Category Archives: Environment Choices for Competitive Advantage

Regulation and Common Sense Often Don’t Mix

In California, Proposition 65 requires that retailers and manufacturers disclose the use of any chemicals that may pose an environmental health risk.    Sounds like common sense, right?  Except go to virtually any retail or commercial or office building in California and pasted on the front door will be a sign that reads:  Chemicals are used in this building known by the State of California to cause cancer or other environmental hazards.

Now, does this warning help you very much? 

Of course not, because it was not designed to inform but to insure that building owners have a legal defense when they gets sued.  The California’s Office of Environmental Health Hazard Assessment (OEHHA) maintains a list of such chemicals required to be included in a Proposition 65 warning as a short cut of “gotcha” starting points for rookie lawyers eager to score their first settlement.

Why it Costs So Much to Do Business Today

In October 2011, OEHHA added the chemical commonly known as “TDCPP” or “Tris” [Tris(1,2-dichloro-2-proply) phosphate)] to that list of Proposition 65 required disclosures. Tris is used widely as an approved flame retardant in home furnishings (couches, chairs, pillows, and ottomans) as well as automotive products (seat padding, overhead liners, foams, and infant car seats).  Once a chemical is added to the Prop 65 list retailers and manufacturers have one year to come into compliance. So after October 2012 these Tris users and makers are eligible for lawsuit target practice.

In practical terms, adding Prop 65 warnings to Tris products forces manufacturers and users to balance two competing risks.  One set of rules requires the use of approved flame retardants in furniture, bedding, auto products and infant clothing and Tris is approved for that purpose while another now labels the use of this flame retardant a cancer risk under Proposition 65.

So which is it?

Are products made with Tris safe or not? 

If I can’t find a product without Tris does this mean I don’t buy furniture, bedding, auto products or kids clothing?

The same OEHHA that added Tris to the Proposition 65 list of chemicals is now accepting public comment on its proposed “No Significant Risk Level” (NSRL) for TDCPP of 5.4 micrograms per day. This means that daily exposure below this level would be exempt from Proposition 65. OEHHA’s decision on whether to adopt this NSRL will not be made until after the public comment process closes in July 2012 but manufacturers have already had to incur the cost of compliance with the Prop 65 listing in order to have them in fully effect by October 2012.  This is a PERECT example of how California has become unfriendly to business, unfriendly to taxpayers, unfriendly to common sense.

So what do you think manufacturers of kids clothing will do—risk being sued by the trial bar if their product does NOT have the required label or take their chances?  Drop the use of Tris and use another approved flame retardant?  Quit making the product all together?  Go out of business?  That is what happened to the company that makes the ubiquitous red plastic gasoline cans we see almost everywhere.  you may have one in your garage to fuel your lawnmover.  The company was sued after some idiot poured gasoline using one of its cans on a fire and was burned by the fire ball he created.  The punitive damages awarded bankrupted this small Miami Oklahoma company which was forced to lay off its 120 employees and shut down.  The makers of Tris and any retailer that sells a product using Tris now have the same big target on their back.

So what should the label read?

“PROPOSITION 65 WARNING: The State of California requires that this cute onesie contain a flame retardant.  The flame retardant chemical “Tris” used in this product is approved for use as a flame retardant in children’s clothing, furniture, bedding and automotive products, but it is also listed on the Proposition 65 list of chemicals known to the State of California to cause cancer and other environmental health problems.  If this product exposes your kid to less than 5.4 micrograms per day don’t worry.  Longer exposures may cause cancer.  Change your kid’s clothing often to restart the clock on your daily exposure readings. If your kid gets cancer while wearing this product you may be able to sue the manufacturer and the store that sold this cute onesie to you.  The State of California has sovereign immunity from lawsuits such as these even though we require the use of the cancer causing chemical contained in this product. Trial lawyers are standing by to take your call.  Anything you win in damages from any such lawsuit is fully taxable by the State of California at the maximum rate allowed by law.”

