Addicted to Risk

Naomi Klein speaks at TED last month about how “our underlying assumption of limitlessness allows us to take the risk that we do.”  She looks at the Alberta Tar Sands, the BP Oil Spill, and our ever falling EROEI, and examines why we continue to see unending growth as the answer to all of our problems.

Complexity and risk increase with oil development.

Witness the Perdido, now producing oil at depths of more than 9000 feet.

Recently international marine modeling expert Malcolm Spaulding shared his thoughts with ecoRI about the oil spill on the Deepwater Horizon, and what went wrong.  Spaulding, after reviewing much of the technical information from the BP hearings, concluded that while the Blowout Preventer Valve will present a lot of evidence on why the rig exploded and sunk, there were “relatively straightforward oversight problems” that could be fixed:

“In this case we had a whole series of human failures in the system. One of the control pods didn’t work. There is some question about whether some of the plumbing on one of the valves was installed correctly.”

Spaulding also believes that a key to future offshore development is improved risk assessment and scenario development, to show that these oil companies can respond should a disaster occur.

Well, witness the Perdido, profiled in the NY Times.  The Perdido is much more sophisticated and complex than the Deepwater Horizon.  Not only does it operate in deeper water, but it is the deepest platform in the world, with a well in production at 9600 feet.  The Perdido is a 20-hour boat ride from shore, which means that fire response vessels may not be able to arrive in time to save the rig in case of a fire.  But the Perdido’s complexity is not in the state-of-the-art rig, it is on the ocean floor:

“The Perdido platform is a vast hub that can drill and pump oil from wells across 30 miles of ocean floor. Below it is a subsea cityscape of pumps, pipes, valves, manifolds, wellheads and blowout preventers — all painted a bright yellow so as to be visible to the floodlights of the remote-controlled submarines that maintain it.  Shell, in reducing the weight of the platform, which can produce up to 130,000 barrels of oil a day, is among the first companies to use a new technique: instead of pumping the drilled liquid to the platform and separating the oil, gas and water there, as is typically done, engineers installed new separation equipment directly on the sea floor. While that improves efficiency, the equipment is also more difficult to monitor and fix than if it were on the platform.”

Lets see, the rig drills at depths that human divers cannot reach; much of the equipment which could cause an accident can be reached only by submarines; the rig is 20 hours from shore.  Additionally, the rig is designed to simultaneously drill new wells and pump out existing wells across 30 miles of ocean floor.   The complexity of the Perdido is incredible.

Does this sound safe?  Can we manage these risks?  Just because the engineer in charge says that the Perdido has “multiple safety barriers and redundant systems,” does that mean we can believe they will work?  Is Royal Dutch Shell prepared to handle an accident?

The Perdido is a banner example of how complex and expensive new energy is becoming.  Energy Returned on Energy Invested, or EROEI, continues to drop closer to 1:1.  The risks only increase.  How exactly is this sustainable?

Is Japan outgrowing growth?

Yesterday in the Times Japanese Professor Norihiro Kato reflected on the news that China recently overtook Japan as the World’s second biggest economy.  Surprisingly, Kato reacted with “relief,” as if a “load [was] off my shoulders.”  In fact, he calls the new Japanese reality a maturity:

“The rest of the world’s population is still exploding, and we are coming to see the limits of our resources.  The age of ‘right shoulder up’ is over.  Japan doesn’t need to be No. 2 in the world, or No. 5 or 15.  It’s time to look at more important things, to think more about the environment and people less lucky than ourselves… Freshly overtaken by China, Japan now seems to stand at the vanguard of a new downsizing movement, leading the way for countries bound sooner or later to follow in its wake.  In a world where limits are increasingly apparent, Japan… may well reveal what it is like to outgrow growth.”

Some economists, those of the ‘right shoulder up,’ neo-classical province, would argue that limitless growth is possible, especially if you remove all regulation and government interference.  These neo-classical economists do not recognize limits, they do not account for the stock of natural resources that is blindly being used.  Of course, Kato points out that in Japan the new 20-somethings are revolting against the old logic of limitless growth.  He calls them non-consumers, frugal, savers.  Will the United States follow Japan?

