Hot Fun in the Wintertime

January 31, 2007 at 3:38 pm
Contributed by:

Folks,

Here’s my latest, about my trip last weekend to some Plan B property up north, including musings on the news that Mexico’s Cantarell field has gone into sharp decline.

It was originally published at Wealth Daily.

–C

Hot Fun in the Wintertime

2007-01-31

By Chris Nelder

Now is the winter of our discontent
Made glorious summer by this sun of York;
And all the clouds that lour’d upon our house
In the deep bosom of the ocean buried.

—Wm. Shakespeare

With all sympathy to my friends and co-workers in the Midwest and on the East Coast, it was downright toasty in northern California yesterday—66º and clear. The sun beat down with unaccustomed intensity on my face and neck, feeling at 2000 feet what it normally feels like at 10,000 feet.

Some of the trees were already showing buds, and the creeks that normally run all year round were barely flowing, little more than stagnant pools in their upper reaches.

Why was I traipsing around in a northern California wilderness? Why, doing what any person who reads these columns probably does, or will soon do: looking for a Plan B for the petrocollapse.

I have learned far too much about the state of the world’s energy situation to kid myself that there is going to be some sort of easy transition to renewables. It just makes sense, from a risk-management standpoint, to have a fallback position. You don’t start building an ark when the water is up to your knees, and I think my toes are getting wet.

Now, don’t get me wrong. I fully support investing in all sorts of renewable energy, particularly liquid fuel alternatives to oil. Because I know, given the lay of the land ahead, that we will have no choice but to go after renewables and conservation, as much as we can manage. We’ll do it all, and we’ll make some good money doing it. I’m 100% on that.

But I wouldn’t lay money—or my life—that it’s going to be enough, in the long run, to secure what I might consider a “normal” life here in the heavily populated Bay Area. I want another option, a more remote, self-sustaining option.

In Search of Plan B

So I was walking around a piece of property recently purchased for that very purpose by a friend of mine, who’s a savvy and experienced investor and a visionary thinker. We were sketching out the site’s possibilities: perhaps a water tank here, living quarters there, an orchard here, a greenhouse over there.

Questions kept coming up: Is the water flow from the wells sufficient to support the crops? How many people might we have to house and feed, if things get ugly fast? How much energy can we produce from hydro, solar, and wind? How much battery support do we need? Is there enough light and decent soil here to support vegetables? What if we don’t have liquid fuels—can we do everything we’re talking about by hand? We’ve got quite a bit of wood, can we buy a small farm-sized cellulosic ethanol plant somewhere? Or a clean, small-scale co-gen plant? A thermoelectric generator?

A piece of smooth black rock caught my eye, which I picked up and realized was obsidian. I noted the sharp edge where it had broken, and wondered whether I could learn, if I really needed to, to shape that into a usable arrowhead, using only a bit of deer antler for a tool.

The Winter of Our Content

How could it be so hot?

In fact, temperatures have been pushing the extremes all month up in the northern California hills, with highs consistently running about 10º over the averages, lows consistently about 10º below the averages, and both the highs and lows coming within a few degrees of the record for each day. Rainfall for January, normally about 6.5 inches, isn’t even half that, at 2.67.

If you didn’t know any better, you’d think it was late spring, early summer.

But it hasn’t just been northern Californians who have been basking this winter. Across much of the rest of the country, the snows of winter finally arrived, but interspersed with record high days. It’s like the winter that wasn’t. Or if you like, the winter of our content.

As I lay on my back in a sunny meadow yesterday, listening to the birds and feeling the warm breeze, I thought, “Wow, this is nice. What a treat!”

Until I had to go and ruin it by reminding myself that this wasn’t normal. It’s not summer. The rain that we don’t get now is water flow that we won’t get from the springs and wells, and the snow that we aren’t getting now in the mountains is meltwater that won’t get shipped to San Francisco and Los Angeles later on this summer.

Half of the World Cup freestyle skiing events, and almost half of the alpine events, have been cancelled or postponed for a lack of snow this year. Temperatures have been so warm that the artificial snow-making machines can’t fight it. Even stalwart, year-round skiing destinations like Tignes in the French Alps and Solden in Austria have had to cancel their traditional early-season events, while the locals watch their glaciers melt.

If this year is anything like the last, those buds that are forming right now on my cherry plum tree will likely be blown right off the branches by abnormally intense deluges next month, or even in March, before the bees have had a chance to come out and pollinate them. So there will be less fruit to go around—either fewer jars of jam for me, or a smaller share for the deer and raccoons and mice and everything else around here that also eats the fruit.

But I have nothing to complain about, with my unremarkable local little plum tree. Last week it was reported that a record-breaking cold snap two weeks ago wiped out nearly three quarters of California’s citrus crop and is threatening other crops as well, such as avocados and flowers.

Crop damage is being recorded all around the world. Here it’s due to freezing, but in Spain it’s due to the heightened intensity of the sunlight.

Naturally, in addition to the climatic signals we’re getting, the flip side of the coin—energy—is sending out a few signals of its own.

Imports at Risk

The warm temps this winter have helped to take oil down from its $61 open on the year to 19-month low territory in the $50s last week. Now it has recovered to around $54, but when you can still fill your tank for $40 or less, it’s low enough to put everybody at ease.

Perhaps we can put our peak oil worries on the back burner and go back to dozing in the sun on this unusually balmy January day.

Not so fast. That $54 barrel is 42 gallons of pure irony, because oil prices have nowhere to go from here but up, way up. (Yes, for those of you who were wondering, that makes irony rather cheap at 77 cents a gallon.)

Last Friday, Mexico’s national oil company, PEMEX, said that production from Cantarell, its largest oil field and one of the four super-giant oil fields that produce 14% of the world’s oil, is going into decline much faster than even the last reports suggested. Production fell from 1.99 mbpd at the start of 2006 to 1.44 mbpd at the end—a whopping 28% drop in one year. And PEMEX’s overall production dropped below 3 mbpd for the first time in six years—after they had projected a steady 4 mbpd rate through 2015.

Whoa, dude!

Cantarell accounts for 60% of Pemex’s production, and Pemex’s revenues account for 37% of Mexico’s federal budget. This is very serious stuff for our southern neighbor and number-two supplier.

It’s little wonder, then, that exports have taken the brunt of the drop in production, falling from 1.82 mbpd to 1.53 mbpd last year. Mexico’s economy is booming (due to the exporting of U.S. jobs) and they need the energy. As I have noted before , we should always expect oil exporters to serve their own needs first. Mexico has already warned that it will be unable to fulfill some of its existing export contracts.

Where does that leave the U.S.? Respected Mexican oil analyst David Shields has projected that PEMEX will lose another 0.4 mbpd of production over the course of this year. In all, the declines add up to a loss of more than 1 mbpd of U.S. supply by the end of 2008. The decline rate of Cantarell is expected to accelerate to 40%. In other words, give it a couple more years and our #2 source of imports is kaput.

Clearly we’re in trouble here. We consume nearly 21 mbpd and produce only about five of that. Where will we turn when Mexico can’t meet our needs?

Our #1 source of imports, Canada, is past its peak of conventional crude and is working full-out to increase production from oil sands, at great expense and effort. But those efforts are unlikely to overcome the decline rate of North American crude production.

