Book Review of The English Spy

This is my first Daniel Silva Novel. It is apparently the 11th or 12th novel in the Gabriel Allon series, an Israeli intelligence operative/assasin).
The book begins with an explosion aboard a charter yacht in the Caribbean which kills a divorced English princess(read: Princess Di). The perp, Eamon Quinn, a master bomb maker formerly of the IRA, now a chef on the yacht, escapes in a Zodiac before the timer hits zero. Whodunit? MI-5 and MI-6 get involved tracking down Mr Quinn. Enter Christopher Keller, ex British commando who has been employed as a hit man by a mobster on Corsica but now gets drafted by British intelligence and Gabriel Allon, an Israeli assassin. The chase is on in Ireland, Northern Ireland, England and a variety of European venues. Enter a few Russian women, one a spy, one a mistress of the PM. Enter a few Russians who ordered the hit and who now want to snuff out Gabriel Allon. Boom! goes the bomb vaporizing some innocent women and children in London and almost Mr Allon who hides out in a safe house recovering from his injuries. It seems the bombmaker, Mr Quinn has now made his second attempt on Gabriel Allon, the first being an attempt which nailed Mr Allon’s family killing his son and brain damaging his wife. So now it’s revenge time. We find out that Mr Quinn was working for a higher up in Russia ,(Read: V. Putin). More chasing around Europe ensues until the Gunfight at the OK Corral back on the Aulde Sod . But Quinn slips out of the noose and we are treated to a tender interlude back in good ole Tel Aviv where Gabriel’s wife is great with child(twins). Allon is on paternity leave from taking over as head of Israeli Intelligence in Tel Aviv. You know Tel Aviv, right? It’s the place where Silva informs us “the missles rain down.,” on numerous occasions. The other British assassin, Chris Keller stays on the job chasing Mr Quinn all over the world finally plugging him in Argentina.

So how do I really feel about the book you ask? It’s acceptable Airport kiosk thriller trash by “#1 NY Times best selling Author Daniel Silva!” as the dust jacket screams.
Despite the predictable formulaic format the book does succeed on a few levels. It flows well with decent dialog and lots of action scenes including some nice torture if that is what rings your bell. The women characters come across as beautiful interesting women spies. Character development is marginal . The plot structure uses real world figures and current events as a substitute for coming up with something original. The whole thing is of course utterly implausible. Silva might as well be on permanent retainer to write propaganda action novels for British and Israeli Intelligence which pretty much describes the book.
This is a vapid, vacuous good guy/bad guy book with only British and Israeli action figures written for the type of readership who view the world through binary lenses. The good guys live in Merrie Old England and the Holy Land. The bad guys live in Ireland, Russia, Iran and the Middle East.
The bad thing is that Silva beats the poor reader over the head promoting his Zionist views clothed in a third rate thriller which had to have taken him at least two weekends to write. The good thing is that Daniel Silva is no longer working as a foreign correspondent reporting from the Middle East. I do believe that he could be a good writer in the thriller genre if he could spend a little more time on his craft, find a good editor, develop some original plot lines and maybe try to see the world in a more nuanced light. In the meanwhile if you want to read authors who have mastered the genre ,you need to look at Fredrick Forsyth. Ken Follett and Robert Ludlum and CJ Box. This was my first Silva novel as I stated at the outset. It will be my last.

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The Big One

 

My first intimation that all might not be right with my world was jacking up the Tahoe with a long handled floor jack and experiencing excessive fatigue for the level of exertion. I rested and the fatigue passed. Two days later on March 8, 2016, I was working out at the Teton Sports Club at near Cross Fit intensity and noticed marked exertion and some dyspnea and having to leave the class after I noticed some chest tightness. I showered and drove home and lay down waiting for the tightness and shortness of breath to abate. I had taken an aspirin worrying that the pain was at least cardiac based angina. When the pain persisted I took some motrin and a Vicodin which had no effect.  The pain increased markedly and I began to sweat in the cool bedroom. I recognized this as diaphoresis ,  another well recognized symptom of an impending heart attack. I called my wife who left work and drove home to carry me to the emergency room. The staff at St John’s Hospital   https://plus.google.com/+TetonhospitalOrg in Jackson rapidly attended to me slapping on Oxygen and monitoring leads as they performed an EKG. The look on the face of the Emergency Room Doctor showed alarm and I turned around and saw the Q waves and the ST segment elevation characteristic of an inferior myocardial infarction. Dr Adam Johnson, the ER Doc quickly put in two large Iv’s and moved me to the code room and began administering a narcotic analgesic and nitroglycerin to control the pain which was becoming more severe. I heard him call for our resident mountaineer/cardiologist, Dr Ellen Gallant. I was fully alert and aware of all the activity and discussion going on around me and I was pleased that the folks were following correct procedure in the right order. I looked at my wife a former ER nurse herself who appeared calm but concerned seated directly across from me. My daughter arrived in tears. I felt very calm myself and decided to relax knowing that allowing fear to take over would release adrenalin which could worsen an already bad situation. I was acutely aware of all conversations going on around me. It seemed my auditory acuity was enhanced.  ER Medicine had been my profession for 15 years and I had taken care of many emergent chest pain patients in the same way that they were taking care of me. The two doctors conferred and told me that I was a candidate for emergency thrombolytic therapy, a relatively high risk treatment to try to dissolve the clot blocking blood flow in my heart. This was quickly administered and it was shortly thereafter that my vital signs deteriorated. Both pulse and blood pressure fell. At one point I heard the word “asystole” and felt my visual fields narrowing. I still felt hyper alert and aware.  Dr Johnson’s face dropped in front of mine telling me “Dr Owens. Talk to me!” I thought to myself, “What am I supposed to say? I am fine and alert.” I decided to try to reassure him and tried to talk but found I couldn’t formulate any words. The thought occurred to me that I now might have had a stroke, a side effect of thrombolytic therapy. My wife also saw all this and said my blood pressure steadily began to fall from 80 to 60 to 40 to 20 and then to 0 along with no pulsation for a 10 second interval. I was surprised to still be crystal clear in my perception even as I heard ominous expressions like “He’s unresponsive. We’re losing him.”

