Action must be taken to reduce the hazards from railroad shipments of Bakken oil
By Carolyn Heising, November 15, 2014
(Photo: CANADIAN PRESS )
Now is the time to ask: Is the growing practice of using trains to carry highly-flammable crude oil from North Dakota’s Bakken shale field through communities in Iowa safe and even necessary?
Is it free of the hazards that led to the railroad accident in Quebec last year that killed 47 people and destroyed half of the town of Lac-Megantic? Or is it adding to the stress on the rail system?
Iowa is one of a number of states that have become a corridor for the shipment of Bakken crude over the past three years. Canadian Pacific Railway ships heavy loads of oil south through five eastern Iowa counties. BNSF Railway ships crude through four western Iowa counties. The oil is transported to refineries on the Gulf Coast or to pipeline connections.
No question about it, U.S. oil production is booming. The shale revolution is the dominant economic and geopolitical event of the past decade. Its effects have been transformative.
The United States is on the verge of becoming the world’s leading oil producer. OPEC is no longer the threat it once was. The growth in the U.S. energy industry has more than doubled in the past 10 years and is now worth about $1.2 trillion in gross product each year, contributing about 30 percent of the job growth for the nation, according to a study by the Perryman Group.
And the oil boom is likely to continue unless a catastrophic event brings it to a halt.
One reason environmental groups seem relatively calm about railroad shipment of crude oil is that they know what a minor event it is amid the chaos of fossil-fuel production and the dangerous and destabilizing chaos of climate change. A big part of the problem is the paradoxically positive economic effect of shale-oil production, which is loading the atmosphere with an enormous amount of global-warming carbon dioxide and methane.
What’s the answer?
Long-term we need to reduce the amount of oil we use in transportation by shifting to electric cars with batteries powered by renewable energy sources and nuclear power. Right now, action must be taken to reduce the hazards from railroad shipments of Bakken oil, which is much more flammable than conventional crude oil.
Freight railroads have gone from being a relic of the past to being a key mode of transport for oil supplies. Currently about two-thirds of North Dakota’s Bakken oil production is transported by rail. And more than 10 percent of the nation’s total oil production travels by rail.
In the last quarter of 2013, more than 71 million barrels of crude oil were shipped by rail, more than 10 times the volume of oil shipped in 2008. Over the past six months, there have been at least 10 large crude oil spills in the United States and Canada because of railroad accidents.
The U.S. Department of Transportation has responded by proposing speed limits along with a system for classifying the oil and new safety design standards for rail tanker cars.
The railroads say there have been relatively few rail accidents and not much loss of oil, considering the huge quantities of oil being shipped around the country. However, oil companies — which own the oil rail cars — are shipping much of the crude in outdated tank cars called DOT-111s that are vulnerable to puncture in a derailment.
The trains have captured the attention of local emergency responders by the amount of oil they carry — 100-plus tanker cars carrying up to 30,000 gallons of highly flammable fuel are not uncommon. In New Jersey, a key rail route, the trains pass within a few feet of homes and schools in highly populated areas.
Those who believe that slower train speeds alone are the answer should think again. A train hauling Bakken crude derailed in downtown Lynchburg, Va., a bustling city of 75,000 people. Three tanker cars tumbled into the James River. One of the tanker cars ruptured, spilling 30,000 gallons of crude.
Fortunately, no one was killed or injured. But local fire officials, who are accustomed to dealing with oil accidents on a much smaller scale, said the train was traveling within the speed limit. After the Quebec disaster, major rail companies agreed to reduce the maximum speed of oil trains to 40 miles per hour when they are within 10 miles of a major city. Lynchburg set its own speed limit of 25 mph. The train was going slower than 25 mph when it derailed.
Because a lot is riding on rail safety, oil companies should consider what other industries that use trains to haul hazardous cargoes have done to prevent accidents. For example, the nuclear industry uses specially-built freight cars to transport used nuclear-fuel assemblies from one nuclear plant to another. Since the 1960s, there have been thousands of trips involving the rail transport of nuclear waste in the United States, without a single serious accident.
That’s a stellar safety record which bodes well for the rail shipment of nuclear waste to a deep-geologic repository — and nuclear power’s increased use for electricity production.
