Michael G. Zey: U.S. Could Become an Energy Exporter

The Providence Journal

 

01:00 AM EDT on Monday, May 5, 2008

 

MICHAEL G. ZEY

 

MONTCLAIR, N.J.

ACCORDING TO McGraw-Hill’s energy-research arm, Platts, every recession since 1973 has been preceded by sharp spikes in the price of oil. Now, as the price of oil sets records, predictably the nation is feeling economic pain again.

After each economic contraction over the last 35 years, the U.S. has vowed to cut its dependence on foreign energy sources by developing its own oil, coal, nuclear and various “alternative” resources. And each time we have squandered energy-development opportunities, in the process becoming more dependent on foreign oil. In 1980, 37 percent of the oil the U.S. used came from foreign sources, rising to 55 percent in 2001 and headed for 65 percent in 2016.

As the Platts report plainly states, without a growing energy supply, countries face “declining growth rates, diminished standards of living, and growing transfer of wealth from importing to exporting countries.” In other words the U.S. either enlarges its energy pool or just waits for accelerating gasoline and electricity prices to erode its global economic competitiveness over the next several decades.

There are some signs we are finally getting serious about becoming energy self-sufficient. Last year saw the first applications for new nuclear-power plant construction in the United States since the 1970s, with 31 new plant-license applications soon to come. Four to eight new U.S. nuclear plants should be in operation by 2016 or so, helping us to compete with China, India, and Russia, which plan over 50 nuclear plants by 2020.

The outlook for developing other energy sources is not as rosy. Several U.S. governors, purportedly concerned about “greenhouse-gas emissions,” have vetoed construction of coal-burning power plants in their states — at least 45 coal plants were abandoned in 2007. Meanwhile China, Germany and the Netherlands are busily constructing “clean-coal” power plants that will use carbon capture and storage (CCS) technology that traps carbon-dioxide emissions and pipes them underground, not into the atmosphere. Are our anti-coal governors aware of this breakthrough?

The High Arctic region’s resources are also critical to U.S. energy independence. But if the government accedes to demands to classify that region’s polar bear as an endangered species, we cannot tap the estimated 10 billion barrels of oil in the Arctic National Wildlife Refuge (ANWR), equal to the next 10-15 years of oil imports from Saudi Arabia. A planned privately funded natural-gas pipeline to transport to the U.S. mainland some of the 35 trillion cubic feet of natural gas from Alaska’s North Slope would also be scrapped.

The list of such wasted opportunities is painfully long. We have cut funding for nuclear-fusion research. We refuse to drill for oil off the U.S. shore, or to build any new oil refineries that could process any additional oil. We are only slowly developing vehicles powered by hydrogen, electricity and compressed air. Many countries, but not the U.S., are seriously examining low energy nuclear reaction devices as a cheap energy source for homes, vehicles, and appliances.

Government and business leaders’ response to this emerging crisis is alarmingly sanguine. Influenced by concerns over global warming, presidential hopefuls Hillary Clinton, Barack Obama and John McCain are offering plans to cap carbon emissions by 2050 by switching to green energy technologies, such as solar, wind and biomass — sources that experts say lack the muscle to power a globally competitive 21st Century economy. They are lukewarm on nuclear-power development. Clearly, neither party has a vibrant pro-progress wing able to pressure the candidates to emphatically demand a strong energy-production program. Is a new party built upon pro-progress principles the solution?

Not to be “out-greened,” PSEG, a big New Jersey energy company, ran an ad encouraging its customers to go on an austerity-style “energy diet,” and seems almost giddy about all the “green-collar” jobs to be created by the windmill and biomass industries. While voicing perfunctory support for nuclear power, the PSEG ad informs us that “the power plant that doesn’t need to be built is the cleanest [plant] of all.” Some economists and government planners are now telling Americans that slower economic growth is actually an “energy solution”—less economic activity, less energy use — omitting the fact such contractions also lead to higher unemployment and lower living standards.

More often than not it is politicians, corporate moguls and environmental organizations sitting together at hearings and legislative councils who are determining this “green” energy future for Americans. One might ask why such conclaves do not seat organizations representing the pro-progress, pro-development, “expansionary” vision of the future shared by most working Americans?

Without such a presence, laws that drastically affect Americans’ lives, such as the 2007 bill requiring all Americans to replace their incandescent light bulbs with 10 times more expensive “environmentally friendly” bulbs by 2012, pass with little public scrutiny or opposition.

Once America achieves energy independence, our next goal should be to become a net energy exporter! The U.S. economy would boom as those petro-dollars pour into the U.S. from abroad, instead of traveling from our pockets to Saudi and Venezuelan treasuries! And the world economy would thrive as we expand the world energy pool with our energy resources and technologies yet to be discovered.