I didn’t feel like I was being lost but I expected to crash momentarily as I saw them bring over the defibrillator. This was the only time I became alarmed because I didn’t want to be defibrillated while fully awake. The staff continued to administer cardiac drugs, dopamine and atropine. At one point there was discussion of the Atropine dose, .5 mg or 1 mg. I wanted to scream out “1 mg! Give me 1 mg.!” And just when the situation seemed most dire I heard someone say, “We got a pressure”. My pulse remained low and I heard Dr Gallant call for a  balloon pacemaker and a cart was brought over. I could see them staring at the monitor and finally I heard reassuring words like”His pulse is coming back. His blood pressure is increasing.”   Being in cardiogenic shock was extremely uncomfortable but as my vital signs improved I could feel the chest pain slowly starting to fade.  Dr Gallant leaned over me and said I needed to have stint placement and she recommended that I be flown to Idaho Falls to Dr Kip Webb, an interventional cardiologist who was highly experienced in the procedure. I remember arguing with Dr Gallant that I might prefer going to Salt Lake City which was the regional referral center I used when I was still practicing. I also said I might prefer going in an ambulance instead of an aircraft. Dr Gallant said she had complete confidence in Dr Webb but  that this was a time critical situation and that I need to get to Dr Webb as quickly as possible. Dr Gallant is a recently arrived cardiologist with many years of experience in one of the nation’s best Interventional Cardiology hospitals, Columbia Presbyterian in New York City. I decided to shut up and go with her plan. By now I was feeling markedly better with minimal chest pain and improving vital signs. From that point things began to move quickly. There was a snowstorm swirling over the Tetons and a helicopter was ruled out. A Swiss built fixed wing aircraft ambulance named a Pilatus PC-12 was already enroute to the Jackson Hole airport and I was quickly bundled up and loaded into an ambulance and rushed to the airport. My wife, Karlene, was told she might be able to fly with me and I heard someone ask her weight to decide if she was skinny enough to go. The ambulance pulled up to the runway and I was quickly loaded into the fuselage of the Pilatus and minutes later we lifted off the runway and climbed steeply into the snowstorm swirling over the Tetons. The aircraft was quiet and powerful and fast and we finally came out on top of the cloud layer into dazzling sunlight. Unfortunately I felt my chest pain returning.  Looking at my EKG  I  saw my ST segment again lifting, a sign of deteriorating cardiac function.  The nose of the Pilatus dropped as we began our descent into SE Idaho and skimmed over bare wheat and potato fields on approach to the Idaho Falls Airport. We landed smoothly and I was loaded into an ambulance and rushed to Eastern Idaho Regional Medical Center locally called EIRMC or “ERMAC”. Dr Webb was standing by the ER doors. He introduced himself to Karlene and myself and briefly stated his plan and in seconds I was taken direct to the Cath Lab where Dr Webb and his staff rapidly busied themselves for a stint placement. Dr Webb uses a radial artery approach instead of the more traditional groin approach which I was more familiar with. I watched him advance the guide wire and the stint on the monitor . I was experiencing moderately severe chest  pain. He said. “It’s in place and I am inflating the balloon to 15 atmospheres”. The next second I felt an immediate abolition of my chest pain. I was simply stunned. The pain was gone…..completely gone!. Dr Webb placed a second stint lower down in my Right Coronary artery and then said “We’re done. I am going to get your wife so she can see what we did.” I think the whole procedure lasted no more than 15 or 20 minutes.

After a night in the cardiac unit , Karlene and I drove back to Wyoming to try to pick up our lives where we left off. I was extremely luck to have been in the right place at the right time, rapidly treated by experts who saved my life. Dr Webb said this approach can be not only life saving but heart muscle preserving if flow can be restored within a four hour window. Lucky me.

Book Review of Hot Earth Dreams

I want to state at the outset that this is the most important book extant on the subject of climate change. It is certainly one of the four or five most important books I have read in my life and it is a must read for anyone trying to escape the white noise of a civilization approaching stall speed after several hundred years of industrialization made possible by burning the accumulated energy of a few hundred million years of decayed animal and vegetable matter. That burning has had enormous consequence for the planet with an explosion of machines and technology, resource extraction and population growth unimaginable to the people toiling in the fields in a pre fossil fuel era a few hundred years ago. Like all explosions, there are consequences which will follow from the unrestricted burning of oil and gas and coal. That is where Frank Landis steps in with this master work of cause and effect, plausible projection and extrapolation of current trends spinning scenarios which are stunning and disturbing. Unique to his book are timelines of what our future world could look like in the near future. Landis maps this future as beginning when the world has shot its carbon emissions wad sometime in the next 50-100 years and continuing for the next 400,000 years. The early portion of that period beginning roughly at the turn of the next century he calls the High Altithermal which will cover about1500 years. The last 398,5000 years he calls the Deep Altithermal period. The High Altithermal is the period during which the earth continuously warms at about 1 degree C every 40 years peaking at about 5 to 8 deg C in the next 200-300 years. This will be a time of great meteorological change which includes sea level rise brought about by melting of the Greenland and the West Antarctic and East Antarctic ice sheets.
The key figures to remember are how many tons of carbon has been emitted to date and how many more will be emitted in the next 100 years. We have emitted 370 Gigatons of carbon in all our history since we climbed out of the trees onto an African savanna. Giga- = billion. Since 1970 we have emitted twice as much carbon into the atmosphere as we did in all human history prior to 1970. If we continue to emit business as usual, we are on track to emit anywhere from 1000 to 1400 GtC(giga-tons of carbon) by the time we are through by the end of this century. This emission will be matched or exceeded by other sources of carbon such as methane clathrates and methane hydrates being released in a thawing Arctic.
The reader must keep in mind that Landis is offering possible scenarios and timelines all based upon the work of climate scientists using models constructed since the advent of computers. The real value of his book is his broad encompassing eclectic approach to all the features of a warming world beyond climatic and meteorological change. For example how will all organisms and populations and nations adapt to these sudden changes? How will language change? What empires will rise or fall? Will this period we call the anthropocene of evolved humankind cease to exist? What will happen to our economic, social and political structures? What civilizations who have risen and fallen before can contribute to the argument.
Additionally Frank Landis has many chapters on how we humans perceive such a discounted future by clinging to faulty reasoning such as binary thinking, by focusing upon a
Revelations style Apocalypse and wishful thinking where Technology will save us. THEY will think of something, right????
Implicit in his book is a tacit assumption that we are dealing with a collapse of world civilization and a massive die off at some point in the not too distant future. Landis tiptoes around this subject and rarely spins dramatic Mad Max cinematic visions. Only rarely does he get explicit of what might happen and how bad it could be. He is a little more daring in his excellent blog: heteromeles.com. In a recent post he imagined what his home state of California might look like at the end of this century. For example he gives the current population of California(39 million) and estimated population in 2050(52 million) and assumes a 95% die-off by the end of the century taking it to 2.6 million which is still ten times the population before the white man arrived. His statics are cold and dry and he eschews delving into what a 95% die-off would look like, what human suffering it would involve. Whew!
Landis structures the book in a unique fashion keeping chapters short as he jumps from subject to subject. It makes for a book which is read chapter by chapter and can be put down without the reader losing his thread. After all this is not a CJ Box thriller.
The book suffers at times from errors of fact and spelling and syntax and it could use a good edit. Some of the terms he uses such as Terafart referring to a Trillion tons of Carbon is jarring to this reader as well as use of street slang like “…this sucks…” and similar expressions mars what is an otherwise extremely well reasoned and highly readable sentence and paragraph structure. He can be humorous and witty as he lays out a really apocalyptic future. His book is detailed and scientific and well annotated with an extensive bibliography. I do feel that he could add more facets to his diamond such as how and why and if these die-offs are inevitable and how they might look. He also needs a chapter or two on the physics of energy and how it relates to fossil based food, goods and service production and how or if so called renewable energy might mitigate his scenarios.
This copy is a published on demand book which needs a big name publishing house to take over production and distribution to get it the audience it deserves. Hot Earth Dreams 1.0 is an amazing effort and this reader is looking forward to version 2.0 .

