What climate activists should learn from the Monterey Shale downgrade

There is an important hidden lesson for climate activists in the vast downgrade of recoverable oil resources now thought to be available from California's Monterey Shale. Almost all climate activists have rejected any talk that the world's oil, natural gas and even coal supplies are nearing plateaus and possibly peaks in their production. That's because they fear that such talk will make the public and policymakers believe that climate change will be less of a problem as a result or no problem at all.

Any yet, for obvious reasons climate activists rejoiced when the Monterey downgrade was announced. But this only served to highlight the fact that climate activists have lost control of the public narrative on energy and can only steal it back by including constraints on fossil fuel supply as part of their story.

In fact, climate activists have been content to accept fossil fuel industry claims--the two parties agree on little else--that we have vast resources of economically recoverable fossil fuels, the rate of production of which will continue to grow for decades--unless, of course, climate activists stop this trend. This stance makes for an heroic narrative, but misses what is actually happening in the minds of the public and policymakers, minds which must be won over in order to address climate change effectively.

Let me explain.

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.

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.

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.

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?

New York state shale gas: Not so much

A drilling foreman once told me, "Don't believe ANY reserve number unless it's linked to a price." And, that is just what petroleum geologist and consultant Arthur Berman and his colleague Lyndon Pittinger have done in a new report on the viability of shale gas in New York state.

Not surprisingly, when Berman and Pittinger considered what it would cost to extract the shale gas beneath New York state at a profit, the mammoth claims about recoverable reserves made by the oil and gas industry appeared heavily inflated.

Source: Business First

The stunning conclusion of the report is that at current prices--in the mid-$4 range per thousand cubic feet (mcf)--NONE of the natural gas trapped in the New York portion of the Marcellus can be profitably extracted. It's possible, of course, that someone would try. But, the economics look very shaky at current prices given what we know about the nature of the underground deposits.

Perverse outcomes: Lifting U.S. oil export ban would mean greater dependence on foreign oil

The United States today is a large net importer of crude oil and refined products. And, yet the story that the country can somehow export crude oil as a foreign policy measure to help reduce Ukraine's dependence on Russia won't die. Oil executives and their surrogates keep bringing it up, and unsuspecting reporters amplify a message that has absolutely no basis.

The reason for this oil industry public relations blitz on the Ukraine is rooted in the industry's desire to end a decades-old ban on U.S. crude oil exports--one which the industry hopes to persuade Congress and President Obama to overturn. There is, in fact, a case regarding market efficiency for overturning the ban, but this is NOT the one the industry is using in its public relations campaign.

Here's why: The major effect of lifting the ban would be to allow domestic producers to sell lighter grades of crude oil--which U.S. refineries have little remaining capacity to refine--to foreign refineries which do have spare capacity. Perversely, that would lead to GREATER imports of foreign oil--mostly heavier grades--more suitable for the current U.S. refinery infrastructure. Net imports would remain unchanged, of course, even as the country's oil supply becomes more vulnerable to events abroad.

Did crude oil production actually peak in 2005?

"Wait a minute," you must be saying. "Haven't we been hearing from the oil industry and from government and international agencies that worldwide oil production has been increasing in the last several years?" The answer, of course, is yes. But, the deeper question is whether this assertion is actually correct.

Here is a key fact that casts doubt on the official reporting: When the industry and the government talk about the price of oil sold on world markets and traded on futures exchanges, they mean one thing. But, when they talk about the total production of oil, they actually mean something quite different--namely, a much broader category that includes all kinds of things that are simply not oil and that could never be sold on the world market as oil.

I've written about this issue of the true definition of oil before. But Texas oilman Jeffrey Brown has been bending my ear recently about looking even deeper into the issue. He makes a major clarifying point: If what you're selling cannot be sold on the world market as crude oil, then it's not crude oil. It's such a simple and obvious point that I'm ashamed to have missed it. And, Brown believes that if we could find data that separates all these other non-crude oil things out, the remaining worldwide production number for crude oil alone would be flat to down from 2005 onward.

A Three-Week Hiatus - Posting to Resume April 13

A crush of consulting work, a heavy travel schedule and an impending move (closer to downtown Portland) necessitate a three-week hiatus in posting. I expect to resume posting on Sunday, April 13.

Net vs. gross energy: Is it wise to be complacent?

Everyone knows that when a potential employer makes a job offer, the salary or wage he or she proposes isn't what you'll be taking home. What you'll take home is your net pay. The number the employer offers you is your gross pay, and that's just what it says on your pay stub.

It's not quite a perfect analogy with net energy versus gross energy. But it's an everyday analogy that most people can understand. Net pay is what you have to pay your bills today. And, net energy is what society has in order to conduct its business (and its fun) on any given day. Net energy is what's left after the energy sectors of the economy--oil and gas, coal, nuclear, hydroelectric, renewable energy industries, and farming which provides food for human and animal energy and crops for biofuels--expend the energy they must to extract energy from the environment and then sell the surplus to the rest of us.

We don't often think of these sectors of the economy because for most people they are out of sight and therefore out of mind. And, until the last decade food and energy have been so consistently cheap in the last 60 years or so, that few people ever paused to ponder the fact that it takes energy to get energy. And, after all, cheap energy is an indication that it takes very little energy to extract huge amounts of energy from the environment. So, why worry about that?