Is Frack about to crack?

Is the Frack about to Crack?

Some very puzzling and contradictory data has been spilling out of my trusty Dell  Precision 390 desktop of late. In November or  December there was a report from the Oil industry rag Oilprice.com on a slowdown in fracksville. Then the WSJ put out a similar story within the last month. Ditto on a blog from the respected INDEPENDENT oil analyst Art Berman. But what does he know? as a Houston oil man said some time back. “Art hates fracking.” The report that really caught my eye was Tyler Durden’s Zerohedge site on 1/20/19 which carried a report from the Big honcho of Continental Resources, Harold Hamm who said that frack volumes could fall 50% this year. He did qualify it as a “Wild guess.” What was more revealing is that the Frack Ponzi which relies on issuing bonds and stock mostly to the hedge fund and private equity crowd was only able to peddle 3 issues in October and NONE SINCE! That is big news and there was signs that the debt already issued was beginning  to smell like 3 day old fish on Wall Street.I mean who would want it? Most have the frackers have been  free cash flow negative forever. That is they are losing money. Free cash flow is operating cash flow minus capital expenditures. Not all companies mind you, just most depending upon what quarter you take a look at. Art Berman said 1/3  of companies were FCF negative in the third quarter at a time when crude prices were pretty high for the year. Continental was one of the winners as well as a few bigger  diversified companies like Conoco Phillips. Some years back Art put out a similar graph of all the companies and at that time I recall that less than 5 were solidly in the red at a time o

f low prices. Above is Tyler’s graph of debt issuance:Below is Berman recent graph of free cash flow for companies engaged in fracking activities in the Permian formation:

And then here is the just issued report from the EIA and Rystad Consultants on the coming boom in Fracksville:

Last week saw some of the most optimistic forecasts for the future of US shale oil production ever published. Rystad Energy announced that the US is on track to produce some 24 million b/d of oil, more than Russia and Saudi Arabia combined by 2025 – assuming that oil prices stay above $58 a barrel. The growth in US liquids production will be driven by major shale basins such as the Permian, Rystad’s report said.
The EIA also joined the optimism last week.  In its Annual Energy Outlook 2019, the administration forecast that US crude oil production will keep setting annual records until 2027 and will remain higher than 14 million b/d through 2040, thanks to continuously growing shale production.   “Near the end of the projection period (2050), the United States returns to being a net importer of petroleum and other liquids as a result of increasing domestic gasoline consumption and falling domestic crude oil production in those years,” according to the EIA.

This was courtesy of Tom Whipple over at Peak Oil Review.  Those numbers are mind blowing forecasts.completely at variance to what I mentioned at the beginning  of this post. The EIA and IEA have been wrong on forescasts for decades usually dialing back numbers with subsequent Energy Outlooks. For eample  The Monterey Shale in California was for some years predicted by the EIA and USGS as the next big gold mine but in 2014 they had to revise the stimates of extractible oil downward by 96%!!!  Art Berman is especially critical of the IEA in Paris. He once noted that the IEA staff is virtually devoid of geologists and consists of statisticians and economists and their idea of making a prediction is to extrapolate  a line from some arbitrary starting point. The head of the IEA, Faith Birol, is a Turkish economist. I do not know if the EIA has scientific staff and is also cluttered up with  economists,witch doctors,and viziers like the IEA but it wouldn’t surprise me. I am eagerly awaiting Art’s take on Rystad’s numbers.

     It should be noted that these agencies and think tanks almost always crank out predictions based upon the estimated resource. But as some wag once noted, it’s not the size of the resource that counts  but the size of the straw! I saw no mention in Rystad’s paper how many wells it would take to reach 24 million bbl/day, or how much sand and water or more importantly how much MONEY  would be needed to hit these numbers.  The inability of  these companies to attract capital in the last 3 months might throw a wet blanket over these predictions.  I assume if the oil price could get to 3 figures and stay there, fracking might become viable but every time in the past 40 years when oil hit a high point, there was a recession. So we have the new truism: high oil prices kill economies. Low oil prices kill companies. There are a few things we do know. Conventional oil wells make money in spades and always have before they eventually deplete. Saudi Arabia has about 1350 wells and as of 2015 the US had  1,666,715!!!

So let’s do the math. Both countries produce about 11 million barrels a day. Divide that by the number of wells and Saudi Arabia extracts an average of 8148 BBL/Day per well and the US 6.59! We know that Frack wells deplete drastically in a year or two and there are a lot of stripper wells in the US but there are stripper wells in Saudi Arabia too.

I have a hunch(just a wild guess) that if these frack companies continue to have difficulty attracting finance they will either go under as many have already or be sucked up by the big fish with deep pockets.(Do fish have pockets?) But the pockets of the big three oil companies may not be as deep as we assume. They have sunk a lot of dry holes looking for oil in the past 15 or 20 tears and piled on a lot of debt:

These aren’t up to date numbers but they show a disturbing trend up to 2017. Little oil companies can go bankrupt but so can big ones if they guess wrong. And to wrap this post up I will state that based upon my own personal research, I do not know if this fracking boom can last . There is no way to be sure.

