Category Archives: energy

Coal Myths and Legends: North Valmy as Dinosaur in the Coal Mine

The applause line “I dig coal” may play well in certain West Virginia venues, but it’s not playing all that well with Idaho Power:

“Idaho Power says its coal plants still generate capacity during high-demand periods, but baseload from the facilities has been declining—a trend it sees continuing in the region, and nationwide.

“The decline in baseload energy production is primarily viewed as driven by low natural gas prices and the expansion of renewable generating capacity,” the utility writes in its IRP. “Because of the low natural gas prices and expanded renewable generating capacity, wholesale electric market prices over recent years have frequently been too low to merit economic dispatch of coal generating capacity.”

Idaho Power is giving serious consideration to retiring its North Valmy plant in Nevada early; notice the references to natural gas prices and the expansion of renewable generating capacity.  In short, coal isn’t coming back, anywhere.

Why? Probably because capitalism works.  

“Coal has been crushed by the shale boom, which has made natural gas — coal’s biggest competitor — extremely cheap. The price that U.S. power plants have been paying for natural gas plunged 71% between 2008 and 2016, the Columbia report found. Coal prices were down just 8% in that same period.

At the same time, coal faces new competition from the rise of renewable energy, including wind and solar. The falling cost of solar energy combined with federal tax credits have created a boom in solar jobs. The solar industry ended 2016 with 260,000 workers, according to the Solar Foundation.” [MoneyCNN]

Why would a utility, or any other business for that matter, purchase supplies from a higher priced vendor when cheaper supplies are at hand?  If you want an example of how the “market works” this is it.  Utilities are increasingly using natural gas and renewables because those sources are (1) cheaper or (2) going to be cheaper in the long run.

A second point should be made — there are two coal markets: Metallurgical coal is used primarily in steel production; Thermal coal is used for electrical production.  Prices for metallurgical coal, also called Met Coal or Coking Coal, have increased as seaborne coal (from Queensland) tightens, and as supplies from Chinese mines diminish as their mines come under increased scrutiny about safety concerns.  The price of Met Coal is a function of not only American mines, but of Australian and Chinese sources.  The price of Thermal Coal has been declining since 2012 and doesn’t show any signs of reversing that five year trend anytime soon.  This is not a case of “if you mine it they will come,”  even with the decline in Thermal Coal prices, the price of natural gas and renewables are still putting pressure on the market.

The Columbia Study (pdf) explains, once again, how capitalism works.  What are the causal factors in the collapse of the coal mining sector of the economy?

“US electricity demand contracted in the wake of the Great Recession, and has yet to recover due to energy efficiency improvements in buildings, lighting and appliances. A surge in US natural gas production due to the shale revolution has driven down prices and made coal increasingly uncompetitive in US electricity markets. Coal has also faced growing competition from renewable energy, with solar costs falling 85 percent between 2008 and 2016 and wind costs falling 36 percent.”

Thus, bolstering the contention made previously that prices matter, and if lower prices are available for some commodity, then that’s where the “market” will go.  There are other factors: (pdf) A slowdown in Chinese manufacturing demands; deregulations may not have any significant effect on mining if the prices for natural gas and renewables continue to decrease; and, while we might expect a modest recovery to 2013 levels — that’s probably all that can be squeezed from this market.

So, Idaho Power/NVEnergy’s decision to concentrate on production using more renewables and natural gas is likely to be sound economically for long term corporate health — and the old coal-fired North Valmy plant sits like a Jurassic Creature in Pumpernickel Valley.

As for employment prospects, coal mining isn’t a growth industry: (pdf)

A plausible  range of US coal mining employment in these scenarios ranges from 70,000 to 90,000 in 2020, and 64,000 to 94,000 in 2025 and 2030 — lower than anything the US experienced before 2015.

Thus, basing economic policy on a sector which includes only 0.03% of our national economy makes precious little sense.  It makes even less sense to look backwards:

“When it comes to electricity generation in the US, the Department of Energy’s 2017 Energy and Employment Report suggests that the solar industry now employs more people than coal, oil, and gas combined. Oil still employs the largest share when including jobs related to fuels, however.

“Our findings would lead us to believe that the right place to invest dollars are in renewable energy rather than fossil fuels,” Delaney says. “These jobs are widely geographically distributed, they’re high paying, they apply to both manufacturing and professional workers, and there are a lot of them.”

