Saturday, March 14, 2015

The Case For Fossil Fuels -- WSJ -- March 14, 2015


March 15, 2015: another great article -- Renewable Energy: The Vision and a Dose of Reality. This is another great article posted back in 2012, and nothing has changed. From the article, observations like this:
Solar power. While sunlight is renewable — for at least another four billion years — photovoltaic panels are not. Nor is desert groundwater, used in steam turbines at some solar-thermal installations. Even after being redesigned to use air-cooled condensers that will reduce its water consumption by 90 percent, California's Blythe Solar Power Project, which will be the world's largest when it opens in 2013, will require an estimated 600 acre-feet of groundwater annually for washing mirrors, replenishing feedwater, and cooling auxiliary equipment
To put 600 acre-feet in perspective, back in late 2011, it was estimated that approximately 6 acre-feet of water was used to frack a Bakken well.

So, every year from here on out, enough water to frack 100 Bakken wells will be used annually to wash those mirrors, and that's just one solar farm. 

Original Post
This is an incredibly good article -- said to be an op-ed / essay, but it is filled with facts and inconvenient truths. It is in the WSJ -- I assume it is not accessible without a subscription to the WJS, but it is so good, I will provide some high notes.

The title of the essay:
Fossil Fuels Will Save the World (Really) and the subtext: There are problems with oil, gas and coal, but their benefits for people—and the planet—are beyond dispute.
It begins:
The environmental movement has advanced three arguments in recent years for giving up fossil fuels: (1) that we will soon run out of them anyway; (2) that alternative sources of energy will price them out of the marketplace; and (3) that we cannot afford the climate consequences of burning them.
And then the writer systematically destroys each of the three points.

So, let's begin. The preamble:
  • in 2013, 87% of world energy came from fossil fuels; unchanged from ten years earlier
  • three categories of fuel and three categories of use (oil for transport, natural gas for heating, and coal for electricity)
  • over this ten-year period, the overall volume of fossil-fuel consumption has increased dramatically, but with an encouraging environmental trend -- a diminishing amount of CO2 emissions per unit of energy produced (the biggest reason: a switch from high-carbon coal to lower-carbon gas in electricity generation)
  • worldwide, wind and solar have contributed hardly at all to the drop in carbon emissions
  • the modest growth in wind and solar has come at the expense of nuclear energy
The first argument: fossil fuels will soon run out -- this argument is dead
  • the shale genie is out of the bottle
  • shale drillers can jump back in whenever price rebounds
  • frackers are experiencing their own version of Moore's law: a rapid fall in the cost and time it takes to drill a well, along with a rapid rise in the volume of production
  • US presidential commission that opined in 1922 that "already the output of gas has begun to wane. Production of oil cannot long maintain its present rate."
  • President Jimmy Carter, 1977, "we could us up all our proven reserves of oil in the entire world by the end of the next decade" (1989)
I love this one:
It is an ironic truth that no nonrenewable resource (coal, natural gas, oil) has ever run dry, while renewable resources - whales, cod, forests, passenger pigeons -- have frequently done so
The second argument: stop using fossil fuels because new rivals will shorty price them out of the market --
  • that is not happening
  • the great hope has been nuclear energy; nuclear is now able to compete with fossil fuels only when it is subsidized
  • hydroelectric: will never be more than it is currently
  • wind: for all the public money spent on its expansion, wind energy has inched up to ... drum roll... 1% of world energy consumption in 2013
  • solar: for all the hype, solar has not even managed that. If we round to the nearest whole number, solar accounts for 0% of world energy consumption
  • both wind and solar are entirely reliant on subsidies to survive
  • the writer than has a long section on subsidies -- how the poor and middle class pay for the subsidies and the rich get that money (think Solyndra)
  • the problem with wind and solar: they take up too much space and produce too little energy (the writer provides good examples)
The last argument: global warming:
There has been no increase in the frequency or severity of storms or droughts, no acceleration of sea-level rise.
Arctic sea ice has decreased, but Antarctic sea ice has increased.
At the same time, scientists are agreed that the extra carbon dioxide in the air has contributed to an improvement in crop yields and a roughly 14% increase in the amount of all types of green vegetation on the planet since 1980.
That carbon-dioxide emissions should cause warming is not a new idea. In 1938, the British scientist Guy Callender thought that he could already detect warming as a result of carbon-dioxide emissions. He reckoned, however, that this was “likely to prove beneficial to mankind” by shifting northward the climate where cultivation was possible.
And then this:
And yet it is increasingly possible that it (AGW) is wrong.
As Patrick Michaels of the libertarian Cato Institute has written, since 2000, 14 peer-reviewed papers, published by 42 authors, many of whom are key contributors to the reports of the IPCC, have concluded that climate sensitivity is low because net feedbacks are modest.
They arrive at this conclusion based on observed temperature changes, ocean-heat uptake and the balance between warming and cooling emissions (mainly sulfate aerosols). On average, they find sensitivity to be 40% lower than the models on which the IPCC relies.
If these conclusions are right, they would explain the failure of the Earth’s surface to warm nearly as fast as predicted over the past 35 years, a time when—despite carbon-dioxide levels rising faster than expected—the warming rate has never reached even two-tenths of a degree per decade and has slowed down to virtually nothing in the past 15 to 20 years.
This is one reason the latest IPCC report did not give a “best estimate” of sensitivity and why it lowered its estimate of near-term warming.
Most climate scientists remain reluctant to abandon the models and take the view that the current “hiatus” has merely delayed rapid warming. A turning point to dangerously rapid warming could be around the corner, even though it should have shown up by now. So it would be wise to do something to cut our emissions, so long as that something does not hurt the poor and those struggling to reach a modern standard of living.

