Behind the Curtain: Oil Supply and Prices

John Tamny writes March 21, 2019 at Real Clear Energy In His Saudi Arabia Documentary, Fareed Zakaria Omitted How Powerless the Country Is

The 1973 embargo “did not imply that we could reduce imports to the United States…[T]he world is really just one market. So the embargo was more symbolic than anything else.” Those were the words of Saudi oil minister Sheik Yamani, in response to the impact of the 1973 Arab (“Arab” is mentioned because non-Arab countries like Iran did not participate) oil embargo on the United States. The U.S. imported every bit as much (in truth, more) oil after the embargo was announced as before; the only difference being that Americans purchased the “Arab oil” from those not embargoed. It’s a basic economic truth that there’s no accounting for the final destination of any good.

So what happened in 1973? Why did oil prices spike? The better question would be one of why did commodities across the board spike? The simple truth is that there were no “oil shocks” in the early ‘70s as much as President Nixon’s fateful decision to sever the dollar’s historical link to gold resulted in the greenback plummeting in value. Wheat, meat, soybeans, oil, and every other commodity priced in dollars spiked. Notable here is that per Robert Bartley’s brilliant 1992 book, The Seven Fat Years, OPEC officials sent out an early ‘70s communique that signaled their inability to control the price of oil; their implicit point that a change in the value of the dollar would by definition have a profound impact on a commodity once again priced in dollars. In short, the “oil shocks” of the early ‘70s were not. They were dollar shocks. Nothing more, nothing less.

All of this rates mention in consideration of a recent CNN special hosted by Fareed Zakaria, Saudi Arabia: Kingdom of Secrets. Up front, it’s fascinating to look at as the footage unearthed by Zakaria’s production team is more than impressive. Zakaria’s production was spellbinding all the while exasperating for the simple economics of exchange and currency not factoring into his analysis, nor history. What was more than interesting could have been great had Zakaria sourced commentators with a better understanding of trade. Instead, viewers had to suffer Thomas Friedman’s often wrong but never in doubt certitude from the left versus the unserious rants of the 45th president on the alleged right. Neither Friedman nor Trump comprehends what’s simple; that embargoes are utterly toothless in an economic or real world sense.

As a result, Zakaria promoted the mistaken view that the ’73 embargo caused soaring prices, gasoline lines and recession in the United States, and there was no commentary to question what Zakaria must know not to be true. The reality is that the flow of Arab oil didn’t decline, and rising prices were dollar related. The gas lines were a logical effect of price controls imposed by federal officials, while the economic slowdown was the expected result of reduced investment that always rears its head when currencies are losing value. Investment is what powers growth simply because it boosts productivity, yet the falling dollar worked as a tax on investment. The malaise-filled ‘70s were a consequence of U.S. policy error, not what happened in Riyadh.

That’s what was so nauseating about Friedman’s assertion that our relationship with Saudi Arabia amounts to (a slight paraphrase here) “keep the oil flowing, and we’ll avert our eyes to what’s happening out back.” Implicit there is that there’s some kind of scenario whereby the Saudis would cease bringing oil to market. Except that there isn’t, and we know this based on the history presented to us by Zakaria himself. As he points out, in 1938 a rather poor Saudi Arabia (per Zakaria) desperately needed money, and with an eye on enhancing the Kingdom’s finances, the royals allowed in western know-how and investment. Soon enough the country was awash in oil, and the riches that come with being a size exporter of the world’s primary energy source.

All of the above in mind, there’s yet again no reasonable scenario whereby the Saudis would cease pumping out the oil. They need the money. Realistically there would be a revolution in the country absent the constant outflow of oil in consideration of how much the citizenry, the state and an ever-growing royal family rely on the Kingdom’s oil wealth. Here Zakaria noted how very much a decline in oil prices in 2014 forced difficult cutbacks in Saudi, but didn’t tie the previous truth to how ridiculous was Friedman’s oft-repeated point that the U.S.’s only rule is that the country pump its oil. Well, of course it will. No rules needed. No matter what happens, Saudi oil will flow. Friedman’s alleged insight into U.S./Saudi relations is more than empty.

And then there’s President Trump. Zakaria seems to think Trump has a point in justifying his desire to maintain warm relations with the repressive country. As Trump puts it (not directly to Zakaria, but in a video clip sourced by him), “you want $150 oil?” Trump’s equally empty argument, one not corrected by Zakaria, is that Saudi Arabia could cut us off on the way to nosebleed oil prices stateside. Except that it couldn’t.

Not only is oil a globally priced commodity, not only is it a certainty that the Saudis will never cease selling what produces abundant dollars for the Kingdom, but the dirty little secret is that neither Saudi Arabia nor OPEC controls the price of oil. Zakaria plainly disagrees, but what’s unfortunate is that he didn’t at least give the opposing viewpoint airtime in a documentary presumably produced with an eye on forcing deep thought and conversation about what is in many ways a mysterious country. Instead, viewers were fed what’s easily disprovable.

Indeed, if the Saudis and OPEC truly control the price of oil as Zakaria attests, why was it so cheap in the 1960s when OPEC formed, but nosebleed expensive in the ’70s? Mood swings? Better yet, if they control the oil price are we to assume the Saudis and OPEC were simply feeling generous in the ‘80s and ‘90s when oil fell as low as $10 barrel? Conversely, were the alleged price setters of a global commodity suddenly overtaken by immense greed in the 21st century such that they jacked up the oil price, only to lower it in 2014 in such a way that Saudi Arabia itself was forced to endure difficult cutbacks? Or is there something else at work?

Very basic logic tells us that something not Saudi and something not OPEC dictate oil’s price. Readers can rest assured that it’s not fracking. Missed by cheerleaders of the latter is that before it was much of a thing, meaning the ‘80s and ‘90s once again, the price of oil was four times lower than it is now. Fracking excites mercantilistic conservatives who don’t understand simple economics.

So what’s the biggest factor when it comes to oil? The answer came up early in this piece. It’s the U.S. dollar. It’s very simple, really. When the dollar is strong and stable as it was during the Reagan and Clinton years, oil is cheap. When the greenback is declining as it was during the Nixon/Carter ‘70s, and the Bush/Obama ‘00s, the price of oil (and other commodities) is soaring. Considering fracking, it’s only economic insofar as the dollar is cheap. Considering Saudi power, it’s most evident when the dollar is cheap.

Frustratingly, none of this came up in Zakaria’s analysis. Fascinating as his attempt to make sense of Saudi Arabia was, it was deprived of greatness by an embrace of all too easy-to-discredit economic fallacy. Contrary to what Zakaria reported, there’s nothing that will stop the flow of Saudi sourced oil, there’s no way the Saudis can keep their oil from being consumed stateside, and their supposed ability to control the price of oil is easily belied by history. None of the previous truths made it into the documentary, and that’s unfortunate.

Fareed Zakaria must know better. And if he doesn’t, he should.

 

Good News: Outbreak of New Energy Realism

Out of the darkness and gloom from climate doomsters shines a declaration of energy abundance, and positive prospects for future well being.  Robert Bradley Jr. writes March 14, 2019 at Master Resource  Perry’s “New Energy Realism” (freedom and fossil fuels are essential, moral, unstoppable) Excerpts in itallcs with my bolds and images.

“The lesson is clear. We don’t have to choose between growing our economy and caring for our environment. By embracing innovation over regulation, we can benefit both. And THAT is the heart of our New Energy Realism.”

At yesterday’s CERA conference, DOE Secretary Rick Perry did not quite come out and say it. But it’s a fossil-fuel world. Some bones were thrown out for the politically correct, economically incorrect energies (grid wind and solar, as well as batteries/electric vehicles), but make no mistake. The philosophy of the US Department of Energy is let the US-led global boom in oil, natural gas, and coal continue.

