Tuesday 2 December 2014

# 20 The US -China climate agreement and European progress



1 )  Summary
After reading through the websites listed below I can see that the US move to cut emissions at least 26% by 2025 and China’s undertaking to level emissions in 2030 is great news. Earlier this year 27 European countries announced that they would cut emissions by 40% in 2030. According to the articles these commitments could lead to much better results in the upcoming 2015 climate talks in Paris. Since the US deal uses 2005 as a baseline and the Europeans use 1990, the two are not immediately comparable. The carbon tax centre shows a long article by Charles Komanoff, calculating that by bringing both to the 2012 baseline the US has to reduce its emissions by 1% per year, while Europe has to reduce theirs by 1.9% per year.


I may be over optimistic but have seen that China wants a carbon tax to fight air pollution but hesitates when rich countries back away from it.( The Australian Senate voted by 39 to 32 votes to repeal their tax). They also feel that without countervailing duties some of their industries may suffer. China cannot be expected to make a move until the US, a major emitter, does the same. With the stringent EPA rulings introduced in June 2014 and possible approval of the revenue neutral carbon tax bill introduced by senators Sanders and Boxer there is a good chance that both countries will approve a carbon tax. That would bring the carbon pricing from 20% of the world’s greenhouse gas emission to 60%. Furthermore as documented in post 17 a revenue neutral carbon tax with border tax adjustments as included in the Sanders Boxer bill would in the US achieve the EPA requirements while imposing import duties on goods from countries without carbon tax. Early in 2013 some British climate change experts already discussed the merits of adapting the countervailing duty recommendations on page 190 of the newly published book  “Rediscovering Sustainability”.  If no global carbon tax can be negotiated in 2015 China could go along with the US and Europe by charging import duties on goods from countries without carbon pricing. In that case there is a good chance that the other 40% of emitters will see the light and  start taxing as well.

PS

In the World Bank report listed below I saw that China has indeed started taxing carbon via an emission trading system in seven cities and provinces. Plans are to extend it nationally by 2016 in order to meet 40-45% reduction levels by 2020 compared to 2005 levels  Mexico has a national climate change law and a target to reduce greenhouse gas emissions 30 percent below a business-as-usual (BAU) scenario by 2020. It started a carbon tax in 2014 and has a voluntary carbon market.South Korea launched its ETS in January 2015, covering 525 businesses from 23 sectors that account for about two-thirds of the country's national emissions. South Korea has a target to reduce emissions 30 percent below business as usual by 2020.

2)  Details of the deals
On 11 November 2014 the U.S. set a new target to reduce its emissions of heat-trapping gases by 26 percent to 28 percent by 2025, compared with 2005 levels. That's deeper than earlier in Obama's presidency, when he pledged to cut emissions by 17 percent by 2020, The US agreement does not require congressional approval, although leading Republicans voiced their opposition..China, whose emissions are still growing as it builds new coal plants, didn't commit to cuts of a specific amount. Rather, Xi set a target for China's emission to peak by 2030, or earlier if possible. He also pledged to increase the share of energy that China will derive from sources other than fossil fuels.


Earlier in 2014 “The European Union  announced its intention to reduce emissions of greenhouse gases by 40% from 1990 levels by 2030. This is the toughest climate change target of any region in the world. Europe will produce 27% of its energy from renewable sources by 2030. The EU is the first to set out emissions reduction targets ahead of a crunch meeting of world governments in Paris in 2015 that will decide a global framework for avoiding dangerous levels of global warming. Every other major developed and developing economy is expected to set out its own binding national emissions target within the next year, for the United Nations talks to go ahead.

3) Comments on the US deal
Mr  McConnell ramped up his party line, calling the US plan ‘unrealistic’ and said that it, as part of the president’s ‘war on coal,’ it would lead to a loss of U.S. jobs,” requiring China to do nothing at all for 16 years “ Not true, quoting Forbes:  China“already positioned itself as a world leader in renewable energy investment, spending $56.3 billion on renewable projects in 2013.” As detailed in post 9, China is the world leader in Carbon Capture and storage which can reduce the Global Warming Potential (GWP) from 4.44 to .25. China also has more installed wind turbines than any other country and produces 23 % of the world’s solar panels . China also is a leader in converting trucks from diesel fuel to natural gas, which emits 15-25 % less greenhouse gases. In the last five years, China has added 1,500 refueling stations for vehicles running on natural gas, with half of those added in the last year.  The United States, by contrast, added 84 compressed natural gas stations last year.

4)  Canada’s emission  problems,
Canada and the US signed identical Copenhagen agreements to reduce greenhouse gas emission by 2020 to 17 % below 2005 levels. The US can achieve this by closing many coal fired power plants and converting others to natural gas. Their wind power becomes more competitive and they have a flexible net, which can absorb 20% wind power before requiring power storage. By 2018 power generation from newly built non-subsidized facilities in cents per KWh are expected to be as follows:  Coal 10-13.6, Natural gas 6.7-13, Nuclear 10.8, Geothermal 10, Biomass 11.1, On shore wind 8.7, Off shore wind 22.2, solar 14.4-26.2, hydro 9. It follows that when carbon is taxed, on - shore wind will become the cheapest energy source.

Canada made  progress by closing coal fired power plants and preparing for carbon capture and storage. Our problem is that extracting oil in Alberta takes a lot of fossil fuel energy and without a healthy carbon tax the replacement with green energy does not develop fast enough. As a result we will most probably only reduce our emissions by 7% rather than the agreed 17%. That conclusion is documented in post 19.

5)  Canada’s political options
 We have a conservative government, which has been in power for many years and actually campaigned against taxing carbon. It will be hard to convince it’s followers to think differently following all these new developments.. Our Prime Minister Mr Harper once again faces the predicament experience by President Truman. He has no one handed advisers.

