ADN by Pat Forgy.
The North Slope Borough has become fabulously wealthy from taxes on the oil industry and its massive Prudhoe Bay infrastructure. More....
Our Mid-Atlantic Energy Senior Consultant Friend
(Reference this Fuel Fix Story by Collin Eaton)
While Alaska producers are poised to finance and build a gas pipeline/LNG export project, Alaska's new Administration seems to be doing everything possible to delay it into oblivion.
We have commented on these various matters separately over the governor's first year in office; we believe that, this issue cannot be separated from the theme of our consultant friend's article on the left.
As development projects are delayed during this low energy price era, experienced oil industry specialists in many areas -- including gas exploration, production, pipelines, liquefaction and ocean transport -- are being laid off and/or retired.
Our consultant friend has observed that this trend endangers future projects, not because of future oil prices but because of the serious lack of oil and gas specialists needed when demand and higher prices again call for more production -- from highly technical projects.
It is another viewpoint that public and private officials involved in pipeline/LNG projects should bear in mind.
If politicians waste too much time trying too hard to dictate what projects investors should build, how, in what timeframe and with what personnel policies (i.e. as Alaskan politicians tend to do), Alaska's gas pipeline could remain a pipe dream for another, perhaps poorer but wiser, generation to tackle.
-dh (Note: we will immediately correct any factual errors in this or any archived material. Please write us with any additions or corrections. Thank you.)
Wood Mackenzie has estimated that the number of major drilling projects on which the oil industry can make money, given current economics, is down by huge amount (although the numbers are actually a little fuzzy). We have written about this trend several times recently, including our note on diminished North Sea drilling. We do not have access to the complete WM report – their press release is below – but it is still fair make several points about the implications of this trend:
· It will be tough to get to the cost reductions estimated as necessary below, without fudging the numbers. The oil companies already challenge costs in a very disciplined manner for every project, even after it goes FID.
· Given current cash flows, it is probable that a number of projects declared marginally profitable after being put through the cost reduction wringer will get deferred for significant time, or simply mothballed.
· This process will have a cascade effect if it goes on for several years. The longer it goes on, the more the reason for deferral will be lack of qualified
specialists. Prostitution is not world’s oldest profession; the oil industry is. The business lost the bulk of a whole generation through layoffs in 1980s and 1990s. With the layoffs this time around, the talent needed for the next upturn simply will not be there.
· Many of these projects will take multiple years to be developed. The lack of timely response to deal with a supply/demand imbalance will also contribute to greater volatility in the future.
Bottom Line: We have seen this movie before. The monsters involved will be bigger and more convoluted in the current version of the story, but the result will be the same. It will not end well.
Today's Energy Links Are From Larry Persily, Former Federal Gas Pipeline Coordinator
Oil and gas news briefs for Sept. 21, 2015
LNG buyers making progress in push for more flexible contracts
(Platts; Sept. 18) - Calls for increased contract flexibility dominated discussions at the fourth annual LNG Producer-Consumer Conference in Tokyo this week, as industry participants met once again to deliberate emerging trends in the LNG market. The debate advanced some from a year ago, when price indexation had largely taken center stage. With some flexibility now granted in this area, the focus increasingly turned to the still-restrictive terms around LNG delivery schedules and destinations.
Numerous industry observers saw the removal of destination clauses, take-or-pay terms and wider quantity tolerance in contracts as key components that will be necessary to manage the looming supply glut in LNG. "LNG producers must improve on the contract practices of the past. Simply put, producers need to help increase the flexibility of the trade," said Jae-do Moon, South Korea's vice minister for trade, industry and energy.
Jean-Pierre Mateille, Total Gas & Power's vice president for trading, conceded that changes around delivery and schedule terms in contracts were inevitable. "Contracts are becoming shorter.” Most U.S. LNG exports will allow destination flexibility, Mateille said, “We see the traditional link between producer of gas and buyer has been broken up by this new business model.” Satoshi Kusakabe, commissioner of Japan METI's Natural Resources and Energy Agency, said removal of destination clauses would help the market because it would draw more players and increase liquidity and spot trades.
Meanwhile, market uncertainty and lack of new project sanctions has prompted caution of future shortages. "Even at current projections, we need to add about 20 million metric tons of LNG per year to maintain a stable supply demand balance [from 2023 onward]," said Demus King, general manager for offshore resources at Australia's Department of Industry and Science. "To deliver in 2023, FIDs need to be made in the next few years."
Global commodity traders see big opportunities in LNG
(Reuters; Sept. 17) - Mining and trading giant Glencore is mounting a challenge to Trafigura and Vitol to become the top merchant trader of liquefied natural gas as a global market in which sales are largely frozen in decades-long contracts looks ready to thaw. Trafigura recently adopted tactics developed from years of trading oil to become the world's top LNG merchant, investing in logistics and storage, while also providing credit and shouldering risk for buyers.
Glencore, on the other hand, plans to double its global LNG trading team and trade as many as 50 cargoes of the fuel over the next year — almost twice what Trafigura traded in its past fiscal year. LNG could soon surpass iron ore as the world's second-biggest traded commodity, with estimates of the market's worth ranging between $90 billion and $150 billion. "The opportunity for growth in LNG trading is spectacular," said Glencore's global head of LNG, Gordon Waters, who joined the firm in July after 18 years at BP.
Trading companies, which industry sources say have so far accounted for less than 10 percent of overall LNG trade, could help trigger a more liquid Asian LNG market, with exchanges from Singapore to Tokyo launching indices and futures contracts in preparation. Glencore — which has had a limited presence in LNG up to this point — plans to trade in spot or short-term deals over the next year and double the size of its three-trader team based in Singapore, London and Madrid.
First Nation seeks title to island at proposed LNG plant site
(Globe and Mail; Canada; Sept. 18) - The Lax Kw’alaams First Nation is seeking aboriginal title to Lelu Island and Flora Bank, creating a legal obstacle for a Malaysian-led consortium that wants to build a liquefied natural gas export terminal near Prince Rupert, B.C. The aboriginal group will file a notice of civil claim to launch the legal action next week in B.C. Supreme Court, Lax Kw’alaams Mayor Garry Reece said Sept. 18.
Pacific NorthWest LNG, led by Malaysia’s Petronas, is proposing to construct an LNG export terminal on Lelu Island, and also build a suspension bridge and jetty to a dock for Asia-bound tankers. Pacific NorthWest LNG has offered assurances that the design of marine infrastructure will not harm the environment. But the Lax Kw’alaams believe there would be environmental damage because Flora Bank contains juvenile salmon habitat in eelgrass beds next to the island in the Skeena River estuary.
“We want to protect crucial salmon habitat, protect our food security and ensure that governments and industry are obligated to seek our consent,” Reece said. The area is part of the traditional territory of the Allied Tsimshian Tribes of Lax Kw’alaams, and Reece believes that gaining aboriginal title will provide the First Nation with an effective veto over specific aspects of Pacific NorthWest LNG’s proposal. The B.C. government said it respects the right of the Lax Kw’alaams to seek title, while the Prince Rupert Port authority said it is examining the implications of the legal challenge.
Petronas will market ‘package deals’ to sell some of its B.C. LNG
(Platts; Sept. 15) - Pacific NorthWest LNG will look to sell additional volumes of gas from its planned Prince Rupert, B.C., facility to Asian buyers as part of "package deals,” responding to buyer demand, company president Michael Culbert said Sept. 16. “The Chinese, Japanese and Indian markets are seeking diversity [in supply sources] and Petronas is looking at a portfolio of supplying LNG for 20 to 30 years that will be sourced from Canada besides Australia and other global producers," he said.
"A prime advantage of mixing LNG supplies from Canada with other producers will be stability of supply that buyers are demanding," he said on a webcast of the Peters and Co. annual conference in Toronto. Petronas holds 62 percent of the B.C. project that is aiming to start exports in late 2019 or early 2020. Petronas is responsible for marketing the LNG, Culbert said, and already has sold nearly 50 percent of the output under long-term deals with Sinopec, Indian Oil Corp., Japex and Petroleum Brunei.
Culbert did not indicate how much LNG that Petronas plans to sell under the package deals, or if negotiations have already started with Asian buyers. Pacific NorthWest LNG is awaiting final clearance from the Canadian Environmental Assessment Agency before taking a final investment decision to build its LNG facility.