How about job training for those seeking to move from a declining sector to sectors with more hiring prospects?  The Trump administration has lauded the prospects of job re-training and apprenticeship programs, but the money isn’t where the mouths are:

“Trump has proposed cutting the Labor Department’s budget by 21 percent in fiscal 2018.  That includes a 40 percent cut to the Labor Department’s Wagner-Peyser Employment Service, which supports about 14 million job seekers annually and last year helped nearly 6 million people find jobs. The proposed cuts also include a $1.3 billion reduction to programs that operate under the Workforce Innovation and Opportunity Act, which Congress reauthorized in a bipartisan move three years ago.”

Drilling down to “coal communities,” the impact is patently worse:

“Based on the limited information provided by the blueprint, President Trump’s FY 2018 budget would cut at least $1.13 billion from these programs and offices, including several in their entirety—a total that may increase when the full budget is released in May.2 Through the POWER Initiative, offices and programs targeted by the cuts funded more than $115.8 million in economic development, job training, and other grant projects targeting coal communities in more than 20 states from 2015 through early 2017.”

It is egregiously unseemly to give pep talks about “digging mining,” in coal country while slashing budgets for economic development and job training for the people facing declining employment prospects in the mining sector in those communities.  Indeed, the current administration gives every impression of saying “we love you,” to coal country residents while allowing greater pollution of their cities and towns, and cutting job training opportunities for residents seeking employment in faster growing sectors of the regional economies.

Meanwhile, the North Valmy plant stands in Pumpernickel Valley.

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Whatever Happened To… S 722 Russian Sanctions?

Whatever happened to S 722, the sanctions bill passed by the US Senate on a 98-2 vote?  Perhaps a more timely question is what happened to the amendment concerning US sanctions on the Russians:

“The amendment would do a number of things. It would codify and
strengthen six existing Obama administration Executive orders on Russia
and Ukraine and on Russian cyber activities and the sanctions flowing
from them.
It would provide for strict congressional review of any effort by the
President to relax and suspend and terminate or waive Russian sanctions
patterned after the Iran Review Act.
It would require mandatory imposition of sanctions on malicious cyber
activity against the United States, on corrupt Russian actors around
the world, on foreign sanctions evaders violating the Russia, Ukraine,
and cyber-related sanctions controls, on those involved in serious
human rights abuses in territories forcibly controlled by Russia, and
on special Russian crude oil projects around the world.”

Seems reasonable in light of what’s been going on to keep the sanctions, codify them, and give Congress a hand in the process in case the administration tries to modify them.  Although there is an argument to be made that allowing Congress to interfere with the sanctions process is problematic, there is a valid counter argument asserting that when an administrative proclivity toward softening sanctions against an international ‘bad actor’ is displayed, Congress needs to have some mechanism for putting on the brakes.   We might also want to pay particular attention to that last line in the amendment description, “and on special Russian crude oil projects around the world,” because this element is a thorny proposition in relation to the pro-fossil fuel policy of the current administration and State Department.

The amendment description continues:

“It would authorize broad new sanctions on key sectors of Russia’s
economy, including mining, metals, shipping, and railways, as well as
new investments in energy pipelines.
It would crack down on anyone investing in corrupt privatization
efforts in Russia–something we have seen a lot of over 20 years.”

This, of course would definitely not be music to the Oligarchs’ ears.  The “privatization schemes” began in the 90s, including the Aluminum wars and the oil grabs, along with other highly questionable distributions of Russian assets, natural and manufacturing.  The Wilson Center analysis is one of the better, more succinct, summaries:

“The small groups of individuals who emerged in control of the privatized enterprises fall into three different groups, according to Goldman. The first is former factory directors that became factory owners. This group outmaneuvered the workers, who were not organized, to gain control of the factories. The next two groups, argued Goldman, were the ones who obtained the greatest wealth–the nomenklatura and non-nomenklatura oligarchs. The nomenklatura oligarchs were the Soviet economic elites who took advantage of their positions to privatize the industries that they regulated. For example, Viktor Chernomyrdin, who oversaw natural gas production during the Soviet era, went on to head up Gazprom, the Russian natural gas monopoly and richest company. When Chernomyrdin went on to become Prime Minister, he passed control on to his deputy who worked under him in the Ministry.”

It’s easy to see why and how privatization became piratization.   And now we come to some of the items in the amendment the current administration might find potentially problematic:

“It would broaden the Treasury Department’s authority to impose
geographic targeting orders, allowing investigators to obtain ATM and
wire transfer records so Treasury can better target illicit activity of
Russian oligarchs in the United States.
It would require Treasury to provide Congress with a study on the
tangled web of senior government officials from Russia and their family
members and any current U.S. economic exposures to Russian oligarchs
and their investments, and that includes real estate.”