Cliodynamics

Cliodynamics is a new field which attempts to put the study of history on a sound scientific footing. And what do new fields need first? You guessed it. A Muse. Let me introduce you to Clio, the Muse of history. Like all good muses Clio comes to us from Greek Mythology. The “dynamics” part I assume refers to system dynamics which for some reason never chose a muse. This term was coined by Peter Turchin. a professor at the University of Connecticut who is a co author  along with Sergey Nefedov of a book I recently read entitled Secular Cycles.  

It is a new slant on an old  theory , that of Social Cycles, the notion that history repeats itself in a repeating sequence of dark ages and golden ages, booms and busts. Turchin and Nefedov’s achievement is applying a number’s based analytical approach to history utilizing a set of variables which they saw as common to eight civilizations they studied from early Roman to late Tzarist Russia. They named this  approach Cliodynamics and dubbed their model a demographic/structural theory. The key variables they emphasized were population, income inequality between elites and commoners, wages and prices, and sociopolitical instability. They called their approach semi-Malthusian. They could just as easily have called it an ecological approach as a good part of their discussion related to carrying capacity of rising and declining populations in the face of disease, famines and wars. They they were looking for patterns in the population and instability oscillations experienced by these eight civilizations. They acknowledged standing on the shoulders of the thinkers and philosophers who preceded them from the 14th century Tunisian Ibn Khaldun, the17th century Neopolitan Giambattista Vico up to contemporaries like Oswald Spengler in the last century. They give particular praise to their associate Jack Goldstone at George Mason University, a sociologist and political scientist specializing in rebellions and revolutions. Goldstone has worked as a consultant to  the Federal Government on a variety of projects dealing with implications of rebellions and instability in relation to US foreign policy.

Their model described four phases which the civilizations cycled through:Expansion, stagflation, crisis and depression . The time span for a full cycle varied but seems to have been around 300 years. The authors emphasize that their study was of agrarian civilizations but most reviewers and others who have commented on the book understandably jump to the applicability of the model to current civilizations. In their conclusion they address this issue with a variety of caveats including a willingness to modify the model to fit contemporary applications. One highly regarded energy and economic blogger, Gail Tverberg described the phases as follows:

 

 

1. Expansion phase (growth) – Increasing population, relatively low taxes, political stability, low grain prices, and high real (inflation-adjusted) wages.
2. Stagflation phase (compression) – Slowing population growth, much heavier taxes needed to support a growing elite class, low but increasing political instability, rising grain prices, declining real wages for most workers, increasing indebtedness, and increasing urbanization.
3. Crisis phase (state breakdown) – Population declining from the peak (typically by disease or by deaths from warfare), high income inequality, political instability increasing to a peak, high but very variable grain prices, high urbanization, tax system in a state of crisis, peasant uprisings.
4. Depression/inter cycle – Low population, attempts to restore state,  declining economic inequality, grain prices decreasing but variable.

Clearly Dr Turchin is thinking about the fit of his model to our society. He posted a recent paper this month dealing with this very point. I found a posted graph very interesting which I reproduce here:

Income inequality was a key variable in Secular Cycles. I have corresponded with Dr Turchin on this graphic which by the way was not his. I felt it understated current income inequality which is a subject much in current news and opinion. Clearly US well being is negative and inequality is growing.

If I were sitting down with Turchin and Nefedov right now I would be asking how their analysis would apply to the  industrial civilization that has blossomed  in the past 200 years. I have spent some time pondering just the fossil energy contribution to the trajectory of our civilization. Energy has been the catalyst that has driven exponential growth in some of Turchin and Nefedov’s  fundamental variables such as population and carrying capacity and food availability.Elite overproduction has clearly been magnified by the enormous wealth conferred on oil consuming societies both directly and indirectly. It has certainly fueled sociopolitical instability. The Japanese attack on Pearl Harbor occurred as a response to the US and Britain cutting off petroleum access to Japan. If my catalyst assumption  of energy’s contribution holds, how might the variables respond in magnitude, amplification and direction.? Might fossil energy be its own independent variable? And let’s not forget the elephant in the room: Globalization. We have an interlinked industrial civilization and if there were to be collapse of one nation, multiple collapses would almost certainly be likely.

I have found negative comments about Cliodynamics from historians skeptical that there are universal laws underlying social behavior, Many historians consider historical processes non-linear and highly complex and equally skeptical that it can be put on as sound a footing as the empirical sciences

. They point to economics which has tried to emulate and ape the physical sciences by employing complex mathematical formulas and modeling techniques with generally dismal predictive results.  In economics the situation may be improving with the work of Ken Rogoff and Carmen Reinhart looking at 800 years of financial missteps in their book: This time is different:Eight centuries of financial folly. History and economics are pretty closely wedded. Turchin’s work is retrospective and correlation is not the same as causation , but some of the correlations seemed pretty stunning. His observation that elite overproduction preceded the crisis phase in all cases is notable. I think it is healthful that Turchin’s background as an ecologist and statistician has wafted some beneficial cross pollination into the historical field. Whether it can be transformed into a science remains to be seen. Double blind testing, the gold standard of scientific inquiry, will be difficult.And as Niels Bohr said “Prediction is difficult, especially about the future.”

 

Empire Builder

 

       I have spent the past several weeks preparing and boning up on natural gas issues in preparation to be a panelist at a meeting of our local Chamber of Commerce. It went well, was well moderated and we all got our licks in and I hope the audience derived some benefit. I fielded some interesting and penetrating questions both during and afterward. The basic assumptions of the economic community  in our isolated high mountain valley  remain intact despite my best efforts to sound the alarm, Paul Revere style.I have pointed out in numerous articles how tenuous our energy extravagant lifestyle here is in Wyoming and particularly in Jackson Hole. I have pointed out that Frac Gas is a bubble, that Wyoming has the highest per capita energy consumption of the 50 states,  and that our economy has legs because of 500 million years of concentrated sunlight. We have burned through 50% of all the oil that has been drilled here in the US just since the late 80’s.That was the high grade ore , so to speak, conventional light sweet crude, most of which looks like Wesson Oil. Now we are into the dirty stuff from tar pits and sand mines and  4 miles under the Ocean. It’s there for the taking at much greater cost in declining net energy and environmental degradation. Ominously, Wall Street  is in the act slicing and dicing and hyping and spinning the meme of energy independence  in its latest bubble. The political dominated energy propaganda arms of the DOE, IEA and EIA along with the oil majors are keeping the American Dream alive with deceptive, unrealistic and unlikely predictions of future abundance. The fact that these predictions are from the mouths of the least reliable subset of hominids: …ECONOMISTS, seems to have escaped everyone’s notice. There are a few independent analysts I have cited in previous blogs as well as some percipient bloggers.http://karenlynnallen.blogspot.com/2013/02/the-end-of-age-of-oil-has-arrived.html#comment-form.