Asian owned-and-operated LNG plant new to the market
(Nikkei Asian Review; Sept. 16) - Companies in East Asia are teaming up to secure cheap, stable supplies of liquefied natural gas. In the process, they are attempting an end-around of the oil giants that dominate the LNG business. One example of how they are trying to do this can be found in Indonesia, where Japanese trading company Mitsubishi and Korea Gas, the world's largest LNG importer, built an LNG plant.
The hope is to eventually ease Big Oil's grip on Asia's LNG market. In August, the first shipment of LNG made its way from the new Donggi Senoro plant to an LNG receiving terminal operated by Pertamina, Indonesia's state-owned oil and gas company. This fall, LNG from the Donggi Senoro plant will be shipped to Korea Gas and Japanese electric utilities, said Toru Kawabata, operations director for the joint venture.
The new plant in Indonesia — at 2 million metric tons annual capacity — is much smaller than the Middle East's typically gigantic production facilities, though it has huge implications for East Asia's LNG market. It is a wholly Asian enterprise in an industry used to Western oil companies taking the lead in building and operating LNG plants — and its output will stay in Asia. Neither Mitsubishi nor Korea Gas has any experience operating an LNG plant, however, and the team has gotten off to a shaky start. After production began, operating errors have caused emergency shutdowns.
Major LNG carrier operator says Australia gas could go to Europe
(Sydney Morning Herald; Sept. 17) - If Asia doesn't want Australia's liquefied natural gas, Europe will take it, said the CEO of one of the world’s largest independent owner and operator of LNG carriers. Australian LNG producers are seeing growth demand in top-consuming East Asia countries, like China, Korea and Japan, dry up as those economies slow down. That's causing some Australian developers whose projects are due to come online to look elsewhere, said Gary Smith, who heads up Golar LNG.
"The only other liquid market that is open to them with the U.S. now closed is Europe," Smith said Sept. 16 at the annual Capital Link Global Commodities Energy & Shipping Forum in New York. "And we've seen it before where cargoes start moving west from Australia instead of east." East Asia nations are not taking a lot of additional supply commitments, with some buyers reselling their cargoes, Smith said. Unless markets in Asia change, Australian LNG is “going to have to go farther to find a home,” he said.
European demand for LNG is constant, since the fuel can be used to replace pipeline gas or used by generators to produce electricity, he said.
U.S. report shows coal losing favor in China
(U.S. Energy Information Administration; Sept. 17) - Economic deceleration, industry restructuring and new energy and environmental policies have slowed China’s growth in coal consumption and are also driving more centralized and cleaner uses of coal. After nearly a decade of rapid growth, coal consumption — which currently supplies two-thirds of China's overall energy use — grew only 1 to 2 percent in 2012 and 2013 and was essentially flat in 2014, according to the U.S. Energy Information Administration.
Total energy consumption in China has slowed as its economic growth has eased and as the composition of its gross domestic product has shifted. In 2013, the service-sector share of GDP surpassed the industry-sector share for the first time in Chinese history. The service-sector share further increased to 48 percent in 2014. Policies to accelerate the development of service industries are likely to sustain the transition away from industry, further weakening coal consumption, the EIA said in its report.
Industry restructuring has reduced China’s energy demand growth from coal-intensive industries such as steel, cement and fertilizer as industry growth slows and processes become more energy efficient. In addition, China's severe air pollution challenges have led to new policies and regulations to restrict coal use in coastal China, to upgrade the nation's coal-fired power generation fleet, and to accelerate the increase of alternative energy technologies.
Idled oil rigs mean less gas production in U.S.
(Bloomberg; Sept. 16) - The retrenchment in drilling for oil in the U.S. is threatening to leave a different market short: natural gas. “The impacts of oil-rig counts extend beyond oil; the outlook for U.S. natural gas is critically dependent on the outcome of this balancing act in U.S. oil rigs,” Anthony Yuen, a strategist at Citigroup in New York, said in a report to clients Sept. 16. “If the oil market remains oversupplied and oil-rig counts fall, the decline in associated gas production would leave the market short of gas.”
Associated gas is the gas that comes out of oil wells along with the crude. Supplies of this byproduct from fields including the Bakken formation in North Dakota and the Eagle Ford in Texas may fall by about 1 billion cubic feet a day next year as drillers idle rigs in response to the collapse in oil prices, Yuen said. The U.S. Energy Information Administration has already forecast that shale gas production will drop in October for the fourth straight month, a record streak of declines.
Crude producers in the Lower 48 states may have to keep the number of working rigs low for a while longer to balance the global oil market, Yuen said. A premature recovery in the rig count may “exacerbate the current oversupplied environment” and weaken prices, he said. While oil prices have been down, natural gas futures have been lower, too, settling at $2.66 per million Btu on the New York Mercantile Exchange Sept. 16, down 41 percent from June 20, 2014.
Floating LNG storage, regasification ships gain in popularity
(Bloomberg; Sept. 15) - At a time when oil and gas producers are writing down assets and canceling projects worldwide, one niche area is booming. Hybrid ships, called floating storage and regasification units, or FSRUs, offer emerging nations from Egypt to Pakistan a cheaper, quicker way to attack power shortages by importing liquefied natural gas. They cost about $300 million to build, half as much as an onshore import terminal, and are up and running as much as six times faster, sometimes within as little as a year, according to FSRU owners Hoegh LNG Holding and Excelerate Energy.
Built at shipyards in South Korea, Hoegh sees as many as 55 such vessels in use within five years, from about 20 now and just one a decade ago. “The main driver is speed,” Sveinung Stohle, Hoegh’s chief executive officer, said by telephone from the company’s Oslo office. “Demand for FSRUs follows a drastic reduction in the cost of LNG. We see that this has caused a very strong increase in requests.”
FSRUs are emerging as the fastest alternative for gas imports as nations imposing limits on carbon dioxide emissions turn to cleaner-burning gas. Competition has cut costs of leasing such vessels by 20 percent to about $120,000 per day from five years ago, said Keith Bainbridge, managing director of industry consultant CS LNG in London. Once the 1,000-foot ships are moored, LNG is transferred from arriving tankers through pipes. The LNG is regasified onboard and typically used at a nearby power plant.
Australia antitrust regulator delays decision on Shell-BG deal
(Wall Street Journal; Sept. 17) – Shell’s $70 billion takeover of BG Group has hit a snag after Australia’s antitrust regulator flagged concerns the deal might squeeze domestic supplies of natural gas and drive up prices. The Australian Competition and Consumer Commission said Sept. 17 it would delay a decision on the deal by about two months toNov. 12, after receiving a welter of submissions from businesses worried Shell would curb local supply in favor of more lucrative sales to Asia through BG’s LNG terminal.
Shell’s proposed acquisition of BG is, in part, a bet that developing countries will move to cleaner-burning gas amid growing pressure to curb emissions. The regulator’s review of the Shell-BG tie-up has become entwined in a separate study of Australia’s East Coast gas market, which Commission Chairman Rod Sims said is one of the few in the world under the shadow of supply uncertainty despite a global gas production boom.
Australia is due to become the world’s biggest producer of liquefied natural gas within two years, as several multibillion-dollar export terminals that began construction when oil and gas prices ran hot start shipping cargoes of LNG to Asia. While that investment holds out the prospect of sharply higher revenues for state and federal governments in Australia, it has also spooked local businesses, which fear paying more for energy as fuel that would have previously fed the domestic market gets shipped overseas.
Gas association launches pro-pipeline public awareness campaign
(Houston Chronicle; Sept. 14) – Increased domestic production has spurred a need for new pipelines to carry natural gas across the country, but also a wariness by some Americans worried about pipelines snaking through the ground. The Interstate Natural Gas Association of America hopes to combat some of the skepticism by rolling out a new ready-for-social-media campaign with videos, graphics and a website emphasizing that pipelines are a vital energy link for the nation.
“If you think about citizens who live near pipelines or in communities where pipelines are proposed to be constructed, they probably don’t know much about natural gas or natural gas pipelines and the tremendous contributions (they) make to overall quality of life,” said Don Santa, CEO of the gas association. With the campaign, INGAA argues that pipelines are the safest method for transporting gas. In addition, gas is better for the environment than the coal it often displaces for power generation.
Cathy Landry, an INGAA spokeswoman, said the group is trying to reach “everyday Americans,” including landowners and others in communities affected by pipeline construction — people who may not realize that natural gas is used to generate electricity as well as fuel furnaces. The campaign is being launched as opponents to oil and gas development have focused more attention on pipelines.
