Fracking

Oil Company Carnage Continues

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Published on The Daily Impact on September 12, 2016

deepwater-horizon

When an oil well like Deepwater Horizon explodes, the images are unforgettable. When the entire industry starts to collapse, it’s hard to see and to remember.

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deepwater-horizon

 

 

 

When an oil well like Deepwater Horizon explodes, the images are unforgettable. When the entire industry starts to collapse, it’s hard to see and to remember.

In a recent essay I proposed the existence of a new human subspecies – homo sapiens ephemera — that is smart (thus sapiens) but severely afflicted by attention deficit disorder and long-term memory loss. Thus ephemera may understand, for example, the connection between a burning fuse at his feet and an imminent explosion, but almost immediately forgets it, goes on to something else, and is surprised by the blast. Nowhere is this behavior more evident than in the U.S. oil patch, whose collapse, predicted here and elsewhere for years, is now described by none other than Moody’s Investors Service, quoted in Bloomberg News as “catastrophic” and perhaps “the worst bust of any industry this century.”

 

Does anybody remember the Savings and Loan debacle? The Enron (“smartest guys in the room”) implosion? The Dot-Com collapse? And the Sub-Prime Mortgages that Ate the World? After each of these episodes, Ephemera slapped his slanted forehead and said, “Boy, that was dumb. But nobody could have seen it coming.” Put on your protective headgear, because it’s happening again.

When they came to you, Ephemera, and asked you to invest gazillions of dollars up front in the New American Oil Revolution, they talked about energy independence! and America, Number One! and everything back the way it was in 1950! But the burning fuse at your feet was about fracking wells that cost ten times that of a conventional oil well and play out nearly ten times faster, about exploding trains and polluted water and earthquakes, in a market that would soon devalue the product by 50%.

Of course you gave them the money. You bought their stock, you bought their bonds, you bought their junk bonds. You lent them money, and when they couldn’t pay it back you lent them more to roll over the debt, which almost immediately became enormous because every one of those expensive wells had to be replaced every three years. You let them convert your secured debt to unsecured debt, or to watered down stock, or to fairy dust. Now, according to Moody’s, there has finally been an explosion. Who could have seen that coming?     

Moody’s reports that twice as many oil and gas companies have gone bankrupt so far this year than did so in all of last year. Investors affected by these failures have seen an average 21 percent return. No, that’s not return on their investment, it’s return of their investment; they lost 80 per cent of their money. And those were secured lenders; junk-bond holders got back 6 cents for every dollar they invested.

Yet the fuse burns on. In the Bakken fracking field in North Dakota, for example, where no oil company has made any money, even when oil was priced at over $100 a barrel, where the total accumulated debt of the players is north of $30 billion, where production has been declining for over a year with oil prices below $50 and well below the cost of production — the zombie companies, almost all of them technically insolvent, continue to borrow operating money through such creative pitches as “distressed exchanges.”

The fuse burns faster, smokes even more, and doesn’t have much farther to go. What’s that? Hillary sneezed? Tell me more…..

Hot Rockin’

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Published on Peak Surfer on August 7, 2016

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"All that is necessary to open up unlimited resources of power throughout the world is to find some economic and speedy way of sinking deep shafts." — Nikola Tesla, Our Future Motive Power, 1931
 

 

 

Like many in the Peak Everything/Age of Limits psychographic, we find ourselves rolling our eyes whenever we hear techno-utopians describing AI implants, self-driving Teslas and longevity DNA-splices. We know all too well that each Google search uses enough energy to boil a cup of water, and that the average cellphone adds one ton of carbon to the atmosphere each year – roughly 3 jet passenger trips back and forth between New York and Cancun.

The insularity of Silicon Valley leads to confirmation bias, to the point where someone like Kevin Kelly, in a recent Long Now talk, can describe the diversification of Artificial Smartness as "alien intelligences" without grasping that we have, right now living amongst us, vastly diverse typologies of intelligence in the biological world, but that our overconsuming, polluting technosphere is killing them off in the Sixth Mass Extinction before we even grok their quantum entanglement.

In Kelly's view we will soon be tapping into artificial, alien intellect like we do electricity or wifi. We will become cyber-centaurs — co-dependent humans and AIs. All of us will need to perpetually upgrade just to stay in the game. And power-up too.

Groan. The digital divide on steroids.

We've opined in many posts here that we thought a rubber-road interface would soon be upon this kind of techonarcissism. Limits will be in the driver's seat again. But oddly enough, it might not be the energy shortfall that pitches all that Teslarati into the ditch.

There is no shortage of energy and there never has been.

Take it back an Ice Age or two. So we discovered fire. Get over it! Being stupid apes, we have become completely obsessed with fire. So now we are burning down the house.

All around us there are much more abundant forms of energy than fire. Consider the gravitational pull of the moon that raises oceans. Consider the spin of the Earth, or the latent heat within its slowly cooling core. Who needs dilithium crystals? We travel through space aboard a dynamo.
 

Nicola Tesla

In the eight years since the post below was originally published in the summer of 2008, it has received a grand total of 68 page views, many of which were doubtless our own. Not wanting to see such gems disappear into the akashic records without at least a few more reads, we're republishing in this summer re-run series.

Bear in mind that Nicola Tesla was a steampunk. In Iceland we can see steam and hydrogen being generated by geothermal heat, but the Teslovian technology being applied — pumped water and steam — is inefficient and self-defeating. It sets up a depletion curve — years to decades — because it cools the magma. Apply today's dielectric alloys instead of steam and you can imagine live current from the temperature differential without cooling the Earth below. But have a look.

Hot Rockin'

Drill, Drill, Drill say the Republicans
Drill, Drill, Drill say the Democrats
Drill, Drill, Drill says McCain
Drill, Drill, Drill says Obama
It polls well.
And, meanwhile, the climate just goes to Hell.

It is interesting to see the major oil companies take on a really tough challenge, like drilling deep continental or deep ocean sites. In order to drill the Bakken formation, where gigatons of carbon deposits are entombed beneath the wheat fields of North Dakota, Montana, Saskatchewan and Manitoba, they are going to have to go very deep, into very hard and hot rock.

Even tougher challenges await Chevron's mega-well, Jack 2 in the Gulf of Mexico, or Petrobras' Saudi-scale Tupi or Carioca fields in the equatorial Atlantic off Brazil. Individual wells in those fields are expected to run $180 million to $200 million each, assuming Big Oil can even solve the impressive technical issues.

Engineers are estimating three decades will be needed to develop alloys for drills and pipes that can withstand the heat 2 to 6 miles down, with 18,000 pounds per square inch of pressure, and temperatures above 500° Fahrenheit (260°C).

Two years ago, Exxon Mobil and Chevron saw diamond-crusted drill bits disintegrate and steel pipes crumple when they attempted to tap deep deposits in the outer continental shelf. Anadarko Petroleum is successfully extracting natural gas under a mere 8,960 feet of water in the Gulf of Mexico, where pressure measures 3,069 pounds per square inch, but it costs a lot to keep replacing imploded joints and ruptured seals.

Pumping oil from the Brazilian fields, parts of which are 32,000 feet (10,000 m) below the surface, will require drilling more than three times the depth of the Anadarko wells and almost twice the world’s deepest Gulf wells, in the Tahiti lease, which cost Chevron $4.7 billion to produce.

But here is the irony. At those depths, the heat is a constant. In energy output worldwide, it measures in the exoWatt range. It could power everything. And you don’t have to sail halfway across the Gulf of Mexico, down into the South Atlantic, or up to the North Pole to find it. Wherever you are on Earth, it is right below you.

We’ve known about this energy source, deep geothermal, for centuries, and we have known how to go about harnessing it, big time, for decades. In 1932, Nicola Tesla wrote in The New York Times, “It is noteworthy that …  in 1852 Lord Kelvin called attention to natural heat as a source of power available to Man. But, contrary to his habit of going to the bottom of every subject of his investigations, he contented himself with the mere suggestion.”

Tesla went on, “The arrangement of one of the great terrestrial-heat power plants of the future (illustration). Water is circulated to the bottom of the shaft, returning as steam to drive the turbine, and then returned to liquid form in the condenser, in an unending cycle…. The internal heat of the earth is great and practically inexhaustible….”

Karl Grossman produced a piece on it for WVVH-TV in Long Island. You can see that on YouTube. An MIT study in 2007 estimated you could produce 100 GWe (the equivalent of 1000 coal plants) for less than the cost of a single coal plant.

So why can’t we see the forest for the trees?

Epiconomics 101: Our Fiscal Genome

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Published on Peak Surfer on May 8, 2016

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"Vital public services like health care, education, transportation and communication should be free."

 

In the May 2d New Yorker, Siddhartha Mukherjee wrote an ode to his mother and aunt, identical twins, taking the opportunity to dig into the roles of nature and nurture in shaping our lives, Going a step farther, he brought in one of our favorite topics here, epigenetics, or the ability of the same DNA strand to issue different instructions depending on external stimuli.

Last year, in our discussion of quantum entanglement, we observed how little of what we call our own bodies is actually our own DNA. More than 95 percent belongs to our unique, personal, coevolving microbiome that not only helps us breathe, digest, and heal illness, but influences our patterns of thought and intentions.

Mukherjee chronicled the gross result of this conspiracy, describing how two brothers, separated by geographic and economic continents, might be brought to tears by the same Chopin nocturne, as if responding to some subtle, common chord struck by their genomes, or perhaps by their epigenomes, and how two sisters — separated long before the development of language — had invented the same word to describe the way they scrunched up their noses: “squidging.”

Mukherjee overlooked the closely entangled microbial web of alien presences, but we’d observe that although these twins may have placed distance and culture between themselves, they had been together long enough to have nearly identical microbiomes from gestation, birth and infancy.

Nucleosome crystal structure at 2.8 angstrom resolution showing a disk-like shape. DNA helices at edge, histones and free proteins in center. The worm-like structures are RNA messengers. reasonandscience.heavenforum.org

Mukherjee writes:

It is a testament to the unsettling beauty of the genome that it can make the real world stick. Hindu philosophers have long described the experience of “being” as a web—jaal. Genes form the threads of the web; the detritus that adheres to it transforms every web into a singular being. An organism’s individuality, then, is suspended between genome and epigenome. We call the miracle of this suspension “fate.” We call our responses to it “choice.” We call one such unique variant of one such organism a “self.”

In his visits with various scientists Mukherjee probed the complex connections of the histones that occupy the empty spaces within the double helix and seem to possess a mysterious power to trigger or silence gene expressions. What he seems to overlook is the role of non-human microbiological agents in making these sorts of choices for their hosts. Indeed, his description of a histone begs comparison to other life forms:

In 1996, Allis and his research group deepened this theory with a seminal discovery. “We became interested in the process of histone modification,” he said. “What is the signal that changes the structure of the histone so that DNA can be packed into such radically different states? We finally found a protein that makes a specific chemical change in the histone, possibly forcing the DNA coil to open. And when we studied the properties of this protein it became quite clear that it was also changing the activity of genes.” The coils of DNA seemed to open and close in response to histone modifications—inhaling, exhaling, inhaling, like life.

***

These protein systems, overlaying information on the genome, interacted with one another, reinforcing or attenuating their signals. Together, they generated the bewildering intricacy necessary for a cell to build a constellation of other cells out of the same genes, and for the cells to add “memories” to their genomes and transmit these memories to their progeny.

While we were pondering these things, bicycling through a Spring rainstorm one morning, we tuned our mobile cyberamphibian prosthesis to Michael Hudson’s interview on Extraenvironmentalist #91. Hudson described how debt deflation is imposing austerity on the U.S. and European economies, siphoning wealth and income to the financial center while impoverishing the periphery. Its the theme of his latest book, Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy.

Crossing two hot wires in our rain soaked brain, the comparison between economic theory and genetics wafted a blue smoke that trailed out from under our bike helmet.

The system itself — the DNA code — is monetary policy, trade rules, labor, capital assets and other components of what we call “the economy.” The histones are the central banks and the FED that set the policies epigenetically by turning switches on or off. The wild cards are those alien protein agents that seem to bring about changes in the histones. A century ago those might have included J. D. Rockefeller and J. P. Morgan. Then came Henry Wallace and Franklin D. Roosevelt. Today they would include Jaime Dimon (Morgan Chase), Lloyd Blankfein (Goldman Sachs), Christine Lagarde (IMF), and Prince Mohammed bin Salman bin Abdulaziz Al-Saud.

It is pretty clear from most indicators that since at least 2008, and likely much earlier, our economic DNA has been instructed to express a cancer. As Gail Tyerberg observes:

Both energy and debt have characteristics that are close to “magic” with respect to the growth of the economy. Economic growth can only take place when growing debt (or a very close substitute, such as company stock) is available to enable the use of energy products.

Back in the era of cheap energy less debt was required. In our era of expensive energy, gigantic and growing debt is required. But you can only build debt on itself up to the point where confidence in repayment by those who are owed the money falters. After that, watch out. No debt, no energy. No energy, no economy.

Greg Mannarino of Traders Choice says:

Let’s just look at the stock market… there’s no possible way at this time that these multiples can be justified with regard to what’s occurring here with the price action of the overall market… meanwhile, the market continues to rise. … Nothing is real. I can’t stress this enough… and we’re going to continue to see more fakery… and manipulation and twisting of this entire system… We now exist in an environment where the financial system as a whole has been flipped upside down just to make it function… and that’s very scary. … We’ve never seen anything like this in the history of the world… The Federal Reserve has never been in a situation like this… we are completely in uncharted territory where the world’s central banks have gone negative interest rates… it’s all an illusion to keep the stock market booming.

… Every single asset now… I don’t care what asset… you want to look at currency, debt, housing, metals, the stock market… pick an asset… there’s no price discovery mechanism behind it whatsoever… it’s all fake… it’s all being distorted. … The system is built upon on one premise and that is confidence that it will work… if that confidence is rattled the whole thing will implode… our policy makers are well aware of this… there is collusion between central banks and their respective governments… and it will not stop until it implodes… and what I mean by implode is, correct to fair value.”

It’s created a population boom… a population boom has risen in tandem with the debt. It’s incredible. So, when the debt bubble bursts we’re going to get a correction in population. It’s a mathematical certainty. Millions upon millions of people are going to die on a world-wide scale when the debt bubble bursts. And I’m saying when not if… … When resources become more and more scarce we’re going to see countries at war with each other. People will be scrambling… in a worst case scenario… doing everything that they can to survive… to provide for their family and for themselves. There’s no way out of it.”

Jason Heppenstall, who lives in Cornwall, England, writes in the 22billionenergyslaves blog:

Aside from the police and the shops closing, public toilets are closed virtually all of the time, and the Post Office too is soon to close down, having been privatised and now asset stripped. The council is being forced to raise its taxation rates by 4% this year to cover the shortfall caused by spiraling costs and diminished funding from central government. Clinics and charities are being squeezed out of existence and the local council tried (and failed) to privatise the town’s midsummer festival.

My wife works in the care sector. The stories I get to hear will make you never want to be dependent on the state in your old age. If you can’t rely on your kids to look after you in your dotage it might be wise to keep a bottle of whisky and a revolver in your bottom drawer. Or maybe you'd rather die of thirst lying in your own mess because the 19-year-old unqualified carer who works for minimum wage is too busy checking Facebook on her phone to hear you pressing the emergency button by the bed.

Former US Budget Czar David Stockman wrote this week:

Owing to the recency bias that dominates mainstream news and commentary, the massive expansion of the Fed’s balance sheet depicted above goes unnoted and unremarked, as if it were always part of the financial landscape. In fact, however, it is something radically new under the sun; it’s the footprint of a monetary fraud breathtaking in its magnitude.

***

In essence, during the last 15 years the Fed has gifted the US economy with a $4 trillion free lunch. Uncle Sam bought $4 trillion worth of weapons, highways, government salaries and contractual services but did not pay for them by extracting an equal amount of financing from taxes or tapping the private savings pool, and thereby “crowding out” other investments.
 

This is not Al Gore. It is Elon Musk, a beneficiary of govt largess

Instead, Uncle Sam “bridge financed” these expenditures on real goods and services by issuing US treasury bonds on a interim basis to clear his checking account. But these expenses were then permanently funded by fiat credits conjured from thin air by the Fed when it did the “takeout” financing. Central bank purchase of government bonds in this manner is otherwise and cosmetically known as “quantitative easing” (QE), but it’s fraud all the same.

In essence, Uncle Sam has gotten $4 trillion of “something for nothing” during the last 16 years, while the Washington politicians and policy apparatchiks were happy to pretend that the “independent” Fed was doing god’s work of catalyzing, coaxing and stimulating more jobs and growth out of the US economy.

What the Fed was actually doing was falsifying and inflating the price of financial assets. As Michael Hudson points out, the prime error is placing the financial sector in the same column as honest labor or capital contributions. Finance is actually a drain on those things. It is a withdrawal from productivity, not a contributor to GDP.

Stockman agrees:

But financial engineering does not add to GDP or increase primary spending; it results in the re-pricing of existing financial assets. That is, it gooses stock prices higher, makes executive stock options more valuable and confers endless windfalls on the fast money speculators who work the financial casinos.

Last month, Mario Draghi, the European Central Bank president, became the first central banker to take seriously the idea of helicopter money – the direct distribution of newly created money from the central bank to eurozone residents.
 

Germany’s leaders have reacted furiously and are now subjecting Draghi to nationalistic personal attacks. Less visibly, Italy has also led a quiet rebellion against the pre-Keynesian economics of the German government and the European commission. In EU councils and again at this month’s IMF meeting in Washington, DC, Pier Carlo Padoan, Italy’s finance minister, presented the case for fiscal stimulus more strongly and coherently than any other EU leader. More important, Padoan has started to implement fiscal stimulus by cutting taxes and maintaining public spending plans, in defiance of German and EU commission demands to tighten his budget. As a result, consumer and business confidence in Italy have rebounded to the highest level in 15 years, credit conditions have improved, and Italy is the only G7 country expected by the IMF to grow faster in 2016 than 2015 (albeit still at an inadequate 1% rate).

The Automatic Earth

With England jumping ship and Germany saying nicht to every reform proposal, the EU is headed for a disaster but Italy seems to be able to still think outside the box. To us this suggests the potential for alien-led histone modification in the DNA of modern finance.

Heppenstall says:

The irony of being called anti-European is that I am ardently pro-European. I’ve lived in four different EU countries, travelled all over and am married to an Italian Dane. Europe, to me, is the most diverse place in the world and has an amazing spread of history and culture. My ideal life would involve spending several months each year travelling around Europe in a camper van and getting to know it in an even more intimate manner. The EU is not Europe; it’s an abstract concept masking a faceless undemocratic organisation that funnels wealth from one place to another and keeps its modesty intact behind a fig leaf of supposed liberalism.

It doesn’t have to be that way. We could still have a Europe united around some core values other than money and power and capitalism. How about a Europe focused on an emerging eco-consciousness? Or what about remaking it as a loose cooperative of bioregions? Or perhaps, at the very least, we could all agree on a shared constitution founded on liberty, equality and fraternity. Former Greek finance minister Yanis Varoufakis has suggested something along those lines, setting up a pan-European umbrella group called DiEM25 that aims to shake things up ‘gently, compassionately but firmly.’ Perhaps there could be more debate about what kind of Europe would be better suited to weathering the coming financial, ecological and energy shocks without causing so much collateral damage to both itself and other nations.

Until that happens we’ll just have to stand back and watch the fireworks. Big institutions like the EU are like skyscrapers; they don’t come crashing down to the ground without taking out plenty of other nearby buildings and the EU is like the leaning tower of Pisa on steroids.  Big things are an artifact of the age of oil – the future is necessarily smaller and more local. The best course of action is to stop arguing over whether it is best to be stood on top of the creaking tower it or beside it, and simply get the hell out of the way before it goes over. 

Draghi’s Italy, it should be recalled, was the country whose Supreme Court last month ruled that Roman Ostriakov, a young homeless man who had bought a bag of breadsticks from a supermarket but had slipped a wurstel – a small sausage – and cheese into his pocket, had acted out of an immediate need by stealing a minimal amount of food, and therefore had not committed a crime. Carlo Rienzi, president of Codacons, an environmental and consumer rights group, told Il Mesaggero, “In recent years the economic crisis has increased dramatically the number of citizens, especially the elderly, forced to steal in supermarkets to be able to make ends meet.” La Stampa said that, for supreme court judges, the right to survive still trumped property rights, a fact that would be considered “blasphemy in America.”

Michael Hudson

Hudson is another epigenetic secret agent. He advocates a debt jubilee similar to what Truman pushed on Europe after World War II, creating the “German Economic Miracle.” In Hudson’s view, the quickest route to reform would be shifting from taxing honest labor to taxing unearned income and capital gains; from burdening the shrinking middle class to shrinking the rentier class. Vital public services like health care, education, transportation and communication should be free.

Ellen Brown, who has been beating the drum for public banks from her Web of Debt page and books, notes that the Bank of North Dakota, the nation’s only state-owned depository bank, was more profitable last year than J.P. Morgan Chase and Goldman Sachs, and that was after the fracked gas bubble burst. She urges local governments everywhere to bypass the Fed and the vulture banking system and create their own public banks.

Ellen Brown

North Dakota has led the way in demonstrating how a state can jump-start a flagging economy by keeping its revenues in its own state-owned bank, using them to generate credit for the state and its citizens, bypassing the tourniquet on the free flow of credit imposed by private out-of-state banks. California and other states could do the same. They could create jobs, restore home ownership, rebuild infrastructure and generally stimulate their economies, while generating hefty dividends for the state, without increasing debt levels or risking public funds – and without costing taxpayers a dime.

The ability of these foreign antagonists to infect the global economy with a new narrative is a relatively recent phenomenon. The false narrative embedded by Bretton Woods and the Chicago School are not that thoroughly ensconced that they can’t be evicted. There is no reason why the inane policies of economic astrologers could not be quickly reversed by protein protagonists with simple but compelling histological reforms, such as basing the future on a bioeconomy that sequesters carbon and runs on sunlight.

