Monthly Archives: May 2011

Power outages hot and cold

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Michael Giberson

A FuelFix post by Tom Fowler relays ERCOT’s report that the Texas grid operator expects to have enough power to serve customers reliably this summer. At the end of Fowler’s post he casually mentioned, in connection with the rolling blackout in ERCOT last winter, “a report by federal reliability officials concluded power plant operators could have done more to prepare for the cold.”

Somehow I’d missed the release of the fed’s report. Since FERC and NERC were cooperating on the report, I headed to the FERC website to see if it had been posted. At http://www.ferc.gov, however, I find a notice saying that FERC would be closed on Wednesday “due to a power outage in the vicinity where FERC Headquarters is located.”

A Washington DC-area news report indicated that the power had been out in the area since around 4 PM, likely due to high summer temperatures. (98 F was nearly 20 degrees warmer than average for May 31 and just 1 degree short of the record.)

NERC – the nation’s FERC-certified electric reliability organization – also just issued its summer reliability assessment for the nation. NERC’s CEO said, “We expect the bulk power system will be able to meet the electricity demands this summer, though we are closely monitoring the effects of storms in the Midwest and Southeast, as well as potential drought conditions.” No mention of possible trouble in DC.

The coincidence of the DC power outage and the confident NERC summer report is mildly amusing (to those of us not sweating through DC’s unseasonably warm, humid night without power), but it appears the outage was a local distribution problem and not a resource adequacy or regional transmission system issue.

Still, maybe federal reliability officials and the local power distributor should have done more to prepare for the heat in the nation’s capital?

Texas legislature passes fracking disclosure bill

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Michael Giberson

The Texas legislature has passed the nation’s first hydraulic fracturing fluids disclosure bill. The governor is expected to sign the bill into law. The text of the bill is available from the Texas Legislature Online website.

In summary, a oil or gas well operator performing hydraulic fracturing will have to disclose the volume of water and the chemical ingredients of the fracturing fluids used. An operator will be able to withhold from disclosure information for which it claims trade secret protections, but affected property owners and neighbors to the property owners will be able to challenge the trade secret designation. In addition, a means will be provided to supply the information to health professionals and emergency responders in case of an injury or other accident.

Aspects of the bill remain controversial, for example the NRDC has criticized limiting public disclosures to ingredients found on the Material Safety Data Sheet (as the law requires) and broad trade secret protection limits.

The requirements will only apply to wells for which the initial drilling permit is issued on or after regulations implementing the law have been adopted by the Texas Railroad Commission. Any well with an initial drilling permit issued before the regulations are adopted will be governed by preexisting laws.

The website of State Rep. Jim Keffer, who introduced the bill in the State House, provided these additional details:

Upon the adoption of rules by the Texas Railroad Commission, an operator with a well that has undergone a hydraulic fracturing treatment will use the website http://www.fracfocus.org to disclose chemical ingredients of hydraulic fracturing fluids on a well-by-well basis. The registry is a joint project of the Ground Water Protection Council and the Interstate Oil and Gas Compact Commission, and was designed for operators to report chemical ingredients listed by the federal Material Safety Data Sheet (MSDS). Under HB 3328, all chemicals intentionally used in the fracturing process (whether listed by MSDS or not) must be reported and publicly disclosed.

Some companies have already posted disclosures voluntarily at www.fracfocus.org. For example, Chesapeake Energy disclosed that on April 7, 2001 at a well in Hidalgo County, Texas, it injected fluids that were composed of about 94 percent fresh water, 4.5 percent CO2, 1.5 percent sand, and a handful of other materials in concentrations ranging from 0.032 percent to 0.0006 percent of the hydraulic fluids.* (As the form says, “Information is based on the maximum potential for concentration and thus the total may be over 100%”)

A Caspar Star-Tribune story reports that Wyoming already has fracking disclosure laws and several other states are considering such laws. Regulators in Montana have proposed fracking disclosure rules, also challenged due to trade secret protection rules.

