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34632ce5ee0389a7486d14da4db8295e | https://www.forbes.com/sites/christinefletcher/2019/10/25/the-pros-and-cons-of-electronic-wills/?sh=10482daa5457 | The Pros And Cons Of Electronic Wills | The Pros And Cons Of Electronic Wills
E-wills are coming. The ability to create, sign and store a will online is becoming a reality in some states. The Uniform Law Commission recently passed the Uniform Electronic Wills Act. This Act will serve as a model for other states who want to adopt this type of legislation. Some states have already dipped their toes into the realm of electronic wills. Nevada and Indiana have laws allowing electronic wills, and Florida and Arizona are considering such legislation. Undoubtedly, other states will follow suit.
Is an electronic will right for you? Here’s what you need to know.
Clients often ask about signing wills electronically. When it comes time to execute the will, they often ask, “Can’t we do this online?” or “Will you take an e-signature?” I try not to take it personally. Millennials find the process of executing a will practically medieval. They question the need to meet with an attorney in person. Most of their other tasks can be accomplished online, so why not this one. While we are past the days of wax seals, having to get something notarized still throws many people into a panic.
An electronic will allow a person to create and execute a will without leaving the comfort of home, and without the need for paper. In general, the process works like this – the user creates a will online and forwards it to an online notary who then has a video chat with the user. The notary asks the user some questions, notarizes the documents and sends it back. The will can then be stored online without a hard copy changing hands. It’s easy, but many lawyers are skeptical.
Probate litigators see the potential for an uptick of business in the future as a result of electronic wills, which leave a tremendous amount of room for undue influence and shenanigans when a lawyer isn’t present. My colleague, partner and probate litigator Lisa Cukier, says, “E-wills are certain to cause and fuel litigation on issues such as the testator’s lack of mental capacity to sign a will and the exercise of undue influence, duress and coercion in the signing of a will.”
Despite concerns from lawyers, e-wills are poised to become a reality in many states. There will be a market for it just like other online legal services. For young people with few assets, creating an e-will may be better than no will at all. However, if you are older, have significant assets or are looking to disinherit folks, an electronic will is not for you.
Older clients are especially susceptible to abuse and undue influence. I remember a home health care aid who used an online service to print a will, which she had the elderly woman she was caring for sign. Coincidently, all the elderly woman’s assets were left to the home health care aid.
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If you have significant assets, you have more at stake. In general, the more assets you have, the more complicated your estate plan will be. It also means more people are likely to fight over your assets when you are gone. Plus, you want to make sure estate tax issues are taken care of. An online service is no replacement for proper legal and tax planning.
An e-will is also an open invitation for future litigation over your estate if you are looking to disinherit people. “These e-wills promise to make the orderly distribution of wealth an exercise in chaos,” adds Cukier. There is no replacement for an in-person meeting with an attorney and witnesses to sign a will.
With any online estate planning or financial tool such as e-wills or robo-advisors, if your situation is simple and you have minimum assets, the service may work for you. However, as things get more complicated and your wealth accumulates, you cannot replace face-to-face personalized service. The difficulty lies in being able to decipher the difference. Everyone thinks their situation is simple.
Most attorneys have war stories about the client who came in asking for a simple will and it turned out to be their most complicated situation ever. If you are not sure about the complexity of your situation, ask your other advisors such as your financial advisor and your accountant. If you do not have other advisors, you would be well advised to speak with one or more professionals to make sure you are on the right track.
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5ff222e0d46bc3bcfdf58972c9076f2c | https://www.forbes.com/sites/christinefletcher/2020/03/23/eight-estate-planning-strategies-in-a-covid-19-world/ | Eight Estate Planning Strategies In A COVID-19 World | Eight Estate Planning Strategies In A COVID-19 World
The reality of COVID-19 has forced many individuals to address the “what if” scenarios that were previously unthinkable, or at least the situations that no one ever wants to talk about or deal with.
Most of us have fortunately never dealt with anything like this – extended periods of isolation at home and long-term social distancing – in our lives. Many people are reaching out to execute estate plans they have put off finalizing and signing. Others are calling to start estate plans they should have started years ago. Attorneys are offering creative solutions to get estate planning documents signed and in place.
Here are eight things you should know.
· Most estate planning work can be done at home. You may not be able to physically meet with your attorney, but you can still create, update or finalize your estate plan. Most attorneys are working remotely and are available via email, telephone and video conferencing to advise you. Documents can be drafted and emailed to you for review, or delivered to you by mail or a tracked delivery service.
· Use the time to get your estate planning house in order. Chances are you now have the time to think through the issues you have placed on the back burner for so long. Take advantage of the time to address your estate planning while these issues are foremost in your mind.
· There are many options for signing document. Many attorneys are approaching will signings on a case by case basis. It may be appropriate to sign it in the attorney’s office or at your home while practicing social distancing, and wearing gloves and masks, if warranted (although I would not want to take these medical supplies away from health care professionals where they are greatly needed). Some law firm are even offering drive-up will signings.
· Meeting with your attorney is not always needed for document signing. In certain circumstances, people may be able to sign documents on their own. Your attorney can forward you instructions on how to have an out of office signing. You may need witnesses who can be friends or neighbors who are practicing social distancing while watching you sign the documents.
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· Online notarization is still in its infancy. While a few states allow for online notarization of certain types of documents, most do not, and only a handful of states allow for electronic wills. Nevada and Indiana, for instance, allow for electronic wills, while Florida’s electronic will statute becomes effective on July 1, 2020.
· Movement to push for online notarization during global health crisis could expand options. Some states may allow for temporary electronic notarization of documents during the pandemic. Massachusetts attorneys, for instance, are working on a petition to the governor requesting that attorneys who are notaries be allowed to notarize documents and conduct will signings online during this period. Your attorney will have the most up to date information for your state’s laws.
· Notarization of wills is not necessarily required. While many attorneys have wills notarized, your state’s statutes may not actually require notarization in order to have a valid will. In Massachusetts, for instance, if you are able to have two people witness your will, you do not need a notary for a valid will. You will, however, need to prove the will as valid afterward. This can be accomplished after the fact by having the parties later sign an affidavit in front of a notary when it is safe to do so.
· Trusts may have different notarization requirements. Although many attorneys include notarization as a form of best practice if you are signing a trust, there are some states where it is not required. For the time being, you may be able to simply sign the trust on your own and a notary can acknowledge the signature later when it is safe. Note, this is not an option if the trust involves real estate and needs to be recorded at the registry of deeds.
Speak with your attorney about how you should proceed with your estate planning in light of this new (and hopefully temporary) reality. At the very least, you can get all your documents finalized and ready to sign when it is safe to venture outside your home.
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be374ad194a230cfc5b0b2e22f9f815f | https://www.forbes.com/sites/christinehopkins1/2020/04/16/ncaaw-big-ten-bella-cravens-transfers-to-nebraska-offering-all-around-depth-down-low/ | Bella Cravens Transfers To Nebraska, Offering All-Around Depth Down Low | Bella Cravens Transfers To Nebraska, Offering All-Around Depth Down Low
Eastern Washington's Bella Cravens chases a loose ball past Portland State's Courtney West (10) ... [+] during an NCAA college basketball game fot the championship of the Big Sky women's tournament in Boise, Idaho, Friday, March 15, 2019. Portland State won 61-59. (AP Photo/Otto Kitsinger) ASSOCIATED PRESS
One of the Big Sky’s rising stars is on the move, as Nebraska women’s basketball announced Wednesday that center Bella Cravens would be transferring to the program.
Cravens, who just finished her sophomore season at Eastern Washington, started 43 of 60 games she appeared in, including 26 of 28 in 2019-20. She was recognized as All-Big Sky Honorable Mention last month.
“Bella is an excellent athlete who is motivated to become the best player she can,” Nebraska head coach Amy Williams said in a statement. “We have a strong need for the things she brings to the table, and we believe her best basketball is still in front of her. We can’t wait to pour into her as a Husker.”
At Eastern Washington, Cravens was best known as a defensive force. She led the conference in rebounds her sophomore season at 8.5 per game, while leading the Eagles in blocks at 1.7 per game. But she could also make her own offense, averaging 2.7 offensive boards to go with a team second-best 10.4 points.
After a 2018-19 campaign that saw Eastern Washington make the Big Sky Tournament final as the No. 6 seed, it faltered in 2019-20, finishing 4-26 overall and 3-17 in Big Sky play. Three Eagles entered the transfer portal last week, all underclassmen.
“You anticipate those big junior and senior years, and it’s disappointing we won’t get to see them here,” said Eastern Washington head coach Wendy Schuller.
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Cravens is in position to find herself in Nebraska’s starting lineup right away thanks to even more underclassmen movement on the Huskers’ side. Both starting forward Ashtyn Veerbeek and forward Kayla Mershon, the only non-regular starter to get a start in 2019-20, left the team after this season.
The most notable immediate plus for Cravens at Nebraska is the opportunity to learn under center Kate Cain, another prolific rebounder (7.2 per game in 2019-20) and blocker (3.4 per game) who’s entering her senior season. Cain made the Big Ten All-Defensive Team for her second time in 2020 and broke Nebraska’s all-time blocks record (280) and improved on her own school single-season blocks record (101).
The two centers have very similar games, presenting a potential dream tandem in the starting five (or a ready-made replacement for Cain). Aside from their twin rebounding and blocking talents, both averaged around 10 points per game last season, functioning not necessarily as the team’s primary scorer but as a reliable option in the post. And both played roughly 26 minutes per game, though Cravens’ minutes were more often limited by foul trouble — she fouled out four times in 2019-20, two of which came against Sacramento State and one of which was in a game she didn’t start.
Last season, Nebraska finished second in the Big Ten in both total rebounds and defensive rebounds, an area where Cravens is sure to make an impact. And, though the main source is obvious, the Huskers led the conference in blocks at 6.3 per game.
Nebraska may not be the most consistent team in the Big Ten — it followed up a third-place finish and NCAA Tournament appearance in 2017-18 with 14-16 (9-9) and 17-13 (7-11) records in the following seasons — but achieving consistency in what’s become a key position for them appears to be the goal as it prepares to bring Cravens into the fold for her final two seasons.
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e3b52595156d600c8bb7cf62e4f50a0f | https://www.forbes.com/sites/christinemcdaniel/2021/02/01/trumps-trade-failure-can-be-bidens-win-on-china-and-wto/?sh=3912afe84e4e | Trump’s Trade Failure Can Be Biden’s Win On China And WTO | Trump’s Trade Failure Can Be Biden’s Win On China And WTO
SHANGRAO, CHINA - DECEMBER 09: A worker arranges paper umbrellas at a factory in Qinghua town on ... [+] December 9, 2019 in Shangrao, Jiangxi Province of China. (Photo by Wang Guohong/VCG via Getty Images) VCG via Getty Images
By former President Trump’s own metric, his trade war with China failed. He was obsessed with the trade deficit, which only grew during his tenure—which is no surprise to anyone who follows the data. As the U.S. economy revs up, our trade deficit typically widens as a healthy demand for imports tends to outpace export growth. Let us hope Biden’s trade team outright rejects such foolish targets.
In fact, Biden’s trade team can do something far better: open up a much-needed conversation on subsidies—and, save the World Trade Organization while they are at it.
In what may turn out to be an unexpected bright spot, Trump’s trade representative, Robert Lighthizer, left his successor at the Office of the U.S. Trade Representative with an opening for a badly needed conversation about subsidies. When China joined the WTO in 2001, members did not change the provisions about subsidies. The Washington consensus was that bringing China into the global trading system would encourage a more market-oriented economy. And most people (except notably Robert Lighthizer) thought existing antidumping and countervailing duty rules and safeguards would be sufficient.
But beyond raising prices for importers, those trade regulations have done little to change China’s behavior. Under President Xi, state control over China’s economy increased, and the number of Chinese state-owned enterprises (SOEs)—one particularly egregious form of subsidization—is roughly the same as it was when China joined the WTO. Out of the 109 Chinese corporations listed on the Fortune Global 500, only 15 percent are privately owned.
SOEs tend to be bulky and poor performers, and they are a problem worldwide. A recent report by the European Bank for Reconstruction and Development documents the rise of state-owned banks (SOBs) in economies of the former Soviet Union. Not only are SOBs poor performers, but they are also dangerously political, which further inhibits resources from finding their best use.
State-owned enterprises can bleed into the global economy with large distortive effects. Caroline Freund and Dario Sidhu did a deep dive on industrial competition in this regard. They note that the four largest construction firms in the world are Chinese SOEs. Engineering and construction have large spillover effects to trade.
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China’s $1 trillion global infrastructure project, the Belt and Road Initiative, is in 34 countries. Think about it: If you are running a big construction project, you will need things like oil, steel, aluminum, civil engineering, real estate, telecommunications, and a range of professional services. Chinese SOEs tend to buy from other Chinese SOEs, leaving even less opportunity for private sector competitors.
Countries have made well-intentioned efforts to address these subsidies, but with little progress. Take steel. In 1978, the Organisation for Economic Cooperation and Development formed the OECD Steel Committee. This group has been meeting for over 40 years to discuss developments in the industry. Their usual topic for the past two decades has been excess capacity, or when supply outstrips demand, which is something that tends to happen with subsidies. It turns out it is hard to find a solution that creates the right incentives. Without new WTO rules, this is probably insoluble.
Subsidization and SOEs breed more subsidization. The market reaction to subsidies is to buy, buy, buy from the subsidizers. In absence of any reaction by governments, this would probably continue until the subsidizers got tired of wasting their money. But producers in importing countries don’t like competing with cheap imports, and when they are well-organized, they often win the sympathy of their governments. After all, it’s hard to argue with “we will compete with anyone, but we can’t outcompete the Chinese Communist Party.”
To reform, first you must measure. Thanks to Global Trade Alert (GTA), policymakers will soon have much better data and information on subsidies across countries and by sector. Global Trade Alert is a non-governmental organization that tracks trade restrictions better than anyone, and Director Simon Evenett recent told me that he and his team are working “full steam ahead” to deliver a major report on the issue, prior to the G20 Leaders’ Summit later this year.
China may be one of the worst offenders, but they are in good company. If we are going to talk about subsidies, then we all—Europe, United States, Japan, and others—need to look in the mirror and clean house. Industries around the globe, whether it is oil, gas, coal, rice, ethanol, agriculture, pulp and paper, and chemicals, among many others, are on the take.
Most governments have been propping up more firms than they usually would thanks to COVID. But once the pandemic subsides, WTO members should come to the table with an open mind and be willing to write a new subsidies chapter. We may not be able to save the WTO without it.
Trump-Lighthizer unilateralism was unsavory but did serve the unintended purpose of tearing the roof off the subsidy issue. For everyone. Biden’s trade team, with his pick of Katherine Tai for U.S. Trade Representative, will have a great opportunity to move this forward. Not all sectors will like it, but the U.S. economy, the world economy, and the world trading regime need it.
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7624d7756170b579f6154f8e617e49b5 | https://www.forbes.com/sites/christinemcdaniel/2021/04/07/twilight-of-the-tax-lawyers/?sh=1b1e073e4ab1 | Twilight Of The Tax Lawyers? | Twilight Of The Tax Lawyers?
A global minimum corporate income tax is neither the Götterdämmerung that business interests and free marketeers may fear, nor the Nirvana of overflowing government coffers imagined by its proponents.
WASHINGTON, DC - NOVEMBER 04: Federal Reserve Chair Janet Yellen testifies before the House Finance ... [+] Committee in the Rayburn House Office Building November 4, 2015 in Washington, DC. Because the Obama administration has yet to appoint a vice chairman for supervision at the Federal Reserve -- as madated by the Dodd-Frank Law -- Yellen is assuming the semi-annual duty for reporting to the committee on the Fed's "supervision and regulation of the financial system." (Photo by Chip Somodevilla/Getty Images) Getty Images
Newly endorsed by Treasury Secretary Janet Yellen, the idea is fascinating, no matter how one feels about it or its undertones of a new world order. Yellen announced that U.S. officials are working with G20 governments to agree to a global minimum corporate tax rate “that can stop the race to the bottom.” She believes it is needed to ensure “that governments have stable tax systems that raise sufficient revenue to invest in essential public goods and respond to crises, and that all citizens fairly share the burden of financing government."
There are arguments for and against it, and readers and commentators will hash those out in the days ahead. Regardless which side you come out on, honest tax policy discussions are extraordinarily complex.
I recently rewatched a cocktail conversation between Austin Goolsbee and the late Edward Lazear. When asked whether he thought a particular tax policy change was a good idea, Goolsbee answered, “Compared to what, and coupled with what?” That is a helpful approach in considering a global minimum corporate tax rate.
If you are starting from scratch, most economists agree that a low tax rate and broad base is the right play. Maybe even just a consumption tax, as Goolsbee said at the cocktail hour. Lazear did not disagree.
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But, of course, we are not starting from scratch. The U.S. tax code alone is more than 2,600 pages long. There are long and ongoing discussions about international tax issues among Organisation for Economic Co-operation and Development (OECD) nations which engage with one other on transfer pricing guidelines, transparency rules, and illicit financial flows, among other issues. Non-OECD members join these conversations as well. These are difficult and technical issues, and major tax policy changes are rare without agreement from multinational corporations, which are important drivers of global innovation and growth, and heavily vested in the outcomes.
Gallery: Top Ranked States By Outstanding Tax Refunds 11 images View gallery
Still, a global minimum corporate tax rate is a constraint on policymaking. It may not be applicable for some countries if their corporate tax rate is higher than the threshold. But even for them, to the extent they would ever want to lower it below that threshold, then it would become a constraint.
Complicating things further, it would be more of a soft constraint, like a gentlemen’s agreement – not a treaty, which is a formal, legally binding agreement. If countries were to change their minds, there is not much others can do.
The United States has pulled out of agreements before, and even treaties that were signed but not ratified. Domestic examples include treaties with Native American tribes of the 1700s and 1800s. International examples go back to at least 1919 with the Treaty of Versailles, and more recently the Kyoto Protocol and Paris Climate Accord (there is an entire list of international examples here).
There is a fairly wide span in the effective tax rates among OECD members, with some countries over 30 percent (France and Chile), and some countries under 15 percent (Lithuania, Ireland and Hungary). The statutory rates tend to be higher, which reflects tax breaks and loopholes.
If the response to a global minimum rate is only to ratchet up these tax breaks and loopholes as special interests look to get around higher rates, then the corporate income tax regime could become more corrupt and arbitrary without actually raising revenue and/or preventing tax havens. Indeed, absent addressing loopholes and shelters, then a global minimum corporate tax rate may be futile.
Might it be possible to achieve some global corporate income tax simplification in this process? Loopholes and tax shelters buried in nation’s tax codes are so grossly inefficient that such a constraint might be worth it. But the key will be in the administration and implementation. And that will take strong commitment across all legislative bodies and government agencies involved.
If Yellen can pull this off, it would be an amazing feat of multinational cooperation in an era that just last year appeared to be defined by new lows in international relations. There are signs that the conversation will move forward. Mathias Cormann, incoming secretary-general of the OECD, told the Financial Times he is confident that a deal can be reached on a minimum rate.
In his book, “Institutional Diversity and Political Economy,” Paul Dragos Aligica wrote of a new chapter in thinking and theorizing about collective action, governance, and institutional arrangements. He challenges social scientists, economists, and even lawyers to think beyond the norms. (A global minimum corporate tax may not be what he had in mind, even if it is voluntary and temporary, but the call to action is there.)
Aligica said the three key components in achieving better institutions and outcomes are communication, bargaining, and discovery. The oncoming global conversation we are about to have will be an experiment in that to be sure.
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4f61cc24b03cbf752c0402052c4ca5cc | https://www.forbes.com/sites/christinemoorman/2013/05/29/overcoming-the-marketing-sales-turf-war-six-strategies-to-integration/ | Overcoming The Marketing-Sales Turf War: Six Strategies To Integration | Overcoming The Marketing-Sales Turf War: Six Strategies To Integration
Marketing needs sales and sales needs marketing. Unfortunately, “need” does not equate to a “successful partnership” between the two groups. Conflict and distrust are more common. Such a dynamic can hurt the bottom line, especially in companies that use sales groups to interface with their customers. The CMO Survey® asked top marketers to describe how their companies structure the marketing-sales relationship. 7% stated that sales is within marketing (marketing has the power), 10.3% noted that marketing is within sales (sales has the power) and 72% indicated that marketing and sales work together on an equal basis. These data from the February 2013 issue of The CMO Survey have not changed much over the last five years. Bottom line: As equal partners, marketing and sales must find a way to work together.
It is easy to blame stereotypes of these two powerhouse functions as the reason for the well-documented sales-marketing turf war. Marketing is analytical and sales is interpersonal. Sales has a short-term focus and marketing has a long-term focus. Marketing is more strategic and sales is more tactical. Marketing is pull and sales is push. However, these stereotypes obscure the truth. In reality, the roles that sales and marketing play and their subsequent relationship depend on how the company chooses to manage and structure these two functions.
Here are six strategies that successful companies use to make the marketing-sales marriage work:
(1) Design marketing and sales responsibilities around the customer buying process: Marketing and sales should be organized around the steps that the customer goes through to become exposed to, build knowledge about, form purchase intentions for, and ultimately purchase the company’s products and/or services. These steps will vary for each company depending on the nature of the product/service, competition, and the industry. Outline these steps and then assign marketing and sales responsibilities at each stage. This way both functions work together to meet the customer needs during each stage and support the customer’s progress to the next.
(2) Create a unified focus on the most valuable customers: One reason marketing and sales do not lock arms in companies is because the company has not focused their joint attention on the most valuable customers. Sales people need to meet their quotas and if those quotas don’t include the company’s most valuable customer, sales will not be prospecting or acquiring the right customers. Marketing can help identify these customers, develop materials to do so, and service sales as it closes these deals. This priority can help facilitate cooperation and create a unifying objective for the two.
(3) Organize around the customer, not the function: Most executives likely agree that there is too much focus on turf and not enough on the customer. There are a number of ways that companies can organize around the customer. One is to create customer groups and not product groups. This puts marketing and sales together into groups to serve segments of customers. Marketing and sales can be split into upstream and downstream customer teams with attention to different aspects of the lead management process. The idea puts the function the employee represents into the background while bringing the activities and purpose of that function into the foreground. This aligns all efforts to better serve the customer and limits finger pointing, power games, and turf wars.
(4) Integrate customer information: When marketers and sales people know different things about the customer, strategy is weakened. Both functions have different customer experiences, so it is inevitable that they develop unique and varying insights. Ideally, these unique sources of insight would be shared across the two groups. However, because this rarely happens organically, effective companies actively manage the sharing of customer data. Salespeople, in particular, have an enormous amount of unfiltered customer exposure. Finding ways to systematically gather this information in a low-cost manner can offer important insights. Sharing databases and co-locating sales and marketing people are two other ways to facilitate this type of interaction.
(5) Require job rotations: Many of my students who enter marketing leadership programs spend 6 to 12 months in a sales role. I think this is a wise investment. If marketing is going to help sales, it is good to understand the salesperson’s experience, first hand. Although less common in most companies, asking salespeople to spend time in marketing could also facilitate cross-fertilization and integration.
(6) Establish individual and shared incentives: Binding marketing and sales together with shared incentives can help pull the organization in one direction. For example, rewarding both functions for converting leads aligns marketing’s efforts with sales’ goals and ensures that sales acts on marketing’s lead-creation activities. However, be careful to not tie all of marketing’s incentives to sales’ performance or vice versa, otherwise a loss of control can create its own stress.
Moving beyond entrenched stereotypes of marketing and sales can be difficult. However, among the companies that rely on a sales force to reach their customers, the strongest actively manage and structure their marketing and sales organizations with one or more of the above strategies. Doing so improves the company’s bottom line and promotes a healthier work culture for both strategic functions of the company.
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1e11538b072cb2847a729fcc64158bfc | https://www.forbes.com/sites/christinemoorman/2015/08/25/mobile-spending-to-increase-160-despite-performance-questions/ | Mobile Spending To Increase 160% Despite Performance Questions | Mobile Spending To Increase 160% Despite Performance Questions
Marketing leaders report their companies currently spend 6% of marketing budgets on mobile marketing and that this investment level is expected to increase to 15.6% over the next three years. The CMO Survey reports this increase in newly released results from 255 marketing leaders.
This whopping 160% increase reflects a growing reliance on mobile to interact with customers where they look for information and make purchases. On top of it, companies hope to reach customers closer to the time of purchase in order to make them aware of offerings, deals, and additional information that may help close more sales.
Despite these hopes, marketing leaders report only modest success in the impact of mobile marketing activities. When asked to rate the performance of their company’s mobile marketing activities on a scale from 1-7 where 1=poorly and 7=excellent, Figure 1 shows the current gap with only customer engagement breaching the halfway mark, while delivering your brand message, customer acquisition, customer retention, sales, and profits all falling below average.
Figure 1. How Mobile Marketing Performs (7-point scale where 1=poor, 7=excellent)
Examining different sectors, Table 1 shows that, on average, B2C companies outperform their B2B counterparts in getting returns from mobile. However, at the same time, no sector has any real advantages.
Table 1. Sector Performance on Mobile Marketing (7-point scale where 1=poor, 7=excellent)
The CMO Survey did not ask how marketing leaders plan to invest the huge increase in mobile spending over the next three years, but it is clear that allocating a large portion of it toward understanding and managing the impact of mobile is essential. As with other aspects of business, it is not the size of your budget that matters, but how you manage the investment to create and leverage critical customer, brand, and financial outcomes. Among the most important steps are fundamentals of marketing strategy, including selecting your target customer, developing and communicating a benefit that meets customers across all aspects of your marketing, including mobile, and then figuring how to reach and engage customers at the right time and in the most effective ways. Importantly, marketing leaders should not forget that poor mobile marketing can harm your brand and your relationships with customers.
For a complete set of results, visit cmosurvey.org
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deda2bc962f38e891b3e980e92b31904 | https://www.forbes.com/sites/christinemoorman/2017/02/28/cmo-survey-marketers-to-spend-on-analytics-use-remain-elusive/ | Marketers To Spend On Analytics, Use Remains Elusive | Marketers To Spend On Analytics, Use Remains Elusive
Spending on marketing analytics—quantitative data about customer behavior and marketplace activities—is expected to leap from 4.6% to almost 22% of marketing budgets in the next three years, representing a 376% increase. At the same time, marketers say barely a third of available data are used to drive decision making in their companies.
These are among the latest findings from The CMO Survey. Conducted biannually since August 2008, and sponsored by the American Marketing Association, Deloitte and Duke University’s Fuqua School of Business, The CMO Survey is the longest-running survey dedicated to understanding the field of marketing. The latest edition received responses from 388 top marketing executives.
When asked to rate the percent of projects in which available and/or requested marketing analytics are used before making a company decision, marketing leaders have consistently reported levels ranging from a high of 37% in 2012 to the current level of 31.6%. These levels are higher for business-to-consumer companies: 38.5% for business-to-consumer service companies, and 33.2% for business-to-consumer product companies.
Figure 1. Company Use of Marketing Analytics
Marketers cited a number of factors that prevent them from using analytics as shown in Figure 2. Almost one third reported that the biggest factor is the lack of processes or tools to measure success through analytics. This suggests that companies have not thought through how analytics will enter the decision making process or how analytics will help marketers understand the effectiveness of their actions. The second largest barrier is that firms lack people who can span the world of marketing analytics and marketing practice. This divide between rigor and relevance requires boundary spanners that are either analytical managers or analysts with managerial insight. Either way, there must be human capital that can connect the dots between marketing practice and analytics. A prior CMO Survey found that only 3.4% of senior marketers believe they have the right talent to play this role.
Figure 2. What Factors Prevent Your Company From Using More Marketing Analytics?