       But in some ways, the oil and gas story is not the big story. It is a  part of the big story which of course is The Rise and Fall of the American Empire. This is a subject I have covered repeatedly coming at it from different angles:ecological, economic, fiscal, sociopolitical and primarily from the foundation of the empire:Energy. I have studied other empires, why they rose and fell as far back as the Harappan and Indus Valley Empires to our present American Empire.It is an engrossing tale of discovery, of chance, of ambition and greed and invention, determination and cooperation of all the players.It happened because all the pieces were in place, the right place. At the right time. It took the energy of people, of animals and of slaves to build the foundation for this empire. But it was the Exajoules of a vast store of fossil energy that provided the afterburner that blew the United States past its European and Asian rivals.

       Absent this unexpected energy bonus enjoyed by America, there is every reason to believe that establishment of Empire was in our DNA. There were abundant resources, willing hands, and capital all converging on a new world, free for the taking.We were probably foreordained to become an empire but no empires last. Empire rise. Empires grow, and empires fall. It is the wherefore and the how , the anatomy and physiology of empires that I find fascinating. It is the physician in me that drives the desire to understand this civilization but unfortunately the study of empires, both healthy and ailing, has not been the sort of study that has yielded results with the same degree of certitude present in fields such as physics or biology. That is until now. But we may just have a new tool to study and dissect empires. Are there universal laws operating which explain the trajectory of empires?. There are qualitative assessments of empires rise and falls. But might there be quantitative factors that might explain the same? That will be the subject of the next blog on Cliodynamics.

Dispatches from Frackbubble Wyoming

Welcome to my world, Frackhole, Wyoming. If you’re wondering what the roads out here in the West look like, have a gander at this scenic vista of oil and gas trucks as far as the eye can see. Of course there have been many days when the eye can’t see very far because of these trucks and the dubious economic benefit they have provided in my little corner of heaven. You know what I am talking about if you happened to be driving through Pasadena California in say, 1956. You see here in Wyoming in the vicinity of the Pinedale anticline or in the little town of Pavillion, we have this little problem with “externalities.” as the economists like to term it. Other people would call it air and water pollution, but we term it the cost of progress. Wyoming has been pulling gas out of the ground for a long time but it’s only been in the last 5 years that we have had choking  Pasadena smog. Unless you are a underemployed roustabout happy to finally  have a job, or one of  equipment suppliers or camp followers of the oil and gas industry, you might be a wee bit unhappy at water you can’t drink and air you can’t breathe. On the other hand, you might just decide to “cowboy up” as we say. “This isn’t your first rodeo,” as we also say. If you ask some of the denizens of Sublette county what they think, you might  also hear something along the lines of “You can’t eat mountains,” if your job depends upon  those long  truck convoys.

In this blog, I have been covering energy and economy  issues looking at cause and consequence, and at past and future trends. Out here mining and energy pay the bills while the rest of us go along for the ride,  reaping the benefits, paying no income taxes and sending our kids to good schools taught by well paid and well trained teachers. We have seen boom and bust times before and it’s boom now. It’s my guess we are seeing perhaps our last big boom. Vast quantities of oil and gas has been exported but we could always see the mountains. On some days  now we no longer can. It’s no secret that our politicians  have long since been captured by these resource industries. They take the money and turn their backs and when the citizens hold meetings and complain  that their eyes burn and their children can’t breathe, the state tells them to car pool and drink bottled water or call for more studies from non EPA analysts who aren’t biased virementalists.

Now is as good a time as any to get back to why a big reason for  Pasadena air in Sublette County. I have an acquaintance who is a geologist near Pinedale who said some of his new drilling rigs are using Nat Gas instead of diesel. Where was all the ozone coming from? Nat gas is clean, right? So I wondered about the fracking pumps and started digging. It seems they are really huge with very powerful diesel engines on the order of 3000 to 6000 hp. And here is the kicker. They don’t frack with one pump. They might frack with a dozen or two linked together in an array. Here is what they look like:

 

Boys, it looks like we got ourselves a CONVOY!

I have not emphasized the negative environmental cost of energy because until this century, it wasn’t always that obvious other than a occasional drunken tanker skipper blundering into hard things or the occasional blowout or explosion.  Lately these negative externalities are getting harder to avoid as we go down the backside of Hubbert’s Peak going from easy oil and gas to  harder frack gas and shale oil. Now we drill not in good old Texas, home of the Chevy Suburban and longhorns but in  god forsaken deserts in North Africa , the Arctic and deep water Gulf of Mexico. But in the past 5 years with US crude production down under 5 million barrels a day and imports almost 15, the industry decided to go after the hard expensive oil that was left right here in the good ole US of A. Fracking is not entirely new because a screwball in 1920 threw nitroglycerin into an oil well to see if that would perk it up a bit. It did, but the idea of getting oil and gas from tight reservoirs really took off with the first commercially successful venture in the Barnett Shale in Texas in 1998. It is still a very new and somewhat secret technology, not well understood even by its promoters. Some of the early wells in the Barnett and particularly in the Haynesville Shale next door in Louisiana were producing truly astonishing  daily flows with gas pressures approaching 8000 psi. It looked like a whole new game. In mid decade natural gas was $10-13, and . US production of nat gas appeared to be in terminal decline. The government even began permitting LNG import terminals in places like Sabine Pass, LA to fill a looming gas deficit. Companies like  Exxon ,Chevron and Total rushed to get into the next big gold rush. With their financial backing, little known companies like Chenniere were able to line up financing of $10 Billion. Chevron and Total signed long term  delivery contracts until 2029 of $125 Million a year with Chenniere. It has been a disaster for those two with only a single tanker delivery.  Other companies like Chesapeake in Oklahoma City were betting on the domestic fracking technology and were snapping up leases using borrowed money every which way but loose. Wall Street bankers who knew a few things about bubble creating by then, got into the act and began throwing money at any wildcatter with a drill bit and a truck with a frack pump. The boom began as every available rig was rushed to Texas, Louisiana, Arkansas and lately Pennsylvania. Within just a few years the US went from importing 15% of its gas down to only 12%. The early players cleaned up. I even got in buying Chesapeake at under $20 and saw it rocket to $70. It was deja vu 1920’s with everyone doing the Charleston. But then with all this supply, gas started falling, and FALLING, and FALLING until it hit $2 last year. Even well capitalized companies like Exxon said “We are all losing our shirts!”  Today the  spiritual father of this boom Aubrey McClendon, the CEO of Chesapeake, the country’s 2nd largest producer of gas cleaned out his desk and handed in his keys to the executive washroom in downtown Oklahoma City. You can only lose money so long. It looks like Aubrey wont be the last to go. I have covered the fracking bubble for the past year and have pointed out what appeared to me to be the economic insanity of gas fracking with $2 and $3 gas, with each new well costing $10 million and $5000 leases now $30,000. Haynesville was said to be possibly the 4th largest potential gas resource after Quatar, Iran and Russia. That was the hype then.  Wall Street’s snake oil salesmen promised huge EURs(estimated Ultimate Return) using a long term production model as they termed it, of up to 65 years,because the flows were so great and the shale formation so big. But after a few years the producers started whispering to themselves that pressures and flows were dropping like a rock after only a few years. In two years some flows were down 80 to 90%. And some of the new wells were duds. We began hearing the term “sweet spots” where production was high. That’s where you wanted to drill but knowing where the sweet spots were required drilling where it wasn’t so sweet and drillers began burning money as most of the leases were structured as “use it or lose it”. And if annual payments were required, cash flow even from mediocre wells was a consideration.               Then in 2009 the SEC put in some new rules which allowed companies to increase their reserves as long as the companies could demonstrate decent production. It had the effect of allowing better access to credit but demanded more drilling. I think you are seeing that we are in a positive feedback loop in which the more you drill, the more you needed to drill.With all this production, prices kept falling. Almost nobody except a few independent analysts noticed. Not the media including respected organizations like the WSJ, the NY Times, Bloomberg and even the Paris based IEA and the US EIA who chortled on about a brave new world of US energy independence. They predicted the US would be back on top as the world’s biggest coal and oil producer as well as a natural gas exporter.  I didn’t buy it and some very bright energy analysts didn’t either. I pointed out the obvious similarities to the bubbles in tech and real estate. The same Wall Street suits  who brought you  trash real estate derivatives were and are still involved in the Frack bubble. They are even today securitizing gas and oil leases among other products. In a sense, that is what it is about now,  land, not gas.  Wall Street is up to its neck hyping joint ventures, partnerships, asset sales, and stock offerings.They have lately spent a lot of time in China. Even the Hedge funds and private equity guys like the Carlysle Group and Blackstone are in there dealing. It probably wont be long before Mitt Romney smells blood and rushes in to scoop up  the carcasses to slice and dice and sell off.