Next week: Epiconomics 102: The Sunlight Economy 

Unconventional Gas Field Development & Optimism Bias

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Published on FEASTA on March 29, 2016

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Unconventional gas field development and optimism bias: submission by Brian Davey to the UK Environment Agency

Brian Davey recently made a submission on fracking to the UK Environment Agency, in response to the UK-based company IGas’s application to drill two wells in North Nottinghamshire as part of its shale gas exploration efforts. You can access the documents which Brian is responding to here.

In his submission, Brian stresses that there is a need for both anticipatory and retrospective experience-based risk assessments, and also argues that there are specific risks in this case that need to be addressed. In conclusion, he writes, “there are now over 550+ peer reviewed academic studies relating unconventional gas field development to public health and the environment – there is an ethical and scientific obligation to connect risk assessment and risk management in order to make it consistent with the findings of this literature.”

Read the submission

 

 

Shale Euphoria

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Published on FEASTA on March 23, 2016

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The Boom and Bust of Sub Prime Oil and Natural Gas

Those whom the gods wish to destroy they first send mad

Introduction

The aim of this article is to show that the shale industry, whether extracting oil or gas, has never been financially sustainable. All around the world it has consistently disappointed profit expectations. Even though it has produced considerable quantities of oil and gas, and enough to influence oil and gas prices, the industry has mostly been unprofitable and has only been able to continue by running up more and more debt. How could this be? It seems paradoxical and defies ordinary economic logic. The answer is to be found in the way that the shale gas sector has been funded. It is part of a bubble economy inflated by monetary policy that has kept down interest rates. This has made investors “hunt for yield”. These investors believed that they had found a paying investment in shale companies – but they were really proving that they were susceptible to wishful thinking, vulnerable to hype and highly unethical practices that enabled Wall Street and other bankers to do very nicely. Those who invested in fracking are going to lose a lot of money.

A Global Picture of disappointed expectations

Around the world big expectations for fracking have not been realised. One example is Argentina where shale oil reserves were thought to rival those in the USA. It is a country where there has been local opposition while central government pushed the industry in alliance with multinational companies and its own company YPC. However profitability has been elusive. To have any hope of profitability shale development has to be done at scale to rapidly bring down costs enough to make a profit. That requires a lot of capital and companies will not make this capital available without being sure that they are going to make a lot of money – but they cannot be sure until they have done tests for up to two years.

“It’s a sort of chicken and egg dilemma. Without profits, the estimated $20 billion a year needed to develop the play won’t come. And without this investment in drilling tens of thousands of wells, the economies of scale won’t be reached on the fields to cut costs.

“A reason not to rush into production — only 400 wells have been drilled — is that wells must be tested for up to two years to gauge the potential of the shale rock before a company will commit billions of dollars. This is especially the case now that low global oil prices have slimmed investment budgets for frontier plays.” (Charles Newbury, “Struggles to cut cost delay oil production in Argentina” Platts Oilgram News. August 17th 2015 at http://blogs.platts.com/2015/08/17/cut-cost-delay-oil-play-argentina/ )

The situation in Argentina highlights the underlying problem for the economics of shale oil and shale gas. Unconventional oil and gas fields have much higher costs than conventional ones. Tapping “conventional” oil and gas from permeable geological strata is cheaper in that the oil and gas flows underground and can be pumped out with less engineering. In contrast an “unconventional gas field” has to release the gas from impermable rock and therefore needs up to 100 more wells for the same amount of gas (or oil). A field must achieve economies of scale to have any chance of making a profit. It needs more activity underground to fracture the rock and it needs more activity on the surface to facilitate that. That is why it is more dangerous to the environment and public health – and also why it is more financially expensive. It requires more ongoing capital equipment too. Without a high gas (or oil ) price all of these activities cannot be made profitable.

Looked at in this way “unconventional oil and gas” is not the magical answer for peak oil (or later for peak natural gas) that it might have once seemed to be. To be long term viable the fracking sector requires three things: favourable geology, high oil and gas prices and easy and cheap credit. All three have proven elusive, making for disappointing results in all of the locations around the world where it has been tried. Unconventional gas is struggling to get off the ground outside of the USA and Australia. And in the USA, where it started, although it managed to get the credit to pay for the capital expenditure there are now grave doubts that a mountain of credit will ever be paid pack.

But let’s look outside of the USA too. Take Europe for example. In 2011 the international oil and gas industry and the Polish government thought Poland was going to be a major source of shale gas. 75 exploratory wells were drilled up to 2015 and 25 were fracked. The amount of gas recovered was one tenth to one third of what was needed for the wells to be commercially viable. Besides retreating from Poland, the industry has pulled out of nascent shale drilling efforts in Romania, Lithuania and Denmark, usually citing disappointing yields.

In the UK and Ireland too fracking is still stuck at the pre-exploratory stage, largely because of the rapid and powerful development of a movement of opposition. Although not definitive, a moratorium in Scotland and a “presumption against” fracking by planners in Northern Ireland, are political set backs for the industry. Yet even if the public and political opposition was not there, there would be reasons to doubt that fracking is viable in the UK. The doubt starts with the geology. While the British Geological Survey has produced maps of shale layers, and while it has been suggested that the carbon content might be there, the data is lacking for other key parameters, for example for rock porosity. In addition the shale in the UK has more folds and faults when compared to US fields. This might to lead to more earthquakes which would damage the wells – plus leading to a potential failure to achieve the pressure needed for fracturing if fracking fluid leaks into small faults when pushed underground.

Oil and Gas Prices

Now there are further doubts because of low and falling oil and gas prices. Here the issues are a little different for oil compared to natural gas on the one hand and for the situation in the USA as compared to other producing zones in the world on the other. That said, what all exploration and production companies are facing, whether in oil or gas production or whether in the USA or elsewhere, is that prices that are too low. It is proving difficult or impossible for most producers to make a profit given the costs of extracting and distribution. That has been especially noticeable for shale gas. Let us however first look at oil prices.

During the crash of 2007-2008 global oil prices crashed from a high peak but then recovered again. Between November 2010 and September 2014 there were 47 months in which oil prices were over $90 a barrel. This period of high oil prices can be described as being broadly reflective of supply and demand. On the demand side the global economy recovered, to a large degree stimulated by a massive credit-fuelled residential and infrastructure boom in China. This pumped up demand. On the supply side production from Libya and Iran was kept out of the world market because of the turmoil in Libya and sanctions against Iran. Thus, while there was some production increase from Saudi Arabia and, eventually, even more from Iraq, these increases were largely cancelled by Iran and Libya. Demand exceeded supply and prices remained high but the situation began to change in the autumn of 2014.

On the demand side the Chinese economy stalled while on the supply side production increased. OPEC as a whole was not the main source of that increasing production, and nor was Russia – the main source of increasing oil production was the boom in US shale oil. For reasons to be explored, production from the USA continued to soar even though prices fell and after a price rally early in 2015 prices continued to fall into 2016.

A similar downward trend has occurred around the world in natural gas prices – though in the USA they have been lower far longer – and certainly too low to allow for profitability.

In regard to gas the issues are somewhat different from oil because the market for natural gas is less globally networked. Natural gas markets are based on global regions and different gas prices in different parts of the world. Thus there is a north american gas market, a european gas market and a market in the far east. There are multiple long distance gas pipelines that are important economically and geopolitically. Wars and rivalries are fought over pipeline routes – this is a component in the Syrian conflict. However natural gas could not be transported so easily between continents – until recently, because now there is an infrastructure for sea transported liquified natural gas under development (LNG). Sea transported LNG begins to change things because it makes the market for natural gas more globally competitive.

At a risk of simplifying a varied picture natural gas prices in various areas have been stable at a low level or drifting downwards over the last two years and insufficient for profitability in a gas fracking sector. In both the USA and Europe natural gas prices are a half of what they were in 2014. In the USA this has been because of overproduction of gas, conventional and unconventional, with conventional production declining and being replaced and overtaken by unconventional production – as of late in 2015 however shale gas production too began to fall. For years production has been unprofitable in all but the best areas and in decline. Now it is in decline generally.

In Europe production decline because of depleting conventional gas fields has not prevented a fall in the gas price because demand has been falling too and this is likely to remain the case. Thus a recent report published by the Natural Gas Programme of the Oxford Institute for Energy Studies, concludes that European gas demand will not recover its 2010 level until about 2025. The decline in demand has been due to warmer winters but also due to low demand because of the low growth in manufacturing which has shifted to Asia, because of low population growth and because of energy saving measures too. At the time of writing it is being suggested that the competitive threat from the development of an LNG infrastructure will encourage Gazprom to change its pricing strategy to try to fight off future competition from sea transported supplies. In summary, it is highly likely that the gas price in Europe will remain low for a long time. If so, this completely undermines any remaining case for fracking for natural gas in europe, and particularly Britain.

At current gas prices all the exploration and production companies active in the UK and Ireland would struggle to make a profit. There are 4 studies of extraction costs of natural gas by fracking in the UK – by Ernst and Young, Bloomberg, Oxford Institute of Energy Studies and Centrica. All have maximum and minimum extraction costs. Current gas prices per therm are less than the minimum extraction cost in the lowest study. So for the industry to continue at all it has to assume that gas prices will rise in the future.

shale costs

Low Gas price vs high extraction costs: Zachery Davis Boren, Greenpeace Energy Desk; August 2015 http://energydesk.greenpeace.org/2015/08/20/super-low-gas-price-spells-trouble-for-fracking-in-the-uk/

So what is the future for oil and gas prices? Of course the future is inherently uncertain – a President Trump might provoke any number of wars making America great again – it is difficult to see how Muslims could be banned from entry into the USA without that affecting oil and gas imports from Muslim countries. Or again heightened conflict between Iran and Saudi Arabia might escalate with massive consequences, and not just for the oil and gas price. In these and other conceivable situations, the more chaos the less companies will want to invest anyway. Whether prices are high, or low, if there is too much turmoil conditions will not favour new investment. But leaving aside extreme geo-political scenarios will prices go up or will they go down? If oil and gas prices rise will this be sufficiently and for long enough for unconventional gas to be developed sustainably in the narrow financial or business sense?

The rising price scenario

It is important to grasp the idea that a rising prices scenario is only credible in conditions where a proportion of the industry has been driven out of the business – which is the hope of the Saudi oil industry. What the Saudis would like to see is not only the US fracking companies driven to bankruptcy but the banks that fund them with badly burned fingers and unwilling to finance the industry any more. That said the Saudis too have limited pockets. Their current aggressive foreign policy has to be funded from somewhere and it is conceivable that they could lose the capacity to push the anti-shale agenda through to the bitter end.

If the oil price does bounce back the beneficiaries would be the survivors. There is a view then that the current low prices will eventually lead, not only to falling production in the future but to bankruptcies and capital expenditure cut backs both in the conventional and unconventional sectors. It would speed the decline of oil fields like those in the North Sea where investment is now being slashed. With declining supply, inventories will be sold off, the market will move back into balance…. and then further the other way – so that eventually demand again exceeds supply. Higher prices, possibly spiking, will encourage new investment and the fracking companies will surge back at the other side of the crisis.

What must however be assumed for this to happen is that at some point “growth will resume” because, over the last two hundred years, it always has. If growth resumes the demand for energy will revive in order to feed it – making more material production and consumption possible. Some economists argue that one factor encouraging a revival in demand ought to be the low energy prices themselves. Higher energy prices act as a drag on the economy so low energy prices should do the opposite – i.e. stimulate it. In a recent speech the chair of the US Federal Reserve, Janet Yellen, said that falling energy prices had, on average put an extra $1,000 in the pockets of each US citizen. It is assumed that this would encourage extra spending and thus extra income.

The falling or stagnant prices scenario

An alternative view is more sceptical about the revival of the global economy and of demand because of the high level of debt. In an economy where indebtness is low, falling energy prices probably would act as a stimulus for energy consumers. But will there be any or enough stimulus where the debt to income ratio is high? In an indebted economy windfall gains from reduced energy prices are likely to be partly used to pay off debts rather than being spent. A further issue is what will happen because of the way in which the finance sector has made itself vulnerable? It has channelled substantial credit to the energy sector – to exploration and development companies that now have difficulties paying this credit off? It certainly will not help in finding investment money to get fracking off the ground in the UK and elsewhere if it all ends in tears in the USA.

In the pessimistic scenario if the economy does not revive then there can be some scepticism that energy prices will revive too. This is the scenario in which deflationary conditions continue and even deepen. On this view the global economy is entering a long period of stagnation, decline and chaos. Some economists are describing how growth has slowed using descriptive phrases like “secular stagnation”. The fate of the Japanese economy from the early 1990s onwards gives grounds for comparison and concern. After a quarter of a century Japan has not escaped prolonged recessionary conditions. Because the global economy is highly indebted central banks have driven down interest rates to zero and now even below that. This has led to a bubble in asset markets but it has done little to spur generalised economic growth.

There could be a vicious circle here – without demand arising in a sustained growth process pushing up energy prices the profitability of the unconventional sector will never be sufficient to make future investment in that sector pay. In these circumstances future oil and gas production will not rise. Production will fall in the USA, especially as more of the identified sweet spots in the best plays are exhausted. In textbook supply and demand theory falling supply should eventually lead, ceteris paribus, to a rise in prices that justifies more investment and therefore more production. However “ceteris paribus” (other things remaining unchanged) does not apply in a stagnating or a declining economy. A declining economy is not one where private economic actors invest money in the hope of a future return because the necessary confidence and conviction about the future is not there. Purchasing power is hoarded, purchases are deferred where possible, debts are paid off where possible. These actions tend to intensify the deflation. If this is what happens, and it seems likely, it will make the problems of the shale gas sector even worse.

The Fracking Companies and the Finance Sector

Before the current difficulties Wall Street made a fortune in fees arranging debt finance for the US shale sector. Investors who were “looking for yield” instead of the ultra low interest rates payable on government debt thought the way to find that yield was to pile their money into junk finance to fund the frackers. Despite the economic reality Wall Street encouraged the misinvestment. Now the wall of energy sector junk finance repayable in the future is huge. The further forward one goes the higher it is. How much of this debt will ever be repaid? And what will happen to those who lent it if it is not? Given what has already been said the long run ability of the sector to repay its debt seems highly questionable. How did it come to this?

debt wall

Source: http://www.artberman.com/art-berman-shale-plays-have-years-not-decades-of-reserves-february-23-2015/

For several years prior to the crash of 2007-2008 the finance sector in the USA were knowingly giving loans to people with no income, no jobs and no assets. The people who organised this were doing so because they were earning fees on each loan arranged. What did they care about the virtual certainty that the loans would never be paid back? The crash was the inevitable result – the consequence of an ethical catastrophe. The banks had packaged the loans up into mortgage backed securities and sold them on so that someone else other than the originating bank carried the risk. Ratings agencies played their role in this crooked system and got fees rating securities that others called “toxic trash” as AAA. Meanwhile derivates contracts against defaults on these rotten securities were also sold even though it was not possible to pay up when the defaults happened – without being bailed out by the monetary authorities, as happened with AIG.

The Shale Bubble – toxic water, toxic air and toxic finance too

For several years after 2007-2008 shale was the next big money spinner – and the next ethical catastrophe for Wall Street. Just as it was blindingly obvious for years that sub prime would crash, but it was a nice money spinner at the time, so Wall Street has made a lot of money pumping up the shale bubble. All the evidence about health and environment costs have been ignored and the information about them suppressed. The information about the economics was ignored too. Of course, someone has to lose eventually but “while the music has played” there has been plenty of money for all sorts of players – petroleum engineers and geologists, PR companies, corrupt politicians, the companies supplying the pipelines, rigs and fracking gear. They had their snouts in the money trough and in many cases abandoned their ethics and their critical faculties while they were feeding.

Nor were investors looking closely enough at where they were going or at what they were funding. Even before the current price crash, many US fracking companies, just like those in Argentina and Poland, were struggling to make real profits yet vast quantities of money were channelled to them. Honest and astute observers who could see that the shale boom was a Wall Street induced bubble were ignored. One example was a report written by Deborah Rogers in early 2013 in which she drew attention to the difference between the reality and the message put out by the PR machine.

According to Rogers “Industry admits that 80% of shale wells ‘can easily be uneconomic.’ Massive write-downs have recently occurred which call into question the financial viability of shale assets and possibly even shale companies. In one case, assets were written off for more than 50% of the purchase price within a matter of months……publicly traded oil and gas companies have essentially two sets of economics. There is what may be called field economics, which addresses the basic day to day operations of the company and what is actually occurring out in the field with regard to well costs, production history, etc.; the other set is Wall Street or “Street” economics. This entails keeping a company attractive to financial analysts and investors so that the share price moves up and access to the capital markets is assured. “Street” economics has more to do with the frenzy we have seen in shales than does actual well performance in the field. With the help of Wall Street analysts acting as primary proponents for shale gas and oil, the markets were frothed into a frenzy. Boom cycles have the inherent characteristic of optimism. If left unchecked, such optimism can metamorphose into a mania such as we saw several years ago in the lead up to the mortgage crisis. (Deborah Rogers, “Shale and Wall Street” Energy Policy Forum 2013 http://shalebubble.org/wp-content/uploads/2013/02/SWS-report-FINAL.pdf)

Long before the price slide beginning late in 2014 the much hyped boom was not what it seemed. Roger’s article shows many parallels between the crazy and unethical excesses of Wall Street prior to the 2007 crash and what has been happening in the shale boom. As had happened with sub prime mortgages which were bundled up to become part of mortgage backed securities and then sold on – new kinds of financial assets were invented and sold to allow the unwary to invest their money in order as to “get a part of the action” and participate in the shale bonanza too. One bank instrumental in all of this was Barclay’s Capital, working together with a company called Chesapeake Energy. To help Chesapeake the Barclay’s financial wizards invented a structure called a Volumetric Production Payment (VPP). Rogers quotes a finance industry magazine, Risk, from March 2012.

“The main challenges in putting together the Chesapeake VPP deal were getting the structure right and guiding the rating agencies and institutional investors—who did not necessarily have deep familiarity with the energy business—through the complexities of natural gas production.”

The resulting financial assets were highly complex, off balance sheet, and as Barclay’s admitted the rating agencies had to be “guided” so that they could understand the complexities of the deal. (So much for the competence and independence of the resulting “rating”. ).

Production taking precedence over profitability (and over economic rationality)

The result was that current profitability took second place to an industry PR narrative about what was supposedly going to happen in the future as the shale companies grew and grew. Prior to the crash of 2007 bank employees were under pressure and being incentivised by bonuses to make as many loans as possible – even though many loans were unsound. Now the fracking company managers were being incentivised to produce as much product as possible even though they were losing money. The measure of the future dream was production growth rather than what it ought to have been – profitable production growth. The latter depended on whether that production growth was actually covering costs of production and it was not. It should be stressed again that this was happening before the current price slide. For example an analyst Arthur Berman looked at the financial figures for Exploration and Development Companies representing 40% of the US shale industry for 2013 and 2014 and found them to be powerfully in the negative. There was a $14 billion negative cash flow in 2014. (http://www.artberman.com/art-berman-shale-plays-have-years-not-decades-of-reserves-february-23-2015/)

berman

Nevertheless the good news headlines about the production growth kept the share prices rising and the managers were on bonuses to make that production growth happen. Apart from the sceptics and the communities whose environments and health were under attack, the industry, the government, some naïve academics and Wall Street, all played their part in pumping up the dramatic narrative of the resurgent American Oil and Gas Dream. Eventually the USA would rival Saudi Arabia and more…becoming great again no doubt. As a more recent article in the Wall Street Journal explained:

“Markets have been waiting for U.S. energy producers to slash output during a period of depressed crude prices. But these companies have been paying their top executives to keep the oil flowing. Production and reserve growth are big components of the formulas that determine annual bonuses at many U.S. exploration and production companies. That meant energy executives took home tens of millions of dollars in bonuses for drilling in 2014, even though prices had begun to fall sharply in what would be the biggest oil bust in decades. The practice stems from Wall Street’s treatment of such companies’ shares as growth stocks, favoring future prospects over profitability. It has helped drive U.S. energy producers to spend more unearthing oil and gas than they make selling it, energy executives and analysts say.

It has also helped fuel the drilling boom that lifted U.S. oil and natural-gas production 76% and 31%, respectively, from 2009 through 2015, pushing down prices for both commodities. “You want to know why most of the industry outspent cash flow last year trying to grow production?” William Thomas, CEO of EOG Resources, said recently at a Houston conference. “That’s the way they’re paid.” (Ryan Dezember, Nicole Friedman and Erin Aillworth. “Key Formula for Executives Pay: Drill Baby Drill” http://www.wsj.com/articles/key-formula-for-oil-executives-pay-drill-baby-drill-1457721329)

The Euphoric Economy at Work – how to rip off manic investors

All of this raises the question of how, with profitability so low, this reckless show has managed to stay on the road for so long and still continues. A cynical answer would be to say that the function of Wall Street is to connect the greedy and stupid with people and institutions without scruples who will spend their money for them. For this to happen optimism must be generated at all times whether this optimism has any foundation or not. The study of bubbles is all about people who are able to swim in an ethical sewer oblivious to their environment. They are too “euphoric” or high on the prospect of making a lot of money to calmly calculate what is happening. Another word for this is mania. It helps to consider this as a period of collective madness like a mania – a period of collective excitement in which the capacity for ethical and other judgements are impaired.

In this collective insanity one can think of the money making calculations like this – if you buy the right to drill and are able to identify the geologically favourable “sweet spots” then at first the results are likely to be good. Instead of then drilling the less favourable locations and seeing your profits fall away you tell beautiful stories to another company with deep pockets enticed by the good news of the early success. So it is possible to sell the less favourable areas. Or maybe you sell the company, merging it with another. In this Wall Street (or the City of London no doubt) will come to your aid because it makes nice fees from mergers and acquisitions. The new owners then makes the loss. It is the buying company that then has to write down its balance sheet when it subsequently discovers that it was sold a mirage.