Admittedly, the number of oil trains and the amount of hazardous cargo they carry is far greater than it is for nuclear companies and most other industries. But if oil companies continue to use puncture-prone tanker cars to haul highly-flammable Bakken crude in 100-car trains traveling at dangerous speeds, the ultimate consequences could be dire, and we will wind up asking ourselves why something more wasn’t done to prevent it.
THE AUTHOR:
CAROLYN D. HEISING, Ph.D., is a professor of industrial, mechanical and nuclear engineering at Iowa State University. Contact: cheising@iastate.edu.
U.N. Panel Issues Its Starkest Warning Yet on Global Warming
By JUSTIN GILLIS, NOV. 2, 2014
Machines digging for brown coal in front of a power plant near Grevenbroich, Germany, in April. Credit Martin Meissner/Associated Press
COPENHAGEN — The gathering risks of climate change are so profound that they could stall or even reverse generations of progress against poverty and hunger if greenhouse emissions continue at a runaway pace, according to a major new United Nations report.
Despite growing efforts in many countries to tackle the problem, the global situation is becoming more acute as developing countries join the West in burning huge amounts of fossil fuels, the Intergovernmental Panel on Climate Change said here on Sunday.
Failure to reduce emissions, the group of scientists and other experts found, could threaten society with food shortages, refugee crises, the flooding of major cities and entire island nations, mass extinction of plants and animals, and a climate so drastically altered it might become dangerous for people to work or play outside during the hottest times of the year.
“Continued emission of greenhouse gases will cause further warming and long-lasting changes in all components of the climate system, increasing the likelihood of severe, pervasive and irreversible impacts for people and ecosystems,” the report found.
In the starkest language it has ever used, the expert panel made clear how far society remains from having any serious policy to limit global warming.
Doing so would require leaving the vast majority of the world’s reserves of fossil fuels in the ground or, alternatively, developing methods to capture and bury the emissions resulting from their use, the group said.
If governments are to meet their own stated goal of limiting the warming of the planet to no more than 3.6 degrees Fahrenheit, or 2 degrees Celsius, above the preindustrial level, they must restrict emissions from additional fossil-fuel burning to about 1 trillion tons of carbon dioxide, the panel said. At current growth rates, that budget is likely to be exhausted in something like 30 years, possibly less.
Yet energy companies have booked coal and petroleum reserves equal to several times that amount, and they are spending some $600 billion a year to find more. Utilities and oil companies continue to build coal-fired power plants and refineries, and governments are spending another $600 billion or so directly subsidizing the consumption of fossil fuels.
By contrast, the report found, less than $400 billion a year is being spent around the world to reduce emissions or otherwise cope with climate change. That is a small fraction of the revenue spent on fossil fuels — it is less, for example, than the revenue of a single American oil company, ExxonMobil.
The new report comes just a month before international delegates convene in Lima, Peru, to devise a new global agreement to limit emissions, and it makes clear the urgency of their task.
Appearing Sunday morning at a news conference in Copenhagen to unveil the report, the United Nations secretary general, Ban Ki-moon, appealed for strong action in Lima.
“Science has spoken. There is no ambiguity in their message,” Mr. Ban said. “Leaders must act. Time is not on our side.”
Yet there has been no sign that national leaders are willing to discuss allocating the trillion-ton emissions budget among countries, an approach that would confront the problem head-on, but also raise deep questions of fairness. To the contrary, they are moving toward a relatively weak agreement that would essentially let each country decide for itself how much effort to put into limiting global warming, and even that document would not take effect until 2020.
“If they choose not to talk about the carbon budget, they’re choosing not to address the problem of climate change,” said Myles R. Allen, a climate scientist at Oxford University in Britain who helped write the new report. “They might as well not bother to turn up for these meetings.”
The Intergovernmental Panel on Climate Change is a scientific body appointed by the world’s governments to advise them on the causes and effects of global warming, and potential solutions. The group, along with Al Gore, was awarded the Nobel Peace Prize in 2007 for its efforts to call attention to the climate crisis.
The new report is a 175-page synopsis of a much longer series of reports that the panel has issued over the past year. It is the final step in a five-year effort by the body to analyze a vast archive of published climate research.
It is the fifth such report from the group since 1990, each finding greater certainty that the climate is warming and that human activities are the primary cause.