One of the indicators I follow is the Friday reporting from Baker Hughes giving the quantity and location and type of drilling rigs nationwide. I have mentioned that the fraction of rigs devoted to gas has been declining pretty steeply and here is the latest graph:

 

AS you can see our gas rigs peaked in 08 and have been dropping since  like a stone. You can also see that the US rigs are the majority of world rigs but it should be noted that neither Russia or China, nor off shore rigs are represented.  The steep decline in US gas rigs  portends a decline in production at some point because most of those US rigs were frack wells with steep depletion profiles.  I expect production to fall off in the not too distant future, especially if gas prices remain unsustainably low. There are a lot of big players who are banking on low  gas prices and increasing production as a keystone of their business models to set up petrochemical  and fertilizer plants, nat gas filling stations and LNG Export terminals. There are politicians on all sides who want to see it happen despite the obvious  business conflicts. I see it as very interesting and a subject of a future blog.

Natural Gas Disinformation:Part 2

I recently did a guest editorial in the Jackson News and Guide, our fine local paper in which I commented upon the wisdom of promoting and subsidizing a NG filling station in Jackson. The paper also quoted me during a phone conversation in a recent follow up which was accurate as well as from the promoter Dennis Lamb, John Willott a retired Exxon Senior Vice President, and Keith Phucas of the Wyoming Liberty Group. In the letter I tried to present the economics of NG as a transport fuel by providing hard concrete data and I did not touch upon other important aspects of NG and energy production such as pollution from emissions and contamination of water supplies although I have covered some of those aspects in this blog in the past. In this post I would like to add some detailed supporting data along with tables and graphs which were not feasible in my editorial.. I will provide references to support my data and conclusions within this post and at the end as well. I caution the reader to be circumspect and skeptical of all presented data whether from me or any other source and to do due diligence before reaching their own conclusion. I would urge the reader to rely on independent assessments and audits which is what I try to do.

Dennis Lamb was quoted as saying “Anytime you can get an alternative fuel source that has 10% of the toxins emitted for half the price, it’s a win-win.” I certainly have no idea what this incoherent statement refers to but pulling statements out of context is often unfair and discourteous but I am mystified nonetheless. What toxins is he referring to? Half of what price and where? The two nearest CNG stations to Jackson are in Riverton and Rock springs and the current price is $1.96 and $1.61

respectively. I am under the impression that these prices do not include fuel tax. Prices in the nearest metro areas of SLC and Denver range from $1.30 in SLC and from $2.33 to $2.80 in the Denver Metro where there is of course competition. The 10% toxins part of Lamb’s comment if that is indeed what he said is ludicrous. Promoters of NG like to state that NG is the cleanest fuel of the big three but that is misleading. It is true that there is somewhat less CO2 emitted per BTU of NG when burned at the source.. Here is a link to a graph of emissions of the three energy fuels and their relative emissions over a 20 year period. The graph show that shale gas emissions exceed emissions from diesel, oil, and coal. Another important fact to remember is that methane is 105 times more powerful than CO2 as a greenhouse gas. Hence the worries about the methane hydrates in Siberia which could be released by Global Warming. All fossil fuels contribute to global warming and NG is no less a culprit than coal or oil if you believe this power point presentation. I fail to see the win-win

situation as promoted by Lamb. Looks like win-win if Lamb obtains free taxpayer funds and lose-lose for the rest of us. Which brings up the point of subsidies. How much subsidy did Bob Shervin receive when he built his Sinclair station just up the street from where Lamb wants to site his? I haven’t talked with Shervin but if the taxpayer is going to subsidize Lamb, then I think Shervin and the other station owners deserve the same subsidy, even if it has to be given after the fact.

I would now turn to the supply side of the argument in more detail which I briefly covered in my earlier post. Willott seemed to agree with me when I said there was a 11 to 23 year supply of NG and then and then he added that “some would say it’s more than 150 years of supply.” There is no one credible who is saying any such thing. John flipped from reserves which are economically recoverable to resources which are not at current historical prices. In fairness to John, the NG resource base world wide is probably huge especially from Alaska and Canada through Siberia not to mention worldwide deep water gas resources. Nobody has surveyed Antarctica which almost certainly has a resource. But again:think Reserves not Resources! Could these enormous resources be tapped as John says? Of course they could, but they are not affordable. It’s the same for coal resources. They are huge but the reserves of affordable coal are not. These deceptive statements from their promoters ignore the concept of net energy. If a resource is so deep or so distant that it takes as much energy to mine it as the energy you get out of it, then it is for all intents and purposes a resource that will never be tapped. This is the fraud of the Green River Oil shale formation in Wyoming, Utah and Colorado. It is not even oil but waxy kerogen locked in rock and if it were recoverable as oil it would be the largest fossil energy source in the world. But remember: Economically recoverable and net energy recoverable. It is not now economic and never has been. Remember: It takes energy to get energy. Let’s return to gas.The next graph is the only credible estimate of how much gas we have. It was prepared by the the Potential Gas Committee(PGC), an quasi independent group representing the industry:

The key numbers to look at are the Proved Reserves and the Optimistic reserves. There are 11 years of proved take it to the bank gas you can count on and optimistically(whatever that means) another 11 years. this is at current consumption. I will caution the reader that these numbers jump up and down as gas moves from resource to reserve category and back, but I think it suffices for planning purposes for individuals and governments. You also see probable resources, some of which could be developed at the right price.That is a key point to remember. Very little of that category will come out of the ground at $2 or $3. I will reiterate, the US IS NOT ENERGY SUFFICIENT in NG now and hasn’t been for over 20 years and if companies like Cheniere which is completing its liquefaction facility in Sabine Pass LA have their way, the US could be exporting $3 US gas to a world which is paying in the mid $teens. BC plans to build a similar facility at Prince Rupert. Once this trapped gas has a chance to escape to world markets to trade like oil and coal, I’ll give you 3 guesses what will happen to NG prices. If you are an oil and gas producer in trouble like Chesapeake, it can’t come too soon. That’s why I find it peculiar that John Willott thinks gas prices will stay low. Now lets take a detailed look at gas production in a few selected states and nationwide. I will show Wyoming’s numbers along with the total US production:

Please note that this includes conventional and frac production, The bottom graph can be enlarged to tease out the various large producing states. You will note that production in all states with the exception of LA are flat to declining given the low NG prices. But I concede if gas were to recover to say $13 which it was a few years back, you would likely see these graphs turn up.

