The Million Dollar Way (The Bakken Oil Blog)

Sunday, May 6, 2012

With Price of Natural Gas Plummeting, Mandates Will Only Result in More Second Guessing

This is a great little opinion piece in this weekend's edition of the Wall Street Journal:

Politicians keep promising to reduce energy prices, but they keep ignoring one easy step: repeal renewal energy standards. Twenty-nine states have these rules requiring local utilities to purchase between 20% and 33% of their electric power from renewable sources. They were enacted over the past decade when lawmakers bought into the fad about cheap "clean energy." Their real effect has been to force utilities to pay above-market prices for electricity, which means higher electric bills for consumers.

No state has learned that lesson the hard way more than Minnesota. In 2007 the legislature mandated that utilities ramp up their renewables to 12% this year and 25% by 2025.

The Minnesota Rural Electric Association, which represents about 50 small utilities serving about 650,000 rural residents, reports that its members lost more than $70 million in 2011 because of the high cost of wind power. "Right now we're paying for wind power we don't need, we can't use and can't sell," says association executive director Mark Glaess.

And then the zinger. The writer compares Minnesota's experience with that of North Dakota's:

And what are consumers getting in return? The environmental benefit is almost zero since no state can do much to alter the global volume of carbon emissions. The renewable mandate was also sold as a way to gain "green jobs" and, as the Environmental Protection Agency puts it, "stimulate market and technology development" in states. But the mandate fails that test too, because Minnesota imports much of its wind power from North Dakota.

A 2012 study by the Manhattan Institute compares states with renewable mandates to those that allow utilities to purchase the cheapest electricity available. The states with mandates paid 31.9% more for electricity than states without them. According to the U.S. Energy Information Administration, residents of North Dakota, a state without a mandate, pay 7.63 cents per kilowatt hour for electricity. Neighboring Minnesota pays 10.76 cents.

With natural gas down to unheard-of prices, and completely unexpected levels, wind energy mandates will only look more ridiculous.

Not mentioned in that short little piece is that the high cost of energy in Minnesota will drive manufacturers out of Minnesota and into North Dakota, which I've blogged about many, many months ago.

Paul Krugman on Books

I don't care for Paul Krugman's ideas on economics, but I do appreciate his thoughts on books. From the Boston Globe, he made two points with which I agree 100 percent:

Paul Krugman: The thing with gadgets — I have a Kindle and an iPad — is that I tend to have several things going at once. I’m reading “City of Fortune” by Roger Crowley, which is about Venice and its glory centuries. I’ve been reading David McCullough’s “The Greater Journey,” about Americans abroad in the 19th century. I like it but can only read it in short snatches for some reason. I’ve also been reading “Caesar” by Adrian Goldsworthy. In recent years I’ve read a couple of Roman things, including “Rubicon” by Tom Holland, about the fall of the Roman republic. I found that in a bookstore. The problem with digital books is that you can always find what you are looking for but you need to go to a bookstore to find what you weren’t looking for.

I agree. I frequent small, independent bookstores, and I particularly enjoy used book stores, and discount book stores. I seldom visit the "big box" book stores any more. And when I find books at the mom-and-pop independent bookstores I tend to buy them there, and try very hard not to buy from Amazon if possible. There are notable exceptions.

The second point Krugman makes:

Paul Krugman: There isn’t much current stuff I really like. The authors I do [like] seem to be mostly Scots or Brits, ...

Elsewhere I have said the same thing: I appreciate English, Scottish, and (rarely) Irish artists best.

And I seldom read any "current" literature. I think I've talked about that before also. In fact, while visiting a bookstore in Provincetown, Cape Cod, Massachusetts, I struck up a conversation with the proprietor and we, interestingly enough, had the same reason for not reading current literature.

Millions of Gallons of Diesel Fuel Being Used in the Bakken

Link to Minot Daily Press here (regional links break early and break often).

As of April 23, 210 drilling rigs were operating in the North Dakota oil field ...

"That's 630,000 gallons of diesel fuel a day that are just going in for operating the drilling rigs. That's not everything else that's going on up there," ...

"We believe from what our marketers can tell us and these aren't solid statistics but this is information we've gathered from visiting with our marketers that 2.5 to 3 million total gallons per day is being consumed in the Bakken. So you can see we experience some diesel fuel crunch now and then.

Essentially, that's 280 semi loads a day that's just going in to feed the Bakken," ...

If you put that into perspective, Tesoro (Mandan Refinery) can produce if it really pushes it about 750,000 gallons of diesel fuel a day. So everything Tesoro is making could essentially be going into the Bakken," ...

The link will provide additional background and source of statistics.