On the upside, data is, for the most part, arriving when needed and is not too complex. Likewise, insight and relevancy do not appear to be the primary drivers of low analytics use levels.
How are analytics driving marketing decision making when they are used? Data reported in last year’s February 2016 CMO Survey reports that the largest use lies in leveraging analytics to generate customer insight (46.4% of companies), followed by customer acquisition (43.6%), customer retention (38.1%), digital marketing (36.7%), segmentation (31.8%), marketing mix decisions (31.5%), and branding (30.8%). Areas that need attention include using analytics in managing pricing, channel partners, and the salesforce—all of which would boost business-to-business company use of analytics.
Concrete recommendations for improving the use of marketing analytics are outlined in a previous Forbes blog that I wrote with Fuqua School of Business students, Sylvia Yang and Shiwani Kumar. We interviewed executives from a range of companies and found ten steps that companies can take to improve their usage levels. One additional recommendation I offer here is that companies should evaluate whether their marketing analytics are of a sufficiently high quality level. In the most recent CMO Survey, only 35% of marketing leaders report they formally evaluate the quality of their marketing analytics. Regular review of the analytics used and not used may spur important conversations about the role that marketing analytics could play in driving firm decision making, which, in turn, should lead to stronger processes for doing so.
Click here to see if you qualify to participate in the next CMO Survey.
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8577b35aa94dac5aa37b039da1ed5571 | https://www.forbes.com/sites/christinemoorman/2019/02/27/cmo-survey-marketers-join-cfos-in-predicting-an-economic-downturn/ | CMO Survey: Marketers Join CFOs In Predicting An Economic Downturn | CMO Survey: Marketers Join CFOs In Predicting An Economic Downturn
*Lauren Kirby and Holly Larson contributed to this post.
The economy is now in its 10th year of recovery with years of eye-popping gains across startup valuations, corporate growth, consumer spending and stock market P/E spreads, to name a few. Are the best days behind us? 2018 certainly ended on a volatile note and market analysts generally portend a coming recession—they just do not know when. The latest CMO Survey digs deep into marketers’ psyches and plans to understand how they are preparing to navigate an uncertain economic environment in 2019.
Are gloomy days ahead? Let’s see what CMOs are thinking now.
CMO optimism flags as business uncertainty increases
Optimism among U.S. marketing leaders has fallen to the lowest level in seven years, according to the February 2019 CMO Survey. On a scale of 1 to 100, with 100 being the most optimistic, marketers say they are now on the fence about the U.S. economy. CMOs ranked their optimism on average at 57.0, a 21%% drop from the 68.9 score we reported one year ago.
Marketer optimism in the overall U.S. economy (0 = least optimistic, 100=most optimistic) The CMO Survey
The bad news continues. Whereas last year 11.8% were less optimistic than a year ago, now 56.2% feel less optimistic. On the other hand, just 20.1% of marketers say they were more optimistic at the end of 2018 heading into 2019, compared with 51.2% who felt the same at the end of 2017 heading into 2018.
Optimism has dropped across all economic sectors, with an incredible 80% of CMOs at B2C product companies feeling less optimistic. Marketers at B2C companies have presided over years of product innovation and have recently been driving up prices. They know that may soon change.
Marketer optimism about the overall U.S. economy compared to last quarter The CMO Survey
Marketers join CFOs in fearing economic downturn
Nearly half (48.6%) of U.S. CFOs believe that the nation's economy will be in recession by the end of 2019, and 82% believe that a recession will have begun by the end of 2020, according to the Duke University/CFO Global Business Outlook from December 2018. Consistent with predictions of recession, the Optimism Index for the U.S. Economy slipped from 70 to 66 this quarter. The survey’s CFO Optimism Index has historically been an accurate predictor of future hiring and overall GDP growth. Interestingly, marketers appear even more pessimistic than CFOs with a big drop in optimism from 68.9 in August to 57.0 in January.
Given that two key members of the C-suite are preparing for the worst, it makes sense for companies to evaluate their growth strategies and consider how they will be affected if market demand slips, customers’ priorities shift, and capital lending requirements and budgets tighten. As The CMO Survey demonstrates, marketers are already thinking along those lines.
Customers value price over quality in 2019
Marketers expect customer priorities to change. Marketers say they expect customers in 2019 to place a stronger emphasis on price (48% increase) and trusting relationships (44% increase). Value now trumps innovation, as pressures for superior product quality have dropped by 32%.
Marketing hiring flagging as recession looms
Perhaps it is no surprise that planned marketing hiring is also in jeopardy. Whereas 2018 was a banner year for hiring, rising 7.3% over 2017, marketers only expect to increase hiring by 5.1% this year.
Another interesting finding in The CMO Survey is that only one in three marketing leaders (37%) feel their role is very clear. We believe this is because marketers are navigating a complex marketplace and touching more areas of the business than ever before, including product and service innovation, the customer experience, sales, and digital transformation, among other priorities. It’s hard to have a defined role when business models and product portfolios are in constant flux.
Marketers look homeward to domestic markets to boost sales
While companies have been focused on international expansion to grow share in countries such as China and India, these efforts have cost billions of dollars and are not without risk. Witness Amazon’s and Walmart’s struggle to compete in India amidst shifting governmental priorities and decentralized supply chains. Domestic spending is up 10% since 2012 and will consume 87% of marketing budgets this year.
Therefore, it is not surprising that CMOs are playing it safer in 2019 by focusing more budget and effort on market penetration, a lower-risk growth strategy compared to diversification or product development. Marketers note that their companies are spending 55.1% on market penetration strategies in 2019—the highest percentage in two years.
CMOs say: It's time to do more with less in 2019
While no one can say when the next recession will hit, it seems that the C-Suite is increasingly united in the desire to prepare proactively for major marketplace changes. One point of difference may emerge in that CMOs report their top challenge lies in driving growth—a challenge that will be harder to meet if markets tighten. It will be essential for marketing leaders to get closer to their customers and to continue to build marketing capabilities—already a top marketing knowledge investment—and foster customer insight. Savvy CMOs can move ahead of shifting demand by proactively adapting marketing, sales, and product strategies ahead of changing markets.
As far as doing more with less, using existing staff to handle a growing workload is a common recession playbook. Fortunately, marketing organizations have digital platforms, deep customer analytics and cloud-based talent pools to help them accomplish their goals. It may require more effort, but it is doable.
Learn more about CMO expectations for 2019 and sign up to participate in the next survey.
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da0203942426f7015eb20de2fc1d9590 | https://www.forbes.com/sites/christinemoorman/2019/04/23/why-social-media-performance-lags-even-as-spending-soars/ | Why Social Media Performance Lags Even As Spending Soars | Why Social Media Performance Lags Even As Spending Soars
Marketers are smart, innovative people. They were early into digital technology and have used marketing automation solutions, CRM platforms and social media to deepen customer relationships and drive measurable business value. They also regularly defend planned budgets to the rest of the C-suite.
So what is behind the social media investment and performance disconnect we see in The CMO Survey?
On one hand, social media investment remains high. Although spending decreased incrementally from its all-time high of 13.8% of marketing budgets in August 2018 to 11.4% in the February 2019 survey, CMO commitment to the channel remains strong. Marketing leaders predict spending to increase 73% to reach 19.7% of their marketing budgets over the next five years, on average. (See chart below.)
On the other hand, social media is not delivering the goods. To date, CMOs acknowledge that social media’s contribution to enterprise performance has been relatively modest. They rate it at a steady 3.1 to 3.3 over the last seven surveys we have conducted since 2016, with 1 = not at all contributing and 7 = very highly contributing. Only large companies ($10B+ in revenues), B2C Product, and ecommerce firms that book more than 10% of sales over the internet have experienced higher returns.
Why Companies Are Doubling Down on Social Media Now?
Here are five reasons companies continue to invest so heavily in a channel that hasn’t yet delivered significant ROI.
#1 -- Social media is a tool companies can control.
Most large companies pay to advertise on Google, Facebook, Amazon, and other platforms. However, they don’t want to be beholden to those behemoths who control the terms of engagement. Google and Facebook alone will capture 60% of all digital advertising dollars in 2019 ($76.57B of $129.34B). Amazon is coming on strong with $11.33B in projected sales.
Marketers’ goal is always to capture leads and connect directly with prospects. Social media is a platform that companies both own and control that’s relatively low-cost to operate. Companies can continually test campaigns on their platform, get immediate results, and scale successful outcomes.
#2 – In contrast, digital advertising is costly and not always effective.
Everyone knows that digital advertising is extremely costly. Yet the jury is out on how effective it is. Procter and Gamble cut $200M from its digital advertising budget after finding that prospects watched ads in mobile newsfeeds for just 1.7 seconds – which Chief Brand Officer Mark Pritchard called “little more than a glance.”
Because consumers are exposed to 4,000 to 10,000 ads a day, it is unlikely that any individual exposure will realize returns. In addition, watching ads is inherently a passive activity, which is less memorable than activities that promote engagement, such as social media. Social media can also be used to reinforce ads and boost their performance.
#3 – Social media is made for mobile.
The future of consumer engagement is mobile, which is one reason why $1 of every $5 advertising dollars now targets smartphones. Social media, with its visual content and short text updates, is ideally suited for mobile engagement.
Consumers engage with social media in bite-sized chunks throughout the day, making it more likely that companies can connect with them. As they like posts and interact with them, they help marketers build customer profiles, which is also true with digital advertising. However, consumers can amplify marketers’ reach by sharing, commenting on, and recommending social posts, which they are less likely to do with digital advertisements.
#4 -- Social media is an extremely versatile business enabler.
CMOs view social media as more than a consumer engagement platform. They use the technology to research consumers by measuring online behavior, brand engagement, and social sentiment; connect with employees and improve workforce performance; and drive product and customer service improvements. As a two-way pipeline into consumers’ wants and needs, social media can provide powerful insights into what to change and when.
As the chart below indicates, CMOs view social media as a strategic tool and are increasing its usage across multiple dimensions.
Specific highlights include:
88.2% of companies use social media for brand awareness and brand building compared to 45.6% in 2018. 64.7% of companies use social media to introduce new product and services, up from 28.7% in 2018. 60.1% of companies use social media to acquire new customers, up from 32.6% in 2018. 55.5% of companies use social media to retain current customers, compared to 28.7% in 2018.
#5 -- Companies know they haven’t solved the attribution problem.
Despite these benefits, the impact of social media on firm performance is difficult to measure. While likes and impressions provide initial metrics on the success of their social media efforts, it can be difficult to deduce how social media contributes to winning new customers and expanding existing relationships. CMOs say they are struggling with this issue. The August 2018 CMO Survey found that 39.3% of companies report they are unable to show the impact of social media on performance, 24.7% can prove the impact quantitatively, and another 36% have a good qualitative sense of the impact, but not a quantitative impact.
The CMO Challenge: Solve social media attribution and integrate the channel more fully into digital marketing
What’s ahead for CMOs and social media? Their path forward is two-fold.
First, they need to solve the attribution problem with the right strategy, technology, and data integrations. First-touch and last-touch models are easy to set up but provide a limited lens into customer behavior that may not be helpful—or accurate. Multi-touch models, which analyze customer behavior across their entire journey, are much more complex and provide a better lens into what is working – and what isn’t. In addition, social, customer and marketing automation data needs to be tightly integrated to create a holistic picture of how customers are interacting with brands and content on- and offline.
Secondly, CMOs need integrate the social channel more closely with their marketing strategies.
In the most recent CMO Survey, marketers gave themselves a 4.2 rating on a 7-point scale where 1=not at all effective and 7=very effective at linking social media to the firm’s marketing strategy, which has been remarkably consistent over the past eight years. Similarly, CMOs report an even lower score of 3.5 when asked how well their companies integrate customer information across purchasing, communication, and social media channels in the August 2018 CMO Survey.
As CMOs plan marketing growth and activities for 2019 and beyond, they may be wise to prioritize social media integration. Most CMOs are concerned about the prospect of an economic downturn this year or next and are refocusing efforts on growing share in domestic markets, which is a defensive strategy. If a downturn does hit, CMOs will need to account for every dollar of marketing spend, and the best way to do so is by demonstrating its ROI.
Want help? Here are 12 tips for integrating social media into your marketing strategy. Let’s add a 13th taken from our most recent survey. A large percentage of a company’s social media activities are performed by outside agencies—23% in our latest survey, the highest rating in five years. Thus, it’s key to align agency incentives around social media performance to ensure that they win financially by driving the right kind of consumer engagement and contributing to revenue wins – not just driving content volumes.
Get the latest CMO Survey.
The CMO Survey has been conducted biannually since August 2008, and is sponsored by the American Marketing Association, Deloitte and Duke University’s Fuqua School of Business. It is the longest-running survey dedicated to understanding the field of marketing. The latest edition, conducted from January 8-29, received responses from 323 top marketing executives.
Learn more about CMO expectations for 2019 and sign up to participate in the next survey.
*Torren McCarthy, MBA Student at the Fuqua School of Business, and Holly Larson, B2B and technology writer, contributed to this post.
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c210137ce49688e2392d2a61f5ca69e4 | https://www.forbes.com/sites/christinenegroni/2016/07/22/officials-prepare-to-exit-mh370-search-but-citizen-investigators-press-on/ | As Officials Prepare To End MH370 Search, Citizen Investigators Are Pressing On | As Officials Prepare To End MH370 Search, Citizen Investigators Are Pressing On
Australians scan the ocean for wreckage of Malaysia 370. (Photo courtesy of Royal Australian Air... [+] Force 1st Joint Public Affairs)
Early on in the search for Malaysia Airlines Flight 370, DigitalGlobe Inc., a Colorado-based satellite company, put out a call for the world to help look for the plane by scanning satellite images of the Gulf of Thailand and the South China Sea. The effort didn’t pay off but DigitalGlobe’s tapping into the brain power of the masses was just the beginning of the most high-profile crowd-sourced investigation yet.
It continues today with the blockbuster claim from citizen investigator Jeff Wise that Capt. Zaharie Ahmad Shah's flight simulator contained a flight nearly duplicating the route the plane is believed to have taken into the South Indian Ocean.
In a story published Friday afternoon by New York Magazine, Wise claims to have obtained a document from the Malaysian Federal Police that reads:
Based on the Forensics Analysis conducted on the 5 HDDs obtained from the Flight Simulator from MH370 Pilot’s house, we found a flight path, that lead to the Southern Indian Ocean, among the numerous other flight paths charted on the Flight Simulator, that could be of interest, as contained in Table 2."
This is not Wise's first contribution to the mystery. Earlier he wrote a cover story for New York Magazine suggesting the airliner was digitally hijacked and flown to Kazakhstan. The recovery of wreckage in Reunion forced him to abandon his earlier theory. Whether he will publish the documents on which he bases this riveting new claim remains to be seen.
Australian investigators examine recovered debris from MH-370. (Courtesy of ATSB)
About that wreckage -- it was private citizens just like Wise who recovered it in Reunion, the Philippines, Indonesia and America. They turned up what officials have been unable to find; parts of the missing airplane.
Among them is Blaine Gibson, a lawyer from Seattle on a self-funded trip to the likely landing spots of floating airplane debris. He has so far turned over three pieces of MH370 wreckage to the Australians.
Wreckage discovered by Blaine Gibson (Photo: Blaine Gibson)
So I have to wonder why the Malaysians and Australians have been so reticent to turn to crowd sourcing during their $130 million underwater search for the plane? Is it possible that both nations were worried asking the public for help would leave them open to ridicule?
Malaysia ought to be inured to that threat. Weeks of global scrutiny after the plane disappeared on its flight to Beijing showed the nation’s aviation and defense minister was not at the top of his game.
But Australia’s failure to open the process to outsiders seemed more baffling at first glance. What most journalists outside of Australia did not know was that prior to its involvement in the search for MH370, the Australian Transport Safety Bureau was embroiled in a controversy that called its own competence into question.
The investigation into the ditching of a Pel-Air jet triggered years of scrutiny of the ATSB.... [+] (Courtesy of ATSB)
A multi-year examination of an overwater aviation accident (read more about it here) involving a Pel-Air medical transport plane was so mishandled it was the subject of a national television investigation, a Senate hearing and an unflattering review of its practices by the otherwise non-confrontational Canadians.
Insiders in Australia snickered at the amount of confidence the rest of the world had vested in the ATSB.
Mariners in the extremely small community of underwater search and retrieval were enraged at the Australians' selection of Fugro , a Dutch underwater engineering firm with little experience looking for airplanes in deep water.
Armchair investigators who had been gathering threads of data to weave an understanding of what was going on, were frustrated that nothing seemed to make sense.
The Aussie tin kickers may have believed being given the sea search for MH370 was an opportunity to redeem their beleaguered reputation. Now that it is poised to wrap up the effort it appears both nations squandered opportunities for outside help.
“If you were genuine and wanting to explore every opportunity to make this a success you would cast your net wide,” said Rob McCallum of Williamson and Associates, an underwater firm that was an unsuccessful bidder for MH370 search work. The Australians not only did not cast a wide net, raw data from the search Fugro was conducting was kept locked up in the proverbial wheelhouse.
“This is not commercially sensitive information. Everybody on the planet wants this airplane found. I have never seen such an outpouring of good will wanting this plane to be found,” McCallum told me.
Man in front of memorial for passengers of MH370 (Photo: Christine Negroni)
In making the announcement that the search will probably end without finding the airliner, Malaysia’s current transportation minister Minister Datuk Seri Liow Tiong La acknowledged that for the families this news would be hard to hear. One cannot argue with that.
Making the recovery of the airliner about alleviating family grief however, diminishes the real reason for the search. It is not to provide closure that the world community wants this airplane found, though that would be a compassionate benefit. The world needs to know what went wrong so that the problems identified can be addressed. No one, including the families of the 239 people who died on MH370, want to see something similar in the future.
Before retiring from the ATSB in June, Martin Dolan seemed to be preparing the world for the worst. In an interview with the Guardian, he said, “We have to contemplate now the possibility that we will not find the aircraft.”
The officials may not, but that won’t keep others from carrying on.
Snow bears the imprint of Eastern Flight 980's flight into Mt. Illimani. (Photo courtesy of Rus... [+] Stiles)
Even as he was speaking those words, two Boston-area men looking for adventure, packed their parkas and headed to Bolivia, in search of an Eastern Airlines 727 that plowed into a snow-covered mountain in 1985.
The official investigators said the plane would never be found, but there were Dan Futrell and Isaac Stoner and posing for pictures with wreckage and claiming to have recovered the black boxes. (Read more here.)
After DigitalGlobe rallied the world to search the seas for Malaysia 370 from the comfort of their desks, Janice Partyka, a marketing strategist, wrote on the company’s blog that given what was later learned about the plane continuing to fly, it was nearly impossible for the crowd search to have been successful but it didn’t diminish the role of citizen scientists.
Recent history has repeatedly proven her right. Are the official investigators listening?
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ae43eece172ce5ec3ec3150ad07c48d5 | https://www.forbes.com/sites/christinenegroni/2017/09/18/boeing-747-return-will-buck-up-maybe-even-cheer-up-irma-damaged-st-maarten/ | Boeing 747 Return Will Buck Up (Maybe Even Cheer Up) Irma-Damaged St. Maarten | Boeing 747 Return Will Buck Up (Maybe Even Cheer Up) Irma-Damaged St. Maarten
KLM's iconic 747 returns to St. Maarten bringing needed aid in and transportation out. Christine Garner
The popular tourist island of St. Maarten cannot expect commercial flights to begin for at least the next two weeks and maybe as long as six, some travelers are being told. Airlines that usually provide service into the island include American Airlines, JetBlue, Delta, Air France, WestJet and KLM.
Still there is a lot of work to do at Princess Juliana International Airport. When the curfew was lifted in St. Maarten on Sunday, local photographer and plane spotter Chris Garner, set out to photograph the damage. She was startled to see a KLM Boeing 747 flying low over the island's famous Maho Beach.
The big blue jumbo jet has been flying into the resort community for so long it is practically a symbol of St. Maarten and many locals and tourists were dismayed when the Dutch carrier replaced the 747 with a smaller jetliner last fall. So Garner was heartened by the sight.
Getting a shot of the Queen of the Sky back over the island, "made my day and made it all worth while to be living here," she said in an email during a brief window when she could upload messages and photos she'd captured.
The Sonesta Maho Beach Resort by the airport was badly damaged. Christine Garner
During her travels around the airport, Garner saw devastating damage at the nearby Sonesta Maho Beach Resort and the casino across the street. She snapped photos of palm trees snapped in two and piles of debris, already swept into heaps ready to be hauled away.
The airport fence was blown down. Garner noted pieces being put back in place. "Most of the damage is with the roof of the airport," she said. After noting that Irma turned the area into a war zone and that media stories of bad behavior were overstated, Garner said, "The people here are extremely positive and we will rebuild and make St. Maarten better than ever."
"The strides they have made is absolutely amazing," she added.
KLM's 747 is a welcome sight arriving with supplies on Sunday. Christine Garner
KLM's 747 was loaded with relief supplies when it arrived Sunday and when it departed for Aruba, it carried visitors and others stranded by the storm. The airplane had seats for 268.
"The islands of the Caribbean are very special to KLM. They hold a place close to our hearts," said, airline president Pieter Elbers in a statement posted on the airline website. "Our crews are always welcomed with great hospitality. Our thoughts therefore go out to the people of St Maarten and we will do our utmost to help where we can."
The airport sign says it all Christine Garner
Like other airlines that fly into this aviation mecca, KLM is still unsure when regular flights will resume. Right now, the airport is beat up on the outside and looks like the United Nations on the inside with "help arriving from everywhere", Garner said. No matter what aircraft brought this help to the battered island, that's got to be a welcome sight.
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de6384a4174a78dc74a69d76b6e8d1e3 | https://www.forbes.com/sites/christinenegroni/2017/09/29/girls-in-aviation-day-shows-battle-of-the-sexes-still-played-on-many-courts/ | Girls In Aviation Day Shows Battle Of The Sexes Still Played On Many Courts | Girls In Aviation Day Shows Battle Of The Sexes Still Played On Many Courts
Girls in Aviation Day may have passed last Saturday with many people unaware of the annual event devoted to building excitement about aviation. But I was reminded of the importance of days like this while watching the new movie "Battle of the Sexes." The film documents the contribution of seventies tennis sensation, Billie Jean King in improving opportunities for women.
Emma Stone and Billie Jean King in publicity photo for the film 'Battle of the Sexes' Photo by... [+] Steven Ryan/Getty Images
While it is difficult in 2017 to remember the day when a man would proudly suggest that "a woman's place is in the kitchen," the fact remains that the participation of girls in some fields, and specifically aviation, is disproportionately low.
My friend Chrissi Culver, an air traffic controller was one of many who worked hard to put on the event in Dallas to show girls the opportunities in the skies and on the ground when the Women in Aviation North Texas Chapter hosted more than a thousand girls on September 23.
A participant in Girls in Aviation Day in Dallas Photo courtesy Chrissi Culver
These events sponsored by Frontiers of Flight Museum, American Airlines and Embry Riddle Aeronautical University and others, stand in stark contrast to companies like Breitling which seems stuck in a Bobby Riggs time warp.
I watched "Battle of the Sexes" in a movie theater in Australia sitting next to 16-year old Eve Cogan. I met her when she was just 11 and already having an impact on aviation.
After writing a report about David Warren who invented the black box so essential to investigating air disasters, Eve decided the Australian's contributions should be acknowledged by naming the Canberra Airport after him. The way was hard. The idea was not embraced by the airport officials in the capital city. Nevertheless, Eve persisted.
In early 2014, falling somewhat short of goal, Australia’s Defense Science and Technology building next to the airport was renamed David Warren Building.
Eve Cogan with descendants of David Warren at the renaming ceremony in Canberra Photo courtesy Eve Cogan
Billie Jean King and the other women players in the seventies didn't achieve what they wanted, they way they expected, and neither will Chrissi and Eve. Change does not often happen in a linear fashion, but with volleys left and right, long and short. Way post to way post might be the way an air traffic controller like Chrissi would see it. Because of these women and others, however, I am confident that one day, an industry comprised of equal numbers of men and woman will look back and wonder why we ever needed a Girls in Aviation day.
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2bef69e1000361c8137563a2dd54a585 | https://www.forbes.com/sites/christinero/2021/04/12/some-of-the-favorite-greenwashing-tactics-of-clothing-companies/ | Some Of The Favorite Greenwashing Tactics Of Clothing Companies | Some Of The Favorite Greenwashing Tactics Of Clothing Companies
Extinction Rebellion members in Amsterdam, protesting the climate impacts of the fashion industry. ... [+] (Photo by Ana Fernandez) SOPA Images/LightRocket via Getty Images
The fashion industry has proven to be adept at spin. It has an enormous environmental footprint, using up more energy than aviation and shipping combined. Thankfully, the public isn’t always gullible. One survey of EU citizens found that 81% don’t trust clothing products’ claims to be environmentally friendly.
But the abundance of information from all sides makes it hard to sort through the exaggerations and the understatements. Here are a few of the ways that clothing companies attempt to portray themselves as more sustainable than they really are, according to the recent “Fossil Fashion” report of the Changing Markets Foundation.
Claim that synthetic fibers are more sustainable than cotton.
Cotton has problems with land, water, and chemical use. But it’s simply untrue that human-made textiles are less environmentally damaging than cotton, as certain fashion brands claim. Fashion’s huge appetite for plastic-based textiles has made this sector the third-biggest consumer of plastic (which of course derives from the fossil fuels industry). A shirt made of polyester has over 2.5 times the carbon footprint of a shirt made of cotton. Synthetic fibers already make up the majority of all fibers used in clothing, and this share is set to grow in the future. Fashion companies like polyester and other synthetic textiles because they’re (unsustainably) cheap and popular; to claim that they’re also green is misleading.
But also: Over-rely on words like “natural” and “organic.”
First of all, there’s no clear, uniform, regulated use of “natural,” “green,” and other terms, so just about anybody can stick them on a package or in an ad. And it’s not always the case that “natural,” however it’s defined, is safe or resource-efficient. Words like these create a green halo that may have little to do with companies’ actual sustainability practices.
Emphasize recyclability, when this only applies to a tiny proportion of their products.
The proliferation of synthetic textiles, including mixtures of natural and synthetic textiles, is creating a recycling nightmare. Natural fibers can’t easily be separated out for eventual reuse or recycling, while polyester clothes are likely to rot in landfills for hundreds of years. So not even 1% of clothes are recycled into new clothes. Brands like Superdry proudly point to the recyclability of their packaging, but that pales in comparison to the carbon footprint of their main product. And when synthetic clothing is made of recycled materials, it generally comes from plastic bottles, which could more efficiently be recycled into other plastic bottles.
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Tout certifications and sustainability programs; these don’t always amount to much.
Voluntary commitments abound in the fashion sector, including the Better Cotton Initiative, Global Organic Textile Standard, and New Plastics Economy Global Commitment. Some are better than others. Various programs may lack transparency, have limited ambitions, or use confusing measurements that give the appearance of greater progress than what has actually been achieved. This doesn’t mean that sustainability labels are useless; they can be a helpful guide to consumers who don’t feel up for wading through reams of research every time they need to buy a jacket. But these certification schemes certainly aren’t a silver bullet, and don’t let clothing companies entirely off the hook.
Address microfiber pollution…but only at the washing stage.
Patagonia has been doing more on the environmental front than many other companies, but relying on washing bags to limit the release of microfibers in washing machines – as Patagonia does with its Guppy Friend bag – doesn’t get to the heart of the microfiber pollution problem. Tiny bits of plastic from clothing make their way into water bodies not only when the clothes are washed, but also simply when they’re worn or disposed of. And because they’re microscopic, water treatment plants can’t always filter these out.