We have the technology, the resources and the skills. Now all we need is the will!

Michael G. Zey, a sociologist and futurist, is author of Seizing the Future (Simon and Schuster), and a professor at the Montclair State University School of Business.

 

Michael G. Zey (The Providence Journal): What Medical Tourism Teaches America

 The Providence Journal

 

01:00 AM EDT on Thursday, September 13, 2007

 

 

 

MICHAEL G. ZEY

 

MONTCLAIR, N.J.

HEALTH CARE today provides one of the great paradoxes of our time. Breakthroughs in genetics, biotechnology, stem-cell research and transplant technology have enabled us to live longer than any generation in recorded human history. But the newest and greatest medical miracles — heart-bypass surgery, LASIK eye treatments, cochlear implants and hip replacements — don’t come cheap.

Presidential hopefuls Hillary Clinton, Mitt Romney, Rudy Giuliani, and Barack Obama all claim that their health-care plans can make medical help affordable and accessible to the broad mass of Americans. But even as they debate government solutions, Americans are taking a uniquely market-driven approach to their medical treatment. In 2006, over 150,000 of us boarded planes to India, the Philippines and Eastern Europe to get hip transplants, heart surgery and dental work.

This number is sure to grow as more of our citizens discover the eye-popping medical-cost savings overseas recently described in Forbes magazine and elsewhere. A $55,000 valve replacement in the U.S. runs $13,000 in Cyprus’s American Heart Institute. In Malaysia, Americans can save $80,000 on a liver transplant and $40,000 on hip-replacement surgery. In Istanbul, the standard U.S. $69,000 price tag for surgical oncology performed by a staff affiliated with Harvard Medical International is reduced to $14,000. In the Philippines, Americans can save tens of thousands of dollars on kidney transplants and bypass surgery. South American dentists undercut U.S. dentists by 20 to 50 percent. Knee-replacement surgery that runs $30,000 in the U.S. costs $6,500 in India. (Cuba’s hospitals did not make any “10 Best” lists, in spite of the plug from Michael Moore’s movie Sicko.)

Practitioners in the U.S. claim that medical service at such low prices must be inferior. But the Joint Commission International, which rigorously inspects hospitals around the world as its parent organization does in the United States, has accredited over 125 hospitals in 23 countries, and expects that number to double soon. Noted Indian hip surgeon Dr. Vijay Bose says that Indian hospitals are simply charging the “appropriate” amount, while U.S. medical costs are “artificially boosted” by malpractice premiums and lawsuits, among other factors. (During the next candidates’ debate, someone should ask trial-lawyer extraordinaire John Edwards how his plan would limit damages from malpractice lawsuits.)

Surprisingly, medical treatment in some countries surpasses that offered in the United States. For instance, doctors in Europe and India have more extensive experience than U.S. doctors using “hip resurfacing,” a long-lasting hip-replacement procedure which preserves a greater portion of the thigh bone. And many foreign countries’ scientific research could very likely generate treatments that would be available in those countries first. An Israeli-Thai company, TheraVitae, is developing an adult-stem-cell therapy for severe heart-disease sufferers. The medical schools and institutes in Chennai, India, are engaged in intensive research in stem-cell research, nanotechnology, tissue engineering, gene therapy and research on curing diabetes.

Predictably, American companies are beginning to encourage their employees to travel to India and other countries for medical procedures, Business Insurance magazine reports. Bonnie Blackley, benefits director at Canton, N.C.-based Blue Ridge Paper Products, said she uses a company named IndUShealth to arrange travel for her employees to India for more cost-effective medical treatment.

As more Americans seek out foreign medical treatment experts, expect fees for major joint-replacement and heart procedures to drop. Daniel J. Snyder of Singapore’s Parkway Holdings hospital chain in Singapore has stated that “the cost of delivering health care in the U.S. will have to come down.” Already the Black Hills Surgery Center, based in Rapid City, S.D., plans to offer knee and hip replacements at half the cost of prices elsewhere in the United States.

The number of Americans taking advantage of global health care should rise yearly. Americans are inveterate bargain hunters, and global health care now enables them to comparison shop for medical procedures on the Internet. And Americans are no strangers to globe-trotting — over 40 million of us traveled or lived offshore in 2006. Some savvy countries are wisely packaging sightseeing vacations with medical-travel trips. Imagine visiting Thailand for a cataract operation and also spending a week on its beaches, or enjoying a safari after undergoing cosmetic surgery in South Africa.

No doubt some hospitals and doctors here might not welcome the inevitable price cutting that could result from the international competition for customers. Pharmaceutical companies have been decidedly negative about Americans’ buying cheaper prescription drugs in Mexico and Canada.