“Human influence has been detected in warming of the atmosphere and the ocean, in changes in the global water cycle, in reductions in snow and ice, and in global mean sea-level rise; and it is extremely likely to have been the dominant cause of the observed warming since the mid-20th century,” the report said.
A core finding of the new report is that climate change is no longer a distant threat, but is being felt all over the world. “It’s here and now,” Rajendra K. Pachauri, the chairman of the panel, said in an interview. “It’s not something in the future.”
The group cited mass die-offs of forests, such as those killed by heat-loving beetles in the American West; the melting of land ice virtually everywhere in the world; an accelerating rise of the seas that is leading to increased coastal flooding; and heat waves that have devastated crops and killed tens of thousands of people.
The report contained the group’s most explicit warning yet about the food supply, saying that climate change had already become a small drag on overall global production, and could become a far larger one if emissions continued unchecked.
A related finding is that climate change poses serious risks to basic human progress, in areas such as alleviating poverty. Under the worst-case scenarios, factors like high food prices and intensified weather disasters would most likely leave poor people worse off. In fact, the report said, that has already happened to a degree.
In Washington, the Obama administration welcomed the report, with the president’s science adviser, John P. Holdren, calling it “yet another wake-up call to the global community that we must act together swiftly and aggressively in order to stem climate change and avoid its worst impacts.”
The administration is pushing for new limits on emissions from American power plants, but faces stiff resistance in Congress and some states.
Michael Oppenheimer, a climate scientist at Princeton University and a principal author of the new report, said that a continuation of the political paralysis on emissions would leave society depending largely on luck.
If the level of greenhouse gases were to continue rising at a rapid pace over the coming decades, severe effects would be avoided only if the climate turned out to be far less sensitive to those gases than most scientists think likely, he said.
“We’ve seen many governments delay and delay and delay on implementing comprehensive emissions cuts,” Dr. Oppenheimer said. “So the need for a lot of luck looms larger and larger. Personally, I think it’s a slim reed to lean on for the fate of the planet.”
Repost from TruthOut [Editor: a good summation of the latest evidence that runaway anthropogenic climate disruption continues to escalate. A new study reports that climate change is ”worse than we thought” because it is happening ”faster than we realized.” – RS]
As Casualties Mount, Scientists Say Global Warming Has Been “Hugely Underestimated”
October 20, 2014, By Dahr Jamail
(Image: High altitude, air pollution via Shutterstock)
As we look across the globe this month, the signs of a continued escalation of the impacts of runaway anthropogenic climate disruption (ACD) continue to increase, alongside a drumbeat of fresh scientific studies confirming their connection to the ongoing human geo-engineering project of emitting carbon dioxide at ever-increasing rates into the atmosphere.
A major study recently published in New Scientist found that “scientists may have hugely underestimated the extent of global warming because temperature readings from southern hemisphere seas were inaccurate,” and said that ACD is “worse than we thought” because it is happening “faster than we realized.”
As has become predictable now, as evidence of increasing ACD continues to mount, denial and corporate exploitation are accelerating right along with it.
The famed Northwest Passage is now being exploited by luxury cruise companies. Given the ongoing melting of the Arctic ice cap, a company recently announced a 900-mile, 32-day luxury cruise there, with fares starting at $20,000, so people can luxuriate while viewing the demise of the planetary ecosystem.
This, while even mainstream scientists now no longer view ACD in the future tense, but as a reality that is already well underway and severely impacting the planet.
It is good that even the more conservative scientists have come aboard the reality train, because a recent National Oceanic and Atmospheric Administration-led (NOAA) study published by the Bulletin of the American Meteorological Society has provided yet more evidence linking ACD with extreme heat events.
To provide perspective on how far along we are regarding runaway ACD, another recent study shows that the planet’s wildlife population is less than half the size it was four decades ago. The culprits are both ACD and unsustainable human consumption, coupling to destroy habitats faster than previously thought, as biodiversity loss has now reached “critical levels,” according to the report. More than half of the vertebrate population on the planet has been annihilated in just four decades.
Let that sink in for a moment before reading further.
Meanwhile, the situation only continues to grow grimmer.