Oil, gas, and coal? Yes …. Ethanol? Not mentioned…. Domestic production? Yes…. Domestic usage? Yes…. Exports? Yes….. Regulation? No …. Sacrifice? No…. Pessimism? No.

Climate change? No mention….

Read between the lines. The fossil fuel boom is great for America and the world. Peak Oil and “the limits to growth” are refuted. Energy reliability (versus intermittency) is key. Heavy regulation of oil and gas is failure. New regulation and pain are unnecessary.

And you don’t even need to mention the Green New Deal.

The Obama era’s creeping radicalism to “keep fossil fuels in the ground” is being reversed. The CO2 mitigation window for the activists is closing rapidly, with the world energy market leaving the Paris accord in shambles. It’s a fossil-fuel world.

Excerpts from his speech follow:

“Just the other day the Meridian Spirit embarked from Sabine Pass with an LNG shipment to India. And just last week a LNG tanker left Cove Point, Maryland with its first shipment. These shipments underscore the Trump Administration’s desire to export more natural resources and innovation technologies to the world.

“DOE [recently] met with producers and midstream developers to identify the next generation of technologies to unlock more of our nation’s resources. Whether carbon capture, developing new solar technology or stepping up efforts on storage, there is a tremendous amount of optimism in the energy sector and for obvious reasons.”

The Meridian Spirit loading a cargo for India’s Gail at Sabine Pass LNG. (Cheniere)

“Energy security is a roadmap to economic prosperity.”

“But today, we have the opportunity to reaffirm a new direction which I call the New Energy Realism. This ‘new energy realism’ rests on the fact that America is in the midst of incredible energy progress.”

“Due to a cascade of technological breakthroughs driven by innovation, America is producing abundant, affordable energy from a wider range of sources than we ever thought possible … and we are using this energy more cleanly and more efficiently as well.”

“… our successes refute old myths, debunk false choices, and transcend limitations, pointing the way to global energy security and shared prosperity. This dramatic progress is a decisive break from the 1970s, when America began pursuing a fundamentally flawed energy policy for which we paid dearly.”

“Those who believed in it claimed that the days of energy abundance were over. It was said we had a permanent energy shortage. It was said that even if we discovered new reserves, they would be too costly to produce or impossible to use without harming the environment. And the solution proposed was a bleak one — draconian regulation of energy.”

“Truth be told, we had no shortage of energy. What we had was a shortage of imagination and a loss of confidence in our ability to innovate. Clearly, the naysayers weren’t realists at all… they were pessimists blinded to the reality of America’s innovative capabilities. And unfortunately, this blindness ruled in one of the least innovative places on earth….Washington, D.C.”

“In a place that so obviously favored regulation over innovation, it was no surprise when the government used one thumb to promote a favorite technology and the other hand to regulate those they didn’t like.”

“In states like Texas, taxes were cut and regulations kept simple and transparent, giving people both the freedom and the incentive to innovate. And with innovation came a revolution in energy technology.”

“As a former Texas governor, I’m proud that the major breakthroughs in hydraulic fracturing and horizontal drilling – leading to our historic natural gas boom — began right here in this state.

“From fossil fuels to renewables…supply rose…costs fell…efficiencies increased…and diversity blossomed. And something else happened as well. Our environment did not become worse. By nearly any measure, it became better, even as our economy expanded and energy development reached new heights.”

“The lesson is clear. We don’t have to choose between growing our economy and caring for our environment. By embracing innovation over regulation, we can benefit both. And THAT is the heart of our New Energy Realism.”

“Over the past year, President Trump and his Administration have brought this realistic view to Washington… and we are seeing its benefits. He has cut taxes and reduced regulations by historic numbers, putting Washington squarely on the side of innovators and investors.”

“… this can only help the President’s plan to spur the construction of more infrastructure. Tax reductions will cut a major cost of doing business, while his proposal to reduce the permitting process to just two years will give investors the confidence to provide the necessary capital and communities visibility on project completion.”

“The President has also signed off on critical new pipelines. He has removed draconian oil-and-gas restrictions on responsible exploration, supported clean coal technologies, and seeks to reinvigorate civilian nuclear energy.

“America is now on the cusp of energy independence, but the President would like to go farther. He would like to share our energy bounty with the world and let the spirit of competition benefit consumers by providing more choices in the marketplace. Already, we are sharing our natural gas.”

“Last year, we became a net natural gas exporter. Today, we export LNG to 27 nations on five continents.”

“We are increasing our coal exports substantially. These exports rose by an estimated 61 percent last year over 2016, according to the Energy Information Administration (EIA). Last August, the first shipment of Pennsylvania thermal coal bound for Ukraine left the Port of Baltimore. In the coming years, we will be exporting multiple fuels.”

“And not only that. We will export the same technologies that made us a clean, abundant, and diverse energy producer in the first place. By exporting our energy, we can free our friends and allies from fuel dependence on unfriendly nations.

“And by exporting our energy technology and know-how, we can help developing countries in Latin America, Africa, and Asia create their own energy renaissance and harness more energy to improve the lives of their citizens.”

“And that includes access to electricity. Over a billion people live without it. We want to reduce that number substantially in the coming years.”

“Now some aren’t happy with us exporting this technology because they oppose most energy production, specifically that of fossil fuels, which comprise 80 percent of world energy usage and continue to produce carbon emissions. I fear that this is the mindset of the Paris Agreement.”

“And while studies show that even by the year 2040, fossil fuels will still comprise 77 percent of world energy use, I believe that continued technological breakthroughs will help us defy this prediction.”

“What are the people without electricity supposed to do? Remember what we have done through technology…..we have not only produced more fossil energy with it; we’ve made that energy cleaner.”

“Since we’re making coal cleaner and since our technology can affordably extract massive amounts of lower-emissions natural gas, we’re likely to continue to reduce the overall emissions of our fossil fuels. That, again, is the New Energy Realism.”

“Thanks to the amazing power of human ingenuity and innovation, we don’t have to tolerate the intolerable…we don’t have to accept hideous sacrifices that harm the poorest among us.”

“And so let us reject the old energy pessimism – and embrace the New Energy Realism…. We would welcome – and help lead – a global alliance of countries willing to help make fossil fuels cleaner, rather than abandoning them. This will help nations diversify their energy supply…a key to achieving energy security.”

“And from that energy security… comes prosperity: affordability, economic growth…rising opportunities…optimism…and, most importantly, the freedom for each individual to pursue and achieve their dreams.”

“Combining opportunity with the freedom to design your own energy future, will enable the production of more energy from more sources, more affordably, and in a cleaner way than it ever could have in freedom’s absence.”

“It is by embracing this New Energy Realism that we will all move toward greater energy security and a brighter, more prosperous future. Let all nations embrace it – and the spirit of imagination and innovation that drives it – for their own sake and for the sake of the world.”

US Refined Coal Surging

Despite predictions that US coal production and use are doomed, Trump policies are sparking an increase in “clean coal”, i.e. refined coal. Activists/alarmists say there is no such thing as clean coal, but as usual they conflate actual air pollution with CO2 emissions, which are plant food rather than toxic. A recent article from EIA explains the rise of refined coal U.S. production and use of refined coal continues to increase. Excerpts in italics with my bolds.

U.S. production of refined coal, which is coal that has been processed to reduce emissions when burned, reached record highs in 2017, and it is expected to increase even further in 2018. Use of refined coal has increased despite the general decline in total U.S. coal consumption since 2008. For the first three quarters of 2018, EIA estimates that refined coal production totaled 121 million short tons (MMst), which is 21% of the total U.S. coal production of 563 million short tons.

According to EIA estimates, refined coal’s share of total coal tonnage consumed for U.S. electricity generation will have increased from 15% in 2016 to more than 18% through October 2018. EIA began collecting data on generation from refined coal in 2016.

