Water worries threaten U.S. push for natural gas

October 1, 2009

Thu Oct 1, 2009 8:26am EDT

By Jon Hurdle

PAVILLION, Wyoming (Reuters) – Louis Meeks, a burly 59-year-old alfalfa farmer, fills a metal trough with water from his well and watches an oily sheen form on the surface which gives off a faint odor of paint.

He points to small bubbles that appear in the water, and a thin ring of foam around the edge.

Meeks is convinced that energy companies drilling for natural gas in this central Wyoming farming community have poisoned his water and ruined his health.

A recent report by the Environmental Protection Agency suggests he just might have a case — and that the multi-billion dollar industry may have a problem on its hands. EPA tests found his well contained what it termed 14 “contaminants of concern.”

It tested 39 wells in the Pavillion area this year, and said in August that 11 were contaminated. The agency did not identify the cause but said gas drilling was a possibility.

What’s happened to the water supply in Pavillion could have repercussions for the nation’s energy policies. As a clean-burning fuel with giant reserves in the United States, natural gas is central to plans for reducing U.S. dependence on foreign oil.

But aggressive development is drawing new scrutiny from residents who live near gas fields, even in energy-intensive states such as Wyoming, where one in five jobs are linked to the oil and gas industry which contributed more than $15 billion the state economy in 2007.

People living near gas drilling facilities in states including Pennsylvania, Colorado, New Mexico and Wyoming have complained that their water has turned cloudy, foul-smelling, or even black as a result of chemicals used in a drilling technique called hydraulic fracturing, or “fracking.”

The industry contends drilling chemicals are heavily diluted and injected safely into gas reservoirs thousands of feet beneath aquifers, so they will never seep into drinking water supplies.

“There has never been a documented case of fracking that’s contaminated wells or groundwater,” said Randy Teeuwen, a spokesman for EnCana Corp (ECA), Canada’s second-largest energy company, which operates 248 wells in the Pavillion and nearby Muddy Ridge fields.

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GM details plans to wipe out current shareholders

May 5, 2009

Tue May 5, 2009 8:01pm EDT

By Kevin Krolicki

DETROIT (Reuters) – General Motors Corp (GM) on Tuesday detailed plans to all but wipe out the holdings of remaining shareholders by issuing up to 60 billion new shares in a bid to pay off debt to the U.S. government, bondholders and the United Auto Workers union.

The unusual plan, which was detailed in a filing with U.S. securities regulators, would only need the approval of the U.S. Treasury to proceed since the U.S. government would be the majority shareholder of a new GM, the company said.

The flood of new stock issuance that could be unleashed has been widely expected by analysts who have long warned that GM’s shares could be worthless whether the company restructures out of court or in bankruptcy.

The debt-for-equity exchanges detailed in the filing with the Securities and Exchange Commission would leave GM’s stock investors with just 1 percent of the equity in a restructured automaker, ending a long run when the Dow component was seen as a bellwether for the strength of the broader U.S. economy.

GM shares closed on Tuesday at $1.85 on the New York Stock Exchange. The stock would be worth just over 1 cent if the first phase of GM’s restructuring moves forward as described.

Once GM has issued new shares to pay off its debt to the U.S. government, bondholders and its major union, it said it would then undertake a 1-for-100 reverse stock split.

Such a move would take the nominal value of the stock back to near where it had been before the flood of new shares. But in the process, GM’s existing shareholders would see their stake in the 100-year-old automaker all but wiped out.

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The Kondratieff Cycle

February 2, 2009

kondratieff-cycle

Graphic compliments of The Long Wave Analyst.

Professor Nickolai Kondratieff (pronounced “Kon-DRA-tee-eff”)

Shortly after the Russian Revolution of 1917, he helped develop the first Soviet Five-Year Plan, for which he analyzed factors that would stimulate Soviet economic growth.  In 1926, Kondratieff published his findings in a report entitled, “Long Waves in Economic Life”.  Based upon Kondratieff’s conclusions, his report was viewed as a criticism of Joseph Stalin’s stated intentions for the total collectivization of agriculture.  Soon after, he was dismissed from his post as director of the Institute for the Study of Business Activity in 1928.  He was arrested in 1930 and sentenced to the Russian Gulag (prison); his sentence was reviewed in 1938, and he received the death penalty, which it is speculated was carried out that same year.  Kondratieff’s major premise was that capitalist economies displayed long wave cycles of boom and bust ranging between 40-60 years in duration.  Kondratieff’s study covered the period 1789 to 1926 and was centered on prices and interest rates.

