Tag Archives: Natural Gas

Peak Oil

Shale Gas: Should We Take Their Word For It?

Do we really want to bet the Big Island’s future on the Energy Information Agency’s projections? It’s much more prudent to hedge our bets. Have a look at what people are saying about recent projections.

From the Post Carbon Institute:

Shale Gas Reality Check

The Energy Information Administration (EIA) recently released its Annual Energy Outlook 2015. How have their projections and assumptions changed over the last year, and how does it hold up to scrutiny against up-to-date production data from key shale gas and tight oil plays?

In 2014, Post Carbon Institute and David Hughes published the most thorough independent analysis of U.S. shale gas and tight oil production ever conducted, and now that analysis has been updated to assess the most current thinking from the EIA. 

The update shows that the EIA’s Annual Energy Outlook 2015 reference case suffers from even greater optimism than the previous year—raising what were already highly questionable projections for cumulative shale gas production through 2040 by nine percent…. Read the rest

This recent Los Angeles Times article is one example of some of the reality:

U.S. officials cut estimate of recoverable Monterey Shale oil by 96%

By Louis Sahagun

Federal energy authorities have slashed by 96% the estimated amount of recoverable oil buried in California’s vast Monterey Shale deposits, deflating its potential as a national “black gold mine” of petroleum.

Just 600 million barrels of oil can be extracted with existing technology, far below the 13.7 billion barrels once thought recoverable from the jumbled layers of subterranean rock spread across much of Central California, the U.S. Energy Information Administration said…. Read the rest

Steve Horn, Research Fellow with DeSmogBlog, also wrote about the EIA’s projects. This article, Drilling Deeper: New Report Casts Doubt on Fracking Production Numbers, appeared in the Huffington Post:

The report’s findings differ vastly from the forward-looking projections published by the U.S. Energy Information Agency (EIA), a statistical sub-unit of the U.S. Department of Energy (DOE).

…”The Department of Energy’s forecasts–the ones everyone is relying on to guide our energy policy and planning–are overly optimistic based on what the actual well data are telling us,” Hughes — a geoscientist who formerly analyzed energy resources for over three decades for the Geological Survey of Canada — said in a press release about the reporting’s findings. 

“By asking the right questions you soon realize that if the future of U.S. oil and natural gas production depends on resources in the country’s deep shale deposits…we are in for a big disappointment in the longer term….” Read the rest

Peak Oil, Sustainability

Are Shale Oil Bankruptcies Coming Soon?

Richard Ha writes:

This Wall St. for Main St. video has oil and energy expert Robert Rapier as guest and it’s a very interesting discussion.

Robert, an internationally known energy expert who was recently on 60 Minutes, discusses various scenarios around the price of oil and cause-and-effect. I like Robert because he has no fear. He calls it like he sees it. He has a chemical engineering background and he has actually run a petroleum plant. He knows what it takes to make ends meet.

Here are some highlights of the discussion:

Robert says that because March and April are normal maintenance months it’s not likely that oil will drop into the $40/barrel range, unless it’s only for a very short time. Usage has started to ramp up in the last few weeks.

He thinks that oil will be in the $50-$70/barrel range for the next few years. The trend will be for the oil price to rise due to demand. T. Boone Pickens feels the price will hit $100/barrel in two years. Robert thinks it will be a little longer. $100 per barrel oil is not good. Any higher than that is bad.

Hedges come off in the next year, so most producers are hoping desperately for higher prices. Demand has increased by one million barrels every year for the last five years, mostly supplied by shale oil. But shale oil wells deplete very quickly. 

Rig count, normally a leading indicator, has fallen but we haven’t seen supply drop yet. Hedges running out in a year will add to upward pressure. Within the year we will start to see the effect of declining rig count.

Robert thinks Saudi will talk about raising prices at the next OPEC meeting. He doesn’t think Saudi Arabia expected to drop to the $40s.

Shale oil is not a panacea. The U.S. has a huge infrastructure advantage over the rest of the world. We have pipelines, water, and refineries in position. For the rest of the world, it means new capital spending. So supply from world shale oil will probably be minimal.

Conventional oil has been declining and U.S. shale oil will not last very long so the world needs to go to natural gas or deep water, and that will put pressure on natural gas prices. After shale oil and gas, there is no more. 

If you like to see the background to the oil and gas supply markets, I highly recommend Robert Rapier’s view of things. It gives you an insider view.

