, but some fear that these might eventually leak, putting gas back into the air and possibly endangering people nearby.
Basalts on seafloor near Juan de Fuca Ridge. Image shows about 3 by 4.5 feet.
Lead author David Goldberg, a geophysicist at Columbia University's Lamont-Doherty Earth Observatory, called the study "the first good evidence that this kind of carbon burial is feasible."
"We are convinced that the sub-ocean floor is a significant part of the solution to the global climate problem," said Goldberg. "Basalt reservoirs are understudied. They are immense, accessible and well sealed--a huge prize in the search for viable options." One of the main advantages, he said, is a chemical process between basalt and pumped-in CO2 that would convert the carbon into a solid mineral.
In their paper, Goldberg and his colleagues Taro Takahashi and Angela Slagle used previous deep-ocean drilling studies of the Juan de Fuca plate, some 100 miles off the Pacific coast, to chart a vast basalt formation that they say could be suitable for such pumping. Basalt, the basic stuff of the ocean floors, is hardened lava erupted from undersea fissures and volcanoes. In this region, much of it lies under some 2,700 meters (8,850 feet) of water, and 200 meters (650 feet) or more of overlying fine-grained sediment. Drilling by the Integrated Ocean Drilling Program has shown the rock is honeycombed with watery channels and pores that would provide room for pressurized CO2. The scientists have mapped out specific areas that they say are isolated from earthquakes, hydrothermal vents or other factors that might upset the system.
Ongoing experiments by Lamont scientists on land have shown that when CO2 is combined with basalt, the gas and components of the rock naturally react to create a solid carbonate—basically, chalk. Later this year, a separate team headed by Lamont geochemist Juerg Matter will begin pumping CO2 into a landbound basalt formation at a power plant near Reykjavik, Iceland—the first such large-scale demonstration. Basalts lie at or near the surfaces of other land areas including the northeast United States; the Caribbean; north and south Africa; and southeast Asia.
Goldberg says that undersea basalts, which are widespread, may be bigger, and better, than ones on land. At the depths studied, any CO2 that does not react with the rock will be heavier than seawater, and thus unable to rise. And in places like the Juan de Fuca, even if some did escape the rock, it would hit the overlying impermeable cap of clayey sediment.
Skeptics point out that getting the CO2 to such sites could be expensive and tricky. But Goldberg says the West Coast formations should be close enough to the land for delivery by pipelines or tankers. He called on government to study the details of how the idea might work, and whether it would be economically feasible. The United States currently spends about $40 million a year studying carbon sequestration, but nearly all of that goes to land-based research. "Forty million is about the opening-day box office for Finding Nemo," said Goldberg. We need policy change now, to energize research beyond our coastlines."
###
Art or advance copies of the paper, "Carbon dioxide sequestration in deep-sea basalt," are available from the authors, PNAS, or The Earth Institute. It is now downloadable as an Earth Institute Open Access Article, from here.
Authors: David Goldberg (lead) Goldberg@ldeo.columbia.edu 845-365-8674
Taro Takahashi taka@ldeo.columbia.edu 845-365-8537
Angela Slagle aslagle@ldeo.colubmia.edu 845-365-8339
Earth Institute press office: Kevin Krajick kkrajick@ei.columbia.edu
212-854-9729 Mobile: 917-361-7766
PNAS press office: pnasnews@nas.edu 202-334-1310
The Earth Institute at Columbia University mobilizes the sciences, education and public policy to achieve a sustainable earth. Through interdisciplinary research among more than 500 scientists in diverse fields, it is adding to the knowledge necessary for addressing the challenges of the 21st century and beyond. With over two dozen associated degree curricula and a vibrant fellowship program, the Earth Institute is educating new leaders to become professionals and scholars in the growing field of sustainable development. We work alongside governments, businesses, nonprofit organizations and individuals to devise innovative strategies to protect the future of our planet. Lamont-Doherty Earth Observatory, a member of The Earth Institute, is one of the world's leading research centers seeking fundamental knowledge about the origin, evolution and future of the natural world. More than 300 research scientists study the planet from its deepest interior to the outer reaches of its atmosphere, on every continent and in every ocean. From global climate change to earthquakes, volcanoes, nonrenewable resources, environmental hazards and beyond, Observatory scientists provide a rational basis for the difficult choices facing humankind in the planet's stewardship.
http://www.eurekalert.org/pub_releases/2008-07/teia-uvr071108.php
Scientists tout Pacific floor for massive carbon capture project
Margaret Munro
Canwest News Service
Monday, July 14, 2008
Vast amounts of greenhouse gases could be stashed under the ocean floor from British Columbia to California say scientists, who have ambitious plans to start testing deep-sea disposal.
The geological formations off the Pacific Northwest coast "offer promising locations to securely accommodate more than a century of future U.S. emissions," the team, led by geophysicist David Goldberg at Columbia University, reported Monday in the U.S. Proceedings of the National Academy of Sciences. [Download report here]
The researchers hope to begin a pilot project as early as next year injecting liquefied carbon dioxide below the ocean floor, Goldberg said in an interview. He says the project, which would cost about $50 million, still needs to be approved by U.S. National Science Foundation and the Integrated Ocean Drilling Program.
A handout graphic shows the location of undersea
volcanic rocks which scientists say could be used
as a vast repository for greenhouse gases.
They would pump the CO2 into test wells on the Juan De Fuca Plate, an enormous basalt formation that runs from Vancouver Island to California about 150 kilometres off shore. The researchers say the plate, made of hardened lava, is honeycombed with watery channels and pores that could hold plenty of pressurized CO2.
While the region is famous for earthquakes and seismic activity, Goldberg and his colleagues have mapped out a 68,000-square-kilometre area they say would be isolated from quakes, hydro thermal vents or other factors that might upset a CO2 storage system. The region is in international waters, just south of B.C. and off the coast of Washington, Oregon and California.
"It is very large and very secure," says Goldberg, noting that "big solutions" are needed for the planet's greenhouse gas emission problems.
The proposed disposal area is in under more than two kilometres of seawater and more than 200 metres of clayey sea floor sediments. Both the water and the sediments would help keep the CO2 in place even in the event of a massive quake, says Goldberg.
Deep ocean drilling experiments have revealed spots around the globe, that might be used to "securely imprison" carbon dioxide captured from power plants or other sources. The potential storage capacity is huge, say Goldberg and his colleagues, who estimate that Juan de Fuca formation "could lock in as much as 150 years of U.S. CO2 production."
The big attraction is that over time the CO2 would become locked into the rock. This is because CO2 and basalt naturally react to create a solid carbonate, which Goldberg says is "basically chalk."
Part of the pilot project would be to assess how long it would take CO2 to react with the rocks - a process that might take anywhere from "decades to a century," he says.
There is plenty of talk about carbon capture and sequestration, but no large-scale projects are yet off the ground because of the cost, technical challenges, and environmental concerns.
Goldberg says the deep-ocean disposal has some clear advantages over plans, popular in Canada, to pump CO2 into old oil wells. There is concern that the CO2 might eventually leak out and drift into the atmosphere.
Goldberg says while ocean disposal would be more expensive, the advantage is that the carbon would eventually be locked up as a solid compound.
While "convinced" sub-ocean disposal can be a significant part of climate change solution, Goldberg says it will take several years to evaluate the feasibility. The proposed pilot would entail pumping a few thousands tonnes of liquefied CO2 into wells that have been previously drilled in the Juan de Fuca plate. Then the researchers would monitor the CO2 and how quickly it reacts with the basalt.
Goldberg team says the West Coast formations should be close enough to the land for delivery by pipelines or tankers.
© Canwest News Service 2008
July 10, 2008
Alberta Pledges $2 Billion For CCS
By Paul Wells
Nickle's Daily Oil Bulletin
10 July 2008
The Alberta government will ante up $2 billion for three to five large-scale carbon capture and storage (CCS) projects that it says will store up to five million tonnes of cabon dioxide (CO2) by 2015 -- a move lauded by industry.
"With this announcement we will continue to demonstrate leadership and encourage the federal government and Alberta industries to make real investments in carbon capture and storage (CCS)," Premier Ed Stelmach said in a statement.
With the potential to reduce emissions at facilities such as coal-fired electricity plants and oilsands extraction sites and upgraders, the $2-billion fund will support CCS projects that are expected to reduce emissions by up to five million tonnes annually."
Dave Pryce, vice-president of Western Canada operations for the Canadian Association of Petroleum Producers (CAPP), says the funding will spur on industry investment for CCS.
"Absolutely, I'm sure it will. It's a significant amount and I don't think we've seen any government come across with a strategy that's this large in dollars," he said.
"I think it's a significant signal of (the province's) commitment. They've now gone down the path, they've put a process in place to engage industry to go forward on this and it's intended to bring investment into putting steel in the ground. It's for project development."
Stephen Kaufman, a Suncor Energy Inc. official and chair of the industry-led Integrated CO2 Network (ICO2N), said the province's financial pledge is a "very positive signal."
"We think it shows the leadership in helping to deploy the early stage CCS projects," he said.
"The ICO2N group has indicated all along that CCS is not going to be able to proceed strictly on a market-based approach and that an approach that includes a partnership with government and industry is going to be needed to get initial projects up and running."
Steve Snyder, TransAlta Corporation's president and chief executive officer, also applauded the province's funding announcement, saying CCS is vital if Canada is to achieve its goal of reducing carbon emissions by 20% from current levels by 2020.
"CCS has the potential to contribute to Canada's economic prosperity and dramatically reduce our environmental footprint at the same time," he said.
"Given its thermal assets, storage potential and access to world leading energy expertise, Alberta is an ideal location to demonstrate the benefits of this technology, which can then be applied elsewhere in Canada, the U.S. and around the world."
Longer term, Alberta's new climate change plan targets a 200 megatonne reduction (from business as usual forecasts) in greenhouse gas emissions by 2050, or 14% below actual 2005 levels. The province said CCS will account for 70% of the total.
The provincial announcement virtually mirrors the recommendations made by the joint federal-provincial ecoEnergy Carbon Capture and Storage Task Force in a report released in January of this year.
"The report (laid) out a pathway to move CCS from talk to action. It shows how industry and government could work together to get several large CCS facilities operational by 2015, cutting emissions by five million tonnes per year at a cost of about $2 billion," said David Keith, the University of Calgary's Canada Research Chair on Energy and the Environment and the only academic on the task force.
"Investment in CCS now is vital to ensure Canada has the option of using CCS to make the very large absolute emissions reductions required over the coming decades," he added.
Stelmach said the $2 billion will be allocated to encourage construction of Alberta's first large-scale CCS projects. The province has issued a request for expressions of interest to begin identifying CCS proposals with the greatest potential of being built quickly and those which provide the best opportunities to significantly reduce GHG emissions.
Pryce noted that the province was light on the details on how projects will be chosen, a situation he expects to be remedied soon.
"One thing we're a little unclear on is the criteria they will use to judge the projects, but that's expected shortly," he said. "The main thing is it sets up a competition to ensure the best projects come forward."
Executives from oilsands giants EnCana Corporation, Shell Canada Ltd. and Petro-Canada sit on a provincial implementation team for carbon capture. Stelmach said that group will recommend to cabinet which projects get to split the $2 billion.
The province said its investment in CCS is essential in helping to meet the goals of Alberta's climate change strategy, while also allowing the economy to continue to grow and provide jobs for Albertans.
"This economic growth, as well as the potential for value-added industries and enhanced oil recovery through CCS, also provide significant taxes and energy royalties, which are invested into priority programs for Albertans, such as health care and infrastructure," the province said in its release.
"This provincial investment is intended to accelerate the development of projects and encourage the necessary investment from industry to make CCS viable in Alberta."
In addition to the $2 billion committed for CCS, the provincial government announced a second $2-billion fund that it says will propel energy-saving public transit in Alberta.
"We're tackling both sides of the emissions challenge on behalf of Albertans and all Canadians," said Stelmach. "We're reducing the impact of industrial emissions with carbon capture and storage and investing in public transit to reduce the impact from our tailpipes."
The province says the second fund announced will take the equivalent of thousands more Alberta vehicles off streets and highways through $2 billion in public transit investments.
Called the Green Transit Incentives Program (Green TRIP), it will promote the use of local, regional and inter-city public transit. The program will support new public transit alternatives throughout the province that will significantly reduce the number of vehicles on Alberta roads and reduce GHG emissions.
Kaufman said the GreenTrip funding is a positive sign that the province has acknowledged that cutting industry emissions is only part of the climate change solution.
"They're recognizing it's the end consumption of petroleum products that really is the big contributor and that they need to be addressed at the same time as industry emissions," he said.
Funds for the two initiatives will come from this year's surplus, which the province expects will be significantly larger than predicted due to higher-than-forecast oil and natural gas prices.
http://www.nickles.com/brn.html
July 08, 2008
Carbon capture and storage: Grave concerns
Andrew Nikiforuk
Canadian Business Magazine
July 21, 2008
The federal government, which has wasted $6 billion on nearly half a dozen failed programs to reduce greenhouse-gas emissions, now has a dumber idea: to spend three times that amount to bury the problem altogether. Now, here's the hare-brained scheme, and hang on to your shorts because it's positively idiotic. The Harper Tories want to construct an elaborate carbon funeral industry to capture, compress and then store climate-warming gases deep underground somewhere outside Edmonton or Regina.
Unfortunately, you and I will have to pay for the $16-billion funeral arrangements, because the infrastructure doesn't yet exist. Right now, the hearse hasn't even been designed, and every nation in the world is balking at the cost estimates, except Canada. Burying carbon has a few other liabilities, too: the underground casket might leak like hell; carbon capture and storage (CCS) requires obscene amounts of energy; and the whole grisly affair will need a 1,000-year-long monitoring program, which, conveniently, is the sort of thing government bureaucracies excel at.
Fortunately, Bruce Peachey has a better idea. The Edmonton-based engineer, researcher and president of New Paradigm Engineering thinks that a government serious about reducing GHGs would pick the low-hanging carbon fruit first. "The government wants to go for the big bang, but there are easier things to do," he argues. And the easiest fruit to pick just happens to be fugitive emissions in the upstream oil and gas business, a subject dear to Peachey's heart.
Peachey has studied the matter in depth for Calgary non-profit research group Petroleum Technology Alliance Canada for nearly a decade. Every year, he says, the oil and gas industry leaks or vents 101 megatonnes of greenhouse gases. That's about a seventh of the 747 megatonnes released in all of Canada in 2005, or nearly three times the amount now pouring forth from the tarsands. Nearly 40% of these leaks consist of pure methane — one of the nastiest climate changers — while the rest is straight CO2 or other fossil-fuel byproducts.
In 2000, Peachey took a look at the huge volume of pure methane being vented by heavy-oil wells in Alberta. In addition to documenting the waste, he also offered a plan to save the methane and use it for well heaters. Alberta's oilpatch regulator then took an interest — and rising natural gas prices helped do the rest. In the end, a recommendation, followed by a 2006 direct regulation, eliminated the venting of five megatonnes of methane from heavy-oil facilities annually. The savings (at $6 to $8 a gigajoule) paid for the design repairs in less than two years. Companies that don't leak valuable natural gas, Peachey notes, just make more money.
The industrial opportunities for plugging leaks are as easy as picking apples. One 2005 Alberta Research Council study measured fugitive emissions at several Alberta gas plants. Facilities that thought they were leaking only 188 tonnes a year were actually fouling the atmosphere to the tune of 1,264 tonnes. With an infrared camera and some simple repairs, one plant reduced its methane emissions by 50% and saved nearly a million dollars a year. Peachey now calculates that a few regulations could force the auditing, measurement and repair of leaky valves and pipes, and thereby reduce fugitive emissions by nearly 40 megatonnes within five years. In contrast, the National Task Force on Carbon Capture and Storage wants two-billion tax dollars to figure out how to bury five megatonnes of CO2 over the next decade.
Only two obstacles stand in the way of Peachey's idea. The first is a lack of rules that direct industry to identify, measure and plug the leaks — an easy fix. The second is the government's unhealthy obsession with CCS. Peachey admits his low-tech scheme has no sex appeal and, unfortunately, saves money. "It's just a couple of $10,000 investments, and there is no photo op," he says. Which probably explains why Ottawa hasn't thought much about it.
Burying carbon can't be done without pumping billions of taxpayers' money into the ground. Unless Canada starts to support sensible enterprises, it will be subsidizing the ugliest and most expensive option: a dead-end funeral service.
July 03, 2008
B.C. Says Its Committed To Major Northern B.C. Project
Nickle's Energy Analects
2 July 2008
The British Columbia government says it is inviting the private sector to partner with it and build the proposed $400-million Northwest Transmission Line (NTL), which is expected to bring economic development to the northwest sector of the province.
"The province remains as committed as we were last year to building this transmission line," Energy, Mines and Petroleum Resources Minister Richard Neufeld said in a statement. "We have $250 million on the table and are challenging industry to join us, put a plan and financing forward to make the Northwest Transmission Line a reality."
NTL was put on hold when construction of the Galore Creek mine was suspended by NovaGold Resources Inc. and Teck Cominco Limited last November.
Last year, the province, BC Hydro and Power Authority and British Columbia Transmission Corporation (BCTC) announced the project, which would have extended the electricity grid and help support economic diversification in the area.
The Galore Creek Partnership was formed by NovaGold and Teck Cominco to arrange funding to construct the line.
Since the project cancellation, the government has talked to mining companies across the province about sharing in the cost of constructing NTL.
In support of the project, the Northwest Power Line Coalition -- including representation from industry, First Nations and communities, the Mining Association of B.C. and the Association of Mineral Exploration of B.C. -- released preliminary results of a study that determined that NTL could attract $3.5 billion in investment and bring eight mining projects to the northwest. This would include 2,000 jobs and more than $300 million in economic activity, the study noted.
Meanwhile in another energy infrastructure development in the north, the Pacific Trail Pipelines Limited Partnership received an environmental assessment certificate for the Kitimat-Summit Lake project. Environment Minister Barry Penner and Energy, Mines and Petroleum Resources Minister Richard Neufeld made their decision to grant the EA certificate after considering a comprehensive review led by B.C.'s Environmental Assessment Office (EAO).
The project comprises constructing and operating a 463-kilometre natural gas pipeline between Kitimat and Summit Lake, including one new compressor station. The proposed system is intended to connect to the existing Pacific Northern Gas Ltd. pipeline and convey supply from the proposed Kitimat liquefied natural gas terminal to the Spectra Energy Gas transmission (SEGT) system.
In addition to the provincial EA, the project also requires approvals under the Canadian Environmental Assessment Act. A harmonized review led by B.C.'s EAO was initiated in accordance with the Canada/B.C. agreement for environmental assessment cooperation.
The B.C. government advised that the federal environmental assessment process is ongoing.
Before the project may proceed, the proponent must also obtain the necessary provincial and federal permits and authorizations.
The provincial environmental assessment certificate contains numerous commitments that the proponent must implement throughout various stages of the project, including:
- assessing the erosion potential of soils and implement adequate erosion controls;
- mitigating potential loss or degradation of instream fish habitat;
- monitoring water quality in the Morice Water Management Area;
- developing a hydrostatic test plan to manage discharge water quality, temperature and withdrawal volumes;
- mitigating potential affects on wildlife and habitat; and
- managing public access into previously inaccessible areas.
Capital costs for the Kitimat-Summit Lake project are estimated at $1.1 billion.
The project will cross provincial and local government jurisdictions. Once the project is in operation, it is estimated that the proponent will pay at least $74 million in provincial and local government taxes over the anticipated 50-year life of the pipeline. The project is expected to create approximately 1,200-1,500 jobs over a 24-month clearing and construction phase.
July 01, 2008
Weaning from Fossil Fuels
Guy Dauncey
Common Ground Magazine
July, 2008
Around the world, people are reeling from the increases in the price of oil. In France, where diesel costs $2.14 a litre, fishermen recently blockaded the straits of Dover, demanding that the government step in with a subsidy.
In Spain, the fishermen went on strike and 10,000 truckers also blockaded the roads around Barcelona and Madrid, saying, “We haven’t got the money to buy fuel!”
In England, truckers and farmers created gridlock by driving at 10 mph along roads in Cornwall, demanding a fuel subsidy of 50 cents a litre.
Similar protests have been happening around the world. Some emotional commentators have fuelled the sense of crisis with headlines such as “Gas prices heading in the stratosphere” (Financial Post, April 17). If $1.40 a litre is the “stratosphere,” how will the Post express its shock when gas hits $2 or $5 a litre? “Gas prices leaving the galaxy, heading towards Andromeda?”
The price of oil will to continue to rise until we no longer need it because we have been forced to evolve beyond it. We are about to take an amazing step into the future by weaning ourselves off Nature’s abundant breasts and using our own intelligence to meet our energy needs. For all of our six million years as walking humans, we have sucked our energy directly from Nature, first as roots, leaves and fruits and then as firewood. Most recently it has been fossil fuels.
But fossil fuels are a one-time gift from the past. We are burning 32 billion barrels of oil a year and if there are a thousand billion barrels left, as most estimates suggest, they will be gone in 31 years. The price of oil will leave the galaxy long before then. Alberta’s oil sands, at two or three million barrels a day, make little difference in a world that burns 87 million barrels a day.
For many, the prospect of weaning seems horrible. The party’s over! Without oil, we will no longer be able to feed ourselves, live in the suburbs or import the goods we need. Everything will collapse. Past thinking engenders fear and a negativity that paralyzes creativity. The fact that our use of fossil fuels also causes global warming adds a litany of grim predictions to a future we are now really afraid of.
And yet, as Roosevelt said in the darkest year of the Great Depression, “The only thing we have to fear is fear itself – nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance.” Fear gives us adrenalin, freezes the brain and simplifies everything down to one powerful instinct: run!
Future thinking is different. It starts with a vision – a post-carbon world – then directs all thinking and creativity to that end. Globally, there is evidence that post-carbon living is possible. People are already living in zero-carbon buildings, driving zero-carbon cars and producing food on organic farms without oil-based fertilizers or pesticides.
The whole of Sweden is planning to be oil independent by 2020. The small town of Gussing, in eastern Austria, has reduced its carbon footprint by a full 93 percent since 1995, using forest biomass energy, solar and waste cooking oil.
Instead of highway trucking, we can build electrified high-speed railways. Ocean going ships are being designed that run on solar, wind, waves and hydrogen. For electricity, there is a global abundance of solar, wind, geothermal and ocean energy. For heat, there are excellent heat exchange technologies, plus solar and geothermal heat. It is only with air travel that we have no obvious solutions.
For any government now facing the anger of truckers, trawlers and taxi-drivers, there is a simple solution. The problem is not the price; it is the inability of companies in a competitive industry to pass the price on without losing ground to their competitors. The solution is for the government to publish a monthly fuel surcharge and require that everyone who burns oil for a living must pass it on to their customers. Let the market sort it out, instead of hard-working truckers and their families.
In one stroke, this particular problem can be solved, allowing us to focus on the main work at hand: to build a 100 percent post-carbon world as rapidly as we can.
Guy Dauncey is president of the BC Sustainable Energy Association (www.bcsea.org) and author of Stormy Weather: 101 Solutions to Global Climate Change. www.earthfuture.com
June 30, 2008
This economic panic is pushing the planet
right back down the agenda
Oil-dependent countries are focused on growth at all costs, and the pale green political consensus looks unlikely to hold
George Monbiot
The Guardian
July 1, 2008
Almost everyone seems to agree: governments now face a choice between saving the planet and saving the economy. As recession looms, the political pressure to abandon green policies intensifies. A report published yesterday by Ernst & Young suggests that the EU's puny carbon target will raise energy bills by 20% over the next 12 years. Last week the prime minister's advisers admitted to the Guardian that his renewable energy plans were "on the margins" of what people will tolerate.
But these fears are based on a false assumption: that there is a cheap alternative to a green economy. Last week New Scientist reported a survey of oil industry experts, which found that most of them believe global oil supplies will peak by 2010. If they are right, the game is up. A report published by the US department of energy in 2005 argued that unless the world begins a crash programme of replacements 10 or 20 years before oil peaks, a crisis "unlike any yet faced by modern industrial society" is unavoidable.
If the world is sliding into recession, it's partly because governments believed that they could choose between economy and ecology. The price of oil is so high and it hurts so much because there has been no serious effort to reduce our dependency. Yesterday in the Guardian, Rajendra Pachauri suggested that an impending recession could force us to confront the flaws in the global economy. Sadly it seems so far to have had the opposite effect: a recent Ipsos Mori poll suggests that people are losing interest in climate change. Opportunities for energy populism abound: it cannot be long before one of the major parties abandons the pale green consensus and starts invoking an oil cornucopia it cannot possibly deliver.
The British government maintains both positions at once. In his speech last week, Gordon Brown said he wanted "to facilitate a reduction in short-term global oil prices" while seeking "to reduce progressively our dependence on oil". He knows that the first objective makes the second one harder to achieve. The government's policy is to build more of everything - more coal plants, more nuclear power, more oil rigs, more renewables, more roads, more airports - and hope no one spots the contradictions.
Is there a way out? Could we abandon the fossil fuel economy without provoking a blistering backlash? Two things are obvious. We need a global system, and the current one, the Kyoto protocol, is bust. It sets no cap on global carbon pollution, its targets bear no relation to current science and are unenforceable anyway, it contains loopholes and get-out clauses wide enough to sail an oil tanker through.
Until recently I supported an alternative system called contraction and convergence. Every country, this system proposes, should end up with the same quota of carbon dioxide per person. The richest countries must produce much less than they do today; the poorest ones could pollute more. Another proposal flows logically from this one: carbon rationing. Having been assigned its carbon quota, each nation would divide up part of it equally among its citizens, who could use it to buy energy or trade it among themselves. These proposals have the merit of capping global pollution, of being fair, progressive and easy to understand and of encouraging us to think about our use of energy.
But, after reading the proofs of a book by the independent thinker Oliver Tickell, to be published next month, I have changed my view. In Kyoto2: How to Manage the Global Greenhouse, Tickell slaughters my favourite ideas. He shows that there is no logical basis for dividing up the right to pollute among nation states. It gives them too much power over this commodity, and there is no guarantee that they would pass the pollution rights on to their citizens, or use the money they raised to green the economy. Carbon rationing, he argues, requires a level of economic literacy that's far from universal in the most advanced economies, let alone in countries where most people don't have bank accounts.
Instead Tickell proposes setting a global limit for carbon pollution then selling permits to pollute to companies extracting or refining fossil fuels. This has the advantage of regulating a few thousand corporations - running oil refineries, coal washeries, gas pipelines and cement and fertiliser works for example - rather than a few billion citizens. These firms would buy their permits in a global auction, run by a coalition of the world's central banks. There's a reserve price, to ensure that the cost of carbon doesn't fall too low, and a ceiling price, at which the banks promise to sell permits, to ensure that the cost doesn't cripple the global economy. In this case companies would be borrowing permits from the future. But because the money raised would be invested in renewables, the demand for fossil fuels would fall, so fewer permits would need to be issued in later years.
Tickell calculates that if the cap were set low enough to ensure that the world became carbon neutral by 2050, the total cost of permits would be about $1 trillion a year, or roughly 1.5% of the global economy. The money would be spent on helping the poor to adapt to climate change, paying countries to protect forests and other ecosystems, developing low-carbon farming, promoting energy efficiency and building renewable power plants.
But his figure seems too low. Like many of the world's climate scientists, Oliver Tickell proposes that the concentration of greenhouse gases should eventually be stabilised at 350 parts per million (carbon dioxide equivalent) in the atmosphere, and his calculations are based on this target. Last week Lord Stern suggested that meeting a less stringent target (500 parts per million) would cost 2% of world gross domestic product. If the price of the carbon permits sold at auction were much higher than Tickell suggests, the extra money could be used for massive tax rebates and social spending, aimed especially at the poor. But could the world afford it?
This money doesn't disappear, it gets spent. Tickell's proposal could represent a classic Keynesian solution to economic crisis. The $1, $2 or even $5 trillion the system would cost is used to kick-start a green industrial revolution, a new New Deal not that different from the original one (whose most successful component was Roosevelt's Civilian Conservation Corps, which protected forests and farmland). This would not be the first time that business was rescued by the measures it most stoutly resists: there's a long history of corporate lobbying against the kind of government spending that eventually saves the corporate economy.
Do we want to save it, even if we can? It is hard to see how the current global growth rate of 3.7% a year (which means the global economy doubles every 19 years) could be sustained, even if the whole thing were powered by the wind and the sun. But that is a question for another column and perhaps another time, when the current economic panic has abated. For now we have to find a means of saving us from ourselves.
monbiot.com
More pipeline capacity needed
New lines worth $23B may be on way
Reuters, Calgary Herald
Friday, June 27, 2008
Capacity is tight on Canada's crude oil pipelines, but as much as $23 billion in new lines could be on the way to help supply current and as-yet-untapped markets, the country's energy regulator said Thursday.
The National Energy Board said new pipeline space is needed to handle rising production from the oilsands and to give producers flexibility in where they can ship their crude.
In a report on the 45,000 kilometres of oil and gas pipelines it regulates, the NEB said there was some rationing of space in 2007 on Enbridge Inc.'s 1.9 million barrel a day system to the U.S. Midwest and beyond, and that the system ran at or near capacity in this year's first quarter.
The industry will get some relief in November when Kinder Morgan Energy Partners is slated to have a 40,000 barrel a day expansion of its Trans Mountain system to the West Coast completed, the board said.
The Canadian Association of Petroleum Producers estimated last week that the country's production could nearly double to 4.5 million barrels a day by 2020, as a host of new oil sands projects start up.
That has the oil industry considering new markets, such as the U.S. Gulf Coast, California and Asia.
Pipeline projects currently under development include Enbridge's 450,000 barrel a day Alberta Clipper project to Superior, Wisc., from Hardisty, Alta., and TransCanada Corp.'s 590,000 barrel a day Keystone line to Southern Illinois and Oklahoma from Alberta.
Keystone is scheduled to be in service late next year and Alberta Clipper in 2010.
Among longer-term proposals, TransCanada is considering a 750,000 barrel a day pipeline to Texas as well as a 400,000 barrel a day line to California.
Enbridge has rekindled plans for the 400,000 barrel a day Gateway line, which would ship Alberta crude to the West Coast, where it could be loaded on tankers bound for Asia.
It is also studying the re-reversal of Line nine between Sarnia, Ont., and Montreal to give Quebec refiners access to western Canadian crude.
Use of natural gas pipelines, meanwhile, declined with waning western Canadian gas production and increased competition with western U.S. supply basins in 2007, the NEB said.
"Pipeline capacity is adequate across the country although there may be occasions of short-term limitation at some points depending upon markets, storage and seasonal shifts," it said.
© The Calgary Herald 2008
Suppose Alberta had this huge surplus - wait, it does!
JEFFREY SIMPSON
Globe and Mail
June 27, 2008
Later this summer, the Alberta government will announce the first-quarter estimate for its 2008-2009 budget surplus.
On budget day, the government based its analysis on $78-a-barrel oil. It predicted a $1.6-billion surplus, even after huge spending increases.
With oil trading between $130 and $140 a barrel, it now looks as if the Alberta budget surplus for this fiscal year will be between $11-billion and $12-billion. Forecasters are already suggesting that the 2009-2010 budget surplus could hit $20-billion.
In Ottawa, the Harper government bought Quebec's argument that a "fiscal imbalance" existed between the federal government and the provinces. The argument ran that Ottawa had too much money, and provinces too little. So Ottawa had to hand over billions of dollars, which the Harper government did.
That was a so-called vertical imbalance between two levels of government. Canada now faces the most severe horizontal imbalance since the 1970s. One province, Alberta, has a surplus 10 times greater than Ottawa's and larger than all the provincial surpluses combined. In fact, Alberta's surplus will be greater than the federal and other provincial surpluses combined.
If oil prices remain high, or go higher, the huge gap between Alberta's revenues (and, to a lesser extent, Saskatchewan's) will widen every year.
Until now, almost no one in the country dared mention this gap. People outside of Alberta were scared of conjuring up memories of the Trudeau era's national energy program. People thought oil would settle back to a lower price. The Alberta government was soaking up the surpluses with a spending spree on infrastructure and health care. The gaps were big, but not that big.
What, if anything, will the national government do faced with this horizontal imbalance? Chances are, nothing, given the Harper government's political base in Alberta and its belief in "open federalism," which invariably translates into letting provinces pretty much do what they want and allowing the chips to fall where they will.
Very high oil prices, however, bring a series of jarring adjustments that do affect Ottawa's ability to run the economy.
The equalization formula, for example, is going to be so out of whack that the Toronto-Dominion Bank anticipates Ontario will be receiving payments from Ottawa within two years.
The Bank of Canada has refused to lower interest rates because it's worried about inflation produced by higher energy (and food) costs.
Manufacturers won't like this approach, since they're being terribly squeezed, but the soaring costs of energy make the bank fear inflation.
The high dollar stems, in part, from the incredible infusion of money into the country from high oil prices that produce gains for producers and losses for consumers. Good luck telling a manufacturer that a dollar at parity with the greenback is a good thing when a productivity gap exists between the United States and Canada.
The Alberta boom sucks up labour from less fortunate parts of Canada. Labour markets, in this sense, are working. Some of the money earned in that province works its way to other parts of Canada, but the gap in the ability of citizens to receive public services among provinces widens.
A national government twice tried to grapple with such huge regional spreads caused by high oil prices. Everyone remembers the NEP, but it's often forgotten that Joe Clark's government tried in 1979 to negotiate a deal with then-premier Peter Lougheed to recycle some of Alberta's petro-revenues across the country. The negotiations were extremely difficult. They remained unfinished when the Clark government fell, with consequences for Alberta.
There will be fierce resistance in Alberta to even discussing the huge challenges associated with this burgeoning gap. We give through equalization, many Albertans will say. End of story. People such as Mr. Lougheed worry about the problem; the current government in Edmonton does not.
A few Albertans talk privately about how the province can spread at least some of its money across the country. Alberta, for example, could take $2-billion of that surplus and launch a crash program with industry and universities across Canada to solve the technical problems of sequestering carbon emissions.
The Harperites apparently won't say boo about the gap, even though the gap makes their life harder as a national government. Since no one can get near Mr. Harper to ask him a question, his views on the situation are unknown.
June 29, 2008
Oil disquiet on the Western front
North American media, Andrew Nikiforuk says, take for granted how much oil undermines democracy, powers our food system, feeds our drug-addled medical industry and concentrates our cities like bovine feedlots
ANDREW NIKIFORUK
Globe and Mail
June 28, 2008
Oil has fantastic powers: Like the genie from One Thousand and One Nights, it can grant impossible political wishes both fair and foul. This is why the U.S. oil baron John D. Rockefeller once, in a moment of reflection, called oil "the Devil's tears," and why Sheik Ahmed Zaki Yamani, in a moment of exasperation, wished that Saudi Arabia had discovered water, and why the late Venezuelan writer Jose Ignacio Cabrujas, in a moment of subversion, wrote that oil can create "a culture of miracles" that erases memory.
Canadians, the newly minted inhabitants of "an emerging energy superpower," now stand at the gas pumps cursing the price of oil and the prospect of shortened summer vacations. Yet they forget that many of our ancestors agonized about the price of slaves only 200 years ago. We too complained bitterly about the cost of feeding indentured labour, and dismissed the ugly rhetoric of abolitionists as offensive.
A barrel of oil, as analyst Dave Hughes often reminds me, equals 8.6 years of human labour. Think about that. "A human life span could produce about three barrels of oil-equivalent energy," he adds. We often miss this Hummer-sized truth because, as the Arabs know, petroleum induces lazy thinking and even lazier economics.
In fact, the North American media take for granted how much oil undermines democracy, powers our food system, feeds our drug-addled medical industry and concentrates our cities like bovine feedlots. It has done so as assuredly as cheap labour built Rome. "Slavery," a Wall Street Journal scribe recently wrote, "was the oil business of its time - profitable, essential, permitting piracy, demanding collusion in countless ills."
I don't think anyone has yet written a good book about how oil has replaced the true meaning of capital, let alone the energy of slaves, but Walter Youngquist has certainly chronicled the miraculous importance of "the Petroleum Interval." Youngquist, the author of GeoDestinies: The Inevitable Control of Earth Resources Over Nations and Individuals (National Book Company, 1997), is no green prophet. For most of his life, the thoughtful, Oregon-based geologist has worked for the world's major oil companies in 70 countries.
Unlike most environmentalists, Youngquist sensibly appreciates the versatility and portability of oil. But unlike most economists, he recognizes that oil is a finite treasure and that most of the world's endowment (the so-called cheap stuff) has been consumed in less than one human lifetime. The oil glass, now half empty, sits on a global table where China and India want a long draught of the economic elixir too. "There is no parallel in history for such a rapid development of and use of a resource as in the case of oil. ... It will be but a brief bright blip on the screen of human history."
Although Youngquist's book is now dated, his wisdom is not. Just a decade ago, he predicted that converting food to gasoline was wasteful nonsense; that industry's faith-based ideology in "technological fixes" was no answer to unrestrained growth; and that the tar sands could not prolong the Petroleum Interval. However, he did think the sands' prudent, well-sequenced development would be "important to Canada as a long-term source of energy and income." He recommended that we conserve the resource, not liquidate it.
Although debates about tar sands and its dirty character now dominate the news, most Canadians still know little about the world's largest energy project. But Larry Pratt does and did. In 1976, then a University of Alberta political scientist, he recognized that this Earth-destroying economy (and that's just what it is) would change the nation. His brilliant book The Tar Sands: Syncrude and the Politics of Oil (Hurtig, 1976) makes for disturbingly prescient reading today.
Pratt argued that the rapid development of the tar sands, which seemed imminent in the 1970s, would hollow out the nation's economy, enrich multinationals, impoverish Alberta and create what even federal bureaucrats then called "a biologically barren wasteland" along the Athabasca River. Pratt also recognized that the tar sands concerned us all: "Every Canadian, and every Canadian's children and their children, have a stake in the future of development of our energy resources." From an environmental standpoint, he predicted that Alberta was "walking blindfolded into the industrialization of the tar sands."
Even an industry consultant told Pratt, more than 30 years ago, "that before commencing development on the scale presently being contemplated, the government should have initiated ecological studies back about 1948 to monitor water flows, climate changes, soil conditions, temperature inversions etc., on a long-term basis. But such concerns were not taken seriously."
In the past decade, the moral carelessness of the Alberta and federal governments has grown exponentially. As a consequence, even U.S. mayors and British energy consumers are now talking about Canada's "dirty oil," because bitumen, no matter how you spin it, is a corrosive, smog-making, water-fouling, bottom-of-the-barrel product. Make no mistake about it: Canada now faces an intractable political emergency. It can either slow down tar sands development to serve a planned national transition to renewable energy sources, or it can rape the world's last great oil field and put the nation on a road to hell.
But however destructive the energy policies of government may be, the root of the problem "is always to be found in private life." That is the argument of U.S. man of letters and farmer Wendell Berry in Sex, Economy, Freedom and Community (Pantheon, 1993), and I share it reluctantly because of its inconvenient and personal implications: The boreal forest and the Mackenzie River basin aren't being destroyed by bad oilmen, but by popular demand and my driving habits. Berry's book, as fresh as newly baked bread, stands as one of the most powerful and conservative critiques of North American life ever written. "We face a choice that is starkly simple: we must change or be changed. If we fail to change for the better, then we will be changed for the worse."
Canadians, a mining people, now face a challenge more daunting than Ypres at the pumps and in the sands.
Andrew Nikiforuk's next book, The Tar Sands: Dirty Oil and the Future of a Continent, will be published this fall.
Envisioning a world of $200-a-barrel oil
As forecasters take that possibility more seriously, they describe fundamental shifts in the way we work, where we live and how we spend our free time.
By Martin Zimmerman
Los Angeles Times
June 28, 2008
The more expensive oil gets, the more Katherine Carver's life shrinks. She's given up RV trips. She stays home most weekends. She's scrapped her twice-a-month volunteer stint at a Malibu wildlife refuge -- the trek from her home in Palmdale just got too expensive.
How much higher would fuel prices have to go before she quit her job? Already, the 170-mile round-trip commute to her job with Los Angeles County Child Support Services in Commerce is costing her close to $1,000 a month -- a fifth of her salary. It's got the 55-year-old thinking about retirement.
"It's definitely pushing me to that point," Carver said.
The point could be closer than anyone thinks.
Three months ago, when oil was around $108 a barrel, a few Wall Street analysts began predicting that it could rise to $200. Many observers scoffed at the forecasts as sensational, or motivated by a desire among energy companies and investors to drive prices higher.
But with oil closing above $140 a barrel Friday, more experts are taking those predictions seriously -- and shuddering at the inflation-fueled chaos that $200-a-barrel crude could bring. They foresee fundamental shifts in the way we work, where we live and how we spend our free time.
"You'd have massive changes going on throughout the economy," said Robert Wescott, president of Keybridge Research, a Washington economic analysis firm. "Some activities are just plain going to be shut down."
Besides the obvious effect $7-a-gallon gasoline would have on commuters, automakers, airlines, truckers and shipping firms, $200 oil would drive up the price of a broad spectrum of products: Insecticides and hand lotions, cosmetics and food preservatives, shaving cream and rubber cement, plastic bottles and crayons -- all have ingredients derived from oil.
The pain would probably be particularly intense in Southern California, which is known for its long commutes and high cost of living.
"Throughout our history, we have grown on the assumption that energy costs would be low," said Michael Woo, a former Los Angeles city councilman and a current member of the city Planning Commission. "Now that those assumptions are shifting, it changes assumptions about housing, cars and how cities grow."
Push prices up fast enough, he said, and "it would be the urban-planning equivalent of an earthquake."
Consumers
With every penny hike in the price of gas costing American consumers about $1 billion a year, sharply higher pump prices would lead to "significant bankruptcies and store closings," said Scott Hoyt, director of consumer economics at Moody's Economy.com.
Consumer spending has held up surprisingly well in the face of skyrocketing pump prices -- bolstered in part, perhaps, by federal tax rebates. But the same day the government reported a 0.8% rise in May consumer spending, a research firm said consumer confidence had plunged to its lowest level since 1980 -- hinting at the catastrophic effect another big gas price surge could have on retailers and customers.
"The purchasing power of the American people would be kicked in the teeth so darned hard by $200-a-barrel oil that they won't have the ability to buy much of anything," said S. David Freeman, president of the L.A. Board of Harbor Commissioners and author of the 2007 book "Winning Our Energy Independence."
BIGresearch of Worthington, Ohio, said more than half of Californians in a recent survey said they were driving less because of high gas prices. Almost 42% said they had reduced vacation travel and 40% said they were dining out less.
If any retailers would benefit, it would be those on the Internet. In a recent survey by Harris Interactive, one-third of adults said high gas prices had made them more likely to shop online to avoid driving.
Restaurant operators such as Brinker International, which owns the Chili's and Romano's Macaroni Grill chains, are suffering and are likely to struggle even more as consumers look for ways to reduce spending. Fast-food chains wouldn't be immune, experts say, although they might fare better as families downscale their dining choices.
Vehicle sales, too, would probably continue to tank. Sales of new cars, sport utility vehicles and light trucks fell more than 18% in California in the first quarter compared with a year earlier. Although some consumers have been shopping for smaller, more fuel-efficient vehicles, many dealers are demanding premiums for gas-sipping hybrids, wiping out much of the financial advantage of buying one.
Nationwide, $200 oil and $7 gasoline would force Americans to take 10 million vehicles off the roads over the next four years, Jeff Rubin, chief economist at CIBC World Markets, wrote in a recent report.
As for the state's beleaguered housing market, prices are falling faster in areas requiring long commutes -- such as Lancaster and Palmdale -- than in neighborhoods closer to job centers.
Sky-high gas prices "would basically reorient society to where proximity would be more valuable," said Tom Gilligan, finance professor at USC.
Americans may also feel the effects of a rise in energy-related crime. Ads for locking gas caps are becoming more prevalent. Restaurant owners are complaining that thieves are helping themselves to used barrels of cooking oil, which can be home-brewed into biodiesel fuel.
Transportation
Workers stuck with long commutes and gas-guzzling cars would look increasingly to public transit, experts say.
Already Californians' mobility is being curbed. Traffic on the state's freeways fell almost 4% in April compared with a year earlier, and ridership on many subway and bus lines operated by the L.A. County Metropolitan Transportation Authority has risen in recent months.
But a huge influx of riders would strain aspects of the system, MTA says, noting that many buses are overcrowded at rush hour now.
Quickly adding capacity to meet demand from new riders wouldn't be easy, because new buses cost hundreds of thousands of dollars and take up to two years to deliver.
Transit advocate Kymberleigh Richards said new riders on popular routes such as Wilshire Boulevard, Vermont Avenue or Sherman Way in the San Fernando Valley "are going to have a bit of a culture shock. It's a different world to be using public transit when you're used to being in your own vehicle by yourself."
Just how many drivers would become public-transit riders if oil surges to $200 a barrel is hard to predict, but there's a big pool of potential customers. About 87% of Southern Californians commute by car, according to 2005 data from transportation expert Alan Pisarski. That compares with 63% in New York and its environs.
Travelers can also expect much fuller airplanes and much more expensive flights -- when they're available at all. Delta Air Lines Inc., for example, recently said it was cutting about 13% of its flights from Los Angeles International Airport to save fuel.
It also could mean shifting flights from outlying airports such as Ontario to LAX to cut overhead costs, said Jack Kyser, chief economist for the Los Angeles County Economic Development Corp. Carriers probably would also trim flights in highly competitive air corridors such as L.A. to the San Francisco Bay Area.
Even the cost of getting away from it all on Santa Catalina Island would go up. Greg Bombard, president of the Catalina Express ferry service, has trimmed schedules, raised fares and reduced hiring to make up for fuel costs that have risen sevenfold since 2002. Another big increase and he says he'll have to ask state regulators, who control his rates, to OK another fare hike.
Trade
The fee increases on the ferry would be nothing compared with the added cost of transoceanic shipping if oil goes to $200. Some experts say high energy costs are altering global trade and slowing the pace of globalization.
It takes about 7,000 tons of bunker-fuel to fill the tanks of a 5,000-container cargo ship for a trip from Shanghai to Los Angeles. Over the last year and half, the cost of that fuel has jumped 87% to $552 a ton, according to the World Shipping Council, boosting the cost of a fill-up to more than $3.8 million.
"To put things in perspective, today's extra shipping cost from East Asia is the equivalent of imposing a 9% tariff on East Asian goods entering North America," said Rubin of CIBC World Markets. "At $200 per barrel, the tariff equivalent rate will rise to 15%."
If oil continues to rise from current levels, officials at the Port of Los Angeles believe West Coast ports would gain business because they are 10 to 12 days' sailing time from Asia, versus the 18-to-20-day route from Asia to the East Coast through the Panama Canal.
But local ports could lose business if shipping costs get so out of hand that companies begin shifting production back to North America from Asia -- something that's happening in the steel industry, Rubin said.