Perhaps we can invite our politicians to sign a pledge that their proposed medical-health systems will in no way prohibit Americans from seeking cheaper and better health care abroad. They should do so enthusiastically. After all, for years they have been lecturing us about how open international competition results in cheaper cars, plasma TVs and DVDs. We can only expect the globalization of health care to be equally beneficial.

More importantly, presidential aspirants must assure us that as they design the next great American health-care system, they will heed the advice the Hippocratic Oath imparts to all medical practitioners: “Do no harm.”

Michael G. Zey is a professor at Montclair State University School of Business, in Montclair, N.J., and the author of the books Ageless Nation, The Future Factor and Seizing the Future.

 

 

READ ARTICLES ON MEDICAL TOURISM BOOM

“Americans seeking stem-cell medical treatment turn to overseas clinics”

http://www.heraldextra.com/content/view/273921/36/

“Stem cell tourism stirs concern”

http://www.stltoday.com/stltoday/news/stories.nsf/news/nation/story/2b1c27e61100ca368625748b00113471?OpenDocument

First Opportunity for U.S. Consumers to Explore Medical Travel: The Medical Travel RoadShow Debuts in Six U.S. Cities

http://www.marketwatch.com/news/story/first-opportunity-us-consumers-explore/story.aspx?guid=%7B70759B35-E3B7-4508-AB39-9CFE4822E07F%7D&dist=hppr

Koreans Live Longer Than Ever

By Bae Ji-sook
Staff ReporterKoreans live up to 79 years on average, the longest ever, and more than the OECD average.

The average life span of Koreans was 79.1 in 2006, higher than the average 78.9 for members of the organization, according to the OECD Health Data 2008 released through the Ministry of Health, Welfare and Family Affairs. It is now narrowing the gap with

 

 

 

 

Japan the “country of longevity,” which boasts 82.4 years.The future for Koreans in terms of life span is quite bright. It is constantly expanding, from 76.4 in 2001 to 77 in 2002 and 78.5 in 2005. “At the end of this year, the figure may exceed 80,” a ministry spokesman said.

 

The OECD said such longevity could be attributable to higher income’s changing people’s lifestyle as a whole; individual care and investment in health management; health insurance coverage expanding year after year; and relatively easy access to medical services.

In fact, the average number of Koreans’ visiting doctors was 11.8 a year in 2005, much higher than OECD average of 6.8. It reflects that health insurance covers nearly every disease and those sick have less of a financial burden, the ministry said.

However, in terms of medical infrastructure, the country still has a way to go. The number of medical staff ― doctors and nurses ― was less than half that of other nations, even though there were more sick beds available.

Also, the number of those dying from cancer and cerebrovascular disease is falling, but those dying from ischemic heart disease and suicide are increasing.

The smoking rate of those over 15 years of age dropped to 25.3 percent in 2005 from 30.4 percent four years ago. Annual alcohol consumption was 8.1 liters per person, lower than the 9.5-liter OECD average.

bjs@koreatimes.co.kr

 

 

Carbon Trading Scam?—French Firm Rhodia Cashes In Under U.N. Warming Program

Source:  Copyright 2008, Wall Street Journal
Date:  July 23, 2008
Byline:  Charles Forelle
Original URL

Copyright 2008, Wall Street Journal

 

A French chemical maker is reaping a potential billion-dollar windfall under a United Nations program intended to spur climate-friendly investment in the developing world, highlighting the challenges of using market forces to tackle global warming.

The company, Rhodia SA, manufactures hundreds of tons a day of adipic acid, an ingredient in nylon, at its factory here. But the real money is in what it doesn’t make.

The payday, which could amount to more than $1 billion over seven years, comes from destroying nitrous oxide, or laughing gas, an unwanted byproduct and potent greenhouse gas. It’s Rhodia’s single most profitable business world-wide. Last year, destroying nitrous oxide here and at a similar plant in Brazil generated €189 million ($300.5 million) in sales of pollution “credits.”

The laughing gas is big money thanks to the U.N.-administered program in which polluters in rich countries buy credits like Rhodia’s, effectively paying for the privilege of continuing to emit greenhouse gases. The money is meant to flow to poorer countries to develop clean-air technology — for instance, an African nation would get a financial incentive to build windmills instead of a cheaper, but dirtier, coal-fired power plant.

Rhodia’s experience shows that even a major Western industrial company can cash in on the pollution-trading program. The Rhodia factory in Onsan alone is slated to bring in more money, under the U.N.-administered program, than all the clean-air projects currently registered on the continent of Africa.