Here in Hawai‘i we depend on oil for 70 percent of our energy. We will transition to natural gas and before long that price will start to rise. We need to grab all the advantages we can get.

Do not throw away the Thirty Meter Telescope, geothermal, and biotech crops. These all help us cope in a world of declining petroleum products.

Geothermal, Lowering Electric Rates

Canada, LNG & What Our Electricity Will Cost in Hawaii

Richard Ha writes:

Hawai‘i’s utilities depend on liquefied natural gas (LNG) as a “bridge fuel,” which will allow it to lower rate payers’ costs. The cost to rate payers, though, depends on the long-term contract HECO can secure.

Canada is probably the best place for Hawaii to acquire LNG. But Canada has some important decisions ahead. Should they build LNG plants, which will require huge upfront investments in the multiple billions? They will have to make some decisions soon.

Click to read a special report on the subject from TD Bank Group (PFD):

Higher prices abroad and an increasingly promising global demand outlook for natural gas have garnered a considerable amount of attention from North American resource producers, who are interested in tapping into foreign markets, via liquefied natural gas (LNG) exports…. 

Japan is the highest priced market for LNG, but Japan has not yet made its final decision about whether it will restart its nuclear plants. And the Russia/China natural gas pipeline could take 10 percent of Asia’s demand off line.

What will Canada do? They are wrestling with this decision right now.

Hawaii rate payers will be interested to see what price contract HECO is able to secure. Whatever it is will determine the electricity rates we pay for the following twenty years.

And we don't want to see what happened in the Aina Koa Pono docket – where the price was kept secret.

The Big Island has geothermal as a low-cost base power. What we don’t want here is for expensive LNG to prohibit the development of our low-cost geothermal.

Lowering Electric Rates, Peak Oil, Renewable Energy Sources

Learning From Germany & Others’ Energy Plans: No Free Lunch

Richard Ha writes:

Germany attempted to transition to a green electricity generation more than ten years ago. Today, some of its electricity rates are the highest in Europe, and it is using coal for 45 percent of its electricity. The lesson here is that there really isn’t any “free lunch.”

From Bloomberg.com today:

Merkel’s Taste for Coal to Upset $130 Billion Green Drive

By Julia Mengewein – Sep 22, 2014

When Germany kicked off its journey toward a system harnessing energy from wind and sun back in 2000, the goal was to protect the environment and build out climate-friendly power generation.

More than a decade later, Europe’s biggest economy is on course to miss its 2020 climate targets and greenhouse-gas emissions from power plants are virtually unchanged. Germany used coal, the dirtiest fuel, to generate 45 percent of its power last year, its highest level since 2007, as Chancellor Angela Merkel is phasing out nuclear in the wake of the Fukushima atomic accident in Japan three years ago.

The transition, dubbed the Energiewende, has so far added more than 100 billion euros ($134 billion) to the power bills of households, shop owners and small factories as renewable energy met a record 25 percent of demand last year. RWE AG (RWE), the nation’s biggest power producer, last year reported its first loss since 1949 as utility margins are getting squeezed because laws give green power priority to the grids….  Read the rest

How is HECO going to both lower our electricity rates and increase intermittent power into the grid? Seems we are going to bet everything on natural gas. At $4/thousand cubic feet (mcf), it is very cheap. In Asia and Europe, it’s more than $11/mcf.

What happens when its price rises in 10 and 20 years? Where will we be then? Will we have a competitive advantage to the rest of the world? Or will we be struggling, like Germany is today?

Where will we be 10 and 20 years from now? We should be paying attention to what people like Marco Mangelsdorf, president of ProVision Solar, and others are saying about the PUC’s request for an energy action plan for the state of Hawai‘i.

HECO’s Response to the PUC’s Orders: Is the Media Right? With Marco Mangelsdorf

Hydrogen, Renewable Energy Sources, Schools

Natural Gas, Hydrogen, & What Kids Learn in Fourth Grade

Richard Ha writes:

The online site Peak-oil.org has an interesting write-up about natural gas and essentially points out that its high decline rate will make the recent spike in natural gas relatively short-lived.

U.S. LNG exports: What Would Randy Udall Say?

There has been considerable talk in the US of late about not only future energy exports but even about using an “energy weapon” against Russia.  While that might be nice, it’s wishful thinking.