The effects of all these developments are especially evident in the Arctic, where sea ice coverage reached its annual minimum on September 17, continuing a trend of below-average years. According to the NASA-supported National Snow and Ice Data Center, Arctic sea ice coverage this year is the sixth lowest recorded since 1978.
Equally disconcerting and symptomatic of the aforementioned, 35,000 walruses crowded onto land near the Northwest Alaska village of Point Lay late last month, when they couldn’t find their preferred resting grounds of summer sea ice.
Earth
The European Space Agency announced that, due to billions of tons of ice loss, a dip in the gravity field over the Western Antarctic region has occurred, making even gravity itself the latest casualty of ACD.
A recent analysis of 56 studies on ACD-related health problems revealed that increasing global temperatures and extreme weather events will continue to deleteriously impact human health on a global scale.
Further north, warming temperatures continue to disrupt the fragile ecological balance in the Canadian Arctic, which is warming faster than most of the rest of the planet. Canada’s minister for natural resources provided a new report detailing the impact ACD is having on that country’s forests, which are being impacted “faster than the global average.”
In neighboring Alaska, summer heat and invasive insects are taking a similar toll on interior Alaska birch trees, according to experts there.
Wildlife populations continue to struggle to adapt to the dramatic changes wrought by ACD. In California, one of the largest populations of state-protected Western pond turtles in the southern part of that state is struggling to survive as its habitat, a natural two-mile long lake, has become a smelly, severely alkaline death trap due to drought and fires there.
Of course it isn’t just wildlife that is struggling to adapt and cope with ACD.
Members of the Swinomish tribe, located north of Seattle, were recently awarded a large grant from the federal government in order to deal with rising seas and flooding, as they live near the mouth of the Skagit River.
Water
The extremes of water, flooding and drought continue to persist and escalate as ACD continues.
In California, where record-breaking drought is becoming a way of life for much of the state, at least 14 communities are on the brink of waterlessness and are trucking in water while trying to find a solution.
In East Porterville, a small rural community in Tulare County, California, the situation has become so desperate that residents are no longer able to flush toilets, fill a glass with water or wash their hands without using bottled water.
Dairy farmers in that state are struggling to survive the drought, as the cost for feed and water is being driven up by the lack of water.
The US Energy Information Administration announced that California’s ability to produce electricity from hydroelectric dams is being significantly hampered by the drought, which covers 100 percent of the state now. This is because the reservoirs, which create power when the water in them is released into turbines, are drying up, thus providing less pressure to spin the turbines. The first six months of this year have seen the state’s hydropower generation decrease by half.
And it’s not just California that is experiencing drought. The better part of the entire Western Hemisphere has experienced some form of drought in recent years, according to another recent report published in the journal Science which states: “A dry spell has killed cattle and wiped out crops in Central America, parts of Colombia have seen rioting over scarce water, and southern Brazil is facing its worst dry spell in 50 years.”
Across the Atlantic, at a recent international conference that was held to discuss the growing global water crisis, experts warned that Britain must prepare for the “worst droughts in modern times.”
In Iran, worshippers have sought divine intervention and they’re being urged to literally pray for rain.
An excellent report by National Geographic asked a critical question: What will happen to the American West, which has been built upon the back of snowmelt, when the snows fail?
On the other end of the water spectrum – melting and flooding – we continue to see global evidence of the impact of ACD. The aforementioned recent satellite observations from the US National Snow and Ice Data Center revealed in October that the Arctic ice cap has melted so much that open water is now a mere 350 miles from the North Pole, which is the shortest distance ever recorded, according to scientists.
This coincides with predictions from leading British and American polar researchers that Truthout has previously interviewed who predict the ice cap will melt completely during the summer as early as next year.
A recent report by the Union for Concerned Scientists warned that several major US cities will see at least 10 times more coastal flooding by 2045, in addition to at least 11 inches of sea level rise by the same year.
In Delaware, they aren’t waiting. There, millions of dollars have been spent to pump sand in to build up dunes along the beaches in order to create a buffer from future storms and sea level rise.
Down in Miami, hundreds of millions of dollars are being spent to install new storm pumps and storm drains in order to combat sea level rise at Miami Beach. Near the Cape Canaveral area, a low-lying barrier island is getting even lower as sea levels continue to rise, so communities there are investigating ways to keep the water at bay, or to plan a retreat.