Refined coal generated more than 235 million megawatthours (MWh) of U.S. electricity in 2017, or 20% of net coal generation, an increase of 2% from 2016. EIA estimates of refined coal through October 2018 suggest an even larger increase in refined coal use to more than 22% of total coal generation.

Refined coal is most commonly made by mixing proprietary additives to feedstock coal. These additives increase the production of mercury oxides, which can then be captured by using mercury emission reduction technologies such as flue gas desulfurization scrubbers and particulate matter control systems.

Refined coal production qualifies for a tax credit under the American Jobs Creation Act of 2004. To qualify for the refined coal tax credit, producers must have a qualified professional engineer demonstrate that burning the refined coal results in a 20% emissions reduction of nitrogen oxide and a 40% emissions reduction of either sulfur dioxide or mercury compared with the emissions that would result from burning feedstock coal. The tax credit was designed to increase with inflation and was valued at $6.91 per short ton produced in 2017 and $7.10 per short ton in 2018. EIA surveys show respondents continued to add refined-coal burning plants even as older conventional coal plants retire, with 36 new refined coal plants coming online from 2016 through October 2018.

Summary

US technology is progressing to reduce air pollution. The principal issues are:
Nitrogen oxides (NOx), Sulfur dioxide (SO2), Mercury (HG), and Particulate matter (PM).

The combination of refining the coal feedstock along with scrubbers is removing the actual environmental hazards. What is left is the unproven claim of global warming/climate change as the reason to deprive people of the benefits of burning coal for gaining power. Power to the people indeed.

Footnote:

A previous post highlighted the mismanaged Ontario phase-out of coal power plants, driven by CO2 obsession but justified by appealing to air pollution.  See Ontario Coal Phase-out: All Pain, No Gain

 

US Leads Globe in Clean Energy Tech

 

North America has grown in population, but not in energy use.

Hank Campbell writes in Science 2.0 America Leads The World In Controlling Energy Consumption And Emissions – We Should Be Exporting That, Not Solar Dogma.  Excerpts in italics with my bolds.

As the world’s most powerful economy, we read a lot about how America needs to do more to use cleaner energy, and less of it.

The data show we already do. Energy is a basic need, like food, and in energy and food America has been a trailblazer in reducing environmental strain. We had a blip upward in emissions from energy when we scuttled nuclear in the U.S. (resulting in a coal surge), but less than two decades later improvements in natural gas had caused coal to be such a non-factor more people are now employed by the solar panel industry than in mining. The energy sector has made such dramatic improvements in emission reductions that President Obama’s Clean Power Plan was outdated before it could ever be enacted; the private sector reached what would have been the government’s 2025 target for energy emissions in 2017.

Americans are also good about responsible energy usage. Though there is a political divide about how much climate has changed since the 1950s, and how much of that is due to mankind, there is no political difference when it comes to green efforts like energy conservation. All of us do it. That shows in recent data from the U.S. Energy Information Administration. Though our population continues to grow, our growth in energy consumption has not.

The growth in energy and emissions is instead in Asia and Africa. But even that is not a bad thing when we consider the health hazards of burning wood or dung, as 90 percent of Africa recently did. The developing world deserves a chance to have centralized affordable energy and the benefits to culture that occur when basic needs become cheaper and more money is available for art and libraries and sanitation. Even coal is a reasonable interim solution because of its cost.

Source: EPA Our Nation’s Air 2018

The World Health Organisation estimates up to 6.5 million annual deaths are linked to air pollution each year but those are not happening here, we have the best air quality in the world; it is happening in homes where one billion people still burn their own fuel for cooking and heating.

We have done a disservice to poor countries telling the World Bank we would only help finance centralized energy in developing countries if it was solar or wind when we know they can’t afford those. We sacrificed sanitation and hygiene in places that need it most.

American science and technology has been a role model for how the world can keep energy affordable and clean. That is what we should be exporting to other countries, not guilt over our success.

 

 

Why More USA CO2 is a Good Thing

A new editorial at Investor’s Business Daily explains: Don’t Join The Media Freak Out Over Recent Jump In CO2 Emissions — It Won’t Last. Excerpt in italics with my bolds.

CO2 Emissions: For the first time in years, U.S. carbon dioxide output rose last year, a new report says. The jump has set off alarms in all the predictable media quarters. Relax. It’s a great sign for the economy, and will mean nothing long term for the environment.

CO2, the main greenhouse gas that global warming advocates most fear, happens to be rising around the world right now. It has been for decades.

But in recent years the U.S. has been the big exception to that trend, with declining amounts of CO2 spewed into the air from its industry. The reason for this is that, thanks to fracking, companies and utilities around the country are replacing coal with natural gas.

At least, that is, until 2016. But in 2018, U.S. carbon dioxide output jumped by 3.4%, according to Rhodium Group, a research firm.

It’s not hard to understand why. Thanks to a booming economy set off by President Trump’s new trade deals, tax cuts and deregulation, in the past two years the U.S. has seen manufacturing jobs surge.

CO2 Emissions Vs. Factory Jobs
Indeed, since Trump entered office, the number of manufacturing jobs has jumped by close to half a million. Once-moribund industrial areas around the country, many of which voted for Trump, are coming back to life. Minority unemployment rates are at or near record lows. Meanwhile, wages rose 3.2% last year, the fastest in a decade.

These are good things. This is prosperity.

Sources: US Federal Reserve Board and MAPI Foundation.

All those people going back to work in refurbished factories in America’s Heartland — you remember, the ones Hillary Clinton called “deplorables” — helped push emissions from manufacturing up 5.7% last year alone.

Transportation also contributed, of course, in the surging economy, with jet fuel (up 33.1%) and diesel fuel (up 3%) posting solid gains. A growing economy also means more electricity demand. Emissions in the electricity producing sector jumped 1.9%.

Then there’s the irony of ironies: some of the increase in greenhouse gas emissions, which activists fear are causing runaway global warming, was due to an unusually cold winter last year. That’s right: Businesses and homes used more fuel for heat than they have in years. Rhodium noted that CO2 from this winter effect rose 10% in 2018.

A Cold, Cold Winter
Are these bad things? No. Not at all.

First off, people need to heat their homes and businesses in winter. That’s a given. Anyone who doubts that deserves the scorn and ridicule that surely would come their way for suggesting otherwise.

Second, those who have regained their jobs in factories across America should be cheered after living through years of steady, unremitting industrial decline. That some media outlets are now treating the very recent rise in CO2 output as some epic tragedy, please.

A healthy economy always produces more CO2 when its growing fast than otherwise. Our current growth rate is roughly 50% higher than it was under President Obama. If it didn’t produce more CO2, that would be surprising.

“The boom in manufacturing is good news for American workers,” said The Daily Caller, “however, major media outlets sounded the alarm on global warming.” Both Washington Post and Bloomberg .

The Post was worst, claiming the “world has only about a decade to make the ‘unprecedented changes necessary” to stave off climate disaster.

Of course, such predictions of doom are based on statistical models that have proven wrong repeatedly in the past. That’s not science; it’s little better than a Ouija Board. And yet, these prophets of climate doom would have us slash CO2 output and destroy hundreds of thousands of jobs just to satisfy the demands of the green socialist movement.

Nothing’s Forever — Not Even CO2
By the way, those gains in CO2 won’t go on forever. The next slump or slowdown will take care of that, by causing many companies to close and many people to lose their jobs. And fracking will continue to chip away at our CO2 emissions.

Meanwhile, around the world, countries are abandoning their restrictions on CO2 emissions that have impoverished them and angered voters. They’re also throwing aside the idea of punitive carbon taxes. People want jobs. They want incomes. They want better lives. And taxing them and the businesses they work for so that they’ll be poorer and pollute less creates resentment, even rage.

Just ask France’s Gilets Jaunes, who have nearly paralyzed President Emmanuel Macron’s administration over his proposal for higher energy taxes. It should be a warning to U.S. Democrats, who hope to parlay fear of a changing climate into total control of the U.S. government.