Let’s move to a side track for a moment and look at those geographic targeting orders in light of recent activity by FinCen:

“The Financial Crimes Enforcement Network (FinCEN) today (2/23/17) announced the renewal of existing Geographic Targeting Orders (GTO) that temporarily require U.S. title insurance companies to identify the natural persons behind shell companies used to pay “all cash” for high-end residential real estate in six major metropolitan areas. FinCEN has found that about 30 percent of the transactions covered by the GTOs involve a beneficial owner or purchaser representative that is also the subject of a previous suspicious activity report. This corroborates FinCEN’s concerns about the use of shell companies to buy luxury real estate in “all-cash” transactions.”

Now, who’s in the “high end residential real estate” business?  This brings to mind that transaction between Donald Trump and the Fertilizer King in south Florida.  Sometimes, it appears, the shells weren’t even thought necessary? However, the high end real estate market is attracting a stream of foreign “investment” which is perilously close to, if not definitively part of, good old fashioned money laundering.  Thus, providing Congress with a study of those tangled webs of Russians and their ‘investments’ and our economic exposure to their machinations might be embarrassing to the current administration?

The amendment also gives the administration some homework:

“It would require the administration to assess and report to Congress
on extending secondary sanctions to additional Russian oligarchs and
state-owned and related enterprises.”  (link to pdf)

Not only would be administration be tasked with enforcing or perhaps even increasing sanctions on the Oligarchs, but it would have to study whether secondary sanctions should be applied on those with whom they do business.

We should recall that this bill, including this amendment, sailed through the Senate on a 98-2 vote.  No sooner did the bill hit the House of Representatives than the leadership thereof displayed a heretofore relatively quiet amorous relationship with the Origination Clause.   Senator Bob Corker (R-TN) thought the origination questions had been settled in the final version of the Senate bill, but House Republicans continued to argue the question had not been resolved.

And now we turn to Nord Stream 2 pipeline, not exactly a subject of banner headlines in the US, but nevertheless an important piece in the sanctions discussion.  The Financial Times reports that the pipeline will pump gas from Russia to European countries in 2019, and is a “flagship project” for Gazprom; among those sanctioned would be investors in the pipeline.  The Oil and Gas lobby is particularly “concerned,

“Rep. Bill Flores, a Republican from Texas, said he’s been approached by “five or six of the majors” based in his state. The energy companies have told him they worry the bill as it stands is overly broad.

“You could restrict the sanctions of those activities within the borders of Russia, that might be a quick fix and also the national security carve out as well,” Flores said when asked how the sanctions bill might be changed to address those concerns. “Most of us are fine with having sanctions on U.S. interests operating inside Russia, with Russian companies, but then going outside of Russia is too broad.”

“Going outside of Russia” appears to be code for “Nord Stream 2.” Somewhere between Nord Stream 2 and the inspection of money laundering and other dubious transactions in the high end real estate business may lie the explanation for administration/House Republican opposition to the passage of S 722.

While Nevadans are calling Senator Heller’s office urging him to vote “no” on the health insurance bill, they may also want to contact our Congressional Representatives about advancing S 722.

Representative Mark Amodei (R-NV2) can be reached at 775-686-5760 (Reno) 775-777-7705 (Elko) or 202-225-6155.   Representative Ruben J. Kihuen can be reached at 702-963-9360 or 202-225-9894.  Representative Jacky Rosen’s Las Vegas office number is 702-963-9500 and Representative Dina Titus can be reached at 202-225-5965 or 702-220-9823.

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Bits and Pieces: Misleading headlines, and other matters in Nevada Politics

Jig Saw Puzzle Sometimes the headline doesn’t quite fit the story. Here’s an example: “Millions in the red an Obamacare insurer has failed” compliments of the Las Vegas Review Journal.   You have to read a few paragraphs down to get the basics of the story.  In addition to poor administration and long repayment waiting periods, “the co-op made a critical mistake: Only Nevada allows enrollment in non-exchange plans outside of the federal sign-up period, which runs from Nov. 1 to Jan. 31. Most insurers require a 90-day wait to discourage people from going without a plan until they get sick, but the co-op started with no waiting period, then added a 30-day window in late 2014. That created a sicker — and pricier — member pool,..”  [LVRJ]  These aren’t issues with the Affordable Care Act, nor is this indicative of any flaws in the overall system. What this illustrates is that the reason most firms go under is poor administration and management.