An energy commentator who thought in depth about the US’s energy policy back-story and the myth of oil independence was Randy Udall, who passed away suddenly in late June last year.  

On March 21, 2013, during one of his last presentations, Randy delivered some remarks, accompanying a set of power-point slides, which provide the type of cautionary background that Washington insiders—including his brother Senator Mark Udall and cousin Senator Tom Udall—should heed.

His complete remarks, now posted on YouTube, were recently transcribed by Steve Andrews; key points are listed below.  The first remark about natural gas exports is actually a response to a question from the audience; the remainder is from his loosely scripted remarks. 

  • This meme that we’ve got a 100-year supply of natural gas started at the Colorado School of Mines.  They have a volunteer group there called the Potential Gas Committee, but the Potential Gas Committee is not looking at proven reserves; they’re looking at how much carbon might there be in 5000 feet of the Mancos shale.
  • I look around and I start running the numbers.  You know how much we’ve produced in this part of the world, in Weld County and Larimer County and the DJ Basin and the Wattenberg field we’ve been drilling for 80 years?  Now, this field is primarily an oil field.  But in that 80-year period of time we’ve produced enough natural gas to run the US for four months.
  • In the Powder River Basin, with those 25,000 natural gas wells, we’ve produced enough natural gas to run the US for four or five months.  When you look into it, there are only about six natural gas plays that are of any size; they’re dominated by three or four of the big ones—the Marcellus in Pennsylvania…maybe it will end up supplying five years’ of US gas demand over the next 60 or 70 years….

Read the rest

This next video—of Randy Udall speaking at the Colorado Renewable Energy Society meeting in 2013—shows what it looks like down there where we are fracking for oil and gas; it shows how the world looked millions of years ago when the oil and gas was forming. Ingenious human beings. This is a very good video if you are interested in this topic.

It’s also very interesting to see how ingenious the oil and gas industry folks are as they developed the technology that resulted in fracking. It’s incredible. But, as Nate Hagens points out, after shale oil and gas, it’s all gone. There’s no more. (I wrote about the global resource depletion authority Nate Hagens, his visit to our farm earlier this year, and his reactions to what we’re doing there.)

But, for us here in Hawai‘i, we can do what Iceland did. With cheap electricity, they make hydrogen on site and they have a hydrogen refueling station. I went over there and looked at it myself. The cars are rolling out now. They are eighty percent green and they will be ninety percent fossil free. We can do the same here with our curtailed and otherwise unused electricity.

We could also create a mini-ammonia processing plant. We really have a lot of interesting and real possibilities.

Leslie Lang, who helps me with this blog, and I were talking about this, and the importance of respecting the past while planning for the future, and she told me about a field trip her daughter took in fourth grade at Kamehameha Schools.

The theme was “Preservation vs. Progress,” and she went along to chaperone. She shared with me something she wrote about it at the time and I asked her if I could include some of her words here, because it really makes the point well that we must honor the past but lead the way into the future. I’m glad they are teaching that to our kids.

Unlike in the old days, when we followed the teachings of the missionaries,today and tomorrow our kids need to be the ones leading the direction based on a healthy respect for our history.

(Note too that we cannot just blindly follow what the folks in the cold country are doing, either. This is not cold country. Some things apply and some things don’t.)

From Leslie, on the fourth grade “Preservation vs. Progress” field trip she accompanied:

The teachers did a great job of talking about the importance of preserving our past, our wahi pana (sacred places), as well as how progress brings what is sometimes necessary change, and how we have to balance those things. We saw this first at Pu‘ukohola Heiau in Kawaihae.

Kamehameha was told that if he built a heiau at that site, he would be able to unite the very divided islands. The ranger explained that if you traveled from Kea‘au (where the school is) to Kawaihae (where the heiau is) in the old days, you’d travel through several different chiefdoms, many of which would be at war with each other. It would be dangerous and difficult. Those wars lasted for 500 years.

He talked about how the heiau was built, and had the kids try to lift a relatively small rock compared to some of the rocks in the heiau. Some of these kids could, and many couldn’t. 

The heiau was so important to Kamehameha, who believed he would receive the gods’ mana upon building it, that this happened: His younger brother was to be its kahu (priest), and he told the brother not to touch any of the rocks. But the brother did, he pitched in to help, and Kamehameha saw. He was worried about that disturbing the mana that he took the rocks his brother touched out in a wa‘a, a canoe, and went far out into the ocean and dumped them.