The U.N. system is designed to use market mechanisms — the trade in credits — to curb emissions in the developing world without stunting those countries’ economies. Critics say the system is flawed. The money from selling credits reduces the incentive for a relatively wealthy country like South Korea to adopt voluntary cuts of its own, they argue.

“Markets are incredibly powerful institutions,” says David Victor, a Stanford University professor who studies climate policy. But in some cases, he says, “you cannot create the right kind of market forces.”

Some also question the logic of paying hundreds of millions of dollars to Rhodia for installing pollution-control equipment that cost a bare fraction of that, about $15 million or so, to install. Simply paying for the installation of the equipment “could have done this an awful lot more cheaply,” says Patrick McCully of International Rivers, an environmental group.

RELATED DOCUMENT

• Take a look at Rhodia’s U.N. filing describing its project in Onsan.Rhodia points out its Onsan project was approved by both local authorities in South Korea and administrators of the U.N. program. Its projects prevent tens of thousands of tons of nitrous oxide — which is 310 times more potent a greenhouse gas than carbon dioxide — from floating into the atmosphere, the company says.

Philippe Rosier, president of Rhodia’s Energy Services division, says the company is committed to environmental protection and has pledged to cut its own greenhouse-gas emissions in France voluntarily by 30% from their 1990 levels by 2010. The company says its efforts world-wide cut the equivalent of 37 million metric tons of carbon dioxide a year; for more than half of those reductions, it says, it receives no compensation.

The U.N. defends its pollution-trading system, saying it helps industrialized countries meet their obligations to cut greenhouse-gas emissions in a cost-effective way. Regarding windfalls for companies like Rhodia, Conor Barry, an official at the U.N.’s climate secretariat in Bonn, Germany, says the U.N.’s objective is mainly to determine that any emissions reductions are “additional” — that is, they wouldn’t have happened without the financial incentives provided by the U.N.’s pollution-trading program.

Mr. Barry declined to speak specifically about Rhodia. In granting approval to this or any project, the U.N. is in effect concluding it will be “additional.”

Rhodia can claim credits for pollution-cutting at the Onsan plant thanks to international climate negotiations, conducted in the 1990s, that categorize South Korea as a “developing” nation. Under the global agreement known as the Kyoto Protocol, developing nations don’t have to curb their greenhouse-gas emissions, but they get a nice bonus if they do: Each ton of emissions cut generates a credit that can be sold through the U.N. program. Rich countries (most of which are required to cut emissions under the Kyoto treaty) can buy the credits in lieu of cleaning up what comes out of their own smokestacks. Individual European companies can also buy credits to meet their caps under European Union rules.

The U.S. hasn’t signed on to Kyoto. But U.S. lawmakers are debating implementing a similar pollution-trading system.

Today, South Korea’s designation as a developing nation looks outmoded. The country is an industrial powerhouse and home to global brands like Samsung and Hyundai. Per capita gross domestic product is roughly $20,000, putting it on par with Portugal, which is considered a “developed” economy under Kyoto.

South Korea’s economic muscle, combined with developing-nation status, means it has plenty of pollution to profitably cut. That has transformed South Korea into a hotbed of pollution-credit sales. So far, South Korea has received about 18% of all the credits issued world-wide.

Koreans say the rules are the rules, and the world agreed to them. “I can’t say the critics are groundless,” says Jung Jaesoo, 48 years old, who runs a consulting firm that advises Korean companies on how to qualify for credits. “But the Kyoto Protocol is a multilateral agreement. It is impossible to make only South Korea an exception now.”

Mr. Jung’s company, Ecoeye Co., has shepherded about a dozen projects to U.N. approval, among them wind, tidal, solar and hydroelectric power plants.

In credits received so far, South Korea is behind only China and India, two much poorer countries that have per capita GDPs of about $2,500 and $1,000, respectively.

“I think South Korea has great potential,” Mr. Jung says. There are still a number of industries, including semiconductors and flat-panel displays, that can sell credits, Mr. Jung says. “These industries produce a lot of greenhouse gases.”

South Korea’s experience is spurring pollution-credit prospectors like Mr. Jung to scour other countries in Asia, including Thailand and Vietnam, for easy pollution reductions.

Michael Hennig, who works in South Korea for a German trading firm and helped set up a deal to sell credits from a fertilizer factory, says he, too, has been peppered with inquiries. “It’s a good business, because the Western world is basically desperate” to purchase these credits, says Mr. Hennig. “If I would have more [credits], I think I could sell them all.”

The U.N.’s pollution-trading system doesn’t directly reduce the amount of greenhouse gas emitted to the atmosphere, since each ton of carbon dioxide cut in a developing country allows someone in an industrialized country to pollute that same amount. Rather, the idea is to transfer money to poor countries to encourage construction of environmentally sensitive factories and spur alternative-energy use. Otherwise, the argument goes, global greenhouse-gas emissions would grow more quickly as developing nations like China expand their economies.