I also must again state that if gas were to stay this low as John expects, I can guarantee bankruptcies or buyouts in the gas sector. John’s boss, Rex Tillerson was asked in testimony before the Council of Foreign Relations last June 27 how Exxon was coping with the low NG prices. Here is an excerpt from his testimony as reported in the Wall Street Journal:
By JERRY A. DICOLO And TOM FOWLER

NEW YORK—-Even energy titan Exxon Mobil Corp. is showing signs of strain from low natural-gas prices.

On Wednesday Exxon Chief Executive Rex Tillerson broke from the previous company line that it wasn’t being hurt by natural gas prices, admitting that the Irving, Texas-based firm is among those hurting from the price slump.

“We are all losing our shirts today.” Mr. Tillerson said in a talk before the Council on Foreign Relations in New York. “We’re making no money. It’s all in the red.”

His comments mark a departure from remarks made earlier this year on how lower natural-gas prices hadn’t yet hurt the company because of its operational efficiency and low production costs.

It should be noted that Exxon is the biggest NG player and wants to get its gas into LNG ships where the real money is, ASAP . The idea that the US should keep its gas at home to keep US energy prices low and promote jobs in the domestic Fertilizer and petrochemical industries apparently hasn’t crossed Rex’s mind. Rex like all corporate titans cares only about Exxon’s bottom line and making money for EXXON and the shareholders and if he get’s his LNG export terminals, he will be making money in spades.

Now let’s take a look at how these low NG prices are killing the producers. Art Berman in a recent paper noted that $22 Billion/qtr is needed to maintain domestic NG supply. Cash flow of the 34 largest producers is only $12 billion a quarter which of course leaves a deficit of $10 Billion/qtr!

With losses of this magnitude there is no such thing as retained earnings and so companies like Chesapeake and others have been selling off assets and seeking joint ventures or assuming more debt to keep the party going. Berman’s source was the highly respected Calgary based Energy Player, ARC Financial . Here is their graph:

I leave it to the reader to draw his own conclusions on the feasibility and future of NG as a transport fuel. Based upon my research, I would say that the conclusion is obvious.

As a disclaimer I have both short and long financial positions in many North American energy producers and pipelines including Exxon. I have no intention of converting my car or truck to CNG.

References:

http://www.eeb.cornell.edu/howarth/Marcellus.html

Shale Gas: How clean is it?

http://online.wsj.com/article/SB10001424052702303561504577492501026260464.html

http://www.slate.com/articles/health_and_science/future_tense/2011/12/is_there_really_100_years_worth_of_natural_gas_beneath_the_united_states_.html

http://www.albertaoilmagazine.com/2012/02/is-the-eias-new-shale-gas-estimates-off-base/

Andreoli, D., 2011, The Bakken Boom – A Modern-Day Gold Rush. The Oil Drum: http://www.theoildrum.com/node/8697.

Berman, A.E. and L. Pittinger, 2011, U.S. Shale Gas: Less Abundance, Higher Cost. The Oil Drum: http://www.theoildrum.com/node/8212.

EIA Annual Energy Outlook 2011 Early Release Overview.

EIA Annual Energy Outlook 2011 Natural Gas Tables: http://www.eia.gov/oiaf/aeo/tablebrowser/#release=EARLY2012&subject=0-EA….

Gilbert, D. and R. Dezember, Chesapeake Energy Pulls Back Amid Natural-Gas Glut: Wall Street Journal, January 24, 2011: http://online.wsj.com/article/SB1000142405297020380650457717865173251197….

Potential Gas Committee 2010 Report: http://www.potentialgas.org/.

http://www.theoildrum.com/node/9751

http://www.theoildrum.com/node/9753

And of course my previous blogs on the same and related subjects.

Hugh Owens MD Jackson Hole 2013

Getting High

Yesterday I strapped on my snowshoes and decided to get high. We here in Jackson Hole have been the victim of deeply subzero inversions lately and the lower you are, the colder you are. The fastest way to warm up is to climb up, which has the additional benefit of getting into vastly clearer air. Normally my wife and I put on cross country skis but if you want to ascend steep snow covered slopes, you can’t beat snowshoes. So I took the opportunity to hike with a naturalist and a botanist, Andy and Amy, over on the West side of the Tetons across from a small ski area. The air above 8000 feet was bracing and clear with hoar ice crystals glimmering and wafting like fireflies off towering firs and spruces. The sky was a stunning cobalt blue, never so blue in summer which is the season we usually hike the Tetons. Not even a whisper of wind. We remarked on how effective the snow and trees were in snuffing out all sound except the occasional chirring of a squirrel or the chick-a-dee-dee-dee of that ubiquitous tiny black capped resident of the high mountains. Andy showed us pine marten tracks in the deep snow, an aspen tree clawed by bears and a huge downed tree where a bear had denned up for the long winter. The view from the top took in the distant Snake River Plain far below. It was for me a great escape from thinking about the ravages of energy extraction , environmental destruction and exploding urban populations. I had a lot to think about on the drive home which will be the subject of a future blog.

Robots or Jobs?

Perhaps you saw the “60 Minutes” segment last week entitled”Are Robots hurting job growth.” It was an eye opener for me and it showed the sudden inroads of robots into the American economy. Most of us are aware auto manufacturing uses robots but I was unaware of the capabilities of the new robots with eyes(video cameras) and brains(Artificial Intelligence) and phenomenal hand eye coordination, so to speak. Philips Electronics recently moved its shaver assembly business from China back home to the Netherlands. A lot of Chinese jobs were lost but few Dutch ones were created. Watching the speed and dexterity of the shaver assembly robots made me realize that these new robots were not your father’s Oldsmobile.Some of the robots in the new Tesla factory in California can even multitask. They are particularly adept at managing, transporting and shipping inventory in distribution centers but their capabilities extend beyond manufacturing and assembly line jobs to information gathering technology and health care. A hospital in California has a fleet of them that deliver patient supplies, meals, lab tests and even fill prescriptions! They are increasingly used in in industrial agriculture in packaging and shipping and it takes no imagination at all to conjure up jobs and even professions that can be outsourced to robots.70 % of Stock transactions are computerized HFT robotic trades, if you will. Who needs airline pilots? The planes can takeoff and land unassisted already, which are tasks much less complicated than the Google self driving car in traffic. The new Boeing 787 is entirely electric, no hydraulic pilot controls, a perfect fit for Cap’n Robot. Other examples that come to mind are Amazon, UPS?FedEx, fast food preparation, big box store stocking and receiving and in my field, performing certain types of surgery and surgery assist. I recently had prostate surgery performed by the Da Vinci Robot. It turned out fine. I’m alive to blog again. 60 Minutes asked two MIT professors whether robots killed jobs and their answer :”That’s the $64000 question.” They proceeded to answer it in the affirmative.

