Blowout week 20

21 stories this week. I kick off with the revelation that Warren Buffet is more interested in tax avoidance than saving the planet.

Congress failed to renew the production tax credit in 2013 and the installation of new windmills plummeted from 8,385 megawatts in the 4th quarter of 2012 to 1.6 in the first quarter of 2013.

And I end with an echo from across the pond provided by Master Resource:

The long list of market distorting policy includes subsidies, mandates, mispricing, costly but ineffective regulations, entry restrictions, political vs. evidence based decision-making, social vs. market emphasis, and just plain anti-market bias.

Buffet: Tax avoidance not wind that makes sense: Wind Construction Collapses Without Tax Subsidy

“I will do anything that is basically covered by the law to reduce Berkshire’s tax rate,” Warren Buffett told Fortune recently. “For example, on wind energy, we get a tax credit if we build a lot of wind farms. That’s the only reason to build them. They don’t make sense without the tax credit.”

Animated catastrophe: Antarctic glaciers melting ‘passed point of no return

The vast glaciers of western Antarctica are rapidly melting and losing ice to the sea and almost certainly have “passed the point of no return,” according to new work by two separate teams of scientists.

West Libyan oil heading for market: Libya Oil Output May Double as Western Protests End

Libya’s daily oil output may double to 500,000 barrels today after protesters agreed to reopen pipelines carrying crude from fields in the country’s western region, according to officials.

OPEC to be called by IEA: Energy agency predicts oil shortage unless supply boosted

Industrialised countries could be facing the prospect of an oil supply squeeze and higher prices later this year unless production is lifted, according to a report just released by the International Energy Agency.

Solar subsidies: UK Scraps Subsidies To Solar Farms ‘Blighting’ The Countryside

Britons have had enough of solar panels ruining their idyllic countryside. The UK government is planning to eliminate subsidies in a bid to keep solar farms from continually sprouting up across the countryside.

Wind can replace coal – official: Wind energy is vital, as new report shows fossil fuels dwindle

RenewableUK says a new report which warns that this country’s reserves of oil, coal and gas will run out in just over five years shows the need for investment in wind, wave and tidal energy to fill the gap.

Researchers at the Global Sustainability Institute at Anglia Ruskin University found the UK has 5.2 years of oil, 4.5 years of coal and 3 years of gas left.

ROP ratios are meaningless like this report: UK “needs more home-grown energy”

In just over five years Britain will have run out of oil, coal and gas, researchers have warned.

A report by the Global Sustainability Institute said shortages would increase dependency on Norway, Qatar and Russia.

Mis-sold energy: E.On energy supplier to pay record £12m for mis-selling

Energy giant E.On is to pay out £12m to some of its customers following an investigation into mis-selling by the industry regulator.

Ofgem said it was the largest penalty paid to date by a UK energy supplier.

The taming of the crude: Safety debate eyes taming Bakken crude before it hits rails

But that is starting to change. A potentially more effective approach, which would remove the most volatile elements from the crude before it is being loaded onto rail cars, is now beginning to get attention, both from regulators considering safety enhancements and some lawmakers, industry executives say.

Companies to pay the price of policy failure: Energy firms face higher charges for power shortfalls

Energy companies face significantly higher charges if they fail to buy enough power to meet customers’ needs, under new Ofgem rules intended to reduce the risk of blackouts.
The measures, due to be published on Thursday, are the latest attempt to encourage companies to build new power plants to help avert a looming energy crunch as old plants close.

Solar to compete with renewables: Government to slash subsidies for large scale solar farms

The government has unveiled proposals to limit the subsidies paid to large solar farms from next April.

Owners of installations bigger than 5 megawatts (MW) will have to compete with other renewables for financing.

Lib Dems place environment ahead of voters: Renewable energy capacity has more than doubled since 2010

Britain’s renewable electricity capacity has doubled since 2010, according to statistics released today.

Liberal Democrats in government have fought to ensure that the environment is a priority for the coalition.

A report from the Department of Energy and Climate Change (DECC) shows that 15% of British electricity is now coming from renewables, enough to power over 10 million homes.

Wind subsidies needed to crush Putin: Ukraine crisis underlines importance of UK renewable energy

Guy Hands, one of the City’s most flamboyant deal-makers, warns on Monday that the Ukraine crisis has underlined the importance of the UK’s renewable energy sector, and attacks those wanting to phase out onshore wind subsidies.

