President Obama’s Divestment Drop-In

On Tuesday, President Obama gave a speech on energy and the environment at Georgetown University. Scheduled between major Supreme Court decisions, in the middle of a work day in the summer during a high-profile criminal case and an international manhunt for Edward Snowden, the speech unsurprisingly – and probably intentionally – got somewhat lost to the non-environmental media. It was truly a speech for supporters, designed to be overlooked by the public at large.

It was noticed by energy markets, though; stocks in coal companies plummeted significantly on news of more regulation for existing power plants and an end to international development aid for non-CCS coal plant construction. The Stowe Global Coal Index fell to its lowest level since the 2009 financial crisis in a sign that investors are beginning to see the writing on the wall. Fossil fuel companies are almost categorically overvalued and as economies begin to account for their full costs, their profits will fall.

It was also noticed by hard-core supporters. At the end of the speech, the President said two words that got environmental groups extremely excited:

“Convince those in power to reduce our carbon pollution. Push your own communities to adopt smarter practices. Invest. Divest. Remind folks there’s no contradiction between a sound environment and strong economic growth.”

305.org’s divestment campaign was launched just this year; in a matter of months, a brand-new issue received a tacit endorsement in a major presidential address. That’s huge. It’s also not particularly surprising given the President’s roots.  Continue reading

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Bubbles in the Ground: Is Natural Gas Too Cheap and Does Fracking Make Money?

Key Takeaways:

  • Gas companies have sunk large amounts of money into shale gas production
  • Current market prices are too low and will likely rise in the near future
  • Most US Natural gas reserves will not require fracking

I recently came across a blog post by a man named Mark Anthony arguing that natural gas produced is substantially underpriced in the United States, and that the companies producing it are carrying huge debt burdens relative to the value of this gas.

If his data are correct, then the actual cost of natural gas should be significantly higher than it is. He tallies debts of $500 billion from selected natural gas companies and the majors against production of 23 TCF of shale gas. This produces a debt load of $21.32 per million BTUs of shale gas produced so far – much, much higher than a price that has hovered between $3 and $4/MMBtu. Combined with the fact that the number of new wells drilled for fracking has plateaued, this would be terrible news for the companies. In his words:

The shale gas is neither cheap nor abundant…had gas prices been $2/mmBtu or $3/mmBtu higher, the industry would have taken home $46B or $69B more revenue. It would not have made a difference in the industry’s $500B collective debts.

What would you think if the US coal sector had accumulated half a trillion dollars of debts after producing coal for two decades? Patriot Coal went bankrupt for a mere $600M of debts, not $600B. I foresee a looming debt crisis of the NG industry. The debts must be resolved in one of two ways. Either NG prices go to ridiculous high levels and stay there sustainable, so the industry makes enough profits to pay off the debts before the gas runs out. If that does not happen, then many NG producers and banks in the shale business will go belly up.

Since there is such a huge discrepancy between the debt load and the market price, and since he did not source his data, I decided to attempt to reproduce his results myself. His production numbers were from 2011; by 2012 United States shale gas production totaled 32.75 trillion cubic feet, for an approximate revenue at $3.50 per million Btu of $117 billion.

Source: EIA

Source: EIA

So far, this is far below Anthony’s stated debt. But it turns out that his debt numbers were overstated by an average of 100 percent per company, excluding the majors (Exxon, Chevron, and company), which he lumped together. Continue reading

NSA Surveillance Programs: Entirely Legal, Potentially Problematic

According to Boundless Informant, a top-secret National Security Agency (NSA) tool leaked by Edward Snowden that monitors the NSA’s collection of electronic information, the agency grabbed 97 billion pieces of electronic intelligence in March 2013. Three billion of those came from the United States. That’s three billion emails, photos, or pieces of web history in a single month.

While the NSA program known as PRISM appears to have focused on collecting foreign electronic intelligence, its own documentation shows that Americans, like dolphins in a tuna net, are frequently swept up in the government’s surveillance collection mechanisms. Although the distinction between foreign and domestic surveillance is frequently stressed by the defenders of extraordinary intelligence gathering practices in the post-9/11 era, PRISM, which archives electronic files from companies including Google, AOL, Microsoft, Apple, Skype, and Facebook, is actually entirely constitutional as understood by the Supreme Court. Continue reading