*In order of decreasing concentration: Petroleum Distillate Blend, Polysaccharide, Mineral Oil (Paraffin Oil, White Mineral Oil), Magnesium Hydroxide, Magnesium Peroxide (Magnesium Dioxide), Magnesium Oxide, Methanol (Methyl Alcohol), Ethoxylated Nonyl Phenol (Nonyl Phenol Ethoxylate), Zirconium sodium hydroxy lactate complex, Triisopropanolamine, Ammonium Hydroxide, Acetic Anhydride, and Acetic acid.

Civil liberties and economics: more than just free markets

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Lynne Kiesling

I wasn’t around KP a lot last week because I was spending a lot of time following the Patriot Act extension debacle and contacting my Congressional representatives to urge them to vote against it (of my so-called representatives, only Senator Durbin did so; I think this is the first time he and I have aligned on an issue).

The past couple of weeks have been brutal for our civil liberties in the US. Consider this incomplete list:

In the past two weeks the legal enforcement of our inalienable right to be free from unreasonable search seems to have almost disappeared.

You may ask why I’m paying so much attention to Patriot Act-related issues (including my frequently-articulated objections to the TSA, an outcome of the Patriot Act), and what is its relevance to our economic decisions and choices. The first and most obvious reason is the morality of the issue. Free people, in a country whose legal institutions are premised on protecting that freedom, have inalienable rights, and we have stipulated legal institutions for the protection of those rights (NOT for the granting and definition of those already-existing rights). In this case the Fourth Amendment of the Constitution is the legal institution being destroyed (and the First and Fifth (due process) are taking a beating too), with the evisceration of our civil liberties as the consequence.

The second reason is the more consequentialist, utilitarian one relating to economics. How can we thrive, be happy, be productive, invest, take on risks, when we are not secure in our life, liberty, and property? Our civil liberties are an essential foundation of those secure property rights on which our economic activity and economic growth are built. Without being secure in our life, liberty, and property, our economic selves wither.

Matt Zwolinski’s recent post at Bleeding Heart Libertarians articulates well why the erosion of civil liberties matters, both at a daily personal level and at an intellectual level, and implicitly at both a moral and economic level, and why we should emphasize both economic liberty and civil liberty in our policy arguments.

Economic freedom is not the only freedom over which governments currently run roughshod.  And, as I have suggested here before, it is probably not even the most important one. …

But libertarians, and especially bleeding heart libertarians, ought to give these issues much more attention than they currently do.  First, these issues matter for people’s lives, especially the lives of the poor and vulnerable who are much more likely to find themselves victimized by the growing police state, either directly or indirectly.  Second, precisely because they aren’t under dispute we can make compelling arguments on these issues without first trying to resolve all of the difficult and intractable problems that divide various schools of political and philosophical thought.

Economic liberties and civil liberties are complements, and the erosion of one erodes the other. These are some of the reasons why I am paying such close attention to the Patriot Act and the TSA, why I am acting to encourage change.

Billionaire Boone Pickens can’t understand why the Billionaire Koch brothers don’t support the slimmed Pickens Plan

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Michael Giberson

Koch Industries and various groups supported by the Koch brothers’ political donations are opposed the Boone Picken’s plan to provide government subsidies to anyone who makes or buys natural gas power vehicles. The position seems consistent with the Koch’s generally libertarian policy outlook, though the company is involved in the natural gas industry and presumably would benefit financially from Picken’s slimmed down plan.

Rather than admire their self-sacrificing political consistency, Pickens is mystified that someone would be opposed to spending taxpayer money to fund his plan.

From E2 Wire, The Hill’s Energy and Environment Blog:

Billionaire energy magnate T. Boone Pickens slammed Koch Industries on Friday for its opposition to legislation he’s promoting that provides tax credits to jumpstart use of natural gas in the trucking industry.

“They don’t ever come toe-to-toe. They don’t get up and discuss these issues or anything. They are very mysterious,” Pickens said on CNBC.

…

But in a statement earlier this month against the bill, an executive with Kansas-based Koch Industries, which is active in refining, polymers and other sectors, said the company has “consistently opposed subsidies that distort markets.”

“We maintain that the marketplace, while not perfect, is the best mechanism for allocating resources to consumers. People deciding what fuels to purchase, instead of the government, is best for consumers and our country,” said Richard Fink, executive vice president for the company. He said that Koch does not question Pickens’ “intentions or integrity,” but added:

“We believe history has demonstrated over and over that these subsidies end up undermining the long-term prosperity of the country. For these principled reasons, we oppose this bill (HR 1380) to give tax incentives to buyers and makers of natural gas-powered vehicles and related infrastructure.”