Local distribution patterns could change too. Stephen Gaddis, chief executive of Pacific Cheese Co., a Hayward, Calif., cheese processing and packaging firm, thinks high fuel prices will push restaurants, retailers and food manufacturers to look for suppliers closer to their operations.
"Local sourcing is ideal. You won't pay as much for freight, and when you use less fuel it's better for the environment," Gaddis said.
Soaring diesel prices will make companies rethink whether they should have large, centralized plants or build smaller ones around the country.
That's what Pacific Cheese is doing. It's building a packaging plant in Texas to be closer to one of its larger suppliers and expects to serve its Southwestern clients from there.
In the near future, however, consumers can expect to pay for the higher cost of producing food and moving it around the country, say food executives, farmers and economists. Even having a deep-dish pizza with extra cheese brought to your door costs more now that chains such as Pizza Hut are charging for delivery.
The workplace
Dramatically higher transportation costs would usher in an era of virtual mobility, or zero mobility, for many workers.
"We're seeing companies go to four-day workweeks, place increased emphasis on working at home, show bigger interest in setting up satellite offices -- anything that gets commute times down and gets people off the road," said analyst Rob Enderle of Enderle Group in San Jose.
Videoconferencing, touted as "the next big thing" for years, would finally have its day, thanks to improved technology and a desperation to cut corporate travel budgets.
Telecommuting, or working from home, is easier than ever because of the spread of high-speed Internet access, said Jonathan Spira, chief analyst at Basex Inc., a business research firm in New York. In particular, workers in "knowledge" jobs that can be performed with computers and phones would benefit.
But Gilligan of USC noted that lower-income workers tend to be in jobs that don't favor telecommuting, such as retail and food service.
"These are the same people who are already being creamed by the mortgage crisis," he said. "The impacts of energy price increases are highly disparate."
Although white-collar workers may be able to telecommute, they could also take a serious financial hit because soaring energy prices tend to wreak havoc on the stock market. The explosion of 401(k) plans and similar retirement accounts in the last few decades -- and the decline of traditional pensions with guaranteed payouts -- have tied workers' financial futures more closely to stocks than they were during the 1970s oil shocks. A prolonged Wall Street downturn could mean a no-frills retirement, or none at all.
Upsides
It wouldn't all be bad, of course. Some industries could boom, providing jobs and tax dollars. California has seen a jump in drilling activity as oil companies try to extract more crude from the state's fields. Regulators expect a record 4,000 wells to be drilled in the state this year.
"Every rig and every crew that's available is working right now," said Hal Bopp, the state's oil and gas supervisor.
And as rising oil prices make alternative-fuel vehicles more cost-effective, California companies such as Tesla Motors Inc., which recently began production of a $100,000 all-electric sports car, could become important leaders in an emerging industry.
Tourist attractions may also see an upswing in local business as families look for less-expensive vacation alternatives close to home. A recent survey by travel insurer Access America found that 26% of Americans would cut back on recreational travel as a first response to higher gas prices.
In Southern California, with its many natural wonders, theme parks and other attractions, the prospect of a "staycation" may be less disappointing than for a resident of, say, Nebraska. And movies, a staple of the local economy, may prosper as Americans seek escapism and a (relatively) cheap night out.
And spending less time stuck in traffic on the 405? Priceless.
"More carpooling, fewer people on the freeways, more telecommuting -- in many ways, what would happen is what people have been trying to make happen for a long time," USC's Gilligan said.
Times staff writers Ken Bensinger, Leslie Earnest, Jerry Hirsch, Peter Pae and Ronald D. White contributed to this report.
June 24, 2008
Global Warming Twenty Years Later
see also Put oil firm chiefs on trial
by James Hansen
www.worldwatch.org
June 23, 2008
Tipping Points Near
Today, I will testify to Congress about global warming, 20 years after my June 23, 1988 testimony, which alerted the public that global warming was under way. There are striking similarities between then and now, but one big difference.
Again a wide gap has developed between what is understood about global warming by the relevant scientific community and what is known by policymakers and the public. Now, as then, frank assessment of scientific data yields conclusions that are shocking to the body politic. Now, as then, I can assert that these conclusions have a certainty exceeding 99 percent.
The difference is that now we have used up all slack in the schedule for actions needed to defuse the global warming time bomb. The next President and Congress must define a course next year in which the United States exerts leadership commensurate with our responsibility for the present dangerous situation.
Otherwise, it will become impractical to constrain atmospheric carbon dioxide, the greenhouse gas produced in burning fossil fuels, to a level that prevents the climate system from passing tipping points that lead to disastrous climate changes that spiral dynamically out of humanity's control.
Changes needed to preserve creation, the planet on which civilization developed, are clear. But the changes have been blocked by special interests, focused on short-term profits, who hold sway in Washington and other capitals.
I argue that a path yielding energy independence and a healthier environment is, barely, still possible. It requires a transformative change of direction in Washington in the next year.
Then: Time to "Stop Waffling"
On June 23, 1988, I testified to a hearing chaired by Senator Tim Wirth of Colorado that the Earth had entered a long-term warming trend, and that human-made greenhouse gases almost surely were responsible. I noted that global warming enhanced both extremes of the water cycle, meaning stronger droughts and forest fires, on the one hand, but also heavier rains and floods.
My testimony two decades ago was greeted with skepticism. But while skepticism is the lifeblood of science, it can confuse the public. As scientists examine a topic from all perspectives, it may appear that nothing is known with confidence. But from such broad open-minded study of all data, valid conclusions can be drawn.
My conclusions in 1988 were built on a wide range of inputs from basic physics, planetary studies, observations of ongoing changes, and climate models. The evidence was strong enough that I could say it was time to "stop waffling." I was sure that time would bring the scientific community to a similar consensus, as it has.
While international recognition of global warming was swift, actions have faltered. The United States refused to place limits on its emissions, and developing countries such as China and India rapidly increased their emissions.
The Coming Storm
What is at stake? Warming so far, about two degrees Fahrenheit over land areas, seems almost innocuous, being less than day-to-day weather fluctuations. But more warming is already "in-the-pipeline," delayed only by the great inertia of the world ocean. And climate is nearing dangerous tipping points. Elements of a "perfect storm," a global cataclysm, are assembled.
Climate can reach points such that amplifying feedbacks spur large rapid changes. Arctic sea ice is a current example. Global warming initiated sea ice melt, exposing darker ocean that absorbs more sunlight, melting more ice. As a result, without any additional greenhouse gases, the Arctic soon will be ice-free in the summer.
More ominous tipping points loom. West Antarctic and Greenland ice sheets are vulnerable to even small additional warming. These two-mile-thick behemoths respond slowly at first, but if disintegration gets well under way it will become unstoppable. Debate among scientists is only about how much sea level would rise by a given date. In my opinion, if emissions follow a business-as-usual scenario, sea level rise of at least two meters is likely this century. Hundreds of millions of people would become refugees. No stable shoreline would be reestablished in any time frame that humanity can conceive.
Animal and plant species are already stressed by climate change. Polar and alpine species will be pushed off the planet, if warming continues. Other species attempt to migrate, but as some are extinguished, their interdependencies can cause ecosystem collapse. Mass extinctions, of more than half the species on the planet, have occurred several times when the Earth warmed as much as expected if greenhouse gases continue to increase. Biodiversity recovered, but it required hundreds of thousands of years.
Getting to 350 ppm
The disturbing conclusion, documented in a paper[1] I have written with several of the world's leading climate experts, is that the safe level of atmospheric carbon dioxide is no more than 350 ppm (parts per million), and it may be less. Carbon dioxide amount is already 385 ppm and rising by about 2 ppm per year. Stunning corollary: the oft-stated goal to keep global warming less than two degrees Celsius (3.6 degrees Fahrenheit) is a recipe for global disaster, not salvation.
These conclusions are based on paleoclimate data showing how the Earth responded to past levels of greenhouse gases and on observations showing how the world is responding to today's carbon dioxide amount. The consequences of continued increase of greenhouse gases extend far beyond extermination of species and future sea level rise.
Arid subtropical climate zones are expanding poleward. Already an average expansion of about 250 miles has occurred, affecting the southern United States, the Mediterranean region, Australia, and southern Africa. Forest fires and drying-up of lakes will increase further unless carbon dioxide growth is halted and reversed.
Mountain glaciers are the source of fresh water for hundreds of millions of people. These glaciers are receding worldwide, in the Himalayas, Andes, and Rocky Mountains. They will disappear, leaving their rivers as trickles in late summer and fall, unless the growth of carbon dioxide is reversed.
Coral reefs, the rainforests of the ocean, are home for one-third of the species in the sea. Coral reefs are under stress for several reasons, including warming of the ocean, but especially because of ocean acidification, a direct effect of added carbon dioxide. Ocean life dependent on carbonate shells and skeletons is threatened by dissolution as the ocean becomes more acid.
Such phenomena, including the instability of Arctic sea ice and the great ice sheets at today's carbon dioxide amount, show that we have already gone too far. We must draw down atmospheric carbon dioxide to preserve the planet we know. A level of no more than 350 ppm is still feasible, with the help of reforestation and improved agricultural practices, but just barely - time is running out.
Moving Away from Fossil Fuels
Requirements to halt carbon dioxide growth follow from the size of fossil carbon reservoirs. Coal towers over oil and gas. Phasing out the use of coal except where the carbon is captured and stored below ground is the primary requirement for solving global warming.
Oil is used in vehicles, where it is impractical to capture the carbon. But oil is running out. To preserve our planet we must ensure that the next mobile energy source is not obtained by squeezing oil from coal, tar shale, or other fossil fuels.
Fossil fuel reservoirs are finite, which is the main reason that prices are rising. We must move beyond fossil fuels eventually. Solution of the climate problem requires that we move to carbon-free energy promptly.
Special interests have blocked the transition to our renewable energy future. Instead of moving heavily into renewable energies, fossil fuel companies choose to spread doubt about global warming, just as tobacco companies discredited the link between smoking and cancer. Methods are sophisticated, including funding to help shape school textbook discussions of global warming.
CEOs of fossil energy companies know what they are doing and are aware of the long-term consequences of continued business as usual. In my opinion, these CEOs should be tried for high crimes against humanity and nature.
But the conviction of ExxonMobil and Peabody Coal CEOs will be no consolation if we pass on a runaway climate to our children. Humanity would be impoverished by ravages of continually shifting shorelines and intensification of regional climate extremes. Loss of countless species would leave a more desolate planet.
If politicians remain at loggerheads, citizens must lead. We must demand a moratorium on new coal-fired power plants. We must block fossil fuel interests who aim to squeeze every last drop of oil from public lands, off-shore, and wilderness areas. Those last drops are no solution. They yield continued exorbitant profits for a short-sighted, self-serving industry, but no alleviation of our addiction or long-term energy source.
Pricing Carbon Emissions
Moving from fossil fuels to clean energy is challenging, yet it is also transformative in ways that will be welcomed. Cheap, subsidized fossil fuels engendered bad habits. We import food from halfway around the world, for example, even with healthier products available from nearby fields. Local produce would be competitive were it not for fossil fuel subsidies and the fact that climate change damages and costs, due to fossil fuels, are also borne by the public.
A price on emissions that cause harm is essential. Yes, a carbon tax. A carbon tax with a 100 percent dividend[2] is needed to wean us off of our fossil fuel addiction. A tax and dividend allows the marketplace, not politicians, to make investment decisions.
A carbon tax on coal, oil, and gas is simple, applied at the first point of sale or port of entry. The entire tax must be returned to the public-an equal amount to each adult, a half-share for children. This dividend can be deposited monthly in an individual's bank account.
A carbon tax with a 100 percent dividend is non-regressive. On the contrary, you can bet that low- and middle-income people will find ways to limit their carbon tax and come out ahead. Profligate energy users will have to pay for their excesses.
Demand for low-carbon, high-efficiency products will spur innovation, making U.S. products more competitive on international markets. Carbon emissions will plummet as energy efficiency and renewable energies grow rapidly. Black soot, mercury, and other fossil fuel emissions will decline. A brighter, cleaner future, with energy independence, is possible.
America's Role
Washington likes to spend our tax money line-by-line. Swarms of high-priced lobbyists in alligator shoes help Congress decide where to spend, and in turn the lobbyists' clients provide "campaign" money.
The public must send a message to Washington. Preserve our planet, and creation, for our children and grandchildren, but do not use that as an excuse for more tax-and-spend. Let this be our motto: "One hundred percent dividend or fight!"
The next President must make a national low-loss electric grid an imperative. It will allow dispersed renewable energies to supplant fossil fuels for power generation. Technology exists for direct-current high-voltage buried transmission lines. Trunk lines can be completed in less than a decade and expanded, in a way analogous to interstate highways.
Government must also change utility regulations so that profits do not depend on selling ever more energy, but instead increase with efficiency. Building-code and vehicle-efficiency requirements must be improved and put on a path toward carbon neutrality.
The fossil fuel industry maintains its stranglehold on Washington via demagoguery, using China and other developing nations as scapegoats to rationalize inaction. In fact, the United States produced most of the excess carbon in the air today, and it is to our advantage as a nation to move smartly in finding ways to reduce emissions. As with the ozone problem, developing countries can be allowed limited extra time to reduce emissions. They will cooperate: they have much to lose from climate change and much to gain from clean air and reduced dependence on fossil fuels.
The United States must establish fair agreements with other countries. However, our own tax and dividend should start immediately. We have much to gain from it as a nation, and other countries will copy our success. If necessary, import duties on products from uncooperative countries can level the playing field, with the import tax added to the dividend pool.
Democracy works, but sometimes it churns slowly. Time is short. The 2008 election is critical for the planet. If Americans turn out to pasture the most brontosaurian congressmen, and if Washington adapts to address climate change, our children and grandchildren can still hold great expectations.
Dr. James E. Hansen, a physicist by training, directs the NASA Goddard Institute for Space Studies, a laboratory of the Goddard Space Flight Center and a unit of the Columbia University Earth Institute, but he testifies here as a private citizen.
[1] J. Hansen et al., "Target Atmospheric CO2: Where Should Humanity Aim?" submitted 18 June 2008. See http://arxiv.org/abs/0804.1126 and http://arxiv.org/abs/0804.1135.
[2] The proposed "tax and 100% dividend" is based largely on the cap-and-dividend approach described by Peter Barnes in Who Owns the Sky: Our Common Assets and the Future of Capitalism (Washington, DC: Island Press, 2001). See http://www.ppionline.org/ppi_ci.cfm?knlgAreaID=116&subsecID=149&contentID=3867.
June 23, 2008
Put oil firm chiefs on trial,
says leading climate change scientist
Turning Up the Heat on Climate Issue
David A. Fahrenthold, Washington Post, 23-Jun-2008
Put oil firm chiefs on trial, says leading climate change scientist
Ed Pilkington, The Guardian, 23-Jun-2008
see also Global warming twenty years later
Turning Up the Heat on Climate Issue
20 Years Ago, a 98-Degree Day Illustrated Scientist's Warning
By David A. Fahrenthold
Washington Post Staff Writer
Monday, June 23, 2008
NASA's James E. Hansen will mark the
anniversary with new testimony.
(2004 Photo By Melanie Patterson --
Daily Iowan Via Ap)
There have been hotter days on Capitol Hill, but few where the heat itself became a kind of congressional exhibit. It was 98 degrees on June 23, 1988, and the warmth leaked in through the three big windows in Dirksen 366, overpowered the air conditioner, and left the crowd sweating and in shirt sleeves.
James E. Hansen, a NASA scientist, was testifying before the Senate Energy and Natural Resources Committee. He was planning to say something radical: Global warming was real, it was a threat, and it was already underway.
Hansen had hoped for a sweltering day to underscore his message.
"We were just lucky," Hansen said last week.
Today, 20 years later, a series of events around Washington will commemorate Hansen's appearance before the Senate committee. Hansen himself will appear before a House committee on global warming. [speech]
This anniversary comes just after a major setback for environmentalists, as a bill that would have begun to regulate greenhouse-gas emissions failed in the Senate.
But still, activists say that Hansen's 1988 testimony will look to history like a turning point -- a moment when the word "if" started to disappear from the national debate about climate change.
"Before Jim Hansen's testimony, global climate change was not on the political agenda. It was something that a few environmentalists and a few politicians . . . were talking about," said Jonathan Lash, president of the World Resources Institute, an environmental group.
"Hansen was clear, explicit and unequivocal," Lash said. "It absolutely put global climate change at the center of the discussion."
Hansen, the director of NASA's Goddard Institute for Space Studies in New York, will give a speech on climate change at noon at the National Press Club. In the afternoon, he is scheduled to give a briefing before the House Select Committee on Energy Independence and Global Warming.
He is now semi-famous, at least in Washington, for his warnings about the growing danger of climate change -- and for his repeated showdowns with higher-ups who have sought control over his message. The clashes have been particularly frequent with the administration of George W. Bush.
In 1988, however, Hansen was just a government scientist, and his cause was almost equally obscure.
He told the sweltering senators that 1988 was shaping up to be the warmest year in recorded history, and that -- with heat-trapping gases building up in the atmosphere -- this was probably not a coincidence.
"The greenhouse effect has been detected, and it is changing our climate now," Hansen said, according to a Washington Post account of the hearing. "We already reached the point where the greenhouse effect is important."
Christopher Flavin of the Worldwatch Institute said Hansen's testimony made a crucial point: that rising temperatures were a problem for the present, not just for future generations.
"Until there was some evidence that it was actually happening, it was virtually impossible to motivate anyone," said Flavin, whose group is hosting Hansen's lunchtime speech today. "That will really sort of go down in history as a kind of pivot point."
Two decades later, climate change has become a global cause. Last year, the United Nations Intergovernmental Panel on Climate Change -- a collaboration of scientists from around the world -- won the Nobel Peace Prize for research establishing a consensus that the phenomenon is real. The panel shared the prize with former vice president Al Gore, who was recognized for his film "An Inconvenient Truth."
But things look different on Capitol Hill. In the two decades since Hansen's testimony, Congress has not passed any law mandating major cuts in greenhouse-gas emissions. In that interval, 21 new coal-fired generating units have been built at power plants around the United States. The country's total emissions of carbon dioxide have climbed by about 18 percent, according to the latest statistics.
The most recent attempt to pass a law, sponsored by Sens. Joseph I. Lieberman (I-Conn.) and John W. Warner (R-Va.), was pulled from the Senate floor June 6, after its supporters could not muster the votes to overcome a filibuster threat.
Opponents of the bill said that it would impose huge costs on the U.S. economy by raising fuel prices and that it would deliver only uncertain results.
In an e-mailed statement, Sen. James M. Inhofe (R-Okla.) said the bill's failure was proof that Hansen's message had not caught on.
"Hansen, Gore, and the media have been trumpeting man-made climate doom since the 1980s. But Americans are not buying it," Inhofe said. "It's back to the drawing board for Hansen and company as the alleged 'consensus' over man-made climate fears continues to wane and more and more scientists declare their dissent."
Today, Hansen said, he intends to repeat his message from two decades ago -- this time with even more urgency. He said he believes that the United States must wean itself almost totally off fossil fuels, and do it as quickly as possible, to stave off the most catastrophic consequences of warming.
"We're at the situation again when there's this big gap between what we understand scientifically and what is known, recognized by the public and policymakers," he said. "This time, we have to close that gap in a hurry, because we're running out of time."
This time, though, the weather won't help as much. The high for today is supposed to be only in the low 80s.
Staff writer Joel Achenbach contributed to this report.
Put oil firm chiefs on trial, says leading climate change scientist
· Speech to US Congress will also criticise lobbyists
· 'Revolutionary' policies needed to tackle crisis
Ed Pilkington in New York
The Guardian,
Monday June 23, 2008
James Hansen, one of the world's leading climate scientists, will today call for the chief executives of large fossil fuel companies to be put on trial for high crimes against humanity and nature, accusing them of actively spreading doubt about global warming in the same way that tobacco companies blurred the links between smoking and cancer. [speech]
Hansen will use the symbolically charged 20th anniversary of his groundbreaking speech to the US Congress - in which he was among the first to sound the alarm over the reality of global warming - to argue that radical steps need to be taken immediately if the "perfect storm" of irreversible climate change is not to become inevitable.
Speaking before Congress again, he will accuse the chief executive officers of companies such as ExxonMobil and Peabody Energy of being fully aware of the disinformation about climate change they are spreading.
In an interview with the Guardian he said: "When you are in that kind of position, as the CEO of one the primary players who have been putting out misinformation even via organisations that affect what gets into school textbooks, then I think that's a crime."
He is also considering personally targeting members of Congress who have a poor track record on climate change in the coming November elections. He will campaign to have several of them unseated. Hansen's speech to Congress on June 23 1988 is seen as a seminal moment in bringing the threat of global warming to the public's attention. At a time when most scientists were still hesitant to speak out, he said the evidence of the greenhouse gas effect was 99% certain, adding "it is time to stop waffling".
He will tell the House select committee on energy independence and global warming this afternoon that he is now 99% certain that the concentration of CO2 in the atmosphere has already risen beyond the safe level.
The current concentration is 385parts per million and is rising by 2ppm a year. Hansen, who heads Nasa's Goddard Institute for Space Studies in New York, says 2009 will be a crucial year, with a new US president and talks on how to follow the Kyoto agreement.
He wants to see a moratorium on new coal-fired power plants, coupled with the creation of a huge grid of low-loss electric power lines buried under ground and spread across America, in order to give wind and solar power a chance of competing. "The new US president would have to take the initiative analogous to Kennedy's decision to go to the moon."
His sharpest words are reserved for the special interests he blames for public confusion about the nature of the global warming threat. "The problem is not political will, it's the alligator shoes - the lobbyists. It's the fact that money talks in Washington, and that democracy is not working the way it's intended to work."
A group seeking to increase pressure on international leaders is launching a campaign today called 350.org. It is taking out full-page adverts in papers such as the New York Times and the Swedish Falukuriren calling for the target level of CO2 to be lowered to 350ppm. The advert has been backed by 150 signatories, including Hansen
Canada tries to cool oil price anxiety
COMMENT: In this article, T. Boone Pickens is quoted: "... price is going to continue to rise until you kill demand." You don't need to be a market fundamentalist to understand the essential logic of this comment. On the other hand, the amazing price of oil today is hardly explainable just on supply-demand fundamentals. The Bye, Bubble? article from Barron's which I've sent out with this email, proposes that the price of oil may be significantly influenced by commodity investment and speculation - a "bubble", unsupported by fundamental conditions. It also notes that the high price of oil corresponds to high share prices for oil producers - and share prices will be the first to collapse if the price of oil collapses. Hmm.
Nothing should have advanced the climate change agenda more, and reduced fossil fuel use more effectively, than the recent screaming rise in oil prices. Had a carbon tax been applied around the world that had that effect on oil prices, the governments that created the taxes would have been unelected, juntad, couped, assassinated en masse. Yet the increase in the price of oil has not been accompanied with a corresponding reduction in global demand. Why is that? Inelasticities in the oil market? The Exxon Valdes effect - big things are slow to respond?
It suggests to me that carbon taxes, even whacking great ones, might not be as effective as we have hoped.
Shaun Polczer
Calgary Herald
Sunday, June 22, 2008
CALGARY - Canada is pushing for more transparency in global energy markets at a special meeting of producing countries in Saudi Arabia, Natural Resources Minister Gary Lunn said Sunday.
Speaking from Jeddah on Saudi Arabia's Red Sea coast, Lunn said Canada has a role to play in calming jittery oil prices that have more than doubled from a year ago.
"All of the countries recognize this is a longer-term problem," he said following the meeting of big oil oil majors and producing countries.
Although Canada accounts for less than three per cent of the world's oil production, it sits on 15 per cent of the world's reserves - second only to Saudi Arabia - mostly concentrated in northeast Alberta.
"It was recognized that there is an adequate supply of oil reserves that remain for decades to come, but we do need to make strategic investments in development of some of these reserves as well as refining capacity."
Despite its relatively small share of the world oil market, Lunn noted that Canada is one of the few countries capable of significantly increasing production.
The Canadian Association of Petroleum Producers said last week Canada's output will nearly double to 4.5 million barrels per day by 2020. More than $100 billion worth of investments are on the books to triple oilsands production which is currently supplying slightly more than one million barrels per day.
Lunn described a "very co-operative approach" at the meeting, which committed to increasing oil production in a manner that recognizes the impact on the environment.
At the meeting, the Saudis suggested they would increase production over and above the 200,000 barrels per day they pledged last week.
But speaking in Calgary Friday, legendary Texas oil man T. Boone Pickens called the Saudi's additional production "peanuts" and said at least world two million additional barrels per day are needed to make a meaningful dent in oil prices.
He said blaming speculators for higher prices is "silly" and told the U.S. Senate last week that global oil production has peaked at 85 million barrels per day.
"So, what is going to happen is that price is going to continue to rise until you kill demand."
Earlier Sunday, King Abdullah said Saudi Arabia is not to blame for soaring oil prices, blaming speculators and surging demand in such developing economies as China and India.
"There are several factors behind the unjustified, swift rise in oil prices and they are: Speculators who play the market out of selfish interests, increased consumption by several developing economies and additional taxes on oil in several consuming countries," the king said in speech.
Despite their best intentions, doubts lingered as to whether the meeting will have an impact on oil prices.
"What I've heard so far are basically all good ideas, but it will probably not change the price tomorrow morning," Royal Dutch Shell CEO Jeroen van der Veer told Reuters in Jeddah.
Energy Minister Mel Knight of Alberta Friday told the Illinois Chamber of Commerce on Friday he expects oil prices to "spike" to $200 and said anything over $150 would damage the world economy.
Gerry Protti, an executive vice-president with Calgary-based EnCana Corp., also doubted whether the Jeddah meeting would accomplish its stated goal of lowering oil prices.
Speaking at the company's investor day on Thursday, Protti said Canada is a "price taker" rather than a "price setter" in the world market. He also said Canada is a marginal player despite its position as the number one supplier of oil and products to the United States.
"It's a market driven by huge forces, of which Canada, from a supply side, is one relatively small component."
There is also the question of whether lower oil prices are actually good for Canada and could threaten the economic viability of oilsands production.
Canada has consistently been pegged as one of the planet's highest-cost suppliers by advisory firms such as J.S. Herold in Connecticut.
Oilsands producers like Canadian Natural Resources' Steve Laut have said the company needs at least $75 US a barrel to cover costs and generate "acceptable" rates of return.
Speaking at the OPEC summit in November, Saudi oil minister Ali al-Naimi said Canada's "sands of oil" rely on unsustainable oil prices to be economically viable.
spolczer@theherald.canwest.com
© Calgary Herald 2008
Bye, Bubble? The Price of Oil May Be Peaking
Andrew Bary
Barron's
June 23, 2008
IT'S PERILOUS TO CALL THE TOP IN A BOOMING MARKET, but the price of oil may be peaking in the current range of $130 to $140 a barrel.
Oil's sharp move up -- prices have doubled in the past year -- caught the world by surprise, including almost everyone involved in the petroleum market, from major exporting nations to big energy companies to the global analyst community. The rally has emboldened oil bulls, who argue the world is bumping up against oil-supply constraints, and that demand will rise inexorably, despite sharply higher prices, as the four billion to five billion people in emerging economies like China and India get a taste of the energy-intensive good life, replete with the cars, air conditioners, refrigerators and computers that Americans and Western Europeans have long enjoyed. Statistics support their view that demand growth is in its infancy in the developing world: U.S. per-capita oil consumption is 25 barrels annually, while Japan uses 14 barrels per person. China's 1.3 billion people consume just two barrels each per year, however, and India's 1.1 billion use less than a barrel a year.
In the next decade, oil indeed may hit $200 a barrel. But prices could fall to $100 a barrel by the end of this year if Saudi Arabia makes good on its pledge to increase production; global demand eases; the Federal Reserve begins lifting short-term interest rates; the dollar rallies, and investors stop pouring money into the oil market. China raised prices on retail gasoline and diesel fuel by 18% Thursday, in a move that is expected to curb demand.
It's tough to know how much of the surge in crude-oil prices -- up 40% just this year -- reflects fundamental supply and demand, and how much is due to other factors, including the dollar, commodity speculation and interest from institutional investors. Like some others, we suspect the run-up was fueled by more than economics.
Jason Edmiston
THERE IS GROWING TALK OF AN OIL BUBBLE, THOUGH evidence of asset bubbles isn't conclusive until they burst. The trajectory of oil prices in the past eight years looks eerily similar to the Nasdaq's eight-year run to a peak of more than 5,000 in March 2000. More than eight years later, the Nasdaq is at half that level.
"My basic message to those who say that prices have to go up forever is that the oil markets have been cyclical for 140 years. Why should that have stopped?" says Edward Morse, chief energy economist at Lehman Brothers.
Saudi Arabia, the world's biggest oil exporter, has pledged to boost production from a recent 9.5 million barrels a day to about 9.7 million in order to reduce prices. The Saudis are hosting a summit of oil producers and consumers on June 22.
"The analytic community is divided on what the recent Saudi comments mean for the market," says Morse, who believes the Saudis will put more oil on the market as they raise production. "That, combined with a declining rate of consumption, should create an inventory surplus that will be palpable as the year progresses."
Morse thinks oil could fall to $100 by year end.
Skeptics say the Saudi vow to boost production is merely talk, and that the country is struggling simply to maintain production because of aging, overworked fields like the huge, 60-year-old Ghawar reservoir. The Saudi government refuses to allow in outsiders to evaluate the state of its oil industry, which has fueled talk the Saudis are hiding something.
Likewise, the size of speculative positions and commodity indexers is impossible to determine, as most trading occurs away from the major commodity exchanges in over-the-counter transactions.
It is hard to argue that oil demand supports $135 crude. Now at 86 million barrels a day, global demand could show little or no increase this year after averaging 1% gains in recent years. Sanford Bernstein analyst Neil McMahon projects that by the fourth quarter, global oil demand could be running below the fourth quarter of 2007.
Consumption is down in '08 in the 30 member nations of the Organization for Economic Cooperation and Development (OECD), which includes the U.S., Western Europe, Japan and Australia. OECD nations account for 57% of global oil demand.
While Americans are married to their cars, $4-a-gallon gasoline has begun to bite; the number of vehicle miles traveled in the U.S fell in March on a year-over-year basis for the first time since 1979. Further declines in gasoline consumption may follow as drivers opt for more fuel-efficient cars, and as innovations like plug-in cars reach the market after 2010. Major U.S. airlines have announced widespread capacity reductions, which could cut demand for jet fuel by 5% or more later this year.
Oil demand continues to grow in the developing world and the Middle East. In Europe, stiff energy taxes generally blunt the impact of higher prices, but diesel fuel, now at nearly $10 a gallon in Britain (double the American price), may be at an unsupportable level. Demand growth could cool in emerging markets, too, as subsidies in many Asian countries are reduced. There is also speculation China has been hoarding diesel fuel ahead of the Olympics in August, in order to cut the use of coal for power generation around Beijing in the hope of cleaning up the city's notoriously polluted air. Once the games are over, China will go back to burning cheaper coal, the story goes.
The supply/demand argument for higher oil prices has some merit. "Name another commodity that has gone up two-and-a-half times in three-and-a-half years and the world hasn't found a way to make more of it," says Byron Wien, chief investment strategist at Pequot Capital Management. "The world isn't finding oil fast enough to replace the 3% to 4% that gets pumped every year."
Wien's boss, Art Samberg, who heads the Westport, Conn.-based investment firm, stated in Barron's midyear Roundtable, published last week, that the commodity bubble "isn't going to burst. It's going to continue to expand." Older oil fields in Mexico and the North Sea are running dry while new sources in places like Kazakhstan and Brazil may prove difficult to bring on stream. In addition, oil increasingly is in the hands of government-run monopolies that may be more interested in maximizing future revenue than boosting current production.
Attachment: An Oil Overview
The dollar's slide and the Federal Reserve's neglect of the greenback have supported commodity prices, oil in particular. But Fed Chairman Ben Bernanke and his colleagues finally seem to have realized that the Fed's aggressive easing actions since last summer, which dropped the key federal-funds rate to 2% from 5.25%, may be fueling global inflation. If the Fed moves to lift rates later this year, as financial markets anticipate, it could buttress the dollar and spur an exodus of speculators from the oil market.
One little-discussed way the U.S. could try to bring down oil prices is to sell oil from the strategic petroleum reserve (SPR). The SPR, intended as a source of oil for national emergencies, now holds 705 million barrels of crude, equal to about 35 days of domestic consumption. With prices higher, Congress moved in May to stop adding to the SPR as it neared capacity. A sale of 100 million barrels of oil would shock the markets and potentially drive down prices.
Long term, the U.S. could benefit through lower oil prices if Congress and the states back President Bush's proposal to allow drilling off Florida, the East and West coasts, and in the Alaskan National Wildlife Reserve, where billions of barrels of oil may lie.
A SHARP DROP IN ENERGY PRICES WOULD HELP WHOLE swaths of the U.S. economy, including retailers, food and household-goods makers, auto makers and transportation concerns. Beleaguered U.S. airlines would benefit because they're expected to spend $61 billion on fuel this year, up $20 billion from 2007.
Few oil stocks would be safe if crude falls $20 to $30 a barrel. Independent exploration and production companies like Devon Energy (DVN), Apache (APA) and XTO Energy (XTO) could get hit hard because they're up sharply in the past year. The majors, including ExxonMobil (XOM), Chevron (CVX) and ConocoPhillips (COP), might hold up better because they have refining and related businesses like chemicals, whose profitability isn't directly linked to crude and natural-gas prices.
Some of the biggest oil companies, notably ExxonMobil, Royal Dutch Shell (RDS/A) and BP (BP), have badly lagged in the past year. BP, for one, has been beset by problems, including a troubled joint venture in Russia.
The majors may be the best energy values because they trade for less than 10 times this year's earnings and around eight times estimated 2009 profits. The '09 earnings consensus reflects an assumption of $100 crude, not the current $135. Bernstein's McMahon estimates Exxon could earn $12 share in 2009, versus the current consensus of $9, if oil holds $130 and natural gas averages $11 per thousand cubic feet; it is now around $13. This suggests Exxon, at 86, may be trading for just seven times estimated '09 profits. Conoco and Chevron also could earn far more than the current '09 consensus under the same oil and gas scenario, Bernstein estimates. McMahon favors BP, Royal Dutch and Marathon Oil (MRO).
One reason for the strength in crude has been modest U.S. inventories. Bill Klesse, chief executive of Valero Energy (VLO), the largest North American oil refiner, told analysts last month that the inventory data may be misinterpreted as a sign of oil scarcity, though it is more a function of the recent state of the oil market, in which futures prices were below spot prices, giving refiners little incentive to maintain excess supply. If the Saudis sell enough oil to drive down spot prices relative to futures prices, refiners and others will be induced to buy and hold more oil in inventory, he said. The oil market is moving to such a configuration, with the current, or spot price of $135 below the December 2008 price of $136.
OIL-MARKET EXPERTS ACKNOWLEDGE THAT commodity-indexing strategies employed by endowments, pension funds and other institutional investors have helped push up prices in the past year. Such investments are thought to have totaled $260 billion as of March, up from $13 billion at the end of 2003, according to Michael Masters, the head of Masters Capital Management, an Atlanta investment firm. Some $55 billion may have flowed into commodity investments during the first quarter alone. The energy complex is the largest commodity market, and gets a disproportionate share of fund flows. Masters estimates index participants may control over 1 billion barrels of crude.
Managers of leading university endowments, including those at Harvard, Yale and Princeton, in recent years have generated outsized returns from investments in hard assets, prompting other investors, such as the giant California Public Employees Retirement System, with over $200 billion in assets, to attempt the same. Calpers is upping its commodity exposure to $7 billion from under $500 million.
This activity is spurring a backlash in Congress, where pension funds and others have been accused of driving up food and energy costs through their increased commodity investments. Lawmakers including Senator Joe Lieberman (independent, Conn.) have proposed a ban on commodity-related investments by pension funds, which Masters supports. Last month he told Congress that commodity regulators need to close a loophole that lets indexers evade commodity-position limits by purchasing over-the-counter swaps and other derivatives.
A selloff in oil and other commodities could cool the ardor for index strategies. Ross Margolies, head of Stelliam Investment Management, in New York, says financial investors would do better buying the shares of commodities producers, not actual goods. Over time, it may be more difficult to make money in commodity investing because holders effectively incur financial costs to carry and store commodities, even if they never take physical delivery.
Though little noticed, short-covering by independent oil and gas producers might have contributed to the recent strength in oil and gas prices. U.S. exploration and production companies like Devon, XTO and Chesapeake Energy (CHK) have hedged an average of about 40% of their 2008 production by selling oil and gas futures, options or derivatives, according to Credit Suisse analyst Jonathan Wolff. As prices have surged, the hedges have slipped underwater, and some producers have sought to unwind their money-losing bets.
Newfield Exploration (NFX) recently announced a $500 million hedge-related loss, and more red ink could follow. Total hedge losses among E&P companies could top $15 billion for 2008, and $8 billion for 2009, Wolff estimates.
While supply challenges could continue to dog the oil market, current prices seem excessive in light of weakening demand and other factors. But it's impossible to know with precision when the bubble will burst. The Saudis could roil the markets with a pronouncement June 22; the dollar could revive or demand could plummet, or all three. And if prices start falling, the downturn could accelerate, sending crude back to $100 -- where it would be cheaper, but still far from cheap.
E-mail comments to mail@barrons.com
June 22, 2008
A Green Coal Baron?
Photograph by John Foxx/Getty Images; Illustration by Geoff McFetridge
THE INVISIBLE HAND ON THE SCALES: In a cap-and-trade system, the government caps the amount of carbon dioxide that energy companies can emit. Then it distributes a new kind of currency — carbon allowances — that each firm must possess to be allowed to release their CO2. If Utility A figures out how to reduce its emissions faster than required — by using cleaner fuels, say, or investing in meliorative technologies — it can trade (sell) its unused allowances to Utility B. The cap is lowered regularly, and because market forces reward those that make the biggest cuts, the system should produce a race to see whose carbon footprint can shrink the fastest.
By CLIVE THOMPSON
New York Times
June 22, 2008
When I met with Jim Rogers one day this spring, he tossed back two double espressos in a single hour. A charming and natty 60-year-old, Rogers is the chief executive of the electric company Duke Energy. But he has none of the macho, cowboy stolidity you might expect in an energy C.E.O. Instead, he lives to brainstorm. He spends more than half his time on the road, a perennial fixture at wonky gatherings like the Davos World Economic Forum and the Clinton Global Initiative, corralling “clean energy” thinkers and listening eagerly to their ideas. The day we met, he was brimming with enthusiasm for a new approach to solar power. Solar is currently too expensive to make economic sense, according to Rogers, because the cost to put panels on a roof is greater than what a household would save on electricity. But what if Duke bought panels en masse, driving the price down, and installed them itself — free?
Photograph by Peter Hapak;
Illustration by Geoff McFetridge
Jim Rogers is the chief executive
of the electric company Duke Energy.
“So we have 500,000 solar units on the roofs of our customers,” he said. “We install them, we maintain them and we dispatch them, just like it was a power plant!” He did some quick math: he could get maybe 1,000 megawatts out of that system, enough to permanently shutter one of the company’s older power plants. He shot me a toothy grin.
Even in this era of green evangelism, Rogers is a genuine anomaly. As the head of Duke Energy, with its dozens of coal-burning electric plants scattered around the Midwest and the Carolinas, he represents one of the country’s biggest sources of greenhouse gases. The company pumps 100 million tons of carbon dioxide into the atmosphere each year, making it the third-largest corporate emitter in the United States.
Yet Rogers, who makes $10 million a year, is also one of the electricity industry’s most vocal environmentalists. For years, he has opened his doors to the kinds of green activists who would give palpitations to most energy C.E.O.’s. In March, he had breakfast with James Lovelock, the originator of the Gaia theory, which regards the earth as a single, living organism, to discuss whether species can adapt to a warmer earth. In April, James Hansen, a climatologist at NASA and one of the first scientists to publicly warn about global warming, wrote an open letter urging Rogers to stop burning coal — so Rogers took him out for a three-hour dinner in Manhattan. “I would dare say that no one in the industry would talk to Lovelock and Hansen,” Rogers told me. Last year, Rogers astonished his board when he presented his plan to “decarbonize” Duke Energy by 2050 — in effect, to retool the utility so that it emits very little carbon dioxide.
Perhaps most controversial, though, Rogers has long advocated stiff regulation of greenhouses gases. For the last few years, he has relentlessly lobbied Washington to create a “carbon cap” law that strictly limits the amount of carbon dioxide produced in the United States, one that would impose enormous costs on any company that releases more carbon than its assigned limit. That law is now on its way to becoming reality: last fall, Senators Joe Lieberman and John Warner introduced a historic “cap-and-trade” bill that would require the country to reduce its co2 emissions by 70 percent before 2050. Earlier this month, the bill failed to advance, but its sponsors will most likely reintroduce it next year once a new president is in office; meanwhile, a half-dozen other rival bills are currently being drawn up that all seek the same thing. One way or another, a carbon cap is coming.
Prominent environmentalists, thrilled, credit Rogers for clearing the way politically; many are his friends. “It’s fair to say that we wouldn’t be where we are in Congress if it weren’t for him,” says Eileen Claussen, head of the Pew Center on Global Climate Change. “He helped put carbon legislation on the map.” This should be a golden moment for Rogers: he has godfathered a bill that could significantly reshape the electricity industry, help balance the world’s climate and establish his legacy as a visionary C.E.O. — a “statesman,” as he puts it. Instead, he is very, very worried, fearful that the real-world version of his dream legislation may end up threatening the company he has spent so many years building.
Though the details are devilish, the basic cap-and-trade concept is simple. The government makes it expensive for companies to emit carbon dioxide, and then market forces work their magic: those companies aggressively seek ways to avoid producing the stuff, to try to get a competitive edge on one another.
This is precisely how the government dealt with acid rain, back in the late ’80s. Acid rain, like global warming to a great extent, was caused by dangerous byproducts from burning coal: the chemicals sulphur dioxide and nitrogen oxide, or “sox and nox,” as they were known colloquially. Environmentalists in the ’80s tried to get Ronald Reagan’s Environmental Protection Agency to crack down on sox and nox, but an antiregulatory mood prevailed. So a group of politicians and forward-thinking environmentalists turned to the marketplace instead.
Through legislation, the government first set a limit, or cap, on how much sox and nox could be discharged by the nation’s coal-burning utilities. These companies then regularly received allowances based on their historic levels of emissions. At the end of a predetermined period, every company had to possess enough in the way of allowances to cover the gases it released or face stiff penalties. Over time, the cap and the number of allowances were slowly reduced.
A system like this creates a carrot and a stick. An electrical utility that reduces its pollution below the cap has leftover allowances to sell to other companies. In theory, a virtuous cycle emerges: a company that invests money to clean up its emissions can more than recoup its outlay by selling unused allowances to its dirtier, laggard competitors. Furthermore, entrepreneurs have an incentive to develop cleanup technologies. And sure enough, following the Clean Air Act amendments in 1990, innovations emerged quickly, ranging from new coal blends to chemical “scrubbers” that removed sox and nox from the smokestacks. Government and industry officials predicted that solving the problem of acid rain could cost $4 billion in new investment — but the marketplace was so efficient that only an estimated $1 billion was needed.
A cap-and-trade program for co2 would try to harness the same dynamics. There are several bills under development — Lieberman-Warner is the most advanced, and the one most likely to pass next year — but they all take roughly the same approach. Greenhouse-gas emissions are capped in key carbon-dioxide-producing industries like gas, oil and electricity. Allowances are issued and companies are free to sell them to one another. Then the cap and number of allowances are ratcheted down over time, sparking, it’s hoped, the same Cambrian-like explosion in the development of cheaper, cleaner technologies.
If Rogers is keen on the idea of cap and trade, it’s because the acid-rain fight was one of his formative experiences as a C.E.O. His first job was a three-year stint as a journalist in Lexington, Ky. — “I was a journalist, so I’m allowed to be a little cynical at times,” he likes to joke — before heading to law school and working as a public advocate in his home state of Kentucky. In 1988, by then 40 years old, he switched sides — the Indiana electrical utility PSI Energy teetered on the verge of bankruptcy, and Rogers was offered the job of turning it around.
Part of what ruined PSI was a $2.7-billion write-off of its nuclear plant when local environmentalists forced PSI to halt its construction after the Three Mile Island accident. Rather than demonize the environmentalists, Rogers instead decided to “put on a flannel shirt” and meet with them in a cafe in Madison, Ind. Phil Sharp, a U.S. representative for Indiana at the time, recalls the activists’ astonishment. “They couldn’t believe it,” he says. “They were always used to taking on the big utility companies. Then he came in and instead of saying, What craziness is this, he said, O.K., let’s talk.” It was partly self-protection, of course; Rogers knew that public opinion could ruin a company. Aware that the environmentalists were also worried about acid rain, Rogers decided it was a problem he should head off.
When cap and trade was proposed as a solution to acid rain, most energy executives whose companies burned coal hated the idea and lobbied fiercely against it. It wasn’t merely that they tended to resist regulation. They also didn’t believe it would work: they didn’t trust that the necessary technology would evolve fast enough. If it didn’t, they worried, very few firms would have extra allowances to sell, and the price of those on the open market would skyrocket. Companies might go broke trying to buy extra allowances to meet their cap.
Rogers was the outlier. He loved the elegance of the market-based approach, and he had a nerd’s optimism that the technology would bloom quickly. “And we were right,” he says. “So that’s what gave me the faith that this approach works. All you have to do is set the market up right.” PSI spent only $250 million to clean up its smokestacks, and allowances were “cheap and plentiful,” Rogers says.
Even as acid rain was being confronted in 1990, climate change was entering the public debate. By this time, Rogers was friends with a number of environmentalists and decided to dive into the science of global warming. He began inviting climate experts from Harvard, NASA and various research firms to brief him. “Pretty soon, I could see that the science was persuasive,” Rogers recalls. Many policy makers behind the acid-rain cleanup suspected that a cap-and-trade program could whip the carbon problem too. Rogers agreed. “What’s unusual about Jim is that he recognized these problems not as a woe-is-me burden but as real growth opportunities, opportunities to change his industry,” says Tim Wirth, president of the United Nations Foundation and a former senator from Colorado who helped write the acid-rain legislation. “That allows him to be cheerful in the face of the opposition.”
And there was plenty of opposition. Back then, merely acknowledging the existence of global warming was a thought crime among coal-burning energy executives. But as early as 2001, Rogers told a meeting of fellow C.E.O.’s in the industry that they should all work to pass a federal carbon cap. “They were stunned,” recalls Ralph Cavanagh, an energy program director at the Natural Resources Defense Council, who was present at the meeting. “That was the first time I had heard a major energy executive say anything like this. But because he was chairman of their energy committee, he wasn’t just a flaky maverick.” Sharp, a longtime friend, chuckles when he remembers how much ire Rogers generated. “They hated him,” he says. “Nobody would invite him for golf.”
