Sunday, May 25, 2014

The great imaginary California oil boom: Over before it started

It turns out that the oil industry has been pulling our collective leg.

The pending 96 percent reduction in estimated deep shale oil resources in California revealed last week in the Los Angeles Times calls into question the oil industry's premise of a decades-long revival in U.S. oil production and the already implausible predictions of American energy independence. The reduction also appears to bolster the view of long-time skeptics that the U.S. shale oil boom--now centered in North Dakota and Texas--will likely be short-lived, petering out by the end of this decade. (I've been expressing my skepticism in writing about resource claims made for both shale gas and oil since 2008.)

California has been abuzz for the past couple of years about the prospect of vast new oil wealth supposedly ready for the taking in the Monterey Shale thousands of feet below the state. The U.S. Energy Information Administration (EIA) had previously estimated that 15.4 billion barrels were technically recoverable, basing the number on a report from a contractor who relied heavily on oil industry presentations rather than independent data.

The California economy was supposed to benefit from 2.8 million new jobs by 2020. The state was also supposed to gain $220 billion in additional income and $24 billion in additional tax revenues in that year alone, according to a study from the University of Southern California that relied heavily on industry funding.

But that was before the revelation by the Times that the EIA will reduce its estimate of technically recoverable oil in California's Monterey Shale by 96 percent--almost a complete wipeout--after taking a close look at actual data for wells drilled there already. The agency now believes that only about 600 million barrels are recoverable using existing technology. The 600 million barrels still sound like a lot, but those barrels would last the United States all of 40 days at the current rate of consumption.

Americans had been counting on the seemingly oil-rich Monterey Shale for more than 60 percent of a supposed newfound bounty of domestic oil locked up in deep shale deposits. But it turns out that the Monterey is rich with oil in the same way that seawater is rich in dissolved gold. In both cases the resource is there, but no one can figure out how get it out at a profit. The EIA previously estimated that resources of so-called tight oil, the proper name for oil from deep shale deposits, could reach 23.9 billion barrels for the United States as a whole. Overnight that number shrank to 9.1 billion.

The firm hired to do the original estimates, INTEK Inc., was saying as recently as December that it planned to raise its estimate for the Monterey to 17 billion barrels, presumably based on representations made to it by the industry.

The firm assumed, apparently without any justification, that the Monterey Shale would be just as productive as other shale deposits such as the Bakken in North Dakota and the Eagle Ford in Texas.

But the geology of the Monterey is riddled with folds and far more complex than other U.S. shale deposits, something that wouldn't have been too hard to find out from existing geological studies and well logs.

We cannot be sure whether those who wrote the wildly overoptimistic INTEK report were eager to encourage drilling and investment in the Monterey, something the oil industry certainly favored. But the colossal miss suggests the possibility that INTEK and its analysts have grown too close to the industry and are serving it rather than the EIA which commissioned the report.

It's no surprise that those who work in the oil industry are perennially optimistic. This high-risk business isn't for the timid. And that optimism is necessary if the industry is going to raise the capital it needs from investors. But it should be obvious that relying on the oil industry for objective information that will form the basis for public policy is a mistake. Independent sources and objective data are important cross-checks on the industry's understandable but often misleading enthusiasm.

The other explanation for the Monterey miss is that the analysts at INTEK are simply colossally inept. Note that INTEK was also responsible for the overall U.S. assessment of 23.9 billion barrels of technically recoverable oil lodged in deep shale formations. The California miss alone reduced estimated U.S. resources to 9.1 billion barrels, a cut which by itself calls into question the entire premise of renewed American oil abundance. But, the gargantuan misreading of the Monterey Shale's resources also suggests that the firm's estimates for other areas of the country need review as well.

A February 2013 comprehensive report on U.S. tight oil and natural gas from deep shales released by the Post Carbon Institute presaged the Monterey disappointment by pointing out how little oil had been extracted per well using advanced techniques in the Monterey Shale. A follow-on report issued in December focused exclusively on the Monterey and concluded that the INTEK/EIA estimate was vastly overblown. Not surprisingly, neither of these independent reports received any oil industry funding.

It is well to remember that the above numbers are all just estimates, and that they are for so-called technically recoverable resources. The estimates tell us little about how much oil from the Monterey or elsewhere might actually be economically recoverable, that is, profitably extracted. For that reason, the oil that is ultimately extracted from the Monterey and other deep shale deposits will likely be less than any estimate of technically recoverable resources. That means that even the 600 million barrel estimate for the Monterey may turn out to be too optimistic.