       There are other places in the world where formations similar to the Permian in W. Texas exist. Namely the Vaca Muerta in Argentina’s high desert and potentially the world’s largest, the Bazhenov in Siberia.  Again, it’s not the size of the resource but the size of the straw and whether the extraction process is cash flow negative or positive. I haven’t previously mentioned this but besides matters of cash flow there is the matter of energy flow or EROEI(energy return on energy invested). Unless these companies can get a decent return in money or energy, what is the point? Germany in WW2 was making aircraft and tank fuel from coal using the Fischer-Tropsch process . It took 2 units of non oil energy to get one unit of fuel energy for  Tiger Tanks and the  ME109.They lost the war because they ran out of oil. I know virtually nothing about these frack formations but water and infrastructure is bound to be a problem in both areas and if global warming continues as is expected, Siberia will lose its permafrost and turn into one big mosquito infested mudhole int the summer.                                                                                                                                        I should briefly recapitulate  some other known facts about  fravking. The depletion rates almost vertical. Here is a graph from the Baaken field in SD taken from Shaleprofile.com. The company is Oasis. Notice that at 24 months the rate has declined 90%.:

         The other important fact to note that these thin light sweet frack grades are great for making gasoline but their  refining yields of the medium distillates like diesel are well below the heavy grades  and this is starting to show up in the spreads, the bid prices with the heavier grades starting to trade at a premium to the frack grades.No surprise that diesel pump prices nation wide are are over 60 cents gallon above gasoline  as reported by Oilprice.com. In our town the spread is far less however.                                                                                                         My final statement in this post is one I have repeated ad nauseam and that is that the world is past its peak in Cheap  Conventional Oil and it is cheap oil that has driven growth in the  world economy. Richard Miller who oversaw prospecting for BP wrote in the Guardian:”We are like a cage of lab rats that have eaten all the corn flakes and discovered that you can eat the cardboard packets too!

Is Jackson Hole sustainable?

   The following a a letter to the editor of the Jackson Hole News concerning sustainability. I submitted a similar letter more than 5 years ago which was refused. It remains to be seen if this letter will be accepted. It might be bad for business.

Can Jackson Hole be sustainable?

“Sustainability” is one of those words often used but misunderstood. The dictionary definition goes like this: Sustainability is meeting the needs of the present without compromising the ability of future generations to meet theirs. It has three main pillars: economic, environmental, and social. In this valley I have often seen the word combined to produce an oxymoron, as in: sustainable growth. Unlimited economic growth is impossible on a finite planet because of limited non renewable resources like oil and metals and degraded renewable resources like soil and water.The dominant force driving economic growth is solar energy, primarily stored  fossil energy with a small contribution from so called “renewable” energy.. There is a direct correlation between energy use per capita and GDP going back almost to the dawn of the Industrial Revolution. Increasing energy use yields increasing economic growth, improvment in living standards and rising wealth. Environmental sustainability is assured if the organisms in the system can obtain the necessary nutrients to meet their energy needs using what is available in their environment’s “carrying capacity.” Social sustainability is a community which cares for, fosters and respects its member’s social, cultural, legal and economic rights and needs allowing loyal members to bind together as a community. It is my contention that we are entering what Jim Kunstler has termed “The Long Emergency.”  We are facing a host of predicaments: Global Warming, species extinction, digital surveillance, economic inequality, social disintegration and violence, political polarization, overpopulation, critical resource depletion, and massive debt issuance  just to name a few. The common cause is the growth and development path the world has followed for the past few hundred years which has been made possible by harnessing the cheap concentrated solar energy contained in fossil fuels, primarily oil. That rodeo is coming to an end. The worldwide production of cheap conventional crude oil has been essentially flat for more than 10 years. Expensive less useful “unconventional” oil has increased but too high oil prices imperil an economy and too low prices imperil the oil companies. The economy has become a highly complex networked, self organized and globalized entity. It has been characterized as a “dissipative structure” capturing and converting energy in much the same way as a hurricane or for that matter almost any living organism. This complexity has hit a point of diminishing returns where problem solving by implementing complex solutions has the effect of adding unanticipated problems. The most obvious problem for Jackson is the Just in Time(JIT) supply chains that allow this valley to survive. Everything and everyone coming to Jackson arrives by oil. We produce virtually no food besides cattle forage. Even the alfalfa pellets for the Elk Refuge arrive by truck. We saw the fragility of Jackson recently when the access corridors were largely closed by avalanches. Grocery shelves went empty as did most gas station fuel tanks.  What Jackson does is produce “services” to the inhabitants, most of whom are visitors able to visit because of their discretionary income. Environmental  sustainability exists when the individuals can live within the carrying capacity using  available resources and not contaminating the environment with their waste. What is the carrying capacity of Jackson Hole? It is effectively Zero for humans if food can’t be grown and stored over a long winter. It might be a few hundred or thousand under skilled agriculture and judicious harvesting of the flora and fauna to augment protein needs. JH a century ago had an operational fabric of social sustainability characteristic of small agricultural communities. I contend that is now degraded by vast income and class inequality, hyper tourism, expensive housing , and services provided by distant workers among other factors.  The decline of cheap energy will end growth as we have known it.  The decline may be swift and sudden going over a “Seneca Cliff “as recently noted in a book  by Ugo Bardi. It may also be possible to obtain energy from renewable sources “decarbonizing” the economy as has been proposed by Alexandria Ocasio Cortez. Ultimately we will have to obtain all our energy from renewable solar energy rather than non renewable solar energy from fossil sources.  It is vital to develop a risk management strategy as an intelligent response if we are to ever achieve sustainability in JH.                                                 

  

Review of OIL, POWER, and WAR by Matthieu Auzanneau

In this post I am just pasting a review of an amazing book about Oil. The author is a French citizen and the book is a translation recently released. It is far more than just a history of the oil industry such as Yergin's The Prize published in 1990. I submitted this review to Amazon where I often review notable books and they refuse to post it. I assume it was due to some strong opinions I offered about some of our recent feckless political leaders. Sorry Jeff. Didn't mean to hurt your feelings.