Analyst forecasts another record year for U.S. gas production
(Platts; Sept. 18) - Record levels for production, power burn and storage injection will help make 2015 another record year for natural gas, Jeff Moore, senior energy analyst at Platts unit Bentek Energy, told attendees Sept. 18 at the 38th annual Coal Marketing Days conference in Pittsburgh. Moore said that while coal plant retirements have helped fuel an increase in natural gas generation, the real driver behind in the rise in demand is the commodity's continued low price.
With the Henry Hub price staying below $3 per million Btu, natural gas generation is deployed ahead of coal, Moore said. The only time gas demand for power generation was near these levels was in 2012, the year the Henry Hub price dipped to about $2 in May, he said. Bentek sees the price rounding out in 2015 at an average of $2.68 and increasing to $2.84 in 2016. From 2017 to 2020, Bentek expects the price to average $3.38, $3.85, $4.23 and $4.42, respectively.
Efficiencies in horizontal drilling and a drastic increase in the initial production rate from wells in the Marcellus and Utica shales will push gas production to a new high in 2015, Moore said. Total U.S. marketed gas production is averaging 72 billion to 72.5 billion cubic feet per day this year but will ramp up to near 74 bcf by the end of 2015, Moore said. Gas inventory levels are predicted at an all-time high at the end of the year, but the volumes depend on winter weather.
U.S. oil production finally starts trending lower
(EnergyWire; Sept. 17) – U.S. crude oil production is finally starting to decline, according to statistics and experts. After months of production increases — even in the midst of falling oil prices — total output volumes have been trending downward as production growth in some areas is being outpaced by declines in major shale oil regions. The trend appears to be holding.
Earlier, it had been difficult to tell whether output declines represented a steady trend or the occasional variance seen month to month. Output continues to expand in the Permian Basin of west Texas and southeastern New Mexico and in federal waters in the Gulf of Mexico. But declines in the North Dakota Bakken Shale, in south Texas' Eagle Ford Shale and from other fields appear to be outpacing growth elsewhere.
"There is evidence now that production from the shale plays is declining, not at a rapid rate, but I just recently saw some data for the Eagle Ford and the Bakken which do show production declines over the last couple of weeks," said Bernard Weinstein, director at the Maguire Energy Institute at Southern Methodist University. The U.S. Energy Information Administration sees a gradual decline continuing for the next year, with U.S. oil production forecast to reach 8.63 million barrels a day in August 2016, a drop of nearly 1 million barrels per day from the April 2015 high-water mark.
Low oil prices may cut into production as companies run out of cash
(Bloomberg; Sept. 17) - As much as 400,000 barrels a day of oil production is at risk as U.S. shale companies like Samson Resources run out of money and are forced to slow drilling. Total debt for half of the companies in a Bloomberg index of more than 60 producers has risen to a level that represents 40 percent of their enterprise value. It’s a sign of distress that shows equity values falling in the face of oil’s crash, said Rob Thummel, a managing director and portfolio manager at Tortoise Capital Advisors.
The companies facing high debt loads, which include Encana and Chesapeake Energy, produced 1.1 million barrels a day in the second quarter of this year, according to data compiled by Bloomberg. If more companies file for bankruptcy as Samson did Sept. 16, or embrace the kinds of draconian cuts needed to survive, output could fall by 200,000 to 400,000 barrels, Thummel said. A loss of that much crude would be the steepest U.S. decline since 1989 — about the same as Oklahoma, the sixth-largest producing state.
“We are going to see a major response because these financially challenged companies won’t be able to produce as much as they did in the past,” he said. As companies run short on cash from low oil prices, they may be forced to idle drilling rigs, file bankruptcy or seek more expensive financing and sell assets. In the past year, U.S. oil producers used 83 percent of their operating cash flow to pay for debt service, according to the U.S. Energy Information Administration. A year earlier, it was less than 60 percent.
Today's relevant energy links from Consumer Energy Alliance:
|Dave, I’ve been meaning to tell you for a long time that your website is a great source of information on what is happening in the industry in our part of the world. - Tom Brennan (NGP Photo, autographing his book, Snowflake Rebellion)|
Bloomberg Business: New Yorkers Reap Lower Power Bills From Shale Gas Bonanza
The shale boom has reached the Big Apple. Wholesale on-peak electricity prices for Manhattan and its four neighboring boroughs averaged $40.99 a megawatt-hour since the start of July through Sept. 11. They’re headed for a record third-quarter low, based on Independent System Operator Inc. data going back to 2006.
NBC News: Meltdown: Where Is the U.S. in the Race for the Arctic?
In the vast Arctic, melting ice caused by global warming is bringing new opportunities, and new problems, to a region that could be the next front in a very cold war — a battle that some say America is losing to the Russians. It's the Coast Guard's job to navigate these turbulent waters — no easy task with an aging fleet stationed off the southern coast of Alaska and tight purse strings nearly 5,000 miles away in Washington, D.C.
Bloomberg: America's Shale Gas Supply Is Caught in its Longest-Ever Decline
America’s shale gas boom hasn’t exactly been booming lately. Natural gas production from the seven largest U.S. shale deposits will drop for a fourth straight month in October to average 44.784 billion cubic feet a day, the lowest since March, based on an Energy Information Administration forecast released Monday. That’s the longest streak of monthly declines in government data going back to 2007.
Bloomberg: U.S. natural gas glut could vanish in 2016, Bank of America says
The glut in U.S. natural gas could come to an end in 2016 as producers struggling with a sustained price slump cut back output. Total production in the lower 48 states may fall by 0.3 billion cubic feet a day compared with 2015, reversing the increase of 3.9 billion cubic feet a day seen in the past two years, Bank of America analysts including Sabine Schels and Francisco Blanch said in a note to clients Monday.
Fuel Fix: EIA: Shale output fell by 350,000 barrels a day since April
Oil production at four major U.S. shale plays is falling sharply. Government analysts say shale oil fields in Texas, Colorado, North Dakota and Ohio are set to decline by 80,000 barrels a day this month, bringing their combined daily output to 5.2 million barrels in October.
Associated Press: Republicans Oppose New Safety Rules on Offshore Drilling
Republican lawmakers on Tuesday criticized an Obama administration move to toughen standards for offshore drilling, saying the new rules would be costly for drillers and threaten to shut down oil and gas exploration off the nation's coasts.
Town Hall: 19 House Members Sponsor Articles of Impeachment against EPA Administrator
Nineteen members of the House of Representatives have co-sponsored articles of impeachment against Environmental Protection Agency Administrator Gina McCarthy. According to the Dallas Morning News, the resolution accuses McCarthy of perjury and making false claims to the House Committee on Science, Space and Technology.
Wall Street Journal: U.S., China Build on Plan to Cut Emissions
Next week, President Barack Obama and Chinese President Xi Jinping will add to earlier pledges to cut greenhouse-gas emissions with specific guidance on what the two countries will do at home to keep climate change at bay, officials said. The United States and China announced Tuesday that cities, states and provinces in both countries would commit to taking parallel steps to address climate change.
Washington Times: Obama set to push on with climate agenda
Despite bitter opposition in Congress, a series of legal setbacks and data showing its environmental regulations will drive up electricity rates, the Obama administration this week is moving full-speed ahead with its climate change agenda, prodding U.S. cities into new policies to reduce carbon emissions.
Washington Examiner: Republican governor faces pressure not to submit to Obama's climate plan
Free-market groups are putting pressure on Michigan Republican Gov. Rick Snyder to back down from his recent decision to comply with President Obama's strict new emission rules for power plants. Snyder made the decision Sept. 1, nearly a month after Obama finalized the rules, called the Clean Power Plan.
The Hill: Interior chief defends Obama against liberal fire
Interior Secretary Sally Jewell fought back on Tuesday against criticisms of her agency from environmentalists who say the fossil fuel production it allows goes against President Obama’s climate goals.
Washington Times: Obama announces new round of taxpayer money for solar power projects
The Obama administration on Wednesday announced $120 million in funding for solar power projects across the country, continuing its policy of using taxpayer dollars to fund the nation’s transition away from fossil fuels and toward renewable energy.
Reuters: Water demand from fracking less than 1 percent of U.S. total: study
Fracking by the U.S. oil and gas industry has increased the burden on the nation's water resources, but still accounts for less than 1 percent of America's total industrial water use, according to a paper by researchers at Duke University published on Tuesday.
Wall Street Journal: Saudis Make Push for Nuclear Energy
While the world’s attention has focused on Iran’s nuclear ambitions, other players in the Middle East have been laying their own plans to develop nuclear power to meet future energy needs. Saudi Arabia, the most ambitious of the group, has announced plans to build 16 reactors over the next several decades, providing a projected 15% of the country’s electricity possibly as early as 2032, according to a Saudi government website.
