By Michael J. Economides

It is billed as a “panel of the world’s leading economists… to fight climate change.” I am not sure what kind of economists they are but the ones that have been meeting in Bonn, Germany seem to ignore what any undergraduate student in business or engineering can readily conclude: the net present value of carbon dioxide fossil fuels is positive and huge; the net present value of any “green” alternatives is negative to hugely negative.

Unless of course they start with the presumption of anthropogenic global warming, which they do and which is not quite the same as climate change, but even more to the point, they accept lock stock and barrel the most alarmist, the direst predictions of the consequences of global warming. If one accepts those, no economic calculation is necessary because the presumed damages have an incalculable impact. There is no real need for “leading economists” to congregate other than provide fake but authoritative sounding pronouncements for what it is a thinly disguised giant worldwide tax. 

The panel was assembled by U.N. Secretary-General Ban Ki-Moon last March and is supposed to report to him in October. “Potential revenue sources include auctioning the right to pollute, taxes on carbon production, an international travel tax, and a tax on international financial transactions, as well as government grants and loans.” The speaker in Bonn: none other than Nicholas Stern, the author of one of the most alarmists reports on the subject in the UK.

Almost certainly because of the failure of US Congress to enact carbon legislation and the debacle in Copenhagen last December, the proposal in Bonn, unabashedly uttered by Stern is for the UN to be the revenue raiser. In a far from subtle manner, the UN has been mentioned for the first time as the vehicle to raise $100 billion per year to fight climate change. This departure from past plans is so outlandish, so far out of any authority that the UN has ever claimed on member states that it would lend credibility to the pronouncements of not just right-wing radio talk show hosts but the most radical phobias of world governance expressed by fringe groups.

Stern is certainly not immune to cherry pick information to prove a point.

One of the most striking examples, one that has been quoted by many, is the Stern Report’s citing of the work of Robert Muir-Wood, head of research at Risk Management Solutions, a US consulting firm. The Report said: “New analysis based on insurance industry data has shown that weather-related catastrophe losses have increased by 2% each year since the 1970s over and above changes in wealth, inflation and population growth/movement… If this trend continued or intensified with rising global temperatures, losses from extreme weather could reach 0.5%-1% of world GDP by the middle of the century.”

Muir-Wood said his research showed no such thing and accused Stern of “going far beyond what was an acceptable extrapolation of the evidence”.

Stern in Bonn was unfazed. He talked of a “new industrial revolution to move the world away from fossil fuels to low carbon growth… It will be extremely exciting, dynamic and productive."

Arousing rhetoric but there was nothing specific. Which technologies will shape this new industrial revolution, what is their viability, what is their own economic attractiveness? What it is certain is that the existing highly attractive, tried and true technologies and energy sources are to be taxed at the tune of $1 trillion per decade. There will be a process, not specified, on how this massive revenue will be “distributed.” And finally the clincher, “private capital also will be crucial, and governments must adopt policies reducing the risk to investors”, i.e. subsidies, i.e., more taxes.

Ideologues seem unrepentant and unmoved by the giant signals from many countries, all in just this year, which led to the Copenhagen fiasco, the wholesale abandonment of subsidized, unrealistic green technologies throughout Europe and the huge disconnect between public pronouncements and actions by practically every country. Now they will try the UN route which is the surest way to further reduce the effort to laughable levels. How is the UN going to compel countries to comply with such massive tax increases?

But never underestimate the environmentalists’ fervor once they find themselves in the government. In the United States we have a new tactic. The EPA, citing the Congressional refusal to enact the holy carbon legislation, which I would have thought would be a yet another giant signal of what the public wants (a bothersome nuisance I am sure) will now attempt to impose regulations on the power and energy industry.

Blinded by ideology and an almost religious anti-carbon devotion have they, from Bonn to Washington, lost all their senses?

Economides is a professor at the University of Houston and the editor-in-chief of the Energy Tribune

There have been two huge lies, the first that hydraulic fracturing somehow causes natural gas to migrate upwards through the geological formations, infiltrating drinking water aquifers. The second, is that “chemicals” mixed with the fracturing fluids will contaminate the same drinking water. One of the chemicals in question is diesel, as has been all of a sudden singled out in a press release on August 5 by something called the Environmental Working Group and another called Earthworks.

