Category Archives: Energy

Faith, Values and Clim-Ergy

This week I was invited to a meeting of a faith-based group which is planning a conference on Climate Change for communities on the Connecticut shore. The invitation was an outgrowth of a presentation I gave on the subject earlier this year.

While I was flattered to have been invited back, I was also mildly uncomfortable, as I typically am when engaging with faith based groups. I do not believe in God. I do not believe in heaven or a here-after. Though I was raised in the Judeo-Christian tradition by a family which was decidedly ecumenical in its religious composition before ecumenicism was cool, I have never felt comfortable in the modalities of religions. I am what some might call a heathen.

Yet I am a person of ‘faith’, by some home-brew definition of that term. Faith and prayer to me are very personal expressions. In the context of religions, faith and prayer too often seem to me to become commoditized and trite, and devoid of the spiritual substance that they purport to give. They become the spiritual equivalent of cereal, mistaking it for food. But that is my personal perspective, and I respect those who gain personal sustenance and value from their religious experiences that I am unable to share.

Still, I feel like a poser when venturing into these communities. As an auditor, trained in the mentality of professional skepticism, and seared by experience in some level of confessed cynicism regarding the capacity of redemption for human-kind from its multiple and serial and repetitive transgressions, I come to these gatherings with what I like to think is a pragmatism that does not fit well with the idealism to which many of the faith based communities strive. And those who have followed this blog for any length of time can appreciate that my sardonic humor might be a show stopper in these venues, but not a hit.

All of which is a long-winded digression to the main point of why I continue to inject myself into places of discomfort. Faith based communities, in my experience, remain one of the few gatherings of civil discourse in a world that is rapidly disintegrating socially and politically. This has some historical irony in that religions of the world have perhaps committed as many, if not more, atrocities against humankind in the name of God than have political entities. (I haven’t got authoritative stats on that, but I’ll throw it out for debate.) Not surprisingly, given that many religious entities are merely political and economic operations in moral robes.

So the challenge for a person of my particular persuasion is to determine how to distinguish the truly faith based communities from the religious posers who co-opt the moral garb of sanctity in order to promote an agenda, but bring no more clarity or certainty or validity to the proposition than you or I.

Enough about me.

In the evolving climate and energy (Clim-Ergy) paradigm, there are many outside the literal faith-based realm who embrace the subject as almost a secular religion. They bring a similar idealism and energy. They approach it from a principled position, and with great self-confidence and certainty that their conceived solutions are as if received from the hand of God on Mount Sinai, consolidated from two stone tablets to an iPad for portability. If their faith and idealism and energy and intellectual gifts were enough, I am confident that we would have progressed much farther on this issue by now than we have. Having observed this issue for 11 years myself, and being a somewhat impatient person with an acute sensitivity to the criticality of time, I am concerned that they do not understand the human and economic realities of this subject any better than their opposition in the climate denial community, many of whom are also in faith based communities, are willing to consider the scientific and environmental realities.

We are at a moment when a growing number of people in the climate denial faction, and a vast number in the “I-don’t-really-want-to-know-or-care” denomination are steadily embracing a ‘come-to-Jesus’ moment, if I may borrow that phrase. “Something’s happening.” They dare not acknowledge it as climate change. They decline to take responsibility in whole or in part for its manifestation. They’re paralyzed by indecision regarding what to do about it. But they’re quite sure that they don’t want to change their current modality of existence for the possibility of heading off something potentially nasty at the pass. (See California and green lawns vs. food and drinking water for illustration.)

The extremes are driving the conversation, but substantive action on a meaningful scale is not happening, or happening at unnecessary cost due to the fractious political environment. The folks who recognize the problem are almost as much of the problem as the folks who refuse to, though the former would loudly protest that proposition, and many times for the same reasons.

For example, in the course of conversation with the faith group, one participant proposed the theme of ‘sustainability’ for the conference. After 11 years, I don’t have a clear concept of what constitutes ‘sustainability’ in meaningful terms. But I am positive that the participant’s definition is not the same as Exxon-Mobil’s, or the coal miners of West Virginia, or the farmers of the Mid-West and California agribusinesses or the politicians whose next biennial contract with voters depends on an electorate largely ignorant of the nits and lice that constitute a true understanding of ‘sustainability’ in action. And much of what corporations peddle as ‘sustainability’ is merely green-wash. If they were truly ‘sustainable’, many of their products would be off the market.

So one group defines sustainability as maintaining the status quo. The other group defines sustainability as moving to a new paradigm that can be maintained because the current status quo cannot. In both instances, the partisans are driven by faith, more than anything else, that their imperfect knowledge of the situation is valid.

So, if we have two faith-based factions, each of whom are equally certain of their values, but both of whom are in conflict for sharing the same reality, what does that leave us? Historically, and all too frequently, war.

The reality is that the ‘sustainability of the status-quo’ faction is the dominant and driving faction at this time.

The reality is that Reality is steadily undermining their credibility, with each fire storm, with each drought, with each monsoon, with each progressively more frequent incursion of the sea upon the land, with each death from protracted famine, with each ravage of disease in an interconnected planet, with each struggle for non-renewable resources in a contorted world of abundant excess and deficient necessities.

But is the alternative camp any more credible? They are offering to take us to a promised-land yet unproven on the scale that it must exist to replace our current reality. They are standing on a platform of science that it riddled with internal contradictions, critical gaps in knowledge, and hidden agendas of human motives of which science is no more immune than any other human agenda, as science has been through the ages. It is populated with some who have never run a lemonade stand, but confidently presume to advocate for doing away with the grid. It is led by others who have created some small success on a local level and believe that it can somehow be extrapolated to the planet, without a clue as to what that entails organizationally, resource-wise or politically. Yet others see this as an eternal cause through which to define their personal importance, and try to bend it to their own psychological need in the name of saving humanity. There are some who will strive mightily to advance wind energy in someone else’s neighborhood or view-shed, financed by someone else’s money. And somewhere in the din of all these conflicting profiles, there are some, generally quiet and persistent and pragmatic, who work diligently below the radar to make some substantive progress in the midst of the human circus.

