Tag: Energy

Zubrin Aims to Turn Waste Gas into Profits

Image: Mars Society
Image: Mars Society

Robert Zubrin—whom I’ve interviewed for the Objective Standard—runs Pioneer Energy out of Lakewood, Colorado. The Denver Post describes the “Mobile Alkane Gas Separator” Zubrin’s company is developing: “The unit captures the waste byproduct of drilling” and turns it into salable natural gas. Zubrin told the Post: “This is a significant step forward and a significant resource for America.” Soon “the first MAGS unit will be sent to North Dakota for full field operations,” the Post reports.

I really hope this pans out, not only so that Zubrin and his crew earn spectacular amounts of wealth, but so that I and millions of other people around the world can have access to the energy he hopes to provide.

Fossil Fuels Help the Poor, Bill Gates Recognizes

Image: Wikimedia Commons
Image: Wikimedia Commons

People living in the world’s poorest regions “desperately need cheap sources of energy now to fuel the economic growth that lifts families out of poverty. They can’t afford today’s expensive clean energy solutions, and we can’t expect them wait for the technology to get cheaper,” Bill Gates said recently. Alex Epstein discusses Gates’s remarks and their context in a recent article for Forbes. Epstein discusses the issue at length and summarizes his own view: “Life has gotten much better in poor countries with massively increased fossil fuel use.”

Gates also believes that “we” (by which I suppose he means government) should invest in research to “make fossil fuels cleaner and make clean energy cheaper than any fossil fuel.” I oppose government forcibly seizing wealth for the purpose, but obviously private R&D can be great. Gates himself is funding research into nuclear energy.

Contra Gasland Deception, Colorado Water Always Featured Natural Methane

A couple of years ago the Colorado Oil & Gas Conservation Commission debunked major claims of the Gasland anti-industrial propaganda film:

Gasland features three Weld County landowners, Mike Markham, Renee McClure, and Aimee Ellsworth, whose water wells were allegedly contaminated by oil and gas development. The COGCC investigated complaints from all three landowners in 2008 and 2009, and we issued written reports summarizing our findings on each. We concluded that Aimee Ellsworth’s well contained a mixture of biogenic and thermogenic methane that was in part attributable to oil and gas development, and Mrs. Ellsworth and an operator reached a settlement in that case.

However, using the same investigative techniques, we concluded that Mike Markham’s and Renee McClure’s wells contained biogenic gas that was not related to oil and gas activity. Unfortunately, Gasland does not mention our McClure finding and dismisses our Markham finding out of hand. . . .

Laboratory analysis confirmed that the Markham and McClure wells contained biogenic methane typical of gas that is naturally found in the coals of the Laramie–Fox Hills Aquifer. This determination was based on a stable isotope analysis, which effectively “finger-printed” the gas as biogenic, as well as a gas composition analysis, which indicated that heavier hydrocarbons associated with thermogenic gas were absent. In addition, water samples from the wells were analyzed for benzene, toluene, ethylbenzene, and xylenes (BTEX), which are constituents of the hydrocarbons produced by oil and gas wells in the area. The absence of any BTEX compounds in these water samples provided additional evidence that oil and gas activity did not contaminate the Markham and McClure wells.

I have not researched what “part” of the contamination of the Ellsworth well was allegedly “attributable to oil and gas development,” nor what sort of development that was, nor what the settlement was. In general, if there is objective evidence of a tort, the government properly intervenes to protect property rights (in light of any contractual relationships) and ensure just compensation for damages.

To me what is most interesting about the document, though, is that it demonstrates that usually methane in water is attributable to natural causes, not industrial development.

Recently I was talking with my father Linn about this, and he shared some anecdotes buttressing this fact:

Your great-grandfather Glenn Linn owned land south of Collbran, Colorado, until around 1963. As a child I spent many summers on this ranch. Of course, I have many fond memories spent in the mountains and one of the exciting memories is when we crossed the small stream running in front of the cabin Glenn would throw a match into the stream. A loud roar would ensue from the surface gas exploding.

In the 1960s the surface gas near The DeBeque bridge was very useful to the ranchers. In the cold winter the ice would freeze on the river which would force the ranchers to chop ice in order for the livestock to drink. Those lucky ranchers who had access to the river near the surface gas simply had to light the gas which kept the water clear of ice. Ranchers and cattle were both happy.