Rigzone: Oil, Gas Works on Solution to Reduce Freshwater in Fracking
While the quantity of water used for hydraulic fracturing increases, essentially with each new well put into production, industry researchers are developing ways to diminish the quality of that water – eliminating freshwater from the solution.
Fuel Fix: House Majority Leader McCarthy announces vote to repeal crude export ban at GHP gathering
The U.S. House of Representatives will move a bill repealing the decades-old ban on exporting crude oil to a vote by the end of the month, the chamber’s majority leader announced in Houston on Tuesday. The vote is a victory for a coalition of Houston-based oil producers who have lobbied for the change since a glut of oil began flowing from U.S. shale.
San Antonio Express-News: Administration balks at GOP-led effort to lift oil export ban
The Obama administration signaled Tuesday that it would not back legislation to authorize widespread crude exports, as a Republican-led effort to lift decades-old restrictions on foreign oil sales gained steam on Capitol Hill.
Alaska Dispatch News: Activists target federal energy leases in climate change fight
President Barack Obama has been amping up his rhetoric about addressing climate change, but a coalition of environmental organizations released a letter on Mondaypushing his administration to do more.
Midland Reporter-Telegram: Congressman decries regulatory hurdles faced by energy industry
Permian Basin oil and gas operators working through the economic challenges presented by $45 crude oil prices are well aware of the other challenge they face. “This is the most unfriendly regulatory environment we’ve ever been in,” said Ben Shepperd, president of the Permian Basin Petroleum Association.
Dallas Morning News: In U.S. shale fields, including in Texas, oil flow slows
The flow of crude from what had been the country’s fastest-growing oil and gas regions, like Texas’ Eagle Ford shale, is declining rapidly, according to data released by the federal government this week.
Midland Star-Telegram: Dramatic drop in Texas drilling permits continues
As if we needed another sign of the decline in oil drilling, the Texas Railroad Commission said Tuesday that it issued only 864 drilling permits in August, a 65 percent decrease from the same month last year. The August 2015 report shows that the agency processed 730 permits to drill new oil or natural gas wells, 14 to re-enter plugged well bores and 120 to re-complete existing wells.
Akron Beacon Journal: U.S. economy, auto sales boost growth in gasoline use
U.S. motor gasoline product supplied, a proxy for gasoline use in the United States, has been rising after reaching an 11-year low in 2012. Although lower gasoline prices have been an important factor in the increase in gasoline use so far in 2015, changes in the labor market and in the vehicle sales mix over the past few years also have contributed to the rise in gasoline use.
Columbus Dispatch: StatOil fined $223,000 over Ohio fracking-well fire
Ohio environmental regulators will fine an international oil and gas company about $223,000 for a blowout and fire last summer at a Monroe County fracking well that contaminated a nearby stream, killed fish for miles and forced about 25 people from their houses.
Philadelphia Inquirer: Amid trying times for industry, shale-gas conference returns
After shifting its annual conference to Western Pennsylvania last year, the shale-gas industry returns to Philadelphia on Wednesday for a two-day gathering amid an economic climate substantially subdued from the industry's early go-go years.
StateImpact Pennsylvania: Federal air rules force coal plants to clean up or shut down
John and Maureen Vilcek have lived exactly one mile from the coal-fired Homer City Generating Station in Indiana County, Pa. since the 1970s. They raised their children here, and hardly notice the constant rumble emanating from the plant up the road.
Yes, Low Oil Prices Also Affect Service Industries and Their Thousands of Employees and Sub Contractors!
Reader Commentary, Below, and Our Reaction
Commentary, "Telling it like it is" carries with it a responsibility for diligence and judgment: We are honored to receive so many calls and emails every week, over many years, from readers throughout the world. We hardly ever make public note of such moving messages, but we have archived a few here.
We are deeply grateful for our reader interaction and wish to highlight these two examples (i.e. left column) today out of respect and appreciation for all faithful readers.
Such support keeps us going strong. We know that industry cannot often "tell it like it is," for it is natural to fear that criticizing a local, state or federal regulator can produce retribution and shareholder losses. This in a country wherein government has grown to not fear the people, as the Constitution envisioned.
Ordinary citizens can't often take the time to study and communicate their reaction to complex energy issues; they just don't like the general result.
News media stories and editorials are pretty much sanitized by management.
So, it falls to independents like us to try to connect the dots and keep our readers informed via links, associations and commentary. And we want you to know that we know our credibility rests upon our sense of responsibility and judgment.
...glad you provide this information. It keeps us IN THE LOOP! Have a GREAT WEEK, DAVE! Bunny and Al Chong
... Most importantly you add such wealth of Knowledge on our energy and industrial and political business news in Alaska.
You are read by many and are the only news letter that covers all the economic and environmental concerns that occur in Alaska and DC as well as sister energy States like North Dakota and Wyoming.
Comment: Way to go, Marcella Munro! Could Canada be thirsting as much for anti-PC, "tell it like it is" truth-telling leaders as the U.S.?!!!
Calgary Herald by Don Braid. Marcella Munro, Premier Rachel Notley’s suddenly controversial new hire at McDougall Centre, has a surprising answer when asked if she’s against pipelines and the oilsands.
“Me? My BMW 325i is my favourite possession. There is no planet on which I could try to argue against the oilsands. I love all the good things petroleum does for me — including driving too fast on Highway 2.”
Notley’s new Calgary “outreach” director certainly isn’t hiding under the stairs at McDougall after being fiercely attacked by the Wildrose and PCs.
EPA ALERT: Let's mark our Thursday calendars. We would bet EPA will swiftly change tactics from apologizing for incompetence to avoiding blame and liability (i.e. Lawyer talk: "We are sorry for the inconvenience but were just doing our job to clean up industry's mess." -dh)
Committee on Natural Resources and Committee on Oversight and Government Reform to Hold Joint Hearing on the EPA’s Animas Spill.
WASHINGTON, D.C. – On Thursday, September 17, 2015, at 10:00 AM, in Room 2167 Rayburn House Office Building, the Committee on Natural Resources and the Committee on Oversight and Government Reform will hold a joint oversight hearing titled, “EPA’s Animas Spill.”
Committee on Natural Resources and Committee on Oversight and Government Reform joint oversight hearing titled, “EPA’s Animas Spill”
WHEN: Thursday, September 17, 10:00 AM
WHERE: 2167 Rayburn House Office Building
Visit the Committee Calendar for additional information, once it is made available. The meeting is open to the public and a live video stream will be broadcast at House Committee on Natural Resources.
The Asia Pacific Resilience Summit kicked off this morning, an event that showcases clean tech solutions for island grids, communities, and military applications across the Pacific. The opening keynote speaker, Governor David Ige, wasted no time in making major headlines, stating, for the first time publicly, a strong opposition to proposed LNG projects.
Yes, Low Oil Prices Also Affect Support Industries!
Just as oil and gas producers and taxing governments are affected by low oil prices, so are the support industries and their thousands of employees, subcontractors and shareholders. Today, we bring you a few words from our respected, anonymous energy consultant friend from the Mid Atlantic region. -dh
"We have continually pointed out that the business models of the private equity companies and the E&P industry could hardly be more antithetical to each other. Cash flow back to the investor is a necessary part of the PE investment strategy, while E&Ps think positive cash flows are for sissies and big, dumb integrated oil companies. But the flood of money into the market and low interest rates have brought them together. Can this marriage be salvaged?
"One ancillary thought: Given the cash shortage for E&Ps for 2016, the Service Companies may get hit worse.
"Here are some thoughts from Wunderlich Securities on the prospects:"
Below the surface of the energy market, we believe that there exists a confluence of factors ready to bubble up and impact E&Ps, OFS, and MLPs. With continually low natural gas prices, abysmal NGL prices, very weak oil prices, and no V-shaped recovery in sight...
...structural shifts in the energy landscape.... Private equity continues to have a considerable interest in the space ... some banks may look to reduce their exposure.... the amount of funds in the space could remain very high. However, the cost of those funds could also be rising as funding from private equity replaces more conventional sources. ...with commodity prices making new lows and fewer hedges in 2016 than in 2015, we think there is a confluence of factors that could alter the energy landscape in the coming 3-6 months....