As Nancy Pelosi said earlier this month, on becoming House speaker again, “We must… face the existential threat of our time: the climate crisis — a crisis manifested in natural disasters of epic proportions.” This is nonsense on steroids.

Capitalism Cleans Up
The truth is, the world is getting much cleaner, when measured by CO2 output per dollar of GDP. So is the U.S. It’s decarbonizing. And as the world population begins to decline later this century and new energy technologies come on line — everything from new battery technology to ultra-safe nuclear power designs — CO2 emissions won’t be a problem, real or imagined.

The real problem? Having enough people working and paying taxes to support all the retirees around the world and pay off hundreds of trillions of dollars of global debt.

What is a problem is the nonstop fear-mongering, demands for more taxes, and dangerous socialist experiments in expanding government control of the economy, all in the name of warding off the threat of global warming.

So don’t worry about this jump in CO2. It won’t last. But the damage from bad green policies foisted on the economy will.

OPEC: The Walking Dead

America is fracking away and has become the world’s greatest oil producer.  Investor’s Business Daily has the story  How Fracking Turned OPEC Into The Walking Dead Excerpts in italics with my bolds.

The river of oil now hitting the market from U.S. fracking has stunned global energy markets. The U.S. has already leapfrogged both Russia and Saudi Arabia as the No. 1 producer. Will U.S. oil lead to OPEC’s demise?

For the first time since World War II, the U.S. is on the verge of being a net oil exporter — something that, just five years ago, would have been considered impossible.

This, of course, has caught the 28-nation Organization of Petroleum Exporting Countries by surprise. Even just a few years ago, the consensus was that fracking and its related technologies would add a decent amount of oil to the market, but nothing like what’s happening now.

Can OPEC Cut Enough?

Now, as OPEC prepares to meet on December 6, its original hope of major output cuts to bolster prices has become a problem. A suddenly booming and opportunistic U.S. oil industry is raising output faster — and producing oil more cheaply — than its competitors. Prices are plunging.

As Javier Blas of Bloomberg notes, U.S. oil output is rising at its fastest pace in 98 years. Meanwhile, both Russia and the Saudis are also pumping at record levels. The U.S. is tipping the scale. Since 2010 in the West Texas Permian Oil Basin alone, some 114,000 new wells have been drilled, bringing millions of barrels of new oil to the market. Other parts of the U.S. are undergoing the same transformation.

That’s bad for OPEC.

“The U.S. energy surge presents OPEC with one of the biggest challenges of its 60-year history,” wrote Blas. “If Saudi Arabia and its allies cut production … higher prices would allow shale to steal market share. But because the Saudis need higher crude prices to make money than U.S. producers, OPEC can’t afford to let prices fall.”

Fracking = Plunging Prices

Yet that’s exactly what oil prices are doing. On November 1, West Texas Intermediate crude traded at $65 a barrel. Today, it’s barely above $50, a nearly 19% drop.

Yes, plunging oil prices might signal concerns over the global economy, or over President Trump’s trade fight with China, or over the election of a Democratic Congress, or perhaps all three. But the fact is, the U.S. is producing enormous amounts of oil today.

One thing history has shown is that so-called cartels such as OPEC have an easy time finding agreement when prices rise, and end up bickering and backstabbing when prices fall. OPEC is definitely in the latter mode right now. Adding to its woes, the Department of Justice is looking into recent bipartisan antitrust legislation to curb OPEC’s market clout.

Are we seeing the final days of OPEC? Thanks to fracking, even if OPEC continues as the walking dead, it will likely never again have the clout it once had.

Ethane is Transforming World Energy

Many of us know of methane (CH4, AKA natural gas), but overlooked in the current drilling revolution is ethane (C2H6) which is quietly transforming the world of energy. The story comes appropriately from the Houston Chronicle (H/T Master Resource). Jordan Blum writes How the ethane molecule changed the Gulf Coast — and the world Excerpts in italics with my bolds.

Overview

Ethane is simply described as C2H6. But that molecule, a byproduct of natural gas, has triggered a petrochemical boom that is reshaping the Gulf Coast, the energy industry that lives here, and global markets for plastics, resins and other petrochemicals.

We followed that molecule from a Texas shale field where it is found, to the petrochemical plant where it is transformed into ethylene, the basic building block of most plastics, and to the Port of Houston, where it is shipped to Asia and other emerging consumer markets.

The impact of ethane is perhaps the most remarkable development in the remarkable story of the shale revolution. Less than three years ago, ethane was a largely unwanted byproduct of oil and gas drilling, much of it burned away in the natural gas stream flowing to power plants, businesses and homes, or flared off at well sites.

But today, ethane is feedstock for nearly half of U.S. plastics production and a valuable export to chemical companies around the world. As ethane flows from Texas shale fields, chemical and energy companies are building and expanding plants to take advantage of the cheap, plentiful raw material, plowing more than $140 billion into the Gulf Coast alone.

“It’s absolutely extraordinary this is happening in the United States,” said Neil Chapman, Exxon Mobil senior vice president. “I can assure you nobody predicted this in 2000 or even 2005.”

U.S. ethane production is projected to reach 2 million barrels a day by 2020, double the output at the height of the last drilling boom in 2014. On the journey from wellhead to market, ethane molecules will change forms several times as they are separated from natural gas, heated to become ethylene, processed into polyethylene, and ultimately extruded and molded into packaging and products that will appear on shelves in stores from Houston to Mumbai and Ho Chi Minh City.

The shale revolution is widely credited to the innovation and determination of one man, the late George P. Mitchell, son of a Greek immigrant and founder of The Woodlands. Mitchell, after striking it rich in oil, spent 35 years stubbornly focused on developing the Barnett Shale near Dallas, a play known for years as the “Wildcatters Graveyard.”

Mitchell, however, persisted, eventually combining hydraulic fracturing with horizontal drilling to unlock the complex shale rock. Mitchell didn’t frack his first profitable well until 1998, but with that success, he sold his company four years later for more than $3 billion to Devon Energy of Oklahoma City.

The shale boom was soon underway, producing oil and gas from Texas to North Dakota to the Northeast. It placed the United States among the world’s biggest energy producers, roiling global markets and upending more than 40 years of geopolitics.

And along with oil and gas came large volumes of another petroleum product known as natural gas liquids.

Three primary components can come out any successful well: crude oil, natural gas, which is essentially methane, and natural gas liquids, primarily ethane, butane and propane. Ethane is the most prevalent natural gas liquid, or NGL, and used solely as a feedstock for petrochemicals.

Mont Belvieu is built atop a salt dome formed more than 100 million years ago from deposits likely left by an ancient inland sea that cut across the North American continent. For more than 60 years, energy companies have used it as a natural storage tank, carving out salt caverns some 3,000 feet deep to hold millions of barrels of petroleum products.

Today, those caverns are increasingly filled with ethane and other natural gas liquids that feed the plastics and chemical industries, making Mont Belvieu and its neighbor to the south, Baytown, the focal point of the Gulf Coast petrochemical boom. Here, where rice fields once stretched as far as the eye could see, Exxon Mobil alone has invested some $6 billion to dramatically expand its 36-year-old plastics plant as well as its sprawling refining and chemicals complex in Baytown.

At these plants, the ethane molecules that squeezed through fissures in shale rock, flowed up a Texas well and traveled more than 150 miles by pipeline, will undergo chemical changes to transform them from once-overlooked byproducts of oil and gas drilling into one of most ubiquitous materials on earth. Hundreds of other pipelines stretching across Texas and beyond will carry millions more barrels of natural gas liquids from U.S. shale fields, converging near the salt dome under Mont Belvieu’s Barbers Hill.

This is the next stop for the natural gas liquids produced by Exxon’s subsidiary XTO Energy. Here, processing plants known as fractionators use varying pressures and temperatures to break the natural gas liquids into components, each with a slightly different combination of carbon and hydrogen, including butane (C4H10), propane (C3H8), pentane (C5H12) and, of course, ethane (C2H6).