Neither side in the Clim-Ergy paradigm is totally right or totally virtuous, though both will insist they are, and therein lies the problem. The issue is devilishly complex. Both factions are similarly complex. And both factions, in my view, share an all too human inclination to simplify the complexity to a level they can comprehend and take comfort in. Regrettably, dumbing an issue down to one’s comfort zone does not solve the issue, although it may temporarily sustain some level of self-esteem.

* * *

In approaching this meeting, I took a trip down memory lane through my eleven years of engagement with this issue, reflecting what I had invested in it, how I had approached it, and what I had accomplished. I have invested a considerable amount of time. I would not change radically how I approached it. But I recognize that I have accomplished little of what I hoped for. That is because accomplishing what I had hoped for ultimately requires bringing other people to a shared perspective, a shared set of values, an alignment of interests that can achieve what none of us can alone.

With this self-assessment in mind, I approach the faith community with some ambivalence; prepared to point out those ideas that I believe will prove counter-productive, but wary of sapping their enthusiasm and idealism with a pragmatism that may be mistakenly (or possibly correctly) perceived as cynicism and negativity.

Still, my concern is that the faith community too often believes that it will succeed by bringing the community to its point of view when in all likelihood that strategy will be modest in success and inadequate to need. The faith community, defined broadly, is more fragmented than it would like to admit. It exists in a world that is becoming more secular by most statistical accounts, suggesting that religion, if not faith, is losing its relevance to the broader populace. To persist in the notion that faith alone can drag the non-believing to a faith-based common ground defined predominantly by faith is an exercise in Einstein’s definition of insanity.

This manifests itself to me in the sincere response of one participant to the meeting who advocated:
“…connecting with the head is fine and will get some people to do some things, but connecting with the heart is where real change happens.”

I would counter that ‘head or heart’ is not a binary choice; the two must inform each other, and advance together. In my line of work, I do autopsies on loads of initiatives driven by the heart or the gut, but from which the head was apparently AWOL. And I have seen too many instances in which the head ruled without the heart to no positive purpose.

I would suggest that the Indiana legislature reversed its faith based position on the LGBT community not out of a change of heart but out of a cerebral calculation of the economic impact of its supposedly ‘moral’ position.

I would suggest that the South Carolina legislature voted to take down the Confederate flag not out of moral outrage for the carnage associated with it, or moral outrage for what the flag had come to represent for too long, but out of pragmatic calculation that the symbol’s optics will cost the State more in tangible and intangible ways from the people who detest it than it benefits from the people who still revere it. This calculation was no doubt more readily achieved in the wake of and with an eye to the Indiana experience.

I believe that the success of the Pope’s recent encyclical, yet to be verified in results, will be due to his effort to reach beyond the incantations of faith to incorporate the teachings of science and speak to the human conditions that transcend religious and philosophical boundaries. This is the true essence of communication: not merely to tell you what I want you to know in terms that I embrace, but to tell you what I want us to share in terms that we can both embrace.

So I become yet again concerned when a participant says:

“We are a group of religious folks, so we should embrace that aspect. People are waiting, anxiously, for the religious community to take the lead on this from a moral, ethical and theological standpoint.”

Again, I do not doubt the sincerity in which this belief is held by the individual and many others in the faith based community, but I question if they have a firm grasp of where the faith-based community stands in the esteem of a world ripped apart by faith-based conflicts, and abused by merchants of faith acting in ungodly ways in God’s name.

This is not to disparage faith based groups as a whole, but simply to point out that their franchise as a whole has been tattered by the abuses of too many among them. That franchise may be overvalued, but it is not without value.

What I believe the faith community can do is to be the facilitator of a community-wide discussion of shared values, not its values; and build the common ground of values that is so desperately needed and so desperately lacking. It should not try to promote its values as a focus so much as to strive to find the common values that all segments of the society can embrace, and build on those with its own contribution as well as others’.

Many of the values issues that underlay Clim-Ergy are at the core of other social, economic and political issues as well. It occurred to me as I approached this meeting that the real need is for human society at whatever level, parish, village, region, state, nation, planet to work toward the shared values on which it can build a shared future. It is audacious of me, to use a polite term, to suggest as I did to this group that before they contemplate a conference on climate change per se, they might want to explore the underlying core of generic values that we must begin to embrace and share in order to come to terms with Clim-Ergy, and our many other challenges. That process could begin next Sunday or Saturday or Friday night.

I have faith in the faith community’s capacity to facilitate change, but to do so, it must see itself more as a facilitator and collaborator than a leader. Sometimes, the best leadership is from within and behind, and not up front.
* * *
In closing, I am reminded of my favorite line from Oedipus Rex:

“When wisdom brings no profit, to be wise is to suffer”

…to which this accountant would add:

When prophets bring no wisdom, there can be no profit.

Whatever may be the core of our faith, we must be courageous to constantly test its wisdom against its fulfillment in improving the human condition.




Fracking Idiocy

Having dealt in my prior two posts with Climate Change idiocy, (and there’s so much more fertile ground to be tilled on both sides of that subject) I’d like to turn my attention today to Saudi America’s continuing delusion of energy independence.

The news of late in the energy arena continues to be of energy abundance and resultant low consumer prices, with some necessary casualties in the oil patch.  Peak Oil is dead.  Fracking will set us free.  Except in Denton, Texas and a growing number of Texas towns that see fracking as an insidious oppression, joining folks in Pennsylvania, and Ohio, and North Dakota and other places where the wildcatters have run roughshod, aided and abetted by local officials whose greed is comparatively modest in scale, but no less deleterious in effect.

Being an accountant, I try to marshal my humble skills to understand events as they are, and not as they are presented. Among the core tenets of accounting is the principle of substance over form.

So what is the substance of our current fracking bonanza?  Have we unleashed unlimited energy wealth?  No.  Hydrocarbons are still a ‘non-renewable’ resource in the sense that we are depleting them far faster than natural processes can replenish them, and at some point, we are bound to hit a wall.  That it may not be in our lifetime does not absolve us of the moral and ethical obligation of stewardship for future generations. (Moral obligation. Such a quaint notion.)

Do we have an abundance of energy?  No, we have simply found a way to exploit a limited resource faster than before. And in absence of any regulatory discipline of the markets, save the Saudis who are NOT our friends, we have driven down the price of a precious resource by exploiting it unconscionably and creating an illusory abundance.

