Posts

Arctic Leaf

Paul Revere: The Teslas are coming, the Teslas are coming!

/in , /by

When he died, the patriot Paul Revere was embalmed in V8 juice, tanning lotion and several energy drinks. Surprisingly, he reappeared at a relatively recent conference of the Massachusetts Association of Automobile Dealers, looking fit and ready for another ride. The dealers had prayed for his second coming. They hoped that even though his previous ride was only one horsepower, he would consent to try a low-horsepower vehicle and ride the state, warning their brave residents that Tesla is online and in-store sales of electric cars coming. The dealers’ marketing folks felt that a reincarnated Revere would do wonders for their shaky image as wheeler dealers (excuse the pun). His deep, holier-than-thou, Fred Thomas-type voice (you know, the actor-turned-politician-turned-actor who now sells most anything on TV for money) would convince all but his former peer group (dead people) that Tesla was anti-American.

“What did Tesla do wrong,” asked Revere? Oh, it’s trying to sell its non-horse, torque-engine vehicles directly to modern-day patriots. Can you imagine euthanizing horsepower? Tears came to Revere’s eyes. But there’s more, paraphrasing a former automaker and cabinet officer Charles Wilson, one of the dealers indicates that what’s good for automobile dealers was and will always be good for America. What Elon Musk, the head of Tesla Motors, wants to do is eliminate dealerships. If the present case before the courts in Massachusetts is won by Tesla and Teslas are sold online, from a storefront, or shopping mall, surely Ford, Chrysler and General Motors will not be far behind. Forget capitalism, forget free markets, forget competition, even forget, Paul, your membership in the old Tea Party in Boston (you know, the taxation-without-representation crowd). Forget everything you fought for. By eliminating dealerships, Tesla will cost jobs. Dealers soon will have to close their doors. Bypassing dealers to sell cars will also first limit and then end our community philanthropy — you know, Little League teams, Fourth of July concerts, community picnics, jerseys for kids etc. Tesla’s headquarters is in California, and it’s a crazy state with Hollywood and all that. Californians act like foreigners. Tesla’s founder believes in global warming, he isn’t satisfied with life in America and he is developing a spaceship where the elite can, someday soon, travel to a second home and ruin our local economy. Losing dealers will make every community less American. Sure, vehicle costs may come down and emissions may improve, but what American is unwilling to pay extra to save his or her friendly auto dealer?

Revere was puzzled. He was a merchant way back then and he believed that competition and the free market were part of the American Dream. (To be honest, he also feared riding and did not understand how he could ride a multiple-horse powered vehicle. He had only mounted one horse.)

But he understood what the dealership folks were trying to tell and sell him. While in his heart, he was a bit ambivalent, he finally said he would do the famous ride again, and this time, because mileage capacity had increased and population of Massachusetts had grown, he agreed to try to go farther west than in his famous, poet-legitimized and sanctified ride.

But just as he gave them the okay, the dealerships received an email from a colleague in Boston that Tesla had won in the Massachusetts court. One dealer started crying. Several others criticized “those activist judges.”

Revere asked to read the email. It indicated that the Massachusetts Supreme Judicial Court unanimously determined that the Mass. State Automobile Dealers “lacked standing to block direct Tesla sales under a state law designated to protect franchises owners from abuses by car manufacturers” (Reuters, Sept. 15, 2014). Succinctly, the law was tied to the franchise relationship rather than unaffiliated manufacturers like Tesla.

The court’s finding should make it easier for Tesla to secure positive rulings in many other states. Earlier this spring, senior officials from the Federal Trade Commission strongly indicated that laws outlawing direct sales harmed consumers. Revere, after looking at the email, felt guilty that he had all but agreed to replicate his famous ride. But he was consoled by the fact that freedom and competition won out, at least in the Tesla case in Massachusetts, and that at least consumer democracy was alive and well in the state. He couldn’t help but muse on the fact that Texas, a state supposedly committed to minimal regulation and almost zero interference by government concerning businesses and citizens’ lives, turned its back on Tesla because of lobbying by dealers. Tesla cannot sell directly in Texas. But, as Ralph Waldo Emerson suggested, “foolish consistency is the hobgoblin of little minds.” After driving a Tesla (with no horsepower), Revere went back to the halo- lit neter lands happy. We haven’t heard from him since. But on faith alone, his experience with reincarnation likely would have made him a fan of Tesla’s electric cars and other alternative fuels.

Arctic Leaf

Flaring gas in North Dakota – what a waste!

/in , /by

You can see them from outer space. The flames from natural gas flares in the Williston Basin of North Dakota now throw off a nighttime glow larger than Minneapolis and almost as big as Chicago. All that energy is going up in smoke.