Edmonton, Canada, is pushing forward with a $2.4 billion bill for flood prevention, as that city is seeing increasingly severe downpours.
Southern France experienced a deluge of 10 inches of rain in just three hours, which amounted to half a year’s worth of rain in one day in Montpellier.
In Norway, massive amounts of melt-water from streams and blue ice on mountains indicated that the ice fields and glaciers on central Norway’s highest peaks were in full retreat, and exposed rock and ice that had not been seen for 6,000 years. On that note, recent studies also show that sea-level rise over the last century (20 centimeters) has been unmatched in 6,000 years.
Recent reports indicate that the Gulf of Alaska has become unusually warm, warmer in fact than since researchers began tracking surface water temperatures in the 1980s, according to NOAA.
In the Atlantic, lobsters off the coast of southern New England are moving up into Canada due to warming waters. The exotic lionfish, native to the Indo-Pacific, is also heading north up the Atlantic coast, as warming waters are changing ocean habitats.
In Greenland, “dark” snow atop the ice sheet is now being called a “positive feedback loop” by an expert there, as the increasing trend is reducing the Arctic’s ability to reflect sunlight, further contributing to runaway ACD.
Recent analysis indicates that scientists could have underestimated the size of the heat sink across the upper ocean, according to a recent report. The study, published in Nature Climate Change, found that the upper 700 meters of the ocean have been warming 24 to 55 percent faster since 1970 than previously thought. This means that the pace and scale of planetary warming is much faster than previously believed.
Lastly in this section, and possibly the most distressing, a recent report revealed that fish are failing to adapt to increasing carbon dioxide levels in the oceans. This means that within just a few generations of fish, a mass die-off could occur due to lack of adaptation. More carbon dioxide in the oceans is adversely changing the behavior of fish through generations, which means that marine species may never fully adapt to their changing environment.
Air
A study published in Geophysical Research Letters showed that tornado activity in “Tornado Alley” in the Midwestern United States is peaking two weeks earlier than it did 50 years ago, and ACD is the culprit.
Erratic jet stream behavior is now believed to be caused by the rapid retreating of Arctic sea ice as a result of ACD. The increasingly unpredictable jet stream is being blamed for more frequent, prolonged spells of extreme weather in Europe, North America and Asia. This includes more and longer freezing temperatures, storms and heat waves.
In October, California found itself in yet another heat wave, with record-breaking temperatures reported in several cities and hotter-than-usual temperatures across the state. The National Weather Service put the San Francisco Bay area and San Diego under a heat advisory and issued a hazardous weather outlook for the Los Angeles area. The Los Angeles Unified School District (LAUSD) cancelled outside activities and sports for the better part of a week due to the extreme heat, which was the second time this school year that LAUSD has had to cancel activities because of high temperatures.
On one day, downtown Los Angeles reached 92 degrees by noon, whereas the average October temperature for that city is 79 degrees. Several cities in Southern California broke record temperatures. Oxnard reached 98 degrees, breaking an almost 70-year-old record.
Fire
As wildfires continued to burn across parts of drought-stricken California, a record-breaking amount of fire retardant was used (203,000 gallons in one day alone) while combatting a massive wildfire in Northern California. The fire was burning so hotly and expanding so explosively, due to the prolonged drought, that firefighters found that normal amounts of retardant weren’t stopping the flames.
It is now well known that fire season in California, as well as across all the other Western US states, is extending due to ACD.
Denial and Reality
The person who runs the American Legislative Exchange Council (ALEC), a free-market lobbying group that opposes policies to mitigate ACD, is not sure whether humans actually cause ACD, according to an interview recently published in National Journal.
When asked specifically whether or not she thought human carbon emissions are causing climate change, ALEC CEO Lisa Nelson said, “I don’t know the science on that.”
The denial-based antics of Gov. Chris Christie are ongoing as well. He recently said that a regional cap-and-trade program from which his state of New Jersey withdrew in 2011 was “a completely useless plan” and added that he “would not think of rejoining it.”
Louisiana’s Gov. Bobby Jindal, a potential Republican presidential candidate for 2016, is taking a “soft denial” approach by admitting that ACD is real, while saying the extent to which humans have a role is still in “doubt.”