The ethane is piped 10 miles to Exxon Mobil’s Baytown complex, which is simultaneously one of the nation’s oldest and most modern plants. The refinery was built nearly a century ago by one of Exxon Mobil’s predecessor companies, Humble Oil. A chemical plant was added in 1979 and expanded in 1997.

The focus of the Baytown expansion was eight furnaces, each costing more than $100 million and standing 23 stories tall — nearly the height of NRG Stadium. The furnaces, built in Thailand, are the heart of a plant known as a cracker, which gets its name from the process that uses extreme heat to crack ethane molecules in half and trigger chemical reactions that form ethylene.

The ethylene is piped back to Mont Belvieu, where some will be stored in the salt caverns, but most will feed another process that will change the hydrocarbons liberated from Texas shale once again.

Where the Baytown complex used heat and pressure to crack ethane into ethylene, Exxon Mobil’s Mont Belvieu plant relies on chemical reactions to fuse trillions of ethylene molecules into polyethylene.

The Mont Belvieu plant opened in 1982, producing mainly low-grade, flexible polyethylene used in plastic wrap and food packaging, and expanded nine years later to produce plastic for more rigid products, such as milk bottles. The most recent expansion, completed late last year, is dedicated to high-performance polyethylene that is light, flexible and strong.

After quality testing, the plastic is loaded into as many as 35 rail cars, each holding about 200,000 pounds of polyethylene pellets, and shipped throughout the country to customers who shape the polyethylene pellets into finished plastics products. About 40 percent of the polyethylene is made for the domestic market.

Polyethylene pellets marked for export are mechanically packaged in 55-pound bags, each holding about 1 million pellets. Every hour, the plant fills about 10,000 bags, which are loaded onto pallets, each holding 55 bags, and trucked to a 70-acre storage yard. As many as 100,000 pallets are kept for up to 45 days until they can be loaded into containers and shipped out of the Port of Houston.

The Baytown and Mount Belvieu plants together employ 7,500 people, and Exxon Mobil estimates that the number doubles to 15,000 when counting contractors and jobs at local suppliers, restaurants and other businesses that support the plant. Exxon pays more than $150 million a year in local taxes and fees.

The plants also have contributed to a surge in exports that has made Houston one of few regions in the country that exports more than it imports. That brings new money into the area — tens of billions of dollars that can be used to expand business, hire workers and increase wealth.

“We’re going to have things that are made in America again and getting shipped overseas,” Fritsch said. “That’s what’s exciting about shale gas. It’s the explosion of industry again in the U.S.”

Climate Change Battle Report

Anyone paying attention knows this summer the media has assaulted the public with many climate scares, both old and new. Each week we see new ones like “marine heat waves” added to threats that 2018 summer temperatures will be repeated and increased until 2022. All sorts of dire consequences are proclaimed, and for what purpose? It can only be the intent to recruit us to join the “fight against climate change.”

Curious as to what jurisdictions might be doing, I went searching for news about actions to strike blows against the climate change nemesis. Media headlines frequently announce that this or that nation, province or city is stepping up to “Fight Climate Change.”  The results are informative.

What Actions Count as Fighting Climate Change

For example a report Ireland will raise carbon tax to tackle climate change. In the text it is announced the nation is not reducing emissions on schedule, and is taking three actions: Setting and raising a tax on carbon, spending more on fuel efficiencies, renewables and climate adaptation projects, and divesting from fossil fuel companies.

Then there is an article Mexico and Canada Join Growing Under2 Climate Coalition  Excerpts in italics with my bolds.

The growing Under2 Coalition is a global pact of cities, states and countries pledging to limit the increase in global average temperature to below 2 degrees Celsius, the level of potentially catastrophic consequences.

With Canada and Mexico’s endorsements, the Under2 Coalition now includes 170 jurisdictions on six continents that collectively represent more than 1.18 billion people and $27.5 trillion GDP – equivalent to 16 percent of the global population and 37 percent of the global economy.

The governments in the Under2 coalition, like California, are leading the fight against climate change. They know that investing in clean growth will help all members reach their ambitious climate change goals and grow their countries’ economies. I applaud their leadership in reducing emissions and supporting clean innovation. Canada is proud to endorse their actions today,” said Minister McKenna.

Coalition members pledge to limit greenhouse gas emissions to 2 tons per capita or 80-95 percent below 1990 levels by 2050.

This action builds on landmark legislation Governor Brown signed in October 2015 to generate half of the state’s electricity from renewable sources by 2030 and double the rate of energy efficiency savings in California buildings. Governor Brown has also committed to reducing today’s petroleum use in cars and trucks by up to 50 percent within the next 15 years; make heating fuels cleaner; and manage farm and rangelands, forests and wetlands so they can store carbon.

What is the Climate Battleground

Some of these actions are purely symbolic virtue signaling and will have no effect on either CO2 emissions or global warming. Divestment for example is a transfer of shares to other investors with no impact upon the value of the target companies. The virtue is not free, in that the portfolio loses diversity (energy being counter cyclical to other businesses), and other industries often generate lower returns. And if the reinvestment is into renewables, those companies’ performance depends on government subsidies that are presently being withdrawn. Another sham is purchasing carbon free electricity credits from a grid mostly supplied by coal and gas plants.

In short there seem actually to be Three Lines of Attack
1.Adaptation and Resilience
2.Improving Energy Efficiencies
3.Transition to Zero Carbon Energy

The first two are worthy initiatives. History proves that future periods are likely to be both colder and warmer than the present, and cold times are the greater threat to human life and prosperity. Prudent public officials should invest in robust infrastructure and reliable, affordable energy. The rub is powering a modern society with windmills and solar panels.

How Goes the Transition Away from Fossil Fuels

The first objective in the Great Green Transition is to stop the use of Coal, Climate Enemy #1. An update report on that front comes from Vijay Jayaraj, Aug 18, 2018, at Townhall The Dawn of Climate Realism: Coal Surges Amid Climate Rhetoric  Excerpts in italics with my bolds.

Many countries have been at the crisscross of warfare between anti-coal establishments and the traditional coal industry. Despite the elite-empowered and politically motivated worldwide campaign to phase out coal, demand for coal is on the rise!

Coal has been “enemy No. 1” for the climate establishment. In fact, it would seem that the entire global warming movement is hinged upon the singular aim to eliminate coal from use.

Catastrophic Anthropogenic Global Warming (CAGW) is a notion that cites a popular scientific hypothesis and concludes that the global temperatures have risen, or will soon rise, to dangerous levels in the post-industrialized era due to human activity.

The proponents of CAGW believe that the primary contributor to this increase in temperature is the combustion of coal and the subsequent release of carbon dioxide gas into the atmosphere.

However, peer-reviewed scientific journals by hundreds of scientists render many of these claims dubious at best. Here are just three of them.

Firstly, contrary to the claim that carbon dioxide is the primary driver of global warming, global temperatures have not risen proportionately to carbon dioxide concentration in the atmosphere. In other words, an increase in carbon dioxide emission has not resulted in an increase in temperature.

Secondly, most of the current “consensus” on climate change is based on forecasts from computer climate models. But the wide divergence between observed temperature and model predictions makes it apparent that the models were programmed incorrectly to be over-dependent on carbon dioxide concentration to predict temperature changes.

In what was a major embarrassment to United Nations Intergovernmental Panel on Climate Change (IPCC), top climate scientists admitted these flaws in the climate models when they failed to reflect real-world temperatures during the last 19 years. The same was widely publicized and even testified to the U.S. House Committee on Science, Space & Technology.