Sea Level Rise and Sustainability

Do you feel lucky?  New York Mayor Michael Bloomberg apparently does not.  He sent one of his Long Term Planning and Sustainability staff members to a hearing before the US Senate Energy and Natural Resources committee in Washington DC on April 19th to testify on New York City’s concerns about the impact of rising sea levels.  The NYC witness Adam Freed, told the Committee that the mayor wanted the Federal Emergency Management Agency to develop detailed flood projection maps to help New York prepare for the impacts of sea level rise on infrastructure and real estate properties in the next century.

Another witness, Ben Strauss, chief operating officer and director of the program on sea level rise at Climate Central, told the committee that sea levels in the United States will rise between one and eight inches by 2030 and between four and 19 inches by 2050. But while Mayor Bloomberg’s staff member was sent to worry out loud in a politically correct way about rising sea levels, the Climate Central witness wanted action on a four-step federal program to reduce risk and vulnerability:

  1. Protect existing beaches that help prevent the impacts of storm surge,
  2. Build artificial defenses where appropriate;
  3. Halt construction in high risk areas; and
  4. Develop a planned retreat from areas that cannot be effectively protected.

With trillions of dollars of Federal debt looming and deficits as far as the eye can see, what do you assess is the probability that the Government will spent your money entertaining strategies like this?  I know—that’s what worries me too!  If we can fund bridges to nowhere imagine how much Congress might spend to keep Broadway from turning into Venice.

Then again, think of the charm New York would have if the streets of Manhattan were all turned into canals with yellow hybrid water taxis wisking you from downtown to midtown.  Bike lanes could turn into kayak channels and since the subways would all be flooded we could build giant moving sidewalks to connect the building above the projected high water line powered by wave action turbines used to squirt sea water through the subway tunnels under pressure.

Deutsch: Blick auf das Empire State Building v...

Deutsch: Blick auf das Empire State Building vom Top of the Rock English: Empire State Building as seen from Top of the Rock (Photo credit: Wikipedia)

The torch on the Statue of Liberty can be replaced with a wind turbine and solar panels can be mounted on all rooftops oriented toward the Empire State Building which can be converted into a concentrated solar power tower with giant tanks of molten salt in the underwater floors to create a combined heat and power microgrid to power the city.

Think of it—auto emissions would be a thing of the past.  We would not need RGGI or EPA regulations or the New York Office of Long Term Planning and Sustainability.

Maybe this isn’t such a bad idea after all—by all mean prepare the maps.  And make sure you hire the same climate scientists who cooked the books to get more research grants because Al Gore told them the climate science was incontrovertible.  Let’s see where did I put that hockey stick formula again?

Coke and Pepsi Change Product to Avoid California Regulatory Stupidity

Coca Cola!

In the ‘Don’t these Regulators have Something Better to Do’ department comes this over the news wires—both Coke and Pepsi decided to change the way they produce their soft drink products to use less 4-methylimidazole (4-MEI) – a chemical used to give the soft drinks their color which California added to its list of carcinogens covered by the warning labels provisions of Proposition 65. And since it makes little sense to produce one product for California and another for the rest of the country the change will be made across the board.

So is 4-methylimidazole really a carcinogen?

Not even the US Food and Drug Administration that never met a chemical it would not like to regulate was buying into this one.  California said the chemical was linked to cancer in laboratory animals.  But the FDA said you would have to drink more than 1,000 cans of Coke or Pepsi a day to get the same dose of the chemical that was given to the lab rats.

Pepsi

Pepsi (Photo credit: *Sally M*)

Do you see what I mean?

California is nearly broke yet it persists in doing dumb stuff like this which drive business crazy, increase the costs and hassle factors of doing business in the Golden state—and sends what in the private sector might be an actionable defamatory message about another person’s product.

The Coke spokesman said the company “wanted to ensure their products would not be subject to the requirement of a scientifically unfounded warning”.

It’s the real thing!

Two Nukes in Thirty Years Do Not a Resurgence Make!

