The Environmental Protection Agency (EPA) has lost a major legal battle with major power companies over the timeframe and extent of coal-pollution regulations, but it will do little to stay the decline of coal in the face of the natural gas revolution.
On Tuesday, the US Court of Appeals overturned an EPA cross-state pollution rule, saying that it stepped on the legal toes of states, which are meant to set their own air-pollution regulations. The court also said the EPA’s caps on sulfur dioxide and nitrogen oxide emissions from power plants in 28 US states, mostly in the East and Texas, were too low.
Even by the EPA’s estimates, the pollution rulings would cost some $800 million annually to facilitate, beginning in 2014.
A victory it is—especially for the major players like Edison and the American Electric Power Co.—but it will do little to change the fact that coal-fired electricity generation is no longer a viable competitor in the face of cheap natural gas.
Coal stocks have experienced significant losses this year, though rallied somewhat on the Tuesday court ruling. At the same time, natural gas futures fell more than 3% with the court ruling, but rebounded right away, with no actual losses.
Friday, August 24, 2012
International Oil Companies Illegally Exploiting Somali Hydrocarbons?
The East African Energy Forum has issued warnings to the Kenyan Government and four international oil companies today that are illegally exploiting offshore hydrocarbon concessions off the southern coast of Somalia. The lobby group has said in its directive to the oil giants that they have engaged in a gross infringement of Somalia's offshore resources, territorial integrity and sovereignty.
"These offshore oil blocks are solely owned by the Republic of Somalia as stipulated in the 1982 UN Common Law on the Sea (UNCLOS). Kenya's move to sell these oil blocks violates international law" says Abdillahi Mohamud, the lobby's managing director.
He states that the oil blocks sold by Kenya in Somali waters are L21, L23, L24 purchased by Italy's Eni, L22 by France's Total S.A., L5 by USA's Anadarko Petroleum Corporation and Block L26 by Norway's Statoil.
The lobby group warned these companies risk being shut out of future Somali energy concessions which are estimated to hold large untapped reserves along with what he described as 'legal action' the group’s lawyers would pursue.
"They should deal directly with Somalia, appropriating these blocks from the rightful owner is not in the interest of these otherwise innovative and successful oil companies."
The lobby group has stated it is planning legal action against Kenya and the oil companies.
"We are not asking for compliance on a matter of dispute, this isn’t a dispute, it’s a violation of Somalia's international boundaries established by an international law of which Kenya is a signatory. We will file court proceedings against those involved in the coming weeks at the International Tribunal for the Law of the Sea in Hamburg, Germany."
He continues on saying it is in Kenya and the oil company’s best interest to cease allocating offshore blocks that rightfully belong to Somalia.
"We will continue to take the matter to the highest courts, any attempt at illegally exploiting Somalia’s energy resources will be met with full opposition from us and our partners."
The lobby group has noted the total area of Somali offshore territory that is being illegally sold by Kenya and purchased by the four oil companies is approximately 116,000 square kilometers, an area about the size of Greece.
"These offshore oil blocks are solely owned by the Republic of Somalia as stipulated in the 1982 UN Common Law on the Sea (UNCLOS). Kenya's move to sell these oil blocks violates international law" says Abdillahi Mohamud, the lobby's managing director.
He states that the oil blocks sold by Kenya in Somali waters are L21, L23, L24 purchased by Italy's Eni, L22 by France's Total S.A., L5 by USA's Anadarko Petroleum Corporation and Block L26 by Norway's Statoil.
The lobby group warned these companies risk being shut out of future Somali energy concessions which are estimated to hold large untapped reserves along with what he described as 'legal action' the group’s lawyers would pursue.
"They should deal directly with Somalia, appropriating these blocks from the rightful owner is not in the interest of these otherwise innovative and successful oil companies."
The lobby group has stated it is planning legal action against Kenya and the oil companies.
"We are not asking for compliance on a matter of dispute, this isn’t a dispute, it’s a violation of Somalia's international boundaries established by an international law of which Kenya is a signatory. We will file court proceedings against those involved in the coming weeks at the International Tribunal for the Law of the Sea in Hamburg, Germany."
He continues on saying it is in Kenya and the oil company’s best interest to cease allocating offshore blocks that rightfully belong to Somalia.
"We will continue to take the matter to the highest courts, any attempt at illegally exploiting Somalia’s energy resources will be met with full opposition from us and our partners."