But aren’t the low prices of the  moment good for consumers and the greater economy, even at the expense of the oil industry?  Yeah,  like sub-prime mortgages and liar loans.  But what about the blow-back that will follow, when the closed-in wells and abandoned rigs don’t snap back to production as fast as prices in the inevitable shortage that will follow?  Remember the boom/bust of the 80s. Or any other period in the history of the industry, which is riddled with boom/bust. And, at the risk of stating the obvious, how long can the consumer expect to benefit at the expense of the industry whose own foolishness has made that benefit unsustainable for both?

Another thing that accountants like to do is to match revenues with expenses.  As I have maintained in prior blogs, if we were to do so with the extractive energy industry, energy prices would be much higher than they are, and we would be conserving much more than we do.  The price of oil and gas does not reflect the burden on the inadequate infrastructure that bears the strain of the current boom and will likely be left severely depreciated without adequate economic recovery when the bust occurs.  It does not reflect the costs of social and environmental degradation, which the industry will not likely clean up before it leaves town. It is consuming water at a voracious rate, frequently in places where it is competing with agriculture and basic human consumption for priority of an exceedingly scare resource.  And while water is a renewable resource, that is not the case for much of the millions of gallons of fracking cocktail that are being permanently sequestered deep in the earth because it is too toxic for recovery and recycle by natural or technological means.  Unless of course another New Madrid quake manages to un-sequester those wells back to the surface, or close enough for unpleasant consequences.  Even folks in Oklahoma and Ohio are beginning to have second thoughts.

No, we don’t match revenues with expenses in the near term, or over the long haul. The energy industry is taking the profits up front, and deferring the knowable costs and plausible long-term contingent risks for others to bear; and in many cases, the ‘others’ bear the costs disproportionately to the benefits they hoped to derive from royalties, or jobs, or tax base or whatever other mirage was flashed in front of them.

Most interesting is how fracking seems to elude serious scrutiny for the economics that underlie the current surge in production.  It is generally known that fracked wells deplete much faster than conventional plays, and that for a company to continue to generate growth in revenue, it must continue to frack new wells faster than the older wells are depleting.  This is often referred to as the Red Queen Syndrome, the need to keep running faster and faster just to stay in place.  It is not a winning game in the long run.  This is a form of ‘kiting’, a term in auditing for a particular type of serial fraud that usually ends badly for the perpetrator and his victims.  Or one could call it a Ponzi scheme and still be close to the truth.

I have to wonder if the major producers backed away from a significant push into fracking because they saw too clearly both the economic folly and the potential long-term contingent liabilities that would befall them with their perceived deep pockets.  Hit-and-run wildcatters don’t worry about the long-term.  So where do the majors go to replenish their depleting reserves?  Deep ocean.  The Arctic.  Russia, a fun place to do business if you don’t have the stomach for Iraq.  Do they take these risks because there’s an abundance of oil and gas to be had under reasonable conditions?  No.

So it may be true that the earth has an abundance of hydrocarbons waiting to be exploited.  But when you add the true costs of exploitation, in every sense of that word, you no longer have cheap and abundant energy.

We have the technical capacity to rape the planet from pole to pole.  That is not in question.  The question is what will be left that is worth the energy.




The Grid: News of its Death Is Premature

The latest claptrap ricocheting off the walls of the business and environmental media echo chambers is word of the inevitable decline and death of the electric grid…or not.  It is more likely to succumb to neglect, along with the rest of our infrastructure, than to technological displacement by renewable technologies any time in the foreseeable future.

Nonetheless, the subject is a tug-of-war between two rival camps of idiocy.  One is comprised of the fossil fuel feudalists and their various front organizations who are fighting the growth of renewables at any scale as a perceived threat to the inevitable decline of cheap and easy carbon.  The other camp  is a combination of visionaries and eco-huckster capitalists who believe in a Disney World (both capitalist and fantasy) future but ignore the social and economic inertia that impedes reasonable progress at best, and their wildest dreams, to be sure.  The utilities themselves in varying degrees are more inclined to be on the side of the Feudalists  than the Fantasy folks.

The following quote is indicative of the kind of siloed, echo-chamber consensus that propagates the illusion of inevitability:

“Utilities are afraid that solar power will be to the electrical grid what PCs were to mainframes, or e-mail to the Postal Service: a technology that will simply kill its predecessors. Coal and nuclear power are both doomed, and the profit-making power grid with it. That’s all to our benefit.”

The writer may not realize this, but personal computers have not dispatched the mainframe; they have merely augmented it.  The Mainframe of yore has morphed into the server farm of now; Big Iron still lives. If it didn’t, there wouldn’t be The Cloud and Big Data.  And, while information is more widely distributed than in the ’70s through the internet, ironically it is every bit as centralized and concentrated as previously.  Just ask your government, or Jeff Bezos, or Eric Schmidt or Mark Zuckerberg.

And email has assuredly impacted the Post Office, but it has not rendered it to the dust bin of history yet, nor is it likely to in the near future.  Congress has reserved that privilege to itself.  The Post Office can still evolve, adapting its network to new and evolving needs, if allowed. But the same sclerotic forces that would kill renewables are doing their best to slay the postal service and any other institutions of social and economic unification.

The electric grid is most definitely in transition, but it is by no means a ‘dead man walking’ for the next half century for three very simple reasons.

1) The technology to replace it with renewable energy is not there, will not be sufficiently developed by the end of this decade, and will take three to four decades or more to propagate to scale.

2) Much of the generation of renewables will be on industrial scale wind, wave  and solar farms (the equivalent of mainframes, if you will) in places of best advantage, for transport to places of greatest need.  Hence, the grid, on some scale, in some configuration, lives. And some power consumers will never have the means to deploy stand-alone renewables without augmentation from the grid.

3) The ultimate system will be a hybrid of distributed and industrial scale generation integrated in a truly intelligent grid because neither option by itself will meet a variety of circumstances than can compromise each.

The Grid is The Net, It will evolve technologically, but it is unlikely to be replaced.  The fact that phone companies are seeking to dis-own their land lines as subscription declines is not the death of the telephone network; it is simply moving to wireless technology, but it is still a centrally managed and financed network.