But Pickens noted the company benefits from subsidies that bolster the ethanol industry and more broadly defended the bipartisan legislation, which was introduced by Rep. John Sullivan (R-Okla.) and has over 180 co-sponsors.

“I am trying to get away from the terrorists. I think that the money that we pay to OPEC, it gets in the hands of the Taliban,” Pickens said, calling use of domestic natural gas a viable alternative.

He also noted that the bill would provide the tax credits for a limited number of years, unlike longstanding ethanol tax subsidies.

“I just want the 18-wheelers and with those I can cut OPEC in half, and my help from the government [is] a five year and out,” Pickens said.

CFTC files oil market manipulation case

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Michael Giberson

At Streetwise Professor, Craig Pirrong examines the CFTC’s case against alleged oil market manipulators Parnon Energy, Arcadia Petroleum LTD and Arcadia Energy (Suisse), all affiliates of the trading firm Arcadia. Whatever the ultimate merits of the case, he says the CFTC is going to have trouble making the charges stick. In part the CFTC must demonstrate that the manipulators were big enough the move the market, but the oil market is huge. Not surprisingly, the price data don’t always stack up in support of the CFTC story. (But be aware that attempting to manipulate a commodity market is illegal whether or not the manipulation succeeds.)

Pirrong concludes with the good news implied by the case: “CFTC has been examining the oil market with a fine tooth comb going back to 2005 if memory serves. If this is the best case they can find after all that, the oil market must be pretty damn clean.”

Also note, with respect to the public image of speculators, that the manipulation alleged intended to push some prices up and other prices down. The case doesn’t support the standard public narrative of speculators driving oil prices endlessly higher.

MORE:

At the E2 Wire blog, some indication of the current political environment within which the agency is operating:

Senate Democrats blasted the chairman of the Commodity Futures Trading Commission Thursday, arguing he is not moving quickly enough to impose new limits on investors in oil markets aimed at curbing “excessive” speculation. Such speculation, the lawmakers argue, is pushing up oil and gasoline prices.

…  Democrats have turned up the heat on the CFTC in recent weeks as high gas prices remain at the top of the congressional agenda. They blame oil market speculation for high prices and say the CFTC limits will temper pain at the pump.

Seven Senate Democrats, led by Sanders, met with Gensler in Sanders’s office Thursday afternoon to call for the immediate implementation of regulations imposing position limits, or caps on the number of futures contracts that a market player may hold, in crude oil markets.

… “All the senators present feel that Dodd-Frank provided the authority and power to the CFTC to get speculators out of the oil markets, that that’s very important to the economy, and the action by the CFTC is way too slow,” Sen. Jeff Merkley (D-Ore.), who also attended the meeting with Gensler, told The Hill. “They are in violation of the law at this point.”

Meanwhile, Republicans in the House of Representatives have voted to cut the CFTC’s budget by 15 percent.

Of course there is no reason to think that the CFTC’s filing of a complaint dealing with oil market trading in 2008 has anything at all to do with the current political pressures on it coming from Congress and the Administration. After all, the CFTC “is an independent agency of the United States government,” Wikipedia says so.

Eagle Ford Shale providing oil production boost

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Michael Giberson

Much of the talk about hydraulic fracturing of shale has been about natural gas, but the method is being used to develop oil shale as well. The New York Times is bringing the news to the east coast, “Shale Boom in Texas Could Increase U.S. Oil Output,” and Texas newspapers have been covering the story too, “Drilling, hydraulic fracturing used in Eagle Ford shale.”

The Texas oil and gas regulator hopes to stay on top of developing issues in the Eagle Ford by forming a task force with producers, oil field services firms, landowners, environmental groups and area politicians. (I guess this is tacit admission that they were surprised by some of the backlash and other developments in the Barnett Shale area in north Texas. The Eagle Ford is much less densely populated, which will reduce some potential conflicts, though water issues will be big in the arid region.)