Speaking of management:  Is Waste Management Inc. living up to the terms of the contract it signed with Washoe County?  The Reno Gazette Journal reports on a crucial point: “One central issue is whether Waste Management has fulfilled the requirement to build an Eco-Center in Reno to sort its single-stream recycling and provide other services to customers. The city allowed Waste Management to raise rates, in part, to finance the construction of the Eco-Center.”  Back in March, 2013, The RGJ reported that the Eco-Center was supposed to streamline recycling in the area, noting that there were still some “kinks” to be worked out. Evidently, the kinks are winning?

The Washoe County Democrats have a quiz for us.  How do you score on a test of Rep. Joe Heck’s statements on Medicare? Social Security? Immigration?  I’ll give you one – yes, he’s called Social Security a “pyramid scheme,” and called for it to be privatized.  By July 2012 he’d called the basic social safety net program a Pyramid Scheme at least four times. [NVDems]

One win for Solar Power:  Perhaps not a long term one, but for now the efforts of NV Energy Inc to slap down the solar power industry in Nevada have been thwarted in the short term. [LVSun]  The power company is all for solar, except: “NV Energy’s proposed plan would reduce the value of credits paid to consumers and add a new fees. In filings with the PUC, the company said that the current structure unfairly shifts costs to customers without solar. The rooftop solar industry expects that the utility-backed proposal would reduce the rate of adoption of solar power.”  Original NV Energy filing here (warning: slow loading PDF)  and here (warning: slow loading PDF).  There’s the Solar Energy’s proponent statement to the PUC August 18, 2015 which makes interesting reading – again a warning: slow loading PDF.

All this in time for the Valley Electric Association to build a 15 mega-watt solar project in the northern part of Pahrump. [PVT]

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Heller and the Keystone Amendments: Taxpayers on the Hook

Heller 3 Before the Keystone Pipeline bill made it to a vote in the U.S. Senate there were some amendments which shed light on the mindset of the proponents of the construction. Remember, this pipeline is for the transportation of foreign oil (Canadian) through (not to) the United States to foreign markets.  S.Amdt 155 came up for a vote, its sponsor Senator Corey Booker (D-NJ) spoke in favor saying,

“Mr. President, I want to say that amendment No. 155 is a  very important amendment. It is common sense. It is practical. The National Environmental Policy Act, NEPA as it is known, is one of the most emulated statutes in the world. It is something that many people see as valuable in other countries because NEPA, in fact, by many is referred to as the modern-day environmental Magna Carta. NEPA regulations require agencies to supplement already-issued environmental impact statements when significant new circumstances or information is found to exist relating to the environmental impact of a project. The pending Keystone bill, however–and quite surprisingly–would deem the final environmental impact statement issued last January to fully satisfy this NEPA requirement going ahead. This would remove the obligation from permitting agencies to supplement any environmental impact statements if significant new circumstances or information is discovered.”

Here’s a loophole through which one could drive an oil tanker.  In every other instance the regulatory agencies are required to consider new evidence and new circumstances when overseeing the environmental impact of any proposal – but not this one. Not Keystone Pipeline. No, once the “final” impact statement is filed – that’s it. No more adjustments. Even if the construction called for a route change which might put a local drinking water source in peril? Even if the construction caused peripheral damages, unforeseen in the initial plans….  Senator Dean Heller (R-NV) was one of the 56 members of the Senate to vote “No” on this amendment.  [rc 46]

S. Amdt 141 was simplicity itself, delay the effective date until the White House had determined that the construction of the Canadian pipeline would have no negative impacts.  Again, Senator Heller voted, “No.” [rc 47]

S. Amdt 178 was also fairly simple. “To ensure that products derived from tar sands are treated as crude oil for purposes of the Federal excise tax on petroleum.”  Here’s a lovely catch

Return, for a moment, back to 2010 when there was a pipeline spill in Michigan, some of which was from Canadian tar sands.  Enter the Tar Sands Tax Loophole:

Five months later, the Internal Revenue Service quietly ruled that a significant portion of the type of Canadian crude flowing through that Michigan pipeline was exempt from the per-barrel tax created for that spill-liability fund. The loophole for oil sands fuel, which also forms the bulk of the crude set to run on the Keystone XL pipeline, remains in effect today despite congressional proposals to close it. [EE]

Now it’s clear – Senator Heller voted against having TransCanadian pay taxes into the spill-liability fund to pay for clean up in the case of a pipeline break or failure.  A vote against this amendment was quite simply a vote in favor of having anyone – anywhere – pay to clean up the oil spill EXCEPT the pipeline company responsible for the problem. [rc 48]   Nothing sends such a Valentine to the Koch Brothers and the Canadian oil companies as this.  And then he voted in favor of the unamended bill. [rc 49]

In short, Senator Heller’s bought into the various and sundry convenient prevarications associated with the Keystone debate.