What is disconcerting in this nonsensical rumination about the inevitable death of The Grid is that it distracts us from the real issues affecting the grid and its constituent utilities:  an orderly technological,  financial and regulatory transition to a differently configured and operational reality.

The notion of ‘going off the grid’ for most of us is more a fantasy than a future.  For those of you with solar panels on your house, ask yourselves: if your system was wiped out by a hurricane, along with many others in your town, how quickly would you be able to replace your panels and get back to business?  Alternatively, how long would it take the utility to re-string lines to your house?  Aside from storms, how many office buildings are likely to meet their own needs from home-grown renewable generation any time in the intermediate term future?  Can we get Metro-North to run its trains on anything but industrial grade electric generation in the intermediate term?

And finally, much as many of us would welcome the demise of coal, it is notable that a growing number of thought leaders in the climate change community are becoming resigned to the need for carbon sequestration technology, given the growing consensus that coal will be with us much longer than our fondest hopes would allow, for a variety of reasons.

Among the major concerns that the utilities and everyone else should be concerned about are:

–  resurrection of the grid that is from its current state of decay due to deferred maintenance;

–  armor the grid against cyber-attack or otherwise mitigate the risks of conventional sabotage;

–  armor the grid against probable extremes and transitions in climate;

–  create a grid that is more modular in design and thereby more scalable and adaptable to the various fluctuations in energy generation, distribution and utilization technology and patterns of usage:

–  evolve a more enlightened management capable of managing a more sophisticated grid;

–  evolve a more sophisticated citizenry willing to accept that this is an infrastructure that we will all depend on in varying degrees, and therefore we must all support.

The Grid is not dead or at death’s doorstep.

But we must not let it linger in agony, or its agony will be our own.





Back in the USSR

Vlad, the Mad Russian, is back from the Olympics, feeling energized as never before.  What a success.

And now its time to go back to the chess board and move a few pieces around, like maybe knights in heavy armor to, let’s say, the Ukraine, or some small part of it like Crimea, or maybe the whole, because Crimea is too small to satisfy an appetite. And besides, his ambitions need a matching bookend to Georgia on his geopolitical trophy mantle, just as his Olympic gold was a complement to his Super Bowl ring, courtesy of Bob Kraft.

What’s the West to do? Well, let’s start with the UN, doing a marvelous job in Syria, with no small resistance from Russia and China.  Don’t want to set any dangerous precedents that may come home to roost in the Ukraine or Tibet, do we?  Check!

Then there’s the EU, the ones closest to the action after Russia.  Victoria Nuland certainly had her thoughts on their posture. Not only was her directness and candor refreshing, if uncharacteristic among diplomats as a profession, but ratified by recent experience in other realms.

Then there’s the Old Boys’ Club of the US, and UK; the partnership that worked so well in Gulf War, the Sequel.  They can talk the talk, but with the bitter memories in their respective polities of that adventure and its lingering aftermath, they may both have trouble getting their respective homeland crowds to re-up for another adventure.

Reminiscent of Obama’s exhortation to the US Senate for support to use force if necessary in Syria, Mad Vlad has just asked the same of the Soviet Parliament, being the true democrat and servant of the people that he is.  It is anticipated that he will have less opposition securing that endorsement than did Barack. Those Soviets, (I meant, Russians) are so efficient!

Obama has warned Russia about Russian intervention in the Ukraine, much as Vlad warned Obama about the same in Syria. Of course, the Ukraine is in Vlad’s front yard, whereas Syria was merely a client. Neither are close to the US homeland, so one might reasonably ask just how invested we might be in the outcome, and what we’re willing to invest to influence.  And besides, it doesn’t help to carry a 44 Magnum if you’ve got an empty cylinder. Right, Harry?

*  *  *

Speaking or 44 Magnums reminds me that this week Secretary Hagel announced the reduction of our armed forces, consistent with our economic circumstances, and in line with our true defense requirements, as distinguished from our ‘aspirational’ defense requirements.  One of the casualties of that announcement was the A-10 Warthog, a so-called relic of Cold War strategy (you remember the Cold War, the one where we faced off against the Soviets?).

I’ve always been fascinated by things military.   The military manages to summon the kind of resources, planning, power and ingenuity for its deadly enterprises that we rarely seem to match in pursuit of the higher and beneficent purposes of the human spirit. Some of their weapons platforms exhibit a deadly beauty that is almost seductive if one can momentarily forget its purpose. The efficiency and devastating effectiveness is testimony to what human-kind can muster when it sets its mind to it.  Ironically, we exhibit our best for our worst, in terms of creativity and focus and drive. I’m fascinated by it all. I just hate to see it used.

The Warthog is a particularly deadly machine. Designed as a ‘tank-killer’ to leverage our limited boots on the European front, it also proved itself in both Gulf wars for close-in support of troops.  With its oversized engines it looks like an ungainly beast, incapable of loitering over a battlefield, but many of our troops were grateful to have it hanging out in their neighborhood.  More than just its good looks, its 30mm gatling gun packs a nasty sting, and its many wing weapons pylons can deliver a wide variety of death-in-a-can to any neighborhood event.

The sudden rise of tension on the Eastern Front suggests that the Warthog might yet be spared overdue retirement to the dry climes of Arizona’s Boneyard. But it would take more than A-10s or drones to confront Russia in the Ukraine. It’ll take boots. Whose boots?  Not ours, contrary to the fondest wishes of our own Mad John McCain, or his faithful side-kick Lindsey (who has his very own AR-15 in his private arsenal and knows how to use it–no desk-bound former JAG is he!)

The influence of the likes of John McCain on foreign policy public discussion has always amused me. His lineage in a military family dynasty, truncated Jet Jockey career and admirable conduct as a POW do not qualify him as a military strategist.  Then there are the chicken hawks like Wolfowitz; Dick Cheney, whose career with firearms has claimed more friends than foes, and the list goes on.  They will all bloviate about the imperative of US action in the Ukraine, as they do in Syria, and did in Libya, with as much of a clue as Dubya as to how it all might end.  After all, it’s the thrill of the game, not the final score, that matters; unless of course we’re keeping score with money to be made by our favorite donors in the defense industry.