The rocks that make up Pu‘ukohola all came from Pololu Valley, about 25 miles away. They were passed hand to hand along a very long human chain of men. We know this because occasionally a rock was dropped, and then it was not used in the heiau so it was left where it lay. There is still a rough path of large pohaku, rocks, lining the route from Pololu to Pu‘ukohola. 

Just off Pu‘ukohola there used to an island called Puaka‘ilima, we learned. It was significant because the ‘ilima flower grew all over that island, and that’s a flower that is cherished for leimaking (and you need hundreds of blossoms to make one lei).

That treasured island was destroyed, blown up, when the state decided it needed to dredge the harbor so big ships could come in with food and supplies. 

Here was the point of that day’s lesson. Progress = change. We have all these people here and are not producing enough food on our own anymore, so we need ships to bring in enough food for us all to eat. That’s why they had to destroy the island. In this case, progress and preservation were at odds. 

Was this the only way to solve that problem? asked the kumu (teacher). I don’t know, she said. Was it the best decision? I don’t know, she said. I don’t know all the details.

“But some day it is going to be you children making these decisions. You are going to have to weigh preservation vs. change.” You have to know about the past and the present to make good decisions about the future, she told them.

Then we went to Kona, to the King Kamehameha Hotel. This is a touristy spot—but just at the back of the hotel is a very important historical place called Kamakahonu. Ahu‘ena Heiau is there, and that’s where Kamehameha died. It was both the end of the story we had been hearing of his life, and another demonstration of preservation vs. progress.

Before we got there, the kumu looked hard at the kids and talked to them for quite a long time about how we are not going there for the hotel, or to look at all the guests, or to talk about the pool. We were not going there to play. 

“There’s nothing wrong with that,” she said. “I like this hotel. It’s where I stay when I come to Kona. But that’s not what we are here for today.” She told them they were there to respect and learn about the heiau. 

Again she talked to them about focusing, and she told them this was going to be the hardest place of all to focus because of all the stuff, the playing, going on all around us. But she told them they needed to do so, to focus, to chant with their attention in the right place.

When they’d been at the Pololu overlook, they’d had this same reminder. When they were done there with their chants and their song about the place, tourists all around us broke into applause. Of course the tourists didn’t know, but it felt inappropriate because although, yes, these kids sound good, they were not entertaining. They were facing the valley and the ocean, not the people, and were paying their respects. 

And when that applause broke out, not one kid looked around, like they would have if it had been a concert for fun. They kept their focus and their attention. It was very interesting to see and not a little impressive.

So back to the hotel, where the kids walked through the somewhat crowded lobby single file and in silence. It was pretty impressive, because believe me these kids can also be normal fourth graders: loud and boisterous. But apparently they also know when not to be. It was really something—people stopped and watched.

We were expected, and hotel Security knew we were going to go into the heiau area beyond the normal kapu (keep out) signs. The kids chanted, and we heard more about the significance of that heiau, and again, Kumu talked about preservation (the heiau) vs. progress/change (the hotel). She presented it so well. She stressed again that someday they are going to be the ones who have to weigh the one against the other. That they have to know both the past and the present to determine the future.

The kumu kept stressing that they were giving these stories about the past to the kids and it was their kuleana, their responsibility, to remember them and pass them on. You cannot make good decisions about preservation vs. progress if you don’t know the importance of what is there to preserve, they said.

It was such an impressive and important field trip. I am not a fourth grader, and I got a hundred times more out of it than I expected. So well thought out and presented. Our kids are very fortunate to be learning such important lessons.

Current Affairs, Geothermal, Peak Oil, Renewable Energy Sources, Sustainability

What Monterey Shale Oil?

Richard Ha writes:

The U.S. Energy Information Administration (EIA) made a dramatic announcement recently: it is revising its estimate of the Monterey Shale Oil supply downward by 96 percent.

Ninety-six percent is a lot.

Especially when you consider that the Monterey Shale Oil supply presented two-thirds of the United States’s oil reserves. It was estimated that we had 100 years of oil reserves left in this country altogether, but now that we know 66 percent of it doesn’t exist, there must be only 34 percent, or 34 years, of oil reserves remaining in the U.S.