Microfibers collected in different washing machine cycles. (Photo by Owen Humphreys) PA Images via Getty Images
This litany of environmental excuses popular with the fashion industry might have you wanting to curl up in defeat. But just because fashion houses can’t always be trusted, doesn’t mean that there’s nothing for individuals and organizations to do. Ultimately, consumers can buy less, buy better, pay more, wash less, and research more.
At a larger level, it’s up to regulators to prevent companies from doing what companies so often do: inflate their images. The “Fossil Fashion” report urges the European Commission, for instance, to “prevent companies from making unsubstantiated green claims, particularly related to their use of recycled polyester from plastic bottles and the share of recycled polyester in their products,” and to put in place rules that “address the proliferation of certification and labelling schemes in the sector. To prevent overstated claims of sustainability by fashion brands, only the most ambitious, robust and full life-cycle schemes should be allowed.”
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a3edc9c0ac848809106a351d3c6c5df1 | https://www.forbes.com/sites/christopherbarger/2011/12/20/the-top-ten-social-media-lessons-of-2011-part-i/ | The Top Ten Social Media Lessons of 2011: Part I | The Top Ten Social Media Lessons of 2011: Part I
As the holiday season prepares to give way to the New Year’s Eve and the end of 2011, the annual influx of year-end lists is about to begin in earnest. Top photos, top news stories, top Kardashian marriages… the lists are on their way. Lest anyone say that social media is any different, here for your consideration, in no particular order, are my Top Social Media Lessons of 2011 – part one today, and part two tomorrow.
Lesson #1: There is a significant amount of social network fatigue.
Google+. Quora. Empire Avenue. Chime.in. Unthink. It seemed in 2011 like there was a new or “hot” social network every month – and watching the social media in-crowd rush to adopt was a sometimes comical diversion. There was certainly an element of “shiny object syndrome” at play in the social media world.
But a funny thing happened on the way to the Internet forum: people stopped rushing to the new toys just because they were new and shiny. Despite significant hype, most of the new social media tools and platforms limped along in 2011. That’s not necessarily because of any weaknesses inherent in these platforms or tools. We may have reached a saturation point with social networking, where people are spending about as much time online as they want to or can, and the pressure of needing to maintain a presence on yet another social platform is feeling more burdensome than exciting.
Newer social platforms can and will thrive in this environment – but they have to offer users a unique feature or function that they can’t get on any other network. (See the item below on Google+.) Just building it doesn’t mean that they’ll come -- because there are only so many hours in a day, and so many places people can maintain a presence online.
Lesson #2: Google+ isn’t “there” yet. But it could be.
After a flurry of attention following its beta launch in June and rapid acquisition of 25 million users, Google+ seemed poised to threaten Facebook and become the new “next big thing.” Many pundits and social media leaders left other networks altogether, trumpeting the superiority of Google’s new network. A few months later, growth has slowed (estimates currently range between 40 and 50 million users), and more cynical observers have proclaimed the network anything from a disappointment to an outright failure.
The truth is somewhere in between. It’s true that Google+ hasn’t lived up to much that initial promise, that too much of the conversation there still focuses on the network itself or the self-perceived importance of many of its users, and that both Google+’s slowing growth and the rapid response of Facebook has contributed to a sense of lost momentum for the fledgling network. Google hasn’t done anything in the past to engender much confidence in its ability to execute social media well (Buzz or Wave, anyone?). Most importantly, perhaps, Google+ just hasn’t seemed to offer a unique enough offering set to cut through social network fatigue and give users enough reasons to join yet another network.
But Google has a not-so-secret weapon that Facebook seems unlikely to be able to match even if it were suddenly willing: search. Integration of Google+ with its search engine, allowing posts to permeate query results, gives both individuals and brands incentive to put more content on Google+ than in Facebook’s walled garden. This integration’s begun already. When fully executed, it may well be Google+’s silver bullet, either helping that network convince more brands and users to choose it over Facebook, or forcing Facebook to adjust by opening more fully to outside search – a major departure from their model of trying to drive as much of the social media experience within its own walls.
The lesson for marketers: don’t listen to the naysayers and those who’ve proclaimed G+ a flop just yet. If Google actually gets search integration right, you’re going to want to be there.
Lesson #3: Facebook, for all its challenges, remains impressively nimble in the face of challenges to its hegemony.
Facebook has become, for many, the social network they love to hate. Privacy violations, dead-of-night terms of service changes, endless seemingly unnecessary layout and UI changes… they’ve led to almost a cottage industry of hating on Facebook. (I confess; privately, I’ve often been one of those grousing loudly about Facebook at times.) With Google+ launching with much fanfare this past summer, one might have read the tea leaves to think that Facebook might be facing a real challenge this year.
But for whatever the company’s faults, let it never be said that Facebook doesn’t nimbly and adroitly respond to market challenges to its position as the predominant social network. A couple of years ago, they introduced NewsFeed partly in response to Twitter’s emergence. In 2011, Facebook rolled out inline profile controls, introduced subscriptions to allow users to follow the updates of those they weren’t connected to as “friends,” and other changes reminiscent of Google+ that seemed to eliminate much the uniqueness or newness of the Plus’s offerings. Quick-response feature shifts like this reduced the threat posed by Google+ and lessened the incentive of casual users to leave Facebook for the newer platform.
It’s become sport in some circles to predict Facebook’s demise over sins both real and imagined. What we saw in 2011 is that the company is too attuned to their market, and too insightful about which complaints are merely annoyances and which are legitimate threats, to fall by the wayside as competitors arise.
Lesson #4: There is still a broad overemphasis on numbers.
There’s nothing like an easily identifiable and understandable success metric to make marketers and business leaders who don’t know (or often even want to know) any better happy. On the surface, number of fans or followers appears to show success and reach in social media – and many marketers, including some in this publication, seem to equate the size of one’s following with the reach of one’s influence.
But it’s just not that simple.
Reach is important; you have a better chance of getting your message out if you have 100,000 followers than 100, obviously. But by Twitter’s own admission, up to 50% of Twitter accounts are inactive. The numbers on Facebook aren’t much better; according to a survey by ExactTarget, 81% of consumers have either “unliked” a brand page or hidden a brand’s content from their news feed. With numbers like that, it becomes very difficult to associate number of followers or fans with true influence. How many of a hypothetical social media influencer or brand’s 100,000 Twitter followers are even actively using Twitter, much less paying attention specifically to that user? If looking purely at numbers of people who’ve “liked” a page, how can a brand know how many people are truly seeing or engaging with its content? (Yes, Facebook Insights reveals numbers of monthly active users, but those numbers aren’t as impressive as pure fan numbers and thus aren’t raised nearly as often.)
Among the more likely indicators of social media success and influence than just numbers would include: percentage of engaged fans/monthly actives, visits to a company’s web or e-commerce site, revenue generated, message penetration within social networks, brand awareness and perception among social network users, or almost anything that demonstrates actual engagement or business results rather than a somewhat unreliable count of people who took a one-time action.
Despite this, the bane of many a PR or marketing professional’s existence will be the client who issues mandates like “get me a million Facebook fans” without knowing what they want to do with those fans once acquired.
Lesson #5: While Americans make lots of noise about privacy, when all is said and done “privacy” doesn’t really factor into social media. Except for when our kids are involved.
We do a lot of talking about privacy and how important it is to us. There have even been academic studies by Ivy League institutions on the fundamental flaws in online social network privacy practices. Facebook is the poster child for privacy concerns online, with years of negative history involving consumer complaints and even investigations by various governments. But Twitter and even Google+ -- which promoted itself partly as a more privacy-friendly alternative to Facebook – have not been immune to privacy complaints. For all the howling about privacy settings being obscure, about information being sold or provided to marketers and businesses, and about how easy it is to have your information accessed or even shared by others, you could be forgiven for thinking that the social networking train might be about to derail.
Yet Facebook continues to accumulate users, with more than 800 million worldwide. Twitter claims more than 100 million active users. Google+ acquired somewhere in the neighborhood of 50 million users in only six months. Whenever Facebook’s latest privacy hiccup is revealed, there is lots of indignance and talk of boycotts or leaving Facebook, but by and large it doesn’t happen. All the privacy talk would appear to be just that; people may not be comfortable with how the major social networks protect their privacy, those concerns do not deter us from being active in those networks.
Except when our children are involved. Then all bets are off. Case in point: Klout.
Klout entered 2011 as a darling of the social media influencer set, and carried a great deal of momentum through much of the year. Klout scores became the new black, spawning a veritable cottage industry of posts and counsel on how one could increase one’s score. But then two things happened: first, Klout changed its algorithm, resulting in fluctuations and drops in scores that upset many users. But equally importantly, Klout found itself accused of automatically creating profiles for users whether they’d signed up for the service or not – including minor children whose only exposure to the tool was having commented on their parents’ pages. Suddenly, the privacy violations were New York Times material, and Klout’s momentum has stalled and sputtered like a Kardashian marriage.
The lesson: for God’s sake, keep away from people’s kids on social networks. Not just “don’t proactively market to them,” but make a concerted effort to avoid them. There will be plenty of time to market to them after they’ve turned 18.
Tomorrow: five more social media lessons from 2011.
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6a347e7a0556d61b21b1f5173c9e13c6 | https://www.forbes.com/sites/christopherbrookins/2020/07/20/bitcoin-interest-wanes-as-a-violent-breakout-looms/?sh=24acf6b6173c | Bitcoin Interest Wanes As A Violent Breakout Looms | Bitcoin Interest Wanes As A Violent Breakout Looms
Volatility Ahead Caution Sign - Blue Sky Background Getty
Since the halving, bitcoin’s price has traded mostly between $9,000 and $10,000, compared to the red hot DeFi and “alt” coins that regularly post triple digit returns. In recent weeks, bitcoin’s range has tightened with many analysts noting a potentially violent price breakout on the horizon. However, there is no consensus on which direction the breakout will assume.
Charles Edwards, Founder of Capriole Investments, suggests bitcoin’s fundamentals have never looked better. “I have a very bullish outlook in the mid to long term. For example, energy value is at all time highs, suggesting BTC is more valuable than ever before. When this is increasing, it is historically very bullish.” This longer term indicator may suggest that a breakout leans towards the bulls.
Interestingly, bitcoin’s tightening volatility is not a new phenomenon, and occurred from late-September to early-November 2018, which ultimately broke out to the downside, falling from $6,500 to $3,400. One quantitative risk indicator value has been dropping quickly coupled with compressing price volatility. The only other time this dynamic unfolded was November 2018, which could suggest that a stark price fall is on the horizon. The caveat is that this signal has only occurred once before, thus suffers from a small sample size.
https://weeklyjab.substack.com/p/weekly-jab-bitcoin-analysis-3
Additionally, the anonymous Founder of Decentrader, Filb, notes “derivatives open interest (OI) increasing as we have consolidated through this period by about 45%, is a similar amount seen before the fall in Q3 last year, to around 8k. It appears OI has been net increasing on dumps. This implies that...the market needs a catalyst to clear this OI out.”
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Tradingview.com, Decentrader.com
Furthermore, Filb adds, “alts have continued their downward trajectory over the past few days, which are probably quite important as to what happens next; particularly if they start dumping and the money flowing back into bitcoin isn’t doing anything. Something to pay attention to for sure.”
Lastly, Bo Collins, CEO of San Juan Mercantile Bank and Trust, notes bitcoin CME futures volume growth from 2019 to 2020 is only approximately +10%, at the time of writing. This number becomes weaker when considering yearly foreign exchange (FX) futures volume growth can regularly eclipse +30%, e.g. 2018. Tepid bitcoin futures growth calls into question the institutional adoption narrative in some respects, and may imply less buying demand than originally suspected.
However, as shown by Glassnode.io, the amount of bitcoin held on centralized exchanges has dropped considerably since March, which seems bullish for bitcoin as spot investors appear to be holding for the long-term rather than short-term trading.
https://glassnode.com/
Furthermore, per Blockchair.com, bitcoin days destroyed supports the aforementioned notion, with 2020 metrics well within the historical average, including far smaller spikes than previous all-time highs, thus bullish.
https://blockchair.com/bitcoin/charts/coindays-destroyed?interval=full
Despite the differing analyses, the only thing that is certain, is that a strong breakout for bitcoin looms. Only time will tell which faction of analysts are proven correct.
Disclosure: The author owns bitcoin and ethereum.
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4d4548837d743b640b631d4c482c1503 | https://www.forbes.com/sites/christopherbrookins/2020/10/28/equity-and-bitcoin-markets-dive-as-covid-19-cases-scare/?sh=26eaaae58486 | Equity And Bitcoin Markets Dive As Covid-19 Cases Scare | Equity And Bitcoin Markets Dive As Covid-19 Cases Scare
Macro uncertainty weighs on bitcoin. getty
Wednesday, equity markets fell ~3% across the board as Covid-19 cases and hospitalizations continued to surge in both the US and Europe, potentially damaging the global economic recovery.
Per CNBC’s Jim Cramer, “I think there’s going to be a call for lockdowns the likes of which we’ve seen in Chicago...lockdowns without stimulus equals what we’re seeing.”
Earlier in the week, bitcoin was able to shake-off similar market worries, which included a 5% up move yesterday. But, at the time of writing, bitcoin has failed to hold onto yesterday’s gains.
Coinmarketcap.com
Lately, bitcoin has managed to decouple from equity markets as a continued outpouring of positive sentiment from new large investors has helped buoy price. This notion has seen bitcoin’s price go parabolic since mid-October, up ~24% over the past 11 days.
Tradingview.com
Most importantly, fundamental metrics had continued to support bitcoin’s strong momentum until recently. Starting this week, fundamentals have pulled back slightly, possibly indicating that some investors are locking in some profits ahead of next week’s election results.
MORE FROMFORBES ADVISORAre Bitcoin and Gold Good Investments?ByTaylor TepperForbes Staff
Per Glassnode, the percent of bitcoin supply held for over 1 year has fallen the most since February 2020, currently 62.48%.
Glassnode.com
Per CryptoQuant, Exchange Inflow Mean (24-hour moving average) has risen to dangerous levels, i.e. above 2, which have led to price drops in prior occurrences.
cryptoquant.com
Also, per CryptoQuant, stable coin inflow volume to exchanges has fallen demonstrably, recently, which may indicate diminished buying power for bitcoin.
cryptoquant.com
However, despite the moderately softening metrics, bitcoin seems to have become the preferred store of value asset in 2020, +80% YTD. Accordingly, the main fundamental chart that matters is the M1 money supply and Fed balance sheet, which have increased by $1.6 and $3 trillion in 2020, respectively.
https://fred.stlouisfed.org/series/WALCL#0
Thus, bitcoin price may cool-off until the post-election “dust settles,” but its long-term trajectory seems well intact.
Disclosure: The author owns bitcoin, ethereum, and thorchain.
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518f1d8969ea882cb449c8c9c5465c19 | https://www.forbes.com/sites/christopherburnham/2018/10/20/this-time-its-different/?sh=51ad22e836bd | This Time It's Different | This Time It's Different
Photographer: Victor J. Blue/Bloomberg
I have been trading stocks since I was eleven, and started trading call-options at age fifteen. “This time it’s different” are the most dangerous words I have ever heard in fifty years of trading.
Or are they?
Eighty-nine years ago next Wednesday, the stock market crashed and with it came the worst depression in modern history. There were many early indicators of a market wildly over bought in 1929. The bank of England had raised their discount rate in September of that year to 6.5%--higher than the average stock dividend yield or the interest paid on investment grade bonds—causing three brokerage houses in London to fail, while the Chancellor of the Exchequer described the New York Stock Market as “a speculative orgy”.
However, my favorite canary in the coal mine is standard deviation. In 1929, the market was at three standard deviations above the mean. The chart below is of the S&P 500 from 1871 to 1930 with the top red line being the mean, and the bottom red line being the standard deviation from the black line.
S&P 500 1871-1930 All charts courtesy of staff of the Institute for Pension Fund Integrity (IPFI)
Seems pretty clear, the market in 1929 was insane.
Now let’s look at the market from 1871 to September 2018:
S&P 500 1871-Present All charts courtesy of staff of the Institute for Pension Fund Integrity (IPFI)
It certainly looks like another “speculative orgy” to me.
However, as Harold Bierman, Jr. points out in his brilliant book, The Causes of the 1929 Stock Market Crash (Greenwood Press 1998), member firms had only 1,549,000 customer accounts (just over 1% of the population) and the value of all the companies on the NYSE that September was just $89 billion. Today, half the nation has exposure to the stock market, including through IRAs, 401ks, and pension funds, and the value is over $30 trillion.
Does that make 2018 different from 1929?
In 1929, almost one-third of the U.S. were farmers. Today it is less than 2%. The most devastating war in human history had ended only eleven years earlier. We have lived in peace (i.e., no world wars) for almost 75 years. In 1929 the Federal Reserve was only 15 years old, and the vast majority of the causes of the Great Depression, certainly its severity, were directly due to the Fed’s incompetence and failure in 1928 to curb “the orgy’, and from 1930 on, to not offer any monetary stimulus, as Milton Friedman wrote in 1963.
So how can we compare the U.S. economy and stock market in 1929 to today? For that matter, should we include market data from 1871 to 1945? How does market volatility from the Gilded Age, when corruption and manipulation were rampant, have applicability to today?
I believe that the modern economy began in 1945. I pick the end of WWII because it was the beginning of the jet age, computers, the national highway system, transistors, television and modern communications, the beginning of the modern civil rights movement, and a moderately competent Federal Reserve. In addition, the world was only then coming out of half a century of unfathomable turmoil. Not only had over 50 million members of the military and civilian population died from 1939 to 1945, almost an estimated 100 million people died during the Spanish Influenza from 1917 to 1920, and this on the heels of, in many ways, an even more devastating war from 1914 to 1918.
Lest we forget, on this 100th anniversary of the end of WWI, on that summer morning in August 1, 1914, when Europe went to war, no one thought it would turn into the most devastating war in world history, and most thought, “the boys will be home by Christmas”. As the armies of the world mobilized, the market rallied, after being down two standard deviations from the mean from 1871 to 1914, up about 22% by 1916. But then the full brutality of the war began to be felt, and like the slow grind of trench warfare, that killed over 1.3 million French soldiers and almost 1 million British, the market dropped and kept dropping, and would continue to fall for four years until December 1920, where after a 54% drop from August 1, 1914, the market began to rally, over 400%, until October 24, 1929.
Here is a chart with the mean and standard deviation of the S&P 500 from 1945 until September of this year:
S&P 500 1945-Present All charts courtesy of staff at the Institute for Pension Fund Integrity (IPFI)
If 1945 to present day represents the modern economic era, then the market is hardly in “orgy” territory, or even “irrational exuberance”.
However, some may argue that 1945 to present day does not fairly represent the “new-new thing” economy. Looking at the current standard deviation of the market from 1980 to present day, or from “BRE”, the beginning of the “Reagan Era”, the market seems downright cheap:
S&P 500 1980-Present All charts courtesy of staff of the Institute for Pension Fund Integrity (IPFI)
With this chart, we are downright cheap!
The words, “This time it’s different”, are still the most dangerous words in investing, but on this 89th anniversary of the Great Crash I have to ask, how far back should we incorporate data, as we project the future?
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57c99acfb85b7e78c2dc150f6113434b | https://www.forbes.com/sites/christophercoats/2012/05/06/what-todays-euro-elections-mean-for-energy/ | What Sunday's Euro Elections Mean For Energy | What Sunday's Euro Elections Mean For Energy
As this blog outlined last week, the French election was sure to have an impact on energy development issues far beyond Paris, both in terms of European funding institutions and nuclear support. As we inch past midnight in Europe and the polls show that President Nicolas Sarkozy is no longer,it’s worth looking at what a François Hollande administration is going to mean for energy efforts across Southern Europe.
For one, Hollande has made it clear that he will reverse Sarkozy’s support for nuclear energy expansion, pledging to close older facilities and sidestep the outgoing president’s promise to extend plant life from 40 to 60 years. In a country that depends on nuclear for 75 percent of its energy needs, Hollande’s approach is sure to demand some serious political will, especially to get anywhere near his stated goal of reducing dependence on the sector to 50 percent within the next 13 years.
The loss of Sarkozy’s support in France marks another blow for European nuclear energy, including the shelving of a campaign to reintroduce the sector to Italy after a two-decade ban. Presented by Silvio Berlusconi as a pillar of his energy policy, Italy’s nuclear return was abandoned after Japan’s Fukushima reminded Italians of why they ditched it in the first place – Chernobyl.
However, Sarkozy’s loss this weekend wasn’t the only contest going on in Europe and in terms of energy development and investment, it’s probably not the most important. Over in Athens, the long standing conservative New Democracy Party and the main socialist party, Pasok were both punished by voters for their role in austerity measures meant to satisfy bailout requirements. In their place, Greek voters offered support for various parties that have opposed advice and austerity demands from Brussels and Berlin, inviting worries that the country could soon see cracks emerge in their current lending agreements and future bailout options.
In terms of energy development, this resistance to European Union involvement and further funding schemes could threaten the country’s signature project of their renewable future – the sprawling Helios solar farm – a 20 billion euro effort aimed at creating 10GW by the end of the decade. Pitched by outgoing Greek Prime Minister Lucas Papademos last month as a pioneering source of energy and revenue for the debt-addled country, the Helios project was supposed to be an economic lifeline, especially if they could realize the possibility of plugging German consumers into the grid. However, with new leadership intent on curbing further EU involvement in the country, getting a hold of structural funds proposed by European Commission President José Manuel Barroso might be a little more difficult than project advocates had hoped.
Still, with local elections in Germany leaving Chancellor Angela Merkel on shakier ground than she’s seen in quite some time, pressure will continue to build to add some growth efforts into the strict austerity strategy she and the outgoing Sarkozy have taken up to now. Sending a few billion in EU structural funds to finance energy projects outside of Athens could be one way to keep Greece from making any sudden moves that could speed their exit and further damage the community or currency. Not likely, but still.
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1e319707465dea41cda7e2bc24dcdde5 | https://www.forbes.com/sites/christophercoats/2013/10/31/lebanese-gas-stuck-in-political-mud/ | Lebanese Gas Stuck In Political Mud | Lebanese Gas Stuck In Political Mud
A seismic vessel is pictured off the coast of Lebanon on September 24, 2012. Seismic surveys of... [+] Mediterranean waters off Lebanon's southern coast suggest they contain 12 trillion cubic feet of natural gas, Energy and Water Minister Gebran Bassil said. (Image credit: AFP/Getty Images via @daylife)
This week, Lebanon’s Energy Minister Gebran Bassil announced that his country’s offshore gas potential could end up being even more plentiful than first announced, telling Reuters that “under a probability of 50 percent, for almost 45 percent of our waters has reached 95.9 trillion cubic feet of gas and 865 million barrels of oil.” Bassil’s comments present a rosier assessment than earlier studies. However, they shouldn't be confused with actual progress when it comes to exploiting Lebanon’s claims to the new-found Eastern Mediterranean offshore bonanza. Instead, the new findings highlight just how much Beirut is missing out on due to a lengthy list of political and fiscal challenges, most notably a political paralysis that has frozen the exploration efforts in place for much of the year.
No New Cabinet, No Progress
While a ballooning public debt and an influx of refugees from Syria over the last year pose a significant challenge to providing the stability necessary to kickstart a massive new exploration effort, it’s the country’s political landscape that is presenting the largest obstacle to Lebanon getting in on the region’s natural gas rush.
For the last six months, Lebanon’s national government has been unable to agree on a new Cabinet, leaving the country in the hands of a caretaker government. Without a functioning cabinet in place, the government has been unable to pass two decrees that would allow final approval for proposed exploration blocs and production contracts. Originally planned for May 2nd, Lebanon’s licensing round has been delayed twice this year and is now scheduled for January 2014. Although the delay has been attributed to a variety of disputes between the country’s many political sects, one of the most prominent issues has been how gas revenues will be split.
While the delays pose an obvious economic challenge to Beirut, they could also cause more problems down that road as further instability continues to erode what little investment confidence the country has to offer. According to the Lebanese government, they have a list of 46 firms ready and approved to bid should the decrees pass, though it’s unclear how long they are willing to wait and how further delays will test their dedication to local efforts.
Furthermore, the longer Lebanon stalls on exploration efforts, the longer they will remain out of the regional discussion about export options currently being held between Cyprus, Israel and Turkey.
Still, even if Beirut is able to get a cabinet in place before the planned January licensing round, actual offshore activity poses a whole new set of problems.
Among Lebanon’s 10 planned exploration blocs, the county’s southernmost claims fall into disputed waters with neighboring Israel. Bloc 9 falls into a contested area between the two countries’ Exclusive Economic Zones, leading to charges from Beirut that Israel was capable of siphoning off Lebanese reserves from current offshore efforts. In response, Israel has appealed to the United Nations in hopes of settling the maritime border dispute, but has pledged action should Lebanon act on claims in overlapping, offshore territory.
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3fa806454c53be70262ae8eddd12670a | https://www.forbes.com/sites/christophercoats/2015/02/26/shale-opponents-keep-up-pressure-in-algeria/ | Shale Opponents Keep Up Pressure in Algeria | Shale Opponents Keep Up Pressure in Algeria
Public opposition to the possibility of shale extraction efforts in Algeria are set to enter their third month, adding strain to the country's beleaguered energy planning.
Although Algeria was largely able to avoid the sort of wide-spread protest that led to the collapse of governments in Libya, Tunisia and Egypt in 2011, the country is now facing growing pressure from communities concerned about similar issues that spurred the Arab Spring. According to a New York Times report, the absence of President Abdelaziz Bouteflika from view due to his deteriorating health and the sharp decline in global oil prices have combined to create a more difficult environment for a normally forceful government reaction to protest efforts.
As a result, the ongoing protest movement against shale efforts – aimed at the process of hydraulic fracturing, or fracking- has continued unabated in Southern towns, driven by environmental concerns, most notably the role of water in the extraction process.
According to the U.S. Energy Information Administration, Algeria is home to the world’s third largest shale deposits behind China and Argentina with 707 trillion cubic feet, though this remains unproven. The country’s potential has attracted interest from a number of foreign firms who have been conducting studies on the country’s potential. However, any shale efforts face a host of obstacles in the North African landscape, including technical expertise, the lack of necessary equipment and water supplies. While tax incentives and additional funding could help overcome the country’s technical and logistical deficit, finding viable water resources for the millions of gallons needed for each shale gas extraction – a process known as hydraulic fracturing – may prove more difficult. According to the U.S. EIA, an average shale well can require up to 5 million gallons of fresh water from start to finish.
In an effort to address concerns among the growing protest movement, Prime Minister Abdelmalek Sellal said this week that the country was only studying the feasibility of shale efforts and no actual exploration was underway.
"The issue of shale gas has been widely debated at the level of the government and the Parliament and we have set strict conditions for the exploitation of this energy," he said, according to local media reports. "There is no exploitation (of shale gas) but only studies and exploration underway,"
Despite these comments, it would be difficult not to assume the government's primary focus on shale as a primary driver of new energy development in the region. Last year, Algiers amended national law to allow more favorable conditions for those firms interested in shale projects last year, Algeria announced a $100 billion budget for new hydrocarbon development, including “blocks for unconventional resources, with tax incentives for foreign companies interested in investing in shale gas and shale oil,” an important component of the country’s energy plans moving forward, according to a Reuters report. Additionally, in June of this year, the country’s government announced plans to launch a dozen test wells over the next 7 to 13 years.
Taken together, it would be hard to assume that the current studies are not intended to lead directly to production efforts.
Should the protest efforts continue, it could spell real trouble for Algeria's finances, which rely heavily on oil and gas export revenues. As often noted in this column, the country's state-backed firm, Sonatrach, has struggled in recent years to cope with declining foreign interest and production levels, a situation made all the more difficult by the slide in global oil prices. Without a strong alternative or conventional recovery plan in the works, Algeria's financial safety net could become strained sooner than later. Perhaps signaling the seriousness of this possibility, the prime minister announced a " hiring freeze across much of the public sector and the postponement of several large projects, including urban tramways and highways and railroads across the country", according to the New York Times report.
