Boom to bubble?

Wetzel County WV, vintage 2012

Interesting news about natural gas lately. First, there was this item from the NY Times about how despite all the hoopla, fracking may turn out to be more of a financial bubble rather than a boom. This won't come as a shock to industry critics and those concerned about its environmental impact. Or to anyone familiar with the history of extractive industries in Appalachia for the last 100 years.

Then there's this: Wetzel County WV has been ground zero for the new gas boom for the last several years, with tons of economic activity and hotel rooms full of gas workers with out of state plates. The latest is that Wetzel has been added to the Appalachian Regional Commission's list of distressed counties.

Golly, could that mean industry promises of universal prosperity might not come true? Holy Appalachian resource curse, Batman!

Game changer?

The big news in WV these days is a "game changing" deal with China Energy that could mean $83 billion in investment around shale gas and related developments. I found two different but interesting takes on this news from different parts of the state.

This Gazette piece warns that the deal could doom WV to another century as a mineral colony and could have negative environmental impacts. Closer to the likely point of impact, I found this piece from the Wheeling Intelligencer, which is generally pretty conservative, to be interesting. While not criticizing the deal as such, it warns about the dangers of continuing to rely on one major industry, even a relatively new one.

It even calls for making the Future Fund, which is only on the books at this point, a reality. The idea behind a Future Fund is to set aside a portion of severance taxes to create a permanent source of wealth for WV.

I especially like the idea of investing more in education, or "preparing our children for careers in which they, not anything pulled from the earth, were viewed as the valuable resource."

In any case, I hope WV doesn't make the same mistake in the century to come that it did in the last one.

The "invisible hand" strikes again

Here's an interesting item from Forbes on the decline of coal. Some excerpts:

Blame it on Obama? No. Blame it on market forces, which have not just provided the tools to dig out shale gas but to also commercialize advanced windmills and solar panels. In lay terms, coal’s financial and political troubles are because the electorate wants cleaner air and water, which has fostered innovation. And national policy has fallen into place and enabled the evolution...

When the political campaigns begin in earnest, the “War on Coal” rhetoric will no doubt get ratcheted up. But if economic survival is, indeed, the underlying concern, the candidates may want to convince their contemporaries to attract investment in the country’s new economic engines, and to implement the policies that would help facilitate such a future.

HELP NEEDED ON IRAN DEAL. For WV readers, Senator Joe Manchin is considered to be a critical vote on the Iran deal. If you can, please contact his office in support of the deal. You can find his numbers here.

Movie time

Here's a little video that various AFSC staff worked on to explain why West Virginia needs to create a Future Fund, also known as a permanent mineral trust fund.

NATURAL GAS AND CLIMATE CHANGE. Here's a look at how one might affect the other.

SERIOUSLY? Krugman takes on Ryan here.

WOULD YOU LIKE TO HAVE EYES IN YOUR NETHER REGIONS? This butterfly does.

GOAT ROPE ADVISORY LEVEL: ELEVATED

Abstract thoughts

I used to think that there were two kinds of people: those who were comfortable in courthouses and those who weren't. I fell into the latter category. This could be because I mostly go into mine to deal with things like taxes on cars and such and have to go through a metal detector to do that.

Lately, however, I've been spending a good bit of time in courthouses around the state talking to county commissions and economic development authorities about the need to create a Future Fund for West Virginia from natural resource severance taxes. I've found that some of them are really nice and welcoming. As in friendly places without metal detectors.

One kind of creepy thing that I've heard about and have seen in some courthouses, however, is a real sign of the times in the Marcellus Shale boom areas, to wit, swarms of abstractors scavenging tax and property records to find victims ...I mean landowners who may or may not own mineral rights to the places they live on. It can often the first step in ruining the lives and health of some inoffensive rural family.

It reminds me of the old stories about how unsuspecting farmers were swindled out of their land in the early days of the coal boom 100 or so years ago.

I think a lot of local people have the same reaction I do to the swarm. Here's one anecdote: while eating at a local restaurant in one north central county with a friend on the Future Fund trail, a waitress gave us a good looking over and tentatively said, "Y'all aren't abstractors are you?" I assured her that we weren't and that they gave me the creeps too. She said she was concerned about the quality of life in the area and was worried about how things would change if and when a major land grab got going there.

I can't say I disagree. I do hope that at least this time around we find away to limit the damage and get something out of it.

MY FINGERS ARE CROSSED. There have been some interesting developments in the federal investigation of Massey Energy's Upper Big Branch disaster that might signal prosecutions moving up the corporate ladder.