Rogers’s environmentalism has a weird flavor to it. Most people involved in the cap-and-trade process talk about their polar-bear moment — the instant when they realized the earth is imperiled. (John Warner, the Republican co-sponsor of the Lieberman-Warner bill, told me his inspiration came when he visited a forest he worked in as a teenager and found it decimated by a change in weather patterns.) In eight months of meeting with Rogers, listening to his speeches and watching him in action, I kept waiting to hear about his polar-bear moment, but it never came. Rogers’s environmentalism is practical, enthusiastic and intrigued by clean-tech innovations, not given to heartstring-tugging rhetoric about vanishing species or redwood trees.
Rogers does, however, talk frequently about “the grandchildren test.” “I want them to be able to look back and say, ‘My granddaddy made a good decision, and it’s still a good decision,’ ” he says. Though he’s only 60, Rogers already has seven grandchildren, and he frequently takes them on trips around the world. He told me, when we met for dinner in Charlotte, N.C., how he asked his 10-year-old granddaughter Emma what she wanted to do when she grew up; she said she wanted to “protect endangered species.” He found it striking that such a young child would already have a sense of the precariousness of nature. “She’s an old soul, let me tell you,” he says.
When asked why Rogers ended up taking such a contrary approach to his job, friends point to the fact that he never trained as an engineer — the background of most energy executives. He isn’t as insular, Sharp points out, so he’s interested in what critics have to say. “Usually what people do is circle the wagons,” Sharp says, “but he listens.”
It is also true that Rogers’s green focus has a purely strategic element. Anyone who was paying attention to public opinion on climate change could see that the government would, sooner or later, have to limit carbon emissions. So why not plan for that — start thinking about how your company would respond, start making friends in Washington? Rogers sunnily agrees that this was a large motivation for his environmental work. “I wanted to get out ahead of it,” Rogers told me the very first time I met him last August, in Washington, which he was visiting nearly weekly to brief and cajole senators.
“It’s the old saw — ‘If you’re not at the table, you’re going to be on the menu,’ ” he says. Last June, Rogers delivered a speech to the Senate environment committee, led by Barbara Boxer, which was beginning to assess the Lieberman-Warner bill. “I want the Senator Boxers, Senator Lieberman or Warner — I want them to feel confident that they can turn to me as an energy expert and trust me,” he said then.
To get a sense of the awesome challenge posed by “decarbonizing” electricity, go to one of Duke’s largest coal-fired plants, near Charlotte. When I visited last summer, I first wandered into the building that houses the furnace, a long tubular mass of steel with surprisingly graceful, almost art-deco lines. Then I climbed a flight of metal stairs to the rooftop, ascending through 120-degree air that left my shirt damp with sweat. Off to one side were the “scrubbers” — enormous metal contraptions that capture some of the acid-rain components by pumping the coal fumes through great waterfalls of limestone slurry. The process produces gypsum, a safe and inert mineral, which Duke sells for use in drywall. Looking down from the roof, I saw huge piles of limestone that dwarfed the trucks scurrying around them. Then it hit me: of the half-dozen structures in the coal plant, the majority are devoted not to producing energy but to cleaning it up. Or put another way, burning coal is trivially easy; it’s cleaning up the emissions that requires all sorts of work and machinery.
“Sometimes I tell people that Duke is really just a company that processes chemicals to produce clean air, and we get electricity as a byproduct,” Rogers said with a laugh when we met in his office afterward. If it’s this difficult to strip out acid-rain chemicals, I can hardly imagine what prodigious feats of engineering will be necessary to remove co2 from electricity production.
Rogers, however, maintains that it is possible to cut Duke’s co2 emissions to half of today’s levels by 2030. That would put the company in line with the goals set by the Lieberman-Warner bill or any of the other cap-and-trade alternatives, which mostly call for a 70 percent reduction in emissions by 2050. Rogers put a pad on his desk and began sketching a pie chart to show me how he’ll do it.
Currently, nearly all of Duke’s emissions come from its coal-fired plants. But those plants are aging; by 2050, every one of them will have to be replaced. If the company is going to replace them anyway, Duke might as well phase in “clean” sources.
It isn’t quite that simple, of course. No low-carbon sources are currently big or cheap enough — and it’s not clear when they will be. For example, Rogers calculates that Duke needs two new 2,200-megawatt nuclear plants. (One of them is currently under development in South Carolina.) But these plants are hellishly difficult to construct. They’re so expensive — many billions apiece — that historically they have required government guarantees, because Wall Street is loath to invest so much in such politically fraught projects. Rogers suspects that public opinion will shift in favor of nuclear energy eventually, because it offers huge amounts of reliable power with no direct co2 emissions.
What about renewable energy, like wind and solar? Rogers says that by 2030 they could make up as much as 12 percent of Duke’s energy supply, but they won’t be a big factor for another decade, because sunshine and wind are too irregular and the plants to harvest them are still too small. This year, Duke signed a 20-year deal to buy the entire electric output of the largest solar farm in the country, SunEdison’s plant in Davidson County, N.C. — it generates all of 16 megawatts, compared with 800 megawatts from a coal plant.
He drew another wedge in the pie chart for coal: it will shrink from producing nearly two-thirds of Duke’s power to just over a quarter. Rogers predicts coal will never go away, because it’s cheap and more accessible than any other energy source. The technology to remove co2 from the smokestacks and “sequester” it affordably is, he estimates, 10 to 15 years away. Duke is planning to build an experimental plant in Edwardsport, Ind., that will “gasify” coal, a tentative first step to capturing carbon. But Duke embarked on this venture only after securing a government subsidy of $460 million. Even if someone manages to make carbon sequestration feasible, Rogers worries that there’s a limit to what the public will tolerate. “We don’t know what happens if the carbon leaks back out of the ground, and we’ve never done it successfully on scale,” he told me. Later, he said, “So you’ll get the next version of Not in My Backyard — it’ll be Not Under My Backyard.”
When Rogers finished, his pie chart was neatly divided into the various fuel options. This plurality is a key part of his vision: no single energy source will save us. None is so plentiful or without costs that it dominates the others. “There’s no silver bullet,” he concluded, “just silver buckshot.”
Interestingly, the one green initiative Rogers says he hopes will emerge most quickly is focused not on generating power but on conserving it. Last year, he concocted the Save-a-Watt plan, which would let Duke profit from helping its customers drastically cut their energy use. Like roughly half the utilities in the United States, Duke is regulated; it can charge more for power only if it builds a new power plant and persuades the regulator to approve a rate increase to pay for it. But the fastest way to reduce a carbon footprint is by improving efficiency. Under Save-a-Watt, Duke would, for example, distribute “smart” meters that automatically turn off customers’ appliances during periods of peak power use. For its first experiment, Duke plans to cut the consumption of its customers in the Carolinas by 1,800 megawatts, which is equal to the output of two new coal-fired plants. The regulator would then let Duke charge higher rates for the electricity its customers do use to pay for all the efficiency technology. Save-a-Watt thus turns the power business on its head: rather than charge customers more to build plants, Duke will effectively charge them not to do so.
“I would rather spend $8 billion implementing efficiency than spend $8 billion on building a nuclear plant,” Rogers told me. Nuclear power has enormous construction and political risks. Efficiency doesn’t. After Rogers spoke with Bill Clinton at a private retreat last year, the former president was so fired up that when he later went onstage at the annual Clinton Global Initiative conference he raved about Save-a-Watt, declaring it “a simple, brilliant idea. It has the capacity to fundamentally change what we do in the United States.”
As the Lieberman-Warner bill took shape last spring and summer, Rogers ought to have been feeling triumphant. Instead, he was increasingly uneasy with what the senators were doing. He was particularly alarmed by the way they planned to hand out co2 allowances.
Among the many mind-numbing details in cap-and-trade politics, the allowances — permission to pollute, essentially — are the most charged. In the acid-rain trading market, the government freely gave the worst polluters the largest allowances, under the assumption that they faced the biggest challenges and needed the most financial help. But the Lieberman-Warner bill, like virtually every other cap-and-trade bill in the works, gives away only 75 percent of the allowances; the government auctions off the rest. Year by year, the percentage of allowances that will be auctioned off steadily rises, until nearly all of them are. In essence, with the stroke of a pen, the government creates a new and valuable form of property: carbon allowances. And for the government, we are talking about staggering amounts of money, the biggest new source of cash in years. Carbon allowances are projected to be worth $100 billion in the first year alone, rising to nearly $500 billion by 2050. To put that in context, an estimate prepared by the Congressional Budget Office predicts that the annual revenues from auctioning allowances will be equal to 15 percent of what the I.R.S. takes in.
Rogers sees this as a financial disaster for Duke. By his calculations, Duke would spend at least $2 billion in the first year alone and have to raise its rates immediately by up to 40 percent to cover that. Worse, coal-fired utilities would not get the special treatment they did under the acid-rain legislation. This time around, a large number of allowances would be given away to nuclear and hydroelectric utilities that already produce very little carbon dioxide. Those companies would not need their allowances and so could sell them for a healthy profit in coal-dependent states. The Lieberman-Warner rules, Rogers says, will effectively impose a “hidden tax” on those states — and they’re primarily the heartland states, where energy costs are already pinching industry and working-class families.
What especially enrages him, though, is how the government wants to spend the cash it raises from the allowances. As Lieberman-Warner worked its way through the Senate environment committee, senators attached assorted riders: $800 billion over the life of the bill for tax refunds to help consumers pay for their higher electric bills, $1 billion for deficit reduction and billions more in handouts to state governments. In industry speeches, Rogers characterized the bill as a “bastardization” of cap-and-trade economics. (He later apologized.) In conversations with me, he expressed special disdain for Barbara Boxer, the California senator who shepherded the bill through the Senate environment committee.
“Politicians have visions of sugarplums dancing in their head with all the money they can get from auctions,” Rogers told me last month. “It’s all about treating me as the tax collector and the government as the good guy. I’m the evil corporation that’s passing through the carbon tax so Senator Boxer can be the Santa Claus!” If the government was going to collect cash from carbon auctions, Rogers figured, at least it ought to invest that money in green-tech research. “A billion dollars for deficit reduction,” he vented. “A billion dollars! What is [Boxer] smoking? I thought we were solving carbon here.”
For all of Rogers’s careful effort to position himself as a forward thinker — and an advocate for the Midwestern coal states — that did not gain him any slack. Congressional insiders who watched Rogers lobby the Senate committee say that regional politics actually worked against him. The Democratic deal makers who promised to deliver the votes for the bill were “a left-center coalition” of senators, most of whom come from urban and coastal states that do not rely heavily on coal. (Boxer, for example, hails from California, which gets only a small percentage of its energy from coal.) “And a lot of people, Jim Rogers in particular, really didn’t play in the negotiations,” says a Congressional aide close to the Lieberman-Warner negotiations who did not have approval to talk to the press. “The members on the Democratic side aren’t particularly responsive to his concerns.”
So by this spring, Rogers found himself in the curious position of fighting tooth-and-nail against a bill he spent years pushing for. It is entirely possible that Rogers is right, and that the auctioning of allowances will lead to economic shocks. Many economists worry about the price of allowances rising out of control. “Clean” technology might not emerge fast enough. Nuclear power could flounder. Desperate to move away from coal, utilities might switch to burning natural gas, driving up its price and thereby substantially inflating the cost of heating American homes.
As Rogers went on the attack, critics countered that he sounded less like an environmental statesman and more like an old-school C.E.O. fighting for government pork, arguing baldly that what’s best for Duke is what’s best for the country — that cap-and-trade will only work if it’s set up in a way that best benefits Duke. John Rowe, the chief executive of Exelon — the country’s largest nuclear power company, which will profit handsomely by selling its allowances — argues that it’s only fair to hit Duke and others with higher costs. Customers in nuclear states have paid higher electric bills for years, because nuclear power is inherently more expensive to generate, Rowe points out. Duke could have switched to nuclear decades ago but didn’t, so now it must pay the price.
“Duke’s customers had a big cost advantage for a very long time,” Rowe told me. “And our feeling is you’re not entitled to have that made virtually permanent.” And he added, “This is sausage making, but Lieberman-Warner makes a pretty good sausage.”
The truth, perhaps inevitably, is that as carbon-cap laws become closer to reality, almost no one is happy. Coal-burning energy firms fear they’ll be destroyed. Environmentalists worry that the energy lobby will gut the bills.
This conflict was laid bare at Duke’s annual shareholders’ meeting in early May. Rogers started things off by devoting a full hour to his 40-year plan to decarbonize Duke. But when it was time for the question period, a dozen environmentalists lined up at the microphones and took up another hour lambasting Rogers for his new coal plant, now being built in Cliffside, N.C. If Rogers was really committed to breaking away from co2 emissions, why wasn’t he pouring the money into renewables?
“Business as usual for even another decade will be disastrous,” said Jim Warren, executive director of the North Carolina Waste Awareness and Reduction Network. A 25-year-old shareholder pleaded with Rogers to stop buying coal from mountaintop mines and foreswear nuclear energy. “What you invest in today, my generation has to pay for in the future,” she said. “Please do not steal from your grandchildren and leave us with a mess to deal with.”
But most of the shareholders, who numbered 250 or so, rolled their eyes as the environmentalists spoke; some openly heckled. “I would just like to caution our company not to get on this global-warming bandwagon,” one shareholder stood up to say. “I’ve read a lot of scientists, and there’s no agreement.” Rogers remained unwaveringly polite to the opposition, though — at several points shushing the hecklers, and thanking each speaker who laid into him.
When I saw Rogers a few days after the event, he grimaced at the memory of it. He is annoyed by opposition to his new coal plant; he also seems genuinely puzzled that local environmentalists don’t see the big picture as he does, that they don’t trust his 40-year plan to slash Duke’s carbon output. He maintains that the new plant will partly replace two older coal-fired ones, and because it is much more efficient, it will produce 30 percent less co2. “Our overall carbon footprint is going to go down,” he insisted. His frustration is the flip side of his desire to talk endlessly to critics of coal; he says he believes he can persuade anyone, which is probably why he seems so alarmed when he fails.
Yet many local environmentalists no longer believe Rogers, and they have precisely the opposite view of how the future should unfold. They view the Lieberman-Warner bill not as too strong but as too weak. They point out, correctly, that Duke stands to reap tens of billions in free allowances, even under the existing bill, money that will subsidize the burning of coal. “This bill gives huge windfall profits to a company that buys a lot of coal, like Duke,” says Frank O’Donnell, the head of Clean Air Watch, an environmental group. “I happen to think that it’s immoral. In a sense, you’re paying the polluter. You’re rewarding the very companies that are the source of the problem.” He says he doesn’t believe that coal-dependent companies will move fast enough unless they feel the tighter pressure of even more aggressive carbon caps. Rogers is simply “greenwashing” his company, saying all the right things so he can wear the mantle of the revolutionary without having to make the hard sacrifices.
Allegations like these perturb Rogers no end. Many protesters, he told me, are an “eco elite” who don’t understand the need working-class people have for affordable energy. But then, in another breath, he admits he also understands why they view him askance.
“There’s an interesting contradiction in my position,” he said. “I’ve struggled with it. On the one hand, I want to smooth out the transition for the customers, because we’ve got low prices. But on the other hand, and this is sort of the awkwardness of it, the other truth is as prices go up, people’s behavior is modified.” Change needs to come, but how fast?
“That’s the art in this, and not the science.”
Clive Thompson, a contributing writer for the magazine, writes frequently about technology.
Copyright 2008 The New York Times Company
June 21, 2008
Don't let the right carbon policy get lost in the screams
JEFFREY SIMPSON
Globe and Mail
June 20, 2008
CALGARY — Consider these words: "For us, there is no debate about climate change. It's real. It needs to be addressed in a serious way and there is no time to lose. The longer action is delayed, the harder it will get."
Words from a greenie environmentalist? A speech by David Suzuki? Something from Stéphane Dion?
No, the words are those of Shell, one of the Seven Sisters of world oil. What to do? the company asks. Many things, to be sure, but one is to "put a price on emitting greenhouse gases."
There you have it: a price. We can fool around, as we have, with voluntary programs, exhortations to do the "right thing," public-awareness campaigns. We can subsidize here, there and everywhere. And we will get next to nowhere in combatting greenhouse gas emissions.
You can sort out politicians (and business people) who are serious about significant GHG reductions by asking a simple question: Who wants to put a price on carbon, and who doesn't?
Then, you can sort out the really serious one from the semi-serious by asking: Who wants the price to be universal, instead of directed only at selected targets, such as "big polluters" in industry?
The really serious ones will be those who espouse a carbon tax to drive up the price of polluting behaviour over time, recycling the additional revenue into lower personal and business taxes. The semi-serious politicians, or the not-at-all-serious ones, will dismiss this idea out of hand, grossly misrepresent it and finance television advertisements against it.
Yesterday, Mr. Dion, the Liberal Leader, showed himself to be a really serious politician about climate change, almost.
He got the formula for a serious attack on greenhouse gas emissions right - mostly - at what will undoubtedly be considerable risk to himself and his party.
The Harper government, lacking a really serious policy and apparently content for Canadian federalism to display complete incoherence, with provinces going off in all different directions, started spreading falsehoods about the Liberal proposal even before it was announced. Nothing suggests these falsehoods will stop. And the media, if the past is any guide, will concentrate on the political cockfight rather than examining the policy's substance, thereby inhibiting public understanding.
The essence of the Liberal plan is simple. It's an approach endorsed by leading economists (see the latest book by Yale's William Nordhaus), deemed theoretically acceptable by the Canadian Council of Chief Executives, preferred (quietly) by many CEOs (including those in the oil patch), already introduced by the British Columbia government, used in some European countries, but nonetheless very politically risky.
Risky, because it takes 30 seconds to explain in a sound-bite world of 10 seconds. So the second part of the explanation - that revenues from the carbon tax will be recycled back into the economy - gets lost in the critics' screams about the first part: They're Raising Your Taxes! Tax Grab! Insane (Mr. Harper's word)!
It doesn't matter that the plan asks the Auditor-General to report on the neutrality of the tax shift. It doesn't matter if, as in B.C., the finance minister's salary must decline if the tax shift is not neutral. In the crude world of attack politics, the risk falls on those who propose really serious policies.
The Dion plan acknowledges this reality, in that it fails to apply the carbon tax to gasoline. This fuel is ubiquitous and politically volatile. But no really serious attempt to use price to change behaviour over time can be complete without applying the tax to the fuel used to power most vehicles.
Instead, the Liberals are taking the existing 10-cents-a-litre federal excise tax on gasoline and calling it a carbon tax, then extending that tax to all other fuels. The greatest impact will be felt on home heating fuels, which is a bit backward in a cold climate such as ours, in contrast to changes from higher prices to vehicles and driving patterns. With gas prices having recently soared, the Liberals got scared, for understandable if regrettable reasons.
But the Liberals got the essence of a serious policy right: Tax the behaviour that pollutes, then use that revenue to reduce personal and corporate taxes. Bravo to the brave.
June 19, 2008
The Big Pander to Big Oil
Editorial
New York Times
June 19, 2008
It was almost inevitable that a combination of $4-a-gallon gas, public anxiety and politicians eager to win votes or repair legacies would produce political pandering on an epic scale. So it has, the latest instance being President Bush's decision to ask Congress to end the federal ban on offshore oil and gas drilling along much of America's continental shelf.
This is worse than a dumb idea. It is cruelly misleading. It will make only a modest difference, at best, to prices at the pump, and even then the benefits will be years away. It greatly exaggerates America's leverage over world oil prices. It is based on dubious statistics. It diverts the public from the tough decisions that need to be made about conservation.
There is no doubt that a lot of people have been discomfited and genuinely hurt by $4-a-gallon gas. But their suffering will not be relieved by drilling in restricted areas off the coasts of New Jersey or Virginia or California. The Energy Information Administration says that even if both coasts were opened, prices would not begin to drop until 2030. The only real beneficiaries will be the oil companies that are trying to lock up every last acre of public land before their friends in power - Mr. Bush and Vice President Dick Cheney - exit the political stage.
The whole scheme is based on a series of fictions that range from the egregious to the merely annoying. Democratic majority leader, Senator Harry Reid, noted the worst of these on Wednesday: That a country that consumes one-quarter of the world's oil supply but owns only 3 percent of its reserves can drill its way out of any problem - whether it be high prices at the pump or dependence on oil exported by unstable countries in Persian Gulf. This fiction has been resisted by Barack Obama but foolishly embraced by John McCain, who seemed to be making some sense on energy questions until he jumped aboard the lift-the-ban bandwagon on Tuesday.
A lesser fiction, perpetrated by the oil companies and, to some extent, by misleading government figures, is that huge deposits of oil and gas on federal land have been closed off and industry has had one hand tied behind its back by environmentalists, Democrats and the offshore protections in place for 25 years.
The numbers suggest otherwise. Of the 36 billion barrels of oil believed to lie on federal land, mainly in the Rocky Mountain West and Alaska, almost two-thirds are accessible or will be after various land-use and environmental reviews. And of the 89 billion barrels of recoverable oil believed to lie offshore, the federal Mineral Management Service says fourth-fifths is open to industry, mostly in the Gulf of Mexico and Alaskan waters.
Clearly, the oil companies are not starved for resources. Further, they do not seem to be doing nearly as much as they could with the land to which they've already laid claim.
Separate studies by the House Committee on Natural Resources and the Wilderness Society, a conservation group, show that roughly three-quarters of the 90 million-plus acres of federal land being leased by the oil companies onshore and off are not being used to produce energy. That is 68 million acres altogether, among them potentially highly productive leases in the Gulf of Mexico and Alaska.
With that in mind, four influential House Democrats - Edward Markey, Nick Rahall, Rahm Emanuel and Maurice Hinchey - have introduced "use it or lose it" bills that would force the companies to begin exploiting the leases they have before getting any more. Companion bills have been introduced in the Senate, where suspicions also run high that industry's main objective is to stockpile millions of additional acres of public land before the Bush administration leaves town.
This cannot be allowed to happen. The Congressional moratoriums on offshore drilling were put in place in 1981 and reaffirmed by subsequent Congresses to protect coastal economies that depend on clean water and clean coastlines. This was also the essential purpose of supplemental executive orders, the first of which was issued by Mr. Bush's father in 1990 after the disastrous Exxon Valdez oil spill the year before.
Given the huge resources available to the energy industry, there is no reason to undo these protections now.
June 12, 2008
U.S. oil law 'won't affect Canada'
Leading U.S. senator says oilsands don't qualify as a 'dirty' product
Shaun Polczer
Canwest News Service
June 12, 2008
CALGARY -- American legislation to bar so-called "dirty" fuels doesn't apply to Canadian oilsands, a leading U.S. senator said yesterday.
Speaking to a forum of Canadian and American business people in Washington, Senator Jeff Bingaman (D-N.M.), chairman the senate energy committee, said oil from Alberta's oilsands doesn't qualify as dirty oil under U.S. law.
The provision, Section 526, bars the U.S. government from buying alternative fuels that create high levels of greenhouse gas.
President George W. Bush signed the bill into law last December, but a special interpretation committee is deciding if Canadian oilsands products qualify for punishment under the law.
Bingaman said it doesn't.
"Since Canadian feedstocks are commingled with U.S. feedstocks at oil refineries, it's hard to see how Section 526 could be enforced against Canadian oilsands in any case," he told the Canadian American Business Council. "I do not believe that Section 526 will be a barrier to oil imports from Canada."
Environmental groups on both sides of the border have been lobbying to have oilsands declared "dirty oil."
Various delegations to Washington, including one led by Premier Ed Stelmach, have faced protests from environmentalists who see oil produced from bitumen as a major source of greenhouse gases linked to global warming.
Yesterday, the Wall Street Journal reported that a coalition of environmental groups led by the Sierra Club succeeded in having air permits for the Wood River, Ill, refinery expansion halted.
The facility, the 10th-largest refinery in the U.S., would process more than 350,000 barrels per day of heavy oil from the ConocoPhilllips-EnCana oilsands venture.
The project was expected to be complete by the first quarter of 2011, but Conoco spokesman Bill Graham said it's unclear if it will be delayed.
The expansion will actually allow the refinery to produce cleaner fuels such as low-sulphur diesel and reformulated gasoline, Graham said. He suggested the public at large is starting to blame the environmental lobby and government red tape for high fuel prices.
Most Americans are happy to have reliable oil supplies from Canada, he said.
"The environmental groups are certainly more aggressive, but what's interesting is the opinion of the public as a whole."
Greg Stringham, the Canadian Association of Petroleum Producers' vice-president of markets and fiscal policy, said Bingaman's comments are a positive indicator. But he cautioned that the environment has become a bipartisan issue that will cross party lines in the upcoming presidential election.
He said he doesn't expect the dirty oil issue to be resolved before November.
"We just have to wait and see how they interpret it [Section 526]," he said.
Dan Woynillowicz, a senior policy analyst with the Pembina Institute, an environmentalist organization, said it's still possible that punitive measures against oilsands will be adopted in the U.S. He dismissed Bingaman's comments as a personal opinion.
"They really are nothing more than the senator's interpretation of Section 526 and how it might be implemented," he said.
Even if oilsands is exempted from clean fuel legislation, Woynillowicz said the American government is still likely to take action to improve its environmental performance.
June 09, 2008
Questions flow from gas line proposal
A primer on the pipeline and the issues legislators are now pondering.
By WESLEY LOY
Anchorage Daily News
(06/08/08 00:05:09)
JUNEAU -- OK, listen up. Are you baffled by this whole natural gas pipeline thing? Are you wondering why Alaska legislators and Gov. Sarah Palin are stuck in Juneau in June instead of out fishing for salmon? Don't have any idea who TransCanada is, or how "Denali" could be anything but a mountain?
Let's take a time out for a little pipeline primer.
Q. So why are the lawmakers in Juneau?
A. Because Palin called them there for a special session.
She wants them to award a license and up to $500 million in state money to TransCanada Corp. as an incentive to build a pipeline from the Prudhoe Bay oil field to a gas distribution network in Alberta, Canada.
The pipeline would be 1,715 miles long and would follow the Alaska Highway.
Q. But don't we already have a pipeline? Why do we need another one?
A. We do have the 800-mile trans-Alaska pipeline from Prudhoe to Valdez. It started up in 1977 and is a famous engineering marvel.
But the pipeline is designed to carry crude oil, not natural gas. So we need a separate line to carry the huge gas reserves stuck in the ground in Prudhoe and other North Slope oil fields.
Q. Three oil companies -- BP, Conoco Phillips and Exxon Mobil -- are the main owners of the North Slope oil fields and the trans-Alaska pipeline. Why haven't they built a gas line?
A. That's a question that's vexed Alaska politicians and economic development boosters for decades.
The oil pipeline has been a money hose for the state, pouring out thousands of jobs and billions of dollars in tax revenue. The politicians and boosters can see another boom in a gas line.
Two words sum up why the oil companies seem to be so stubborn: cost and risk.
A gas line would be super expensive, probably more than $30 billion. Its success would depend largely on future gas prices. In recent years, prices have soared. But will they stay high? The oil companies also worry that Alaska politicians might raise taxes after they've invested in a pipeline.
Given those factors, the oil companies have chosen to stake their money on safer projects elsewhere in the world.
Besides, they've had a lucrative use for the gas -- for a couple of decades they have pumped the gas back underground to pressure more oil out of Prudhoe.
Q. So who is TransCanada?
A. It's a Calgary-based energy company that specializes in running gas and oil pipelines. It's also involved with nuclear, gas, coal, wind and hydroelectric power plants.
The company doesn't drill for oil and gas like BP, Conoco and Exxon do.
TransCanada is small compared to the oil companies. According to a study done for legislators, TransCanada has a market value of $23 billion compared to $144 billion for Conoco, the smallest of the three oil companies.
Alaska's gas could fill TransCanada's existing pipeline network for many years -- a wonderful thing for the company, according to financial experts.
TransCanada is the only company eligible for the state license and the $500 million in incentive money. That's because Palin picked it from among five bids received last fall under a new law, the Alaska Gasline Inducement Act or AGIA.
The oil companies chose not to bid.
Q. If legislators grant the license, the welders will finally go to work on the gas line, right?
A. Wrong! The license is not a construction contract. All it does is obligate TransCanada to try to line up customers for its pipeline, and to get permission to build from federal pipeline regulators.
Q. Who would the customers be?
A. BP, Conoco and Exxon, plus any other drillers with gas to move to market.
It's these customers, not TransCanada, who ultimately pay for the pipeline through shipping fees.
Under the rules, they'd have to pay the fees over many years even if for some reason they didn't have gas to ship, or the price of gas crashed. Think of it like your gym membership -- you pay even if you skip your workouts.
This is why a gas pipeline is so risky for the oil companies, even if somebody else builds it.
Q. If TransCanada does sign up customers and wins federal permission, when might it build the gas line?
A. According to the schedule the company gave the state, construction could start in seven years with the first gas flowing in late 2017.
Q. If the legislators give TransCanada the AGIA license, does this mean only TransCanada has the right to build a pipeline? And would the oil companies have to use it?
A. No and no. In fact, two of the oil companies, BP and Conoco, now say they have their own plan to build a pipeline to link into the North American distribution grid in Alberta. The project looks very much like TransCanada's.
The oil companies have coined a name for their pipeline -- Denali, like the mountain.
Federal pipeline regulators conceivably could grant permission to either or both pipelines.
Q. When will the legislators vote on the TransCanada license?
A. Under the law, they have until the end of July. House Speaker John Harris, R-Valdez, says he expects the vote will come by the middle of next month. Before they vote, lawmakers plan to hold hearings around the state, including Anchorage the week of June 16.
Q. What happens if they reject a TransCanada license?
A. That's a gray area. Some lawmakers have serious reservations -- they don't see the need to hand TransCanada a half-billion dollars when BP and Conoco say they'll build a pipeline without the state subsidy.
Other lawmakers, tired of waiting so many years for a gas line, favor the license, saying they just don't trust what the oil companies say.
Awarding TransCanada the license is a top priority for the popular governor. Palin says the pipeline company has the right stuff.
Failing a yes vote on the license, we might see a new round of bidding under AGIA.
Find Wesley Loy online at adn.com/contact/wloy or email him at wloy@adn.com
or call him in Juneau at 1-907-586-1531.
June 05, 2008
In Houston, all eyes are on Canada
Enthusiasm about oilsands - and insecurity elsewhere - put Canada at the forefront of global petroleum play
Claudia Cattaneo
Canwest News Service
Thursday, June 05, 2008
Rich natural gas deposits in northeastern B.C.
are among the petroleum resources in Canada
that are drawing more interest from the U.S.
CREDIT: Stuart Davis, Vancouver Sun files
HOUSTON -- Americans may show little appreciation or awareness at times of Canada as their top energy supplier, but in this global oil industry centre, Canada is hot.
It's a big change in sentiment from a few years ago, when U.S. companies would rather cozy up to Russia or the Middle East than tough it out in the frozen North. Now, the size of the oilsands, the strong Canadian currency, even the emerging Horn River natural-gas play in northeast British Columbia, a lookalike of the fabulously successful Barnett Shale near Fort Worth, Tex., are big topics of conversation in this city's grand oil towers.
Ed Stelmach and Danny Williams, premiers of oil-and gas-rich Alberta and Newfoundland, respectively, are well-known, and securing close relations with them has become a priority. Royalty policies are debated and compared. Curiosity about oilsands or East Coast offshore extraction technologies runs high. Energy Magazine, a Houston-based publication that covers the global energy scene, last month named Canada Country of the Year.
Indeed, industry heavyweights such as Chevron Corp. would like a lot more Canada right now. "If you want me to put one word on it, it's 'enthusiastic,' " said Gary Luquette, Chevron vice-president and one of the highest-ranking executives for the company based in the city. "Chevron has targeted Canada as one of the areas where we really would like to grow."
Part of the reason is that there is a greater understanding of the oilsands, what it takes to produce them, and the U.S market for Canadian oil, said Luquette, president of Chevron North America Exploration and Production Co. The San Ramon, Calif.-based oil supermajor was an early believer in the Northern Alberta deposits, as a partner in the Athabasca Oilsands Project run by Royal Dutch Shell PLC.
"Access around the globe has changed, and so as you find more and more areas that are off-limits or problematic in terms of entering, you come back to Canada and say, 'My goodness, you have a huge resource base, why not Canada?' "
The oil nationalization policies sweeping other oil-producing jurisdictions, such as Venezuela, have placed Canada in such a favourable light that the Houston-based staff of Enbridge Inc. have an inside joke: "Hugo Chavez is the Enbridge employee of the year because he's done a lot to help us," said Stephen Letwin, the top executive in the United States for the Canadian oil-pipeline company. Enbridge is expanding aggressively in the country and working to bring oilsands oil all the way to the U. S. Gulf Coast.
Some refineries it deals with are going out of their way to buy Canadian.
John Lowe, executive vice-president for exploration and production for Houston-based ConocoPhillips, said Canada is so important to his company that one out of seven dollars it will invest this year is going north, much of that to Alberta. The oilsands "still have lower returns than some other projects, but they are one of the largest resources we have in the company, so they are extremely important because of the size and scale that can be achieved."
"The resource is just enormous, it's a very unique resource around the world," he said in an interview from Edmonton, where he told the Chamber of Commerce recently that "this province, its resources and its people are vital to us and to the world's energy future."
Even Rex Tillerson, the chairman and CEO of Exxon Mobil, which only recently recommitted to the oilsands with the Kearl project, called the deposits "a tremendous resource opportunity to meet our energy needs.
"It's very difficult in terms of the technology, but a lot of the technology has been developed and is continuing to be developed that is going to make more of that resource affordable and deliverable in a way that is less intrusive to the environment," Tillerson said after addressing shareholders last week in Dallas.
All the talk about Canada is fuelling buzz that U. S. companies will increase their oilsands exposure by making sizeable acquisitions.
From the standpoint of U.S.-based firms, "When you look around the world, and where you are going to get the secure access to resource, there are two areas that pop to mind -- first is oilsands, and the other is the U.S.," said Brian Reinsborough, president of Nexen Petroleum U.S.A., the Dallas-based U.S. affiliate of Nexen Inc.
"I think you will see more U. S. companies taking a position in Canada."
ConocoPhillips, which has been talked about as a potential bidder for EnCana's oilsands spinoff once EnCana splits itself into two entities next year, doesn't have any acquisition plans, Lowe said. However, he said ConocoPhillips knows EnCana's oilsands assets better than anybody else through a joint venture involving EnCana's two major thermal projects in Alberta and ConocoPhillips' two U.S. refineries.
Chevron, which has been trying to expand in the oilsands, has been finding it difficult to make a move. "It's challenging economically, all of the acreage is pretty much tied up now."
The Alberta government didn't help by increasing royalties that have made the oilsands even more of a challenge, a message that Chevron has conveyed to Stelmach, Luquette said.
For Chevron, the momentum is moving to another Canadian basin -- the East Coast offshore, where it is looking at expanding an already sizeable position that includes a stake in the Hibernia field, the proposed Hebron heavy-oil field, and exploration in the Orphan basin.
"We now look at the East Coast of Canada in a preferred way," Luquette said. "We can be competitive in the East Coast. The oilsands for us has fallen to the bottom."
© The Vancouver Sun 2008
June 04, 2008
Protect Waterton-Glacier park, groups implore UN
MARK HUME
Globe and Mail
June 4, 2008
VANCOUVER -- Several leading environmental groups in the U.S. and Canada have written to the United Nations asking that proposed energy developments along British Columbia's Flathead River be investigated as threats to a World Heritage Site.
In a letter sent yesterday, the organizations state that Waterton-Glacier International Peace Park, which links globally significant national parks in Alberta and Montana, be placed on the UN's World Heritage in Danger list.
"There is substantial danger that the existing statutory and regulatory framework will fail to adequately protect Waterton-Glacier International Peace Park and its surrounding lands from adverse impacts caused by mining and CBM [coal bed methane] development in the headwaters of the Flathead River," the groups state in a letter to Francesco Bandarin, director of the UN's World Heritage Centre.
The UN has recognized Waterton-Glacier International Peace Park as a World Heritage Site since 1995, when it was listed because of its "outstanding universal value" and its extraordinary densities of grizzly bears, wolves, lynx and wolverine.
Chloe O'Loughlin, executive director of the B.C. chapter of the Canadian Parks and Wilderness Society, one of eight groups that signed the letter, said placement on the World Heritage in Danger list would bring intense scrutiny to the coal and coal bed methane projects, which environmentalists say will pollute the Flathead River.
The proponents, whose projects have not yet been approved by government, have said they will operate within strict guidelines that are meant to protect the environment.
But critics claim the massive open-pit coal mine, which would remove 40 million tonnes of coal and create 300 million tonnes of waste rock, and the methane project, which could potentially see thousands of wells drilled in a 500-square-kilometre zone, would inevitably pollute the Flathead River.
The Flathead rises in the southeast corner of B.C., with Waterton National Park lying directly east of the Rocky Mountains in Alberta, and Glacier National Park to the south in Montana.
The Flathead forms the western border of Glacier National Park, and the proposed B.C. developments have drawn criticism from Montana's leading politicians, and recently from Barack Obama, who was campaigning in the Democratic primary in Montana earlier this week.
Ms. O'Loughlin said the environmental groups, which include the Sierra Club BC, National Parks Conservation Association and the Wilderness Society, have turned to the UN because of concerns that B.C. will approve development in the Flathead despite growing opposition.
She said protesting to the World Heritage Committee is a logical step because the developments could not only pollute the Flathead, but might also fragment habitat used by wildlife that now move easily back and forth from B.C. into the parks in Alberta and Montana.
"A World Heritage site is in danger here. It is being threatened by potential energy and mine developments in the Flathead and will be as long as the Canadian portion of the Flathead is open for business," Ms. O'Loughlin said.
She said she expects a response from the World Heritage Committee within six weeks and is hoping an investigation could begin soon after. "There is a sense of urgency about this," she said.
There are 14 World Heritage sites in Canada, including the Rideau Canal, which runs from Ottawa to Kingston and was listed by the UN last year. Nahanni National Park in the Northwest Territories and L'Anse aux Meadows in Newfoundland were the first Canadian sites on the list in 1978.
The UN has 30 sites on its World Heritage in Danger list, none in North America.
Among the sites in danger are Garamba National Park in the Democratic Republic of the Congo, where wildlife have been massacred; the Galapagos Islands, Ecuador, which are threatened by the introduction of alien species; and Simen National Park, Ethiopia, where human settlement and road-building activities are blamed for wildlife declines.
June 03, 2008
Obama opposes plan for mine on B.C. river
MARK HUME
Globe and Mail
June 3, 2008
VANCOUVER — A wild British Columbia river has become part of the political landscape in the U.S. presidential campaign.
With voters in South Dakota and Montana going to the polls today in the last two primaries in a dramatic race for the Democratic nomination, front-runner Barack Obama appealed to environmentalists - and a few superdelegates - by throwing his support behind a campaign to halt a proposed coal mine on the headwaters of the Flathead River, in southeastern B.C.
"Barack Obama supports efforts by Senators Max Baucus, Jon Tester as well as Governor Brian Schweitzer to stop the Cline mine," Matt Chandler, of Mr. Obama's Montana press office, states in an e-mail that was released yesterday.
The three Montana politicians, all superdelegates at the Democratic national convention, have been strong critics of the proposed mine, saying it would pollute waters south of the border and threaten Montana's Glacier National Park.
"The Flathead River and Glacier National Park are treasures that should be conserved for future generations," stated Mr. Chandler in the e-mail, which was released by its recipient, Will Hammerquist, a Montana representative of the National Parks Conservation Association.
Mr. Chandler confirmed the e-mail and said it had been sent after consultation with Mr. Obama over the Flathead issue, but he declined to comment further.
Mr. Hammerquist, whose non-profit U.S. organization works to protect American parks, said it is an important statement by a heavyweight politician who appears on the verge of winning the Democratic nomination and possibly becoming the next president.
"I think it's significant," Mr. Hammerquist said of Mr. Obama's position. "That [statement] about supporting the efforts of Montana's federal elected delegation and the governor, to stop the Cline mine, is really strong."
Mr. Hammerquist said that if Mr. Obama becomes president, his interest in the Flathead would elevate the issue to the highest political level and could lead to an agreement between Canada and the U.S., and Montana and B.C., over collaborative management of the transboundary river.
"It's a huge signal for us on the American position on this issue," said Chloe O'Loughlin, executive director of the B.C. chapter, Canadian Parks and Wilderness Society.
"Here's a potential president of the United States on one of the busiest days of his career, on the eve of his nomination, standing up for this critical piece of wilderness in B.C. This is a very significant statement."
Ms. O'Loughlin said the decision over whether the proposed coal mine goes ahead clearly rests with B.C. and Canada, but Mr. Obama's statement shows how important the issue is south of the border.
"I think Premier Gordon Campbell and Barack Obama could be good diplomats on working towards an international agreement to co-operatively manage the river; that's what I'd like to see," said Ms. O'Loughlin, whose organization has been calling for protection of the Canadian portion of the river for 20 years.
Governor Schweitzer and Senators Baucus and Tester have for years been trying to persuade B.C. and Canada to add the watershed to an international network of parks that protects the Rocky Mountain landscape where B.C., Alberta and Montana meet. East of B.C.'s Flathead Valley region is Waterton Lakes National Park, in Alberta, and south is Glacier National Park, in Montana.
In a recent letter to Mr. Campbell, Governor Schweitzer described the Flathead as "one of the cleanest and wildest rivers remaining in America," and urged B.C. to protect it.
He suggested Montana and B.C. could reach "an agreement that provides B.C. with sustainable economic opportunities along our common border while protecting the upper Flathead River Basin."
Earlier this year, the B.C. government rejected a British Petroleum proposal to extract coal-bed methane in the Flathead basin, and recently the Liberal MLA for the region, Bill Bennett, said that coal mining should not be allowed in the valley.
But the most controversial proposal remains alive. Cline Mining Corporation has plans to remove 40 million tonnes of coal and 300 million tonnes of waste rock during a 20-year open-pit operation.
May 27, 2008
Rockefeller Rebellion Turns Up Heat on Exxon
COMMENT: Long set of articles, but fascinating if you're inclined to be fascinated by this stuff. Change comes about in many different ways, but the forces that create the conditions for change usually have to come from all directions. ExxonMobil - that's gonna be one hard nut to crack.
Rockefeller Rebellion Turns Up Heat on Exxon
John D.'s Heirs Seek Change -- and Respect
By LESLIE EATON and RUSSELL GOLD
Wall Street Journal
May 24, 2008
Two decades ago, Neva Goodwin Rockefeller grew so tired of all the baggage that came with her fabled family name that she changed it and became plain Neva Goodwin.
But now, Ms. Goodwin, 63 years old, is embracing the powerful Rockefeller name as she publicly challenges the management of Exxon Mobil Corp., successor to the oil company founded by her great-grandfather, John D. Rockefeller. As Neva Rockefeller Goodwin, she has marshaled four generations of Rockefellers to join her in a campaign to force major changes at one of the most profitable companies in the world. The battle will come to a head at Exxon's annual meeting Wednesday in Dallas.
See a family tree of the Rockefellers.
[You need to be logged into the Wall Street Journal for this to work]
Some members of the family joined the fight out of a passionate belief in the threat of global warming; others were concerned that Exxon is overlooking business opportunities or risks. Many seem offended that the company appears impervious to the wishes of its shareholders, including those named Rockefeller.
And they have struggled -- not always successfully -- with the feeling that engaging in a public brawl with Exxon was simply not the done thing. After all, David Rockefeller, 92, the former chairman of Chase Manhattan Bank, had taught them that investor activism was "mostly carried out by nuts," says his daughter, Ms. Goodwin, a Cambridge, Mass., economist.
Fifteen family members, mostly cousins from Ms. Goodwin's fourth generation, have stepped forward to co-sponsor four shareholder resolutions urging change at Exxon. While three address concerns about global warming and renewable energy, the Rockefellers have rallied most enthusiastically around a fourth proposal to name an independent chairman, a plan they say is supported by 73 direct descendents of John D.
Focus on Oil
Exxon roundly rejects the need both for an independent chairman and for investing more in alternative energy. Chairman and Chief Executive Rex Tillerson says his job is to protect shareholders' investments by helping the company's thousands of engineers and scientists focus on its core business: oil and natural gas. The company says oil and gas will continue to provide the bulk of energy needs and they are working to provide that needed energy.
"We are a petroleum and petrochemical company," he said in an interview. "In fact, we think we're the best one in the world and our performance would tend to support that."
The odds are long that the family will get its way. As stockholders with only a tiny holding relative to Exxon's 5.3 billion voting shares, the Rockefellers' main clout comes from wielding their name to gain attention and woo other shareholders. The fact that Exxon just finished the most profitable year in American corporate history doesn't help their cause. Last year, Exxon posted a profit of $40.61 billion. The company's shares have more than doubled in the past four years.
Big Push
In the run-up to Wednesday's shareholder meeting, normally limelight-loathing Rockefellers have pulled out the stops to push their proposals -- including holding a press conference at a Manhattan hotel and endorsing a campaign slogan: "Exxon for Owners."
Peter M. O'Neill, 45, the son of one of Ms. Goodwin's cousins, is doing something that is usually anathema in the family: acting as a spokesman and giving interviews to the press.
It's an unprecedented effort by the politically diverse clan, says family historian Peter J. Johnson, who has worked for the Rockefellers for 32 years. "To actually get consensus in the family is rare," he says.
Exxon executives at first belittled the Rockfellers' potential influence by pointing out to reporters that the family members sponsoring the proposals own only .006% of the company's shares.
Family members say they own much more, but won't say how much. They say most of the family investments sit in a thicket of trusts set up starting in 1934 and mostly managed by a unit of J.P. Morgan Chase. Some say they don't even tell other family members how much they own.
On May 12, Exxon sent a letter to shareholders urging them to reject the proposal for an independent chairman, arguing "no one governance model fits all companies."
The Rockefellers are mounting the most serious shareholder revolt against Exxon in recent memory. But they're going up against a company with unrivaled success at finding, extracting and refining fossil fuels. Exxon has managed to make billions of dollars a year whether oil prices were high or low under men who spent their whole careers tending its fields and refineries. That strong culture strikes some outsiders, including the Rockefellers, as insular.
The Rockefellers' ties to Exxon go back to the 1870s, when John Davison Rockefeller Sr. began to put together the cartel that became Standard Oil. Trustbusters later split it into 34 companies, including what became Chevron Corp. and ConocoPhillips. Two of the largest, Exxon and Mobil, merged in 1999.
A century ago, Mr. Rockefeller was reviled as a rapacious plutocrat. Eventually he and his son, John Junior, developed a reputation for philanthropy on a grand scale. The family was responsible for, among many other things, restoring Colonial Williamsburg and creating Grand Teton National Park.
John D.'s five Rockefeller grandsons were towering figures of the mid-20th Century. Most famous was Nelson, four-term governor of New York and later vice president under Gerald R. Ford. The only survivor of that group is Neva's father, David, who issued a statement offering his support to the family's campaign.
Younger members of the now 232-person clan have generally avoided the spotlight. They live all over the world, but gather twice a year, often at Kykuit, the Rockefeller estate in Pocantico Hills, up the Hudson River from New York City.
