What is the Murkowski Resolution?

Through CARE’s Monthly Newsletter, The PowerLine, and through special e-mail alerts, we have been encouraging people to contact their Senators asking them to support the Murkowski Resolution. The Debate on the floor has been postponed until June 10. There is still time to push for approval of the “Resolution of disapproval.”

It is a complicated legislative process that is hard to fully comprehend. This posting by our friend from the Competitive Enterprise Institute, Marlo Lewis and Former Senator and Governor of Virginia, George Allen, offers the best overview we’ve seen. Please give it a read. If the EPA’s power grab alarms you, pass this link on to everyone you know and ask them to contact their senators too! Here’s a link to make sending your Senator a note asking him or her to support the Murkowski Resolution!

The EPA's Shocking Power Grab
The U.S. Environmental Protection Agency is carrying out one of the biggest power grabs in American history. The agency has positioned itself to regulate fuel economy, set climate policy for the nation and amend the Clean Air Act—powers never delegated to it by Congress. It has done this by declaring greenhouse gas emissions a danger to public health and welfare, in a proceeding known as the "endangerment finding."

On June 10 the U.S. Senate is scheduled to debate and vote on Alaska Sen. Lisa Murkowski's resolution of disapproval to overturn the endangerment finding. The resolution is absolutely necessary to restore democratic accountability in climate policymaking.

If allowed to stand, the EPA's endangerment finding will trigger a regulatory cascade through multiple provisions of the Act. America could be burdened with a regulatory regime more costly than any climate bill Congress has rejected or declined to pass, yet without the people's representatives ever voting on it.

Consider how the endangerment finding will expand the EPA's power beyond any plausible congressional mandate.

To begin with, the finding compels the EPA to establish greenhouse gas emission standards for new motor vehicles. About 95% of all vehicular greenhouse gas emissions are carbon dioxide (CO2) emissions from motor fuel combustion. Because there is no commercially proven technology to capture CO2 tailpipe emissions, the principal way to reduce the amount of CO2 emitted per mile is to reduce the amount of fuel consumed per mile. In other words, greenhouse gas emission standards for automobiles are basically fuel economy standards by another name. By empowering the EPA to set greenhouse gas emission standards, the endangerment finding also empowers the EPA to determine the stringency of fuel economy standards, even though the Clean Air Act gives the EPA no such authority.

Once the greenhouse gas emission standards go into effect, CO2 becomes a "regulated air pollutant" and, thus, automatically subject to additional regulation under the Act's Prevention of Significant Deterioration (PSD) pre-construction permitting program and Title V operating permits program. Under the Act, a firm must obtain a PSD permit before it can build or modify a "major stationary source" of regulated air pollutants, and obtain a Title V permit before it can operate such a source. The problem is that an immense number and variety of previously non-regulated entities—big box stores, office buildings, apartment complexes, small manufacturers, even commercial kitchens—emit enough CO2 to qualify as "major" sources.

By the EPA's own admission, applying PSD and Title V to CO2 leads to "absurd results." The EPA and its state counterparts will have to process approximately 41,000 PSD permit applications per year (instead of 280), and 6.1 million Title V permit applications per year (instead of 14,700). Agencies' administrative resources will be overwhelmed, producing ever-growing backlogs that slam the brakes on new construction and force millions of firms to operate in legal limbo. A more potent anti-stimulus package would be hard to imagine.

To avert a red ink nightmare, the EPA proposes to "tailor" the permitting programs so that they exempt for six years all sources emitting less than 50,000 tons per year (TPY) of CO2-equivalent greenhouse gases. But the Act plainly states that a source is subject to PSD if it has the potential to emit 250 TPY of a regulated air pollutant and Title V if it has a potential to emit 100 TPY. In reality, the EPA proposes to amend the statute. This breach of the separation of powers only compounds the constitutional crisis inherent in the EPA's bid to hijack fuel economy regulation and climate policymaking.

Even if courts uphold EPA's tailoring rule, it's anybody's guess how many smaller sources EPA will try to regulate after 2016. Government burdens have a habit of ratcheting up over time.

The tailoring rule also provides no protection from the endangerment finding's most absurd result—rulemakings to establish National Ambient Air Quality Standards (NAAQS), set below current atmospheric concentrations, for greenhouse gases. Environmental litigation groups are only acting on the obvious implication of the EPA's assertion that the root cause of endangerment is the "elevated concentration" of greenhouse gases when they demand that the EPA initiate such rulemakings.
The economic consequences would be devastating. Even a global depression lasting several decades would not be enough to lower CO2 concentrations from today's level—roughly 390 parts per million—to 350 ppm, the new politically correct "stabilization" target advocated by former Vice President Al Gore, the Center for Biological Diversity and numerous other environmental groups. Yet under the Clean Air Act, states are obligated to attain NAAQS within five years or, at most, 10 years. The endangerment finding thus sets the stage for environmental activists to transform the Act into a deindustrialization mandate via litigation. The Murkowski resolution would nip all this mischief in the bud.

A strong case can be made that the EPA's endangerment finding is scientifically flawed. However, the Murkowski resolution is a referendum not about climate science but about the constitutional propriety of the EPA exercising powers not delegated by Congress. The resolution would overturn the "legal force and effect" of the EPA's endangerment finding, not the EPA's scientific reasoning or conclusions.