Our #3 source, Saudi Arabia, looks to be past its peak as well. By the end of last year it was just barely keeping up with a 9 mbpd production rate, which they claim was intentional in accordance with OPEC production cuts. But some shrewd observers believe that due to the high water cut of its major field, Ghawar, they couldn’t produce more than 9 mbpd if they wanted to, and their decline rate may be as high as 4%.

Our #4 source, Venezuela, is past its peak of conventional crude as well. Its recently reelected leader, Hugo Chavez, seems to be angling for “ruler for life” status, and last week told the U.S. to “go to hell” for questioning his plans to govern by decree. He’s been forcing U.S. oil companies out of the country by nationalizing Venezuelan oil operations, and has been cutting some fat supply deals lately with customers to his east. Anybody want to count on him to make up Mexico’s shortfall?

And #5? That would be Nigeria—where the government admitted last week that, due to constant attacks on its facilities by the rebel group MEND, all of its oil refineries have been shut down, forcing the country to import all of its refined products. You heard right: Our number-five supplier of crude has to import all of its refined products. Their economy is grinding to a halt and the number of foreign hostages continues to grow. I hardly need remind anyone, I’m sure, that all of the above is sure to breed further terrorism.

Iran? While its oil facilities have languished under sanctions owing to its pursuit of nuclear technology, its burgeoning population (who receive fat federal subsidies for gasoline) has delivered a double-whammy, increasing domestic energy demand at a rate well beyond the rate of its supply growth. Consequently, its exports peaked in 1996 and have dropped ever since, even though they are responsible for 40-50% of the federal budget. According to Johns Hopkins University researcher Roger Stern, exports could be halved by 2011, and cease entirely by 2015. “It seems plausible that Iran’s claim to need nuclear power might be genuine, an indicator of distress from anticipated export revenue shortfalls." Stern says. Like Nigeria, Iran actually has to import refined oil products like gasoline to cope with demand…despite being the second-biggest exporter in OPEC. The expected investment in their oil infrastructure going forward? About zero.

Iraq? It will be years—maybe decades—before its oil infrastructure can be made functional again at any significant levels. That is after it somehow finds stability and peace and security. For now, it’s a non-factor.

We may hope other potential sources of imports will be expanded. But recent data show that the import demands from nearly every nation in the world are on the uptick. Even Venezuela recently had to resort to buying oil from Russia just to fulfill its supply contracts. Everybody thinks they can increase imports as domestic production tails off.

It’s like everybody is eyeing that last slice of pie, thinking they’re the only ones who are interested in seconds.

Steep Climb Ahead

I wiped the sweat from my brow for the fiftieth time as I ascended another few hundred feet up a slope so steep, I was nearly on all fours just to stay on it. This is rugged, rocky terrain populated by rugged creatures: mountain lions, black bears, elk and deer. The sun beats down hard in January and you’re crawling on your hands and knees through thick manzanita, trying to figure out how to scratch a self-sustaining life out of that land.

You have to be as rugged as the place itself. As rugged as the original American Indians who lived there, making flour from acidic pine nuts they harvested from large, thorny pine cones. As rugged as the bears, who might not want to give up their turf so easily.

Here’s a take-home from the weekend: “Plan B isn’t going to be easy.”

Not my Plan B, not my friend’s, and not the country’s.

We need to face up to the simple fact of oil depletion as quickly as possible. We can’t produce enough oil to meet our needs, and the alternatives aren’t going to arrive soon enough or in large enough quantities to keep the whole business moving normally.

We’re entering a new era altogether.

A friend of mine recently observed that the “peak” metaphor itself, while appropriate for talking about oil flow rates, is unhelpful for what really matters to us, which is how it affects our lives. It makes one think of riding a roller-coaster slowly up a hill, then accelerating as we descend down the other side.

But in reality, we really should look at it the other way around. As he put it, “We are not actually at the peak of any roller coaster, but at the bottom of a valley, moving at maximum speed. All that’s left is slow, uphill, hard work, no more thrills.”

Slow, uphill, hard work. It’s not exactly the kind of message that people flock to. But those who heed it can profit, and thrive, on the coming changes.

Chris Nelder

Best Solar Power Commercial Ever

January 31, 2007 at 9:20 am
Contributed by:

I found a powerful commercial about the potential of solar power.

Download the high-res original here, or watch it below.

–C


Twenty Billion - a Drop in the Barrel for Renewable Energy

January 25, 2007 at 7:52 pm
Contributed by:

Folks,


Here’s my latest, originally published at Energy and Capital and Green Chip Review.

As always, I invite your feedback. What do you think? Is asking Big Oil for $20 bil too much?

–C

Twenty Billion - A Drop In The Barrel for Renewable Energy


By Chris Nelder


January 22, 2007


Last week, by nearly a 100-vote margin, the U.S. House of
Representatives voted to do what OPEC has been unable to do: defend a higher
price for oil.


Although oil’s at a 19-month low, I’m sure that wasn’t precisely the
intent of H.R. 6. The “Clean Energy Act of 2007” could have been more accurately
titled the “Cleaning Up Our Energy Act of 2007,” because it was mainly about
repealing tax credits and royalty exemptions for the oil and gas industries, so
that the money could be squirreled away in a fund, for later spending on
home-grown renewable energy and efficiency.


Big Oil has admitted that it didn’t need most of those tax breaks.
How could they, when they have been racking up record profits—obscene profits,
according to some—for the last few years in a row?


But I don’t think H.R. 6 is quite what they had in mind.


The CBO
estimates that H.R. 6 will generate $6.3 billion in savings from direct spending
over the next ten years. And the Joint Committee on Taxation estimates that over
the same period, it will generate an additional $14 billion in revenues.


That adds up to a $20 billion kitty to be spent on renewable energy!
For those of us who invest in renewable energy, that’s cause for a Slim Pickens
“Yeeeee-hawww!!”


Like Taking Candy From a Cry-Baby


In particular, some of the bill’s provisions will:



  • Eliminate some income tax deductions for domestic production of oil
    and natural gas.

  • Close a loophole (created by a clerical error) which allowed some
    Gulf of Mexico leases to avoid royalty
    payments. Oil companies now can choose to renegotiate the leases and pay by
    the existing royalty schedule (about $9 a barrel), or they can pay a
    “conservation of resources fee,” or…they can be barred from bidding on future
    drilling leases altogether.

  • Repeal additional royalty relief on future production, which had
    been granted in the Energy Policy Act of 2005.

  • Remove an inadvertent tax benefit in the Jobs Act of 2005, which
    lowered the income tax rate paid by oil companies by reclassifying oil and gas
    production as a “manufactured good.”

Naturally, the
oil companies and their friends have been vocal in their opposition to H.R. 6.
Grover Norquist, the guy who wanted to shrink the federal government until he
could “drown it in the bathtub,” says H.R. 6 will “decrease domestic energy
production and provide a boost for OPEC producers — thereby increasing our
energy dependence.”


Methinks the
lady doth protest too much.


The domestic oil
industry is now earning $78 billion in profits every year. Just one of the big
oil companies, ExxonMobil, earns $40 billion of that. And they would have you
believe that setting aside an aggregate $2 billion a year, or 2.5% of Big Oil’s
profits today, for investments in renewable energy and efficiency is going to
break their backs.


See this? It’s
the world’s smallest violin, playing “Poor, Poor, Pitiful Me.”


If the oil
industry were paying one dollar in taxes, no doubt Norquist would say it was a
buck too much.


