Low Natural Gas Prices Hurting Coal Helping Electricity Bills

Surging natural-gas production from shale rock formations has caused a glut in U.S. natural-gas production, which has pushed prices lower for both gas and coal.  Coal and natural gas compete as fuels to produce electricity. This has lowered energy costs for homes and businesses, given a crucial competitive advantage to manufacturers that use natural gas as a raw material, and created jobs in other industries, like steelmaking, trucking and construction that make products and supply services to drillers. But lower prices for coal and gas have resulted in lower revenues for some energy companies, prompting them to cut back on gas drilling and coal mining.

In a handful of states, while consumers and many businesses are benefitting, some local and state government tax collections are being impacted. The budgetary squeeze is particularly acute in West Virginia, where rich reserves of coal and natural gas have long been a key source of revenue.
In September, Arch Coal Inc.  idled a local coal mine here that employed 50, and natural-gas producer Chesapeake Energy Corp.  laid off 115 workers at a field office here earlier this month, relocating many of them to Ohio where its drilling is more profitable and where jobs and revenues continue to grow.

Pennsylvania officials announced last month that a fee enacted earlier this year on shale-drilling has so far resulted in $204 million for local communities and counties.  Consumers are also seeing more money in their pockets. Over the past three years, electricity bills from the Pittsburgh region's four biggest utilities fell by 30% to 41% mostly as a result of lower natural-gas prices, according to the Pennsylvania Public Utility Commission. Average monthly home-heating bills were cut by $60 to $100. Cheap natural gas has prompted utility companies to burn more of it and less coal, which has eroded coal prices.

Even as the country gained thousands of oil and gas jobs in the past year, the coal sector lost thousands of jobs.

In Arkansas, severance-tax revenue from natural-gas production declined 33% through October, compared with the same period a year ago.

Earlier this year, Wyoming Gov. Matt Meade instructed state agencies to trim their budgets for next year by 8%, as a result of the impact of low natural-gas prices. Since then, the output of coal—another big revenue generator for the state—also has sharply slowed.  State officials expect coal production will be 9% less than they had estimated, resulting in an additional hit of tens of millions of dollars.

In West Virginia, officials have been bracing for a sharp drop in coal-related severance-tax revenue this year, as a result of lower production and prices. But some have been surprised that gas-related revenue has also taken a hit as a result of low prices. (WSJ, 11/25/2012)

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Water Management In Europe

Water pollution and excessive water use are still harming ecosystems, which are indispensable to Europe’s food, energy, and water supplies. To maintain water ecosystems, farming, planning, energy and transport sectors need to actively engage in managing water within sustainable limits. 
 

‘European waters – current status and future challenges’ brings together findings from nine other European Environment Agency (EEA) reports published during the course of 2012 and early 2013. The report shows a mixed picture for the status of Europe’s water bodies, while the findings are worrying when it comes to ecosystems’ ability to deliver essential services.
 

Strong ecosystems should be maintained, partly because they provide vital services which are often overlooked, the report says. For example, restoring a wetland is not only good for biodiversity but also water filtration, water retention and flood prevention. Although essential, these services are not accounted for in current financial and economic systems.
 

• Ecosystems are under pressure. Less than half (48 %) of Europe's surface water bodies are likely to be in good ecological status by 2015, as specified by the Water Framework Directive (WFD). To meet this target, water bodies must further reduce nutrient pollution and restore more natural features. The effects of these problems are clear – 63 % of lakes and river habitats in the EU are reported to have an ‘unfavourable’ conservation status.
• Modification of water bodies is harming ecosystems. The extent of modification of water bodies – the ‘hydromorphological status’ – is also a problem in 52 % of surface waters. Artificial modifications such as dams or reservoirs can prevent plants and animals from migrating or reproducing.
• Pollution problems in European waters. Nitrate pollution from agricultural fertilisers is the most long-term pollution problem for European surface waters. At the current rate of improvement, nitrate levels will still be too high for several decades to come, the report notes. Phosphates and ammonia pollution are reducing more quickly, due to better waste water treatment. This improvement is visible in the improving water quality at bathing sites across Europe – in 2011, 92.1 % of sites met the minimum standards.
• Agriculture and other sectors are using water inefficiently. Water scarcity is caused by human demands exceeding the available freshwater resources, adding to the ‘water deficit’ during summer droughts in many parts of Europe.
• Drought is increasing across Europe. The number of countries affected by drought per decade increased from 15 in the period 1971–1980 to 28 in the period 2001–2011. Climate change is expected to exacerbate this problem.
• Flooding is becoming more frequent, especially in Northern Europe. More than 325 major river floods have been reported in Europe since 1980, of which more than 200 have been reported since 2000.This is partly caused by increased building in flood prone areas. Projected climate change is expected to lead to more floods in many areas.