Who should make climate policy—the people's representatives or politically unaccountable bureaucrats, trial lawyers and unelected activist judges appointed for life? That is the sole question raised by the Murkowski resolution. The U.S. Constitution permits only one answer.

Sen. Barbara Boxer, D-Calif., warns that if the public has to wait for Congress to pass legislation to control greenhouse gas emissions, "that might not happen, in a year or two, or five or six or eight or 10." Yes, but that is representative democracy. And the democratic process is more valuable than any result that the EPA might obtain by doing an end run around it. Of all people, U.S. senators should understand this basic precept of our constitutional system.


George Allen is a former U.S. senator and governor from Virginia. He is also chairman of the American Energy Freedom Center. Marlo Lewis is a senior fellow in environmental policy at the Competitive Enterprise Institute.

Kerry-Lieberman Climate Bill Equals Lost Jobs

What would happen to you and your family if you were laid off from work? You would be immediately faced with the daunting task of finding another job when national unemployment stands at 9.9%. This nightmare scenario could quickly become a reality if Congress manages to pass the Kerry-Lieberman climate bill, also known as the American Power Act. This monstrosity of a bill would destroy job opportunities for hard working American families struggling to make ends meat through higher taxes, higher utility rates, and outsourcing solar panel and wind turbine manufacturing to China. In addition, unilateral economically self-destructive behavior on part of the United States would result in lower wages for American works while workers in China and India would remain unhindered.

This blog entry will change your view on how environmental/energy policy affects you, your family, and your community. The actions of Washington have very real consequences and it's time to take notice and begin putting political pressure on your members of Congress to KILL THIS BILL! (Please click on text for Congressional contact information directory)

Kerry-Lieberman Equals Lost Jobs
Senators John Kerry (D-MA) and Joseph Lieberman (IND-CT) claim that their new energy bill, the American Power Act, would save the environment. What they don't tell you is that it would powerfully destroy jobs.

The Congressional Budget Office is more honest. Last week it issued a report entitled "How Policies to Reduce Greenhouse Gas Emissions Could Affect Employment." The report concluded that "job losses in the industries that shrink would lower employment more than job gains in other industries would increase employment, thereby raising the overall unemployment rate."

With the national unemployment rate now 9.9%, Americans are concerned about their job prospects and those of friends and neighbors. Polls show that many believe that reducing global warming, the so-called benefit of lower greenhouse gas emissions, is less important than economic growth. With the slowdown in many measures of global warming over the past decade, it's an inconvenient truth that climate change is playing second fiddle to jobs.

Adding to the public's skepticism are leaked emails from the University of East Anglia in November 2009 showing the destruction of original global temperature data and the suppression of research papers authored by global warming dissenters. Americans are no fools - they know that no reduction in global warming will occur if America reduces greenhouse gases without similar action by China and India, and these countries have not agreed to comparable steps.

The Kerry-Lieberman bill is the Senate companion to the climate change bill that the House passed last summer, the American Clean Energy and Security Act of 2009, cosponsored by Henry Waxman, Chairman of the House Energy and Commerce Committee, and Edward Markey, Chairman of the House Energy and Environment Subcommittee, both Democrats.

Senator Lindsay Graham, an influential South Carolina Republican, was originally one of the cosponsors of the Senate bill, making it nominally bipartisan and giving it a greater chance of passage. But he dropped his sponsorship at the end of April.

On Wednesday, Mr. Kerry issued a statement saying that "It is time for Democrats, Republicans, and Independents to come together to pass legislation that will create American jobs and achieve energy security, while reducing carbon pollution by 17 percent in 2020 and by over 80 percent in 2050."

The bill requires that the country's total greenhouse gas emissions in 2013 be 5% lower than 2005 levels and that levels in 2020 be 17% lower - even as the economy, one hopes, has been expanding - and that by 2050, emissions be 80% below the 2005 baseline.

Representative Joe Barton, ranking member of the House Energy and Commerce Committee, declared, "And just like with Waxman-Markey, we'll need to crash dive the economy back to something resembling the 1870s in order to reach the anti-global warming targets that Kerry-Lieberman sets for 2020, 2030, and 2050."

Indeed, it's not technologically possible to meet these goals now without radically reducing the American standard of living. The bill's sponsors appear to believe - or hope - that passage of the law will inspire technology to appear as needed. The bill contains numerous grants to "eligible partnerships" to develop such technology, as well as to study the fields of clean and renewable energy.

The mechanism for achieving the bill's proposed, ambitious goals for emissions reduction is standards for power plants, heavy industry, and transportation, and a "cap-and-trade" program beginning in 2013.

Under this new, far-reaching regulatory regime, Environmental Protection Agency politicians, in consultation with other Cabinet agencies, would issue regulations within a year governing the allocation of allowances to emit greenhouse gases.

The bill would require EPA to shrink allowances steadily to 2050. When any year's emissions exceed a firm's cap, it would have to purchase allowances from the government or other companies. That is a tax under another name, driving up costs that would be passed on to consumers.

Supporters of the bill claim that the new regulations will create jobs as more Americans are employed to produce new emissions-suppressing technology. But funds for new capital expenditures have to come from somewhere, and the costs are passed to consumers in the form of higher prices.

Not only does the bill penalize American firms through higher costs of production, it causes jobs to be created abroad through required investments in wind turbines and solar panels, now commonly manufactured in China. But carbon-intensive sources of energy such as coal and oil, which are disfavored by the bill, are produced domestically and employ American workers.