It will NOT be a long term “job creator,” because most of the jobs, about 3,500 will be short term construction.  The construction jobs would be beneficial, but only about 35-40 long term jobs would be created.  The pipeline does transverse a section of a major aquifer, and that’s reason enough in an agricultural region (read: breadbasket) to think very carefully about pipeline spills.   While it’s one thing to support a foreign pipeline transporting foreign oil to the world markets – it’s another to exempt the pipeline and oil producers from paying into the  Spill Liability Fund.

The Fund can provide up to $1 billion for any one oil pollution incident, including up to $500 million for the initiation of natural resource damage assessments and claims in connection with any single incident. The main uses of Fund expenditures are:  State access for removal actions; Payments to Federal, state, and Indian tribe trustees to carry out natural resource damage assessments and restorations; Payment of claims for uncompensated removal costs and damages; and Research and development and other specific appropriations.

Recall, the next time Senator Heller bemoans the “tax payer bailouts,” that he just voted to put the U.S. taxpayer on the hook for any clean up costs associated with the Keystone project.

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Heller: Environmental Equivocation and the Koch Brothers

Heller 3

Nevada Senator Dean Heller (R) was one of 98 members of the upper chamber to vote for an amendment to S. 1 (Keystone Pipeline bill) in which the Senate declared ‘global climate change is NOT a hoax.’ [rc 10] That’s good for starters.  However, Senator Heller didn’t get over the finish line. Along came vote number 12, which sought to clarify the nature of the global climate change:

S Amdt 58: (2) “The [Intergovernmental Panel on Climate Change], in addition to other institutions, such as the National Research Council and the United States (U.S.) Global Change Research Program (USGCRP), have concluded that it is extremely likely that global increases in atmospheric [greenhouse gas] concentrations and global temperatures are caused by human activities.”;…

If one of the significant causes of global climate change isn’t human activity, then what might Senator Heller be thinking?   Is the Senator one of the 18% of all Americans who believe the current situation is the result of natural environmental patterns? Is he one of the 70% of Tea Party Republicans who believes there’s no solid evidence for global climate change?  Or, is he part of the 30% of moderate Republicans who believe there’s no solid evidence for global climate change?   [Pew]

“Opinions of Republicans and Republican-leaning independents divide into four roughly equal size groups: 23% say there is solid evidence of global warming and it is mostly caused by human activity; 19% say warming exists but is due to natural patterns; 25% see no solid evidence and say it is just not happening; 20% say there is no solid evidence but not enough is known yet.” [Pew]

If Senator Heller’s vote on the “hoax issue” is sincere, then he’s probably not a member of the 19% “natural patterns” Republican brigade, nor would he be a member of the “just not happening” chorus. That leaves the 25% who quibble about “not enough is known yet” crowd.  He’s certainly not part of the 23% who say there is solid evidence, and the phenomena is caused by human activity.

Senator Heller will no doubt emphasize his vote on the Hoax Issue as evidence of his moderate views. However, that second vote narrows the box into which he’s placed himself, a box generally shared by those who hew towards the fossil fuel corporation’s line adopted by the less moderate strain of the GOP.

In order to adopt this weasel position between and among the Republican camps one has to ignore the science from NASA (Climate Change Evidence),

“On Earth, human activities are changing the natural greenhouse. Over the last century the burning of fossil fuels like coal and oil has increased the concentration of atmospheric carbon dioxide (CO2). This happens because the coal or oil burning process combines carbon with oxygen in the air to make CO2. To a lesser extent, the clearing of land for agriculture, industry, and other human activities have increased concentrations of greenhouse gases.” [NASA]

It would also be necessary to ignore the conclusions of the Union of Concerned Scientists:

“The atmospheric concentration of CO2 has increased from a pre-industrial era (AD 1000 – 1750) concentration of approximately 280 parts per million (ppm) to around 383 ppm, as measured at Mauna Loa, Hawaii in 2007.[2,9] The carbon in the atmospheric CO2 contains information about its source, so that scientists can tell that fossil fuel emissions comprise the largest source of the increase since the pre-industrial era.” [UCS]

For those inclined to get into the molecular weeds behind this conclusion, the UCS offers a more detailed discussion at the link given above.