The stories about being duped are never told as loudly and plainly as the stories of the wonderful shining future that sell the fraud in the first place. That’s because managers do not like to speak loudly about their incompetence to avoid the embarrassment of admitting they were duped. It is usually possible to deny that it would have been possible for them to know what was happening and, after all, why should these managers care when it was other people’s money that they were losing? (The money of shareholders or bond holders).

But if the faith in the industry can be maintained then these kind of deals can at some time make the banksters and crooked production company bosses much more money than merely by drilling and fracking for shale gas or oil. Thus buying and selling drilling leases (bundled up together just like sub prime mortgages were) was a great money spinner for companies like Chesapeake. The greater the euphoria generated, the more money to be made. This is Deborah Rogers again:

“Aubrey McClendon, CEO of Chesapeake Energy, stated unequivocally in a financial analyst call in 2008: ‘I can assure you that buying leases for x and selling them for 5x or 10x is a lot more profitable than trying to produce gas at $5 or $6 mcf.’”

Eight years later Aubrey McClendon was dead. He had been charged on a federal indictment of bid rigging from late 2007 to 2012 and drove his car at high speed into a bridge. There was a strong suspicion that he had killed himself.

The madness of shale goes on. Wall Street and the shale companies are still managing to play the same game of passing the risk parcel to the bigger fools who will take the loss. If people can be persuaded to buy into the companies just before they go bust then the smarter and bigger players can get out. At the time of writing (March 2016) there are suspicions that the banks are orchestrating a rise in the price of oil in order to help the shale companies raise capital which will enable them to pay off the banks while letting “the suckers” take the fall. This led one analyst to describe the glut, not just of oil, but of stupidity.

“Even the experts are stunned by this unprecedented glut in stupidity of managers of other people’s money: “Billions of dollars of dilutive equity continue to roll in with seemingly no end in sight,” Houston-based oil investment bank Tudor, Pickering, Holt & Co. said in a research note.” (http://oilprice.com/Energy/Crude-Oil/In-Risky-Move-Wall-St-Backs-Shale-With-Nearly-10-Billion-In-Equity.html)

Ethical or Financial Bankruptcy – which is more fundamental?

It is common in economics to refer to markets becoming frothy at times like this. Commentators seek to find the fundamentals underlying the “froth” (perhaps better described as scum). But what are “the fundamentals” in this story? The really fundamental thing is not that this sector is financially bankrupt – it is that it is ethically bankrupt too. An ethically bankrupt sector is definitely not sustainable. Any economic sector that destroys the environment including the climate, assaults public health and then enlists government in a corrupting endeavour to write and use the regulations in such a way as to undermine the very possibility of resistance is corrupt to the core. An industry that destroys people’s health and environment and then settles in court on condition that people are bound to secrecy about what has happened to them, as is common practice in the USA, cannot be trusted to tell the truth. It does not surprise in the least therefore that the unethical business methods of this sector, as well as the unethical methods of its allies in finance, also rely on trickery and defrauding anyone stupid enough to invest their money in it.

What will happen in the USA will no doubt have a big impact for the future credibility of the fracking industry in the UK and elsewhere in the world. That story is not yet in its final chapter but what has happened in the USA is already a cautionary tale and we would be stupid to ignore it. Local authorities in the UK should be careful that they are not caught out picking up the environmental costs of a collapsing industry. It has already happened in the USA and Canada – the advantage of limited liability to an industry without ethics is that it enables it to pass the cost of clearing up to communities after bankruptcies.

“CBC News reported that falling gas and oil prices have prompted many smaller companies to abandon their operations in Alberta, Canada, leaving the provincial government to close down and dismantle their wells. In the past year alone, the number of orphaned wells in Alberta increased from 162 to 702. At the current rate of work,
deconstructing the inventory of wells abandoned just in the past year alone will be a 20-year task.” (Source: Johnson, T. (2015, May 11). Alberta sees huge spike in abandoned oil and gas wells. CBC News. http://www.cbc.ca/news/canada/calgary/alberta-sees-huge-spike-in-abandoned-oil-and-gas-wells-1.3032434 )

In conclusion – a mountain of debt that will never be repaid?

People might ask, if the future of fracking is so much in doubt then why bother to build a movement of opposition to oppose it? The answer can be expressed by adapting a famous quote by John Maynard Keynes. In the original Keynes says “the market can remain irrational longer than you can remain solvent”. The market can also remain irrational long enough to do a lot of damage. What this article has barely done at all is refer to what are called, in economics-speak, the “external costs” of fracking – the damages to climate, to local environments and to public health. Nor has this article examined the claimed benefits to employment and to local economies which are usually grossly overstated. There is now plenty of evidence about these things. What I have tried to do instead is to show that even in the narrowest of meanings of “economic” fracking does not make sense. A lot of damage is being done and there will be little positive to show for it. The ability to continue this destructive path is due to the legacy of political influence of the fossil fuel lobby in government and in the finance sector. The legacy influence has been strong enough to ignore and crush the opposition despite the damage. In the USA it can be argued that the fracking boom has been an irrational, unethical and ultimately unprofitable attempt to extend the lifetime of fossil fuels in order to keep the oil and gas industry in work, aided and abetted by Wall Street. It is an industry trying to secure a future for an influential network of professional and business interests that should, in truth, be being wound down – including the engineers, the university departments of petroleum geology, the regulators to name a few. A mountain of debt has been accumulated to perpetuate the illusion that these people have a future in which they can go on much as before – a mountain of financial debt that will never be repaid.

Stupidity has a knack of getting its way – Albert Camus

Sources and further reading:

On geological uncertainties: Mason Inman “Can Fracking Power Europe?”, March 2016 at http://www.scientificamerican.com/article/can-fracking-power-europe/

Charles Newbury, “Struggles to cut cost delay oil production in Argentina” Platts Oilgram News. August 17th 2015 at http://blogs.platts.com/2015/08/17/cut-cost-delay-oil-play-argentina/

Low Gas price vs high extraction costs: Zachery Davis Boren, Greenpeace Energy Desk; August 2015 http://energydesk.greenpeace.org/2015/08/20/super-low-gas-price-spells-trouble-for-fracking-in-the-uk/

European natural gas supply and demand: https://www.oxfordenergy.org/publications/the-outlook-for-natural-gas-demand-in-europe/ and https://www.oxfordenergy.org/wpcms/wp-content/uploads/2016/01/Gazprom-Is-2016-the-Year-for-a-Change-of-Pricing-Strategy-in-Europe.pdf

Oil Majors as a source of investment capital http://www.telegraph.co.uk/business/2016/02/12/oil-firms-urged-to-avoid-dangerous-investment-cuts /

Deborah Rogers, “Shale and Wall Street” Energy Policy Forum 2013) http://shalebubble.org/wp-content/uploads/2013/02/SWS-report-FINAL.pdf

Fragility of UK explorer’s finances: http://www.companywatch.net/wp-content/uploads/2016/01/oil-and-gas-smaller-cap-research-11-January-2016-final.pdf

Crisis in US Shale Sector: http://www.bloomberg.com/news/articles/2016-03-11/oil-boom-fueled-by-junk-debt-faces-19-billion-wave-of-defaults

Arthur Berman “The Miracle of Shale Gas and Tight Oil is Easy Money” http://www.artberman.com/the-miracle-of-shale-gas-tight-oil-is-easy-money-part-i/

http://www.artberman.com/art-berman-shale-plays-have-years-not-decades-of-reserves-february-23-2015/

http://www.cnbc.com/2016/03/02/ex-chesapeake-ceo-mcclendon-dies-in-car-wreck-day-after-indictment.html

Ryan Dezember, Nicole Friedman and Erin Aillworth. “Key Formula for Executives Pay: Drill Baby Drill” http://www.wsj.com/articles/key-formula-for-oil-executives-pay-drill-baby-drill-1457721329

“Energy in the economy”: Brian Davey Credo. Economic Beliefs in a World in Crisis Feasta books 2015. http://www.credoeconomics.com Chapters 32 and 33.

The Paris Gravity Well 2: Trillionization

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Published on Peak Surfer on January 24, 2016

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Discuss this article at the Environment Table inside the Diner

"We will not suddenly convert steel mills, cement kilns and road surfacing machines to operate on sunbeams."
 

Charlie said, "That's the trouble. You see it the way the banking industry sees it and they make money by manipulating money irrespective of effects in the real world. You've spent a trillion dollars of American taxpayers' money over the lifetime of the bank and there's nothing to show for it. You go into poor countries and force them to sell their assets to foreign investors and to switch from subsistence agriculture to cash crops. Then, when the prices of those crops collapse, you call this "nicely competitive" on the world market. The local populations starve and you then insist on austerity measures even though your actions have shattered their economy….

"You were intended to be the Marshall Plan, and instead you've been carpetbaggers."

— Kim Stanley Robinson, Sixty Days and Counting: Science in the Capitol (2007).

“With fundamentals changing slowly and risk appetite falling rapidly, the stage is set for a longer period of risk asset underperformance,” Jabaz Mathai, a strategist at Citigroup Inc., said.  “There is no quick fix to the headwinds facing global growth.”

"Similar periods of weakness have occurred in only five other instances since 1985: (1) the majority of 1988, (2) the first half of 1991, (3) several weeks in early 1996, (4) late 2000 and early 2001, and (5) late 2008 and the majority of 2009 … all either overlapped with a recession, or preceded a recession by a few quarters."

There has been a storm brewing since the last trifle with full-on collapse in 2008-2009. The extend-and-pretend debt balloon was reinflated and stretched to new enormities as Keynesian cash infusions fueled a Minsky Moment, if not a Korowicz Crunch.

The instability in finance is compounded by the instability in demographics. In Mexico City, Bogata and Rio they call them NINIs — the millions of youth between 15 and 24 who neither study nor work. They are now about a fifth of the population in the underdeveloping world, responsible for higher rates of homicide, gangs, and unwed pregnancy. Of those born to NINI mothers, there is a 22.3% greater likelihood of becoming a NINI, according to the World Bank. All this tinder simply builds, bides its time, wanders the streets, waits for a revolutionary spark.

As we said here last week, the trigger for the markets' sudden move may have been what happened in Paris but could not stay in Paris. When it filtered out from the December summit that 195 countries had actually done the unimaginable and set a goal of carbon neutrality, meaning phasing out net fossil fuel emissions by 2050, the financial sector was at first caught dumbfounded. The World Bank guys flinched.

Now it has sunk in. The Guardian reports:

Former OMB Chief David Stockman's recap

Investors face a “cataclysmic year” where stock markets could fall by up to 20% and oil could slump to $16 (£11) a barrel, economists at the Royal Bank of Scotland have warned. In a note to its clients the bank said: “Sell everything except high quality bonds. This is about return of capital, not return on capital. In a crowded hall, exit doors are small.” It said the current situation was reminiscent of 2008, when the collapse of the Lehman Brothers investment bank led to the global financial crisis. This time China could be the crisis point.

Government subsidies are about to undergo a titanic shift. Many governments spend more on fossil-fuel subsidies than they do on health and education, more than a trillion dollars. Consumer benefits such as subsidized fuels and cheap finance add $548 billion per year. Government support for companies to expand production add another $542 billion just in G20 overdeveloped countries, and a mere top 8 of those will spend $80 billion of this kind every year, four times the investments going to renewables globally.

Tomorrow those same Big-8, and 188 others, will begin spending several times those trillions subsidizing renewables. Jeremy Leggett, founder of Solar Aid and Solarcentury, calls it "trillionization." It won't begin to fill the energy gap that the switch will create, but the psychology of sunk investment will be in charge from thereon out.

Oil producing states and countries are aghast. The "clear signal" that Paris sent was not what they were expecting. In Alaska, the Permanent Fund has been running in the red and the legislature is talking about an income tax. Had the Paris Agreement not come together, they might hope for a rebound of fossil prices and investments in drilling the North Slope and Arctic Refuge.

Petroblas, the national oil company of Brazil and wellspring of the Brazilian Economic Miracle, is now cash negative. It will be forced to turn to the government for a bail-out, but to where will its government turn?

In Mexico, the deficit is running 100 billion and the peso has dropped from 12 in 2014 to soon-to-be 20 against the dollar. If you have dollars you can get a meal in a good restaurant or a room for the night for 5 or 10 of them. So far in January the price rise of food for the average Mexican is alarming. Onions are up 19%, poblanos 15%, bananas 10%, tomatoes 9%.
 
The national oil company, PEMEX, came out on Monday saying it is not true that its operating with losses, but below the $26 per barrel it would be. On Tuesday the price dropped to $24.74. It closed the week at $22.77 but as we write this you can buy a barrel in Mexico City for as little as $20.32. Mexico's federal budget is entirely dependent on oil money and don't look now but Mexico, when it was petrodollar flush, became a net importer of most staple foods and many other essential commodities, which helps explain the grocery dilemma. Mexico now buys onions, poblanos, bananas and tomatoes from California. Also beans, corn and rice.

Gotta love those World Bank guys.

Venezuela, which surprised everyone by signing the Paris Agreement at the final hour, declared an economic emergency on January 15. France, which foolishly drank too much atomic kool aid thinking it might spare itself from petrocollapse, has a budget shortfall of 2.2 billion dollars and declared national economic emergency on January 17. The jobless rate in France, the eurozone's 2d largest economy, is above 10%, compared with a 9.8% EU average.

Andrew Roberts, RBS’s credit chief, said:

European and US markets could fall by 10% to 20%, with the FTSE 100 particularly at risk due to the predominance of commodity companies in the UK index. London is vulnerable to a negative shock. All these people who are long [buyers of] oil and mining companies thinking that the dividends are safe are going to discover that they’re not at all safe.

We suspect 2016 will be characterized by more focus on how the exiting occurs of positions in the three main asset classes that benefited from quantitative easing: 1) emerging markets, 2) credit, 3) equities … Risks are high.

Zero Hedge reports:
 

"For dry bulk, China has gone completely belly up,” said Erik Nikolai Stavseth, an analyst at Arctic Securities ASA in Oslo, talking about ships that haul everything from coal to iron ore to grain. “Present Chinese demand is insufficient to service dry-bulk production, which is driving down rates and subsequently asset values as they follow each other.”

“China’s slowdown has come as a major shock to the system,” said Hartland Shipping’s Prentis. “We are now caught in the twilight zone between shifts in China’s economy, and it is uncomfortable as it’s causing unexpected slowing of demand.”

The continued collapse of The Baltic Dry Index remains ignored by most.

According to  Zero Hedge:

The North Atlantic has few to nil cargo traveling in its waters. Instead, the giant container ships are anchored. Unmoving. Empty.

Commerce between Europe and North America has literally come to a halt. For the first time in known history, not one cargo ship is in-transit in the North Atlantic between Europe and North America. All of them (hundreds) are either anchored offshore or in-port. NOTHING is moving.

This has never happened before. It is a horrific economic sign; proof that commerce is literally stopped.

The slow response to the Paris outcome has been a complete portfolio review by every actuary and bean-counter in the biggest banks and investment houses, pension funds and mutuals. Hedge fund managers are scratching and sniffing for places to park billions being lifted from soon-to-be-stranded fossil assets. The clean-tech market, signaled first by China, is reacting by recycling cash out of fossil holdings.

Peter Sinclair of ClimateCrocks.com reports:

The Energy Information Administration calculates in its 2015 analysis that the average U.S. levelized cost for new natural-gas advanced combined cycle plants is 7.3 cents per kilowatt-hour — the same as solar.

However, to compare accurately, we have to add about 10 percent to the cost of solar to firm up this variable resource. So we’re close to cost parity, but not quite there.

At $1 per watt, the levelized cost falls to just 5.7 cents per kilowatt-hour, well below cost parity with new natural-gas plants. With two-axis trackers and the best solar resources, which increase the capacity factor to 32 percent, that cost falls to just 4.5 cents per kilowatt-hour. We’re headed to $1 per watt as an all-in cost in the next five to 10 years.

Bloomberg New Energy Finance reported last summer that wind power was the cheapest source of power in the U.K. and Germany in 2015, even without subsidies. The article’s tagline reads: “It has never made less sense to build fossil fuel power plants.” The same article highlights the feedback loop that solar and wind power have in terms of reducing the cost-effectiveness of fossil fuel power plants due to the dispatch order of renewables versus fossil fuel plants.

The solar singularity is indeed near (here?) in the U.S. and increasingly around the world. I described previously that 1 percent of the market is halfway to solar ubiquity because 1 percent is halfway between nothing and 100 percent in terms of doublings (seven doublings from .01 percent to 1 percent and seven more from 1 percent to reach 100 percent). The U.S. will reach the 1 percent solar milestone in 2016. We’re halfway there. Buckle your seatbelts.

There are plenty of unemployed oil workers ready for retraining. James Howard Kunstler: 

So, in 2015, the shale oil companies laid off thousands of workers, idled the drilling rigs, and kicked back to pray that the price would go back up. Which it didn’t…. The landscape of North Dakota is littered with unfinished garden apartment complexes that may never be completed, and the discharged construction carpenters and roofers drove back to Minnesota ahead of the re-po men coming for their Ford F-110s.

To see what does well in the new, post-Paris domain, watch stocks like First Solar (FSLR), Renewable Energy Group (REGI), SolarCity (SCTY) and Siemens (SIE) over the next quarter, and mutuals like Firsthand Alternative Energy (ALTEX), New Alternatives (NALFX) and Guinness Atkinson Alternative Energy (GAAEX). Some of these know their audience and have vowed to screen for social justice. Gabelli SRI AAA says, for instance:

The fund will not invest in the top 50 defense/weapons contractors or in companies that derive more than 5% of their revenues from the following areas: tobacco, alcohol, gaming, defense/weapons production….

There is a psychology that sets in once the corner is turned on fossil investments that may make a big difference in the political debate about climate change. For more than half a century the GOP, the Fossil Lobby and Wall Street have blocked, cut or delayed investments in renewables and papered it over with greenwash. Forced by pledges made in Paris — and a legally-binding agreement with the word "shall" used 143 times — and the emergence of a huge new global competition to begin not only unchaining the clean-tech sector, but to actively promote it with subsidies, research grants and moonshot-scale deployments, the psychology of chasing after sunk investments will drive an apolitical energy conversion.

Moreover, 350.org and Greenpeace are ramping up campaigns to make sure the promises made in Paris are kept.
 

No pipelines, no mines. You said 1-point-5!
No pipelines, no mines. You said 1-point-5!
No pipelines, no mines. You said 1-point-5!

Clean energy will not deliver a 1:1 replacement for fossil fuels. Get over it. We will not suddenly convert steel mills, cement kilns and road surfacing machines to operate on sunbeams. But the investments we do make, and the worsening weather, will drive us to make even more and ever larger investments, in a forlorn search for a full replacement. While wasteful, it is not nearly as wasteful as the industrial and military investments of the past century or more.

Persian Gulf wars, going back to antiquity, have never been fought over sunlight. As David Stockman recently recalled:

[A] 45-year old error … holds the Persian Gulf is an American Lake and that the answer to high oil prices and energy security is the Fifth Fleet.

***

That doctrine has been wrong from the day it was officially enunciated by one of America’s great economic ignoramuses, Henry Kissinger, at the time of the original oil crisis in 1973. The 42 years since then have proven in spades that its doesn’t matter who controls the oilfields, and that the only effective cure for high oil prices is the free market.

The switch to sunlight will make the lives we are living better for many, especially those on the front lines of the oil wars, even as we continue towards an Anthropocene Armageddon with little sign of being able to change that trajectory.

Guy McPherson is fond of reminding us, after University of Utah professor Tim Garrett's deft analysis, that industrial civilization is a heat engine.

In a well-read article in Climate Change in November 2010, Garrett ran the simple arithmetic:

Specifically, the human system grows through a self-perpetuating feedback loop in which the consumption rate of primary energy resources stays tied to the historical accumulation of global economic production — or p×g — through a time-independent factor of 9.7±0.3 mW per inflation-adjusted 1990 US dollar.

If civilization is considered at a global level, it turns out there is no explicit need to consider people or their lifestyles in order to forecast future energy consumption. At civilization’s core there is a single constant factor, λ = 9.7 ± 0.3 mW per inflation-adjusted 1990 dollar, that ties the global economy to simple physical principles. Viewed from this perspective, civilization evolves in a spontaneous feedback loop maintained only by energy consumption and incorporation of environmental matter.
 

Unsold cars sit on receiving docks all over the world

Because the current state of the system, by nature, is tied to its unchangeable past, it looks unlikely that there will be any substantial near-term departure from recently observed acceleration in CO2 emission rates. For predictions over the longer term, however, what is required is thermodynamically based models for how rates of carbonization and energy efficiency evolve. To this end, these rates are almost certainly constrained by the size and availability of environmental resource reservoirs. Previously, such factors have been shown to be primary constraints in the evolution of species


What this means is the same thing that Gail Tverberg, Richard Heinberg and many others have been saying for a very long time — modern economies are a product of cheap energy. Take that away and they crash and burn. That’s the good news. Garrett says there is no other climate remediation model that works. Civilization is a heat engine whether it is powered by nuclear fusion or photovoltaics. The global economy must crash for humanity to stand a chance. McPherson would take it a step farther and say it is already too late, enjoy what time you have.

The famous Fermi paradox raises the question: why haven’t we detected signs of alien life, despite high estimates of probability, such as observations of planets in the “habitable zone” around a Sun-like star by the Kepler telescope and calculations of hundreds of billions of Earth-like planets in our galaxy that might support life. To produce a habitable planet, life forms need to regulate greenhouse gases such as water and carbon dioxide to keep surface temperatures stable. Early extinction, before interstellar communication, solves the Fermi Paradox. So does merely the extinction of civilization capable of interstellar communication without the same degree of trauma. No civilization, no heat.