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e3c349d01a3f8601f6cdc586784e6538 | https://www.forbes.com/sites/christophercoats/2016/01/31/morocco-on-track-for-2020-renewable-goals/ | Morocco on Track for 2020 Renewable Goals | Morocco on Track for 2020 Renewable Goals
Morocco’s efforts to boost renewable energy in the north African nation took a step forward last week with news that it made up about 35% of energy generation in the country.
According to government officials, the renewable sector’s progress puts it on track to reach a 42 percent goal within the next few years.
Industry media quoted Ali Fassi Fihri, general manager of the national power utility ONEE as stating that when adding the projects that are currently under construction in wind, solar and hydro, Morocco is on track to achieve a 43% renewable share by 2020. If achieved, this would put the country far ahead of regional neighbors in alternative energy contributions. Further, the country intends to reach a 52% share by 2030, putting it ahead of many European countries.
Of course, this progress will depend on sustained investment interest from abroad and active support from the government - both of which the country currently enjoys.
In recent years, Morocco has worked to reduce its dependence on foreign sources through the development of domestic projects, including exploring newly found traditional reserves and shale projects. However, the state’s embrace of solar and wind has become a pillar of the country’s energy policy.
Recently, this push ran into delays with the announcement that it would push back the opening of the Noor-1 solar power plant. According to the AFP, the plant was scheduled to be opened on the 27th of December, but was pushed back without further details offered by the project’s communications agency.
The country’s focus on renewable development has not come at the total expense of more traditional energy options, including the promotion of new exploration and production efforts for natural gas actors in the region. However, Morocco has repeatedly made clear its goal of establishing itself as a regional leader in renewable energy development - a development key to easing the country’s long-standing dependence on costly and increasingly unreliable energy imports.
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345ba8429c5f54ad42b3002589957d3d | https://www.forbes.com/sites/christophercorrea/2012/02/06/clint-eastwoods-halftime-in-america-ad-a-game-changer/ | Clint Eastwood's 'Halftime in America' Ad a New Ballgame | Clint Eastwood's 'Halftime in America' Ad a New Ballgame
Another Super Bowl, another slew of ads. It's become a predictable--perhaps, at this point, even rote--occasion: A volley of commercials insinuate themselves into our homes, packaged in either tidily clever trappings or whimsically left-field vignettes, that have less to do with selling the items than justifying the need to celebrate them. Super Bowl ads are often more eagerly anticipated than the 60 minutes of gameplay stringing them together like trinkets on a bracelet. They're often admired for their ability to distract, whet or surprise.
But every once in a while, an ad comes along that doesn't just stop the game, it changes the game. It happened in 1984, when Apple hired Blade Runner director Ridley Scott to shatter perceptions (both literally and figuratively) of personal computing. It happened in 1993, when McDonalds benefitted from basketball legends Michael Jordan and Larry Bird challenging each other to sink utterly implausible baskets (off the scoreboard; from the Hancock Building; over the river: "nothing but net") to score a burger. It happened with Clara Peller's t-shirt-slogan-in-the-making "Where's the beef?" and it continued with a trio of frogs croaking their love for Budweiser in concert.
This year another advertisement entered a crowded field, without pomp but predicated on real-world circumstance--Chrysler's "Halftime in America," featuring a weathered but resolute Clint Eastwood. He isn't exactly selling anything in the spot, which is filmed to resemble a political ad if it were produced by Paul Haggis (Eastwood's collaborator on Million Dollar Baby and the director of Crash). Instead, he aims to jolt, then scold, but ultimately soothe, the viewer. First seen walking from the shadows of a hazy football game, he hunches his shoulders and walks with a tired grace. Speaking in a voice so gravelly you could walk across it, he declaims that the American auto industry's primary focus has been compromised by "fog, division, discord and blame," but America "knows how to come from behind to win."
The narration baldly but earnestly offers a commentary on the notion of halftime representing a rebirth not just for athletes, but for John Q Public, the American economy and the city of Detroit. Although Chrysler isn't mentioned in his speech--which accompanies a montage of faces, flags, factories and automotive products--the evocation is clear and packs a wallop.
Also, it's difficult to not be reminded of President Reagan's "Morning Again in America" commercial. Here's the text from the Chrysler ad:
This country can't be knocked out with one punch. We get right back up again, and when we do the world is going to hear the roar of our engines. Ya, it's halftime in America, and our second half is about to begin.
And here's a snippet of Reagan's 1984 political ad, which was narrated against a similar montage of men and women going to work:
Today more men and women will go to work than ever before in our country's history...It's morning again in America, and under the leadership of President Reagan, our country is prouder and stronger and better.
The recession of 2007-2009 threw Motor City's economy into tumult; the jobless rate peaked at 16.6 percent in July of 2009. Today it is 9.7 percent. "They almost lost everything," Eastwood growls. "But we all pulled together. Now Motor City is fighting again."
It was a bold move for the car maker to not feature its product line during the two-minute spot, but it resonated all the more because of it. Eastwood represents Hollywood, another made-in-the-U-S-A industry, and has been a seminal actor and director for five decades. His most recent role (and his last, according to interviews) was in a film about a retired car factory worker in Detroit. It could have been a controversial move, too politically charged for prime time sports, somber even. But there is hope scattered among the physical flotsam of metal and welding sparks and hidden beneath the harsh tones. It is an ad that attempts something a little different than suggest one buy a product; it depicts the history, the present state and the possible future for, a country that experienced a mechanical renaissance partly forged by it.
***
VOTE for your favorite ad from Super Bowl XLVI
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e052fb73cdf47c1e9969571d4dcd3550 | https://www.forbes.com/sites/christophercorrea/2012/07/31/what-is-audience-development/ | What Is Audience Development? | What Is Audience Development?
You're walking along the sidewalk of a heavily trafficked street in your city's shopping district. You move with a crush of civilians that teem like a school of fish in the same physical space, all pursuing unique destinations. Before you step any farther, something jolts you from your original trajectory like a beacon. You pause a moment to observe the signal, then acknowledge it, thus allowing yourself to be ushered in by it. Others follow suit, and before long a crowd has gathered and streamed inside with you. Here's the sign:
That's audience development.
Very few experts with a toe in the water, or a finger in the wind, can forecast from whence the momentum or impact social media and virality come. There is a logical argument in favor of the influence of Facebook, YouTube and Twitter as viable launching pads, of course. And now that social media platforms have proven effective (read: profit/revenue-savvy) to businesses and brands in engaging with potential customers, growing brand awareness and disseminating marketing messages strategically across the vastness of the online landscape, experts continue to quantify their use.
Audience development is simply this: attracting diverse people at scale toward a social object. By inviting them in via a unit of compellation (in my example, it's the "SALE" sign), a variety of people with a variety of interests are courted and willingly corralled. Whether or not they enter the store to peruse the so-called sale is entirely up to them. Typically, sales are not actually store-wide, but rather occur on a department-by-department or brand-by-brand basis--it's more tenable that way for quality control. A sale sign usually is targeted at one group of people in particular, but, like a billboard, functions as a catch-all for potential business. Unlike a billboard, the sale sign is both signifier and gateway to the social object. Sometimes the discounted items will be on target with the consumer; sometimes they won't. In similar fashion, not all content online will be everybody's cup of tea, but exposing it to wider audiences will help ensure that the targeted niches are engaged.
So what does it mean exactly to "go viral"? does a small business that makes a short video consider it viral if it's shared within the business's niche community by more than ten people via Facebook or Twitter, but didn't generate new leads? Does virality equate to more people receiving something, or people of a specific niche receiving it? Does it need to make news offline to qualify as a viral success?
According to Answers.com, "Viral means becoming extremely popular in a very short amount of time. Often for something to be considered viral it needs to make its way into everyday non-internet life."
Businesses and brands that are publishing online content through creative media channels--i.e., YouTube, Facebook, Twitter, blog posts--are all ultimately aiming to achieve wider distribution launchpads. But what they are also trying to accomplish is provide value to the audience with quality content that engages, so that the audience believes that your product or service is the one for them.
There is an argument that the larger the distribution, more people will see your social object, allowing for greater opportunities to redistribute your content to a larger audience. Movie distributors have a similar challenge.
Take two highly successful films that are doing record box office business (in their own ways) this summer: "The Avengers" and "To Rome With Love". The former is a traditional blockbuster, replete with superheroes, eye-popping visuals, comic relief and star appeal. The latter is by all accounts a tiny movie event, but also abetted by an all-star cast, comic relief and great visuals. The Marvel comics-related film opened on more than 4,000 screens (wide audience reach) and attracted viewers of every stripe, suggesting there might be something for everyone. The ads, online and off, attested to this. The inflated success of this film (it's earned more than $600 million domestically) was due to repeat viewings by its target demographic. Put another way, "The Avengers" has many merits that indicate its success, but increasing the population of the United States is not one of them. Yes more people watched that movie than others this summer, but the more realistic rubric suggests that repeat viewers (read: niche and target audiences--those for whom the SALE sign in my original thesis applies) equated to repeat business.
Woody Allen's romantic comedy has done remarkably well, too, in spite of its grosses that are hovering around $12 million. It opened on far fewer screens, specifically art house cinemas in cosmopolitan cities. It earned wider release, adding more screens once it initially was deemed something other people needed to see, once word of mouth and ticket sales reached a saturation point. Both movie, well into their runs now, are earning more than $1,000 per screen, meaning they're achieving audience engagement.
Audience development requires either of these tactics: target a specific group and bet on it catalyzing scale; or target a larger, less specific group and bet on some portion doing business and spreading it. For content online (including video), audience development is part of the equation now more than ever before, since there is just so much content "out there".
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bf43d47fa0dfc11852260dc82b2c3549 | https://www.forbes.com/sites/christophercorrea/2013/04/11/why-video-games-are-addictive-and-bigger-than-movies-will-ever-be/ | Why Video Games Are More Addictive And Bigger Than Movies Will Ever Be | Why Video Games Are More Addictive And Bigger Than Movies Will Ever Be
Movies are so 20th century. At least that's what Internet entrepreneur Tobias Batton posits. A serial entrepreneur designing apps and games for the last seven years, Batton believes that video games--on both home console (like Xbox and Playstation) and mobile platforms--are already the most powerful entertainment medium and show no signs of relinquishing the mantle. In his keynote presentation presented at mediabistro's Social Gaming Summit last November, Batton laid out his theory on what he believes is a global sea change in public consumption of information and recreation. Before we go too far down the rabbit hole (he brings the likes of no less estimable cultural anthropologists than Abraham Maslow, Ivan Pavlov, Joseph Campbell and Stanford neuroscience professor Robert Sapolsky to the discussion), a bit about Tobias Batton.
Tobias Batton
His first company was called LiberatedFilms.com, a web application built to give independent filmmakers an opportunity to get more exposure online. When it got acquired in 2008, he delved into gaming, building a variety of popular web and mobile titles, including 2008's widely played Clan Wars, which preceded Facebook games and the Appstore. Then he created the cultural phenomenon iGirl, an app featuring a 3D animated female avatar that could be customized with different clothes, languages and environments, whose interaction queues could be commanded by voice. It was downloaded tens of millions of times.
In 2009, Silicon Valley pioneers Sanjay Reddy and Nova Spivak hired Batton to build their web application Live Matrix, a crowd-sourced popularity system with real time tracking of event popularity.
He was a game designer in IGN’s incubator, and is currently a key player in the evolution of mobile technology. His latest mobile game is launching next month.
All stories are the same
Part of Batton's theory about the relentless popularity of video games stems from their being a mere extension of the same basic trope--which has informed nearly every book and film since time immemorial. Here are a few examples:
Our hero, Harry Potter, lives an uninspiring life before meeting Dumbledore who ushers him into the fantastic world of Hogwarts. The hero learns of an evil plot to terrorize and control the world and masters magical abilities in order to prepare for this conflict, ultimately triumphing by defeating Lord Voldemort.
and
Our hero, Bruce Wayne, lives an uninspiring life before meeting Ra's al Ghul who ushers him into the fantastic world of secret societies. The hero learns of an evil plot to destroy Gotham City with fear and masters martial arts in order to prepare for this conflict, ultimately triumphing by defeating Scarecrow.
and
Our hero, Luke Skywalker, lives an uninspiring life before meeting Obi-Wan Kenobi who ushers him into the fantastic world of the Galaxy. The hero learns of an evil plot to terrorize and control the Galaxy and masters the Force in order to prepare for this conflict, ultimately triumphing by defeating Emperor Palpatine.
and
Our hero, Neo, lives an uninspiring life before meeting Morpheus who ushers him into the fantastic world of Zion. The hero learns of an evil plot to enslave humans and masters the manipulation of reality in order to prepare for this conflict, ultimately triumphing by defeating the Machines.
Sound familiar? According to Batton, what these successful enterprises share is a proven model of IP development. Joseph Campbell's thesis of the journey of the archetypal hero found in world mythologies has colored both modern psychology and storytelling. His book, "The Hero with a Thousand Faces," has been cited by filmmakers like George Lucas as a key influence on their films. Video games are making the vicarious hero's journey more interactive than any other media have allowed. Some classic examples over the last 30 years include "The Legend of Zelda," "Final Fantasy," "Half-Life," "Far Cry 3," "Skyrim" and "Dishonored."
By the numbers
Let's paint this picture from a purely dollars and cents perspective over the last four years*:
*IGN; boxofficemojo.com
Noticing a trend?
The (meta)physics of video games
Per Batton, operant conditioning plays a hand in game design which filmmaking cannot replicate. "Since films are not interactive, it can't play a role in that medium," according to Batton. "There is no signal or reaward, it's just sit-and-watch. This is the reason that games are better tools and a more effective form of psychological learning. The individual modifies the occurrence and form of his own behavior due to the association of that behavior with a stimulus."
Batton's "Variable Dopamine Wavelength Mapping Theory" features a system based on Dopamine (the organically produced neurotransmitter responsible for reward-driven learning) spikes in the brain, applied directly to an overlap of both Maslow’s pyramid and Pavlov’s trigger-based framework. Here's how it works:
A game, at its core, is a series of systems Consumers purchase games for purposes of entertainment When systems are built in a game, the designer of the system should consider what is known about the neurotransmitter Dopamine as a tool for operant conditioning
Here's what it looks like:
Copyright © Tobias Batton
The important element of Dopamine in regards to a game, is that humans have feelings of joy, anticipation and motivation when the neurotransmitter is released in their brain. So it is the game developer's goal to understand how to leverage this element to operantly condition our users to become addicted to a game. Dopamine is released before a reward is gained, instead when the subject is presented with the stimulus that leads to the reward. This is the key, for example, to why Las Vegas is so powerful. Dr. Sapolsky has taken Pavlov’s studies and repositioned where the most intense emotional triggers of cause and effect reside: at the signal before a reward is obtained versus receiving the actual reward. Dopamine spikes are much higher when a reward is not guaranteed, or when the reward is unknown. In other words, it's about the pursuit of happiness, not happiness itself.
Copyright © Tobias Batton
This is the reason so many games fail, says Batton. "They build one good system, and one good system just isn’t good enough. It’s too easy to become repetitive. You have to create a variety of systems that carry various dopamine wavelengths so they can lean on each other."
It all taps into Maslow's "Hierarchy of Needs". "The needs at the bottom of his pyramid are less interesting and carry less intrinsic choice," says Batton. "For example I have to sleep. There is no choice. However, I have a lot of latitude in how I determine a solution to a problem, or what moral guidelines I follow. Or even what I choose to accomplish in my life."
So how does this ultimately define how video games will be the link to previous narrative formats and the future of both telling stories and defining cognition? "Building a series of systems with variable dopamine wavelengths that will have a tendency for their peaks to align in ways that give users little time to make a choice before they feel their next dopamine release," says Batton. "It's about motivating people to keep playing, all the while building on a framework that lends itself to the innate human condition." For a real trip across the light fantastic, Batton suggests that the best way to fully absorb the influence of video games is to just examine our own lives. "The daily grind, just living and doing and working and relationships, all of it, it's all about risk and reward," he asserts. "I need to get good grades so that I can get into a good school. I go to a good school to get a good job. I need a good job if I want to be successful in my professional pursuits. I need to do well professionally to earn good money. And in order to be an accomplished person, to establish a happy, well-taken-care-of family, I need to earn and provide. This isn't a new idea. These themes are biblical and they're scientific. The games I make, and the games I like to play, they tap into this fundamental theory, and who wouldn't want to be an architect in a medium that both honors and toys with the human condition."
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04064f8243b38e49d7e92e9b7413aa11 | https://www.forbes.com/sites/christopherdodson/2020/06/24/exclusive-new-orleans-pelicans-mayor-latoya-cantrell-placed-strong-bid-to-host-nbas-return-to-play/ | New Orleans Pelicans, Mayor LaToya Cantrell Made Strong Bid To Host NBA’s Return To Play | New Orleans Pelicans, Mayor LaToya Cantrell Made Strong Bid To Host NBA’s Return To Play
NEW ORLEANS, LOUISIANA - OCTOBER 11: Executive Vice President of Basketball Operations David Griffin ... [+] of the New Orleans Pelicans reacts during a preseason game against the Utah Jazz at the Smoothie King Center on October 11, 2019 in New Orleans, Louisiana. NOTE TO USER: User expressly acknowledges and agrees that, by downloading and or using this Photograph, user is consenting to the terms and conditions of the Getty Images License Agreement. (Photo by Jonathan Bachman/Getty Images) Getty Images
The New Orleans Pelicans were well on their way to making a push for the 2020 NBA playoffs when the COVID-19 pandemic brought a sudden halt to all sporting activities. In the NBA’s effort to salvage the season and resume play, the Pelicans and elected officials in New Orleans looked to throw an assist to all of the league’s teams. According to sources with the team and the local government, New Orleans executives, along with state and city officials, put in a diligent effort to present a very strong bid to act as one of the cities in a multiple-city campus/bubble plan.
An NBA Board of Governor’s conference call on Thursday settled most of the specifics. By the end of July, 22 of the league’s teams will descend on Orlando to finish the season and crown a champion. New Orleans executives had a significant voice in the room concerning the location and formatting logistics of the new schedule, not just on matters concerning Zion Williamson and the format.
Executives for the New Orleans Pelicans pushed hard for the New Orleans hosting idea. When I reached out to the New Orleans Saints and Pelicans Senior Vice President of Communications Greg Bensel about the story, he replied, “As the NBA looked to re-open, they did their due diligence and research on best potential in-market planning and what could cities and arenas pull off safely. So in many markets with city and state restrictions it was going to be impossible, hence the bubble concept” and the following New Orleans bid.
The New Orleans plan included the Hyatt in downtown New Orleans as the campus transit hub and the Smoothie King Center as the game site. Even though New Orleans was an initial coronavirus hotspot, the city flattened the curve quickly and had success in mitigating the virus. The team’s plan had the full support of Governor John Bel Edwards, Mayor LaToya Cantrelle, and Gayle Benson. According to a source with the team not allowed to discuss the failed bid, it was a “bid to help save our tourism and promote that New Orleans was back and ready for business.”
New Orleans eventually lost out to the Orlando bid. The Disney resort is home to the ESPN Wide World of Sports sprawl of a complex. The ABC/ESPN connections led to a comfortability that could not be overcome by the New Orleans bid. The Disney complex also offers what is essentially a closed-off private city. So attractive is the site, Orlando has been a proposed host for several professional sporting leagues. Still, the NBA recognized the strong merits of the New Orleans bid.
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In a message from Kelly Flatow, NBA Executive Vice President, the league recognized “New Orleans has a rich history of hosting world-class sporting events- including NBA All-Star Games in 2008, 2014, and 2017. The New Orleans Pelicans and the Greater New Orleans Sports Foundation collaborated to propose a safe and healthy environment for the NBA’s return to play. We’re appreciative of the leadership and support.”
Major League Soccer will play a tournament in Orlando this July. The NWSL will return to action in June. The NHL will have Phase 2 practices this week. As it is understood, the NBA examined several options in the effort to resume play. The league office spent weeks narrowing down what cities and arenas could potentially host games. New Orleans was a finalist in the process but lost out to the Orlando bid. Greater New Orleans Sports Foundation President Jay Cicero acted as the team’s liaison with the NBA league office.
GNOSF President Cicero stated, “The NBA has significant trust in Mrs. Benson, the Pelicans and our organization, having gained significant experience and knowledge after hosting 3 NBA All-Star games in a record 9 years, most recently in 2017. For New Orleans to be considered and trusted by the NBA is an honor, and a testament to our strong relationship as well as how far the State and City have come since March 11.”
The easiest part of the schedule was in front of the New Orleans Pelicans but now those games are lost. Having somewhat of a home-court advantage going forward would have helped ease that pain for fans, even if they were not allowed to attend games. Now, the team must trek to Disney World to make an abbreviated playoff push with a healthy Zion Williamson.
A bid for home cooking would have been a boost to the team’s regional marketing and the local food, beverage, and tourism industry. The bid eventually fell short, but it does show the New Orleans Pelicans and city are planning for better days and looking to lead the way, together. Those invovled with the process feel the effort put into this bid counts for something. The initiative to put this bid together will lead the team and city towards more positive engagement going forward.
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0d1149b38f5d511c8e37dc554f526d5d | https://www.forbes.com/sites/christopherdodson/2020/07/02/lonzo-ball-brandon-ingram-express-desire-to-team-with-zion-williamson-long-term/ | Lonzo Ball, Brandon Ingram ‘Express Desire’ To Team With Zion Williamson Long Term | Lonzo Ball, Brandon Ingram ‘Express Desire’ To Team With Zion Williamson Long Term
NEW ORLEANS, LOUISIANA - MARCH 06: Brandon Ingram #14 of the New Orleans Pelicans reacts against the ... [+] Miami Heat during a game at the Smoothie King Center on March 06, 2020 in New Orleans, Louisiana. NOTE TO USER: User expressly acknowledges and agrees that, by downloading and or using this Photograph, user is consenting to the terms and conditions of the Getty Images License Agreement. (Photo by Jonathan Bachman/Getty Images) Getty Images
Had the COVID-19 pandemic not brought a halt to the season, the New Orleans Pelicans would be on the clock to offer or match a contract issued to restricted free agent Brandon Ingram. That decision will now be put off until October 18, 2020, but Pelicans Executive Vice President of Basketball Operations David Griffin believes both Lonzo Ball and Ingram want to be in New Orleans long term.
In the latest media Zoom call conference session, Griffin said, “...We’re looking at this from the standpoint of we believe very strongly both Lonzo and Brandon want to be a part of the future here and we anticipate that happens, and we’re going to continue to work from that vantage point because they’ve been very, very clear in their desires to continue their careers here.”
While Ball and Ingram have years of experience together in drastically different situations every season, the front office has only seen Williamson play with the rest of the presumed core of the future for 19 games. Judging how they play together and what roles suit each player best was just starting to come into focus when the season was halted.
Long term salary cap implications have to be factored into the roster-building equation now. The New Orleans Pelicans have only four players under contract for the 2021-22 season not counting draft picks yet made. Griffin and General Manager Trajan Langdon will be in Orlando, per Griffin. The coaching staff and roster are still “at the mercy of the virus.” Both Griffin and Langdon expect the salary cap to stagnate or shrink, possibly for more than a couple of seasons.
When asked about the salary cap going down and the market that creates Griffin said, “I mean intellectually you’d believe that that’s true. If there’s less financial bandwidth and flexibility that precludes teams from outside your organization making a run at people, but at the same time it only takes one. And you never know how people are going to allocate their resources.”
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Derrick Favors is an unrestricted free agent after New Orleans is finished in Orlando. Jrue Holiday has a player option after next season. Can New Orleans allow Holiday to leave for nothing one year after hyping him as a possible MVP candidate? The Pelicans have to allocate their resources wisely to maintain their young core but keep useful veteran leadership in the locker room. Backing up their stated philosophy is paramount; the team cannot be seen as sending mixed messages to Williamson and the fan base.
Reading between the lines, it seems the decisions for the next offseason are largely settled. Griffin does not expect the outcomes in Orlando to change the team’s approach to building next season’s roster. Griffin said, “I think we have a good feel for what our roster needs moving forward regardless. To some degree, I hope that the ‘bubble’ doesn’t become fool’s gold: that you don’t buy into something that maybe isn’t realistic.
Again, you have to go into the ‘bubble’ understanding that by in large, it’s going to create some randomness and the variability of whose playing at any given time on the opposing team and who’s playing whose minutes and those types of things will have a huge bearing on outcome. For that reason, I think, it’s almost like when you scout and you look at the NCAA tournament, and you try to take it with a grain of salt when a guy gets crazy hot in the tournament. You have to do the same thing in this ‘bubble’ situation: rely on the data that you had.”
Griffin continued, explaining that data through personal experience watching the team grow organically, just as he imagined.
“We were fortunate because we ran all the on-court presentations. I got to watch our team in a totally non-emotional time and watching film in addition to that throughout this period of time. In a non-emotional way, when you look at our roster you make determinations about what we are, what we need to be. It’s a much better way to make decisions than to go into the ‘bubble’ deal with everything we’re going to deal about in the ‘bubble’ and then try to make decisions off of that. I would tell you I don’t think we’re going to put a lot of stock in that in terms of dictating our long-term future.”
But what will that long term future look like with Ingram and Ball on their second contracts and Zion Williamson in the middle of a rookie deal? Well, that is why Gayle Benson pays Griffin and Langdon their salaries. Hire the best and hope for the best but know you have the best should the most chaotic unknown in sporting history hit the league. Griffin said Aaron Nelson is facing the most challenging time of his career. Griffin and Langdon are thinking long term while Nelson is frantically trying to ensure players are prepared for the present.
Griffin said, “It’s been challenging, but it’s similarly challenging for the whole league. Not knowing what the salary cap is going to be, by way of example. Those things are challenging. Not knowing when the following season starts or ends is going to be a challenge for everyone, so I think as you’re building your team, you’re going to have a very short turnaround. You’re not going to have a lot of time with the data in terms of what the cap numbers really are, so you’re going to have to make decisions very quickly.
What that’s done for Shane Kupperman and our salary cap team here has been to run every single scenario. Shane and Mike Blackstone and our team there, Marc Chasanoff. They’ve been literally preparing a scenario for virtually every outcome with what the cap might look like and what that means we would then be anticipating paying our free agents and guys that we want to extend. It’s a challenge. It’s a challenge for everybody.”
Planning the Future Salary Cap
As of publishing, the decision to offer Ingram the max is 109 days away. While some teams are able to punt salary cap hits into the future, ala the New Orleans Saints, the Pelicans’ decision will have a trickle-down effect on the roster immediately. The decision ultimately lies with Griffin.
Since this is only a fictionally spending of Gayle Benson’s money, the decision on Favors this summer seems straightforward. If New Orleans wants to keep him, they will offer a salary worth more per year than the mid-level exception (MLE) of about $9.6 million accounting for COVID-19 cap concerns. That would limit the number of teams that could sign Favors, mostly down to a few contenders the Pelicans would battle in a potential playoff series.
Many of those teams already have someone in the role Favors would occupy. There are lottery-bound teams that could offer Favors a max-level deal this summer. Then it would be up to Favors who would have to consider a Pelicans offer somewhere in between the MLE and the max.
Nicolo Melli signed for approximately $8 million over two years. His salary actually decreases from $4.1 million this season to $3.8 next year. His qualifying offer for the 2021-22 season is only $4.8 million. Melli started slow but found a groove once Williamson returned to the lineup. He could play himself into a huge raise next season.