 

Looking ahead to responsive water resources management
 

Solutions to many of Europe’s water problems have been analysed in the European Commission’s Water Blueprint document, published in 2012. The EEA report, launched today at the Blueprint conference in Cyprus, underpins the Blueprint’s recommendations and provides a baseline for monitoring progress.
 

New incentives can help Europe reduce the amount of water that is wasted, according to the EEA report. Suggested measures include reconsidering pricing structures for water use or domestic metering. However, incentives introduced with other policy objectives in mind can also encourage wasteful behaviour, for example some governments subsidise water use or encourage water-intense crops in dry areas.
 

Farming remains one of the largest pressures on Europe’s water resources, so agriculture and the food industry are major actors in significantly improving the situation. In the future, payments to farmers under the Common Agricultural Policy should consider their overall effect on water resources, the report says.
 

Energy production is another sector with a high impact on water in Europe. Biofuel production can be water intensive, while hydropower plants often divert water used for other sources. Extracting non-conventional oil and gas resources can also lead to water pollution. Careful planning can balance these demands against the needs of ecosystems, the report says.
 

Overall, river basins need to be further managed with constructive dialogue between the many stakeholders in the area. Public participation and the development of a strong knowledge base are paramount to engage into this dialogue.
 

The report states that the river basin is the best geographical scale for making accurate ’water accounts’– in effect asset management to balance the incoming and outgoing resources. Upcoming challenges for water resource management can only be met when water managers have the right information at their fingertips. (EEA Press Release)

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Carbon Tax

Congressional Research Service

Carbon Tax: Deficit Reduction and Other Considerations

Summary

The federal budget deficit has exceeded $1 trillion annually in each fiscal year since 2009, and deficits are projected to continue. Over time, unsustainable deficits can lead to reduced savings for investment, higher interest rates, and higher levels of inflation. Restoring fiscal balance would require spending reductions, revenue increases, or some combination of the two. Policymakers have considered a number of options for raising additional federal revenues, including a carbon tax.

A carbon tax could apply directly to carbon dioxide (CO2) and other greenhouse gas (GHG) emissions, or to the inputs (e.g., fossil fuels) that lead to the emissions. Unlike a tax on the energy content of each fuel (e.g., Btu tax), a carbon tax would vary with a fuel’s carbon content, as there is a direct correlation between a fuel’s carbon content and its CO2. Carbon taxes have been proposed for many years by economists and some Members of Congress.

If Congress were to establish a carbon tax, policymakers would face several implementation decisions, including the point and rate of taxation. Although the point of taxation does not necessarily reveal who bears the cost of the tax, this decision involves trade-offs, such as comprehensiveness versus administrative complexity. Several economic approaches could inform the debate over the tax rate.

Congress could set a tax rate designed to accrue a specific amount of revenues. Some would recommend setting the tax rate based on estimated benefits associated with avoiding climate change impacts. Alternatively, Congress could set a tax rate based on the carbon prices estimated to meet a specific GHG emissions target. Carbon tax revenues would vary greatly depending on the design features of the tax, as well as market factors that are difficult to predict.

One study estimated that a tax rate of $20 per metric ton of CO2 would generate approximately $88 billion in 2012, rising to $144 billion by 2020. The impact such an amount would have on budget deficits depends on which budget deficit projection is used. For example, this estimated revenue source would reduce the 10-year budget deficit by 50%, using the 2012 baseline projection of the Congressional Budget Office (CBO). However, under CBO’s alternative fiscal scenario, the same carbon tax would reduce the 10-year budget deficit by about 12%.