But wait! Can that excess heat civilization is producing be turned into air conditioning for the planet? Is there a permacultural decroissance that could rescue our genome? Stay tuned, but first, next week, we play the Trump card.

 

 

 

 

 

 

 

 

The Paris Gravity Well 1

Peak-Exxon-OIlgc2reddit-logoOff the keyboard of Albert Bates

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Published on Peak Surfer on January 17, 2016

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Discuss this article at the Environment Table inside the Diner

"The idling of rail, barge, ship and pipeline traffic is the biggest change of its kind in 30 years."

 

   The World Bank Guys talked about rates of return and the burden on investors and the unacceptable cost of the doubling of the price of a kilowatt hour. Everyone there had said all of this before, with the same lack of communication and absence of concrete results.

Charlie saw that the meeting was useless. He thought of Joe, over at the daycare. He had never stayed there long enough even to see what they did all day long. Guilt stuck him like a sliver. In a crowd of strangers, 14 hours a day.

The bank guy was going on about differential costs. "And that's why its going to be oil for the next 20, 30 and maybe even 50 years," he concluded. "None of the alternatives are competitive." Charlie's pencil tip snapped.

"Competitive for what?" he demanded. He had not spoken until that point and now the edge in his voice stopped the discussion. Everyone was staring at him.

He stared back at the World Bank guys. "Damage from carbon dioxide emission costs about $35 per ton. But in your model, no-one pays it. The carbon that British Petroleum burns per year by sale and by operation runs up a damage bill of $50 billion dollars. BP reported a profit of $20 billion so actually its $30 billion in the red, every year.

"Shell reported a profit of $23 billion but if you added the damage cost it would be $8 billion in the red. These companies should be bankrupt. You support their exteriorizing of costs so your accounting is bullshit. You are helping to bring on the biggest catastrophe in human history.

"If the oil companies burn the 500 gigatons of carbon that you are describing as inevitable, because of your financial shell games, then two-thirds of the species on the planet will be endangered, including humans. But you keep talking about fiscal discipline and competitive edges and profit differentials. It's the stupidest head-in-the-sand response possible."

The World Bank guys flinched at this. "Well, we don't see it that way."

 

— Kim Stanley Robinson, Sixty Days and Counting: Science in the Capitol (2007).

 While the story coming out of the White House Press Room this week was phrased as a temporary moratorium on new coal mining leases on federal lands, the bigger story was in the details of the review that the President had ordered. Like Robinson's character in Sixty Days, the White House recognized that the real cost of coal is not currently accounted for in its price, so the new review will tally the environmental impacts, including destruction of public lands from air and water pollution from strip mining and failed mine reclamation, public health impacts from transporting and burning coal, damage from ash spills, greenhouse gas emissions and climate change. It will set a price on future leases based on this thoroughgoing review that brings the cost of coal in line with the reality of the actual costs.

If this had to be run through Congress, powerful coal-state Senators like Mitch McConnell would derail it before it got out of committee. As merely Bureau of Land Management regulatory policy, it falls under the Executive Branch, where the President's is the only opinion that counts.

Tomorrow senior politicians, digiratti activists and Hollywood stars ski into the Swiss resort of Davos for the annual World Economic Forum. The theme was to have been the 4th Industrial Revolution – robots, AI and the  biotechno singularity — but the buzz is all about the latest crash of the world economy.

The trigger for all this change may have been what happened in Paris but could not stay in Paris. In December we reported from the United Nations climate meeting where many of these same characters — John Kerry, Leonardo DiCaprio, Justin Trudeau, Angela Merkel — were on stage. We described then how an amazing role reversal was in progress and how it had transformed COP-21, midway through the second week of deadlocked negotiations.

The roles that switched were between the dominants, like Exxon-Mobil, Shell and BP, and the submissives — the entire renewables industry. Renewables are largely a digital world, enjoying advancements in crystal structure, solid state controllers, neodymium and other rare earth metallurgy that follow the proscribed arc of Moore's law, doubling in efficiency and halving in cost at close intervals, driving exponential adoption and dissemination.

Fossils, in contrast, are an analog industry, trying to wring the last drops of intoxicating elixir from the carpet of the pub after closing time. In 2015 those two curves crossed, and renewables are now cheaper (even free at some hours for select consumers in certain markets) while coal, oil and gas are queuing up outside bankruptcy court.
 

Salvaging beer from the bar floor after last rounds

The US Department of Energy reported this week:
 

The Short-Term Energy Outlook (STEO) released on January 12 forecasts that Brent crude oil prices will average $40 per barrel (b) in 2016 and $50/b in 2017. This is the first STEO to include forecasts for 2017. Forecast West Texas Intermediate (WTI) crude oil prices average $2/b lower than Brent in 2016 and $3/b lower in 2017. However, the current values of futures and options contracts continue to suggest high uncertainty in the price outlook. For example, EIA's forecast for the average WTI price in April 2016 of $37/b should be considered in the context of recent contract values for April 2016 delivery, suggesting that the market expects WTI prices to range from $25/b to $56/b (at the 95% confidence interval).

The decline in oil price is too little, too late. It cannot keep pace with the price decline we are seeing in the clean tech revolution. Consequently, more people now work in the US solar industry than in oil and gas at the wellhead. In 2015, for the third straight year, the solar workforce grew 20 percent. Clean tech employs far more women than fossil, and 5 percent of the workforce is African American, 11 percent Latino, and 9 percent Asian/Pacific Islander.

At the same time, rear-guard action by the Coal-Baron-selected legislatures in Arizona and Nevada —  states that could be leading the nation in solar power production — have led to layoffs in the renewables sector. The pushback over solar and wind fees by grid owners, punitive taxes, and net metering promise to keep those states in the Dark Ages, as they did the United States for the past four decades.

In a famous L'il Abner cartoon, Pappy Yokum tells L'il Abner, "Any fool can knock down a barn, it takes a carpenter to build one." To which L'il Abner replies, "Any fool? Let me try!"

Listening to the Republican presidential candidates debate is like watching a Fox-den full of L'il Abners.
 

US Solar Power 2010-2015

So it is not surprising that at the stroke of a pen, three Republican appointees on the Nevada Power Utility Commission decided the fates of millions of ratepayers when they killed solar feed-in-tariffs in that state. It was not unlike Michigan governor Rick Snyder deciding to kill and maim thousands of Detroit residents by switching their water to a polluted source and then covering up the damage. You might say no-one gets killed or maimed from solar energy, and that's closer to true, but plenty more get poisoned every year from the fossil alternative.

The numbers being parsed in Davos will be puzzling to many attending that meeting. From a peak in January 2015 to last October, movements of crude by rail declined more than a fifth. The research group Genscape said rail deliveries to US Atlantic coast terminals continued to drop to the end of the year and the spot market for crude delivered by rail from North Dakota’s Bakken region “is at a near standstill.”

Just 5 years ago investors clamored for more tank cars to pick up the slack from overwhelmed pipeline capacity. Now those cars sit idle on sidings and no one is ordering more. Pipelines are idle too, as refineries on the coasts have found that it is cheaper to buy crude of higher quality than shale oil, shipped by ocean tanker from Canada, Nigeria and Azerbaijan.
 

Junk bond sales are all that supports
the fracked gas Ponzi scheme.

A Congress desperate to please its oil masters in an election year abolished four-decade-old restrictions on exporting domestic crude. While some tankers now take crude from the Gulf Coast to refineries in Venezuela, where the heavy sludges and half-formed keragens can be more economically processed because of fewer environmental restrictions, the US then imports back the finished products at a hefty mark-up.

The idling of rail, barge, ship and pipeline traffic is the biggest change of its kind in 30 years. And while the shift away from coal-powered energy, the long recession, and the petering out of the fracking and shale Ponzi real estate play would obviously lead to fewer tons, barrels and cubic feet being moved, it doesn't explain the full depth of the stoppage. The rail and barge slowdown is now spreading to more consumer-oriented segments. Intermodal carloads typically related to consumer goods fell 1.7 percent in the final quarter of last year.

"We believe rail data may be signaling a warning for the broader economy," the recent note from Bank of America says.
 

"Carloads have declined more than 5 percent in each of the past 11 weeks on a year-over-year basis. While one-off volume declines occur occasionally, they are generally followed by a recovery shortly thereafter. The current period of substantial and sustained weakness, including last week’s -10.1 percent decline, has not occurred since 2009."


“When people get hungry, governments fall” — Stuart Scott, Through A Dark Portal, Radio Ecoshock, January 13, 2016

If you can read the tea leaves, or even if you can't, we are now in the long slide. We will examine the financial road ahead, and the Paris Effect on that, in greater detail next week.

 

 

 

 

 

 

 

 

 

 

 

 

Billions of Barrels of US Oil Set to Disappear. Poof.

oil-fire-1024x681gc2smOff the keyboard of Thomas Lewis

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oil-fire-1024x681

An oil refinery in Puerto Rico burns in 2009. That’s one way to make a bunch of oil disappear, but accountants can do it faster. And they’re going to. 

Published on The Daily Impact on December 10, 2015


In a few weeks, several billion barrels of American oil will vanish in an instant. (I am not making this stuff up: the headline is right there on Bloomberg Business, hardly a chicken-little medium.) This is — shortly to be was — the oil that just a few months ago (Remember? When we were young, and happy?) was to return us to energy independence, to make us the number one oil producer in the world, to bring the happy days here again for good.

Okay, there were weasel words salted into those assurances all along, words that we didn’t realize were there until too late. The new American oil revolution was going to put us on the road back in the general direction of North American energy independence (as long as you counted Mexican and Canadian oil, too); and we would be the number one oil producer if you included in your definition of “oil” such things as biofuels, refinery gains from heat expansion, spillage and, if necessary, drippings from leaky transmissions in shopping mall parking lots.

Well, we bought it. Even the president said we had a hundred years of petroleum lying under our feet. Thus it would be our great-grandchildren, not our grandchildren, whose lives we would ruin by burning it all up. Whew, that was a relief.

But much of that oil is about to disappear, not with the boom of an oil-train explosion or deep-well blowout or terrorist bomb, but with the quiet click of a computer mouse. And this time it’s not (as it often has been before) the Energy Information Administration revising downward a previous guess about oil reserves.   

As the American shale-oil boom, a.k.a. American Oil Revolution, was accelerating back in 2009, the Masters of the Oil Universe demanded and got an accommodation from the Securities and Exchange Commission: it was made easier for the oil companies to claim as hard assets, for purposes of valuing their companies and borrowing money, the value of all the oil they estimated to be “in reserve,” which is to say lying somewhere under the ground they had under their control.

The oil companies’ estimates of their own “proven reserves” were astronomical, of course. In the careful words of one expert observer, David Hughes, “There was too much optimism built into their forecasts.” Translation: They lied.

It is as if you and I, on applying to the bank for a loan, were able to claim as assets all the money we intended to make in our lifetime. “$20 million over 20 years, you say? Why then a $10 million loan should be no problem.” And so it was for the fracking industry, which never could have got started without oceans of cheap borrowed money.

Remarkably, at the time the SEC snuck two tiny limitations into the newly permissive rule, so niggling that no one thought them worthy of mention. To be, um, legitimate, these claimed assets had to be 1) profitable to extract under current market prices, and 2) actually extracted within five years. Profitability went away a year ago when oil prices collapsed from over a hundred dollars a barrel to under 50. Despite the fact that quarterly assessments of assets, including oil reserves, are required, bankers and hedge funds and operators used smoke and mirrors to avoid the Draconian restructuring that the new prices required. But now the five years have run out.

Hence the vanishing oil (which of course is not really vanishing, because it never existed). Chesapeake Energy Corporation, one of the noisiest participants in the erstwhile “Revolution” (Successful? That’s a whole ‘nother story.) is among the hardest to be hit: at year’s end it will lose over a billion barrels of reserves, or 45% of its assets.

Chesapeake is hardly alone. Moody’s Investment Service has just issued a report on the “deteriorating credit quality” in the oil and gas sector, a set of “exceptionally adverse conditions” that are “staggering in their breadth and severity.”

So this is how the oil revolution ends, not with a bang but a poof.


Thomas Lewis is a nationally recognized and reviewed author of six books, a broadcaster, public speaker and advocate of sustainable living. He also is Editor of The Daily Impact website, and former artist-in-residence at Frostburg State University. He has written several books about collapse issues, including Brace for Impact and Tribulation. Learn more about them here.

Exxonomics 101

surfer-girl-2gc2reddit-logoOff the keyboard of Albert Bates

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Published on the Peak Surfer on November 8, 2015

PeakSurfer

Discuss this article at the Energy Table inside the Diner

"You don't need 100,000 marines to secure windmills in North Dakota."

 

 The New York Times, which is quickly becoming to print media what Fox is to television news, has done what no first year news stringer should do. It buried the lead. 

It buried the lead on what is likely to become one of the most important stories of all time.

Hidden in the science section of its November 6th daily edition is this headline from a story by Clifford Kraus: More Oil Companies Could Join Exxon Mobil as Focus of Climate Investigations.  Kraus's lead is:

HOUSTON — The opening of an investigation of Exxon Mobil by the New York attorney general’s office into the company’s record on climate change may well spur legal inquiries into other oil companies, according to legal and climate experts, although successful prosecutions are far from assured.

The story goes on to describe the fraudulent activities undertaken by Exxon Mobil, Chevron and other oil majors from 1990 to 2001, using astroturf fronts with names like Global Climate Coalition and the American Legislative Exchange Council. The writer, and presumably the Times editorial team, assumes the reason NY Attorney General Eric T. Schneiderman is investigating is because the companies spent millions or billions on a disinformation campaign, purchasing no fewer than four U.S. presidents and vast numbers of Congressmen and Senators. These disinformation campaigns cast doubt on climate science by parading shill pseudoscientists before legislative committees. The purchased politicians then went before the public and parroted the oil company line: "Climate Change? Nothing to see here, move along."

The Times seems to think the NYAG is after some kind of conviction for perjury or advertising fraud.

By now this spin on the story is so old and been told so many times, we are surprised that it is still considered news. Maybe that is why it got bumped to the science page. Everyone knew, despite the feigned shock of Bill McKibben, Naomi Klein and others, that Exxon had extensively researched the subject in the 1970s, concluded by the mid-80s that climate change was a serious threat, and then killed its own research program and financed opposition.

The real news story is something else. It is not what the investigation is but where it is. The New York Attorney General's office peers from its eyrie in Albany down the Hudson River, across the white plains and palisades to lower Manhattan, but it is only one of two such offices that watches. The other is located closer to the action, in the Federal Courthouse just below Wall Street, where dwells the United States Attorney for the Southern District of New York, a Mr. Preet Bharara. If you bike by there, however, you see that dog is chained by a very long chain that runs all the way to the back porch of a big white house in Washington. Lest we forget, the nation's last Attorney General came from and went back to Wall Street's Covington & Burling, after 6 years of hearing nothing, seeing nothing and saying nothing as the nation's top law enforcer.

Why should Exxon and Chevron be worried? That would be because what is of interest to a NYAG watchdog is not about buying politicians or suborning perjury. It's about stock manipulation. After a decade of pretty good in-house science, Exxon and the other majors knew by the 80s that the pace of global warming was accelerating and that very soon there would be a massive, increasingly desperate effort underway to shift from fossil fuels to carbon-free renewables in order to escape Cauldron Earth. The hotter it gets, the more frenzied this effort will become, and the less likely Exxon will be able to cash in its balance sheet of fossil assets.
 

Meadows, et al, 1971 Limits to Growth with overlay of
Bates 1990, Climate in Crisis

If you were a CEO of one of these companies, the math would trouble your mind. It would cloud your thinking as you set up for that long putt on the 8th green. It would creep into your internal dialog as you are eyeing that cocktail waitress at a swank restaurant. Your worth as a company, the basis for the company's share price, and your own compensation and stock option packages, all depend on the estimated and proven reserves of oil and gas still in the ground. If, for some reason, those reserves could never be withdrawn – never be burned – then you have a serious problem. Your company is overvalued, and likewise the share price, and your own personal net worth. This is what interests the NY Attorney General. It's the math. Its also the mens rea – your state of mind; what you knew and when you knew it.

It is one thing to have a company whose worth exceeds not only that of any company on Earth but also of any company in history. It is another entirely if that worth is overstated, perhaps by a factor of 100, 1000, or one million times. That becomes the biggest stock fraud in history. For a young or politically ambitious AG, it is a ticket to glory.

On Thursday the Times reported:

Attorneys general for other states could join in Mr. Schneiderman’s efforts, bringing far greater investigative and legal resources to bear on the issue. Some experts see the potential for a legal assault on fossil fuel companies similar to the lawsuits against tobacco companies in recent decades, which cost those companies tens of billions of dollars in penalties.

Potential fines and imprisonment don't begin to tell the story here. Devaluation of the stock – mark to market – is the real penalty. Is Exxon, whose shares are held by teachers' credit unions, public employee pension funds, and more people than almost any other stock, too big to fail? Whether it is too big to jail is irrelevant. Once that asset is devalued, something huge will be set in motion: a trillion dollar switch away from fossil investment, and just coincidentally, an end to the leading justification for military adventurism, support for Israeli hardliners, the puppet regime in Kiev, the ISIS black op and Saudi Arabian feudalism, among other pastimes.


That whole shooting match in Syria, driving millions of refugees into Europe, is about whether Bashar al-Assad, an ally of Russia and Iran and a proponent of a gas pipeline from Iran across Kurdistan to the sea, will be deposed by ISIS terrorists trained by CIA in the Colonel Kurtz style of spectacular horror and funded by the Pentagon so that the US could instead build a pipeline to European markets through Syria from Iraq. The Russian Air Force, with a new generation of fighters that can fly circles around anything built by Lockheed Martin, is looking like it will decide that one. It is pulverizing ISIS.

You don't need 100,000 marines to secure windmills in North Dakota.

That is the story the Times is missing.

In the Thursday story, the Times had a link to a 29-page Exxon report for its shareholders. The company essentially ruled out the possibility that governments would adopt climate policies stringent enough to force it to leave its reserves in the ground, saying that rising population and global energy demand would prevent that. “Meeting these needs will require all economic energy sources, especially oil and natural gas,” it said. Here is an image from that report. We especially enjoyed the absurdity of their idea of what better farming looks like.

 

World population is going to grow by 3 North Americas in 15 years.

In their report, Exxon predicts that the world will add 2 billion more people in the next 15 years, or roughly four more North Americas if you include Mexico and Canada. This tracks similar assessments by the UN and the World Population Council. That increase is baked in the cake just from the number of adolescents reaching childbearing age in these coming years. Exxon believes GDP will grow at 3 times the rate of population if energy supply is adequate. "We see the world requiring 35 percent more energy in 2040 than it did in 2010."
 

"In analyzing the evolution of the world’s energy mix, we anticipate renewables growing at the fastest pace among all sources through the Outlook period. However, because they make a relatively small contribution compared to other energy sources, renewables will continue to comprise about 5 percent of the total energy mix by 2040."


While we don't buy the whole package, we find ourselves agreeing with Exxon about one thing. Business as usual is not possible with an all-renewables portfolio. We wonder where even the finance for such a build-out would come from? More debt? The world financial system came with in a hair's breadth of financial collapse in 2008. Since then the balloon has reinflated and stretched bigger. China just arrested its free-falling stock market by issuing even more debt. But sooner or later loans have to be repaid, with interest, and in a shrinking resource economy they cannot be. When the day of reckoning eventually arrives, our chances of avoiding collapse are very slim. Gail Tverberg says,  "The change … is similar to losing the operating system on a computer, or unplugging a refrigerator from the wall."

Where we part company with Exxon is that Exxon thinks governments will choose to keep heating the planet and we think they will dispense with business as usual. Only time will tell, although the issue will be up for serious debate this December in Paris.

Business as usual will not be an easy thing to give up.

In terms of energy conservation, the leaps made in energy efficiency by the infrastructure and devices we use to access the internet have allowed many online activities to be viewed as more sustainable than offline.

On the internet, however, advances in energy efficiency have a reverse effect: as the network becomes more energy efficient, its total energy use increases. This trend can only be stopped when we limit the demand for digital communication.
 

***

In recent years, the focus has been mostly on the energy use of data centers, which host the computers (the “servers”) that store all information online. However, in comparison, more electricity is used by the combination of end-use devices (the “clients”, such as desktops, laptops and smartphones), the network infrastructure (which transmits digital information between servers and clients), and the manufacturing process of servers, end-use devices, and networking devices.  

Low Tech Magazine

By 2017, the electricity use of the internet globally is expected to rise to between 2,547 teraWatt-hours (low case) and 3,422 tWh (high case). The high case is made more likely by underdeveloping nations bypassing wired communications to go directly to smart phones and other devices, which are increasingly dependent on cloud services. Under these circumstances electricity use for internet will likely double every 5 years, to 110000 tWh (110 petaWatt-hours) by 2040. This would add another USA in electricity consumers every 5 years  three more USAs in 15 years. That, of course, assumes that cloud computing doesn't follow the exponential growth its proponents seek.

Can renewables meet this demand? Right now in the US, renewables account for 13.2 percent of domestically produced electricity. Wind turbine capacity is 65 GWe installed (0.07 tWe), but because of wind and load intermittency, the mills only turn about 32% of the time, producing about 180 million kWh last year (180 GWhr, or 0.2 TWh). That was one ten-thousandth of what was used globally by the internet. To build out renewables to power just the internet by 2040 would require 110 pWh, or more than a million times all the renewable electricity produced by the USA today.

How probable is that? Exxon is completely accurate in labeling it fantasy.

And speaking of fantasy, imagine for a moment that Mr. Schneiderman gets his teeth into Exxon's stock fraud and won't stop shaking until the company restates its book value, sans proven reserves. There has been a recent fall in oil price (owing less to fracking, as the popular narrative has it, than to China's deflationary spiral that has tanked world demand), but if you are a shareholder, this might be a good time to sell.

Or you could take your advice from the nation's paper of record and assume everything is hunky dory. 