Really? US Embassy In Saudi Arabia Halts Operations Due To Security Concerns? -- March 14, 2015

For the record: the data for the CLR Lawrence wells in North Tioga oil field has been updated (IPs, test dates; total production to date); at this post

Most Important News On Pi Day

NCAA basketball: Harvard beats Yale in "championship" game -- 53 - 51. Harvard advances to the NCAA championship tournament; one of 32 teams in the first round.

Disclaimer: this is not a sports betting site. Do not make any Las Vegas betting decisions regarding March Madness based on anything you read here or think you may have read here. But I can say with some certainty: it's unlikely Harvard will take the NCAA championship in 2015. 

Well, This Is Not Good

Fox News is reporting:
U.S. officials said Sunday they will halt operations at the embassy and consulates in Saudi Arabia for the next couple of days, in response to “heightened security concerns.”
Embassy officials in Riyadh issued the statement, saying telephone lines at the facilities will be down Sunday and Monday and encouraging U.S. citizens in Saudi Arabia to “be aware of their surroundings and take extra precautions when travelling throughout the country.”
The message did not cite a specific security concern or threat nor call for the evacuation of the facilities. 
Call me "over reacting," but this does not sound good. Perhaps the JV team is phoning it in.

Later: see first comment below.  The Saudi princes do not have a "record" of defending themselves. They do not have a "warrior culture." From wiki:
The army has been chronically understrength, in the case of some units by an estimated 30 to 50 percent. These shortages have been aggravated by a relaxed policy that permitted considerable absenteeism and by a serious problem of retaining experienced technicians and noncommissioned officers (NCOs). The continued existence of a separate national guard also limited the pool of potential army recruits.
When Syria/Iran/ISIS go after the prize, the big question is whether the US wants to confront Russia by proxy.

This Is Really Not Good

PJ Media is reporting:
Seattle’s $15 minimum wage law goes into effect on April 1, 2015.
As that date approaches, restaurants across the city are making the financial decision to close shop.
The Washington Policy Center writes that “closings have occurred across the city, from Grub in the upscale Queen Anne Hill neighborhood, to Little Uncle in gritty Pioneer Square, to the Boat Street Cafe on Western Avenue near the waterfront.”
Of course, restaurants close for a variety of reasons. But, according to Seattle Magazine, the “impending minimum wage hike to $15 per hour” is playing a “major factor.” That’s not surprising, considering “about 36% of restaurant earnings go to paying labor costs.”
Seattle Magazine, “Washington Restaurant Association’s Anthony Anton puts it this way: “It’s not a political problem; it’s a math problem.”
“He estimates that a common budget breakdown among sustaining Seattle restaurants so far has been the following: 36 percent of funds are devoted to labor, 30 percent to food costs and 30 percent go to everything else (all other operational costs).
The remaining 4 percent has been the profit margin, and as a result, in a $700,000 restaurant, he estimates that the average restauranteur in Seattle has been making $28,000 a year.
“With the minimum wage spike, however, he says that if restaurant owners made no changes, the labor cost in quick service restaurants would rise to 42 percent and in full service restaurants to 47 percent.”
Restaurant owners, expecting to operate on thinner margins, have tried to adapt in several ways including “higher menu prices, cheaper, lower-quality ingredients, reduced opening times, and cutting work hours and firing workers,” according to The Seattle Times and Seattle Eater magazine.
As the Washington Policy Center points out, when these strategies are not enough, businesses close, “workers lose their jobs and the neighborhood loses a prized amenity.” A spokesman for the Washington Restaurant Association told the Washington Policy Center, “Every [restaurant] operator I’m talking to is in panic mode, trying to figure out what the new world will look like… Seattle is the first city in this thing and everyone’s watching, asking how is this going to change?”
My hunch: Starbucks will see an increase in business as their competition goes away. 