Your grandfather Otto Armstrong related that the train would stop just past the town of DeBeque so that the passengers see a geyser raise several feet into the air caused by surface gas. This must have been a great spectacle with the train engines of the 1920s and 30s bellowing smoke and a geyser spouting water feet into the air.

But we all know what’s going on here. The anti-industrial environmentalists will damn any sort of energy development that alters the natural environment in any way, no matter how much energy production contributes to human life and flourishing. And they’re not about to let the facts get in the way.

Image: Creative Commons by Tim Hurst

Coal Remains King for Reliable, Economical Energy

The following article originally was published in the April 16, 2010, Grand Junction Free Press.

Coal remains king for reliable, economical energy

by Linn and Ari Armstrong

Apparently the legislature’s idea of a “pro-business” bill is paying off special interests with legal favoritism that screws consumers.

Previously the Ritter administration promoted harsher drilling restrictions that dampened Colorado’s oil and natural gas industry. More recently, the legislature passed bill 1365, which requires Xcel to replace some low cost, coal-burning power plants with natural gas. Guess which industry lobbied and advertised in favor of the bill.

The new controls, combined with requirements that utilities produce 30 percent of their energy from so-called “renewable” sources by 2020, will ensure that Coloradans face ever-increasing utility bills. So thank the legislature when you have to cut back on your savings, college funds, grocery budget, or entertainment spending.

Artificially increasing our energy costs is an explicit goal of the environmentalist lobby, which figures higher prices will force people to cut back on use, as well as make wind and solar energy comparatively more attractive.

While we’re thrilled that our region provides the resources for natural gas production, our state shouldn’t be so quick to dismiss coal. The World Coal Institute estimates that “there are over 847 billion tonnes of proven coal reserves worldwide,” enough “to last us over 130 years at current rates of production,” compared to 40 or 60 years worth of oil and gas. Known reserves tend to expand over time as companies find more and improve extraction technology. Our nation contains huge reserves of coal.

Environmentalists will retort that the “known reserves” of solar and wind power extend to billions of years. The problem is collecting it economically. Sunlight scatters over the surface of the earth only during certain hours, and it can be reduced by clouds. The wind blows only occasionally, sometimes it blows too hard for the generators, and again it is widely dispersed. This energy is hardly “free;” energy collectors must be built and continually maintained.

After the collection problem, the second major problem for solar panels and wind turbines is storing the energy. Most of our usable energy must be stored in chemical form. This is true of coal, gas, solar, and wind. Once we move beyond sailboats, wind-powered mills, and solar dehydrators, heating up water or bricks pretty much exhausts the possibilities of using “renewable” energy until we talk about modern advances.

Wood, coal, oil, and natural gas contain combustible elements that may be burned for energy. The electricity generated by solar panels and wind turbines must be converted to chemical energy, such as hydrogen storage or a battery. Hydrogen suffers volatility problems. The material of batteries must be mined and otherwise produced. Batteries are expensive and extremely messy to produce and discard. Plus, they leak energy.

A lump of coal is much like a little energy-packed battery that never loses energy until purposely converted. Somebody lying in a hospital bed, hooked up to various electronic devices, need not worry about clouds or other variances interrupting the local power source. Coal is reliable as well as economical. Coal has made our lives vastly safer, longer, healthier, more comfortable, and more productive.

What does the future of energy hold? We do not doubt that at some point researchers and industrialists will figure out new and better ways to power our lives. Critics of Ayn Rand’s novels who have never actually gotten around to reading them may not have noticed that Rand, who once wrote of the blessings of smokestacks, imagined a world in which a creative genius invents a generator to convert atmospheric electricity into a never-ending power source, destined to replace coal and oil.

If we could accurately predict energy advances we’d grow very wealthy. Perhaps somebody will figure out how to economically convert coal to gas or chemically “burn” it in a fuel cell. Perhaps somebody will make a breakthrough in nuclear energy. Perhaps cheap solar panels will someday blanket rooftops across the country.

What we do know is that the government should stop playing favorites. Businesses should succeed or fail in a free market, not according to how well they kiss legislative backside. If the goal is to address measurable, objectively harmful, localized pollution, that is properly a matter for court remedies, not legislative micromanagement.

