Category Archives: When

Oil Industry Investments Rapidly Becoming Uneconomic

My letter to The Southland Times published in today’s paper:

OIL INDUSTRY INVESTMENTS

I heartily agree with Richard Soper [October 29] that Environment Southland is “not a green pressure group”.

Clearly that label cannot apply either to the Rockefeller Brothers Fund, the Norwegian Sovereign Wealth Fund, etc.

Oil is rapidly becoming an uneconomic option and divestment is actually the prudent economic decision.

Responsible institutional investors globally are weighing the evidence and making the choice on an economic and moral basis.

Right now, the oil industry is being driven to a crisis point by the combination of restricted cash flow due to depressed oil prices, and declining return on investment from (ever harder to access) new reserves.

Well before the current low prices prevailed, oil majors were issuing profit warnings, and performing desperate accounting manoeuvres such as share buy-backs to sustain their investor’s yields.

BP, Shell, ConocoPhillips, Saudi Arabia, are all in major trouble, with investors calling for capital restraint. Witness also the fracking ponzi schemes unravelling in the USA, where investors promised high returns have been continuously disappointed.

Additionally, the global economy appears to be sinking further into a deflationary spiral, which may well serve to depress oil prices further, worsening the crisis as noted recently by Goldman Sachs.

The coming oil supply crisis that this inevitably leads to is a major risk to our entire economy here in New Zealand. Investing in risk reduction in this context, preparing our community for an energy and capital constrained future, would be a far better use of our capital.

This would show they are taking the welfare of our children, and our children’s children seriously.

Nathan Surendran

Here’s the fully referenced version: http://bit.ly/1XNyPFt

Here’s hoping Environment Southland and Venture Southland take note…

And here’s an image to accompany the letter which reinforces my case that any industry cannot do well with declining productivity of capital on the scale the oil industry is currently seeing, making it a BAD INVESTMENT…

oil - capex vs production

We desperately need to get serious as a community, nation and species, about the need to leave oil before it leaves us!

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The view from further down the oil supply pyramid – de-growth probable – an interview with Gail Tverberg. Southland NZ implications.

An edited transcript of an interview on the Extraenvironmentalist Podcast, Episode #55. If you’d prefer to view the video interview that this excerpt is based on, you can watch it here: http://bit.ly/ZekRDz. After the transcript, some potential ideas as to how to put this into effect for Southland NZ are added.

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Seth: Gail’s been in this peak oil scene for a long while, and she’s watched the whole scene play out. And being an actuary, she knows how to look at the numbers and see where the risks fall, and it’s very interesting her perspective that she comes from.

Gail: One kind of response is to kind of agree, but then put it out of your mind and say, “well, maybe it will happen to my grandchildren,” or something like that. Or maybe “she just doesn’t know what she’s talking about.” I think that the people who are closer to a situation, maybe the other actuaries for example, they look and they say, “Aha! I think she’s got something there.” Well, when I talk about the oil situation, I think I explain it a little bit differently than what a lot of people understand.

The way I see peak oil is different. The way I describe things is sort of in terms of a triangle of resources, and the way I see things is that we start at the top of that triangle, and the resources at the top of the triangle are the easy-to-extract, cheap oil. We started there a long time ago, and most of those are already extracted. Then we have to move down and we get to the little bit more expensive, little harder to extract oil, or maybe a little farther away, or maybe not quite as good a country that’s got a good political system.

diminishing returns on oil extraction - pyramid

Figure 18. Oil and Gas Resource Volume Versus Resource Quality. This graphic illustrates the relationship of in situ resource volumes to the distribution of conventional and unconventional accumulations, and the generally declining net energy and increasing difficulty of extraction as volumes increase lower in the pyramid.
Source: "Snake Oil: How Frackings False Promise of Plenty Imperils Our Future"  
Chapter 2, ‘Technology to the Rescue’ - Richard Heinberg. http://bit.ly/1iqIAJa

We keep going down the triangle, and there always looks like there’s lots more oil there, but what happens is the more oil that’s there, it’s harder to extract. It’s more expensive to extract and it disrupts the economy. It’s not the cheap oil that our economy started with when the economy was first set up. So it tends to lead to recession.This was never factored in.

People who are looking at the situation just look at the big triangle and say, “My! There’s lots and lots of oil down there.” Yeah, there is lots and lots of oil down there, and that oil may permanently stay in the ground because it’s so expensive to extract and it causes so many economic problems. When we do extract it, we really can’t afford to extract it.

Well, I think what happens is that the oil prices don’t necessarily go up all that high. In fact, I think what we’ve been seeing is exactly what happens. The price goes up a little, but what happens is that you start getting debt defaults. It goes up and you start seeing the situation like we had in Europe.

Europe is a little bit different than the United States because in the United States, we’ve got cheap natural gas which is kind of helping us along to kind of offset the high price of oil. But in Europe, they don’t. They’ve got high-priced natural gas besides high-priced oil, and they’re the ones that are going to be hit worst by the debt defaults. But I think that the way this all evolves is through debt defaults from the high price of oil, and we’re going to see Greece and maybe we’ll see Spain – I think we’re also going to see some kinds of situations in some of the oil-producing countries, for instance Egypt, the countries that find that they’re out of balance as well. And we’re going to see bad financial situations there too. It’s not just in Europe, but the way this all plays out as peak oil, what it looks like is financial collapse.