      Matthieu Auzanneau has written the definitive history of oil, far eclipsing the authors who preceded him, notably Daniel Yergin who wrote THE PRIZE in 1991. Yergin's book, now very dated covers similar ground up to about 1990. Yergin's book emphasizes the importance and positive aspects of the rise of and importance of the oil industry in transforming the industrial civilization and he is even today a consultant to the world's oil production titans. He is often portrayed as the authoritative voice of the oil industry broadly brushed.. His predictions of oil demand and supply along with the EIA and IEA have long dominated the discussion over policies of oil extraction and supply. He has been exceedingly well paid as a spokesman of big oil and the conflict of interest should be obvious. An independent analyst he is not. Auzanneau, a French citizen, stands in sharp contrast to Yergin and covers similar ground as did Yergin but delves far deeper into the history and importance of oil and gives a far clearer picture of the people and events behind the rise of the industrial economy fueled by oil. Where Yergin in his readable style gives a history of oil, Auzanneau gives a history of the importance of oil as the fundamental basis of wealth and military power and the bedrock of the world economic system. In addition he fills in the 30 year gap from the publication of Yergin's The Prize.
Fundamentally the book is a behind the scenes look at the origins of the oil industry from John D Rockefeller of Standard Oil and his necessarily tight relationships with financial Tycoons like JP Morgan. The economic and industrial power of the oil industry allied with the military and political power of the federal government expanded into an empire seeking to control access to oil resources far distant from the dusty windswept plains of Texas and Oklahoma. He covers the other European and Asian competitors also striving for dominance of oil supplies as all sought to monopolize access to The Prize. The book is filled with fascinating anecdotes of the major players in the industries and the palace intrigues of world political leaders. There is a long section on the role of oil in wars of the last century and the 21st century as well. The lesson I learned is that most of the wars were over and about oil. The victors were victorious because they had oil. The losers lost because they didn't. For example Germany's military aircraft technology was equal to or superior to American and British technology but the Germany's insufficient access to quality crude stocks and additives yielded fuel of inferior octane quality. The Luftwaffe's 90+ octane avgas was no match for the allies 130+ octane gasoline which delivered far higher performance. When the German military failed to secure Caspian ,Middle Eastern and Romanian oil fields, the war was lost. The same happened to Japan when their pipeline to the Indonesian oil was cut. Oil Power and War covers how the US CIA and Britain's MI6 maintained a stranglehold over Persian Gulf oil in the postwar period by bribes,secret cartels and Faustian agreements with the Middle East countries. This included Operation Ajax toppling Mohammad Mossadegh, the "father" of Iranian democracy in August 1953, and establishing "friendly" regimes aligned with their corporate and colonialist goals. The US played off one country against the other to make sure no country or leader achieved dominance or became too uppity challenging the established order of the giant independent oil majors. Eventually Persian Gulf leaders and tribes rebelled against the colonial powers and nationalized their industries, the situation that exists today. The US with its own domestic vast oil supplies dominated the world stage for much of the 20th century but as domestic resources waned our political and economic elites mounted a renewed power grab for Persian Gulf oil access laid out clearly in the Carter Doctrine which established the US as the policeman of the oil corridors. Auzanneau covers this in exquisite detail. The lies of the Bush and Cheney administration are laid out in stark detail. Dick Cheney shouted "It is not about oil!" He insisted It was about promoting democracy and preventing the use of weapons of mass destruction. It was about creating prosperity and spreading democratic western values. These are revealed as blatant lies as the war was solely about getting access to the last unsurveyed Iraqi oil fields which needed to go to American Oil companies after the invasion of Iraq. But the strategy to seize Iraq's oil failed. Civil war ensued. The entire region was thrown into chaos and irony of ironies, it was China who ended up with the bulk of the access. The picture Auzanneau portrays of America's feckless misadventures in the Middle East is not a pretty one. Shortly after the absurd "mission accomplished" Bush spectacle on the Aircraft carrier USS Abraham Lincoln in 2003, Madeline Albright was asked about the 500,000 children in Iraq who perished in the lead up to the war because of US bombs and sanctions. "Was it worth it?" she was asked. Secretary of State Albright did not hesitate. "Yes. It was worth it."
The books value lies not just in a fantastically detailed history of oil but in the importance of oil as the primary energy of our industrial civilization. Oil IS the economy and the control of Oil is power. Oil and energy use per capita is directly correlated with improved living standards, public health and achievements of medicine,democracy, women’s suffrage, education and technological advancement in the countries that possessed the access and the use of oil. But fossil oil is finite and as it depletes can the economy and these hard won societal achievements principally in the West, be preserved? These are questions Matthieu addresses and he offers his opinions which must be emphasized are his opinions. He does not suffer fools gladly and spares no punches with current world leaders. This will offend some readers and inform others. My opinion as an oil analyst is that his data and facts are unassailable in most cases . This book is the historical gold standard about oil history and anyone who wants to understand how the industrial world came into being and where its trajectory might land must read this 550 page masterpiece.