One Man's Thoughts On The Bakken -- March 14, 2015

Disclaimer: this is not an investment site. The following is posted to provide an assessment of the Bakken by a single individual or company or board of directors. It is not posted for purposes of determining whether an investment in this company or any company is warranted. This is not an investment site. Do not make any investment, financial, or relationship decisions based on this post or based on any post at this blog or based on anything you think you might have read or inferred (that is our granddaughter's favorite new word) from this site. I provide this information only for my own use, but for the time being it is open to anyone who wants to read it. If this information is important to you, go to the source.

This is a portion of the comments posted over at Seeking Alpha from the CEO of a real estate investment trust located, I believe in Minot, North Dakota:
You are obviously curious to what affect this drop in oil prices has had on IRET and I would like Diane to update you on some of specifics later in the call, but I wanted to remind you that we did not pivot the portfolio on Boomtown USA, better known as Williston, North Dakota. But we have strategic joint ventures to maximize our returns in real estate.
Of the wealth of information about the Bakken field, I will encourage you to search out the Bakken Magazine to get a true perspective of the activities in real estate. That being said, I want to call your attention to this map of North Dakota.
As you can see, the statistics provided by the North Dakota Department of Mineral Resources and the latest issue of the Bakken Magazine gives you an indication of the breakeven price point at which new drilling would cease.
McKenzie County in the heart of the Bakken would need prices to drop to $30 per barrel to cease new drilling. And although, I think, that is an interesting statistic, what I find even more interesting is the ballpoint (sic) which states the price at which production from existing wells would be shut-in: $15 per barrel.
According to a report published by the North Dakota State Industrial Commission, dated December of 2014, there are approximate 12,000 wells in production. Since I have been told that can take upwards of three people to maintain production, I believe the need for housing will continue. Most of the production workers are target tenants. Those are committed for longer-term and seek amenities that our complexes provide.
We will continue to monitor energy impact on IRET and adjust our decisions accordingly. But as Diane will point out later in the call, the impact to IRET has not as drastic as has been suggested by some of the national attention we have received. 
Remember we have five projects, three multifamily and two medical facilities underway on a Minneapolis market despite our risks throughout the upper Midwest.
There were a number of typographical errors in the original transcript (which is not a big deal; I am impressed how fast these transcripts can be posted). I tried to catch the typos and correct them but obviously missed some. 

Utterly Appalled -- March 14, 2015

This is simply an amazing story coming out of Colorado. Two-hundred-thousand folks happy with their health insurance will see it canceled because the policies do not meet President Obama's standards. They should have been canceled a year ago, but the government gave the insurance companies permission to keep them in force for one year so that folks could look for suitable ObamaCare insurance.

But the year is up, and 200,000 Coloradans will see their health policies canceled. PJ Media is reporting:
Colorado Sen. Cory Gardner (R) said he’s “utterly appalled” by the Colorado Division of Insurance decision to cancel 190,000 health plans that don’t comply with Obamacare regulations — even though they have the authority to continue the old plans for another year under grandfathering rules announced last year.
Colorado insurance commissioner Marguerite Salazar told 9News that “by delaying it, it doesn’t give us a good pathway into full implementation of the ACA.”
“I feel like we gave people that year, we have a great robust market in terms of health insurance in Colorado,” she said.
The senator said that last year he urged Gov. John Hickenlooper’s administration “to pursue any legal avenue to allow insurance providers to keep these plans for the foreseeable future.”
“They listened at that time, and DOI had all the authority it needed to keep these plans around for at least another year, allowing individuals and families more of the time they need to adjust to this onerous new healthcare law. But DOI has decided to end these plans instead, forcing thousands of Coloradans to deal with the cancellation of their insurance,” Gardner said in a statement.
“Once again, Coloradans are suffering from the effects of President Obama’s ill-conceived healthcare law. I continue to support fully repealing this law and replacing it with common-sense, market-driven legislation that could address the need for expanded health insurance coverage while keeping costs down.
"Until the law is repealed, however, we must do everything we can to ensure that Coloradans do not suffer needlessly because of it.”
Colorado voted for President Obama in 2012, from wiki:
This election solidified Colorado's transformation from an historically Republican-leaning state into a Democratic-leaning swing state. Obama's 2012 victory in the state, on the heels of his 2008 victory, marked the first time that the Democrats had carried Colorado in two consecutive elections since the landslide re-election of Franklin Roosevelt in 1936.
At Least It's Hard To Catch

CNN is reporting:
Ten Americans are being flown back to the United States as the Centers for Disease Control and Prevention investigates the possibility they might have been exposed to Ebola in Sierra Leone.
The number could change as the investigation continues.
The news comes one day after an American health care worker who came down with Ebola while volunteering in West Africa arrived at a National Institutes of Health hospital for treatment.
"(The) CDC and the State Department are facilitating the return of additional American citizens who had potential exposure to the index patient or exposures similar to those that resulted in the infection of the index patient," the CDC said in a written statement.
The Atlanta-based CDC said none of these individuals now returning from Africa have been diagnosed as having Ebola.
The heath care worker with Ebola was in serious condition Friday, the NIH said.
JV Threat Is Growing