To some Rockefeller watchers, the newfound activism appears to be another outbreak of the unease about their oil-based fortune that periodically grips family members. Those who came of age in the 1960s and 1970s were particularly ambivalent, says Peter Collier, a California writer who has chronicled the Rockefeller, Roosevelt and Ford families.
"For them, Exxon is not only an environmental malefactor, it's also original sin," he said in an interview. By challenging Exxon, "They are trying to remove the stain of oil from the family name."
That's a little melodramatic for many of the Rockefellers, including Ms. Goodwin, who in the 1970s was a friend and colleague of the unconventional inventor and professional visionary Buckminster Fuller. She lives with her historian husband in a baby-blue clapboard house, where a collection of Far Side cartoons sits on a bookshelf near volumes of Charles Darwin's correspondence. A Prius is parked in the garage.
"I don't feel responsible for everything my family has ever done," she says. "Selectively, I look at the really fine things the family has done and am extremely proud."
As co-director of the Global Development and Environment Institute at Tufts University, Ms. Goodwin's interest in corporate power was mostly academic. But a couple of years ago at Tufts, she met Sister Patricia A. Daly, a shareholder activist, and decided to co-sponsor her resolution, at Exxon's 2003 annual meeting, asking the company to study the impact of climate change.
Looking for Support
Ms. Goodwin then turned to her two-dozen Rockefeller first cousins for support. Five signed an email that read, in part, "Most members of our family will own shares of Exxon for far longer than the present management will be in place, and therefore we have an important interest in and responsibility toward the long-term viability of the company."
The resolution failed, but it ignited interest among the family, which formed a committee to study the issue. Some on the committee were ardent environmentalists; others had a pragmatic business outlook.
Among the latter was Mr. O'Neill, a former social worker who once ran a mental health clinic in Harlem and now sits on the boards of several private companies and philanthropies. A man who speaks carefully and uses "dialogue" as a verb, he says he worries that Exxon isn't positioning itself for a sea change in the energy markets.
"I care about the bottom line," he says, noting that for him, as for most in the family, Exxon is the largest single investment.
Talk with Executives
Twice in 2004, in response to requests by the Rockefellers to meet with Exxon about their concerns, the company sent investor-relations executives to talk to the family in their art-filled offices on the 56th floor of 30 Rockefeller Center. The family wanted to discuss Exxon's assumptions about the future of energy, particularly the company's assertion that alternative fuels will make few inroads into the dominance of oil and gas, Ms. Goodwin says. The Rockefellers were concerned Exxon would be vulnerable if energy markets changed more -- or more quickly -- than the company anticipated.
Exxon managers brought basic presentations to the meetings that the company gives to most shareholders, according to family members, and didn't specifically address their worries.
Exxon didn't respond to requests for information about what happened at those meetings.
The next year, the family held a private conference to educate itself, inviting scientists, engineers, industry executives and activist investors. "This is an advantage to being a Rockefeller," Ms. Goodwin says. "If you want to have a discussion about the future of energy, people are willing to come to it."
Family interest in Exxon was snowballing when Mr. Tillerson took over as chief executive in January 2006, succeeding Lee R. Raymond. But the Rockefellers made little headway with Mr. Tillerson, either.
Congratulatory Letter
Forty-three family members signed a congratulatory letter asking to meet him and the board. Instead, Mr. Raymond and Mr. Tillerson invited only Ms. Goodwin's father, David, to a Manhattan lunch. Although Ms. Goodwin eventually got an invitation, she says she didn't hear "anything they haven't said other times to many people."
Attempts to meet directly with other members of the board were rebuffed, Ms. Goodwin and Mr. O'Neill say. An Exxon spokesman says the requests were handled in the same manner used for all shareholders. Last fall, Exxon arranged for some activist shareholders to meet executives and researchers investigating alternative energy. Mr. O'Neill says he came away still concerned about the company's long-term strategies.
Mr. Tillerson says Exxon monitors potential new fuels, but won't invest in them simply because it's the politically correct thing to do. He says he refuses to support a policy of "casting a lot of corn out on the ground and hoping some of it takes root."
By spring of last year, the family's frustration with Exxon had reached full boil. At their June gathering, in a Tudor-style building on the Kykuit estate known as the Playhouse and hung with portraits of their ancestors, they decided to take action.
One way was to put their ideas to a shareholder vote by co-sponsoring so-called proxy resolutions at Exxon's annual shareholder meeting. The resolutions are nonbinding, although companies seldom ignore those that attract a majority.
Ms. Goodwin filed her own proxy resolution, calling on Exxon to study the effects of global warming on poor communities, and several of her cousins rallied round as co-sponsors. Other cousins and their children opted to support two other environmental resolutions, one on reducing greenhouse gases and the other on investing in alternative energy.
Mr. O'Neill chose to co-sponsor the independent chairman resolution, which had been introduced for several years by Robert A. G. Monks, a longtime activist on corporate governance. They were joined by another Rockefeller, John de Cuevas, a writer and environmentalist whose grandmother was John D. Rockefeller Sr.'s eldest child.
Heavy Support
The chairman proposal has drawn the support of more than 93% of John D. Rockefeller Jr.'s 78 direct adult descendents, the family says. (Senator Jay Rockefeller of West Virginia has his holdings in a blind trust, and said in a statement that though supportive, he isn't directly involved).
Mr. Monks, who had gradually been building support for his proposal to 40% of the vote last year, believes an independent chairman can help ensure an independent board, and an independent board is key to a company's evaluation of its strengths and weaknesses. As he wrote in a letter to shareholders, "such inner-reflection is difficult when the board is lead by a CEO who has spent most of his adult life at the company, as has the entire executive management team." For Mr. Monks, the Rockefeller support was an unexpected boon that moved the debate outside his world of corporate-governance geeks. "God bless them," he says of the Rockefellers. "They hate the idea of publicity. But they are willing to do it because they think something is wrong at Exxon."
Reticent to Speak Out
Most Rockefellers have been reticent to speak publicly about the effort. One family member who did agree to talk was Michael S. Rockefeller, a grandson of Nelson, who runs an Internet advertising agency called Active Media. The family realized it would take heat for its position, he says, and it has: He says some critics have described the family as "rich, spoiled little kids."
But one criticism, he says, "makes us just boil": The argument that John D. himself would never have agreed to a separate chairman-president arrangement.
According to Mr. Johnson, the family historian, that is exactly what happened in 1896, when the patriarch gave up operating control of Standard Oil while serving in the top board position until 1911.
Mr. O'Neill says he had to do a lot of soul searching before agreeing to go public with their fight. Rockefeller family members sit on a lot of corporate boards, he says, "and we're not known for being meddlers."
Write to Leslie Eaton at leslie.eaton@wsj.com2 and Russell Gold at russell.gold@wsj.com3
URL for this article: http://online.wsj.com/article/SB121157457128518175.html
STANDARD OIL'S FAMILY TREE
When the Supreme Court ordered the breakup of Standard Oil Trust in 1911, 34 companies came out of the split. Many of those companies have since recombined to become some of today's largest oil companies.
• Standard Oil of Indiana is spun out of Standard Oil (1911); becomes Amoco in 1954. Acquired by BP (1998).
• Atlantic Petroleum Storage Company is acquired by Standard Oil (1874); becomes independent again with breakup of Standard Oil (1911); partners with Richfield Oil Corp. & forms Arco (1966), is acquired by BP (2000).
• Standard Oil of California is spun out of Standard Oil (1911); Socal buys Gulf, rebrands as Chevron (1984).
• Continental Oil is reincorporated after breakup of Standard Oil (1911); Conoco, as it is later called, becomes part of Du Pont (1981), later is spun out as a separate company; merges with Phillips Petroleum to become ConocoPhillips.
• Standard Oil of New Jersey becomes independent with dissolution of Standard Oil Trust (1911); changes name to Exxon (1972); merges with Mobil (1999) -- itself is a descendant of Standard Oil known as Standard Oil Co. of New York (Socony).
• Standard Oil Company of Ohio is created by breakup of Standard Oil (1911); BP acquires 25% stake in Sohio (1970) after discovery of oil in Prudhoe Bay; BP acquires rest of Sohio, creating BP America (1989).
• The Ohio Oil Co. becomes independent after breakup of Standard Oil (1911). Changes name to Marathon Oil Co. (1962); becomes a subsidiary of United States Steel Corp. (1982); splits into independent company known as Marathon Oil Co. (2001)An independent chairman, they argue, could chart a strategy for Exxon's future, one that many of them hope would include more focus on renewable energy. They also believe an independent chairman -- to whom the CEO would be accountable -- might be more responsive to shareholder concerns.
Energy For Exxon Holders, Profit Is Not Enough
By RUSSELL GOLD
Wall Street Journal
May 24, 2008
Hundreds of Exxon Mobil Corp. investors will gather Wednesday at the Morton H. Meyerson Symphony Center in Dallas. Attendees of the annual shareholders meeting should expect Exxon's own Bengal Traders brand coffee, visual displays that tout the company's latest technological breakthroughs -- and a clash between activists and management over the future of the company.
In some ways, it is an odd time for discontent among the Exxon faithful. With crude-oil prices at record levels, Exxon's stock hit a record high this week. Dividends are up. Profits are unprecedented.
By these financial measures, Rex Tillerson, the chairman and chief executive, should expect to hear a chorus of hosannas from some investors for his recital of the past year's accomplishments. But the activists are focused on the future. They worry Mr. Tillerson isn't preparing enough for what many expect to be a turbulent time in the energy markets.
The debate on the future of energy isn't academic. Exxon believes that in 2030, just as today, about 60% of the world's energy demand will be met with oil and natural gas. (The rest is largely coal, nuclear and hydropower.) Therefore, the company directs the vast majority of its capital budget to finding, extracting and selling oil and gas.
Most activists believe governments will soon mandate carbon-emissions constraints in order to curb global warming. This will lead to the swift rise of nonfossil fuels such as wind, solar, nuclear and biomass.
Exxon faces a raft of shareholder resolutions aimed at both steering the company toward a greener future and forcing change at the top by appointing an independent chairman.
These votes have been gathering momentum. In 2003, a proxy resolution to split the chairman and chief executives roles received 22% of the vote. Last year, it got 40%. Another proposal, to require Exxon to set specific goals limiting greenhouse-gas emissions, was favored by 31% of shareholders last year. Both are back on Wednesday's ballot. A new proposal would require Exxon to take a hard look at sustainable-energy technologies.
Offering vocal support to all three measures are descendants of John D. Rockefeller, the founder of Exxon-forerunner Standard Oil. Not only are they using their name to draw attention to the resolutions, the family and its retinue have been on the road in recent weeks urging institutional investors to cast their shares in favor of change. Exxon management opposes these resolutions, arguing that its record speaks to its ability to adroitly handle complex energy markets.
These resolutions are non-binding. If one attracts a majority of votes, Exxon could simply ignore it. But precedence and good corporate governance suggest otherwise. Two years ago, a shareholder resolution calling for the resignation of any Exxon director who doesn't get a majority of votes passed and was subsequently adopted by the board.
Exxon management might take solace in another shareholder resolution offered this year. The item proposes eliminating nonbinding resolutions altogether because they're "a primary tool of 'activist' or 'nuisance' shareholders." Exxon advises a vote against this measure, stating that suggested change is "the best way to carry out reform of the shareholder proposal process at this time."
Write to Russell Gold at russell.gold@wsj.com
May 26, 2008
Enbridge spills oil in Wisconsin
COMMENT: Enbridge has apparently resucitated its Gateway Pipeline proposal (big oil pipe from Edmonton to Kitimat, not quite so big condensate pipe from Kitimat to Edmonton). The company promises promises, but First Nations aren't buying, and critics and supporters alike recognize how challenging the terrain is, that the pipeline will have to cross salmon rivers, etc.
So, to demonstrate what an exemplary job it can do, Enbridge oils up the countryside with another pipeline, in Wisconsin...
State says pipeline builder damaged streams, wetlands
Lee Bergquist, Milwaukee Journal Sentinel, 24-May-2008
Oil spill tainted water table
Lee Bergquist, Milwaukee Journal Sentinel, 15-Feb-2008
Oil group cleans spill in Clark County
Thomas Content, Milwaukee Journal Sentinel, 03-Jan-2008
State says pipeline builder damaged streams, wetlands
DNR seeks penalties for Enbridge's recent project
By LEE BERGQUIST
lbergquist@journalsentinel.com
Milwaukee Journal Sentinel
Posted: May 24, 2008
The state Department of Natural Resources is alleging that a Canadian company is responsible for more than 100 environmental violations related to the construction of a 321-mile pipeline spanning much of Wisconsin.
The DNR has asked the state Justice Department to prosecute Enbridge Inc. of Calgary, Alberta, for damaging waterways and wetlands while building the pipeline.
The pipeline is part of a $2.1 billion project to transport crude oil from the oil sands region of Alberta to Chicago and was touted by supporters as a new way of moving 400,000 barrels of raw petroleum into the Midwest a day.
In Wisconsin, the 42-inch and 20-inch pipeline runs along an existing pipeline route from Superior to Delavan, where it connects with another pipeline.
The DNR said that Enbridge workers illegally cleared and disrupted wooded wetlands, and were responsible for other lax practices that resulted in discharging sediment into waterways.
There were no oil spills, although the company was responsible for major spills on a companion pipeline in 2007.
The Wisconsin Wetlands Association has been monitoring the project by tracking public documents from DNR inspectors.
The group has pressed the DNR since last fall to refer Enbridge for prosecution.
"The project has been sloppy," said Erin O'Brien, the association's wetland policy and conservation specialist.
She said there has been a pattern of smaller violations that, when taken as a whole, are likely to cause long-term damage.
The DNR has spent considerable time on the case because of the size and complexity of the project, said Susan Crawford, administrator of the division of enforcement and science.
"We think a significant penalty is appropriate," Crawford said.
A phone call and e-mail to the spokesman at the Justice Department was not returned on Friday. An attorney at the agency working on the case declined to comment.
Documents show scores of incidents in which workers failed to protect wetlands and waterways, allowing mud and sediments to flow into water bodies.
"I am not minimizing there was some major erosion into streams," said Denise Hamsher, director of the federal and state regulatory affairs at Enbridge Energy Co. Inc., a unit of Enbridge.
But by the end of the year, "we will have very high restoration and very little evidence of a pipeline."
She said oil is beginning to fill into the pipeline, but it is not yet operational.
A second Enbridge project that will run 23 miles in Wisconsin from Delavan through Rock County into Illinois was approved recently by the DNR. Despite concerns over the 321-mile pipeline, and previous spills, there was no formal opposition to the smaller project.
But at the start of the larger project, in December 2006, environmental groups, including the wetlands association, filed suit against the DNR, contending that the agency erred by not requiring an environmental impact statement.
In February 2007, the existing pipeline, which runs parallel to the new project, released 176,000 gallons of Canadian crude in Rusk County, one of the largest spills in the state's history. There was a separate spill of 50,000 gallons in Clark County in January 2007.
The DNR said the cleanup at both sites was completed and Enbridge crews continued to monitor groundwater supplies near the spill.
Oil spill tainted water table
Recent pipeline leak seeped into deep hole in northern Wisconsin
By LEE BERGQUIST
lbergquist@journalsentinel.com
Milwaukee Journal Sentinel
Posted: Feb. 15, 2007
An oil pipeline spill on Feb. 2 in Rusk County - one of the largest such accidents of its kind in state history - has been found to have contaminated the local water table, officials confirmed Thursday.
The accident is one of two resulting in the release of at least 176,000 gallons of Canadian crude oil in northern Wisconsin since the beginning of the year.
Both are under investigation by the U.S. Office of Pipeline Safety and being reviewed by the state Department of Natural Resources.
The spills took place during construction of a 320-mile pipeline by Enbridge Inc. of Calgary, Canada, alongside its existing pipeline from Superior to near Whitewater.
The expansion has drawn criticism, and a lawsuit, from environmental groups including the Wisconsin Wetlands Association and the River Alliance of Wisconsin. The groups say the massive undertaking should have required a highly detailed environmental impact statement, instead of a less rigorous environmental assessment.
The DNR, which reviews such projects for effects on streams and wetlands, said the pipeline expansion did not rise to the level at which Enbridge needed to complete the more thorough analysis.
The operations in Wisconsin owned by Enbridge were formerly known as Lakehead Pipeline.
Enbridge is expected to seek permission shortly for construction of another pipeline - this time along private land where a pipeline doesn't currently exist.
The new pipeline would run through 23 miles of Rock County into Illinois, where the company also plans to add more capacity.
"Obviously, it does not make us feel very comfortable to trust Enbridge to do the right thing," said Lori Grant, policy program manager for the River Alliance.
"I think they are in a hurry to move forward with the project. It makes you wonder if these spills are a part of their M.O."
But Enbridge spokeswoman Denise Hamsher said, "We greatly regret what happened - and it's a spill we just won't accept."
She said the two spills are the first breaks in more than four years along the company's more than 8,000 miles of pipeline right of way in North America.
Enbridge says it operates the largest pipeline system in the world.
The company moves crude oil from northwest Canada to terminal locations, including Chicago, Detroit and Montreal.
Enbridge said the expansions are needed because of growing demand for Canadian crude - an alternative to Mideast oil.
Oil moved through Wisconsin is refined in Chicago.
The first of the two spills took place Jan. 1 in Clark County when 50,000 gallons of crude leaked onto farmland and into a drainage ditch.
Hamsher said the pipeline inexplicably cracked open and released crude until an operator could shut down the line from an operations center in Canada.
The oil was removed and returned to the pipeline, she said.
Crews will use equipment that runs the length of the pipeline to look for explanations for why the pipeline cracked, Hamsher said.
In the second accident, Feb. 2 near Exeland in Rusk County, crews mistakenly struck the existing pipeline while preparing to extend the new pipeline beneath a roadway.
Oil filled a large hole more than 20 feet deep before the flow was again shut down. But in this case, Enbridge and the DNR confirmed oil that was not removed seeped into the water table, a finding that could potentially affect local private water supplies.
But state officials and the company say the spill is in a remote locale where only one seasonal home lies within the immediate area.
Monitoring wells will be constructed around the accident site to determine the spread of the oil.
A spokesman for the Office of Pipeline Safety said it was premature to draw conclusions about the accidents.
DNR records show that the 1973 Lakehead Pipeline break in Jefferson County was the largest such break in Wisconsin.
The Feb. 2 spill appears to be the fourth biggest pipeline spill, according to DNR records, though officials at the agency said computerized records could be incomplete.
There have been other larger spills from bulk tanks, the DNR said.
In 2005, Enbridge reported 412,650 gallons of oil were spilled in its North American operations and largely contained within its operational facilities.
The two spills in Wisconsin this year would represent 43% of that figure.
State Oil Spills
The Two Spills
Jan. 1: Clark County. The pipeline cracked open and released crude oil until an operator could shut down the line from an operations center in Canada, an Enbridge spokeswoman said.
Feb. 2: Near Exeland in Rusk County. Crews mistakenly struck the existing pipeline while preparing to extend a new pipeline beneath a roadway. Oil filled a hole more than 20 feet deep before the flow was shut down, and some of it seeped into the water table.
Oil group cleans spill in Clark County
50,000 gallons from Enbridge cover field
By THOMAS CONTENT
tcontent@journalsentinel.com
Milwaukee Journal Sentinel
Posted: Jan. 3, 2007
The company planning to build a crude oil pipeline across Wisconsin is on the scene of an oil spill that sent more than 50,000 gallons of crude oil onto a farmer's field in Clark County.
Enbridge Inc. spokesman Larry Springer said as many as 40 workers were at the site Wednesday working to remove oil and tainted soil from the field in the Town of Curtiss, 43 miles west of Wausau.
The spill was detected Monday, when Enbridge noticed a drop in pressure along its pipeline, which carries crude oil from Canada through Minnesota and Wisconsin to Chicago and then Detroit. Crews said they detected a 4-foot long split on the seam of the pipe, which was put into service in 1998.
The cause of the split and spill remains under investigation, and Enbridge plans to conduct tests on the damaged piece of pipe. A new piece of pipe was installed Tuesday, and the pipe was preparing to resume carrying crude oil by Wednesday evening or today, Springer said.
The line, a 24-inch diameter pipe that is one of two run by Enbridge through Wisconsin, carries about 300,000 barrels of oil a day, he said. The state Department of Natural Resources is on site monitoring cleanup.
"There is oil penetrated about an inch into the ground," DNR spokesman Dave Weitz said. "They are moving quite rapidly to clean that surface up."
The spill covered about one-half acre of the field, and the environmental damage is marginal, he said.
Denise Hamsher, an Enbridge spokeswoman, said the last rupture of one of Enbridge's major pipelines occurred four years ago. The company transports 63 million gallons a day, she said.
Enbridge is preparing to start construction on a 321-mile pipeline that would cross Wisconsin, including on the same property where the spill occurred this week. That project received approval from the state Department of Natural Resources in November.
The spill comes less than two weeks after environmental groups sued to block construction of the pipeline, saying the DNR should have done a more exhaustive analysis and citing a track record of spills.
In Wisconsin, Enbridge has been responsible for seven spills since 1999, the DNR said. Six of the spills were at the company terminal in Superior and were largely contained, the agency said.
Springer said the company does not foresee the spill affecting the company's plans to build the new pipeline.
The Associated Press contributed to this report.
May 03, 2008
Dumb as We Wanna Be
McCain-Clinton gas "tax holiday" breathtakingly ridiculous
By Thomas L. Friedman
New York Times
Wednesday, April 30, 2008
It is great to see that we finally have some national unity on energy policy.
Unfortunately, the unifying idea is so ridiculous, so unworthy of the people aspiring to lead our nation, it takes your breath away. Hillary Clinton has decided to line up with John McCain in pushing to suspend the federal excise tax on gasoline, 18.4 cents a gallon, for this summer's travel season. This is not an energy policy. This is money laundering: we borrow money from China and ship it to Saudi Arabia and take a little cut for ourselves as it goes through our gas tanks. What a way to build our country.
When the summer is over, we will have increased our debt to China, increased our transfer of wealth to Saudi Arabia and increased our contribution to global warming for our kids to inherit.
No, no, no, we'll just get the money by taxing Big Oil, says Mrs. Clinton. Even if you could do that, what a terrible way to spend precious tax dollars -- burning it up on the way to the beach rather than on innovation?
The McCain-Clinton gas holiday proposal is a perfect example of what energy expert Peter Schwartz of Global Business Network describes as the true American energy policy today: "Maximize demand, minimize supply and buy the rest from the people who hate us the most."
Good for Barack Obama for resisting this shameful pandering.
But here's what's scary: our problem is so much worse than you think. We have no energy strategy. If you are going to use tax policy to shape energy strategy then you want to raise taxes on the things you want to discourage -- gasoline consumption and gas-guzzling cars --
and you want to lower taxes on the things you want to encourage -- new, renewable energy technologies. We are doing just the opposite.
Are you sitting down?
Few Americans know it, but for almost a year now, Congress has been bickering over whether and how to renew the investment tax credit to stimulate investment in solar energy and the production tax credit to encourage investment in wind energy. The bickering has been so poisonous that when Congress passed the 2007 energy bill last December, it failed to extend any stimulus for wind and solar energy production. Oil and gas kept all their credits, but those for wind and solar have been left to expire this December. I am not making this up. At a time when we should be throwing everything into clean power innovation, we are squabbling over pennies.
These credits are critical because they ensure that if oil prices slip back down again -- which often happens -- investments in wind and solar would still be profitable. That's how you launch a new energy technology and help it achieve scale, so it can compete without subsidies.
The Democrats wanted the wind and solar credits to be paid for by taking away tax credits from the oil industry. President Bush said he would veto that. Neither side would back down, and Mr. Bush -- showing not one iota of leadership -- refused to get all the adults together in a room and work out a compromise. Stalemate. Meanwhile, Germany has a 20-year solar incentive program; Japan 12 years. Ours, at best, run two years.
"It's a disaster," says Michael Polsky, founder of Invenergy, one of the biggest wind-power developers in America. "Wind is a very capital-intensive industry, and financial institutions are not ready to take `Congressional risk.' They say if you don't get the [production tax credit] we will not lend you the money to buy more turbines and build projects."
It is also alarming, says Rhone Resch, the president of the Solar Energy Industries Association, that the U.S. has reached a point "where the priorities of Congress could become so distorted by politics" that it would turn its back on the next great global industry -- clean power -- "but that's exactly what is happening." If the wind and solar credits expire, said Resch, the impact in just 2009 would be more than 100,000 jobs either lost or not created in these industries, and $20 billion worth of investments that won't be made.
While all the presidential candidates were railing about lost manufacturing jobs in Ohio, no one noticed that America's premier solar company, First Solar, from Toledo, Ohio, was opening its newest factory in the former East Germany - 540 high-paying engineering jobs - because Germany has created a booming solar market and America has not.
In 1997, said Resch, America was the leader in solar energy technology, with 40 percent of global solar production. "Last year, we were less than 8 percent, and even most of that was manufacturing for overseas markets."
The McCain-Clinton proposal is a reminder to me that the biggest energy crisis we have in our country today is the energy to be serious -- the energy to do big things in a sustained, focused and intelligent way. We are in the midst of a national political brownout.
April 30, 2008
Enbridge considers re-reversing oil flow
and pipeline to west coast
Energy Processing Canada
Mar/Apr 2008
At the World Heavy Oil Congress in Edmonton in mid-March, Enbridge Inc.'s chief executive Pat Daniel said his company is looking at moving oilsands crude to the U.S. Northeast and Eastern Canada by re-reversing the flow of Line 9 to Montreal from Sarnia, Ontario or building a new pipeline. Enbridge, the country's second-largest pipeline operator, switched direction of Line 9's oil flow a decade ago so it could ship imported oil into central Canada.
According to Mr. Daniel, Line 9, which was built in the 1970s so refineries in Quebec could have secure access to Western Canadian crude, could be revamped for approximately $100 million, moving oilsands-derived crude to Portland, Maine, where it would be shipped down the East Coast of the U.S. by tanker.
By the late 1990s Line 9, which has a capacity of 240,000 barrels a day, sat idle, so Enbridge, with the support of major Ontario refiners, reversed the flow at a cost of about $90 million.
About a month earlier, Enbridge dusted off plans for its $4-billion Gateway pipeline project to Canada's West Coast in response to demand from producers and refiners wanting oilsands crude shipped to Asia. In 2006 the company put the 400,000 barrel a day line on the back burner to concentrate on expanding its crude oil pipeline network in the U.S.
But now Enbridge has convinced enough potential customers to fund the remaining costs to get Gateway to the regulatory approval stage, with an in-service target between 2012 and 2014. "The pull from the other end of Gateway initially was primarily from the Chinese, but in this initiative the Chinese are not participants, and the pull ranges from Japan down to Singapore, so much broader Southeast Asia interest," Mr. Daniel explained.
PetroChina signed a deal in 2005 to cooperate with Enbridge on the project to ship Alberta oilsands crude to the Pacific Coast. It also agreed to consider signing up for half the capacity.
Plans call for the proposed 1,200-kilometre pipeline to extend to a terminal in Kitimat, British Columbia, from Strathcona County in Alberta. An adjacent line would move condensate in the other direction. At Kitimat, as many as 20 tankers a month, including six very large crude carriers, would load the oil and ship it across the Pacific and possibly down to California.
Enbridge chief executive Pat Daniel said his company is looking at moving oilsands crude to the U.S. Northeast and Eastern Canada by re-reversing the flow of Line 9 to Montreal from Sarnia, Ontario or building a new pipeline.
Copyright Northern Star Communications Ltd. Mar/Apr 2008
Provided by ProQuest Information and Learning Company. All rights Reserved
March 30, 2008
Those who control oil and water will control the world
New superpowers are competing for diminishing resources as Britain becomes a bit-player. The outcome could be deadly
John Gray
The Observer
Sunday March 30 2008
History may not repeat itself, but, as Mark Twain observed, it can sometimes rhyme. The crises and conflicts of the past recur, recognisably similar even when altered by new conditions. At present, a race for the world's resources is underway that resembles the Great Game that was played in the decades leading up to the First World War. Now, as then, the most coveted prize is oil and the risk is that as the contest heats up it will not always be peaceful. But this is no simple rerun of the late 19th and early 20th centuries. Today, there are powerful new players and it is not only oil that is at stake.
It was Rudyard Kipling who brought the idea of the Great Game into the public mind in Kim, his cloak-and-dagger novel of espionage and imperial geopolitics in the time of the Raj. Then, the main players were Britain and Russia and the object of the game was control of central Asia's oil. Now, Britain hardly matters and India and China, which were subjugated countries during the last round of the game, have emerged as key players. The struggle is no longer focused mainly on central Asian oil. It stretches from the Persian Gulf to Africa, Latin America, even the polar caps, and it is also a struggle for water and depleting supplies of vital minerals. Above all, global warming is increasing the scarcity of natural resources. The Great Game that is afoot today is more intractable and more dangerous than the last.
The biggest new player in the game is China and it is there that the emerging pattern is clearest. China's rulers have staked everything on economic growth. Without improving living standards, there would be large-scale unrest, which could pose a threat to their power. Moreover, China is in the middle of the largest and fastest move from the countryside to the city in history, a process that cannot be stopped.
There is no alternative to continuing growth, but it comes with deadly side-effects. Overused in industry and agriculture, and under threat from the retreat of the Himalayan glaciers, water is becoming a non-renewable resource. Two-thirds of China's cities face shortages, while deserts are eating up arable land. Breakneck industrialisation is worsening this environmental breakdown, as many more power plants are being built and run on high-polluting coal that accelerates global warming. There is a vicious circle at work here and not only in China. Because ongoing growth requires massive inputs of energy and minerals, Chinese companies are scouring the world for supplies. The result is unstoppable rising demand for resources that are unalterably finite.
Although oil reserves may not have peaked in any literal sense, the days when conventional oil was cheap have gone forever. Countries are reacting by trying to secure the remaining reserves, not least those that are being opened up by climate change. Canada is building bases to counter Russian claims on the melting Arctic icecap, parts of which are also claimed by Norway, Denmark and the US. Britain is staking out claims on areas around the South Pole.
The scramble for energy is shaping many of the conflicts we can expect in the present century. The danger is not just another oil shock that impacts on industrial production, but a threat of famine. Without a drip feed of petroleum to highly mechanised farms, many of the food shelves in the supermarkets would be empty. Far from the world weaning itself off oil, it is more addicted to the stuff than ever. It is hardly surprising that powerful states are gearing up to seize their share.
This new round of the Great Game did not start yesterday. It began with the last big conflict of the 20th century, which was an oil war and nothing else. No one pretended the first Gulf War was fought to combat terrorism or spread democracy. As George Bush Snr and John Major admitted at the time, it was aimed at securing global oil supplies, pure and simple. Despite the denials of a less honest generation of politicians, there can be no doubt that controlling the country's oil was one of the objectives of the later invasion of Iraq.
Oil remains at the heart of the game and, if anything, it is even more important than before. With their complex logistics and heavy reliance on air power, high-tech armies are extremely energy-intensive. According to a Pentagon report, the amount of petroleum needed for each soldier each day increased four times between the Second World War and the Gulf War and quadrupled again when the US invaded Iraq. Recent estimates suggest the amount used per soldier has jumped again in the five years since the invasion.
Whereas Western countries dominated the last round of the Great Game, this time they rely on increasingly self-assertive producer countries. Mr Putin's well-honed contempt for world opinion might grate on European ears, but Europe is heavily dependent on his energy. Hugo Chávez might be an object of hate for George W Bush, but Venezuela still supplies around 10 per cent of America's imported oil. President Ahmadinejad is seen by some as the devil incarnate, but with oil at more than a $100 a barrel, any Western attempt to topple him would be horrendously risky.
While Western power declines, the rising powers are at odds with each other. China and India are rivals for oil and natural gas in central Asia. Taiwan, Vietnam, Malaysia and Indonesia have clashed over underwater oil reserves in the South China Sea. Saudi Arabia and Iran are rivals in the Gulf, while Iran and Turkey are eyeing Iraq. Greater international co-operation seems the obvious solution, but the reality is that as the resources crunch bites more deeply, the world is becoming steadily more fragmented and divided.
We are a long way from the fantasy world of only a decade ago, when fashionable gurus were talking sagely of the knowledge economy. Then, we were told material resources did not matter any more - it was ideas that drove economic development. The business cycle had been left behind and an era of endless growth had arrived. Actually, the knowledge economy was an illusion created by cheap oil and cheap money and everlasting booms always end in tears. This is not the end of the world or of global capitalism, just history as usual.
What is different this time is climate change. Rising sea levels reduce food and fresh-water supplies, which may trigger large-scale movements of refugees from Africa and Asia into Europe. Global warming threatens energy supplies. As the fossil fuels of the past become more expensive, others, such as tar sands, are becoming more economically viable, but these alternative fuels are also dirtier than conventional oil.
In this round of the Great Game, energy shortage and global warming are reinforcing each another. The result can only be a growing risk of conflict. There were around 1.65 billion people in the world when the last round was played out. At the start of the 21st century, there are four times as many, struggling to secure their future in a world being changed out of recognition by climate change. It would be wise to plan for some more of history's rhymes.
· John Gray is author of Black Mass: Apocalyptic Religion and the Death of Utopia, published by Allen Lane in paperback on 24 April
March 28, 2008
Partners to study nuclear role in oilsands
Alberta Research Council and U.S. energy department sign agreement
Gordon Jaremko
Edmonton Journal
Friday, March 28, 2008
CREDIT: Chris Schwarz/Edmonton Journal
The Alberta Research Council has signed an agreement
with the U.S. government to study the use of atomic
energy in the oilsands.
EDMONTON - Use of atomic power for oilsands development will be investigated by a research partnership, announced today, between the Alberta and United States governments.
The Alberta Research Council and the U.S. energy department's main nuclear laboratory in Idaho signed an agreement calling for work on potential bitumen belt applications of electricity, heat and chemical byproducts from reactors proposed north of Edmonton.
"This is a marriage made in heaven," said Idaho laboratory associate director Bill Rogers. Although no budget for the collaboration was announced, he said potentially all his operation's 3,800 scientists can be drafted into the Alberta project.
"The U.S. is dependent on Alberta for energy security," Rogers said, pointing to the province's "essential" role as the biggest source of increasing American oil and natural gas imports.
In the U.S. view, Alberta stands out for reliability and stability as a supplier, he emphasized. Elsewhere "we face nationalization of resources in countries that are hostile to the U.S.," Rogers said.
ARC vice-president Ian Potter said the partnership plans to work out a research agenda by late summer or early fall.
Potential topics range from making nuclear reactors provide heat for steam used in thermal oilsands production to production of hydrogen and oxygen used in high volumes by bitumen upgraders, Potter said.
"Meeting our province's electricity demands both now and in the future begins with reliable and clear information on all of the available energy options," said Mel Knight, Alberta's minister of energy.
"We welcome collaborations such as the one announced between the Alberta Research Council and Idaho National Laboratories to provide the solid analysis and research on the options available to address Alberta's unique needs."
gjaremko@thejournal.canwest.com
© Edmonton Journal 2008
Things like this don't come out of the blue, and just because BC has a no-nuclear energy policy, doesn't mean it isn't at the table. In fact, here it is at Idaho National Laboratories last fall. (www.inl.gov)
http://www.inl.gov/featurestories/2006-12-14.shtml
http://www.inl.gov/featurestories/2008-02-07.shtml
INL proudly describes its facilities thus:
"In operation since 1949, the Idaho National Laboratory is a government reservation located in the southeastern Idaho desert. At 890 square miles (569,135 acres), the INL Site is roughly 85 percent the size of Rhode Island. It was established in 1949 as the National Reactor Testing Station, and for many years was the site of the largest concentration of nuclear reactors in the world. Fifty-two nuclear reactors were built, including the U.S. Navy's first prototype nuclear propulsion plant. During the 1970s, the laboratory's mission broadened into other areas, such as biotechnology, energy and materials research, and conservation and renewable energy.
"INL consists of several primary facilities situated on an expanse of otherwise undeveloped terrain. Buildings and structures at INL are clustered within these facilities, which are typically less than a few square miles in size and separated from each other by miles of undeveloped land. In addition, DOE owns or leases laboratories and administrative offices in the city of Idaho Falls, some 25 miles east of the INL Site border. About 30 percent of INL's employees work in administrative, scientific support and non nuclear laboratory programs and have offices in Idaho Falls. These include engineers; scientists; and administrative, financial, technical and laboratory employees. "
http://www.inl.gov/visitorinformation/index.shtml
One of its largest projects is a $2.9 billion cleanup of earlier work:
"The Idaho Cleanup Project (ICP) involves the safe, environmental cleanup of the Idaho National Laboratory site, which has been contaminated with waste generated from World War II-era conventional weapons testing, government-owned research and defense reactors, laboratory research, and defense missions at other U.S. Department of Energy (DOE) sites. The 7-year, $2.9 billion cleanup project, funded through the DOE's Office of Environmental Management, focuses equally on reducing risks to workers, the public, and the environment and on protecting the Snake River Plain Aquifer, the sole drinking water source for more than 300,000 residents of eastern Idaho."
https://idahocleanupproject.com/
March 23, 2008
Lessons from Germany's energy renaissance
ERIC REGULY
Globe and Mail
March 21, 2008
BERLIN — Solar power will cost next to nothing. The fuel – the sun – is free. The price of the photovoltaic cells used to covert sunlight into electricity will plummet.
Just give it time.
That's the theory of Ian MacLellan, the founder, vice-chairman and chief technology officer of Arise Technologies, a Canadian photovoltaic (PV) cell company. But there's one small hitch: Arise doesn't have time.
PV cells are still expensive. The solar energy market needs priming. Arise shareholders want profits. Mr. MacLellan is 51 and would like to see his company make a buck before he's a senior citizen.
Arise CEO Ian McLellan.
Canadian Solar
First Solar
Enter Germany. The ever-so-generous Germans tracked him down and made him an offer he couldn't refuse – free money, and lots of it – as long as Arise promised to build a PV factory on German soil. The German love-fest even came with flowers for Mr. MacLellan's wife, Cathy.
Today, Arise's first factory is about a month away from completion in Bischofswerda, a pretty eastern German town about 35 kilometres east of Dresden, in the state of Saxony. Covering two storeys and 100,000 square feet, the sleek grey metal building will have some 150 employees and produce enough PV cells each year to power the equivalent of 60,000 houses. The value of the annual output, based on today's prices, will be $375-million, or more than three times the company's current value on the Toronto Stock Exchange.
“I couldn't build this in Canada,” Mr. MacLellan said. “Germany is a very high-quality environment for us. I have nothing to worry about.”
Arise couldn't build the plant in Canada because the level of financial incentives, engineering and construction expertise and general awareness of the growth potential of renewable energy simply don't exist there.
Those factors are abundant in Germany and it shows: The country has become the world leader in renewable energy technology, manufacturing, sales and employment. The German map is dotted with hundreds of renewable energy companies. They make PV cells, wind turbines, solar thermal panels, biofuels and technology for biomass plants and geothermal energy.
No PV cells are made in Canada. The Canadian solar industry, lured by money and markets, is jumping across the Atlantic and landing in Germany and a few other European countries with generous incentives.
The German and Saxony governments, with a little help from the European Union, offered Arise about €50-million ($80-million) in financing. The package included a €25-million grant, which is being used to offset half the cost of building the factory and installing the three assembly lines, and €22.5-million of working credit lines and equipment loans at highly attractive rates.
The land was cheap and included a handsome, though abandoned, brick building from 1818 that began life as an army barracks, became a dance hall after the First World War and a Soviet military barracks during the Cold War.
Arise plans to restore the old pile and use it as an office and corporate retreat. “We're turning an old military base into a solar factory – how 21st Century is that?” Mr. MacLellan asked.
Germany has created 240,000 jobs in the renewable energy industry, 140,000 of them since 2001, said Matthias Machnig, State Secretary for the federal Ministry of the Environment. Renewable energy technologies already make up 4 to 5 per cent of Germany's gross domestic product; Mr. Machnig expects the figure to rise to 16 per cent by 2025.
Renewables generated 14 per cent of the country's electricity last year, significantly ahead of the 12.5-per-cent target set for 2010. “We are making a huge investment in the markets of the future,” Mr. Machnig said.
How did Germany turn green technology into a leading industry? And is the aggressive effort to attract renewable energy companies, backed by scads of taxpayers' money, a formula that should be imitated in Canada or its provinces? Mr. MacLellan thinks so. “I think Ontario is in a leading position to clone Germany,” he said.
GERMANY'S VAST renewable energy industry is a careful and deliberate blend of industrial, political and green policies. Wind power has been leading the charge. Germany is a windy country and the ubiquitous wind farms generated 7.4 per cent of Germany's electricity last year.
With onshore wind energy growth starting to level off – offshore wind probably will take off once favourable regulations are in place – the Germans are injecting the photovoltaic industry with growth hormones. “In a few years, the PV industry could be bigger than the German car industry,” said Thomas Grigoleit, senior manager for renewable energy for Invest In Germany, a government investment agency.
It should come as little surprise that Germany has become green energy's focal point. The country is a natural resources desert. It lacks oil and natural gas and its coal production, which is heavily subsidized, is falling. The country has a moratorium on nuclear energy development. Renewable energy is more than just a feel-good exercise; Germany sees it as securing its energy future in a world of disappearing fossil fuels.
There's more to it than energy security. Germany is both latching onto, and propelling, an industrial trend. It wants to do to renewables what it did to the car industry; that is, create a jobs and export juggernaut. “We are at the beginning of the third industrial revolution,” said Mr. Machnig, referring to the growth potential for renewable energy.
Germany is using its political might to ensure it benefits mightily from the green revolution. The country is Europe's biggest economy and the continent's (and the world's) biggest exporter. As the economic heavyweight, it has a lot of political influence over its neighbours, said Paul Dubois, Canada's ambassador to Germany. “This is the key country,” he said.
Nineteen of the European Union's 27 countries count Germany as their main trading partner, he noted. The figure for France is only three (Germany, Spain and Malta) and only one (Ireland) for the United Kingdom.
The upshot: If Germany builds green technology such as wind turbines and solar panels, its friendly neighbours will be sure to buy them, or so the German government believes. That translates into the things politicians and economists like – jobs, export earnings, trade surpluses, international prestige.
There's more. As Europe's most influential country, Germany can pretty much guarantee that renewable energies will be the growth machine of the future. How? By insisting on aggressive, EU-wide carbon reduction targets, care of Angela Merkel, the German Chancellor who is no doubt the greenest European leader.
In February, the EU vowed to reduce greenhouse gas emissions by 20 per cent by 2020 and said it would try to raise the target to 30 per cent. “If you take climate change seriously, we have to reduce carbon dioxide emissions by 60 to 80 per cent by 2050,” Mr. Machnig said. “This is the biggest industrial change ever. This means reducing emissions [in Germany] from 10 tonnes per capita to two to four tonnes per capita.”
Germany doesn't think the reductions are possible without a broad effort that includes renewable energy, the EU emissions trading system and, of course, a fortune in subsidies to kick-start the green technologies and guarantee them a market for many years. The main subsidy for renewable energy generation is the “feed-in tariff,” which was established in 2000 under the Renewable Energy Sources Act.
As far as subsidies go, this one is a beauty. The feed-in tariff for solar electricity is about 50 euro cents per kilowatt-hour, or almost 10 times higher than the market price for conventionally produced electricity (the subsidy for wind energy is considerably less, though still well above the market rate).
German utilities must by law buy the renewable electricity. The cost, in turn, is passed on to the consumer and is buried in his electricity bill. “The feed-in tariff has put Germany on the world [renewable energy] map,” said Mikael Nielsen, the central European vice-president of sales for Vestas, the Danish wind turbine company that makes turbine blades in Germany. “If it weren't for the tariff, you wouldn't have a market like this.”
The subsidy for all forms of green energy, largely wind, with solar just starting to come on strong, costs the government about €3.5-billion a year. The figure is expected to rise to €6-billion by 2015, and then will slowly decline. No wonder the renewable energy industry is on fire in Germany.
But Germany's lunge into renewable energy is not without its critics. The solar industry in particular is sucking up tens of billions of euros of grants and the question is whether taxpayers are getting value for money. “The construction of a solar power plant is currently an almost riskless investment,” the German newspaper Berliner Zeitung said in November.
RWI Essen, a German economic research institute, published a paper earlier this month [March] called “Germany's Solar Cell Promotion: Dark Clouds on the Horizon,” which concluded the feed-in tariff has not accomplished two of the government's most cherished goals – job creation and carbon reduction.
The subsidies for German solar energy probably rank as the highest in the world, thanks to the feed-in tariff and other subsidies. RWI estimated the total subsidies per job created in the PV industry (based on the subsidies and direct PV employment in 2006) at an astounding €205,000.
The tariff has created more demand than the German PV market can satisfy. In fact, most of the PV cells have been imported, creating jobs abroad, not in Germany (though this may change as Germany attracts manufacturers like Arise). RWI argues that billions of euros in subsidies have crowded out investment in other, perhaps more promising, technologies and has probably made the PV industry less efficient that it might otherwise be.
RWI said “the subsidized market penetration of non-competitive technologies in their early stages of development diminishes the incentives to invest in the research and development necessary to achieve competitiveness.”
Finally, RWI says the feed-in tariff “does not imply any additional emission reductions beyond those already achieved” by the EU emissions trading system. Its argument is that reductions under the cap-and-trade system would be made whether or not the feed-in tariff existed.
The indictment is dismissed by the German Environment Ministry and by the PV industry. Mr. MacLellan notes that every form of energy is subsidized to some degree and that the PV subsidies will help Arise's German factory become profitable quickly, allowing the business to pay income taxes within two years. “This is not charity,” he said.
For his part, Mr. Machnig said the subsidies will help establish an export market – three-quarters of the wind turbines made in Germany are exported, for example – as the number of technology manufacturers expands. Furthermore, he said, renewable energy can only make Germany more competitive as the price of fossil fuels rises. By 2020, renewables will provide 27 per cent of Germany's electricity production.
ARISE TECHNOLOGIES was launched in 1996 by Ian MacLellan, an amiable motormouth and Ryerson electrical engineering graduate who calls himself a “solar geek with a spread sheet.” Five years later, it formed a partnership with the University of Toronto to develop a high-efficiency “thin-film-on-silicon-wafer” solar cell.
The company, whose headquarters are in Waterloo, Ont., went public in 2003 in Toronto (it's also listed in Frankfurt) and at times came close to running out of money. Its fortunes reversed in the past couple of years as energy prices soared and Arise displayed a remarkable talent for snagging government freebies. The feds' Sustainable Technology Development Canada fund handed the company $6.4-million in 2006. The general enthusiasm for clean energy technologies allowed Arise to raise $34.5-million in a bought deal last October.