Kondratiev waves — also called Supercycles, surges, long waves or K-waves — are described as regular, sinusoidal cycles in the modern (capitalist) world economy.  Averaging fifty and ranging from approximately forty to sixty years in length, the cycles consist of alternating periods between high sectoral growth and periods of slower growth.  The Kondratieff wave cycle goes through four distinct phases of beneficial inflation (spring), stagflation (summer), beneficial deflation (autumn), and deflation (winter).

The phases of Kondratieff’s waves also carry with them social shifts and changes in the public mood.  The first stage of expansion and growth, the “Spring” stage, encompasses a social shift in which the wealth, accumulation, and innovation that are present in this first period of the cycle create upheavals and displacements in society.  The economic changes result in redefining work and the role of participants in society.  In the next phase, the “Summer” stagflation, there is a mood of affluence from the previous growth stage that changes the attitude towards work in society, creating inefficiencies.  After this stage comes the season of deflationary growth, or the plateau period. The popular mood changes during this period as well.  It shifts toward stability, normalcy, and isolationism after the policies and economics during unpopular excesses of war.  Finally, the “Winter” stage, that of severe depression, includes the integration of previous social shifts and changes into the social fabric of society, supported by the shifts in innovation and technology.


Massive Arctic ice shelf breaks away

September 3, 2008

Wed Sep 3, 2008 11:39am EDT

By David Ljunggren

OTTAWA (Reuters) – A huge 19 square mile (55 square km) ice shelf in Canada’s northern Arctic broke away last month and the remaining shelves have shrunk at a “massive and disturbing” rate, the latest sign of accelerating climate change in the remote region, scientists said on Tuesday.

They said the Markham Ice Shelf, one of just five remaining ice shelves in the Canadian Arctic, split away from Ellesmere Island in early August. They also said two large chunks totaling 47 square miles had broken off the nearby Serson Ice Shelf, reducing it in size by 60 percent.

“The changes … were massive and disturbing,” said Warwick Vincent, director of the Centre for Northern Studies at Laval University in Quebec.

Temperatures in large parts of the Arctic have risen far faster than the global average in recent decades, a development that experts say is linked to global warming.

“These substantial calving events underscore the rapidity of changes taking place in the Arctic,” said Derek Mueller, an Arctic ice shelf specialist at Trent University in Ontario.

“These changes are irreversible under the present climate and indicate that the environmental conditions that have kept these ice shelves in balance for thousands of years are no longer present,” he said in an e-mailed statement from the research team sent late on Tuesday.

Mueller said the total amount of ice lost from the shelves along Ellesmere Island this summer totaled 83 square miles — more than three times the area of Manhattan island.

The figure is more than 10 times the amount of ice shelf cover that scientists estimated on July 30 would vanish from around the island this summer.

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Hot commodities

June 11, 2008

The big question about resources: Is it too late to invest? Short answer: Nope. And it’s easier than ever to get into the game.

By Brian O’Keefe, senior editor

(Fortune) — Back in 2001, the executives running Australian mining giant BHP Billiton sensed that China’s economic growth was gaining critical mass. So they commissioned a study on how the country’s rapid industrialization might affect the global markets for copper, coal, iron ore, oil – all the stuff that the company pulls out of the earth and sells.

“The results were quite – well, ‘outrageous’ is probably the right word,” CFO Alex Vanselow told me when I visited BHP’s headquarters in Melbourne a few months back. “Because we didn’t believe it. We thought something must be wrong. If our models were right, the pressure China would put on the world would be tremendous.”

But the more they tinkered with their models, the more unbelievable the results became. The fast-growing per-capita income of China’s billion-plus people pointed toward a massive thirst for raw materials. When the researchers added India’s potential for growth – and its own billion-plus population – the numbers got even more extraordinary. And when they factored in the industry’s inadequate investment in new production capacity, they concluded that over the next two decades there would be a historic demand-driven boom in the resources world.

Today, of course, the commodities boom that the BHP (BHP) study anticipated is in full swing – and impossible to ignore. You see it every day in the $100-plus it now costs to fill up your SUV. Or the 39% increase in the cost of electricity over the past eight years. Or the fact that you’re paying 20% more for that box of pasta than you were a year ago.

As painful as all those rising prices can be for consumers, the bull market in raw materials has proved to be an awesome investment opportunity. Over the past five years the S&P 500 has had a total return of 59%. But over the same period, the diversified Dow Jones-AIG Commodity index has risen some 110%, and the S&P GSCI Commodity index, another broad measure, has jumped 141%. The price of gold has more than doubled, and crude oil and copper have soared more than fourfold. If you were prescient enough to go long on rice on New Year’s Day, you’ve already seen a return of 33% this year.

No wonder, then, that money is flooding into resource markets. According to Gresham Investment Management, institutional investors like pension funds and endowments had $175 billion in commodities at the end of 2007, up from $18 billion in 2003. Just as predictably, Wall Street has rushed out a flurry of new products geared toward individual investors.

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