While Obama contemplates his limited options, which fall somewhere between lousy and none, it might be worth asking what we have done, and do do in comparable situations to Russia.  What would we do if Mexico cozied up to China, or the Chinese built a floating colony in the Arctic Circle to enforce its territorial prerogative, as with the South China Sea?  How do others look at our involvement in Columbia, Nicaragua, Panama, El Salvador, Honduras, Chile, the Dominican Republic, (did I leave anyone out)?  Just keeping the peace, folks.  Nothing to see here.  Let’s move on.

*  *  *

If there must be boots on the ground for our A-10s to support, they will have to be European boots.  Chances of that happening are fewer than Obama’s options.  A community that lacks the means to summon economic resources to trump Vlad’s initial hand is unlikely to send boots and pay in blood to win the game. This enables Obama to invoke a policy statement I have seen prominently pinned on so many cubicle walls: “Failure to plan on your part does not constitute an obligation to perform on my part.”

To which the mantra will emanate from the lips of the McCain/Lindsey  duo in two-part harmony: “The stability of Europe is in our strategic national interest!”  Yes it is, like so many other things.  But we can’t bluff our way through this one and hope that our broken military can somehow outlast Russia’s broken military in a head-to-head confrontation in its own backyard.

*  *  *

But there is one thing even more existential to Russia than its interest in the Ukraine: its energy ATM machine.  Herein lies a long-term, non-military strategy option that might well scare the bejesus out of Mad Vlad (if that’s imaginable)!

What if Obama took a page from The Great Communicator’s play-book and launched a Son-of-Star-Wars strategy; not with missiles, but with energy?  What if Obama called a conclave of European nations and said now is the time for Western Europe and the US to declare its independence from energy tyranny from any source, and launch a Marshall Plan equivalent of investment in renewable energy and energy-efficient technology with the same fervor that we launch wars? In the interim while we ramp up our research and deployment, Saudi America can pledge to support Europe’s conventional energy needs.

Vlad would quickly have to recalculate his interests, not only in the Ukraine, but elsewhere, because the countervailing  bargain would be that if Russia wants stable international energy markets to support its domestic kleptocracy in the near to long-term, then it must commit to certain international understandings of behavior.

To which cynics might counter that Mad Vlad would smile that Mad Vlad kind of smile and say:  there’s a bigger world market than Western Europe for our wonderful energy.  And that’s true, like China, right on its border, hungry for all the energy it can supply, and all those other lovely resources in warming Siberia, that China’s burgeoning populace and economy desperately need, even more than Russia needs the Ukraine. How long might it take Chinese cross-border ‘migration’ to create the same ethnic imperative pretext that the Russians seek to leverage in the Ukraine?  Maybe a decade, two?

The energy card is a long-term strategy to deploy, but if Vlad is half as smart as he thinks, he will appreciate its short-term possibilities in the markets.  Needless to say, it could unleash all kinds of intended and unintended consequences:

–  Even as Saudi America’s production ramps up to need, prices will likely escalate.

–  Price escalation will force further conservation, a good and necessary outcome that might not occur as quickly under other circumstances.

–  Environmental concerns will escalate in the intermediate term with escalation of carbon based energy production, but that will be a regrettable and unavoidable step on the way to a more efficient and renewable energy future, less subject to energy imperialism, more environmentally sustainable, and inevitable.

–  A united West might have indirect benefits in dealings with China, causing it to recalibrate its role in a world where it may no longer dominate a more united Western world.

–  Europe, no longer the post-WWII basket case of yore, would have to come to terms with its intrinsic security needs and put cash on the table to roll its own or Buy American, either way carrying its own weight, because we cannot and should not.  Their security cannot mean more to us than it does to them.  Or as Victoria would say….

–  Among negative consequences may be a switch to covert cyber attacks from Russia to dissuade or disrupt such a strategy among the weak of will.  But this too can have a positive outcome, forcing us to give attention to cyber security that we have failed to support sufficiently since the dawn of the technology.

Dangerous times. Neither economic/energy war nor cyber-war should be viewed as antiseptic alternatives to old style blood-and-bullets.  But this approach could have vastly better outcomes for all than a rush to McCain Madness to counter Vlad Madness.

Meanwhile, Chuck might want to consider rescinding his retirement order for the A-10s, and keep those Vulcan guns well-greased.  Just in case.



But What If I’m Wrong?

“But what if I’m wrong?”

A novel question, don’t you think?

This seems to be a preposterous question to many experts and people of authority. Their degrees and titles are accumulated like armor to shield them from such questioning by others, and our narcissistic society of recent decades does much to program high levels of ‘self-esteem’ and ’empowerment’ to fill in any gaps in credentials. Can you picture Larry Summers or John Boehner or Larry Ellison or Marissa Mayer asking this?

As an auditor and consultant who has spent much of my time questioning the wisdom of others, I am exposed to the occupational hazard of turning those weapons of critical inquiry on one’s self. Fortunately, it is rarely suicidal, and it can sometimes have the benefit of alerting one to one’s own foolishness before it is brought to one’s attention by others, ….generally not gently.

I engage this question most often, which is generally daily, with the subjects of climate change and energy transition. A recent article on the protracted drought in the western US brought the question to the fore. At issue is whether the western US is undergoing a cyclical drought that has happened before in various cycles and various levels of severity for various extended periods of time, or whether this is the systemic effect of climate change that will not manifest as a cycle, but a trend.  If we wait for a definitive answer, the consequences could be dire for those directly affected.  If we rush to act on either assumption, we stand a risk of wasting precious resources or precious time. In the moment, one bears a significant risk of error, with consequences, one way or another.

The specific manifestation may be drought, but the contextual question of cause is by no means unique to this piece of geography or this particular natural phenomenon.  Climate skeptics and climate change adherents can each marshal arcane data to support their position, or alternatively poke holes in the credibility of the other side’s argument.  Often, neither side can prove or disprove their argument, because neither side has sufficient bullet-proof information. Much of what climate change advocates rely on for climate history is inferential evidence drawn from proxies: tree rings, ice cores, soil cores, etc.  And the more direct and current evidence is either insufficient in time span or insufficient in breadth and depth of accumulation (e.g. ocean temperatures, atmospheric readings at higher altitudes over the entire globe for completeness and uniformity) to be able to have a lock on an argument. The skeptics’ preferred route is divide an conquer: cherry-pick the data that supports the premise, and narrow in on a particular arcane facet to the exclusion of everything else that’s happening.  A recent article on divergent approaches to storm surge and sea level rise further illustrates the dilemma.