Before Zion Williamson is eligible for an extension, it is Melli that might force New Orleans into a decision on paying the luxury tax. Melli proved he will be serviceable at worst for a few more years, but his late start to his NBA career will keep him on short, moveable deals. While personally fond of the affable Italian, he could be the final piece to any trade for an All-NBA talent like Bradley Beal.
The team’s decisions on Jrue Holiday, Ingram, and Melli will squeeze the margins in negotiations with Josh Hart, Frank Jackson, E’Twaun Moore and Kenrich Williams. Brandon Ingram’s contract will be near the maximum allowed. Planning for a smoothed cap and a return to normalcy in a few years, Ingram is looking at 4 years, at a $120-125 million total.
The decision on Lonzo Ball can wait another year. The New Orleans Pelicans will offer Zion Williamson the maximum allowable contract as soon as it is possible. As silly as it may sound, offering Williamson over a quarter of a billion dollars plus incentives is a bargain. A stagnant salary cap may prevent that from happening in four years, but in six or seven years the NBA economy should be back to normal.
Jaxson Hayes and Nickeil Alexander-Walker will be on the same timeline as Williamson unless the Pelicans decide to decline a team option in the third or fourth year. Hayes and Alexander-Walker would likely be traded instead of released for little return on investment. With so many current players and future draft picks on the books at a rookie scale, the Pelicans are less dependent upon the salary cap going down or stagnating.
Other teams that are built around veterans and are in win-now mode will have to consider different options. On the other end of the Pelicans’ roster spectrum are veterans like JJ Redick, who could be viewed as a mercenary shooter but has also genuinely showed an appreciation for the city and this team. It is a tough decision that will spark debates on what is left of New Orleans sports radio.
Brandon Ingram is a 22 years old NBA All-Star who has improved several aspects of his game every season. Wanting nothing but good vibes in the building, the Pelicans should offer Ingram the full five-year max as soon as possible. The rest of the roster decisions have a far-reaching effect on the future of the franchise. Along with the dozen or more draft picks in the next five years, the New Orleans can negotiate with players and teams from a position of power.
It is up to David Griffin and his revamped front office to succeed with this surplus. Anything less than consistent playoff appearance for the next decade would be borderline unforgivable in the Big Easy, considering riches the team possesses currently. It may cost a bit more in luxury tax, and a year sooner than expected, but the franchise cannot shortchange it’s best future for short term savings in the present pandemic economic climate.
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73b4698532e3fe90f0ca44d43ff48be8 | https://www.forbes.com/sites/christopherdodson/2020/12/04/josh-hart-stepping-up-offensive-game-for-playoff-push-with-new-orleans-pelicans/ | Josh Hart Stepping Up Offensive Game For Playoff Push With New Orleans Pelicans | Josh Hart Stepping Up Offensive Game For Playoff Push With New Orleans Pelicans
NEW ORLEANS, LOUISIANA - MARCH 01: Josh Hart #3 of the New Orleans Pelicans shoots against Kyle ... [+] Kuzma #0 of the Los Angeles Lakers during the first half at the Smoothie King Center on March 01, 2020 in New Orleans, Louisiana. NOTE TO USER: User expressly acknowledges and agrees that, by downloading and or using this Photograph, user is consenting to the terms and conditions of the Getty Images License Agreement. (Photo by Jonathan Bachman/Getty Images) Getty Images
The New Orleans Pelicans overhauled much of their roster this offseason and brought in Stan Van Gundy to develop the young core and shape up a playoff squad. Van Gundy said during media week interviews that he will stress getting back on defense in transition, protecting the paint, avoiding senseless fouls, and defensive rebounding as a team. These are all areas of the game where Josh Hart, the ferocious heartbeat of the team last season, excels.
Hart shared the team had to pace themselves well to ensure “we make a run in the playoffs because that’s our goal. A lot of the guys haven’t done it, I haven’t done it, but we are looking forward to it...I think we are right there; we are a playoff team. We have toughness, we have a great competitive nature, an amazing coaching staff. We already have great team comradery. All of those things help contribute to a winning culture. I think we are a playoff team. We all do. That’s half of it. We just have to go in, especially in training camp, to get those habits down to be successful in a lot of these games. Especially close games where we have lead in the fourth and instead of giving up that lead we are able to extend that lead.”
Hart said of playing for Van Gundy, “It’s going to be good. He will be really amazing for us in terms of creating good habits, having accountability and attention to detail. It’s those kinds of things that I feel we could have been better at last year. Just talking with him, he is going to make sure we are doing what we are supposed to be doing. For a young team that wants a winning culture that is what you need. You need guys that are going to hold you accountable. I’m looking forward to it. It’s going to be good. It’s going to be tough and it’ll be challenging at times but it’s going to make us better.”
Hart is embracing the opportunity to learn from such a respected coach and values the opportunities the season will bring to both him and the Pelicans. He is a 6’6’’, 220-pound combo guard with capabilities to defend power forwards and point guards effectively. He should prove very useful to the defensive-minded Van Gundy. However, Hart is aiming for his best season yet after having spent the abbreviated offseason expanding his offensive game. He should be in line for a few more fast-break opportunities now that Steven Adams is here to “steal” all the rebounds as Hart jokily commented.
Hart averaged 10.1 points, 6.5 rebounds, and 1.7 assists per game last season. His per 36 numbers (13.5 pts, 8.7 rebs, 2.2 a) suggests he can handle more playing time without a drop-off in production, especially playing with a full roster and not the skeleton squads of last season. The extra minutes might be a cardio challenge but Hart is ready for whatever role helps the team and has prepared himself to feature heavily in a playoff rotation. Hart knows him hitting the open shots that will come playing with Zion Williamson and Brandon Ingram will go a long way to securing a spot in the postseason.
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“I don’t think anyone is going to be mad hearing they have to shoot more. I’m excited for it, it’s obviously something I’ve wanted to do. You know talking with Stan (Van Gundy), I felt there were certain things I can do that I can contribute to the team that I was not able to show the last several years in my career. I just want to make sure I do whatever makes the team better. If that’s a bigger role offensively, a bigger role defensively, whatever it is I want to put myself up to the challenge. I want to exceed all expectations whether that’s the coaching staff or front office or myself. I’m excited for it. It’s going to be a challenge with all of the ups and downs during the season but I’m looking forward to it and want to find a sense of consistency over these 72 plus games we are going to have.”
Hart did not post many workout videos during the offseason but one did surface of him shooting three-pointers in a methodical, fundamentally focused fashion. He was not quickly jacking up shots for the sake of saying they went up. No Hart was internalizing the whole process and committing it to a subconscious memory. He wants to show he “continues to get better and can “shoot the ball, better than I did last season. That’s a big goal for me. Defensively I want to make sure I take...I see myself as taking the challenge of guarding some of the better players and doing those kinds of things.”
It seems reasonable to expect Hart will see a slight increase in playing time considering the new roster and coaching staff. His defense was critical in keeping the team competitive in some games. The increase of energy in the Smoothie King Center was palpable when Hart came into a close game. It was like the team’s beloved junkyard dog had gotten off the leash. Though associated with the dirty work on the court Hart really was the on-court heartbeat and rhythm of the team during the toughest of times. He refused to quit and it showed up on the stat sheet. He brings that winning mentality every night, regardless of coach, roster, or game location.
When asked about his toughness and Van Gundy’s comment about the Pelicans not getting punked Hart replied, “Oh I mean it is extremely important. Especially since we have a young group of guys. We only have two guys in their 30’s. You’ve got JJ who is the old man of the group with a cane and then you’ve got EB who is a young 31. It’s going to be good for us. I think we showed that at times last year. Zo’s competitive, BI’s competitive, myself, and you can keep going down the line. You’re not going to punk us. We’ll be competitive every single night and get the winning culture going.”
Whatever his role on offense, Hart can help the New Orleans Pelicans rebound from a disappointing season by continuing to set the standard for exceptional rebounding. Among eligible guards, only Luka Doncic, Russell Westbrook, Jayson Tatum, and Ben Simmons grabbed more defensive rebounds per game than Hart last season. Hart was also tenacious on defense, never giving up or conceding a basket. Only eight guards contested more shots last season and they all started more games and played more minutes than Hart.
Hart got his hand up in the opposition’s face 7.6 times per game, leading the team and finishing seventh among guards in contested two-point shots per game. Though often playing fewer minutes than those above him on the leaderboard, Hart finished 10th in total shots contested. As Hart stated at media day last summer, he refuses to be a mouse in the house. He can contest shots all the way to the rim and avoid fouls that hurt the team. Only three guards (Brandon Clarke, James Harden, Shai Gilgeous-Alexander) defended more shots at the rim per game than Hart last season. Only Clarke was more successful in creating missed shots.
That type of dedication to winning basketball encourages everyone to live up to a championship standard. Hardworking, yet humble, Hart just wants to return to the court with his new teammates. As far as being in a contract year Hart just wants to show he is “healthy and I’m getting better. Offensively, shooting and attacking the basket. Defensively, I’ll make strides there.” He reiterated that it is more about showing he is “healthy, getting better, and able to play a full 72-plus games.”
New Orleans Pelicans fans are focused on the plus. Not in the number of games played in the last sentence but the positive plus that Josh Hart has been since being traded to the team. He pleaded his case with David Griffin to stay in New Orleans after the Anthony Davis trade to the Los Angeles Lakers. The fans in the stands see a trait in Hart they never saw in Davis, and it is one the locals cannot miss. The stuff coming out of the kitchens is only part of the diet. The rest is all Hart and determination to rise to any challenge.
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88b99b73d141288e55523dde053e06c8 | https://www.forbes.com/sites/christopherdodson/2021/02/15/new-orleans-saints-moving-forward-on-superdome-remodel-with-saftey-as-top-priotity/ | New Orleans Saints Moving Forward On Superdome Remodel With Safety As Top Priotity | New Orleans Saints Moving Forward On Superdome Remodel With Safety As Top Priotity
NEW ORLEANS, LOUISIANA - JANUARY 19: The Mercedes-Benz Superdome illuminates an amber hue light to ... [+] support the Biden Inaugural Committee's COVID-19 Memorial: A National Moment of Unity and Remembrance in on January 19, 2021 in Louisiana, New Orleans. The coronavirus (COVID-19) pandemic worldwide has claimed over 2 million lives and infected over 95.6 million people. Getty Images
The New Orleans Saints approach every home game and community endeavor with safety and security as a top priority. The team’s professional approach and that of the Mercedes-Benz Superdome staff did not go unnoticed, as the team was recently awarded for having the best overall Safety and Security rating in the NFL. Now amid an offseason remodeling of the stadium, and with the pandemic in mind, the team is moving forward and trying to accommodate everyone with the first-class care the fans have come to know and appreciate on gameday.
The best overall for Safety and Security honor comes via the NFL’s 2020-21 Voice of the Fan rankings. The rankings are creating using a compilation of fan surveys after every home game. Teams are graded on Overall Safety & Security, Overall Arrival Communication and Mobile Ticketing, as well as other key metrics. New Orleans finished first those first three categories.
The team released a statement emphasizing the “rankings are illustrative of the seriousness and importance the organization set out to accomplish beginning in April of 2020 in collaboration with Ochsner Health System, ASM Global and the entire Saints organization of creating and implementing a comprehensive health and safety plan (VenueShield) for every person that entered the Mercedes-Benz Superdome.”
Saints owner Gayle Benson added, “The health and safety of our fans, employees, game staff and participants will always be our top priority and driving principle. Organizationally, we pride ourselves in our mission of providing the greatest fan experience in the NFL. I am gratified we were able to come together to safely host thousands of fans while also protecting all of those who make our games possible. From the initial onset of this pandemic, we proactively sought the guidance and advice of health and safety experts, and set out to create logical and intentional procedures and processes and finally, making sure we were able to deliver every game day. Simply put, we have the best and safest fan experience in the NFL because we have the best fans in the NFL. We are thrilled that our efforts best protected our fans, players, coaches, and staff and that collectively everyone felt safe.”
The team could have possibly safely accommodated a few more fans but local pandemic guidelines strictly limited attendance. Even the bars are closed for Mardi Gras. The next time the Saints celebate a win in the locker room, Mayor Latoya Cantrell does not want the to risk the city’s team being fined or docked draft picks again.
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The Superdome will have a new sponsor for this upcoming season, as was confirmed months ago. The Saints are still waiting for the all but inevitable retirement announcement coming from Drew Brees. Regardless of the names on the back of the jerseys or atop the iconic Superdome roof, the team hopes to have the throbbing heart of the city’s Saints fan pumping to full capacity next season. To help with the logistics of tackling this health care crisis, the team has offered to alter the remodeling construction inside the stadium and space within Champions Square to help coordinate an effective vaccination location. Senior Vice President/Chief Operation Officer Ben Hales said even “parking lots and the brewery” could be utilized.
The New Orleans Saints are also mapping out the logistics of a new seating plan that will see the addition of 12 new premium seating lounges at ground level and also a newly constructed visitors locker room. Fans need not fret about losing thousands of loud voices worth of home-field advantage while also being far too hospitable to visiting teams. The new locker room was a requirement for any new bids to host the Super Bowl and other big events. Even Final Four teams will need an expanded locker room area. Those events are such large revenue generators for the city and state that the cost is negligible compared to the return. Additionally, the new seating arrangement will allow the total capacity to remain close to present-day numbers.
It should be noted this is now team money flowing into the stadium, not state money owed to the team. Most of the terms of that deal signed by the state and team has ended, lapsed, or has otherwise been terminated. This is an additional investment by ownership and management to keep the Superdome viable as a world-class venue, not just a viable NFL stadium. There will be some growing pains to learn the nuances of how this new building works but the end product will worth the adjustments. Some season tickets holder may lose their old vantage point of the field but they will still have a seat in the stadium.
The Saints “have contacted approximated 95% of all affected season ticket holders” as of this time. While the renovations will affect over 4,000 actual seats, the team is finding ways to keep existing season ticket holders in the building. Seats will not be taken out of the stadium, they will just be relocated. The new seats and big events coming to town will enjoy the new Superdome luxuries of wider concourses, more concessions, and additional vertical transportation options like elevators and escalators. Any season ticket holder that cannot find a fitting option at this time will be placed on a prioritized right of first refusal styled list.
“Culturally, health and safety is our first priority in everything we do,” said New Orleans Saints President Dennis Lauscha. “When we were faced with the unique challenges Covid-19 presented in April, we immediately went to work by seeking out the best health and safety experts available to help us establish the very best policies and procedures to keep people safe. We are proud that we were able to deliver for our fans and team. We are particularly appreciative of the health and safety experts led by Ochsner, who guided our team and ASM Global in creating our plan. More than anything, the success of our program was a result of the work of our staff, constant and on-going communications, and staff training, and most importantly, the tremendous cooperation of our fans.”
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74c7faa137e5a31aaab399f0734a230d | https://www.forbes.com/sites/christopherelliott/2020/05/23/how-i-escaped-from-europe-without-an-emergency-evacuation-plan/?sh=30f54d8c421a | How I Escaped From Europe Without An Emergency Evacuation Plan | How I Escaped From Europe Without An Emergency Evacuation Plan
No one thinks about an emergency evacuation plan when they book a vacation. So when my Medjet membership came up for renewal late last year, I couldn't have imagined being airlifted back to the United States during a pandemic. And I never thought a team of professionals would help me escape from Europe.
But they did. A few days ago, I found myself on the move and closely watched. I'd just boarded a flight from Nice, France, to Paris with my three teenage kids.
My phone buzzed:
"Good Morning Mr. Elliott, we’re reaching out to confirm if you have boarded your flight for Paris."
Yes, I replied to the ops center. I was on the plane. And my kids and I faced a 22-hour trip from southern France to the Pacific Northwest. Four flights, three stopovers — and a lot of messages from a company called FocusPoint International, which handles the security evacuations for Medjet.
The author's kids at the start of their journey in the almost abandoned airport in Nice, France. Christopher Elliott
What is an emergency evacuation?
Several companies offer emergency evacuation services. Although most of them specialize in medical evacuations, Global Rescue and International SOS also offer crisis response services such as evacuations and repatriations. You can also purchase an insurance policy from a company like Cavalry Elite Travel Insurance, which gets you home if you're hospitalized or caught in a dangerous situation 100 miles or more from home. FocusPoint's mission — to identify threats, mitigate risks, and respond to crises — may seem a little amorphous. But in plain English, they'll get you out of Dodge when you need it.
I didn't know I was covered for an emergency evacuation through Medjet and FocusPoint. Late last year, when it was time to renew my Medjet membership, I saw an option called Medjet Horizon, which includes the company's standard medical evacuation coverage, plus what it calls worldwide travel security, crisis response, and evacuation services. I knew we were going to be in Europe for a while, so I decided to buy it.
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Fast forward three months. We were stuck in Nice after the pandemic and needed to come home. I contacted my travel advisor at Valerie Wilson Travel and asked her for help to escape from Europe.
"You should check with Medjet," she said.
A few minutes later, I was on the phone with Medjet. It turns out I was covered for an evacuation. After some back-and-forth, and a handoff to their partner FocusPoint, they decided to get us out on a commercial flight: on Air France from Nice to Los Angeles via Paris, and Delta Air Lines from Los Angeles to Spokane, Wash. That's 7,276 miles and nine time zones if you're keeping track.
The evacuation plan came together so quickly, I hardly had time to process it: After nearly two months of being confined to an apartment in France, we were going home.
Our circuitous way home from Nice to Uncle Pete's basement in Spokane, Wash. Christopher Elliott
Traveling without an emergency evacuation plan
Most American travelers go abroad without an emergency evacuation plan. Even, ahem, journalists who write books about being the world's smartest travelers. Like most experienced travelers, I had a vague idea of what I'd do in an emergency. But traveling through Europe, I thought, "What could possibly go wrong?" I never thought I'd have to escape from Europe.
That's a common mistake, as hundreds of thousands of other travelers learned in March. The continent was locked down, flights were canceled, and many travelers found themselves stuck overseas. A proper emergency evacuation plan addresses the following questions:
Who's in charge of getting me home? Who has the authority to make decisions about my repatriation? Who has access to my critical documents, like passports, immunization records, credit cards and emergency contact numbers? Do we know what to do when a crisis happens? Where's the plan?
I admit, I only could answer only one or two of those questions. Basically, I was traveling without an emergency evacuation plan. And I know that if I was doing it, then plenty of other experienced travelers were, too. That's one of the reasons I'm writing this story. Please, if you're reading this, get an emergency evacuation plan. Even if you're going to be away for a long weekend. Know what will happen when things go wrong.
The author's children disembarking their flight from Nice, France, to Paris. Christopher Elliott
This is what it's like to be evacuated
When people think of an emergency evacuation, images of helicopters landing on a rooftop come to mind. One of my favorite evacuation stories is Igor Natanzon's, who was airlifted from his South Pole photographic expedition by Redpoint Travel Insurance.
But most evacuations happen by more conventional means — a commercial flight, a train, or bus. The difference is that you have the backing of a team of professionals working in a 24-hour ops center.
In the days leading up to our evacuation, FocusPoint conducted regular welfare checks. That's a WhatsApp message followed a few hours later by an email. If you miss your check-in, they call your cell phone to make sure you're still alive.
It felt a little over the top since we were in a safe apartment in Nice. But if we had been in a third-world country, cut off from home, those welfare checks would have been vital. Because if you're not well, they make sure you get well.
For example, I spoke with a Global Rescue representative earlier this week who said one of its clients was stuck in Africa during the coronavirus lockdown. During a welfare check, the client said he couldn't find food. Global Rescue made arrangements to deliver groceries to his doorstep.
The author on a nearly empty Air France Flight 66 from Paris to Los Angeles on May 9, 2020. Christopher Elliott
"Watch for any signs of illness"
My primary contact at FocusPoint was Randy Haight, the company's senior director for global response and protective operations. Everyone called him Doc. Before evacuating, we had several detailed conversations about the risks of remaining in France and of flying back to the States during a lockdown.
Doc explained that in an evacuation, you normally take the first opportunity to get someone out. But for us, it wasn't that simple. The first opportunity would have required an overnight in virus-ravaged New York and possibly a second overnight in Dallas or Minneapolis. We could also stay in Nice for a few days and take a more direct route through LAX. The question was: Is Nice really safe?
One of Doc’s main concerns was our health. He asked me to double down on my temperature checks. "Please monitor yourselves daily," he wrote in an email. "Watch for any signs of illness — COVID-19 or anything else — and let us know immediately if you or your children become sick."
The other problem: Our apartment lease was running out. We could extend it for another week, but after that, we were homeless. And all the hotels remained closed. No matter how safe France was during the coronavirus lockdown, our time in Europe would come to an end sooner or later. It was time to come home.
Aren Elliott, the author's son, arriving in Los Angeles. Christopher Elliott
In an emergency evacuation, someone's with you every step of the way
FocusPoint overlooked no detail. The moment the door to our apartment closed and locked behind us, someone was monitoring us constantly. It felt a little bit like a worried mother texting you on your first trip outside the country, except that the concern was warranted. The risks of international travel couldn't be overstated. Even though the airports and airlines were taking every precaution, the coronavirus was still running rampant. Only U.S. citizens and returning residents were allowed to travel back to the States.
I covered our journey home in this Sunday's Washington Post. But I didn't go into detail about the role of my travel advisor, Medjet or FocusPoint.
In a perfect world, all three are working together to ensure your safe return. My agent, Julie Vigliotti, monitored our flight itinerary and helped us process a cancellation for a flight I had booked a few weeks earlier. She offered to help us if we encountered any problems, which is exactly why you hire a travel agent at a time like this. I felt like I had a team working to get my family home — and a backup just in case.
WhatsApp messages between the FocusPoint ops center and the author on the day of travel. Christopher Elliott
What if something goes wrong when you're being evacuated?
If we'd missed the first leg of our flight from Nice to Paris, my kids and I would have been in trouble. Unable to access our apartment or find a hotel, we would have only had one option. We could have booked a seat on the only other flight out of Nice that day, to London. At the time, the situation in London was far worse than in southern France, in terms of the risk of infection. From there, we might have had to do another overnight in New York and then another in Dallas — a four-day odyssey back to the West Coast.
That's the value of working with a company like FocusPoint. They have people on the ground who can fix things. A few years ago, I visited the headquarters at International SOS, and was impressed with the breadth of their networks. We're talking hospitals, doctors, translators and local fixers.
Although we made it back to the States without any complications — except maybe for a horrible case of jetlag and a touch of culture shock — it was reassuring to know that they could have solved almost any problem.
Arriving in Spokane, Wash., after 22 hours of travel. Next up: two weeks of quarantine. Christopher Elliott
Do you need to work with a company that provides an emergency evacuation plan?
I began to look for the text messages from our virtual mom in the ops center as our journey progressed.
In Los Angeles: "We trust that you have arrived safely? Checking in to see how you all are doing."
In Seattle: "Please let us know if boarding procedures are all successful upon your departure flight to Spokane."
Finally, in Spokane: "We trust that you have had a safe flight home. The transportation arranged for you has arrived and is standing by."
And, true to their word, there was a car waiting for us when we walked out of the airport to find a car waiting to take us home.
A day after we arrived, a FedEx package landed on our doorstep. It was an American flag and a personal letter from Greg Pearson, FocusPoint's chief executive.
"My hat's off to you and your family for making it through this crisis," he wrote. He noted that his company had assisted more than 150,000 customers during the coronavirus crisis. Its services included shelter-in-place assistance, health and welfare checks, and emergency messaging services.
"I hope that you and your family can now put this ordeal behind you and when the time is right, travel fearlessly," he added.
But our journey wasn't over. We had two weeks of self-quarantine in Uncle Pete's basement ahead of us. Our isolation ended this morning, and I'm happy to report that we're symptom-free.
I don't think we'll ever travel without protection again. At a time like this, anyone who travels anywhere should strongly consider a coverage plan that offers emergency evacuation services. You'll probably never need it, but if you do, you'll be relieved to know you have it. I am.
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1dd3fdcb0dce33b01b5c9662ded98b16 | https://www.forbes.com/sites/christopherelliott/2020/07/18/travel-alert-these-summer-outdoor-activities-are-safe/?sh=70a61605292c | Travel Alert: These Summer Outdoor Activities Are Safe | Travel Alert: These Summer Outdoor Activities Are Safe
Are there any activities you can do this summer that won't get you sick? Yes, but as with all things ... [+] travel, you have to read the fine print. Getty
During this summer of social distancing, the travel industry has a message for you: You can still take a vacation without getting sick. There are a number of outdoor activities that are perfectly safe, it claims.
About one-third of Americans are planning a domestic trip, according to a new survey by LuggageHero. And roughly 1 in 5 intend to travel abroad.
But should you?
If you're all alone outdoors, are you safe? Perhaps. Getty
Summer outdoor activities that are safe
Here’s a short list of summer outdoor activities that are considered safe:
Biking Camping Hiking Rafting Scuba diving Stargazing
Safe alternatives to three months of confinement
On my daily walk through the hills of North Reno, Nev., I've been thinking about alternatives to three more months of indoor confinement. The hiking paths aren't famous, but they offer a terrific view of the Peavine Peak and the foothills scorched by an early summer wildfire.
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The jackrabbits outnumber people here. And more often than not, fellow hikers wear face masks and step to the other side of the trail when they see you coming. Hiking here is reasonably safe, unless the bunnies get COVID. Then all bets are off.
The author's son, Aren Elliott, on an unnamed trail in North Reno, Nev. You can hike this summer ... [+] without getting infected. But you have to be careful. Christopher Elliott
Beware of self-serving recommendations that will get you sick
As a travel journalist, I've been getting slammed with press releases declaring that this summer, you can take a socially distanced vacation without the risk of a COVID-19 infection. It's simple, according to the experts: Just rent an RV, pitch a tent, or head to a remote resort away from all the crowds. Problem solved!
Nonsense. Following that advice may get you sick.
Hotels, resorts and RV manufacturers are doing everything they can to remain relevant and financially solvent. But travel is a social activity. And while we can maybe agree that this isn't the summer to attend a concert or visit a crowded beach, the travel industry's self-serving advice isn't sound.
Are there any outdoor activities that are safe? It turns out the answer is a qualified "yes." But as with any travel product, you have to pay attention to the fine print. Renting bikes or pitching a tent doesn't guarantee you won't end up with COVID.
I asked the experts to help me separate the PR from the facts. Here's what they told me.
Biking can be a safe activity this summer -- if you keep your distance. Getty
Biking
Riding a bike isn't just a fun recreational activity. With some mass transit not operating, it may be one of the only ways to get around this summer. "It’s a fun way to release pent-up stress, breathe in fresh air, and get moving," says Julie Singh, cofounder of TripOutside, a travel site that focuses on outdoor activities. No wonder bike sales are revving up this summer. But Singh warns that biking alone is the safest way to bike this summer. In a large cluster of bikes, à la Tour de France, you could get infected. "Groups increase the risk of transmission, so heading out solo to wide open, uncrowded areas is your best strategy," she adds.
Where to bike: Minneapolis is rated as one of the most bikeable cities in America. I also love Montreal — if you can get there. Just before the lockdown, I checked in to the new Kimpton Vividora Hotel in Barcelona. You can check out bikes while you're a guest at the property. We explored the city on bikes, and it was lots of fun. Alas, the hotel is closed because of the virus, and if I were to go biking in Barcelona now, I'd steer clear of the crowds.
Camping can be safe this summer, but stay away from crowded campgrounds, say experts. Getty
Camping
There's camping and then there's camping. As my FORBES colleague Alex Ledsom noted, RVs are a massive trend in the age of COVID. But there's an assumption that campers are safe. They aren't. I'm probably going to get myself into trouble for saying this, but you're not likely to be any safer on a campsite than at a hotel, and maybe less so. Why? Well, if you've ever stayed on a campsite, you probably already know the answer. Those shared bathrooms and showers are breeding grounds for all kinds of germs. But if you go out into the wilderness, away from all the people — now that's camping. Suchot Sunday, a Canadian personal finance blogger, is doing exactly that. She's avoiding Canada's busy national parks entirely this summer. "For us, camping means more thought about large groups and social distancing," she says.