The Rest of the
Story


But they do have
a point: the Clean
Energy Act of 2007 probably will slow down the pace of Gulf
of Mexico production somewhat. Without a big federal subsidy (in the
form of royalty-free leases and fat tax credits) that the “free marketers” love
so much, international oil companies might prefer to lift oil from somewhere
else in the world, for now. And that will, in turn, increase imports, to make up
for decreased domestic production. Which will lead to higher crude prices, and
more money into the pockets of foreign producers.


That’s where the free market-lovin’, Alaskan oil-drillin’ crowd would
like to stop the narrative: OPEC and other oil producers win; you pay more at
the pump, and America becomes more “dependent.”
Those Democrats are going to war with Big Oil, and the winners will be the
terrorists, and the loser will be you.


But of course, that’s not the end. That’s maybe the next chapter or
two. Allow me to tell the rest of the story.


If we’re not at the peak of oil production yet, then we soon will be.
Easily within the time scale (10 years) of this bill. The things we’re doing to
mitigate that, like increasing domestic ethanol production, will help, but they
can’t make up for the shortfall in oil production. That means that oil prices
are going higher—much higher—and that’s true no matter how much oil we produce
domestically! Everyone from Matthew Simmons to Goldman Sachs has worried
publicly that we could see spikes to $180/barrel, depending on how the cards
fall.


So the more domestic oil that we don’t sell today, when it’s cheap,
will be worth much more in the future. And it will be even more vital to our
national security than it is today, when we can call tankersfull to us, at will,
for mere cash. Ten years after the peak—say, 2017—exports, no matter how vital,
may come to be of secondary importance to just keeping one’s own lights on for
some oil producers (like all of the producers in the U.K.


As we move into the future, oil and gas prices will rise, and
carbon-based fuels will be disfavored, be it by agreement or mandate or a market
mechanism like carbon credits. Meanwhile, the cost of renewable energy and
efficiency improvements will decline. Those two trend lines meet somewhere in
the near future. The far future has a new paradigm, one that is based on clean,
green fuels. Countries known for their long-term strategic planning horizons,
such as Sweden and China,
are already preferring the clean, green path.


The sooner we make the necessary investment to begin that transition,
the easier and cheaper it will be. Modern materials, like carbon fiber and
highly refined silicon and specialized plastics, which are essential to building
out a renewable energy infrastructure, are a whole lot cheaper and easier to get
right now than they will be in ten or twenty years.


Domestic production from renewables offers long-term security, and
keeps more of that precious, miraculous oil around for the future, when we may
desperately need it for much more valuable things (like making plastics) than
just burning it in a 10% efficient engine. Drilling our oil today only offers
security of supply for the short term.


We don’t yet know the difficulties of tomorrow, but on the current
trajectory, it’s not looking pretty. The simple fact that we are about thirty
years late in getting serious about renewable energy and conservation should be
reason enough to ask Big Oil to help pay for the transition. Who better to make
the investment in tomorrow’s energy than today’s energy companies?


In a perfect world, with perfect markets, we would have started
choosing domestic renewables over foreign oil long, long ago. If our markets had
good feedback mechanisms for the real costs of oil, and the extraction of
something nonrenewable had an appropriate cost, and our carbon emissions weren’t
“externalized” but actually paid for by somebody, and a hundred other things,
instead of being twisted like corkscrews, the Invisible Hand would have already
put its big Invisible Finger on renewables.


How many trillions of dollars have we spent to have our military
protect our oil supplies in foreign lands? How many people died for it? Nobody
counts it. But we spent it, and they died, all to get us right here where we are
today: waist deep in the Big Muddy without a paddle, if you will. (Cue The Fugs’
“Wide, Wide, River.”)


The IEA says the world will spend $20 trillion in new investment in
oil and gas over the next 25 years, just to keep supplies up with demand.
Wouldn’t you rather spend that money to get you out of the blood-and-oil game
altogether?


So, we’re really talking about 1/1000th of the investment
that humanity is prepared to make in oil and gas over the next 25 years, no
questions asked, after which we would be even deeper in the Big Muddy.


This isn’t a war on Big Oil. We’re just starting to play catch-up
with reality.

Guest Appearance on TheStreet.com

January 22, 2007 at 8:47 pm
Contributed by: Chris

Folks,

Today I had the privilege of appearing as a guest on The Real Story with Aaron Task, a daily podcast from TheStreet.com. We talked about alternative energy stocks.

You can listen to it here: Bulls Feel the Pinch.

He also covered my stock picks in his article today, Gurus: Top Alternative Energy Stocks.

For those who are interested in alternative energy investing, you might also want to check out the recommendations in Aaron’s article yesterday, Coming Week: Alternative Ideas. .

–C

Drunk on Ethanol

January 21, 2007 at 8:18 pm
Contributed by:

Folks,

Here’s a recent article I wrote for Wealth Daily about the explosive growth I expect this year in ethanol production, and why it’s a good sector to invest in.

–C

Drunk on Ethanol

2007-01-17


By Chris Nelder

Alcohol—It’s not just for drinking anymore.

Those who watched the ethanol charts in 2006 might have thought they were looking at a drawing of the Eiffel Tower, so sharp and fast was its rise and fall. So before we get into the real story about why ethanol is probably going to be 2007’s hottest sector, let’s look at what went wrong.

I believe the biggest reason was simply speculation. A big tide of “hot money” flowed in and then flowed out of the ethanol group. President Bush admitted to our nation’s addiction to oil, oil prices shot up, and a mandatory phase-out of MTBE started to take effect, all bullish indicators that came within a few months of each other during the spring. Momentum begot momentum, and the whole group rose precipitously.

But then oil prices softened and confidence in the economy came roaring back as the hurricane threat failed to materialize, geopolitical threats seemed to stabilize (albeit temporarily), inventories rose and damaged infrastructure was rebuilt. So oil fell sharply through the second half of the year and took the ethanol group with it.

Was any of this a reason to stop loving ethanol? Not on your life. It was just a big party where a bunch of traders got drunk on ethanol and then woke up with a hangover. All of the above were short-term factors. On the fundamentals, ethanol is swelling like a grape. Let’s look at the facts.

The Only Major Substitute

As any observer who is up to date on the problem of peak oil knows, the most pressing problem right now isn’t a need for greener electricity, but for liquid fuels. Solar and wind and most other forms of RE make electricity. What we need most urgently is a replacement for liquid fuels, particularly diesel and gasoline.

Biodiesel is a good alternative, and if properly managed it can even be carbon-neutral. But numerous studies have shown that there are few places in the world where biodiesel production can be significantly scaled up without cutting into food supply, and even in those places the potential is minimal—a few percent of the overall need. And this is simply because growing oilseed crops is an energy-intensive business that requires good farmland—just like food crops. This is true for soybeans, corn, rapeseed and all the other typical feedstocks for biodiesel.

That leaves only a couple of liquid fuel alternatives: ethanol, methanol, and various forms of gas-to-liquid technology, which I discussed in last week’s article. Of the alternatives, ethanol is the only real contender that is ready to step up right now and deliver an alternative liquid fuel at production-scale levels that doesn’t depend on oilseed crops. Because it’s the product of fermentation, and not of an oilseed, it can be made from all sorts of waste products—landfill contents, biowaste from agricultural operations, wood chips, basically anything organic—and it can be used as a small (5–10%) portion of the fuel mixture for any gasoline engine without modification, or as a large (85%, or “E-85”) portion in “flex fuel” vehicles. Ethanol is already replacing MTBE to fulfill a federal mandate that took effect last year.