Ceres, a Boston nonprofit organization, issued a report last week illustrating that the huge surge in oil production in the Bakken Shale has outrun the drilling industry’s ability to cope with the natural gas byproduct. “Almost 30% of North Dakota gas is currently being burned off,” the report said.

The report also states, “Absolute volumes of flared gas have more than doubled between May 2011 and May 2013. In 2012 alone, flaring resulted in the loss of approximately $1 billion in fuel and the greenhouse gas emissions equivalent of adding one millions cars to the road.”

The loss rate has actually been reduced from 36% in 2011, but production has tripled in that time, meaning that an additional 266 billion cubic feet (BCF) a day is going up in smoke.

Moreover, according to the report, North Dakota gas contains other valuable products. “The natural gas from the Bakken formation contains high volumes of valuable natural gas liquids (NGLs), such as propane and natural gasoline, in addition to dry gas consisting mostly of methane. It is potential worth roughly four times that of the dry gas produced elsewhere in the United States.”

“There’s a lot of shareholder value going up in flames,” Ryan Salomon, author of the report, told Reuters.

So why can’t more be done to recover it? Well, unfortunately, according to the North Dakota Industrial Commission, the spread between the value of gas and oil, which has stayed pretty close historically, has now increased to 30 times in favor of oil in the Bakken. Even nudging up gas prices to $4 per thousand cubic feet (MCF) in recent months hasn’t made much difference. Consequently, it isn’t worthwhile trying to collect gas across widely dispersed oil fields.

Encouraging this waste is a North Dakota statute that exempts flared gas from paying any severance taxes and royalties during the first year of production. Since most fracking wells have a short lifespan, gushing forth up to 60% of their output in the first year, this makes it much easier to write off the losses.

Nonetheless, all this adds up to a colossal waste. As of the end of 2011, the amount of gas being flared each year in North Dakota was the equivalent of 25% of annual consumption in the United States and 30% Europe’s. The high burn off has moved the country up to fifth place in the world for flaring, only behind Russia, Nigeria, Iran and Iraq, and ahead of Algeria, Saudi Arabia and Venezuela. Although the World Bank says worldwide flaring has dropped by 20% since 2005, North Dakota is now pushing in the opposite direction. Altogether, 5% of the world’s gas is wasted in this way.

Efforts are being made to improve the situation: with big hitters are doing their part. Whiting Petroleum Corporation says its goal is zero emissions. Hess Corporation, which has a network of pipelines, is spending $325 million to double the capacity at its Tioga processing plant, due to open next year. Continental, the largest operator in the Bakken, says it has reduced flaring to 11% and plans to reduce it further. “Everybody makes money when the product is sold, not flared,” Jeff Hunt, vice chairman for strategic growth at Continental, told Reuters.

But it’s all those little independent companies and wildcatters that are the problem. Storage is impossible and investing in pipeline construction just too expensive. Entrepreneurs are doing their part. Mark Wald, a North Dakota native who had left for the West Coast, has returned to start Blaise Energy Inc., a company that is putting up small gas generators next to oil wells and putting the electricity on the grid. “You see the big flare up there and you say, `Something’s got to be done here,’” he told the Prairie Business.

But the long-term solution is finding new uses for natural gas and firming up the price so that its collection is worthwhile. What about our transport sector? We still import $290 billion worth of oil a year at a time when as much as half of that could be replaced with domestic gas resources. Liquid natural gas, compressed natural gas, conversion to methanol, conversion to ethanol – there are many different ways this could be promoted right now. Ford has just introduced an F-150 truck with a CNG tank and an engine that can run on either gas or gasoline. With natural gas selling at the equivalent of $2.11 a gallon (and even cheaper in some parts of the country), the new model can pay off the additional $9,000 price tag in two to three years. There are now an estimated 12,000 natural gas vehicles on the road and the number is growing rapidly. “This is an emerging technology in a mature industry,” Ford sustainability manager Jon Coleman told USA Today.

But an even better way to harvest this energy might be to design small, transportable methanol converters that could be attached to individual gas wells. Methane can be converted to methanol, the simplest alcohol, by oxidizing it with water at very high temperatures. There are 18 large methanol plants in the United States producing 2.6 billion gallons a year, most of it consumed by industry. But methanol could also substitute for gasoline in cars at lower cost with only a few adjustments to existing engines. The Indianapolis 500 racers have run on methanol for more than 40 years.

The opportunities in the Bakken are tremendous – and the need to end the waste urgent. The U.S. Energy Information Administration estimates that production in the Bakken is due to rise 40%, from 640,000 to 900,000 barrels per day by 2020. North Dakota has already passed Alaska as the second-biggest oil producing state and now stands behind only Texas, where pipeline infrastructure is already built out and less than 1% of gas is flared.

The increased production, matched with the expanding technology for using gas in cars, presents an enormous opportunity.