We’ve lost count of the times Governor Ritter and his media stooges have exultantly proclaimed that the higher-cost “new energy economy” will “create jobs.” They neglect to count the jobs lost in other energy sectors and among all the other businesses that suffer because people must spend their money instead on higher energy costs.

In the real world, no form of energy is free. And politicians are hardly competent to evaluate the relevant tradeoffs.

Seeking Substance in the Energy Debate

The following article originally was published February 15 by Grand Junction’s Free Press.

Seeking substance in the energy debate

by Linn and Ari Armstrong

Scott McInnis, the presumptive Republican candidate for governor, blasted his Democratic opponent John Hickenlooper over energy policy in a February 9 speech to the Colorado Mining Association.

Hickenlooper, McInnis said, “sat on his hands” as the state’s Democrats imposed “rules and regulations” that took “Colorado from number one to rock bottom on states that are friendly to do natural gas and energy business in” (as reported by the Denver Daily News).

The next day, ColoradoPols.com, a partisan left-wing group, accused McInnis of lying. Citing a story in the Daily Sentinel, Colorado Pols claimed, “Colorado in fact issued more drilling permits than surrounding states last year.” Moreover, as the AP reported, “1,487 new wells were drilled in Colorado last year.”

So who’s telling the truth? Did the Democrats’ controls drive energy-related jobs out of the state, or did Colorado’s energy industry continue to perform relatively well despite the recession? Both sides are exaggerating their claims and ignoring important nuances of the discussion.

We know that going through energy policy takes some hard work. We urge readers to stick with us — especially if you intend to vote this November. If you don’t want politics to be controlled by big money and hyperventilating attack ads, you have to vote based on ideas and facts. That means you have to research the debates and seriously question candidates on both sides.

Energy is important. As the AP reported earlier this month, Grand Junction “led the nation with job losses last year,” suffering particularly from “job losses in the energy field. Its unemployment rate nearly doubled in the same period last year, from 4.7 percent to 9 percent.”

We’ve been advocating the Politics of Substance with our columns and with our candidate survey. McInnis, by the way, has promised to answer our survey, and we hope Hickenlooper does as well. We will publish their complete comments at FreeColorado.com, and we look forward to evaluating their remarks. See http://tinyurl.com/cosurvey10.

Regarding the energy debate, the first thing to notice is that the guy painting the rosy picture of Colorado’s energy industry is David Neslin, the director of the state’s Oil and Gas Conservation Commission. Neslin favored the rules that McInnis wants to change.

Any direct comparison between Colorado and its neighbors is worthless. It’s sort of like saying the Denver Nuggets are doing great because they can outplay the local high school team. What matters is not how Colorado compares to its neighbors, but whether Colorado is performing to its potential.

Walk over to your computer and search the internet for “Piceance Basin.” You will find a Geological Survey map showing a large region of Western Colorado encompassing Grand Junction. What’s important about this area is that it is a major reserve of natural gas (as Gary Harmon described in a great article over at the Sentinel last December).

What about the claim of new wells drilled in Colorado last year? The number of wells drilled tells us little about trends of overall production. Plus, what matters is the change in new wells from year to year.

We talked with Neslin on the phone, and he said “production was up a little bit in Colorado last year from 2008.” But would production have been even higher with improved rules?

Morever, the comparison to 2008 is misleading, because companies were already changing their behavior in 2008 in anticipation of the rules. Last year the Denver Business Journal reported that, when Encana Oil & Gas had $500 million to spend, “None of it went to Colorado; all of it went to operations in Wyoming, Texas and elsewhere, according to the company, which cited ‘uncertainty’ about the proposed regulations for its decisions.”

The upshot is that the article by Colorado Pols calling McInnis a liar is a partisan hack job that twists the facts to support its political agenda.

But McInnis is also stretching the facts. The political rules may be one factor hampering Colorado’s energy industry, but it probably isn’t the most important one.

In a media release, McInnis claims that Colorado is losing energy jobs to Pennsylvania because of the relatively better political rules there. But, as Harmon wrote, extracting the natural gas from our region can be difficult. Harmon wrote that “the Marcellus Shale formation in the eastern United States has become more attractive” due to drilling advances. (It’s also close to eastern customers.) That formation happens to run through Pennsylvania.

Energy policy is far too important to be dumbed down for partisan advantage. People’s jobs and livelihoods depend on energy production. As consumers we depend on natural gas to heat our homes and provide additional energy.

We think McInnis can make a good case that overbearing rules have softened Colorado’s energy industry relative to where it could be. But it is a complex field influenced by technological advances, federal rules, geology, prices, and costs. McInnis will be more persuasive when he offers the relevant context and nuance.

Linn Armstrong is a local political activist and firearms instructor with the Grand Valley Training Club. His son, Ari, edits FreeColorado.com from the Denver area.

Energy Debate: Rigs Lost and Unfavorable Energy Climate

With Scott McInnis beating the energy plank hard today, I thought this was a good time look into the background of the debate. My dad and I are currently working on a column for the Free Press; these are a couple of important issues I’ve come across in my research.

As the Denver Daily News reports, McInnis claimed,“What those [Democratic] rules and regulations did, frankly, was take Colorado from No. 1 to rock bottom on states that are friendly to do natural gas and energy business in.”

Amy Oliver Cooke points to (what I take as) the origin of McInnis’s claim.

Here’s what the Denver Business Journal has to say on the matter (June 25, 2009):

Oil and gas executives surveyed about where they are inclined to invest their company’s money have ranked Colorado last among the states.

The latest survey was issued June 24. It’s been conducted annually for three years by the Fraser Institute in Calgary, Alberta, Canada. …

The survey ranks states as well as other countries.

The first survey, in 2007, ranked Colorado at the top of the list of places executives considered positively for oil and gas investment. By 2008, the state’s ranking had fallen to No. 52 out of 81 locations around the world.

The June 2008 survey said executives had grown wary of the state’s efforts to tighten rules governing oil and gas operations here.

Of course this survey is subjective in nature, and articulated preferences may not match revealed preferences. The survey doesn’t mean much. What matters is whether energy companies are staying in Colorado and investing here. (That said, Colorado Pols is more than a little out of line for calling McInnis a liar, given that his remark is based on a credible source. Notably, the AP story that Colorado Pols cites imprecisely paraphrases McInnis; his quote above accurately reflects the survey results.)

Next up is McInnis’s claim: “Statewide, the number of rigs in Colorado is down 71 percent, a testament to his [Governor Ritter’s] anti-jobs policies.”

I’m not entirely sure where McInnis is getting this figure. I did find the same figure in an AP story from March 26, 2009:

New figures show the natural gas rig count in western Colorado’s Piceance Basin has taken a bigger percentage drop than in Utah’s Uinta Basin and the entire state of Wyoming.

Carter Mathies of Arista Midstream Services, a Golden-based energy services company, told The Daily Sentinel in Grand Junction that the Piceance rig count has dropped by 71 percent since October, from 102 rigs down to 30.

He says the Uinta Basin count has fallen 62 percent to 21 and the Wyoming count has fallen 54 percent to 36.

Industry officials say Colorado’s pending new rules for drilling are the reason the count has fallen more sharply in the Piceance than other areas. Officials say the reason is the higher cost of drilling in the Piceance.

Unfortunately, I could not locate the Sentinel article referenced by the AP. I did find an article from December in which Mathies, here identified as “president of Clover Energy Services LLC in Grand Junction,” said that an ExxonMobil deal is “a good signal for the longer-term prospects of natural gas.”

Another claim about rigs lost was reviewed last year by Colorado Pols. Penry stated, “The Piceance Basin has lost 60 percent of its rig count.” The clowns at Colorado Pols pretend to refute Penry by claiming “the only state with a higher percentage of rigs operating than Colorado is North Dakota.” But Penry wasn’t comparing Colorado to other states, he was comparing Colorado Period 2 against Colorado Period 1. However, that still leaves the problem of where Penry got his information.

I did get a tip from the Rocky Mountain Oil Journal, which claims that rigs in Colorado have declined from 78 a year ago to 47 now (though I’m not sure of the original date of the information). The reference is Baker Hughes, which I also found.

Baker Hughes explains:

A rotary rig rotates the drill pipe from surface to drill a new well (or sidetracking an existing one) to explore for, develop and produce oil or natural gas. The Baker Hughes Rotary Rig count includes only those rigs that are significant consumers of oilfield services and supplies and does not include cable tool rigs, very small truck mounted rigs or rigs that can operate without a permit. Non-rotary rigs may be included in the count based on how they are employed. For example, coiled tubing and workover rigs employed in drilling new wells are included in the count.

So I take it this is the relevant measurement, though I’m not entirely sure what this measurement includes or what it means in terms of the overall energy industry.

Notably, the U.S. rig count has dropped by 64 from last year, from 1399 to 1335, or a 4.6 percent drop.

Baker Hughes offers an Excel file called “Rigs By State — Current & Historical Data.” This includes a monthly count from 2000. Here I’ll list the average counts for Colorado from the January listings:

January, 2000: 18
January 2001: 26
January, 2002:25
January, 2003:31
January, 2004: 45
January, 2005: 65
January, 2006: 84
January 2007: 96
January 2008: 100
January 2009: 87
January 2010: 45 (The February 5 figure is 48.)

The recent low is October 16, 2009, with 36 rigs. The high is November 7, 2008, with 124 rigs. (May of 2008 is nearly as high.)

Based on these figures, then, both McInnis and Penry are roughly correct in their estimations of lost rigs, depending on which time frame we care to specify. From the highest mark to the latest figures, the number of rigs has dropped by 76, or 61 percent.

I’m confident the folks at Colorado Pols will apologize to Penry at their earliest convenience.

Of course, the lost-rigs figure does not prove the political rules are responsible for the lost rigs. As David Neslin pointed out to me today over the phone, we’re in the middle of a recession, and natural gas prices have tanked; “as a result, drilling activity and natural gas development declined across the nation.”

I don’t know how to square Neslin’s comment, “production was up a little bit in Colorado last year from 2008,” with the loss of rigs in 2009. Again, I don’t know how closely rig-count is related to total production. But I sure wish an expert in the field would lay out the full set of facts!

Or, fancy this: somebody who gets paid to report the news might, you know, actually research the issue rather than rely on sound-bites from bureaucrats and politicians.

Review Questions for Epstein’s Essay on Standard Oil

As I recently noted, Liberty In the Books, which I co-moderate, reviewed Alex Epstein’s essay, “Vindicating Capitalism: The Real History of the Standard Oil Company.”

I strongly recommend that free-market activists join a reading group in their area — or start a new one. See my notes for some ideas about how to do that. (Alternately, if you live out in the boondocks, you can follow the Denver group’s lead on your own.)

Following are my review questions that we used to guide our discussion. Remember, the point of review questions is to inspire discussion and keep it basically attached to the assigned reading. There is no need to discuss every question on the list. Page numbers here refer to the printed edition; I also include the section headers. This reading, assigned in advance of our meeting, worked great for a two-hour discussion.

1. Describe the views of John D. Rockefeller expressed by:‎
a) Henry Demarest Lloyd, 1881 (Pages 29-30)
b) Ida Tarbell, 1904 (Page 30)
c) Howard Zinn, 1980 (Page 31)
d) Paul Krugman, 1998 (Page 31)

2. What is the view of free markets expressed by Ron Chernow and John Sherman? (Pages 31-32)

The “Pure and Perfect” Early Refining Market

3. What is the theory of “pure and perfect competition?” (Pages 32-33)

4. What is Epstein’s basic economic critique of the doctrine of “pure and perfect competition?” (Page 33)

5. What were the benefits of kerosene to human life? (Page 33)

6. What caused the dramatic increase in kerosene refineries from 1859 to 1864? What were some of the problems with earlier refineries? (Pages 33-35)

7. What was the trend in refineries from 1865 to 1870? (Page 35)

The Phenomenon

8. What regional advantages contributed to Cleveland’s oil refineries of 1863? (Page 36)

9. What were the characteristics of Rockefeller’s first refinery? (Page 36)

10. What in Rockefeller’s background contributed to his success in business? (Pages 36-37)

11. In what specific ways did Rockefeller improve efficiency, expand markets, and advance technology in his industry? (Pages 37-39)

12. What is “vertical integration,” how did Rockefeller practice it, and what are the benefits? (Page 38)

13. What was the state of Rockefeller’s venture in 1870? (Page 40)

The Virtuous Rebates

14. What was Ida Tarbell’s view of the railroad rebates granted to Rockefeller, and what is Epstein’s criticism of Tarbell? (Page 41)

15. Why did railroads grant Rockefeller rebates? (Pages 41-42)

16. Were Rockefeller’s practices “anticompetitive?” (Pages 42-43)

The Missing Context of Standard’s Rise to Supremacy

17. From 1870 to 1880, what challenges did oil refineries face, what was the growth of Standard Oil, and what was the shift in oil prices? (Pages 43-44)

18. Why doesn’t Epstein believe that cartels can succeed? (Pages 44-45)

19. What was the strategy of the South Improvement Company, and what were the results? (Pages 45-46)

20. What was the Pittsburgh Plan, and what were the results? (Pages 45-46)

From 10 to 90 in Eight Years

21. According to Epstein, what motivated Rockefeller to buy out various competitors? (Pages 46-47)

22. Did Rockefeller’s treatment of some competitors to “a good sweating” constitute “predatory pricing?” (Pages 47-48)

23. What was the state of Standard Oil in 1873 and 1874? (Pages 48-49)

24. What arguments did Rockefeller make to competitors to persuade them to sell their businesses to him? (Pages 47, 49)

25. How did the Pennsylvania Railroad attempt to compete with Standard Oil, and what was the result? (Pages 49-50)

26. How did Standard Oil operate from 1870 to 1880, and what happened to the level of oil production and to kerosene prices? (Pages 50-51)

The 1880s and the Peril of the “Monopolist”

27. Did Standard Oil operate according to standard antitrust theory in the 1880s? (Page 52)

28. What was the “peak oil” theory articulated in the mid 1880s? Was was the problem with this theory? (Sound familiar?) (Page 52)

29. Why did Rockefeller expand oil production in the 1880s, what did he find, how did he cope with “skunk oil,” and what did this do for Standard Oil? (Pages 52-53)

30. What new competitors did Standard Oil face in the 1880s? (Pages 53-54)

31. What was the difference between Standard Oil and government monopolies? (Pages 54-55)

The Standard Oil Trust and the Science of Corporate Productivity

32. What was a trust, and what legal problems did it overcome? (Page 56)

33. What were Standard Oil’s successes as a trust? (Pages 57-58)

34. What were Rockefeller’s skills as a business manager? (Pages 59-60)

35. What changing market conditions did Standard Oil face from 1899 to 1914, and what happened to the company’s output and market share? (Page 60)

36. What were the journalistic and political responses to the successes of Standard Oil? What was the motivation of this reaction? (Pages 61-62)

Sunshine Payola

Now that Peter Blake has taken his retirement package from the Rocky Mountain News, he seems to writing for the paper for free. But, whether or not he’s not being paid for his work, his articles remain invaluable. His February 28 article describes the case of a Rick Gilliam, who pushed for mandates for solar power before cashing in on… solar power. Here is the story as Blake tells it:

Amendment 37, an initiative approved by voters in 2004, was designed by renewable-energy advocates. It specified that 10 percent of the power generated by the state’s largest utilities had to come from renewable sources by 2015. Most will come from wind, which, though unreliable as a baseload source, is relatively cheap. But solar, although far more expensive, has its advocates, and they must be appeased. The initiative specified that 4 percent of the 10 percent [meaning 4 percent of total energy] be generated by the sun.

The voters chose in 2004, but three years later the legislature was so confident that renewables were popular it decided to kick up their share to 20 percent, by 2020, without a referendum.

Rick Gilliam of Western Resource Advocates, a nonprofit environmental group, was the principal author of Amendment 37 and its registered representative. In 2005 and 2006, after Amendment 37 passed, he won major environmental awards.

But in January 2007 he… join[ed] SunEdison of Baltimore as director of Western states policy. SunEdison had just landed a contract from Xcel to build the largest “solar electric farm” in Colorado, near Alamosa. Designed to produce 8.22 megawatts capable of powering 2,600 homes along the Front Range, it cost $60 million. It went online late last year.

In other words, Gilliam is responsible for the forced transfer of wealth to solar-electric producers — including himself. Neat trick! But this is hardly new: who do you think pushed for the corn-gas laws? Or the mercury-bulb laws? Rent seeking is the second-oldest profession in human history, if not nearly as honorable.