Looming Deadline

One factor that’s spurred the rush into South Korea is a looming deadline: Many expect the country will be reclassified a “developed” country after 2012, when Kyoto’s current requirements end. That means extra urgency for companies to get credits now. Park Chun-kyoo, director of the South Korean environment ministry’s climate-change policy division, says it is “much too early” to say what will happen at international climate talks.

Critics say the system that funnels money to companies in places like South Korea is partly to blame. It sends signals that “are exactly the opposite of what we should be sending,” says Mr. Victor, the Stanford professor. For South Korea — a relatively wealthy nation — emissions cuts should be an obligation, not a windfall, he says. “It’s just part of being a responsible citizen.”

Western nations are likely to press for South Korea to be recategorized as developed. At this month’s meeting of the Group of 8 nations, officials from the U.S. pressed for Asian countries to promise to cut their own emissions as a part of a new climate accord to take effect after Kyoto.

Until then, the current pollution-credit program is likely to balloon. At the summit, G-8 nations committed to major emissions reductions, and the EU passed a measure bringing airlines into Europe’s pollution-trading system in 2012. Both moves will spur demand for more pollution credits.

No one has mined South Korea for credits as successfully as Rhodia. The Paris-based company was spun off in 1998 from Rhône-Poulenc, a French chemical and pharmaceutical conglomerate.

The subsequent years were unkind. Rhodia creaked under heavy debt. The ballyhooed recall early this decade of the painkiller Vioxx, after reports of heart problems, crippled Rhodia’s contract-drug-manufacturing business.

But by 2003, Rhodia managers had figured out that two of its factories — the Onsan plant in South Korea and the Brazil facility — were jackpots. For reducing one ton of carbon dioxide, the U.N. issues one credit. One ton of the more potent nitrous oxide yields 310 credits.

These credits are currently changing hands at about €21 on European markets, although prices can vary wildly because the market is relatively new.

Many adipic-acid plants long ago slashed nitrous oxide emissions. Indeed, the technology to burn it off was developed in the 1970s. By the 1990s, most adipic-acid producers in the U.S. and Europe started to voluntarily cut their emissions under pressure from environmentalists. Rhodia itself did so in 1998 at its plant in Chalampé, France.

But it had left its then-smaller Brazil and Onsan plants unmodified. At the time, “there was no obligation to do it,” says Mr. Rosier of Rhodia, the executive in charge of the credit project.

A Good Investment

The advent of credit sales under the U.N. program in 2004 made nitrous-oxide abatement lucrative. In 2006, Rhodia turned on the furnace to destroy the gas at the Onsan plant. The furnace cost roughly $15 million to install. It was a good investment: The plant is projected to generate more than nine million credits a year, and Rhodia is initially authorized for seven years of credits.

The Onsan factory sits in an industrial park that runs for four miles up the Korean coast, wedged between evergreen hillocks and the open sea. The plant is a gurgling network of boilers and centrifuges. A metal pipe carries the waste gas outside, where it is stripped of other pollutants, fed with natural gas and then burned off. An outside auditor checks emissions data, and every few weeks the U.N. issues new credits.

In the case of some greenhouse gases, the U.N. imposes constraints to combat the “perverse incentives” to run a factory simply to generate pollution credits, says the U.N.’s Mr. Barry. A few years ago, the U.N. came under fire after some Chinese plants started reaping huge numbers of credits for relatively small changes to their manufacturing process.

There are no such U.N. constraints on adipic-acid production, Mr. Barry says, since there’s demand for the finished product, given its importance in manufacturing nylon. “With adipic-acid prices, it’s not considered economically viable to produce the product” simply to generate pollution credits for sale, he says. However, he adds, the U.N.’s panel examines the situation regularly as prices change.

Currently, if adipic-acid production is a profitable business, it’s only barely. The average cost of producing adipic acid was just over $1,750 a metric ton in June, while the sales prices in the benchmark Chinese market were barely higher, at around $1,800 a metric ton, according to industry consultant PCI Nylon GmbH. That works out to a slim profit of roughly $50 a metric ton. “The economics of adipic-acid production are currently pretty awful,” says PCI’s Robin MacDonald.

The figures suggest that Rhodia almost certainly makes more money from selling pollution credits than it does from producing adipic acid. If Rhodia’s adipic acid at Onsan generates a profit of $50 or so a metric ton, that’s worth $7.5 million a year. The company is making much larger sums from sales of pollution credits: According to U.N. figures, Rhodia was issued more than 11 million credits for cuts in 2007; at the €15 price Rhodia says it recently has been getting, they are worth some €173 million ($275.1 million).