Falling US Reserve Margins

I know it’s an election year and the administration is looking for good news anywhere it can find it, but the press reports about Energy Secretary Steven Chu saying “the resurgence of America’s nuclear industry starts here in Georgia, where you just got approval for the first time in three decades to build new reactors,” are both sad and laughable.

He was of course talking about the Nuclear Regulatory Commission’s February 9th approval of the two unit expansion at Southern Company’s Plant Vogtle in Waynesboro, Georgia.  The Secretary said rightly that nuclear power has played an important role in the U.S. energy portfolio and still provides 20% of total electricity produced and 70% market share of all the carbon-free electricity produced.

Story is sad because nuclear power’s spectacular performance for more than 30 years gets no respect from environmental advocates clamoring for greenhouse gas emissions reduction.  Another inconvenient truth is that if we had not killed off every new nuclear plant since the 1970’s we would today have a lot less coal fired generation today and would be a lot closer to the goal of emissions reduction.

What was laughable in Secretary Chu’s remarks was his warning that global competition for nuclear technology leadership is “fierce.”  It is laughable because it is true everywhere but America. He said we needed to build more nuclear power today or import it tomorrow—–hello!   News Flash for the Department of Energy, the US surrendered long ago in the fight for nuclear power.  The technology, manufacturing and expertise are now found in Japan and South Korea and China and the US must get in the queue and wait our turn.

Enough ranting, the approval of the Westinghouse AP1000 reactor design is indeed good news but we should not get excited about seeing many of these giants built.  We won’t.  The cost is too high and the risk of fickle regulation too large, and ruinous inflation too near over the long construction cycle.  Building a new nuclear power plant is a career not an assignment.

There is indeed a future for nuclear energy but this is not it.  The new future for nuclear is small, modular, passive designs that allow package plants to be build in baby nuke factories and trucked to their locations.  If Secretary Chu wants to change the future he should make a bet on this new modular nuclear technology and give America a chance to reclaim its leadership role in clean, reliable nuclear power.

There ends the rant, and begins the prayer.

Al Gore Calls Global Warming Skeptics Racists

12 16 09 Bearman Cartoon Global Warming Heat Miser

One day climate change skeptics will be seen in the same negative light as racists.”—Al Gore

That was the story from an Al Gore video interview published recently on UStream TV online.  Obviously it was designed to be provocative because the climate change folks have little left in their arsenal after climategate revealed that the global warming theory was based upon “cooked” science, academic bullying and bravado.

Al Gore is a smart guy and surely he realizes he cannot resurrect the once frenzied concern about global warming, err—climate crisis, err—climate change (insert politically correct name du jour here) so easily. So he’s doing what has worked before in so many political campaigns—he’s playing the race card, as Bill Clinton might say.  But having seen that dirty trick used before we no longer accept it as fact.

Al Gore can still get headlines with his bombastic rhetoric but mostly on slow news days these days.  The video is likely to haunt Al Gore someday soon much like the old wizard revealed behind the curtain as a trickster.

But unlike Dorothy who believed, we no longer believe.

The Daily Caller picked up this story and ran it on one of its slow news days when nothing more could possibly be said about President Obama’s vacation.  But if Gore did the interview, as he claimed, to try to reclaim the conversation from the skeptics it did not appear to be working out too well for him by judging from the comments posted.

Whether history judges Al Gore as a new Paul Revere warning of crisis ahead or an old snake oil salesman peddling junk science and politically correct policies remains to be seen.

We do know this:  The more interviews Al Gore gives on this topic the less we believe it.

Shovel-Ready Domestic Energy Projects at Work

Every day there is more bad economic news it seems, and even President Obama started campaigning for reelection a year early.  But things are different in North Dakota.  The only things they worry about there is whether they can hire enough people to meet the labor demand and can they build the pipeline and other infrastructure needed to turn their black gold into real gold fast enough.

Welcome to America’s domestic energy production economics lab experiment!