Alexandria Ocasio Cortez and The Green New Deal:poscript

       In my last post I made calculations on the feasibility of going 100% renewable power by 2030 which is the plan given a rebirth by Representative Ocasio Cortez(NY). I offered some opinions and facts why getting to 100% "green" energy used to generate just electricity was not feasible given the structure of our energy economy. I made the statement that when they said ALL POWER DEMAND BEING MET through renewable sources, they must have meant just electrical power which is 38% of our total power consumed in the US. I just finished watching the recent 60 minutes interview of Alexandria by Anderson Cooper and she made it crystal clear that the statement of 100% demand going green was in fact correct. I don't know if it is worth my effort to point out how unreasonable that goal is given the importance of oil and gas to an  industrial economy but a brief rebuttal is certainly in order. The extraction, manufacture and processing and transportation of all of the other non renewable and many of the renewable resources of this economy are reliant upon diesel fuel for example. Oil and gas feed stocks are the basis of most of the chemical industry, paints, adhesives, pesticides and fertilizers and herbicides. Mining of these resources is almost 100% dependent upon diesel powered machinery. The roads whether asphalt or concrete require huge inputs of fossil energy.. The transportation industry is almost 100% powered by diesel and gasoline vehicles.   Heavy trucks and ships, planes and  trains will never see replacement with electrical power sources. Just the notion that the country could go to just one energy source, electricity, is not only ludicrous but extremely fragile. If a grid goes down, EVERYTHING goes down. Prudence dictates we keep a mix of energy sources as backup in case one becomes unavailable. Does Alexandria really think that just the transportation system could be converted to electric power? The term stranded assets hardly covers the hundreds of millions of trucks, cars , tractors, power tools, chain saws, marine engines, and generators that would have to be replaced wholesale. Mind you, some day, probably in this century that in fact is going to  happen but to suddenly try to do this in just 11 short years is preposterous.  I wonder if living in a walkable city like New York with excellent mass transit has blinded her to the fact that in flyover country such a lifestyle doesn't exist. Suburbia defines the United States even if it is the greatest misallocation of resources the world has ever seen as was voiced by James Kunstler.  I wonder if she has thought that New York would empty out in a week if the diesel trucks supplying her food  and materials stopped running. All of the large dense urban concentrations of people and businesses and industries are reliant upon distant supply chains powered mostly by diesel. I can't end this post without saying that Alexandria Ocasio Cortez is a charismatic figure who is willing to dream of a better world and is trying to remold a decadent, corrupt, destructive wasteful unhappy, unhealthy and obese civilization that is circling the drain. She gets a lot of what is wrong and wants to change it. For her to be effective she will have to pick and choose her battles and be prepared to compromise and listen to her opponents who unfortunately are the political.  corporate and academic power elites who have caused this mess in the first place. They will not be happy to give up their wealth and power to a 29 year old up and coming Joan of Arc from Brooklyn.

An Economic Analysis of the Green New Deal. Could it work?

     With the start of the new year there Has been  a veritable brouhaha around some of the new progressive house members like Alexandria Ocasio Cortez and others who are long on personality and enthusiasm to turn around the lumbering  cruise ship of the Democratic Party. At the top of their agenda is recognition of the looming spectacle of climate change. Their answer is a brave attempt to bring back the old concept of a Green New Deal first proposed more than a decade ago. The Green New Deal modeled along Roosevelt’s New deal is a legislative attempt to combat rising carbon emissions driving worldwide climate change. Their goal is to radically change the energy mix in the US from one based on fossil fuels to 100% renewable energy by 2030. There have been similar proposals from other states and cities and countries along these lines, notably California going 100% renewable by 2045. This post is an attempt to examine the feasibility of their proposal. The link of their entire proposal is here. I will paste some of the specifics from that proposal .  The proposal is readable and includes a long FAQ about the proposal which I urge the reader to examine.  I have not been able to find any constructive criticism of the  Green New Deal anywhere  so with nothing left to lose I will now jump into the breech and lend my two cents. Here are some of the specifics:

(A) The Plan for a Green New Deal (and the draft legislation) shall be developed with the objective of reaching the following outcomes within the target window of 10 years from the start of execution of the Plan:

                                     i.                    Dramatically expand existing renewable power sources and deploy new production capacity with the goal of meeting 100% of national power demand through renewable sources;

                                   ii.                    building a national, energy-efficient, “smart” grid;

                                 iii.                    upgrading every residential and industrial building for state-of-the-art energy efficiency, comfort and safety;

                                 iv.                    eliminating greenhouse gas emissions from  the manufacturing, agricultural and other industries, including by investing in local-scale agriculture in communities across the country;

                                   v.                    eliminating greenhouse gas emissions from, repairing and improving transportation and other infrastructure, and upgrading water infrastructure to ensure universal access to clean water;

                                 vi.                    funding massive investment in the drawdown of greenhouse gases;

                               vii.                    making “green” technology, industry, expertise, products and services a major export of the United States, with the aim of becoming the undisputed international leader in helping other countries transition to completely greenhouse gas neutral economies and bringing about a global Green New Deal.

(B) The Plan for a Green New Deal (and the draft legislation) shall recognize that a national, industrial, economic mobilization of this scope and scale is a historic opportunity to virtually eliminate poverty in the United States and to make prosperity, wealth and economic security available to everyone participating in the transformation. In furtherance of the foregoing, the Plan (and the draft legislation) shall:

i.                    provide all members of our society, across all regions and all communities, the opportunity, training and education to be a full and equal participant in the transition, including through a job guarantee program to assure a living wage job to every person who wants one;

ii.                    diversify local and regional economies, with a particular focus on communities where the fossil fuel industry holds significant control over the labor market, to ensure workers have the necessary tools, opportunities, and economic assistance to succeed during the energy transition;

iii.                    require strong enforcement of labor, workplace safety, and wage standards that recognize the rights of workers to organize and unionize free of coercion, intimidation, and harassment, and creation of meaningful, quality, career employment;