CIA says ISIS threat is growing -- the international "A" team is struggling against the JV's. Fox News is reporting:
CIA Director John Brennan said Friday that the Islamic State had “snowballed” beyond Iraq and Syria, estimating that at least 20,000 fighters from more than 90 countries have gone to join the militant group, several thousand of them from Western nations, including the United States. Brennan’s statement marks a change from the narrative the Obama administration has been pushing on the success of the fight against ISIS. 
At least it's just the JV team. I recall the president saying we could take them out in a "New York minute" if we wanted. Well, maybe he didn't say a "New York minute" but it was something to that effect.

This is not a political site. Do not make any political decisions -- like deciding to run for President of the United States or for the US Senate -- based on anything you read here or think you may have read here. If this is important to you, go to the source, generally Fox News or the Drudge Report. I'm joking. Go to MSNBC.

Excellent Update Of US Unconventional Oil Situation During Current Slump In Oil Prices -- The Globe And Mail -- March 14, 2015

If you have time to read only one story today, this story over at The Globe and Mail should be the one. The headline suggests the story is only about Texas, but there is plenty about North Dakota, also.

For example:
Despite the slump, Encana is doubling down in the shale oil business after spending $10-billion last year on Eagle Ford and Permian assets as it shifted focus from natural gas to liquids. The company recently cut its 2015 capital budget by 25 per cent from levels it had projected in December, but it is going full speed in the Eagle Ford and Permian basins, as well as in Canada’s Duvernay and Montney shale plays.
Its strategy will depend on men like Jeff Balmer, the vice-president in charge of Eagle Ford operations, who is tasked with improving productivity and driving down costs in the properties acquired from Freeport-McMoRan Inc. last June. In the nine months since acquiring Eagle Ford assets, Encana has cut drilling times by a quarter and also increased average initial production from its wells by 25 per cent.
“If you look at the improvements on the drilling and completion side, as well as the base production, the progress we’ve made in the short time we’ve been around is phenomenal,” he said in an interview at the Karnes City field office. The company says it can produce oil profitably from its Eagle Ford and Permian properties at $50 a barrel – although spot prices averaged less than that in the first quarter.
And North Dakota:
North Dakota saw its number of uncompleted wells jump by 75 to 825 in January, as producers are spending the $4-million needed to drill a deep, horizontal well but forgoing the $4-million to $5-million needed to frack it and connect it to the Bakken’s gathering system.
“We’re just seeing that inventory grow and grow and grow,” Lynn Helms, director of the state’s Department of Mineral Resources, said on a call this week.
Mr. Helms said producers have a year to complete wells that have been drilled, and he expects more completions and production this summer as demand picks up and some operators hit that regulatory deadline. At the same time, producers could benefit from a sharp decline in state taxes if WTI prices average less than $55.09 a barrel for the next two months, and that tax cut would also encourage production, the state official said.
North Dakota producers are particularly stressed as realized prices for Bakken crude have fallen to $32 a barrel. At those prices, state officials forecast production would drop from current 1.2 million barrels a day to one million in July, 2015, then 875,000 in July, 2016, and 720,000 in 2017. The department estimates that industry currently needs prices of $75 a barrel to sustain production growth.

Week 10: March 8, 2015 -- March 14, 2015

Top story of the week
PAA acquires new storage terminal near Watford City

Big story of the week
WPX Victor Elk well in Reunion Bay produces 54,000 bbls of oil in first month  

Vern Whitten photographs -- Spring in the Bakken

North Dakota production drops 3% month-over-month -- Director's Cut
Twelve more QEP permits in Spotted Horn; drilling unit approved for 48 wells
The Red Queen is in the Bakken
CLR's Hartman wells have been updated
Thursday with 21 new permits
Missouri River Resources with four permits in same 320-acre drilling unit
Active rigs bottom out at 111 for the week in North Dakota
Update on three huge Whiting wells
Oasis had 26 wells coming off confidential list, one day this week
Graphic of 17 CLR sites on one pad (or two neighboring pads) -- the Sanish
North Dakota state lease sales, February, 2015
Stockyard Creek never seems to quit: four more Whiting permits

Natural gas
Huge NGL capacity increase in the Bakken -- ONEOK update

Bakken economy
Williston population estimated to be 31,143 for calendar year 2014

Statoil eyes EOG
Whiting: Plan A
Whiting: Plan B
Brent-WTI price spread continues to ... spread
Chevron to increase asset sales by 50%

US economic malaise due to low gasoline prices -- analyst