Mr. Rosier declined to comment on the relative profitability of adipic acid and pollution credits. He played down the financial significance of credit sales, saying the price of credits is highly volatile and could fall.

As to whether it is sensible for his company to reap rewards for installing pollution-control technology in a highly industrial country like South Korea, Mr. Rosier says the rules of the U.N.’s system were set by the Kyoto negotiators.

“We were not part of these discussions, we didn’t make the rules of the game,” he says. “We know only to work with the rules as they were set down.”

Kyoto’s Long Goodbye

Wall Street Journal
July 11, 2008; Page A14

One of the mysteries of the universe is why President Bush bothers to charge the fixed bayonets of the global warming theocracy. On the other hand, his Administration’s supposed “cowboy diplomacy” is succeeding in changing the way the world addresses climate change. Which is to say, he has forced the world to pay at least some attention to reality.

That was the larger meaning of the Group of Eight summit in Japan this week, even if it didn’t make the papers. The headline was that the nations pledged to cut global greenhouse emissions by half by 2050. Yet for the first time, the G-8 also agreed that any meaningful climate program would have to involve industrializing nations like China and India. For the first time, too, the G-8 agreed that real progress will depend on technological advancements. And it agreed that the putative benefits had to justify any brakes on economic growth.

In other words, the G-8 signed on to what has been the White House approach since 2002. The U.S. has relied on the arc of domestic energy programs now in place, like fuel-economy standards and efficiency regulations, along with billions in subsidies for low-carbon technology. Europe threw in with the central planning of the Kyoto Protocol — and the contrast is instructive. Between 2000 and 2006, U.S. net greenhouse gas emissions fell 3%. Of the 17 largest world-wide emitters, only France reduced by more.

So despite environmentalist sanctimony about the urgent need for President Bush and the U.S. to “take the lead” on global warming, his program has done better than most everybody else’s. That won’t make the evening news. But the fact is that the new G-8 document is best understood as a second look at the “leadership” of . . . you know who.

The G-8 also tends to make grand promises that evaporate as soon as everyone goes home. This year, picking up the “accountability” theme pressed by the U.S., envoys grudgingly accepted a plan that will track — and publicize — how well countries are living up to their word. So when the G-8 endorsed greenhouse reduction “aspirations” that are “ambitious, realistic and achievable,” the emphasis fell on the last two attributes.

Put another way, global warming is an economic, not a theological, question. It is not at all clear that huge expenditures today on slowing emissions will yield long-run benefits or even slow emissions. Research and development into sources of low-carbon energy is almost certainly more useful, and the G-8 pledged more funding for “clean tech” programs. This is vastly preferable to whatever reorganization of the American economy that Barack Obama and John McCain currently favor in the name of solving this speculative problem.

The G-8 also conceded that global-warming masochism is futile and painfully expensive. If every rich country drastically cut CO2, those cuts would be wiped out by emissions from China and India. “Carbon leakage” is a major problem too, where cutbacks in some countries lead to increases in others with less strict policies, as manufacturing and the like are outsourced. This whack-a-mole won’t stop without including all 17 major economies, which together produce roughly 80% of global emissions.

Much to the ire of Kyotophiles, Mr. Bush started this rethinking last year when he created a parallel track for talks on a post-2012 U.N. program, luring China and India to the table with more practical options. But developing countries, led by that duo, still refused to sign on to the G-8’s 2050 goal. They aren’t eager to endanger their growth — and lifting people out of poverty — by acquiring the West’s climate neuroses.

The irony is that Kyoto has handed them every reason not to participate. Europe knew all along that it couldn’t meet its quotas, so it created an out in “offsets.” A British factory, say, buys a credit to pay for basic efficiency improvements in a Chinese coal plant, like installing smokestack scrubbers. This is a tax on the Brits to make Chinese industries more competitive. Sweet deal if you can get it.

It gets worse. The offsets are routed through a U.N. bureaucracy that makes them far more valuable in Europe than the cost of the actual efficiency improvements. So far, Kyoto-world has paid more than €4.7 billion to eliminate an obscure greenhouse gas called HFC-23; the necessary incinerators cost less than €100 million. Most of the difference in such schemes goes to the foreign government, such as China’s communist regime.

Given these perverse incentives, the magical realism of Kyoto has backfired in a big way. The global warming elite will never admit this, because that would mean giving up their political whip against George Bush. But Kyoto II is already collapsing under its own contradictions. By sticking to a more realistic alternative, this reviled President has handed his green opponents a way to save face.