This science experiment in the potential for putting American technology and entrepreneurship to work in unconventional oil and gas is going well—real well.  Monthly oil production is ahead of year over year levels by 23% and up 78.5% over the past two years according to the North Dakota Department of Mineral Resources.  Oil production in 2011 has averaged 10.5 million barrels per month, twice the 2008 levels, and three times the rate of five years ago.

President Obama would certainly like to take credit for the growth in jobs and personal income in North Dakota. Oil related jobs more than doubled from 6,800 jobs in May 2009 to 15,200 jobs in May of 2011. North Dakota’s unemployment rate is 3.2% compared to the Us average of 9.1%.

In the first quarter of 2011, North Dakota personal income grew faster than anywhere else in the US at a 6.9% increase four times the national average of 1.8%. As the ripple effect of high employment rolls through the North Dakota economy overall state employment level reached an all-time high in May 2011 and is now 2.5% above the June 2009 level when the recession officially ended.

When that oil gets to market and taxes are paid, North Dakota’s treasury ended up with $237.5 million MORE than projected over the last two years.  For May 2011 state income tax revenues beat expectations by 10.6% and sales tax revenue was up 13%.

Maybe that is why resistance to unconventional oil and gas production using horizontal drilling and hydraulic fracturing long stalled in New York State suddenly seems to be easing.  Why Pennsylvania is seeing the same signs of growth from its own rationalization of policies and regulations that held back domestic energy production in the Marcellus shale and Utica Shale.

America gets it! 

Domestic energy production is one of the most promising avenues for climbing out of our economic hole.  Even better it uses American technology, American entrepreneurship, using American workers to harvest American energy and keep American money at home rippling through our economy.

Now that’s a stimulus program we can believe in!

Give the President what He wants and Give it to Him Hard!

AEO 2011 Electric Generation by Fuel

That was the message from American Electric Power in announcing that it will retire 6,000 MW of coal fired power generation to comply with new US EPA regulations.  The stunning announcement by AEP on June 9th rattled power markets and sent politicians running for cover.  The decision will cost more than 600 jobs and $40 million per year in payrolls.

On June 10th US EPA spokesman Roy Seneca said:

“These long-overdue Clean Air Act standards will slash hazardous emissions of mercury and other acid gases, preventing thousands of asthma and heart attacks and premature deaths. Utilities have known for decades that these standards — which are still in the proposal stage and have a built-in 3-year-compliance timeline, have been coming for decades. They also know that they are free to approach EPA with serious, fact-based compliance plans, and that state governments also have the ability under the law to seek more time for the plants in their jurisdictions.”

AEP Chairman and CEO Mike Morris said the utility will take other actions in its proposed compliance plan including adding advanced emissions reduction equipment on 10,100 MW of remaining coal capacity, converting 1,070 MW of coal generation to 932 MW of natural gas, and adding 1,220 MW of new natural gas-fueled generation to restructure its power portfolio.

AEP to Replace coal with Natural Gas Generation

AEP said in a press release that the cost of the EPA compliance plan was between $6 billion to $8 billion in capital investment over the next 8 years but could go higher because of the high demand for labor and materials caused by EPA’s aggressive 3-year compliance time frame which AEP has called unreasonable. The costs of the compliance plan could also change based on the final form of the EPA regulations and the actions by state regulatory commissions that must approve the plan and fund it likely through higher rates.

48,000 MW of Coal Power Plants Affected by EPA Rules

AEP’s announcement is the first of what likely will be a string of bad news stories resulting from the proposed EPA’s Clean Air Transport Rule (CATR) and Utility Maximum Achievable Control Technology (MACT) rulemaking to limit nitrogen oxides, sulfur dioxide and mercury emissions by the electric power industry.