Obama Administration’s Regulatory Agenda will Result in Virtual Moratorium on Gulf Offshore Energy Development
Administration’s Policies “Undermine Safety, Rather Than Enhance It”
WASHINGTON, D.C. – Today, the House Committee on Natural Resources held an oversight hearing in New Orleans, LA, on the current state of offshore oil and gas activity in the Gulf of Mexico. The panel received testimony from U.S. Senators David Vitter (R-LA) and Bill Cassidy (R-LA), industry representatives, and the U.S. Department of the Interior’s (DOI) Bureau of Safety and Environmental Enforcement (BSEE).
The hearing focused on the impact of federal policies on energy development in the Gulf, including DOI’s proposed well control rule, and what actions can be taken to promote the responsible development of outer Continental Shelf (OCS) resources.
"Federal regulations such as the proposed well-control threaten another moratorium by shutting down the majority of the Gulf rig fleet. Some provisions of this rule could actually undermine safety, rather than enhance it," stated Committee on Natural Resources Chairman Rob Bishop (R-UT). "Other federal measures, such as the crude export ban, limit new market opportunities and U.S. production potential. We should encourage the production of affordable energy, not continue decades-old policies that force companies to shut-in those resources because they are not economic to bring to market."
"This administration's energy policy appears to have two objectives: cause Louisianans to lose their jobs and continue our dependence on foreign oil,” stated Rep. Garrett Graves (R-LA). “We have already been through the moratorium and permitorium where the federal government shutdown the Gulf of Mexico's energy fields. These new illogical regulations on the offshore industry – conceived in a vacuum with insufficient stakeholder input – will not ensure safe exploration and production operations, but they will result in less production, more supply boats tied up and more people losing their energy jobs."
“The Obama Administration was held in contempt of court over its previous moratorium in the Gulf, so now President Obama is seeking through regulation to create a new moratorium by making it prohibitively expensive to drill in the Gulf,” stated Water, Power and Oceans Subcommittee Chairman John Fleming (R-LA). “I’m glad the BSEE will finally be sitting down with industry experts, but it’s a shame they didn’t do that from the start."
Calgary Herald, by Geoffrey Morgan.Suncor Energy Inc.’s Steve Williams blasted the “stupidity” of pipeline politics in the U.S. and Canada....
|Our Readers will be interested in Tom Brennan's (NGP Photo) Sunday, Anchorage Daily Planet review of the role Exxon, ARCO, Tom, Hank Rosenthal and others -- including your author -- played in Alaska Waterfowl enhancement policies of the 1970s and 80s. -dh|
Exxon CEO Rex Tillerson explains factors contributing to middle eastern oil producer decisions affecting world-wide supply, demand and pricing. This excerpt once again underlines the importance of competitive tax and royalty policies. In these volatile economic times, elected leaders in Alberta, Alaska and other North American energy producing areas should be focused more on "what we can do to attract investment," rather than, "what can we do to squeeze more blood out of the oil producing 'turnips' at the expense of future prosperity." -dh
|ADN. Alaska Governor pays gasline consultants more than $100k PER MONTH. (Comment: meanwhile, Alaska's annual budget deficit exceeds $3 billion. Spending programs are on the chopping block and higher taxes are on the horizon. Brilliant. -dh)|
ADN. Gov. Bill Walker (NGP Photo) is heading to Japan to speak at a conference on the global liquefied natural gas market. Walker spokeswoman Katie Marquette says the governor will be in Tokyo next week for the LNG Producer-Consumer Conference. While there, he plans to meet with prospective liquefied natural gas buyers about bringing Alaska's gas to the global market. (Meanwhile, the LNG world continues to be flooded with competitors -- leading to a growing trend of LNG spot market pricing. Depressed oil and gas prices are in the process of stranding big LNG projects, including Russia's Arctic energy development plans. To deepen our understanding of world price trends, we provide this interview summary featuring Exxon's CEO. -dh)
Today's comment from our anonymous, Aussie LNG expert reader:
The troubled Yamal LNG project in Arctic Russia was the subject of a recent Reuters report which provided an update on the financing for the project. As we noted last week, the appetite of Chinese financiers to come to the Yamal party is far less than the Russians would like and other options appear nebulous.
That leaves JV partner Total potentially having to provide even more support for Yamal than it has already given. This factor could have some relevance to current machinations in Australia and PNG over Woodside Petroleum's (WPL) proposal to acquire Oil Search (OSH).
Media reports have speculated that Total could be a potential rival bidder for OSH. However, even a Super-Major needs to manage its available cash, and with its commitments to Yamal possibly being unpredictable, Total may be reluctant to over-stretch itself in PNG.
Here is an excerpt of Exxon CEO Rex Tillerson's insightful comments during a recent interview by Petroleum Intelligence Weekly. This excerpt and commentary was provided by one of our gracious, anonymous readers, a Mid-Atlantic energy consultant:
...comments during an interview with with Rex Tillerson, CEO of Exxon, on several aspects of the current global crude oil market. In particular, we were interested in his observations of OPEC’s (non)actions to support crude oil pricing. He provides an excellent, long-term view of the dilemma facing the Saudis, particularly after they spent billions to provide reserve supply capacity after 2008. This is an excellent observation on how Saudi Arabia (essentially OPEC in one country) is really focused on how the oil market will morph from its current condition. ... There is obviously some collateral damage inflicted on some players (Russia, Venezuela, Iran, et al), but it does not represent the primary issue being dealt with by Saudis.
The relevant passage:
Regarding Opec, Tillerson does not believe that the organization, and Saudi Arabia in particular, has given up its oil market management role; rather, it has recognized the magnitude of the challenge created by current market conditions. He explains this point as follows:
"I don't think Opec has surrendered at all. I think they have recognized what they are dealing with. Their alternatives were to do what they have traditionally done when we have gone through these cycles, and that is manage their production to sustain a price band.They, too, rightly judged how out of balance this thing was and concluded that wasn't going to get them anywhere other than to really have to curtail their production. So, I think what they are doing is classic price discovery. It is largely the Saudis that have decided they need to undertake this. It is the future of the kingdom — how they are going to manage their resources, what level of capacity do they need to maintain, and [whether] they have to continue to invest to maintain capacity that they cannot produce. This is something that that a lot of folks overlook. And I remind folks that when prices went out of whack, got up to the $140 per barrel range, the Saudis, [Oil Minister] Ali Naimi in particular, recognized that was not good. The world looked at spare capacity and it was gone, evaporated. The Saudis had on everything they could produce, so, the king authorized them to develop two million barrels per day of capacity with the intent of shutting it in. I tell policymakers in Washington, who bash these guys all the time, you don't understand, these are the best friends you've got. No other nation in the world would invest billions and billions of dollars to develop 2 million b/d of oil producing capacity to shut it in. They had to demonstrate to the markets that spare capacity had been restored. Otherwise they can't play that role. Now they've invested all that money, they've got all that spare capacity, and now they are asking themselves: boy, did we make a big mistake? All this North American stuff came on and they have to understand what the pricing structure is today in order to make decisions about how much spare capacity, if any, they need to manage in the future in order to continue to play their role. So, I don't think they have changed their view about what role they need to play and what role they want to play. It is rather: how do they play it? And that is not obvious to any of us. It is going to be very informative to all of us to understand the price discovery process. Just where are the marginal barrels and how elastic are they? A lot of people thought it gets to $60 and everything would become obvious. I never held that view. I commented early on that I thought people would be pretty surprised at just how resilient this thing is, which is what I told the Opec meeting when I spoke to them in June. I said, you need to be ready for this to take a while. I think the fact that we have gone through several of these price convulsions this year, shouldn't be a surprise to anyone."
An Expert Speaks: "Alaska's In-State LNG Project"
We Urge All Alaskans To Read The In State Natural Gas Opinion Piece Below; It Is Written By One of America's (and Alaska's) Most Experienced Community LNG Operators. (Normally, we are addressing Alaska's gas export project: Ak-LNG. Today, we look at an Alaska intrastate project.)
|Vancouver Sun by Vaughn Palmer. Louisiana beats British Columbia and Alaska on LNG Export Projects|
We do not support a government subsidized natural gas utility and believe the model being employed by Alaska to serve Fairbanks is deeply flawed (See archived history by entering into right column "search", "Commentary, Fairbanks Natural Gas".) But we also believe that if there is to be a subsidized project, it should minimize making critical mistakes. And, its formation should not grow from political influence and decision-making. Furthermore, influence leaders should not be dissolving the independence of the Alaska Industrial Development and Export Authority (AIDEA) by giving it political instructions (i.e. where to buy the gas, etc.).
If Alaska decision makers fail to listen to Latchem, some very poor decisions could harm electricity and natural gas consumers from Homer to Anchorage to Mat-Su to Fairbanks.