Inevitably, yes.  Japan is mired in deflation, where “consumer demand has become so weak – and deflationary expectations are now such the norm – that the economy seems no longer to respond to such monetary tools.”  Sound familiar?  Interest rates are at record lows here in the United States, and the economy is responding sluggishly, if at all.  Economists are arguing that the era of inevitably rising house prices is over.  That housing wealth was the engine for the nacent growth in the past decade.  With health care costs continuing to rise, our current economic model is unsustainable.

Of course, when you consider looming resource limits, where oil, minerals, and even fresh water will become more scarce and more expensive, and you have a recipe for a sea change.  The old guard will continue to argue for exponential growth, but sooner or later, the kids won’t buy the same tired argument.

How can we change our economy from a jet to a helicopter?

Ecological Economist Herman Daly

Herman Daly, an Ecological Economist from the university of Maryland, argues that we humans will, sooner rather than later, have to transtion from a growth-based economy to what he calls a Steady State Economy (SSE).  In Daly’s conception, the economy has grown immensely over the last few hundred years compared to the static, steady state of the Earth; the more it continues to grow, the more it will have to conform to the Earth:

“That behavior mode is a steady state—a system that permits qualitative development but not aggregate quantitative growth. Growth is more of the same stuff; development is the same amount of better stuff (or at least different stuff). The remaining natural world no longer is able to provide the sources and sinks for the metabolic throughput necessary to sustain the existing oversized economy—much less a growing one. Economists have focused too much on the economy’s circulatory system and have neglected to study its digestive tract. Throughput growth means pushing more of the same food through an ever larger digestive tract; development means eating better food and digesting it more thoroughly. Clearly the economy must conform to the rules of a steady state—seek qualitative development, but stop aggregate quantitative growth.”

To further identify what a SSE would look like, Daly compares a growth based economy to an airplane, designed for forward motion, unable to hover in place.  Unlike the airplane, a SSE would be more like a helicopter, which is designed to hover.  In other words, the SSE would have a relatively constant population and stock of capitol, and maintain a reasonable rate of materiel throughput “within the regenerative and assimilative capacities of the ecosystem.”  To create the SSE, Daly recommends upstream resource taxes (instead of income taxes), redistribution of wealth, ecological protectionism, and an emphasis on durable, long lasting consumer goods.

To achieve these goals, decoupling will be necessary.  Absolute decoupling in when resource impacts decline in total, across the economy.  In his book Prosperity Without Growth, Tim Jackson points out that despite greater efficiencies and technological innovations, no absolute decoupling has occurred since the Kyoto climate summit:

“Despite declining energy and carbon intensities, carbon dioxide emissions from fossil fuels have increased 80% since 1970.  Emissions are almost 40% higher than they were in 1990 – the Kyoto base year – and since the year 2000 they have been growing at over 3% per year…. [and] what’s true for fossil resources and carbon emissions is true for material throughputs more generally.”

So, decoupling will require hard work and sacrifices in our standards of living.  However, energy and mineral resources get more and more expensive by the day, as the Energy Returned on Energy Invested continues to drop across the board, from oil to copper.  Additionally resources that we humans have long taken for granted are becoming scarce.  Today the New York Times described new investments by Australian in desalination plants to meet the country’s water needs:

‘In one of the country’s biggest infrastructure projects in its history, Australia’s five largest cities are spending $13.2 billion on desalination plants capable of sucking millions of gallons of seawater from the surrounding oceans every day, removing the salt and yielding potable water. In two years, when the last plant is scheduled to be up and running, Australia’s major cities will draw up to 30 percent of their water from the sea. The country is still recovering from its worst drought ever, a decade-long parching that the government says was deepened by climate change. With water shortages looming, other countries, including the United States and China, are also looking to the sea. “We consider ourselves the canary in the coal mine for climate change-induced changes to water supply systems,” said Ross Young, executive director of the Water Services Association of Australia, an umbrella group of the country’s urban water utilities. He described the $13.2 billion as “the cost of adapting to climate change.”’

What this means is that the economy is already bumping up against the limits of the Earth.  However, the decoupling that Daly advocates will require careful coordination on development, between nations, not the type of ad hoc development planning that is evident in Australia.  Unfortunately, as Jackson shows in his book, the developing economies, especially in India and China, will require more and more resources in coming years.  The schism that was evident at the Climate summit in Copenhagen between Europe and the United States, and the developing economies belies that the careful coordination required to achieve decoupling is a long way off.  Unfortunately, I think it will take some much more vivid evidence of the economy bumping up against the limits of the Earth to inspire the necessary action and coordination.  The growth based economy, represented by the worship of Gross National Product, is in our DNA.  It will take a shock to our system to create the conditions for the necessary change.