On the one hand he may want to continue catering to the many conservatives who still believe that a carbon tax hurts the economy and the poor. These people can’t be convinced that a revenue neutral carbon tax, like we have in BC is effective, does not harm the economy and pays a lot of money to the poor. The BC tax has reduced the consumption of petroleum products by 17% without loss of GDP. All tax money collected is refunded fairly. The table in   http://www.fin.gov.bc.ca/tbs/tp/climate/Carbon_Tax_Report_and_Plan_Topic_Box.pdf   shows that there are 17 refund categories and that for this period, 2014/15, $ 1.2 billion will be collected. Of that amount $ 194 million  (16%) goes to the poor and the low income people who don’t pay income tax. The two lowest taxpayer groups receive $ 264 million (22%) of all money collected. The BC system is used in the US and the UK as an example to show how easy it is to implement and administer. Washington an Oregon will use the model. Those 2 states signed the Pacific Coast Collaborative, which will bring carbon pricing to 53 million people with a GDP of $ 2.8 trillion

On the other hand Mr Harper could decide to follow the US and introduce a revenue neutral carbon tax bill. This would encourage discussion and catch the attention of many people who believe in climate change but have no clue how the tax system works. He could explain that more than 1000 companies of over 60 countries demand a global carbon tax. These include the world’s largest, third largest sixth largest and eleventh largest oil companies as well as the world’s third largest airline. These companies know that they can increase their profits once a global tax is in place.( See post 12). He could also explain that Preston Manning, an influential conservative has changed his views. In 1997 as leader of the opposition he furiously criticized the Liberal Government for signing the Kyoto agreement. Now he propagates a carbon tax to set a “just price” for industrial emissions and thus fine tune a woefully inadequate market(ish) economy.

Introduction of the carbon tax may also reduce the pipeline protests. At the moment there are heated demonstrations resulting in arrests of people trying to stop the additional Kinder Morgan  pipeline. Part of the objection is based on KM not publicizing how they will improve the pipeline following well known problems in the industry as shown under points 12. 13 and 14 in post 1. Quite some protesters cite the oil sands development as a reason to block pipelines. They should realize that demand for oil will keep rising until a global carbon tax has been established and that oil export is important to the economy. Due to limited direct access to Asian markets Alberta has to sell its oil at low prices which costs $ 15 billion per year. That means that until the pipelines or the G7G railway have been completed Ottawa loses billions of tax dollars which could have been used to help the provinces with their financial problems.

6)  New References   Some points in the above text are covered by previous references on this blog.
http://fuelfix.com/blog/2014/03/04/natural-gas-vehicles-show-phenomenal-growth-in-china/



Sunday 2 November 2014

# 19 Canada's carbon tax problems

It may be over- simplification but after reading a lot about carbon tax and the problems in Canada, the US and Australia I see that Canada has an external problem while it shares an internal problem with those two other countries. The external problem is that we have vast oil reserves and by not taxing our output or extraction energy sufficiently, other countries get upset. They oppose additional pipelines in the hope that it will curtail our oil sands production. This won’t happen because rail transport will take over. They also try to get local environmentalists on their side by proclaiming that we contribute to the world’s greenhouse gas emission. Until a global carbon tax has been established, demand for oil will keep rising and if we don’t sell the oil, other countries will and the world’s GHG emissions will rise just as much.

The internal problem is that in all 3 countries the word “tax” is interpreted as a tax grab by the government rather than a tax shift to make green energy more competitive. Neither the parties in power nor the opposition have been able to convince the public that a revenue neutral carbon tax system returns all the money to those who paid the tax and that people who buy below average fossil fuel actually gain money. Some government officials still claim that the tax hurts the economy and the poor while the opposite has been proven over and over again. US president Harry Truman is known to have expressed, on occasions, a wish for a few one-armed economists. It seems the president was sick of hearing from advisors of that trade who would tell him, "On the one hand--but on the other hand. That is the problem which politicians are facing. They have to base their policies on one hand or the other. Our policies were established years ago based on the one hand  when “Prime Minister Stephen Harper and several members of his cabinet and caucus had previously questioned the scientific evidence linking human activity to global warming, describing the Kyoto Protocol as a “socialist scheme.” Now that the other hand becomes more pronounced it will require serious discussions to change course.  For years we have been exposed to negative slogans and it will take time to change the public attitude.

 Shell, BP, Exxon Mobil, Statoil and Cathay Pacific demand a global carbon tax because they will profit from it. Other major multinationals in the petrochemical, food processing, insurance, construction and computer industries demand it as well. When you read the pro carbon tax speeches by    Rex Tillerson, CEO, ExxonMobil,    Jamie Dimon, Chairman and CEO JPMorgan Chase & Co.    Donald E. Felsinger, Chairman and CEO, Sempra EnergyJim Gordon, CEO, Energy Management, Inc,    Bruce Williamson, CEO, Dynegy,   Robert Olsen, Chairman, ExxonMobil International Ltd., you see that they all envisage a global carbon tax, which is essential to stay competitive. Carbon tax causes the cost of all fossil fuels to rise. That does not only cause higher transportations costs but also the cost of many goods made from fossil fuels. That is why it is essential to refund all carbon tax collected to those who paid it so they can afford to pay for the higher priced goods.

 Many manufacturers are against taxing carbon because unless we go global we will need complicated import duty arrangements between countries. The coal industry is dead against it because even when a global agreements has been reached they will lose. At the BC rate of $ 30 per tonne of CO2 the cost of thermal coal will rise 70% compared to 9% for crude oil. Even at $ 20 per ton as recommended in the US Sanders Boxer bill they will suffer. Australia and the US are major coal suppliers and their governments are under high pressure from the coal industry not to tax. Due to all this political wrangling  carbon tax has become such a dirty word that even environmentalists appear to shy away from it. They should realize that it is the most effective tool to combat climate change and bring it up at every pipeline demonstration.
 
