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First Phase of Global Fracking Expansion: Ensuring Friendly Legislation

Repost from Inter Press Service
[Editor: Significant quote: “’Under pressure from the fossil fuel industry – which has deep pockets and promises employment and investment – several governments have already started to weaken their environmental legislation, alter their tax regimes and put in place industry-friendly mining licensing and production processes, in order to attract foreign investors and expertise….’”  See especially U.S. government promotion below.  – RS]

First Phase of Global Fracking Expansion: Ensuring Friendly Legislation

By Carey L. Biron
Fracking fluid and other drilling wastes are dumped into an unlined pit located right up against the Petroleum Highway in Kern County, California. Credit: Sarah Craig/Faces of Fracking
Fracking fluid and other drilling wastes are dumped into an unlined pit located right up against the Petroleum Highway in Kern County, California. Credit: Sarah Craig/Faces of Fracking

WASHINGTON, Dec 1 2014 (IPS) – Multinational oil and gas companies are engaged in a quiet but broad attempt to prepare the groundwork for a significant global expansion of shale gas development, according to a study released Monday.

Thus far, the hydraulic fracturing (or “fracking”) technologies that have upended the global gas market have been used primarily in North America and, to a lesser extent, Europe. With U.S. gas production in particular having expanded exponentially in recent years, however, countries around the world have started exploration to discern whether they, too, could cash in on this new approach.

According to an estimate published last year by the U.S. Energy Information Administration, some 90 percent of the world’s shale gas could be found outside of the United States – an incredibly lucrative potential. “It’s likely there will be a revolution,” Maria van der Hoeven, the executive director at the Paris-based International Energy Agency, has said.

Yet according to the new study, from Friends of the Earth Europe, a watchdog group, only Brazil has strengthened its regulatory regime in anticipation of this expansion. Of the nearly dozen countries the new report looks at, most are doing the opposite.

“Under pressure from the fossil fuel industry – which has deep pockets and promises employment and investment – several governments have already started to weaken their environmental legislation, alter their tax regimes and put in place industry-friendly mining licensing and production processes, in order to attract foreign investors and expertise,” the report states. “This is often at the expense of the public interest.”

In terms of production this remains a nascent industry. Nonetheless, neither governments nor companies appear to have undertaken efforts to guard against the complexities that will arise, including around the potential for social, environmental and even political tensions.

“The industry is trying to change the legislation in those places where they want to operate, to try to repeat as much as possible the favourable policies we’ve seen in U.S. energy policy,” Antoine Simon, a shale gas campaigner with Friends of the Earth Europe and lead author on the new report, told IPS.

“The key here is to ensure that the legal frameworks are as friendly for the industry as possible. That’s the first phase of this global strategy, and we’re seeing it in each country we studied.”

No safeguards

Outside of North America and Europe, Argentina has moved forward the quickest on shale gas development, and thus offers a key example on legislative action for which companies may be looking.

For instance, Argentina has put in place a new law guaranteeing a minimum price for fracked gas. Further, this minimum price is some 250 percent higher than the previous valuation – a sweetheart guard against the bottomed-out prices that are currently impacting on gas production in the United States.

Simon says this law has a telling nickname in Argentina – the “Chevron Decree”, a reference to the U.S. oil and gas company. The day after the law was passed, he notes, Argentina’s main state-backed oil and gas producer signed a long-term production deal with Chevron.

Other countries have put in place favourable new tax policies for oil and gas investors. In Morocco, for instance, producers will be exempt from corporate taxes for the first decade of operation, while Russia has created similar policies for oil production over the next 15 years.

Yet the lack of action to simultaneously put in place environmental or social safeguards in most countries runs a variety of risks, Friends of the Earth Europe and others warn. Hydraulic fracturing requires massive amounts of water, for instance – up to 26 million litres per drill site.

The new report finds that a significant proportion of shale gas reserves around the world are located in areas that are already experiencing significant water shortages and even related violence. Likewise, many of these shale basins are beneath major cross-border aquifers.

Even before these issues are addressed by national governments, then, the oil and gas industry could gain influence in setting policy on the notoriously contentious issue of freshwater use.

Alongside concerns about the local impact of shale gas development is a broader lack of clarity today on the extent to which developing countries would be able to benefit from any new gas-related revenues. Thus far, only Brazil has specifically addressed this issue.

“In our research, Brazil was the only exception in terms of passing legislation that ensured they would get some significant revenues,” Simon says. “Really that doesn’t seem to be happening in other countries, where instead we’re seeing a lot of legislation that offers state aid to push investors to come to their countries.”

Beyond a few notable exceptions in Latin America and South Africa, Simon suggests that this issue has not yet seen significant opposition by civil society. Still, advocacy groups do point to a growing trend of global understanding and mobilisation on fracking concerns.