The CBO report shows that emissions reduction programs would cause job losses in coal mining, oil and gas extraction, gas utilities, and petroleum refining. In addition, workers' wages adjusted for inflation would be lower than otherwise because of the increase in prices due to a cap and trade program. CBO concludes that some workers, therefore, would leave the labor market, because at the new lower wages they would prefer to stay home.

Any reader of the CBO report would realize that it's not in the interests of American workers to embark on an emissions reduction program with our current high unemployment rate. According to CBO, "While the economy was adjusting to the emission-reduction program, a number of people would lose their job, and some of those people would face prolonged hardship." Workers laid off in declining industries would find it hard to get new jobs.

The CBO report points out that "In cases in which a shrinking industry was the primary employer in a community, the entire community could suffer." The tax base would dwindle and real estate would lose its value as unemployed workers moved elsewhere. The community's personal income would diminish and real estate values would fall as the jobless moved away.

Despite the creation of 290,000 jobs in April, the unemployment rate stands at 9.9%, higher than the United Kingdom, Canada, and even Germany and Italy. When given a choice between the ephemeral benefits of carbon reduction and jobs that pay for rent and groceries, out-of-touch politicians might choose Kerry-Lieberman. But, for most Americans, jobs win every time.

Diana Furchtgott-Roth is a senior fellow at the Hudson Institute.

Green-Think: It Is Less About The Environment And More About Using Environmental Accidents To Advance Social And Political Agendas

With the daily news continuing to focus on the oil spill in the Gulf, there is ongoing discussion as to what it all means. One suggestion is that the environmentalists are grieved. Surely there is truth to that as everyone—oil producers included—is. But there is much more going on in the background.

We were pleased to receive the following insights from Steven Milloy, author of Green Hell: How Environmentalists Plan to Control Your Life and What You Can Do to Stop Them , widely known for his popular website: junkscience.com. This piece is bound to stir up some controversy while offering substantial food-for-thought.

If you are not familiar with Steven Milloy, we invite you to listen to CARE’s Conference Call recording when he was our featured guest, March 2009.

Greens Love Oil Spills
If you think that environmentalists are lamenting the Gulf oil spill, think again.
President Obama discomfited the greens in March when he announced that he would expand opportunities for offshore drilling. Although not a sincere policy proposal, the President’s announcement nonetheless worried the greens as they thought that they might have to make a concession on offshore drilling to get oil industry support for a climate bill.

Although the President reiterated his support for more drilling after the spill, Congressional Democrats, environmental groups and the Center for American Progress have all publicly breathed a sigh of relief. Their view is that the spill not only strengthens their hand against more drilling, but increases the likelihood of getting a climate bill through the Senate.

“Environmentalists hope the BP spill turns into a game changer that will help propel the climate legislation’s passage much like the Exxon Valdez oil spill led to the 1990 Clean Air Act amendments,” reported Climatewire (May 4).

This is not likely to be the case since the public of 2010 is much more hip to the green agenda than it was in 1990, but the Climatewire report provides clear insight into green-think. They don’t care about the planet’s environment so much as they do about how they can use environmental accidents to advance their social and political agenda.

Not convinced?

Consider the puzzlingly slow response of the Obama administration to the spill.
Although Homeland Security chief Janet Napolitano claims the government has been involved since “day one,” in fact, that “day one” response was limited to search and rescue efforts. Days after the spill, White House Press Secretary Robert Gibbs dismissed the severity of the accident, stating, “I don’t honestly think it opens up a whole new series of questions, because, you know, in all honesty I doubt this is the first accident that has happened and I doubt it will be the last.”
As the spill got worse, threatening coastal areas and the administration, the administration remained content to allow the inept BP—responsible for the largest oil spill on Alaska’s North Slope in 2006—to putter around with unsuccessful efforts to repair the leak and contain to the spill.

For an administration that claims to be so sensitive to the environment, its reaction was curious. Why didn’t the administration rush to action? If your house is catches fire, does the 911 operator respond to your call for help with, “Let’s wait and see if you can put it out before we send a fire truck.”

Interestingly, a Clinton administration-era plan calls for the immediate use of fire booms in case of a major Gulf oil spill, according to a Mobile Press-Register report. A single boom (costing only a few hundred thousand dollars) towed by two boats can burn 1,800 barrels of oil an hour, “raising the possibility that the spill could have been contained at the accident scene 100 miles from shore.”

But there were no booms onsite or anywhere close. It took federal officials more than a week to even conduct a test burn. Booms won’t be onsite until Wednesday or Thursday of this week.

It’s hard to know for sure whether this all simple lameness on the part of government, or whether the Obama administration is in no rush to prevent a disaster because it perceives an oil-drenched Gulf Coast as a way to advance cap-and-trade and anti-oil agendas. But why would it let a good crisis go to waste?


Steve Milloy publishes JunkScience.com and is the author of Green Hell: How Environmentalists Plan to Control Your Life and What You Can Do to Stop Them (Regnery 2009).

The Tale Of Two Americas

There is a tale of two Americans playing out right before our eyes. In the state of Pennsylvania, there is an job-creation surge being fueled by the shale gas industry. In the state of California, there is a campaign to drive hundreds of thousands of Californians out of work by mandating the creation of "green jobs" at the expense of other sectors of the economy. The shale gas industry has sent up a flare of hope during dark economic times while environmentalists are doing everything they can do to prolong this recession.