I think a big piece of the reason why the economies of Greece and some of these other countries are falling apart is because they are such big oil importers, such big users of – they’re so dependent on fossil fuels. I think Greece is actually coal that they’re using a lot of, but what happens is that as the prices increase, the tourists, for example, are not able to travel as much, so it cuts back on the tourist packages that they were selling. And so things don’t go as well. They lay people off of work, and you start seeing the recession that we see, and the taxes aren’t high enough to pay the benefits that they’ve promised the laid off workers, and you start seeing the pattern that we see today.

I think what we’re going to see coming ahead from what is being called peak oil, but I guess it’s really the high oil prices is we’re going to see more and more of what people will think of as financial collapse. And that’s going to be happening around the world. It probably will start in Europe, but it’s going to spread to the United States. It may very well spread to China. It is going to have an impact on places like even Africa too, because they are depending on us for some of the exports that we send them as well.

It’s hard to see a good solution to the problems that we’re coming to right now. I mean maybe there are few mitigating things, you know, that we can have our gardens and we can try to make things better, and not plan for a new bigger car and a new bigger house, and a new bigger all of these things, but I think a lot of it is a question of how long it takes for the whole situation to play out. We don’t have a whole lot of control over it. If it plays out over a long enough period, it may very well be that some of those mitigating things that we do will actually be a reasonably good help for some people…

Justin: So Gail was saying that a lot of what we actually do to respond to peak oil depends on how fast this plays out. We really are at the mercy of how quickly we’re depleting our oil reserves, but we’re also at the mercy of the geology and how quick the oil does deplete because we can do things like frack the land and pull out shale oil, and delay some of the absolute scarcity of oil, but like Gail was saying, if you look at the big picture, it is like a triangle. And as you get further down from the tip of the triangle, which is that easy-to-extract oil, as you get towards the middle, if you’re still inside it, you just look down and you see – wow, there’s so much oil remaining. And you see that everywhere now, with so many reports that are coming out saying that we just have basically a limitless oil reserves. But that oil is not the same as the stuff that was at the tip of the pyramid…

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Editor’s note: The Extraenvironmentalist spoke with Gail Tverberg of ‘Our Finite World’ during the 2013 #degrowth conference in Montreal. The full podcast episode is available to listen to here: http://bit.ly/1qhWluX

Peter Brown on degrowth – 6m

Michael M’Gonigle on education – 17m

Josh Farley on money and alternatives to GDP  – 26m

David Suzuki on localism – 43m

Bill Rees on denial – 53m

Mary Evelyn Tucker on a new narrative – 1h06m

Janice Harvey on culture change  – 1h12m

Charlie Hall on energy return – 1h27m

Gail Tverberg on peak oil  – 1h43m

Juliet Schor on working less  – 1h5om

Joan Martinez-Alier on ecological economics – 2h6m

Erik Assadourian on degrowth – 2h15m

Gregor Macdonald on the IEA, claims about US oil production and Jeremy Grantham – 2h38m

Transcripts of the other interviews from this 2013 ‘degrowth’ episode are being released following on from the 2014 degrowth conference in Leipzig, to keep the buzz going, and stimulate further conversation. For a playlist of the video recordings from the live sessions from Degrowth Conference 2014, click here: bit.ly/degrowth2014_sessionsplaylist_ee.

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This transcript was originally prepared for my blog, Southern Energy and Resilience. Regular readers will know that I try to put a Southland, NZ spin on things I post. Here’s a few thoughts on what this means for this region:

New Zealand is in many ways exceptional when considering Peak Oil. It has its own oil and gas supplies, which at the time of writing are producing enough liquid fuel to support around 70-75% of our current needs. However, our current proven reserves are subject to the same eventual declines that we’re seeing globally. Recent efforts to find further productive wells in risky deep sea locations are so far proving fruitless. Reliance on the same strategy as in the USA – massive expansion in fracking activities – is both a short term strategy only, and also dependent on huge capital expenditure which has to be debt financed.

Globally, this risk is growing of supply disruption, because of soaring costs of production, and a ceiling on the price the market can bear, beyond which the global economy goes into recession:

“The world’s leading oil and gas companies are taking on debt and selling assets on an unprecedented scale to cover a shortfall in cash, calling into question the long-term viability of large parts of the industry.

 

The US Energy Information Administration (EIA) said a review of 127 companies across the globe found that they had increased net debt by $106bn in the year to March, in order to cover the surging costs of machinery and exploration, while still paying generous dividends at the same time. They also sold off a net $73bn of assets.

 

This is a major departure from historical trends. Such a shortfall typically happens only in or just after recessions. For it to occur five years into an economic expansion points to a deep structural malaise.

 

The EIA said revenues from oil and gas sales have reached a plateau since 2011, stagnating at $568bn over the last year as oil hovers near $100 a barrel. Yet costs have continued to rise relentlessly. Companies have exhausted the low-hanging fruit and are being forced to explore fields in ever more difficult regions.

 

The EIA said the shortfall between cash earnings from operations and expenditure — mostly CAPEX and dividends — has widened from $18bn in 2010 to $110bn during the past three years. Companies appear to have been borrowing heavily both to keep dividends steady and to buy back their own shares, spending an average of $39bn on repurchases since 2011.”

