Gas Attack

Two weeks ago, I wrote about the Shell oil rig Kulluk, which was then beached on an uninhabited island off Alaska’s south coast.  Shell has since refloated the rig and it’s now in a sheltered harbor being inspected.  This is not the end of Shell’s troubles.

Shell’s incompetence with equipment (see here for a longer, but far from comprehensive list) is merely one factor they’re passing around the Bromo-Seltzer at HQ these days.  Aside from the fact that one commenter on an industry web site said Shell’s Alaska operations look like “six monkeys playing football,” the real terror is natural gas.  Fracking, if you read this blog (or even go to the movies) is familiar to you as is the way it destroys landscapes, pollutes groundwater, divides communities and releases hellacious amounts of greenhouse gases (which conveniently slip between regulatory regimes).

Beyond that, fracking has put huge volumes of natural gas on the market, creating a glut that’s given a painful kick in the pants (where the wallet is kept) to other forms of energy.  Coal, nukes and oh, yes oil, which has been king for the past 150 years are all feeling the effects natural gas has brought to the so-called free market.

What’s that got to do with Alaska?  Shell wants to drill for oil in the Arctic Ocean off Alaska’s North Slope.  All the other oil majors want Shell to drill, so they can eventually get into the Arctic and get their share.  Shell is the lead edge of the wedge.

Then there’s the Trans-Alaska Pipeline System (TAPS), which for 35 years has carried oil from the top of Alaska to the bottom.  ExxonMobil, BP and ConocoPhillips dominate the onshore pumping and because those fields are playing out, the oil industry is desperate to get fresh oil into TAPS, because if they can’t keep the oil flowing, TAPS will turn into what Amory Lovins calls “the world’s biggest ChapStick.” (What’s with all the product placement this week, Mark?)  If all that oil, hot from millions of years underground isn’t kept moving at all times, it cools and turns to wax.  So the whole US oil industry is dedicated to finding and pumping more and more oil in Alaska.

As you might imagine, the per-barrel cost of exploring, drilling, pumping and transporting oil from the top of the globe is considerable.  Shell has already spent $5 billion in Arctic Alaska and is at least seven years from pumping the first drop.  On one hand, there’s plenty of oil to be had and money to be made, plus a pipeline to be kept open (and an extension to be built), but on the other hand, the time window in which all of that needs to happen – thanks to natural gas – will be one of low energy prices, perhaps below the cost of getting that oil to market.  Oh, the corporate personhood!

Five time zones away, the same thing is happening to the nuclear industry.  Here in Vermont, the state and any number of environmental groups are laboring heavily to shut the 41-year-old Vermont Yankee nuke plant.  Shell Oil and Entergy (Vermont Yankee’s owner) could go head-to-head in a screw up and mishap competition.  (Yay!  More incompetence!  Only now with radioactive material!)

Just as it did with oil, the nat gas glut is making the arithmetic difficult for the nukesters, by undercutting the cost of producing electricity.  Just as the Kulluk was being tossed like a beach ball off Alaska, an analyst for the Union Bank of Switzerland let it be known that Entergy would be better off, moneywise, shutting Vermont Yankee and a few other nukes around the country.

I’m sure Entergy’s bean counters would love nothing more than to get out the mothballs, but shutting down at this point might mean signaling defeat in Entergy’s legal battle with the State of Vermont and greenies, which could set a precedent that might empower citizens all over America.  Actually letting people govern would set off a headlong rush for the executive restrooms on Wall Street and must be avoided at all costs, so the pointless fight goes on.

This wheezing, decrepit money pit of a nuke plant costs millions in legal fees to keep open and if the attorneys are successful, will need well over $100 million in equipment upgrades and now some smart-assed bank analyst with a bow tie says the whole debacle isn’t worth it.

Is this a case of “the enemy of my enemy is my friend”?  Hell no.  The frackers are even killing their own profitability with their gas glut, but that’s how the real “free market” – AKA the tragedy of the commons – works.  The real enemy is global warming, see above regarding greenhouse gases.  Meanwhile, I think we’ll see more Morton’s Fork situations as 21st century society descends from tragedy to farce.

© Mark Floegel, 2013

Post a Comment

Your email is never published nor shared. Required fields are marked *