Is he thinking the Union of Concerned Scientists might be “too liberal?” Then, he might want to have a look at the joint publication from the U.S. National Academy of Sciences and the British Royal Society.  It’s not like the price is too steep – he could buy a copy for $5.00.

The Big Publication in this field comes in the form of reports from the International Panel on Climate Change.  Their conclusion in 2014 couldn’t be more clear and  precise:

“Human influence on the climate system is clear, and recent anthropogenic emissions of greenhouse gases are the highest in history. Recent climate changes have had widespread impacts on human and natural systems. {1}”

“Anthropogenic” is a fancy scientific way to say ‘US.”  Humans, human beings, persons, people…

Taking the argument one step further, even the Gas Giants are bending their positions on global climate change.  Consider the actions from Shell Oil which generated three prospects and settled on their ‘greenest one’ as company policy back in 2008:

“The greener Blueprints scenario, it said, would be better for both the company and for the world. Shell CEO Jeroen van der Veer publicly called for governments to impose a price on carbon emissions. He wasn’t alone: BP and Exxon, once famous for funding bogus “climate skeptic” research, joined Shell in offering to work with President Obama on a real climate policy, with Exxon executives noting that they’d favor a carbon tax over cap-and-trade.”  [Slate]

Before patting ExxonMobil on the back, that corporation seems to have been trying to play both sides of the road since 2008. The Koch Brothers and ExxonMobil were major funders of the “countermovement” on climate change, but more recent donations to the anti-science activities appear to be coming from such sources as the Donors Trust, and Donors Capital, organizations which are “dark money,” and do not publish the sources of their funding.

Since 2008, Koch Brothers and ExxonMobil have pulled back their funding for climate change denying publications, but the Koch Brothers have surfaced as one of the major contributors to the Donors Trust.

“Donors Trust is not the source of the money it hands out. Some 200 right-of-center funders who’ve given at least $10,000 fill the group’s coffers. Charities bankrolled by Charles and David Koch, the DeVoses, and the Bradleys, among other conservative benefactors, have given to Donors Trust. And other recipients of Donors Trust money include the Heritage Foundation, Grover Norquist’s Americans for Tax Reform, the NRA’s Freedom Action Foundation, the Cato Institute, the American Enterprise Institute, the Federalist Society, and the Americans for Prosperity Foundation,chaired (PDF) by none other than David Koch.” [MJ]

Interesting, the ultra-conservative advocates of the exploiters and polluters who finance that “countermovement” on global climate change are the self-same fat cats who bankroll anti-government, anti-tax, anti-bank regulation, and anti-climate improvement actions.

If Senator Heller has ‘doubts’ about the significance of human activity as it relates to global climate change, from whence is he receiving those uncertainties?

It’s not from the International Panel on Climate Change, it’s not from the British Royal Society, it’s not from the National Academy of Sciences, or the Union of Concerned Scientists, and it’s not from NASA.  That leaves the Koch Brothers and the dark money in the Donors Trust and Donors Capital funds.

Receiving one’s marching orders from the Donors Trust (rather than IPCC or NASA) is no way to convince any thoughtful person that the position taken is “moderate” in any way. It’s far easier to come to the conclusion that Nevada’s junior Senator has adopted the Koch Brother’s radical reactionary brand of Republicanism.  As every grandmother ever said, “You are known by the company you keep.”

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Another Day, Another Drill Baby Drill Bill

Oil RigAnother day, another bit of living proof Republicans don’t have a clue how world oil markets work…or if they do they don’t care, and they are perfectly pleased to do the bidding of multi-national oil corporations. Witness their shiny new bill: Lowering Gasoline Prices to Fuel an America That Works Act, or H.R. 4899, for which Rep. Mark Amodei (R-NV2) and Rep. Joe Heck (R-NV3) were pleased to vote, but which didn’t fool Rep. Steven Horsford (D-NV4) or Rep. Dina Titus (D-NV1). [rollcall 368]

The bill is a Christmas Wish List from the Oil Barons to the U.S. Congress, it’s Drill Baby Drill, and Shale Smacking Goodness — for the oil barons.

The bill’s authors assume the American public has a density equivalent to the API standard for heavy crude, i.e. an API gravity of less than 20°.

We’d have to be that dense in order to believe that more offshore drilling is going to have a perceptible impact on gasoline prices.  To demonstrate that we have an API gravity of at least light sweet crude, (37° to 42°) let’s review.