However, the cost we would have to pay for oil companies to retrieve it would exceed what it would cost them to do so. In other words, if we consumers were willing to pay $1 million/barrel, all of those 34 years’ worth of oil could probably be recovered. But if we the people can only pay $150/barrel, we might only see ten years’ worth drilled. Hmm.

Those of us who attend Association for the Study of Peak Oil conferences (I’ve attended five now, the only person from the Big Island to do so) have known that the claim that the U.S. has a 100-year supply of oil was way overestimated. We are never going to be Saudi America.

Kurt Cobb writes about this at Resource Insights:

The great imaginary California oil boom: Over before it started

Sunday, May 25, 2014

It turns out that the oil industry has been pulling our collective leg. 

The pending 96 percent reduction in estimated deep shale oil resources in California revealed last week in the Los Angeles Times calls into question the oil industry's premise of a decades-long revival in U.S. oil production and the already implausible predictions of American energy independence. The reduction also appears to bolster the view of long-time skeptics that the U.S. shale oil boom–now centered in North Dakota and Texas–will likely be short-lived, petering out by the end of this decade. (I've been expressing my skepticism in writing about resource claims made for both shale gas and oil since 2008.)

California has been abuzz for the past couple of years about the prospect of vast new oil wealth supposedly ready for the taking in the Monterey Shale thousands of feet below the state. The U.S. Energy Information Administration (EIA) had previously estimated that 15.4 billion barrels were technically recoverable, basing the number on a report from a contractor who relied heavily on oil industry presentations rather than independent data.

The California economy was supposed to benefit from 2.8 million new jobs by 2020. The state was also supposed to gain $220 billion in additional income and $24 billion in additional tax revenues in that year alone, according to a study from the University of Southern California that relied heavily on industry funding.

But that was before the revelation by the Times that the EIA will reduce its estimate of technically recoverable oil in California's Monterey Shale by 96 percent–almost a complete wipeout–after taking a close look at actual data for wells drilled there already. The agency now believes that only about 600 million barrels are recoverable using existing technology. The 600 million barrels still sound like a lot, but those barrels would last the United States all of 40 days at the current rate of consumption….

Read the rest

We need to take a step back and reevaluate where we are and what we need to do. As I’ve been saying for years now, we need to get on with geothermal. For the Big Island, the path we need to take is clear.

A byproduct of the oil operations is natural gas, and it would be helpful if natural gas prices rose to help with the costs of development.

It’s kind of like curtailed electricity. If it could be sold at any price, it would help lower the bid price of geothermal and wind operations and would result in lower electricity costs for the rubbah slippah folks.

If curtailed electricity could be bought at a cheap enough price, it could also enable a hydrogen storage option. Then we could get a hydrogen fuel cell option for various motors. And we could look at converting hydrogen to ammonia, so we would have nitrogen fertilizer to help with our food security. 

Geothermal, Lowering Electric Rates, Peak Oil, Renewable Energy Sources

‘Behind the Plug & Beyond the Barrel’

Richard Ha writes:

I spoke on behalf of the Big Island Community Coalition (BICC) at the Hawai‘i Island Renewable Energy Solutions Summit 2014 on April 30th, which was titled “Behind the Plug and Beyond the Barrel," and here's what I said: 

BICC mission

Good morning. Thanks for the introduction. I will use just this one slide, and you can read our mission statement on it, which is to lower the cost of electricity. “To make Big Island electricity rates the lowest in the state by emphasizing the use of local resources.”

I would like to spend some time talking about who makes up the BICC.

Dave DeLuz, Jr. – President of Big Island Toyota.

John Dill – Contractors Association, and Chair of the Ethics Commission

Rockne Freitas – Former Chancellor Hawai‘i Community College

Michelle Galimba – Rancher, Board of Agriculture

Richard Ha – Farmer

Wallace Ishibashi – Royal Order of Kamehameha, DHHL Commissioner

Kuulei Kealoha Cooper- Trustee, Jimmy Kealoha and Miulan Kealoha Trust.

Noe Kalipi – Former staffer for Sen Akaka, helped write the Akaka Bill, energy consultant

Kai'u Kimura- Executive Director of ‘Imiloa.

Bobby Lindsey – OHA Trustee

Monty Richards – Kahua Ranch

Marcia Sakai – Vice Chancellor for Administrative Affairs, former Dean of UH Hilo, College of Business

Bill Walter- President of Shipman, Ltd., which is the largest landowner in Puna.