EPA Rules Cost the Economy $184 Billion

A economic impact study of the proposed EPA rules done by NERA, a nationally recognized economic analysis consultant, hired by a power industry trade group, the American Coalition for Clean Coal Electricity said the rules will force 48,000MW of coal fired generation to shut down at a cost of about $18 billion per year or $184 billion total to consumers for added coal unit compliance costs, fuel price impacts, and the costs of replacement energy and capacity including the stranded cost of power plants that still have substantial remaining useful life and thus revenue requirements that will also have to be recovered in higher rates.  NERA estimated average U.S. retail electricity prices in 2016 would increase by about 12%, making the CATR and MACT rules the most expensive EPA regulations ever imposed on power plants.

So what?

So stumping for votes for reelection in West Virginia, Ohio, Virginia, Kentucky and Indiana just got a lot tougher for President Obama who must not only defend these new EPA rules but also the economic impacts they cause on industry, job creation and economic recovery in Midwest, South and Texas where coal is important.

Fracking Safety for Unconventional Oil & Gas Domestic Growth

US Shale Gas Potential to 2035

Fracking Safety Review Panel named even as new unconventional production records are set.

President Obama’s Blueprint for a Secure Energy Future seeks to reduce the U.S.’s dependence on oil and increase the use of renewable energy sources.

North Dakota is doing its part by setting another record production month in March with reports that it pumped 359, 589 barrels of oil per day in March according to the North Dakota Department of Mineral Resources.

But no good deed goes unpunished as the old saying goes so back in Washington DC:

  • On April 16, 2011 House Democrats Henry A. Waxman, Edward J. Markey and Dina DeGette released a report they said was “the first comprehensive national inventory of chemicals used by hydraulic fracturing companies during the drilling process.” used by the 14 leading oil and gas service companies in the U.S.  They want the industry to disclose all the chemicals used in fracking and want EPA to regulate their use in hydraulic fracturing to prevent groundwater contamination.
  • On May 9, 2011 U.S. Department of Energy Secretary Steven Chu formed a subcommittee of his Energy Advisory Board of industry, environmental and state regulatory experts to make recommendations to improve the safety and environmental performance of hydraulic fracturing from shale formations in response to fears that use of fracking chemicals can cause groundwater contamination.
  • Frankly, the oil and gas industry has not helped allay concerns about groundwater contamination by its reluctance or refusal to release the ingredients used in fracking fluids.  This has fed fears that the chemicals are dangerous and given opponents of horizontal drilling using hydraulic fracturing more ammunition for their NIMBY cause.

The steady increase in domestic oil and natural gas production from unconventional sources is a genuine American energy success story.  US DOE’s Energy information Administration says recoverable unconventional natural gas deposits may represent more than 100 years of average domestic supply and oil recovery from unconventional sources is offsetting the foot dragging on drilling in the Gulf and deep water along the coasts needed to replace rapidly depleting conventional vertical drilling resources.

So let’s get on with this health and safety review and set some best practices to assure that hydraulic fracturing is the safe, reliable, effective E&P strategy we think it is for putting America back into the energy production big leagues.

Obama plays the Energy Shot Clock

Trans-Alaska Pipeline System (PS: pump station...

Image via Wikipedia

After months of vilifying oil and gas companies for being—well—oil and gas companies by suspending drilling after the Gulf oil spill, imposing new regulations that raise costs and undermine America’s competitiveness without much change in safety or environmental protection, and then abusing administrative discretion with the slowness of regulatory review—suddenly domestic energy production to bring down high gasoline prices in time for the 2012 campaign is a high priority.

Do I sound cynical?

High energy prices are what the president’s base has always wanted.  It is easier to use the regulatory apparatus of government to create uncertainty and thus raise prices than it is to argue for the legislative changes necessary to keep prices high.  High energy prices are seen as inducing more energy conservation and efficiency.  High energy prices make renewable energy options more attractive.  High energy prices are the sine non qua for the transition to a clean energy economy.

Yes, but. . .!

High energy prices hurt the president’s reelection campaign.  High energy prices hurt economic recovery and slow American jobs creation just when he needs it most.  But high energy prices also, perversely, keep that bull’s-eye on the heart of big oil making them a perfect ongoing target for politicians—-except now it is Republican politicians tarring President Obama with the cynical sin of ‘protesting too much’ while Americans suffer.