Death Watch in the Oil Patch

 Pumpjack-1024x768  gc2smOff the keyboard of Thomas Lewis

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Pumpjack-1024x768

Oil pumpjacks starting to suck oil instead of money. (You and I know, of course, that grasshopper pumps are not used in fracking, but have become a universal symbol for the oil bidness in the Mainstream Media, so there you go. And here you are.).

Published on The Daily Impact on October 28, 2015


In the same sense that brave individuals are said to “fight” stage four cancer, the American oil industry has spent a harrowing year fighting reality. Since oil prices tanked last summer, the industry has drawn down its strategic reserves of whitewash, pig lipstick, shinola and embalming fluid to keep things looking good even as they were decomposing. They did a pretty good job, but then they’ve had a lot of practice.Their theory, apparently; when you’re kicking the can down the road, a myth is as good as a mile. Consider a brief compendium of the lies, damned lies and statistics the oil guys have sold the country in the past few years.

Myth Sold: The Oil “Revolution.”  Hydraulic fracturing was a technological breakthrough that was going to make America number one in world oil production again, restore American energy independence and guarantee American hegemony for (pretty much) ever.    

Fact: Fracking is an extremely expensive and environmentally destructive way to wring the last few drops of  oil out of source rock. While it temporarily increased US oil production, it never equalled our peak production of 1970, and while it temporarily decreased our oil imports (which are now on their way back up), it never threatened our status as the world’s largest importer of oil.

Myth Sold: Technology Will Save Us. When oil prices cratered, the frackers reassured their investors, lenders and us that they could handle it. They had improved the fracking technology so much they could continue to make a profit producing $50-a-barrel oil.

Fact: The much-hyped changes were just so much tinkering, and profits remained illusory. Virtually every company involved in the fracking patch had negative cash flows from the beginning. Operating profits from the wells were wiped out by the costs of replacing the wells every three or four years, because of their hideous depletion rates. Conventional wells produce for 20 years, five time longer than fracked well.

Myth Sold: Efficiency Will Save Us. Like the old line about balancing the federal budget by eliminating waste and fraud, this sounds reasonable but never happens. The frackers concentrated on the “sweet spots,” the small areas of their holdings with the best returns, and they started placing four drilling rigs, instead of one, on each pad.

Fact: Thus their production actually increased for a few months after the price crash. But, well productivity is flatlining now and with the rig count down by about half, new wells are not being brought on line and production has started to fall sharply.

Myth Sold: Hedging Will Save Us. For the first year or so of depressed prices, frackers benefited from hedges — contracts to sell their product at last year’s prevailing prices. The theory was, prices would be back up before the hedges ran out.

Fact: The hedges have run out. The people who used to take the other side of the hedges are not answering frackers’ phone calls. Maybe because their phones have been disconnected.

Myth Sold: Junk Bonds Will Save Us. And so they did, for a while. Infusions of cash — from, among others, vultures hoping to acquire cheap oil company assets and ride the resurgence to a new, new oil revolution — in the form of junk bonds, leveraged loans, sub-prime loans, covenant-lite loans, etc., kept the bubble inflated.

Fact: What resurgence? Banks and other lenders, reluctant to recognize the mounting losses, continued to pretend that the oil companies whose assets’ worth had been cut in half were still solvent. Nothing wrong here! Why do you ask?

New Fact: Right now, the banks are conducting a mandatory review of the worth of the assets pledged against their fracking loans, that is, the value of the oil the companies still have to extract. This spring, the banks assessed the oil at last year’s prices, and with fingers tightly crossed rolled over the loans.

It was a stretch then; can they do it again, eke out a few more months of myths? On the one hand, maybe so, denial is not just a river in Egypt. On the other hand, good as they have been, the sellers of the myths appear to be sold out.  


Thomas Lewis is a nationally recognized and reviewed author of six books, a broadcaster, public speaker and advocate of sustainable living. He also is Editor of The Daily Impact website, and former artist-in-residence at Frostburg State University. He has written several books about collapse issues, including Brace for Impact and Tribulation. Learn more about them here.

Fortune: “Frackers Face Mass Extinction”

  fracking-well-night-e1292530315346   gc2smOff the keyboard of Thomas Lewis

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Published on The Daily Impact on September 30, 2015


Awareness is gradually seeping into the financial press that the Great American Oil Revolution has been over for months — witness the current Fortune headline,“Frackers Could Soon Face Mass Extinction.” If the general media had any grasp of what was happening in America, or what it meant, CNN would be doing wall-to-wall coverage of the deserted man-camps in North Dakota, the unemployment lines in Texas, the equipment yards stacked with idle derricks, the spreading panic in the junk-bond, bond and stock markets. Instead we get Donald’s beautiful tax plan, Hillary’s elusive emails and Carly’s mythical video tapes.

Today is the last day of the rest of the frackers’ lives. That’s because it is the last day of the third quarter of the year, the day after which banks audit their loans, assessing anew the value of the assets held as collateral.

Frackers pledge their oil reserves, and those reserves are worth today about half of what they were worth a year ago. A year ago, they borrowed everything they could. In about two weeks when the audits are done they’re going to have to give half of it back. Many of the companies don’t have it.

Analysts quoted by Fortune expect a third of the fracking companies to go under.

I expected this to happen at the end of the first quarter, when the banks did the first of their two annual reassessments. But I forgot the old rule of thumb: borrow ten thousand dollars, and the bank owns you, borrow ten million and you own the bank.  Back in April, lenders bent over backwards to avoid reclassifying loans, and predatory investors poured money into junk-bond rollovers of expiring junk bonds, because they simply could not believe that the ride was over. Prices would go back up, was the mantra they chanted, and all would be well again.

As I’ve reported here over and over, this disaster would have overtaken the fracking patch even if oil prices had not tanked, because its root problem was the hideous decline rate of fracking wells, most of which are exhausted within four years.

Imagine if they built houses of water-soluble materials. You buy a house for $200,000 or so, and at the end of four years it’s uninhabitable and worthless, and you have to buy another one. You might have been making good money those four years, but enough to set aside $50,000 a year? That’s been the fracking problem from the beginning, and virtually every company in the business has had to borrow heavily – actually, recklessly — to stay in the game.

Which is over. For most. There will always be some operators diligently wringing out the last few drops of combustibles, but the Brave New World of American oil supremacy in a cowed world, the age of American energy security, the renewed American oil economy  — all creations of marketing departments in search of the proverbial greater-fool investors and lenders — are toast.  

Still can’t believe it? Check out David Stockman, “Going Broke in the Shale Patch;” Oil Price.com, “Is This the End of the Shale Gas Revolution?;” CNBC, “US Drillers About to Start Hemorrhaging;” Bloomberg, “Wall Street Lenders Growing Impatient with U.S. Shale Revolution” and “Junk-Debt Investors Fight for Scraps as U.S. Shale Rout Deepens;” and even the Wall Street Journal“Fracking Firms that Drove Oil Boom Struggle to Survive.”

Yes, it’s morning in the American fracking patch, but instead of Ronald Reagan’s rhapsodic dawn it’s more like something out of Revelations. Even the staid Fortune Magazine says, “Doomsday may finally be coming to the fracking industry.”


Thomas Lewis is a nationally recognized and reviewed author of six books, a broadcaster, public speaker and advocate of sustainable living. He also is Editor of The Daily Impact website, and former artist-in-residence at Frostburg State University. He has written several books about collapse issues, including Brace for Impact and Tribulation. Learn more about them here.

True Believers

From the keyboard of James Howard Kunstler
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oil shock for law firms
 
Originally Published on Clusterfuck Nation  August 17, 2015
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There is a special species of idiot at large in the financial media space who believe absolutely in the desperate and tragic public relations bullshit that this society churns out to convince itself that the techno-industrial high life can continue indefinitely, despite the mandates of reality — in particular, the fairy tales about oil: we’re cruising to energy independence… the shale oil “miracle” will keep us driving to WalMart forever… our wells doth overflow as if this were Saudi America… don’t worry, be happy…!

Such a true believer is John Mauldin, the investment hustler and writer of the newsletter Thoughts From the Frontline, who called me out for obloquy in his latest edition. After dissing me, he said:

“I have written for years that Peak Oil is nonsense. Longtime readers know that I’m a believer in ever-accelerating technological transformation, but I have to admit I did not see the exponential transformation of the drilling business as it is currently unfolding. The changes are truly breathtaking and have gone largely unnoticed.”

Mauldin is going to be very disappointed when he discovers that the vaunted efficiencies in shale drilling and fracking he’s hyping will only accelerate the depletion of wells which, at best, produce a few hundred barrels of oil a day, and only for the first year, after which they deplete by at least half that rate, and after four years are little better than “stripper” wells. The PR shills at Cambridge Energy Research (Dan Yergin’s propaganda mill for the oil industry) must have pumped a five-gallon jug of Kool-Aid down poor John’s craw. He believes every whopper they spin out — e.g. that “Right now, some US shale operators can break even at $10/barrel.”

The truth is the shale oil industry couldn’t make a profit at $100/barrel. The drilling and fracking boom that began around 2005 was paid for with high-risk, high-yield junk bond financing and other sketchy, poorly collateralized financing. Most of the earnings in the early years of shale oil came from flipping land leases to greater fools. Now that the price of oil has fallen by more than 50 percent in the past year, the prospect dims for that junk financing to be repaid. Since that was “bottom-of-the-barrel” financing, the odds are that the shale producers will have a very hard time finding more borrowed money to keep up the relentless pace of drilling needed to stay ahead of the short depletion rates. They are also running out “sweet spots” that are worth drilling.

We will look back on the shale oil frenzy of 2005 to 2015 as a very interesting industrial stunt borne of desperation. It gave a floundering industry something to do with all its equipment and its trained personnel, and it gave wishful hucksters something to wish for, but it never penciled-out economically. Shale oil production turned down in 2015 and the money will not be there to get the production back to where it was before the price crash. Ever.

Some additional uncomfortable truths should temper the manic fantasies of hypsters like Mauldin. One is that we are no longer in the cheap oil age. All the new oil available now is expensive oil — whether it’s Bakken shale or deep water or arctic oil — and it costs too much for our techno-industrial society to run on. That is why the world financial system is imploding: we can’t borrow enough money from the future to keep this game going, and we can’t pay back the money we’ve already borrowed. We have to get another game going, one consistent with contraction and with much lower energy use. But that is not an acceptable option to the people running things. They are determined to keep the current matrix of rackets going at all costs, and the certain result will be very messy collapse of economies and governments.

Industrial economies face a fatal predicament: Oil above $75/barrel crushes economies; under $75/barrel it crushes oil companies. We’ve oscillated back and forth between those conditions since 2005. The net effect in the USA is that the middle class is rapidly going broke. All the financial shenanigans aimed at propping up Wall Street and Potemkin stock markets was carried out at the expense of the middle class, now deprived of jobs, incomes, vocations, stability, and prospects. They may already be at the point where they can’t afford oil at any price. That “energy deflation” dynamic, in the words of Steve Ludlum at the Economic Undertow blog, is a self-reinforcing feedback loop that beats a path straight to epochal paradigm shift: get smaller, get local, get real, or get out.

The hypsters and hucksters won’t believe this until it jumps up and bites them on the lips. These are the same idiots who believe we are going to continue Happy Motoring by other means — self-driving, all-electric cars — and who think there is some reason for human beings to travel to other planets when we haven’t even demonstrated that we can plausibly continue life on this one.

As I averred last week, America is at the bottom of a self-knowledge low cycle in which we are incapable of constructing a coherent story about what is happening to us. The techno-industrial fiesta was such a special experience that we can’t believe it might be coming to an end. So, one option is to believe stories that have no basis in reality. As Tom McGuane wrote some forty years ago: “Life in the old USA gizzard had changed and only a clown could fail to notice. So being a clown was a possibility.”


James Howard Kunstler is the author of many books including (non-fiction) The Geography of Nowhere, The City in Mind: Notes on the Urban Condition, Home from Nowhere, The Long Emergency, and Too Much Magic: Wishful Thinking, Technology and the Fate of the Nation. His novels include World Made By Hand, The Witch of Hebron, Maggie Darling — A Modern Romance, The Halloween Ball, an Embarrassment of Riches, and many others. He has published three novellas with Water Street Press: Manhattan Gothic, A Christmas Orphan, and The Flight of Mehetabel.

Shortest Book Ever: Oil Company Ethics

Off the keyboard of Thomas Lewis

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Published on the Daily Impact on July 19, 2015

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Stress reveals character among humans, and the ongoing, slow-motion implosion of the great American shale oil revolution is throwing stark light on the nature of the humans involved in the oil industry. (I refuse, contrary to the shorthand title of this piece, to attribute human characteristics to corporations. They have none. The people who run them sometimes do.) One should not expect much of people who take as their life’s work the wresting of the planet’s last morsels of carbon from the earth so that we can burn it and destroy the ecosystem that nourishes us, but still: they live among us, they raise children, they pretend to share with us at least some fundamental values.

Even knowing, as many of us do, that they lie, that they hire elegant blonde women to stroll across our Sunday TV landscape and lie in their cosmetically enhanced teeth about what oil companies are doing and what the consequences are, it is nevertheless something of a shock to watch their present descent from dishonesty and greed to sheer, don’t-give-a-damn evil.

Cases in point:

  • Oil companies that find themselves in trouble in Alberta are simply walking away from their rigs, leaving miles of pipe in the ground and acres of polluted ground and water on the surface to be cleaned up by a little-known and under-funded industry organization, the Orphan Wells Association. Last year, the OWA had 164 wells to clean up in Alberta; now that number is up to 704. It’s possible to handle a clean site for $50,000 and two years of work, but oil people are not clean operators, and many sites  are costing more than a million dollars and are taking 10 years to fix. The OWA has been completing remediation on 43 sites a year; at that rate its present backlog is 16 years long.
  • One tar sands operator in Alberta reacted to falling profits by laying off 15 people and refusing to transport them out of the wilderness in which they were working. Air transportation into the tar sands for 20 days of work and back out for eight days off was provided by the company, but the 15 were told that getting back to civilization was their problem. The classy company (Canadian Natural Resources Ltd.) relented only after worldwide outrage at the plight of the dismissed workers.
  • Oil companies whose wells play out in the Gulf of Mexico are “required” to seal them permanently to prevent leaks of the residual oil, which is still under pressure in pipes subject to severe corrosion. There are 27,000 abandoned wells in the Gulf, of which nearly 4,000 have a figurative cork stuck in them — a temporary seal that the company intends maybe to someday somehow replace with the “required” permanent seal. (Wait, make that “permanent” seal.)
  • In the eight years since Exxon Mobil promised the world to stop funding climate-change-deniers, it has given them more than $2.3 million to pollute public discourse and hamstring efforts to deal with the oncoming planetary crisis. It took a British newspaper — the Guardian — to figure this out, and oddly enough, CNN did not go wall-to-wall on this story.
  • Nor did anyone pay much attention to the story — okay, this is old news, but still capable of rendering hair flammable — that the fracking industry in California continues to get rid of its waste fluids — millions and millions of gallons of water so polluted it can never be used for anything related to human consumption — by injecting them into previously untainted underground aquifers that are the state’s last best hope for irrigation and drinking water as their worst drought in history continues.

There’s more, much more. But before this abbreviated review of oil company crimes against humanity becomes the longest book in the world, let’s go turn on the TV and watch the Exxon Lady sing her Siren song.


Thomas Lewis is a nationally recognized and reviewed author of six books, a broadcaster, public speaker and advocate of sustainable living. He also is Editor of The Daily Impact website, and former artist-in-residence at Frostburg State University. He has written several books about collapse issues, including Brace for Impact and Tribulation. Learn more about them here.

The Crash of 2015: On Track, Behind Schedule

Off the keyboard of Thomas Lewis

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As demonstrated in Paris in 1895, what matters is not whether the train wreck was on time. What matters is that it’s a wreck. (Wikipedia Photo)

Published on the Daily Impact on June 22, 2015

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The dominoes are toppling, just as we have been expecting for nearly a year now, but slower than we thought. The fact-resistant strain of humans (Thank you, Borowitz Report) now in charge of the world are trying to use vast amounts of money to counteract gravity, and, counterintuitively, succeeded in slowing the dominoes’ fall. But not for long.

To review our expectations of last summer: the hideous decline rate of fracking wells (of up to 90% in three years) was forcing frackers to borrow huge amounts of money to put up large numbers of new wells at a breakneck pace in order to preserve the illusion (it was always an illusion) of a revolution in American oil leading to prosperity and “energy independence.” On average, it cost the frackers over $4 to get $1 of revenue in the door during the first quarter of this year. A year ago, with oil commanding $100 a barrel, they were still spending $2. As the old joke goes, the only way to make any money when you’re losing on every transaction is to make up for it with volume. But since most of the money spent was capital expenditure — i.e. new wells — their operating statements showed profits and nobody looked at the balance sheets.

We ran this scenario on our abacus and concluded that these guys were going to go broke. And that when they did, not only would U.S. oil production resume its long slide toward zero, begun in 1970, but they would blow up the junk-bond market, almost certainly the bond market, and probably the stock market. These expectations were in place before the price of oil tanked last fall, and set the expectations in concrete.

Now, let’s review the state of play:

Are they broke? Pretty much. As Bloomberg reports (“The Shale Industry Could be Swallowed by its Own Debt”), S&P has so far this year lowered the outlook or downgraded the credit of almost half the exploration and production companies it rates. Amazingly, despite the awful numbers, lenders have continued to pour money into the zombie companies (See “Oil Money: Too Dumb to Fail”) as they struggle to keep pumping so they can turn over their debt so they can keep pumping. Remember the old advice — when you find yourself in a hole, stop drilling? They don’t.

Has the junk-bond market fallen apart yet? Looks like it. “Investors” experiencing sudden attacks of vertigo pulled $5.5 billion out of the junk bond market in the two weeks ending June 17, and $3.6 billion so far this year out of the funds based on high-risk “leveraged” loans.

Is the regular bond market in danger? Oh, yeah. According to Bank of America Merrill Lynch, last week “High grade credit funds suffered their biggest outflow this year, and double the previous week.” Some of this was no doubt related to the hair-on-fire volatility of the European and Asian bond markets during the last month or so, but not all of it.

Is oil fracking production declining? Yes, indeed. According to the U.S. Energy Information Administration, fracking output declined last month, by more this month, and will continue falling off at least through the end of the year. (It’s really a forever thing, but they can’t bring themselves to say it.) [See “It’s Official: The Shale-Oil Boom is Over”]. Worldwide, 150,000 jobs in oil and gas production have vaporized, with the U.S. having the “fastest and steepest decline.”

Is the stock market in trouble? Deeply. On Thursday, the Nasdaq tech-stock index reached its highest number in history, but only the uninformed, the inexperienced and the truly, deviously evil are celebrating it. It’s like having a party because grandma, at 99, just recorded her highest temperature ever. Stocks are hideously over-valued, highly leveraged, and insanely volatile — all sure signs of impending crash. Every day now, you can find some Master of the Universe talking of the need to have at hand a bag of “physical cash” in preparation for what they are referring to as a “systemic event.”

How much more clearly, and with how much more authority, could we possibly be told to brace for impact?


Thomas Lewis is a nationally recognized and reviewed author of six books, a broadcaster, public speaker and advocate of sustainable living. He also is Editor of The Daily Impact website, and former artist-in-residence at Frostburg State University. He has written several books about collapse issues, including Brace for Impact and Tribulation. Learn more about them here.

This Week In Doom June 14, 2015

That-Was-The-Week-That-W-That-Was-The-Week-473964
Off the keyboard of Surly1
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Originally published on the Doomstead Diner on June 14, 2015

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seal pres freda


“If instituted, the TPP’s IP regime would trample over individual rights and free expression, as well as ride roughshod over the intellectual and creative commons,” Assange said. “If you read, write, publish, think, listen, dance, sing or invent; if you farm or consume food; if you’re ill now or might one day be ill, the TPP has you in its crosshairs.”

-Julian Assange, Founder, Wikileaks, November 15, 2013

 


In a stunning rejection by his own party, President Barack Obama had the TAA amendment to the TPP go down in flames in a Friday House vote, and with it his earliest effort to get fast track enabled for this  sellout of the American people. And demonstrates himself as the latest opportunistic tool of corporations and the hyper rich, and the truth of that trope attributed to Gore Vidal: "There is only one party in the United States, the Property Party … and it has two right wings: Republican and Democrat." This week deja vu has an American president sending "advisors" into a war-torn area to train the locals; one wonders what sort of training the Iraqis can possibly receive to not throw down their weapons and flee the field of battle?  One of the main instigators of last weekend's celebrated Texas pool party/  police riot gets hers, but in a way that leaves us feeling somewhat uneasy. NPR budget cuts have hit their fact checkers, as they run a story on fracking being the next great economic engine for the US economy at a time when rig counts have plummeted and 67 per cent of domestic shale oil production has been taken off line. Almost as if an invisible hand were "suggesting" what they run… And income inequality has gotten so bad that food pantries are running out of food, such is the demand.  But, what, me worry? The markets are up!

 


Democrats reject Obama on trade

 

The big news this week was when a strange-bedfellows coalition of conservatives and progressive democrats voted to deny President Obama fast track authority for the TPP. Thus the New World Order of transnational corporations hit a small snag in their journey to legalize their current de facto hegemony over nation states and citizens under color of law.

The House voted 302 to 126 to sink a measure to grant financial aid to displaced workers, fracturing hopes at the White House that Congress would grant Obama fast-track trade authority to complete an accord with 11 other Pacific Rim nations."I will be voting to slow down fast-track," House Minority Leader Nancy Pelosi (D-Calif.) said on the floor moments before the vote, after keeping her intentions private for months. "Today we have an opportunity to slow down. Whatever the deal is with other countries, we want a better deal for American workers."