These folks are all operating in their private capacities. I'm chair of the BICC, and the only person from Hawai‘i to have attended five Peak Oil conferences. I've visited Iceland and the Philippines with Mayor Kenoi's exploratory group.

As you can imagine, the BICC has strong support all across political parties and socioeconomic strata. People get it in five minutes.

Oil and gas are finite resources, and prices will rise.  One note about natural gas: the decline rate of the average gas well is very high. Ninety percent of the production comes out in five years. This is worrisome.

Hawai‘i Island relies on oil for sixty percent of its electricity generation; the U.S. mainland only two percent.

As the price of oil rises, our food manufacturers and producers become less competitive, as we all know. Food security involves farmers farming. And if the farmers make money, the farmers will farm.

What can we do?  By driving the cost of electricity down, the Big Island can have a competitive edge to the rest of the world.

Since rising electricity rates act like a giant regressive tax, lowering electricity rates would do just the opposite. And since two-thirds of the economy is made up of consumer spending, this would be like "trickle up" economics. If the rubbah slippah folks had extra money, they would spend and everyone would benefit.

 The lowest-hanging fruit:

1. Geothermal. Allows us to dodge the finite resource bullet. It is the lowest-cost base power. The Big Island will be over the hot spot for 500,000 to a million years.

2. We throw away many lots of MW of electricity every night. Hu Honua will probably throw away 10 MW for ten hours every night. PGV, maybe 7 MW for ten hours.

3. Wind, too.

Maybe HELCO will allow us to move the excess electricity free. They don't make any money on the throwaway power now, anyway. What if we used it for something that won't compete with them? Then people could bid for the excess, throwaway power for hydrogen fueling stations, to make ammonia fertilizer, and to attract data centers. Hawaii could become the renewable energy capital of the world. People would love to come here and look at that. As airline ticket costs rise, the walk around cost in Hawai‘i would not.

The BICC call for lowering electricity costs could leave future generations a better Hawai‘i.  And that is what we all want.

Peak Oil, Renewable Energy Sources

Natural Gas Inventory Unexpectedly Low, Futures High

Richard Ha writes:

From the Wall Street Journal on Thursday, some concern over the price and availability of natural gas:

Natural Gas Makes Biggest Gain in Two Months

Concern Over Low Stockpile Lifts Market

By Timothy Puko

Natural-gas prices on Thursday posted their biggest one-day gain in two months after a smaller-than-expected increase in U.S. inventories reignited fears that supplies are too low.

Producers added 24 billion cubic feet to stockpiles in the week ended April 11, less than the 34 billion cubic feet average forecast by analysts and traders in a Wall Street Journal survey. Gas supplies are coming off an 11-year-low after a frigid winter boosted demand to burn it for home heating…. Read the rest

The big picture is this: natural gas is pumped underground during the summer, when production is high, and then pulled out of the ground and used in the winters. Because this past winter on the mainland was exceptionally cold, natural gas stores were drawn down much more than is normal or was anticipated.

Now that we’re in the season when we pump natural gas back into storage, there might not be enough to take care of next winter without the price escalating significantly.

The Wall Street Journal article above notes a spike in natural gas futures as people realize that not much gas is going back into underground storage to compensate for this past cold spell. Stock traders are saying, “Holy smoke!”

This is one of the reasons I’m pushing so hard for geothermal – so that we can get off this treadmill.

I was just talking to Robert Rapier, who is saying the same thing. He said that a mild winter might not have caused this mid-$4/1000 cubic feet price to seem normal. He wrote about this last month at Energy Trends Insider:

Gas Inventories Reach 11-Year Low

By Robert Rapier on March 13, 2014 with 7 responses 

Natural Gas Update

Two weeks ago I wrote about the abnormal situation with natural gas inventories in Natural Gas Inventories are Headed Toward Zero. I got a number of questions and comments about that essay, and since then we now have another two weeks of inventory data, let’s update the picture….Read the rest

The question people are asking now is: What happens if we cannot refill the underground natural gas storage fast enough, and before winter rolls around again. And what if it happens to be exceptionally cold again?

Stay tuned.

Big Island, Education, Geothermal, Hydrogen, Lowering Electric Rates, Mauna Kea, Peak Oil, Science, Sustainability, Where We Live

A Big Picture Look

1 Comment

Richard Ha writes:

Yesterday I sat in Judge Nakamura’s courtroom full of people both for and against the Thirty Meter Telescope (TMT) being built on Mauna Kea. I looked over at Kealoha Pisciotta, who has led the opposition all these years, and thought about how much I admire her.