 

Full article here: http://bit.ly/1pKCvre

And in recent months, sell prices have been trending down again, worsening the situation for the producers, due to major reductions in demand from Asia, amongst other reasons:

“So far this week, oil prices in New York and London continued the collapse that has been going on since mid-June. New York futures closed at $91.67, after hitting the lowest intra-day level since May 2013, and London closed at $98.18, the lowest close since April 2013. As has been the case for several months, the markets are seeing too much production and too little demand.  US crude output hit a 28-year high last month and Libya’s National Oil Company is saying that Libyan production is up to 800,000 b/d, despite the turmoil in the cities.

The EIA and OPEC have lowered their expectations for global demand growth in 2014 and Saudi Arabia announced that it had cut its production by 400,000 b/d in August due to a drop in exports to Asian markets.”

 

Full article here: http://bit.ly/1qpyoDL

Richard Heinberg:

Yeah, the big news right now is that the industry needs prices higher than the economy will allow, as you just outlined. So we are seeing the major oil companies cutting back on capital expenditure in upstream projects, which will undoubtedly have an impact a year or two down the line in terms of lower oil production. That is why I think that Campbell and Laherrère were right on in saying 2015, 2016 maybe, we will also start to see the rapid increase of production from the Bakken and the Eagle Ford here in the US start to flatten out. And probably within a year or two after that, we will see a commencement of a rapid decline.

So you know, on a net basis, taking all those things into account, I think we are probably pretty likely to see global oil production start to head south in the next year or two.

But this change in capital expenditure by the majors, that is a new story. You know, just a couple of years ago, they needed oil prices around $100 a barrel in order to justify upstream investments. That is no longer true. Now they need something like $120 a barrel but the economy cannot stand prices that high. So you know, if the price starts to go up a little bit, then demand just falls back. People start driving less. And so the economy is unable to deliver oil prices to the industry that the industry needs. This is—I think Gail Tverberg is saying this is the beginning of the end. I think she is right.

 

Full article here: http://bit.ly/1lYqfFg

 In NZ, we are geographically dispersed, and heavily dependent on oil supply in our economy. Furthermore, we produce none of the electronics, etc that will be unavailable if disruption in globalised supply chains occurs.

Risk of long term disruption from fuel shortages is growing yearly as our energy budget, or the net energy available to us as a species declines, and the situation we face may well be very different from the past, for a set of reasons Gail Tverberg outlined earlier this year:

The big problem in the past with civilizations that collapsed was that humans were using renewable resources faster than they could renew. Population continued to expand as well. The combination of rising population and depleting soil and forest resources led to diminishing returns, lower wages for many workers, and difficulty funding governments. A 500 year gap between civilizations took the population pressure off an area. Forests were able to regrow, and soil was able to renew (at least partly through regeneration of soil by erosion of base rock).

 

Today, we sill have the problems we had in the past, but we have some new ones as well:

 

  • We are depleting aquifers much more rapidly than they regenerate. In many cases, the water table is far below what can be reached with simple tools. It will take thousands of years for these aquifers to regenerate.
  • We are depleting minerals of all kinds, so that we now need “high tech” methods to extract the low ore concentrations. These minerals will be out of reach, without the use of electricity and fossil fuels. In fact, the vast majority of fossil fuel energy supplies will also be out of reach, without today’s high tech methods. Eventually this may change, with new fossil fuel formation and with earthquakes, but the timeframe is likely to be millions of years.
  • Most people today do not know how to live without fossil fuels and electricity. If fossil fusel and electricity disappeared, most of us would not know how to produce our own food, water, and other basic necessities.
  • Most of us could not just “pick up and do as we did before,” with respect to our current jobs, if the government and 95% of the population disappeared. Our jobs are often supported by global supply chains that would disappear, as well as direct use of fossil fuels and electricity.
  • The world is sufficiently networked that most of it is likely to be drawn into a world-wide collapse. In the past, areas that did not collapse continued to function. These areas could act as a back-up, if functions were lost.

 

In the past, the 500 year gap was enough to allow regeneration of forests and soil, once population pressures were reduced. If that were our only problem now, we could expect the same pattern again. Such a regeneration would allow a reasonably large group of people (say 500 million people) to get back to a non-fossil fuel based civilization in 500 years, with new governments, roads and other services.

 

In such a new civilization, we would likely have difficulty using much metals, because ores are now quite depleted. Even reprocessing of existing metals is likely to require more heat energy than is easily available from renewables sources.

 

We are now so dependent on fossil fuels and electricity that any collapse that does take place seems likely to be faster than prior collapses. If the electric grid goes down in an area, and cannot be repaired, most business functions will be lost – practically immediately. If oil supply is interrupted, it also will bring a halt to most business in an area, because workers can’t get to work and raw materials cannot be transported.

 

We are being told, “Renewables will save us,” but this is basically a lie. Wind and solar PV are just as much a part of our current fossil fuel system as any other source of electricity. They will only last as long as the weakest link–inverters that need replacing, batteries that need replacing, or the electric grid that needs fixing. We are being told that these are our salvation, because politicians need to have something to point to as a solution–not because they really will work.

 

For the full article: http://bit.ly/TOXvkL

How do we address these risks?