When deciding how to allocate revenues, policymakers would encounter key trade-offs: minimizing the costs of the carbon tax to “society” overall versus alleviating the costs borne by subgroups in the U.S. population or specific domestic industries. Economic studies indicate thatusing carbon tax revenues to offset reductions in existing taxes—labor, income, and investment— could yield the greatest benefit to the economy overall.

However, the approaches that yield the largest overall benefit often impose disproportionate costs on lower-income households. In addition, carbon-intensive, trade-exposed industries may face a disproportionate impact within a unilateral carbon tax system. Policymakers could alleviate this burden through carbon tax revenue distribution or through a border adjustment mechanism. Both approaches may entail trade concerns. (CRS)

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Fiscal Cliff & Energy Subsidies

Because the Budget Control Act (BCA)’s 12-member supercommittee failed to reach a compromise last year, a package of deep spending cuts and steep tax hikes is now slated to take effect on January 1, 2013 (the Fiscal Cliff). Although energy subsidies are not specifically target by BCA cuts, negotiations to avoid the automatic cuts could include energy subsidies.  Wind, nuclear, solar, oil and natural gas subsidies are all in danger of losing subsidies.

President Obama is using his 2013 budget request as the starting point for his plan to 'control the budget.'

When companies default on loan gurantees, the government has to pay.  That is real money.  When companies get to deduct certain expenses, that is money not going to the U.S. treasury.  Of course, government support will continue to be an essential component in subsidizing energy sources because it helps in keeping energy prices at reasoaable levels, enables U.S. technology innovation, stimulates job creation and promotes economic expansion. Energy subsidies may be direct cash transfers to producers, consumers, or related bodies, as well as indirect support mechanisms, such as tax exemptions and rebates, price controls, trade restrictions, and limits on market access.

The wind energy production tax credit is already scheduled to expire at the end of the year.  Pressure to reduce the deficit and debt could kill this credit that has been helpful in stimulating wind production since 1982.

The American Association for the Advancement of Science (AAAS) estimates that federal R&D budgets would decline $12.1 billion in fiscal year 2013 if the spending cuts mandated by last year’s Budget Control Act take effect. By agency, the Department of Defense would lose $6.9 billion in R&D; National Institutes of Health, $2.4 billion; Department of Energy, $972 million; NSF, $456 million; NASA, $763 million; and Department of Agriculture, $189 million, according to the analysis.

Energy industries have enjoyed a century of federal support. From 1918 to 2009, the oil and gas industry received $446.96 billion (adjusted for inflation) in cumulative energy subsidies. Renewable energy sources received $5.93 billion (adjusted for inflation) for a much shorter period from 1994-2009.  Average annual support for the oil and gas industry has been $4.86 billion (1918-2009), compared to $3.50 billion for nuclear (1947-1999) and $0.37 billion (1994-2009) for renewable energy.

A 2009 study by the Environmental Law Institute assessed the size and structure of U.S. energy subsidies over the 2002–2008 period. The study estimated that subsidies to fossil-fuel based sources amounted to approximately $72 billion over this period and subsidies to renewable fuel sources totaled $29 billion. The study did not assess subsidies supporting nuclear energy. The three largest fossil fuel subsidies were:

1. Foreign tax credit ($15.3 billion)
2. Credit for production of non-conventional fuels ($14.1 billion)
3. Oil and Gas exploration and development expensing ($7.1 billion)

The three largest renewable fuel subsidies were:

1. Alcohol Credit for Fuel Excise Tax ($11.6 billion)
2. Renewable Electricity Production Credit ($5.2 billion)
3. Corn-Based Ethanol ($5.0 billion)

In the United States, the federal government has paid US $74 billion for energy subsidies to support R&D for nuclear power ($50 billion) and fossil fuels ($24 billion) from 1973 to 2003. During this same timeframe, renewable energy technologies and energy efficiency received a total of US$26 billion. The Energy Policy Act of 2005 provided an initial $18 billion in loan guarantees for new nuclear reactors.  An additional $36 billion was added to this amount.  The U.S. government also guarantees nuclear power accident costs above $7 billion.  Will these subsidies remain in the face of the Fiscal Cliff.