The company's biggest break came entirely by accident. In March, 2006, a German PV magazine called Photon International carried a story on Arise. Two months later, Mr. MacLellan was in Hawaii for the World Photovoltaic Conference. “A guy from Invest In Germany tracked me down,” he said. “We met and he said: ‘We're very interested in your company and we want all the best companies to build in Germany. We'll give you half the money.' ”
Invest In Germany has offices around the world (though not in Canada) and its 80 employees, most of them young, multilingual and highly educated, are considered superb salesmen and women. Its goal is to convince foreign companies to build plants and create employment in Germany and the appeal is quick, one-stop-shopping.
The team offers everything from assistance in site selection and construction engineering to German financing and incentives from the European Union. Boozing even features into the sales pitch. In the “Quality of Life” section of the promotional literature, the agency cheerily notes the country is home to “1,250 breweries with more than 5,000 different kinds of beer” (a statistic not lost on Mr. MacLellan, who loves German beer).
The agency has had particular success in attracting renewable energy companies. Some of the industry's best-known players – among them Shell Solar, EverQ, First Solar, Nanosolar and Signet Solar – have built factories in Germany and created thousands of jobs. “We work hard to find suitable companies,” said Mr. Grigoleit of Invest In Germany. “We go to conferences and trade fairs. We open up kiosks and we have offices in Chicago, Boston, Shanghai, Tokyo and other cities. What we can offer is speed of entry into the German market.”
Mr. MacLellan was impressed by Invest in Germany's efficiency. Within months of the Hawaii meeting, the financial and engineering machinery for the German plant were in place. The funding package, including the €25-million grant, was approved in December, 2006, only seven months after the Hawaii encounter. Construction of the factory started last August and the first cells will roll off the assembly by the end of April. “This is amazing,” he said. “We've gone from the first meeting to production in less than two years.”
He optimistically predicts PV cells made by Arise and other companies “will hit a wall of infinite demand” and he's evidently not alone. At last count about 55 solar companies had set up in Germany. The majority are in the former East Germany, where the incentives are fatter because the employment rate is lower than in the industrialized western half of the country.
There are a similar number of wind energy companies. More of both are coming. The German government's “GreenTech” environmental technology atlas, which describes the technologies and lists companies that develop and build them, runs 500 pages.
In July, a Quebec company called 5N Plus will open a plant in Eisenhuttenstadt, a town on the German-Polish border southeast of Berlin. The plant, its first foreign operation , will employ 45 and make high-purity metals for thin-film PV panels. Jacques L'Ecuyer, the CEO, said he built there because of the incentives – Germany provided about one-third of the plant's €9.5-million cost – and because he wanted guaranteed access to the European market. “If we have a presence in Germany, it will be easier for us to do business in Germany and in Europe,” he said.
CANADA SEEMS to have taken notice of the German example. Make that parts of Canada.
The West is still obsessed with oil. Quebec has few incentives for wind and solar power, probably because it has so much cheap (and renewable) hydro power, Mr. L'Ecuyer said.
But Ontario, battered by manufacturing job losses and the high dollar, has made renewable energy part of its industrial salvation plane. The province now has its own feed-in tariff for renewable energy and recently announced a five-year $1.15-billion program, called the Next Generation of Jobs Fund, to help finance everything from “green” auto research to pharmaceuticals manufacturing. Arise may tap into the jobs fund to expand in the Waterloo area, where it is building a plant to refine silicon for PV cells.
Ontario's new incentives, Mr. MacLellan said, “are not as attractive as Germany's but they're getting close.” With Germany still on top, Arise is already making plans to add a second, and possibly third, PV factory, in Bischofswerda, next to the one opening in April. Arise has more than enough available land and the town, one of eastern Germany's Cold War victims, would welcome the jobs.
More foreign companies are bound to rush to Germany while the financial goodies last. Mr. Grigoleit said Invest In Germany is targeting other Canadian renewable energy companies. He won't say how close they are snagging them but seems confident they will be unable to resist what he calls the “magnet” effect.
Even if Canada decides it wants a renewable energy industry of its own, it will face formidable competition from Germany.
Germany's Solar Cell Promotion: Dark Clouds on the Horizon
French utility eyes Spanish energy market
Globe and Mail
Associated Press
March 21, 2008
PARIS — The French utility Electricite de France SA has had exploratory talks with the Spanish construction company ACS and is interested in the Spanish energy market, a spokeswoman for EDF said Friday.
But spokeswoman Carol Ritrivi declined to comment on a report Friday in The Wall Street Journal that EDF and ACS are in advanced talks about teaming up to buy two Spanish utilities for more than $100-billion.
The newspaper, citing unidentified people close to the discussions, said EDF and ACS — whose full name is Actividades de Construccion y Servicios SA — have discussed forming a bidding team that would make simultaneous offers for two Spanish utilities, Iberdrola DS and Union Fenosa SA.
The deals would have a combined value of $134-billion including debt and excluding possible premiums, the report said.
Iberdrola, based in Bilbao, is expanding internationally and is in the final stages of a deal to acquire Maine-based Energy East — parent of Central Maine Power, Rochester Electric and Gas Corp., and New York State Electric & Gas Corp. — for $4.6-billion and the assumption of $4-billion in debt.
Ms. Ritrivi noted that EDF chief Pierre Gadonneix has said his company is interested in the Spanish market but would not make a hostile bid if the Spanish authorities were opposed.
Ms. Ritrivi confirmed EDF has had “contacts” with ACS that she qualified as “more or less exploratory.”
The Journal report said the deal is far from certain, and could run into possible resistance from Spanish authorities and potential opposition from competition regulators in several countries and jurisdictions, as well as Iberdrola.
ACS, Iberdrola and Union Fenosa spokesmen were unavailable for comment on Friday, a public holiday in Spain.
March 22, 2008
The Rising Price of Coal
By Kelpie Wilson
t r u t h o u t | Environment Editor
Friday 21 March 2008
As the global energy/climate crisis deepens, coal has become the starkest symbol and most telling measure of our predicament. Coal produces more carbon emissions than other energy sources - more than twice that of natural gas per unit of energy output. Consequently, coal-fired power plants are responsible for about one-third of US emissions of carbon dioxide. Despite this, we are mining and burning more coal than ever.
On March 18, the nonprofit Environmental Integrity Project (EIP) released an analysis of EPA data showing that carbon dioxide emissions from the electric power industry increased by 2.9 percent in 2007 and have risen 5.9 percent since 2002. Coal is the culprit.
According to an Associated Press report, the cause of last year's increase was a combination of three factors: increased electricity demand; a shortage of hydroelectric power, leading to greater reliance on coal, and the reduced efficiency of aging coal-burning power plants.
While utilities around the nation have plans to construct more than 100 new coal-fired power plants, public concern over global warming and toxic pollution has put the brakes on many of them. Last year in Texas, public interest groups prevented TXU Energy from going ahead on eight new coal-fired plants that would have increased the state's emissions by 24 percent, according to the EIP report.
But as demand for electricity rises and cleaner fuels like natural gas get scarcer and more expensive, the relentless pressure to burn coal fuels delusions such as "clean coal."
"Clean coal" is a combination of two technologies, one of which is expensive and the other completely unproven. The expensive one is coal gasification, and it is a genuinely cleaner way of burning coal. It involves baking coal to drive off gasses that aren't much dirtier than natural gas, and the gasses then are burned for power production. This technology costs a minimum of 20 percent more than a conventional pulverized coal plant, which is why only two such plants exist in the United States.
The other part of the "clean coal" scheme involves carbon capture and storage. This technology is not proven and the potential costs are enormous. A US Department of Energy pilot project called FutureGen was recently canceled with the DOE citing soaring cost projections among its reasons for ending the project.
But even if the "clean coal" idea were workable, the realities of the coal fuel cycle ensure that coal can never be truly clean.
At the Public Interest Environmental Law Conference in Eugene, Oregon, in early March, a panel of citizen activists talked about the front and back ends of coal use: mining and waste disposal. Teri Blanton, of Kentuckians for the Commonwealth spoke about the heartbreak of mountaintop removal coal mining in Appalachia. The mining technique is dynamiting hundreds of thousand of acres of biologically diverse forest ecosystems to get at the coal underneath, and dumping the waste into streams. Blanton told the story of one of her neighbors who lost his land to a mining company. "When I say he lost his land," she said, "I mean he literally lost his land. One day he found that his land was just gone, blasted away to nothing."
According to the group Appalachian Voices, more than 800 square miles of mountains have already been destroyed by mountaintop removal and if the blasting continues unabated it will devastate an area the size of Delaware by 2010.
Coal mining also uses great quantities of water and pollutes streams in the process. Slurries of waste laden with toxic heavy metals are leaching into streams and river systems. Earthen impoundments that hold back the sludge are unstable and threaten communities. A sludge dam breach in 2000 in Martin County, Kentucky, dumped more than 300 million gallons of toxic sludge, killing virtually all aquatic life for 70 miles downstream of the spill.
Brad Bartlett of the Energy Minerals Law Center talked about the post-combustion end of coal. Air pollution controls at existing coal plants capture 125 million tons of pollutants, amounting to "the largest solid waste stream in the US," according to Bartlett. He said that it is not formally regulated as hazardous waste despite the presence of heavy metals and other toxins. Some of it is used to make building materials and roads, but the rest is just landfilled.
When you think of Alaska, you usually think of oil, not coal, but Vanessa Salinas of Alaskans for Responsible Mining said that Alaska also has huge amounts of coal - about one-eighth of the world's coal reserves and half of US coal reserves. Currently there is only one operating coal mine in Alaska, but BHP Billiton, the largest mining company in the world, is conducting an extensive coal exploration program and four new strip mines are being proposed.
Alaskans should be more concerned than most people, Salinas said, because global warming impacts are being felt more strongly in the Arctic than anywhere else. On February 26, the tiny village of Kivalina sued two dozen oil, power and coal companies over their greenhouse gas emissions that contribute to global warming. Melting sea ice is exposing the village to erosion from storm waves and surges.
Coal burning also threatens Alaska's famed fishing industry. Coal is notorious for its mercury pollution, and older marine fish are showing increasing levels of mercury. Salinas blamed coal burning pollution from Asia and noted that most of the coal mined in Alaska would be shipped to Asia. In this way Alaskans would poison their own fishing industry.
Salinas has worked with Native Alaskans to stop these coal mines. She said Native people have told her that they feel coal functions as "the liver of the world" and it should be left in the ground. Coal as the "liver" of the world is not a bad metaphor. Coal is not just another mineral; it is biological. It is the remains of ancient life. The liver cleanses toxins from the body, and coal, if left in the ground, keeps our climate cool and our air and water clean.
While Alaskan coal is destined to be shipped to Asia, it looks like Appalachian and even Wyoming coal will increasingly be shipped to Europe. Recent reports in The New York Times and The Washington Post describe a spike in global coal consumption. With the falling dollar value, American coal is now a bargain for overseas buyers; however, that is in the context of an overall price rise that is unprecedented. Spot market coal prices have risen by 50 percent or more in recent months. Coal consumption worldwide has increased by 30 percent over the last six years.
American electricity consumers are used to hearing that coal is much cheaper than renewable alternatives like solar and wind, but that might not be true for long. Consumers haven't seen the impact of expensive coal yet because most utilities lock in coal supplies with long-term contracts. Electricity rates will begin to shoot upwards when those contracts expire in the years ahead.
There is no chance that prices will come back down again either, because Peak Coal, like Peak Oil, is fast approaching. Journalist David Strahan, in a January 17 article for New Scientist, has documented what's known about coal reserves. He concludes that the official figures, like the official figures for recoverable oil reserves, have been vastly inflated.
On March 18, Standard & Poor's released a study concluding that utilities and states with Renewable Portfolio Standards need to do a better job of revealing how expensive their mandates for renewable solar and wind power will be. By that same token, utilities should be required to reveal all of the current and future costs for dirty and increasingly expensive coal power.
Kelpie Wilson is Truthout's environment editor. Trained as a mechanical engineer, she embarked on a career as a forest protection activist, then returned to engineering as a technical writer for the solar power industry. She is the author of "Primal Tears," an eco-thriller about a hybrid human-bonobo girl. Greg Bear, author of "Darwin's Radio," says: "'Primal Tears' is primal storytelling, thoughtful and passionate. Kelpie Wilson wonderfully expands our definitions of human and family. Read Leslie Thatcher's review of Kelpie Wilson's novel "Primal Tears."
See also The Great Coal Hole
David Strahan, New Scientist, 17-Jan-2008
States’ Battles Over Energy
Grow Fiercer With U.S. in a Policy Gridlock
By FELICITY BARRINGER
New York Times
March 20, 2008
Utility executives in Kansas were shocked last fall when a state environmental official rejected two coal-fired power plants because of the millions of tons of carbon-dioxide emissions they could produce. In a state where coal generates 73 percent of the electricity, the pro-coal forces were unable to work their will.
That ineffectiveness will be underscored as early as Friday if Gov. Kathleen Sebelius, as expected, vetoes an effort by the Kansas State Legislature to ensure the plants are approved. A handful of lawmakers seeking a new energy policy are blocking the attempt to override.
The struggle over those plants is an example of a growing trend in climate-change politics. In the absence of clear federal mandates for emissions from smokestack industries, states that have been proving grounds for new environmental approaches to energy are becoming battlegrounds as well.
“There are certainly battles happening all over the nation,” said Steve Clemmer, the Clean Energy Program research director at the Union of Concerned Scientists. In Kansas and Washington State, the battles are over individual plants. Other fights, as in California, are over how to structure carbon controls — essentially, who will have to pay, and how much. Some, as in Minnesota, are over how much renewable energy must be created and what forms are appropriate.
And that list does not take into account major battles between the states and the federal government, exemplified by the Environmental Protection Agency’s refusal to let California control greenhouse-gas emissions from automobiles.
What to do about the greenhouse-gas emissions from fossil fuels — particularly the coal that fuels the lion’s share of electricity in 25 states — is a question Washington has largely dodged. But politics, like nature, abhors a vacuum. The national gridlock over climate-change policy has led to an ever-increasing number of state initiatives.
Currently 18 states seek to cap carbon dioxide emissions for industry and 25 support mandates for renewable energy; renewable-mandate legislative battles are under way in Ohio and Michigan. There are three multistate compacts intended to limit emissions and allow trading of carbon allowances; governors of 10 Midwestern states, including Ms. Sebelius, joined such a pact last fall.
The trend has not been slowed by the Bush administration’s approval of new gas-mileage standards for new trucks and cars, or its nearly simultaneous refusal to give California and 17 other states the waiver needed to control emissions from cars.
For example, Washington State last year passed a law limiting the amount of greenhouse-gas emissions that any new power plant could produce. After the law was passed, regulators blocked a power plant that would be partly coal-fired, saying it would emit an illegal amount of carbon dioxide.
But in a state reliant on emission-free hydropower, that is a less controversial decision than the rejection of new coal plants in Kansas.
The more a state depends upon coal, the more likely resistance will be fierce. About half the states get more than half their electric power from coal.
In states like California that are well on the way to establishing a carbon-constrained regime, the battles are over how to structure carbon controls, how to distribute permits allowing limited emissions and how to ensure that companies with tight controls are given credit for acting before new rules are adopted. But when the public utilities commission’s first rough draft was unveiled, the largest coal-consuming utility in the state, the Los Angeles Department of Water and Power, lashed out at state regulators, saying their proposals would unfairly favor some utilities over others.
The Los Angeles facility is not alone. The industry, generally united five years ago against controls on carbon emissions, now presents a broad spectrum of opinions, with low-coal utilities like Pacific Gas & Electric in Northern California favoring the certainty that carbon controls will bring, and embracing mandates for renewable energy. Meanwhile, coal-dependent utilities like the Southern Company in Georgia firmly resist both ideas.
All the utilities cite fairness as their objective, but they define it differently. The same is true in discussions about climate-controls in the political arena. In Kansas, the arguments over fairness and economic harm took on a particular fierceness after two plants proposed by the Sunflower Electric Corporation were rejected by Rod Bremby, the secretary of health and environment, in October. A pro-coal lobbying group, Kansans for Affordable Energy, was soon formed. Its report, filed with the Kansas Ethics Commission and obtained by DeSmogBlog.com, shows $120,000 of its $140,400 assets came from Peabody Coal, which could supply the new plants from its mines in Wyoming. Another $25,000 came from Sunflower itself.
The new group placed newspaper advertisements with pictures of the smiling faces of Presidents Mahmoud Ahmadinejad of Iran, Vladimir V. Putin of Russia and Hugo Chávez of Venezuela — suggesting that if the coal plants were killed, those natural-gas exporting countries would benefit. The advertisement made no mention of the fact that none of these countries actually export natural gas to the United States.
Then the Republican-controlled Legislature moved to save the project by stripping state officials of any power to base power-plant decisions on potential greenhouse-gas emissions.
Eighty-five percent of the power would be sold out of state, mostly to Colorado. The fact that most of the electricity is not needed now by Kansans is a central argument made by the anticoal forces. Steve Miller, a spokesman for Sunflower, argues that Kansas’s economy depends on exports of commodities like grain, and that the new electricity would be another valuable export.
Both chambers of the Legislature passed bills to strip Mr. Bremby of the power to make a decision on the plants based on greenhouse-gas considerations. But the majority in the House was not veto-proof. At the end, the pro-coal forces tried to win over dissenters by sweetening the measure with an amendment requiring that renewable sources, like wind, make up 10 percent of electrical generation by 2012, 15 percent by 2016, and 20 percent by 2020.
The dissenters did not budge. Utility lobbyists like Scott Segal of the Electric Reliability Coordinating Council see these state-by-state battles as examples of why a single national policy is preferable. Congress is considering several bills setting mandatory controls on carbon dioxide emissions; the Bush administration remains committed to voluntary actions.
“There is a growing recognition among national politicians and many in the states that it will not do to have a state-by-state approach to global climate change,” Mr. Segal said, adding, “the notion that any one state or group of states could make a material contribution to solving the problem is farcical.”
Joshua Svaty, a representative from central Kansas, disagrees. He said in an interview that the pro-coal forces in the state “started with the mindset of how can we maintain business as usual?” But he added, “The national mood — not just of politicians but of people — is that we’re tired of business as usual and we want to move forward with a new energy policy.”
Copyright 2008 The New York Times Company
March 20, 2008
Energy giant eyes $5B hydro project
TransCanada, ATCO assess Slave River
Geoffrey Scotton
Calgary Herald
Thursday, March 20, 2008
CREDIT: Graphic: Rachel Niebergal, Calgary Herald
Energy and pipeline giant TransCanada Corp., along with ATCO Power Ltd., is eyeing the development of Alberta's last remaining major hydroelectric prospect, on the Slave River -- a potentially $5-billion project supplying emissions-free power.
"We are presently assessing the feasibility of the Slave River project with our partner ATCO," TransCanada's president for energy, Alex Pourbaix, told the Herald, suggesting the site could accommodate a 1,200 to 1,300-megawatt hydro development.
"A very key part of that feasibility analysis (is) we are doing some work to understand the project itself, understand the stakeholders up in the region and people that would be impacted by it. We're in an early feasibility stage," said Pourbaix.
The project is the latest of a raft of massive generating proposals that have emerged to serve a near-doubling of Alberta's power production required by 2027 to satisfy North America's fastest-growing industrial and residential demand.
The Slave River concept -- which would easily be Alberta's largest hydro facility -- comes on the heels of Bruce Power LP announcing it is pursuing an up to 4,400 megawatt, $10-billion or more, nuclear facility near Peace River.
"Obviously we're looking at a major project," ATCO power president Rick Brouwer told the Herald, adding the facility, if completed, would require transmission upgrades. Sister company ATCO Electric is
Alberta's second-largest transmission operator and controls the territory around the Slave River site.
"We're not averse to developing large projects," said Brouwer, adding that emissions-free generation is particularly attractive in the wake of changing and increasingly onerous standards around carbon-dioxide production, particularly in power generation.
"With this type of generation, we can help Alberta and Canada meet some of their environmental goals in terms of greenhouse gas production and reductions," said Brouwer. "This could make a very significant impact."
Interest in the Slave River's hydroelectric potential stretches back to at least the 1970s. In the early 1980s, Alberta Environment conducted a study on the hydroelectric potential of the area near Fort Smith., where the river -- and 107 billion cubic metres of water a year -- crosses into the Northwest Territories.
"Due to the high volume of water, the rapids along this stretch of river possess enormous hydroelectric potential," Alberta Environment said in a commentary.
"The monetary and environmental costs were deemed too high for the power demand and the project was put on hold indefinitely," the department added.
Now, TransCanada and ATCO, both Calgary-based, are examining the economics and social and environmental aspects of the project and have already decided a traditional hydro project with a large dam and reservoir is not appropriate.
As an alternative, a so-called run-of-river approach, where river water is directed through turbines without being stored, is being studied.
"The Slave River hydro development is looking at a number of different run-of-river concepts," says a brochure the two firms will use in community consultations. "Most require a structure on the river somewhere between Fort Smith and Fort Fitzgerald . . . without long-term water storage capability."
Brouwer emphasized that TransCanada and ATCO view extensive consultation with local residents and aboriginal communities as an essential first step in the evaluation process for the project, which would take at least 12 years to complete.
"Trust is absolutely critical -- and we have to earn it," said Brouwer. Atco Power, part of the broader ATCO Ltd. network controlled by Calgary's Southern family, operates about 4,800 MW of generation in Alberta and around the world, including the 1,000 MW Barking Power Station in London, England.
"We have people in the community over the next few months to talk about the process they, the community, feel is appropriate," said Brouwer. "That's the first point on our agenda."
Analysts note that a Slave River project will have to compete with roughly 20,000 MW in potential projects that are vying to satisfy the 5,000 MW of additional capacity required by 2017 and the 11,500 MW of additional output needed by 2027.
In a market where the risk of projects is borne completely by the developers, the very long lead times and massive capital costs of a major hydro-electric proposal can put it at a disadvantage.
"A project of that size, scale and magnitude, $5 billion, is significant with a long lead time. That's putting a lot of money at risk for a very long time in an uncertain marketplace," said Duane Reid-Carlson, president of the Calgary-based energy consultancy EDC Associates Ltd. "That's the problem with a project of this size and magnitude. It's very vulnerable."
gscotton@theherald.canwest.com
© The Calgary Herald 2008
March 19, 2008
Australia plans carbon storage under ocean
COMMENT: Just musing here, but think of the potential appeal to the BC government. Not only does it play to the climate change agenda, but it also allows you to get drills into your offshore, ostensibly to send carbon dioxide into the seabed, not remove gas or oil from it.
MICHAEL PERRY
Reuters
Globe and Mail
March 19, 2008
SYDNEY — Australia plans to allow greenhouse gas emissions to be stored in the ocean floor around the island continent, with exploration for suitable sites possibly starting in 2008.
Energy Minister Martin Ferguson said the government would amend the Offshore Petroleum Act this year to allow for seabed storage of carbon emissions from coal-fired power stations.
“Australia has significant geological storage potential, particularly in our offshore sedimentary basins,” Mr. Ferguson told an energy conference in Sydney late on Tuesday.
“I am hoping that amendments to the Offshore Petroleum Act 2006 will be passed in time for the government to release acreage for exploration in 2008, making Australia one of the first countries in the world to establish a regulated carbon capture and storage regime,” Mr. Ferguson said.
Green groups are critical of the plan to store carbon emissions in the ocean floor, saying they are concerned about the chances of leakage of emissions into the ocean environment.
“The coal and energy corporations are doubtless lobbying hard for the government to carry all liability for any leakages while they continue to profit from their polluting practices,” Greens Senator Christine Milne told local media on Wednesday.
Australia's Labor government, elected in November, 2007, ratified the Kyoto Protocol the following month, reversing an 11-year policy by the previous conservative government.
Prime Minister Kevin Rudd's government has made climate change a priority and has released a “National Clean Coal Initiative” which will see a regulatory regime for access and tenure to offshore Australia for geological storage.
Australia is the world's largest coal exporter and is reliant on fossil fuel for transport and energy. About 80 per cent of electricity is produced by coal-fired power stations.
The country is responsible for about 1.2 per cent of global greenhouse gas emissions and is one of the highest polluters per capita.
Its carbon emissions are forecast to continue to grow due to its heavy reliance on coal for electricity, although the government says the country will meet its Kyoto emissions targets by 2012. Emissions will grow by 108 per cent of 1990 levels from 2008 to 2012.
“Coal will continue to make a major contribution to Australia's energy needs well into the future and therefore we need to urgently reduce greenhouse gas emissions from coal-fired electricity generation,” said Mr. Ferguson.
“Clean coal technologies involving carbon capture and storage will play a vital role in meeting future greenhouse constraints. A nationally co-ordinated effort is needed to bring forward the commercial availability of these technologies.”
March 17, 2008
Alberta's nuclear reactor plan doubles to four
by Shawn McCarthy
The Globe and Mail
March 14, 2008
OTTAWA -- Ottawa's new climate change rules have provided an important boost to Bruce Power's expanded nuclear ambitions in northwestern Alberta, Duncan Hawthorne, the company's chief executive, said yesterday.
Bruce, a private sector consortium that operates a nuclear site in Ontario, revealed a bold $10-billion plan to build as many as four reactors and bring nuclear power to a province that is run on fossil fuels.
The plan, outlined in a filing with the Canadian Nuclear Safety Commission, also calls for the dumping of Atomic Energy of Canada Ltd. as a preferred technology supplier and opens up the project to competitive bidding to build Western Canada's first nuclear reactors.
The news came as Bruce Power completed its purchase of Energy Alberta Corp., a startup company that was working with AECL on a bid to build a project less than half the size of Bruce's new application, which calls for as much as 4,400 megawatts of power at a site 30 kilometres west of Peace River.
Bruce Power said it would take a technology-neutral approach to the Alberta project, meaning it will consider AECL's new ACR technology along with types offered by France's Areva SA, Mitsubishi Corp.'s Westinghouse unit and the General Electric Co./Hitachi Ltd. group.
Bruce Power estimated it could cost $10-billion to build the four reactors, though costs in the nuclear industry - as with virtually all major construction projects - have been climbing rapidly.
Mr. Hawthorne, who conducted a series of town hall meetings in the area yesterday, acknowledged the firm faces some resistance to nuclear power in Alberta. The province relies on coal for 50 per cent of its nearly 12,000 megawatts of electrical generating capacity, and natural gas for another 40 per cent.
But he said federal Environment Minister John Baird provided a boost to the nuclear option when he announced this week that Ottawa would prohibit the building of coal-fired power plants after 2011 unless they capture emissions of carbon dioxide and sequester the gas in permanent underground storage.
Mr. Hawthorne said a clean-coal plant with sequestration could be as much as 50 per cent more expensive to build per megawatt of capacity than nuclear plant.
"It certainly does make it more realistic to think of nuclear as alternative. It could be a straightforward commercial debate," he said.
Alberta Premier Ed Stelmach refused to say yesterday whether the provincial government would endorse Bruce Power's plan to build a nuclear power plant in the province.
He said Alberta's recent election, which concluded last week with the Conservatives winning their 11th successive majority, delayed the province's plans to assemble a panel to help study the matter.
"We are speaking to them, we are interviewing them and it's just a matter of putting the group together," Mr. Stelmach said. "But it's something that will be advanced - this total picture for energy. The globe is changing around us. We've got to have that information at hand."
Mr. Hawthorne noted that booming Alberta has seen a sharp rise in electricity demand, which has climbed 29 per cent since 2000. The province's electricity planning authority has forecast a shortfall of 5,000 megawatts by 2017.
"I think the odds are pretty high that Alberta will come to the view that nuclear could and should play a role."
The rapid expansion in the oil sands is a major factor in that expanding demand, and Bruce Power is looking to sign a long-term power contract with project operators to help finance the construction of the power plants.
The company would also look to sell power to the broader electricity market.
While Energy Alberta was seen as an upstart with no nuclear operating experience, Bruce Power has an established track record in Ontario. It operates six Candu reactors at the Bruce facility on Lake Huron near Kincardine, Ont., is refurbishing two more and is looking to add another two reactors, though it has not chosen a reactor design.
Bruce Power is owned by Calgary-based TransCanada Corp., Saskatoon-based Cameco Corp. and the BPC Generation Infrastructure Trust, a trust established by the Ontario Municipal Employees Retirement System, the Power Workers' Union and the Society of Energy Professionals.
AECL spokesman Dale Coffin said the Crown corporation welcomed the decision by Bruce Power to proceed with an expanded version of the Energy Alberta project. "We're confident the ACR1000 will be the best choice for Alberta," he said.
March 13, 2008
U.S. may protect oilsands
Considering move to exempt region from new crackdown
Claudia Cattaneo
National Post
Tuesday, March 11, 2008
Chris Schwarz/CanWest News Service
The oilsands are likely to produce more than three million barrels a day
by the middle of the next decade.
CALGARY -- In response to concerns that new U.S. environmental legislation will drastically impact development of Canada's oilsands, Washington is considering classifying oil produced from the region as "conventional" fuel rather than subject it to the stringent standards expected of "alternative" fuels.
The U.S. government passed a law that prohibits federal procurement of alternative fuels that generate more greenhouse gases than "conventional sources," which spurred a warning last month from Canada's ambassador to the United States, Michael Wilson. Mr. Wilson said a narrow interpretation of the legislation would include the vast deposits of the oilsands -- where U.S. firms are major investors and the U.S. government is a major customer.
An interdepartmental working group with representation from several U.S. agencies is looking into how to classify the Alberta deposits under the new rules, said a source who suggested the step was taken because "D.C. does not want to hammer" the region.
Mr. Wilson's letter to several senior members of the U.S. administration -- including Robert Gates, the Secretary of Defence, and Condoleezza Rice, the Secretary of State -- outlined concerns with the Energy Independence and Security Act 2007, passed in December.
"The U.S. government would be seen as preferring offshore crude from other countries over fuel made in part from U.S. and Canadian sources," Mr. Wilson argued. "Further, the U.S. government would be contradicting other stated goals to encourage greater biofuels use and Canadian oilsands production."
The letter also warned of unintended consequences for both countries if it compromised the oilsands, which are a key supplier to U.S. military and postal fleets.
The rationale for classifying the oilsands as conventional oil is that, unlike alternative fuel sources, the deposits are well established, yielding more than one million barrels a day and likely to produce more than three million barrels a day by the middle of the next decade. As such, they are no longer "a science experiment," as one source put it.
A decision is expected this spring.
The administration of George W. Bush has encouraged oilsands development from its early days to help reduce U.S. dependence on Middle East imports. U.S.-based companies such as ConocoPhillips, Chevron Corp., Exxon Mobil Corp. and Devon Energy Corp. are among the deposits' biggest investors.
The legislation and new low-carbon fuel standards adopted in California are seen as major setbacks for the oilsands industry because they restrict the market for its oil, all of which is exported to the United States. A major worry is that such rules could have a domino effect and be adopted in other jurisdictions.
In his Feb. 22 letter, Mr. Wilson argued that Canada does not consider oil extracted from the oilsands as alternative fuel. "Oil produced from the oilsands, like oil from other sources, is processed in conventional facilities," Mr. Wilson wrote, noting that it would be difficult to identify fuel on the U.S. market that was 100% extracted by conventional means.
Mr. Wilson also notes that the U.S. administration recognized the oilsands as part of the mainstream when 174 billion barrels of oilsands reserves were included by the U.S. Department of Energy in its annual tally of proved world oil reserves.
Put carbon burden on consumers, petro leaders say
Gordon Jaremko
Canwest News Service
National Post
Monday, March 10, 2008
EDMONTON -- Oil industry leaders called for a national carbon tax on consumers Monday to help pay for building new greenhouse-gas disposal systems.
The levy would put the burden where it belongs -- on fossil-fuel users that cause the most emissions, said Nexen Energy president Charlie Fischer and Enbridge president Pat Daniel.
"Our industry is prepared to do its share," Fischer said as environmental obstacles to oilsands development took centre stage at the 2008 World Heavy Oil Congress in Edmonton.
The comments came on the same day the federal government announced new measures to cut carbon emissions. They included requiring oilsands facilities that start in 2012 or later to capture and store the bulk of their carbon emissions. As well, emissions reductions would be required from existing facilities and those that start before the end of 2011.
About 30% of oilsands carbon-dioxide emissions come in Alberta from producing bitumen and upgrading it into synthetic light oil ready for conversion into fuels, Fischer said.
Refineries another 15% of the waste greenhouse gas into the atmosphere, he estimated, citing expert consultant studies commissioned by his company.
Fuel users account for a 55% majority of the emissions blamed for global warming, Fischer said.
A new carbon tax would serve a dual purpose of encouraging more efficient motoring and generating money for proposed industrial greenhouse gas collection and storage installations, Fischer suggested.
"Government has a big role to play if carbon capture and storage is to become a reality," Fischer said.
Suncor Energy president Rick George stopped short of calling for consumer taxation but said industry cannot shoulder the entire burden of paying for cutting greenhouse gas emissions.
"Everybody's got a piece of this," said George, whose firm leads an industry consortium proposing a multibillion-dollar collection, pipeline and disposal network for carbon-dioxide.
"Industry has taken the lead on carbon capture and storage. I'm glad to see governments are moving forward. Their support is absolutely essential," George said.
A task force appointed by Prime Minister Stephen Harper and Alberta Premier Ed Stelmach called in February for immediate creation of a $2-billion government fund to help kick-start construction of disposal networks.
Neither government has made financial commitments.
But the recommendation will be reviewed by a carbon capture secretariat that will be appointed as part of the province's developing green plan, Alberta Environment deputy minister Peter Watson said.
The technology is a cornerstone of provincial policy and a report making a detailed "business case" for construction partnerships between government and industry will be sought by the end of the year.
"We need clarity on greenhouse gas regulation," Fischer said.
An international carbon tax that treats all fuel users equally would be an ideal policy, Fischer said.
"We're doing very little to change consumer behaviour," he said. "People don't want to change and they want cheap fuel."
Collecting, transporting and disposing of waste carbon-dioxide will cost $80 to $100 per tonne of emissions, estimated Daniel, whose Enbridge is sponsoring a network stretching from the northern bitumen belt south to central Alberta.
"We're going in the right direction. We need to move a bit faster," he said.
The expense works out to "a couple of dollars a barrel," Daniel estimated.
The added costs would not likely be enough to force cancellation of any oilsands projects, the Enbridge president predicted. But the expense of carbon capture and storage would work out to one to two cents per litre of refined fuels.
Daniel urged enactment of "some form of carbon tax" because costs of cleanups should be felt by all that contribute to environmental problems, he suggested.
"It has to be a sharing."
Edmonton Journal
gjaremko@thejournal.canwest.com
March 12, 2008
Forest Grove passes resolution against LNG terminals
Jill Rehkopf Smith
The Oregonian
March 11, 2008
FOREST GROVE -- Forest Grove has became the first Oregon city to pass a resolution opposing construction of liquefied natural gas terminals near the mouth of the Columbia River and pipelines to Central Oregon.
City councilors on Monday unanimously supported the resolution, which cited the project's potential danger to the ecological balance of the Columbia, to the natural resources along the pipeline route and to the water supply of Forest Grove.
"It's not a case of 'Not In My Back Yard,'" said Councilor Pete Truax, who drafted the resolution. "This is 'in nobody's back yard.'"
Out-of-state companies have proposed building several LNG terminals in the state, including two on the Columbia River.
Proponents argue natural gas provides cleaner energy than coal and the projects will provide good jobs in Oregon. The gas would be extracted from other countries and shipped to a Columbia River terminal, then sent through underground pipelines to far-off distribution points, including California.
Two of the proposed pipelines, Palomar -- a joint venture between Northwest Natural Gas Co. and TransCanada Pipelines Ltd. -- and Oregon LNG, would pass near Gales Creek and Gaston and through Forest Grove's watershed.
Councilor Tom Johnston said that growing up in Gales Creek he lived through earthquakes and landslides and worries about damage to a pipeline located there.
Councilor Victoria Lowe pointed out that it's not just Forest Grove's water supply that might be affected because the pipeline would pass near Hagg Lake, which serves Beaverton, Hillsboro and other cities.
In addition to local testimony, Brent Foster, executive director of Columbia Riverkeeper, drove in from Hood River for Monday's hearing.
Foster cited damage from construction of a Coos County natural gas pipeline, a project approved by voters in 1999, such as erosion, landslides, stream pollution and tainted or blocked water supplies.
Foster also invited councilors to type "gas pipeline accidents" into the Google search engine on their computers to see all the references that come up.
Gov. Ted Kulongoski and key state agencies share Forest Grove's concerns, said Patty Wentz, a Kulongoski spokesperson.
The pipelines and terminals need state permits before they can be built, and state attorneys are looking into the extent of Kulongoski's authority to hold up those permits, Wentz said.
Kulongoski is also concerned that a 2005 law that took siting authority for such facilities away from the state and put it into federal hands also limited citizen involvement.
"People are trying to be involved in this process," Wentz said of the Forest Grove resolution. "It's not a hollow gesture. The governor is paying attention."
March 11, 2008
Enbridge mulls reversal of pipeline
Reuters
Globe and Mail
March 10, 2008
EDMONTON — — Enbridge Inc. [ENB-T] is looking at moving oil sands crude to the U.S. Northeast and Eastern Canada by reversing the flow of one of its pipelines or building a new one, its chief executive officer said Monday.
Enbridge, whose pipelines carry the lion's share of Canada's crude exports to the United States, may construct a new line to Philadelphia from southern Ontario or re-reverse the flow of Line 9 to Montreal from Sarnia, Ont., Pat Daniel said.
Enbridge switched direction of Line 9's oil flow a decade ago so it could ship imported oil into central Canada.
Speaking to reporters following a speech to the World Heavy Oil Congress in Edmonton, Mr. Daniel said the company could revamp the existing line at relatively low cost.
The price of changing the direction of Line 9's flow would be $100-million or slightly more, he said.
The company could reverse Line 9, which was built in the 1970s as part of a protectionist federal energy policy, before it completes its proposed Gateway pipeline to the Pacific Coast from Alberta. That project is expected to be in service some time between 2012 and 2014.
"If we move to reverse Line 9, that could come before Gateway," Mr. Daniel said. "If it is large volume, 400,000 barrels a day, Gateway would come first."
Line 9 currently has a capacity of 240,000 barrels a day.
It could move oil sands-derived crude to Portland, Me., where it would be shipped down the East Coast of the United States by tanker.
Enbridge is in the midst of a $12-billion expansion program to accommodate rising production from the oil sands. Output from the northern Alberta region is expected to nearly triple to 3 million barrels a day by 2015.
Mr. Daniel said new lines are necessary because the refinery-ready synthetic oil produced in the oil sands region is being priced at a discount to conventional crude.
Enbridge recently dusted off plans for the $4-billion Gateway line after advancing other capacity expansions to the U.S. Midwest and beyond.
Line 9 was built during the energy crises of the 1970s so refineries in Quebec could have secure access to Western Canadian crude.
By the late 1990s it sat idle, prompting Enbridge, with the support of major Ontario refiners, to reverse the flow of the pipeline at a cost of about $90-million.
February 29, 2008
SaskPower tries retrofit route
SHAWN McCARTHY
Globe and Mail
Wednesday, February 27, 2008
OTTAWA — Saskatchewan's provincially owned utility said Wednesday it will spend $758-million, on top of $240-million provided by this week's federal budget, to rebuild an aging power plant into North America's first clean-coal unit that will capture and store carbon dioxide.
Armed with $240-million in federal funding announced in Tuesday's budget, Saskatchewan's Minister for Crown Corporations, Ken Cheveldayoff, said the provincial utility will proceed with a 100-megawatt plant that will capture a million tonnes a year of CO{-2}.
The greenhouse gas will then be piped to nearby oil fields, where it will be injected underground to boost the recovery of crude.
The Saskatchewan project represents a major shift in the search for technology that would allow utilities to burn cheap and plentiful coal without emitting greenhouse gases that cause global warming.
Until recently, companies focused almost exclusively on new gasification plants that separated the carbon dioxide prior to combustion. In this project, SaskPower will rebuild a coal unit at the Boundary site in the southeastern part of the province, extend its life by 30 years and include postcombustion capture technology.
"It's a leading-edge project that, if it works out well, it can be replicated in other plants," Mr. Cheveldayoff said. He added the clean-coal project will allow SaskPower to cut its greenhouse gas emissions by 7.2 per cent from 2006 levels.
The Boundary site is near Estevan, where EnCana Corp. already uses carbon dioxide – piped from North Dakota – in an enhanced oil recovery project. The EnCana operation has been widely studied, and scientists believed the CO{-2} injected there will remain trapped for thousands of years.
SaskPower had considered constructing a new, 300-megawatt clean-coal plant that would capture the carbon dioxide prior to combustion but cancelled the project because of rapidly rising costs.
SaskPower president Patricia Youzwa said the demonstration project is a critical step in the commercialization of clean-coal technology.
"By doing a project like this, we'll better understand what the economics are and how the technology performs relative to other alternatives that there may be for reducing greenhouse gas emissions," she said in an interview.
She said SaskPower has not yet chosen the technology that it will use to capture the gases from its flue, though experts say there has recently been progress with ammonia chilled scrubber technology.
The province has committed to sharing the information from its demonstration project with coal-dependent utilities in Alberta and Nova Scotia.
There have been substantial advances in postcombustion clean-coal technology in the past year, and several North American utilities are now considering projects.
David Lewin, senior vice-president with Edmonton-based Epcor Utilities Inc., said the industry will be watching the Saskatchewan project to assess the commercial viability of retrofit carbon-capture.
David Keith, a University of Calgary environmental engineer, said the retrofit technology could be an important tool in the battle against climate change.
But a recent task force on carbon capture and storage, on which Dr. Keith served, recommended that government spend $2-billion to implement the technology throughout Western Canada. This week's budget effort, he said, will leave Canada far short of its goals to reduce emissions.
© The Globe and Mail
Clean coal
Sask. Party moving forward with plans for clean coal project
James Wood
Saskatchewan News Network
Wednesday, February 27, 2008
REGINA -- With federal money in hand, the Saskatchewan Party government is moving forward with plans for a clean coal carbon sequestration demonstration project.
A day after the federal budget earmarked $240 million to the province for the project, Crown Corporations Minister Ken Cheveldayoff and SaskPower president Pat Youzwa announced plans for a seven-year, $1.4 billion project that involves the retrofit of one of SaskPower's coal-fired power generation units at Boundary Dam near Estevan.
The end result is intended to be the production of 100 megawatts of power with zero greenhouse gas emissions, reducing the Crown corporation's emissions by about one megatonne a year.
Casting a shadow over the project however is SaskPower's last foray into clean coal, which saw a planned new 300-megawatt plant shelved last year, partly because projected costs rose from $1.5 billion to $3.8 billion.
The U.S. government also recently pulled its funding for a clean coal project in Illinois because of cost overruns.
But Cheveldayoff expressed confidence in the financial projections for the new project.
"It's happening immediately. Planning is beginning right away, we're looking at construction starting in 2011. It's happening as soon as possible. We're keeping our finger on the numbers that are out there. This is the best information that we have recognizing the cost escalations that are happening around us and some of that has been built in," he told reporters at the provincial Finance building.
SaskPower will put $758 million into the project on top of the federal funding.
With the plant itself projected to cost $1 billion, the additional $400 million is needed for surrounding infrastructure such as the pipelines for the carbon dioxide.
Cheveldayoff said the government will look to the private sector for the additional funding, with the anticipation that costs will be offset by the sales of carbon dioxide for use in enhanced oil recovery.
Youzwa said the facilities at Boundary Dam would need to be refurbished or replaced in coming years in any case, which the company estimated would cost $800 million without the clean coal component.
The SaskPower president cautioned that the company must still undertake detailed engineering work, choose the technology to clean emissions at the stack and complete discussions with the oil industry on the carbon dioxide sales.
"Until that's completed we won't be ... bringing forward decision items to commit large amounts of capital. The project has to work and make sense both environmentally and economically," she said.
The prospect of a coal-burning plant with minimal greenhouse gas emissions through the capture and storage of carbon dioxide has been a beacon for Saskatchewan governments of all stripes given the province's large coal reserves, its per capita greenhouse gas emissions that lead the country and the prospect of selling the developed technology to other jurisdictions.
NDP Leader Lorne Calvert said he's glad to see the government moving forward with a new clean-coal project but he's concerned about the uncertainty around many aspects, especially the private-sector funding.
There is also a question about the potential for cost escalation given the seven-year timeframe involved, said Calvert, whose government put the $300-megawatt project on the backburner.
"If they haven't even determined now the technology they're going to use, how can they be definitive about the numbers," he said.
The ex-premier noted that if the costs do go up, it's unlikely the federal investment will rise in kind and those increases will likely fall on the province.
The Saskatchewan Party government has committed to keeping the greenhouse gas targets adopted last year by Calvert's government, which included stabilizing emissions by 2010 and cutting them by 32 per cent by 2020.
The projected reduction from the new clean coal project represents a roughly six per cent cut from the province's greenhouse gas emissions in 2005.
While the interest in clean coal and carbon sequestration is growing among governments and industry, it represents a mirage for many environmental groups.
"If the government told SaskPower it needed to reduce its emissions by one megatonne, it could invest probably one-tenth to one-fifth of that amount ($1.4 billion) and get one megatonne of reductions, by investing in efficiencies, by investing in other renewable sources of power," said Dale Marshall, climate change policy analyst with the David Suzuki Foundation.
The costs for Saskatchewan's new project are in fact significantly higher than recent power-generation projects brought on line by SaskPower.
The Centennial Wind Power project, officially commissioned in 2006, cost $250 million and provides 150-megawatts of generation. The planned addition of two natural gas-powered turbines near Kerrobert is estimated to add nearly 100 megawatts at a cost of $150 million.
Cheveldayoff and Youzwa said the government is looking at all options for power generation.
But coal-fired generation represents part of Saskatchewan's "base load power" while wind power faces limitations because it is intermittent, said Cheveldayoff.
Natural gas, while cleaner than regular coal-fired generation, still has significant greenhouse gas emissions.
Bob Stobbs, the chair of the Canadian Clean Power Coalition industry group, said the price for future clean coal projects will come down once a plant is actually up-and-running.
© Canwest News Service 2008
February 28, 2008
Alaska town sues 24 energy companies on climate change
Village sues energy firms for climate change
Elizabeth Bluemink, Anchorage Daily News, 27-Feb-2008
Alaska town sues 24 energy companies on climate change
Timothy Gardner, Reuters/Guardian, 27-Feb-2008
Village sues energy firms for climate change
KIVALINA: 23 companies blamed for emissions
tied to coastal erosion threat.
By ELIZABETH BLUEMINK
ebluemink@adn.com
Anchorage Daily News
February 27th, 2008
The eroding village of Kivalina in the Northwest Arctic is suing Exxon Mobil and 23 other energy companies for damage related to global warming.
The suit was filed Tuesday in the U.S. District Court in San Francisco on behalf of the Native village's federally recognized tribe and its city government, according to lawyers for the village.
Kivalina, located on a shrinking barrier island in the Chukchi Sea, says the energy companies should pay to move the village to safer ground.
"We need to relocate now before we lose lives," said Janet Mitchell, city administrator for Kivalina, in a news release announcing the lawsuit.