Apart from a few flaws affecting institutions the BC carbon tax system seems ideal. It has been praised abroad as being effective, easy to implement and administer. While the details are shown in posts 1 and 10 it is worthwhile to stress once more that by law the government has to list each year how much tax has been collected and how it all was refunded. As can be seen in http://www.fin.gov.bc.ca/tbs/tp/climate/Carbon_Tax_Report_and_Plan_Topic_Box.pdf   there are at the moment 17 refund categories. Note that the 5% reduction of personal income tax at $ 264 million ( 22% of all tax collected)  is a fair deal for the 2 lower income groups. The low Income tax credit for people who pay no income tax but have to live with the higher costs also seems fair, 194 million ( 16% of all tax collected) . Many people are not aware of these refunds because it is not specifically mentioned on the income tax forms. Some people complain that the business taxes have been lowered, not realizing that this is a result of the carbon tax. They can also see that the refunds to businesses have been reduced over the years while those for individuals and families stayed the same.

To emphasize once more how far behind we are in taxing carbon here is another summary:
In Canada quite some people still believe that a carbon tax will hurt the economy and the poor, the opposite is true.  73% of the 103 studies analysed by the World Bank showed that carbon pricing has a positive impact on employment. Extensive studies for many European countries showed that England broke even while the rest gained from carbon pricing. 10 US states have experienced carbon pricing for years and report dramatic gains.(Post 1). BC experienced a 17% reduction in the use of fossil fuel without loss of GDP while the consumption in the rest of Canada rose by 1 ½ %. The poor don’t suffer. Low income people receive 16 % of all carbon tax collected. In October 2013 Washington and Oregon signed the Pacific Coast Collaborative and will start taxing carbon based on the BC model. Together with carbon pricing in California and Alaska carbon pricing will come to four states and one province which have a combined population of 53 million people, with a gross domestic product of $2.8-trillion.

For quite a while the government has proclaimed that we are already half way through in meeting our Copenhagen agreement. In one of my 2013 emails I asked Mr Harper to consider publishing figures showing how we will meet the other half. I did not see it but in a recent article by Mr Jeffrey Simpson of the Globe and Mail I see that we at best we will see 7% reduction rather than the 17%. This is not an off the cuff estimate but the findings based on an annual report by Ms Gelfand, who is the Commissioner of Environmental Development, an offshoot of the Auditor General’s office.  The US has an identical agreement which could have been met by accepting the Waxman Markey bill. It was voted down in part due to the complex political system but also following publications by the powerful Heritage Foundation. It claimed that it would cost $ 1500 per household while the Congressional Budget Office, the EPO and several others put the cost at $ 150 per family. The Heritage Foundation just ignored how the tax proceed are refunded to those who paid the tax. In June 2014 the EPA introduced strict new regulations forcing coal fired power plants to switch to natural gas, which emits only half the amount of CO2. Those regulations or the present revenue neutral carbon tax bill introduced by senators Sanders and Boxer will in all likelihood allow the US to meet their 17% reduction target.

The US has introduced and debated at least 5 carbon pricing bills and we have not tabled a single one. No wonder the French president told us in his speech on November 3d that we are far behind on fighting climate change.




Sunday 24 August 2014

# 18 Pipeline protests cause widespread oil transport by rail


During the last few years there has been so much opposition to new pipelines that rail transport has increased rapidly’ By the end of this year there will be sufficient new loading stations and rolling stock to ship 1,000,000 barrels per day (bpd) from Alberta by rail. If it would all be destined to the Gulf Coast refineries we no longer need the Keystone XL pipeline which has an ultimate capacity of 830,000 bpd. Plans are underway to replace the Northern Gateway pipeline and the Kinder Morgan pipeline with a railway from Alberta to Alaska allowing shipment of 1,500,000 bpd through the under-utilized port of Valdez. The railways have certainly helped Alberta’s economy. Due to insufficient pipeline capacity they had to sell their oil at bargain prices. In 2012 they lost $ 25 billion. In 2013 the losses dropped to $20 billion and for the foreseeable future they will be $15 billion per year due to export restrictions to Asia. There are no figures readily available how much Ottawa loses in tax revenue but it must be billions, which could have been used to help the provinces with their financial problems.

While not all oil is as dangerous as the North Dakota type which caused the Quebec disaster, it is clear that transport by rail is riskier and takes more energy than transport by pipeline. This post gives an overview of the present rail developments and the objections to pipelines. I hope that public opinion about pipelines and marine transportation can as yet be changed.

1)     Replacement of the Keystone XL pipeline
According to an article in the June 9th Macleans magazine there is a Calgary investment dealer, Peters and Co, who estimates there will be by the end of this year enough facilities in Western Canada to ship more than 1,000,000 bpd. They are an investment dealer that has specialized in the Canadian oil and natural gas, midstream, and oilfield services, Their findings are in line with 2013 predictions shown in http://www.bnn.ca/News/2013/7/12/Analysis-Late-to-oil-by-rail-Canada-faces-risks-in-rush-to-catch-up.aspx :
“In the United States, shipments swelled to almost 100,000 cars in the first quarter, some 760,000 bpd based on the 700-barrel cars that are standard for lighter oil shipments, according to American Association of Railroads data. Canada is poised to catch up. In 2013 rail shipment was 230 000 bpd.  New loading facilities in Alberta and delivery of rolling stock on order will soon increase the volume. Business News reports the advantage of bitumen "Every time we bring in another barrel of Canadian heavy crude, we make enormous progress with regard to reducing our raw material cost," PBF Chairman Tom O'Malley recently told analysts. The refiner aims to triple deliveries to 80,000 bpd by year's end with new rail cars. "That is the game.". The railroad costs are stated by “Gibson, which is signing up customers for a 60,000-bpd terminal in Hardisty, Alberta, estimates using a unit train would cut the cost of moving crude to the Gulf Coast to $14-$17 per barrel, compared with $17-$21 per barrel on a manifest train hauling mixed
cargo.”