In the recent past, economists have stated that technology kills old jobs and creates new ones by increasing so called aggregate demand as a result of increasing productivity and falling prices. But this seems to have ceased with robots who are fast replacing wage slaves with robotic slaves who can work 24/7, don’t complain or unionize, don’t need pensions or healthcare or get injured and require disability settlements. If you’re a corporate CEO who cares only about the bottom line and getting rich off slavery, what’s not to like? OF course the real $64,000 question wasn’t asked: What happens when all work is done by robots? There are obviously profound societal and economic implications but that’s TV journalism for you. It isn’t called the boob tube for nothing. The show did not go unnoticed by the Robotics industry who have filled the internet with rebuttals asserting that technology and robots create jobs.Right.Some recent political figures remind me of robots. Like that guy who ran against that other Hawaiian/Kenyan fella? If he wasn’t a robot I’ll eat my Vise Grips. I’m digressing….. One of the main themes I hammer repeatedly in this blog is that the reader or viewer must always remember the role of bias in any argument so absent irrefutable supporting evidence, I will regard such industry rebuttals as suspect. I also find it curious that no political figures have stepped up either supporting or decrying robots. With 9% approval, perhaps the Congress fears wholesale replacement by robots. Robotic replacement of some of the workforce has profound implications for the world and the paucity of articles and news on the subject is disturbing. I can think of dozens of questions? Do robots pay taxes? Specifically payroll (Social Security!)taxes? Income taxes, sales taxes, VAT? Like all slaves, I assume that to be a negative. Slaves also don’t consume or purchase the fruits of their labor. If our workers are robots, who will buy those shavers and Teslas.? If the US is returning to manufacturing using robots, wont China and other countries be doing the same? Jobs returning to the US? Don’t bet on it. Robotics is globalized and the Tesla robots for example are made in Germany.. Terry Gou, the CEO of Foxconn who is notorious for his electronics sweat shops making Apple products has announced that he has already purchased robots and plans to replace a million workers with a million robots within 3 years! He currently employs 1.2 million low wage Chinese workers. AS of 2011 I read that China already has 75000 robots and we know that Chinese engineers should have little trouble designing or pirating and manufacturing a robotic workforce under their totalitarian capitalistic system. Just tell those million peasants to return to their villages. No problem. The whole dismal dictionary of the dismal science may need rewriting and rethinking. Let’s start with capital and labor. What are robots? Capital or labor? The industrial revolution was about machine tools replacing hand tools, with machines doing the work formerly done by people but until now machines had not had the potential to replace most or all of the labor force. Of course like any good slave labor force you will need overseers and guards and perhaps even mechanics to repair and maintain the robots but it would seem that even those jobs could be outsourced to robots. It would seem obvious that the displaced workers just might not take all this lying down. Income disparity is already vast and a slave labor force collects no wages. All the money will be returned to just a few company elites and their investors and the banks. What will we non robots do if robots have all the jobs except for a few engineers who design and oversee robots? Watch NASCAR? College football? Who needs thousands of colleges preparing students for jobs when there aren’t many jobs? I don’t read much sci-fi but it seems the only way to imagine such a future. My guess is that we have here a recipe for revolution what with all those semi automatic weapons and 30 round clips being snapped up at Wall Mart. It would seem a good time to look at the Luddite Revolution 2 centuries back in an upcoming blog.

Natural Gas Disinformation

Here is a copy of  a letter I sent to our local paper in which I commented upon a proposal to open natural gas filling stations in Jackson:

 

 

Natural Gas for Transportation in Jackson?

 

Energy independence for the US is a hoax. Whoa Pard. Aren’t you coming on a little strong? Even the President has told the country we have 100 years of natural gas supply from its reserves? With numbers like that shouldn’t Jackson be converting its vehicle fleet to NG? Were it true, a case could possibly be made to do so. But it is not true. To start with, the US is nowhere near energy independent in Oil or Natural Gas(NG) even now with the glut  of the past 3 years. The US as of last year still had to import 12.7% of its NG. For the previous 20 years, that average was 15.7%. Doesn’t sound like energy independence to me.  It is essential that as citizens we understand the terminology of energy. Obama was confusing reserves with resources. To be a reserve, the energy must be commercially producible. A Resource may have production potential at some price, if it’s there. A resource is subdivided into 3 categories of probable, possible, and speculative. The US does not have 100 years of reserve NG. It has somewhere between 11 and 23 years of reserves at current consumption.  It may have 90 to 100 years of NG resources, but Resources are emphatically not Reserves. Remember to be a reserve it must be commercially producible. US production of NG peaked in about 2009 and has been flat ever since. Most of the traditional gas fields in the US with the exception of Louisiana and the insignificant Marcellus Field in PA are in decline, and that includes Wyoming which accounts for only 8 % of US production. US rig counts as reported by Baker Hughes are in decline as well. There are several reasons for this chiefly the very low price for NG for the past few years hovering between $2 and $4 which for most fields is way below break even. Goldman Sachs a few years back made a presentation trying to lay out the profitability of rapidly depleting Frac Gas fields and concluded that depending on the field, a minimum price of $6 to $8 was the level of profitability. A major reason why frac gas is still being produced is because the companies have shifted their rigs to the fields having both tight oil and tight gas. The oil is still profitable and the gas is merely a by product of oil exploration and drilling. In a few places like SLC, a driver can buy gas for the equivalent of $1.25/gallon but if gas prices return to a profitable level that price will likely be at parity with gasoline. Do the math and see if that $5 or $10,000 conversion cost makes economic sense to you or to your commercial fleet. If you get say 20 mpg and drive 12000 miles a year, you will use 600 gallons/yr. At current gas prices in Jackson just below $3/gal, you spend $1800/yr. If you pay $1.50 for tax free NG, that would be $900/yr. Looks like payback is around 10 years if the price differential between gas and gasoline stayed the same which if you believe my numbers will be highly unlikely. Once gas prices return to a level of profitability, that differential will disappear. A nationwide conversion to NG for transportation is unaffordable for a country running $1 trillion plus deficits.  The gas industry is begging for yet more subsidies from the Federal and state government including agencies like the Wyoming Business Council. If the City of Jackson makes the mistake of converting its vehicle fleet to NG and when prices hit parity, it will be the citizens who are stuck with the bill. If a group wants to purchase equipment and a station, by all means let them, with their own money at their own risk, and not the taxpayers of Jackson or Wyoming.