The bottom line, there numerous sources for Congress to look at in the energy sector if it wants to cut deficits and debt.  However, these subsidies great benefits to America and eliminating them could lead to significant energy price increases, which can raise the prices of other goods and services. (Physics Today, 11/16/2012, Green Tech Media, 10/4/2012, Wikipedia (Energy Subsidies)

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Patriot Coal Says It Is Getting Out of Mountain Top Removal

As part of a deal with citizen groups, Patriot Coal
is going to retire this dragline mining machine
 that is currently used at its Hobet complex
 along the Boone-Lincoln County line.

Patriot Coal, the second largest producer of surface-mined coal in West Virginia, has just agreed to end its mountaintop removal mining. Enormous environmental costs foisted on Patriot Coal forced them to file for Chapter 11 bankruptcy in July 2012.  They admitted that the costs of treating its contaminated mine water would exceed $400 million. Along with its commitment to end large scale surface mining in the region, Patriot’s CEO acknowledged its human and environmental costs, telling the judge overseeing the agreement that “Patriot Coal recognizes that our mining operations impact the communities in which we operate in significant ways.”

Patriot Coal has agreed to phase out mountaintop removal and other forms of strip mining, in a move Patriot officials say is in the best interests of their company, its employees and the communities where it operates. In a deal with citizen groups and environmentalists, Patriot said it would never seek new permits for large-scale surface mining operations, according to details of the settlement that were made public in federal court Thursday afternoon.

St. Louis-based Patriot can continue some existing and smaller mining projects, but must also implement a cap on surface production and eventually stop all strip mining when existing coal leases expire.

The deal does not require Patriot to immediately close any mines or lay off any workers. The company must cut corporate-wide surface production starting in 2014, and gradually reduce it to no more than 3 million tons annually -- less than half of 2011 surface output -- by 2018.

Patriot, the second largest producer of surface-mined coal in West Virginia, becomes the first U.S. coal operator to announce plans to abandon mountaintop removal, a controversial practice linked to serious environmental damage and coalfield public health problems.

The settlement still faces a review by the U.S. Justice Department, and needs approval from Chambers and from the judge overseeing Patriot's bankruptcy case.

Mountain Top Removal

Patriot had already agreed to a deal to clean up dozens of illegal selenium discharges at three major mining complexes in Southern West Virginia. But since filing for bankruptcy reorganization in July, Patriot has been at odds with citizen groups over the company's efforts to delay its compliance deadlines.

The settlement gives Patriot the additional time, bumping back compliance deadlines from May 2013 until August 2014. Hatfield said the move allows the company to defer up to $27 million of compliance costs from 2012 and 2013 to 2014 and beyond, improving Patriot's liquidity as it tries to complete bankruptcy reorganization.

Details of the broader deal on mountaintop removal were spelled out in a 15-page "global settlement" document made public Thursday:

Patriot will never submit new applications for Clean Water Act "dredge-and-fill" permits for new "large-scale surface mining." That term is defined as any surface mining that requires an individual permit review by the federal Army Corps of Engineers. It does not include permits for underground mine face-ups, coal-hauling roads, preparation plants and other such facilities.

The company agrees to a five-year plan to reduce its surface mining tonnage from last year's 7.7 million tons to a permanent cap of 3 million tons annually in 2018. If Patriot buys other companies that conduct surface mining, those new subsidiaries are subject to the tonnage cap. If Patriot sells any of its surface mining operations, the expected future tonnage from those mines is subtracted from the cap.

In West Virginia, Patriot will retire its two draglines, giant boom excavators used at its largest mountaintop removal sites. A dragline used at its Paint Creek complex will be retired within 60 days, while one at its Hobet complex along the Boone-Lincoln border will be retired by Dec. 31, 2015. Patriot can sell the machines, but only if the buyer agrees never to use them again in Kentucky, Tennessee, Virginia or West Virginia.

Patriot can continue with "small-scale surface mining," but only at existing mining complexes where both underground and surface mining was already underway or planned. Small-scale surface mining is also limited to coal already owned or leased by Patriot, and is defined as not being associated with the construction of valley fills requiring an individual permit under Section 404 of the Clean Water Act.

Patriot agrees to withdraw existing permit applications for two large surface mines, Colony Bay and Hill Fork, both in Boone County. The company can continue to pursue a permit for its Huff Creek Surface Mine in Logan County, and environmental groups agreed not to file a legal challenge unless the U.S. Environmental Protection Agency raises water quality concerns about the proposal.