Shipping to refineries rather than to ports is cheaper by rail than by pipeline. The bitumen does not have to be cooled and diluted. It can be loaded hot and shipped raw in insulated railcars with heating coils. No expensive concentrate is required and each car holds 30% more bitumen than if it was shipped as dilbit. At the refinery the bitumen is re-heated to 150o C and pumped out. While Gulf Coast refineries  prefer our oil, the US has a glut of light crude and hopes that soon their export ban will be lifted. Canada is exempt from the export ban and already gets about 268,000 barrels of oil a day from the U.S. This is why North Dakota oil is shipped by rail to Eastern Canada for processing and export.



Here is another indication that major oil companies are planning to ship by rail.

HOUSTON — With limited pipeline options to ship oil sands crude out of Canada, Exxon Mobil Corp. plans to move up to 100,000 barrels per day of Canadian oil using a new rail terminal that should be running by 2015, an executive said Thursday.
The terminal, to be constructed in Alberta, will cost up to $250 million if it is built to a maximum capacity of 250,000 barrels of oil per day, said David Rosenthal, Exxon Mobil’s vice president of investor relations, during a conference call with analysts.
The rail terminal is being developed by Kinder Morgan and Imperial Oil at an initial cost of $170 million. Exxon Mobil has a 70 percent ownership stake in Imperial Oil.



2)     Replacement of Northern Gateway and Kinder Morgan pipelines


An alternative to the 525,000 bpd Northern Gateway line and the additional  590,000 bpd Kinder Morgan line is a 1,500,000 bpd railway line from Alberta to Alaska. The extra capacity could be used to ship more oil to Asia or to the Gulf Coast refineries. When it is double tracked it could transport 5,000,000 bpd. Double tracking would also allow shipping potash, grain, lumber and minerals. It was original conceived by Alaska and the Yukon in 2005 and 2007 because oil shipments through Valdez were dwindling.  Following increased opposition to the Northern Gateway Pipeline the potential was further discussed with First Nations and an agreement has been reached. The present estimated cost is $8.4 billion for the single track and $ 10.4 billion for the double track. This is comparable to the $5.5 billion for the Northern Gateway and $ 4.1 billion for Kinder Morgan pipeline. An easement already exists for ¼ of the route (Fort Mc Murray to Peace River). Alaska is already investing in infrastructure in anticipation of approval. .An advantage is that every step in the planning is undertaken after thorough consultation with First Nations. Another advantage is that shipping from Valdez to Asia is 2-4 days less than through BC ports. Shipping to Valdez will cost $6-$8 per barrel compared to $5 per barrel for the Northern Gateway pipeline. Tanker shipment from Valdez costs $2-$3 per barrel to Asia, $3-$4 per barrel to the Gulf coast and $ 4-$6 per barrel to Europe.

nrunfailco.com/ESW/Files/G7G_Project_Update_Jan-3-2013.pdf
reports that the $6 Million study of 2005-2007 has been updated  and will be followed by a $40 million feasibility study which will hopefully receive 25% financial support from the Alberta government.

The  February 2014 edition of the Alaska journal http://www.alaskajournal.com/Alaska-Journal-of-Commerce/February-Issue-2-2014/Report-due-in-March-on-Canadian-Alaska-oil-railroad-link/ reports that the Alberta government is funding a $1.8 million pre-feasibility study through the Van Horne Institute at the University of Calgary. Some more details are given about oil quality requirements and the degree of under-utilisation of the port.  TAPS owners, which include BP, ConocoPhillips and ExxonMobil, have said they are interested in shipping more liquids through the pipeline, which is now operating at about one-fourth of its design capacity


In February 2014 news came out that the 1.5 million barrels per day could be shipped by 10 trains. It also explains the First Nations involvement.  



The idea of shipping a million barrels of sticky bitumen a day via a rail line is unprecedented. Jean-Francois Arsenault, of the Ottawa-based infrastructure development firm, told the Edmonton Journal last January that G7G’s single-track version of the project would require 10 trains a day, each pulling 200 cars, to transport 1.5 million barrels.


Vickers said researchers at the University of Alaska Fairbanks and the University of Michigan are investigating the potential for the railroad to transport minerals from Yukon mines.
AECOM Canada, a technology company, has already said it wants 10 percent equity in the project, according to Vickers’ presentation. First Nations tribes and the six tribes between the border and Delta Junction would hold a 50 percent stake in a so-called Aboriginal Alliance Trust. The trust would disseminate dividends among the tribes. The remaining 50 percent would be held by G7G.




3)     Environmental objections to pipelines

A main objection, in particular from Europe is that the extraction of oil in Alberta takes a lot of energy and that with our projected expansions we will not meet our Copenhagen agreement. We already failed miserable with our Kyoto accord and by pulling out we upset their carbon trading system. For details of our environmental records see point 8 in post 1. Our failure to become serious about pricing of carbon is a main objection, now shared by the US which is much further ahead than we are and will in all likelihood meet their Copenhagen agreement which is identical to ours.( see post 16 “carbon tax progress”)
 
In BC environmentalists and local politicians reject the pipelines and make the public feel guilty by stating that our oil exports increase the world’s greenhouse gas emission, see http://www.vancouverobserver.com/blogs/climatesnapshot/carbon-tsunami-lead-enbridge-northern-gateway-takes-aim-bc and http://www.vancouverobserver.com/news/vancouver-s-green-brand-be-blackened-oil-pipelines-says-mayor#comment-260670 They overlook that world demand for oil will keep rising for quite a while and that the emissions will go up regardless which country supplies the oil. Taxing carbon will eventually ease the flow. Taxing will however have far more impact on coal than on oil. At the BC tax rate of $30 per tonne of CO2 the price of thermal coal will go up by about 70%, while crude oil goes up by only 9% (see post 17, cost of taxed oil and coal, windpower progress)