The scientific community, which we are told is 97% supportive of the premise that Climate Change is a) real, and b) subject to human influence, is somewhat schizophrenic as a group on the subject of climate change.  On the one hand, some significant chorus of the community is warning us in breathless tones of the impending point of no return in climate system dynamics that will seal our fate.  On the other hand, with each new report on ice sheets, or tornadoes or ocean acidification, or monsoonal rains, or new high temperatures, or whatever, they demure to make a direct connection to climate change because “we don’t yet have enough data to state the case conclusively”.  That may be valid from a perspective of scientific methodology, but it does not sustain the thesis that we “must do something NOW”, even though the apparent trend of events that we all can observe suggests that we probably should. And, it does not sustain the proposition of exactly what we should do now to what attainable effect.

There are four reasons why I can sustain commitment to the hypothesis of climate change in spite of science’s struggle to bring coherence to seemingly disparate facts or conundrums in modeling:

1)  Something’s going on, across a broad range of phenomena with some level of consistency and apparent escalation that it cannot be responsibly dismissed as just another day in paradise, even if we can’t explain it definitively now. (multiple data points)

2)  Even if the science remains somewhat muddled and inconclusive within the straight-jacket of its empirical methodology, the anecdotal evidence from that unruly place we call The Real World is sufficiently diverse in nature, and congruent in basic direction to give comfort that a trend of some kind is developing to which we must pay attention, because the consequences could be such that we cannot afford to ignore.  (Multiple perspectives)

3)  While the scientific community is by no means immune to herd mentality, the breadth of professional specialties and institutions and vested interests who have come to consensus defies credible belief that the consensus is merely herd mentality orchestrated by some world-dominating cabal. (Checks and balances)

4)  So many of the arguments hurled at consensus science by the outliers and their camp followers are predicated on such apparently flimsy logical and factual constructs that they beg dismissal from serious consideration. (Logical fallacy)

But still one must allow that even the minute minority may be right for the wrong reasons. Scientific progress has often been built on destruction by renegades of conventional wisdom of the moment. They cannot be summarily dismissed.

Is the sun a factor in global warming? Quite likely, although current scientific methodology has given it modest influence. Are greenhouse gases the major cause? Quite probably because we know the chemistry of burning carbon fuels beyond question, and we know the physics of their effect.  Unfortunately those physics are not the only physics to be considered in understanding climatic evolution.

So, an open mind is essential, and the question: “But what if I’m wrong”, is a vital tool of self-assessment and intellectual integrity for all players.  But too few seem to use it.

The Question (BWIIAW) becomes particularly important when one’s responsibility for decision-making impacts the well-being of others; their lives and livelihood, their health, their wealth. People who are clueless about climate change are keenly aware of their personal circumstances, and understandably distrustful of those who pronounce with obvious disregard for personal consequences. The manifestation of arrogance and indifference on both sides of  the climate debate is troubling, and explains in large measure why humankind has not progressed sufficiently on this issue.

Nor is The Question exclusive to climate change.  It might be nice for both sides of the fracking issue to try it out.  And genetic engineering. And nano-technology. And technological displacement. And Big Data Analytics. And economic policy. And foreign policy. And medical efficacy. And data privacy. And right to life. And death with dignity. And interventions of all kinds for all the best of intentions. And the list goes on. In a time when Big Data has yet to vanquish great uncertainties, and when judgments in a nanosecond can yield regrets that ‘keep on giving’, we can all afford a moment to ask ourselves ‘The Question’.

Asking The Question doesn’t necessarily give me answers, but it does inject a minimum daily requirement of humility. And as long as a voice in my head does not whisper ‘Sid, you’re probably wrong, or at least on really thin ice’, I can inch forward for another day, and ask again tomorrow.



Clim-Ergy: A Strategic Rubik’s Cube

The news of late in the climate and energy circles has been interesting.  Little factoids are entering the collective consciousness, like meteoroids piercing the upper atmosphere, burning brightly, and burning out.  But leaving in their fading trace the unsettling question: what else is up there waiting to come down, and where will it land?

We in the northeastern US have been celebrating the one year anniversary of Sandy not only with remembrance of the event, but with the discomforting realization that the way back is not nearly as quick or easy as one might have wished.  For public officials with any degree of comprehension, it is also a harbinger of things to come.

The headlines out of the IPCC in September obsessed over the 95% certainty among scientists that humans are significant contributors to global warming, the stuff that may cause more Sandys, and Colorado floods, and contagious Australian wildfires, and Sister Sandy killer storms in Europe, protracted drought in Texas where frackers are competing with farmers for scarce water that will become too little for either, and…the beat goes on.

But the real news in Climate circles is not the 95%, but the talk of a carbon budget: the global maximum of emissions that the planet can endure before ‘going postal’ (as we used to say before workplace and public space violence became trendy and went viral).  As scientists and policy makers debate the limits and timing of reaching a climatic point of no return, the news from disparate perspectives becomes increasingly foggy.

–  We hear that CO2 emissions are increasing at a declining rate, which gives false comfort because it is attributed to switch to natural gas, increased energy efficiency, and a moribund economy, and is largely limited to the United States, which is becoming a diminishing factor in the global carbon budget. What happens if the world economy recovers?  But right now, THAT does not seem to be an imminent prospect.

–  A chorus of voices are still singing the praises of frack-gas and the US’s ‘game-changing’ energy independence, as if that’s in the bag.  But off-stage, a growing chorus of voices are raising concerns that should have been addressed from the beginning regarding various levels of pollution and emissions. Fracking is reaching a critical mass and age that is manifesting its true self in ways that can no longer be concealed by corporate PR and governmental concerted ignorance.  While the fracking data is still fragmented and subject to active partisan dispute, it is accumulating, and will likely resolve to some credible consensus on environmental impact in the next five years.