Where to camp: I've done most of my camping in remote parts of the Austrian Alps. And this summer, with COVID under control in Europe, you don't even have to worry about social distancing, at least not like you do in the States. If I had to choose a place in the U.S., I'd pick central California, maybe somewhere along the beach. Just take the 101 north from Santa Barbara and you can't go wrong.
If you go hiking, stick to the early morning and late afternoon. Getty
Hiking
But don't do it like everyone else, advises Alicia Filley, who founded the website The Healthy Hiker. Her advice: To maintain optimal social distancing, go hiking early in the morning or late in the evening. "Most people who are on vacation spend the morning lazily getting ready and head back to their campsite or hotel early in the afternoon to relax," she told me. "Take advantage of the long summer days by getting an early start and hitting the trail by 7 a.m. or doing an evening hike starting at 6 p.m."
Where to hike: Hands down, Sedona, Ariz. The network of hiking trails that run through the red rocks offers something for everyone — steep grades, creeks that you have to jump across, rock arches and, of course, sweeping vistas of breathtaking Arizona scenery. There are plenty of terrific hiking guides in Sedona, but I would recommend that you take a long weekend to discover it for yourself. That's half the fun.
Whitewater rafting can be safe with the proper precautions. Getty
Rafting
As counterintuitive as it may seem, river rafting — if done correctly — won't make you sick. Trade groups like the Arkansas River Outfitters Association (AROA) have taken steps to help its members keep the activity safe and fun. It's second nature to the outfitters, who are experts in risk mitigation. The steps include daily symptom screenings of employees, encouraging guides to wear a face covering or mask while on trips, no-contact check in and, of course, increased disinfecting of all rafting equipment. "It's a well-ventilated, safe outdoor experience," says AROA spokeswoman Chelsea Coe.
Where to go rafting: I haven't tried rafting in the Reno area, where I'm spending the summer. But one of my most memorable whitewater rafting adventures happened a few years ago in Alaska's Denali National Park, in early September. Alas, the outfitter closed permanently — another victim of the pandemic.
If you go scuba diving, make sure you bring your own equipment or you clean the rental equipment ... [+] thoroughly. Getty
Scuba diving
Scuba diving and snorkeling are an almost perfect social distancing activity. It's just you and the fish. But there's a catch. Rental equipment isn't always cleaned to standards. (Take it from me — I used to certify divers in the Florida Keys.) So to stay COVID-free, bring your own gear, including your mask, fins, snorkel and regulator, or make sure you clean the rental gear yourself with disinfectant.
Where to go diving: Catalina Island, just off the coast of Southern California, is an intriguing dive spot. You'll find kelp forests and bright orange Garibaldi damselfish. "It's an ever-changing opportunity for adventure and exploration," says Sherri Cline, director of marketing for Catalina Divers Supply.
Stargazing is a solitary activity that can be done safely this summer. Getty
Stargazing
"Stargazing won't get you sick," says Ben Williams, founder of the online magazine Road Affair. The reason? It's a solitary activity — it's just you and the galaxy. Williams recommends one of the Dark Sky Parks in the country where there's no light pollution, and you can see the stars clearly. Death Valley National Park is one of the largest Dark Sky Parks in the country. And Cosmic Campground within Gila National Forest was one of the first Dark Sky Sanctuaries in North America. "Stargazing is a powerful experience, which everyone can and should enjoy safely," he says. "Plus, it's the simple things in life that are the most rewarding." How true.
Where to go stargazing: Definitely, Hawaii's Big Island (if you can get there). Drive up to the Mauna Kea Visitors Center at sunset and watch the stars come out.
Only one way to ensure you won't get sick this summer
I've said it before, and I'll say it again: The best way to stay healthy this summer is to cancel your vacation and stay home. I made this unpopular recommendation in a recent USA Today column and received a barrage of hate mail from readers who thought I was trying to take away their fun.
Not so. I'm offering these summer activities to make sure you can live to see your next summer vacation.
You can thank me later.
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7fe5ba0770cc120e934f0858e3c95c99 | https://www.forbes.com/sites/christopherelliott/2020/09/05/this-is-travels-new-normal-say-hello-to-the-american-staycation/ | This Is Travel's New Normal: Say Hello To The American Staycation | This Is Travel's New Normal: Say Hello To The American Staycation
Kauai's Waimea Canyon, where Elaine Schaefer and her husband Jack staycationed. Elaine Schaefer
Staycations may be the vacation trend of 2020, but does anyone really know who these staycationers are?
Meet Elaine Schaefer, who didn't go anywhere this summer. And by "anywhere" I mean she didn't take a puddle jumper from Kauai to Oahu and catch a flight to the mainland, like almost every other Hawaii resident. It's kind of hard to do that when the state is under a strict quarantine order.
Instead, she drove from Princeville, where she lives, to Kekaha, on the other side of Kauai. Then she turned down a winding road to Kōkeʻe State Park near Waimea Canyon and checked into a cabin.
Waimea Canyon, known as the Grand Canyon of the Pacific, may be one of the most beautiful places in Hawaii. From the lookouts, you can see the mile-wide gorge, and beyond it the ocean and the forbidden island of Ni‘ihau.
Note: This is the second in a two-part series on the changing American vacation. Here’s the first part, which explains how we got here.
Jack Benzie, Elaine Schaefer's husband, at Kōkeʻe State Park in Kauai. Elaine Schaefer'
Staycations may already be the new vacations
"These are very rustic, mainly two-bedroom cabins set among the trees," says Schaefer, who publishes a travel blog for seniors. "They have a wood-burninig stove, kitchen, living room and bedrooms — and no internet."
The only restaurant in Kōkeʻe closes at 3 p.m., so Schaefer got to use the kitchen often.
"We plan to go back again soon," she told me.
In many ways, her experience reflects that of the typical American staycation in 2020. Staycationers want to go somewhere remote, safe but also simple. Sometimes they're "microcationers" who want to walk down the street from home to their hotel. They're adventurers who need to disconnect. Mostly, they want to be isolated and away from a possible COVID infection.
These desires to disconnect aren't likely to go away any time soon. In fact, experts say they may become a permanent thing. Actually, staycations may already be the new vacations.
Karen Cummings' cabin near Kezar Lake, Maine. Karen Cummings
What is the American staycation?
The average person who traveled, or planned to travel, in 2020 kept their vacation destination within four hours of home, according to research by VactionRenter.com. Nearly 80% of respondents said there are vacation opportunities within 50 miles of their home, and over half agreed this type of vacation can be just as enjoyable as going somewhere farther away.
"These short-distance destinations, or nearcations, are also likely more affordable, which could be another factor for cars being the most popular mode of transportation to reach a vacation spot, according to our survey," says Marco del Rosario, chief operating officer for VacationRenter.com.
Another recent survey by Farmers found that 74% of drivers want to stick close to home when they're traveling. Just over a third (36%) are only willing to drive less than 100 miles one way.
For Susan Kalinowski, the point of the staycation wasn't to travel far, but to feel far away. She lives in Boylston, Mass. In July, she spent five days in nearby Mashpee, Mass.
"Just being away and having a change of scenery and being near the ocean was a big plus." says Kalinowski, a retired nursing assistant. "I figured with the quarantine I didn’t want to go out of state."
Karen Cummings, a retired marketing professional, also decided it was time to get out of her house in Fryeburg, Maine, this summer.
"I rented this 1930s cabin overlooking Kezar Lake, which is all of 13 miles from my home," she says. "Just couldn’t stand not going anywhere. At first I decided I was crazy to do it but then it ended up being a really fun getaway."
She invited friends to visit her. They dined at nearby restaurants and hung out at the beach. It was a nice change of pace from last year's busy travel schedule, which included trips to Cuba, Portugal, and Italy.
"We spent every evening admiring and judging the sunsets," she says. "A perfect vacation."
What's the appeal of an American staycation?
So why do people today prefer staycations to more traditional vacations?
They save time. Driving a few miles, or even walking to your hotel, means you recover a lot of valuable vacation time. There's no need to spend hours on a plane or in a car. You're already there.
They save money. Besides eliminating trip expenses, you also have an unfair advantage when you're on your home turf. You know all the good restaurants, and if you forget something, you can go home and get it. Also, no need to pay a pet sitter. You can come home to feed Fido and check the mail.
They save the environment. If you've looked at the enormous carbon footprint each airline passenger leaves behind, you'll love the staycation. There are no planes involved, and if you walk to a green hotel, congratulations — you're carbon-neutral!
Put it all together and you have compelling reasons to stay put, says Ryan Todd, the head of sales at the new Canopy by Hilton Philadelphia Center City. So far, nearly 90% of his business has been local.
"They're looking for a change of scenery for their workspace, favoring the hotel atmosphere because of its onsite amenities, service offerings and stringent health safety protocols," he says.
But are American staycations really the new vacations?
But wait — aren't these just people making temporary adjustments to their vacation schedule? How can they say this is permanent? Some professionals, in fact, don't think it will last forever. Del Rosario of VactionRenter.com is one of the skeptics.
"I believe these travel trends will continue through the rest of 2020 and potentially into 2021 as the pandemic remains prevalent," he says.
Others say staycations are here to stay.
"I suspect that this trend is actually the beginning of a lasting behavior change in travel," says Michael Altman, program director and lecturer in the hospitality and tourism management program at Meredith College in Raleigh, N.C.
If you listen carefully to the staycationers of 2020, though, you'll hear something: these "perfect" vacations. They talk about repeating them again "soon." It's clear that they've discovered something that's probably worth keeping.
"Staycations are not a trend anymore," says Rob Stein, managing director of The Stein Collective, an affiliate of Ovation Travel Group. "Quite simply, nearcations offer clients the opportunity to create unique experiences with minimal baggage — both literally and metaphorically. A quick self-drive, Uber ride, or even a leisurely stroll can create refreshing — and enduring — perspectives within the physical center of our lives."
In fact, for many luxury travelers, a staycation and a vacation are now one and the same. Something tells me we're going to spend the next year wrapping our heads around that one.
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662062c909f2cdb7ea8633af41191f9a | https://www.forbes.com/sites/christopherelliott/2020/12/16/surprise-airline-customer-service-improved-in-2020-heres-why/ | Surprise! Airline Customer Service Improved In 2020. Here’s Why. | Surprise! Airline Customer Service Improved In 2020. Here’s Why.
Airline customer service improved in 2020. Here's why, according to the ACSI. getty
Airline customer service improved in 2020, rising to its highest level since 1994. That's right, air travel got better while the world fell apart, at least according to the latest numbers from the American Customer Satisfaction Index (ACSI), a closely-watched barometer for customer service.
"The airline industry has been on an upward trajectory over the past couple of years," explains David VanAmburg, ACSI's managing director. But even the pandemic couldn't stop it; in fact, it may have helped.
"Perceived value has skyrocketed," he adds. "Seat comfort — historically the lowest-rated benchmark — is the most improved, rising 3% since March 2020."
The ACSI released airline scores, as well as other travel industry results, this morning. (You can read my exclusive interview with VanAmburg in my newsletter.) But as with almost all things airline-related, the reasons behind the industry's customer-service rise are a little complicated — and disappointing, at least from a passenger perspective.
Why did airline service improve in 2020?
"It was a banner year for airlines in terms of customer satisfaction," VanAmburg told me. "That, despite the hand they were dealt."
But a lot of the increases were tied to seat comfort. United Airlines, for example, improved its seat comfort more than any other airline, which led to some impressive gains in customer satisfaction. Did it actually replace aging economy class seats with more comfortable, spacious ones?
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"They did not," says VanAmburg.
Instead, the lower volume of passengers benefited passengers and raised customer satisfaction scores. ACSI notes a similar jump just after 9/11.
"People were getting through the lines faster, they were getting seated faster, and the planes weren't as full. It was a better experience. There's nobody elbowing you on either side. That creates a higher level of customer satisfaction," he says.
Despite rising customer service scores, gains were uneven
Even though airline service improved in 2020, not all airlines had reason to celebrate.
ACSI
ACSI
The standout is JetBlue, which dropped 3% to a score of 76. That's an all-time low for the carrier. JetBlue is the only carrier to show no improvement in seat comfort since 2019. The airline, which once offered generous legroom even in economy class, has gradually moved toward the legacy carriers when it comes to seat comfort. So it's no surprise that its scores would more closely resemble those of the major airlines.
The biggest improvement from 2019 belongs to low-fare airline Spirit, which gained a net 6% since 2019 to reach 67. But it still joined Frontier, another low-cost airline, at the bottom of the ACSI rankings.
"Despite some improvement, the two airlines lag far behind the rest of the industry for in-flight services such as entertainment and complimentary food or beverages," says VanAmburg. "Hardly surprising given their no-frills business models."
What did passengers like about flying?
So, even though airline service improved in 2020, some improvements were more noticeable than others. The ACSI asked airline passengers to rate their experiences based on a variety of factors. They ranged from the quality of the carrier's mobile app to in-flight entertainment.
A look at the benchmarks offers a glimpse into the flying experience in 2020 — and exactly how airline service improved.
ACSI
ACSI researchers found that passengers like mobile apps — and despite the gains, they dislike airline seats.
Airline mobile apps performed well, with scores of 82 for reliability and quality. Researchers noted a small decline in scores for check-in and website satisfaction (both 81). Baggage handling, flight crew courtesy, and gate staff courtesy remained reasonably high at 79, along with loyalty programs and on-time arrivals.
The only significant declines for airlines during the pandemic were reservations (-2% to 80), call center satisfaction, and the boarding experience (both down 3% to 78). The researchers said they were surprised those scores didn't fall more, considering the high call volumes because of cancellations and the challenges of social distancing while boarding.
At the low end for airlines, customers still find room for improvement when it comes to overhead storage, in-flight food and beverages, and in-flight entertainment (all scoring 74 to 75), according to the ACSI.
Interestingly, food and beverage service assessments didn't worsen, even though airlines reduced these offerings during the pandemic.
Seat comfort, the driver of this year's customer satisfaction scores, ranked dead last on the list.
Will airline service improve in 2021?
Airline service in 2021 will depend on several factors, according to the ACSI. Among them: the distribution of COVID-19 vaccines and the pace of the recovery. Strangely, the more crowded the planes get, the worse customer perceptions of service become. A quick recovery will help airlines but hurt their customer service.
Bottom line: This is probably as good as it's going to get for a long time.
"I think we'll see a dip in airline customer satisfaction in 2021," says VanAmburg.
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6c1e337b9af48cba64d474db5a33e9a6 | https://www.forbes.com/sites/christopherelliott/2021/04/10/dont-you-dare-protect-your-summer-vacation-like-this/ | Don’t You Dare Protect Your Summer Vacation Like This | Don’t You Dare Protect Your Summer Vacation Like This
Here's how to protect your summer vacation. Insurance is a good start, but you may need more. getty
No one in their right mind would take a vacation this summer without a little protection. And I'm not talking about sunscreen, either.
"With the uncertainties of COVID for summer travel, a comprehensive trip insurance policy is a must," says Rajeev Shrivastava, CEO of VisitorsCoverage.
Travel protection such as insurance or a medical membership used to be optional for travelers. But post-pandemic, it's pretty much mandatory. In some cases, it's literally a requirement. Many European countries require health insurance coverage for your visit, and more are doing so every day.
Increased demand for travel protection
"We’re seeing increased excitement for travel paired with an increased demand for travel insurance," says Karisa Cernera, senior manager of travel services at Redpoint Travel Protection. The Redpoint team has been staying on top of insurance requirements, which are changing by the minute. They’re complicated.
"We recommend that clients review official government websites at their travel destination for the most up-to-date entry requirements," she adds. "Many destinations are now requiring travelers to purchase travel insurance which protects against COVID-19 related losses and medical needs."
In fact, there's a list of things your travel protection absolutely must have this summer. If you're booking a vacation soon, you need to know what they are, say experts.
So how do you fail to protect your summer vacation? By not reading your insurance policy carefully. By ignoring the "free look" provisions that let you get a refund if you have second thoughts about a policy. By ignoring COVID-19 and other medical expenses and assuming that travel insurance is all you need. And by being clueless about what's not covered.
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By the way, I know a thing or two about protection. I run a nonprofit organization dedicated to helping consumers, and we get a lot of travel complaints. In more than half of those cases, having insurance or a medical evacuation membership could have helped avoid the problem.
Here's what travelers want this summer
A new survey of summer travelers conducted by World Nomads conducted suggests most people are concerned with having to call off their trip because of another COVID-19 surge:
43% of respondents considered trip cancellation the most important component of travel insurance 31% said emergency medical and dental coverage was essential. 27% wanted COVID-19 coverage.
"The data shows that the potential risks of COVID-19 still dictate the travel mindset," says World Nomads spokeswoman Lisa Cheng.
People are paying attention. At Texas A&M University, officials stopped just short of requiring their study abroad program participants to buy insurance.
"We aren't requiring students purchase additional insurance," says Holly Hudson, executive director of the education abroad program at Texas A&M University. "However, all students are strongly encouraged to purchase additional insurance that will cover their expenses in the case that their flight or program is canceled or if they are recalled to the U.S. because of COVID-19."
You never know what might happen this summer
Summer travel can be unpredictable in other ways, say experts. "The summer months also bring varying weather conditions, storm warnings, and hurricane season," notes Jeremy Murchland, president of Seven Corners. "If you are traveling to a destination that may be particularly vulnerable to hurricanes, stay alert and research how your travel insurance plan may ease the stress of potential dangers with disaster coverage."
Related: Best Pandemic Travel Insurance Plans 2021
Read the fine print on your insurance policy (then read it again)
That's the advice of John Thomas, an associate professor of hospitality law at Florida International University's Chaplin School of Hospitality & Tourism Management. "The key legal term in a travel insurance policy is force majeure or, in plain English, conditions beyond the control of the air carrier or cruise line, railroad or hotel," he explains. "The specific conditions should be listed and should include flight interruptions due to: natural disasters, insurrection, labor strikes, bridge or highway closures, pandemic illness outbreaks at origin or destination and government restrictions on travel or business."
Problem is, many travelers don't review the fine print — so they don't know what is and isn't covered. Professor Thomas says good travel insurance should also provide for reimbursement to travelers despite any offer for a credit for future travel by the airline or cruise line, railroad or hotel.
Take a free look before you commit
Little-known fact: Some policies let you try before you buy. “Look for travel insurance policies that offer a free-look period and use that time to read your policy, so you understand what it covers and doesn’t cover," says Daniel Durazo, a spokesman for Allianz Travel. (Their policies allow for a 15-day period before it becomes nonrefundable.) What if you don't like the policy? "You can purchase a new product or cancel your policy for a full refund,” says Durazo.
Does your insurance cover COVID-19?
It should, says Christine Buggy, vice president of marketing at Travelex. "Even with COVID-19 cases declining, there is still a risk of contracting the virus before or during your trip. You will want to ensure that your travel insurance plan covers COVID-19 like any other illness," she says.
But what does that mean? If you, a traveling companion, family member or business partner, fall ill before or during your trip, you may be eligible for trip cancellation, trip interruption, emergency medical or medical evacuation coverage.
"Some travel insurance providers consider COVID-19 a known event which means you may not be eligible for coverage," Buggy warns.
Protect your summer trip by covering medical expenses
"Every travel insurance policy right now should include accommodations for medical needs," says Ravi Parikh, CEO of RoverPass, a campground booking website."It's important to be prepared for the worst-case situation: a positive COVID-19 test while traveling. Before signing onto any policy, you should read it carefully and or reach out to the provider to ensure this is one of the provisions."
RoverPass recently partnered with Generali Global Assistance to offer access to its network of medical care providers to people who use its booking service while traveling. Parikh says he thinks companies in the travel industry must do their part to ensure their clients' safety while preventing the spread of COVID.
You may need more than travel insurance
Most travelers are interested in protecting their trip investment if they have to cancel, says Laura Heidt, the insurance desk manager at Brownell Travel. Instead of future credit vouchers from suppliers, insurance offers money back. But you may need more, she notes.
"Additional medical transport coverage makes sure that if you do get sick, or injured while traveling you can be moved to a hospital at home for treatment and recovery," she says. "A medical transport membership like Medjet can get you moved to a hospital at home."
Here's the thing: Most people think of medical transportation as being exclusively for international trips. Not so, says Heidt. "It can be just as inconvenient, for you and your family, for someone to be stuck in a hospital just a few states away as it is to be stuck halfway around the world," she adds.
What if you have to evacuate?
"While traditional travel insurance might offer coverage for incidents like terrorism, pandemic, or natural disaster, it may not include the costs of specialized travel assistance services used to help you escape danger or evacuate if something goes wrong during your trip," says Stephen Anderson, a spokesman for FocusPoint International’s CAP Plan.
Evacuation membership plans offer an extra layer of protection. If something goes wrong on your trip, they offer access to experienced, multilingual travel specialists. These pros can coordinate in-country emergency response and assistance services, including evacuation.
Is everything covered? I mean everything
Travelers should make sure all of their expenses are insured, says Sherry Sutton, vice president of marketing at Travel Insured International. That includes transportation, accommodations, and any tours. One major mistake inexperienced travelers make is failing to insure everything.
"Purchase a travel insurance plan with trip cancellation coverage, and insure their full, non-refundable trip cost," she says. "It's recommended that you thoroughly review all the covered cancellation reasons. Canceling for a covered reason can reimburse up to 100% of your insured trip cost."
By the way, if you think you may need to cancel for a reason that's not covered, ask about a "cancel for any reason" policy. While it's a little more expensive (10% to 12% of your overall trip cost), you can cancel for any reason and get a refund of between 50% and 75%.
Also, understand what's not covered
"While it is important to understand what is covered in your policy, it is equally important to understand what is not covered," says Joey Levy, a travel advisor with Embark Beyond. "Most standard travel insurance policies do not cover fear of a pandemic, which includes things such as border closures or government travel restrictions. The only way to avoid that? A "cancel for any reason" policy.
And now you know how to protect your summer vacation. Oh, and don't forget the sunscreen.
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84d31ab8b1c2ed0ece2e2702b3342999 | https://www.forbes.com/sites/christopherelliott/2021/04/17/this-is-the-future-of-ridesharing-what-you-need-to-know-about-lyft-and-uber-now/ | This Is The Future Of Ridesharing: What You Need To Know About Lyft And Uber Now | This Is The Future Of Ridesharing: What You Need To Know About Lyft And Uber Now
As the pandemic starts to fade, the future of ridesharing remains uncertain. But here's what experts ... [+] say you should expect. getty
Before Will Peach hails an Uber, he reviews what he calls the Holy Trinity of pandemic ridesharing precautions.
He always sits in the rear passenger side seat and cracks the window. He avoids unnecessary conversation. And he uses hand sanitizer and minimizes his contact with the car's surfaces.
Peach isn't just another worried rideshare customer. He's also a medical student in Europe, so he knows more than the average person about the risks of a COVID-19 infection.
"Breaking the ridesharing process down into three simple precautions has made them easy to remember and hopefully kept transmission rates low," he says.
Welcome to the future of ridesharing. It's an increasingly busy corner of the travel industry in which many passengers follow Peach’s top three pandemic precautions — and more. Smart travelers will need to know the latest research on ridesharing safety, plus the essential protections that can keep them healthy.
It's been a rough ride for ridesharing
Ridesharing has had a bumpy ride since the pandemic started. And the future of ridesharing is equally uncertain.
A year ago, Lyft and Uber ridership dropped 70% to 80%. Only now, with vaccines being more widely distributed, has ridership has started to return. Uber is even trying to recruit new drivers as customers resume traveling.
"While a full recovery has yet to be made, our data shows that we're approximately 85% of the way there," says Avi Wilensky, founder of Uphail.com, a ridesharing site. "In other words, our March 2021 usage is about 15% less than what our March 2019 was."
MORE FROMFORBES ADVISORRideshare Insurance For Uber And Lyft DriversByJohn EganContributor
But it's not like before. I know this because the most visited place on my consumer advocacy site is the company contacts page for Uber. We're a magnet for Uber comments and complaints. Mostly complaints. And it's been a wild ride. My favorite story is the one about the woman banned from Uber because she wore the wrong mask.
Leave this window open when you ride
A recent UMass study suggests that opening the windows farthest from the driver may offer some benefits. The findings may provide COVID-19 risk reduction measures for future ridesharing passengers, according to Varghese Mathai, an assistant professor of physics at UMass Amherst.
No more carpooling
When it comes to the future of ridesharing, options for carpooling will remain limited, say frequent travelers.
"Before the pandemic happened, I could share a cab with at least three more passengers," says Robert Johnson, a frequent ridesharer who runs a woodworking site. "Now, I can only share a cab with one passenger. I think this is a safety measure both for the passengers as well as for the driver."
Johnson says you can't be too careful (notice a theme here?). He even recommends wearing casual clothes and then changing into formal work clothes once you get to the office. That way, you can avoid spreading whatever germs you picked up in the car.
Ridesharing can still be cost-effective in the future if you're careful
An Uber or Lyft ride may still be the cheapest — and fastest — way to get from point A to point B. But you have to be careful, say experienced ridesharers.
"It's a cost-benefit calculation if you want to rideshare at the moment," explains Henrik Jeppesen, a travel blogger who lives in Estonia.
If COVID-19 infection rates are high, as they are in Estonia right now, Jeppesen recommends avoiding ridesharing entirely. But as cases come back down, you can hail an Uber or Lyft, as long as you do so carefully. He recommends contacting the rideshare company beforehand to find out about masks. (Here's Uber's policy for the U.K., for example.)
Even when COVID-19 ends, you'll still want to think about safety
Travel is risky, whether there's a pandemic or not. Even though drivers usually have to pass background checks, some may slip through the cracks, say experienced ridesharers. In the future, travelers will have to be more vigilant than ever — particularly with all those new drivers coming onboard.
"There's a possibility that you could ride with a driver who shows unseemly conduct," says ridesharing veteran Christian Velitchkov, the co-founder of a marketing site.
His advice: Always ride in the rear of the vehicle as a safety measure. Never exit on the traffic side of the car.
This is the future of ridesharing: How to do it now
Attitude is everything when it comes to the future of ridesharing.
"Be selective, but not afraid," advises Will Coleman, CEO of Alto, an employee-based, on-demand rideshare and delivery company. And ask lots of questions about your ridesharing company.
"It’s important to understand the safety protocols of the service you're using. How are they vetting their drivers and vehicles? Are their drivers equipped with the right training and support to keep you safe?" he asks.
But riders will return, say experts.
"As cities continue to reopen and relax social distancing guidelines, we’ll start to see ridesharing as a necessity once again for commuters and those utilizing the service for essential activities," says Judah Longgrear, CEO of Nickelytics, a mobility adtech company. "This requires a lot of trust-building between rideshare drivers and passengers."
I'd like to boldly predict that ridesharing will be back better than ever in 2021. But I'm watching the fourth wave of cases slowly rise, despite vaccines and lockdowns. Something tells me it will be an uneven return to ridesharing this year.
And in the meantime, if I have to hail an Uber or Lyft, I'll remember the Holy Trinity of pandemic ridesharing precautions. And maybe say a prayer.
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e8190ddea68c4865d96f514d8417d1a1 | https://www.forbes.com/sites/christopherelliott/2021/04/24/here-they-are-this-summers-hottest-international-destinations/?sh=61caa3d63d08 | Here They Are: This Summer's Hottest International Destinations | Here They Are: This Summer's Hottest International Destinations
Santorini, Greece, is one of this summer's hottest destinations. getty
This summer's hottest international destinations are really hot.