Uncle Sam wants YOU to consider the world your grandchildren will inherit

Happy Independence Day, America!  Seeing all of the American flags that blanket Bristol, Rhode Island in preparation for the 225th parade tomorrow (the oldest in America), I can’t help but think back to the days after 9/11, when George W. Bush addressed the nation, and told us to join together and consume:

“When they struck, they wanted to create an atmosphere of fear.  And one of the great goals of this nation’s war is to restore public confidence in the airline industry.  It’s to tell the traveling public:  Get on board. Do your business around the country.  Fly and enjoy America’s great destination spots.  Get down to Disney World in Florida.  Take your families and enjoy life, the way we want it to be enjoyed.”

Americans always go big.  We consider conspicuous consumption to be a sign of success, of generosity, of having achieved something.  Of course, with the dust of the fallen Twin Towers still in the air, Bush asked us to go to Disney World.  The debt-fueled consumption binge of the last decade is now past due, as seemingly half of America has defaulted on debt in a significant way.  However, the bigger picture goes beyond the economy that is dependent on continued exponential growth. The problem is that growth cannot continue to grow endlessly; we humans are reaching the limits of what this planet can provide, and like Icarus, we may fly too close to the proverbial sun.

Sustainability has become a buzzword in corporate America, but it means more than using green products.  The fact is that we waste too much energy and minerals.  Many of the products we buy are designed to fail so that we will go out and buy another one.  Now, that lack of quality may help create jobs in China, but that just wastes resources.

It wastes water, for one.  Fresh water is a resource that we all take for granted; do you know how much water goes into a hamburger?  I bet you would be shocked.  Second, we have a finite amount of energy and mineral resources, and we remain in denial about the need to shift to alternative energy resources.   The Energy Returned on Energy Invested for oil, coal, natural gas, and most common minerals continues to drop, which means that each new unit of resource will require the use of even more energy.  Once upon a time oil had an EROEI  of close to 100-1; now we get only three barrels for every one barrel we use in the extraction process.  That problem will only get worse. Additionally, those finite energy resources are destroying our climate by increasing the concentration of greenhouse gases.

On this July 4th, I wonder why conservation, efficiency, and sustainability can’t be considered patriotic.  See, our grandchildren and great grandchildren will inherit the world that we leave to them.  We can have one last big party, or we can give them an opportunity to flourish as well.

Your land, my land, Gasland.

Before I begin to tell you what brought me to tears this morning, I want to ask you what exactly you would be willing to sacrifice for cheap energy.  Think about all the material goods that you buy with cheap energy, all of the disposable and replaceable goods.  Think about all of the devices in your home that consume electricity, and all of the functions they provide for you.   Now, consider what you would be willing to give up in order to ensure that the supply of cheap energy is unending.  What if you learned that the water from your tap was no longer drinkable?  What if you learned that you might have irreversible brain damage?  What if you learned that you might lose your sense of taste and smell?  Would that be worth it?

Gasland Director Josh Fox lighting some polluted tap water on fire.

Well, this morning I watched the new documentary Gasland, which premiered on HBO last night.  Immediately, my connection to the subject matter was visceral, because like the filmmaker, Josh Fox, I am a Pennsylvanian by birth.  Fox owns a home on 19 acres of pristine forest that is part of the Marcellus Shale, a formation of sedimentary rock that stretches throughout the Appalachian Basin from New York, south to Virginia.  Energy companies targeted the Marcellus Shale for its natural gas resources, along with other shale formations across the country.  The Marcellus Shale alone was estimated in April 2009 by the Department of Energy to contain 262 Trillion Cubic Feet of Natural Gas.  However, industry estimates exceed this amount.  To extract natural gas from shale formations, energy companies use Halliburton-proprietary technology.

How is the natural gas extracted?   A technique known as hydraulic fracturing, or fracking is used.  A well is drilled deep (typically about 8,000 feet) into the shale formation, and millions of gallons of water, sand, and proprietary chemicals are injected at high pressure into the well.  The pressure fractures the shale and opens fissures, which allow the natural gas to flow freely out of the well.  Sounds simple, right?  Well, 596 chemicals are used in the fracking process.  In 2005, the Bush/Cheney Energy Bill (known officially as the Energy Policy Act of 2005) exempted natural gas drilling from the Safe Drinking Water Act?  Why was that legislation necessary?  It exempted the energy companies from disclosing the chemicals used in the fracking process.  For each frack, 80-300 tons of chemicals may be used. Scientists have identified volatile organic compounds (VOCs) such as benzene, toluene, ethyl benzene and xylene.  Fracking produces wastewater, and the VOCs in the wastewater are evaporated into the air, where they produce ground level ozone, which can travel up to 250 miles.