My selection of stories posted by Luis de Sousa At The Edge of Time. Luis looks at the evolving energy scene.

Bailing out Ukraine: Ukraine to use EU and IMF money to pay for Russian gas

Ukraine plans to use EU and IMF money to pay for Russian gas, but will not pay a cent unless Moscow agrees a market price, its authorities say.

Oil companies struggle with high energy costs: Oil Producer Pleas Snubbed by Norway as Offshore Costs Surge

Oil and gas companies can expect little help from Norway on tackling surging costs as the government of western Europe’s biggest crude producer tones down plans for measures that producers hope will boost earnings.

Geologists worried: The Status of U.S. Oil and Gas Production (Spring 2014)

I find it interesting that many of the individuals expressing the greatest concerns about oil and natural gas supplies are petroleum geologists. The list includes, but is not limited to, Jean LaHerrere, Colin Campbell, Art Berman, Jeremy Leggett, David Hughes and Jeffrey Brown.

Libya hits bottom line: Libyan oil operations closed since March, OMV says

Operations in Libya for Austrian energy company OMV were curtailed sharply by security issues, CEO Gerhard Roiss said Tuesday.
OMV said its production for first quarter 2014 was 311,000 barrels oil equivalent higher year-on-year. Roiss said in a statement production from his company’s portfolio in Norway helped offset losses from North Africa.

Negative energy prices: Germany Sets New Record, Generating 74 Percent Of Power Needs From Renewable Energy

On Sunday, Germany’s impressive streak of renewable energy milestones continued, with renewable energy generation surging to a record portion — nearly 75 percent — of the country’s overall electricity demand by midday. With wind and solar in particular filling such a huge portion of the country’s power demand, electricity prices actually dipped into the negative for much of the afternoon, according to Renewables International.

The last week on Master Resource:

Negative Greens: Greens Going Gas (emissions data, economics speak for themselves)

The safety and importance of hydraulic fracturing are not just industry talking points. They are conclusions embraced by virtually everyone, outside of a narrow subset of political activists who refuse to let science and facts get in the way of their extreme agenda.

Amazing Marcellus: Marcellus: Natural Gas Giant of the East (new technology, new life for 19th century energy fields)

Pennsylvania was the birthplace of the oil and natural gas industry in the 1800s. A century and a half later, the Marcellus shale play has once again put Pennsylvania and West Virginia in the energy headlines.
This time the focus is on natural gas more than oil–and with wells that are at least one hundred times deeper than the first oil well drilled in 1859. The rapid growth in supplies in an area exceptionally close to major demand markets has been a benefit to regional economic growth and has helped reduce U.S. dependence on imported energy. It has also increased the need for enhanced downstream infrastructure.

US learns how to screw things up the European way: Electric Reform Needs a Pro-Market Voice (unopposed politicization must cease)

The electricity regulatory framework is broken.
The long list of market distorting policy includes subsidies, mandates, mispricing, costly but ineffective regulations, entry restrictions, political vs. evidence based decision-making, social vs. market emphasis, and just plain anti-market bias. Add to this a gaggle of well-financed crony capitalists that can attend endless meetings to advocate for more of these misguided efforts.

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21 Responses to Blowout week 20

  1. Joe Public says:

    1. “Animated catastrophe: Antarctic glaciers melting ‘passed point of no return”

    It seems ironic that in the week a reviewer suggested Bengtsson’s paper be rejected because it added little to (mankind’s) knowledge, the paper linked-to in the above headline the Beeb reported in 1999 “Nature blamed for melting ice ”

    The research, published in the journal Science, concludes that the melting, which began nearly 10,000 years ago, may well continue until the sheet collapses completely.

    The sheet is about 932,000 sq km (360,000 square miles) in area, roughly the size of Texas and Colorado together.

    If it did collapse, global sea levels would rise by up to five or six metres, enough to submerge many coastal regions. But collapse is unlikely, on present trends, for another 7,000 years.

    Professor Howard Conway of the University of Washington, one of the scientists involved in the research, said there might be nothing anyone could do to slow or reverse the melting.

    2. “Wind can replace coal – official: Wind energy is vital, as new report shows fossil fuels dwindle”

    “Researchers at the Global Sustainability Institute at Anglia Ruskin University found the UK has ….. 4.5 years of coal…. left.”

    Really? RenewablesUK, the organisation with no vested interest, really ought to check the facts:-

    UK coal consumption:- In 2012 the UK consumed 64 million tonnes.

    UK coal production:- In 2012 the UK produced 16.8 million tonnes

    UK coal reserves:- The UK has abundant (3,196 million tons) reserves of coal

    For those without a calculator, 3196/64 = nearly 5 decades, at current rate of consumption.

    • Euan Mearns says:

      1) It is a great animation of Antarctic glaciers totally devoid of any evidence that Man made climate change has anything to do with the observations at all. Antarctic glaciers, like everything else in the fantasy world of climate science are supposed to be static.

      2) Reserves / production figures are known to be virtually meaningless and I’m astounded that an academic group can publish this sort of dross. The media by now should know if the source is academia it should be treated with scepticism.

      The R/P raio for UK oil has been below 6 since 1984. It’s a miracle, 30 years have passed and we have not yet run out of oil. The damaging thing here is that we do have serious energy supply and energy security issues that need to be treated in a serious way. Not “were going to run out of oil in 5 years we need to build wind mills.”

    • Hi Joe,

      The proper reference for UK coal reserves is the one that the British government provides for the World Energy Council Surveys

      For the latest survey, proved recoverable reserves for year-end 2011 were 228Mt. I believe that this is an appropriate estimate of future production.


      • Joe Public says:

        Thanks for that info Dave.

        I note you use the adjective ‘proper’, rather than maybe ‘accurate’.

        I find it hard impossible to believe that there is such a discrepancy between the figures of 228Mt and 3,196Mt. I’ve no idea which is the most accurate.

        But if we’re using 64Mt pa and there’s only supposed to be 228Mt reserves, ……. our own coal will run out in only just over ……. 3.5 years.

        • Hi Joe,

          “I note you use the adjective ‘proper’, rather than maybe ‘accurate’”

          British reserves as reported to the World Energy Council have been less than 3Gt since 1992. The minister who is quoted at the UKCoal web site mislabeled resources as reserves. UKCoal is being dishonest on its web site, because they know the difference, and they distinguish between them correctly in their annual reports to stockholders.

          With respect to which number might be the most accurate, consider that British coal production last year was 12.7Mt. The annualized decline rate over the last ten years has been 8% per year. There is no way future production will be anywhere near 3Gt.


          • Joe Public says:

            Hi Dave

            I’m genuinely confused.

            From the June 2012 – Energy and Climate Change Committee – Draft Energy Bill: Pre-legislitive Scrutiny
            Written evidence submitted by the TUC Clean Coal Task Group

            “The UK has plentiful coal reserves2 currently estimated to be at least 3.1 billion tonnes which is enough for around 60 years at current production levels. This is far more than our gas reserves which are 13 years maximum at current production levels.”


            OK. It’s not implausible that the reserves of one fuel may inadvertently be ‘wrong’ in a parliamentary source. But the second sentence states gas reserves at 13 years, vs the Renewables UK prognostication of only 3 years.

          • Joe Public says:

            Hi Dave.

            Cracked it. The missing phrase is ‘economically recoverable’, which Roger (below) alludes to, in his description of gold mining viability.

            (IMHO) UKCoal is correct to state reserves (i.e. what is ‘left’ in the ground) = 3,196 million tons; RenewableUK and Anglia Ruskin University’s report are at fault for NOT correctly describing the 4.5 years-worth as ‘economically recoverable’ coal. [The report does NOT define ‘reserves’]


          • Hi Joe,

            The usual definition of reserves requires economic viability. That is precisely the distinction between reserves and resources. For the deep coal identified by Charles Hendry in his response to Parliament in 2011


            only the first 129Mt would qualify as reserves. The rest should be resources.

            Because of the mines that have closed since then, that 129Mt would be reduced now.


          • Roger Andrews says:

            Dave: The CIM standards I linked to earlier require “reasonable prospects for economic extraction” before you can even report a resource, and the level of detail one has to go into to meet this criterion sometimes makes “resources” almost indistinguishable from “reserves”. (A client I work for who submitted a “resource” estimate last year had to back it up with a 187-page report.) I suspect that a lot of the UK’s ~3 billion tons of coal “resources” might drop off the scope if this criterion were applied to them too.