What factors determine oil prices?  There’s a picture for that —

Oil Price DiagramThere’s a supply side and a demand side, which in our good old capitalist system creates the prices.   On the supply side, crude oil comes from both OPEC and non-OPEC countries. The demand side is determined by consumption from countries that either are, or aren’t, members of the Organization of Economic Cooperation and Development, aka OECD. [EIA]  The blithe assumption on offer is that if the U.S. drills for more crude oil, and puts more crude oil on the market, the lower the price will be at the pump.  Not. So. Fast.

All those arrows point, not to your local refinery — much less your most convenient filling station — they point to the Spot Price.  The price of oil also depends on the demand for it, and there are two more charts to illustrate who’s demanding what.  First, let’s look at the non-OECD countries, like China, India, and Saudi Arabia:

Non OCEDWithout getting into too much gory detail, the blue columns represent demand from countries like China, India, and Saudi Arabia. The price and consumption trends tend to follow one another.  Now, let’s take a look at the other graph — the one illustrating the OECD countries, the United States and most of Europe.

OECD chartWhat do we learn from this illustration?   The EIA explains:

“The Organization of Economic Cooperation and Development (OECD) consists of the United States, much of Europe, and other advanced countries. At 53 percent of world oil consumption in 2010, these large economies consume more oil than the non-OECD countries, but have much lower oil consumption growth. Oil consumption in the OECD countries actually declined in the decade between 2000 and 2010, whereas non-OECD consumption rose 40 percent during the same period.”

Consumption is higher in developed countries — that’s just about obvious with our higher rate of vehicle ownership — but we have a lower rate of oil consumption growth.  While oil consumption rates were going down in the U.S. and Europe, non-OECD consumption rates were going up, up by 40% as the EIA reports.  Notice that the price and the consumption lines don’t track for OECD countries — that would be us — as they do for the non-OECD countries — that would be China, India, and Saudi Arabia.

Now, let’s return to that spot price.

“The spot price is the current market price at which an asset is bought or sold for immediate payment and delivery. It is differentiated from the forward price or the futures price, which are prices at which an asset can be bought or sold for delivery in the future.” [InvestAns]

The spot price is set in the ‘markets,’ i.e. the commodities market. For today’s prices Bloomberg News “Energy” page provides what the w-o-r-l-d price is for crude oil and refinery products.  Now we can approach the obvious question — who benefits from increased offshore drilling in U.S. waters?

A quick look at the two charts above should provide a major clue — it would be the areas with the highest consumption growth rate, i.e. the non-OECD countries — China, India, Saudi Arabia, etc.  Since oil is sold on the w-o-r-l-d market it will most likely go where there is the most demand.

Thus, what Representatives Heck and Amodei are supporting is the increase in offshore oil leases for multi-national oil corporations to sell the oil on the world market, in which it will probably go to those countries (non-OECD) like China, India, Brazil, etc. in which the consumption growth rate is higher.

To add insult to the injuries, the oil companies aren’t developing the leases they currently hold

“As of May 2012, nearly 72 percent of  the area on the Outer Continental Shelf (OCS) that companies have leased for oil and gas development – totaling 26 million acres – are not producing or not subject to pending or approved exploration or development plans. ” [Dept Interior, May 2012 pdf] [TP]

One might quibble with how the Department of the Interior categorized lands undergoing seismic and geophysical testing as not “active,” but the fact remains — about 2/3rds of the current leases aren’t producing.  The quibblers do make a legitimate point, not all leases will yield production.  Yet the thrust of the latest  Republican incarnation of Drill Baby Drill, as evidenced by the title of the bill itself, it that somehow more leases will automatically mean lower prices at the pump. Once more, glance back to the OECD chart and notice that the consumption and the price lines don’t match.

In the immortal words of oil-man President George W. Bush: “I know it’s in Texas, probably in Tennessee that says, ‘Fool me once, shame on … shame on you. Fool me… You can’t get fooled again!‘” [Time]

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Ukraine 101

As Ambroise Bierce once put it, “War is God’s way of teaching Americans geography.” [BQ] It needn’t be a full fledged conflict, in these days of cable media it can be a threat of armed conflict in a volatile region.   Unfortunately, what we learn in the form of geographic knowledge we tend to subsume beneath a pile of pre-existing and often simplistic assumptions.

In the interest of complicating a complex situation further, perhaps it’s time to test a few assumptions.