Firstly, we need to know as a nation what they are, and their relative importance. The Wise Response Appeal, here in New Zealand http://bit.ly/wiseresponse, is calling for a non-partisan appraisal of the global risk environment we’re operating in, and asks the question: “As demand for growth exceeds earth’s physical limits, causing unprecedented risks, what knowledge and changes do we need to secure New Zealand’s future wellbeing?”

I think that’s a really good starting point, and will hopefully point central government, and in time, local government, in the right direction if it is allowed to inform policy decisions.

However, in the meantime, and because we may not have that much time, I feel it’s imperative for local government, particularly the likes of our regional economic development body to consider putting some money into heading in the right direction, aside from central government directives. That direction acknowledges that; the oil won’t be with us forever, that it will be very difficult to ‘adapt’ at the point of crisis, and that ‘degrowth’ in economic activity is a reality we’re facing far sooner than the mainstream media will admit (with some notable exceptions: http://bit.ly/1pKHXZx http://bit.ly/1zhiyNW).

In Southland, we have some of the most productive farmland in New Zealand, and it’s possible that given our low population density and remoteness from nuclear facilities (try managing the waste at those locations successfully, without the high energy budget we currently are squandering…),  that we have the potential to be a place where humans can continue to thrive.

I’ve already posted some ideas regarding how we might enable this under the ‘how’ category http://bit.ly/1lzmhmD on the blog, and will continue to do so. In the meantime, I’d like to add that it would make sense for Venture Southland and the Regional / District Councils to consider the following observation when deciding how much resource to throw at preparation for this probable future:

” 3. A love/hate relationship with risk. It’s a paradoxical idea, but one way to build resilience, or antifragility, is to keep the vast majority of the business as safe as possible, but then take big risks – ones that may pay off 10-fold or more – with a smaller part of the business.

Think of the famous idea from Clayton Christensen of trying to disrupt or cannibalize your own business before someone else does. Imagine setting up a skunk works to identify major risks to the business stemming from resource constraints or climate change – and then lean into those risks and come up with products and services that avoid them and challenge the core business (for example, a car company investing in car sharing programs which consumers use to save money, but also reduce material and energy use dramatically).”

For the full article: http://bit.ly/1qOsSbF

We already have some independent economic analysis supporting this general direction in the form of the BERL report from 2012: http://bit.ly/1qpuVVU http://bit.ly/1qpwP8O  and Venture Southland continues to explore these possibilities: http://bit.ly/1qpv5N4, however, the content of the major development initiatives as outlined in the annual report http://bit.ly/1qpvsHd is mostly lacking in this type of thinking, despite my submission suggesting some potential avenues to explore http://bit.ly/1sTdmeB.

 

Nathan Surendran

BEng(Hons) CEng MCIBSE MEI

Consultant – Schema Consulting Limited

e: nathan@schemaconsulting.co.nz

m: 021 209 6286  p: 03 221 7487

l: linkedin.com/in/nathansurendran

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Southern Energy and Resilience – Newspaper Edition

I’ve compiled many of my ‘go to’ news feeds into a helpful newspaper format (you can subscribe for daily emails) for those who are interested in reading around the issues I’m blogging about. You can access it via the link: Southern Energy and Resilience – News Feeds in paper format

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You won’t believe how angry this will make you…

2 Fundamental issues we face:
– The private creation of money as debt – have you heard..? ‘Money is just an IOU, and the banks are rolling in it.’ http://bit.ly/1rfcumz)

– Energy profit reduction (cost of production for fracking, tar sands, heavy oil is higher, so profits are less) is driving global economic woes, as we have less affordable energy available. The video below succinctly explains this in 2.5 minutes.

The 2005 Hirsch Report (NEARLY 10 YEARS AGO!!!) in the USA examined several scenarios relating to oil supply:

Mitigation Study
A 2005 analysis for the U.S. DOE ASSUMED CRASH PROGRAM IMPLEMENTATION:
[THIS IS] THE MOST OPTIMISTIC CASE
Scenario I – No action until peaking occurs – EXTREMELY BAD
Scenario II – Mitigation starts 10 years before peaking – SERIOUS TROUBLE
Scenario III – Mitigation starts 20 years before peaking – NO PROBLEM?

Note that the Hirsch Report was written pre 2008. The International Energy Agency’s Chief Economist Fatih Birol now states that Peak Oil occured in 2006: http://ab.co/1tdj3HH

Did you get that? We are around 10 years after the global peak in conventional oil production, and we’re really still not taking the need for mitigation, and now adaptation, seriously enough. Not by a long way!

If you feel you’re still not getting why this is so urgent now (we’ve heard about this as a future issue for a long time now), then this 15 minute lecture by Canterbury University’s Associate Professor Susan Krumdieck is a helpful look at the risks from the ‘forward operating environment’ that we face:

http://bit.ly/VTXj4K

Feeling angry? Time for some radical ideas about a positive response!

Implications for Southland, and some more on suggested course of action:

Continue reading

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The religion of ‘economic growth’ – where is it leading us?