 Drastic reduction in the use of thermal coal is the solution to reduce the world’s greenhouse gas emission. Natural gas produces only about half the CO2 emissions than coal does. By forcing all power stations to switch from coal to natural gas the world’s emissions will drop substantially. In the US a newly introduced EPA bill tries to achieve that. Now even some influential Republicans feel that a revenue neutral carbon tax will work better, see http://www.jsonline.com/news/opinion/revenue-neutral-carbon-tax-would-improve-on-epa-regulations-b99282755z1-261548361.html
 The Sanders Boxer Bill which at $20 per ton of CO2 includes provisions for border tax adjustments (Import duties) to encourage other countries to follow the US lead may be the answer see http://www.carbontax.org/blogarchives/2013/02/15/sanders-boxer-set-gold-standard-but-write-off-fiscal-potential-of-carbon-tax/.  Shell, BP Exxon Mobil and Statoil demand a global carbon tax. They have vast reserves of natural gas and will profit by selling it for power generation. The tax will encourage development of green energy so that eventually all energy required to extract the Alberta oil will be obtained from green sources. Some people claim that it takes the equivalent of one barrel of oil to extract one barrel. That number is disputed and certainly does not apply to all Alberta oil. Furthermore some US oil requires just as much energy seehttp://insideclimatenews.org/news/20130219/oil-sands-mining-tar-sands-alberta-canada-energy-return-on-investment-eroi-natural-gas-in-situ-dilbit-bitumen

In Canada there is quite some opposition to carbon tax. People still believe that it costs them money, that it is bad for the economy and that it will hurt the poor. That is certainly not the case in BC, where the government has to show each year how much money was collected and how it was all refunded to those who paid the tax. Those who buy less than average carbon get more money back than they paid. This can be achieved by driving fuel efficient cars and using a heatpump system to keep their house warm.  At the moment there are 16 refund categories see http://www.fin.gov.bc.ca/tbs/tp/climate/Carbon_Tax_Report_and_Plan_Topic_Box.pdf Note that in 2013/2014 the poor got a refund of $ 195,000,000 via the low income climate action tax credit. That is over 16% of all carbon tax collected.

4)     Opposition to pipelines and tanker transport based on past disasters
 Enbridge has had many serious leaks in their lines. The most catastrophic one is the Kalamazoo spill. It was caused by inadequate leak detection instrumentation and poor maintenance. The industry relied on internal instruments which in the US detected only 5% of the leaks between 2002 and 2012. These internal instruments only detect leaks larger than !½ % of the flow and even misses some of the large ones because there are so many false alarms that the real ones can be misinterpreted as happened during the Kalamazoo spill from line 6B, causing a 17 hour shut-off delay.  Here are some details of the cracks which caused the rupture. They are part of a NTSB  investigation led by Mr Nicholson  “The spill from Enbridge's 6B pipeline was caused by multiple small corrosion-fatigue cracks in the pipe that grew in size, linked together and created a rupture over 80 inches long when the pipeline's pressure was increased.” About 15,000 cracks were discovered in Enbridge pipelines, according to a 2005 crack report, Nicholson said. Enbridge tried to manage these defects by prioritizing them by immediacy. The NTSB report also shows that the tools used to measure cracks were inadequate for the type of cracks in Pipeline 6B. “Federal regulators never fully reviewed or drilled the company on its spill response plan”.

During the inquiry of the Northern Gateway pipeline all efforts were made to exclude the above findings from the discussions. It would have been an ideal opportunity to show how much extra work will be done to avoid repetition of such disasters and how important it is to have strict regulations about crack detection and repair. The government should also be willing to provide sufficient trained staff to oversee that all those rules are followed.

The Northern Gateway pipeline has many features which will make the line one of the safest in North America. The trouble is that most of it only shows up on blogs. Last year I had 3 email exchanges with Enbridge suggesting that they make far more technical information available to the public and explain how all the previous problems can be overcome. In the process I learned something about pipelines and wrote what is now post 1 of www.neilwilhees.blogspot.ca On  1 September 2013 I emailed post 1 with all the backup data to Enbridge with the following note . “Having seen how much opposition there is based on past problems I have included at the end of my article a number of questions which may change opponents ‘ minds if you can once in a while point out how things have improved on specific points.” Enbridge’s reply on !0 September 2013 was “Thank you Neil - we appreciate your support!”.

When you read points 12, 13 and 14 of post 1 you will see that a lot more public discussion is required to make the pipelines acceptable. Point 14 also includes unanswered questions about the tanker transport. Further data are shown on post 4 “Oil spills from tankers” and many regulations and references are shown on post 15 “How safe is the Northern Gateway tanker traffic”. I have seen many arguments against pipelines and the Exxon Valdez disaster is often mentioned as an example of environmental impact. A lot has changed since that time and we must be prepared to pay quite some extra money to ensure that everything will be done safely.  The extra cost will still be insignificant compared to the $15 billion we lose every year because we can’t easily access the Asian market. Like for the pipeline itself, a lot more details have to be published by the main media to make the project acceptable to the public.


Monday 18 August 2014

# 17 Cost of taxed oil and coal, wind power progress



Shell, BP, Exxon Mobil and Statoil demand a global carbon tax (see post 12). This is not only because they need it for future planning. They have vast reserves of natural gas, which emits only half the amount of CO2 as coal does. The price increase caused by the tax would force coal fired power stations to switch to natural gas. That is a perfect example how the world’s greenhouse gas emissions can be reduced without subsidies. The tax has to be global, otherwise there will be unfair competition and complicated duty arrangements between countries based on their pricing of carbon.