        • Euan Mearns says:

          I believe we will shortly be down to 1 deep mine and will be lucky if it keeps going for 3.5 years. But that will not mean our coal has run out. It means we will have stopped mining coal. If we ever start again is a good debating point to have with Dave.

          We have mined the easy to get at coal. What is left is deeper and in the wrong place, i.e. not beside the railways and power stations or Newcastle. Going forward it seems more likely our coal would be developed by in situ gasification. I am not enthused by this process since it takes us back to the 19th century manufacture of coal gas.

  2. Roger Andrews says:

    Euan & Dave:

    I’ve worked for many years as a resource/reserve estimator in the mining industry, and one of the first things you learn is that price is major control on resource size. Recently, for example, I’ve been working on a gold mine that contains about 1.5 million ounces recoverable at $1,400 gold but three or four times as much at $2,000 gold. A lot of this has to do with the fact that gold grades tend to be lognormally distributed while coal is either there or it isn’t, but I was wondering to what extent all the estimates of recoverable coal (or gas, or oil) reserves or resources take price into account. Or to put the question another way, if the price of oil doubles, what happens to reserves?

    • Hi Roger,

      I will wait to hear from Euan says about oil and I hope he will invite a post from you on estimating gold reserves. My sense is that the situation for underground coal mining is utterly different from hard rock mining. Coal prices are much more stable than metal prices, and there are often long-term contracts with power plants. Only rarely is there an adjustment for the current price. And once shut down, coal mines rarely reopen.

      At the national level the early coal reserves were intended as estimates of total future production. People started with geological maps,and applied simple rules: minimum seam thickness (1 foot in the early days), maximum depth (4,000 feet at the beginning), assume a recovery factor (80% at the beginning), and simply added it up. As you say, coal is coal. This approach gave the UK 190Gt at the time of the first major international survey in 1913. It was still 169Gt at the 1962 World Power Council Survey (the 11th international survey) in 1962, with about half of the difference accounted for by production.

      At some point there is a realization that there are few opportunities for new mines, and the reserves drop to the reserves at the producing and planned mines. This is where the UK is now, at 228Mt. I think this is a pretty good estimate of future production, but it is much smaller. The total production will be about 27Gt.


      • Euan Mearns says:

        Dave, how do you fancy writing a guest post on the history of UK coal mining? Reserves evolution etc. Sure you must have something like this already – just needs the final chapter.

    • Euan Mearns says:

      Roger, I’ve been busting a gut on Germany 🙁 Oil and gas reserves are an ethereal quantity where price “economic recovery” is one variable. Other variables include how many wells you have on a field since the SEC only allow extrapolation so far away from a well. Furthermore, the reserves reported by BP involve two fundamentally different reporting standards. The OECD and some of OPEC use the over strict SEC standard while the ME OPEC countries use their own modified version of the SPE methodology which is way over generous.

      What happens if oil prices double? Well look at the UK chart I posted, oil price went up 5 fold 2000 to 2008 and reserves barley blinked. But they have gone up since in a form of delayed response. We have some large new projects about to come on, but the industry is also in panic about the cost of decommissioning, the prospect of an independent Scotland and the near total lack of exploration success for so long as anyone can recall.

      I’ve not had time to look at what you just sent me – will do soon. But a guest post on the economics of gold mining would be welcome, and how energy prices impact that in addition to gold prices. Olympic dam is another mining story that has always fascinated me. When they started to talk desal plants for mineral extraction I kind of suspected that the game was up. Charts of global gold production and all that would be nice to have.

    • Roger Andrews says:

      Euan & Dave. Thank you for your responses.

      The difference between mineral reserves and energy reserves is that energy gets consumed while most minerals can be recycled, and gold is the arch-recyclable metal. Very little gold in fact ever gets consumed; almost all of it gets “stored” in the form of jewelry, coins or bullion. (An industry joke is that we find a gold deposit, dig the gold out of the ground and turn it into gold bars, and then we put the gold bars back into undergound storage and leave them there.)

      So gold probably isn’t a good case to study. Something like copper (peak copper?) might be better.