‘sustained economic recovery’? Not by any sane assessment. Printing money is illegal at home for good reason. The same ought to be true of QE, as it has a worse effect, even just considering its scale, but also as the ‘trickle down’ effect that the policy is predicated on (in theory, restarting banks lending to SME’s) is clearly not real (http://bit.ly/1lQRv6r), and worsens inequality (http://bit.ly/TNgZqn). And never mind that we’re all indebted up to our eyeballs, and the SME’s and general public have no appetite for further indebtedness…

Public confidence is an illusion, as is control, and will evaporate sooner or later, as the ability to direct and manage the financial crisis with ‘more of the same’ thinking is shown to be unsustainable. “We cannot solve our problems with the same thinking we used when we created them.” – Albert Einstein

I wouldn’t wish the obvious challenges of the next term of government on my worst enemy. The sooner we accept growth is dead, and there is a fundamental shift under way, the better for everything and everyone. It’ll become obvious in the next few years to even the dullest of career politicians, lets just hope it galvanises them into asking the right fundamental questions. I feel these are:

Q1 – Why do we need growth? A: To service interest payments on money lent into existence as debt. http://bit.ly/1rfcumz

Q2 – Why is the economy moribund? A: Because we’ve hit diminishing returns on capital and energy in many spheres, as the expansion in economic activity and natural resource throughput of the last couple of centuries bumps up against planetary boundaries. http://bit.ly/1qhWoXB

Q3 – What is a realistic view of the future? A: De-growth of economic activity, energy consumtion, natural resource exploitation rates, population, until we get back inside the sustainable capacity of the planet. http://bit.ly/1qhWluX and http://bit.ly/1z69MSK

Image

It’s the basic maths of (exponential) growth, and people shouldn’t be allowed to govern nations until they’ve externalised this basic and fundamental concept: http://bit.ly/1rfc6Ve or review the talk given by Professor Albert Bartlett here: http://bit.ly/1vtJk0L

Not convinced? Further resources worth a look:

  • Limits to Growth–At our doorstep, but not recognized: http://bit.ly/1sVx3X0 – I’d actually recommend all Gail Tverberg’s writing at her blog ‘Our Finite World’ http://bit.ly/1qDeFgB
  • The Next Global Meltdown Is Baked In: Connecting the Dots Between Oil, Debt, Interest Rates and Risk: http://bit.ly/1m6WvmW

/rant…

 

So what about positive alternatives, Nathan..?

The lower net energy future that we’re looking at makes certain activities more or less worthwhile, notwithstanding the probable disruption coming due to shortages in fundamental needs, primarily food (http://bit.ly/1pUDHHi) and water (http://bit.ly/1lxmYpr).

Do I think all growth in economic output is bad? No. Southland as a region has to grow in some respects, as we will have to provide more for ourselves going forward, if we want to sustain a human presence in the province. This will be a result of ever more expensive transportation costs. In a practical sense, the seas will again expand (http://bit.ly/1pI2Eu1), but also the effort for the trip to Dunedin, or even Invercargill… As we look to a more local future, we’ll recognise more the inter-dependence with our closer neighbours, and we’ll have to reconfigure food and water supplies, finance, business, politics to suit this new reality. It’s why I’m interested in the Transition Towns movement: http://bit.ly/1iSSfsq, and Transition Engineering: http://bit.ly/transitionengineering and why I support the Wise Response appeal: http://bit.ly/wiseresponse, submitted to parliament, which posits that:

A risk assessment is the first step in determining the nature, urgency and interrelationship between potential threats to New Zealand’s future economic social and environmental security. The World Economic Forum’s Global Risks 2014 report is an example of such an assessment. A report for New Zealand would provide a firm basis from which to engage the public and businesses in identifying practical ways to respond.

This petition therefore calls on Parliament as a whole to see funds allocated for an assessment of NZ’s critical risks in 5 key areas:
1. Economic / Financial Security: the risk of a sudden, deepening, or prolonged financial crisis.
2. Energy and Climate Security: the risk of continuing our heavy dependence on fossil fuels.
3. Business Continuity: the risk exposure of all New Zealand business, including farming, to a lower carbon economy.
4. Ecological / Environmental Security: the risks in failing to genuinely protect both land-based and marine ecosystems and their natural processes.
5. Genuine Well-Being: the risk of persisting with a subsidised, debt-based inequitable economy, preoccupied with maximising consumption and GDP.

I made a recent submission to the Venture Southland draft business plan 2014 (http://bit.ly/1lxqCQb), outlining what I feel are some alternatives to the directions the region is currently looking:

Submission:

Page 7
Relating to: statement that “significant growth opportunities” exist.
Comments:
● Given: Vision and Mission Statement
● Given: increased environmental impacts from ‘growth’ at odds with the Vision and Mission statement
● Question: Does VS believe that ‘growth’ in the commonly accepted ‘GDP increase’ from increased levels of economic activity (which automatically creates increased throughput of natural capital and therefore increasing environmental impacts) is actually desirable?