While the agreement eventually reduces Patriot's strip-mining production to zero, it phases that reduction in starting with a cap of 6.5 million tons in 2014. Patriot's surface mining production would be limited to 6 million tons annually in 2015 and 2016, and 5 million tons in 2017 before a cap of 3 million tons becomes effective in 2018.

In mountaintop removal, coal operators use explosives to blast apart mountains to uncover valuable, low-sulfur coal reserves. Leftover rock and dirt is shoved into valleys, burying streams. (Charleston Gazette, 11/16/2012)

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Water Cap & Trade Can Lead To Environmental Injustice

Fred Tutman

"Pollution Trading and Zip Code Environmentalism"

 

By Fred Tutman
 

In a society where the environment that surrounds you is treated like a commodity, we can usually count on most people buying the very best environment for themselves and their families that our incomes and means will afford. That is why in America, your zip code says a lot about your income, your prospects, your life expectancy and your environmental health. So while black and brown people in America see our wealth fast disappearing in a bonfire of foreclosures, poverty zones and long unrequited promises of social equity—it ought to come as no surprise that the non-diverse environmental community is busily creating the latest in a long series of programmatic efforts to ensure that the places where they like to live, recreate, and invest will always get restored, mitigated and protected.
 

Pollution trading is the latest scheme to ensure that existing Federal laws to protect clean and water bypass black and brown communities, even while these so called market tools for the environment would only serve to widen the chasm between the haves and have nots in America.
 

Groups that include the Chesapeake Bay Foundation and the World Resources Institute and others are busily working to authenticate cap and trade initiatives for the Chesapeake Bay region that would allow the worst polluters (statistically located in poor or communities of color) to increase their regulated emissions and discharges to the environment while paying those who presently live elsewhere in relatively nice areas for the privilege to pollute. Also, brokering fees for these transactions will be paid to middle-men known as “aggregators”. Skeptical, check out the Bay Bank: a self proclaimed marketplace where your environment is for sale. Fish habitat? No problem. Wetlands, sure we”ll put it in a box for you.
 

Some Bay conservationists are just as eager to sell the ecology in a fire sale as they are in conserving it.
 

For example predominantly black Prince George’s County might be slated to have the massive coal burning power plant known as the Chalk Point Generating station to increase its discharges of waste into the waters near the black residential town of Eagle Harbor (in Southern Prince George’s). The plant proposes to get state permit to do this in exchange for buying pollution credits form a farmer who happens to live in a predominantly white populated County located several miles downriver. It’s a great deal for the wealthy plant operators, a good deal for the farmers too, who get more cash and no more pollution than before. The black residents of the town? They get added pollution. Trading boosters have no problem with this lopsided transaction. It’s good for the net impacts on the Chesapeake Bay they say.
   

The proponents also argue that this approach to regulating pollution will produce incentives for polluters to clean up their act by giving them additional time and flexibility to comply with the laws while creating fresh sources of investment capital to be used to incentivize compliance with the environmental laws. What they do not say—indeed what they have not even considered is that environmental organization can also get money from these transactions by serving as aggregators or as contractors to conduct restoration projects funded by the trading money. In fact Wall Street brokerage firms are excited about the prospects of selling derivatives and other investment instruments based on pollution trades! Eureka! Pay to pollute. Now there’s a great proposition. Let’s face it. When you monetize the environment then only those with lots of money will have a good environment.
 

But treating your neighborhood like a “marketplace” virtually assures that only good marketplaces will have their environmental health problems addressed. Those with something worth trading will get fresh investment in their communities in derived from “credits”. But those with existing pollution will of course get only “trades” and deferred promises.
 

How could an implausible Ponzi scheme like this one even get on the table? Because the sad truth is the environmental community which panders to the rich and privileged doesn’t think the environment of the region’s black and brown citizens is worth saving. They will quickly inform you that scarce investment dollars go much further in those areas where they like hang out. The "environment" invariably happens to be exactly where they are-- not where we are. 