That is the reason President Obama said in his weekly radio address that his Administration will extend existing leases in Gulf of Mexico, off Alaska Coast, hold more frequent lease sales in an attempt to bring down high gasoline prices.

But the timing of the President’s announcement was also not accidental.  It coincides with action in the Us House of Representatives on three bills sponsored by the Republican majority to expand and speed up offshore oil and gas drilling. The Republicans understand the President’s strategy and thus seek to take the energy issue away from him by forcing his hand.  So they adopted the president’s own words saying the goal of the bills is to ease gasoline prices, but they also acknowledged it won’t happen right away.  Reflexively, the White House opposed all three bills knowing even if they pass the House they are unlikely to pass the Democratic-controlled Senate.  Administration spokesmen said the Republican measures would undercut safety reviews and open environmentally sensitive areas to new drilling. But President Obama also adopted some of the bills’ provisions to suck more oxygen out of the Republican attempts to box him into action.

  • Obama said that he would extend all Gulf leases affected by his temporary moratorium on drilling imposed after last year’s BP oil spill by one year. That would give companies additional time to begin drilling.  But the Administration needed to take this action because the drill rig are expensive and companies can’t afford to let them sit idle so a growing number of Gulf of Mexico rigs were being pulled out and moved to Brazil and elsewhere so they can make money.  Obama did not want to get hammered in the heat of the campaign by allegations that he gave away America’s domestic production opportunities by dithering and thus is the cause of high oil prices.
  • New safety requirements put in place since the BP spill also have delayed drilling in Alaska, so President Obama also administratively extended lease terms there for a year. An oil lease typically runs 10 years.  The problem here is the Alaska Pipeline is facing increasing operating problems due to reduced oil flows.  When the pipeline is full oil travels faster and retains heat, lower flows slow the speed of the oil subjecting it to cold Alaska temperatures reducing pipeline efficiency, increase costs of maintenance and risking leaks.  Shell Oil plans to drill off the Alaska coast for more oil have been delayed by an air pollution permit, but now a concerned President Obama is forming an’ interagency task force to coordinate the necessary approvals’. He also will hold annual lease sales in the vast National Petroleum Reserve on Alaska’s North Slope to get oil flowing again through the Alaska Pipeline. Republicans bills proposed exempting drilling off Alaska from air pollution permit required the Administration has used to avoid action. Allowing additional drilling in Alaska is a prudent, safe and economic decision to keep the energy infrastructure already in place working to meet America’s energy needs.  Why delay?  Well the Administration was loathe to help Alaska while Sarah Palin was on his back.  But high oil prices also became higher risk in the President’s calculus since he could not afford the blame for shutdown of the Alaska Pipeline during a period of high prices because his Administration would not let the oil companies put more oil in the pipe.
  • Lease sales in the Gulf of Mexico postponed last year will be held by mid-2012, coincidentally the same time required by the House Republican bills. The President said he would direct the Interior Department to speed up environmental reviews and seismic studies needed to assess how much oil and gas is recoverable along the Atlantic Coast.
  • The president repeated his call to eliminate taxpayer subsidies to oil and gas companies. The problem with the action he proposes is those “taxpayer subsidies” are the same ones applicable to every other business in America and cutting them for all risks increasing uncertainty thus slowing job creation.  Cutting them just for oil and gas companies will be seen for what it is—politics.

So like it or not energy is shaping up to be a big issue in the 2012 campaign.

How Serious is the Global Warming Threat?

That was the essence of the question put to 1,000 adults across 111 countries by the Gallup Organization in a recent survey.

“How serious is the threat of global warming is to you and your family?”

Worldwide the threat perception increased 1% to 42% of those surveyed, but the results were skewed.  Americans and Europeans were more skeptical of the global warming threats while Latin America and sub-Saharan Africa were more concerned.

Here are the numbers: