Saturday, June 13, 2009

Congressional Budget Office Says Waxman-Markey Legislation Would Generate About $850 Billion Over 10 Years

The Congressional Budget Office Cost Estimate for the Waxman-Markey legislation predicts that revenue generated by auctions of carbon emissions credits will be $846 billion from 2010-2019.

By fiscal year, the projections (in billions) are:

  • 2010: .9

  • 2011: 39.1

  • 2012: 59.1

  • 2013: 63.5

  • 2014: 90.6

  • 2015: 104

  • 2016: 112.3

  • 2017: 117.6

  • 2018: 126.1

  • 2019: 132.3

  • All but about $24 billion of the revenue will be used to pay for programs proposed in the legislation.

    Friday, June 12, 2009

    Brazilian "Pre-Salt" Oil Reserve Legislation Imminent?

    The Brazilian Energy Ministry confirmed Wednesday that legislation is being drafted that will set the terms for the development of the "pre-salt" oil reserve situated in the Atlantic Ocean.

    As reported by the Financial Times ("Brazil Readies Oil Reserves Law," June 11, 2009), three key legislative provisions are:

    A state-owned company would be established to own the reserve and grant concessions;
    A system of "production sharing agreements" would be created to replace the existing system allowing companies to own the oil they discover;
    Revenues generated by the government would be used for social spending projects.

    The regulatory structure being considered by Brazil is patterned after a similar one put in place by Norway when the North Sea oil reserve was discovered several decades ago.

    The full magnitude of the pre-salt oil reserve remains uncertain although the energy ministry has said that it is now about 50 billion barrels and may reach considerably higher. In comparison, Saudi Arabia has about 270 billion proven barrels, Venezuela about 100 billion barrels, and the U.S. about 25 billion barrels.

    Rio Tinto Rejects Chinalco Offer, But China Remains Very Much in the Resources Acquisition Picture

    One of the most fascinating aspects associated with the natural resources sector is watching Chinese government-affiliated businesses as they attempt to acquire resources around the world.

    Sometimes the Chinese firms succeed, while in others they do not. The latter was the case recently when mining giant Rio Tinto rejected a nearly $20 billion investment package by Chinalco, which was set up in 2001 when 12 Chinese aluminum-related enterprises were consolidated into one firm. Headquartered in Beijing, Chinalco has in recent years been on the hunt for resources for the rapidly expanding Chinese economy.

    Another major natural resource-related disappointment for China's leaders came in 2005 when the U.S. government stepped in to prevent an $18.5 billion acquistion by China National Offshore Oil Corp. of Unocal.

    To be sure, in both the case of Australian-based Rio Tinto or Unocal national interests helped throws spanners into the deals. But China will not be going quietly into the night...not with a resource-hungry population to serve as well as $2 trillion in funds waiting to be invested (thanks Washington!).

    Just to name a few of the places where China is actively involved now or is trying to buy assets: Afghanistan, Brazil, Cuba, Ecuador, Iran, Peru, the Sudan, Venezuela. The days are now long gone when the only players were coming from Australia or Canada or the UK or US. Of course, this is greatly oversimplified, but it is worth bearing in mind that the world of natural resources acquisition has become more competitive and exciting. Don't blink or Chinalco may make an offer on a gold mine near Reno, Nevada.

    For more on this topic, see today's Financial Times story, "Outmanoeuvred."

    Publication News: Two Members of Graduate Program "Community" Author Article in Argentine Mining Journal

    Word comes from Buenos Aires that two members of the graduate program "community" have authored a new paper about mining in British Columbia.

    Leonardo Rodriguez (spring 2008 LLM graduate) and Pedro Serrano Espelta (a long-time supporter of the graduate program) have published "British Columbia (Canada) Regulacion Legal en un Territorio Con Tradicion Minera" in Panorama Minero No. 353, March 2009 at page 25.

    Both gentlemen work for highly-respected firm of Marval, O'Farrell & Mairal in Buenos Aires.

    Thursday, June 11, 2009

    U.S. "Clean Energy Economy" Picking Up Speed According to Pew Report

    The American clean energy economy grew between 1998 and 2007 about two and a half times faster than overall national job growth according to a new report by the Pew Charitable Trusts.

    "The Clean Energy Economy: Repowering Jobs, Businesses, and Investments Across America," which was published yesterday, reported that clean energy jobs grew at a rate of 9.1 percent during a period when traditional jobs increased by 3.7 percent.

    The outlook for the clean energy economy looks promising, according to the report. “The clean energy economy is poised for explosive growth,” said Lori Grange, interim deputy director of the Pew Center on the States. “These jobs are driving economic growth and environmental sustainability at a time when America needs both. There is a potential competitive advantage for federal and state policy leaders who act now to spur jobs, businesses and investments in the clean energy sector.”

    Pew's definition of a clean energy economy is one that "generates jobs, businesses and investments while expanding clean energy production, increasing energy efficiency, reducing greenhouse gas emissions, waste and pollution, and conserving water and other natural resources.” There are five categories of jobs: (1) energy efficiency, (2) clean energy, (3) "environmentally friendly" production, (4) pollution mitigation and conservation, and (5) support and training.

    Florida Gov. Charlie Crist, a Republican, said, "This research demonstrates what we've long known – that embracing a clean energy future for Florida will produce a vital new economic sector with new job opportunities across the Sunshine State while protecting our environment and increasing our energy security."

    Meanwhile, New Mexico Gov. Bill Richardson, a Democrat, said, "The Pew Charitable Trusts report illuminates how the clean energy economy is a strong and important part of New Mexico's and America's economy. The Pew report is a welcome analysis that details the core clean energy economy and the important role that policy plays in driving growth."

    An overview of state-by-state performance in the clean energy economy can be accessed here.

    Shells Settles in Saro-Wiwa Case

    Royal Dutch Shell, the family of Nigerian environmental activist Ken Saro-Wiwa, and the families of other activists who died in Nigeria's oil producing region in the late 1990s, have reached a $15.5 million settlement.

    The case, which I blogged about on June 7, brings to an end a case featuring allegations that Shell played a role in the deaths of the activists. As part of the settlement, the plaintiffs agreed to move to dismiss all legal claims made against Shell.

    The settlement will be shared by 10 plaintiffs, create a trust to benefit the Ogoni people who live in the oil rich but extremely polluted region, and pay the plaintiffs' lawyers' fees.

    In commenting on the settlement, Shell said it had "always maintained that the allegations were false. While we were prepared to go to court to clear our name, we believe the right way forward is to focus on the future for Ogoni people, which is important for peace and stability in the region."

    The Center for Constitutional Rights, which represented the plaintiffs, characterized the settlement as a "victory."

    Ken Saro-Wiwa, Jr., the son of Ken Saro-Wiwa said, “In reaching this settlement, we were very much aware that we are not the only Ogonis who have suffered in our struggle with Shell, which is why we insisted on creating the Kiisi Trust.”

    Perhaps this is a just and reasonable settlement. But the difficult issue of how natural resources firms can best operate in the communities where they work remains a perplexing one. And the issue of the Nigerian government's complicity -- or not -- in the whole matter also remains unresolved.

    For a country so extremely rich in natural resources, oil has often brought pollution, violence, and destruction. The "curse of oil" some have called it.

    Wednesday, June 10, 2009

    Addressing Climate Change A Key Priority as Sweden Prepares for European Union Presidency

    Combatting climate change will be one of Sweden's two priorities during its July 1 to December 31 presidency of the European Union.

    Prime Minister Fredrik Reinfeldt, who spoke yesterday in Brussels about his government's upcoming presidency, emphasized the need for the world to take more aggressive actions to combat climate change. Mr. Reinfeldt said:
    "As I stand here today, the Greenland and West Antarctic ice sheets continue to melt and sea levels continue to rise. We are experiencing more extreme weather conditions, with severe storms and droughts. And while this is happening, emission levels have not even started to decline.

    "On the contrary. According to the IPCC, between 1970 and 2004 greenhouse gas emissions increased by 70 per cent. There is no more time to lose, if we do not want our children to suffer even more dramatic consequences of climate change.

    "Over the last year I have often been told that, in the middle of deep economic crisis, countries cannot afford to spend money on "green dreams". I would argue the contrary. They cannot afford to keep their current costly energy sources.

    "Let me take Ukraine as an example, and a particularly interesting one given recent signs of an impending gas crisis. Today Ukraine uses energy about three times less efficiently than EU countries on average. Studies demonstrate that if Ukraine's energy efficiency could reach the level of countries like Slovenia and the Czech Republic, Ukraine would come close to being independent of gas imports from Russia.

    "So in addition to the benefit of having cleaner air, improved health and reduced risk of natural disasters, many countries would even improve their public finances by addressing climate change and their energy mixes. I guess that is what you call a 'win-win' situation.

    "Studies by McKinsey show the same thing. Global greenhouse gas emissions could be cut by about 40 per cent by 2030 at a cost of less than half a per cent of global GDP. I will say it again: the cost of inaction is far higher than the cost of action.
    I say this knowing that, at the same time, many developing countries will have difficulties making the initial investments. The EU has therefore stated its readiness to take on its fair share in the framework of an agreement in Copenhagen.

    "The Swedish Presidency - and I personally - will do our utmost to continue to work out the details of such financing arrangements as well as ways of transferring technology, to enable an agreement on global emissions reductions in Copenhagen.

    "We know that substantial mitigation efforts are needed in all countries if we are to keep the increase in global average temperature below two degrees compared to pre-industrial levels. Developed countries must take the lead in reducing emissions and reach a mid-term target of cutting emissions by 25 to 40 per cent.

    "And the EU has done its homework. We have promised to cut emissions by 30 per cent by 2020 in the framework of an international agreement. The energy and climate package agreed last December is the most ambitious mitigation policy the world has ever seen."
    In addition, Mr. Reinfeldt went a step farther and suggested, "We now need to initiate discussions on how economic instruments can best be utilised in climate policy. I believe tools such as a carbon tax and emissions trading, if designed well, can play a key role in addressing climate problems."

    Easier said than done if you ask me. Carbon taxes, while considered in many circles a more efficient way to discourage greenhouse gas emissions, are anathema in the U.S. So this is effectively a non-starter in Washington, D.C. (and probably various corners of Europe as well including the U.K.).

    Nevertheless, the Swedish PM seems encouraged by his view of the challenges ahead and particularly as they are reflected in the actions of the Obama Aministration: "I'm pleased to say that we are receiving encouraging signals from President Obama and his administration, who have profoundly improved the discussions on this issue."

    But has the PM inadvertently put the kiss of death on EU-U.S. cooperation on this matter? In many parts of the U.S., the American presidency is not exactly supposed to embrace European proposals. It makes you look like a "citizen of the world" as opposed to only a "citizen of America."

    It's no surprise that President Obama has proclaimed himself a citizen of the world. That's what liberal Democrats do. But so has one other fairly recent president: none other than Ronald Reagan...

    Waxman-Markey Energy Legislation Report Released

    The U.S. House Energy and Commerce Committee has released the committee report on the comprehensive energy legislation -- also known as the Waxman-Markey bill -- that was approved last month.

    The report includes the bill as amended, a section-by-section explanation, and all committee votes on the measure.

    Meanwhile, yesterday the committee heard testimony on issues related to emission allowances. Thomas Ferrell, president of Dominion Resources, told the committee that the Edison Electric Institute -- an investor-owned electric utility trade organization -- supports a provision giving local electric distribution companies 30 percent of the allowances for free, E&E News PM reported ("Waxman Releases Committee Report of Cap-and-Trade, Energy Bill," June 9, 2009). On the other hand, David Sokol, chair of MidAmerican Energy Holdings, asked the committee to delete the free emissions allowances.

    Tuesday, June 9, 2009

    Mutual Funds and Climate Change: Growing Support for Shareholder Resolutions

    Climate change related shareholder resolutions that involve U.S.-based companies were supported in 2008 at an all time high of 24 percent by mutual fund companies.

    Put another way, "mainstream U.S. mutual fund" firms supported climate change resolutions nearly 24 percent of the time, a large increase over the 14.7 percent level at which they supported similar resolutions in 2007.

    A recent Ceres' report said:
    "The increased support mirrors rising overall investor support for climate change resolutions in recent years.  It comes as the business case for supporting climate-related resolutions is increasingly clear, as regulation of greenhouse gas emissions is now a reality in many regions of the U.S. and federal regulations are a strong possibility.

    "When fund companies vote against climate resolutions it raises serious questions about whether they are violating their fiduciary duty by not representing their customers' long-term financial interests.  That's because climate change can pose major financial risks to the companies the funds invest in."
    Among the leading mutual fund firms voting in favor of climate change resolutions were:
    • Charles Schwab
    • Credit Suisse
    Just one more issue that company management teams and boards of directors need to be considering in their business plans...

    Monday, June 8, 2009

    European Greens Enjoy "Great Result" in European Parliament Elections

    The United Green Parties of Europe hailed their success this morning as the results of the 2009 European Parliament elections -- held from June 4-7 -- were tallied.

    Initial results indicate that the European Green Party will control 46 seats in the next European Parliament, which will run from July through June 2014.  This number compares with the 35 seats that the Greens controlled during the previous European Parliament. 

    Spokesperson Philippe Lamberts, who was elected a member of the European Parliament (MEP) from Belgium, said:
    "To have increased the number of Green MEPs from 35 to 46 is a great success.  Our showing is even more remarkable when you consider that we have 11 more seats than before in a European Parliament with 49 fewer MEPs."
    The Greens ran particularly well in Belgium, Denmark, Finland, Germany, and Sweden.

    Quintin Peel, chief European political columnist for the Financial Times, said that the Greens were one of the "winners" in the poll results.

    Despite controlling only about seven percent of the total number of seats in the European Parliament, the Greens have historically had considerably more influence than their numbers suggest.  In fact, looked at as a whole, the European Parliament is probably the "greenest" major governmental institution in the world. 

    Americans may find this hard to believe, but the U.S. Congress comes in a very poor second -- particularly in the last decade --- when compared head-on-head with the European Parliament.  No Green Party representative has ever been elected to Congress, and the so-called "unofficial" green party of America -- the Democrats -- has no small number of fossil fuel apologists.

    The New "Sentinels of the Prairie:" Wind Turbines and the Energy of the Future

    Historically the phrase "Sentinels of the Prairie" has been used to describe the enormous grain elevators that dot the landscape in the American Midwest.  But today, the sentinels may indeed be of a different kind: wind turbines.

    One cannot understate the potential future importance of wind-generated electricity both to the American (and other locales all around the globe as well) electricity portfolio, but also to the economic well-being of the generally rural landscapes where these gigantic pieces of equipment operate.  Currently, the U.S. derives about 1 percent of its total electricity from wind.

    Recently I drove from Denver east to Manhattan, Kansas, a trip of about 500 miles. One travels through the heart of the American Midwest on this trip. About half-way across Kansas, on the north side of Interstate 70 from mile-marker 216 to 228, you see a vast array of wind turbines generating electricity. The project, Smoky Hills Wind Project, consists of 56 Vestas V80 turbines (1.8 MW each) and 99 GE turbines (1.5 MW each) and generates 250 MW.  It is owned jointly by Trade Wind Energy and Enel North America.  For a state such as Kansas, that has struggled to bring additional economic development to rural areas, the wind farms represent economic growth.

    To a nation hungry for even more electricity, and only now coming to grips with the environmental impacts of continuing the tradition of fossil-fuel based generation, these wind farms represent a path to a cleaner future. Is wind-generated electricity a panacea? Hardly. Things that seem to good to be true often are.

    There are formidable challenges ahead for wind generation, not the least of which are the lack of transmission lines to move this power to population centers and the "inflexibility" of the current grid to "accept" widely disbursed generating facilities (as contrasted to a relative handful of huge fossil-fuel fired plants).

    With respect to the lack of transmission, there is the not so insignificant issue of who should control the siting of these lines.  Traditionally state public utility commissions have handled this.  Thus, to build a transmission line from say northern Colorado, where wind is plentiful, and transport it to say Chicago, a population center that needs enormous amounts of power, means convincing several public utility commissions along the route that a transmission line should be built in their state.  There are those who say that transmission line siting always must be handled at the state level, but one wonders in this time when electrons really don't (and never have) respect state jurisdictional boundaries.

    Then there is the matter of the grid and its inability to handle multiple sources of generation.  This will cost money to retrofit or to rebuild in places, but is this really a cost or a future investment in energy security?

    Most electric utilities have been lukewarm to the idea of more wind generation.  For a 100 years they have often used fossil fuel and the paradigm has been to bring the fuel to the population centers and then make the electricity there.  Since they have generally been able to simply pass on the cost of the fuel to the consumer, the incentive to look for a less costly fuel source has not really been in their business plans.

    Consequently, in the age of wind and solar, there must be a change in thinking to generating the electricity where nature allows it (in the Midwest and the Southwest) and then transporting it to the population centers.  

    To be sure, there will be winners and losers in this change.  The railroads won't like it; the coal industry including management and unions will oppose it; some local communities will fight the idea of wind farms nearby or of transmission lines running across the horizon.  But there have always been winners and losers in American capitalism.  Does anyone think that the environment and individuals with, for example, asthma are not losers in the present system?

    It is impossible to perfectly balance all of the interests in the new energy economy.  Someone will always oppose a new form of business, a new way to generate electricity.

    The final picture tells an interesting story about how the U.S. has lost the lead it once had in nearly all things environmental.  The 155-foot blade seen in the picture was manufactured in Denmark.  It was shipped across the Atlantic to a port in Texas.  Once there, a trucking firm loaded it up and transported it to North Dakota where it will put in many years of service generating clean electricity.

    All of us share an enormous stake in clean energy generation.  The stake includes some challenges alongside enormous opportunities.  Once "the price is right" in terms of the cost of electricity generation -- meaning that all of the "costs" associated with electricity generation are figured into the price to the consumer -- wind and solar will soar.  

    At the end of the 19th century, buggy whip makers were obviously not thrilled about the advent of the car and the railroad.  These new modes of transport threatened the buggy whip makers, and in time automobiles and railroads put buggy whip makers out of business.  But surely there is something to learn there.  When times change businesses must change.  This is one of those times.        

    Sunday, June 7, 2009

    U.S. Mining Firm Involved in Anti-Union Deaths in Columbia?

    Mining firm Drummond Company has denied involvement in the deaths of mining union leaders and others in Columbia.

    A civil lawsuit filed last week in federal court in Alabama accuses Drummond of "paying the right-wing United Self Defense Forces of Columbia (AUC) to protect [Drummond's] business interests in the Cesar and Magdalena provinces of Columbia, and to terrorize and murder innocent residents in the region who they perceived as sympathetic to leftist guerrilla groups and supportive of local union organizations," PRNewsWire reported. The suit alleges that in November 2000, Drummond executives ordered the execution of two union leaders -- "guys that were causing problems" at Drummond's mines.

    In response, Drummond said on May 29:
    "The the latest chapter in an effort by trade unions and their lawyers to falsely blame Drummond...for some of the tragic violence against union leaders and others that plagued Columbia for decades. Similar allegations were made in a lawsuit filed in 2002, and were rejected by an Alabama jury in a judgment that was affirmed by the United States Court of Appeals. Drummond [denies] the allegations of this latest lawsuit, and repeat[s] that the and always has been not to provide support to any outlaw groups in Columbia including paramilitaries."