      I’ll think about whether I might be able to put something together on mineral reserves, resources and economics. However, you should be aware that a key consideration will be exactly how one defines a “mineral resource” and a “mineral reserve”, and to address this subject I would have to get into a discussion of classification criteria that would rapidly cause everyone’s eyes to glaze over. You can get a foretaste from the Canadian definitions linked to below. (Why the Canadian definitions? Because they’re more liberal than anyone else’s, and as a result a disproportionate number of the world’s mining companies are now registered in Canada). 😉

      • Euan Mearns says:

        Olympic Dam was a copper mine with U by product that was to be converted by BHP Billiton to a U mine with Cu by product. Its an incredibly interesting case study since U prices were going up, the Cu mine was underground, and was to be converted to an open cast pit, but oil prices were also going up making the cost of clearing overburden too high. I think a head rolled at BHP.

        Should keep you busy for several years Roger should you be able to rise to the challenge 😉

        On a more serious note, any case study illustrating the interplay between ore grade, mineral price, overburden removal, energy consumed and energy price would be keenly awaited. I gotta go cook dinner now 😉

      • Hi Roger,

        Thank you for the link. I noticed that Canada expects people the same definitions for coal. I believe Canada was the first country to change coal reserves from a spreadsheet seam thickness and area calculation to strictly economic criteria. It caused an amazing drop, from 1234Gt in 1913 to 90Gt in 1948 tp 7Gt now. Cumulative production is 3Gt.


  3. Syndroma says:

    May 16, 2014, Amsterdam (Netherlands) | The Supervisory Board of Directors of South Stream Transport B.V. met today at the Company’s headquarters in Amsterdam. During the meeting, it was noted that all arrangements for the first two offshore pipelines are in place.

    • Euan Mearns says:

      Looks like you guys get to keep Crimea and got away with a slap on the wrist 😉 South Stream must be Ukraine’s worst nightmare since once it is built Ukraine transit can be avoided altogether (?) meaning Russia can simply terminate deliveries on non-payment. Or perhaps deliver just enough to keep E Ukraine warm in winter.

  4. Roger Andrews says:


    Several years is right 🙁

    An interesting, albeit possibly apocryphal story was circulating 40 years ago about the discovery of Olympic Dam. Western Mining reportedly drilled holes on a number of structural intersections looking for stratabound copper in the Cambrian, and at Olympic Dam they indeed found a deposit, but in the Precambrian. But nothing succeeds like success, and what’s a billion years between friends anyway 🙂

  5. Euan Mearns says:

    Bishop Hill cary this story today:

    MSP Alex Johnstone (Conservative, North East Scotland) has this week tabled question for answer in the Scottish parliament on causes of last month’s power black-out which cut off electricity to 200,000 homes in the Highlands and Islands.

    Some may recall….

    Dear Mr Johnstone,

    You may recall we met a few years ago when I arranged a political debate on energy at the University of Aberdeen. I have since set up my own blog dealing with energy and climate issues and yesterday I ran a simple post based on a letter published in the P&J providing an alternative explanation for the Scottish blackout. This was cross posted to Bishop Hill, the UKs biggest climate and renewable energy sceptic blog. It has had large national exposure.

    While there are reasons to doubt the reliability of all the claims made by Mr Mackay in his letter, much of it rings true. The blackout occurred on a windy and gusty night and the grid engineering works designed to enable the grid to cope with such conditions are not yet complete. It does not seem credible that a faulty switch at Knocknagael substation would alone blackout the whole of northern Scotland. And it does seem more credible that the switch did its job, isolating a part of the system, setting off a chain reaction that resulted in an extensive rolling blackout, as claimed by Mr Mackay.

    John Swinney: I am absolutely certain that it was not a contributing factor. Mr Johnstone is free to ask whatever questions he wishes, but I would think that what I said to the Parliament in my original answer—that Scottish and Southern Energy Power Distribution discovered a faulty electronic relay at its Knocknagael substation, which is near Inverness—would have been enough reassurance for him.

    My emphasis added, where “it” refers to wind power.

    I am advised that one way of getting at the truth in this matter is to see the “engineering incident report” from SSE, although I gather this may not yet be complete. I encourage you to pursue this matter since it is critical that the SNP energy policy is scrutinised and those who advocate it, are held to account.

    Yours sincerely,

    Dr Euan Mearns

    Did wind power cause Scottish blackout?

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