The landscape for 2007 is so bullish for ethanol, at least one analyst has worried aloud that we might have an ethanol oversupply by the end of the year. But I don’t believe that will be the case, as most analysts like him know far less than they should about the realities of global oil supply.

Fifteen-Fold Growth Ahead

The Energy Information Administration’s (EIA) new Annual Energy Outlook 2007 report projects major growth for ethanol, from about 5 billion gallons today to 13.6 billion gallons in 2030. But that’s just for corn. From cellulose, according to DoE, it could be another 47 billion gallons. That’s a 15-fold increase in ethanol production over the next 25 years. Yowsa!

For its part, biodiesel is set for a 16-fold increase, from 25 million gallons in 2005 (a small fraction of one percent of our transportation diesel) to 400 million gallons in 2030.

Quick Reality Check

Now, that’s a growth story any investor can get excited about. But before we get carried away with it and start thinking that this is going to bail us out of the peak oil problem, let’s have a little reality check.

To be clear, I do believe that we will increase our use of biodiesel as enthusiastically as we are doing with ethanol—wherever we can and to whatever extent we can. Every producer will sell every drop it refines, and get a decent price for it, and their shareholders will be happy campers. Biodiesel has as much enthusiasm as ethanol in Congress and in the business world and retail market.

But our best-case projection of 61 billion gallons of ethanol capacity by 2030, is less than half our current U.S. gasoline consumption of about 150 billion gallons annually. Actually, it’s closer to a third when you consider that ethanol has only about 70% of the energy content of gasoline.

Our current production of ethanol, at 5 billion gallons, is only about 3% of our current gasoline consumption. And by the way, it required a full 13% of the U.S corn crop to produce, as 98% of it was made from corn.

Now you see why I call corn our least-desirable feedstock for biofuels. I know—as apparently, not many policymakers do—that the EROI, or energy returned on investment—is so low for most oilseed based crops that in the long run they’re simply not worth using. And this is nowhere as true as it is for corn, the most favored by far of all biodiesel feedstocks. The moral of the story? Just because it doesn’t make sense in the long run doesn’t mean we won’t do it. Same old, same old. Viva Monsanto!

Still, the growth anticipated in the biofuel sector is nothing short of huge.

It’s a Corn-Likker Hoedown

Let’s run down just a sampling of the recent announcements about ethanol projects:

  • Last week, Alternative Energy Sources (AENS.OB) announced that they have received $1 million in government grants for new ethanol plants in Illinois and Iowa.
  • On December 28, 02Diesel Corp (OTD), which makes clean-burning ethanol/diesel fuel blends, announced that it has received another $1 million in funding from the Department of Defense, with which it is under contract to help figure out how to switch to cleaner-burning diesel fuels for the military’s massive rolling stock. (Most war machines run on diesel.) The DoD is the largest energy consumer in the Federal government and one of the largest consumers of liquid fuels overall, burning through 60 billion gallons a year. Under Executive Order 13123 of 1999, the DoD must reach a 35 percent reduction in energy use by 2010, and it’s going to achieve a good chunk of that by using more ethanol.
  • On December 22, Canada’s government announced new targets for renewable fuel content (that’s ethanol and biodiesel) in gasoline and diesel, requiring an average of 5% renewable content in gasoline by 2010 and 2% in diesel by 2012. That might not sound like much, but it constitutes a massive upscaling of ethanol production.
  • Cargill Inc. subsidiary Emerald Renewable Energy LLC has just announced that it will build four new 100-million gallon ethanol plants in the Midwest, nearly tripling Cargill’s ethanol production.
  • Demonstrating their serious intent in Congress, Sen. Barack Obama and other Midwest senators have already offered the Biofuels Security Act, which would require the United States to use 60 billion gallons of ethanol and biodiesel a year by 2030. Along with Sen. Jim Bunning (R-KY), he also introduced the Coal-to-Liquid Fuel Promotion Act of 2007, a package of loan guarantees and tax credits that would promote large-scale production of CTL fuels. Other Congressmen are offering their own energy solutions, such as Rep. Roscoe Bartlett’s Energy Farm Bill, which will offer federal R&D support to make farms “net positive” in both food and energy.

But that’s just a small sample of what’s in the works. This is an absolutely massive growth opportunity. The bottom line is clear: ethanol is finally going to have its day, big time, and starting this year.

2007: Renewable Energy Gets Real

January 10, 2007 at 1:01 pm
Contributed by:

Folks,

Here’s my take on what this year will hold, especially for the energy investor. This was published at Green Chip Stocks

–C

2007:
Renewable Energy Gets Real

By Chris
Nelder

January 9, 2007

In my
previous article, “2006:
A Time of Transition,” I looked back at some of the major changes and
trends of the last year. The most obvious to me were 1) a major change of
public consciousness about global warming and our vulnerability in oil and gas
supply, 2) confirmation of peak oil theory in the data on last year’s supply
and demand, and 3) some very weighty changes in the geopolitical balances of
power, as influenced by oil and gas. Now let’s take a look at how those trends
will develop in 2007.

RE
Explodes

First and
foremost, I think it’s clear that 2007 is the year when renewable energy
finally gets real. As in, it will make sense as an investment, just on the
return alone, no matter what your politics, or your view on climate change, may
be. This tipping point for RE has been awaited for so long, the veterans in the
wind and solar businesses (especially) have grown gray and grizzled, waiting at
the altar with a handful of long-dried brown flowers while their beards grow to
the floor. But no more. This is it, baby!

Let’s take
a look at just a small selection of the positive indicators.

The Energy
Information Administration’s (EIA) Annual Energy Outlook 2007
report projects major growth
in all forms of RE: more biofuels, more CTL capacity, more alternative forms of
transportation, more nuclear generation, more coal use, and an acceleration in
the adoption of energy efficiency measures. In fact, the biggest growth sector
in their projections through 2030, at 6.8% annually, is “Other,” a
category that “Includes liquid hydrogen, methanol, and some domestic inputs to
refineries.” Their projected annual growth rate for ethanol? A stunning 11.8%!

Bellying
up to Ethanol

In the
ethanol sector, 2006 saw a few darlings turned demons, and some IPOs that went
south so fast, you’d think it was a migration of falcons. So should ethanol still
be unloved? Not at all.

As any
observer who is up to date on the problem of peak oil knows, the most pressing
problem right now isn’t a need for greener electricity, but for liquid
fuels. Solar and wind and other forms of RE are great, and clean, and we
continue to love them, but they make electricity. What we need most urgently is
a replacement for liquid fuels, particularly diesel and gasoline. As I will
explain next week, there are some inherent limits to biodiesel production, primarily
that it’s mostly made from corn in the U.S., and consequently, quickly cuts
into food supply. While ethanol is also mostly made from corn today, it can
also be made from a variety of waste products. 

Ethanol
production in the U.S. is set to double over the next 18 months, and increase as
much as 15-fold by 2030. Now that’s a growth story! So much so, that Thomas
Weisel Partners analyst Kevin Monroe wrote, in his January 5 note to clients,
that the latter part of 2007 may see an oversupply of ethanol—although he
blames the demand side primarily, calling for greater discretionary spending
and higher Renewable Portfolio Standards (RPS) for ethanol.