Thirdly, contrary to the claim that recent warming is historically unprecedented, today’s temperature levels are similar to the temperatures the earth experienced in the first and eleventh centuries. Also known as Roman Warm Period and Medieval Warm Period, these were times when, though as warm as today or warmer, the earth’s ecosystems flourished. The notion that “today’s temperature levels are at unprecedented levels” is completely false.

Despite these (and many more) straight-forward evidences against the CAGW hypothesis, the climate establishment continues to advocate for the ban of coal and coal-fired power plants. Global climate treaties like the Paris Agreement were set out to target and close down coal plants in developing countries.

But to their surprise, coal use is rising.

This financial year, Coal India—India’s largest state-controlled coal mining company—saw its first-quarter profits jump 61 percent and its coal production rise 15.23 percent. India has a long-term vision to increase its coal output and has been vocal about “carbon imperialism”—a term it uses to define the attitude of the anti-coal climate establishment.

In 2017, coal accounted for 60.4 percent of total energy consumption in China. The country’s coal production outputs for the first seven months of 2018 was 1.98 billion tons, 3.4 percent higher than the same period last year. China’s coal imports surged this July and hit a record high (29 million tons), beating the previous highest recorded monthly volume import (January 2014).

But the surge in coal is not just limited to Asia.

Russia’s coal production of 410 million tons was its highest since the Soviet era and is expected to reach 420 million tons this year. The coal industry is set to expand in the coming years with massive infrastructure upgrades.

U.S. coal output reached a 16-year high in 2017 (701 million tons), after a change in leadership that saw the lifting of heavy restrictions on coal from the previous administration. Coal output in 2017 was 40.8 million tons higher than in 2016, and India was the top importer of U.S. coal in Asia (13 million tons).

The trend continued in 2018, and the month of April recorded the highest coal export in five years. U.S exports to India reached 6.2 million tons in just the first half of 2018, which is nearly the entire export (6.8m tons) to India in 2017! And coal is expected to do fairly well in the U.S. despite the disruption from the natural gas boom.

The situations for coal in India, China, and the U.S. are prime examples of the coal industry’s strength. It can also be said that the climate rhetoric has failed to break the world’s dependence on coal. And for good reason. Coal remains among the cheapest, and technically simplest, sources of the abundant, affordable, reliable electricity indispensable to the modern industry and technology that are indispensable to lifting and keeping whole societies out of poverty.

Leaders across the globe understand the indispensable role of coal in their economies. They are also beginning to understand the exaggerated nature of climate-change dangers promoted heavily in the mainstream media.

The climate establishment’s doomsday prophecies failed to come true in the last 20 years, which saw global temperature remain largely stable. Arctic ice remained stable, global agricultural outputs increased, more people rose out of poverty, and the forests in Europe grew instead of shrinking.

Clearly, there is no reason why the coal industry should slow down, and it won’t. Overblown climate-change rhetoric is leading rapidly to the downfall of the climate establishment, and nations are moving past it at a rapid pace.

Postscript:

Methane Waste Prevention Circus

Circus

In the middle ages, theologians strenuously debated the number of angels dancing on a pinhead. Now we have lawyers and judges going around in circles in order to prevent methane emissions. This circus show is a direct result of the embedded green bureaucracy in government, together with a segment of the population mobilized by fear of global warming/climate change.

The courtroom drama started when the Obama administration in its midnight hours gave environmentalists a Christmas gift with a new Methane Waste Prevention Rule issued by BLM (Bureau of Land Management). It demonstrated how federal agencies were enslaved by green ideologues in order to choke any energy developments with a slew of regulations and penalities. In fact, folks like the EDF (Environmental Defense Fund) are traumatized by fear of “greenhouse gases”, and methane in particular. Their real mission is to keep fossil fuels in the ground, thereby securing an imaginary future where the climate is always favorable and never changes.

This hysteria has been deliberately instilled and maintained by climatists (alarmists/activists) and produces a circus whenever they feel threatened (which is often). This is a case in point, and a cautionary tale for anyone trying to reconcile conservation and development.

Aside: In 1978 Billy Martin was Manager of the New York Yankees baseball team during a particularly turbulent time with players, coaches, the owner and fans. The Yankees were known by the NYC borough housing their stadium; overnight they went from the “Bronx Bombers” to the “Bronx Zoo.” The long-running soap opera prompted this comment from third baseman Graig Nettles: “When I was a kid I wanted to be either a ball player or work in a circus. Now I get to do both!”

Harvard Law School has a record of the series of acts in this soap opera here Methane Waste Prevention Rule

The schedule of Acts in the Methane Waste Prevention Circus (synopsis only; details at linked website)

History Before Trump Era (BTE)
On November 18, 2016 BLM published the Waste Prevention Rule with an effective date of January 17, 2017 and additional compliance deadlines set for January 17, 2018.

Three days before publication (November 15, 2016), but after the rule was signed, industry and states filed challenges to the rule in the District of Wyoming.

On January 17, 2017 the District of Wyoming denied a request for a preliminary injunction (leaving the rule in effect during the litigation).

Trump Common Era (TCE)
On February 3, 2017 The US House of Representatives passed a Congressional Review Act resolution to disapprove the rule, which would have voided the rule and barred any other “substantially similar” rule in the future.

On March 28, 2017 President Trump’s Executive Order on Promoting Energy Independence and Economic Growth directed the BLM to review the rule.

On May 10, 2017 the US Senate voted down the House of Representatives’ Congressional Review Act resolution, with three Republicans voting no.

On June 15, 2017 BLM announced that it was postponing the 2018 compliance dates for an indefinite period of time (as long as litigation is pending), “pursuant to the Administrative Procedure Act” in a notification in the Federal Register.

On July 5, 2017 California and New Mexico challenged BLM’s postponement of the compliance dates.

On July 10, 2017 several environmental groups also challenged BLM’s postponement. The Northern District of California granted a motion to relate these two cases on July 12, 2017 and North Dakota and several industry groups were later allowed to intervene in the consolidated cases.

On September 7, 2017 the Northern District of California denied a request to transfer the litigation challenging BLM’s postponement to the District of Wyoming.

On October 4, 2017 the Northern District of California determined BLM’s June 15, 2017 postponement was unlawful, granting summary judgment in the case that vacated the postponement notification and reinstated the rule’s January 17, 2018 compliance date.

Also on October 4, 2017 BLM proposed a rule to delay the 2018 compliance dates in the Obama-era rule until January 17th, 2019. The agency accepted comments until November 6, 2017.

On October 27, 2017 industry groups asked the District of Wyoming to issue a preliminary injunction on the rule’s January, 2018 compliance deadlines to keep them from going into force while litigation is pending.

On October 30, 2017 the District of Wyoming agreed to a Trump administration request to slow the litigation by postponing briefing deadlines as BLM goes through its rulemaking process to repeal, revise, or rescind the rule pursuant to Executive Order 13783.

On November 2, 2017 Democratic lawmakers wrote a letter to Secretary Zinke opposing BLM’s attempts to repeal, revise, or rescind the rule.

In the last week of November 2017 environmental groups filed briefing with the District of Wyoming opposing the industry groups’ October 27, 2017 preliminary injunction request.

On December 4, 2017 BLM filed a notice of appeal to the Ninth Circuit of the October 4, 2017 Northern District of California decision finding the June 2017 BLM delay unlawful.

On December 8, 2017 BLM published a final rule delaying the 2018 compliance dates until 2019. Often referred to as the “Suspension Rule,” this was the final version of the rule BLM proposed on October 4, 2017.

On December 19, 2017 New Mexico and California sued BLM over its December 8, 2017 final rule to suspend the methane rule’s 2018 compliance dates, delaying them until 2019. A coalition of environmental groups also sued over the December 8 rule. Both lawsuits were filed in the District Court for the Northern District of California and were consolidated in January 2018.

On December 29, 2017, the U.S. District Court for the District of Wyoming granted a request from industry groups and Wyoming and Montana to stay litigation in light of the final Suspension Rule BLM issued on December 8, 2017.