Sure she does, and sure they do. Whatever their motivations, I'll take it, as someone unalterably opposed to the TPP, along with legislation-by-lobbyist, secret deals done in secret, and clandestine negotiations held away from the disinfecting power of sunlight.  Now comes the whores-trading. Be certain that this weekend the lobbyists have earned their steak and lobster dinners, as round after round of wheedling ensues in Jerusalem on the Potomac. 

TAA/TPP was stalled by a huge number of phone calls from angry constituents spluutering with outrage– Outrage, I say! — to staffers in Congressional offices. There is a politics of a changed conversation afoot in this country, in the wake the financial collapse of 2008, and of OWS in 2011– that signals that the winds of political will do not only blow in one direction. Charlie Pierce:

There now is a legitimate progressive power base within the Democratic party that no longer takes the prerogatives of the corporate class as inviolable, and that must be considered seriously by any Democratic president and by any Democratic politician… This is not a failure of presidential leadership. It's the assertion of political power from another direction. If that unnerves the Green Room consensus, that's too bad. The president got a bad beat, not because he is a bad president, but because, on this issue, on this Friday afternoon, he found himself trying to sell something to a constituency that has changed. 

 

The fact is that pro-trade Democrats have been eclipsed by the anti-corporate wing of the party, which has been on the rise since 2008. It also exposed the weakening hand of House Minority Leader Nancy Pelosi (D-Calif.), who reportedly had been whipping for days to support the president’s agenda, only to throw in with the rank-and-file rebellion at the last minute, ostensibly the better to retain some cred. The fate of this monstrous trade legislation now depends on Obama’s ability, along with business-friendly interests, to twist arms, cajole and/or bribe dozens of Democrats to switch their votes before next week. Apparently the sides are going to line up and scrimmage again next Tuesday. Meanwhile, discuss among yourselves wither John Boehner or Nancy Pelosi has the biggest set of balls in the room.


Neocons Erect:  The First 450 Soldiers On Their Way Back to Iraq



I am old enough to have seen this movie before:  faced with intransigent guerrilla warfare, an American president decides to send  in four hundred or so "advisors," the better to train the locals in in the fine arts and techniques of counterinsurgency, then follow that up with AC-47-loads of all the boodle that emerges from the cornucopia of the arms manufacturers. .  


This time the American president is not John F Kennedy, but Barack "Don't do stupid stuff" Obama. The NYT reports on the latest excursions of Empire. For which you continue to foot the bill for with your children's futures…

President Obama is open to expanding the American military footprint in Iraq with a network of bases and possibly hundreds of additional troops to support Iraqi security forces in their fight against the Islamic State, White House officials said on Thursday.

For Mr. Obama, who has long resisted being drawn into another ground war since pulling out all forces in 2011, the latest developments represented another incremental step back into a sectarian conflict he had once hoped to be done with by the time he left office. Supporters of a more robust effort against the Islamic State called it a welcome if inadequate step to make good on the White House’s vow to defeat the Islamic State, while critics warned of sliding into a broader, bloodier and ultimately ineffective campaign.

For a President working on his legacy, this represents a leaden step. Meanwhile war profiteers cheered. (For an interesting but unrelated story of war profiteering and how it works, for the so-called Big 5 and especially for the legions of contractors, see Isaac Faber here.)

 


Justice of a sort

By now, the story of the pool party in Mckinney Texas, the police overreaction, the termination of the officer involved and the bleats of outrage have all become part of the national conversation. And in the wake of all that, this datum as a coda:

  

After a video of a 15 year old African-American teen being slammed into the ground by McKinney Police Officer Eric Casebolt went viral last weekend, a twitter campaign was launched to identify the woman involved in the fight that led to police being called.  Tracey Carver-Allbritton has now been placed on administrative leave by her employer, CoreLogic Inc., a  major financial data and analytics firm closely aligned with Bank of America.

Ms. Carver-Allbritton is demonstrably a racist and should certainly be held legally responsible for her actions, as should any adult who picks a fight with underaged minors. Yet I have certain-to-be unpopular misgivings about her losing her job as a result of this action, as I did for obvious racist and overall lout Donald Sterling being obliged to sell his basketball team as a result of the contents of a conversation illegally recorded and obtained. The end does not always justify the means. Because we all have to live with the implications of what the means… means. Fruit of the poisoned tree, and all that.
 


National Petroleum Radio: America's Next Economic Boom Could Be Lying Underground

From time to time, I find myself in arguments with well-intentioned liberal friends who argue that National Public Radio is not part of the mainstream media. This is risible, inasmuch as I have firsthand knowledge of the politics and the pressures brought to bear on public media enterprises. I toiled for a time in the management precincts of local public television and radio, and have seen how the system works– or doesn't. Public media has found itself increasingly reliant upon corporate funds which to stretch the modicum of funding provided from government sources, which typically just enough to pay the programming bills. So both stations and producing entities turn to the people with the money, who, as you will see in the media from time to time, exert editorial control over projects. The much ballyhooed documentary, "Citizen Koch" never saw the light of day as a result of meddling by you know who.

Likewise, I know firsthand how the local chief executive officer spiked  "Counterspin," the only show that held the media to account, produced by "Fairness and Accuracy in Media." FAIR is the national progressive media watchdog group, challenging corporate media bias, spin and misinformation. "Counterspin" corrects the prevalent bias. The CEO attempted to explain himself in a public forum and found his justifications poorly received and shouted down. What was never made clear was who forced his hand, and why.

All of which we are supposed to blissfully ignore and go on our merry way, continuing to drink from a poison trough. With that background in mind, let's bring this week's monstrosity, courtesy of your tax supported local public media and NPR: wholly in thrall to fracking interests, shale oil is a boom, they say. Harvard economist Michael Porter's new report is exciting, they say, using all the breathless adjectives and adverbs available to a fresh crop of marketing interns. Porter's report is duly excited

about the deep reserves of natural gas and oil that have been made accessible by hydraulic fracturing technology, or fracking — a boon he examines in detail in a new report.

"It is a game changer," Porter says. "We have estimated that already, this is generating a substantial part of our GDP in America. It's at least as big as the state of Ohio. We've added a whole new major state, top-10 state, to our economy."

Woo-hoo! Holy 2012, Batman! Happy days are here again! Perhaps budget cuts at NPR news has meant they don't consult industry reports or the financials. The NPR report fails to mention the shuttering of wells and the thousands of layoffs in the oilfields and in related support industries. Or the worldwide low price of oil, which has become so cheap that many companies have stopped drilling. The sad truth is that the shale oil boom is actually already over. Tom Lewis has the sobering details at his blog, The Daily Impact:

It comes now from the US Energy Information Agency, and is headlined by Bloomberg Business, so yes, it’s official. As Bloomberg put it, “US Shale Boom Grinds to a Halt.” Which, actually, is overstating the case by a good bit, there isn’t going to be a “halt.” Nevertheless, as sane people everywhere have been insisting for years, the shale boom is, as it always was going to be, a bust.

This — now official — assessment is in the form of a set of projections by the EIA, which, we should remember, has pretty consistently been overly optimistic in its assessment of the oil business. Remember, they were the folks who estimated that the Monterey Shale in California held 14 billion barrels of recoverable reserves — two-third of America’s total oil wealth — until they ran the numbers again and re-estimated the Monterey at 96% lower.

 

This shale oil boom  has always been a classic American hustle, designed to coax capital out of investors with the promise of liquid gold in them thar shales. Rig counts have been dropping for 26 straight weeks, since the world price for crude bottomed out late last year. 67% of US rigs have been taken out of service.  Don't believe me; do your own due diligence.  But remember this story the next time your local public radio station goes on the air begging for funds, or when a friend cites an NPR report as proof of the veracity of some story. Bet them a tote bag they're wrong.

 


Food Banks In New York Are Running Out Of Food

 Here's one of the most depressing stories that moved last week.

Welcome to the Recovery! Food banks across the US state of New York are running out of food (37% of food pantries say they have had to turn away needy people because they ran out of food), amid falling funds and rising demand from people that have trouble affording food. About 2.6 million people have trouble affording food across New York with about 1.4 million New York City residents relying on food pantries to feed themselves, according to the Food Bank For New York City. But as PressTV reports, contrary to the belief that people visiting food pantries are homeless and jobless, most customers are employed, but are not paid enough money to put food on the table without help.

This is a point worth repeating: people using food banks are working people, people who have jobs, people who get up the same way you do, pull on their trousers or slacks, and go put in their 40 to 60 hours, but are still unable to feed themselves and meet their other obligations. You may find yourself asking, "Are there no prisons? Are there no workhouses?  Or even, is there no Congress?" Oh yes, Congress has noted well their plight. As Joshua Krause via The Daily Sheeple notes,

Despite the media’s claims that we’re no longer in a recession, millions of Americans are still struggling to make ends meet. It seems that America has developed a permanent underclass of citizens that just can’t quite rise above their poverty. No matter how high home prices rise or how far the stock market soars, the profits never seem to trickle down to this segment of society.
 
If you’re looking for proof that this permanent underclass exists, look no further than the massive number of people who still rely on food stamps and food pantries to survive. In fact, their ranks may be growing, which is starting to cause some food pantries to run out of resources on a regular basis. In New York City, 1.4 million residents eat at food pantries (out of a total population of 8.5 million), a number which is currently growing 20% every year.
 
The largest influx of food bank users occurred in 2013, when Congress cut the Supplemental Nutrition Assistance Program by $18 per person. Since that time, 40% of food stamp users have had to turn to food banks to sustain themselves, and 37% of food banks in New York City have admitted that they have turned away hungry residents in recent years, after running out of food.

Meanwhile, televangelists like Kenneth Copeland, Joel Osteen, and Creflo Dollar preach the Gospel of Prosperity to some of the largest congregations in the country, and host television programs that seem to air continously. One recalls the Bible's shortest verse: "Jesus wept."

 


banksy 07-flower-thrower-wallpaperSurly1 is an administrator and contributing author to Doomstead Diner. He is the author of numerous rants, articles and spittle-flecked invective on this site, and quit barking and got off the porch long enough to be active in the Occupy movement. He shares a home in Southeastern Virginia with his new bride Contrary in the triumph of hope over experience.

It’s Official: The Shale-Oil Boom is Over

Off the keyboard of Thomas Lewis

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Published on the Daily Impact on June 9, 2015

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It comes now from the US Energy Information Agency, and is headlined by Bloomberg Business, so yes, it’s official. As Bloomberg put it, “US Shale Boom Grinds to a Halt.” Which, actually, is overstating the case by a good bit, there isn’t going to be a “halt.” Nevertheless, as sane people everywhere have been insisting for years, the shale boom is, as it always was going to be, a bust.

This — now official — assessment is in the form of a set of projections by the EIA, which, we should remember, has pretty consistently been overly optimistic in its assessment of the oil business. Remember, they were the folks who estimated that the Monterey Shale in California held 14 billion barrels of recoverable reserves — two-third of America’s total oil wealth — until they ran the numbers again and re-estimated the Monterey at 96% lower.

So they might not be great statisticians, but they are the ones we have, and upon whom the world relies for US oil numbers. And they now say that shale oil production in the US — which for five years has been on a rocket-launch trajectory that should have punched through six million barrels per day by now — will fall to 5.58 million bpd this month and to 5.49 million bpd next month and ever faster thereafter. The trajectory of a rocket when the engine quits.crude graph

EIA’s forecasts are based on the number of rigs at work and their estimated productivity. The rig count has been dropping for 26 straight weeks, since shortly after the world price for crude oil cratered late last year. 67% of US rigs have been taken out of service. So it’s a bit of a mystery how production has been maintained this long, especially by firms that went into this crisis deeply in debt and hemorrhaging cash.

One explanation is that the rigs taken down were the least productive and the ones remaining the most fruitful. But that does not explain how insolvent companies continue to sell their product at a loss. I suggested the most likely rationale last week [Oil Money: Too Dumb to Fail]: that whacked-out investors with too much money for their own good were betting that oil will rise again (just like the South) and that all will soon be well. On that flimsy basis they have been shovelling money at some of the worst balance sheets in the history of accounting.

The popular press — including, I am sorry to see, Bloomberg — has been ascribing these events to a complex global game of market-manipulation chess being played by Saudi Arabia and the other OPEC countries. Curses! they say, Foiled again by those crafty devils! Reality check number one: those crafty devils are simply not that smart. Reality check number two: everything that is happening to the shale patch now would have happened if the price of oil had stayed above $100 a barrel. Because our crafty fracking devils aren’t that bright either.

[Rule Number One here at the Daily Impact: when an event can be explained as the result of either conspiracy or stupidity, go with stupidity. If you want to be proved right.]

Remember the talk, just a year ago, of “energy independence?” Of how we were going to be “Number one in the world in oil and gas production?” Of how we would start exporting the stuff and thus bend the rest of the world to our will? All gone now, as the EIA has just confirmed.

Reality is back. The fracking boom will be a bump on the long slide to no oil at all, and as the other, last-ditch sources of the last few drops play out, the industrial world has less and less time to execute a very hard landing, or to do nothing and, as the pilots say, augur in.

And that’s official.


Thomas Lewis is a nationally recognized and reviewed author of six books, a broadcaster, public speaker and advocate of sustainable living. He also is Editor of The Daily Impact website, and former artist-in-residence at Frostburg State University. He has written several books about collapse issues, including Brace for Impact and Tribulation. Learn more about them here.

New U.S. Recession Already Here

From the keyboard of Thomas Lewis
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First published at The Daily Impact  May 14, 2015
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MICROSOFT

 


We hear every day from the bean counters whose jobs require them to play in the Don’t-Worry-Be-Happy Band, whose favorite numbers (by which I mean their favorites, not ours) are “Recovery is Bustin’ Out All Over,” “Happy Days are Here Again,” and “When I am a Rich Man.” The other, independent bean counters are hard to hear amid the blaring brass, but if you pay attention you can hear what they’re yelling: the next recession has already started.

When the federal government reported yesterday on the growth of retail sales last month, there wasn’t any. Growth, that is. April sales overall were flat compared with March, with declines in autos, department stores, electronics & appliances, furniture and food & beverages. The strongest growth was in internet, sporting goods, restaurants & bars, and health store sales. Overall sales increased year to year, but by less than one per cent, the slowest growth since 2008. Wait, wasn’t that the year the last recession hit stride? What a coincidence.

This is hardly the first or only indication that the U.S. economy is in serious trouble. Federal agencies have reported just in the past week or so that consumer confidence is plummeting, and household spending is expected to nosedive. Last month, statistics on the gross domestic product in the first quarter of the year showed consumer spending to be weaker than at any time since World War II, except for the fourth quarter of 2008. Another coincidence.

The GDP report, whose bottom line was a dismayingly tiny growth of 0.2%, included another stunner. During the first quarter, privately held, unsold inventories of stuff increased by  $122 billion. Without the activity generated by putting all that stuff in storage somewhere, the GDP would have been down by 3% and all hell would have broken loose. The question now is, with consumer spending anemic and getting weaker, who is going to buy all that crap?

If American consumers suddenly decide to go shopping, by the end of this year they will have more than 6,000 fewer stores in which to do it. That’s how many store closings have been announced so far, including Radio Shack (1784), Office Depot/OfficeMax/Staples (625), Dollar Tree/Family Dollar (340), Barnes & Noble (223) Walgreen’s (200), Sears (77), see the full list here.

When the economy sputtered in January the apologists said don’t worry, it’s just a blip, lower gas prices will fix everything. When it was worse in February they said don’t worry, it’s the bad weather, spring will come and fix everything (but wait — doesn’t the small print on those guesstimates say “seasonally adjusted?”). When March missed expectations they said don’t you worry, April will blow your socks off. It’s mid-May and everyone’s socks are still on.

Without taking into consideration the collapse of oil fracking, now ongoing; or the frightening flight of money from the bond markets, now ongoing;  or the imminent eruption of the overheated casino stock market, expected any minute; the economy’s fundamentals indicate that recession, at least, has begun. So it’s too late to ask whether we’re going to have one. What we need to ask now is, how bad is it going to be?

Quick — another chorus of “Happy Days.”

 

 


Thomas Lewis is a nationally recognized and reviewed author of six books, a broadcaster, public speaker and advocate of sustainable living. He also is Editor of The Daily Impact website, and former artist-in-residence at Frostburg State University. He has written several books about collapse issues, including Brace for Impact and Tribulation. Learn more about them here.

 

The Oil Crash: Something Wicked This Way Comes

Off the keyboard of Ugo Bardi

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Published on Resource Crisis on May 11, 2015

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The recent oil price crash signals the impending demise of the oil and gas industry as a major world energy producer. That should be a good thing, in principle, but something wicked may still come out of the process.

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With the ongoing collapse of the oil prices, we can say that it is game over for the oil and gas industry, in particular for the production of "tight" (or "shale") oil and gas. Prices may still go back to reasonably high levels, in the future, but the industry will never be able to regain the momentum that had made its US  supporters claim "energy independence" and "centuries of abundance." The bubble may not burst all of a sudden, but it surely will deflate.

So, what's going to happen, now? The situation is, to say the least, "fluid". A great rush is ongoing to convince investors to place their money where there is still some chance to make a profit. I think we can identify at least three different strategies for the future: 1) more of the same (oil and gas) 2) a push to nuclear, and 3) a push for renewables. Let's see to examine what the future may have in store for us.

1) A push for more gas and more oil. The oil&gas industry has not yet conceded defeat; on the contrary, it still dreams of centuries of abundance (see, e.g. this article on Forbes). It seems unthinkable that investors would still want to finance uncertain enterprises such as squeezing more oil from exhausted fields or, worse, from difficult and expensive technologies such as coal liquefaction. But you should never underestimate the power of business as usual. If people feel that they absolutely need liquid fuels, then they will be willing to do anything to get liquid fuels.

The main problem with this idea is not so much its technical feasibility. By throwing every resource at hand at the task (and beggaring the whole economy in the process) it would not be impossible to fool peak oil for a few more years. The problem is a different one: it is with climate change and with the fact that we are running out of time. If we keep burning hydrocarbons, we just can't make it: the industrial society cannot survive the resulting warming and the associated troubles. That is true if we keep burning at the "natural" rate, that is along the bell shaped curve. Imagine if we try to keep growing, instead (as all politicians in the world say we should).

All this is becoming well known and, as a result, a push toward further hydrocarbon production (or, God forbid, more coal) will be possible only if accompanied by a strong propaganda campaign destined to silence climate science and climate activism. Some symptoms that something like that is in the making are evident enough to be disturbing. Consider that none of the Republican candidates for the US 2016 elections supports the need for action on climate change, that in Florida government employees are not allowed to use the term "climate change" or "global warming," that NASA has been defunded on anything that has to do with climate change, and more. Then, a certain logic starts to appear: "muzzle the science and keep on burning". Something very wicked this way comes…..

2. A new push for nuclear. This option would not be so bad as the first, more hydrocarbons. At least, nuclear plants do not directly generate greenhouse gases and we know that it is a technology that can produce energy. Nevertheless, the hurdles associated with its expansion are gigantic. The first and foremost problem is that the uranium mineral production is not sufficient for ramping up nuclear energy from a few percent of the world's primary energy production to a major fraction of it – to be able to do that would require investments so large to be mind boggling. To say nothing about the need for rare minerals in nuclear plants: beryllium, niobium, hafnium, zirconium, rare earths, and more; all in short supply. Then, there are all the nightmarish problems of nuclear waste disposal, safety, and strategic control.

Nevertheless, if it were possible to convince investors to pour money into nuclear energy, then it would be possible to see an attempt to restart it, despite the various problems and disasters that have given to nuclear a bad name. An attempt to do just that seems to be in progress. President Obama is said to be considering a massive return to nuclear and investors are told to prepare for a gigantic surge in uranium prices. Will it work? Unlikely, but not impossible. Something wicked this way comes……
 

hafnium as a neutron absorber, beryllium as a neutron reflector, zirconium for cladding, and niobium

 

 

 

Read more at: http://phys.org/news/2011-05-nuclear-power-world-energy.html#jCp


3. A big push for renewables. Surprisingly, the renewable industry may have serious chances to take over from a senescent oil industry, leaving the nuclear industry standing still and gasping at the sight. The progress in renewable technology, especially in photovoltaic cells, has been simply fantastic during the past decade (see, e.g., the recent MIT report). We have now a set of methods for producing electric power that can compete with traditional sources, watt for watt, dollar for dollar. Consider that the most efficient of these technologies do not need critically rare materials and that none brings the strategic and security problem of nuclear. Finally, consider that it has been shown (Sgouridis, Bardi, and Csala) that the present renewable technology could take over from the current sources fast enough to prevent major damage from climate change.

It looks like we have a winner, right? Indeed, the atmosphere around renewables is one of palpable optimism. If renewable energy picks up enough momentum, there will be nothing able to stop it until it has catapulted all of us, willing or not, into a new (and cleaner) world.

There is a problem, though. The renewable industry is still tiny in comparison to the nuclear industry and especially in comparison to the oil and gas industry. And we know that might usually wins against right. The sheer financial power of the traditional energy industry may well be enough to abort the change before it becomes unstoppable. Something wicked may still come……. (*)

(*) "Something wicked this way comes" is mainly known today as the title of a 1962 novel by Ray Bradbury. Actually, it comes from Shakespeare's Macbeth..

The Crash of 2015: Vultures vs. Jackals

From the keyboard of Thomas Lewis
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First published at The Daily Impact  April 25, 2015
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So. How have you frackers been feeling, lately? Just checking. (Photo by docentjoyce/Flickr)

So. How have you frackers been feeling, lately? Just checking. (Photo by docentjoyce/Flickr)

 


The crash of 2015 has been paused temporarily by a curious circumstance: a brawl among the financial scavengers who by now should have carted away the body parts of the great American fracking boom. Against all logic, financial vultures are fighting with financial jackals for possession of the corpse, and while doing so are pumping transfusions into it even though decomposition is already well under way. Here’s what’s happening:

The Vultures believe the decline of American oil fracking is only temporary, a product of the sudden decline in oil prices that struck last fall, and that with the inevitable return to $100-a-barrel oil, the frackers will return to profitability. Now, this is a curious thing to believe when it is easily determined that the companies involved have had negative cash flows since the very beginning of their revolution,even at $100 a barrel. Nevertheless, the Vultures believe in their scenario so fervently that they have been amassing cash with which to buy up prostrate frackers at the bottom of the market and thus make billions as the market rises, phoenix-like, back to the skies. Private equity firms such as Blackstone, Carlyle Group, Apollo, and KKR, for example, have raised about $30 billion and are just waiting to see the floor to begin their coup.  But where’s the floor?