The industry counters that improved technology could change what seems unobtainable now into accessible oil. But, it cites no specific developments that are not already in use and therefore reflected in current estimates of what we can hope to extract. And the idea that we should base our public policy on innovations that no one has thought of yet seems more than a little unwise.

Moreover, while technology can improve, the laws of physics don't. The industry is already moving from the so-called "sweet spots" in shale deposits to those that are more difficult to exploit. That process will continue until the laws of physics and economics team up to make drilling unprofitable, and that will be the end of the shale boom in the rest of the country.

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P.S. In a previous piece I asked, "Will anyone who is currently predicting U.S. energy independence be punished if the story turns out to be wrong?" My answer was probably not. Now, we will find out if that turns out to be the case. My guess is that the oil industry will redouble its efforts to convince the public and policymakers to continue to believe something which cannot be supported by the evidence.

P.P.S. Tupper Hull, spokesman for the Western States Petroleum Association, told the San Francisco Chronicle the following in response to the Monterey Shale revision: "People forget that the boom taking place in Texas and particularly North Dakota did not happen overnight. There were decades of operators trying to understand the technology and the geology." He seems unable to recognize that in the decades that it may take to figure out how to unlock the Monterey Shale, California and the world will be working hard to create an advanced energy infrastructure that will make the Monterey irrelevant. Technology isn't standing still in renewable energy either.

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he has written columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin (now Resilience.org), The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.

Sunday, May 18, 2014

Our shadow, the Borg, and the ruthlessness of efficiency

During my graduate school days--which featured 1,000 pages plus of assigned reading in history each week--I used to fall asleep watching late-night reruns of "Star Trek: The Next Generation" after returning home from evening trips to the gym. (Given the circumstances, you'll understand that curling up to a good book was not my way of unwinding back then.)

Starfleet meets its shadow

Recently, I've taken another look at some of those episodes that I mostly dozed through in the mid-1990s as well as episodes of other Star Trek spinoffs. What stands out is how much the Borg, a collectivist race of ruthlessly efficient drones seeking perfection (as they define it), fit perfectly as the shadow side of the United Federation of Planets, presumably the good guys.

What comes into relief through this fictional contest is that it really represents an unconscious internal struggle in our modern culture; the Borg are the shadow side of our post-Enlightenment society.

Let me back up for a minute. When I say shadow, I am referring to a concept first coined by Swiss psychologist Carl Jung to denote that part of our personalities that we do not like and therefore do not identify with. It's the part that often wants to do socially unacceptable things, and sometimes does them without us even being aware of it. This is a key idea. We tend to avoid being conscious of or owning negative tendencies in ourselves, often to the point where we project those tendencies onto others.

Our own faults, when manifested in others--or more likely, when we imagine them in others--seem absolutely clear to us in them. It is the basis for the biblical saying, "You hypocrite, first take the log out of your own eye, and then you will see clearly to take the speck out of your brother’s eye." And, there is the schoolyard version: "I'm rubber, you're glue; everything you say bounces off me and sticks to you." In short, this is what Jung means by projection. It happens in societies as a whole as much as it occurs in individuals.

I mentioned that we are a post-Enlightenment society, meaning, of course, that our dominant values derive from The Enlightenment--a very broad historical era lasting from the late 17th century through the 18th century--which revolutionized thinking in all areas of human endeavor including politics, science, economics, and the arts, and emphasized empirical investigation and rational thought. So, what did this era teach us that generates this shadow side we don't like to acknowledge? It taught us that nature is imperfect and can be improved and that there is no end to the improvement we can bring to nature and to ourselves through rational thought and efficient management.

All of this seems quite a good thing to the modern mind. And, human history as a story of perpetual progress has gone along swimmingly from the time of the Enlightenment until relatively recently.

Now, faced with the deleterious effects of the growing human footprint on Earth--particularly, climate change and the rapid and exponential depletion of renewable resources such as soil and fish and of nonrenewable resources such as metals and fossil fuels--we are finding that our notions of efficient and rational management are being challenged.

Let us think for a minute about the fictional race of the Borg. The Borg say they assimilate entire cultures and incorporate their technological and cultural distinctiveness into the Borg collective. But the visible result is a society of uniformly unthinking soldiers who simply do what they are told by a cruelly calculating, all-seeing consciousness. There is no rainbow of colors representing the diversity that has been assimilated, only the monotonous black cube-shaped (read: rational) ships and the black and metallic gear worn by the crew.