The denial project’s success is evidenced by large numbers of Americans racing to buy and develop seashore properties in areas well known to be at high-risk for rising seas and increasingly intense storms. Mike Huckabee, now apparently a chronic presidential candidate, is among those racing to build on shores that will be submerged in the not-so-distant future.
It’s no coincidence that merely 3 percent of current Congressional Republicans have even gone on record to accept the fact that climate disruption is anthropogenic, according to PolitiFact, which also found that there is a grand total of eight Republican non-deniers, total, in the House and Senate.
Another interesting turn of events shows companies like GE and Google operating as large companies do in advance of elections – funding both sides to safeguard their interests. In this case, these companies, along with others, are making campaign contributions to Congressional ACD-deniers – while simultaneously professing to be pro-sustainability companies.
Meanwhile the media blitz continues, as the Rupert Murdoch-owned and ACD-denying Wall Street Journal recently ran an article titled “Climate Science Is Not Settled,” which was chock full of the usual ACD-denier talking points. The article provides us with a prime example of how the doubt narrative is consistently slipped in as a meme: “Any serious discussion of the changing climate must begin by acknowledging not only the scientific certainties but also the uncertainties, especially in projecting the future.”
In stark contrast to the “doubters” and “deniers,” the Pentagon recently announced that ACD poses an “immediate risk” to national security, according to the Department of Defense’s 2014 Climate Change Adaptation Roadmap.
Shaun Donovan, the new US director of the Office of Management and Budget, used his first speech to talk about the dangers of inaction on climate change, in regards to the federal budget. “From where I sit, climate action is a must do; climate inaction is a can’t do; and climate denial scores – and I don’t mean scoring points on the board,” he said. “I mean that it scores in the budget. Climate denial will cost us billions of dollars.”
Google CEO Eric Schmidt recently admitted that funding ALEC was a “mistake,” and said that the group’s spreading of disinformation and lies about ACD was “making the world a much worse place.” During an NPR interview, Schmidt said, “Everyone understands climate change is occurring and the people who oppose it are really hurting our children and our grandchildren. . . . And so we should not be aligned with such people – they’re just, they’re just literally lying.”
The Endangered Species Coalition recently released a list of things people should take their children to go see outdoors, because if they wait too long, their kids might not get a chance to see them before they become extinct. The list includes monarch butterflies, polar bears, great white sharks, white bark pine trees and Snake River sockeye salmon.
A study published in Environmental Research Letters showed that switching to natural gas will not reduce carbon emissions very much, and could in fact increase them slightly, due to the fact that it would discourage the use of carbon-free renewable energy sources. This is significant because there are many lawmakers who are ACD “realists,” including President Obama, who advocate that natural gas is a “solution” to ACD.
A remarkable electronic dashboard created by The Guardian shows some of the key indicators of planetary health, where you can view updated snapshots of the impacts your country, as well as humans, are having on the environment.
Lastly, possibly the most disturbing reality check of all comes from MIT’s 2014 Climate and Energy Outlook. The recently released report revealed that global energy use and carbon dioxide emissions will likely double by 2100.
Repost from The Benicia Herald [Editor: Benicia’s own Grant Cooke has written a highly significant three-part series for The Benicia Herald, outlining the impending fall of the fossil fuel industry and concluding with good advice for the City of Benicia and other cities dependent on refineries for a major portion of their local revenue stream.This is the last of three parts. Read part one by CLICKING HERE and part two by CLICKING HERE. – RS]
Big Oil’s endgame: What it all means for Benicia
October 12, 2014, by Grant Cooke
IN APRIL 2014, THE HIGHLY RESPECTED Paris-based financial company Kepler Chevreux released a research report that has rippled through the fossil fuel industries. In it, Kepler Chevreux describes what is at stake for the fossil fuel industry as world governments’ push for cleaner fuels and reduced greenhouse gas emissions gathers momentum.
The firm argues that the global oil, gas and coal industries are set to lose a combined $28 trillion in revenues over the next two decades as governments take action to address climate change, clean up pollution and move to decarbonize the global energy system. The report helps to explain the enormous pressure that the industries are exerting on governments not to regulate GHGs.