Funny story about that. The Hyenas have a similar strategy but are using different tactics. They are the ones transfusing the corpse with fresh money, buying up junk bonds and penny stocks by the dump truck load so they will be in position for the resurrection — not because they have bought the company but because they have bought into it. Their injections are keeping the corpses alive enough that they are still twitching: the death certificate cannot be signed, and the Vultures cannot land. It’s a scavenger standoff.

This is yet another unforeseen consequence of two serious infections afflicting our financial system (leaving aside, for the moment, the ailments of the fracking boom). One sickness is the enormous amount of cash, the largely unearned wealth of the two per cent, sloshing around in the frantic hands of managers under orders to do something with it, make the clients some decent return on investment, you know, like 20%. The other is the cold dead hand of the Federal Reserve, holding interest rates for all safe investments to around one per cent, forcing the frantic to take their money to a casino somewhere and risk it all in search of the legendary 20%.

The stock-market casino is on fire and it looks like the roof is going to come down any day now, so they’re not going there. They’ve already blown up the housing market, and pretty well saturated the subprime auto-loan bonanza, and have bought up a gazillion foreclosure houses to rent out (and in the process have found out just how much it sucks being a landlord). “Over here!” someone yelled a few months ago, “I found 12%!” And the stampede was on, leading to the current contretemps between buzzards and hyenas.

But the zombie companies that have lured them in to the feast are, in fact, still dead. Bloomberg reports that half of the 41 fracking companies now doing business in the United States will be gone by year’s end. And that Schlumberger Ltd., the world’s largest oilfield services provider, will lay off 11,000 people, the second largest downsizing since the oil-price crisis began (the largest? Schlumberger’s elimination of 9,000 jobs in January). Rig counts are dropping and so is production.

The dispute between the vultures and the hyenas does not make the corpse they are contesting more valuable. It simply delays the disposition of the remains and the resumption of the Crash of 2015. For maybe a week.

 


Thomas Lewis is a nationally recognized and reviewed author of six books, a broadcaster, public speaker and advocate of sustainable living. He also is Editor of The Daily Impact website, and former artist-in-residence at Frostburg State University. He has written several books about collapse issues, including Brace for Impact and Tribulation. Learn more about them here.

 

 

Shale Gas & Fracking: Science or Propaganda?

Off the keyboard of Brian Davey

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Published on FEASTA on April 9, 2014

Frack-Map-2

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Shale Gas and Fracking: The science behind the controversy – review by Brian Davey

By Michael Stephenson, Elsevier, 2015. Michael Stephenson is Director of Science and Technology at the British Geological Survey.

Anyone looking for a comprehensive review of the controversies associated with fracking is going to be disappointed by this short book. After having ploughed almost all of its 170 pages I found, near the back, the following sentence:

“I won’t go through all of the contested issues, because the chapters in the book provide a basis to carve out your own analysis looking at some of the main peer reviewed papers”.

So the message is that if you want to make up your mind about shale then go to the peer reviewed literature. The implied message in this, made explicit at times, is that many opponents of the shale gas industry don’t do this and many members of the public rely too heavily on rumour and panicked reports leading to what Michael Stephenson claims is a low quality to the public policy debate. The public policy debate needs to be guided by academic scientists in peer reviewed papers…..like him.

As he writes, towards the end of this book:

“In this book I hope I have shown how a controversial subject can be tackled with science. There are various definitions of science around. One that I like is “…a systemic endeavour that builds and organises knowledge in the form of testable explanation and predictions about the universe.”

“I like the word endeavour because it implies that a lot of science is slow and may be painstaking. I also like the bit about testable explanations and predictions. Most science is a long journey, which sometimes goes in the wrong direction, but this element of testable explanation, usually means it gets back on the right track….If it is properly funded, if the scientists are listened to and if their results are out there for all to see then the public debate is better, and policy and regulation are better. ” (p 145 )

While reading this particular passage, sitting in the library of the British Geological Survey in Keyworth near Nottingham, I had to suppress the urge to blow a raspberry.

A lot of science is slow and painstaking Stephenson tells us, and it sometimes goes off on the wrong direction but don’t worry, with more time it will get back on track.

Well, how much time do we have, Professor Stephenson? Leaving aside for now which side of the issue he would come down on, would Professor Stephenson not agree that the stakes are incredibly high? The stakes are high because they concern whether people are to have their living environment and their health ruined, or not. They are high because they concern whether shale gas contributes to triggering runaway climate change, overshooting 2 degrees above pre-industrial temperatures, or not. So how much time do we have to solve these problems?

The facts are uncertain and in dispute and there is a lot at stake and Professor Stephenson is telling us that the process must be slow and painstaking. Yet the government had already made up its mind by 2012. It had taken all the important decisions about pushing this industry – with people like Stephenson giving it cover. By January of that year Stephenson had already published an article in New Scientist titled “Frack responsibly and risks and quakes are small.”

So if science is slow and needs time for scientists to debate things based on the evidence from peer reviewed articles – how come Mike Stephenson already knew 3 years ago that “responsible fracking” had low risks? What about all the evidence gathering that was so necessary to come to that conclusion?

As it turns out three quarters of the available studies on the impacts of shale gas development were published in the two years 2013 and 2014. The number of peer reviewed studies doubled between 2011 and 2012 and then doubled again between 2012 and 2013 while in 2014 there were at least 154 peer reviewed studies. The bad news for Mike Stephenson is that almost all reveal problems with fracking. Might it be that Mike Stephenson came to a provisional conclusion 3 years ago and assumed that he did not have to change his mind? Or might it be that he has not been keeping pace with the literature since then?[1]

I don’t know the answer to these questions but it seems fair to me to ask. If you are going to profile yourself as an advocate for scientific research and peer reviewed articles deciding policy, after having “raised the quality of public debate”, then it seems to me you ought to regard yourself as also being under corresponding ethical obligations. These include:

(1) not finally deciding before the evidence is in, or at least taking pains to explain that your opinion is provisional and might be revised with more information;

(2) attempting some coverage of all the major controversial issues rather than just choosing a small sample of issues for your review of the peer reviewed literature and then covering other issues in a less thorough way or not mentioning them at all;

(3) making an effort to take in and accurately presenting points of view that are not your own;

(4) staying up to date on the scientific debates in dispute.

In this review I intend to show that Mike Stephenson has not done these things. As already pointed out he wants to say – you must do your own peer review process of the controversial issues. Well, anyone who wants an in depth understanding will indeed have to but it’s a very convenient approach for the author to deal with some issues and then not to deal with the others. A casual reader with little time could easily read this book, and assume that by doing so they have got the gist of the main arguments, and that they do not need to read further. If they did do this it is my contention that they would be left with an extremely misleading impression. Many problems with fracking that are now emerging in peer reviewed articles would remain unknown – out of sight out of mind. They would be unknown unknowns.

Climate Policy

Nor do I think that Stephenson has done a very good job of presenting alternative viewpoints – particularly in the debate about climate policy. He relies heavily on an approach to climate policy advocated first of all several years ago by S. Pacala and R. Socolow of Princeton University, the so called “stabilisation wedges” approach. This is an approach, in case you did not know it, that is sponsored by BP. It is also NOT about reducing global emissions but is about keeping emissions “flat” over the next 50 years. It is about stopping emissions growing until such time as the world has developed the capacity for carbon capture and underground storage. [2] Such a policy would, of course, be another great job creation scheme for geologists for it is they that would have to identify the safe places for underground storage. At the same time the fossil fuel industry, having played the major role in digging or pumping carbon out of the ground would now be able to make big money pumping the CO2 back into the ground.

The problem with this approach of course is that the world does not have time to stabilise emissions according to the agenda of BP. Emissions have to fall and very fast indeed if the world is to have any chance of not overshooting a 2 degree temperature increase over the pre-industrial. Leading climate scientists like those of in the Tyndall Centre are quite clear on this. Scientists like Kevin Anderson of Manchester University had repeatedly made submissions to parliament making this point drawing on the peer reviewed science that they have done. In a blog that Anderson put on this own website in January of this year he explains [3]:

“Shale gas within 2 degrees C carbon budgets. The development of a UK shale gas industry is incompatible with UK’s equitable share of the IPCC’s carbon budget for a “likely” chance of not exceeding the 2 degrees C obligation. This remains the case even if shale gas can be combined with carbon capture and storage (CCS) technologies. The CO2 emissions from gas CCS are anticipated to be 5 to 15 times greater per kWh of electricity generated than are the emissions from either renewable or nuclear. Add to this the timeframe for developing a mature UK shale gas industry and, even with CCS, shale gas can have no appreciable role in the UK energy mix”.

Fugitive emissions

Now let’s turn to the issue, mentioned in the book, of “fugitive emissions”. As Stephenson acknowledges, the real killer for any argument that natural gas is better for the climate than coal is evidence about so-called “fugitive emissions”. This is a phrase used to describe the leakage of natural gas or methane into the atmosphere during the production and distribution of natural gas. Since natural gas is mainly methane and since methane is a very powerful greenhouse gas, much more powerful that CO2, a high level of leakage would completely undermines the case for shale gas. If fugitive emissions are high then the argument for natural gas is lost – if they are low then there is a case that natural gas is a lower carbon energy source (although whether it is low enough, given the need to rapidly reduce emissions, is another question). So what’s the situation and how does Stephenson describe it in this book?

As Stephenson says there are two ways of trying to measure fugitive emissions – the bottom up method, measuring leakage in and through equipment and the top down method from aircraft, towers and so on. The two methods of measurement give very different results and if the airborne measurements are the more accurate ones then the verdict goes against natural gas on climate grounds. So this is a crucial question – and what concerns me here is how well the author tells this particular story and presents the evidence.

In my judgement – he does not do a very good job. He presents just one study about airborne measurement by Scott Miller et al. which does not fit his preferred view and then tries to dissuade the reader about the top down measurements:

“Are these broad brush atmospheric measurements more reliable than the patchy measurements from actual well operations? Perhaps, but can we be sure that the aircraft measurements are attributing methane to the right sources, after all swamps and municipal waste dumps produce methane – as do cattle. And cattle are common in Texas” (p 117)

Later the reader is again leaned on as to how to interpret the balance of the literature. On page 144 we are told

“Now taking the issue of whether shale gas is lower carbon than coal the conclusion of a balance of peer reviewed articles is that it probably is. Although shale gas does come with fugitive emissions, these probably don’t offset the ‘carbon savings’ that you get by using shale gas rather than coal in a power station. But the conclusion is tentative because it does step from a rather small number of measurements that suggest that fugitive emissions aren’t particularly large and does go against one study (Howarth’s group at Cornell University) that suggests large fugitive emissions”.

Note that by this stage in his book the top down airborne emissions measurements have disappeared from Stephenson’s presentation of the issues. No mention of Scott Miller here. Has Scott Miller been dismissed because he and his team might be measuring cattle burps after all?

Cattle that burp propane…and missing studies that don’t make it into this book

When I read this I went off in search of the Scott Miller article and an academic friend easily dug out a few more articles about the airborne measurement of emissions from the academic literature. Surprise surprise – Scott Miller et al were well aware of cattle, municipal waste dumps and other sources of methane. In fact their paper was not just about oil and gas field sources of methane. It was arguing that there is a general underestimate of methane emissions, including from cattle. It was also about tracking down the different sources and in regard to confusing cattle emissions with gas field ones his article says this:

“Texas and Oklahoma were among the top five natural gas producing states in the country in 2007and aircraft observations of alkanes indicate that the natural gas and/or oil industries play a significant role in regional CH4 emissions. Concentrations of propane (C3H8), a tracer of fossil hydrocarbons, are strongly correlated with CH4 at NOAA/DOE aircraft monitoring locations over Texas and Oklahoma (Fig. 5). Correlations are much weaker at other locations in North America ( to 0.64). “

So what is going on here Professor? Do Texas cattle burp propane?

As I wrote earlier, if you’re going to argue for peer reviewed science settling issues then you really are going to have to do a literature search to see if there are other relevant articles. In this case there are. For example, there is an article by Anna Karrion and team in the Geophysical Reserach Letters in 2013 [5]

Their article is titled “Methane emissions estimate from airborne measurements over
a western United States natural gas field”. It was published in August 2013 so there are no excuses for not finding and citing it. The measurements were taken over the Uintah gas field in Utah in February 2012 where 6.2 to 11.7% of production was found to be leaking. This level of methane leakage is a disaster for the climate – and a disaster for the argument of Professor Stephenson too.

But perhaps this was cattle burping? However the Karrion research team did adjust their measurements for cattle and natural seepage. These adjustments were based on a study of methane emissions from free range cattle combined with census data of cattle for this region, available from the US department of Agriculture. Another study of methane seepage was also taken into account. It is interesting to compare the magnitudes. The research team only shaved 2.5% off their measured gas flux to correct for cattle and natural seepage – with the rest of the measurement being oil and gas field related. The other 97.5% of the gas was from the field.

There was no excuse for not mentioning this. In fact there have since been other studies.
I do not know when Stephenson’s book went to press but 6 months before its recent release there was another study by Schneising et al. that used satellite data for the Bakken and Eagle Ford formations. Scientists from Germany, the United Kingdom and the University of Maryland show 10.1% (plus or minus 7.3%) and 9.1% (plus or minus 6.2%) for the Bakken and Eagle Ford formations respectively.[6]

Flaws in the inventory measurement of methane emission rates

To complete that argument let’s look closer now at the sources that Professor Stephenson bases himself on – the studies by MacKay and Stone and by Allen et al at the University of Texas. Here I am relying heavily on free lance researcher Paul Mobbs because he has done a study a critique of MacKay and Stone, which contains a critique of the Allen paper too. Basically Mobbs argues that the figures that MacKay and Stone use for leakage are too low and the figures that they use for gas production are too high. Thus the percentage of gas production leaking is miscalculated [7]. Let’s walk through this argument.

Firstly, Mobbs points out how the inventory method of measurement of leakage that MacKay and Stone use has been challenged. He cites an article in Nature which refers to the Colorado measurements from airplanes plus a new study in press of the Denver–Julesburg Basin conducted with scientists at Picarro, a gas-analyser manufacturer based in Santa Clara, California. The later study relies on carbon isotopes to differentiate between industrial emissions and methane from cows and feedlots, and the preliminary results line up with the earlier Colorado findings [8].

Mobbs also criticises the Allen paper on leakage referred to by MacKay and Stone and finds it to be flawed. It is a non randomised study of 0.1% of the wells drilled in the USA so cannot be taken as a representative sample. [7] The companies concerned volunteered themselves for measurement and if they did that it is probably because the companies were reasonable confident that measurements for their installations would be low. It is also relevant to point out, as Mobbs does, that the publisher had to correct the Allen article after initial publication, because the authors had not declared conflicts of interest.

Mobbs continues

“On the other side of the equation, the figures Mackay and Stone used for gas production per well are too high. Currently there is a great deal of debate over how much gas and oil unconventional wells actually produce [9]. Recent studies suggest that resource estimates need to be downgraded, now that we have sufficient statistical data of what is actually being produced in the field [10]. There is no specific source for Mackay and Stone’s figures, but their modelling assumes levels of gas production which are roughly twice the value determined by the US Geological Survey [11] and the US Department of Energy [12].

“The easiest way to explain the flaw in Mackay and Stone’s reasoning is this: The method of calculation was correct. However, they took a figure for the emissions from gas production which may be half what it should be. This was divided by a figure for gas production which was twice as big as it should be. The result was that they produced an estimate for emissions which was one quarter of what it should have been.”

How much production, now and in the future?

It will be noticed here that Mobbs makes reference to a debate about how much oil and gas unconventional wells produce. This leads me to another aspect of Stephenson’s book that needs critical appraisal. A reader will not find any inkling of this debate in the pages of the book. Stephenson uncritically takes the viewpoint of the United States Energy Information Agency (EIA), including its projection of future production. He appears to be unaware that, for some time now, a number of authors have been warning that the shale boom in the USA is a bubble that would burst and that it would all end in tears. There has been what has been called a “battle of the forecasts” but Stephenson makes no mention of it.

Straight from pages one and two Stephenson is telling us that shale gas will provide half of US domestic production before long. Increasing volumes will be exported to Mexico and Canada. Not only that – manufacturing is returning to the USA because of cheap fuels and bulk chemicals and primary fuels in particular are booming. It is all a wonderful success….

…or, alternatively, the kind of hype that is typical of an economic bubble.

So what can we learn from academic studies based on peer review? Here’s what Mason Inman says in that Nature article already cited [8]:

“To provide rigorous and transparent forecasts of shale-gas production, a team of a dozen geoscientists, petroleum engineers and economists at the University of Texas at Austin has spent more than three years on a systematic set of studies of the major shale plays. The research was funded by a US$1.5-million grant from the Alfred P. Sloan Foundation in New York City, and has been appearing gradually in academic journals and conference presentations. That work is the “most authoritative” in this area so far…

If natural-gas prices were to follow the scenario that the EIA used in its 2014 annual report, the Texas team forecasts that production from the big four plays would peak in 2020, and decline from then on. By 2030, these plays would be producing only about half as much as in the EIA’s reference case. Even the agency’s most conservative scenarios seem to be higher than the Texas team’s forecasts…..”

Oh dear – there are the peer reviewed forecasts and there are the assertions of Professor Stephenson. Speaking for myself the academic studies that have been appearing in peer reviewed journals seem more thoroughly researched than the forecasts derived uncritically from the EIA. (5 peer reviewed articles are mentioned in the Nature article).

Bubble economics – in a gold rush, sell shovels

Mike Stephenson has written a book about shale gas but has omitted to mention, perhaps because he did not notice, that most of the US shale oil and gas industry has not actually made any money. In fact it has lost a lot of money. Sure it has produced a lot of oil and gas and that has (probably temporarily) arrested the decline of the oil and gas sector in the USA. Sure this has brought oil and gas prices down – and in the last year it produced a glut that has led to a price crash. Sure, it has been a veritable bonanza for oil and gas equipment and logistics companies like Halliburton, Schlumberger and Baker Hughes. As the saying goes, “in a gold rush – sell shovels”. However, the exploration and production companies have been losing money year after year.

In a study presented to a recent industry forum in Heuston and available on YouTube a consultant called Art Berman gives free cash flow figures for a sample of 40% of US exploration and production companies in this sector. He shows negative cash flow of $13.5 billion in 2013 going up to a negative of $14.26 billion (annualised from 3 quarters) in 2014. As a result debt in the sector has risen from nearly $165 billion in 2013 to $172.5 billion in 2014. [13]

Note that most of this is before the recent crash in oil and gas prices – a crash produced by a glut in the market. And where did this glut come from? The answer is not from Saudi Arabia or the other producers, but from the shale sector in the USA. If the sector could not produce a profit last year and in 2013 how is it going to now? A number of authors have been arguing for several years that the shale oil and gas boom was a bubble. Was Professor Stephenson unaware of their work?

The fact is, and this is another thing that Stephenson does not discuss – the shale boom in the USA did not occur in an economic vacuum. Ultra- low interest rates brought about by “quantitative easing” after the economic crash of 2007-2008 meant that banks and institutions in the finance sector were looking for somewhere to put their money that would actually make money. There was a “hunt for yield” and a lot of that money went into junk bonds and capital for shale exploration and production companies which were prepared to borrow money at high rates of interest. This was based on their assumption and expectation that, at some point in the future the rising prices of gas and oil would start paying big time for their expensive to finance exploration and production frenzy.

As in every bubble the confidence that it would pay off, if not now, but eventually, has kept the process going….and kept the merchants of hype turning out the “good news” that people like Stephenson have swallowed uncritically.

All of this matters – for it is key to the Stephenson argument that there is a balance of risk and reward and if the shale gas story is not going to last and is economically unsustainable anyway then the rewards will be small or non-existent for the production companies and for consumers. This is not to deny, of course, that some companies will have made a lot of money. As I have said these are the services companies like Halliburton, Schlumberger and Baker Hughes who have “sold the shovels” in this particular “gold rush”. Such subtleties are not to be found in this book and Stephenson writes about risks and rewards without ever reflecting on the fact that those who get the rewards and those who get the risks loaded onto them are different people.

Professor Stephenson as Goldilocks – looking for just the right amount of regulation

If the shale gas boom is not going to last and is unsustainable then there are problems with another part of the Stephenson book – the bit about regulation. On pages 125-126 he opines:

“This book is about risk and reward in shale gas. The reward is jobs and growth – maybe cheap energy. The risk is damage to the environment and human health. In countries where shale gas is being developed how is this balance between risk and reward being struck? The answer is mainly through regulation. Regulation can’t be too stringent such that it completely stifles the ability for a company or a driller to try different techniques – but at the same time it can’t be too lax, such that that it doesn’t completely protect the public and the environment”

It’s all rather like Goldilocks and the porridge that was too hot, the porridge that was too cold and the porridge that was of just the right temperature. But what is lacking in this banal idea of trade-offs is the possibility that there is no such “just right” balance – that the level of regulation that would effectively protect the public would be so costly that it would stifle the industry – whereas the level of regulation that would enable the industry to operate profitably would be so weak that it would be highly dangerous to public and the environment. What is also lacking in this banal presentation of the issues is the possibility that some of the processes are not amenable to regulation anyway. As a peer reviewed guest editorial in the British Medical Journal, which was critically examining a report by Public Health England, puts it [14]:

“…the report incorrectly assumes that many of the reported problems experienced in the US are the result of a poor regulatory environment. This position ignores many of the inherent risks of the industry that no amount of regulation can sufficiently remedy, such as well casing, cement failures and accidental spillage of waste water.”