Pickens: My Plan to Escape the Grip of Foreign Oil

T.Boone Pickens

 

 

By T. BOONE PICKENS
July 9, 2008; Page A15

One of the benefits of being around a long time is that you get to know a lot about certain things. I’m 80 years old and I’ve been an oilman for almost 60 years. I’ve drilled more dry holes and also found more oil than just about anyone in the industry. With all my experience, I’ve never been as worried about our energy security as I am now. Like many of us, I ignored what was happening. Now our country faces what I believe is the most serious situation since World War II.

 

 

Texas billionaire T. Boone Pickens says his “Pickens Plan” to increase natural gas and wind power’s role as energy sources is not a play for personal gain. Steve Gelsi reports. (July 9)

The problem, of course, is our growing dependence on foreign oil – it’s extreme, it’s dangerous, and it threatens the future of our nation.

Let me share a few facts: Each year we import more and more oil. In 1973, the year of the infamous oil embargo, the United States imported about 24% of our oil. In 1990, at the start of the first Gulf War, this had climbed to 42%. Today, we import almost 70% of our oil.

This is a staggering number, particularly for a country that consumes oil the way we do. The U.S. uses nearly a quarter of the world’s oil, with just 4% of the population and 3% of the world’s reserves. This year, we will spend almost $700 billion on imported oil, which is more than four times the annual cost of our current war in Iraq.

In fact, if we don’t do anything about this problem, over the next 10 years we will spend around $10 trillion importing foreign oil. That is $10 trillion leaving the U.S. and going to foreign nations, making it what I certainly believe will be the single largest transfer of wealth in human history.

Why do I believe that our dependence on foreign oil is such a danger to our country? Put simply, our economic engine is now 70% dependent on the energy resources of other countries, their good judgment, and most importantly, their good will toward us. Foreign oil is at the intersection of America’s three most important issues: the economy, the environment and our national security. We need an energy plan that maps out how we’re going to work our way out of this mess. I think I have such a plan.

Consider this: The world produces about 85 million barrels of oil a day, but global demand now tops 86 million barrels a day. And despite three years of record price increases, world oil production has declined every year since 2005. Meanwhile, the demand for oil will only increase as growing economies in countries like India and China gear up for enhanced oil consumption.

Add to this the fact that in many countries, including China, the government has a great deal of influence over its energy industry, allowing these countries to set strategic direction easily and pay whatever price is needed to secure oil. The U.S. has no similar policy, because we thankfully don’t have state-controlled energy companies. But that doesn’t mean we can’t set goals and develop an energy policy that will overcome our addiction to foreign oil. I have a clear goal in mind with my plan. I want to reduce America’s foreign oil imports by more than one-third in the next five to 10 years.

How will we do it? We’ll start with wind power. Wind is 100% domestic, it is 100% renewable and it is 100% clean. Did you know that the midsection of this country, that stretch of land that starts in West Texas and reaches all the way up to the border with Canada, is called the “Saudi Arabia of the Wind”? It gets that name because we have the greatest wind reserves in the world. In 2008, the Department of Energy issued a study that stated that the U.S. has the capacity to generate 20% of its electricity supply from wind by 2030. I think we can do this or even more, but we must do it quicker.

Martin Kozlowski

My plan calls for taking the energy generated by wind and using it to replace a significant percentage of the natural gas that is now being used to fuel our power plants. Today, natural gas accounts for about 22% of our electricity generation in the U.S. We can use new wind capacity to free up the natural gas for use as a transportation fuel. That would displace more than one-third of our foreign oil imports. Natural gas is the only domestic energy of size that can be used to replace oil used for transportation, and it is abundant in the U.S. It is cheap and it is clean. With eight million natural-gas-powered vehicles on the road world-wide, the technology already exists to rapidly build out fleets of trucks, buses and even cars using natural gas as a fuel. Of these eight million vehicles, the U.S. has a paltry 150,000 right now. We can and should do so much more to build our fleet of natural-gas-powered vehicles.

I believe this plan will be the perfect bridge to the future, affording us the time to develop new technologies and a new perspective on our energy use. In addition to the plan I have proposed, I also want to see us explore all avenues and every energy alternative, from more R&D into batteries and fuel cells to development of solar, ethanol and biomass to more conservation. Drilling in the outer continental shelf should be considered as well, as we need to look at all options, recognizing that there is no silver bullet.

I believe my plan can be accomplished within 10 years if this country takes decisive and bold steps immediately. This plan dramatically reduces our dependence on foreign oil and lowers the cost of transportation. It invests in the heartland, creating thousands of new jobs. It substantially reduces America’s carbon footprint and uses existing, proven technology. It will be accomplished solely through private investment with no new consumer or corporate taxes or government regulation. It will build a bridge to the future, giving us the time to develop new technologies.