iv.                    ensure a ‘just transition’ for all workers, low-income communities, communities of color, indigenous communities, rural and urban communities and the front-line communities most affected by climate change, pollution and other environmental harm including by ensuring that local implementation of the transition is led from the community level and by prioritizing solutions that end the harms faced by front-line communities from climate change and environmental pollution;

v.                    protect and enforce sovereign rights and land rights of tribal nations;

vi.                    mitigate deeply entrenched racial, regional and gender-based inequalities in income and wealth (including, without limitation, ensuring that federal and other investment will be equitably distributed to historically impoverished, low income, deindustrialized or other marginalized communities in such a way that builds wealth and ownership at the community level);

vii.                    include additional measures such as basic income programs, universal health care programs and any others as the select committee may deem appropriate to promote economic security, labor market flexibility and entrepreneurism; and

viii.                    deeply involve national and local labor unions to take a leadership role in the process of job training and worker deployment.  

(C) The Plan for a Green New Deal (and the draft legislation) shall recognize that innovative public and other financing structures are a crucial component in achieving and furthering the goals and guidelines relating to social, economic, racial, regional and gender-based justice and equality and cooperative and public ownership set forth in paragraphs (2)(A)(i) and (6)(B). The Plan (and the draft legislation) shall, accordingly, ensure that the majority of financing of the Plan shall be accomplished by the federal government, using a combination of the Federal Reserve, a new public bank or system of regional and specialized public banks, public venture funds and such other vehicles or structures that the select committee deems appropriate, in order to ensure that interest and other investment returns generated from public investments  made in connection with the Plan will be returned to the treasury, reduce taxpayer burden and allow for more investment.

 As you can see this is an ambitious plan that goes far beyond simple measures to reduce CO2 emissions such as a carbon tax and calls for eliminating gender inequality, protection for tribal rights, job retraining for oil, gas and coal workers, universal income and universal health care and other goals. It would take a book to respond to the entire platform and my goal is examine just the energy and economic feasibility of their ideas. The first goal is to:

1. Dramatically expand existing renewable power sources and deploy new production capacity with the goal of meeting 100% of national power demand through renewable sources;                                                                                                                           
2.   Dramatically expand existing renewable power sources and deploy new production capacity with the goal of meeting 100% of national power demand through renewable sources;

It is important to note the phrase : dramatically expand sources.

Here is an exceedingly understandable graph of energy use by source and sector in the US in 2017 taken from the EIA:energy units are in quadrillion btu(10 to the 15^th btu) with percent in parentheses underneath:

­­­­­This graph is worthy of a careful perusal and I will repeatedly refer back to it. As I have mentioned in previous blog posts, the way energy is quantified is confusing and has a myriad of units, For example natural gas energy content is in cubic feet(1000 cubic feet), oil is in barrels, coal is in tons and electricity in kilowatts. All of these energy sources could be and should be converted to a unitary standard of energy which is the joule but alas this is rarely done but the graph above does break it down into percentages which for our purposes will have to suffice. Since we are talking about renewable energy in the Green New Deal, let’s do a breakdown concentrating on just the renewable energy segment. In this case I am talking about just electrical energy.

Electricity consumption is 38% of the energy used  in the US and electricity is generated from fossil fuels, nuke fuels and renewables. Renewables only account for about 1/6(17%) of  electricity generation with the bulk from hydro dams(7.4%), wind(6.3%) all solar(2.6%). The balance of that 17% is accounted for by wood, biomass and geothermal sources. It is no surprise that for the last decade it has been wind and solar growing the fastest but as of a year ago wind and solar only counted for a bit over half of all renewable energy(.524). That means half of the 17% renewable contribution to electricity generation or only 8.9 %(.524X17%). In other words electricity was still over 91% fossil and nuke supplied. Here is a diagram of current renewable electricity contributions courtesy of Gail Tverberg:

So in 10 years the Green plan wants ALL ”national power demand” produced from renewable sources.  The statement does not say just: electricity power demand but ALL national power demand. That means no coal plants, no NG plants, no oil, no Nuke plants………all mothballed or decommissioned in 11 years, all replaced by renewable sources and it will have to be supplied from only wind and solar. Mind you, all the best dam sites are taken and wood, biomass and geothermal sources have long since been maxed out. I think their policy statement must mean just national ELECTRICITY power demand, not all power demand. Obviously the statement needs some clarification because if it is all power sources that would mean no fossil fuels for anything in 11 years…no coke for steel production, no oil for transportation, no NG for fertilizers and so forth. I must assume they mean just electricity generation. Even so, can we go from wind and solar producing 8.9% of national electricity and go to using 100% renewable sources to in 11 years? It should be mentioned that in the world only about 3% of electricity is produced using wind and solar sources. I have read estimates of how many wind mills would be required to get to 100%  and it is in the hundreds of thousands. Solar  in 2017 contributed just 2.5% of electricity generation . The math is relatively simple to calculate how many solar farms or giant 2 MW windmills it would take to get to 100%  and it is prodigious not only in numbers but in dollars, trillions of dollars, and these farms need transmission towers and maintenance support not to mention vast tonnages of concrete and copper and  of course rare earth metals which are 96 % imported(mostly from China). There are a myriad of issues with a plan like this which I will not consider right now but I think that the cost and resource issues are daunting.  The Green Planners would counter that there would be a lot of jobs for concrete companies, trucking and crane companies, power tower companies, solar panel installers and manufacturers etc. I have concluded from reading the data that a plan like this is unaffordable but the bigger question is that: would it be worth it, carpeting limited and largely remote and rural sections of the country with wind towers and solar farms? The biggest problem with wind and solar besides cost, reliability and lifespans is that these sources are INTERMITTENT! The wind blows sometimes and the sun only shines in the daytime. Electricity for heating in winter and cooling in summer is often a mismatch for intermittent sources. Solar doesn’t yield as many electrons in winter and wind in much of the country is weaker in the summer.. The fossil and nuke plants generate electricity constantly and predictably, not intermittently. If you add intermittent sources to the grid you need a base load electricity supply in place to handle the intermittency of wind and solar, increasing when the wind drops and the sun goes down and throttling back when the gales of November come howling. This has not been a serious problem in most locales as long as the wind and solar contribution has been tiny but the utility companies have warned repeatedly that increasing these renewable sources to a large percentage will lead to grid instability, power surges and blackouts. Then there is the issue of subsidies. New wind and solar sources get priority on the grid, preferential PPAs(power purchase agreements) and tax subsidies as well. They may be producing excess power when it is not needed but they get to go to the front of the bus so it is the base load sources that have to adapt.  This means you have to have base load sources with the ability to throttle up and down and divert excesses rapidly and reliably. These base load power plants work best at  a high constant output and running them  at varying outputs is hard on them as well as inefficient. Boilers and turbines like internal combustion engines have an optimum performance envelope and varying this envelope means varying boiler pressures and temperatures, cooling and lubrication pressures and so forth. The green plan wants to totally eliminate fossil electricity generation but that is only possible if there is another source to balance out the flow of electricity to match demand. Their answer is a simple one: battery storage. In theory that would work with enough batteries spread all over the country. We are told that storage batteries are more efficient than ever as the eminent environmentalist Bill McKibbon wrote in a long article in a recent New Yorker. That is true but their  chemical energy density remains minute compared say to the chemical energy density of oil or coal and the cost to replace base load generation would be very high. The  cost of new wind and solar without storage is around 5 cents/kWh but if storage were to be added the cost would soar to 70 cents to $1.10 a KWh according to Rodger Andrews at Energy Matters. The average house in the US uses between 800 and 1200 kWh a month.  My house is between 1000 and 1600 depending upon the season. With solar/battery storage my electrical bill would rise to $700 to $1700/month.­­­!!! Batteries with massive concentrated chemical energy capacity equivalent to fossil energy are one of those promised energy miracles like fusion energy…………always just over the horizon but never delivered. Battery backup is a mature technology and it functions well at the proper scale but the pie in the sky notion that it could be scaled up to country size is ridiculous.

Let’s back up now and try to see the big picture:global climate change brought on by ever increasing emissions. Notice my assumption: CO2 emissions from the burning of fossil fuels is the dominant variable causing global warming. If you consider that assumption a hoax like Donald Trump, then embarking upon a massive attempt to reduce or eliminate CO2 emissions is totally unnecessary and a waste of time and money. What’s more the link between energy consumption and living standards and economic growth is undeniable. Here is a slide from a recent presentation by Gail Tverberg to  the IEEE (Institute of Electrical and Electronics Engineers):

The careful reader will note her tacit assumption about energy consumption and economic growth. This is a FUNDAMENTAL POINT of my blog. Another fundamental point is the link between energy(consumption) and wealth.More than a decade ago I was puzzling over concepts of wealth and money and economics. Where does wealth come from? Why has wealth production grown so much in the last few hundred years? Is there a link between population growth and wealth? What is the common thread among these and many others over the past 200 years in that period we now call the Industrial Revolution? It came to me rather suddenly one day: ENERGY ! That is the link. THE link. Energy has always been the link but what is different in the past few hundred years from human use of energy? The answer is cheap fossil energy. It is that abundance of inexpensive seemingly inexhaustible energy which almost totally replaced muscle energy from humans and animals and allowed the creation of machines and extraction of the earth’s resources using  technology that flowed like river from this new wellspring of energy. Freeing up human and animal muscle energy and replacing it with fossil energy running machines allowed massive  exponential increases in food production for example, which naturally allowed exponential increases in human reproduction. Exponential increases in resource extraction and products derived from these fossil resources followed. Freeing up human and animal hands allowed humans new opportunities to provide services. In just the wink of an eye in the history of human evolution we went from gathering roots and firewood to cook them to stepping down upon the surface of the moon. All this progression in complexity and technology was made possible by unlocking and harnessing the bond energy between three elements: carbon, hydrogen, and oxygen. Bingo! I thought to myself. Wealth flows from that bond energy as does population growth, economic growth, improvements in education and health…………..you name it. The industrial revolution was caused by the availability and utilization of a cheap new energy source. Just one problem was immediately obvious. All this new energy was the lucky consequence of a few hundred million years of algae and fossils percolating down through the world’s oceans where it decomposed and was covered up with sediments and altered by temperature and pressure into oil and gas. On the land a similar process of carbon and hydrogen containing plants fell to the floor of vast forests accumulating and compressing over millions of years into coal and heavy hydrocarbon layers. The problem? These hydrocarbons were FINITE. At the beginning of the Industrial age they seemed infinite but now we know they are finite. Fossil resources are just a few of  the many other non renewable finite resources of the planet. They are not renewable on a scale of human lifetimes. When these resources are gone or too hard to find and extract, the rodeo is over. When the energy from them dries up so does wealth creation, economic growth, economic progress, pocket money…………….the advancement of human civilizations! Whew! Really? That’s it? Yup, pardner. That’s it. But the economists and greenies come scurrying out from behind the trees saying: Don’t worry. Be happy. We get it. If that nasty dirty old coal and oil energy disappears, the market  will just substitute energy from somewhere else. Economic growth doesn’t have to cease. Human advancement can continue using renewable energy. Plus we can now save the planet by stopping burning those stinky things. We don’t have to get our electricity from burning coal, oil and gas  and uranium to boil water to make steam to spin a heavy copper generator. We can get it from the sun and the wind which is a permanent renewable energy source. NOT! WRONG! These so called renewables can only be built  and maintained using fossil energy.  What’s more these misnamed renewables have short life spans, only 15 to 30 years in the case of wind and solar and  somewhat longer in the case of hydro. They can only be built and maintained, decommissioned and perhaps recycled by using fossil energy, primarily diesel fuel. So you see they are not renewable after all. Let’s call them what they really are: expendables or if you prefer NON-renewables. Now back up again and go look at that source/sector graph from the EIA. Even if we could get Tinkerbelle to wave her magic wand PRESTO!CHANGE-O! and move all our electricity production  to “expendables” we have only cut our emissions 38%.  We still have 62% of all our national energy demand being met by fossil resources producing CO2. What does the Green New Deal have to say about that? Here. Read it for yourself:                                                            (1)upgrading every residential and industrial building for state-of-the-art energy efficiency, comfort and safety;