An exclusive new customer survey by travel agency Embark Beyond finds travelers plan to flock to destinations known for warm summer temperatures — and more relaxed COVID-19 travel restrictions.
"This year's hot list is very different from most years," says Jack Ezon, managing partner of Embark Beyond. "It reflects both our clients' burning desire to explore outside our borders this year and shifting destinations based on which borders seem to be open to Americans this summer."
Note: Between now and the start of summer, things can — and probably will — change.
In fact, shortly after Embark finished this list, the U.S. State Department tightened the list of "Level 4" countries it recommended avoiding. It's all the more reason to work with a knowledgeable travel advisor and buy an industrial-strength travel insurance policy. And if you still need help, you can always ask my nonprofit organization for a hand.
Still, we can dream this summer, can't we? Here are the top 10 places to vacation in the summer of 2021:
Antipaxos, Greece. Greece is the hottest destination this summer. getty
Greece
Almost one-third of the Embark's summer business this year is heading to Greece. "Greece is our most popular European destination this summer since it was first to announce open borders to Americans," says Leo Sorcher, who oversees the agency's Inhabit the World division. In fact, long before COVID-19, people dreamt about partying at Scorpios Beach Club on Mykonos and taking in the sunsets from the scenic village of Oia on Santorini.
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Earlier this week, Greece announced that the country would open officially for tourism on May 14. It will join Croatia and Montenegro as the only countries in the Mediterranean to accept Americans this summer. Turkey is already open.
It's really hot in: The Santa Marina resort. Also, the new Kalesma in Mykonos and Canaves Epitome in Santorini are high on the must-do list, according to Embark. "Our clients are also obsessed with the new Nafsika Estate, a private villa run by the famed Mystique on Santorini," adds Sorcher. Embark runs a Greek and Ottoman Summer program that will let you see some of the hottest places in Greece and Turkey this summer with confirmed upgrades and flexible cancelation policies.
Hot air balloons flying in sunset sky Cappadocia, Turkey getty
Turkey
Coming in a close second, Turkey remains a big draw for American visitors. But a recent COVID-19 surge has put a hold on some activities, according to Bridget Cohn, a senior luxury advisor and founder of Bee Hospitality, the private membership affiliate of Embark Beyond. "While Turkey's borders are open and the country is accepting Americans who provide a negative PCR test within 72 hours of arrival, the country is currently experiencing strict lockdown, curfew, and restrictions due to a very recent surge in cases," she notes.
It's really hot in: Maçakızı. The new Edition "has a fabulous new vibe," while the Mandarin Bodrum and Amanruya are the "ultimate luxury sanctuary," says Cohn. For a more private experience, Bee is renting private luxury gulets — traditional Turkish wooden sailing boats — to bring clients on custom weeklong excursions to untouched areas of pristine Turkish coastline reachable only by boat.
A giraffe mother grooming her calf in Serengeti. getty
Tanzania
Tanzania accounts for fully 10% of Embark's Africa business. And for a good reason. "This is probably the only year in your lifetime you can snag prime space for the Great Migration," says Limor Decter, an Africa expert at Embark Beyond. "It's called the Greatest Show on Earth. There will be few other tourists."
It's really hot in: Everywhere! "Clients are taking advantage of an opportunity to experience the splendor of the Serengeti, climb the peak of Mount Kilimanjaro sans the crowds, or relax on the beaches of Zanzibar," says Decter. "This year, there will be minimal crowds and vehicles vying for the spectacular wildlife viewing at the Ngorongoro Crater, so it won’t feel like Disney World." Decter recommends the renovated Singita Sabora, which she calls the most over-the-top glamping experience in the world.
A woman standing in the Blue Lagoon, Iceland getty
Iceland
Iceland was one of the first countries to reopen to American visitors, and it remains a favorite, particularly as a relief to the hot summer weather. "Summer is prime time to visit Iceland. There's never been a better year to see it without being overwhelmed with tourists — or being shut out of some of the rare luxury properties often booked eight months in advance," says Kim-Marie Evans, a family and adventure specialist at Embark Beyond. Remember, the sun doesn’t set from May 21 to July 21.
It's really hot in: Reykjavik. Try the Retreat at the Blue Lagoon, the "ultimate locale if you want a base camp and exclusive access to the famous waters," according to Evans. "For the trendier set, the new Edition adds a new layer of cool to Reykjavik." Still too hot for you? Take a snowmobile tour to the top of the Langjökull Ice Cap, the largest ice cap in all of Europe.
View of Beaches Turks & Caicos Resort Villages & Spa. getty
Turks & Caicos
Turks & Caicos is just a three-hour flight from most Northeastern U.S. destinations. Lately, travel experts have started to call it the "new spring break" destination for Americans. "It's family-friendly, with apartment-style resorts and eco-adventures surrounding the white sand beaches and electric-blue sea," says Deborah Gellis, a travel expert with Embark Beyond.
It's really hot in: The Shore Club and Beach Enclave Long Bay, which is ideal for the warmer months of July and August. Being on the windier side of the island delivers the perfect climate, according to Gellis. Meanwhile, on the other side of the island, families are flocking to the all-beachfront Grace Bay Club.
Bright and colorful harbor image of Saint Barthelemy.. getty
St. Barths
It seems St. Barthélemy is the closest most Americans will get to the French Riviera this summer. Though closed now, the island indicates it will open to vaccinated Americans by May. "Jetsetters love the authentic French flavor, stunning coastline and hip vibrant boutique hotels and great beach clubs," says Dawn Oliver of WellXplored, a wellness affiliate of Embark Beyond. "Bookings for this July feel like the peak season of March since it is the closest thing to St. Tropez most Americans will get this summer."
It's really hot in: The iconic duo — Eden Rock and Cheval Blanc Isle de France. "Always top of the list for our clients at Embark Beyond," says Oliver. "I also love Le Barthélemy, another boutique hotel with a great vibe in the center of everything, or Le Toiny for privacy and seclusion."
Catamans, near Land's End, Cabo San Lucas, Baja CA, Mexico. getty
Mexico
Specifically, Los Cabos, on the southern tip of Mexico’s Baja California peninsula. That's where Embark is currently sending 8% of its international clients. "Los Cabos is a spectacular destination that is a beautiful blend of sophisticated, casual, luxurious, and authentic," says Laura Worth, art expert with the agency. "It's become the Hollywood playground of 2021 and even more in demand."
It's really hot in: The "sexy" new Zadun is a favorite for honeymooners. Best for families? The new Four Seasons, says Worth.
Woman walking on beach in Anguilla. getty
Anguilla
Anguilla announced it would be opening up on July 1 to vaccinated Americans who will be exempt from the current “bubble” restrictions. It was known as one of the safest places to visit during the pandemic, with fewer than 30 documented cases. "Now Anguillan enthusiasts are taking their winter Anguillan vacation this summer," says Cindy Salik, a travel advisor with Embark Beyond. "Aside from the most stunning beaches in the world, what makes Anguilla unique is its selection of great restaurants, hard to find in the Caribbean. The weather is always amazing, the food and service are incredible, and the beaches consist of miles of white sand and turquoise water."
It's really hot in: Belmond Cap Juluca is the ultimate romantic escape, with just 95 rooms spread out on the most beautiful one-mile stretch of beach on the island. For families, Salik also recommends the Four Seasons Anguilla.
Stradun (aka Placa), Dubrovnik's main street with the Bell Tower of the Franciscan Church in the ... [+] distance - Dubrovnik, Southern Dalmatia, Croatia getty
Croatia
Croatia is one of the best values in Europe this summer. Located on the Adriatic Sea, it also takes a nice picture. "It's considered one of the most beautiful destinations in the world," says Kari Angelo, a travel advisor with Embark Beyond. "In addition to boating in the crystal blue waters of the Adriatic, the country offers a full gamut of activities." They include exploring and hiking the national parks and waterfalls and a vibrant nightlife scene. Just a short speedboat ride from the town of Split, you'll find the famous Blue Cave Of Biševo, considered to be one of the wonders of the Adriatic Sea.
It's really hot in: Villa Dubrovnik, The Excelsior, and the Monte Mulini resort.
The Inca citadel of Machu Picchu in the early morning light with Huayna Picchu mountain in the ... [+] background getty
Peru
“This summer is a once-in-a-lifetime opportunity to visit Peru and see Machu Picchu without hordes of other travelers," says Kate Sullivan, a South America expert with Embark Beyond. But Peru has even more to offer: world-class restaurants such as Lima's Central, the Paracas National Reserve along the coast, and, of course, the Amazon.
It's really hot in: The new Explora Valle Sagrado, a haven for hikers who want to trek through the Sacred Valley to explore archaeological sites. Board the new Belmond Andean Explorer train to see Peru in style.
For many Americans, this summer will be the first real opportunity to travel abroad in more than a year. This list of the top 10 places to vacation is a helpful starting point, showing your best options for a quick getaway.
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0a2d8a766fa1a403407cdf9648e7cdb5 | https://www.forbes.com/sites/christopherelliott/2021/04/30/why-every-virtual-office-needs-a-virtual-assistant/ | Why Every Virtual Office Needs A Virtual Assistant | Why Every Virtual Office Needs A Virtual Assistant
Virtual assistants are helping mobile executives keep their lives and careers organized. getty
The pandemic didn't just make offices virtual. It has also made office assistants virtual.
More than half of American employees say they'd prefer to be remote at least three days a week even after the pandemic, according to a recent PWC study. Some of these workers now migrate between rentals in the Sunbelt during the winter and their homes up north in summer. Others have completely untethered, trading in their homes for RVs and total location independence.
"The pandemic proved that all of the talent doesn't necessarily have to be in the office," says Jeff Amon, CEO of The Clear Desk, a company that provides outsourcing services. "In fact, oftentimes it is beneficial to have them out of the office."
The fix is a new kind of assistant — a virtual assistant (VA) — trained to meet the needs of the nomadic labor force.
But what's a virtual assistant? How do you use one? How much should you pay for a VA? And how do you find one? More mobile workers than ever are asking themselves those questions, including me.
What is a virtual assistant?
A virtual assistant is a freelancer who provides administrative, creative or technical help for clients remotely, usually from a home office.
"Anything that can be done on a phone or computer can be done by a virtual assistant," says Robert Nickell, CEO of Rocket Station, a company that provides virtual services to companies. He says traffic to his site surged 300% during the pandemic as interest in finding virtual help skyrocketed.
Virtual assistants take their craft one step beyond freelancing platforms like Upwork or Fiverr, providing mobile entrepreneurs with assistants on an ongoing basis. And the virtual aspect can also translate into savings.
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"The quality of virtual assistants is extremely high while their cost — particularly for overseas VAs — remains relatively low compared to traditional employees," notes Nickell. "Virtual assistants often have college degrees, valuable skills, extensive work experience, and the perfect disposition to work effectively in a remote environment."
How people are using virtual assistants
Mark Whitman has used virtual assistants for "all kinds of tasks." Those include content writing, search engine optimization (SEO), social media and newsletter production and general administrative tasks like managing calendars and email accounts.
Whitman is the CEO of the travel site Mountain IQ. During the pandemic, with demand for virtual assistants on the rise, he started a new venture called Tasket, which matches location-independent entrepreneurs with virtual help.
Whitman told me that even though virtual assistants can do almost anything, it doesn't mean they can do it well. When you're not working in an office, you have to spell out all of your expectations. That's how he does it.
"Every task comes with a detailed step-by-step standard operating procedure that sets out exactly how a task needs to be completed," he says. The procedures must be so detailed that anyone could pick one up and complete a task without training."
How much does a virtual assistant cost?
I've also spoken with other location-independent entrepreneurs who say they've switched most of their business to using virtual assistants because of the money they save. You can find an English-speaking virtual assistant for as little as $5 an hour in some countries. But that can be problematic on several levels.
Kari DePhillips works with several virtual assistants who help with her public relations and SEO business, The Content Factory.
"I have a few different virtual assistants I work with for different types of projects," she explains. "For instance, one is a systems expert who manages our email marketing setup. This virtual assistant charges $45 per hour. But I have others that I pay $20 per hour. It's less specialized work, like research."
She even outsources the work of finding and vetting virtual assistants. She turned to Digital Nomad Kit for help. The company provides a matchmaking service for people who want to find a qualified virtual assistant.
Hannah Dixon, who runs Digital Nomad Kit, says anyone considering a VA needs to think about ethics in their hiring decision. Hiring by nationality — which is code for paying substandard wages for virtual help — can be an issue.
"People are beginning to seek out and pay virtual assistants according to the value of their skills and experience, with nationality not being a factor," she says. "This is something I have been advocating for years, and it's really encouraging to see a marked shift in direction for this space."
How to tame the "chaos" of your life
If the idea of a virtual assistant resonates in a post-pandemic world, you are not alone. My life is so disorganized that I can't even find the words to describe it. So when I saw Emerald Storm's site, which listed "chaos management" as a specialty, I had to know more.
Storm, whose eponymous virtual assistant company has grown by 263% this year, says her growth has come from referrals — people whose lives have been changed by hiring a virtual assistant.
"From our perspective, we sell the most important resource a person can have: time," she says.
But there's a right way and a wrong way to buy time.
Her advice:
Take inventory. Make a list of all the things you do in a day, in a week, in a month. Then decide what you can delegate and ask the virtual assistant you're considering if they can do those things. You might find you need more tech support than calendar management, so you want to make sure your virtual assistant aligns with your needs.
Don't go with the cheapest option. It's almost always the wrong one. "I've had so many clients who come to me after two or three bad experiences hiring overseas or even domestically because they went with the cheapest option," she says. "They are burned out, hurt, and out all the money and time that went into trying to make the cheaper option work."
Do a gut check. Are you ready to let go of the reins and trust someone to do the work? Are you prepared to train your virtual assistant to do things to your preferences? Are you ready to make yourself available to answer questions and give guidance, especially during the first eight weeks? If the answer is yes, you're ready for a virtual assistant, she says.
After researching this article, I decided to tame the chaos in my own life. I'm going to find a virtual assistant. But that's another story.
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85949e4cd8f479f817ec08c28361ab13 | https://www.forbes.com/sites/christophergray/2020/06/11/treat-your-account-like-a-business-james-henry-mastered-the-business-of-tiktok-and-now-plans-to-take-on-hollywood/ | ‘Treat Your Account Like A Business’: James Henry Mastered The Business Of TikTok And Now Plans To Take On Hollywood. | ‘Treat Your Account Like A Business’: James Henry Mastered The Business Of TikTok And Now Plans To Take On Hollywood.
James Henry Headshot James Henry
Prolific doesn't begin to describe James Henry's creative output.
Across his many social media channels, Henry has posted hundreds of videos. But what's more impressive than the number of videos is the manpower he harnesses to produce original content. Henry's videos are elaborately planned, scripted, and extensively rehearsed. And James, who is the star of all his videos, also wears the hats of producer, writer, and editor.
Henry's creative skits and quirky videos are numerous on Instagram and YouTube, but TikTok is the social platform where Henry's hard work has paid the most dividends.
"It took a couple of years to go from zero to millions of followers, but I believe it's all due to the originality of the videos I created," said Henry. "It takes a creative and diligent mind to create original content weekly. I've always focused on quality over quantity because you never know who's watching."
TikTok's more than 800 million active users is dominated by Generation Z, a cohort of young Americans who started using digital technology before their first words. Just barely over three years old, TikTok has made more celebrities of nameless aspiring performers in a shorter period than YouTube, Instagram, and others. TikTok is one of the few social platforms where a user with hardly any followers can have a broad audience see their content. TikTok's algorithms that prioritize viewership over followers sets it apart from other social platforms, allowing for unfamed performers, in some cases with little talent, to become stars overnight. A few of TikTok's top celebrities arrived at stardom by accident, often by copying the dance moves of lesser-known users and riding the media-frenzy to celebrity status.
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Henry's story is different, however. Overnight success for Henry is the result of years of planning and execution. With wisdom well beyond his 25-year-old mind, James is as talented and as he is smart. Though he is naturally funny, possesses great comedic senses, and dances like the best of them, which is a premium in TikTok, he admits he would be nowhere without a master plan.
"There have been cases in the past where black creators have created a specific dance yet when a white creator with a massive following does it, they blow up from it, and the black creator gets no credit, or as many would say 'the hype."
Henry could be referring to the case of 14-year-old African American Jalaiah Harmon, who created the widely popular "renegade dance," arguably TikTok's most widely popular dance craze. This one dance contributed to the fame of several white performers, though, Harmon never received any credit until #blacktwitter rallied to her defense demanded she gets the credit.
Henry knows he has to stand out. "As a person of color, I can honestly say that I've had to work harder to get half of what the white creators on the platform have been able to attain … The majority of the white creators on the platform with a large following can post a quick five-second video of themselves repeating the same dance in 5-10 videos and get millions of views. That's not something I have the privilege of doing. I incorporate dance in my videos, but they have always been choreographed and well-rehearsed because I'm aware that for those dance videos to be of interest to the viewers on TikTok, I have to stand out."
One of Henry's first videos to break one million views featured him doing funny dances in the grocery store aisle for Ellen DeGeneres's dance challenge. Now Henry regularly breaks one million. "I hit a streak at one point when nearly every other video I created went viral on the platform, with my highest viewed video hitting over 34.7 million views."
And James Henry is among TikTok's most successful performers. His TikTok success has amassed him a large online following and opened the doors to brand deals with HP, Doritos, Chipotle, Crocs, Sparkling Ice, Adobe, Simmons, Webnovel, WhatDoYouMeme, RaidShadowLegends, Mafia Games. Threadbeast also sponsors him for clothing, and he has few others in the works spearheaded by the brands and partnerships office at TikTok.
But at 25, Henry is just getting started. And just like his plan to rule TikTok. He has a plan to take on Hollywood.
"In five years, I see myself being more established in television and film as an actor and producer. I see myself being the lead or co-star in a hit series and feature films. I also plan on starting my own production company where I can take matters into my own hands and develop series' and films that are refreshing, entertaining, and have a purpose. I'm hopeful that I will be an example for black creatives that want to break into the entertainment industry so that they can forge their path through social media by showcasing their talents instead of waiting for someone to grant them an opportunity or to tell them that they're good enough."
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c1e44f1e000adf4cf7899d2bde3191fa | https://www.forbes.com/sites/christophergray/2021/05/03/recording-artist-and-serial-entrepreneur-branden-thompson-is-giving-50000-in-scholarships-to-hbcu-students-in-stem/ | Recording Artist And Serial Entrepreneur Branden Thompson Is Giving $50,000 In Scholarships To HBCU Students In STEM | Recording Artist And Serial Entrepreneur Branden Thompson Is Giving $50,000 In Scholarships To HBCU Students In STEM
Brandon Thompson Headshot Branden Thompson
The recent conviction of Derek Chauvin has been a well-received demonstration of accountability in a world where there has been a seemingly blatant assault on Black lives. However, the recent killings of Daunte Wright and Andrew Brown Jr. show there is much to be done in terms of social justice in this country. Protests against injustice in America have called into question the lack of equity in many aspects of our everyday lives, including education in STEM.
There is a significant lack of equity and access in STEM education, with major barriers to entry for Black students. The most recent data is from 2018 but shows stark contrasts for the Black community represented in STEM. On average, approximately 238 of every 100,000 U.S. residents hold a bachelor’s degree in STEM. For the Black community, only 161 of every 100,000 residents hold such degrees.
Branden Thompson, Founder of the Back at Zero Foundation, is using his platform to educate young people about financial literacy, entrepreneurism and is offering 5 HBCU college students the opportunity to win $10,000 each towards their STEM education.
“Having graduated from an HBCU, I remember the financial struggles I had to endure to attain my education, and now that I’m in the position to help others financially, I wanted to offer an opportunity to help others that may be struggling to stay in school. I would like to inspire young people to believe in their natural gifts & talents so that they may achieve their dreams,” he says.
Through his own experience, Thompson is doing the work to help others. “After high school, I attended Hampton University in Virginia but due to the lack of financial aid and access, I had to transfer to Prairie View, a smaller HBCU located closer to my hometown of Houston,” Thompson recounts. He went on to graduate with a B.S. in Engineering due to the financial security he believed it could provide and started his career at The Boeing Company. After four years of working in the corporate world, Branden felt like he was not fully realizing his potential and thought he was better suited for entrepreneurship. He Co-Founded TradeHOUSE, a wealth management and investment organization with the “mission to teach young adults business skills to invest in cryptocurrency.”
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Heavily influenced by the game of basketball and his coaches that instilled the values of “unity, hard work, and consistency” and inspired by his single-mother, a fellow entrepreneur and hair salon-owner, Branden wanted more than what the corporate world was offering, and even more so, to share it with others – freedom. He’s been able to do just that and is going even further to ensure college students have more financial support for their education and to explore their many talents.
After attaining such a significant level of success with cryptocurrencies, Branden decided to pursue his hidden passion for music, and his alter ego “Sir Trilli” was born. His first single, “Shake the Bank,” hit the airways in March of this year with the video first being shown on BET Jams. “My music speaks about financial literacy in a fun and musical way,” says Thompson.
Branden’s goal is to empower people to control their own destinies through financial literacy whether that be through his music or his organization. When asked what the future holds, Branden’s response comes as no surprise. His goal is to “[meld] the financial and music industries to spread financial literacy to the world.”
Thompson’s advice to young people working hard to achieve their goals: “Don’t listen to people who don’t have the results or lifestyle that you want; listen to your inner voice and follow your own path.”
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8ffab95f9fa42a525bec88cf1055d702 | https://www.forbes.com/sites/christopherhelman/2010/12/13/new-york-bans-gas-fracking/ | New York's Ban On Gas Fracking: Time For Drillers To Shoulder The Burden Of Proof | New York's Ban On Gas Fracking: Time For Drillers To Shoulder The Burden Of Proof
The Marcellus Shale. Image via Wikipedia
New York Gov. David Paterson today signed a bill that will ban natural gas drillers from using the practice known as hydraulic fracking when developing fields in the gas rich Marcellus Shale. Environmentalists are happy at the ban. Energy companies are happy that the ban wasn't for longer.
For what it's worth, the ban doesn't bother me a bit. Even though I'm convinced that the fears over the effects of fracking are far overblown, the U.S. has plenty of natural gas that does not happen to lay beneath the water shed of our most populous city. Natural gas is cheap and plentiful right now--so this is a fine time to stop the development of this resource in the Empire State while we try to sort out the implications of fracking.
The debate over this technique has taken on a life of its own in recent years. A handful of citizens in Texas and Pennsylvania say it's responsible for polluting their groundwater. And judging by the paranoid fears of polluted water supplies and the debunked propaganda being dished out in movies like Gasland you'd be excused for thinking that fracking was a new, unproven technique. Something that the gas drillers had suddenly begun trying to sneak by us. (see: Vocal And Tiny Minority Propagates Natural Gas Disinformation.)
Instead, fracking--the injection of millions of gallons of water and sand with a smattering of chemicals--has been in use for decades. In the case of the Marcellus shale, where gas is trapped in tight rock formations, fracking is the only known way of fracturing the rock to allow the gas to escape. If done right, in a wellbore that is properly completed and cemented to prevent any gas from leaking out into the practice is virtually guaranteed not to pollute groundwater. In the Marcellus Shale the gas zone is thousands of feet deeper than the water aquifers--and the rock in between famous for its impermeability--fracking fluids will not naturally migrate that far up from the depths.
The Environmental Protection Agency is studying the issue. The New York ban comes on the heels of last week's announcement by the EPA that wells drilled and fracked by Range Resources in the Barnett Shale of northern Texas had contributed to the pollution of water aquifers. Range Resources says the aquifer pollution wasn't caused by work on their wells at all but by natural influx of shallower gas up into the water. After all, the gas zone being fracked is more than a mile deeper than the allegedly polluted water zone. "This is our home, too, and no one wants to make sure this is done right more than we do," said Range V.P. Mike Middlebrook. (See: Range Resources Is King of The Marcellus Shale.)
Texas regulators were miffed at the EPA jumping the gun considering that they've been studying the issue for months and sharing data with EPA. Texas Railroad Commission member Elizabeth Ames Jones said, “I disagree with EPA's premature actions. The Commission bases its decisions on sound science and fact. If this is another EPA action designed to reach pre-determined conclusions and to generate headlines rather than conduct a successful environmental investigation, then the public is poorly served.”
The EPA seems to be driven more by politics than science. The EPA Region 6 administrator who issued the report on Range Resources, named Al Armendariz, featured prominently in Gasland, has been paid by the Environmental Defense Fund to produce a study (subsequently debunked) about the air effects of drilling in the Barnett Shale. Armendariz's C.V. says that he's done work for the Sierra Club, Public Citizen and Downwinders At Risk.
But here's the thing--the concerns of regulators can't be dismissed just because of their politics. The concerns of homeowners can't be dismissed just because it's so unlikely that fracking polluted their water. If the gas drillers want to but this debate to rest and get on with developing America's monumental gas resources, they are going to have to figure out how to make everyone happy, or if not happy then at least satisfied that the practice is acceptable.
I recently interviewed Christophe de Margerie, the chief executive of French oil giant Total for an upcoming Forbes Magazine story. Total has a joint venture with Chesapeake Energy to drill in the Barnett Shale. In discussing the debate over fracking, he said, "In French we say we have to practice the principe de precaution" -- which means, in short, that if an action has a suspected risk of causing harm, then the burden of proving it is not harmful falls on those who advocate taking the action. "Does this mean we cannot do it? No. Do we stop because of this? No," he says. "Just be responsible."
To that end, the companies, like Halliburton, that lead the market for fracking, need to publicly reveal all the chemical components that go into the stuff and give the rationale for why they are used. The companies, like Range Resources and Chesapeake Energy, that are drilling the Marcellus and other shale formations, need to talk with regulators and agree to industry-wide minimum standards covering the drilling, completion and fracking of wells.
Now is the time to do it. Gas prices are low and the nation has more than enough supply to meet our 27 trillion cubic feet of annual demand. Drillers don't much care about the New York ban because they have plenty of other places to develop--and in many areas of the Marcellus, Barnett and Haynesville shales they're being forced to drill just to hold onto their acreage. They wouldn't mind at all if the ban helps push up gas prices on the margin. If adding precautions and oversight adds to the costs and worsens the economics of gas drilling, so be it. All costs get passed on to the consumer anyways. Including the cost of peace of mind.
See also:
How Long Before Range Resources Makes A Deal?
Can Gas Fracking Pollute Groundwater? Unlikely.
Gas Industry Faces The Dangers Of Fracking
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58647375fb4a6cf1a6420626a5d7b5dc | https://www.forbes.com/sites/christopherhelman/2011/01/21/chesapeake-energy-whats-up-with-these-lawsuits/ | Chesapeake Energy: What's Up With These Lawsuits? | Chesapeake Energy: What's Up With These Lawsuits?
Image via Wikipedia
In recent weeks more and more oil and gas industry folks have been drawing my attention to articles like this, this, and this, from small-town papers about the bevy of lawsuits being filed against Chesapeake Energy. Most of the plaintiffs are landowners in Texas and Michigan who agreed to lease their land to Chesapeake (often at prices more than $5,000 an acre) for oil and gas exploration. They signed contracts with Chesapeake, or one of its agents and received orders for payment in amounts totaling millions of dollars. So imagine their surprise when a few weeks later instead of getting cash the landowners instead got letters from Chesapeake claiming to void the leases and stating "we will not be funding the order of payment." Try doing that with your landlord sometime and see what happens.
Enough landowners felt they had a case against Chesapeake that in Texas last year they filed a class action lawsuit over leases in the Barnett Shale. More recently we've seen individual cases being filed in northern Michigan, where Chesapeake and Encana Energy had been competing for acreage in the Collingwood Shale. A test well drilled by Encana into the Collingwood a year ago was a big success, and set off the land rush. A state auction of mineral rights last May reportedly brought an unprecedented $178 million for 118,000 acres.