IT WASN'T JUST YOUR IMAGINATION. The Great Recession was really bad.

UP WITH THE CHICKENS?  You may be happier.

GOAT ROPE ADVISORY LEVEL: ELEVATED

Busted

One of the pleasures of blogging is occasionally getting reamed by people who read the stuff you post. I have a friend who is not shy at all about kicking my butt when she thinks I need it. In yesterday's post, I implied that it might be possible, with greater documentation, regulation, taxation and all that to make the Marcellus Shale natural gas boom something closer to a win/win situation.

My friend argues, not unconvincingly, that

There is no way we could come out better than lose/lose/win. And that's impact on the environment/local residents/drillers. Especially in WV where we will not get decent regulations.

She might be right. In fact, she probably is.

All I can say is that, to use a favorite metaphor of a friend of mine, the train has already left the station. I don't think it's possible to stop shale gas drilling right now. But, as some local citizens on the ground where the boom is occurring argue,  it might be possible to minimize the damage, improve practices, advocate for better regulation and taxation and all that, and to document what is happening.

I think the documentation--from health impacts to roads to taxes to air and water quality to  social cost--together with public education, is going to be critical to getting any kind of decent or even less bad outcomes out of this.

Some lines by Leonard  Cohen come to my mind (and they may have shown up here before):

"Everybody knows the dice are loaded/
everybody rolls with their fingers crossed
/everybody knows the war is over/
everybody knows the good guys lost."

But, as the eminent philosopher Tom Petty observed, "Even the losers get lucky sometimes." I don't necessarily believe that good is bound to prevail in the end, but I do believe that we live in an open and unpredictable universe where all kinds of things are possible and that, with luck, cunning, and technique, we might be able to make things a little better than they might have been for a little while anyway.

I'm not sure whether that makes me a pessimistic optimist or an optimistic pessimist.

READ MORE here and here.

GOAT ROPE ADVISORY LEVEL: ELEVATED

Cui bono?

The Latin phrase "cui bono?" can be loosely translated as "who benefits?" I asked that question recently to a resident of a county that is ground zero in Marcellus Shale natural gas drilling, aside from the companies involved. (By the way, there are a lot of different companies involved in the process. It's not like, say a US Steel plant back in the day where one company does the whole thing. One firm may clear pads, another one drill, another frack, another lay pipe, several others haul equipment, sand and water, etc.)

Here are some of the people identified as benefiting:

*the out of state workers who drive, drill, frack, etc.;

*the owners of businesses like motels, convenience stores, restaurants, and other businesses that cater to the industry and those who work in it;

*big landowners who own the mineral rights to their own land--something that doesn't happen as often as you might think--and who can locate some well pads far enough away from their living quarters to generate some income without ruining their quality of life. Ditto absentee owners.

I had a conversation with a union official yesterday asking about whether local and/on union workers (preferably both) were getting anything out of it. He said that some were, particularly in the pipeline end. Some unions represented at various points in the process are Laborers, Operating Engineers, and Teamsters, with some others.

I'm glad there are some winners outside CEOs and stockholders. But I'd like to see the numbers increase. Better regulation, more protections for the environment, more transparency, more efforts to hire local workers would be a start.

At the risk of being a broken record, West Virginia as a whole could be a winner if we set aside some of the revenue from natural gas to create a Future Fund to help transition our economy beyond mineral extraction.

LIES, TRUTH, THINGS UNSAID AND THE POLITICS OF COAL. Here's a great post from Ken Ward's Coal Tattoo that lays it all on the line.

GO NORTHEAST, YOUNG MAN (OR WOMAN). There's more social mobility there

CHIMPS have culture. And some plan ahead when it comes to stone throwing.

GOAT ROPE ADVISORY LEVEL: ELEVATED

Frack-a-delic

"Externalities" is an economics term that is often forgotten by worshipers of the market god. An externality is a kind of market failure, an example of a situation in which markets aren't efficient. The most troubling kind is a negative externality, which occurs when the costs of a particular kind of business aren't borne by either the buyer or seller and don't show up on the bottom line. Instead, they are passed on to someone else, often the public, which typically has to clean up the mess if it is going to be cleaned up at all.

I kept thinking about negative externalities while driving around Marcellus Shale natural gas drilling in northern WV. One example are the roads that are chewed up by heaving trucks hauling equipment in and out. Then there is the carbon emitted from the wells and drilling and transport process. Then there are all the nasty chemicals that show up in air, water, and solid waste. Then there is the noise pollution and diminished quality of life for people who live near the operations. Then, what kind of health effects are going to show up down the road? Etc.