Let us consider also why it is hard to distinguish the Borg and the Federation, particularly its quasi-military and scientific arm, Starfleet, from a structural standpoint. Starfleet claims to operate peaceful vessels of exploration. But, these vessels carry deadly photon torpedoes and powerful ray-producing phasers, one or both of which are used in nearly every episode (but only for defensive purposes, of course).

With a couple of notable exceptions the Starfleet crew members we encounter dress in virtually identical uniforms (except for limited variation in color) and take orders from a captain and ultimately from Starfleet headquarters. While not exhibiting what the Borg call the "hive mind," these crew members strive for maximum coordination in their action.

To us the Borg seem hideous with their biomechanical and bioelectrical implants used sometimes as weapons. We find Starfleet characters more acceptable only because they wear their technology on the outside--an array of weapons, sensors, long-range scanners, and medical marvels--all designed to give them the reach, the power and the precision that the Borg embody as fully integrated human-machine hybrids.

Both societies, however, exemplify the "homo colossus" that Overshoot author William Catton Jr. says we have already become. The Borg bring to the fore the menacing character of this hybrid being. Starfleet characters--because they do not visibly integrate their technologies within their bodies--tend to disguise this menacing character.

The Borg's explicit mission is to assimilate other cultures. Starfleet aspires not to interfere in the developing cultures of others as enshrined in the so-called prime directive. But, again and again Starfleet crews violate this principle of non-interference. (And, of course, the show would be deadly dull if the characters followed all of Starfleet's rules all the time.) Also, recall that the Federation is an ever-expanding galactic empire incorporating new civilizations within its fold--albeit willingly we are told.

Both the Borg and Starfleet are out to rationalize and improve the universe wherever they go. (It turns out that like the Earth, the stars, too, are imperfect.) But, viewers, not surprisingly, do not identify with the rationalizing process as envisioned by the Borg.

As with the fictional Starfleet we modern people have high-minded ideals: tolerance, diversity, freedom of choice, and provision of the material means for a dignified life for all (that is, all beings classified as people). But, our methods for achieving these ideals are like those of the Borg: the assimilation of everything we can exploit in the biosphere.

As with Starfleet we say we respect the individual and therefore respect the right to privacy. But we are moving ever closer to surveillance technologies that may some day rival a starship's ability to identify the life signs of a specific, identifiable individual while in orbit around a planet. With that kind of power, it's hard to imagine anything resembling privacy in the fictional world of Star Trek.

And, as I walk down any city street today and see all the people with earphones and headsets, I wonder if the Borg hive mind has already arrived. The National Security Agency need only tap into the inherent two-way communication abilities of those devices to give us the practical contemporary equivalent of a Borg drone's totally exposed existence.

One thing that makes us prefer Starfleet characters over the Borg is their resistance to absolute efficiency and perfection. One Borg character who becomes a crew member in the "Star Trek: Voyager" series (after her separation from the Borg collective) is constantly disappointed by the inefficiency of humans, by their failure to seek out perfection. And, viewers will find themselves championing the Starfleet characters against the perfectionist Borg on whom those viewers project their own perfectionist and efficiency mania.

Recently, a friend pointed me to a story about a wireless hardware engineer who set his mind to solving what he perceives as the "food problem." His solution would make a Borg drone squeal with delight--if Borg drones could actually do that.

This entrepreneur is launching a supposed complete nutritional drink that is touted as a total substitute for a regular diet. He has researched what the human body needs and has put it into a single liquid formula aptly named Soylent (after the film "Soylent Green" in which the population eats a food product similarly designed to give them complete nutrition). He believes Soylent could bring down the cost of feeding the world, make balanced nutrition affordable and reduce the time people spend getting, preparing and eating food. What could be more efficient?

Even the writers of the Star Trek series couldn't bring themselves to do what this current-day entrepreneur proposes. Starship replicators may synthesize food from the basic building blocks of the universe, but they synthesize it into salads and steaks and chocolate ice cream.

We moderns are both Starfleet and Borg without realizing it. On the surface we speak of pluralism, diversity and individual freedom. Underneath we are a ruthless homogenizing force that seeks maximum efficiency. Efficiency is our version of perfection, and the drive for perfection by definition is unitary rather than multivariate. There is only one state of perfection. And, so all that is not perfection or tending toward it is eventually driven out.