1.Vladimir Putin wants to rebuild the Russian Empire.” This conclusion has been drawn by former CIA Deputy Director Mike Morell. [CBS] Morell opines that the current problems between Russia and Ukraine stem from the ouster of the former Ukrainian prime minister who sought closer economic ties to Russia.   Yes, Putin has decried the break up of the old Soviet Union, so this line of argument has a kernel of consistency.  However, it also requires ignoring the instances in which Putin has observed that Ukraine is an independent nation. [NPR]  The two notions are not necessarily mutually exclusive, but “nostalgia does not presupposed expansionism.” [IndUK]  A little more thought may be in order before we leap to this conclusion.

2.If Ukraine falls then Moldova, etc. are next.”  Slow down. If Putin’s nostalgia isn’t a ‘plan’ for Russian expansion then the argument falls apart, no matter how many nations formerly affiliated with the old Soviet Union are added to the list.

3.It’s just like Georgia.”  Every analogy, or attempt to argue by analogy, eventually crumbles into absurdity, and this one falls apart more quickly than most.   The European Union sponsored a three volume study on the 2008 conflict in Georgia and concluded the conflict was started by…the Georgians.  [EU vol 1 pdf] Specifically, a “sustained Georgian artillery attack on the town of Tskhinvali.”   Given the vast military superiority of Russian forces, had the Russians wanted re re-annex Georgia it would not have been an insurmountable task.  They didn’t. The Russians didn’t even take the Georgian capital at Tbilisi.   Georgia is still an independent entity, with a prime minister elected from a unicameral parliament. [CIA]  That doesn’t mean there aren’t some hard feelings, “Russia’s military support and subsequent recognition of Abkhazia and South Ossetia independence in 2008 continue to sour relations with Georgia.” [CIA]

Abkhazia has a long history of association with Georgia, but not one without periodic conflicts. [BBC] The problems with South Ossetia are more profound.  Their language is more closely related to Persian than Georgian, and Georgians account for less than 1/3rd of the South Ossetian population. [BBC] While the Russians have formally recognized the independence of Abkhazia and South Ossetia  only  Nicaragua, Venezuela, Nauru, and Tuvalu followed suit.  Abkhazia uses the ruble as its currency and about 50% of its total state budget is financed by the Russians.  The economic situation in South Ossetia is a bit more dire, it has one major asset — the Roki Tunnel, which connects Russia to that portion of  Georgia.  Most of its economy is based on subsistence farming.

In short, it’s one thing to ‘declare’ a region independent and offer it recognition, but quite another to present the world with a fait accompli.  And, we’d also be well advised to note the geographic and economic ties between Russia and the two portions of Georgia upon which it has bestowed recognition are more complicated than a superficial glance would evoke.

4.We have to DO something.”   That would be a good thing, had we major compelling interests in Ukraine.   The major imports (in order) are (1) refined petroleum 13%, (2) crude petroleum, (3) semi finished iron, (4) hot rolled iron, and (5) railway freight cars. [OEC]  32.4% of the country’s imports come from Russia, 9.3% from China, 8% from Germany, 6% from Belarus, and 4.2% from Poland. [CIA]  The amount of refined petroleum imported might suggest that U.S. companies might be able to Drill Baby Drill into relevance.  This, of course, assumes that U.S. petroleum products sold on the international oil market would dominate the Ukrainian market.  However, when a country has a neighbor with an abundance of natural gas and refined petroleum (Russia) readily available at lower cost, then both the cost and the convenience outweigh U.S. capacity to get more involved in that market. [WaPo]  The arguments for the TransCanadian Keystone pipeline and fracking are essentially for our own domestic political consumption, and have little relevance for the petroleum (refined or otherwise) on global markets.

If we aren’t a major trade partner with Ukraine what vested interests are we to protect by involving ourselves in their political turmoil?   The related question is: Are we the global police force?  If we adopt this stance then we have to be ready to assume the costs associated with it.   We are paying approximately $816 billion for our operations in Iraq, another $701 billion for operations in Afghanistan [GP]  how much more are we prepared to pay for incursions into Ukraine…Syria…Libya…?

If we don’t adopt this stance then are we prepared to acknowledge that other nations, specifically members of the European Union, and even more specifically Germany, have greater interests involved in the stability of their relations with Ukraine and Russia?  [CarnegieEurope] [New Yorker]

Might a better American policy on the current issues between Russia and Ukraine be to allow those with more immediate interests take the lead in defusing the situation?  Or, in basketball parlance, should we be the player who makes other players on the court more effective?

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