–  Meanwhile, in parallel with the environmental questions on fracking technology, the question of fracking’s ultimate productive and economic viability is beginning to emerge, as the folks at the now defunct blog, The Oil Drum, suggested that it would. Growing, if disputed, evidence is suggesting that fracking is displaying the ‘Red Queen Syndrome’: that in order to sustain production levels, it must run ever faster to add new wells in order to compensate for the rapid decline of earlier wells.  In other words, increases in drilling activity will add to a declining increase in aggregate supply until the cumulative demand of capital to sustain is no longer justified by the productive results.  That becomes ‘problematic’, as they say, because in business and public policy circles the operating assumption is that cheap gas will fuel a prosperous and growing future.  What happens IF you kick that leg out from under the economic stool.  (Forget the environment, it’s not important.)

–  But, speaking of the environment and aside from natural gas, there is the growing sense that whatever we do in the USofA with our hypothetical abundance of gas, other major players are retreating from their positions in carbon reduction (Canada, Britain, Australia most prominently), which suggests that the global increase in CO2, if momentarily in hiatus due to an economic time out, will march on again whether the economy grows appreciably or not.    The energy budget will collide with the carbon budget if renewables cannot take up the slack, which, by most responsible and credible projections, they will not in sufficient time.

While the remnants of the British Empire retreat from commitments to reduce carbon, Germany and Spain are trying to work off a hang-over from their binge spending on renewables that have created economic dislocations in their energy markets, and in Spain’s case contributed to distress in its public finances.  A cautionary tale to those who would rush headlong into renewables transition without clearly thinking through its economic ramifications in transition. The common thread between the situation in Europe with energy economics dislocation and the depression of gas prices resulting from the fracking boom is that in both cases, government or industry forces rushed headlong into a perceived opportunity without contemplating long term consequences. In one case, government regulation failed; in the other, the market failed. In both cases, foresight and discipline failed. In the end, we’re collectively poorer.

Meanwhile, Shell, as one prominent fossil fuel energy company, seems to be suffering multiple personality disorder.  It has retreated from some fracking investments, to try again for the more secure? prospects off Alaska’s coast, from which it retreated last year. What a difference a year makes. Either they are dismissing last winter as a spell of bad luck, or they’ve vastly improved their capacity to deal with bad luck, or they’re convinced that the Coast Guard has vastly improved its capabilities to pull their sorry assets out of trouble, if needed.  Good luck.

Still from another cubical, a Shell executive opines that the US has oversold the potential of fracking and been perhaps a tad overexuberant in pursuing and promoting its potential. But, that’s just one man’s opinion.  And yet another Shell executive, former Chairman Hofmeister, allows that ‘everybody knows that some fracking wells go bad’. This could win the 2013 award for understatement, but let’s not rush to judgment.

Meanwhile, a few degrees south of the Arctic, Brazil’s wunderkind files for bankruptcy, doing potential serious damage to the myth of Brazil’s presumptive energy future (a parable of relevance to the US?)  Now there’s nothing particularly newsworthy about the fact that oil exploration is risky business for big guys and little guys, and there’s nothing newsworthy about some self-styled capitalist buccaneer overplaying his hand, but the intersection of the two, and its ripple effects on Brazil are instructive of what can happen when greed, desperation and hubris are mixed and shaken in an economic cocktail, as is also occurring in China and Russia now. And Clim-Ergy will likely produce many more such situations.

–  Consistent with the above, it is notable that a group of scientists has urged environmentalists to look more kindly on nuclear energy as an antidote to continued and growing reliance on carbon based fuels, and a last-ditch strategy to curb CO2.  That’s kind of like asking a chronically ill person to consider treatment by a witch doctor, because the local medical facility has been closed.  Mind you, I have nothing against nukes.  It’s a clean fuel, if you ignore the waste.  By the way, what ARE we doing with that stuff?

As I write this blog, Super Typhoon Haiyan has just whacked the Philippines, and is lining up Vietnam in its sights.  Imagine what a comparable storm retracing Sandy’s path might do with 147 mph winds. But Sandy was a freak.  Won’t happen again.

*  *  *

So, where does all of this net out? What’s the bottom-line, as they say? Here are a few random inferences:

1.  In five years, environmental concerns with catch up with fracking. It will be greatly circumscribed in its application by the tougher and relevant regulations that should have guided it from the beginning. (Yes, ladies and gentlemen, we are capable of fore-thought. We just choose not to use it too often.  Although, Dick Cheney certainly did.)

2.  At about the same time, a critical mass of drilling and statistical history of productivity will have been attained, and will show that frack-gas nirvana is a mirage.  If environmental factors don’t constrain its development, economic factors will.

3.  As a consequence of #2, natural gas prices will rise significantly over current fantasies of future affordability, causing a rush back to the drawing board to rethink business and public policy realities in the context of that energy reality.  Even a continuing limp economy may not be enough to offset the impact of demand relative to supply.

4.  Within five to ten years, the cumulative economic impacts of natural events will convince the 80% of the population who currently prefer to sit on the fence that the Ignorati on Clim-Ergy, both on the Left and the Right, must be ignored, and SOMETHING must be done to address the trajectory of events that are beyond rational dispute, even if they still defy nice, neat statistical categorization and correlation based on provable science. Something must be done, but what?

5.  But by then, it will be too late.  We will be locked into a trajectory that will take decades and more likely centuries to work out. It may already be too late, but we will have worsened it over the next ten years by frantic and ignorant efforts to sustain the economically unsustainable at the expense of the environment. The consequence will be an ironic form of poetic justice when the environment renders payback in stark economic consequences.

6. Equally frustrating will be costly and ineffective responses engaged in desperation. An equivalent brain-trust to the one that will get us there, will try to get us back with visions of geo-engineering solutions, but with no greater capacity or will to consider unintended consequences of our consistently myopic, short-term thinking.  The only safety brake on our natural group-think tendency for collective incompetence will be the fact that we won’t be able to afford these schemes, if we can agree on them. We will squander precious funds on token efforts that will not scale to effect.

*  *  *

Of course, many ‘pragmatists’ will read these words and dismiss them as Chicken-Little-sky-is-falling nonsense. On the other hand, we KNOW that other civilizations before us have collapsed, which is to say that on some level there is historical precedent which makes the scenario possible. We may just do it on a far grander scale because ‘we have the technology’.