Other
Liquid Fuel Alternatives

Other than
ethanol, the only other liquid fuel alternatives are biodiesel, methanol, and
various technologies to convert coal, natural gas, wood, and other less
energy-dense, and therefore less desirable, energy feedstocks into liquid
fuels—at high production costs, both in dollars and energy. Let’s run down the
numbers:

Demonstrating
their serious intent in Congress, Sen. Barack Obama and other Midwest senators
have already offered the BioFuels Security Act, which would require the United States to use 60 billion gallons of ethanol and biodiesel a year by 2030. Along with
Sen. Jim Bunning (R-KY), he also introduced the Coal-to-Liquid Fuel Promotion
Act of 2007, a package of loan guarantees and tax credits which would promote
large-scale production of CTL fuels. Other Congressmen are offering their own
energy solutions, such as Rep. Roscoe Bartlett’s Energy Farm Bill, which will
offer federal R&D support to make farms “net positive” in both food and
energy.

Hard
Times for Hydrocarbons

Not only is
the Democratic majority leading the way in Congress to push for alternative
fuels, but they’re also gunning for Big Oil. It looks likely that they will repeal
some of the 2004 tax cuts for oil and gas companies, to the tune of $5 billion.
Not only that, they are making a concerted effort to collect royalties on
drilling leases, which went unpaid under the Bush administration due to a
clerical error. Add another $9 to $11 billion for that. And where will that
money go? Into a new fund that will promote conservation and help develop
renewable energy. Compared to the dearth of investment in renewables that has
happened under the last six years of leadership by Big Oil cronies, that’s a
HUGE shot in the arm for renewables.

Further,
the oil industry may expect a new attempt at passing a federal law against
price gouging by oil companies, and the elimination of another set of tax
breaks that weren’t intended for them, but which have benefited them, “a break
they didn’t earn, deserve or need” says Rep. Jim McDermott, D-WA.

But the
biggest potential new cost—untold billions more—may come from another proposal,
which would raise taxes on oil inventories. “That would significantly raise the
cost of holding inventory,” and “prices will go through the roof,” causing oil
companies to reduce their stores, according to Red Cavaney, president of the
American Petroleum Institute. This is very bad news indeed, for a country increasingly
dependent on imports.

The Peak
Comes Into View

The oil
industry isn’t going to like 2007 for another reason: the peak of global
production. As I mentioned in my 2006 wrapup, it appears that we may have
reached the global peak of crude oil production in 2006, including the
unconventional types that have been expected to increase overall production for
another few years. We already hit the conventional oil peak in 2005.

The outlook
for oil production in 2007 isn’t promising. Exploration for oil fields is
coming up more often with gas than with oil, reflecting the reality that we’ve
already plucked the low-hanging fruit, and we’re now getting into the iffy
prospects. Oil companies are reducing their exploration budgets,
preferring to prospect on Wall Street for M&A targets than to risk drilling
yet another dry hole. Dry holes are now outnumbering wet ones by about 4 to 1.

It also
appears that previous forecasts, both for growth in reserves and growth in new
oil and gas fields, were overly optimistic. “An Evaluation of the USGS World
Petroleum Assessment 2000”, a 2005 paper from The American Association of
Petroleum Geologists, compared a 30-year forecast by the USGS (US Geological
Survey) from 1995, with the actual additions that materialized in the world
through 2003. They discovered that in the intervening eight years, or 27% of
the forecast span, “only about 11% of the estimated undiscovered oil and about
10% of the estimated undiscovered gas resources were discovered.” This is not
an encouraging revelation, given how often these USGS surveys are cited as if
they were biblical truth. The only “growth” that was more or less on target was
the growth in reserves estimates, which are, as any peak oil student knows,
notoriously unreliable and politically skewed.

Unfortunately,
the “Invisible Hand” isn’t stepping in yet, to correct the supply issue via
higher prices. For a multiplicity of reasons, not the least of which is futures
speculation, crude and gas prices remain low relative to the recent past, with
light sweet crude now at an 18-month low. Consequently, expansion plans are
getting tabled, particularly for some of the more exotic (though eagerly
anticipated) sources like the tar sands of Alberta.

In some
cases, ironically, the price of oil, itself, is stifling oil projects. For
example, at the Shell’s Alberta oil sands project, the cost of producing a
barrel of oil, after a planned 100,000 b/d expansion, will be six times higher
than the cost of a barrel when the project first started!

Let’s take
another example: offshore oil production. Saudi Arabia’s efforts, alone, to
offset the depletion of their major fields and increase their ‘spare’
production capacity, has drawn away some 58 offshore drilling rigs from the Gulf of Mexico. That’s over a third of the 148 rigs that we had in the Gulf in 2001. This
competition from the Saudis has caused the cost of renting the rigs to
skyrocket, from about $190K per day last year, to $520K per day this year. That
pushes them out of the feasibility zone for some of the mature, marginal wells
in the Gulf. All of which adds up to less domestic production of oil, and a
greater reliance on imports.

In dollar
terms, it adds up to about $20 trillion in new investment over the next 25
years, just to keep supplies up with demand, according to a recent IEA
estimate. But, even as frightening as that number is, following the lessons of
the examples we just discussed, we should expect that number to be even higher,
when the day arrives. Much higher!

Higher
Prices, More Attacks Ahead

All of this
has prompted some observers to note that we seem to be setting ourselves up for
another crisis and a serious price spike, when (not if) the next major shortage
event occurs (another good hurricane season, a successful terrorist attack on a
Saudi oil facility, Iran’s blocking the Strait of Hormuz, Russia’s playing
hardball…pick your poison). We have already seen a warning that Canada’s
natural gas exports to the U.S. could decline about 10% from where they are
today, due to reduced drilling (due to higher costs) and the increased
consumption of gas by the tar sands boom.

According
to the IEA, in 2007 the supply growth outside of OPEC should roughly balance
out the demand growth, which it will have to do, because OPEC production
remains flat at 28.8 mbpd. Many peakers have observed that OPEC’s announced
production cuts, particularly Saudi Arabia’s, may be simply a way to hide the
fact that they’re in terminal decline and can’t do much about it.

As for the
price, one analyst I respect, Tim Guinness of the Guinness Atkinson Funds, puts
the 2007 probabilities for the price of WTI (West Texas Intermediate crude) as
follows: 10% for under $50, 40% $50-60, 40% $60-80, and 10% over 80. Based in
his predictive track record, I think these estimates are a bit on the
conservative side, and we should see $80 oil this year, no problem. One factor
that I don’t think he, or most other analysts, has taken into account, is the
price increases that will likely be the eventual result of all the pressures
I’ve described herein on the oil business as a whole.

But supply
and demand issues aside, the oil and gas picture is considerably worse once you
factor in the geopolitics. While Russia, Venezuela, and Bolivia all made bold
moves to renationalize their oil and gas assets in 2006, kicking out the
Western oil majors, there is no reason to think that they’re going to be any
nicer this year, or that other countries who have enough military might to
defend themselves might not try to follow suit. Russia really has Europe by the
short hairs, especially in the icy grip of winter, and Venezuela has become a rock in the shoe for the U.S., because we can’t live without her imports—not
with Canada and Mexico both on the downslope. The biggest sticks on the block,
the U.S. and the U.K., are increasingly vulnerable to geopolitical disturbances
to their supplies of fossil fuels. I think it’s safe to expect that terrorist
attacks on facilities in Nigeria and Angola will continue in 2007, because they
were remarkably successful in 2006. And let’s not forget that Africa is one of
the two places in the world that really has any hope of seriously increasing
its exports of oil and gas right now, since the world’s major producers are all
past the peak (or likely so).