                    2. eliminating greenhouse gas emissions from  the manufacturing, agricultural and other industries, including by investing in local-scale agriculture in communities across the country;

                    3. eliminating greenhouse gas emissions from, repairing and improving transportation and other infrastructure, and upgrading water infrastructure to ensure universal access to clean water;

                    4. funding massive investment in the drawdown of greenhouse gases;

                    making “green” technology, industry, expertise, products and services a major export of the United States, with the aim of becoming the undisputed international leader in helping other countries transition to completely greenhouse gas neutral economies and bringing about a global Green New Deal.

 Easy peasy. If you go through that list of solutions you will see that we will have to insulate all our buildings with what? Insulation derived from fossil derived sources like foam or fiberglass which are “state of the art”? No more industrial agriculture with giant diesel powered tractors and combines tending 50,000 acre wheat farms. We will go local Ag. We will all be like yours truly with chickens, a Jersey milk cow, pigs and sheep  and a big garden. We won’t get our fertilized pesticide laced GMO  produce, meat and milk from  giant farms  in California’s Central Valley carried by semis to Walmart. Sounds good to me. After all that is what we do here at Rendezvous Mountain Farm. But what about all those other poor slobs  in sprawling subdivisions and big city apartments who have to commute to their miserable cubicles on  SUV clogged freeways? Can they go local and grow their own food and slop their pigs like we do in rural Wyoming? There are probably many people who would like to be able to do that and a few who already have but we are stuck with a suburban sprawl gas powered happy motoring model which uses 92% of the oil, 25% of that imported. The Green New Deal says get a self driving Tesla or ride on expanded mass transport. These suggestions are on the surface good ones. After all they are being used in some countries and cities around the world to a very limited extent. For example the average European uses one half the energy of the average American.  I think a minimal goal would be for the Green New Deal to adopt a European Energy standard. The Green Deal says the US can lead the world in manufacturing, inventing and exporting green energy technology to the world. There’s a new job for you and your kids. Now they can finally move out of the basement with their master’s degree in sports communications and finally achieve the American Dream. I won’t go over all the rest of their New Deal program with its laundry list of wishin’ and hopin’. Their plan not clearly stated obviously involves an entire restructuring of the American and world economy, how and where we live and work. Even their specific recommendations are short on specifics. For example if you want to reduce the consumption of a product you have to add a disincentive to its use. You Tax it. Put consumption taxes on products and services using  fossil fuels. Tax gas and diesel and jet fuel . The federal tax on commercial jet fuel is 4 cents/gallon. In Wyoming we add a whopping 5 cents.Commercial air travel is 3% of world CO2 emissions. The simple expedient of adding just $2 or $3 tax to a gallon of gas or diesel would lead to a sudden drop in US emissions. Is this politically feasible?  Talk to the yellow vests in France when they tried that.

    I guess it should be apparent that I think the well intentioned Green New Deal as proposed using vast funding from the Federal Government in similar fashion to Roosevelt’s New Deal has less than a snowball’s chance in hell of getting implemented as written. Here is their answer to how this massive Deal will be paid for:

How will the government pay for these investments?

• Many will say, “Massive government investment! How in the world can we pay for this?” The answer is: in the same ways that we paid for the 2008 bank bailout and extended quantitative easing programs, the same ways we paid for World War II and many other wars. The Federal Reserve can extend credit to power these projects and investments, new public banks can be created (as in WWII) to extend credit and a combination of various taxation tools (including taxes on carbon and other emissions and progressive wealth taxes) can be employed.  

In other words it will be paid for by yet more debt and possibly taxes but you will notice that nowhere in the Green New Deal proposal is there an estimate of the costs. As I have previously written the wealth to fund the New Deal or WW2 and even stupid blunders like Viet Nam came from borrowing and this spending used real wealth derived from where? Fossil Fuels. It can be argued that the Giant Bank bailout of 2008 using QE trillions was a colossal waste of money. It benefited only the banks and large corporations(like the oil companies!) It will never be paid back. My guess is that an estimate of the cost of a Green NEW DEAL would be an order of magnitude greater. I expect someone will soon come up with some estimates which will inform the discussion.Now I will try to conclude this overly long blog by returning to what I see as the challenges facing not just the US but the world : Global Climate Change and the end of fossil fuels.  The only real ultimate guaranteed help for the planet’s heating climate will be the end of fossil fuels and the question is will it happen in time? The planet will benefit from ending the use of oil, gas and coal but it is hard to overestimate the havoc caused by the withdrawal of these energy generating and wealth creating substances to the humans on the planet.