People--lots of people--who didn't benefit from the market transaction are going to be paying for this for a long time to come. I know this drilling is going to be done, but I don't think we've gone far enough in regulating it and I don't think anyone yet has any idea what the long term consequences are going to be.


WHAT IS IT GOOD FOR? Support for the war in Afghanistan is at an all time low.


A PARADIGM SHIFT in global economic thinking? Maybe, but it hasn't hit here yet.

IN POLITICS, who needs facts?

WHAT ABOUT GOLIATH? An archaeological dig in Israel may shed like on biblical King David's time.

I WANT ONE. Scientists have discovered fossils of a "mini-mammoth" that stood about three feet high.

GOAT ROPE ADVISORY LEVEL: ELEVATED

Fractopia

Remember these guys?

People have been talking about the Marcellus Shale natural gas boom for a few years in WV. So far, most of it has been taking place to the north of my  normal stomping grounds but I made a visit last week to see how it hit Wetzel County, which sits right at the base of WV's northern panhandle.

Aside from the Ohio River border, most of the county is pretty rural and was relatively bucolic, the operative word being was. Now the countryside has been torn up along with the highways as well pads, frack ponds, and pipelines go in all over the place.

Fracking or hydraulic fracturing is a term you hear a lot in conjunction with shale gas drilling. It refers to the practice of pumping water, sand and chemicals into horizontal wells thousands of feet underground. Actually, fracking is only one of several steps along the way.

As I understand it, the whole process consists of site preparation (they call them pads), which I've heard called "mini mountaintop removal sites." Basically it means clearing and leveling an area of several acres. Then comes the drilling, which goes down thousands of feet vertically and then moves horizontally across the layer of shale in which the gas is trapped. Then they "seal" the shaft by pumping concrete in to supposedly protect ground water and aquifers from contamination. We all know that concrete never cracks, right?

Once the well is dug, an explosive charge is detonated along the horizontal shaft to break up the shale. After that the fracking is done, in which several million gallons of water, sand and God knows what kind of toxic stuff is pumped in at high pressure to help release the gas. About half of the frack fluid stays in the ground; the rest has to find a home somewhere else.

Once stuff starts coming up the drill shaft, the next step is flaring to eliminate waste gas. Once the gas is good to go, it is pumped along pipelines with the help of natural gas  compressors. I'm sure I left out a few steps. All this involves thousands of tons of traffic on rural roads and lots of noise, besides concerns about air, water, solid waste and hazmat contamination. In a word, it's a mess. And, yes, lots of jobs are involved, but most of those go to out of state workers.

The WV legislature created some pretty good draft legislation, but it was "tweaked"--some would say gutted--by Gov. Tomblin. More regulation needs to happen if the political will can be generated. And we need to create a future fund from natural gas and other severance taxes to make sure WV gets a little something out of this mess.

PRIORITIES. Here's a good op-ed by a friend of mine which makes the connection between huge cuts in state corporate taxes and possible cuts in child care for low income working families. Unsportsmanlike conduct, I say.

HARD TIMES. Here's a sneak preview of Paul Krugman's latest book on the messed up economy.

FLEAS. Dinosaurs had em. Big ones.

SPEAKING OF GAS, the dinosaurs apparently had plenty of that too.

GOAT ROPE ADVISORY LEVEL: ELEVATED

Fracked up

The part of West Virginia I grew up and live in isn't exactly the most interesting part of the state. But sometimes not interesting is good. Things have been interesting with coal in southern WV for a century or so. Not in a good way.  And things are getting really interesting in the Marcellus Shale parts of the state that are getting drilled now. Likewise, not in a good way.

I happen to be from a place that is north of the southern coalfields but south of the northern gas fields, for the moment anyway. Which is just fine with me.

SPEAKING OF WHICH, there's lots of frack traffic in the news these days. Last week, the Obama administration called for stronger regulations and more disclosure of shale gas drilling. Here's a look at the economics of the industry. And here's news about a report that suggests that water table contamination from shale gas drilling is a real danger.

I hate to say this--and I really hope I'm wrong about it--but sometimes I think that in the end the gas industry will do more harm to this state than its illustrious carbon predecessor.

BUT TO STAY ON MESSAGE, let me say again that WV would be nuts not to create a Future Fund from natural gas severance tax revenues so that our economic future will be better than the past.

GOAT ROPE ADVISORY LEVEL: ELEVATED

Not much room in the inn

I am by no means the brightest crayon in the box--and if I ever come close to forgetting that, the Spousal Unit is usually right there to remind me. Another case in point occurred on an otherwise glorious road trip from one corner of WV to another to try to drum up support for creating a Future Fund for our state from taxes on natural resources.