As I sat there, I thought back to 2008, when rising oil prices started being such a big concern. At the top of my mind then was finding an economic alternative to tourism and opportunities for keiki education, both of which the TMT will provide. Locating the TMT here is a great opportunity, and I put a lot of effort into supporting it.

As I sat there yesterday, I thought, too, about how the TMT will help the Big Island cope with our rising energy costs and changing economy; because of it, money will flow into our economy instead of out. It will bring 10 years of construction jobs, and $1 million/year toward Big Island student education for each of more than 55 years. More importantly, it will bring to the Big Island an attitude of “Not, No Can. CAN!”

In 2007, I’d met Gail Tverberg at my first Peak Oil conference in Houston. A former insurance actuary whose job was to price insurance risk, she is someone who approaches the world oil supply problem from a risk management perspective. I helped bring her to the Big Island to give presentations, and she observed that our dependence on tourism makes Hawai‘i very vulnerable.

In 2008, shale and gas production hadn’t yet started in earnest. Natural gas prices were very high at $12/thousand cubic feet. According to a USDA analysis, there was an 80 percent correlation of natural gas price to ammonia fertilizer cost, and that had a frightening effect on local farmers. The price of natural gas dropped to $2/mcf, and now it’s around $4.50/mcf. This, coupled with a subsequent increase in natural gas supply, has given us some breathing room. But it’s only temporary.

We have another fairly unique opportunity to protect ourselves against seriously rising energy costs, which are already impacting our lives negatively and will continue to go up if we don’t make changes:

Geothermal energy.

After having attended five Association for the Study conferences (the only person from our state to do so) I’ve found that it’s all a matter of 1) cost, 2) what works and 3) comparative risk.

Geothermal addresses all three of those points. It’s inexpensive compared to using oil to produce our energy; we already know that it works; and after decades of experience with it here, the comparative risk is low.

It also allows the possibility of making hydrogen, which we can use to fuel our ground transportation, and also ammonia fertilizer for farmers. There are a lot of wins there.

Peak Oil

The Cost of Farming

2 Comments

Richard Ha writes:

Now that the GMO discussion has stabilized, let’s move forward.

There is a big picture here that is not being discussed. In the coming weeks, I will be writing about various input costs of farming, because as costs go up we need to be planning and preparing. 

Today I want to discuss what farming looks like from a farmer’s point of view. 

Farmers were shocked back in 2008 when the cost of nitrogen fertilizer spiked. Ammonia is a key component for making nitrogen fertilizer, as well as plastics and pesticides, and the cost of ammonia is highly correlated with the price of natural gas.

Impact of Rising Natural Gas Prices on U.S. Ammonia Supply

Natural gas is the primary raw material used to produce ammonia. Approximately 33 million British thermal units (mm Btu) of natural gas are needed to produce 1 ton of ammonia. Natural gas accounts for 72-85 percent of the ammonia production cost, depending on the size of the ammonia plant and the price of ammonia (TFI (a)). Ammonia prices were weakly correlated with natural gas prices before 2000, but became strongly correlated after 2000….  Read the rest

Natural gas had been cheap, but its cost started rising and, in 2008, it reached $12/thousand cubic feet (mcf). I addressed the State Farm Bureau convention and told the farmers it was not their fault that fertilizer and input costs had risen so much and that their costs were suddenly so high.

After 2008, the price of natural gas declined dramatically because of shale oil and shale gas production. It dropped below $3/mcf. Right now it’s slightly higher, a little over $4/mcf,  because of winter home heating. 

So we’ve seen the effects of high natural gas prices on farming input before, back in 2008, and we know it will go up again.

What exactly is the outlook for the price of natural gas and therefore fertilizer, plastics and pesticide costs?

On the mainland, thousands of wells produce natural gas. Keep in mind, though, that the average gas well produces 90 percent of its total production – 90 percent of everything it’s going to ever produce – in its first five years. In contrast, Saudi Arabia oil fields have lasted for more than 50 years.

It’s only common sense that natural gas prices are going to rise, and therefore our farming input costs will go even higher. The only question is how fast and how high?

Coming up I’ll write about what people are predicting, as far as when prices will go up and how high they will go.