How To
Boil a Frog

Hydrocarbon
fuels are also increasingly under attack for their greenhouse gas emissions.
While President Bush buries his head in the sand, still refusing to admit that
global warming is manmade, and breaking his campaign pledge to regulate CO2,
the states and cities have stepped into the leadership void and taken action:

·        
By the end of
the year, we should have at least a dozen states with laws intended to reduce
greenhouse gas emissions.

·        
Twenty states
already have portfolio standards that require their utilities to produce some
percentage of their power from renewable sources.

·        
In his State of
the State address today, California Gov. Arnold Schwarzenegger is expected to
announce that he will order, by executive decree, a 10% cut in motor vehicle
emissions of greenhouse gases. (Under state law, the governor has the authority
to regulate fuel content.) A 10% cut in emissions will translate to a 20% drop
in gasoline consumption, and more than triple the size of the state’s
renewable-fuels market, because burning biofuels produces less carbon than oil.
This will offer some much-needed confidence for biofuel manufacturers,
particularly Pacific Ethanol, the largest independent marketer of ethanol in
the West. “The opportunity is there, not just for us but for others to see
a critical path to additional production of renewable fuels for the California market,” said Bill Jones, chairman. “That’s very important for
financing additional plants and the long-term viability of an emerging
industry.”

From a
global warming perspective, the latest statistics show that 2006 was the
hottest year yet, and 2007 is “set to be the hottest on record worldwide
due to global warming and the El Nino weather phenomenon,” according to the
Britain Meteorological Office.  ”This new information represents another warning that climate
change is happening around the world,” the office said.

In terms of
public opinion on global warming, Big Oil just took another big hit, with the
publication of a report last week by the Union of Concerned Scientists, which
showed that Exxon has “funneled nearly $16 million between 1998 and 2005
to a network of 43 advocacy organizations that seek to confuse the public on
global warming science.” Their campaign has deliberately distorted global
warming research, and attacked state and local actions to regulate carbon
dioxide emissions. And that $16 million is just from Exxon; we don’t yet know
how much has been spent on disinformation by the oil industry as a whole. So
that cat’s out of the bag. Now that the public has proof that Big Oil is trying
to confuse them and stymie the debate, it won’t be quite as easy to confuse the
public about global warming anymore.

The
Chinese Threat

But beyond
public opinion and policy, the global warming threat is bigger than ever, in
real terms. We have new reports that in China, the emissions from the increased
burning of coal are suffocating and killing its people. Those emissions are also
killing the trees in California, and rendering fish stocks around the world
even more unsafe to eat, due to the increased levels of mercury that
bioaccumulate in fish, after being expelled into the atmosphere by coal plants.

Sounds bad,
but how bad is it? Really bad.

China only recently learned that some ten
new coal plants—8.5 gigawatts’ worth!—had been built in Mongolia, without its knowledge or permission. They join 2000 older, very dirty plants, and another
500 more coal-fired power stations that are on the way. China’s coal output has doubled over the last five years, and they are on course to
overtake the U.S in coal consumption within two years.

After years
of resisting any caps on their greenhouse gas emissions, China now has goals to curb their emissions, and reduce their energy consumption by 20% per
unit of national income by 2010. But, as the world’s second largest energy
consumer, with an economic growth rate of some 10%, they are a major (and
opaque) factor in any global effort to get climate change under control.

Take
vehicles, for example. The number of vehicles in China is expected to explode
from 25 million today to 175 million by 2020. They now have one car per 280
people, but they are industrializing rapidly and they want to live like us—with
one car for every two people. From an energetic standpoint, as the U.S. industrialized, we went from oil consumption of about one barrel per person per year
in 1900, to 27 barrels in 1970. China now consumes about 1.3 barrels per person
per year. To put all of that in perspective, let’s not forget that China has five times the U.S. population, at about 1.5 billion.

Other
Renewables & Solutions

Ethanol and
biodiesel may be getting a disproportionate share of the spotlight, given the
urgency of the liquid fuels issue, but all other solutions and forms of
renewable energy are also set for explosive growth. Senator Harry Reid, the new
majority leader, is coming out strongly in support of solar, wind, geothermal,
biomass, and nuclear power. “We can’t do it overnight but I think we have to
set goals,” he says, indicating that we might expect much more along those
lines.

There is
even a growing coalition of bipartisan support for raising the fuel economy
standards, joined by Senator Reid and Senator Ted Stevens (R-AK). As any peak
observer can tell you, raising these standards is, by far, the lowest of the
low-hanging fruit for dealing with an impending shortage in liquid fuels. It’s
a no-brainer, and pays off immediately.

The outlook
for solar and wind is nothing but rosy. The annual growth rate for solar
photovoltaics is estimated at 11.2% in the EIA’s 2007 outlook, implying that
the PV market will double in about six years. For wind, their projected growth
rate is 5.2%, which seems on the low side, given other available projections.

Even
geothermal energy, once an all-but-forgotten part of the energy mix, is getting
goosed with federal and state incentives.

It’s Hip
to be Green

Everywhere
I turn, I am getting media messages about reducing my energy load and my carbon
footprint. By the end of 2007, I predict that a sizable number of Americans
will take concrete measures to do their bit, be they simply replacing some
light bulbs with LEDs or compact fluorescents, or buying carbon credits to
offset their last vacation, or buying a hybrid, or putting solar thermal and
solar PV panels on their roofs. It’s not quite yet hip to be green, but by the
end of the year, it will be.

Plug-in
hybrids may be the biggest winner of all, with their potential to displace some
of our imported oil with domestically produced electricity, particularly
electricity produced by clean, green sources, and at a lower cost than gasoline
to boot. I read somewhere that Toyota originally made the Prius with a plug-in
option for the European market, which was removed for the U.S. market. I’m not sure under what sort of rationale that dubious decision was made, but
when that option is restored for cars in the U.S., hopefully in at least some
models before the end of the year, I predict a boom in their sales. Again: it’s
a no-brainer!

But I think
the most profitable RE investments in 2007 will be the least-noticed players, tiny
little off-the-radar companies who are quietly figuring out how to squeeze a
little more utility out of the energy that goes into all sorts of devices, from
tiny battery powered gadgets to passenger cars. More efficient engines, LED
lights, buildings that turn off their own lights at night, more energy
efficient computers and displays, smarter thermostats…the list is virtually
endless. In a post-peak world, we will have to find ways to do more with less,
all across the board. We have an entire infrastructure to replace! This is
going to be a huge growth sector in 2007, despite its lack of sex appeal.

In sum, I
think the time has finally arrived when it’s no longer political suicide to
talk about energy conservation. And, as Sen. Obama has observed, the lack of political
will has been the primary reason for our lack of motivation to deal with these
problems, problems that we’ve known about for decades. The CFR has given the
all-clear, and now it’s safe to be green, and well on its way to being cool.

A (Minor) Christmas Miracle at the Salton Sea

January 6, 2007 at 1:31 pm
Contributed by:

Folks,


This one is considerably off
the beaten path for GRL, but I wanted to share the story, and my ambivalence
about publishing it was resolved
today when I came across, quite accidentally, two other stories about the
Salton Sea. So here is my little story, replete with information
freely plagiarized from Wikipedia and elsewhere.

A (Minor) Christmas Miracle at the Salton Sea

A Brief History of the Salton
Sea



Considering what it is–a 55 x 25 km, 376 square mile “sea” (actually an
inland saline lake)–it’s amazing how few people know about it, even
people that live only 150 miles away
in Los Angeles.