The first stop on the journey was to the beautiful and blessed counties in the southeast, Greenbrier and Summers. Then back through Charleston, up through Parkersburg and along the mighty Ohio River to New Martinsville in Wetzel County.

I didn't bother to try to reserve a room, considering it to be a truth universally acknowledged that aside from graduation, homecoming, major football games and other high holy days of obligation, there is never a need to reserve a room in advance in any West Virginia town.

Fool that I was. I had forgotten that Wetzel County is ground zero for Marcellus Shale natural gas drilling. As in Fracks-R-Us. I hit town around 9 at night and every motel I could find was full--and the parking lots were full of trucks with out of state plates.

One of the sore points of the Marcellus boom is that most of the drilling and pipeline jobs go to people from out of state, who incidentally need a place to stay. I saw plates from Oklahoma, Kansas, Michigan, Texas and pretty much anywhere but here.

(I was driving a rental with NY plates, so I don't have a whole lot of room to talk on that point).

It started to look like I'd either have to go up to Wheeling or down to Parkersburg to crash when I decided to try one last place and got the last room available.

The most interesting part was a conversation with the hostess. She said they were full most every night, at least from Sunday to Thursday, with gas workers from all over. I asked whether they were a rowdy bunch and she said no. Most days they are up and out by 5 or 6 and sometimes don't get back till after dark. By 9, she said, it was pretty quiet. Duly noted.

I spent the next day seeing what gasland really looks like. Short answer: not terribly pretty. I'll hold off till I can upload some pictures but here's the punchline: we've seen lots of coal, oil and gas booms and busts in this state. More busts then booms, no anatomical reference intended. We need to do something different this time around to ensure that WV profits more from its natural wealth in the 21st century than it did in the 20th.

A voice from gasland

The Spousal Unit recently made a trip to northern West Virginia, which is ground zero for the Marcellus Shale natural gas boom, which is transforming the face of several rural counties in the state. While there, she came upon a flier warning landowners not to be taken to the cleaners by drillers.

The flier quotes the CEO of gas giant Chesapeake Energy as saying

"I don't like to buy acreage for fair price, I like to go in and put a play together where we put our army of 5,000 landman to work, and we are buying it lease by lease for a very inefficient cost average to the rest of the industry to try and replicate and we make it a transaction where there is not a public market, it's us and the landowner and we're gonna most generally going to get the benefit of that side of the transaction, so think about again, every time we move we are buying acreage worth 5 to 10 times what we pay"

Sounds like the modern version of coal company land grabs at the turn of the 20th century. What was that saying about those who don't learn from the past?

Drilling for gold with silver

Grassroots groups and plenty of ordinary citizens are losing their patience with the WV legislature for its failure so far to regulate Marcellus Shale natural gas drilling, which can have all kinds of negative consequences for citizens, landowners, taxpayers and the natural environment.

A number of groups joined together today in the state capitol for a well-attended press conference on the subject. You know it's a good press conference when the reporters outnumber the speakers and this would definitely qualify.

Some speakers were landowners who told gut wrenching stories about damage to health, family and property and even the loss of a beloved home. Others addressed broader issues.

Aside from compelling stories, for me the stickiest soundbite had to do with water, which is something that will be trashed in massive quantities in the hyraulic fracking process used in Marcellus drilling. As one speaker put it, "Water is life. Everyone knows that."

Water is likely to be the most valuable commodity (and it's really sad that water is becoming a commodity) in the coming century. The speaker predicted that water will continue to be a precious and declining resource long after the drilling is done. Squandering water in this way is like "using gold to drill for silver."

Here's my take on the issue. If memory serves, F. Scott Fitzgerald said that there were no second acts in American life. I don't think that's the case. The Marcellus Shale issue gives WV leaders something like a second chance to have some control over how powerful extractive industries treat the state and its people. State leaders had the same chance 100 or so years ago and blew it.

In their defense, it probably would have been hard for a state politician living in the 1880s to imagine the abuses and exploitation the coal industry would inflict on the state. Current lawmakers have no such excuse.

GO LONG. E.J. Dionne Jr. advises President Obama to try something other than capitulation here.

RELIGIOUS RIGHT: the sequel.

A WORTHY SUBJECT. This item on the art of airplane sleeping speaks to my condition as it is yet another valuable art I haven't mastered.

GOAT ROPE ADVISORY LEVEL: ELEVATED