This is the opposite of what nature teaches us. Nature seeks to maintain diversity (and its inherent redundancy) as a bulwark against the unexpected, as insurance that some species will survive in an ever-changing biosphere. Nature doesn't know what will be perfect for tomorrow's conditions, so it does not strive for perfection. This diversity isn't efficient in the sense we moderns think of that term. But it is far more resilient and survivable, and it has a much, much longer track record than our human idea of efficiency.

The shadow side of our culture acts as it does out of a ruthless rationalism that prefers efficiency in production above harmony with the natural world that sustains us. And, the more we ignore the shadow side and merely pretend to be advocates of diversity and tolerance (forgetting that we need to extend these to the nonhuman world), the more potent that side will become. Evil men in history usually imagined they were doing good. What they were really doing is ignoring their own shadow side and that of the nations they led, projecting that shadow side instead on their perceived enemies.

It is a difficult thing to accept our limits and our inherent negative traits. But, if we know the evil that we are capable of, if we incorporate the shadow into our conscious lives, that tends to put a brake on our efforts to "improve" the people and the world around us. It makes us more thoughtful as we contemplate the possibility of unintended consequences. And, above all, it makes us humbler.

Humility, however, is the last thing on the mind of most Starfleet crew members, Borg drones or nonfictional modern overly-confident humans. But it is the trait we need in abundance if we are to survive on the transformed planet we have now created.

Image Source: CBS Entertainment

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he has written columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin (now Resilience.org), The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.

Sunday, May 11, 2014

Taxing the sun: The Koch brothers find a tax they like

We hear so much from the fossil fuel lobby that the free market should determine our energy future--that government shouldn't favor one technology or fuel over another. When implemented, this view typically favors the incumbents which in this case are fossil fuels: coal, oil and natural gas. Very convenient.

But does the industry believe its own rhetoric? The Koch brothers, the much-maligned fossil fuel titans, were in the news last week after their legislative stalking horse, the innocuously named American Legislative Exchange Council (ALEC), was discovered pushing legislation in the states that would establish fees (read: taxes) for hooking solar panels to the existing grid. (Yes, I know it's not exactly a tax because the utilities who are also lobbying for it collect it. Again, very convenient.)

Now these are the same Koch brothers who say they hate taxes and anything that looks like a tax and certainly anyone who wants to raise taxes. But taxing solar panel owners is essentially what they are doing in an attempt to make increasingly competitive electricity from solar less competitive with fossil fuels.

If they or their surrogates were true to their libertarian principles, they would be fighting to repeal all energy subsidies embedded in federal and state policy including those for fossil fuels. But, of course, they aren't. With apologies to Matthew, a contributor to a very famous book, beware of false libertarians who come to you in conservative clothing but inwardly they are ravening pigs--pigs who continue to feed at the government trough while conspiring to prevent any competitors from dining with them.

When they say it's about principle, you can be almost 100 percent certain that it's really just about power--the power to impede an energy transition that is both necessary and inevitable.

What's changed the landscape so dramatically is the swiftly falling price of solar energy--so swift, that those in the fossil fuel industry who said solar would never be competitive with fossil fuels are very worried. And, many believe the downward price trend will continue.

Now there is a cost to utilities and to society to have people hook up their solar panels to the electric grid. But given the worsening outlook for climate change and given the broad uncertainties surrounding prices and supplies of fossil fuels (which are finite and MUST decline some day), it seems foolish at this point to discourage solar installations as a matter of policy.

The states that fall for this Koch-brothers-inspired-ALEC-implemented nonsense will almost surely find themselves LESS competitive in the future as they continue to rely on fossil fuels, the prices of which have been climbing for more than a decade even as solar experienced its dramatic price drop. (Even U.S. natural gas, now in the mid-$4 range per thousand cubic feet (mcf) and therefore declared cheap, remains at levels over 125 percent higher than the average price Americans paid in the 1990s, i.e., $1.92 per mcf. Liquefied natural gas (LNG) delivered to Europe is more than twice that and more than three times the American price for deliveries to Japan.)

The development of solar might not be where it is today without government research and financial incentives. But the amazing advances and astonishing price drop are vindicating those who advocated public support of solar.

Solar energy is one important response to the twin crises of climate change and fossil fuel depletion. Admittedly, it addresses only part of our energy needs: electricity and heating. We still need to find a compelling substitute for oil which remains the dominant fuel for the world's transportation system.