According to Penn State University, "the shale gas industry's boom is creating 100,000 jobs in Pennsylvania during 2010..." In contrast, "California's unemployment has soared from less than 5 percent to more than 12 percent since Gov. Arnold Schwarzenegger signed the California Global Warming Solutions Act three years ago." See the difference? Embracing traditional energy sources like shale gas can turn back the tide of rising unemployment while government-mandated "green jobs" will exacerbate America's current economic plight.

In reality, the problem is much more complicated than this which is why CARE is pleased to bring you insights from Dennis T. Avery, an environmental economist and senior fellow with the Hudson Institute. We invite you to read his latest analysis so you have the knowledge needed to set the record straight and tell the tale of two Americas; one that embraces traditional energy sources and economic prosperity while the other embraces government-mandated "green jobs" and the economic misery that comes with it.

Green Jobs or Shale Gas? The Numbers Talk
The shale gas industry’s boom is creating 100,000 jobs in Pennsylvania during 2010, according to Penn State University. Only a few of these new jobs are on drill rigs; many of those jobs go to highly-skilled oil patch veterans from out of state. But the gas industry’s expansion has created jobs by the tens of thousands in steel production, construction, and services.

More important, the clean, low-cost energy from the shale gas will go on creating additional jobs in every Northeast regional industry that needs energy—meaning all of them. The shale gas boom is creating similar huge job gains throughout Appalachia, Texas, and Louisiana, with the new shale drilling system also about to expand in the huge Bakken oil shale deposits under the Dakotas and Montana.

Meanwhile, the giant state of California has created only 48,000 "green jobs" over the 13 years from 1995 to 2008. Green jobs still make up only 1 percent of California’s economy. Worse, says State Senator Bob Dutton, the high energy taxes needed to create those few green jobs are at the same time killing millions of jobs in all sorts of industries across the state. California’s unemployment has soared from less than 5 percent to more than 12 percent since Gov. Arnold Schwarzenegger signed the California Global Warming Solutions Act three years ago.

The governor promised that the global warming tax would "create a whole new industry to pump up our economy, a clean-tech industry that creates jobs, sparks new cutting-edge technology and will be a model for the rest of the nation and the rest of the world." Instead, the global warming taxes will drive up the prices of all non-renewable energy—as they were intended to do.

California taxpayers will now pay for wind turbines and solar panels made in China, while California has lost more than 600,000 manufacturing jobs. Business relocation specialist Joseph Vranich says he’s working full time to help companies flee California’s rising costs and restrictions. He warns that no one is calling about moving into the Golden State.

Senator Dutton points to CalPortland Cement, which has cancelled its California expansion plans and is considering a Nevada location instead. It recently closed a cement operation in Colton, laying off 100 workers.

That’s a preview of the "green jobs" impact. The manufacturing—and farming—will be done in places that don’t impose energy taxes. If the Congress imposes import tariffs, that still won’t provide cost-effective energy for American farming, manufacturing, or transport. With far less energy available, our standards of living must drop dramatically.

The Wall Street Journal reports the Southern California Public Power Authority is warning of a 30 percent hike in electric rates. The Los Angeles Department of Water and Power has told business to expect a 21 percent hike this year. LA Mayor Antonio Villaraigosa says the city must raise rates because "the State is breathing down our necks . . . where we could be looking at fines of $300 million [in 2012] and $600 million on top of that."

All of this in spite of the low correlation between CO2 and our thermometer records—22 percent. The correlation with sunspots is 79 percent. Does Washington care? Or does President Obama want $6 gasoline, tripled electric bills—and $800 billion per year in energy taxes to "spread the wealth" among his allies?

DENNIS T. AVERY is an environmental economist, and a senior fellow for the Hudson Institute in Washington, DC. He was formerly a senior analyst for the Department of State. He is co-author, with S. Fred Singer, of Unstoppable Global Warming Every 1500 Hundred Years, Readers may write him at PO Box 202, Churchville, VA 24421 or email to cgfi@hughes.net.

Transocean Rig Disaster: The Well From Hell

It has been a tough month for energy on the disaster front. The news media seems infatuated with the off-shore oil spill and rig blow out. For all the focus, they do not really offer a comprehensive overview of what happened—though truly it will be weeks, if not months before the truth is really known. We cast the net to our experts and found the following technical, thoughtful and understandable review from one of our favorite energy experts: Byron King.

As you know by now, the drilling vessel Deepwater Horizon exploded, burned and sank last week, with the loss of 11 workers and injuries to many more. What happened? What's happening now? What's going to happen? He’s been working to piece things together.

What do you think? Does this help you understand? Does it change you thoughts on off-shore drilling?

An Ill-fated Discovery
According to news accounts, at about 10 p.m. CDT last Tuesday, Deepwater Horizon was stable, holding an exact position in calm, dark seas about 45 miles south of the Louisiana coastline. Water depth in the area is 5,000 feet. The vessel manifest listed 126 souls on board.

Deepwater Horizon was finishing work on an exploration well named Macondo, in an area called Mississippi Canyon Block 252. After weeks of drilling, the rig had pushed a bit down over 18,000 feet, into an oil-bearing zone. The Transocean and BP personnel were installing casing in the well. BP was going to seal things up, and then go off and figure out how to produce the oil -- another step entirely in the oil biz.