Lastly, would a prudent investor be considering a multi-hundred-million-dollar government investment at a time of stock market volatility, when the State's investment outlook is negative, when the State is not balancing its budget and when the government has no plan for balancing the budget?
If it does decide to imprudently pursue the Fairbanks gas utility subsidy, it had better listen to experts like Latchem, then make the decision based on real numbers and sharp pencils...before choosing and pursuing the most economical path.
In 2013, Gov. Sean Parnell introduced and the Legislature passed SB 23, a measure that would provide a substantial subsidy ($57 million in grants and $200 million in low interest loans and bond funding) for the development of a natural gas liquefaction plant in Prudhoe Bay and a gas distribution system in Fairbanks. My company, Spectrum LNG, began developing a parallel LNG project the year before so we were disappointed that the state of Alaska would try to develop a competing LNG plant. A little over a year later we sold our development to the state's Alaska Industrial Development and Export Authority (AIDEA) and it adopted it as its own. AIDEA selected a different developer to finish the project.
For too many reasons to fit into this commentary, AIDEA terminated its agreement with the chosen developer in 2015. The Legislature also amended SB 23 to permit the funds to be used for an LNG plant in locations other than Prudhoe Bay. This allowed AIDEA to seek new proposals from potential developers that would include Cook Inlet operators.
This brings me to the point of this commentary: Only a small group of special interests will benefit from Fairbanks getting its natural gas from Cook Inlet. The result: Anchorage and Fairbanks will pay a very high price -- too high a price -- and here is why.
Imagine that the Cook Inlet basin is a glass of iced tea. For years Anchorage, Japan (through the Kenai LNG plant), the fertilizer industry and a very small Fairbanks market, all had straws in this glass. As the level in the tea glass fell, the price began to rise. At some point the fertilizer plant couldn’t compete with other fertilizer plants in the world that were located next to cheaper gas, so it shut down. The next victim was the LNG plant that had been supplying Japan for close to 40 years. Only Southcentral Alaska and a small straw for Fairbanks remained. To its credit, Anchorage developed contingencies that included the importation of fuel for home heating and generation of electricity. The majority of Fairbanks citizens continued to suffer from the run-up in oil prices because they were and continue to be largely reliant on oil.
An expensive new straw
It takes relatively large companies to explore for natural gas in high-expense areas like Cook Inlet. So it costs a lot to develop the glass of iced tea in this analogy. But when the level in the glass nears the bottom, the big guys lose interest and sell their remaining interests to smaller companies. Today, even though Cook Inlet gas prices are two to three times as high as Lower 48 prices, there are no major oil and gas companies exploring or developing. The opposite is occurring. The big players are leaving. Marathon left after the RCA decided it would meddle in their affairs. ConocoPhillips just announced its remaining Cook Inlet assets are for sale. The departure of major Cook Inlet producers has to worry both Enstar and the Southcentral electric utilities responsible for heating and lighting the most populous part of Alaska.
Absence of major producers creates opportunities for second-tier companies like Hilcorp that are proficient and efficient at squeezing more ice tea out of the glass at lower operating costs than the majors. And given the higher prices for gas now -- along with exploration tax credit incentives -- a few smaller, more nimble explorers have arrived. They are pursuing a chance to develop production from small potential reserves that the majors passed over, but which could pay up to three times what they sell gas for in the Lower 48. The majors know that if they developed more Cook Inlet production, it would cause the price to correct and more closely resemble Lower 48 pricing. The second-tier companies take the risk that the prices will remain high long enough for them to make a good return on their investment.
The second-tier companies are now hoping to prolong the high prices by shoring up the demand side of the price equation. If they are successful in getting another straw from Fairbanks into their glass of iced tea, they can continue to enjoy selling gas for two to three times the highest price in North America. The new straw from Fairbanks will be the LNG plant that the state itself is going to pay for.
This is a wakeup call to the citizens of Southcentral Alaska and their legislative delegations. In the middle of the state’s largest budget deficit, you are considering spending millions of dollars that might lower Fairbanks’ energy price slightly, but will cost Anchorage many times that savings by shoring up already ridiculously high Cook Inlet prices.
There is an attractive alternative. Spend the state’s money tapping a new gas supply that doesn’t compete with Southcentral Alaska. In fact the new supply is not so new, but is proven and developed, and one of the largest reservoirs in the world. And there are no other straws in that huge glass. Even if other straws get added later, they likely will not cause an increase in price since they will have to compete in the world market.
Since before the trans-Alaska oil pipeline was built, many looked for the development of a gas line. While a lot of gas line proponents were looking for short-term construction opportunities, the long-term thinkers were looking for a way to monetize all that stranded gas. Alaska doesn’t have to build a pipeline to get at least some of that ocean of gas to market, for in-state use. The stage is already set for the construction of a small-scale LNG plant in Prudhoe Bay that will bring much cheaper energy to the Interior, as intended by SB 23 (i.e. cheaper than if it were purchased from Cook Inlet).
But there is an effort being made to shift this new straw from Prudhoe Bay to Cook Inlet. If consumers from Fairbanks to Southcentral do not become involved in this issue, special interests will profit at their expense for years to come. If the state had not subsidized this development, the private sector would be hard-pressed to build an LNG plant in Cook Inlet to supply the Interior against a Prudhoe Bay based supply. If Spectrum LNG didn’t believe this, we would have already built on our own Cook Inlet location. But since there is a lot of state money involved that requires no return, special interests only have to steer this investment toward Cook Inlet to accomplish their goal, without putting their own money at risk.
North to the future
By way of disclosure, our company Spectrum LNG is an LNG developer and producer. We are participating in AIDEA’s second effort to secure additional LNG supplies for the Interior energy project. Our principals and investors were the original developers of Fairbanks Natural Gas, LLC and its associated small scale LNG plant at Point Mackenzie. We own another LNG plant site adjacent to the existing plant and can develop a new larger plant at this site, but it would require a Cook Inlet based supply of gas. It would have lower construction and operating costs, as well as a cheaper truck transport to Fairbanks. Though we would benefit from our decades of Alaska LNG experience and ownership of our Cook Inlet site, we urge consumers to look carefully at what they will lose if the politicians and special interests succeed in omitting the North Slope gas option.
The bottom line is that Southcentral consumers would be better served by the state not building an LNG plant at all -- especially in their own Cook Inlet supply area. The people of the Interior will be best served by the state subsidizing a plant being built in Prudhoe Bay where the gas supply is cheap and abundant, in spite of the higher construction and operating cost.
It’s difficult to consider an LNG project absent Golden Valley Electric Association as the largest potential customer. Golden Valley is in a position to expedite the arrival of more natural gas to Fairbanks by simply agreeing to use the fuel for power generation in North Pole. This is not an original idea. GVEA themselves negotiated a 15-year natural gas purchase agreement with BP Alaska contemplating such a plan. Should GVEA decide to implement its plan to take Prudhoe Bay gas south to North Pole, the rest of Alaska will benefit.
From a public policy standpoint, it’s difficult to pass on a project that can finally tap into Alaska’s largest gas reserves and do so in a manner that provides economic benefit to all Alaskans.
Ray Latchem is president of Spectrum LNG, a privately held liquid natural gas producer based in Tulsa, Okla., which has built projects in Alaska from Prudhoe Bay to Point Mackenzie.
PETROLEUM NEWS -- SAExploration seismic programs approved - 08/16/2015 (Login to read Full story) SAExploration has received approval from the Alaska Department of Natural Resources, Division of Oil and Gas, for two seismic surveys, both on state land and waters in the Beaufort Sea, one in the vicinity of the Colville River Delta and one within the Prudhoe Bay area. The permits, both marine-base....
From the Senate Energy Committee: See How Envronmental Extremism is Destroying California Lives
Aussie Oil and Gas Observer: The smashing of the Shanghai stock market yesterday – an 8.5% fall (the biggest one day decline in eight years) – has reverberated around the world in both stock markets and commodity markets, and oil was not left out of the carnage. *** Japan’s average LNG price (per mmbtu) for June was down again – at US$8.65. Volumetrically this figure is largely driven by contract purchases. At this price, few if any Australian LNG projects would have been sanctioned in the last decade. ***
Quote of the day, from the classic play (and movie) Glengarry Glen Ross, which captures something of the atmosphere within employee ranks in oil companies at present:
“As you all know first prize is a Cadillac El Dorado. Anyone wanna see second prize? Second prize is a set of steak knives. Third prize is you’re fired”.