But it is telling that solar is fast becoming so important that those who said it could never be competitive are now having to campaign actively against it. That should tell you all you need to know about whether the solar energy revolution is real.

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he has written columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin (now Resilience.org), The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.

Sunday, May 04, 2014

Could NAFTA force the Keystone XL pipeline on the United States?

As the Obama administration puts off once again any decision on authorizing the Keystone XL pipeline, there are whispers of another intriguing possibility. If the U.S. government fails to approve the pipeline soon or rejects it outright, the Canadians may challenge the delay or rejection under the provisions of the North American Free Trade Agreement (NAFTA) signed by both countries. This move opens up a politically attractive option not previously available to the Obama administration, something I'll discuss below.

I've been wondering about how NAFTA might affect any decision. Under its provisions, Canada is obliged to maintain the same ratio of exports to total production of oil and natural gas as prevailed in the previous 36 months regardless of the situation, that is, emergency or no. The pain of any voluntary restriction by Canada must be borne in proportion to its current consumption. Each party to the treaty would be obliged to suffer the same percentage decline in oil or gas deliveries from Canadian production.

So, what if Canada decides to expand oil production from the tar sands and export that oil to Asia? Would that production be included in total Canadian production for the purposes of the treaty? Could the United States proceed against Canada for reducing the proportion that the United States is receiving from total production?

Or, what if the Canadians build an eastward-flowing pipeline that simply delivers the extra oil to eastern Canada ending that region's dependence on imported oil? The answers to these questions are not clear to me. The treaty doesn't seem to envision such scenarios.

But now it seems that with the U.S. government dithering over the Keystone XL pipeline decision, it is Canada that is the aggrieved party. Still, until recently I couldn't see how the NAFTA rules about export ratios would have any bearing on the Keystone decision. As the importer in the treaty, the United States seems to have an avenue for protesting any reduction or cutoff of oil deliveries, but the Canadians do not seem to have any leverage to force the United States to take more Canadian oil.

However, a reader alerted me to the current thinking in Ottawa which includes preparations for a possible challenge to any rejection by the U.S. government of the Keystone XL. Under entirely different provisions of NAFTA the Canadian government is readying itself to claim that the Keystone XL project is being treated differently from other previously approved pipeline projects which now cross the U.S.-Canadian border and that such discrimination is not allowed under NAFTA.

It turns out that the company proposing the pipeline, TransCanada, would also have standing under NAFTA to bring such a complaint. But the company is at present noncommittal about any such move.

Now let me spin a possible interpretation of these events without claiming any inside knowledge about the motives of the parties involved. With Congressional elections coming up later this year, it seems obvious that President Obama is loathe to anger environmentalists--some of whom are large donors--by approving a pipeline which they claim will aggravate climate change by increasing the exploitation of the tar sands. (Of course, oil from the tar sands could simply be shipped elsewhere.)

The president has now put off any decision for two elections hoping to placate his supporters. But he has angered the Canadian administration in the process.

Now, here is the kind of situation where I've asked myself in the past whether Obama just doesn't see the whole picture or whether he is actually 10 steps ahead of everyone else including me. This is because I fully expected him to approve the pipeline after the 2012 election. I didn't think he could put it off. And, I thought his own supporters would see him as cynical for merely postponing until after the election a decision he had already made.

But Obama has successfully delayed once again. So, I began thinking along the same lines as I did in 2012: He'll surely have to approve the pipeline after the 2014 election. He'll have no choice. His own State Department says that it is no less safe than any other pipeline. In fact, it will be safer because the latest safety technology will be applied. And besides, the State Department says explicitly that the oil will simply go elsewhere if the United States doesn't take it. So, the president will finally be forced to exhibit his cynicism on this issue.

But with the Canadian move, there is another possibility that would work out perfectly for Obama and the Democratic Party. After the election and seeming to stand on principle, the president rejects the Keystone XL pipeline application. This is hailed as a big win for the environmental movement.

After the celebration dies down, the Canadians challenge the decision under the arbitration provisions of NAFTA. Any decision by the arbitration panel is final. The panel then decides that the failure to approve the pipeline is discriminatory under the treaty and reverses President Obama's decision. The president reluctantly complies. What else can he do? His hands are tied by the treaty.

Is this what the president wants to have happen? I claim no power to read minds. But, perhaps some people in the administration know the answer. It is possible that they haven't thought of this scenario, but I doubt. And so, just this once the president may not be 10 steps ahead of me. We'll see.

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he has written columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin (now Resilience.org), The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.