Shale formations in the United States.

The really disturbing part of this process is the contamination of drinking water.  Fox travels across the country to Colorado, Wyoming, Arkansas, and Texas, where this technology has been deployed, and goes into homes where the tap water is now flammable.  The scale of the development is extensive.

I urge you to watch this film, and spread the word about this ongoing environmental catastrophe.  This technology raises the question of what lengths we as Americans will go to for cheap energy.  Is our standard of living sustainable?  What are the consequences of that cheap energy?  Economists consider consequences that are not reflected in the cost of a product externalities.  Right now the costs of our energy are not transparent, but purposely opaque.  The 2005 Bush/Cheney exemption is a prime example of this.  Clean natural gas is just as much of a misnomer as clean coal.  There is no free lunch.  Americans need to reconsider the sustainability of our economy, of our lifestyles.  Permanent damage is occuring daily.

However, there is one thing that you can do now to help the communities affected, and help to increase the safety requirements in natural gas extraction: call your Senators and Representatives, and demand that the Frac Act be passed.

The Fracturing Responsibility and Awareness of Chemicals Act (H.R. 2766), (S. 1215)—was introduced to both houses of the United States Congress on June 9, 2009, and aims to repeal the exemption for hydraulic fracturing in the Safe Drinking Water Act. It would require the energy industry to disclose the chemicals it mixes with the water and sand it pumps underground in the hydraulic fracturing process, information that has largely been protected as trade secrets. The House bill was introduced by representatives Diana DeGette, D-Colo., Maurice Hinchey D-N.Y., and Jared Polis, D-Colo. The Senate version was introduced by senators Bob Casey, D-Pa., and Chuck Schumer, D-N.Y.  Needless to say, the energy industry opposes this act.  Gasland breaks my heart, because the Pennsylvania that I grew up in is at risk.  So is the water supply of New York City and Philadelphia.  Please see this important film, and take action.

The Nuclear Option

As the crisis in the Gulf proceeds, and impressive sounding technology like diamond-tipped saws failed to stop the leak, some people suggested the nuclear option.  It would be difficult to complete at the depth of the wellhead.  However, this propoganda film from the USSR shows how the Soviets pulled it off at a surface gas well.

The Containment Cap apparently captured 441,000 gallons on Friday, but an estimated 500,000-1,000,000 is leaking daily into the Gulf.  Tony Hayward is optimistic:

‘BP chief executive Tony Hayward told the BBC on Sunday that he believed the cap was likely to capture “the majority, probably the vast majority” of the oil gushing from the well. The gradual increase in the amount being captured is deliberate, in an effort to prevent water from getting inside and forming a frozen slush that foiled a previous containment attempt.’

However, Coast Guard Adm. Thad Allen is pessimistic:

‘[Allen] said on CBS’ Face the Nation that the spill, which is ravaging beaches and wildlife, will not be contained until the leak is fully plugged and that even afterward “there will be oil out there for months to come. The disaster, which began with an oil rig explosion in mid-April, will persist “well into the fall,” Allen said.’

Hopefully the Containment Cap works like Tony says it will.  However, given how many failures were faced along the way, and how difficult it is to work at these depths with current technology, it is no wonder people continue to bring up the nuclear option.  With oil likely to leak through the fall, the question I have is this: if BP was so eager to drill at a depth of 5000 feet, why weren’t they prepared to deal with all possible outcomes of that effort?  When remote operated submarines and diamond tipped saws don’t work, and that is the best that BP has, you have to ask how much effort BP and TransOcean put into contingencies.

As oil becomes more difficult to obtain, and the costs of extraction increase, we will only go to greater and greater lengths to get more oil.  I hope that in the future, instead of subsidizing the oil, and leaving the externalities out, that the externalities get factored into the cost of oil, and that the subsidies are made clear, so that consumers really know how much a gallon of gas costs.  That will allow consumers to make an educated decision about their energy use.