“As more and more studies confirm the risks of air pollution, water contamination, increased earthquake activity and climate change impacts from fracking, the more people oppose this destructive and intensive process,” Wenonah Hauter, the executive director of Food & Water Watch, a U.S. watchdog group, told IPS.

“The movement to ban fracking has resulted in hundreds of local communities taking action to stop fracking, several states and countries instituting moratoriums, and the movement continues to grow.”

In October, Food & Water Watch organized an international day of action to ban hydraulic fracturing. Hauter notes that the event featured “over 300 actions in 34 countries, from Australia to Argentina, even Antarctica, calling for a ban on fracking”.

Food & Water Watch reports that France and Bulgaria have already banned hydraulic fracturing, while local moratoriums have also been passed by hundreds of communities across the Netherlands, Spain and Argentina.

U.S. government promotion

Meanwhile, the drivers behind fracking-related pressures are not simply multinational companies and national governments keen on investment. It was in the United States where hydraulic fracturing was invented and proved its potential, and today the U.S. government is reportedly taking a central role in promoting these techniques worldwide.

In almost all of the countries studied for the new report, researchers found the development of shale gas to be “closely linked” to a U.S. government agency, the U.S. Unconventional Gas Technical Engagement Program (UGTEP). Housed within the U.S. State Department, since 2010 the UGTEP has engaged in a wide variety of technical assistance around gas development.

“Governments often have limited capability to assess their own country’s unconventional gas resource potential or are unclear about how to develop it in a safe and environmentally sustainable manner,” UGTEP explains on its website. “The ultimate goals of UGTEP are to achieve greater energy security by supporting the development of environmentally and commercially sustainable frameworks.”

While U.S. diplomats are specifically tasked with strengthening U.S. business prospects abroad, critics say UGTEP’s activities constitute the broad promotion of hydraulic fracturing under the guise of U.S. diplomacy.

“UGTEP uses official government channels and US taxpayers’ money to promote high-volume horizontal hydraulic fracturing worldwide, opening doors for the main global players in the oil and gas industry,” the Friends of the Earth Europe report states.

“Through UGTEP, the US is also actively engaged in re-shaping existing foreign legal regulations to create the desired legal framework for the development of shale oil and gas in the targeted countries.”

Edited by Kitty Stapp
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    Solar industry heating up in California

    Repost from The Sacramento Bee
    [Editor: I still burn fossil fuel in my car, but my home and my electric bicycle are powered by the sun.  In Benicia, call or email Dave Hampton of Diablo Solar – Dave and the crew did a great job on my home.  – RS]

    Solar industry is heating up again after stumbling during recession

    Northern California companies are part of the energy surge
    By Mark Glover, 11/08/2014
    Birds fly over a solar power array, owned by the Sutter Basin Growers Cooperative, that provides Northern California farmers with a renewable energy source to power key equipment and save on energy costs in Knights Landing.
    Birds fly over a solar power array, owned by the Sutter Basin Growers Cooperative, that provides Northern California farmers with a renewable energy source to power key equipment and save on energy costs in Knights Landing. | Paul Kitagaki Jr./Sacramento Bee file

    The solar power industry, viewed more than a decade ago as a game-changing, jobs-producing juggernaut in California, took its lumps during the recession.

    But now it’s coming back with a vengeance, both here and globally.

    Some California solar system installers say they have work backlogs. New deals to build new solar power-generating arrays are being announced regularly. And the nation’s No. 1 solar installer, San Mateo-based SolarCity Corp., recently created ripples industrywide, announcing a loan program that lets homeowners finance and buy their rooftop solar systems. It also announced an offering of what it calls the nation’s first solar bonds.

    “Inch by inch and now leap by leap, solar is growing and creeping further into the mainstream … and California is a center point for what we’re seeing now,” said Alfred Abernathy, a Bay Area energy analyst.

    That growth is fueled partly by a sunnier economy, falling manufacturing costs, federal tax incentives and increasing consumer and corporate enthusiasm for renewable energy. Solar also has boomed far beyond California’s borders, spreading in China, Japan and Europe.

    For perspective, the U.S. Department of Energy shows that the United States currently has about 16 gigawatts of installed solar power, or enough to power more than 3 million average American homes. Through June this year, California accounted for nearly half – 7 gigawatts – of the national total. A gigawatt is a unit of power equal to 1 billion watts.

    By contrast, China’s solar power supply is more than 23 gigawatts, and it has set a goal of 35 gigawatts in 2015. Japan surpassed 14 gigawatts early this year and is working toward a goal of doubling that by 2020.

    Sacramento’s solar hotspots

    The industry’s hot streak has rippled throughout the Sacramento area.

    SolarCity, which employs more than 500 locally, plans to move its rapidly growing sales staff into 60,000 square feet of space at 1000 Enterprise Way in Roseville’s Vineyard Pointe Business Park next month.

    SolarCity CEO Lyndon Rive noted that if his company’s Sacramento-area operations alone were considered a single company, it would be among the largest solar firms in the United States.