Pages 16-20
Relating to: “Major Initiative: International Marketing Alliances”
Comments:
● Missing category of potential migrants is people looking to relocate to an area with the following characteristics:
○ Non­nuclear (serious question marks exist over decommissioning of commercial nuclear power plants in a high price oil future ­ e.g. no long term waste storage facilities currently fully commissioned, anywhere in the world).
○ Low population density and high food production capacity.
○ Projected to be less affected (low lying coastal areas excluded) by global warming than most other parts of the world.
○ Abundant fresh water resources ­ huge catchment area above the plains, and natural storage in the lakes.
● Market to them on the basis of the above advantages. The people who are aware of these factors and have a desire to relocate are likely to be of a desirable demographic (affluent, educated, motivated to help with transition to a lower carbon, more strongly sustainable economy).
○ Idea: why not create a strategic plan for encouraging new sustainable communities with similar characteristics to http://bit.ly/1om4rRJ

Pages 21­-23
Relating to: “Major Initiative: Rural Community Engagement”
Comments:
● Community owned distributed power capacity ­ wood gasification, with short rotation coppice, biogas, etc. Leverage global open source initiatives such as http://bit.ly/1mMFNp4 ­ can be locally manufactured ­ job creation… Would also provide an alternative and probably cost effective alternative to the existing renewables proposals. There will be significant manufacturing capacity available when the smelter winds down.
● Further reading: ‘Power from the People’ http://bit.ly/1lQCXE7 -­ I have a copy for loan.
● Link this to the marketing to the demographic mentioned in my previous comment. Why can’t Southland Market itself of the basis of the highest number / density of off grid settlements in the world? It’d save on all the grid infrastructure maintenance that must be a significant proportion of the standing charges rural communities pay. Do the maths on whether this makes sense.

Pages 24-­26
Relating to: “Major Initiative: Events Promotion and Development”
Comments:
● Given Southland’s geographic location and rising energy / transportation costs, this should be viewed from the perspective of community building around ‘worthwhile’ activities based on what will be affordable from an energy / travel perspective in the longer term ­ in this light, the ‘crank it up’ day is probably the most worthwhile event in Southland…

Pages 27-­29
Relating to: “Major Initiative: Land­use opportunities”
Comments:
● I’m a founder of Love Local ­ a charitable trust, set up to provide locally sourced fruit and vegetables from the
○ Opportunity: create a food hub or hubs for Southland on a ‘not for profit’ (or ‘for benefit’ as it’s more appropriately termed) basis, to provide a direct grower to market pipeline that can bring small / medium size local producers into the market.
○ Opportunity: Use the blueprint designs from the likes of Open Source Ecology http://bit.ly/1w0LJSE as the basis for a local manufacturing industry geared to supplying the needs of these small scale farmers. Many other tools for low carbon agriculture exist which could be locally fabricated. There will be significant manufacturing capacity available when the smelter winds down.
○ Further reading: the blog posts I’m writing on behalf of Love Local for the sustainablesouthland.co.nz website. To date: http://bit.ly/LLSustSthlndBlog1, http://bit.ly/LLSustSthlndBlog2, with more in draft.
● Why not look into Bamboo and Hemp as well, both have huge potential for the local economy and a large, existing export market for products that local industries could adapt to service: sawmills for bamboo, bamboo and hemp as a biomass coppice source for biomass energy projects (higher biomass production per acre by far than forestry, and a lot faster to realise a return).

Sorry if these comments are a bit rushed / terse. I didn’t realise this was out for comment in time to put more effort into it. I hope the above is helpful!

Sincerely, Nathan

I’m speaking to my submission on the 14th. It’s a public meeting. Want to have some discussion on this..? Call me or come along: 03 221 7487 – the meeting is at the Venture Southland offices at 143 Spey Street in Invercargill, and submission hearings start from 1pm for an hour and a half.

 

 

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Presentation of ‘Wise Response’ Appeal to Parliament

MP Dr Kennedy Graham presented this non-partisan appeal to the house on Wednesday.

An hour ago, I received on the steps of Parliament this petition. I undertook to bring it immediately to the attention of the House. The Clerk has tabled the petition today. It is fair to say that this is perhaps the most important petition ever to be delivered to Parliament. It is called “The Appeal to Parliament for a New Zealand Risk Assessment”. It calls for the 50th Parliament to commit to an all-party risk assessment of how and where New Zealand might be exposed to key global threats. No single undertaking could be more important. The petition comes just 2 days after the fifth report of the Intergovernmental Panel on Climate Change on the assessed impacts of climate change for the world in the 21st century.

As the petition puts it, we live on a biologically complex and exquisite planet, home to 7 billion people and a myriad of other unique life forms. We believe, say the petitioners, that it is our human responsibility to maintain the integrity of life support systems and the natural processes that sustain and renew them. It follows, they contend, that our generation must satisfy our present material needs in ways that do not diminish the prospect of their realisation for future generations. The petitioners express a concern. So far, they say, New Zealand has failed to truly face up to such unprecedented threats to its collective security. Yet with scientists saying that certain critical thresholds are upon us, the consequences of not taking the proper action will, in all probability, be disastrous and irreversible. “Therefore,” they say, “in the name of all our children and grandchildren we, the undersigned, call on the New Zealand Parliament to face up to this situation now… We believe that Parliament should build on its proud tradition of foresighted collective response to risks, and initiate a risk assessment as the first step in achieving a more secure future.”

This petition is signed by some 6,000 New Zealanders, with a leadership group of 100 signatories. They include a former Prime Minister and past MPs; the mayor of a major city; leading Māori; a number of former All Blacks and Black Caps; a university pro-vice-chancellor and other prominent academics; a former Parliamentary Commissioner for the Environment; a poet laureate; some of the country’s leading artists, authors and broadcasters; and several leading scientists who serve on the Intergovernmental Panel on Climate Change itself. I choose to cite one name, Sir Lloyd Geering, professor of religious studies at Victoria University. I cite him because, at age 96, Professor Geering is a member of the Order of New Zealand, the highest honour this country can bestow. This is no ordinary petition. It is no disparagement of any others brought to this House to recognise that this petition is of unprecedented magnitude and import. It essentially appeals to Parliament to consider the future of the planet and our nation, and it does so in light of the enormity of what lies before us.