The lobby group has noted the total area of Somali offshore territory that is being illegally sold by Kenya and purchased by the four oil companies is approximately 116,000 square kilometers, an area about the size of Greece.
Energy Independence by 2020 with Romney?
Presidential candidate Mit Romney on Thursday promised voters a US entirely energy independent by 2020, the allegedly detailed plan for which he plans to unveil on his campaign tour stop in New Mexico later today.
The key to Romney’s ambitious promise is to aggressively increase local production of oil and natural gas on federal lands and on the country’s coasts.
Romney reportedly put the finishing touches on his plans during a $6-million luncheon in Houston yesterday with the help of oil industry majors. The plan would also necessarily seek to remove a number of federal regulations aimed at reducing pollution.
Key to the plan is a state-centric strategy that would allow each state to manage its own development of energy resources on federal land, effectively removing federal government control over these lands and allowing states to determine the issuance of exploration licenses.
The grand plan also promises to create 3 million energy jobs.
On a broader level, the plan would lift the Obama administration’s suspension of fossil fuel development off the coast of Virginia in response to the 2010 BP oil spill. In addition, the plan would boost development of the Keystone XL pipeline
The key to Romney’s ambitious promise is to aggressively increase local production of oil and natural gas on federal lands and on the country’s coasts.
Romney reportedly put the finishing touches on his plans during a $6-million luncheon in Houston yesterday with the help of oil industry majors. The plan would also necessarily seek to remove a number of federal regulations aimed at reducing pollution.
Key to the plan is a state-centric strategy that would allow each state to manage its own development of energy resources on federal land, effectively removing federal government control over these lands and allowing states to determine the issuance of exploration licenses.
The grand plan also promises to create 3 million energy jobs.
On a broader level, the plan would lift the Obama administration’s suspension of fossil fuel development off the coast of Virginia in response to the 2010 BP oil spill. In addition, the plan would boost development of the Keystone XL pipeline
The Truth About Gasoline Price Volatility
Nothing infuriates Americans more than volatile, spiking gasoline prices. Often the causes given for gasoline price hikes seem contrived. Iran and Israel trade harsh words in press reports and before the ink is even dry of the page oil prices tick up. Word of a fire at an oil refinery is enough to send prices shooting up as high as the flames on the cracker —and just as fast.
Those price spikes never seem to come down nearly as fast as they shoot up. Politicians are quick to blame oil companies for gouging customers, speculators for manipulating markets, traders for withholding supply.
The truth about gasoline price volatility is both a little more complicated and yet quite simple. The factors that seem to have the most impact on gasoline prices include:
- Global Oil Swing Productive Capacity. While the world has plenty of oil overall, prices are set by the amount of excess capacity at the daily margins. That is how much oil is left over when all the contracts for delivery are met. How much oil is available if something goes wrong? If some refinery shuts down? If some pipeline bursts? If some war breaks out? This marginal oil quantity has traditionally been controlled by Saudi Arabia’s ability to ratchet up or ratchet down the amount of oil pumped each day. This control over swing productive capacity is what gives OPEC its market power and drives the rest of us crazy.
- The Refinery Business Model. The oil refining business is a hard way to make a living. These plants are enormously complicated. They require skilled precision to keep them operating at optimal performance and many things can—and do go wrong. Yet it is almost impossible to build new refineries in the US today because of the environmental regulation, high capital costs and the NIMBY pressures in every potential location. We live close the edge of full refining capacity, yet refining margins are very thin because the costs of operation are so high.
- Boutique Fuels Mandates Create Monopoly Markets. A recent fire at the Chevron refinery near my home in the San Francisco Bay area adversely affected the supply of the blends of gasoline used in many of the Western States. A pipeline rupture in the Midwest reduced the supply of oil to refineries serving Chicago. While do these incidents have such a major impact on gasoline supply and price? Because the environment restrictions on fuels has created a system of boutique fuel blends that are virtual monopolies in many markets. The gasoline produced in the Richmond Chevron refinery is specifically designed for the Western market and no other gasoline products can be shipped in from other states to make up for a supply shortfall when a fire or other supply chain problem happens. So having reasonable gasoline prices requires that virtually EVERYTHING must work perfectly in the gasoline production supply chain—or else.