Kepler Chevreux used International Energy Agency forecasts for global energy trends to 2035 as the basis for its research, and it concluded that as carbonless energy becomes more available, and as government policies make steep cuts in carbon emissions, demand for oil, natural gas and coal will fall, which will lower prices.
The report said oil industry revenues could fall by $19.3 trillion over the period 2013-35, coal industry revenues could fall by $4.9 trillion and gas revenues could be $4 trillion lower. High-production-cost extraction such as deep-water wells, oil sands and shale oil will be most affected.
Even under business-as-usual conditions, however, the oil industry will still face risks from increasing costs and more capital-intensive projects, fewer exports, political risks and the declining costs of renewable energy.
The report continues: “The oil industry’s increasingly unsustainable dynamics … mean that stranded asset risk exists even under business-as-usual conditions. High oil prices will encourage the shift away from oil towards renewables (whose costs are falling) while also incentivizing greater energy efficiency.” Eventually, fossil fuel assets will be too expensive to extract, and the oil will be left in the ground.
As far as renewables are concerned, Kepler Chevreux says tremendous cost reductions are occurring and will continue as the upward trajectory of oil costs becomes steeper.
Kepler Chevreux’s report is consistent with others released in 2014. One report from U.S.’s Citigroup, titled “Age of Renewables is Beginning — A Levelized Cost of Energy (LCOE)” and released in March 2014, argues that there will be significant price decreases in solar and wind power that will add to the renewable energy generation boom. Citigroup projects price declines based on Moore’s Law, the same dynamic that drove the boom in information technology.
In brief, Citigroup is looking for cost reductions of as much as 11 percent per year in all phases of photovoltaic development and installation. At the same time, they say the cost of producing wind energy also will significantly decline. During this period, Citigroup says, the price of natural gas will continue to go up and the cost of running coal and nuclear plants will gradually become prohibitive.
When the world’s major financial institutions start to do serious research and quantify the declining costs of renewable energy versus the rising costs of fossil fuels, it becomes easier to understand the monumental impact that the Green Industrial Revolution is having.
Zero marginal cost
Marginal cost, to an economist or businessperson, is the cost of producing one more unit of a good or service after fixed costs have been paid. For example, let’s take a shovel manufacturer. It costs the shovel company $10,000 to create the process and buy the equipment to make a shovel that sells for $15. So the company has recovered its fixed or original costs after 800 to 1,000 are sold. Thereafter, each shovel has a marginal cost of $3, consisting mostly of supplies, labor and distribution.
Companies have used technology to increase the productivity, reduce marginal costs and increase profits from the beginning. However, as Jeremy Rifkin points out in “Zero Marginal Cost Society,” we have entered an era where technology has unleashed “extreme productivity,” driving marginal costs on some items and services to near zero. File sharing technology and subsequent zero marginal cost almost ruined the record business and shook the movie business. The newspaper and magazine industries have been pushed to the wall and are being replaced by the blogosphere and YouTube. The book industry struggles with the e-book phenomenon.
An equally revolutionary change will soon overtake the higher education industry. Much to the annoyance of the universities — and for the first time in world history — knowledge is becoming free. At last count, the free Massive Open Online Courses (MOOCs) had enrolled about six million students. The courses, many of which are for credit and taught by distinguished faculty, operate at almost zero marginal cost. Why pay $10,000 at a private university for the same course that is free over the Internet? The traditional brick-and-mortar, football-driven, ivy-covered universities will soon be scrambling for a new business model.
Airbnb, a room-sharing Internet operation with close to zero marginal cost, is a threat to change the hotel industry in the same way that file sharing changed the record business, especially in the world’s expensive cities. Young out-of-town high-tech workers coming to San Francisco from Europe use Airbnb to rent a condo or an empty room in a house instead of staying at a hotel. They do this because they cannot find a room with the location they need, or because their expense reimbursement cap won’t cover one of the city’s high-end hotel rooms. Industry analysts estimate that Airbnb and similar operations took away more than a million rooms from New York City’s hotels last year.
A powerful technology revolution is evolving that will change all aspects of our lives, including how we access renewable energy. An “Energy Internet” is coming that will seamlessly tie together how we share and interact with electricity. It will greatly increase productivity and drive down the marginal cost of producing and distributing electricity, possibly to nothing beyond our fixed costs.