This House is the arena for party rivalry and the contestation of ideas. We devote our time to critiquing each other and competing for electoral support. It is pluralistic democracy and that is fine, but there are issues that transcend domestic political competition—above all, the fate of the planet. There is no other phrase that can do it justice. It requires that we lower our swords and come together to reason our way through. There is something primordial occurring here and we need to be up to the task. We need to be up to the task, for future generations, not only our own, depend on the decisions we make in this House now and in the critical next few years. I advance this admonition to myself as much as to colleagues opposite. I have on occasion been critical—trenchantly so—of Government policy, but I have also held conferences in the neighbouring Chamber designed to enable us to come together in a different setting and spirit and reason our way to a cross-party consensus. May this appeal assist us in that endeavour. May it be favourably received.

Mo tātou, a mo ka uri, a muri ake nei

Whilst he specifically mentioned ‘climate change’ in the context of the recent IPCC report, there are many other risks that the Wise Response Appeal asks that government consider, as outlined in our Press Release:

WHAT DO GLOBAL RISKS MEAN FOR NEW ZEALAND’S WELL-BEING?

Many credible new reports say our “global village” is under increasing stress from environmental, social and economic trends that are largely ignored by our politicians. At the same time, we know our country is heavily dependent on oil, globalised supply chains, distant markets, a stable global financial situation, and reliable access to resources, including a livable climate.

Our group, “Wiseresponse”, considers this could mean NZ is vulnerable. Under these circumstances there is an urgent need to understand if any changes are required to secure New Zealand’s future well-being. We consider risk assessment has the potential to break down social and political barriers and start this process.

This initiative has the backing of many organisations and NZ’ers including Dame Anne Salmond, Sir Lloyd Geering, Bryan Gould, Te Radar, Tim Hazledine, Chris Trotter, Neville Peat, Anton Oliver, Hoani Langsbury, Morgan Williams, Janet Stephenson, Peter Barrett, Fiona Farrell, Keri Hulme, Wayne Smith, Sir Geoffrey Palmer, Gerry Te Kapa Coates, Chris Laidlaw, and many others. The first 100 notable signatories are here: http://bit.ly/1g2hrt1.

The Appeal has been launched on Avaaz (http://bit.ly/wr-avap).

The Appeal was presented on the steps of parliament, April 9th with support from Generation Zero.

So far, the Green Party and Labour indicated official support for the Appeal:

Green Party: Greens support high profile Kiwis’ call for climate action

Labour Party: Wise heads want wise response

Please add your name to the appeal, we’re resubmitting numbers to select committee in a month or so.

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April 11, 2014 · 3:23 am

Ex govt adviser: “global market shock” from “oil crash” could hit in 2015

Oil is not scarce. We’re nowhere near running out. What we are seeing however is diminishing returns on investment for the extraction of oil. I’m not sure if you’ve seen the news regarding the oil major’s profit warnings recently. Oil extraction has been the most profitable business in the history of the earth, but has in recent months been issuing profit warnings, with major players such as Shell having to sell assets (like drilling leases) to pay their dividends (https://www.google.co.nz/search?q=oil+majors+profit+warning) – effectively ‘eating their seed corn’ of future profitability.

Like all good businessmen, the oil majors went after low effort profits first, in the form of easy to extract reserves. Once these were depleting, they ploughed profits back into improved technology to go after the next easiest reserve, and so on. In the 1930’s in Texas for example, you could get 100 barrels of oil out for every 1 barrel you put to extraction effort. This 100:1 ‘Energy Return on Energy Investment’ (EROEI, or often EROI) gave fantastic profits. As these reserves are now declining in production, and they are having to go for reserves with much higher effort (and therefore lower EROI) to extract such as tar sands (Canada), oil sands (Venuzuala), fracking and deep sea drilling (Global), there is a decreasing profit, as the marginal cost of production (the amount it costs to extract a barrel, in both energy and monetary terms) climbs. The net result is lower profits, and lower ‘net’ energy available to society to power our current way of life. See chapters 1&3 of this book: http://www.postcarbon.org/end-of-growth-chapters/ – free to read online – for more detail.

From a recent Guardian article:

…a leaked email from Shell’s head of exploration to the CEO, Phil Watts, dated November 2003:

“I am becoming sick and tired of lying about the extent of our reserves issues and the downward revisions that need to be done because of far too aggressive/ optimistic bookings.”

Leggett reports that after admitting that Shell’s reserves had been overstated by 20%, Watts still had to “revise them down a further three times.” The company is still reeling from the apparent failure of investments in the US shale gas boom. Last October the Financial Times reported that despite having invested “at least $24bn in so-called unconventional oil and gas in North America”, so far the bet “has yet to pay off.” With its upstream business struggling “to turn a profit”, Shell announced a “strategic review of its US shale portfolio after taking a $2.1bn impairment.” Shell’s outgoing CEO Peter Voser admitted that the US shale bet was a big regret: “Unconventionals did not exactly play out as planned.”