The Macondo Block 252 reservoir may hold as much as 100 million barrels. That's not as large as other recent oil strikes in the Gulf, but BP management was still pleased. Success is success -- certainly in the risky, deep-water oil environment. The front office of BP Exploration was preparing a press release to announce a "commercial" oil discovery.

This kind of exploration success was par for the course for Deepwater Horizon. A year ago, the vessel set a record at another site in the Gulf, drilling a well just over 35,000 feet and discovering the 3 billion barrel Tiber deposit for BP. So Deepwater Horizon was a great rig, with a great crew and a superb record. You might even say that is was lucky.

But perhaps some things tempt the gods. Some actions may invite ill fate. Because suddenly, the wild and wasteful ocean struck with a bolt from the deep.

The Lights Went out; and Then...
Witnesses state that the lights flickered on the Deepwater Horizon. Then a massive thud shook the vessel, followed by another strong vibration.

Transocean employee Jim Ingram, a seasoned offshore worker, told the U.K. Times that he was preparing for bed after working a 12-hour shift. "On the second [thud]," said Mr. Ingram, "we knew something was wrong."
Indeed, something was very wrong. Within a moment, a gigantic blast of gas, oil and drilling mud roared up through three miles of down-hole pipe and subsea risers. The fluids burst through the rig floor and ripped up into the gigantic draw-works. Something sparked. The hydrocarbons ignited.

In a fraction of a second, the drilling deck of the Deepwater Horizon exploded into a fireball. The scene was an utter conflagration.

Evacuate and Abandon Ship
There was almost no time to react. Emergency beacons blared. Battery-powered lighting switched on throughout the vessel. Crew members ran to evacuation stations. The order came to abandon ship.

Then from the worst of circumstances came the finest, noblest elements of human behavior. Everyone on the vessel has been through extensive safety training. They knew what to do. Most crew members climbed into covered lifeboats. Other crew members quickly winched the boats, with their shipmates, down to the water. Then those who stayed behind rapidly evacuated in other designated emergency craft.

Some of the crew, however, were trapped in odd parts of the massive vessel, which measures 396 feet by 256 feet -- a bit less than the size of two football fields laid side by side. They couldn't get to the boats. So they did what they had to do, which for some meant jumping -- and those jumpers did not fare so well. Several men broke bones due to the impact of their 80-foot drop to the sea. Still, it beat burning.

With searchlights providing illumination, as well as the eerie light from the flames of the raging fire, boat handlers pulled colleagues out of the water beneath the burning rig. In some instances, the plastic fittings on the lifeboats melted from the heat.

The flames intensified. Soon it was impossible for the lifeboats to function near the massive vessel. The small boats moved away from the raging fountain of fire fed by ancient oil and gas from far below.

The lifeboat skippers saved as many as they could find -- 115 -- but couldn't account for 11 workers who were, apparently, on or around the drill deck at the time of the first explosion. Nine of the missing are Transocean employees. Two others work for subcontractors.

Damon Bankston to the Rescue
Fate was not entirely cruel that night. Indeed, a supply boat was already en route to the Deepwater Horizon. It was the Tidewater Damon Bankston, a 260-foot long flat-deck supply vessel.

Damon Bankston heard the distress signal. Her captain did what great captains do. He aimed the bow toward the position of Deepwater Horizon. Then he tore through the water, moved along by four mighty Caterpillar engines rated at 10,200 horsepower. Soon, the Damon Bankston arrived on scene, sailed straight into the flames and joined the rescue.

Meanwhile, Coast Guard helicopters lifted off from pads in southern Louisiana, and Coast Guard rescue vessels left their moorings. "You have to go out," is the old Coast Guard saying. "You don't have to come back."

The helicopters flew in the black of night toward a vista of utter disaster. Arriving on scene, the pilots watched in awe as columns of flame shot as high as a 50-story building. The helicopters were buffeted by blasts of super-heated wind coming from the flames, while chunks of soot the size of your hand blew by.

The pilots hovered in the glow of the blazing rig, while Coast Guard medics fast-roped down to the deck of Damon Bankston . The medics quickly assessed the casualties, strapped critically injured crewmen to backboards and hoisted them up to the helicopters. Then the pilots turned north and sped ashore to hospitals.

Uninjured survivors returned to land on the Damon Bankston. And others came out to fight the blistering flames.

But the Deepwater Horizon wasn't going to make it. The situation deteriorated, to the point of complete catastrophe. The ship was lost.

At about 10 a.m. CDT on Thursday morning, 36 hours after the first explosion, the Deepwater Horizon capsized and sank in 5,000 feet of water. According to BP, the hulk is located on the seafloor, upside-down, about 1,500 feet away from the Macondo well it drilled.

Still Spilling Oil
We were told that the oil well drilled by the Deepwater Horizon was sealed in. The "official" word was that the well wasn't gushing oil into the sea. My sources were no less than U.S. Coast Guard Rear Adm. Mary Landry, of the New Orleans district, as quoted in The New York Times.

But over the weekend, Rear Adm. Landry and The New York Times reported that the well IS leaking oil, at a rate of about 1,000 barrels per day.

The on-scene information comes from remotely operated underwater robots that BP and Transocean are using to monitor the well and survey all the other wreckage of the Deepwater Horizon. There's now a large amount of equipment and pipe and a myriad of marine debris on the seafloor near the well. It's a mess.

Apparently, the blowout preventer is not controlling the flow of oil. According to Transocean, the blowout preventer on Deepwater Horizon was manufactured by Cameron Intl. (CAM: NYSE).