The above development raises the question, how well will other oil companies fare? Not too bad, as can be seen from the calculations below. A tax of $30 per tonne of CO2 as applicable in British Columbia raises the price of crude oil by 9% and the price of thermal coal by at least 70%. That 9% is within the range of price fluctuations caused by political events but the 70% is hard to swallow by coal companies. It is however the only way to make green energy more competitive without subsidies. Such subsidies have worked but they are not equally distributed and a lot of money has been wasted on firms which eventually went bankrupt.

 Last year the US spent billions of dollars on subsidies at 2.3 c/kWh, which gives an idea how much wind power is generated. They are now about to terminate the subsidies because wind power has become competitive even without the help of carbon tax. According to the Department of Energy, the average electricity cost from a new natural gas plant in 2018 will be 6.7 cents per kWh, compared with 8.7 cents for wind, 10 for coal and 11 cents for nuclear power. Energy from offshore wind farms remains expensive, at 22 cents per kWh see http://www.globalpost.com/dispatch/news/afp/140115/blown-away-us-suspends-wind-power-subsidies-now  

 Ontario is not that lucky. They are obliged to pay a subsidy of 13.5c/kWh for wind power and at least 44c/kWh for solar power until their 20 year contracts signed since 1999 are running out, see http://www.theglobeandmail.com/report-on-business/rob-commentary/the-sorry-lessons-of-green-power-subsidies/article4103467/

 Since power from wind remains unsteady a carbon tax would encourage the development of pumped storage facilities and vehicle to grid systems. That would allow to store wind power and maintain a steady delivery during windless days. It could even be used to store excess windpower to meet peak demands.

Here follow the calculations:

Taxed price per barrel of crude

The search for correct figures is complicated by the fact that there are many different barrel values for dry and liquid goods. In the US and Canada the fluid barrel equals 119 litres but the figures below are based on the oil barrel which equals 159 litres

According to http://numero57.net/2008/03/20/carbon-dioxide-emissions-per-barrel-of-crude/ each barrel of crude contains 317 kg of CO2. At the present British Columbia rate of Can$ 30 per tonne of CO2 we would cash in an extra 317x30/1000  = Can$9.52 (US$ 8.76) per barrel of crude.

This compares to the Ministry of Finance tax schedule for oil products as follows:
Gasoline @ 6.67c /L =       Can  $ 10.61/ bbl = US $ 9.76
Light fuel oil@ 7,67c/L=    Can $ 12.20/ bbl = US $ 11,22
Heavy fuel oil @ 9.45c/L =  Can $ 15.03/bbl = US $ 13.83

These are all higher than the $ US 8.75 per barrel of crude arrived at in the article. That may be explained by other fractions in crude which contain less carbon per volume. The present price for crude oil is US $ 97.10/bbl so the BC tax of US$8.76  per barrel would add about 9% to the price.

Taxed price per ton of coal.

There are 3 different values for the ton. British Columbia’s carbon tax is $ 30 per tonne of CO2, which is the metric ton, 1000 kg (2204.6 pounds). The long ton is 2240 pounds and the short ton is 2000 pounds. In BC coal is taxed at $53.31 to $62.31 per tonne depending on heat value. Present prices for coal are shown in $ US per short ton and will be converted to $ Can per tonne. The carbon tax bill in the US is based on $20 per T of CO2. There is quite some confusion about symbols so until further investigation we only know that it is well below the BC rate.

According to http://www.infomine.com/investment/metal-prices/coal/ the present price of thermal coal has during the year varied between US$55 and US$65 per short ton and is at present US$ 60 per short ton

http://www.steelonthenet.com/files/metallurgical-coal.html shows a table of quarterly prices for metallurgical coal. There is a gradual drop from US$202/short ton in 2011 to the present US$106/short ton,

The resulting minimum figures are:

                                      Cost US$/st   Cost Can$/tonne  Carbon tax   Total    % increase
Thermal coal low heat v        60                    71.88            53.31       125.19           74
Thermal coal high heat v      63 (est)              75.47            62.31       137.78          83
Metallurgical coal                 106                  126.99            53.31      180.30          42 


Monday 4 August 2014

# 16 Carbon tax progress


In the last 6 months there were some encouraging developments as follows:

1)     Many more companies demand global carbon pricing

In 2013 just over 100 multinational companies had signed the Carbon Price Communiqué. They were frustrated by the slow progress of the UN negotiations to obtain a fixed price for carbon which would allow better planning and eliminate unfair competition. In 2014 the Trillion Tonne Communiqué was added. It points to an environmental tipping point unless a global carbon price is established. By now over 1000 business leaders from more than 60 countries have signed one of the communiqués.  Among the signatures are those of the world’s largest oil company, 2 other major oil  companies, the world’s third largest airline and major multinational companies in petrochemical, construction, insurance, food processing and electronics. Post 12 of my blog shows how some companies will profit from a global carbon tax. It is hoped that the politicians will start paying attention to all those advantages and reach at least a partial agreement at the 2015 conference. For details seehttp://www.climatecommuniques.com/andhttp://www.climatecommuniques.com/Trillion-Tonne-Communique.aspx