Hydraulic fracturing panel discussion at AEI

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Michael Giberson

Kenneth Green hosted a panel discussion on the environmental consequences of hydraulic fracturing at the American Enterprise Institute. Panelists were: Ron Bailey of Reason Magazine, Mark Brownstein from the Environmental Defense Fund, Timothy Considine from the University of Wyoming, and Amy Mall of the Natural Resources Defense Council.

The video above is just a short sound bite by Ron Bailey, I couldn’t figure out how to embed the full video. Find the full video archived at the AEI website. Readers here who have followed the fracking posts will be familiar with many of the points discussed, but the video offers some sense of which environmental issues are currently seen as important.

Non-traffic causes of traffic congestion

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Michael Giberson

Is this an unpriced external effect of shooting off fireworks on July 4?

July 5 tends to have an unusual number of animal-related traffic problems, as pets, spooked by the fireworks on the previous day, have a greater propensity to wander onto freeways.

From Eric Morris at the Freakonomicsblog, “Road Blocks: The Strange Things That Cause Traffic.”

Other non-traffic contributors to traffic congestion mentioned in the article: oil spills, antifreeze, oranges, lemons, livestock, wild animals, abandoned pets, suicides, homicides, discarded Christmas trees, and furniture and appliances including couches, chairs, refrigerators, and stoves.

Michael Webber’s “Energy at the Movies”

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Michael Giberson

Michael Webber, mechanical engineer and Associate Director of the Center for International Energy and Environmental Policy at the University of Texas at Austin, provides a look at society’s changing relationship to energy as revealed in movies (and the occasional TV clip) in “Energy at the Movies.” At just over an hour and forty minutes, it takes a little commitment to get through, but if you are at all interested in the topic, you will probably find it worth the time.

The SXSW film festival included an hour-long panel discussion of “Energy at the Movies.” I haven’t watched it yet, so don’t vouch for it personally. If you enjoy “Energy at the Movies,” then the panel discussion seems an obvious next step.

(HT to Melissa Lott at the Global Energy Matters blog.)

Texas gaining smart grid buzz

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Michael Giberson

Texas is becoming a recognized leader in smart grid development, and just wait, it is going to get better. One external bit of circumstantial evidence for this claim comes from a meeting last week at the White House hosted by Aneesh Chopra, Assistant to the President and Associate Director for Technology within the White House’s Office of Science & Technology Policy. When Chopra wanted to discuss the smart grid, he called on Texans: Barry Smitherman of the Public Utility Commission of Texas, Brewster McCracken of the Pecan Street Project in Austin, and representatives from Dallas-based Oncor, Houston-based CenterPoint Energy and Houston-based Reliant Energy. In addition, folks from Itron (Spokane, WA), Landis+Gyr (UK), and the Zigbee Alliance (San Ramon, CA) will be participating.

There are two sides to the smart grid world: the wires company-style improvements and the retail customer revolution. Things are happening in Texas on both sides. The wires company developments will come sooner, because it provides a foundation for the customer-side developments and because it is easier for incumbent utilities to understand and deploy. The retail customer revolution belongs to today’s innovators and explorers, who are likely not today’s well-established incumbents. The revolution will be slower, because in general consumers are reasonably happy with their power suppliers and don’t do much active shopping around. Eventually, however, it will be revolutionary.

Lots of places have rolled out smart meters, and utility smart grid investments are happening many places as well. But for the most part a smart meter tied to a customer on a cost-of-service regulated flat-rate tariff is like owning a smart phone connected to the Ma Bell monopoly of last century. There may be a certain cachet for gadget geeks in having such a thing, but otherwise it mostly just sits there.

Texas has, in the ERCOT-linked parts of the state, all of the pieces in place for a customer-driven revolution: the Texas competitive retail market, smart metering, a competitive wholesale market, and use of true interval meter data rather than load profiles to allocate wholesale costs to retailers. Consumers will better understand their use of electric power, that understanding will inform their energy choices, a competitive retail market place will allow creative retailers to work with customers to enhance their energy choices, the retailers will begin to engage the wholesale market differently, and the competitive wholesale market will adapt to the changing demands of power customers.

There is a lot of exciting engineering work happening, in Texas and elsewhere, but when it comes to a dynamic retail market that can make the most of that engineering work, Texas is the only place in the United States with a good foundation.