What happened? We don't know that just yet. Earlier reports that underwater robots sealed the blowout preventer were wrong. It's possible that the blowout preventer is only partially closed. We'll find out, eventually. Meanwhile, BP and Transocean have announced that they will make another effort to activate the blowout preventer. They need to stop that oil.

BP is also preparing to drill one or more relief wells to secure the site permanently. BP has mobilized the drilling rig Development Driller III, which is moving into position to drill a second well to intercept the leaking well. With the new well, the drillers will inject a specialized heavy fluid into the original well. This fluid will secure and block the flow of oil or gas and allow BP to permanently seal the first well.

Riser Problems?
According to the Coast Guard and BP, oil is leaking from two spots along what is left of the riser system. Here's a schematic view:



Originally, the risers (represented by the blue line in the graphic above) were affixed to the blowout preventer on the seafloor, and extended 5,000 feet straight up to the "moon pool" of the Deepwater Horizon. When the drilling vessel sank, it took the riser piping and bent it around like a pretzel.

The remnants of the riser system now follow a circuitous underwater route. According to BP, the risers extend from the wellhead up through the water column to about 1,500 feet above the seabed. Then the riser system buckles back down toward the seafloor. (Frankly, I'm astonished that it all held together as well as it has. It's a credit to the manufacturer, which I'll discuss below.)

According to the Transocean website, the riser devices on the Deepwater Horizon were manufactured by VetcoGray, a division of General Electric Oil & Gas. The specific designation is a "HMF-Class H, 21-inch outside diameter riser; 90 foot long joints with Choke & Kill, and booster and hydraulic supply lines."

Here's a photo of something similar. These are Vetco risers sections that I saw on another vessel, the Transocean Discoverer Inspiration, when I visited that ship last month:

The different color stripes on the risers indicate differing amounts of buoyancy. The idea is to put heavy riser pipe down at the bottom, connected to more buoyant risers above. The buoyancy keeps the entire riser system in more or less neutral buoyancy, so that the drill ship doesn't have to somehow hoist up the huge weight of all that pipe.

As you can see, there's a large-diameter pipe in the middle of each riser. That pipe is then encased in a buoyant foam substance. The risers are bolted together at the flange sections. The bolts are about as big as the arm of a very strong man. The nuts, which tighten things down, are the size of paint cans.

After the risers are assembled and hanging down from the drilling vessel, the drilling personnel lower and raise drilling pipe through the large-diameter center riser pipe. All the drilling mud stays inside the drill pipe on the way down hole, and inside the riser pipe on the return.

On the side of the riser sections, you can see smaller-diameter pipes. These are choke & kill, booster and hydraulic pipe components. The pipes run parallel to the large-diameter inner pipe. These pipe systems run down to the blowout preventer on the seafloor.

The idea is to keep the drilling process an enclosed system. All the "drilling stuff" -- the drill-pipe, drilling-mud and drill-cutting returns -- stays inside the large-diameter pipe. The smaller pipes hold fluid to transmit hydraulic power and help control drilling. In particular, the pipes on the side aid in communicating with and controlling the blowout preventer.

Technical Specs
Ideally, when the risers are working as intended, nothing leaks out into the sea. Then again, you're not supposed to twist and bend the riser sections like a pretzel. So how strong is a riser system? Extremely strong, actually.

According to technical literature from GE Oil & Gas, the riser equipment is "designed for use in high-pressure, critical service and deep-water drilling and production applications." The pressure-containing components are rated for working pressures of 15,000 psi. That's the same as the Cameron blowout preventer on the Deepwater Horizon. The materials used in risers have exceptional tensile and bending load characteristics.

According to Vetco paperwork that I've seen, the Class H riser sections have a 3.5 million pound load-carrying capacity. That's the equivalent weight of about four fully fueled Boeing 747s. These risers are super strong.

Still, it's not just any one single piece of riser section that does it all. These sections all get bolted together, for 5,000 feet in this case. The riser sections all have to work together as a system. The whole string is only as strong as the weakest spot. And yes, even the strongest steel will break if you apply enough stress.

It all has to work together. You've got the riser sections, along with things called HMF flanged riser connectors. Then there are HMF riser joints; flex joints; telescopic joints; and, near the top, things called "fluid-bearing, nonintegral tensioner rings." Together, these all comprise the marine riser system.

In general, the riser components compensate for heave, surge, sway, offset and torque of the drilling vessel as the ship bounces around on the sea surface. The bottom line is to maintain a tight seal -- what's called "integrity" -- between the subsea blowout preventer stack and the surface during drilling operations.

Down at the bottom, at the seafloor, the risers are connected to the blowout preventer by a connector device. The GE-Vetco spec is for a device that accommodates 7 million foot-pounds of bending load capacity. That's about eight fully fueled Boeing 747s.

What's the idea? You want a secure connection between the high-pressure wellhead system and the subsea blowout preventer stack. That's where mankind's best steel meets Mother Nature's high pressures.

High pressures? You had better believe it. And in this case, Mother Nature won. So looking forward, there's going to be a lot of forensic engineering on the well design and how things got monitored during drilling. Transocean drilled the well, but BP designed it. So the key question is how did the down-hole pressures get away like they did?

What Happens Now?
It's a good thing that the Deepwater Horizon didn't settle right on top of the well. At least there's room for the remotely operated vehicles to maneuver. Also, there's still a lot of riser still floating in the water column. So there's some element of integrity going down to the blowout preventer.