2)     Carbon tax development in the US
In the US quite some progress has been made following proposed EPA rulings. These are aimed at cutting carbon-dioxide emissions from the nation's power plants as much as 30 percent below 2005 levels by 2030. Some influential Republicans now realize that they can’t block the EPA rulings.They also realize that it will hit the coal industry hard without having any defined compensation.They rather have a revenue neutral carbon tax which achieves a lot and would allow taxing imports from countries without carbon tax.  It may sway opposition Republicans to vote for a recently introduced carbon tax bill, which is superior to previous cap and trade bills. If accepted this could lead to serious discussions with China, who previously dismissed cap and trade but considered a carbon tax. They obviously want to see first what the US will do. For details see http://www.vox.com/2014/6/1/5770556/EPA-power-plant-rules-explainer ,http://www.carbontax.org/progress/carbontaxbills/andhttp://www.jsonline.com/news/opinion/revenue-neutral-carbon-tax-would-improve-on-epa-regulations-b99282755z1-261548361.html

3)     Environmentalists can be persuaded to think about carbon tax

Lately I have been reading quite some on-line articles about pipeline protests and note that the people opposing new pipelines complain about the potential GHG emission of our oil without realising that demand will keep rising until a global carbon tax has been established. I try to reach them by placing comments where possible. When I simply state that a carbon tax is essential to curb the oil flow, the word tax alone puts them off and 80% disagree with me. Hence I explain with specific examples from my blog that:

--- A revenue neutral carbon tax does not hurt. We get all the money back and gain if we buy less than average carbon
--- World demand for fossil fuel will increase until a global carbon tax is in place, allowing taxing of exported carbon.
--- Our export of that extra fossil fuel does not increase the world’s GHG emissions. If we don’t supply it, others will.

Since the media still ignores many important aspects affecting climate change I hope that you also will be able to spread the word via on-line newspapers. Not all papers count “agree” and “disagree” markings and not all people who read my comments will bother to mark.From my comments on the articles below I randomly selected a block of 24 and at that time at least 2705 read the comments and 63% agreed, which is quite encouraging. Since that time I updated the list and will keep doing so. Just by title alone you can see that there is a lot of opposition to pipelines.

On !7 October 2014 another count showed that of the comments on 29 articles since 13 April 2014 at least 7515 had been read with an agree rate of 60%. A very promising trend is that the comments are still read well after the articles are published. The most astonishimg example is that the 3 comments dealing with carbon tax on a 17 May article in http://www.vancouverobserver.com/news/thousands-rally-against-enbridge-northern-gateway-photos#comment-259326 were read by at least 809 people on Aug 3 and at least 3953 people on 17 October. The next day another 101 had rated it. The agree rating dropped from 68% in August to 60% in October
































http://www.vancouverobserver.com/news/anti-pipeline-protesters-march-through-downtown-vancouver
140502















http://www.vancouverobserver.com/news/world/filipinos-blame-canadian-government-and-industry-monster-typhoon#comment-252867


http://www.vancouverobserver.com/blogs/earthmatters/hundreds-protest-against-port-metro-vancouver-%E2%80%9Cclosed-door-decision-making%E2%80%9D#comment-252494

Wednesday 23 July 2014

# 15 How safe is the Northern Gateway tanker traffic?


At the very end of post 1 under item point 14), Pipeline and tanker transport details yet to be clarified,  item h), Tanker selection and sea conditions, you will see that little is published about modern tanker design, certification  and maintenance of tankers, improved weather forecasting, better navigational aids and applicable rules and regulations. Some of the certification is referred to in post 4 but I now received from my son Brian a much more detailed account of all the regulations. Like for the pipeline itself I feel that if all regulations are strictly followed not much can go wrong. This will require extra personnel. The extra cost for the personnel will be insignificant compared to the money we lose by not having this pipeline. In 2012 we lost $ 25 billion. In 2013 we shipped 230 000 barrels per day by rail and the losses dropped to $ 20 billion.  It is expected they will stay at $ 15 billion per year until we have sufficient pipeline capacity, see http://fullcomment.nationalpost.com/2014/07/04/sherry-cooper-we-cant-say-no-to-northern-gateway/

Brian has been at sea for 37 years, For 23 of those years he has been in most BC coastal inlets on vessels of Fisheries Patrol and  Ocean Science Research. By exchanging stories with other mariners he has a good picture of what goes on in the tricky areas. He has supervised refits for several ships and knows how, despite all the rules, mistakes can go undetected without strict oversight by several independent authorities. Here follows his account:

Shipping Crude oil in the Pacific Northwest.
Many concerned people are unaware of the advances and improvements in the shipping industry that have been made in recent years. Advances include, improved navigation technology, management practices, traffic monitoring, ship design, communication, and stringent regulation.
Improved navigation aids include integrated navigation systems such as electronic chart and information system .ECDIS integrates electronic charts with other navigation systems such as GPS, Radar and automatic identification systems (AIS). Ships over 300 tonnes gross are required to be fitted with automatic identification systems and will continuously transmit the vessels identity, position, speed, and heading. See AIS link: http://www.marinetraffic.com/en/
Traffic monitoring and guidance has also benefited with new technology. Marine communications and traffic services (MCTS) have been in operation for many years and has evolved with the advent of new technology such as AIS. Vessel traffic services (VTS) monitors vessel movement and provides communications and information to vessels in transit. Vessels are required to obtain clearance and report in at specified way points during transit within Canadian waters. VTS also utilizes shore based radar and AIS to assist in tracking and plotting of vessels in the zones. More shore based radars are scheduled to be installed to improve coverage. See link to VTS: http://www.ccg-gcc.gc.ca/e0003910
Canadian Marine Pilots are a mandatory requirement for all vessels over 350 tonnes transiting Canadian waterways. These pilots are certified and trained in the navigation of the vessels they are responsible for. They have extensive local knowledge in the local waterways in which they provide the service.