The companies are contributing to global warming that is threatening to destroy the village, according to the lawsuit, which demands a jury trial. The defendants include one coal company, nine oil companies and 14 power companies. Three of the oil companies -- Exxon, BP and Conoco Phillips -- operate on Alaska's North Slope.
Exxon spokesman Gantt Walton said Tuesday that the company needs more time to review the lawsuit before commenting. Conoco and BP officials in Alaska declined to comment for this story.
In the past few years, cost estimates to relocate Kivalina to the mainland have varied between $95 million and $400 million.
State and federal officials are working on plans for additional shoreline protection for Kivalina and other coastal villages threatened by erosion. There is no plan for relocating them yet. One village, Newtok, has begun relocating itself.
State officials hadn't heard about the lawsuit Tuesday and didn't know how it would affect their planning.
"Now there is a good question. ... It would take quite a bit of time to accomplish anything through the courts, as evidenced by Exxon Valdez and other things," said Mike Black, deputy commissioner for the state Department of Commerce, Community and Economic Development. He was referring to the civil lawsuit filed by fishermen and other plaintiffs for damages related to the Exxon Valdez spill in 1989. The case is being argued in the U.S. Supreme Court today.
SEVERE STORMS
Kivalina's nearly 400 residents, most of them Inupiat Eskimo, have been buffeted by severe storms in recent years. Last fall, many residents briefly evacuated Kivalina worrying that a big storm would wipe out homes and other buildings. The storm wasn't as bad as feared but it took out a chunk of the village's seawall.
The lawsuit cites reports published by the U.S. Corps of Engineers and the U.S. General Accountability Office that have linked erosion in coastal areas of Alaska to climate change and rising temperatures.
Sea ice forms and attaches to the coast later in the year, breaks up earlier and is less extensive and thinner, exposing the village to storm waves and surges, according to the lawsuit.
"Each of the defendants knew or should have known of the impacts of their emissions on global warming and on particularly vulnerable communities such as coastal Alaskan villages," the complaint says.
ALLEGED CONSPIRACY
Some of the companies, especially Exxon, also are liable for damages to Kivalina because they are guilty of conspiring to "create a false scientific debate" about global warming to deceive the public, according to the lawsuit.
The legal complaint details the alleged conspiracy, saying that trade associations have "formed and used front groups, fake citizens organizations and bogus scientific bodies. ... The most active in such efforts is and has been defendant Exxon Mobil," the suit claims.
Walton of Exxon defended his company's stance on climate change. The company takes the issue seriously and is reducing its greenhouse gas emissions, funding research and talking about climate change policy with governments around the world, he said.
The law firms spearheading the lawsuit are the San Francisco-based Center on Race, Poverty & the Environment and the Anchorage office of the Native American Rights Fund.
Nine other attorneys are involved. Some are litigating other climate change-related suits, including defending California's attempt to force auto makers to comply with its greenhouse emissions limits, which are stricter than federal regulations.
This isn't the first time an Eskimo group has pointed blame at others for climate change. In 2005, the chairwoman of the Inuit Circumpolar Conference and more than 60 Inuit hunters and elders in Alaska and Canada asked the Inter-American Commission on Human Rights to hold hearings in Canada and Alaska to investigate harm posed to Inuit people in the Arctic by climate change, and to declare the United States in violation of human rights law as the largest emitter of greenhouse gases.
The commission rejected the petition but allowed testimony at a brief hearing last March in Washington, D.C.
In addition to Exxon, BP and Conoco, the Kivalina lawsuit names Chevron Corp., Shell Oil Co., Peabody Energy Corp., AES Corp., American Electric Power Co., DTE Energy Co., Duke Energy Corp., Dynegy Holdings Inc., Edison International, MidAmerican Energy Holdings Co., Mirant Corp., NRG Energy, Pinnacle West Capital Corp., Reliant Energy Inc., Southern Co., Xcel Energy Inc. and a few other affiliated companies.
Find Elizabeth Bluemink online at adn.com/contact/ebluemink or call 257-4317.
Alaska town sues 24 energy companies on climate change
By Timothy Gardner
Reuters/Guardian
Wednesday February 27 2008
NEW YORK, Feb 27 (Reuters) - An Alaskan village north of the Arctic Circle has filed suit in a U.S. District Court against 24 energy companies, in an attempt to link erosion damage from global warming to the defendants' actions.
Residents of Kivalina, a village of about 400 native Inupiat located on the tip of a barrier reef between the Chukchi Sea and two rivers, filed suit on Tuesday against the companies in U.S. District Court in San Francisco.
The suit is one of many global warming cases that have been filed after the U.N.'s climate change panel last year squarely placed the blame for global warming on human actions.
Village residents claimed that greenhouse gas emissions from the companies help warm the atmosphere and melt sea ice that used to protect them from winter storms. "Houses and buildings are in imminent danger of falling into the sea as the village is battered by storms and its ground crumbles from underneath it," the suit said.
The residents seek relocation costs which could run to $400 million.
Late last year, the U.S. National Oceanic and Atmospheric Administration offered a gloomy report on global warming's impact on the Arctic, finding less ice and hotter air.
The defendants, including Exxon Mobil Corp, BP Plc, Chevron Corp, coal miner Peabody Energy Corp, and power generator American Electric Power, are some of the largest producers of products that emit the main greenhouse gas carbon dioxide, or sell coal, the dirtiest fossil fuel.
Matt Pawa, a lawyer for the plaintiffs, said in an interview that under nuisance laws any major contributors to pollution problems can be sued.
He said since greenhouse gases combine together in the atmosphere to cause the overall problem of global warming, the biggest polluters can be blamed for contributing to the damage in Alaska. "Individual CO2 molecules don't have name tags," he said when asked if the companies could be directly linked to damage to the village.
The companies were chosen because they conduct some business in California, where the suit was filed. Pawa represented environmental groups in a successful automobile greenhouse emissions case in Vermont late last year that major automakers are appealing.
Gantt Walton, a spokesman for ExxonMobil, the world's largest publicly traded oil company, said the company had no comment on the case because it was still reviewing it.
He said ExxonMobil takes global warming "very seriously" and that the risks have warranted action by the company including reducing greenhouse gas emissions at its operations and supporting research into technology that could lead to breakthroughs.
Representatives of two other companies, Peabody and Chevron, did not immediately return telephone calls.
(Editing by Matthew Lewis)
February 26, 2008
Stelmach wants full report on oilsands moratorium
Groups seeking no new development in three areas until 2011
Jason Markusoff and Renata D'Aleisio
Calgary Herald
Monday, February 25, 2008
CALGARY - The Alberta Conservatives will not decide for months on a request from several major oilsands companies to halt development leases in three huge and environmentally sensitive swaths of the oilsands region, Conservative Leader Ed Stelmach said today.
The request threatens to pit Stelmach's commitment to environmental protection against his campaign mantra of not "touching the brake" on energy development, although he repeatedly dodged that question as the final week of campaigning towards next Monday's election began.
Industry giants including Petro-Canada, Imperial Oil, Husky Energy and Suncor Energy support the request for protected conservation areas in a January letter to the Alberta government by the Cumulative Environmental Management Association. The letter asks that the government not sell oilsands leases in the three areas until at least 2011.
"Although the sale of leases does not guarantee that commercial bitumen production will occur in that specific location, it does open the door to that possibility and the accompanying ecological disturbance," the letter states.
Last week, the Assembly of Treaty Chiefs in Alberta also unanimously supported the resolution for an oilsands moratorium.
Stelmach noted some oilsands firms disagreed with the letter's recommendation, and suggested if re-elected, the Tory government would hold off until final recommendations from CEMA come in June.
He said the government would have its own study completed by then with a plan to limit certain air-emissions from the oilsands sector.
"All recommendations that come forward we take seriously, but even if there wasn't a request to hold back any of the leases, we would be looking at leases if it extends beyond what we think, environment thinks, is the right level, the most appropriate level of emissions in that area," Stelmach said.
"So the cumulative environmental effect will take precedence because we want to make sure we maintain the air quality around Fort McMurray."
EnCana and Canadian Natural Resources are among CEMA's members who opposed the recommendation, although non-industry players including the local government, environmental groups and Environment Canada side with CEMA's majority.
Chief Allan Adam of the Athabasca Chipewyan Dene First Nation and a member of the Keepers of the Athabasca organization brought the resolution to the Assembly said the province hasn't properly consulted aboriginals over oilsands development.
"The cumulative impacts of oil sands development has all but destroyed the traditional livelihood of First Nations in northern Athabasca watershed," Adam said in a statement.
In Calgary, Stelmach reiterated he doesn't want to slow development. However, he didn't link his "no touching the brake" slogan with this request, but rather took it as a springboard to continue attacks on his rival Alberta Liberals.
"Governments do not control the economy," Stelmach said. "The last time the economy was controlled by a government was back in the 1980s and it was the federal Trudeau Liberals... we're not going back to those dark days.
Taft's party has no formal links to the federal Liberals, and he has slammed the Tories for fear-mongering and name-calling. Taft said the calls for a moratorium show the province needs to rethink how it's developing the oilsands.
Taft said if the Liberals formed government, the party wouldn't approve new oilsands projects until a detailed plan is drafted for managing impacts on the environment, infrastructure and labour.
"The consensus is we need to manage oilsands development better," he said. "The Tories have allowed a free-for-all. This is the biggest industrial development on the planet. We need a plan."
NDP Leader Brian Mason said his party has always favoured a more regulated pace of development in the oilsands.
"The devastation on water and on the environment is severe," he said in Edmonton. "And it's really one of the reasons we think we need to be reforming our economy into a green energy economy."
February 24, 2008
AECL: Canada's nuclear fallout
JESSICA LEEDER
Globe and Mail
February 23, 2008
DEEP RIVER, ONT. — He was a newcomer to the Canadian Nuclear Safety Commission, a refugee from the Crown-owned nuclear facility at Chalk River who brought with him a sparkling bit of inside knowledge.
His colleagues were reviewing a set of safety upgrades, designed by Atomic Energy of Canada Ltd. to modernize the NRU, the 50-year-old research reactor that supplies more than half of the world's medical isotopes.
"Staff in Ottawa were totally convinced that the [upgrades] were in," said one CNSC insider who spoke on condition of anonymity.
The new man knew better: Not all the upgrades were done.
Former Canadian Nuclear Safety Commission president Linda Keen speaks to journalists after testifying before the Commons natural resources committee on Parliament Hill in Ottawa January 29, 2008. REUTERS/Chris Wattie
That bit of information — confirmed days later in November by AECL — launched a frenetic 10-week tussle between the company and Canada's independent regulator that led to the shutdown of the isotope-producing nuclear reactor, so vital in the diagnosis and treatment of cancer and heart disease. Fearing an international crisis, the government intervened, overruled the regulator and ultimately fired its president, Linda Keen — a move that stunned the global nuclear community.
Insiders suggest the firing was intended to distract attention from the ugly spill of evidence leaching from the dispute: At the dawn of the nuclear renaissance, with the appealingly green industry planning a series of multibillion-dollar projects, Canada's nuclear flagship is wobbling. If it falters, potential sales of the trademark Candu reactors to industrialized countries could be jeopardized, and the prospect of the Conservative government allowing AECL to be swallowed by an international competitor could climb — putting Canada's reputation as a world nuclear heavyweight at risk.
Over the past month, The Globe and Mail has interviewed dozens of people with intimate knowledge of the company and the global nuclear landscape, including AECL employees, retirees, former board members, federal bureaucrats, former government ministers, current and former members of the CNSC and business people with close ties to AECL.
The interviews revealed:
* AECL has been fraught for years with internal management problems that were repeatedly acknowledged by government officials and flagged by business partners and the federal auditor-general, yet never fixed;
* the company's lobbying campaign to have the government decrease tensions with the CNSC, backed by private-sector partners, has been mounting steadily for more than a year;
* Minister of Natural Resources Gary Lunn was allegedly e-mailed information about problems at AECL at least two days before he admitted to learning about the reactor shutdown (he denies seeing the e-mail);
* emergency legislation passed last December restarted the reactor only days earlier than it could have been if the safety commission had not been overruled.
While AECL's long-festering tensions with Ms. Keen — seen as the company's main obstacle to new reactor sales — were defused by her firing last month, the red flags raised by the isotope debacle and all that seeped out in its wake may have created new hurdles for the Crown corporation.
"It's not good for AECL. They look incompetent. They look sloppy. They look unbusinesslike," said Anne McLellan, who oversaw the company for five years during the mid-1990s as natural resources minister. "Canada doesn't have that many signature technologies. This is your last, best shot to see AECL survive. I think in an area like this, you have to fish or cut bait."
A slippery slope
AECL was created as a Crown corporation in the postwar heyday of 1952. The company's first three decades are historic: The work done by scientists at Ontario's Chalk River and Manitoba's Whiteshell Laboratories cemented Canada's reputation as a producer of some of the world's top nuclear research.
But in the late 1980s, the company slowly began its downward slide. Brian Mulroney's Conservative government considered privatizing parts of the company. By 1991, MDS Inc., an international drug and medical research company, won a bid to buy Nordion International Inc., the profitable isotope-producing arm of AECL. The price tag: $165-million.
"They got a heck of a deal," said Robert Ferchat, the former Bell Mobility chief executive who was chairman of AECL in 1991. "They got a company who had a lock on the world markets for the isotopes, and no competition."
The deal included a long-term agreement under which AECL was compelled to provide MDS with a continuous stream of isotopes or face penalty.
Mention of the deal still raises ire in Deep River, where most Chalk River employees live. The tiny community northwest of Ottawa was created in 1944 for the Manhattan Project where the first atomic bomb was made. The deal marked the beginning of an era in which the company's commercial obligations started taking priority over research pursuits.
Through the early 1990s, the deal began to cause problems when NRU, built in 1957, and its older backup, NRX, started showing their age. AECL struggled — and failed — to get funding for a replacement.
"That reactor was old and tired in 1994. They were using equipment that was primitive — old Black and Decker drills, everything about it looked and felt decrepit," said Mr. Ferchat, who tried to raise alarms about company spending. "Executives kept telling me I'm only supposed to look after the board. They didn't want you in their business."
With prospects of a new reactor looking grim, AECL began designing a $32-million package of upgrades for NRU that would, among other things, add a backup emergency power supply that was fire-, flood- and earthquake-resistant, to convince the regulator to extend NRU's lifespan past 2000. The undertaking was "very demanding," said Phil Gumley, an engineer involved in the plans. "When we first learned about the requirement, I kind of felt a bit depressed knowing exactly what we had to do. We knew we were in for a long haul in 1992."
Progress on the upgrades slowed in the mid-1990s when the Liberal government began a nationwide program of cuts. AECL became "a skeleton of an organization that could barely function," said one former middle manager.
Ms. McLellan, the natural resources minister at the time, defended the approach. "Back in the early 1990s, it wasn't clear what the future of nuclear was," she said. "There had been no new facilities built in many years. [The nuclear accidents at] Chernobyl and Three Mile Island were still fresh in people's minds. It was a time of great uncertainty."
But AECL could have done more with its resources, Ms. McLellan said. "I don't think they ever stepped up to the plate in the way their main competitors did. However, AECL did have one hand tied behind its back in the sense that government could never provide them with the dollars they felt they needed to compete effectively. I also thought that they were an undisciplined operation."
Part of Ms. McLellan's antidote was to appoint Reid Morden, the former director of the Canadian Security Intelligence Service, as AECL's CEO in 1994.
"When I was first appointed, it was to bring about managerial change," Mr. Morden said, adding that guarding the isotope supply was a clear priority. Early in his term, that issue was highlighted by the threat of a strike involving one of the unions at Chalk River.
"I think it's one of the few times I actually had a call from the minister saying, 'Whatever is going on up there, fix it,'" Mr. Morden recalled.
That same year, MDS Nordion agreed to foot the $140-million bill for a pair of new reactors, called Maples. "MDS felt it was a big price, but there was a good feeling," said a former MDS Nordion executive, adding: "They quickly ran into problems and the problems just kept coming."
The major stumbling block occurred during commissioning tests that showed the reactors have a positive power coefficient instead of the negative power coefficient that design plans predicted. Reactors can work in either mode. However, until AECL is able to explain mathematically why their predictions were wrong, the regulator will not sign off on the Maples' operation.
"Being able to predict things is absolutely key in the nuclear business," said John Waddington, a former director-general of the CNSC.
As the Maples situation heightened tensions between the regulator and AECL, politicians became increasingly unwilling to step in, the former MDS Nordion executive said.
"[MDS Nordion's] petition was always … remember if something bad happens to NRU… Canada is going to be hurt, and we're going to look really bad. Having this high-tech business where Canada is the best in the world in health care, you really don't want to mess that up.
"This project was considered a tar baby. If you touch it, it sticks to you."
Butting heads
When Conservative cabinet minister Gary Lunn inherited the Natural Resources portfolio in February, 2006, it appeared problems at AECL were beginning to subside. Fed up with trying to explain the Maples' ballooning costs and six-year delay to shareholders, MDS Nordion had agreed to a mediated settlement with the Crown corporation that effectively transferred the Maple problems back into AECL's custody. MDS Nordion was paid $25-million, and a new 40-year isotope supply agreement was struck.
Within a month of becoming minister, Mr. Lunn met with Ms. Keen, the Liberal-appointed, two-time head of the nuclear regulator. He shared with her the new government's view that regulatory oversight could be streamlined. The pair had "great discussions," Mr. Lunn recalled this week. However, sources in Ottawa told The Globe the meeting had an icy tone, punctuated by Ms. Keen's reminder to Mr. Lunn of the CNSC's quasi-judicial, arms-length status.
Soon after, Ms. Keen took the podium at the Canadian Nuclear Association's annual convention and gave notice that the commission was imposing more rigorous safety standards and, being underfinanced and understaffed, could not meet the booming industry's timelines for new approvals.
For AECL, the announcement was a blow. The company was counting on the commission to conduct prelicensing consultations on the ACR1000, the next-generation Candu seen as the company's hope for future commercial success. Such consultations are common in countries that are home to major reactor companies and critical to ensuring that companies don't proceed along expensive, flawed design paths.
Ms. Keen's suggestion that her overstretched commission would no longer prioritize prelicensing was seen as obstructionist.
AECL's private-sector partners, including SNC-Lavalin, GE Canada and Hitachi Canada, hired some of the best-connected lobbyists in Ottawa to carry that message forward; other industry members complained directly to the Prime Minister's Office, sources said.
"We've tried to communicate however we could to whomever we could, to make this point," said Patrick Lamarre, president of SNC-Lavalin's nuclear division.
Michael Burns, the B.C.-based wind power executive who Mr. Lunn appointed as chairman of AECL, began to lobby the minister, whom he said he spoke with once a week during his chairmanship, about addressing the problems with Ms. Keen and her commission.
"I told [Mr. Lunn] then the dysfunctional relationship was going to cause serious trouble for commercial operations at the company. I told him we were going to have a train wreck. And I gave him a plan to fix it," Mr. Burns said.
The goal, he said, was to induce the government to legislate an overhaul at the CNSC, including Ms. Keen's position.
Mr. Lunn refused to discuss whether he attempted to push that reform in Ottawa, saying he is "not at liberty to talk about … discussions with cabinet colleagues."
Mr. Burns said his impression is that Mr. Lunn tried, but "couldn't get any traction."
A reactor shuts down
The train wreck that Mr. Burns forecast began in slow motion during the first week of November, 2007.
A dearth of leadership was beginning to show at AECL. The company's Mississauga-based president, Robert Van Adel, had spent little time in the office since announcing his retirement that June, and, because the company was embarking on a restructuring plan, there were no immediate plans to hire a new CEO. On top of that, Mr. Burns, the company's frustrated chairman, decided to resign.
While the leadership at AECL's headquarters in Mississauga was hollowing out, a problem at Chalk River was heating up. There, a CNSC staffer and former AECL employee (who declined to be interviewed for this story) divulged to his new boss his hunch that a final element of the NRU safety upgrades — the connection of two seismically qualified pumps to the new emergency power supply — had not yet been completed.
Staff were working on the assumption that the pumps had been connected, based on a letter that AECL sent to the regulator in December, 2005, confirming completion of the work. "All seven NRU Upgrades are now fully operational …" the document read.
Confused, the CNSC inquired about the pumps, and, after an internal scramble, AECL confirmed the problem. For the next week, staffers on both sides quietly tried to figure out what led to the miscommunication. In the midst of this, AECL shut down NRU for monthly maintenance. As tensions with the CNSC rose, it became clear the reactor would not be restarted.
"AECL considered the implications of starting up again. We were pushing back. They were taken by surprise," the CNSC insider said. "It was like a game of chess."
Two weeks later, AECL attempted to get the regulator's consent to restart the reactor with one of the new pumps connected. But their technical argument, called a safety case, was rejected.
"It was not good. It needed more work. It was about 12 pages of cold calculations," one insider said.
With AECL and the CNSC still trying to hammer out a compromise, concerns about the isotope supply began to catch politicians' attention. Mr. Lunn and Health Minister Tony Clement began to publicly criticize Ms. Keen, characterizing her as a partisan zealot blind to the health impacts of her decisions on Canadians in need of isotopes, and guilty of safety overkill.
As they lobbied against the CNSC, it seemed of little importance to the ministers, as well as to Prime Minister Stephen Harper, that the Chalk River facility sits on earthquake fault lines. The area has never experienced a major earthquake, but two minor quakes struck in December, registering 3.0 and 3.6 in magnitude.
"There will be no nuclear accident," Mr. Harper announced in the House of Commons on the day Parliament was to vote on a bill to overrule the regulator.
That same day, after being served with a government directive informing the CNSC to take into account the health of Canadians, Ms. Keen told Parliament that she could allow the reactor to return to service with one new pump connected in about a week if AECL provided the commission with a proper safety case.
But AECL said they could not complete the safety case until Dec. 13, meaning that, without government intervention, the reactor would remain shut down until around Dec. 18.
Dissatisfied with the timeline, Parliament voted to enact Bill C38, allowing AECL to restart the reactor once one pump was connected without applying for consent to the regulator.
The reactor was officially restarted on Dec. 16 — just days earlier than Ms. Keen may have allowed without parliamentary interference.
Still, the following month, Ms. Keen was removed from her presidential post, a move that raised questions about whether the ugly, two-month power play was really about isotopes.
"This should never have come to a midnight session in Parliament," said Duane Bratt, a nuclear policy expert at Calgary's Mount Royal College. "The real issue is these new reactors that are about to be approved. The Canadian nuclear industry is facing competition in their backyard. There is fear."
With a report from Shawn McCarthy in Ottawa
Enbridge gets pipeline approval from NEB
Globe and Mail, CP
February 23, 2008
The National Energy Board has given its approval of the $2-billion Alberta Clipper oil pipeline proposed by Enbridge Inc. but attached certain conditions in response to concerns raised in public hearings last November. The pipeline will stretch from Alberta to Wisconsin. The Canadian portion stretches 1,078 kilometres between Enbridge's terminal near Hardisty, Alta., and the Canada-U.S. border near Gretna, Man. The Calgary-based pipeline company must conduct an emergency response exercise at its South Saskatchewan River crossing to allay concerns about safety. The company says it's reviewing the details of the board's decision. ENB (TSX) closed up 13 cents at $40.83.
NEB Alberta Clipper proceeding - OH-4-2007
OH-4-2007 Reasons for Decision
Southern Lights - Enbridge pipeline project clears regulatory hurdle
Globe and Mail, CP
February 21, 2008
Enbridge Inc. says the National Energy Board has approved the $2.2-billion (U.S.) Southern Lights pipeline project, which will ship chemicals from the U.S. Midwest to northern Alberta for oil sands development. The new line will carry 180,000 barrels per day of diluent - light hydrocarbons or chemicals used to dilute the oil sands enough to allow it to flow through pipelines. The full Southern Lights plan involves laying nearly 1,100 kilometres of new pipe, reversing the flow in some existing lines and using other existing facilities. ENB (TSX) closed up 54 cents to $41.24.
NEB Southern Lights Proceeding OH-3-2007
OH-3-2007 Reasons for Decision
Enbridge revives $4-billion pipeline
New demand from Asia, domestic clients; Chinese pullout cancelled earlier project
NORVAL SCOTT
Globe and Mail
With files from Reuters
February 22, 2008
CALGARY -- Enbridge Inc. has lined up enough support from a clutch of Asian refiners and Canadian oil producers to revive its $4-billion plan to build a pipeline from the oil sands to the West Coast, just months after China pulled out of the project.
Enbridge has now turned to Southeast Asia to find customers for its Gateway pipeline and attracted enough funding from refiners there to accelerate work on winning regulatory approval, says Enbridge chief executive officer Patrick Daniel. "The pull from the other end of Gateway, initially, was primarily from the Chinese, but in this initiative the Chinese are not participants," Mr. Daniel told investors at a conference in Whistler, B.C., yesterday.
The project was shelved last year when PetroChina Co. Ltd. - a Chinese national oil company that had said it would buy half the Gateway crude - withdrew and rebuked Ottawa for not doing enough to support the project.
Mr. Daniel has travelled to Asia regularly, leading Enbridge teams seeking to woo potential customers. Now, he said, customer demand for the pipeline "ranges from Japan down to Singapore - so [there is a] much broader Southeast Asian interest."
Print Edition - Section Front
Section B Front Enlarge Image
The Globe and Mail
The Enbridge pipeline would enable Canadian oil sands producers to tap into a new and fast-growing market. The U.S. Midwest accounts for most oil sands exports, putting producers at risk if that market becomes saturated and prices plummet.
Oil sands producers have been leaning heavily on pipeline builders such as Enbridge to connect Alberta to new markets, including the U.S. Gulf Coast. Some producers had cooled on Asia as a potential destination as U.S. refiners showed they were willing to take on more Canadian production. Enbridge is looking for support to build a pipeline from Illinois to Texas that would allow Canadian crude to reach markets further south.
But interest for an Asian outlet seems to have returned. Kinder Morgan Canada already operates a medium-sized pipeline from Alberta to British Columbia's coast that it plans to expand. It usually supplies crude to California or the U.S. Northwest.
Last year, a record amount of that crude - as much as seven oil tankers, or about 550,000 barrels of oil - travelled to buyers in Asia last year, according to the National Energy Board, Canada's energy regulator.
The increased shipments suggest that Asian firms have been testing both Canadian heavy crude and light synthetic crude in their refineries to see how well they work, with a view to taking more in the future.
"The crude needs to be tested in refineries, and that's what is happening," Ian Anderson, chief executive of Kinder Morgan Canada, said in a recent interview.
"It will take some time until there's a meaningful [Asian] market developed that producers will commit significant portions of supply to. But in the next several years we'll see Canadian crude penetrate that market more and more, until there's a critical mass that would underpin both producers making a commitment [to Asia] and a significant pipeline expansion," Mr. Anderson said.
While Enbridge would not say which countries or companies have committed to Gateway, South Korea would likely join Singapore and Japan as customers.
Enbridge is still in talks with some Chinese firms about getting involved in Gateway, spokeswoman Jennifer Varey said. She wouldn't say how much funding customers have committed to the project.
ENBRIDGE INC. (ENB)
Close: $40.70, down 54¢
February 15, 2008
Water Provides an Ocean of Opportunity for Clean Energy
RedOrbit News
14-Feb-2008
As researchers continue their search for new sources of clean energy, their attention has turned to the Gulf Stream. Rushing at 8.5 billion gallons per second, the Gulf Stream represents a potential non-stop flow of new energy.
Florida Atlantic University researchers plan to test a small turbine later this year. They say that the currents could one day be used to produce as much power as 10 nuclear plants and supply one-third of Florida’s electricity.
The university received a $5 million grant from the state in hopes of developing technology that big energy companies can utilize to offer clean efficient energy. As of now, there are currently no commercial projects directed toward ocean currents.
"We can produce power 24/7," said Frederick Driscoll, director of the university's Center of Excellence in Ocean Energy Technology.
Researchers hope that while the initial cost to begin the process may be high, the currents will allow for a cheaper source than fossil fuels. But many things remain unknown, such as the “Cuisinart effect” by which the spinning blades could pulverize the creatures of the ocean.
David White of the Ocean Conservatory said that due to the lack of actual testing in the ocean, the environmental effects are currently unknown.
"We understand that there are environmental trade-offs, and we need to start looking to alternative energy and everything should be on the table," he said. "But what are the environmental consequences? We just don't know that yet."
Federal Energy Regulatory Commission spokeswoman Celeste Miller said that they have issued 47 permits for ocean, wave and tidal energy projects. However, most of these permits only allow researchers to study an area’s potential rather than apply equipment.
"It's the best location in the world to harness ocean current power," Driscoll said of the 30 mile wide Gulf Stream.
As an alternative, on the West Coast, researchers are looking at waves as a possible way to generate energy. For example, Canada-based Finavera Renewables has received a FERC license to test a wave energy project in Washington state, which will include four buoys that could generate enough energy to power 700 homes.
Roger Bedard of the Electric Power Research Institute said the organization found that these projects could only be able to supply about 6.5 percent of modern electricity needs.
"We've got a limited amount of flat sandy bottom on the Oregon Coast where we can put out pots and where we can fish, and the wave energy folks are telling us they need the same flat, sandy bottom," said Nick Furman, executive director of the Oregon Dungeness Crab Commission. “It's not the 10-buoy wave park that has the industry concerned. It's that if it's successful, then that park turns into a 200- or 400-buoy park and it just keeps growing."
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Electric Power Research Institute: http://www.epri.com
Finavera Renewables: http://www.finavera.com
Federal Energy Regulatory Commission: http://www.ferc.gov
Center of Excellence in Ocean Energy Technology: http://coet.fau.edu
Oceans Eyed As New Energy Source
By BRIAN SKOLOFF
AP - Associated Press
14-Feb-2008
DANIA BEACH, Fla. (AP) — Just 15 miles off Florida's coast, the world's most powerful sustained ocean current — the mighty Gulf Stream — rushes by at nearly 8.5 billion gallons per second. And it never stops.
To scientists, it represents a tantalizing possibility: a new, plentiful and uninterrupted source of clean energy.
Florida Atlantic University researchers say the current could someday be used to drive thousands of underwater turbines, produce as much energy as perhaps 10 nuclear plants and supply one-third of Florida's electricity. A small test turbine is expected to be installed within months.
"We can produce power 24/7," said Frederick Driscoll, director of the university's Center of Excellence in Ocean Energy Technology. Using a $5 million research grant from the state, the university is working to develop the technology in hopes that big energy and engineering companies will eventually build huge underwater arrays of turbines.
From Oregon to Maine, Europe to Australia and beyond, researchers are looking to the sea — currents, tides and waves — for its infinite energy. So far, there are no commercial-scale projects in the U.S. delivering electricity to the grid.
Because the technology is still taking shape, it is too soon to say how much it might cost. But researchers hope to make it as cost-effective as fossil fuels. While the initial investment may be higher, the currents that drive the machinery are free.
There are still many unknowns and risks. One fear is the "Cuisinart effect": The spinning underwater blades could chop up fish and other creatures.
Researchers said the underwater turbines would pose little risk to passing ships. The equipment would be moored to the ocean floor, with the tops of the blades spinning 30 to 40 feet below the surface, because that's where the Gulf Stream flows fastest. But standard navigation equipment on ocean vessels could easily guide them around the turbine fields if their hulls reached that deep, researchers said.
And unlike offshore wind turbines, which have run into opposition from environmentalists worried that the technology would spoil the ocean view, the machinery would be invisible from the surface, with only a few buoys marking the fields.
David White of the Ocean Conservancy said much of the technology is largely untested in the outdoors, so it is too soon to say what the environmental effects might be.
"We understand that there are environmental trade-offs, and we need to start looking to alternative energy and everything should be on the table," he said. "But what are the environmental consequences? We just don't know that yet."
The Federal Energy Regulatory Commission has issued 47 preliminary permits for ocean, wave and tidal energy projects, said spokeswoman Celeste Miller. Most such permits grant rights just to study an area's energy-producing potential, not to build anything.
The field has been dealt some setbacks. An ocean test last year ended in disaster when its $2 million buoy off Oregon's coast sank to the sea floor. Similarly, a small test project using turbines powered by tidal currents in New York City's East River ran into trouble last year after turbine blades broke.
The Gulf Stream is about 30 miles wide and shifts only slightly in its course, passing closer to Florida than to any other major land mass. "It's the best location in the world to harness ocean current power," Driscoll said.
Researchers on the West Coast, where the currents are not as powerful, are looking instead to waves to generate power.
Canada-based Finavera Renewables has received a FERC license to test a wave energy project in Washington state. It will eventually include four buoys in a bay and generate enough power for up to 700 homes. The 35-ton buoys rise above the water about 6 feet and extend some 60 feet down. Inside each buoy, a piston rises and falls with the waves.
The company hopes later to be the first in the U.S. to operate a commercial-scale "wave farm," situated off Northern California. The project with Pacific Gas and Electric calls for Finavera to produce enough electricity to power up to 600 homes by 2012. Finavera eventually wants to supply 30,000 households.
Roger Bedard of the Electric Power Research Institute said an analysis by his organization found that wave- and tide-generated energy could supply only about 6.5 percent of today's electricity needs.
Finavera spokesman Myke Clark acknowledged that wave energy is "definitely not the only answer" to the nation's power needs and is never going to be as cheap as coal. But it could be "part of the energy mix," and could be used to great advantage off the coasts of Third World countries, where entire towns have no connection to electrical grids, he said.
Nick Furman, executive director of the Oregon Dungeness Crab Commission, said he fears the wave technology could crowd out his industry, which last year brought in 50 million pounds of crab and contributed $150 million to the state's economy.
"We've got a limited amount of flat sandy bottom on the Oregon Coast where we can put out pots and where we can fish, and the wave energy folks are telling us they need the same flat, sandy bottom," Furman said.
"It's not the 10-buoy wave park that has the industry concerned. It's that if it's successful, then that park turns into a 200- or 400-buoy park and it just keeps growing."
February 14, 2008
Oilpatch profits to hit $23B this year
CBC News
Thursday, February 14, 2008
Record high oil prices and rising production from the oilsands should see profits in Canada's oilpatch hitting almost $23 billion this year, the Conference Board said Thursday.
That would represent an 18 per cent jump from 2007's profit figure.
The processing plant at the Suncor oilsands
project in Fort McMurray, Alta.,
pumps steam into the air.
(Jeff McIntosh/Canadian Press)
"With the price of oil expected to stay well above $80 US per barrel for the entire year, industry profits will once again reach new highs in 2008," said Conference Board economist Todd Crawford.
"However, rising industry costs and an expected decline in prices next year, due to additional global supply coming online, should cause profits to weaken in 2009," he said.
Crawford predicts that the ever-cyclical industry will see its profits tumble by 29 per cent in 2009 before recovering in 2010.
The report calls for a 9.2 per cent increase in total crude production this year, with the extra production coming from non-conventional sources like the oilsands. Conventional production will continue to drop.
The big profit increase this year will come despite rising costs and labour and material shortages, it says.
The independent research group also forecasts that Alberta's royalty increases in 2009 will have little effect on oilpatch investment as high oil prices will continue to attract new money.
http://www.cbc.ca/money/story/2008/02/14/oilpatch.html
Groups say federal review of Keystone line is inadequate
COMMENT: Increasingly, North Americans are focussing on the greenhouse gas emissions associated with Alberta's oilsands. In the news item that follows these comments, the intervention being reported on is in the US regulatory process for TransCanada's Keystone Pipeline, which is proposed precisely to move oilsands production to US refineries and markets. It is one example of how that focus on oilsands related GHGs is playing out.
In its own approval decision for the Canadian portion of the Keystone Pipeline, the National Energy Board makes no mention of greenhouse gases, other than to indicate that it was requested to include consideration of them in the List of Issues for the hearing (by the Communications, Energy, and Paperworkers Union of Canada).
Keystone Reasons for Decision - OH-1-2007
The NEB appears to have forgotten the regulatory jurisdiction it embraced with the GSX Pipeline proceeding, with respect to downstream effects of a pipeline. In May 2001, the Joint Review Panel made a (it was hoped) precedent-setting decision to include consideration of these downstream effects, including greenhouse gas emissions. In this case, it considered one of the unbuilt gas-fired generation plants on Vancouver Island - the infamous VIGP, later to be known as Duke Point Power - that would be built as a consequence of the GSX Pipeline. The precedent was used later to argue successfully in the Sumas Energy 2 transmission line hearing that the upstream effects of the SE2 generation plant should be considered in the review of the transmission line.
In its decision approving the GSX, the Panel said,
"Regarding GHG, the Panel considers climate change an important Canadian and global issue and recognizes the Government of Canada’s effort in this regard by the ratification of the Kyoto Protocol and the development of the Climate Change Plan for Canada. Consideration of GHG emissions associated with a proposed project allows applicants, the public and governments to evaluate proposals and actions in the context of existing and developing policies and plans for managing GHG emissions (i.e., the Climate Change Plan for Canada)." (p32)GSX Reasons for Decision - GH-4-2001
Perhaps it's the change in federal government, or perhaps the NEB believes that what it decides in British Columbia doesn't really apply where the big continental oil and gas infrastructure is at play... Whatever, greenhouse gas emissions didn't get even a cursory nod in the NEB's Keystone decision.
See also Environmentalists target airline customers about other campaigns focussing on oilsands and GHGs.
Pipeline is an environmental risk, below, is just one of many letters to North Dakota newspapers expressing other concerns about the Keystone project, mainly about more local issues to do with leaks, health, and safety.
Elsewhere in North Dakota, concerns about pipelines appear lost in excitement over the state's own oil boom. See Dunn County residents learn more about oil at Killdeer meeting, also below. The Bakken Formation which underlies eastern Montana, western North Dakota, and southwestern Saskatchewan could contain as much as 500 billion cubic feet of oil. In an industry always overexcited at the size of a man's oilfield, the big numbers bandied about Bakken are to be expected, but take them with a cold shower. The economically producible oil will be substantially less.
But IF new work in Bakken proves that there's a lot of oil there, you can also expect promised oilsands investment to ooze right out of Alberta and into Bakken. Not all oil production has the same ecological footprint. Bakken is sweet crude and produces gas as well as oil.
See the Wikipedia entry on the Bakken Formation
Janell Cole
N.D. Capitol Bureau
Thursday, February 14, 2008
BISMARCK — The TransCanada Keystone Pipeline shouldn’t have a final go-ahead yet because a federal environmental study failed to heed the increased global warming caused by the “dirty” tar sands oil the line would carry, environmental groups said Wednesday.
The groups, including the Dickinson–based Dakota Resource Council, also charge that the proposed pipe strength isn’t good enough to ensure groundwater safety and that the federal study neglected to consider protection of American Indian cultural resources.
The 30-inch pipeline, set for construction beginning this spring, is to run from Alberta through Saskatchewan, Manitoba, the Dakotas, Nebraska, Missouri, Kansas and Illinois. It will carry oil extracted from the northern Alberta tar sands to Illinois refineries, with a future branch extending to a crude oil hub in Oklahoma.
DRC joined with the Natural Resources Defense Council, headquartered in New York, and the Iowa-based Plains Justice to comment on the final federal environmental impact statement.
The groups said they “found that the final (EIS) failed to address the impacts of expansion in refineries for the dirty tar sands oil, and the local impacts of the pipeline.” And, they said, the study fails to show how “promoting and catalyzing expansion of tar sands oil” is in the national interest. Processing tar sands oil causes three times as much global warming per barrel compared to conventional oil, they said.
The State Department is eventually expected to issue a “record of decision” giving the federal approval for the construction. Meanwhile, the North Dakota Public Service Commission is also in the final stages of approving the route through the state, from near Walhalla to near Cogswell. The PSC meets again this morning to work on its draft order.
TransCanada spokesman Jeff Rauh said Wednesday, “The EIS is adequate.” He said it covers all the pertinent issues and “we look forward to starting on the project.”
Pipeline critic Janie Clapp of Lankin said Wednesday, as she and other opponents have said before, that the federal government’s approval of a slightly thinner pipe in sections of the line “may contaminate our drinking and agricultural water.”
But Rauh said the federal pipeline safety agency that has permitted the slightly thinner pipe determined it will be as safe as or safer than other pipelines. Its approval includes 17 pages – more than 50 special conditions – that the company must meet in order to use the slightly thinner pipe, he said.
Rauh also said the EIS contains 35 pages of detail about the consultation done with Indian tribes and the State Department regarding the line’s possible affect on native resources.
Janell Cole works for Forum Communications Co., which owns The Dickinson Press.
Pipeline is an environmental risk
By GEORGE MAGNUS JOHNSON
Fargo, ND
Bismarck (ND) Tribune
Jan 15, 2008
Once again North Dakota's beleaguered environment and protesting citizens are being swept aside by a big business juggernaut, the Canadian Keystone pipeline. If this pipeline is so essential for our never-ending gas guzzling habits, why can't it be built along the I-29 corridor? This siting would lessen environmental despoilation, the threat of an accident (remember Clear Brook, Minn.), and the inevitable risks of water contamination.
But no, Keystone says it will build where it wants to. The company apparently can get by with arrogant threats to resistant landowners and disdain for environmental concerns. They say they cannot change their plans because it would cost too much. Have we heard that argument before?
The next question to ask is, where is the North Dakota Public Service Commission? Are they in place to serve the interests of corporations or to protect North Dakota's environment and citizens? An excellent letter on the subject appeared in a newspaper in September 2007, pointing out the near-certainty that this pipeline - indeed any pipeline - will sooner or later leak.
Now is the time to contact the PSC. I understand that they will make the final decision in mid-February. The phone number is 328-2400 and the e-mail address is ndpsc@nd.gov.
Dunn County residents learn more about oil at Killdeer meeting
By LAUREN DONOVAN
Bismarck Tribune
Feb 14, 2008
KILLDEER - Cathy Trampe, of Dunn Center, said she made a deal with her husband, Ernest: If they got an oil well out in one of their grazing pastures, they'd sell the cows.
The well came and the cows got sold, though they're still waiting for their first royalty check in the mail.
The Trampes and more than 130 others from the Dunn County area were in Killdeer on Tuesday night for a town hall meeting that was all about oil, though first and afterward it was about visiting over chips, beer and beef sandwiches in the commodious Buckskin banquet room.
There's a lot to talk about in Dunn County these days, with 13 oil rigs lighting up the night like prairie skyscrapers out there.
A lineup of speakers made it clear the well on the Trampes' land is just the tip of what could be the most sustained and lucrative oil "iceberg" in state history.
That deep iceberg of oil in the Bakken formation is situated like a horseshoe, dropped irregularly on the northwest quadrant of the state and covering more than 24,000 square miles. The Bakken's oil reserve could contain as much as 200 billion to 400 billion barrels of oil, which makes the 1.6 billion barrels produced in all of state history so far seem like a proverbial drop in the bucket.
The size of the reserve is under study by both the North Dakota Department of Mineral Resources and the U.S. Geological Survey, with the new numbers expected out in the next two months. But records for state oil production and number of new wells permitted are teetering now.
Lynn Helms, director of the mineral division, told the packed house that daily oil production will likely surpass the state's record set in 1985 by mid-year.
North Dakota, long ranked ninth among states in total oil production, is now ranked eighth ahead of Montana and could move into fifth or sixth place, he said. This year could breech the record for new well permits. That record is 1,098 permits issued in 1981.
The Bakken may take another 40 to 50 years to fully develop making it an extremely sustained oil event. Helms said the micro-porosity of the rock may make it a good candidate for enhanced recovery using carbon dioxide, rather than a water flood, when that stage comes.
Dunn County is in the heart of the best of the Bakken production so far, along with wells in Mountrail County.
Helms said the oil industry expected good production from the Bakken to spill over from Montana closer to the state line, but the surprise has been to find it further afield. That could put Mercer County in a good position for oil development as evidenced by strong interest in Mercer County when the State Land Department auctioned 21,000 mineral acres in the county two weeks ago.
"It's the march to the lake (Sakakawea)," Helms said of the oil rigs' path. "The industry believes there's Bakken potential all the way to mid-Mercer County."
Helms said oil production in Dunn and Mountrail counties is "shooting straight up." A fairly steady increase of daily oil production at around 2,000 barrels jumped up to 7,000 barrels when wells in those counties came in recent months, he said.
He said Bakken formation produces a sweet crude oil that's being "gobbled up" by Tesoro's Mandan refinery. "It's the best oil in the world," Helms said.
Mark Makelky, director of the state's Pipeline Authority, said crude oil pipelines - particularly the east-west Enbridge pipeline - are expanding capacity.
"It's not enough yet," Makelky said. Enbridge will go from 110,000 barrels capacity to 160,000 in its next expansion phase. That phase will max out the pipeline, and the next step is to build another line, he said.
All the natural gas coming off the oil wells and flaring now in Dunn and Mountrail will be eventually gathered, though there are some constraints on the smaller pipelines that feed into the main 42-inch Northern Border Pipeline that exports much of the state's gas production, Makelky said.
Ron Ness, who directs the North Dakota Petroleum Council, said the boom is back, especially in view of oil tax revenue. The state's share of oil taxes could amount to more than $600 million this biennium alone, he said.
A proposed constitutional measure will divert some of that revenue into a trust that could eventually yield $75 million a year in interest, Ness said.
Like pipelines constrain product, North Dakota's available workforce could constrain the boom. Ness said the industry needs 12,000 new and replacement workers over the next four years "to get the job done."
The North Dakota Association of Oil and Gas Producing Counties coordinated the Dunn County meeting and others still to be held.
They're scheduled at noon Feb. 22 in Bowman at the Sweetwater Golf Course Clubhouse; at noon Feb. 25 at the Farm Festival building in Tioga; at 6 p.m. Feb. 25 at the Two Way Steakhouse in Stanley; and at noon Feb. 26 at the 4 Bears Casino at New Town.
Vicky Steiner, director of the county association, said each meeting will be tailored with information for each oil location.
February 08, 2008
Proportionality
Energy Bulletin
7 Feb 2008
There is a strange clause in the North American Free Trade Agreement (NAFTA) that applies to only one country, Canada. The clause states that Canada must continue to supply the same proportion of its oil and gas resources to the US in future years as it does now. That’s rather a good deal for the US: it formalizes Canada’s status as a resource satellite of its imperial hub to the south.
From a Canadian perspective there are some problems with the arrangement, though. First is the fact that Canada’s production of natural gas and conventional oil is declining. Second is that Canada uses lots of oil and gas domestically: 70 percent of Canadians heat their homes with gas, and Canadians drive cars more and further than just about anyone else. The problem is likely to come first with natural gas; as production declines, there will come a point when there isn’t enough to fill domestic needs and continue to export (roughly 60 percent of Canada’s gas now goes to the US).
That point is not decades in the future, it is fairly imminent.
Then there is the problem of Climate Change. Canada is committed by treaty to reducing domestic emissions of carbon dioxide. But most of Canada’s emissions come not from consuming fossil fuels, but producing them. Increasingly, from producing synthetic diesel fuel from the tar sands of Alberta.