On January 5, 2018 the American Petroleum Institute moved to intervene in the December 19 lawsuits in the Northern District of California, saying the rule would be economically damaging. On January 9, 2018 the states of North Dakota and Texas also moved to intervene on behalf of BLM. Both of these motions were granted on February 26, 2018.

In the week of February 12, 2018 BLM released a proposed rule (the Revision Rule) to replace the 2016 Waste Prevention Rule.

On February 22, 2018 the Northern District of California issued a preliminary injunction preventing BLM’s December 8, 2017 Suspension Rule from taking effect. This order also denied a January 9th request by BLM, North Dakota and Texas to transfer the case to the U.S. District Court for the District of Wyoming.

On March 7, 2018 U.S. District Court for the District of Wyoming agreed to resume industry and state challenges to the rule, lifting a stay issued on December 29, 2017 and setting a briefing schedule for pending motions.

Also on March 14, 2018 BLM announced it would voluntarily dismiss its appeal to the Ninth Circuit of the October 4, 2017 ruling from the Northern District of California, finding BLM had violated the Administrative Procedure Act by postponing 2018 compliance dates. The Ninth Circuit granted its motion to dismiss on March 15, 2018, ending the substantive portion of this case.

On April 4, 2018 the US District Court for the District of Wyoming agreed to suspend key provisions of the Waste Prevention Rule. The court stayed the case pending BLM’s completion of rulemaking process for the Revision Rule.

On April 5th and 6th, 2018 California, New Mexico, and environmental groups filed notices of appeal to the 10th Circuit Court of Appeals of District of Wyoming’s April 4, 2018 order staying implementation of provisions of the Waste Prevention Rule.

On April 23, 2018 BLM filed a notice of appeal to the Ninth Circuit of the February 22, 2018 order denying a motion to transfer venue and granting a preliminary junction.

On April 30, 2018 the District of Wyoming denied appellants’ April 6, 2018 motion to stay its April 4th decision. By denying the motion, the court left in place its suspension of key provisions of the rule and stay of the case pending completion of the regulatory process for the Revision Rule.

On May 11, 2018 Environmental Defense Fund sued Interior and BLM for BLM’s failure to respond to FOIA requests “to produce records relevant to efforts to suspend, delay, repeal and/or revise the Waste Prevention, Production Subject to Royalties, and Resource Conservation final rule.”

On June 4, 2018 the Tenth Circuit denied a request from California, New Mexico and environmental groups to stay the April 4th order of the District of Wyoming (suspending key portions of the rule and staying litigation at the district court level) pending the Tenth Circuit’s consideration of their appeal of the order. In the same ruling, the Tenth Circuit also denied Wyoming, Montana, and industry groups’ motion to dismiss the appeal of the April 4th order entirely.

On June 20, 2018 BLM filed a motion to voluntarily dismiss its appeal to the Ninth Circuit filed on April 23, 2018. This leaves in place the February 22, 2018 preliminary injunction of BLM’s Suspension Rule.

On July 30, 2018, environmental groups, California, and New Mexico filed a brief with the 10th Circuit asking the court to overturn the District Court’s decision to enjoin the Methane Waste Prevention Rule.

Currently Running Methane Circus Performances

Four cases related to the Waste Prevention Rule and the Administration’s efforts to delay, suspend, or roll it back are currently active:

  • Wyoming v. U.S. Dep’t of the Interior, No. 2:16-CV-00285 consolidated with Western Energy Alliance, et al. v. Sally Jewell, 2:16-CV-0280. (D. Wyo.) — challenging the original Waste Prevention Rule,
  • California and New Mexico v. Zinke, No. 3:17-CV-03804 consolidated with Sierra Club et al., v. Zinke. No. 3:17-CV-03885 (N.D. Cal.) — challenging BLM’s June 15, 2017 notification of postponement of the rule’s compliance dates,
  • California and New Mexico v. BLM, No .3:17-cv-07186 consolidated with Sierra Club et al v. BLM 3:17-cv-07187 (N.D. Cal.) — challenging BLMs December 8, 2017 Suspension Rule delaying the Waste Prevention Rule’s 2018 compliance dates, and
  • EDF v. Dept. of Interior, No. 1:18-cv-01116 (D.D.C) -– a FOIA suit against BLM regarding requested documents relating to its efforts to delay, suspend, and rollback the Waste Prevention Rule.

I searched a lot to find out what is the root of the legal conflict. Almost everything in the media is from alarmist sources and avoids the details and differences between what is proposed in 2016 and 2018. The most informative source IMO is the legal brief submitted by the energy producers April 23, 2018 Comments on BLM 2018 Revisions to Waste Prevention Rules Excerpts below in italics with my bolds.

To Whom it May Concern: Western Energy Alliance (the Alliance) and the Independent Petroleum Association of America (IPAA) appreciate the opportunity to provide comments on the Bureau of Land Management’s (BLM) proposed revisions of certain provisions of the Methane and Waste Prevention rule, or 2016 rule. The 2016 rule as promulgated exceeded BLM’s authority under the Mineral Leasing Act (MLA), and that the decision to re-evaluate the rule is required. The proposed revision rule more accurately captures the scope of BLM’s waste minimization authority, and will better ensure federal mineral interests are adequately protected without excessively burdening federal lands development with overreaching regulations.

IPAA represents thousands of independent oil and natural gas exploration and production companies, as well as the service and supply industries that support their efforts. Independent producers drill about 95% of American oil and natural gas wells, and produce about 54% of American oil and more than 85% of American natural gas. The Alliance represents over 300 companies engaged in all aspects of environmentally responsible exploration and production of oil and natural gas in the West. Alliance members are independents, the majority of which are small businesses with an average of 15 employees.

The 2016 Waste Prevention Rule Exceeds BLM’s Statutory Authority

The 2016 rule exceeds BLM’s statutory authority under the MLA and must be revised. The United States District Court for the District of Wyoming expressed significant concern with the rule. The court described BLM as having “hijacked the EPA’s authority under the guise of waste management” and stated that “the BLM cannot use overlap to justify overreach.”1 Given such a strong warning of the legal vulnerability of the rule, it is logical and necessary that BLM move to substantively revise it to more accurately reflect the agency’s statutory authority. Our comments on the 2016 rule, which are attached hereto as Appendix B and reincorporated in full by reference herein, provide an overview of our concerns with the technical and legal vulnerabilities of the 2016 rule. Many of those concerns went unaddressed and are subject to the ongoing litigation referenced above. This letter raises further concerns with the 2016 rule.

The stated primary goal of the 2016 rule was to reduce methane emissions from oil and gas operations. During that rulemaking process, BLM repeatedly emphasized that the methane reductions achieved by the Proposed Rule justified its provisions. As the Wyoming court noted, however, BLM only has “authority to regulate the development of federal and Indian oil and gas resources for the prevention of waste.” Id. at 15 (emphasis in original). Therefore, some emissions reductions may occur as a result of an otherwise lawful measure to prevent the “waste” of gas pursuant to BLM’s authority under the MLA. But BLM’s obligation to promulgate reasonable waste prevention measures does not confer any authority to regulate air quality. The Wyoming court also made clear that the “protection of air quality . . . is expressly within the ‘substantive field’ of EPA and states pursuant to the Clean Air Act.” Thus, in the context of the 2016 rule, BLM lacks authority to require the oil and gas industry to reduce methane (or other air) emissions.

The only way BLM could justify the 2016 rule was to incorporate global climate change benefits. As the Wyoming court put it, “the Rule only results in a ‘net benefit’ if the ‘social cost of methane’ is allowed to be factored into the analysis . . . [and] [t]he Court questions whether the ‘social cost of methane’ is an appropriate factor for BLM to consider in promulgating a resource conservation rule pursuant to its MLA authority.”The social cost of methane was formally withdrawn by Executive Order No. 13783, Promoting Energy Independence and Economic Growth, meaning it is no longer a suitable metric for rulemaking.