Commentary: We are very proud -- and respectful -- of one of our readers, an Australian energy expert, for acting on our suggestion that he begin writing an energy blog (Column Right).
We call him "Aussie" here, because his active energy investing and consulting do not allow him the flexibility of using his proper name on his blog at this time.
Aussie is a brilliant thinker, observer of energy trends and realities, and writer. He is also prolific, producing new commentary almost daily. He knows North American energy issues well.
In short, we are delighted to begin bringing you his commentary.
We think you'll share our respect for his wisdom and insight as he tackles the effect of this week's economic crisis in China on energy projects, prices, projections and employees.
Following is a clip from his email today. -dh
Our Face Book comment on this issue:
The science is not settled (See Praeger University comment below).
Believing that it is settled is justifying environmentally extreme movements designed to bloat bureaucracies and amass political power by forming critical partnerships with subsidized businesses that could not survive in a non-subsidized world.
This process is also known as "crony capitalism" which is designed to destroy capitalism and free enterprise over time.
One of many effects of "climate politics" is justifying massive income redistribution from economical fossil fuels, taxpayers and utility ratepayers to subsidize expensive alternate fuels represented by countless lobbyists.
This video is a true public service that can be useful in communicating basic facts to our fellow citizens, fellow taxpayers, and fellow utility ratepayers.
We are are being misled by armies of entrepreneurs with alternate energy profit motives who are major funders of political campaigns.
We can think of this wealth transfer alliance as the eco-crony capitalist-political cycle of life. -dh
New Video: What They Haven't Told You about Climate Change
Since time immemorial, our climate has been and will always be changing. Patrick Moore explains why "climate change," far from being a recent human-caused disaster, is, for a myriad of complex reasons, a fact of life on Planet Earth.
Senate Energy Committee - California Drought and ESA
ICYMI: This is a very interesting piece on the current drought in California that’s causing a “humanitarian disaster” in the Golden State. Charles Cook chronicles his firsthand experiences in California’s Central Valley that’s experiencing devastating economic impacts stemming from the state’s ongoing drought crisis. -
From: Michael Tadeo, Senate Energy and Natural Resources Committee
Golden State Dust Bowl: How environmental extremism is destroying California’s Central Valley (National Review)
August 10, 2015, Issue
By, Charles C. W. Cooke
Central Valley, Calif. — The road to Fresno is flanked by missed opportunities. Just ten years ago, to drive across this extraordinary valley was to be blinded by miles upon miles of burgeoning green life. Now, the fields that run alongside State Route 180 resemble the squares on a giant, schizophrenic checkerboard. On one block there are pistachios, almonds, tomatoes, and grapes, stretching as far as you can see; on the next all is brown and fallow, and the dust swirls upward toward the heavens. On the edge of the small farm town of Mendota, an abandoned sugar plant stands defiantly against the sky. It is beautiful, in a peculiar way — a fading Hopper sketch for an unsure world. This was a resolute place, once.
That was before the decline; before the worst drought in 1,200 years turned some of America’s most fertile ground into a Dust Bowl; before soft-handed politicians in a faraway city took a look at an economic miracle and concluded that it was expendable. There is no question that God has played His role in bringing about this crisis: It has not rained consistently in the Central Valley for half a decade now, and the reservoirs in the northern part of the state are dangerously low. But Caesar must share in the blame. Because the valley is liable to become parched in rainless times, California has constructed a complex system of pipes and pumps that funnel lifesaving water southward from the Sacramento–San Joaquin Delta. Since 2007, that system has been deliberately crippled. In that year, the Natural Resources Defense Council convinced a judge that, by operating the pumps at high capacity, California was killing too many smelts — a small fish that is explicitly protected within the Endangered Species Act. In consequence, the throughput was severely curtailed, and the farmers, who under the state’s “seniority” system have the last claim on the water, were all but cut off. Two years later the drought began, and a blow was struck upon a bruise.
On the edge of a field on the outskirts of Mendota, unemployed farmworkers have built a tattered town. In another era it would have been described as a “Hooverville”; today, it bears no appellation at all. These are forgotten people, and their hamlet is veiled by indifference.
I meet Frederico, a Guatemalan farmhand who has lived here for six years. He has only a few dollars to his name — kept in cash, of course — but he considers himself “one of the lucky ones” nevertheless. “I could have nothing,” he tells me, gesturing toward a hut that he has built from abandoned sheets of wood and a stretch of discarded canvas. “But I have a house.”
Frederico is one of the many workers in California’s Central Valley who have seen their livelihoods all but destroyed by the Great Drought. “I manage to work a little here and there,” he explains, “but the water . . . the water. Often I have to go 20 miles to find work.”
Above all else, he misses the shade. “In 2008 and 2009, they started to cut my hours,” he says. “Eventually, I couldn’t pay rent.” So he moved here, to a dusty pasture by the side of a highway, and he built his tumbledown shack. “I went to the recycling place and found the bits for my house,” he recalls. “There were trees here. But they burned down. It is so hot.”
Frederico’s neighbor, a new arrival to the camp, is burning trash in a hole. He, too, has come from Mendota. “I was living in an apartment building,” he tells me, declining to give his name. “But when I lost my job, I didn’t have money for rent.” His landlord wanted a long-term lease, and he couldn’t pay. Since moving out here, he has gained occasional employment. But it is barely enough to provide food and water. “If somebody finds a job,” he tells me, “they communicate it to the whole camp. That person becomes a hero.”
He does not expect to move out anytime soon. “I am working on a garden,” he says, with a proud smile. He has started to decorate, too, putting on a wooden front door and hanging a painted sign from the roof. There is a bank of dirt behind the first row of homes, and he has planted seeds into it — some oak, some pine. Eventually — in decades — they will accord him some relief from the sun.
I meet the town’s self-appointed leader, a Salvadoran immigrant who has been here for six years. “I felt super when I was able to work,” he tells me. “Now I can’t buy medicine; I can’t buy food. I used to work 40 hours a week. Now I work eight.” Compared with the elderly workers, who cannot compete in this market, he has it good. “The older people are getting into drugs and alcohol,” he says. “I resolve any conflict here. People have started to respect and look up to me.”
Happily, he has little to do as peacemaker. Generally, the camp’s 50 or so residents look out for one another, sharing skills and food and news of job openings. When things become especially dire, some ride broken bicycles around the fields, in search of bottles that might carry a small recycling value. And then they wait: for work, for the food bank, for a sign from above.
Some of these people are in the United States illegally; others are citizens who have fallen on hard times. The cynic will wonder whether it is America’s problem that a group of lawbreakers cannot find work. I caught myself wondering precisely this when touring the camps. And yet, wherever one’s sympathies lie on that thorny question, to look at the tents in isolation is a mistake. Mendota’s unfortunates are symptomatic of a much, much broader problem — a canary in the coal mine. A decade ago, the Central Valley was a wonder of the world — a place where anybody could find work. Today, it is playing host to a humanitarian disaster.
In the parking lot outside a gas station in nearby San Joaquin, Mayor Amarpreet Dhaliwal runs me through the decline. An immigrant from Punjab, in India, Dhaliwal has seen the region at its best and worst. “I’ve been here since 1983,” he says. “I worked in the fields for my first year and a half. I did everything that the farmworkers do. The picture has been slowly changing.”
The scene that Dhaliwal paints is best described as one of trickle-down poverty. “I’ve been running a small business here since 1991,” he says. “There aren’t so many customers these days. I also run an agricultural-hardware business here in town — and a small farm. We have seen the same trend. I have the numbers for the last 14 or 15 years, and there’s a downward trend. We’re just waiting for the rain.”
As we chat, a couple of older men amble slowly and unsurely down the fading railway lines that run through the city. One of them is wearing a ripped vest and a faded New York Yankees cap; the other is in a filthy Dickies shirt and a tattered Puma hat. Neither man has many teeth left, and those that do remain are rotten and brown. The heavy green stains on the pair’s jeans and sneakers reveal that they are returning from a shift in the tomato fields. This has been a good day.
Such days are few and far between. “They used to come and drag us out of the house,” one of the men tells me. Now, “they rotate people around to give us all a chance.”
“Sometimes people bring them food or clothes,” Mayor Dhaliwal says. “The charities have stepped up to the plate. We have a kitchen that comes two days a week. We also have a food bank. And that’s great. But these men want to earn their bucks. They don’t want handouts. This is about dignity. I want real jobs out there. I want people lining up around the block, not handouts.”