For one thing, it’s a freak of nature. Millions of years ago, its waters
were part of the Gulf of Mexico. Then about 10,000 years ago, the waters
receded, leaving a body of saltwater in the Salton Basin, a large depression
about 65 meters below sea level which includes Indio, California. About 700 A.D., this body was refilled with freshwater when the
Colorado River silted up, and overflowed northward, changing course, instead of
flowing straight to the Gulf. That created a lake known as Lake Cahuilla, much larger
at 180 x 50 km, which was the home of the Cahuilla and the
Kumey native Indians for perhaps 1000 years, but which apparently slowly
dried up.





Then
it began to change again:


Evidence
of an ancient shoreline suggests that Lake Cahuilla occupied the basin until
about 300 years ago. From 1824 to
1904, Colorado River flows flooded the Salton Basin no fewer than eight
times. For example, an 1840 flood
created a salt lake three quarters of a mile long and a half a mile wide and,
in June 1891, another outpouring of Colorado River water created a lake 30
miles long, 10 miles wide. It is
uncertain as to how many times water has filled the Basin over the centuries
but human intervention is responsible for inundating the basin only once.

That human
intervention came in 1901, when the California Development Company dug
irrigation canals from the Colorado River, to allow agricultural development of
the area’s fertile grounds, which lacked only water. But then a big flood in
1905 caused the Colorado to breach a dike in the Imperial Valley, sending almost
all of the river’s flow into the formerly dry basin, which at that time was
a major salt-mining operation. It took two years to stop the flow, and this
created the “Salton Sea” that we have today.


In the 20s, it
developed into a very popular recreation destination, offering boating, fishing,
and habitat for migrating wildfowl. By the 50s it had a few popular resorts on
its shores.


The lack of a
drainage from the Sea, however, and the inflows from agricultural runoff rich in
dissolved salts and fertilizer, has caused its waters to become gradually more
salty. Water from the New River
in particular has resulted in large algal blooms and
elevated bacteria levels. The New River is considered to be the single most
polluted river in America.


By the 60s, it
had become so salty that large fish die-offs had started to occur, and the
ecosystem started downhill.





It now has a salinity of more than 40%, which is
saltier than ocean water. Once it reaches 44%, experts say, only the tilapia
that were introduced into the sea starting in the ’30s will still survive.



In turn, the
bacteria that resulted from the fish die-offs have killed off many of the birds,
particularly in large-scale die-offs of grebes and pelicans in 1992 and 1996.
Today, the sea still supports 30% of the remaining population of the endangered
American White Pelican.


Today, it’s a
pretty desolate area, apart from the well-watered and healthy-looking acres of
oranges, peppers and other crops that surround it. It looks like a movie set,
with weathered and broken signs along the road advertising fun and exiciting
resort destinations ahead; boarded up eateries and motels; and a barren sea,
clustered with battered looking mobile home parks on its shores. The people who
still live there, as far as I have been able to gather from a couple of
different movies I’ve seen about it, anyway, are either Latino farmworkers,
white refugees from society, meth heads and meth cooks, a small poor black
population that was moved there en masse in the aftermath of a California
earthquake some decades back, or park rangers. It’s a very strange, and not a
terribly hospitable looking place. Although apparently the locals are pretty
friendly, based on those interviewed in the excellent and very entertaining 2006
documentary, Plagues and Pleasures on
the Salton Sea


My
Story


So as I drove
along I-10 a week ago, making my way home from Christmas with the family, and
saw the sign for the turnoff to the Salton Sea, I took it. I just had to see for
my own two eyes what this nutty place was about, apart from the movies.


I debated with
myself whether it was a good call for at least the first 20 minutes, as I wound
my way through an endless parade of RVs and travel trailers hauling ATVs and
extra gas. I assume there was some sort of ATV gathering going on out there,
because there were so many of them. I took the longest drive of my life around a
gas station filled with dozens of 45+ ft. long vehicles, just to get to a pump, still debating the detour.
The Salton Sea is about 25 miles off the interstate, on four-lane state highways with
interminable traffic lights. Plus I was on my way to a rendezvous with several
different parties in L.A., including one at LAX. The schedule was a little
tight. But my curiosity got the better of me, and I continued on.


When I got there,
it was really a strange sight. Salt deposits rise out of the water like
stalagmites.





Old fish skeletons are everywhere.





The beach is made not of sand, but crushed shells, mounds and mounds of them.





The surface of the water is
unused, and its color is thick and green with algae. To my surprise, though, it
hardly smelled at all. The whole area just seemed all dried out.



After a while
taking the pictures you see here, I walked over to the visitor center to check
out the exhibits. The place was closing and I could see the two rangers
inside, locking up. I contented myself with the outdoor kiosk displays.


After a few
minutes a middle-aged Asian woman approached me, and asked me if I had a coat
hanger, as they had locked themselves out of their car. I was initially
suspicious, and looked around, realizing that aside from myself and the two
rangers, there was nobody there other than her, her two young girls around age
9, and presumably her husband. It was about 4:30 pm and it was starting to get
dark, and they were obviously in a fix. This really wasn’t a good place for a nice young Asian-American familly to be hanging out after dark.

Well, I didn’t
have a coat hanger, but I did happen to have a slim jim. I found it in a parking
lot or something years ago, and stashed it away in the back of my truck, where
it has stayed. I haven’t used it once in all those years, although it was locked
in the truck several times, as I paid a AAA guy to come and let me back in.

So I went and got
it and gave it a whirl. The whole while, the lady and her two daughters had prayed, and looked on
anxiously as the husband tried to help me. I wasn’t
able to use it as it is designed to be used, though. I have no skill and no experience with that tool. I could get it down the front of the window and cause the
handle to wiggle, but that was it. But I was, after a while, able to use it on
the inside of the window, to reach and pull the door lock lever and let them
back in.


They were so
happy. The father directed one of his girls to “give that man a hug!” and,
reluctantly, she did. They were worried, he told me, as it was getting dark and
the nearest locksmith, in Indio, was at least an hour away. “You must have been
sent by the angels!” the mother said. They offered me money, beverages,
anything, but I declined and just walked back to my truck with a wave. “God
bless you!” she shouted after me. “God bless you too!” I tossed over my shoulder.


I was struck for
a moment by the beauty of being in a moment like that, particularly being on the
helping end of it, where you just happen to get the help you need at the right
moment, against the odds. It was a minor Christmas miracle.





What
Next?


Various proposals
to save the sea have been offered since the 50s, but all have their drawbacks
and serious risks. A debate continues to rage over whether the sea should
even be saved, with environmentalists on both sides.

Before he died,
Senator Sonny Bono had made restoring the Salton Sea to health and properity his
personal ambition, and wanted it to be his legacy. He succeeded in getting the
California State Legislature to prepare a restoration plan and do an
environmental impact study.

Today I received an email from the Defenders of
Wildlife, an email list to which I subscribe. They are asking us to join the
fight to save the Salton Sea, on behalf of the many migratory birds who depend
on it as a stopping-over point. You can join there campaign here.


I also learned today that the Salton Sea is one of the
few locations in the southwest with a successful geothermal generating plant. I
saw the plant as I drove by, but I didn’t know what it was. I can tell you that
it was far more discreet than the Palo Verde nuclear station I also passed along
I-10, and demonstrated no emissions whatsoever.





I mean, look at that thing! I had to wonder what the environmental impact might be of such a huge cloud generator as that nuclear station.