Under the MLA, produced gas is “wasted” only if it could have been economically captured and marketed or put to beneficial use on the lease. Thus, to establish that a proposed waste prevention measure is a “reasonable precaution” against “waste” and authorized under the MLA, BLM must demonstrate that the gas can be economically captured by the operator or beneficially used on the lease. If a waste prevention measure renders gas capture or use uneconomic, then BLM has no authority to impose it.

The reality is that without duplicative and burdensome federal rules, industry has made tremendous progress in addressing issues associated with venting, flaring, and methane emissions. According to EPA’s most recent greenhouse gas inventory, between 1990 and 2016, methane emissions from petroleum and natural gas systems declined 14% while natural gas production increased 50%. In the 2016 inventory (published in 2018), petroleum system methane emissions declined 3% since 1990, and methane from natural gas systems declined 16% since 1990. These decreases come despite a 71% and 48% increase in production, respectively, since 2005. Most important, the most recent EPA data, which applies more accurate calculation methodologies, show that emissions from associated gas venting and flaring decreased 36% from 2015-2016. See 2018 GHG Inventory Report at 3-64. In fact, EPA revised petroleum system methane emission estimates going back to 1990, resulting in an average decrease of 28% for a given year relative to previous estimates due to the “recalculation of associated gas venting and flaring emissions using a basin-level approach.” Id. at ES-6 (the same recalculation results in increased CO2, however). EPA’s new data reveals that the 2016 rule was premised on inaccurate information regarding the volume of methane emissions attributable to venting and flaring, and is therefore, an arbitrary and capricious agency action that was premised on faulty logic and without adequate support on the record. EPA’s new and updated data further supports the agency’s rationale for the Proposed Rule.

Conclusion

In closing, we reiterate the tremendous progress that America’s oil and natural gas industry has made, and will continue to make, in addressing venting, flaring, and methane emissions. EPA’s most recent data concerning such emissions demonstrates that despite a significant increase in production in recent years, emissions continue to decline, including specifically methane emissions from venting and flaring. In this respect, the fundamental premise upon which the 2016 rule was based is not accurate and warrants a reconsideration of the rule. The 2016 rule exceeded BLM’s authority, made numerous and fundamentally flawed assumptions in its assessment of both the cost of compliance to industry and the benefits derived from the rule, and was an unlawful, arbitrary and capricious agency action. Accordingly, BLM was required to make substantial revisions to that rule, and we believe the Proposed Rule is a vast improvement and consistent with the agency’s statutory authority in most respects.

Footnote:

This is another example of using regulations and legal techniques to add layers of complication and cost with the intent of stopping energy extraction:  “Leave it in the ground.” A previous post showed how this is an activist strategy with deep commitment and deep pockets supporting it.  Just look how quickly legal teams acted to obstruct a more balanced rule, and put sand in the gears of deregulation.  In fact a circus should be more fun instead of a  continual battleground with slings and arrows.

Battle of Agincourt.

Background

Methane Gets a Bad Rap  More Methane Madness

Methane is Natural not Pollution Carbon Sense and Nonsense

Game Plan against Fossil Fuels Climatist Revolutionaries

Note:   Here is the proposed rule:
A Proposed Rule by the Land Management Bureau on 02/22/2018

2018 Update: Fossil Fuels ≠ Global Warming

gas in hands

Previous posts addressed the claim that fossil fuels are driving global warming. This post updates that analysis with the latest (2017) numbers from BP Statistics and compares World Fossil Fuel Consumption (WFFC) with three estimates of Global Mean Temperature (GMT). More on both these variables below.

WFFC

2017 statistics are now available from BP for international consumption of Primary Energy sources. 2018 Statistical Review of World Energy. 

The reporting categories are:
Oil
Natural Gas
Coal
Nuclear
Hydro
Renewables (other than hydro)

This analysis combines the first three, Oil, Gas, and Coal for total fossil fuel consumption world wide. The chart below shows the patterns for WFFC compared to world consumption of Primary Energy from 1965 through 2017.

WFFC2017

The graph shows that Primary Energy consumption has grown continuously for 5 decades. Over that period oil, gas and coal (sometimes termed “Thermal”) averaged 89% of PE consumed, ranging from 94% in 1965 to 85% in 2017.  MToe is millions of tons of oil equivalents.

Global Mean Temperatures

Everyone acknowledges that GMT is a fiction since temperature is an intrinsic property of objects, and varies dramatically over time and over the surface of the earth. No place on earth determines “average” temperature for the globe. Yet for the purpose of detecting change in temperature, major climate data sets estimate GMT and report anomalies from it.

UAH record consists of satellite era global temperature estimates for the lower troposphere, a layer of air from 0 to 4km above the surface. HadSST estimates sea surface temperatures from oceans covering 71% of the planet. HADCRUT combines HadSST estimates with records from land stations whose elevations range up to 6km above sea level.

Both GISS LOTI (land and ocean) and HADCRUT4 (land and ocean) use 14.0 Celsius as the climate normal, so I will add that number back into the anomalies. This is done not claiming any validity other than to achieve a reasonable measure of magnitude regarding the observed fluctuations.

No doubt global sea surface temperatures are typically higher than 14C, more like 17 or 18C, and of course warmer in the tropics and colder at higher latitudes. Likewise, the lapse rate in the atmosphere means that air temperatures both from satellites and elevated land stations will range colder than 14C. Still, that climate normal is a generally accepted indicator of GMT.

Correlations of GMT and WFFC

The next graph compares WFFC to GMT estimates over the five decades from 1965 to 2017 from HADCRUT4, which includes HadSST3.

WFFC&GMT2017

Over the last five decades the increase in fossil fuel consumption is dramatic and monotonic, steadily increasing by 227% from 3.5B to 11.5B oil equivalent tons.  Meanwhile the GMT record from Hadcrut shows multiple ups and downs with an accumulated rise of 0.9C over 52 years, 6% of the starting value.

The second graph compares to GMT estimates from UAH6, and HadSST3 for the satellite era from 1979 to 2017, a period of 38 years.

WFFC&UAH&HAD2017

In the satellite era WFFC has increased at a compounded rate of nearly 2% per year, for a total increase of 87% since 1979. At the same time, SST warming amounted to 0.44C, or 3.1% of the starting value.  UAH warming was 0.58C, or 4.2% up from 1979.  The temperature compounded rate of change is 0.1% per year, an order of magnitude less.  Even more obvious is the 1998 El Nino peak and flat GMT since.

Summary

The climate alarmist/activist claim is straight forward: Burning fossil fuels makes measured temperatures warmer. The Paris Accord further asserts that by reducing human use of fossil fuels, further warming can be prevented.  Those claims do not bear up under scrutiny.

It is enough for simple minds to see that two time series are both rising and to think that one must be causing the other. But both scientific and legal methods assert causation only when the two variables are both strongly and consistently aligned. The above shows a weak and inconsistent linkage between WFFC and GMT.

Going further back in history shows even weaker correlation between fossil fuels consumption and global temperature estimates:

wfc-vs-sat

Figure 5.1. Comparative dynamics of the World Fuel Consumption (WFC) and Global Surface Air Temperature Anomaly (ΔT), 1861-2000. The thin dashed line represents annual ΔT, the bold line—its 13-year smoothing, and the line constructed from rectangles—WFC (in millions of tons of nominal fuel) (Klyashtorin and Lyubushin, 2003). Source: Frolov et al. 2009

In legal terms, as long as there is another equally or more likely explanation for the set of facts, the claimed causation is unproven. The more likely explanation is that global temperatures vary due to oceanic and solar cycles. The proof is clearly and thoroughly set forward in the post Quantifying Natural Climate Change.

Background context for today’s post is at Claim: Fossil Fuels Cause Global Warming.