      In order to inform my conclusions I must introduce some concepts that initially may seem somewhat afar from this blog topic but in fact are concepts integral to its understanding. Allow me to introduce Ilya Romanovich Prigogine, a Russian physical chemist  and thermodynamic physicist :

He received the Nobel prize in 1977 for his conceptual theories of dissipative structures, complex systems and thermodynamics, particularly the irreversibility  of complex structures. I have a good reason for closing with Prigogine’s work  which can be difficult to follow even for this blogger who has a degree in chemistry and advanced courses in physics. So stay with me on this. There are many examples of dissipative structures.  Here is the definition of dissipative structures: “A dissipative system is a thermodynamically open system which is operating out of, and often far from, thermodynamic equilibrium in an environment with which it exchanges energy and matter.  Dissipative structures are open systems, they need a continual input of free energy from the environment in order to maintain the capacity to do ‘work’. It is this continual flux of energy, into and out of a dissipative structure, which leads towards self­-organization and ultimately the ability to function at a state of non-equilibrium. Other examples of dissipative systems include turbulent flows, cyclones, hurricanes, lasers and all forms of living organisms.”The definition states that in a thermodynamically open system, a dissipative system is irreversible.  Economists have also embraced the concept and propose that the economy is a dissipative structure. In that sense an economy cannot “un -grow”. I haven’t read this but I think civilizations are also dissipative structures or systems. Dissipative systems rise, organize and fall and in that sense hurricanes are similar to economies or civilizations. If the current world economy is a dissipative structure it is somewhat unique in that it is highly linked and  networked, with all manner of feedback loops and at times displaying chaotic behavior. But like all dissipative structures it relies upon an exchange of energy flows to exist and to grow. But like a hurricane, when the energy inputs are cut, the system disspates or if you will, collapses. I think that will happen to the world economy when the energy inputs from fossil fuels wind down thereby reducing the complexity of the world economic system. I do not know if the writers of the Green NEW Deal have ever heard of Ilya Prigogine.If they have and have bought into Ilya’s theory, they might opine that the system would not dissipate  if it could be kept going and self organizing with an alternative energy source. This could be one scenario. Another could be a partial dissipation and reorganization at a lower complexity or energy level. A third would be total collapse to Armageddon complete with the 4 horsemen of the apocalypse.  I would think the Green New Dealers would favor the first because it offers the panglossian technology loving possibility of BAU and having your cake and eating it too. I favor the second  because it offers the hope that we humans could reduce our energy consumption voluntarily in  a planned  gradual response to withdrawal of cheap energy. My view is that energy is the economy and if energy dissipates, what do you have? Ultimately we humans will have to use renewable wind and solar energy, heating our water and homes and buildings.  Wind energy could run our machines directly or on a human scale generating electricity or pumping water and grinding grain. I think that at least here in the United States, we will have a lot of stranded assets connected with suburban sprawl and the automobile and truck transportation infrastructure. If energy is wealth, then its withdrawal and most especially oil energy, means that our far flung empire of highways and big box stores and manufacturing relying upon distant supply chains and just in time inventory is doomed just like those vinyl clad 4000 square foot McMansions and those 2 hour solitary commutes  to  a cubicle in a 4000 lb suv. The intelligent response is to recognize this scenario as a virtual certainty sometime this century. The intelligent response to global warming brought on by fossil emissions is to reduce those emissions  to  close to zero whether voluntarily or by government prodding or edict.The intelligent response is not just to drive less and fly less but walk more, work more physically, eat better and live simpler, consuming as little as possible of all resources. My depression era mother had an expression I never forgot: “Use it up, wear it out, make it do, or do without.” I have improved the saying:” Fix it up , Use it up. , wear it out or do with out.”

Maybe one of these days I will try to dream up more intelligent responses to this reworking of our civilization and I remain optimistic that many of us will adapt and figure it out. The timeline of  this energy economy downsizing is anybody’s guess but the sooner we as individuals or communities, states or even nations mount  intelligent responses, the easier and more gradual  the adaptation and the less the suffering. My wife says that education of the people is a key strategy and she is certainly correct.  That is why I plug away at this blog trying to spread the gospel from my pulpit, but like Cassandra I feel my warnings will not be heeded.  There are none so blind as they who will not see. I have noticed that the younger generations are getting it. Look at the effect of  Gretta Thunberg,                                                                                                                                                                                                                                                                                                                                                 a Swedish teenager had who sat in front of the Swedish Parliament day after day protesting political inaction in the face of global warming. Her recent address to the UN Conference on climate change, COP24 in Katowice Poland merits watching. In it she chastised world political leaders for ignoring the looming disaster of human caused global climate change. It’s no surprise that it is the young who are up in arms because it is they who will reap the harvest of a ruined world. The old rich guys who caused it all could care less because they will be dead. Plus it will just cost them money.                                                                                                                                                                                                                                                                                                                                                                                                                                                               I am afraid that the BAU scenario of a government funded Green New Deal is doomed not only for the physics and economy based reasons that I laid out, but politically in a divided nation and world, a non starter. I hope instead for scenario #2  where I think some compromise might be possible especially if we can educate enough of the populace to enact emission reduction individually or collectively. The apocalyptic doomer possibility #3 is too horrible to imagine but the intelligent response for that is: hope for the best and prepare for the worst.