It's absolutely imperative to shut off that oil flow. We just have to hope and pray that the BP and Transocean people can get the blowout preventer shut off. Or that there's enough integrity to the risers somehow to get in there and control the leaks, perhaps with some sort of plug. One other idea is to lower a large "hood" over the leak and capture the oil so it can be pumped up to a storage tanker ship.

Meanwhile, the relief well has to go down -- carefully and safely. This Macondo well is history. Seal it. Mark it. Give it back to the sea. Move on. Don't tempt fate on this one.

And wow... for a relatively modest-sized deep-water discovery, this thing sure has turned into the well from hell.

Welcome to the World of Deep-water Risk
As I've said before, this accident is Mother Nature's wake-up call to everyone. Deep-water drilling is a high-stakes game. It's not exactly a "casino," in that there's a heck of a lot of settled science, engineering and technology involved.

But we're sure finding out the hard way what all the risks are. And it's becoming more and more clear how the totality of risk is a moving target. There's geologic risk, technical risk, engineering risk, environmental risk, capital risk and market risk.

With each deep well, these risks all come together over one very tiny spot at the bottom of the ocean. So for all the oil that's out there under deep water -- and it's a lot -- the long-term calculus of risk and return is difficult to quantify.


Byron King earned his Juris Doctor from the University of Pittsburgh School of Law, graduated cum laude from Harvard University, served on the staff of the Chief of Naval Operations, and is a regulator contributor to the Whiskey and Gunpowder investment newsletter.

Obama's Offshore Drilling Gamble

One has to wonder what President Obama thought he was gaining with his announcement about offshore drilling. It was gamble that can't pay off. Team Gore immediately sent out a notice that started with these words:

"President Obama disappointed millions of Americans by announcing his plan to open vast coastal areas to offshore oil drilling. At a time when we need clean energy and climate solutions, this plan is a giant step backward--allowing oil companies to reap billions, while feeding America's addiction to dirty fossil fuels."

At CARE, we sent out our own announcement that was published in newspapers throughout the country. With a tongue-in-cheek tone, we pointed out that Obama's confidence in Alternatives must be fading.

Regular contributor to the CARE Blog, Michael Econmides, Editor-in-Cheif of the Energy Tribune, sent us this fact-filled commentary that predicts that by the magic date of 2050, fossil fuels will still provide are 85 percent of the US energy mix--no matter what US political rhetoric may ascribe on alternative energy sources. Who wins with the offshore announcement? Or, is it just off-base?

Drilling Down in Obama’s Oil Play

Barack Obama – a president as hostage to liberal rhetoric as one could ever envision, and who ran a presidential campaign on the most virulent of anti-oil, pro renewables tickets – has unexpectedly reversed the long-standing US ban on offshore oil drilling.

Speaking in Maryland on Wednesday, the president announced he was giving the go ahead to allow oil and gas exploration and, presumably, drilling along the Atlantic coastline, the eastern Gulf of Mexico, the north coast of Alaska, Alaska’s Cook Inlet and other sites. Pending applications to drill will remain in place and the ongoing ban on offshore drilling on the West Coast will continue.

While green and conservation groups are aghast at their Green-caped Super-Hero, and villainous Big Bad Oil may be rubbing its hands in glee, the rest of us might take time out to ask: What is really going on here? Why now, just when Interior Secretary Ken Salazar had been set to drop a G (Green) bomb on oil leases elsewhere?

Well in the wake of the Democrat’s recent victory on healthcare and the Obama’s falling approval rating in the polls, someone appears to have come up with a play designed to cause confusion. But by tossing a bone on domestic drilling to the Republicans, Obama’s team may believe it can buy him some Republican (and dissident Democrat) votes – along with some credibility on bipartisanship – before his upcoming next big move: the push for cap and trade.

At the very least, the partial lifting of the offshore drilling ban is a move designed to cause confusion, including, no doubt, among Obama’s supporters – a calculated gamble he believes he can pull off -- while stealing some populist Republican thunder. And who can deny that offshore drilling licences will create real jobs; not the pale green, transitory stimulus variety? It may even give him a bump in the approval polls.

But we could spend all day surmising as to the Obama administrations oil play. Could we not just accept it at face value? There is always a potential quid pro quo on offer somewhere – especially from a guy bent on instigating national cold turkey in pursuit of weaning America off what George Dubya termed its “addiction” to oil. While the polls might buy it, it’s doubtful that Republicans will.

But we needn’t worry about delving too deep beneath the surface of the drilling decision. A simple look at the math tells us all we need to know. That is, that the decision is a disingenuous one. It must be, given the government’s twin-track policies on energy and climate.

First: the energy facts. Currently, 85 percent of the US energy mix is provided by oil, gas and coal. And the US is using around 100 quads (quadrillion Btu) of energy, and so these numbers reflect both percent and actual energy use. If we take the Energy Information Administration’s figures of 0.5% increase per year and extrapolate total energy use to 2050, this would translate to about 125 quads. (Incidentally this is a surprisingly small figure considering the recent past, which was as high as 2% annual increase and China’s forecast of over 3.2% annual growth. Is the EIA trying to please the Obama White House?)