As we leave, the taller of the men clasps his hand around Mayor Dhaliwal’s arm and speaks quickly in Spanish. He is clearly nervous. “He is saying that he sleeps poorly because he lives next to the railway line,” Dhaliwal tells me. “He is worried that the gas tanks behind his home are going to explode and kill him.”
“I got this mark from a snake,” the mayor tells me, pointing to the long scar that runs along his elbow. He looks at up at the sky. “I could have died, but God saved me.”
In Huron, I meet with a peer of Dhaliwal’s, Mayor Sylvia Chavez. Home to 7,000 people, Huron is the fourth-poorest municipality in all of California. “Look outside,” Chavez urges me. “It’s June, and the town is empty — as if it were a winter day! Usually, we’d have trucks and buses coming through. Usually, there would be traffic lines at the four-way stop. Usually, there would be lots of new faces.”
Not anymore. Huron, which has a population that is 98 percent Hispanic, has an unemployment rate of 35 percent. “The guy at the gas station across the street no longer sells gas, because there’s nobody to sell it to,” Chavez tells me. “He just does contract work now.” This, it seems, is a fairly common story. Ten years ago, Huron Tire Service Inc. was in such demand that the owner was running out of space in which to keep his inventory. “There were piles of tires all over the place,” Chavez says. Today, he orders his supplies ad hoc.
The decline in commercial activity has hit the city’s government hard. Sales-tax and gasoline-tax receipts are down dramatically. Courtesy of harsh spending cuts, 2015 was the first year in five that the city was in the black. “We’re just holding on,” Chavez tells me. “We’ve had to cut a lot. It’s difficult to know what to do.”
The human cost is real. “People used to leave their doors open at night,” Chavez recalls. “Now they can’t leave anything outside. We have a lot of stealing now. There are break-ins at homes; there is theft from farms and stores. I don’t walk around late at night anymore.” Domestic violence and child abuse have become “big problems,” as has substance addiction. Chavez cannot work out why the decline of the area hasn’t become a bigger story. Why isn’t it leading the national news?
Even locally, there is a good amount of shoulder-shrugging. “I went to a meeting in Fresno,” she says, rolling her eyes, “and they were talking about putting together a new committee to regulate the supply of groundwater. I sat there listening to them and I thought, Another agency: That’s exactly what we need!”
Huron serves as a particularly extreme example of the Central Valley’s predicament. But the challenges that it is facing are by no means unique. In her downtown office, the sheriff of Fresno County, Margaret Mims, lays out the numbers. “Back in 2010,” she explains, “we just didn’t have the sales or property taxes. So we had to lay a whole lot of people off.”
“A whole lot” is no exaggeration. In the space of a few months, the county had to let 77 people go. “We lost deputy-sheriff positions. We lost correctional-officer positions. It affected everybody.” Things are improving — slowly. But, Mims sighs, the department is “still about 70 deputies short of where we were in ’09.”
“The unemployment rate has made the gangs worse,” Mims tells me, “especially if there is violence in the home. The kids look outside, and they see the gangs. They move from a dysfunctional family to a functional one.” Such behavior makes the economic picture considerably worse, contributing to a disastrous spiral that is going to be extremely difficult to break. A piece of copper from an automated pump may be worth around $10 to a criminal, but it costs around $2,000 to replace. Even worse, if farmers do not initially notice the theft, they may have to wait for replacement parts and end up losing their crops. This results in fewer opportunities for work, which leads more people to crime, which . . .
“In the ’09–’10 budget year, we closed down three floors of our county jail,” Mims recalls with a grimace. “We just couldn’t hold people who needed to be held. That was a horrible time to live through.” It was not just petty thieves who benefited from the absence of jail space. “There are 442 inmates per floor. We had to let 1,326 people go,” Mims says. “We couldn’t afford the staff that it took to guard them. I just hated the message that it sent. The feeling out there was, ‘We can do whatever we want because they don’t have jail space.’” Eventually, Mims had to draw a line — at murderers.
Todd Suntrapak, the CEO of Valley Children’s Hospital, knows all about such tough choices. The drought, he tells me, is “not a very sexy issue.” In consequence, the coverage of its ruinous fallout has been “limited to this valley.” “That this is not a bigger issue in Sacramento — or even nationally,” he submits, is “unimaginable.”
For the facility he manages, the drought has been little short of a disaster. Valley Children’s is the only pediatric hospital between San Francisco and Los Angeles, and it was short of doctors when times were good. Now, it simply cannot cope with the demand. “We have seen double-digit increases in volume to our ER for the last four years,” he records. “Thirty-three percent of kids in the area are living in poverty, and that number is likely to increase.”
Newly unemployed workers continue to stream in, mostly “coming for the primary care that they were unable to get in their communities.” By the time they get here, they’re invariably sicker. Because so many fields are fallow, the amount of particulate matter in the air has increased considerably. This has led to an increase in chronic respiratory diseases, and it has provoked lethal complications among those who are already ill. “The dust can be a death sentence,” Suntrapak concludes. “If you have a weak immune system, it’s catastrophic.” And it’s not just the environment. The “child-abuse-prevention team is busier than it’s ever been.”
This year, Suntrapak’s staff is already 20 percent over its budget assumptions. The state is paying, too. Eighty-two percent of the patients at Valley Children’s are on Medi-Cal, California’s version of Medicaid. Six years ago, that number was 70 percent. For many, it is no mean feat just to get here. “They use up whatever gas money they have for the month just to reach us,” he tells me. “And then they can’t pay for the medication they need.”
At an emergency meeting run by El Agua Es Asunto de Todos, attendees are tearing their hair out. El Agua was formed by a former consul to Mexico, Martha Elvia Rosas, in the hope that sustained action would draw attention to the water crisis and force the federal government to act.
The speakers are schoolteachers, charity workers, medical professionals, university professors, family farmers, and local politicians — not your typical critics of runaway environmentalism. But, having watched their communities crumble, they have been moved to act. “There has to be a compromise,” one woman tells me before the meeting starts. “People are suffering.”
“People go to the grocery store,” says a teacher from the city of Firebaugh, “and they see melons, they see lettuce, they see tomatoes — and they think it’s all okay. In San Francisco, they turn on the faucet and they see water. It’s all taken care of. Nobody cares. People haven’t seen the devastation that’s going on here.”
When I ask for information, the visitors surround me and share their stories of decline. A once “vibrant school system with lots of parent support” has been turned into a nightmare, in which families “starve and scrape together to survive”; there is abundant “domestic violence,” and “kids need constant counseling”; single-family homes are now “hovels for multiple families,” while “garages are shelters for out-of-luck workers”; the food banks have “gone from assistance to subsistence” — so necessary, perhaps, that “in 70 or 80 percent of communities, they are indispensable.”
One gentleman, a soft-spoken local politician whose constituents have been hit hard, strikes a desperate tone. “We’re losing hope,” he laments. “Is anybody out there listening to us?”
He is unsure that they are. “We’re starting to think of extreme ideas,” he says. Those ideas? Blocking the freeway; limiting the flow of produce to market — anything that will force people to pay attention.
It is clear that he is just blowing off steam with such talk. Even the most passionate of my interlocutors — a middle-aged Hispanic man who talks in fiery, urgent language — is aware that such courses of action would be counterproductive. “This is a population that wants to work, not cause trouble,” he tells me. “If they had their way, you would only see them early in the dawn hours of the morning, when they are going into the fields. Then you would see their shadows when they leave the fields at night. They are not going to do anything sensational. They don’t want to ruffle feathers.”
He will be setting no fires. But his anger is real, and it is palpable. “I love the environment,” he says. “I fought to protect the majestic redwoods. But when our group invited the EPA to meet with the farmworkers and families here, they declined.” So, disgracefully, have California’s elected representatives. Time and time again I hear it said that politicians outside California are more interested in finding a solution than those within. “Where is Barbara Boxer? Where is Nancy Pelosi?” Noting caustically that Hispanics are being disproportionately affected, some go so far as to suggest that there is racism at play.
There is not — just environmental zealotry and an arrogant indifference to its human cost, borne by these people suffering under the sun. People who walked into the fields looking for the American dream but found it dammed at the source. If it so wished, Congress could amend the Endangered Species Act tomorrow, and the valley could enjoy a little more of the water that it needs to raise its daily bread. But, for now at least, Congress will not do so — not, one suspects, until breakfasting grandstanders in Washington, D.C., come to ask in irritation why the orange-juice jugs are empty and there are no longer any melons in the fruit bowl.
Deputy Communications Director
Senate Energy & Natural Resources Committee