I have worked on hydraulic fracturing for more than 25 years, mostly as an academic, and while I consulted with the new villains, Schlumberger, Halliburton and BJS, I do not work for them. I have written probably more books and papers than anybody else on the subject and I have consulted with companies in 70 countries. I estimated I have trained 6,000 engineers all over the world.

The idea that formations 10,000 ft below ground can somehow contaminate drinking water aquifers, 9,500 higher through the growth of the fracture height is beyond preposterous. I would like to see a calculation, any calculation from anybody that is affiliated with these groups that can show fracture height migration of ten thousand feet. Ironically, in fracture design we are worried and try to avoid fracture growth of 100 ft or so to avoid losing production to another formation. 

If fracture height cannot connect the reservoir with the water aquifer then what could do it? Natural gas migration through the rocks themselves by some magic we do? If that were the case, if the separating multiple layers of different rocks were that porous, the reservoir would not have existed in the first place, having leaked naturally all the way to the surface over millions of years of geologic time.

The “chemicals” we use are not that many nor are they sinister. We use mostly gelling agents, not much different than the common kitchen flour to thicken the water to allow it to transport the particulates, tiny granular materials to keep the fracture propped so that gas and oil will flow into the well (still 10,000 ft below ground.) We also use a few other chemicals to modify the properties of the fracturing fluid, one of which is a small volume of diesel as a “leakoff control agent” to prevent the fluid from leaking off into the formation, perpendicular to the fracture face, while we are fracturing. If the diesel leaks off it would rejoin its cousins, hydrocarbons that make up oil and gas, the same ones from which diesel comes from. No harm done there.

If these groups worry about the wells themselves leaking, wells that are drilled through the ground, superficially it may be a legitimate concern. But this has nothing to do with fracturing. About 100,000 wells are fractured worldwide every year and in all my years in this industry I have heard of precious few examples of such accidents. The reason is that oil and gas wells are hermetically sealed with steal casing and a cemented annulus. They are perforated only at a very limited interval, perhaps 50 to 100 ft, exactly where the targeted reservoir is. Fracturing fluids will not go anywhere else. Beyond the obvious environmental calamity, the industry would consider such a leak, not just in drinking water aquifers but in any other formation, thousands of feet away separated by impermeable rocks, as a huge failure in its primary purpose: to train fracturing fluid injection exactly where it is supposed to go. Wasting what it is at times a multi-million dollar exercise is not the habit of this industry.

In the August 5, press release, here are some choice quotes: “Oil washing up on our shores is not the only threat America currently faces from the oil and gas industry…. Currently, there is not a system in place to make sure that toxic diesel fuel is not polluting our drinking water sources.”

And of course the obvious: “This industry has proven time and time again that they cannot be trusted to regulate themselves… Full regulation of hydraulic fracturing is needed to ensure that our drinking water is protected.” There you have it.

What is mystifying is that nobody in these groups seems to understand that they are committing hara-kiri in their position in the public eye. Picking on a tried and proven technology such as 60-year old hydraulic fracturing makes little sense.

Here is the clincher and I would like for the readers of this piece to get it. What is at stake here is at least 90% of natural gas production and perhaps 70% of oil production in the United States. In the mature petroleum environment of this country, characterized by depleted pressure and very low permeability reservoirs (on land we have used all of the choice formations decades ago) hydraulic fracturing is the only way to produce oil and gas wells. For almost all gas wells in the United States fracturing is not a choice. It is a necessity.

A back of the envelop calculation suggests that the war on fracturing toys with about $200 billion per year. This is the incremental value added by fracturing in the United States at just the wellhead. The multiplier in the economy is several times that. The damage to the US energy supply would be incalculable. This is why the cavalier attitude of the environmental groups is hard to fathom. They do publish their telephone numbers to solicit public support. So here they are. It would be great if you call them.

Dusty Horwitt, Environmental Working Group:  202-939-9133
Lauren Pagel, EARTHWORKS:  202-550-8960