 

Pollution trading is an amazing give-away to the worst polluters in our midst. It perpetuates the idea that you can eliminate pollution while maintaining the same old polluting economy and business practices. It furthers the myth that you can trade something that doesn’t even belong to you. It breaks the faith with those of us awaiting environmental fairness and justice, by instead trading, mitigating and offsetting what remains of our environmental quality into folding money that goes elsewhere and helps build and restore other communities.
 

It is a horrendous miscall and a bad left turn by a conservation community that ought to be embarrassed after 40 some years of vigorous effort to Save the Bay , and even more vigorous funding toward that end, yet it has produced a Chesapeake Bay estuary no better off than when the Bay program was started. So instead of cleaning it up, we will now convert it to cash instead? Right. Public investment continues to go to the more pristine areas of the Bay, to private beaches, country clubs and marinas. Nowhere near the documented hubs of the State’s worst toxic releases, no place near the blight and redevelopment needs of those urban landscapes that also drain to the “bay”; and decidedly nowhere close to where black and brown people disproportionately live work and play.
 

Pollution trading is the latest in a series of deferrals of the Federal Clean Ware Act. If market solutions rely on voluntary incentives then assuredly there is no great incentive than corporate profits. Allowing polluters to the option of reducing their pollution or trading instead, is a no brainer for them. It dooms those of us who are underrepresented in the halls of funded environmentalism to the ongoing legacy and stigma of dirty water and funky air. It is color blind environmental racism at its most brutal and unfair expression.

 

To be clear, I personally oppose pollution trading for legal, equitable and moral reasons, and therefore I will oppose it in any forum where I can do so. The solution to the Bay cleanup is to vigorously enforce the laws—not trade our problems onto less fortunate neighborhoods. But if trading arrives nonetheless, then we the poor, the black, the brown, the economically and environmentally disenfranchised of the areas most underserved neighborhoods, must grab a seat at the table to assure that if trading occurs then it does so fairly and without bias. That if there are “credits” to be had at our expense then we should at minimum get our fair share of them. That if there is a gold mine to be had, that communities of color don’t get only the shaft. And if there is “new money” to being produced for the environment that we must ensure that it does not go the same route as that “old money” that we barely got our fair share of.
 

Frederick Tutman

Riverkeeper, CEO

Patuxent Riverkeeper

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Black Elk Energy Offshore Oil Rig Accident

Black Elk Energy Offshore Operations, LLC confirmed that a fire ignited Friday morning on the company’s platform located at West Delta 32 Block, located in the Gulf of Mexico approximately 17 miles southeast of Grand Isle, La. There were 22 workers on the platform at the time of the incident. Two individuals have yet to be accounted for and an aggressive search and rescue effort is underway. Nine workers were injured and are now being treated at a number of hospitals in the New Orleans area. Eleven workers were safely evacuated.

The National Response Center, U.S. Coast Guard and the Bureau of Safety and Environmental Enforcement were promptly notified of the incident. The fire was extinguished within an hour. The United States Coast Guard confirmed following an over flight that there is no visible sheen. The production platform has been shut in since mid-August.

On Friday morning local time, a fire and explosion ripped through an oil platform owned by Black Elk Energy in the Gulf of Mexico near the mouth of the Mississippi River. The company was started in 2007 by John Hoffman, a former BP Amoco executive. 

Indications are that this oil rig explosion is unlikely to turn into a major disaster, fortunately. The platform was located in 56 feet of water in the West Delta Block 32 of the Gulf of Mexico. According to an interview with Hoffman, workers were in the final stages of a maintenance job when they were to perform a “clean cut” with a saw on a water line. Instead of using a saw, the worker used a cutting torch instead. This ignited vapors in the line, that fire then ignited fuel stored in a nearby tank, cause an explosion. 

According to data filed with the U.S. Government, Black Elk holds at least 88 oil and gas leases and last quarter pumped 14,000 barrels of oil and oil equivalents per day. The Houston-based company, currently holds interests in properties in Texas and Louisiana waters, including 854 wells on 155 platforms, and recently announced an expansion with plans to drill 23 new wells in the Gulf of Mexico.

Two persons were missing from the initiate recovery operations.  One deceased body has been recovered.

About Black Elk Energy: Black Elk Energy Offshore Operations, LLC is an independent oil and gas company headquartered in Houston, Texas. (Examiner, 11/16/2012, Black Elk Energy Press Release)

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