Management practices have evolved in order to improve safety and minimize risk. International standards have been developed in a safety management system (SMS). The SMS is a required management format utilized to include vessel, and equipment specific needs and requirements. The SMS system also includes training requirements, and reporting structure allowing employees to identify risks.
Ship design has had many changes over the years. New tanker requirements for ship design now include double hull and segregated ballast. On board equipment has improved greatly over the years as well giving much improved reliability and safety. New technology such as integrated machinery alarm and control has been utilized to monitor the status of all on board equipment. Safety equipment such as fire detection and automated fire extinguishing have also improved with new technology.
Stringent regulation is achieved by utilizing classification societies such as Lloyds Register, Det Norske Veritas  (DNV),  Bureau Veritas,  and American Bureau of Shipping (ABS). These classification societies are delegated to perform ship inspections and certification on behalf of Transport Canada. The Delegated Statutory Inspection Program (DSIP) allows Transport Canada inspectors to oversee the safety of the large number of ships entering Canadian waters.
Enbridge plans to ship crude oil from Kitimat. This has been studied by Transport Canada through a review process. The study and recommendations are available on the link below.
Link to Termpol review on Northern Gateway Project (pdf): http://www.neb-one.gc.ca/fetch.asp?language=E&ID=A2Q4A7
I believe that new technology and improved management has made shipping of crude oil in Canadian Waters a safe and feasible proposal.
Brian Heesterman
Marine Engineer  1st Class.




Saturday 21 June 2014

# 14 Vancouver tries to stay green by rejecting 2 oil pipelines




Four major oil companies demand a global carbon tax because it would force power generation plants to switch from coal to natural gas, which emits only half the amount of CO2. Cathay Pacific, the world’s third largest airline, demands the tax because it would bring in a lot of extra cash until other airlines are as fuel efficient as they are. These are examples how a universal carbon tax will reduce the world’s greenhouse gas emissions without having to resort to subsidies and complicated duty arrangements.  A global carbon tax would make green energy cheaper than that from fossil fuel. That price differential would  force Alberta’s  oil companies to go green with the large amount of energy required to extract the oil. That would enable Canada to meet its Copenhagen commitment. At present many countries believe we will not be able to meet that commitment. Until a global agreement has been reached, demand for oil will keep rising, no matter who supplies it. If Canada would renege on its export commitments that oil would soon be replaced by Venezuela or Saudi Arabia oil and there will be no difference in the world’s GHG emissions.  This fact is overlooked by more than a few environmentalists and politicians. In  http://www.vancouverobserver.com/news/vancouver-s-green-brand-be-blackened-oil-pipelines-says-mayor#comment-260670  you can see that Vancouver’s mayor Robertson and councilor Reimer both make statements suggesting that the amount of oil we ship has an impact on the world’s greenhouse gas emission. Mayor Robertson rejects the Kinder Morgan and Enbridge pipelines partly on that basis. Carbon tax, which is the most powerful greening tool we have, is not even mentioned . He talks about creating more green jobs and rising energy prices do that.

Objection to pipelines based on fear of spills is a valid one. The technical and regulatory details of oil transport are not  discussed in the main media and as a result many people believe that the new pipelines will be just as bad as the old ones and that nothing has changed since Exxon Valdez. The Vancouver Observer invites reader’s comments. I left one under the heading “Oil spills”. Those familiar with this blog will not find anything new but for those who only see this post, please look at the previous one as well. It gives a summary of each post.


The”Oil spills” comment has been shown for two days and so far 13 people agreed while only 2 disagreed. That is encouraging. Here is the comment:

Oil spills

One of the problems with oil pipelines is that until recently their leak detection systems could not detect spills smaller than 1 ½ % of the flow. Even for larger flows signals are sometimes misinterpreted because there are many false alarms. That happened in the Kalamazoo spill where operators thought the alarm was caused by a bubble in the line or a blockage and shut-off was delayed by 17 hours. In the US only 5% of the spills between 2002 and 2012 were detected by instruments. The investigation of the Kalamazoo disaster also revealed that there is virtually no oversight nor strict regulations how to deal with cracks in pipelines. Enbridge used inadequate crack detection equipment, knew for 5 years that there were 15000 cracks in the line and only repaired them by trying to prioritize them. Nobody ordered a shutdown and some of those cracks grew in size and linked together to cause the rupture.

On September 1 st 2013 I sent Enbridge an email which contains my observations  with the following note: “Having seen how much opposition there is based on past problems I have included at the end of my article a number of questions which may change opponents  minds if you can once in a while point out how things have improved on specific points”. While Enbridge thanked me for my support, few of those important matters are discussed in the media. They also include questions about the marine transport. A lot has changed since Exxon Valdez and it is important to know what the real concerns are. Hardly anybody has the time to read the Termpol report but people want to know where the safe hiding places are awaiting storms, who gives approval to proceed when bad weather is forecasted or whales have been spotted, how have the concerns raised at the enquiry been resolved, how do the additional navigation aids work, are ships traced constantly from shore to avoid a Queen of the North disaster, how do modern tankers differ from first generation double hull tankers. Please write to the government, Enbridge and Kinder Morgan to obtain answers about their instrumentation, maintenance procedures and regulations to be followed. When enough people do that we may get a more open discussion about these matters and press for guarantees  before it is too late

Since the existing pipelines are full, Alberta’s landlocked oil has to be sold at bargain prices, costing the Alberta economy $20-$30 billion per year. Obviously this causes Ottawa to lose billions of dollars in tax revenue which could be used to help the provinces with infrastructure, services for remote communities, healthcare and education. The push for new pipelines is therefore understandable but it has to be done the right way. For those who are concerned about the global greenhouse gas emission, please campaign for a global carbon tax because that is the only way to reduce the oil flow. Until that has been achieved demand for oil keeps rising and it makes little difference who supplies it. Sure extraction from the oil sands uses a lot of energy but so do some of the newer techniques elsewhere. That is why green energy has to become more competitive by taxing all fossil fuels. 4 Major oil companies and one major airline demand a global carbon tax. They are well ahead of politicians who still believe that carbon tax hurts the economy while most studies show the opposite.