It does not have to be this way, but Congress passes laws without the slightest regard to how they will be implemented or enforced in practice. Congress takes credit for Clean Air but allows bureaucrats to impose regulations that have costs or impacts far beyond what the law intended. This happens because our environmental laws are written to ignore the cost while taking credit for the benefits. Our laws allow Federal agencies to set their own standards for measuring benefits. They are not subject to any burden of proof. The laws allow comment periods on rulemaking proposals but the bureaucrats do not have to accept the comments. The system is one-sided and so are the costs!
A more balanced and reasonable approach to environmental regulation would require Congress to approve major rulemakings by a Federal agency so it cannot avoid the accountability for imposing the costs. Existing regulations should be subject to sunset provisions and forced to be reconsidered regularly to reflect changes in technology and other factors. New laws requiring regulations should not go into effect until the final rules to implement the law are approved by Congress. Just as environmental advocates can sue in Federal Court to enforce environmental laws, those subjected to them should be able to sue over the reasonableness of the impacts of the law and rules to force the government to own its burden of proving that the benefits outweigh the costs and do not constitute an unreasonable taking of private property for which just compensation is required.
These changes in our regulatory regime won’t get more refineries built, but they would inject some common sense into the regulatory process and force the Federal agencies that dream up all these rules that the benefits are worth the cost and the practical application of proposed rules is reasonable and in the public interest.
Those price spikes never seem to come down nearly as fast as they shoot up. Politicians are quick to blame oil companies for gouging customers, speculators for manipulating markets, traders for withholding supply.
The truth about gasoline price volatility is both a little more complicated and yet quite simple. The factors that seem to have the most impact on gasoline prices include:
- Global Oil Swing Productive Capacity. While the world has plenty of oil overall, prices are set by the amount of excess capacity at the daily margins. That is how much oil is left over when all the contracts for delivery are met. How much oil is available if something goes wrong? If some refinery shuts down? If some pipeline bursts? If some war breaks out? This marginal oil quantity has traditionally been controlled by Saudi Arabia’s ability to ratchet up or ratchet down the amount of oil pumped each day. This control over swing productive capacity is what gives OPEC its market power and drives the rest of us crazy.
- The Refinery Business Model. The oil refining business is a hard way to make a living. These plants are enormously complicated. They require skilled precision to keep them operating at optimal performance and many things can—and do go wrong. Yet it is almost impossible to build new refineries in the US today because of the environmental regulation, high capital costs and the NIMBY pressures in every potential location. We live close the edge of full refining capacity, yet refining margins are very thin because the costs of operation are so high.
- Boutique Fuels Mandates Create Monopoly Markets. A recent fire at the Chevron refinery near my home in the San Francisco Bay area adversely affected the supply of the blends of gasoline used in many of the Western States. A pipeline rupture in the Midwest reduced the supply of oil to refineries serving Chicago. While do these incidents have such a major impact on gasoline supply and price? Because the environment restrictions on fuels has created a system of boutique fuel blends that are virtual monopolies in many markets. The gasoline produced in the Richmond Chevron refinery is specifically designed for the Western market and no other gasoline products can be shipped in from other states to make up for a supply shortfall when a fire or other supply chain problem happens. So having reasonable gasoline prices requires that virtually EVERYTHING must work perfectly in the gasoline production supply chain—or else.
It does not have to be this way, but Congress passes laws without the slightest regard to how they will be implemented or enforced in practice. Congress takes credit for Clean Air but allows bureaucrats to impose regulations that have costs or impacts far beyond what the law intended. This happens because our environmental laws are written to ignore the cost while taking credit for the benefits. Our laws allow Federal agencies to set their own standards for measuring benefits. They are not subject to any burden of proof. The laws allow comment periods on rulemaking proposals but the bureaucrats do not have to accept the comments. The system is one-sided and so are the costs!
A more balanced and reasonable approach to environmental regulation would require Congress to approve major rulemakings by a Federal agency so it cannot avoid the accountability for imposing the costs. Existing regulations should be subject to sunset provisions and forced to be reconsidered regularly to reflect changes in technology and other factors. New laws requiring regulations should not go into effect until the final rules to implement the law are approved by Congress. Just as environmental advocates can sue in Federal Court to enforce environmental laws, those subjected to them should be able to sue over the reasonableness of the impacts of the law and rules to force the government to own its burden of proving that the benefits outweigh the costs and do not constitute an unreasonable taking of private property for which just compensation is required.
These changes in our regulatory regime won’t get more refineries built, but they would inject some common sense into the regulatory process and force the Federal agencies that dream up all these rules that the benefits are worth the cost and the practical application of proposed rules is reasonable and in the public interest.
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