    Last month, Folsom-based 8minutenergy Renewables LLC received approval to build three solar projects of up to 135 megawatts in Kern County. Collectively called the Redwood Solar Farms, it will be developed on 640 acres of farmland. Construction of the first phase is set to begin in December, with energy production expected to begin in mid-2015.

    Roseville’s SPI Solar, which warned in an early 2013 filing with the Securities and Exchange Commission that there was “substantial doubt as to the company’s ability to continue as a going concern,” has found new life since closely aligning operations with LDK Solar Co., its China-based parent company. In recent weeks, SPI has signed a blizzard of solar development agreements in China (regarded as the world’s No. 1 solar market), Japan and Europe.

    David Hochschild, one of five commissioners on the California Energy Commission and an expert in renewable energy, acknowledged that solar energy was once regarded as a relatively exotic technology that was outside the mainstream for most consumers. But that perception is changing, and he envisions solar’s growth path similar to what the mobile phone industry experienced nearly a generation ago.

    “I think the future is very bright, and I think that we will eventually reach the point where solar panels are as ubiquitous as cellphones,” he said.

    Driving the growth

    A combination of factors is propelling solar forward in California.

    For one, an improving economy has helped. Sales and installations of residential and commercial solar systems nosedived during the housing meltdown but are on the upswing now.

    Mark Frederick, president and CEO of CitiGreen Solar in Auburn, says his company is backlogged with orders from commercial clients. “My experience with businesses is that they are willing to invest (in solar) when they have had three good years in a row, and we have been seeing that.”

    Hochschild cites another major factor: “In the past, the barrier has been cost, but it’s no longer a barrier.”

    Improved methods of solar panel production have dramatically reduced manufacturing expenses, said Hochschild. In 1980, solar panels cost around $35 per watt to produce, he said. That fell to around $5 a watt in 2000 and currently stands at around 70 cents a watt.

    Low cost was not always considered a plus in the solar industry. China’s overproduction of solar panels was cited by some energy experts as one of the factors producing a soft market in 2012. But the international playing field has shifted.

    Subsidization of solar projects in China and Japan helped turbocharge the industry in those nations, to the point where Hochschild says the United States is the world’s No. 3 solar market, behind China and Japan, respectively. In China’s case, it went from being a relatively small builder of solar installations to a major builder in just several years.

    That has benefited Roseville’s SPI Solar, which is now finding substantial work overseas due to its relationship with Chinese parent LDK. Xiaofeng Peng, SPI’s chairman, says SPI is now “one of the largest photovoltaic development companies in (China’s) market.”

    Hochschild said California’s solar market also has benefited from Gov. Jerry Brown’s push for a third of California’s energy supply to come from renewable sources by 2020. Also helping the solar industry are federal tax credits of 30 percent for homeowners and businesses that install solar panels by Dec. 31, 2016.

    Tax credits also played a role in SolarCity’s recently announced solar financing plan, which analyst Abernathy called a “game-changer.” “On one level, it’s a variation of the old-fashioned car loan.” Under the company’s MyPower plan, consumers take out a 30-year loan to purchase their rooftop solar system, rather than leasing it, which is the norm. The benefit of buying the system is that the homeowner gets the 30 percent federal tax credit, instead of the solar company.

    Some red flags

    For all of solar’s promise, energy analysts warn that the industry’s history is laced with periods of boom and bust, dating back to the 1954 invention of the world’s first practical solar cell by scientists at Bell Laboratories in New Jersey.

    Already, there are some red flags.

    In Japan, where subsidies and a favorable tariff policy created a solar boom following the March 2011 Fukushima nuclear disaster, energy analysts are now citing a glut of renewable-energy businesses and applications for solar facilities. Some fear that the industry could collapse under its own weight. Japan solar investors who were betting on relatively high renewable-energy rates over the long term are now voicing concerns.

    In Europe, Germany was the embodiment of solar power expansion from 2010-12, installing a whopping 22.5 gigawatts of capacity. However, solar power installations have declined for two years, accompanied by significant job losses in the industry. Renewable-energy advocates have blamed the German government for enacting policies that restricted tariff benefits and put unreasonable restrictions on utility-scale installations.

    SolarCity’s Rive dismissed concerns about the solar industry and its past history, stating that the recessionary dip in California occurred in manufacturing, not in the growth of solar companies.

    As further evidence of the increasingly mainstream interest in solar technologies, a handful of major U.S. companies are now offering their workers substantial discounts on solar installations for their homes, making it another employee benefit like health care. The discounts will be available to 100,000 employees of four companies – Cisco Systems, 3M, Kimberly-Clark and National Geographic – part of a program announced last month by the World Wildlife Fund.

    To insiders like Rive, that’s yet another sign of the solar industry’s momentum: “Now, more people are educated on it. More people are getting it.”

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