…Despite “soaring drilling rates,” US tight oil production has lifted “only around a million barrels a day.” As global oil consumption is at around 90 milion barrels a day, with conventional crude depleting “by over four million barrels a day of capacity each year” according to International Energy Agency (IEA) data, tight oil additions “can hardly be material in the global picture.” He reaches a similar verdict for shale gas, which he notes “contributes well under 1% of US transport fuel.”

…”Shale-gas drilling has dropped off a cliff since 2009. It is only a matter of time now before US shale-gas production falls. This is not material to the timing of a global oil crisis.”

In an interview, he goes further, questioning the very existence of a real North American ‘boom’: “How it can be that there is a prolonged and sustainable shale boom when so much investment is being written off in America – $32 billion at the last count?”

…The 2015 oil crunch forecast, Leggett writes, is corroborated by the Industry Task Force report:

“In this report we updated the evidence that defines global oil reserves and extraction rates, and concluded that the global peak production rate for oil would likely occur within the decade, very likely by 2015 at the latest – at a value no higher than 92 million barrels per day.”

Based on flow rate data, the report found that “increases in extraction would be slowing down in 2011–13 and dropping thereafter.” From then on, global oil production would drop “at 1% a year from 2015. If the then IEA forecast of demand rising to 105 million barrels a day in 2030 were to prove correct, supply would fall short in 2015.”

Ex govt adviser: “global market shock” from “oil crash” could hit in 2015 | Nafeez Ahmed | Environment | theguardian.com.

[For more on the problems with projected shale oil and shale gas output via fracking (mainstream projections are almost always from organisations with vested interests and reasons to talk up their investments), please review the free to view online serialisation of the book by Richard Heinberg (author of the much respected ‘Museletter‘): Snake Oil and a longer and more in depth technical report by David Hughes, Drill Baby Drill.]

Additional to the above issues with energy supply, we’re close to the end of the most recent 7(ish) year cycle in global financial terms. I’d just like to point out a few facts:
– The global financial crisis was in a large part the result of the aforementioned reducing net energy available to society. There are a few different ways to say this. Lacking space and time to really summarise well this here, here are a few links:  For the views of a Wharton School of Economics Professor and advisor to the EU: https://www.youtube.com/watch?v=9e0UofNMzKM (I’d only watch the first 12 minutes or so, he goes on a bit about technological fixes that I have doubts about after that), or a well known commentator with impressive credentials (http://www.financialsense.com/contributors/nicole-m-foss) http://vimeo.com/66770756#at=0, or an Actuary http://ourfiniteworld.com/2014/03/21/oil-limits-and-the-economy-one-story-not-two/, or a Professor of Engineering at Canterbury University http://www.youtube.com/watch?v=KZ5Lb_ySIEg
– We’ve done nothing to fix the underlying problems of economics. In fact, we’ve rewarded banks globally for failed business models through QE, et al, allowing them to assume a larger, and therefore more threatening role in this current cycle. For more (readable, rather than hugely technical) commentary on this to further your understanding if my statement is at all controversial, I’d highly recommend this blog’s economics posts.
– Given that they have a literal ‘license to print money’ (http://www.theguardian.com/commentisfree/2014/mar/18/truth-money-iou-bank-of-england-austerity) and that they should be insanely profitable, banking must be restructured, because they can’t even remain profitable with the cards stacked FOR them…

 

Why am I pointing all this out? I guess my concern is that whilst I agree with the likes of Dave Kennedy that we need to remain positive, and work towards more renewables, etc, there’s a piece missing from the story. In light of the risks I’ve outlined above, which are not discussed very much in public debate in Southland, I think we’ve got to make some choices about what our priorities are going forward.

It’s all very well saying (as I have in the past) IF we’d made serious inroads into a ‘renewables transition’ 3-4 decades ago when this was much less urgent, we’d have had time to build some m

ore of the infrastructure that is needed, but even then we’d have problems. It’s simple the case, as Susan Krumdieck makes in a recent presentation (already linked to above) that that infrastructure needs maintaining too, and that infrastructure maintenance generally requires fossil fuels at many parts of the supply chain for replacement parts, etc.

What the current popular focus on renewable energy masks, is the far more pressing need to deal with basics of survival such as water and food, particularly in light of probable failures in supply chains as a result of cascading failures in Finance, Commerce and Government that seem very likely in the coming decade, and possibly the earlier part of it…

My feeling currently is that we have got to get back to basics, producing food locally (in Southland there are a few different efforts underway to do something about this, such as ‘Love Local Charitable Trust‘ and the Farmers Market, Community Markets, etc), figuring out how drinking water supply works (hint – rainwater storage tanks…) if grid electricity becomes unreliable or unavailable (yes, Southland has Manapouri, but even that is reliant on fossil fuels for maintenance, and what about maintenance of the grid infrastructure, or even god forbid a major alpine fault earthquake, and the probable long term effects on grid electricity transmission lines in a transport fuel scarce future?), etc.

Discerning the future and responding appropriately is a very difficult task, and it’s why I’m involved with the ‘Wise Response‘ appeal, which asks government to perform a broad spectrum risk assessment, aiming to help New Zealand as a nation come to terms with the global risk environment and shape appropriate policy response. Have you given your support to the Wise Response appeal yet?

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