Meteorites happen.  Mankind can make it happen.  In the end, the result’s the same.

In the mean time, don’t let The Future get you down. Party on, Dudes and Dudettes! Par-tay on!



Frack This: Perverse Incentives – Part 2

A funny thing happened on the way to Saudi America: The Market collided with reality while intoxicated with wishful thinking.  This post from Bloomberg confirms what skeptics of the fracking frenzy warned.

In fairness, the article does not conclusively prove the point posited by experts not in the employ of the extractive industries that decline in yield of fracking is inevitable based on known historic trends in such fields. But it gives some substance to the argument and deserves further attention before we toss Peak Oil into the trash-heap of history.

Enhanced drilling is not a new phenomenon, I first heard of it in the eighties.  Horizontal drilling is the new improvement that has enhanced the economics of drilling in otherwise challenging plays. Unconventional extraction has not found ‘new’ resource as the industry so often likes to imply.  Rather, it has made known resource more available on a technical basis, but has not necessarily made it sufficiently economical.

The steep decline in well yields, the dependency on water resources that are inherently scarce in many of these basins, and the risk of long-term environmental contamination from the toxic cocktails these technologies depend on are intrinsic risks of fracking. But the drop in energy prices is a foreseeable and preventable one. It’s an issue of seeing what you want to see, or not.

The buccaneers of the energy industry followed the typical gold rush/ land grab psychosis that so typically creates the boom-bust cycles in this industry.  ‘Let me get there first, stick as many tubes in the ground as I can, suck as much out as fast as possible, and worry about the consequences after.”  Forget that the end market was not prepared for the sudden rush of supply.  Now as always, it’s about pumping as much out as possible and cornering today’s market. Forget that you’re pushing a non-renewable resource that does not have ready replacement.  Forget that your feeding frenzy is pushing that precious resource at a depressed price due to its temporary market glut.  Ignore that you’re making diminishing returns per unit; make it up in volume! Perverse incentives.

But in fairness to the energy entrepreneurs, they are not alone.  Local and state officials are as desperate as the EEs are greedy.  Grab those royalties. Grab those jobs. Grab those taxes, no matter what the cost in infrastructure, social structure or environmental rupture.  Don’t be too persnickety about environmental hazards. You might kill the goose that lays the golden egg.

It’s not like we haven’t seen the social and economic consequences of imbalanced growth in the past. Examples abound.  And the typical response of Chamber of Commerce boosters is to argue for more of the same until ‘the market balances itself’.  That process generally turns out to be unpleasant.  But the perverse incentives of near term growth at the cost of long-term sustainability are always too tempting to The Leadership.

Nor are ‘the little people’ exempt.  The payback of a well lease is a lot more certain than a lottery ticket.  But the hazards and risks of loss are a lot greater than a buck.  But what could possibly go wrong?  Toxic cocktail anyone?  Would you like that warmed at your faucet? Perverse incentives. We see what we want to see.

Perverse incentives up and down the food chain render responsible civic decision-making futile.  Too many parties are co-opted along the way.  And unfortunately, even the voices of opposition take positions that are self-defeating.

For example, to oppose fracking on principle is as foolish as to support it on principle; or for that matter attacking or supporting climate change in the abstract..  Don’t fight fracking per-se.  Fight its negative elements on their merits.

–   Demand that government require drillers to conform with the Clean Water Act. Exemption is automatically suspect of reason if not integrity.

–   Require them to disclose the ingredients of their fracking cocktails and then assess their known risks.

–   Place a fee on drilling to assure adequate funding of independent inspection and monitoring of drilling and production activity, and basic research to better understand and anticipate the long-term geophysical implications of an activity that has no statistically significant track record…yet.

–   Stop the land rush. Pace the development so that communities and infrastructure can evolve at a sustainable pace and create a ‘long term annuity’ rather than a short-term windfall that will likely be squandered.

–   Stop the gold rush.  Regulate the pace of development consistent with the pace of end-market capability of absorbing product at a price that fairly covers all appropriate costs of production (including waste management and effects of environmental degradation) as well as risk and return on investment.

–   Stop the flaring.  It is wasteful of a precious resource. It is environmentally harmful. It is done to escape the appropriate costs of containment (and the benefits therewith), and indicative that the industry is hell-bent on pushing a product at the lowest (and irresponsible) cost in order to seize short-term profit at whatever cost.  Stopping flaring will conserve resource and increase cost of production. Increasing production cost to cover its rightful responsibilities will increase the price to reflect truer value.  Increasing price will cause conservation (and curtail some otherwise level of waste) to a net social and environmental benefit, and not necessarily at an economic  detriment (except to the greedy).  That’s how a rational market should work.  Wish we had one.

In the end, fracking, or climate change, or any other paradigm must be judged and adjusted based on the merits of their component parts, and their net effect.

Apparently the land grab frenzy to corner the market on frackable real estate, combined with a recent decline in the yields of said property, combined with a glut of supply in the market is a confluence of events that benefits no-one in the long run.  But when have we ever cared about the long run.

So the folks in Williston, ND may want to hold onto their momentary embarrassment of riches, and reserve them for cleaning up the downside of Paradise Lost.

No-holds-barred, free market unregulated competition. Kind of like no-holds barred, extreme martial arts. Great fun for the winner. Great fun for the spectators, unless the bodies of the losers land in your lap.

*  *  *

Separately, but related, I would like to acknowledge and express my regrets at the passing of the blog, The Oil Drum (TOD), from active to archival status. It has been a source of insight to me in recent years, as was another blog, Oil Depletion Analysis Center (ODAC).  ODAC terminated last year for lack of financial support. But TOD has chosen to step down for a very different reason.  It has concluded that it has said all that needs to be said in principle about Peak Oil.  The issue of precise timing in the media world of instant analysis and constant second guessing from ill-conceived opinion is secondary to the fundamental geological truths and market probabilities that have not changed, and have not been vanquished by fracking.  Merely delayed.

So the various contributors have chosen to disperse to other venues, having said what they felt needs to be said, and letting that archived word stand as testament in their behalf, as the future unfolds.

I, on the other hand, still have a few random mutterings to share.