So tell us this Professor Stephenson – how does one regulate for traffic accidents and accidental spills? You can re-route heavy goods vehicle traffic – but tell us how you can you re-route the exhaust emissions from the large numbers of heavy vehicles or the other equipment? Also, you can regulate but tell us how you can you guarantee that companies will keep to the regulations? We’ve already had experience in Nottinghamshire, where I live, of one drilling company breaching several planning conditions and it was local people who noticed, not the regulatory authorities because they only have one enforcement officer for ALL planning issues in the whole of Nottinghamshire.

If “no amount of regulation” can sufficiently remedy problems of the industry then the argument that risk and reward can be balanced through regulation is purely and simply wrong. Or if I am wrong then it is up to Professor Stephenson to prove it using peer reviewed evidence. In his book he cites a study of a varying amount of regulation in different US states – but that is not engaging with the core issue. Prove that regulation makes enough difference Professor!

In fact I think Professor Stephenson will find that peer reviewed literature is beginning to suggest the opposite of what he wants us to believe. There is evidence that tighter regulations do not have an impact. A recent study from Colorado shows that even with tighter regulations air pollution that is damaging to health has increased. This was because emissions per well improvements were overwhelmed by the increased number of wells. [15]

What this makes clear is that while Stephenson waves the flag for looking at the scientific evidence in peer research articles there are lots of points in this book where his opinions, for that is what they are, are not backed up by peer reviewed research at all.
The Shale Gas Factory and things “we” must put up and cope with
This is particularly the case in the chapter called “The Shale Gas Factory” where he has his work cut out as an apologist. He is honest enough to acknowledge that a fracked gas field is (in his words) “unpleasant” to live close to, most of all in the drilling phase. He mentions the industrialisation of the countryside, the high volumes of traffic, the enormous size of the trucks, the fragmentation of the countryside into parcels, the tremendous noise, the effect on local wildlife. But his argument that people will have to put up with all of this is not based on peer reviewed science – it is the pleading of a gas industry advocate, pure and simple. For example, he writes:

“But all of these are nuisances that are associated with other industries and oil and gas activities. I don’t mean to minimise them, but they are the sort of things that we can cope with. Trucks can be re-routed; noise can be put up with, land can be reclaimed just like it can after any industrial activity like quarrying.”

I especially liked the “I don’t mean to minimise them, but they are the sort of things we can cope with”. Who is this “we” exactly? His entire book is an exercise in minimising the dangers and unpleasantness.

Note here the assumption that if the problems associated with fracking are the same as problems of the oil and gas industry in general then somehow they don’t matter so much and “we” will just have to be put up with them. All over the world the oil and gas industry works hand in glove with military dictatorships and autocracies and is implicated in human rights abuses because it operates with the assumption that it can enter other people’s space, other environments and the people who live there will have to put up with it. All over the world people are expected to “put up” with damage to their living environment and expected to “cope”.

But people all over the world do not want to put up with the damage done by the oil and gas industry. Which is why, when people start to oppose them the oil and gas companies use their connections in government and the big money that they earn to bribe politicians, hire mercenaries and/or work with military dictators to buy off opposition or repress it violently. For example, when Ken Saro-Wiwa campaigned against environmental devastation caused by Shell and other oil companies in Nigeria he and 8 other leaders of the Ogoni tribe was hanged with the connivance of the oil and gas companies like Shell. Closer to home the Shell to Sea campaign in County Mayo in Ireland shows another community that rejected the assumption that it should just put up with the construction of a natural gas pipeline through its parish. In that case the community formed links with the Ogoni campaigners in Nigeria. [16][17]

The oil and gas sector has a culture of its own – it is used to working against opposition. As the film Gaslands II shows, when people in the US started to campaign against fracking they found themselves dealing with people with expertise in counter-insurgency.
Here’s some more to reassure the reader:

“Will these activities be dangerous? They might be. Trucks might spill chemicals, waste tanks might overflow in a stream. But these are industrial installations that engineers are good at managing and have been managing for a long time. In many ways there is no difference from building sites.”

More nuisances that the Professor “does not mean to minimise”

Once again the professor “does not minimise” the dangers. But don’t worry. We are dealing with engineers. They wear hard hats so they must know what they are doing……

But have you got a peer reviewed article to back that up Professor Stephenson? Because here’s some information from a peer reviewed journal called the American Journal of Industrial Medicine from July of last year which actually compares oil and gas field fatalities to that on building sites. The research was into health and safety needs associated with drilling and fracking and was by researchers from the Colorado School of Public Health and the College of Health Sciences at the University of Wyoming. What they found was high injury and mortality rates among gas and oilfield workers. The occupational fatality rate was 2.5 times higher than the construction industry and seven times higher than that for general industry.[18]

Curiously, while the fatality rate was higher than on building sites the injury rates were lower than those of the construction industry. This suggests that injuries were under reported. Again I do not know the reasons for this but I speculate that it is because it is not so easy to hide a death but I suppose, as Professor Stephenson might say, people in the industry have learned to cope and put up with mere injury. Other problems that the researchers found that the workers coped and put up with were crystalline silica levels above occupational health standards as well as particulate matter, benzene, the noise and radiation.

The point I would wish to make at this point is that corresponding to the things that Mike Stephenson thinks “we” have to put up with there are statistics of accident rates, hospital admission rates, deaths. It is possible to see evidence of trends affecting professions working in fields like industrial medicine, health and safety and public health which eventually leads to informal studies and then to peer revewed studies.

After 2006 when the Shale boom hit the Bakken region in the USA, the Mercy Medical Centre in Williston and the Tioga Medical Centre in neighbouring Williams County saw their ambulance runs increase by more than 200 per cent. Tioga’s hospital saw a staggering leap in trauma patients by 1,125 percent. Mercy had a 173% percent increase.” Drugs (including overdoses of prescription drugs, methamphetamines, and heroin) explain many of the cases, with oilfield related injuries such as “finger crushed or cut off, extremity injuries, burns and pressure burns” accounting for 50% of the cases in one of the region’s hospital emergency rooms. [19]

Why is this such a dangerous and brutalised industry?

Now if you are a Professor Stephenson this is something to be put up with but other people might ask how it comes about that alcoholism, drug addiction, sexually transmitted diseases, violence and accidents suddenly shoot up when the oil and gas industry comes to town?

Might it be that the industry has a largely mobile workforce that arrives and has no attachment and hence no loyalty to the people and the areas that it moves through? Might it be that the workforce puts up with the noise, the fumes, the accidents and so becomes brutalised and indifferent to the people who live in the places that they rip apart and then move away from? Might also be that a highly mobile and partly international workforce who are dislocated like this, permanently transient, are desensitized emotionally and that that is what makes them turn to drugs and alcohol? It might be that this is an industry whose culture desensitises them and then they expect local people to put up with the destruction of the places that they move through? (These are my hypotheses for peer reviewed research with a workforce with undeniably high rates of drug, alcohol and violence problems).

On the other side of this process the people who have to put up with the industry, feel disempowered by the likes of Professor Stephenson, the politicians and his friends. They become understandably stressed and anxious and their mental health suffers – particularly when it is expected that these “are the sort of things that we can cope with”. Speak for yourself Professor.[20]

Some would say “home is where the heart is” but, for Stephenson, a loyal advocate for the industry that always just moving through on route to the next oil and gas field, an industry from which so much money for the BGS comes, it’s all a matter of personal preferences.

Here he is, “not minimising” again:

“As for industrialisation of the landscape and the shale gas factor, there’s no doubt that for a period of time that could last for as much as a year there will be intense industrial activity. After this, during production, activity is less intense and obtrusive and after abandonment there is no activity. Whether you think that the landscape is scarred and tainted with industry at this stage depends on your point of view. It’s true that access roads will still divide up the land after the wells are plugged and clearings in the woods will still be visible for a long time after. Some will say that’s what our landscape looks like already – a particular pattern of past uses of the land. Others will say it’s unacceptable” ( p108)

Well we know what Stephenson would say….unless perhaps if it was about where he lives, I don’t know. What I do know is that this has nothing to do with peer reviewed science. What I also know is if this sort of thing happens it leaves measurable scars on the people and the places that live there and this turns up eventually in statistics and then in peer reviewed articles about health.

As the Concerned Health Professionals of New York state “ public health problems associated with drilling and fracking are becoming increasingly apparent. Documented indicators variously include increased rates of hospitalisation, ambulance calls, emergency room visits, self reported respiratory and skin problems, motor vehicle fatalities, trauma, drug abuse, infant mortality, congenital heart defects and low birth weights”. ([21] [22] [23] [24] [25] [26] [27] [28] [29] [30] [31] [32] [33] [34] [35] [36] )

Note the infant mortality rates. Young children are being killed by this industry.

The case for the precautionary principle – criteria for where ‘enough is enough’

But let’s continue. If you are going to use peer reviewed articles to reveal what the issues are then it assumes that the industry will be able to go ahead anyway because you can only learn about the issues in real life by looking at the retrospective record. This indeed is the assumption of Stephenson’s book. You will not find in it any criteria for deciding that the health or environmental damage has exceeded some threshold level where Professor Stephenson thinks the government should cry “enough – this industry must be closed down as too dangerous to public health and/or too dangerous to local environments and/or too dangerous to the climate system.” Why Professor?

Of course there is a paradox in all of this – you can only gather evidence of whether something is safe or not, or can be made to be safe or not, through the actual doing. We can only say something like this in retrospect. You can only test your explanations and predictions about fracking by doing fracking – and if the doing of fracking shows the explanations and predictions that the risks are low to be wrong then it advances your science all right but, in the meantime, environments may have been damaged, you may have hurt a lot of people and you may have set off runaway climate change. Great for the science – but too late if you have created an industry, invested a lot of capital in it, built the gas fired power stations to burn the gas….and triggered a runaway process.

That, of course, is the case for the precautionary principle. While I read this book I looked out for mention of the precautionary principle and, towards the end looked in the index to check I had not missed it somewhere. It’s not in this book. Why not? Of course the precautionary principle is a damage avoidance strategy to be used to prevent things happening that might be very dangerous before the full evidence is in. It is supposed to be embodied in EU policy but in practice the powers that be and industrial interests never think in these terms because it restricts their freedom of action. Their attitude is – so what if there are risks if the industry and government can make other people and places carry these risks? Those are the sort of things that “we” – in other words those unlucky enough to be living in a gas field “can cope with”.

Of course in this case we in the UK are lucky because we have the experience right across the USA to help us decide whether to ban fracking or not. All the evidence is still not in – but we have a fair amount to go on. In this respect books like those of Mike Stephenson, which are powerfully misleading to the public and politicians can do a lot of damage. It is true that at £70 a copy not many people will read it but it will help to cover the backs of the decision makers and gives the appearance that they are following the evidence of their scientific advisers. No doubt it will also help the BGS show loyalty to its friends in the oil and gas industry. This will help to keep pulling in the money and contracts which pay for such a very large percentage of what the BGS does. It will keep the government sweet too.

Conclusion – the central idea of this book is banal and naive

In conclusion, the central theme of this book – that “science can be allowed to decide through peer reviewed debate” is at best innocent in the naive sense, pious and misleading. It evokes a world where issues are decided on by politicians and the public guided by neutral scientists who deliver the facts. But this fairy tale for the children begs all the difficult questions.

Firstly it takes time for the facts to emerge and, in the meantime there is uncertainty about how dangerous the industry is or is not. To find out what the situation is you have to let the industry proceed in at least one or more places but what you might find is that it does a lot of damage. So you find out when the damage has already been done – when, for those places it is too late.

Secondly what you are likely to find out if and when there is damage done is that a lot of resources get put into a cover up and massaging the truth. The clash of ideas is inevitably “polluted” by public relations strategies used particularly by the most powerful actors to influence which interpretations are presented and which get noticed in public debate.

Thirdly, the way issues are framed makes a huge amount of difference and it is possible to choose some issues and some papers about them and ignore or dismiss others in a way that is incredibly misleading.

Fourthly generous resources are available to present and research some avenues of inquiry while not being available at all to investigate others. The idea that there is ‘no evidence’ for a problem can be presented as proof that the problem does not exist whereas it may be proof that no resources have been made available to look.

Fifthly, narratives of risk and reward can ignore the way that some people might be rewarded while everyone else, including future generations, can lose badly. This can lead to a further paradox – the winners in public policy debates may be the people with the greater resources. But their greater resources may be because they are the beneficiaries of a process that others suffer from, and are impoverished by. There is then an asymmetry in the resources different groups bring to the public policy debate as well as an asymmetry in access to the “corridors of power” and the detailed policy making process.

In the end this leads to a situation in which the people who write the policy are the people who benefit from the policy – this includes the frackademics of course who get lots of money and are feted with lots of attention by high ranking politicians. Then places like the British Geological Survey keep raking in the money and the research grants – though quite why a geological institution should be a lead agency to research multi-dimensional issues of public health and environmental damage is itself debatable. Sure they have a role – but as a lead agency? Might it be because they are already closely tied into “collegiate” relations with the oil and gas industry so can be trusted by a government and officialdom that has also been co-opted by the industry? As Stephenson puts it:

“…if its properly funded, if the scientists are listened to and if their results are out for all to see then the public debate is better and policy and regulation are better…” (p145)

Yes, he would say that wouldn’t he?

Note

Most, though not all, of the literature referred to in this review are taken from the compilation of the concerned health professionals of New York which is downloadable at www.concernedhealthny.org

You can see Paul Mobbs’ scalable diagram of the political, academic, PR and industry connection which Stephenson is in at http://www.fraw.org.uk/mei/archive/fracktured_accountability/frackogram_2015.svg.

(1) S”hale gas and public health – the whitewash exposed.” The Ecologist Mobbs P. (2014) http://www.theecologist.org/News/news_analysis/2385900/shale_gas_and_public_health_the_whitewash_exposed.html

(2) http://cmi.princeton.edu/wedges/intro.php

(3) http://kevinanderson.info/blog/why-a-uk-shale-gas-industry-is-incompatible-with-the-2c-framing-of-dangerous-climate-change/

(4) http://www.pnas.org/content/110/50/20018.full

(5) GEOPHYSICAL RESEARCH LETTERS, VOL. 40, 4393–4397, doi:10.1002/grl.50811, 2013

(6) “Remote sensing of fugitive methane emissions from oil and gas production in North American tight geologic formations” Oliver Schneising, John P. Burrows, Russell R. Dickerson, Michael Buchwitz, Maximilian Reuter and Heinrich Bovensmann, in “Earth’s Future 2 (10) 548-558) Article first published online: 6 OCT 2014 DOI: 10.1002/2014EF000265 http://onlinelibrary.wiley.com/doi/10.1002/2014EF000265/abstract;jsessionid=EA0823B336056464D344E41EE226992A.f01t04

(7) http://www.fraw.org.uk/files/extreme/decc_2013-2.pdf ; http://www.theecologist.org/News/news_analysis/2417288/fracking_as_bad_for_climate_as_coal_uks_dodgy_dossier_exposed.html ;
http://www.fraw.org.uk/files/extreme/allen_2013.pdf

(8) ‘Methane leaks erode green credentials of natural gas’ by Jeff Tollefson at http://www.nature.com/news/methane-leaks-erode-green-credentials-of-natural-gas-1.12123#/b3

[9]    “A reality check on the shale revolution”, David Hughes, Nature, 21st February 2013 – http://fraw/files/extreme/hughes_2013.pdf

[10]    “Natural gas: The fracking fallacy”, Mason Inman, Nature, 3rd December 2014 – http://www.nature.com/news/natural-gas-the-fracking-fallacy-1.16430

[11]    “Variability of Distributions of Well-Scale Estimated Ultimate Recovery for Continuous (Unconventional) Oil and Gas Resources in the United States”, Open-File Report 2012-1118, U.S. Geological Survey, U.S. Department of the Interior, June 2012 – http://www.fraw.org.uk/files/extreme/usgs_eur_2012.pdf

[12]    “Updated Fugitive Greenhouse Gas Emissions for Natural Gas Pathways in the GREET Model”, A. Burnham et al., Energy Systems Division, Argonne National Laboratory, October 2013 – https://greet.es.anl.gov/files/ch4-updates-13

(13) “Years not decades. Proven Reserves and the Shale Revolution. The Apparent End of the Beautiful Story” http://www.artberman.com/wp-content/uploads/HGS-NA-Presentation-23-Feb-2015.pdf

(14) Editorial: “Mistaking Best Practices for Actual Practices. Public Health Englands Draft Report on Shale Gas Extraction”, British Medical Journal, 17th April 2014 http://www.bmj.com/content/348/bmj.g2728

(15) “Influence of Oil and Gas Emissions on Ambient Atmospheric Non Methane Hydrocarbons in Residential Areas of Northeastern Colorado”,Thompson et al 2014. Ementa: Science of the Anthropocene 2, 000035

(16) http://www.theguardian.com/world/2009/jun/08/nigeria-usa

(17) https://en.wikipedia.org/wiki/Shell_to_Sea

(18) “Occupational exposures in the oil and gas extraction industry: State of the science and research recommendations.”, Witter, R.Z., Tenney, L., Clark, S., and Newman, L.S. (2014). American Journal of Industrial Medicine, 57(7), 847-856. http://onlinelibrary.wiley.com/doi/10.1002/ajim.22316/full

(19) http://www.bakkentoday.com/event/article/id/37101

(20) “Potential health impacts of the proposed shale gas exploration sites in Lancashire.” Karunanithi, S. (2014, November 6). Reported at a meeting of the Lancashire County Council Cabinet, Thursday, 6th November, 2014 at 2.00 pm in Cabinet Room ‘B’ – County Hall, Preston, Item 9 on the agenda(1-68). Retrieved from http://council.lancashire.gov.uk/documents/b11435/Potential%20Health%20Impacts%20of%20the%20Proposed%20Shale%20Gas%20Exploration%20Sites%20in%20Lancashire%2006th-Nov-2014%2014.pdf?T=9

(21) Compendium at www.concernedhealthny.org

(22) “Study: More gas wells in area leads to more hospitalizations.” The Citizen’s Voice. Skrapits, E. (2014, October 2). Retrieved from http://citizensvoice.com/news/study-more-gas-wells-in-area-leads-to-more-hospitalizations-1.1763826

(23) “Fatal truck accidents have spiked during Texas’ ongoing fracking and drilling boom.” Houston Chronicle. Olsen,L. (2014, 11 September). Retrieved from (24)
http://www.houstonchronicle.com/news/article/Fracking-and-hydraulic-drilling-have-brought-a-5747432.php?cmpid=email-premium&cmpid=email-premium&t=1a9ca10d49c3f0c8a9#/0

(25) “Proximity to natural gas wells and reported health status: Results of a household survey in Washington County, Pennsylvania.” Rabinowitz, P.M., Slizovskiy, I.B., Lamers, V., Trufan, S.J., Holford, T.R., Dziura, J.D., Peduzzi, P.N., Kane, M.J., Reif, J.S., Weiss, T.R. and Stowe, M.H. (2014). Environmental Health Perspectives. Advance online publication. http://dx.doi.org/10.1289/ehp.1307732

(26) “Drugs, oilfield work, traffic pushing more people through doors of Watford City ER.” Bakken Today. Bryan, K.J. (2014, August 3). Retrieved from http://www.bakkentoday.com/event/article/id/37101/
(27) S Schlanger, Z. (2014, May 21). In Utah boom town, a spike in infant deaths raises questions. Newsweek. Retrieved June 10, 2014, from http://www.newsweek.com/2014/05/30/utah-boom-town-spike-infant-deaths-raises-questions-251605.html
(28) American Lung Association state of the air 2013. Retrieved June 10, 2014, from http://www.stateoftheair.org/2013/states/utah/uintah-49047.html .
(29) “Birth outcomes and maternal residential proximity to natural gas development in rural Colorado.” McKenzie, L. M., Guo, R., Witter, R. Z., Savitz, D. A., Newman, L. S., & Adgate, J. L. (2014). Environmental Health Perspectives, 122, 412-417. doi: 10.1289/ehp.1306722
(30) “Study shows fracking is bad for babies”. Whitehouse, M. (2014, January 4). Bloomberg. Retrieved June 10, 2014, from http://www.bloombergview.com/articles/2014-01-04/study-shows-fracking-is-bad-for-babies
(31) “The impact of oil and gas extraction on infant health in Colorado.” Hill, E. L. (2013, October). Retrieved June 10, 2014, from http://www.elainelhill.com/research
(32) “Shale gas development and infant health: Evidence from Pennsylvania (under review).” Hill, E.L. (2013, December). Retrieved June 23, 2014 from http://www.elainelhill.com/research.
(33) “Fracking’s real health risk may be from air pollution.” Abrams, L. (2013, August 26). Salon. Retrieved June 10, 2014, from http://www.salon.com/2013/08/26/frackings_real_health_risk_may_be_from_air_pollution/
(34) “Statement on preliminary findings from the Southwest Pennsylvania Environmental Health Project study” [Press release]. Dyrszka, L., Nolan, K., & Steingraber, S. (2013, August 27). Concerned Health Professionals of NY. Retrieved June 10, 2014, from http://concernedhealthny.org/statement-on-preliminary-findings-from-the-southwest-pennsylvania-environmental-health-project-study/
(35) “Investigating links between shale gas development and health impacts through a community survey project in Pennsylvania.” Steinzor, N., Subra, W., & Sumi, L. (2013). NEW SOLUTIONS: A Journal of Environmental and Occupational Health Policy, 23(1), 55-83. doi: 10.2190/NS.23.1.e
(36) Poll shows support for a drilling moratorium in Pennsylvania. StateImpact. Phillips, S. (2013, May 14). Retrieved June 10, 2014, from http://stateimpact.npr.org/pennsylvania/2013/05/14/poll-shows-support-for-a-drilling-moratorium-in-pennsylvania/

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