This is almost the case with the early adopters of solar and wind energy. As they pay off these systems and their fixed costs are covered, additional units of energy are basically free, since we don’t pay the sun to shine or the wind to sweep around our back wall. This is the concept that IKEA, the Swedish furniture manufacturer, is exploiting. IKEA is test marketing residential solar systems in Europe that cost about $11,000 with a payback of three to five years. Eventually, we’ll be able to buy a home solar system at IKEA, Costco or Home Depot, have it installed and recover our costs in less than two years.
All three elements — carbon mitigation costs, grid parity and zero marginal costs — and others like additive manufacturing and nanotechnology are part of the coming Green Industrial Revolution. It will be an era of momentous change in the way we live our lives. It will shake up many familiar and accepted processes like 20th-century capitalism and free-market economics, reductive manufacturing, higher education and health care. More to the point, it will see the passing of the carbon-intensive industries.
Like the centralized utility industry, the fossil fuel industries and the large centralized utilities have business models predicated on continued growth in consumption. Once that nexus of declining prices for renewables and rising costs of extraction and distribution is crossed — and we are already there in several regions of the world — demand will rapidly shift and propel us into “global energy deflation.”
Think about it: No more air pollution strangling our cities, no more coal ash spills in rivers that our kids swim in, no more water tables being poisoned by fracking toxics. Better yet, think of no more utility bills and electricity that is almost free. These are among the unlimited opportunities that extreme productivity can provide.
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SO WHAT DOES ALL THIS MEAN FOR BENICIA? Our lovely town, along with some of our neighbors, has enjoyed a stream of tax revenue from the fossil fuel industries for several decades. This will end as these industries lose the ability to compete in price with renewable energy. After all, if my energy costs drop to near zero, I’m not going to pay $5 for a gallon for gas or 20 cents per kilowatt hour. If Kepler Chevreux, Citigroup and the prescient investment bankers are right — and they usually are — oil company profits will begin a death spiral accompanied by industry constriction and refinery closings. Losing $19.3 trillion over two decades is a staggering amount even for the richest industry in world history.
Benicia should begin a long-range plan to replace Valero’s current tax revenues. Two decades from now this town will be very different — we are headed toward a city of gray-haired pensioners and retired folks too contented with perfect weather and amenities to sell homes to wage earners who, in fact, may not be able to afford big suburban houses and garages full of cars.
Instead, the Millennials are choosing dense urban living that’s close to work, and they prefer getting around by foot or bicycle, with some public transportation and the occasional Zipcar to visit the old folks in ‘burbs. The last thing pensioners want to do is pay extra taxes for schools and services they aren’t using, so raising taxes to meet the tax revenue shortfall is probably out of the question.
A similar revenue shortfall is probably facing the thousands of fossil fuel and utility industry employees who are thinking of retiring in the East Bay. Many plan to live on their stock dividends and pass the stock along to their heirs. This will be difficult as the industry begins the attrition phase of its cycle. They should see a financial planner and diversify.
To gamble Benicia’s safety and expand GHG emissions by approving Valero’s crude-by-rail proposal is illogical given that the oil industry is winding down and fossil-fuel will soon not be competitive with renewables. It would better for the Bay Area if we start to help Valero and the other refineries begin the long slow wind-down process, and gradually close them while the companies are still profitable. If we leave the shutdown process to when the companies start to struggle financially, they will just lock the gates and walk away, leaving the huge environmental cleanup costs to the local communities much the way the military does when they close bases.
There’s no good reason why Benicia residents should be saddled with the burden of a shuttered and vacant Valero refinery. We should begin the process as soon as possible and work with the refinery to not only find a way to replace the lost tax revenue, but to identify who will pay for the hazard waste and environmental cleanup.
At the very least, Benicia City Council should understand the move to a carbonless economy, read the Citigroup and Kepler Chevreux reports and the other emerging research, and accept the fact that Big Oil has begun its endgame. Leadership is about looking forward, not back, and identifying and solving problems at the most opportune time.
Grant Cooke is a long-time Benicia resident and CEO of Sustainable Energy Associates. He is co-author, with Nobel Peace Prize winner Woodrow Clark, of “The Green Industrial Revolution: Energy, Engineering and Economics,” set to be released in October by Elsevier.
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