Partial list of sources for this essay: http://www.eia.gov/oil_gas/natural_gas/data_publications/eia914/eia914.html

http://www.theoildrum.com/files/After%20The%20Gold%20Rush_Page_14.jpg

http://www.slate.com/articles/health_and_science/future_tense/2011/12/is_there_really_100_years_worth_of_natural_gas_beneath_the_united_states_.html

Regards, Hugh Owens MD

The thoughtful reader of whether we can or should make a  jump to an alternative form of energy use for transportation needs to know far more than the price differential between gasoline and CNG prices in Salt Lake City. The single most confusing issue is how production and consumption and prices are reported in the media on all the fossil fuels much like the economic  and job data that is dispensed from the government. I have spent a lot and I mean a LOT of time sorting through often conflicting numbers and the data is often  if not usually in conflict. So get used to it. There will be bias reported depending upon who is reporting. For example an investor group or an investment bank may report statistics tacitly designed to encourage and reassure investors pointing out a bright investment future for their particular product. You will find differing numbers reported on production and consumption even between the international agency, the IEA and the US agency, the EIA. If you go to these  agency websites you may wear out your computer mouse trying to tease out what you are looking for. If you go to industry sites like the API(American Petroleum Institute), you are likely to be served up optimistic and rosy data which I generally regard as suspect unless I can find verification from other sources. For example if you are worried about the negative side of fracking for oil and gas,you might as well forget the  corporations and their lobbying arms. If you  read their company releases you will read that frac wells hardly ever leak or contaminate water supplies and that fracking is the new energy nirvana for the United States leading to more jobs and companies returning to the US because of low energy prices.  You will see the usual cliche buzzwords like sustainable and common sense approach. When I see terms like these I know that they really translate to unsustainable and idiotic. For example, you will rarely see any mention of the negative aspects of fracking for gas or oil and its possible contribution to global warming. Methane is many orders of magnitude worse than CO2  in its contribution to global warming and I rarely see articles dealing with whether gas wells leak methane to the atmosphere. Of course they do! Anyone who lives in my state anywhere near the Pinedale anticline gas fields knows they leak. I have driven there in quiet winter days when my eyes burned so bad I could hardly see the road. I once stopped for gasoline in Pinedale and complained to the station about the smell and the smog and the cashier smiled and said”Ah…the smell of money!”. The thick ozone cloud in the area has many causes besides leaking frac wells. Diesel pumps power the rigs and the frac injection pumps and my Toyota pickup is also a small part of the problem. The tragic fact is that no one knows how many wells leak and how much and you can be sure that the industry will under report it. There are a few good reports on the problem like this long monograph from  Schlumberger about 10 years ago. What alarms me is that I haven’t been able to find a credible source of how much the new fracking techniques of horizontal drilling involving numerous long laterals arcing out from a single pad because the old studies largely involved cemented vertical casings. Fracking doesn’t involve intact cemented casings in the entire drill path. It fractures the rock far distant from the main drill bore. There is no easy way even for the drillers  to know how much or how often methane finds its way up existing rock cracks or into adjacent aquifers. In the largely unregulated get rich quick wild west environment of the big frac basins, the big players know better than to open their mouths. In the state of Wyoming our  captured regulators have been loathe to say anything negative about the oil and gas industry. When the citizens complain about burning eyes and getting asthma because of the gas smog, the state doesn’t restrict drilling or issue cease and desist orders to the drillers. Instead  they recommend that all parties should cooperate and car pool and drive less.

  The second main point I would like to point out to individuals or governments contemplating a shift to alternatives to oil like CNG cars and trucks is to be aware of the unregulated and uncertain supply picture for natural gas. There is also no national regulatory body controlling gas production like there was for oil back when the Texas Railroad Commission was calling the shots for oil production in order to ensure stable prices and lower the risks for destructive booms and busts. I have looked long and hard and have been unable to find out how much gas is available and produced  purely as  gas plays. USGS does break down gas by type and origin.  The current rig count reported by Baker Hughes shows that about 2/3 of current wells are oil and 1/3 gas but even that is a bit misleading. All manner of hydrocarbons come out of these wells. There is oil in gas wells and gas in oil wells. Gas prices are so low that  the oil and gas industry is still flaring  gas to the atmosphere. This is rarely reported but the industry continues this abominable practice. Some of the oil drillers do try to recover this gas and re inject it to help the oil rise to the surface but injection pumps cost money as do laying gas pipelines. Methane is being flared in the Bakken and the Eagle Ford tight oil fields today as recently reported in the Oil Drum.I have read that more than 30% of gas is as a by product of oil fracking.   I mentioned in my letter that gas prices are below the cost of production. If that is the case why would the drillers not just cap the wells and wait for better prices? I wondered the same thing and found that even with the low prices,the producers have to maintain cash flow even if they are losing money because cash flow services their loans, keeps investors happy and people employed. Some of the early gas fields are of course actually still making money because they  were first to the game and collared low price leases and with the high gas prices 5-6 years ago were able to hedge their production. But one must keep in mind that these producers can only lose money so long. They are hanging in as long as they can hoping for a rebound. There are many events that could trigger that rebound. If the current recession deepens and oil demand and oil price drops as some predict, oil fracking could drop below profitability. The recent cancellation of the Bakken Express pipeline could have occurred for many reasons but ultimate  frac oil profitability and amortization of its cost must certainly be factors. Crude oil trades freely on the world market and is generally easily  transported but North American gas is largely trapped. This is the main reason that the gas producers are lobbying hard for export  LNG terminals and pipelines to let this trapped gas escape to the coasts so it can be loaded on to LNG Ships destined for Asia and European markets where the current price is many multiples above the US price. Just yesterday Transcanada obtained permission to run a  6 $Billion pipeline to Prince Rupert BC to supply Asian markets. If you wonder why a country like the US  which is not energy independent in natural gas should be exporting

 

 

 

 

 gas, you are to be forgiven. That’s why you see so many conflicting and obfuscatory media reporting like” Fertilizer and petrochemical companies are considering returning to the US to  take advantage of low price natural gas,” or T Boone Pickens begging for government subsidies to convert the US car and truck fleet to CNG. The companies know that the surest way to high price natural gas is to let it escape to the world market where it will trade closer to the BTU content of crude oil. If it were, gas would be priced over $15 and that is the kind of price that would put a smile on the face of Aubrey McClendon, the CEO of Chesapeake, one of the country’s big players. It is also the kind of price that would kill CNG cars and trucks, so something has to give. You can’t have both.

      If the reader is wondering where I come down on the side of NG vs gas for transportation, I would say NEITHER!  I would like to see the country moving away from car and truck transportation of people and cargo and moving to a “fuel” that is sustainable and vastly cheaper: Electricity!,which can be generated from darn near anything, including Wyoming gas and coal. The level of public and private debt in this country is such that there is no way that a new gas pipeline/filling station infrastructure could be constructed from scratch when the country is too broke now to repair its roads and bridges. The uncertainty about price and availability of Natural gas in my opinion  absolutely militates against a switch from gasoline to gas by anyone but most especially by my local government or utility if they are going to fund it from my taxes and utility bills.

     If the reader is interested, I have covered this subject in more depth in previous posts last year.