To learn more about the Salton Sea and how you can get
involved with the local campaign to save it, go the web site of the Salton Sea Coalition.


–C

2006: A Time of Transition

January 4, 2007 at 6:09 pm
Contributed by:

Reposted from Wealth Daily:

2006: A Time of Transition

by Chris Nelder

At the beginning of a new year, the urge to look back and review the one gone by, and consider what the new one will bring, is irresistible. In my review of 2006, one theme emerged, and that is transition.

Politically, it was a year where the Bush administration’s rhetoric about terrorism, and its unwavering commitment to staying the course in Iraq, began to sound tired and out of touch. We started the year with few voices of opposition being heard, but we ended it with a mid-term election rout, and the Democrats back in control of Congress. It was a year when the excesses and corruption of some of the most powerful and wealthy people in America finally came to judgment. Being one of those Californians who got bent over by Enron in 2001, I still feel cheated that “Kenny Boy” Lay died before doing a day of time for his crimes, but at least he and his cronies were brought to justice. From Abramoff to Delay to Foley to all the rest of the rotten bunch, we swept at least some of the corruption from Congress.

It was a year when we began to explore the complex relationships between global warming, major weather events, and fossil fuels. There was the release of An Inconvenient Truth, Al Gore’s superb movie about global warming. We started the year where a substantial portion of Americans still thought there was a real scientific debate about whether global warming was a real problem at all, and where journalists still persisted in trying to portray “balance” when all of the data are really on one side. But we ended the year with millions of people having seen the data for themselves, and having seen the unmistakable trends now under way across the entire earth. We still have deniers, but we have a whole lot fewer of the deliberately confused.

The quality and quantity of data about climate change also improved radically in 2006. We had a sharp increase in the number of studies, and many more results were reported by the press. NASA reported in September that the earth’s temperature is the highest it’s been for a million years. We saw whole populations of whales moving north due to the warming oceans. We watched 750,000 square kilometers of formerly permanent Arctic sea ice melt. We watched huge portions of the Antarctic ice shelves calve into the water. And we learned that the reason we didn’t get a big hurricane season may have been that we had so many dust storms (due to drought) in Africa.

On the energy front, the peak of global oil production started coming into view. All the data aren’t in yet, so it’s too early to say. But the data we do have indicates that the global supply of oil rose less than 0.2% (after consecutive years of 2% gains), while the global demand for oil increased unabated by another 1%. All of the supply increase came from non-OPEC suppliers, mainly in Russia and Africa. But on the whole, the areas that have been expected to make up the shortfall—the Caspian, West Africa, Brazil, and the Canadian oil sands—are not growing quickly enough to make up the shortfall.

It’s possible that 2006 was the global production peak, but it may have been more due to changing consumption patterns than to supply changes. We won’t know for another year or more if that was the case, due to the notoriously bad problems of getting data about oil production from most parts of the world. Kenneth Deffeyes, geology Professor Emeritus at Princeton, a devotee of M. King Hubbert’s who has applied his modeling techniques to global production, famously quipped that the global peak was Thanksgiving Day, 2005. Now it appears that 2005 was, in fact, the global peak of conventional oil, and the increases from unconventional oil (polar and ultra-deepwater, oil sands, natural gas liquids and condensates, etc.) haven’t materialized at the speed, or in the quantities, that had been expected.

Geopolitically, 2006 was very much a year of transition for oil suppliers, seeing Russia, Venezuela and Bolivia all make bold moves to gain greater control over their oil and gas production, and renationalize their assets. The majors like Exxon, Shell and BP were forced out of their investments, and the national governments began increasingly to use their supply as a geopolitical weapon. Just as it did in 2005, Russia’s gas brinksmanship nearly left much of eastern and central Europe in the cold, driving a hard bargain at Christmas, and forcing them to pay nearly doubled prices for natural gas.

Europe, in particular, developed a whole new level of sensitivity about their dependence on foreign supplies, causing the EU’s Energy Commissioner to begin work on a new common energy policy for the EU, and to warn publicly that they face a major energy crisis in the next 20 years unless they do something about it, fast.

This looks, for all the world, like the beginning of a new kind of cold war, where the mere threat of withholding supply is enough to affect the balances of power. As of 2006, national oil companies (NOCs) now control over 90% of the world’s remaining oil. The majors, including Exxon, Shell, BP, Chevron, and all the rest, are in control of a mere 10%.

On the demand side, OECD nations declined by at least 1.3%, due in part to slowing economies, a warmer winter, and gains in efficiency. But non-OECD nations, including the overheated economies of China and India, consumed an aggregate 3.5% more oil—1.3 million barrels per day—in 2006 than they did in 2005. China’s crude imports alone surged 10% higher in 2006, and their economic growth is still red-hot.

The crude oil price spike of 2006 was probably the most noticeable phenomenon, starting and ending the year at $61, but going as high as $78 in July. As the price climbed through the spring, public outcry led some Senators to call hearings and question the heads of Big Oil on their pricing and maintenance practices. But, observing what some have called a “mutual suicide pact” between Congress and Detroit, nobody dared invoke the sacred cow of CAFÉ standards. As the price of crude plunged to $55 and gasoline dropped back into the low $2 range, the pressure let up, and we were back to business as usual before election time. Some analysts took the opportunity to declare (on the basis of absolutely nothing other than a lower oil price) that peak oil theory was dead and discredited.

Explanations for the spike, and the drop, varied widely: an increase in the “terror premium” to which the markets eventually became inured; an expectation of damaging hurricanes that never materialized; the loss of infrastructure from Katrina and Rita plus the temporary shutdown of the leaky pipes in the Alaska, most of which was recovered by the end of the year; and a huge tide of hedge fund money that surged in and surged right back out of the energy complex. Theories were legion.

But almost none of them focused on the fundamentals of supply and demand. I maintain that the Street has still not priced in the reality of peak oil, and continues to be swayed primarily by short term factors like weekly inventory reports. Energy traders still behave like a mass of seagulls, chasing each other’s momentum around on the beach. We strive to be more like Jonathan Livingston, and keep a long view of the situation as much as possible.

Here’s what I see, from a loftier vantage point. The fundamental problems of oil supply and demand got worse in 2006. Population growth is still unchecked and undiscussed. The geopolitical balances of the world are even more unstable now than they were a year ago, and major oil exporters enjoy more control than ever. We’re definitively past the peak in conventional production, and entering the uncertain three-to-five year period just before the absolute global peak. Most of the world now recognizes that climate change and fossil fuel use are inextricably connected, and many have begun serious efforts to switch to renewable fuels and increase the efficiency of our fossil fuel uses. And hardly anybody is still pretending that oil isn’t the reason that our armed forces are in the Middle East.

Awareness of the peak oil problem is still dawning, albeit much more slowly than I would like. We started 2006 with President Bush’s admission that we were addicted to oil, but his comment was about dependency on unstable producers, not about global depletion. And by the end of the year, Congress and the White House had talked much, but accomplished little. For its part, most of the press (with a very few notable exceptions, like the Chicago Tribune and the U.K.’s Guardian) continue to seem muddled about the whole issue, easily led astray by the wild promises of economists and oil industry propaganda.
But on the whole, I think 2006 showed some promise that we can get our heads around these problems and start making tracks toward solutions. We have a very long way to go, but it’s a start.

Next week, we’ll take a look at some of the developments that we can look forward to for the coming year.

Until next time…


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