The future begins as soon as Congress and the president act. The government must mandate the formation of wind and solar transmission corridors, and renew the subsidies for economic and alternative energy development in areas where the wind and sun are abundant. I am also calling for a monthly progress report on the reduction in foreign oil imports, as well as a monthly progress report on the state of development of natural gas vehicles in this country.

We have a golden opportunity in this election year to form bipartisan support for this plan. We have the grit and fortitude to shoulder the responsibility of change when our country’s future is at stake, as Americans have proven repeatedly throughout this nation’s history.

We need action. Now.

Mr. Pickens is CEO of BP Capital.

Chesapeake, Plains Set to Tap Gas Field

Joint Investment Seeks 
To Make Obscure Area 
A Big Energy Producer

By BEN CASSELMAN
July 3, 2008; Page B3

A $3.3 billion joint-venture deal between Chesapeake Energy Corp. and Plains Exploration & Production Co. is the latest sign that a long-obscure swath of north Louisiana and east Texas is emerging as the country’s hottest area for natural-gas exploration.

Under the agreement, Plains will pay $1.65 billion in cash for a 20% interest in Chesapeake’s drilling leases in the field, known as the Haynesville Shale. Plains will also shoulder $1.65 billion of Chesapeake’s drilling costs over the next three years or so, and will have the right to buy into any future leases Chesapeake signs in the area.

Chesapeake Energy Corp.

Gas Power: A $3.3 billion joint venture between Chesapeake Energy and Plains Exploration & Production is bringing attention back to this swath of north Louisiana and east Texas.

Chesapeake was the first company to recognize the Haynesville field’s potential, and its 550,000 leased acres there make it by far the area’s largest player. The company has said its leases could produce as much as 44 trillion cubic feet of natural gas — nearly twice what the entire U.S. consumed last year.

Chesapeake shares rose 3% to $69.40 in 4 p.m. New York Stock Exchange composite trading on the news, and are up 56% since the company first announced its Haynesville discovery in March. Plains shares fell 5.3% to $69.35, also on the NYSE.

Experts said the deal shows how much Chesapeake stands to gain from its head-start. The agreement with Plains values Chesapeake’s Haynesville territory at $30,000 per acre, more than six times what the company paid. In a conference call with investors Wednesday, Chesapeake said it has spent $2.5 billion to acquire and develop its Haynesville holdings — meaning the company will earn back all its money and more via the Plains deal, while still retaining 80% of its acreage.

The deal also highlights just how fast development is moving in the Haynesville field. The town of Haynesville, 60 miles northeast of Shreveport, was the site of an oil boom in the 1920s, according to local history, though today it has only about 2,700 residents.

But the area’s natural-gas potential was almost completely unknown until March, when Petrohawk Energy Corp. discussed it at an analyst conference. Later that month, Chesapeake announced it had leased more than 200,000 acres in what is known in the industry as a play, and said Haynesville may “have a larger impact on the company than any other play in which it has participated to date.”

That announcement set in motion a frantic rush to lease land and drill wells. Major natural-gas producers such as Anadarko Petroleum Corp., Devon Energy Corp. and XTO Energy Inc. have leased land, and even global giant Royal Dutch Shell PLC has gotten involved, via a partnership with Canadian energy producer EnCana Corp.

On Monday, Petrohawk said its first horizontal well in the Haynesville field was producing nearly 17 million cubic feet of natural gas a day, and Chesapeake on Wednesday said it expects its wells to produce an average of 4.5 to 8.5 billion cubic feet each over their lifetimes.

The potential investment is huge. Chesapeake alone expects to drill 600 Haynesville wells in the next three years, which would cost $3.9 billion at current rates, although the company expects to reduce its per-well costs over time. Ultimately, Chesapeake plans to drill some 6,875 wells on its current leases.

Discovery of the Haynesville field is the latest in a series of developments that have remade the U.S. natural-gas industry in recent years. Higher prices and new technologies have allowed companies to extract gas from dense rocks called shales, a process considered too difficult and expensive until a few years ago.

The success of the Barnett Shale, a massive gas formation around Fort Worth, Texas, has driven companies to scour the continent for new shale resources — though none has yet rivaled the Barnett field.

Experts said early results suggest Haynesville could be different. But they warned that companies are buying access to acreage there in part to appeal to outside investors, who are seizing on the latest natural-gas discoveries — and often moving on as soon as the next one is announced.

“People want the exposure and Haynesville’s the latest and greatest,” said David Tameron, an analyst at Wachovia Capital Markets. “If you go back six months, it was Appalachia. A year before that it was the Barnett. Six months from now, they’ll be talking about a Utica shale or something else. It’s the nature of Wall Street.”

Write to Ben Casselman at ben.casselman@wsj.com