Second: the Obama administration has made several statements regarding its intent to cut CO2 emissions by 83% of the 2005 figures by 2050. This would mean that the current 85 quads that come from fossil fuels must be reduced to less than 14.5 quads, which would imply that, by 2050, the contribution from fossil fuels to the US energy mix should be reduced to about 11.5% (some even mentioned less than 10 percent) of total energy consumption. But that in turn would mean that wind and solar, the darlings of this administration would provide essentially all the rest – a patent impossibility.

More drilling for more oil just exacerbates Obama’s insoluble conundrum.

The announcement is designed to hoodwink would-be opponents, and there are many, of cap-and-trade or a carbon tax. If Obama was sincere about energy and energy “independence” he would immediately rescind the EPA’s finding of CO2 as a pollutant, which by coincidence came into force on April Fool’s Day. Further, it would actively encourage drilling rather than starting environmental studies that would drag on for years with excruciating permits, followed by certain environmentalist challenges that would just about take this offshore oil non-production to 2050.

The interesting thing is that almost every key energy assessment from knowledgeable energy insiders, including the DOE’s own EIA, suggest that by 2050, fossil fuels will still provide around 85 percent of the US energy mix, no matter what US political rhetoric may ascribe on alternative energy sources.

The fact is the Obama Administration already has an impossible circle to square on its current energy pronouncements. Whatever political calculations may be in play, the President’s offshore oil card play may trump his carbon-reducing climate play – but it makes “nonsense on stilts” in harmonizing both.

Michael J. Economides and Peter Glover are authors of “Energy and Climate Wars: How naive politicians, green ideologues and media elites are undermining the truth about energy and climate” to be published by Continuum, in September.

Least Expensive Power for the Future--It’s Not What You Think

On March 25th, we had a great conference call with Robert Bryce. A call Participant had suggested Robert as a featured guest after seeing him on television with John Stossel. In that interview, Robert Bryce debated T. Boone Pickens regarding the “Pickens Plan” and the ability of wind to do what Pickens proposed. We invited Robert Bryce (author of Gusher of Lies and the forthcoming Power Hungry: The Myths of "Green" Energy and the Real Fuels of the Future) to join us and he did. It was a great discussion. If you have not listened to the recording, available on CARE’s website, we encourage you to check it out.

During the call, Robert pointed us to an article he’d written that very day and posted on his website. His article is based on a recent IEA Study called “Projected Costs of Generating Electricity.” The study has not gotten much media attention—and you can expect it will not, as it does not affirm the popular views on electricity generation. We believe this is information all American’s need to know.

Give it a look. What do you think?

IEA: Nuclear Power is Cheap, Wind Energy Is Expensive
The wind energy lobbyists love to claim that installing new wind turbines is the cheapest form of new electricity generation capacity. In fact, I heard that very claim while at a party here in Austin a few weeks ago. But as usual, there’s the hype and there’s the reality.

On March 25th, the International Energy Agency, in cooperation with the Organization for Economic Cooperation and Development’s Nuclear Energy Agency, released a study called “Projected Costs of Generating Electricity.” The results are yet another refutation that wind is the least-costly source of new generation. Using what it calls the “levelized costs of electricity,” a metric that includes key factors like the discount rate, construction costs, load factors, fuel prices, and carbon costs, the study found that nuclear power is the least-expensive option for new generation in North America, Europe, and Asia Pacific when the discount rate is 5%. Meanwhile, wind energy was often the most expensive option regardless of location and whether the discount rate was 5% or 10%.

Levelized Cost of Electricity for Nuclear, Coal, Gas, and Onshore Wind Power Plants

Source: OECD

When the discount rate was moved to 10%, then nuclear remained cheaper than other sources in both North America and Asia Pacific. Indeed, at that higher discount rate, the median cost for nuclear power in Asia Pacific is less than half that of wind. But nuclear’s economics falter in Europe under a 10% discount rate making it slightly more expensive than both coal and gas, but it remains substantially cheaper than wind.
The study collected data from 190 power plants in 21 countries. And while the IEA included numerous factors in coming up with their estimate of costs, this text from the report is critically important:
The electricity generation costs calculated are plant-level (busbar) costs, at the station, and do not include transmission and distribution costs. Neither does the study include other systemic effects such as the costs incurred for providing back-up for variable or intermittent (non-dispatchable) renewable energies.


Those two sentences are telling. While the IEA report shows that wind energy is usually more expensive than conventional generation, their cost calculations do not include two of the most expensive--and controversial--aspects of integrating wind energy into a given electric grid: the transmission lines needed to carry wind-generated electricity to distant cities, and the cost of backup generation capacity that must be available to assure that the intermittent electricity supplied by the wind turbines doesn’t cause the grid to go dark.

Expect wind lobbyists and environmental advocates to downplay the importance of this IEA report. (For my recent article on earlier IEA and EIA projections on the cost of wind energy, go here.) But just look at the figures from the new IEA and consider the disparity in costs between wind and nuclear. Also look at the disparity in costs between wind and conventional generation, particularly in Asia. Then consider how much higher the costs of wind would be if all of the costs--that means adding in the transmission line costs and the backup generation costs--were factored into the equation.

The punchline here is abundantly obvious: Adding more wind energy to the US electricity grid will mean higher costs for consumers.

Robert Bryce's articles have appeared in dozens of publications ranging from the Wall Street Journal to Counterpunch and Atlantic Monthly to Oklahoma Stripper. Bryce, the managing editor of Energy Tribune, is also a senior fellow at the Manhattan Institute. He lives in Austin.