Even if Canadians decide to drive less and turn down their thermostats, those efforts will do little or nothing to change energy production rates (hence emissions rates), because any extra amounts of fuel produced but not used domestically will simply be exported south; in fact, they virtually must be by the terms of NAFTA.
So Canada’s energy security and global climate security are both held hostage by a provision within a trade agreement, a provision that is unique in all of the world’s treaties. Canada has every reason to repudiate the proportionality clause, and to do so unilaterally and immediately.
Of course, the current Canadian government will not do so. Nor will the main opposition party. Both are securely bound to do the will of their puppeteers in Washington. But what about the NDP, Canada’s other main (center-left) party? Couldn’t it make the abolition of the proportionality clause a key campaign issue? Surely Canadians care about energy security and simple fairness. By raising the question, the NDP would educate Canadians about the links between fossil fuel depletion, globalization, and climate change, while forcing the other parties to either identify themselves with, or abandon, a policy that imperils their nation’s future.
Party leaders might be wary of the US response, but the latter would be fascinating to see. Of course the US would threaten all sorts of trade punishments. However, the domestic US political fallout is delicious to contemplate: in this case, US motives would require no speculation, as do the nation’s real goals in Iraq or elsewhere in the oil-rich Middle East. Americans wouldn’t be using economic muscle against demonized Arabs on the other side of the world, but against people who are culturally just like themselves who happen to live north of an imaginary line. The unfairness of the proportionality clause would be apparent to everyone and the idiocy of US energy and climate policy would also be plainnot just to Canadians, but to the rest of the world and (crucially) to US citizens as well.
With so much at stake, and with current policy leading inevitably toward crisis, isn’t it time for a bold move such as this?
February 06, 2008
When oil crisis hits, fantasyland will become nightmare
Freezing in the Dark: Why Canada Needs Strategic Petroleum ReservesGordon Laxer Parkland Institute & Polaris Institute January 31, 2008 Download report |
Oil ShockwaveNational Commission on Energy Security June 23, 2005 Download report |
Frances Russell
Winnipeg Free Press
Wed Feb 6 2008
IN 1980, furious Albertans slapped bumper stickers on their cars stating "Let the eastern bastards freeze in the dark" to protest Ottawa's "Canada First" National Energy Program. Every federal government since has ceded national energy policy to the provinces and, by proxy, to the North American marketplace.
This appalling abdication of leadership leaves Canada completely exposed to the supply crisis experts predict is inevitable once the world enters the dark and uncertain time of Peak Oil.
Here are some of the reasons why:
Canada exports 67 per cent of its oil to the U.S. yet 40 per cent of Canadians are totally reliant on offshore, mostly Middle Eastern, oil. The three leading Middle Eastern countries upon whom 36 per cent of Ontarians and 90 per cent of Quebecers and Atlantic Canadians depend are Algeria, Iraq and Saudi Arabia.
Before the North American Free Trade Agreement, 30 per cent of Canada's oil was exported to the U.S. NAFTA has more than doubled Canada's oil exports south.
The five proposed new pipelines from Alberta's tar sands to the U.S. will commit 75 to 80 per cent of Canada's oil to the American market. Yet it is the taxpayers of Alberta and Canada who will pay the staggering environmental costs and subsidize the extraction bills.
NAFTA's proportionality clause prohibits Canada's government from reducing energy exports even in times of crisis unless Canada cuts its consumption by the same amount.
No new east-west oil pipeline has been built in Canada since the Trudeau era. Until 1999, there was a steady flow of 250,000 barrels of western oil east to Montreal through the Montreal-Sarnia pipeline. Since 1999, that same pipeline brings 250,000 barrels of offshore oil west to Sarnia. Industry, not government, reversed the flow, no questions asked by government.
If a crisis hits, there is not enough east-west pipeline capacity to transport western oil to eastern Canadians.
Not only are there no new east-west pipelines on the drawing board, none is even being contemplated. No statistics are kept so no one knows where Newfoundland's daily 370,000 barrels of oil go.
Canada is the only oil-producing country -- and the only western industrialized country -- not to have a Strategic Petroleum Reserve (SPR). The International Energy Agency (IEA) requires net import nations to maintain emergency 90-day oil reserves. Net export nations are not obliged to keep SPRs because the IEA sensibly assumes no country exports without ensuring domestic needs first. The IEA has no mechanism for a nation that doesn't control its own resources.
Peak Oil is coming fast. The U.S. Department of Energy predicts it no later than 2010. The drop-off will be steep and rapid, throwing the world into crisis upon any war, terror attack or natural disaster. "Government intervention will be required, otherwise economic and social implications would be too chaotic," says the USDE.
Oil Shockwave, a 2005 U.S. National Commission on Energy Policy report, warns that a fairly minor disruption to world oil supplies would create a 177 per cent price spike. If the U.S. bombs Iran and the Strait of Hormuz is closed, global supply could be cut by one-fifth, or 17 million barrels a day.
As oil supply tightens, nations are moving away from free markets. About 80 per cent of global oil reserves are controlled by state-owned oil companies. Most have a nationalist orientation; domestic needs come first.
Canada's energy policy -- or lack thereof -- is unique across the globe. Again, it has no SPR, although nearly half its citizens are totally dependent on foreign oil. It ranks its own domestic needs and security inferior to those of its neighbour. Central and Atlantic Canadians are left without energy security and dependent on Middle East oil so that the U.S. can have greater energy security and less dependence on Middle East oil.
These sobering realities -- and more -- are laid out in a new report by the University of Alberta's Parkland Institute and Ottawa's Polaris Institute. Entitled Freezing In The Dark: Why Canada Needs Strategic Petroleum Reserves, its author is University of Alberta political economist Gordon Laxer, Parkland's founding director.
Laxer finds the curtain of silence around Canada's lack of energy security "unbelievable. We are as dependent on Middle East oil as the Americans. Every other country is talking about its security of supply -- India, China, the U.S. They are locking up long-term contracts with oil-producing countries. But here, nothing. We are so focused on our exports that nobody in Ottawa seems to think about security of supply for Canadians."
Laxer is shocked at the disinterest he encountered at the National Energy Board and Natural Resources Canada. "There's resource nationalism rising around the world, but the NEB and NRC just say they can't see a problem: 'We have all this oil and we can go to spot markets.' They're off in fantasyland."
When the oil crisis hits, Canadians will find the fantasyland a nightmare. They shouldn't forget who to blame.
January 31, 2008
Suncor presses ahead with Voyageur expansion
Royalty deal paved way, says CEO
Shaun Polczer
Calgary Herald
Thursday, January 31, 2008
Barely hours after reaching an agreement with the province on royalties, Suncor Energy Inc. on Wednesday pushed ahead with its $20.6-billion Voyageur oilsands expansion.
The project, which will add 200,000 barrels per day (bpd), will take Suncor's oilsands production past 550,000 bpd by 2012, making it the largest oilsands producer in Canada and, indeed, the world.
On Wednesday, company president and CEO Rick George said Tuesday's royalty deal was the catalyst to formally sanction the massive undertaking.
"Was it a factor? Absolutely," he said. "It's fair to both sides and enabled us to move forward overall.
"We do want to be the developer of choice and we do also want to be the developer that's here for the 50- to 100-year run, not just the short term."
Voyageur becomes the latest in a backlog of more than $100 billion worth of oilsands projects on the books slated for the Fort McMurray area.
Suncor joins Shell and Canadian Natural Resources Ltd. among operators that have committed to building multibillion-dollar expansions to extract oil from the gooey sands and send it to U.S. refiners.
More than half of the project's estimated budget -- about $11.6 billion -- is earmarked for the construction of a third upgrader that will convert 245,000 bpd of bitumen into 200,000 bpd of synthetic crude oil.
Another $9 billion will go to expanding the company's Firebag in-situ project, which will be built in four subsequent phases.
At its peak, the project will see 7,800 workers onsite.
Voyageur has been in the works since 2003, but was put on hold while Suncor reviewed costs that were pegged at $10 billion as recently as 2005.
George estimated that some $2.5 billion has been spent to date on front-end engineering and project scope work. "We only have $18 billion to go," he quipped.
George said Suncor took pains to reduce environmental impacts such as water use and said the door is open for applying new technologies, such as coke gasification to minimize the use of natural gas to make oil.
Suncor said the project would generate a 15 per cent return on capital at oil prices of $60 US a barrel, although UBS analyst Andrew Potter estimated an after-tax gain of 12 per cent at oil prices of $70 -- a rate he termed "reasonable."
Oil prices rose 69 cents in New York on Wednesday, to close at $92.33 US.
"(It's) a return that is competitive with full cycle global oil exploration," he noted.
Along with the Voyageur expansion, Suncor announced a $7.5-billion capital budget for 2008, including $6 billion earmarked for oilsands.
"We continue to believe that Suncor represents a best-in-class story from an execution and growth standpoint," said Raymond James analyst Justin Bouchard.
spolczer@theherald.canwest.com
Suncor project overview
- The $20.6-billion investment is expected to deliver an integrated expansion to boost production to 550,000 bpd in 2012.
- About $9 billion is to be spent to construct four stages of in-situ production, with each stage to produce an average of 68,000 bpd of bitumen.
- About $11.6 billion will go toward construction of an upgrader designed to process 245,000 bpd of bitumen into 200,000 bpd of crude oil. The product slate is to consist of approximately 85 per cent sweet crude oil and diesel, and 15 per cent sour crude oil.
- The cost estimates include investments in infrastructure, including pipelines, camps, administration facilities, cogeneration, tank farms and an interchange on Highway 63 to enable safe traffic flow.
- At peak construction in 2009 to 2010, the expansion is expected to employ 7,800 people. On completion, the expansion is expected to create 800 permanent new jobs.
© The Calgary Herald 2008
B.C. firm gets U.S. funds for ethanol plant
Gordon Hamilton
Vancouver Sun
Thursday, January 31, 2008
A Vancouver bioenergy company has been awarded up to $30 million by the U.S. Department of Energy to build a small-scale biorefinery in Colorado.
The grant to Lignol Innovations Inc., the U.S. subsidiary of Vancouver-based Lignol Energy Corp., is part of a $114-million funding commitment by the U.S. to four different companies. Each is to build refineries that can commercially produce ethanol from cellulose, part of a U.S. government commitment to produce 30 billion gallons of ethanol a year from a variety of sources by 2020.
The Department of Energy said the government grants will cover about a third of the cost of the projects.
"This is a major, major injection of cash into new technologies," said Lignol CEO Ross MacLachlan of the award.
Lignol is to build a plant in Colorado, which MacLachlan said will have a total cost of $88 million.
The plant is to be operated by Suncor Energy, which operates a refinery in Commerce City, Colo. Suncor is to buy all of the ethanol produced.
A condition of the U.S. funding is that the plant must be completed by 2012. Once completed, it is expected to produce 2.8 million gallons of cellulosic ethanol a year, MacLachlan said.
Cellulosic ethanol is essentially alcohol distilled from the natural sugars in trees. It takes far less energy to produce ethanol from wood than from corn, but it is more costly.
Lignol has a pilot plant that uses a pulp digester to cook wood chips to remove the lignin, the binder in wood that holds the fibres together.
The pulp is broken down by enzymes into sugars which are then fermented and distilled. MacLachlan said the enzymes are what makes the process expensive, but Lignol's process uses fewer enzymes and extracts other chemicals from the wood that have added value, making the process more feasible.
© The Vancouver Sun 2008
January 19, 2008
Oil Demand, the Climate and the Energy Ladder
By JAD MOUAWAD
New York Times
Published: January 19, 2008
Energy demand is expected to grow in coming decades. Jeroen van der Veer, 60, Royal Dutch Shell’s chief executive, recently offered his views on the energy challenge facing the world and the challenge posed by global warming. He spoke of the need for governments to set limits on carbon emissions. He also lifted the veil on Shell’s latest long-term energy scenarios, titled Scramble and Blueprints, which he will make public next week at the World Economic Forum in Davos, Switzerland. Following are excerpts from the interview:
Dave Olecko/Bloomberg News
Jeroen van der Veer
Q. What are the main findings of Shell’s two scenarios?
A. Scramble is where key actors, like governments, make it their primary focus to do a good job for their own country. So they look after their self-interest and try to optimize within their own boundaries what they try to do. Blueprints is basically all the international initiatives, like Kyoto, like Bali, or like a future Copenhagen. They start very slowly but before not too long they become relatively successful. This is a model of international cooperation.
Q. Your first scenario looks very similar to today’s world, with energy nationalism, competition for resources and little attention to consumption.
A. It depends where you live. I realize there are different opinions about Kyoto in the world. But if you think about Bali, Bali is a good outcome if people can agree how to have useful discussion in the coming two years and the United States, China and India are on board. The Blueprints world is maybe a world that starts slowly and is not that easily feasible, but you see some early indicators that it is a realistic possibility.
Q. The world seems to be at some form of inflection point with a big shift in demand.
A. The basic drivers are pretty easy and they are twofold. You go from six billion people to nine billion people basically in 2050. This combination of many more people climbing the energy ladder, which is basically welfare for a lot of people who live in poverty, creates that enormous demand for energy.
Q. How will the demand be fulfilled?
A. Many politicians think we have to make a choice between fossil fuels and renewables. We have to grow both fossil fuels and renewables. And that will be a huge effort for both.
Q. More energy means more carbon emissions. How do you deal with that?
A. That is absolutely the crux of the matter. The principal way we see is that in the very short term, man-made carbon emissions will increase. But over time people will figure out ways — and we work very hard on that — that while using fossil fuels you try to find carbon dioxide solutions. For instance, carbon sequestration. The problem is that many of the renewables, if you take the subsidies out, are still too expensive. That is the dilemma we face now.
Q. Fossil fuels are still going to represent the lion’s share of the energy mix in the next century?
A. First, there is no lack in itself of oil or gas, or coal for that matter. But the problem is that the easy-to-produce oil or easy-to-produce gas will be depleted or with difficult access. But if you look at difficult oil or difficult gas, which we in the industry call the unconventionals, such as oil sands or shales, they may be exploitable. But per barrel, you need a lot more technology and a lot more investments, and per barrel you need a lot more brain to produce it. It’s much more expensive.
Q. What kind of alternatives can compete?
A. The competition is partly true competition — markets, inventions — and part of it is governments. I think if you can price carbon dioxide, probably you can stimulate carbon capture and sequestration. If you tax a certain form of energy, over time it gets more expensive and you may use less of it.
Q. It still seems there is a gap that is hard to bridge.
A. If carbon is the real bottleneck, as a world it makes sense that we use our money where we get the biggest reduction for the lowest cost. You get more carbon reduction for less money by tackling the power sector and maybe the building sector.
Q. It is still hard to see that people are willing to pay more for greener energy.
A. I am a strong believer and strong advocate of free enterprise. If you would like to solve the carbon problem in the world, free enterprise has to work in close cooperation with governments to form the right framework. How you tackled the sulfur dioxide problem in the United States was the basic inspiration for the European trading system of carbon. So there are examples from the past we can apply to overcome that problem. But we can’t do it on our own as an industry. We need cooperation from governments.
Q. How close are we to an understanding globally that climate policy and energy policy are all interrelated issues?
A. Thanks to Al Gore, and many others, the awareness is there. There is a kind of sense of urgency. Secondly, there is a preparedness to do things. Thirdly, do we agree who has to take what action? I think that is still a huge problem.
Q. There was a lot of disagreement at the Bali climate conference.
A. That is correct. I realize that Bali is still very difficult. I am not a pessimist. I see it as a very difficult start-up. The crux of the matter is, if the people say, “Hang on, we are really concerned about the climate and we’d better do something on carbon emissions,” that is in the end the powerful force which politicians and companies cannot ignore. And I think we are past that point.
---
Pipeline rivals race to U.S. Gulf Coast
TransCanada, upstart Altex aim for Texas
Shaun Polczer
Calgary Herald
Saturday, January 19, 2008
The race is on to the U.S. Gulf Coast to ship Alberta oilsands to Texas, but it could be a case of pride coming up the backstretch for two old rivals.
A decade ago, Jack Crawford was rattling the cages of TransCanada Corp. with a bold proposal to build the Alliance natural gas bullet line to Chicago.
Alliance, a direct challenge to TransCanada's entrenched gas shipping monopoly, shook up the industry and set the stage for a decade-long restructuring of Canada's largest pipeline company.
Ten years later, Crawford is doing the same thing as the CEO of Altex Energy Ltd., which is aiming to build a $5.3-billion bullet bitumen line to the largest refining market in the world.
The stakes are high and Crawford once again finds himself brushing up against TransCanada -- this time with its Keystone heavy oil pipeline to the Texas Gulf.
"It's somewhat reminiscent of Alliance," Bob Hastings, a pipeline analyst with Canaccord Adams in Vancouver, says of Altex. "You know, done on the back of a napkin at the P-Club."
But the rules of the game are not the same as they were a decade ago and the outcome is even less certain.
TransCanada is no longer a monopoly, having diversified into power generation, nuclear facilities, oil pipelines and liquefied natural gas.
CEO Hal Kvisle acknowledged Alliance forced the company to restructure, transforming it into the much larger entity it has become today.
In addition, the field has grown much wider as other competitors seek to diversify their own businesses.
"It's a little different. This time you've got Kinder (Morgan), Enbridge, TransCanada and a bunch of other guys down there," Hastings adds.
As a rule, Altex, a privately owned company backed by one large mystery investor and a couple of U.S. private equity firms [Kern Partners], is tight-lipped about its activities.
But by using a combination of proprietary technologies, the company hopes to shave the cost of shipping bitumen by one-third to half compared with a similar conventional system like Keystone.
Altex hopes to achieve the ambitious target by reducing the amount of natural gas liquids, or "diluent," needed to thin the bitumen to make it flow.
The cost of diluting the heavy oil can often exceed the price of shipping it, Crawford said in a presentation to the summit.
"They're a direct competitor, you know, a head-to-head competitor," Crawford told reporters following the conference. "Having said that, we think our technology from an economic perspective blows away the competition."
Even Kvisle concedes the biggest competitive advantage goes to the pipeline that can deliver the most direct route. On that mark, Altex has the clear lead. "There's no patent on route selection," he quipped. "People can build wherever they want."
By contrast, TransCanada has to ship oil from Hardisty to Winnipeg on reconfigured gas pipe -- the original No. 1 mainline -- before it can start feeding it to Oklahoma, Illinois and eventually to Texas.
"This is the same pipeline C.D. Howe caused to be built and brought down the Canadian government," he said.
But TransCanada's advantage lies in its ability to reconvert depreciated natural gas pipe to carry oil at a substantially lower cost than building a greenfield project.
"They've got free pipe," adds Hastings. "If you've already got pipe in the ground, why would you build another one? I think it's pretty innovative."
In addition, Keystone has substantially more flexibility over the kinds of products it can carry, which include synthetic crude oil that can also be mixed with bitumen to form a product called "syn-bit."
If the Alberta government eventually decides to mandate more upgrading in the province, it could negate Altex's diluent advantage, Kvisle said.
"If the world moves in that direction and there is significantly more upgrading in Alberta that does not create a problem for us," he said. "That's an upside."
If approved, Altex could begin shipping 250,000 barrels a day starting in 2012, while Keystone would move about 600,000 barrels a day starting in 2010.
Keystone in September received National Energy Board approval to convert and construct the Canadian facilities, and in January of this year got the preliminary green light from U.S. authorities to begin construction later in 2008.
TransCanada says it already has firm contracts for 495,000 barrels a day, while Altex, in typically low-key fashion, will only say it is talking to "major" shippers.
Both Kvisle and Crawford deny there is a race to the Gulf, claiming both pipelines will be needed.
The Canadian Association of Petroleum Producers forecasts some 1.8 million barrels per day of incremental heavy oil and bitumen production in Alberta will be added over the next 10 years.
Greg Stringham, the association's vice-president of markets and fiscal policy, noted that figure is greater than the combined capacity of all the pipelines planned to date.
"There are a lot of proposals," he said. "It's still only about half of the growth that we see."
However, it's unlikely all that oil will make it to Texas; some will wind up in Oklahoma, Illinois and eventually California, provided the environmental issues are sorted out.
"We're probably going to need more capacity. We just don't know where."
spolczer@theherald.canwest.com
© The Calgary Herald 2008
Elk Valley Coal pleads for competitive freight rates
COMMENT: One might note that Elk Valley Coal Corp is complaining that it is constrained in its negotiating room because it has no options other than CP to move its coal to port. Put that situation in the mirror and waddyaget? CP has only one customer. Seems like a standoff. Or a perfect opportunity for a mutually satisfactory deal. An imperfect but balanced market, sort of.
For those who don't have a clue what triggered this news item, a "Competition Policy Review Panel" was convened in July 2007. Here is what it is tasked to do:
The Competition Policy Review Panel
* The Competition Policy Review Panel was announced on July 12, 2007, following a pledge in Budget 2007 to review Canada’s competition policies and its framework for foreign investment policy.
* The Panel is chaired by L. R. Wilson. Other members are Murray Edwards, Isabelle Hudon, Thomas Jenkins and Brian Levitt.
* The Panel is targeting to report to the Minister of Industry and the Government of Canada by June 30, 2008.
Objectives
With increased global competition and national governments competing to attract global capital, the Panel believes there are two goals for Canada’s economic performance:
1. To promote Canadian direct investment abroad, and create the domestic conditions to foster the development of Canadian businesses.
2. To maximize Canada’s attractiveness as a destination for talent, capital and innovation.
Mandate
* The task of the Panel is to provide recommendations to the government on how to enhance Canadian competitiveness.
Read more here.
Download the Panel's consultation paper, Sharpening Canada's Competitive Edge.
The Panel's website, www.competitionreview.ca
Teck Cominco was responding to the request for submissions, the deadline for which closed on January 11. Submissions will be posted on the website "within a few days."
"The Panel will [also] hold a series of regional and thematic consultations in selected cities across Canada with interested parties in January and February 2008." But it's January 19th now, and there's nothing on the website about these meetings - perhaps it's an invitation-only deal which will tend to skew mightily the demographic the Panel talks to.
Elk Valley Coal pleads for competitive freight rates
By Scott Simpson
Vancouver Sun
Friday, January 18, 2008
VANCOUVER - British Columbia's biggest mining operation is describing itself as a railway monopoly "captive" in need of freight rate relief in a new submission to a federal competition review panel.
Elk Valley Coal Corporation is asking the Competition Policy Review Panel to scrutinize national rail transport policies with an eye to compelling railways - primarily Canadian Pacific - to offer more competitive pricing for their services.
At the very least, it asks, railways should be obliged to price freight service "on the basis of cost" rather than market advantage.
The Elk Valley operation, a series of five southeast B.C. mines operated and co-owned by Vancouver's Teck Cominco, is worried that it's at a competitive disadvantage to rival Australian producers of metallurgical coal used for steelmaking - some Australian mines have a choice of railways to move their product.
Coal is the number one commodity transported by rail in Canada and accounts for 30 per cent of annual tonnage through the Port of Vancouver.
But a submission to the panel says lack of rail competition means overall costs are so high that a downturn in global coal prices would render some Elk Valley mines unprofitable.
"There is no competition for rail services at any of Elk Valley's mines," said president and CEO Boyd Payne in a press statement. "Each mine is captive to the carrier that serves it."
In its submission to the panel, Elk Valley says it is competitive with Australia on mine operation costs "but excessive transportation costs push the company into the fourth quartile of overall cost for the steelmaking coal industry and makes it vulnerable to volatile prices.
"Elk Valley pays far more for transportation than its competitors in Australia even after adjusting for Elk Valley's greater distance to tidewater."
The submission calls on the panel to effect what it calls "structural changes" in the negotiating relationship between railways and their shipper-customers - principally through the imposition of freight pricing schemes that reflect the true cost of rail operations.
On a year-by-year basis, railways and shippers have recourse to a Transportation Act mechanism called final offer arbitration in which a neutral third party determines if freight rates are fair.
But Greg Waller, Teck Cominco investor relations vice-president, said in an interview on Friday that it's a temporary, short-term solution "that only provides you with one year at a time."
"And in this business we need to make investments for the long term. We need to have the assurance of a cost structure for a period of time longer than one year.
"Whether the price goes up or down, the fact is that our costs are very high in terms of making an investment for the long term."
Canadian Pacific communications director Mark Seland said the railway was "surprised" by the Elk Valley submission and noted that there are no active arbitrations about its pricing schedules.
He said it would not be in CP's best interest to render its customers uncompetitive, because their distress would contribute to a decline in the railway's own revenue.
He also noted that CP's present contract with Elk Valley expires in 2009 and suggested that "it's not coincidental" that that criticism of the current arrangement is surfacing.
© Vancouver Sun
January 17, 2008
The great coal hole
By David Strahan
New Scientist
17 January 2008
There used to be a joke about taking coal to Newcastle but these days the laughing stock is getting the stuff out. Newcastle in New South Wales, Australia, may be the biggest coal export terminal in the world’s biggest coal-exporting country, but even it is having trouble keeping up with demand. The line of ships waiting to load coal can stretch almost to Sydney, 150 kilometres to the south. At its peak last year, there were 80 vessels in the queue, each forced to lie idle for up to a month.
The delays have been lengthening since 2003 – and not just because of the port’s limited capacity in the face of soaring demand. Gnawing doubts are also beginning to emerge about supply, not just in Australia but worldwide, and not only because of logistics but also because of geology. In other words, coal may soon be running short.
Ask most energy analysts how much coal we have left, and the answer will be a variant on “plenty”. It is commonly agreed that supplies of coal will last for well over a century; coal is generally seen as our safety net in a world of dwindling oil. But is it? A number of recent reports suggest that coal reserves may be hugely inflated, a possibility that has profound implications for both global energy supply and climate change.
The latest “official” statistics from the World Energy Council, published in 2007, put global coal reserves at a staggering 847 billion tonnes. Since world coal production that year was just under 6 billion tonnes, the reserves appear at first glance to be ample to sustain output for at least a century – well beyond even the most distant planning horizon.
Mine below the surface, however, and the numbers are not so reassuring. Over the past 20 years, official reserves have fallen by more than 170 billion tonnes, even though we have consumed nothing like that much. What’s more, by a measure known as the reserves-to-production (R/P) ratio – the number of years the reserves would last at the current rate of consumption – coal has declined even more dramatically. In February 2007, the European Commission’s Institute for Energy reported that the R/P ratio had dropped by more than a third between 2000 and 2005, from 277 years to just 155. If this rate of decline were to continue, the institute warns, “the world could run out of economically recoverable …reserves of coal much earlier than widely anticipated”. In 2006, according to figures from the BP Statistical Review of World Energy, the R/P fell again, to 144 years. So why are estimates of coal reserves falling so fast – and why now?
One reason is clear: consumption is soaring, particularly in the developing world. Global coal consumption rose 35 per cent between 2000 and 2006. In 2006, China alone added 102 gigawatts of coal-fired generating capacity, enough to produce three times as much electricity as California consumed that year. China is by far the world’s largest producer of coal, but such is its appetite for the fuel that in 2007 it became a net importer. According to the International Energy Agency, coal consumption is likely to grow ever faster in both China and India.
Another less noticed reason is that in recent years many countries have revised their official coal reserves downwards, in some cases massively, and often by far more than had been mined since the previous assessment. For instance, the UK and Germany have cut their reserves by more than 90 per cent and Poland by 50 per cent. Declared global reserves of high-quality “hard coal” have fallen by 25 per cent since 1990, from almost 640 billion tonnes to less than 480 billion – again more than could be accounted for by consumption.
At the same time, however, many countries including China and Vietnam have left their official reserves suspiciously unchanged for decades even though they have mined billions of tonnes of coal over that period.
Taken together, dramatic falls in some countries’ reserves coupled with the stubborn refusal of others to revise their figures down in the face of massive production suggest that figures for global coal reserves figures are not to be relied on. Is it possible that the sturdy pit prop of unlimited coal is actually a flimsy stick?
That is certainly the conclusion of Energy Watch, a group of scientists led by the German renewable energy consultancy Ludwig Bölkow Systemtechnik (LBST). In a report published in 2007, the group argues that official coal reserves are likely to be biased on the high side. “As scientists we were surprised to find that so-called proven reserves were anything but proven,” says lead author Werner Zittel. “It is a clear sign that something is seriously wrong.”
Since it is widely accepted that major new discoveries of coal are unlikely, Energy Watch forecast that global coal output will peak as early as 2025 and then fall into terminal decline. That’s a lot earlier than is generally assumed by policy-makers, who look to the much higher forecasts of the International Energy Agency, which are based on official reserves. “The perception that coal is the fossil resource of last resort that you can come back to when you run into problems with all the others is probably an illusion,” says Jörg Schindler of LBST.
According to the Energy Watch analysis, world coal production will peak in around 2025. In that case output would undershoot official forecasts from the International Energy Agency’s World Energy Outlook (WEO) by a substantial margin. Source: Energy Watch Group
A look at how official global reserves are calculated does little to bolster confidence. The figures, compiled by a husband-and-wife energy consultancy called Energy Data Associates based in Dorset, UK, are gathered principally by sending out a questionnaire to the governments of 100 coal-producing countries. Officials are asked to supply figures under clearly defined guidelines, but many do not. “About two-thirds of the countries reply,” says Alan Clarke of Energy Data Associates, “And maybe 50 are usable.”
Top ten holders of proved recoverable reserves. Source: World Energy Council Survey of Energy Resources 2007
Some countries have been known to make elementary errors filling in the forms, often with the effect of massively increasing their reserves. Undoing these apparently innocent mistakes has led to some of the major downward revisions of recent years.
Although Clarke defends his data as the best available, he is also the first to admit that there are shortcomings. “It’s no secret that the result is a bit of a ragbag. It ranges from well-established estimates for some countries to others that are fairly airy-fairy, and some that are highly political and not to be believed.”
Figures for two of the world’s biggest coal producers are particularly hard to glean. Russia has failed to update its numbers since 1996, China since 1990. “There is really nothing very certain or clear-cut about reserves figures anywhere,” Clarke says. Even senior officials in the coal industry admit that the figures are unreliable. “We don’t have good reserves numbers in the coal business,” says David Brewer of CoalPro, the UK mine owners’ association.
Annual production in the top ten coal producers. Source: World Energy Council Survey of Energy Resources 2007
Even so, the industry consensus rejects thoughts of an imminent shortage, or “peak coal. Milton Catelin of the World Coal Institute, the international producers’ trade body, admits that he does not understand what has led to the reductions in quoted figures for reserves, but insists that it is not down to a lack of coal. “With regard to coal the world is not resource limited,” he says. “It’s limited only by the economics of recovery and environmental concerns.”
The industry position is born of the traditional view that “reserves” is essentially an economic concept – the amount of coal that could be produced at today’s prices using existing technology. This is not the same as “resources” – the total amount of coal that exists. Seen in this light reserves are, to some extent, replenishable. If shortage bites and prices rise, uneconomic resources – seams that are too thin, too deep or too remote from markets – become economic and can be reclassified as reserves. And because global resources are vastly greater than global reserves, the industry argues there can be no imminent shortage. “It’s there if the price is high enough,” Brewer says. “It’s all a matter of price.”
Northwest Europe Steam Coal Marker Price. Source: McCloskey Group
Problem is, the real world seems to have forgotten this piece of economic lore. Although the price of coal has quintupled since 2002, reserves have still fallen. This is similar to what is happening with oil, where fresh reserves have not been forthcoming despite soaring prices. To a growing number of oil industry commentators this is because we have reached, or are just about to reach, peak oil – the point at which oil production hits an all time high then goes into terminal decline.
Some experts are starting to reach a similar conclusion about coal. “Normally when prices go up, mine managers ramp up production as fast as possible and shortage quickly turns to glut,” says coal geologist Graham Chapman of the consultancy Energy Edge in Richmond, Surrey, UK. “This time it hasn’t happened.”
He concludes that the industry has already produced most of the easily mined coal and “from now on it’s going to be a significant challenge”. In China, for example, much of the remaining coal is more than 1000 metres below the surface, Chapman says, while in South Africa the geology is extremely complex. Elsewhere, flooding and subsidence may have “sterilised” significant reserves: the coal is there, but will almost certainly never be mined. As a result, Chapman agrees that true reserves are probably much lower than the official figure.
David Rutledge, chair of Engineering and Applied Science at the California Institute of Technology, shares this view. He became interested in coal after attending a presentation on climate change at which the levels of carbon emissions from fossil fuels were thought too uncertain to be specified. Although the issue was not strictly on his patch, Caltech has a healthy interdisciplinary tradition and early in 2007 Rutledge decided to have a go at solving the uncertainty. The results are even more dramatic than those of Energy Watch.
To forecast coal production Rutledge borrowed a statistical technique developed for oil forecasting known as Hubbert linearisation. M. King Hubbert, after whom the method is named, was a the Shell geologist who founded the peak oil school of thought. In 1956 Hubbert famously predicted that US oil production would peak within 15 years and go into terminal decline. He was vindicated in 1970.
Although accurate, Hubbert’s original forecast depended on the idea that oil peaks when half has been consumed, and half is still underground. So the date of the peak can only be predicted if you have a reasonably accurate estimate of the total oil that will ever be produced. Such estimates can be unreliable – and are worse in the case of coal. Hubbert linearisation, published in 1982, solves this problem by presenting the numbers in a different way.
Linearisation works by plotting annual production as a percentage of total production up to that point (on the vertical axis), against total production on the horizontal axis. This produces a graph showing how the percentage growth rate of total production changes as the resource is extracted (see graphs below). For oil, this percentage generally declines from almost the earliest days of production, even when annual output is still rising, and soon settles into a roughly straight downward-sloping line. By extending the line to the bottom of the graph, you can deduce the total amount that will ever be produced. “Once you have a straight line,” says Rutledge, “you’re off to the races.”
Top: UK coal production since 1855. Bottom: Hubbert linearization of UK coal production since 1855. Source: Prof Dave Rutledge, Caltech
To test the linearisation technique for coal, Rutledge applied it to historical data for UK production, which peaked in 1913. He says it provides a better model of the decline since then than traditional economics, which tends to blame factors such as foreign competition and Winston Churchill’s decision to switch the navy to oil, and later the displacement of coal by natural gas. Because the straight-line decline in the growth rate of total production starts long before the peak and continues long after, for Rutledge this suggests the cause is fundamentally geological, reflecting the increasing difficulty of expanding production while exploiting resources of progressively poorer quality. “Had you known this method in the 1920s,” Rutledge says, “you could have predicted accurately where British coal output is today.”
He has also applied it to today’s major coal-producing countries, including the US, China, Russia, India, Australia and South Africa – with startling results. Hubbert linearisation suggests that future coal production will amount to around 450 billion tonnes – little more than half the current official reserves.
The idea of an imminent coal peak is very new and has so far made little impact on mainstream coal geology or economics, and it could be wrong. Most academics and officials reject the idea out of hand. Yet in doing so they tend to fall back on the traditional argument that higher coal prices will transform resources into reserves – something that is clearly not happening this time.
So what if coal does peak much sooner than most people expect? According to the International Energy Agency’s latest long-term forecast, economic growth will require global coal production to rise by more than 70 per cent by 2030, so if Rutledge is right, the world is heading for an energy crisis even worse than many already predict. Hopes that coal-derived liquid fuels will be able to step in as oil runs out will also be dashed.
The sliver lining to this gloomy scenario is its effect on climate. Forecasts by the Intergovernmental Panel on Climate Change assume more or less infinite replenishment of coal reserves, in line with traditional economic theory. Less coal means less carbon dioxide, so the impact on emissions could be enormous. Using one of the IPCC’s simpler climate models, Rutledge forecasts that total CO2 emissions from fossil fuel will be lower than any of the IPCC scenarios. He found that atmospheric concentration of CO2 will peak in 2070 at 460 parts per million, fractionally above what many scientists believe is the threshold for runaway climate change. “In some sense this is good news,” Rutledge says. “Production limits mean we are likely to hit the general target without any policy intervention.”
C02 emissions and peak concentration are lower Rutledge’s producer-limited profile than all 40 IPCC SRES scenarios. Source: Professor Dave Rutledge, Caltech
Neither Energy Watch nor Rutledge could remotely be described as climate-change deniers – quite the opposite – but their findings worry many climate scientists, including Pushker Kharecha at the NASA Goddard Institute for Space Studies in New York. He agrees that coal reserves are probably overstated, but insists that curtailment of coal emissions is still essential to combat climate change. He gives a simple reason for this view: “What are the risks if the low-coal people are wrong?” To pin our hopes on low coal would be dangerously complacent, he argues, because if it is only marginally wrong the additional emissions could ensure catastrophe.
Whoever turns out right, the good news is that the imperatives of climate change and peak coal are identical. “In the long run, economies that rely on depletable resources are doomed to fail,” says Zittel. “The coal peak makes it even more urgent to switch to renewable energy without delay.”
Pipeline to B.C. back on track
Asian demand for Alberta crude makes 1,300-km route to B.C. port feasible, Enbridge president says
Gordon Jaremko
The Edmonton Journal
Saturday, December 29, 2007
Enbridge president Pat Daniel
CREDIT: Reuters, File
Courses are being charted for supertankers to fetch Alberta oil for Asia from a new British Columbia terminal planned for Kitimat.
Engineers are designing tunnels to put a new pipeline beneath the mountains between Edmonton and the Pacific Ocean without scarring alpine scenery or wildlife habitat.
A mobile training camp is touring aboriginal settlements along the proposed 1,300-kilometre route to recruit candidates for project jobs as welders, electricians, plumbers, pipefitters, steamfitters and millwrights.
"We have had strong general support for the concept of broadening out markets for Alberta crude," Enbridge Inc. president Pat Daniel said in an interview.
A year after suspending regulatory review of its Gateway Pipeline proposal to focus on higher priority construction of links to the United States, Enbridge is stepping up preparations for laying the new ocean export route.
"We still feel the line will be built," Daniel said. "It's not just for China," he added.
As consumption in developing countries grows, pushing up prices for limited conventional oil towards $100 a barrel, Daniel said interest in the oilsands is on the rise among overseas refiners.
A partnership with PetroChina, to sell Gateway delivery contracts, is lining up a new market for Alberta that spans Southeast Asia, including Japan, Korea and Singapore, he said. California, a Canada-sized oil market currently not served by Alberta export pipelines, is also a sales target, Daniel added.
Oilsands developers have a strong interest in tapping into emerging overseas destinations for growing output, the Enbridge president said.
Adding Asian outlets would inject a favourable element of "pricing tension" into mainstay export markets in the U.S., Daniel said.
American refineries would compete for Alberta supplies by paying full international prices and ending a tradition of commanding discounts in exchange for taking production that has no buyers outside North America, he predicted.
By setting a flexible target date of "the 2012 to 2014 time frame" for completing Gateway, Daniel said Enbridge is matching projected acceleration of oilsands production to about three million barrels per day or nearly triple current average volumes.
The new pipeline is being designed to ship all varieties of Alberta output, from asphalt-like bitumen with coarse impurities to premium "upgraded" synthetic oil ready for refining into fuels up to the latest anti-pollution standards for sulphur-free gas and diesel.
Current Enbridge work on Gateway is preparing the project for federal engineering, safety and environmental reviews expected to be long and intense.
The Alberta firm hired Danish marine traffic specialist Force Technology to chart detailed courses in B.C. coastal waters for giant ships known as VLCCs, or very large crude carriers.
With lengths of about 340 metres and 60 metres beams, and deep hulls drawing 23 metres of water when loaded with 2.3-million-barrel cargoes, the tankers are built on the proportions of a jumbo West Edmonton Mall.
But B.C. tugboat masters and coastal navigation pilots, using Danish ship simulators akin to mock cockpits used to train jet airliner crews, demonstrated VLCCs can sail safely along every kilometre of an identified, detailed route past B.C.'s rugged northwest coast up to the proposed Kitimat oil terminal, Enbridge reported.
Engineering advances are also harnessed for laying the most environmentally sensitive legs of the pipeline route.
Gateway plans include two tunnels through mountains that will set new standards for an industry that traditionally lays pipe at shallow depths by digging trenches in all terrain.
"We want to do whatever we can to minimize environmental impact," Daniel said.
Except for short river crossings, Enbridge has yet to use tunnels in its 13,500-kilometre oil pipeline network between Norman Wells in the Northwest Territories and Chicago, but is confident the new method can work.
The proposed Gateway route runs northwest from Edmonton to Grande Prairie along Highway 43, enters the Rocky Mountains in B.C. wilderness south of Tumbler Ridge, then crosses mostly Crown land west to Kitimat.
More than five years of courting aboriginal support continues in frequent contacts with B.C. native communities and an employment preparation program. A mobile school dubbed Trade Routes is touring up to 20 northern B.C. communities, seeking candidates for 18-month training programs in skilled trades that will be required by the pipeline project.
Construction is expected to take nearly three years and employ more than 5,000 workers.
The last estimate for building the 400,000-barrels-daily pipeline, $4 billion, was up 60 per cent from initial estimates but was made in 2005 before steep cost increases hit oil and gas industry developments.
gjaremko@thejournal.canwest.com
© The Edmonton Journal 2007
January 12, 2008
How coal can power your portfolio in 2008
“Coal-fired power plants are being built from Shanghai to Berlin to Wichita, Kan. The International Energy Agency expects demand for thermal coal to rise by 2.2 per cent a year – more than either oil or natural gas. The reason is simple. Coal is cheap – it can generate a million British thermal units (Btu’s) of energy at less than a third the cost of natural gas, and less than a sixth of the cost of fuel oil."By Conor McCreery Globe Investor Magazine Online January 2, 2008
Coal companies had a huge year in 2007. The Stowe Global Coal Index, which includes firms that source over half of their revenue from the coal industry, jumped by 104 per cent this year. Compare that to the 4 per cent the S&P 500 returned.
To some this big move in coal stocks means the party is already over. But don’t bet on it.
There are two ways to look at coal: as a feedstock for the steel industry, so-called coking coal, and therefore a play on infrastructure; and as a source of cheap power. Thermal coal is what is burned in coal-fired electricity plants.
Patricia Mohr, commodities market specialist at Bank of Nova Scotia is calling for coking coal prices to jump by 49 per cent in 2008. UBS sees a similar gain. That’s because of problems getting the coal used in steelmaking out of Australia and into Japanese and Chinese furnaces.
On the other side of the coal ledger Ms. Mohr expects thermal prices to climb too.
“They’ll probably be up by double digits,” she said. That’s largely because coal-fired power plants are being built from Shanghai to Berlin to Wichita, Kan. The International Energy Agency expects demand for thermal coal to rise by 2.2 per cent a year – more than either oil or natural gas.
The reason is simple. Coal is cheap – it can generate a million British thermal units (Btu’s) of energy at less than a third the cost of natural gas, and less than a sixth of the cost of fuel oil.
Of course if you are going to play some of the names below you have to be comfortable with the environmental cost of the black stuff – even the most efficient coal-fired plants produce twice as much carbon dioxide as natural gas.
Consol Energy Inc (US$44.61/CSX–NYSE)
One of the giants of the space. The coal miner’s stock has already doubled in the past 12 months, but it’s still the top pick of analyst David Khani of Virginia-based brokerage Friedman, Billings Ramsey & Co. “Consol has one of the highest margins in Northern Appalachia, and it’s only getting better.” The high-sulphur, and therefore, cheaper coal from that area is now back in vogue as tighter environmental standards mean most plants now have scrubbers. Mr. Khani also likes the fact Consol owns its own terminal in Baltimore, giving it a leg up on competitors in taking advantage of demand in Europe and Asia.
Foundation Coal (US$53.25/FCL-NYSE)
Analyst Pearce Hammond of Houston-based brokerage Simmons & Co. likes Consol, but for his money FCL is a better play because of its cheaper price-to-earnings ratio. FCL trades at 8.5 times and seven times 2008 and 2009 earnings before interest tax depreciation and amortization, while Consol is up at 10.2 times and 7.9 times, respectively.
FCL also mines in Northern Appalachia and Mr. Hammond says stockpiles of Northern Appalachia (NAPP) coal are below average for utilities – he expects that to change. Mr. Hammond also likes FCL’s mining presence at Powder River. Rio Tinto is selling assets in the Wyoming basin, and Hammond believes those will fetch a higher price than many expect, “showing the value of the space.”
Massey Energy Co. (US$34.38/MEE-NYSE)
Of the big U.S. coal plays, Massey is benefiting from demand from steel makers and the expected rise in coking prices. Massey has about a quarter of the domestic market and recently inked a deal with Essar group, which has steel operations in India and Latin America.
Massey is the top pick of Ann Kohler analyst at New York brokerage Caris & Company, “The upward pricing pressure on coking coal could certainly be a long-term trend,” she said.
China Shenhua Energy (63.94 yuan/Shanghai - 601088)
With China undergoing a massive expansion of its coal-fired electricity capacity – some reports claim the nation is building a plant a week – China Shenhua is an intriguing opportunity for the adventurous investor.
The stock is one of UBS’ top-two Asian mining picks. UBS likes Shenhua’s strong presence in the domestic thermal market, its ownership of transportation infrastructure and its coal-liquefaction project, which UBS expects will generate 6.8 million barrels of oil equivalent by the end of the year.
FreightCar America (US$34.98/RAIL-Nasdaq)
The few bears on coal all point to one problem – the rising cost of getting the black-stuff above ground. Analyst Michael Gallo of New York–based brokerage CL King says one way to make money on coal, even if the miners don’t, is to try RAIL.
The company is the largest manufacturer of coal-carrying freight cars in the U.S. – with about 80 per cent of the market.
With more than 150 coal-fired plants due to come on-line in the U.S. between 2009-2012 Mr. Gallo expects 26,000 new coal-cars will be needed. He also says half of the 269,000 cars in use are older models and need to be replaced.
“This could make FreightCar a good second-half story”.
MarketVectors Coal ETF
And, finally, coming in the new year a new exchange traded fund will provide investors with yet another way to play the commodity thanks to Van Eck Global. The ETF will aim to replicate the return of the Stowe Coal Index and is expected to hit the market in the first two months of 2008. The fees and the expense ratios have yet to be set. Van Eck is still working on a ticker symbol – here’s hoping it’s as much fun as “MOO” – the ticker for Van Eck’s agribusiness ETF.
Special to The Globe and Mail
January 11, 2008
TransCanada's Keystone pipeline reaches milestone in U.S.
COMMENT: Oblivious so far to the NRDC campaign to target the North American airlines which are buying fuel produced from oilsands bitumen (see Environmentalists target oilsands customers), TransCanada Corp's Keystone pipeline project not surprisingly leaps another regulatory hurdle.
Globe and Mail
January 11, 2008
CALGARY — TransCanada Corp. says its Keystone pipeline partnership has received a favourable assessment from U.S. regulators that asserts the project will have “limited” negative effect on the environment.
A final environmental impact statement from the U.S. Department of State has found the pipeline project and its Cushing extension “would result in limited adverse environmental impacts,” TransCanada said Friday.
Keystone is slated to transport crude oil along a 3,456-kilometre system from Hardisty, Alta., to U.S. Midwest markets in Illinois and to Cushing, Okla.
