Month: June 2016

Powering Down

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Everyone is aware of Obama’s suppression of the Keystone XL pipeline project.  But the legal, regulatory, and PR assault against critical infrastructure construction goes far beyond this. WSJ reports that:

Many major fossil-fuel projects across the U.S., from pipelines to export terminals, have been shelved or significantly delayed because of a confluence of new regulations, grass-roots opposition and a drop in energy prices.  Overall, more than a dozen projects, worth about $33 billion, have been either rejected by regulators or withdrawn by developers since 2012, with billions more tied up in projects still in regulatory limbo.

Among the projects that the WSJ article identified as ‘cancelled’ were the $875MM ‘Constitution’ gas pipelines for the Northeastern US and the $3 billion “Northeast Direct” for the same region.

Natural gas is, of course, a major source for generating electricity, and the only practical way of getting the gas to the power plants is via pipeline.

(The CEO of New England’s power grid operator), said pipeline) projects are badly needed. Residential consumers in New York and New England paid between 5% and 41% more than the national average for natural gas in March, the latest month for which data were available. They also paid more for electricity, which itself is increasingly made with natural gas. 

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Frack-Log…ACTIVATED!

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In my two previous blog posts here and here I talked of a new extended flow oil fracking technique coming on-line that resulted in a lot of drilled uncompleted wells (DUC) and the population of such wells (~5,000). In the comment section of one of those columns I speculated that we have a top end on oil prices where “turn on a dime fracking” will cut in at a price point of $50 a barrel

We now have a “flaming datum” for that speculation, oil having just bumped -HARD- into the $50 a barrel roof for world oil prices. The 5,000 DUC Frack-log is being activated with — I strongly suspect — the new extended play oil fracking technique.

It is being reported in various places that the US rig count jumped from NINE RIGS in mid-May to 325 last week and there was no change from 325 rigs this week. That is a 36 fold increase in rig count in a week!!

Based on figures I’ve gotten from those in the industry, the range of production you can expect from those wells, depending on the geology, length of the laterals (6,000 to 8,000 feet) and the number of fracking stages (200′, 300′ or 400′) will result in initial barrel per day production of between 400 and 800 barrels a day per fracked well (with a very, very rare 1,300 barrel a day play from time to time). So we are looking at between 130,000 to 260,000 barrels a day of American oil fracking production arriving in the next few months.

Compared to Saudi production, 130,000 to 260,000 barrels of oil a day represents between 1.3% and 2.5% of the Saudis’ daily oil flow. The number of DUCs activated to provide that production amount to 6.5% of the frack-log. And all that for what amounts to Zero “CAPEX” (capital expenditure), plus the operating expenses of worker wages, the rental price for existing, out of service, oil fracking rigs, and oil tanker trucks to move product to rail heads or oil pipelines.

Now you know why the Saudis didn’t agree with OPEC oil production cutbacks this week. The Saudis maxing out their oil production is no longer about stopping American oil frackers. The Saudis’ long term regime survival strategy amounts to being the “Last Petro-State Standing.”

The Saudis — like everyone else inside the Big Oil economic paradigm — simply cannot compete with that sort of rapid to market, low cost & low risk oil. The Saudis’ highest priority now is to keep their customers as long as they can, because if they lose them they may never get them back.

Socio-Economic Modeling and Behavioral Simulations

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SimulationsIn his Foundation series of books, Isaac Asimov imagined a science, which he termed psycho-history, that combined elements of psychology, history, economics, and statistics to predict the behaviors of large population over time under a given set of socio-economic conditions. It’s an intriguing idea. And I have no doubt much, much more difficult to do than it sounds, and it doesn’t sound particularly easy to begin with.

Behavioral modeling is currently being used in many of the science and engineering disciplines. Finite element analysis (FEA), for example, is used to model electromagnetic effects, thermal effects and structural behaviors under varying conditions. The ‘elements’ in FEA are simply building blocks, maybe a tiny cube of aluminum, that are given properties like stiffness, coefficient of thermal expansion, thermal resistivity, electrical resistivity, flexural modulus, tensile strength, mass, etc. Then objects are constructed from these blocks and, under stimulus, they take on macro-scale behaviors as a function of their micro-scale properties. There are a couple of key ideas to keep in mind here, however. The first is that inanimate objects do not exercise free will. The second is that the equations used to derive effects are based on first principles, which is to say basic laws of physics, which are tested and well understood. A similar approach is used for computational fluid dynamics (CFD), which is used to model the atmosphere for weather prediction, the flow of water over a surface for dam design, or the flow of air over an aircraft model. The power of these models lies in the ability of the user to vary both the model and the input stimulus parameters and then observe the effects. That’s assuming you’ve built your model correctly. That’s the crux of it, isn’t it?

I was listening to a lecture on the work of a Swiss team of astrophysicists the other day called the Quantum Origins of Space and Time. They made an interesting prediction based on the modeling they’ve done of the structure of spacetime. In a result sure to disappoint science fiction fans everywhere, they predict that wormholes do not exist. The reason for the prediction is simply that when they allow them to exist at the quantum level, they cannot get a large scale universe to form over time. When they are disallowed, the same models create De Sitter universes like the one we have.

It occurred to me that it would be interesting to have the tools to run models with societies. Given the state of a society X, what is the economic effect of tax policy Y. More to the point, what is cumulative effect of birth rate A, distribution of education levels B, distribution of personal debt C, distribution of state tax rates D, federal debt D, total cost to small business types 1-100 in tax and regulations, etc.  This would allow us to test the effects of our current structure of tax, regulation, education and other policies. Setting up the model would be a gargantuan task. You would need to dedicate the resources of an institute level organization with expertise across a wide range of disciplines. Were we to succeed in building even a basic functioning model, its usefulness would be beyond estimation to the larger society.

It’s axiomatic that anything powerful can and will be weaponized. It is also completely predictable that the politically powerful would see this as a tool for achieving their agenda. Simply imagine the software and data sets under the control of a partisan governing body. How might they bias the data to skew the output to a desired state? How might they bias the underlying code? Might an enemy state hack the system with the goal to have you adopt damaging policies, doing the work of social destruction at no expense or risk to them?

Is this achievable? I think yes. All or most of the building blocks exist: computational tools, data, statistical mathematics and economic models. We are in the state we were in with regard to computers in the 1960s, before microprocessors. All the building blocks existed as separate entities, but they had not been integrated in a single working unit at the chip level. What’s needed is the vision, funding and expertise to put it all together. This might be a good project for DARPA.

The Administrative State to Citizens: You Have No Rights

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The Pacific Legal Foundation, who last year at the Supreme Court won the right of citizens to challenge EPA rulings, has now won the right of citizens to challenge the determinations of the US Army Corps of Engineers.

It is not enough that agencies pass rulings and regulations that amount to law without their ever going through Congress or being voted on. Increasingly, the Administrative State takes the approach that you will do whatever they say without recourse, under penalty of egregious fines or imprisonment. Your tax dollars at work.

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