“This outcome is another significant milestone in advancing the Keystone Pipeline project,” TransCanada president and chief executive Hal Kvisle said in a statement.
“We plan to begin construction in second quarter 2008 to achieve an in-service date of fourth quarter 2009 in order to move the growing supply of Canadian crude oil to key U.S. markets.”
TransCanada expects to receive a presidential permit that will authorize construction and operation of facilities at the U.S.-Canada border crossing in mid-February.
Applications for other U.S. regulatory approvals are expected in the first quarter of 2008.
The $5.2-billion (U.S.) project will see main pipeline facilities in Canada converted from natural gas to crude oil transmission and the construction of about 2,200 kilometres of pipeline and pump stations in the United States.
TransCanada has said the system will be capable of delivering 435,000 barrels per day initially, expanding to 590,000 barrels per day on completion of the Cushing extension in 2010.
Shares in the company were down 11 cents at $39.95 in early morning trading on the Toronto Stock Exchange.
Environmentalists target oilsands customers
U.S.-based lobby group goes after fuel made from heavy oil
By Gordon Hamilton
Vancouver Sun
Thursday, January 10, 2008
VANCOUVER - A powerful American environmental lobby group launched a campaign Thursday against airlines using fuel derived from the Alberta tar sands, using the same tactics that proved so successful in limiting clearcut logging in B.C. rainforests.
The Washington D.C.-based Natural Resources Defense Council said it is pressuring 15 major U.S. and Canadian airlines to publicly oppose the use of jet fuel made from the tar sands, liquefied coal and oil shale.
Eco-groups in the U.S. and B.C. developed their markets campaign model on the B.C. Coast. American purchasers of B.C. lumber and paper products, such as Home Depot and Victoria's Secret, were pressured to alter their buying strategies through campaigns targeting them as environmentally unfriendly.
Forest companies here changed their practices when purchasers complained they were tired of buying truckloads of two-by-fours that came with a protester hanging off the back.
NRDC claims that some of the aviation fuel used by airlines like United, is derived from tar sands oil. The production of tar sands oil generates more heat-trapping global warming pollution compared with conventional oil, the eco-group claims.
In an interview Thursday, Liz Barratt-Brown, senior attorney for the organization, said the marketing campaign is focusing first on airlines in the Chicago and Denver areas. Those two U.S. cities are prime markets for aviation fuel derived from Alberta's tar sands, she said.
"The government of Alberta and especially the industry there may not have time to listen to U.S. environmentalists. But when their customers start asking them questions, then they respond," she said.
"Part of our effort here is to start engaging in the debate over the future of tar sands development and the use of fuels by the aviation industry."
EDMONTON - All but one of 10 Alberta oilsands mines received a failing grade on environmental performance in a report released Thursday by the Pembina Institute and the World Wildlife Fund.
The report says the mines have substantial room for improvement in their environmental practices. They need to "step up and work together to solve these environmental challenges," a news release from the study's authors said.
Pembina and WWF graded 10 mines in areas such as environmental management, land impacts, air pollution, water use and management of greenhouse gases, using information provided by the companies.
The average score among the mines assessed was 33 per cent. Albian Sands Muskeg River mine scored the highest, with 56 per cent, while Syncrude and the proposed Synenco Northern Lights Mine had the weakest scores, both with 18 per cent.
"The poor environmental performance reflects badly on the oilsands mining companies, which include the largest and most profitable major oil companies in the world," said WWF Canada's Rob Powell in the release. "These companies have both the expertise and the resources to do much better.
"Government must establish limits to curb impacts on fresh water, the global atmosphere, wildlife and public health."
Syncrude rejected the report's findings.
"We obviously don't agree with their findings," said company spokesman Alain Moore. "In fact, we consider ourselves a leader in sustainability in the oilsands."
Moore said the company is the most efficient user of water in the industry. And the company has an emissions-reduction project worth $772 million that will bring down sulphur pollution in phases between 2009 and 2011, he said.
The study found that while the majority of oilsands operations have environmental policies in place, only two provided evidence of having an independently-accredited environmental management system.
In addition, no operation, except Albian Muskeg River Mine, has voluntary targets to limit greenhouse gases and no mine has publicly reported targets to reduce water usage from the region's Athabasca River, the report said.
The 10 companies reviewed, in order of ranking, are Albian Muskeg River Mine (existing), Total E&P, Petro-Canada Oil Sands, Shell Canada, Imperial Oil, Suncor, Canadian Natural, Albian Muskeg River Mine (expansion), Syncrude and Synenco.
Alberta Environment spokesman Jim Law said that as companies come into the oilsands business and as technology improves, the department does require that the new technology be implemented. As for the older companies, the department does require continuous improvement in environmental performance, he said.
CanWest News Service
© Vancouver Sun
Seeking Friendlier Skies
Natural Resources Defense Council
January 10, 2008
Under-Mining the Environment
The Oil Sands Report Card
Pembina Institute & WWF
January 10, 2008
January 08, 2008
Nova Scotia to create test centre for tidal power
Nova Scotia to create test centre for tidal power
Globe and Mail, 08-Jan-2008
N.S. to harness Fundy tide power
The Chronicle Herald, 08-Jan-2008
Parrsboro mayor hopes to turn tide
Tom McCoag, Chronicle Herald, 08-Jan-2008
Nova Scotia to create test centre for tidal power
Globe and Mail
January 8, 2008
PARRSBORO, N.S. — Nova Scotia is creating a centre to test tidal power projects in the Bay of Fundy.
Premier Rodney MacDonald announced $4.7-million in provincial government funding Tuesday, along with a $3-million interest-free loan from EnCana, to set up the centre.
“This facility can become a landmark centre of excellence in our efforts to provide cleaner sources of energy,” MacDonald said.
“The more we move away from coal-based electricity, the more we protect our environment — a key priority for this government.”
Three companies will put test turbines on the floor of the bay, spending between $10-million and $15-million each on their projects.
Nova Scotia Power is teaming up with Ireland's Open Hydro on its turbine project, while Minas Basin Pulp and Power Co. is joining with UEK Hydrokinetic. The third company to test in the area is Clean Current of British Columbia.
The companies hope to have test turbines in the water by early 2009 and will supply power to the province's electricity grid once the projects are in operation.
Mr. MacDonald made Tuesday's announcement in Parrsboro on the Bay of Fundy and has said he believes tidal power can supply about 15 per cent of Nova Scotia's electricity needs.
Gerry Protti, president of EnCana Corp.'s offshore and international division, said the company thinks tidal power is “a promising and untapped energy resource here in Nova Scotia.
“Unlocking the unconventional power of the tides requires innovative thinking and the kind of creative partnerships that will be generated at this centre.”
N.S. to harness Fundy tide power
The Chronicle Herald - Halifax
The Canadian Press
08-Jan-2008
Nova Scotia hopes to harness the power of
the Bay of Fundy tides to provide cleaner power
for the province. (LEN WAGG/Staff/File)
PARRSBORO — Nova Scotia is creating a centre to test tidal power projects in the Bay of Fundy.
Premier Rodney MacDonald announced $4.7 million in provincial government funding Tuesday, along with a $3-million interest-free loan from EnCana, to set up the centre.
``This facility can become a landmark centre of excellence in our efforts to provide cleaner sources of energy,'' MacDonald said.
``The more we move away from coal-based electricity, the more we protect our environment — a key priority for this government.''
Three companies will put test turbines on the floor of the bay, spending between $10 million and $15 million each on their projects.
Nova Scotia Power is teaming up with Ireland's Open Hydro on its turbine project, while Minas Basin Pulp and Power Co. is joining with UEK Hydrokinetic. The third company to test in the area is Clean Current of British Columbia.
The companies hope to have test turbines in the water by early 2009 and will supply power to the province's electricity grid once the projects are in operation.
MacDonald made Tuesday's announcement in Parrsboro on the Bay of Fundy and has said he believes tidal power can supply about 15 per cent of Nova Scotia's electricity needs.
Gerry Protti, president of EnCana Corp.'s offshore and international division, said the company thinks tidal power is ``a promising and untapped energy resource here in Nova Scotia.
``Unlocking the unconventional power of the tides requires innovative thinking and the kind of creative partnerships that will be generated at this centre
Parrsboro mayor hopes to turn tide
Area may host trial tidal power project
By TOM McCOAG
Amherst Bureau
Chronicle Herald
Tue. Jan 8
PARRSBORO — Mayor Doug Robinson hopes Premier Rodney MacDonald will be in Parrsboro today to announce that the Cape Sharp area has been selected as the site for a trial tidal power project.
"What I’m hearing is that the premier and (Energy Minister Richard) Hurlburt won’t be here to announce which company will be doing the project but that they will be announcing the project site," the mayor said Monday.
"Since they’re holding the meeting, I’m assuming and hoping they’ll be telling us that the site we’ve been supporting for about two years, which is just off Cape Sharp, has been selected."
Cape Sharp is a spit of land that juts out into the Minas Channel 10 to 20 kilometres west of Parrsboro opposite Cape Split at the narrowest part of the Bay of Fundy.
"I certainly hope it is being located at Cape Sharp because having it there would mean more activity for our harbour," the mayor said.
"The town could also benefit because the location for where the electricity comes ashore could be built here, as well as buildings required to support the operation of the project."
The president of the Heavy Current Fishing Association of Halls Harbour, which represents about 30 fishermen, wasn’t quite as enthused.
"Cape Sharp is a very important fishing area for us," Mark Taylor said. "I’ve fished lobster there for 30 years. It’s an important migratory route for them as well. We just don’t know what impact having these (tidal energy) machines in the water will have on that fishery.
"If it is there, we will lose some important fishing area that can’t be replaced unless you moved in on someone else’s territory, which wouldn’t be a good idea."
Mr. Taylor’s association has had three of six promised meetings with proponents of the project, which he said include the province and Nova Scotia Power. But many questions still have to be answered, he said.
"We’d like to see the science for it. We’d like to know what impact it will have on the migration of lobster. We’d even like to know how close we can set our pots to these machines. Until they can answer questions like those, we really don’t know what we could lose."
Mr. Taylor admitted the answers may not be known until the test site is built. But if the tests prove the project is viable, then "200 machines in that area could mean that fishery is lost to us," he said. "And if it isn’t viable, we wonder if they will be required to clean up the site so that it remains a good spot to fish."
An American group, the Electric Power Research Institute, has indicated that the Bay of Fundy in the Cape Split area has the potential to be the best site in North America for large-scale, grid-connected tidal energy generation.
Last year, the province called for a pilot tidal power project for the Bay of Fundy, and in November the government shortlisted seven bidders. They include Maritime Tidal Energy Corp. of Halifax and partner Marine Current Turbines of Britain, Arnold Systems LLC of New York, Clean Current Power Systems Inc. of Vancouver, Lucid Energy Technologies of Indiana and Nova Tidal Power Inc. of Tatamagouche.
Minas Basin Pulp and Power Co. of Hantsport and Nova Scotia Power, owned by Emera Inc., have submitted bids to build a tidal energy test facility, a part of the project that includes designing and operating a structure to collect electricity from the turbines and processing scientific data.
No device is expected to go into the bay before next year.
Nuclear watchdog president blasts Lunn over letter
Globe and Mail
January 8, 2008
The president of the Nuclear Safety Commission is accusing Natural Resources Minister Gary Lunn of improper interference with the agency.
And in a letter to Mr. Lunn, Linda Keen warns that she'll fight in the courts any attempt by the minister to have her fired.
Ms. Keen says Mr. Lunn's letter threatening her termination for refusing to follow a ministerial directive will send a “chill” through quasi-judicial agencies that are supposed to be at arm's-length from government.
The nuclear watchdog says she has asked the privacy commissioner and the RCMP to investigate how Mr. Lunn's letter came to be leaked to the media.
Linda Keen
Linda Keen
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The Globe and Mail
Ms. Keen came under fire late last year when she insisted the 50-year-old nuclear reactor at Chalk River, Ont., remain closed until a backup safety system was installed.
Mr. Lunn, and the Prime Minister, pressured the agency to reopen the reactor, eventually bringing in emergency legislation to overturn the watchdog's decision and restart the reactor.
Meanwhile, the Sierra Club of Canada wants Parliament to protect the Commission from political interference.
Citing the leaked letter, the environmental group says the nuclear safety commission must be granted protection similar to that given superior court judges and the auditor general.
Sierra Club director Stephen Hazell says the safety of Canadians is put at risk when the nuclear watchdog faces the kind of bullying Mr. Lunn has demonstrated since the medical isotope scare at Chalk River.
The Office of the Privacy Commissioner of Canada is looking into the matter, to determine whether the leak constitutes a breach of privacy.
AECL waits anxiously as Britain considers its nuclear future
RICHARD BLACKWELL
Globe and Mail
January 7, 2008
Britain's government is expected this week to give the go-ahead for new nuclear reactors in that country, a move that could boost the fortunes of beleaguered Atomic Energy of Canada Ltd.
Prime Minister Gordon Brown won't name a builder for the reactors when his plans are outlined in Parliament, but the government is expected to defy environmentalists in approving a new generation of power stations to replace the country's aging reactors.
AECL's Candu reactor is already on the short list of technologies being considered for the new construction, so a thumb's up from Britain could potentially lead to a huge contract for the Canadian nuclear agency.
"There's a lot of speculation that they will support a new build [of nuclear plants]," said Jerry Hopwood, vice-president of reactor development at AECL.
At the same time, he said, the government "may announce a process of selecting the technologies that go forward into the next stage of pre-licensing." In other words, it could outline how the short list of suppliers will be cut down to an even smaller group.
Last July, AECL's next generation ACR-1000 nuclear reactor was chosen as one of four technologies that will be considered for Britain's expansion. The country's nuclear regulatory agency also said reactor technologies from General Electric Co., Westinghouse Electric Co. LLC and Areva Group would qualify.
If everything moves forward in a timely manner, the final selection of a builder could be made in a couple of years, with a contract signed some time after 2010, and the reactors up and running by 2017 or 2018.
AECL is hoping its European experience - it recently commissioned a new Candu nuclear plant in Romania - and its reputation for delivering projects on time and on budget, will give it a leg up on its competition, Mr. Hopwood said.
But AECL wouldn't handle a British project on its own. It would likely work in a consortium that includes engineering firm SNC-Lavalin Group Inc., manufacturer GE-Hitachi Global Nuclear Canada Ltd., and component builder Babcock & Wilcox Canada.
This "Team Candu" is the same group that is bidding to build new nuclear reactors in Ontario. The consortium would also include local suppliers in Britain. Last summer, AECL told unions there that more than 70 per cent of the manufacturing for new Candu reactors could take place in that country.
Still, companies that supply the nuclear industry in Canada could expect significant spinoff benefits, were AECL to land a British contract.
"It would obviously be a good thing for the Canadian industry," which is already busy with nuclear refurbishment projects, said Murray Elston, president and chief executive of the Canadian Nuclear Association.
At the same time, the expected vote of confidence from the British government will help the nuclear industry over all, he said. "It just confirms what everybody has been saying recently, [which is] if you want to have a positive impact on the issue of climate change and air pollution, then you're going to have to have nuclear power as part of your mix."
Nuclear critics, however, say the chances of AECL getting the British contract are slim.
Britain was not keen on Candu heavy-water technology in the past and wouldn't likely go for it this time, said Norm Rubin, director of nuclear research at Toronto-based Energy Probe.
In addition, he said, AECL's new ACR-1000 reactor is still unproven, and the company's reputation has been damaged by the recent shut-down of its Chalk River reactor that produces medical isotopes.
On top of all that, the British government has said it wants private utilities to develop any new nuclear plants, and Mr. Rubin said he's not convinced there is any way new nuclear plants can be built without heavy government involvement or subsidies.
Nuclear power just isn't competitive when costs and financial risks are taken into account, he said.
January 07, 2008
The $100 prize
Daniel Yergin, one of the world's leading energy experts, weighs in on crude oil's march into uncharted territory
Geoffrey Scotton
Calgary Herald
Sunday, January 06, 2008
As one of the world's foremost experts on energy, particularly oil and gas, along with geopolitics, Daniel Yergin is sought out for his insight on the dynamics of world crude and natural gas markets and their impact on the economic and political sphere.
Yergin is the chairman and co-founder of Cambridge Energy Research Associates, arguably the world's leading energy consultancy. During his career, Yergin has been the recipient of the Pulitzer Prize for his 1990 No. 1 bestselling book, The Prize: The Epic Quest for Oil, Money and Power. The work was subsequently made into an eight-hour PBS/BBC series viewed by more than 20 million people and translated into 12 languages. His 1998 followup Commanding Heights: The Battle for the World Economy, co-written with Cambridge Energy colleague Joseph Stanislaw, received a similar treatment.
Cambridge, Mass-based Yergin has chaired the U.S. Department of Energy's Task Force on Strategic Energy Research and Development, and is a board member of the United States Energy Association and a member of the U.S. National Petroleum Council. He is also the only foreign member of the Russian Academy of Oil and Gas and a "Wise Man" of the International Gas Union. Yergin is a distinguished visiting fellow at Yale University's centre for globalization, a trustee of the Brookings Institution, a board member of the New America Foundation, a director of the U.S.-Russia Business Council and an adviser to the International Institute for Economics.
Herald economics reporter Geoffrey Scotton spoke recently with Yergin about the recent breaching of the $100 US per barrel level for crude oil, which Yergin describes as "a very strong psychological measure." All figures are in U.S. dollars.
Question: What does $100 oil mean?
Answer: At one level, it's a record and it's a score. But really, if you dissected that price, it tells a lot of what's going on in the world. It's telling us about the strength of the global economy, in particular Asia and particularly in China. It's telling us about mounting geopolitical fear of risk of disruption, in terms of, particularly, Iran and Iraq. It's certainly telling a story about the weakening of the (U.S.) dollar and the continuing weakening of the dollar. It's telling us that there is a series of small disruptions, interruptions.
The other thing that it's telling us, that I think is important that gets overlooked, is how rapidly costs have gone up in oil and gas development. That's maybe the great overlooked factor here, because the public and politicians focus, of course, on the price, but what the industry deals with is the reality of these costs that have gone up so dramatically.
In a way, $100 oil tells a pretty dramatic story of how much things have changed in just three or four years.
Q: Does it stand out less when one considers it in the context of sharply increased, and rising, costs?
A: I suppose. The $100 is really part of a trend and embedded in it is how rapidly costs have risen.
Upstream costs -- we created this thing that's called the IHS/CERA Upstream Capital Cost Index and the newest one shows that costs continue to go up dramatically. Basically, since 2000, costs have doubled and most of that doubling has been in the past three years.
Among other things, what that has done is lead to delays and postponements, and scaling back and re-prioritizing projects. So all of that means that there is a noticeable lag in responding to this, what is really a global commodity boom.
Q: Do high oil prices mean the world economy is going to grind to a halt?
A: It's striking to me that there was more anxiety when oil was hitting $50, $60 or $70 and more concern when it's hitting $100, although it's completely obvious that $100 is higher than $70. When we were at $50 or $60, we were nowhere near the $99.04 record April 1980 -- we're now above it, so we're now in uncharted territory -- and price tells a story. It also provides a lot of information. There will be an inevitable response, but there's always a lag. If we stay in this kind of a range, we'll see more of an impact. We've created this scenario we call breakpoint, where oil averages $120 and spikes as high as $150. Six or eight months ago, it seemed like the twilight zone and now it kind of has a reality to it. The idea is that when you get up to the breakpoint, at some point oil starts to lose its traction in the transportation sector.
Q: Is $100 oil based on reasonable fundamentals?
A: In our view, the current price is somewhat de-coupled from the fundamentals of supply and demand. The market is tight, but we think without these other factors at work, particularly the dollar, the fear of disruption and the rapid acceleration of costs, we wouldn't see prices where they are now. There's one other factor that's brought us there -- it's just the momentum. There's this kind of excitement about it in international markets. People expected it to happen. So, to some degree, there's been a self-fulfilling prophecy in this.
Q: So, there's psychological momentum at work?
A: There's no question that all these factors come together and ramp into psychology and people piling in. When the Fed cuts interest rates, it not only affects interest rates, it affects the price of oil and I think that a lot of people have been betting on the Fed, and that means going long on oil as a hedge against the dollar.
Q: What does $100 oil mean for Canada and for Alberta, and for our place in the world's economic echelon?
A: We did a scenario that touched on this last week. I find that most Americans do not realize that by far the most important source is Canada; they don't realize the role Canada plays in terms of natural gas and how tied together our economies are. Obviously, Canada, and Alberta in particular, has been a big beneficiary of this. When we do our analysis of where the major growth is going to be over the next 10 years in terms of oil production, Canada is right up there near the top of the list. I think that in general that $100 oil is a symbol of the age, but so is the relationship of the Canadian loonie to the U.S. dollar. These prices are all telling us about change in the global economy.
Q: How about Alberta and the oilsands? There's been an awful lot of interest in the oilsands in recent years. Presumably, $100 oil is going to make the attention paid to the oilsands even stronger.
A: It certainly heightens the interest, it heightens the interest in energy security and that's beneficial to the oilsands. But the oilsands is having to cope with the same rising costs. This is a capital-intensive industry, so it certainly should give a boost to the oilsands, but this high-cost environment is also a challenge for the oilsands.
Q: Is it fair to characterize $100 oil as a concrete sign that energy has taken on a new importance in the world?
A: One hundred dollar oil is a very clear sign that energy is at the top of the global agenda once again and that there's worldwide recognition of its importance. It's also why people are talking so much, wherever I go in the world -- whether it's Russia, China, western Europe, the Mideast as well as North America, people are talking about energy security in one form or another. It's a sign of the times.
Q: In terms of high crude prices, along with high finding and production costs, analysts also cite a security premium or a fear premium. What other factors are being felt?
A: Costs are a very big piece of this, (the U.S.) currency's a big piece of this and also the best global economic performance in a generation, or maybe ever, has been part of it. Like so many things that happen, it's a lot of things coming together.
Q: What do you foresee as the impact on the U.S. economy?
A: If prices stay in this range, when it starts to pass through to consumers, coming at the same time as the deepening credit crunch, it certainly will add to the worries about the U.S. economy and it will raise the temperature politically because it arrives as the presidential campaign is starting to move into overdrive.
Q: What about the impact on developing economies, particularly those of China and India?
A: The Chinese would like to slow down their economy. The Indian economy is less sensitive. Oil looms much larger in the Chinese economy. I think the Chinese government . . . would like to cool off their economy some and slow down the demand growth in energy, but there are political concerns about what the political impact will be of deregulating price. It's still a big political challenge for them.
gscotton@theherald.canwest.com
© The Calgary Herald 2008
January 04, 2008
Alaska picks TransCanada pipeline bid
Alaska picks TransCanada pipeline bid
David Ebner, Globe and Mail, 04-Jan-2008
Gas pipeline applicants pared to one
Jeannette J. Lee, Anchorage Daily News, 04-Jan-2008
AGIA Completeness Review Finalized
TransCanada Meets Statutory Requirements
News Release, Governor Sarah Palin, 04-Jan-2008
TransCanada's Alaska Highway Pipeline Project
AGIA application: Executive Summary
See also:
Role of major north slope producers unclear with signing of AGIA
Alaska picks TransCanada pipeline bid
DAVID EBNER
Globe and Mail
January 4, 2008
CALGARY — TransCanada Corp.'s proposal to build a massive natural gas pipeline from Alaska to Canada is the only one that will be officially considered by the state, Gov. Sarah Palin said on Friday.
Five companies, including Calgary-based TransCanada, had submitted applications to build the pipeline about a month ago under the Alaska Gasline Inducement Act. Gov. Palin on Friday said only TransCanada's was considered complete and the state will not further evaluate the other applications.
“We have long stated that it only takes one good application,” Gov. Palin said in a statement. “We're thrilled to have a project sponsor willing to build a pipeline on terms that benefit all Alaskans.”
There has been talk since the 1970s of an Alaskan gas pipeline connecting the major reserves on the state's north slope with the rest of the continent. In 2006, Exxon Mobil Corp., BP PLC and ConocoPhillips Co., the companies that control the gas, reached a deal with Alaska's former governor to develop the line but it was scrapped by the new administration.
TransCanada Corp.
The Globe and Mail
For TransCanada, Alaska's decision is an early win but doesn't mean the company has won the contest. There is now a two-month public comment period, after which the state will decide whether to submit TransCanada's application to the legislature for approval.
Even if TransCanada is politically successful, it would still need to secure long-term shipping contracts from Exxon, BP and ConocoPhillips before it could proceed. TransCanada has said it has always worked closely with the potential gas shippers.
The big name not mentioned in Alaska's Friday news release is ConocoPhillips, which has proposed a $30-billion (U.S.) pipeline to connect Alaska with Alberta, carrying four billion cubic feet of gas a day –roughly 5 per cent of demand in the U.S. ConocoPhillips made its application outside of the gasline inducement act, saying it didn't need state funds to proceed with its proposal.
AGIA Completeness Review Finalized
TransCanada Meets Statutory Requirements
Office of the Governor Sarah Palin
No. 08-002
January 4, 2008, Anchorage, Alaska – Governor Sarah Palin today announced that the State of Alaska has finished its completeness review of the five AGIA applications. The application from TransCanada Alaska Company, LLC/Foothills Pipelines, Ltd. (“TransCanada”) satisfied all of the mandatory requirements set out in AGIA. Thus, TransCanada’s application will move to the next phase, the evaluation phase, of the AGIA process.
AGIA requires that, before an application can be evaluated, it must first undergo a “completeness review” by the commissioners of Natural Resources and Revenue to determine whether it complies with the requirements of AGIA. Then, the commissioners must evaluate the application to determine whether it will sufficiently maximize the benefits to Alaskans and merit issuance of the exclusive AGIA license. The commissioners are now soliciting public comment to help them evaluate the TransCanada application and make that determination.
The five companies which had applied under AGIA to develop and build a natural gas pipeline to transport North Slope gas to market were: AEnergia LLC, the Alaska Gasline Port Authority, the Alaska Natural Gas Development Authority, Little Susitna Construction Company, Inc. (“Sinopec ZPEB”); and TransCanada. While TransCanada’s application was deemed complete, the commissioners determined that the other four applications did not meet the requirements of AGIA. Those applications will not be evaluated further.
“We have reached another important milestone in bringing our Alaska’s natural gas to market,” said Governor Palin. “We have long stated that it only takes one good application. We’re thrilled to have a project sponsor willing to build a pipeline on terms that benefit all Alaskans. Today’s result is tremendously satisfying.” Public review and comment will begin on January 5, 2008 and will last 60 days, closing March 6, 2008. The public may review all applications received and provide comments to assist the commissioners in their determination of whether TransCanada’s application proposes a project that will sufficiently maximize the benefits to Alaskans and merits issuance of the exclusive AGIA license. If the commissioners find that the TransCanada application meets that test, they will forward it to the Legislature for approval.
All applications and public comment procedures have been posted online at www.state.ak.us.
###
Gas pipeline applicants pared to one
By JEANNETTE J. LEE
Anchorage Daily News
04-Jan-2008
Only one of the five applications submitted for the exclusive license to build a natural gas pipeline to transport North Slope gas to market will advance to the next round of public scrutiny, Gov. Sarah Palin announced today.
The application from TransCanada Alaska Co./Foothills Pipelines Ltd. was the only one that met all the state's requirements, Palin said during a press conference in Anchorage.
"We have long stated that it only takes one good application. We're thrilled to have a project sponsor willing to build a pipeline on terms that benefit all Alaskans," Palin said.
The application will be evaluated by the state to determine whether it provides the maximum in benefits to Alaskans and merits issuance of the exclusive license. As part of that, a 60-day public comment period on TransCanada's application opens Saturday and ends March 6.
After that process, if the state determines it meets those requirements, the application will be forwarded to the Legislature for approval. Winning the state license would entitle TransCanada to a package of financial incentives under the Alaska Gasline Inducement Act, or AGIA, a law passed by the Legislature in May.
The winner commits to move forward with plans for a multibillion-dollar pipeline rather than committing to actually building the line.
Winning the state license also doesn't preclude another company from pursuing the pipeline project. Conoco Phillips, the state's biggest oil and gas producer, has made a proposal that falls outside the scope of AGIA.
Other applications with TransCanada's under AGIA that were submitted but did not meet state requirements were from the Alaska Gasline Port Authority, AEnergia, Sinopec ZPEB and Alaska Natural Gasline Development Authority.
Officials from those companies were notified today that their applications did not meet all the requirements set out by the law and will not be evaluated further.
TransCanada is a leading Canadian energy and pipeline company with a long interest in an Alaska gas line.
A North Slope gas line has been discussed since before oil first moved down an 800-mile trans-Alaskan pipeline in 1977. But the prospects only gained momentum in the last few years with natural gas futures trading in the mid-$7 range for 1,000 cubic feet of gas.
In 2006, former Gov. Frank Murkowski settled in principle with BP, Exxon Mobil Corp. and Conoco Phillips on fiscal terms -- taxes and royalties -- for producing the North Slope gas.
It would have frozen oil taxes for 30 years and gas taxes for up to 45 years for the three major oil companies.
Still, that deal did not guarantee a pipeline would get built; the hope was it would enable producers to move forward with a pipeline.
The line would ultimately have delivered 4.5 billion cubic feet of natural gas a day, which is about 7 percent of the current U.S. demand.
But state lawmakers felt the deal had too many giveaways for big firms, including locking in the tax rates. The Legislature never voted on the deal.
That led Palin, who took office 13 months ago, and her administration to chart a different course. Rather than negotiate with one group, her plans called for new guidelines designed to stimulate competition among oil and pipeline companies.
While energy analysts have estimated there to be about 35 trillion cubic feet of proved natural gas reserves in the North Slope, they believe that figure will rise in the future.
A large amount of natural gas comes to the surface when oil is being pumped from Alaska's large-but-dwindling oil fields. But for now, the industry reinjects the gas into the ground.
All the applications are available online at www.gov.state.ak.us/agia.
TransCanada at a glance
* The business: A top Canadian pipeline and power company with 36,500 miles of natural gas pipelines across Canada, the U.S. and Mexico.
* Headquarters: Calgary
* Work force: 3,550 employees
* Chief executive: Hal Kvisle
* 2006 financials: $1.1 billion profit on $7.5 billion in revenue
* Web site: www.transcanada.com
Source: TransCanada Corp.
January 03, 2008
California Sues EPA Over Emissions Rules
15 Other States Back Effort to Win Waiver to Allow the Setting of Tougher Standards
By Keith B. Richburg
Washington Post Staff Writer
Thursday, January 3, 2008
NEW YORK, Jan. 2 -- California, joined by 15 other states led by New York, sued the Environmental Protection Agency on Wednesday over its refusal to allow the state to set its own, tougher vehicle-emissions standards to control greenhouse gases and combat global warming.
The suit, to which Maryland is a party, was filed in the U.S. Court of Appeals for the 9th Circuit in San Francisco two weeks after the EPA's decision to turn down California's request for a waiver that would have allowed it to begin implementing a landmark 2004 state law limiting carbon dioxide output from cars, trucks and SUVs. That law would require new vehicles to cut tailpipe emissions by a third by 2016, which California officials said would result in a fuel-efficiency standard of 36.8 miles per gallon.
Such waivers have been routinely granted to California under the 1970 Clean Air Act, which allows the Golden State to set its own air-pollution standards with federal approval. As a result, California has often been a national leader in developing air-quality protections.
In denying the waiver this time, EPA Director Stephen L. Johnson said following a single federal policy rather than having a confusing patchwork of state laws would be a more efficient way to combat global warming. In December, President Bush signed an energy bill that will raise vehicle fuel-efficiency standards nationwide to 35 mpg by 2020, four years later than the California mandate. Johnson called that approach a better way to address vehicles' contributions to the greenhouse-gas buildup.
In filing the lawsuit, California Attorney General Edmund G. "Jerry" Brown Jr. (D) said, "There's absolutely no justification for the administrator's action," the Associated Press reported. "It's illegal. It's unconscionable and a gross dereliction of duty.
"To curb the innovative efforts of California and other states makes no sense," Brown said in an interview.
In New York, Attorney General Andrew M. Cuomo announced that his state will lead a coalition of 15 states backing California's legal right to set its own environmental standards in the face of what he called inaction at the federal level.
"The EPA's attempt to stop New York and other states from taking on global warming pollution from automobiles is shameful," Cuomo said in a statement. "By denying New York the right to set global warming emissions standards for cars, the Bush administration is intentionally obstructing our efforts to combat climate change."
The EPA's deputy press secretary, Jonathan Shradar, said in a statement: "As the Administrator indicated when announcing his intention to deny the California waiver request, under the recently signed Energy bill we now have a more beneficial national approach to a national problem which establishes an aggressive standard for all 50 states, as opposed to a lower standard in California and a patchwork of other states." He referred questions to the Justice Department.
Besides Maryland and New York, the other states and agencies that joined the suit are Massachusetts, Arizona, Connecticut, Delaware, Illinois, Maine, New Jersey, New Mexico, Oregon, the Pennsylvania Department of Environmental Protection, Rhode Island, Vermont and Washington.
Also yesterday, Sen. Dianne Feinstein (D-Calif.) sent a letter to the EPA inspector general's office asking for a formal investigation into how the decision was made to deny California the waiver.
In the letter to Deputy Inspector General Bill A. Roderick, Feinstein said the agency's administrator appears to have "deviated from standard Administration protocols in making this unprecedented decision," among other things by ignoring the advice of the EPA's technical staff and consulting with the White House before denying the waiver.
Did Hydro-Québec miscalculate?
KONRAD YAKABUSKI
Globe and Mail
January 3, 2008
MONTREAL — Jean Charest inaugurated Hydro-Québec's newest generating station, the $1.5-billion Péribonka IV project in the Saguenay, with the same boast Quebec premiers have been using on their subjects for nearly half a century.
"When we speak of energy, we speak of ourselves. We speak of our ancestors. It's part of our DNA, of who we are politically," Mr. Charest said at the 385-megawatt station's opening last month.
It's true that hydroelectricity has been the uninterrupted current of Quebec politics since the Quiet Revolution. But that doesn't mean it's always been the matter of manifest destiny Mr. Charest would like us to think it is.
How else could Hydro-Québec find itself on the hook for about $150-million to Calgary-based TransCanada Corp. without a kilowatt to show for it? That is how much the massive publicly owned utility will pay TransCanada this year to mothball its spanking new co-generation power plant at Bécancour, Que., near Trois-Rivières.
Was it a simple, but embarrassing, forecasting error on Hydro-Québec's part that led it to inaccurately project supply and demand in 2008 and beyond?
Or is the TransCanada payout another example of the cost to taxpayers of the empire-building mentality that the utility has harboured since the province nationalized its hydro assets in 1962?
Transparency has never been Hydro-Québec's strong suit. So, trying to figure out the internal politics at the utility, which generates enough juice to power almost two Ontarios, is an energy-intensive endeavour.
In the fall of 2003, the utility unveiled a five-year plan that sent shivers through Quebeckers, who had long taken their province's electricity self-sufficiency for granted. Hydro-Québec warned of looming shortages unless the new power plants were green-lighted pronto.
It was in that context that Mr. Charest's government approved Hydro-Québec's construction of its own 900-MW gas-fired station west of Montreal, in a region known as Suroît, in addition to a proposal by TransCanada to build a $500-million, 500-MW co-generation facility at Bécancour.
Within months of that, the Charest government unveiled Quebec's most ambitious energy development agenda in a generation - all of which was music to the ears of the empire builders at Hydro-Québec. Under the Charest government's plan, about 9,000 MW in new hydroelectric and wind power capacity will come on stream by 2015.
The fiasco at Bécancour should lead any thinking person to question the wisdom of that plan.
More history: The Suroît station was never built. It became the focus of massive protest by environmental groups, rightly concerned that it would mar Quebec's image as a leader in clean energy. But the TransCanada project went up without as much as a peep from the protesters - or more precisely, the kind of peep that gets media attention.
The bright side is that no climate-warming vapours from Bécancour have been entering the atmosphere since Tuesday. TransCanada has agreed to shut down the station - which has been open barely a year - for all of 2008, and possibly longer.
In 2003, Hydro-Québec signed a 20-year contract to purchase the electricity produced at Bécancour at a rate tied to the price of natural gas. If it was a dubious deal for Quebec taxpayers then, it's a literally lousy one now.
Warmer winters, the recent closing of Norsk Hydro's magnesium refinery, and the slated shutdown of AbitibiBowater's Belgo paper mill are just a few developments that have left Hydro-Québec sitting on huge surpluses of power at least until 2010.
Not long ago, Hydro-Québec would have touted this as a boon to the bottom line. Surpluses could be exported to energy-starved utilities in Ontario or nearby U.S. states at prices higher than those charged to industrial consumers in Quebec.
Now, though, Hydro-Québec frets that if it were forced to buy power it no longer needs from TransCanada, it would have to sell it at below-cost rates on the North American spot market. It's cheaper to pay TransCanada to shut down Bécancour. The Alberta-based producer will get $54-million this year from Hydro-Québec not to produce any electricity, and another fixed fee of about $95-million that it must pay TransCanada whether Bécancour generates electricity or not.
So, if not hype, what are we to make of Hydro-Québec's plans? Not a single long-term export contract with Ontario or any U.S. state has been signed in years, raising doubts about whether any of the 9,000 MW worth of projects in the pipeline are needed or cost effective - especially if Hydro-Québec's talk of promoting conservation is at all serious.
Quebec's capacity to export power to Ontario will double by 2010, to about 2,500 MW, but the Ontario Power Authority's recent proposal for long-term development makes only passing reference to imports. Ontario is aiming to meet its requirements internally.
As usual, the big winners in all of this will be Quebec's aluminum smelters. With Hydro-Québec's big surpluses, their bargaining power to procure yet more cheap electricity has been re-energized. What a waste.
Clean energy attractive
Vancouver Sun
Thursday, January 03, 2008
LONDON -- Investment in clean energy worldwide rose by a third last year to $117 billion US, boosted by widespread concerns over global warming, researchers New Energy Finance said Wednesday. Government measures to combat climate change and support clean energy sources such as wind, biofuels and solar have drawn investment funding into the sector, helping it weather a wider credit crunch that has strained markets and threatened lending elsewhere.
The amount of new money invested in clean energy grew to $117.2 billion last year, up 35 per cent from $86.5 billion in 2006, said New Energy Finance, which defines new investment as public and private funding of clean energy companies and assets.
© The Vancouver Sun 2008
New Energy Finance Report
Review of 2007: new investment in clean energy surges past $100bn
Dialing it down
by Paul Stastny
Jan 2008
Source: Oilweek Magazine
http://www.oilweek.com/articles.asp?ID=508
Most pundits see weakening activity levels in the gas-conscious Western Canadian Sedimentary Basin in 2008, as oil prices stay high, gas prices remain depressed, and winter weather continues to be a non-factor
As the oil and gas industry sails into 2008, it will be under pressure to change the way it works in the face of an increasingly complex operating climate—royalty hikes, environmental pressures, labour constraints, infrastructure renewal and capital availability issues, commodity pricing, and a strong Canadian dollar.
New and existing projects will require careful anticipatory planning. Paying attention to industry forecasts—and there are no shortage of those—can play a role, but a key ingredient to successfully riding out an increasingly volatile working environment, according to professional services firm Deloitte, is incorporating proactive thinking into long-term project plans.
“It is clear that the entire energy market is in the midst of significant upheaval,” a recent Deloitte report on the Alberta royalty review states. “As resources such as air, water, and land [formerly perceived as mostly unconstrained] become more constrained, governments may find themselves stepping in to refocus market attention and prevent negative impacts to certain markets or sectors. Consequently, producers and other stakeholders will be challenged to evolve the way they assess the market, plan projects, engage in internal and external dialogue, and strengthen their respective positions by anticipating change instead of reacting to it.”
Drilling
The Petroleum Services Association of Canada, in its benchmark drilling activity forecast for 2008, is projecting a continued and dramatic slowdown in petroleum industry field activity this year.
http://www.psac.ca/media_centre/pdf/20071031.pdf
For the year, the association is predicting only 14,500 completions in western Canada, which represents a 17 per cent drop from the 17,550 completions it said would be drilled in 2007. The 2008 figure, PSAC president Roger Soucy said, encompassed at least a certain degree of activity erosion flowing from Alberta’s new royalty regime.
“While producers and the industry as a whole are still calculating the impacts of the new royalty regime, all indicators are for some negative impacts, which we had to take into account in further reducing 2008 well counts—which were already low due to low natural gas prices,” Soucy said.
On a provincial basis, PSAC estimates 9,575 wells will be drilled in Alberta in 2008, representing a 25 per cent decrease over 2007. However, drilling activity in the three other western provinces is expected to increase in 2008 over 2007. In British Columbia, drilled wells will be up by 10 per cent to 900 wells, while Saskatchewan and Manitoba can each expect to see a 3 per cent improvement to 3,600 completions and 350 completions, respectively.
The Canadian Association of Oilwell Drilling Contractors’ forecast mirrors that of PSAC. CAODC is also expecting a dramatic reduction in field activity in 2008 under the pressure of continued weak natural gas prices, high operational costs, and a very strong Canadian dollar. Assuming no material change in average well depths (7.4 drilling days per well), CAODC expects 13,735 wells will be drilled in 2008.
http://www.caodc.ca/PDF/Forecast-Oct07.pdf
Fleet utilization will come in at just 34 per cent in 2008, according the CAODC. This is well below the average annual utilization level of 50 per cent. Importantly, the association expects first-quarter activity to only reach a utilization level of 50 per cent.
“The winter drilling season, normally the busiest time for drilling and service activity, has been lost due to the uncertainty created by the Alberta royalty review,” the CAODC says. “An average of 445 rigs out of a fleet of 890 will be drilling. The last time utilization was at, or lower than, this level was 1992.”
Somewhat more optimistic drilled expectations have been posted by investment house analysts as well as the Canadian Association of Petroleum Producers. CAPP expects about 17,000 wells to be drilled in 2008.
Oil prices
BMO Capital Markets’ managing director, Randy Ollenberger, says his firm remains quite bullish on the oil patch in light of strong oil prices. He predicted oil prices will likely hover in the US$90-plus range over the next five years or so, even if such prices are not supported by economic fundamentals.
“About $10 to $15 per barrel can be attributed to speculative forces, driven by gasoline demand and the lack of global refining capacity,” he says. “The United States essentially has to import gasoline 365 days a year. That has added some tension to the overall system and it has given rise to the situation we’ve never seen before in the world market—where we’ve run out of refining capacity.”
And gasoline demand is expected to grow stronger as developing countries buy more cars. Vehicle penetration in the United States in 2004, Ollenberger says, was about 800 cars per 1,000 people. In the same year, China hit roughly 30 vehicles per 1,000 people, which is the same level the United States had in 1917.
“If you just extrapolate that to where China has the level of vehicle penetration that Eastern Europe currently has, that represents another 12 million barrels a day of gasoline demand,” he says.
This many additional automobiles would require another 12 million barrels of gasoline refining capacity, which is “simply not in the cards. There’s simply no plans to build 12 million barrels a day of refining capacity,” Ollenberger says.
For oil prices to go down would require petroleum companies to spend a lot of money on refinery expansion. But they are reluctant to do so in light of rising replacement reserve costs over the last six or seven years.
“[Increasing replacement costs] are really not being driven by service rig cost inflation,” Ollenberger says. “They’re really being driven by not finding replacement reserves.”
The other component of high oil prices is the high associated costs of producing oil, from services to royalties. North America has generally been more expensive than other places in the world, with Canada weighing in as the most expensive basin in the world to operate in, according to Ollenberger.
Canada’s unfavourable ranking is drawn out in greater detail by CAPP’s vice-president of western Canadian operations, David Pryce. In terms of global oil and gas five-year investment returns on cumulative capital costs, Canada sits at the bottom of the list along with Argentina, at just 12 per cent. The United States averaged returns of 15 per cent. The worldwide average is 18 per cent (22 per cent without North America). Saudi Arabia and North Africa are each at 22 per cent, while the highest returns can be found in Brazil at 35 per cent and in China at 39 per cent.
Natural gas
Brian Purdy, senior analyst with National Bank Financial, echoes a widely held view on natural gas—and not a particularly promising one—for 2008.
“The natural gas inventory situation appears in danger of reaching full storage similar to 2006, dimming the prospects of a turnaround in natural gas prices,” Purdy says.
Most weather forecasts are suggesting that this winter will be two per cent warmer than average, which won’t help generate higher demand, while rising liquefied natural gas (LNG) imports will keep supply concerns in check. LNG imports in the U.S. climbed 44 per cent in 2007 (approximately 200 billion cubic feet), offsetting lower Canadian production, Purdy says.
The biggest jump in LNG imports came in the spring and summer of 2007, when imports swelled to more than three billion cubic feet per day from less than two billion a day. The International Energy Agency (IEA), however, says import levels retreated in September and October as strong foreign demand drove up prices outside of North America, thereby shifting flow of LNG away from the United States.
Without a cold winter, natural gas is expected to continue floundering at current levels in the range of sub-$5 to $6-plus per thousand cubic feet throughout 2008. The U.S. sub-prime mortgage collapse and the ensuing slowdown in U.S. house building is further slackening natural gas demand for space heating.
Lex Kerkovius, portfolio manager and senior resource analyst with McLean and Partners Wealth Management, says he is possibly even less optimistic about natural gas in the coming year, although he expects a price recovery some time in 2009.
“But there are a lot of ‘ifs’ that have to happen before I would hang my hat on a recovery,” he says.
Some of those uncertainties include a reasonably cool winter this year followed by a warm summer and less LNG landings in North America. “In other words, LNG demand needs to stay relatively robust in Europe,” he says. “And that depends on how cold the winter is in Europe. Last year, European gas prices were weak in the middle part of 2007 after a warm winter there and as a result all European Union countries were in a surplus natural gas inventory position.”
As for LNG landings in the U.S., National Bank’s Purdy points out that North American regasification capacity continues to grow. And LNG imports are expected to keep pace with that additional capacity.
The IEA expects another 170-billion-cubic-feet increase in LNG imports in the U.S. in 2008, despite stronger European LNG prices. (The difference in prices is partially levelled by lower shipping costs to the United States from its largest LNG supplier, Trinidad. It costs an additional US$0.40 cents per million British thermal units to ship from Trinidad to Europe than to the U.S.).
If anything may slow the imports of LNG into the United States, it is the rising costs of LNG liquefaction. According to Purdy, they are up three-fold at $900 per tonne of LNG per year (or $18.5 million per billion cubic feet per year).
“Another crucial variable [to a natural gas price recovery] is the drilling complexion in the United States,” Kerkovius says. “To date, U.S. drilling hasn’t really come off.”
In fact, gas production is still increasing in the United States. An immense amount of activity is taking place south of the border, where the focus has been on unconventional basins in the Rockies and Texas. The reason for the robust activity, according to BMO’s Ollenberger, is the difference in economics between conventional and unconventional basins.
“You have a break-even price of about $9 on conventional gas and about $7 on unconventional,” he says. “In the United States, they’re chasing a lot more unconventional gas and in Canada, we are chasing more conventional gas.”