Hoping that Collingwood could be the big new shale gas find Chesapeake sicced its landmen on the region to scoop up acres. But after some additional drilling last year, Chesapeake determined that the reserves in the Collingwood were too modest to justify a drilling campaign. Henry Hood, Chesapeake's senior v.p. of land and general counsel admitted in a phone interview this week that after the sobering test results, Chesapeake sought to get out of as many Collingwood leases as it could.
Hood insists that all contracts that Chesapeake makes with landowners are contingent upon verification of title. If the title doesn't check out, the company is within its rights to void the agreement. "Some people do not own what they represent or believe they own when the lease is negotiated," says Hood. "All leases are made subject to title verification. When it becomes known that the title is not marketable or liens are discovered, leases can be rejected."
In some cases, explains Hood, the land is mortgaged and so effectively owned by a bank. He says that if Chesapeake wants a piece of land bad enough it will work with landowners and banks to secure a subordination agreement--so that Chesapeake's rights to keep producing oil and gas from the lease wouldn't be interrupted in the event of a mortgage default.
Such agreements are standard, concurs attorney William Schlecte, who is representing several plaintiffs against Chesapeake, because "almost every parcel of property has a mortgage on it."
Landowners in Michigan with mortgaged properties had plenty of time to make such arrangements with their banks before Chesapeake completed its title checks, says Hood. He says a lot of the complaints are little more than sour grapes from landowners whose acreage went from "being worth nothing, to being worth a lot, to being worth nothing" all in a matter of months. "If it's good land then someone else will lease it," he says.
When titles check out, and the landowner on the lease owns the acreage free and clear, then "we're going to close on those we've agreed on," says Hood. Chesapeake has spent $320 million in Michigan in the past year, he says.
That's cold comfort to plaintiffs who don't buy Chesapeake's reasons for backing out of leases. They say they've been defrauded by Chesapeake, whose high per-acre offers caused them to turn down smaller deals from competitors like Encana, which they feel would have been less likely to try to break contracts. "We're singled out because we have the most ambitious leasing program," says Hood. "To the extent that we felt morally or legally obliged to close, we closed."
Attorneys say they are set to file "hundreds" of suits against Chesapeake. Though most of them appear to be brought by individual landowners, there are also some other oil and gas companies unhappy with Chesapeake. I think this story is only just beginning, and as we learn more about these lawsuits we'll bring you the juicy details.
Meanwhile, here's the text of a statement provided by Hood, basically explaining that with a company as big and active as Chesapeake there's bound to be some malcontents from time to time:
"Chesapeake is the largest oil and natural gas leaseholder in the U.S., with almost 15 million acres of leases from hundreds of thousands of lessors who have been paid more than $15 billion in lease bonuses and royalties through the years. As a result of these leases and its drilling and development expertise, the company is also now the second-largest producer of natural gas in the U.S. and a top-20 producer of oil. In fact, Chesapeake acquired approximately 90,000 leases in 2010. The percentage of lessors who have expressed dissatisfaction is far less than 1%.
Lease prices vary widely over time based on prospective energy-producing potential, competition and energy prices at the time the lease is acquired. The vast majority of our lessors are satisfied with their transactions as leasing is a negotiated process. However, some owners "hold out" too long for the highest possible price or for specific non-standard lease provisions that can prolong negotiations. During this delay, circumstances may change, making the lease less attractive and causing the leasing company to lose interest. This can result in a transaction not being closed.
Also, some people do not own what they represent or believe they own when the lease is negotiated. All leases are made subject to title verification. When it becomes known that the title is not marketable or liens are discovered, leases can be rejected.
No doubt, affected owners are unhappy when this occurs and they miss a leasing opportunity. Some who have leased may later become unhappy when they discover others may have been paid more for their leases. Occasionally, lawsuits are filed by unhappy owners, but that is rare and the cases almost always get worked out.
Chesapeake works very hard to maintain good relations with its lessors and strives for the highest level of good faith and ethical conduct in its negotiations with landowners. The fact that there are so few lawsuits compared to the hundreds of thousands of leases Chesapeake has acquired indicates the rarity of these disputes and the success we have in creating more value for mineral owners than any other energy company in the U.S."
Stay tuned. There's more to this. And please leave a comment below if you've had any interesting experience leasing land to Chesapeake.
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947bc534a9fe5b1f618311fd60c78820 | https://www.forbes.com/sites/christopherhelman/2011/03/15/explainer-what-caused-the-incident-at-fukushima-daiichi/ | Explainer: What Caused The Incident At Fukushima-Daiichi | Explainer: What Caused The Incident At Fukushima-Daiichi
This article was written for Forbes by Kirk Sorensen, a nuclear technologist who operates the site energyfromthorium.com, where he has posted some insightful explanations of what happened at Fukushima-Daiichi and thoughts on the future of nuclear power.
A cut-away of G.E.'s Mark 1 containment structure used in the Fukushima reactors
In the mid-afternoon on Friday, March 11 the seismic sensors at the Fukushima-Daiichi nuclear power plant in the Fukushima Prefecture of Japan registered the earliest indications of the largest earthquake in modern Japanese history. They executed a preprogrammed response and began to drive all of the long control rods into the three reactors that were currently operating at the site. The control rods caused each generation of fission to produce fewer neutrons and fewer fission reactions. In three minutes the reactors were making 10% of their rated power from fission; in six minutes they were making 1%, and within by ten minutes nuclear fission as a source of heat had ended in the first three units at Fukushima Daiichi. It would never begin again.
Each fission reaction splits the nucleus of an atom of uranium-235 or plutonium-239 into two smaller atoms and releases a great deal of energy. The energy release from nuclear fission is roughly a million times greater per unit weight than fossil fuels, which is why nuclear fission is such a compelling long term energy source. The two "fission products" that result are highly radioactive but decay towards stability very quickly. There are about 80 different sequences of decay that fission products can follow, and roughly a quarter reach a completely non-radioactive state within a day. Within a month, about three-quarters are stable, and within a year about 80%. But in the first few hours after a nuclear reactor shuts down these fission products are producing significant amounts of heat and unlike fission, this heat generation can't be turned off. It has to run its course to completion. Therefore, managing what is called "decay heat" is one of the most important aspects of operating a nuclear reactor safely. To remove the heat, today's reactors have an abundance of safety systems, all of which have the same mission—keep removing decay heat from the nuclear fuel. As the reactors at Fukushima-Daiichi cooled down, the tsunami hit.
The tsunami destroyed the diesel generators that provide power to drive the pumps that circulate the water coolant through the reactor that removes decay heat. Without an active removal of decay heat, the reactor was adding heat to the water faster than it was taking it out, and the temperature was rising. Because this was a reactor that operated on water that was already at its boiling point, this also meant that the pressure inside the reactor was rising as well.
The reactors at Fukushima-Daiichi are called boiling-water reactors (BWRs) and were manufactured by General Electric. They have a primary and a secondary containment structure, both made from thick reinforced concrete, to protect against the release of radioactive materials. Inside the primary containment are two vessels called a "drywell" and a "wetwell". The drywell is a large steel pressure vessel that looks like a giant upside-down pear and holds the reactor and primary pumps, and the wetwell is a large toroidal vessel that looks like a donut. The wetwell is connected to the drywell by a number of wide pipes. Both the drywell and the wetwell are surrounded by a secondary containment vessel (or shield building) also built from reinforced concrete about a meter thick. This rectangular secondary containment building is the structure that most people have seen in pictures of the reactor. At the top of the secondary containment building is a steel frame structure with "blowout" panels that holds the crane used to remove solid nuclear fuel during fueling and refueling.
The designers of the reactors at Fukushima-Daiichi had anticipated situations where pressure was rising in the core. So long as power was available, pumps would circulate hot fluid from the reactor to the wetwell where it would be condensed. Heat removal could continue indefinitely in this way. But it all relied on a power source, and power had been lost due to the tsunami's destruction of the diesel generators.
The water in the reactor is susceptible to damage from radiation, causing it to split into its components, hydrogen and oxygen. Normally, circulation would channel the hydrogen and oxygen to a recombiner where they would be restored back to water, but in the hours after the reactors were shut down, hydrogen was accumulating and separating in the wetwell and reached a point where it was vented into the sparse steel-frame structure at the top of the reactor building. It was only a matter of time before the hydrogen reached a level where it would detonate, and one after another, the first unit, then the third unit, and finally the second unit, suffered hydrogen explosions that blew off the steel panels and left the top of the reactor building exposed. The reactor vessels remained intact as did the reinforced concrete containment buildings, but each reactor building lost its hat due to the hydrogen explosions.
Initially there was hope of saving the reactors to generate power again after the crisis had passed. But as that hope faded and the need to remove the steadily-decreasing decay heat remained, operators at Fukushima-Daiichi took measures that would cool the reactors but would ruin them for future operation, such as the decision to try to cool the reactors with seawater. It will be necessary for some time to actively cool the reactors while the decay heat continues to decrease, but within a few months it will be possible to depressurize the reactors and assess their internal states. There may have been some melting and damage to the fuel—it is not known at this time.
What is known is that this is a situation very different than Chernobyl or Three Mile Island. There was no operator error involved at Fukushima-Daiichi, and each reactor was successfully shut down within moments of detecting the quake. The situation has evolved slowly but in a manner that was not anticipated by designers who had not assumed that electrical power to run emergency pumps would be unavailable for days after the shutdown. They built an impressive array of redundant pumps and power generating equipment to preclude against this problem. Unfortunately, the tsunami destroyed it.
There are some characteristics of a nuclear fission reactor that will be common to every nuclear fission reactor. They will always have to contend with decay heat. They will always have to produce heat at high temperatures to generate electricity. But they do not have to use coolant fluids like water that must operate at high pressures in order to achieve high temperatures.
Other fluids like fluoride salts can operate at high temperatures but at safer, lower pressures. Fluoride salts, unlike water, are impervious to radiation damage and don't evolve hydrogen gas which can lead to an explosion. Solid nuclear fuel like that used at Fukushima-Daiichi can melt and release radioactive materials if not cooled consistently during shutdown. Fluoride salts can carry fuel in chemically-stable forms that can be passively cooled without pumps driven by emergency power generation. A reactor based on this technology would avoid the extreme situation that was encountered at Fukushima-Daiichi. It may be in our best interest to pursue them in building the next generation of nuclear power plants.
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09e0a5ef9b78f1c50a33e809dbd431a5 | https://www.forbes.com/sites/christopherhelman/2011/06/27/tycoon-says-north-dakota-oil-field-will-yield-24-billion-barrels-among-worlds-biggest/ | Tycoon Says North Dakota Oil Field Will Yield 24 Billion Barrels, Among World's Biggest | Tycoon Says North Dakota Oil Field Will Yield 24 Billion Barrels, Among World's Biggest
Gallery: Harold Hamm 9 images View gallery
Billionaire Harold Hamm is convinced thereʼs 24 billion barrels of oil to be coaxed from the Bakken field of North Dakota and Montana. No one has more acres there than he does.
The last time we profiled Harold Hamm, the billionaire founder of Continental Resources, it was early 2009 and oil prices had slumped to $40 a barrel. This was bad news for Hammʼs big push into the Bakken oil play of North Dakota and Montana, where tight rocks and tricky drilling necessitate $50 crude to break even. With oil back at $100, Hamm is sitting pretty with the biggest holding in the Bakken and set to invest $1 billion there this year in his quest to prove that it is not just one of the biggest oil fields in the United States, but in the whole world. “Out of all the oil plays in the U.S., thereʼs just one Bakken,” Hamm says. “It towers above everything else.”
Continental has already prospered from Hammʼs Bakken bet—shares are up 250% since early 2009. Hammʼs 72% stake is worth $8 billion. Hamm currently has 25 of the 175 rigs working the Bakken. In the past year Continental's Bakken output has exploded 70% to 28,000 barrels per day.
Heʼs just getting started. "We're going to triple the size of the company within five years,” says Hamm, 65. Within five years Continental will likely be pumping 100,000 bpd from the basin, and to grow its proved reserves from 400 million barrels to more than 1 billion.
Bakken. The name has become shorthand for the entire 8 million acre Williston Basin area of North Dakota and Montana. The United States Geological Service (USGS) made headlines in 2008 when it determined that the formation likely held 4.3 billion barrels of recoverable oil and gas equivalents. Already a kingsize hoard.
Thatʼs nothing, says Hamm. He's convinced that the recoverable bounty is more like 24 billion barrels (20 billion of crude, plus the equivalent of 4 billion barrels in natural gas and other liquids). If true, this is oil on an outlandish scale--enough to double America's proven reserves; nearly as much as ExxonMobil's 28 billion in reserves; enough oil to supply the entirety of U.S. demand (roughly 20 million barrels per day) for three years. It would rank high up on the world's biggest oilfields.
The Bakken is just the biggest of myriad spots across the country where drillers have triggered an onshore oil boom. New reserves and new fortunes are being made in the Eagle Ford shale of Texas, the Niobrara in Colorado, the Marcellus in Pennsylvania, and (another Hamm favorite) the Woodford in Oklahoma. Even in the century-old fields in the San Joaquin Valley of California, Occidental Petroleum has found another billion barrels by drilling deeper and smarter. In 2010 U.S. crude production was up 150,000 bpd to 5.51 million bpd, despite downturns in Alaska and the Gulf of Mexico, all on the strength of Lower-48 drilling. The Energy Information Administration forecasts Lower-48 growth of 230,000 bpd this year.
"As far as energy supplies go we're in as good of shape as we've been in for 25 years," says Hamm, who thinks that by developing domestic reserves the U.S. could cut its reliance on foreign oil by half, to 25% of supply. “The glass is not just half full, but fixing to run over. It may cost a little more to produce than it used to, but itʼs there.”
Geologists have known since the 1970s that the Bakken formation was brimming with oil. But its reservoir rock has low porosity, meaning that getting the oil out was technically tricky and unjustified by oil prices kept low by plentiful Middle Eastern reserves. “For decades we resisted going after it because of the threat that OPEC could have opened the spigots and drowned us,” says Hamm. “But I donʼt think they [OPEC] has sufficient excess capacity to do that today.”
Could Hamm be right about the Bakkenʼs barrels? The USGS canʼt comment; though its geologists met with Hamm and other Bakken operators recently, they wonʼt be done with a reassessment for two years. Wood Mackenzie, the respected global compiler of oil and gas data, says its latest estimates on Bakken reserves are more like 9 billion barrels. The North Dakota Department of Mineral Resources, citing recent work done by its state geologists, figures the North Dakota portion of the basin has 11 billion recoverable barrels--up from the 2 billion the department estimated in 2008.
So reserve estimates have been moving up, if not yet to 24 billion. Whatʼs changed? Operators like Continental, EOG Resources, Hess Corp., Occidental Petroleum and Marathon Oil have drilled some 3,000 wells there since 2008, and learn more on each one. A primary discovery: that just 100 feet below the primary Bakken formation (itself 10,000 feet down) is a whole other layer of oil-bearing rock called the Three Forks, which is separate from the Bakken and sealed off by a layer of shale. Watching flow rates, the companies agree that the average well drilled into either layer will produce around 500,000 barrels of oil in its lifetime.
Hammʼs number is aggressive because his drilling technique is aggressive. Most analysts and operators assume one well per 640 acres of reservoir. Too conservative. Continental has developed a new drilling concept it calls Eco-Pad to exploit both reservoirs. One rig will develop a 2-square-mile area by drilling eight wells—four into the Bakken layer and four into the Three Forks. Each well goes down two miles, then horizontally two miles through the reservoir. Using explosive charges, the drillers will make hundreds of holes (called “perforations”) in the pipe of each well. Then comes the hydraulic fracturing— where the well is injected with 1.8 million gallons of water and sand that props open tiny fractures in the dolomite rock to let out the oil. The “Eco” in this Eco-Pad concept? All this work on eight giant wells gets done from one spot, causing less surface impact.
From there, itʼs simple arithmetic. The basin covers about 8 million acres. Hamm figures there's room for 48,000 wells. If each one delivers that 500,000 barrel average, you get 24 billion barrels. Even then, drillers will be harvesting well less than 10% of what geologist Edward Murphy of the North Dakota Geological Service figures is 250 billion barrels of original oil in place. The Williston basin is churning out 450,000 bpd now. Within four years, says Hamm, it will be producing 1.2 million bpd -- as much oil as is currently recovered from the entire U.S. side of the Gulf of Mexico.
As for Continentalʼs take? With 900,000 acres, the company is looking at potential recovery of 3 billion barrels. (It has just 400 million in proved reserves booked now.) Even though what heʼs got will take decades to develop, Hamm says, “If we had been better funded, we would have bought three times as much acreage in the Bakken.”
He has plenty else in the works. Forbes caught up with Hamm outside Oklahoma City for a helicopter tour of the Woodford shale—a hot new play where Continental will invest $350 million this year.
Soaring 500 feet above farmland and ranches was a new perspective for Hamm--his first ever helicopter rid. But he's intimately familiar with the red earth below. "I drilled a lot of wells through here," he says, recalling the boom of 1981, when he was just a contract driller and it looked like a forest out here "with a rig on every section." There's still a few of those old wells producing out here: "A good oil well sure helps an old farming operation," says Hamm.
Oklahoma's drilling boom faded when prices slumped in 1982. The rigs left; the easy oil and gas long since discovered. Then came the drilling revolution— using horizontal drilling and fracture stimulation (fracking) to bore far deeper than before into a trickier reservoir called the Woodford shale.
Armed with maps and GPS coordinates we find one of Continental's rigs. Built by Patterson, it uses a top-drive motor with 2,500 horsepower to drill up to 15,000 feet deep and a mile across. We circle so tight and low around the operation that it almost feels like we're balancing on the tip of the rig's derrick.
As well as he knows the land, this bird's eye view is a new perspective for Hamm--his first ever helicopter ride. He could afford a fleet of them. But Hamm is a man of the earth. He prefers to drive himself around in a big white Lincoln pickup truck. He would rather grab a burger at the Sonic drive-thru than do the white tablecloth thing. The son of a sharecropper, and one of 13 children, he fell in love with rocks and became a geologist.
What's exciting about these shales like the Woodford, says Hamm, is that they are the "source rock" for the conventional oil and gas reservoirs that drillers used to target years ago. Oil and gas formed in the shale layers and over millions of years some of it slowly oozed upwards to be trapped in shallower reservoirs.
Even things like drilling rigs and fracking crews can be elusive in a natural gas field that stretches 50 miles across by 100 miles long. After doubling back, we find a crew from Schlumberger completing one of Continental's already drilled wells. The site is circled by dozens of trucks bearing sand to be mixed with millions of gallons of water and blasted down into the earth where it cracks the brittle rock and props open tiny capillaries through which gas can escape to the well. The Woodford gas is "wet," meaning that it's rich in higher value liquids like propane and butane. Despite a market price of $5 per thousand cubic feet for dry gas, Continental's volumes here fetch as high as $8.
Continental has some 270,000 acres in the Woodford and 10 of the 50 rigs working here. Devon Energy has 240,000. They figure there's room to drill 10,000 wells here over the next 20 years. So far Continental has poked just 20 wells. "We're in the first inning here," says operations chief Rick Muncrief. "Just getting started."
What could go wrong, both for Continental and Americaʼs nascent oil and gas boom? Oil prices would have to slump below $50 to make Bakken development uneconomic. Environmentalists could block the pipelines needed to get the Bakken crude to market. But the scariest spectre is the threat of federal regulation of fracking--which could halt Bakken drilling for up to two years as companies proved to the feds that what they're doing is safe.
Hamm doesn't have much patience for fear-mongering over fracking, especially in the Bakken, where a layer of nearly impermeable shale sits above the oil bearing reservoirs. That layer has trapped the oil where it is, 10,000 feet down, for millions of years, so Hamm has no doubt that it will prevent any fracking fluids from migrating upwards too.
Even a temporary ban on fracking would be an economic blow for America. The oil and gas industry uses nearly as much steel as the auto industry. The Bakken drilling boom has created upwards of 20,000 long-term jobs and lots of royalties for landowners. "The oil and gas ecosystem touches on everything," says Muncrief.
It's one thing to make oil and gas drillers prove that their fracking won't endanger New York City's watershed. Hamm doesn't think politicians would be dumb enough to do anything that would outright quash the development of plays like the Bakken and Woodford. As if to prove his faith in the future, Hamm recently decided to move Continental's headquarters from sleepy Enid, Okla. to almost bustling Oklahoma City. Continental bought Devon Energy's old 19-story headquarters that it is vacating for newly built digs. There's lot of extra space in the building now, but if Hamm really does manage to triple the size of Continental in five years, it would be about the size that Devon is now. No slowing down for this wildcatter. “All I want to do is find oil and gas.”
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e5eb88a4d42d5a3cd679b23b50bbe615 | https://www.forbes.com/sites/christopherhelman/2011/07/20/abu-dhabi-oil-sheikh-writes-his-name-in-the-sand-two-miles-wide/ | Abu Dhabi Oil Sheikh Writes His Name In The Sand, Two Miles Wide | Abu Dhabi Oil Sheikh Writes His Name In The Sand, Two Miles Wide
Hamad. From Google Earth
Let's see Donald Trump top this. On a sandy island in Abu Dhabi Sheikh Hamad bin Hamdan Al Nahyan has inscribed what is in effect the biggest graffiti tag the world has ever seen. Hamad, 63, a scion of the billionaire Abu Dhabi royal family, has gouged his name in capital letters two miles across and half a mile wide. His moniker is so big it can be seen from space (as this Google Earth pic demonstrates). The tip of the "H" reaches into the strait that leads to the Arabian Gulf, allowing Hamad to fill the first two letters of his name with water. The "M" looks partially filled as well.
Why? Why not? Think of it as economic stimulus. It took a lot of imported laborers from the likes of Pakistan and Bangladesh to dig those canals. And for all we know, this could be part of a grand tourism plan. The island that "Hamad" has been inscribed on, Al Futaisi, is said to be entirely owned by the Sheikh and contains resorts, a golf course and horse stables.
Perhaps the sheikh's goal is to make his entire name navigable by yacht, home to a giant marina. Or, in a nod to the elaborate man-made island housing developments just up the coast in Dubai, perhaps Sheikh Hamad intends to line the banks of his ego-canals with condos.
Hamad has shown a penchant for excess in the past. He is said to own more than 200 cars, including seven Mercedes 500 SELs painted in the colors of the rainbow. Indeed the man known as the Rainbow Sheikh has even created the Emirates National Auto Museum, home to a custom-built globe-shaped motor home said to be one-millionth the size of the Earth itself. If he weren't so rich, we'd call this guy an artist.
Hamad. Wide view. From Google Earth
Have you been to Al Futaisi or the Emirates car museum? Can you think of better things to write in the sand? Please leave a comment.
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72cf9fc29c836172ee8314049e297939 | https://www.forbes.com/sites/christopherhelman/2011/08/30/has-peak-oil-come-to-the-non-opec-world-maybe/ | Has Peak Oil Come To The Non-Opec World? Maybe. | Has Peak Oil Come To The Non-Opec World? Maybe.
Peak Oil. Are we there yet? Image via Wikipedia
The world's biggest oil companies put in a pretty pathetic performance in the second quarter of 2011. Not in terms of earnings -- those were great, with Exxon posting $10.7 billion and Royal Dutch Shell doing $8 billion. Just what you'd expect with Brent crude at a lofty $120 a barrel.
Where the results were disappointing was in the barrels. Of the 16 big U.S. and European oil companies studied by Deutsche Bank analyst Paul Sankey, 14 of them saw their production of petroleum decline in the quarter. Collectively, the drop amounted to 12% of total liquids volumes, or 1.2 million bpd. Their average output for the quarter totalled, 14.67 million bpd. Even excluding the effect of Libya's issues, the decline was 8%.
Only Exxon and Shell managed 1% volume gains in liquids.
The situation didn't get much better when Sankey looked at other big non-OPEC producers. Brazil's supposed growth engine Petrobras was down a touch, as were Russia's Lukoil and TNK-BP and China's Sinopec. Rosneft (2.2 million bpd) and PetroChina (2.4 million bpd) did eke out gains of 2% and 4%.
Overall, the producers of 31 million bpd (out of a worldwide total of roughly 86 million bpd) saw their output fall 4%. No wonder Sankey titled his report "The Death of Non-OPEC."
OPEC volumes, by contrast, were up 2% in the quarter, figures Sankey.
So what's going on? Is Peak Oil here, at least in the non-OPEC part of the world? Maybe so. "In identifying mega-themes, we have argued that the shift from the 20th to 21st century represents the end of the oil age and the beginning of the global electricity age," writes Sankey. "The concentration of remaining (abundant) oil reserves into OPEC hands derives an obvious corollary: the end of growth from non-OPEC supply."
The supermajors are finding it harder and harder to pry away the remaining megaprojects from state-run oil companies. Of the biggest OPEC members like Saudi Arabia, Iran, Venezuela and Iraq, only the latter is eager to bring in the majors to help develop reserves.
Add in the fact that natural decline rates on big fields average 5% a year, and it will become ever harder for Big Oil to stay big. Christophe de Margerie, the pragmatic chief executive of French giant Total, believes that global peak oil will hit within five years (see my story on Total: "High Friends In Low Places").
The bigs are finding some growth from newly developed natural gas resources. Indeed, when you factor in gas production, Exxon's total volumes were up 10% in the second quarter -- thanks to the ramp up of its megaproject in Qatar (See my cover story: "ExxonMobil -- Green Company Of The Year"). But gas sells for barely a third of oil on an energy equivalent basis.
There were some outliers. BP had the biggest plunge, down 10% or 250,000 bpd due to the effect of selling off assets in the wake of the oil spill. Spain's Repsol was down 15%, with Hess Corp. off 10%.
What about the impact of liquids produced from unconventional resources like the Eagle Ford shale and the Bakken formation? Though that’s been a big growth trigger for smaller independent explorers, writes Sankey, “their growth is far less meaningful at the margin.”
So what will it mean for the oil market when only OPEC can meet oil demand, especially considering that China and India's oil needs are ramping from such a tiny per capita base? "It seems very clear that higher and highly volatile oil prices will be a necessary fact of future oil markets," writes Sankey.
What's an investor to do? Buy oil companies of course, especially those that show any likelihood of boosting oil output. The only big one likely to do that this year, Occidental Petroleum, trades at 10 times expected 2011 earnings. Sankey also rates Canadian Natural Resources a buy, expecting eventual growth from its oil sands operations.
Another idea (mine, not Sankey's) -- buy the bigger independents like Anadarko Petroleum, Apache Corp., EOG Resources, which have real growth potential and will likely become meals for the growth-starved majors in the years ahead.
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92ace5d750fdb77f0bfd5b8ac4d896e8 | https://www.forbes.com/sites/christopherhelman/2011/11/02/bug-zapper-how-a-new-machine-snuffs-killer-bacteria-with-ultraviolet-blasts/ | How A New Machine Uses U.V. Rays To Blast Killer Bacteria | How A New Machine Uses U.V. Rays To Blast Killer Bacteria
Chief of staph: Brian Cruver with his Xenex machine
Cooley Dickinson Hospital in Northampton, Mass. treats 40,000 emergency room patients a year. In 2010, 33 people admitted for surgery or other ailments caught a superbug called Clostridium difficile, or C. diff. Six died and three others had their colons removed. Cooley has company: Last month Joseph Brant Memorial Hospital in Ontario, Canada got slapped with a $50 million class action after a C. diff outbreak killed 50. Antibiotic-resistant bacteria infect 100,000 patients a year, and they are notoriously hard to fight. One study by Dr. Roy Chemaly, head of infection control at Houston’s MD Anderson Cancer Center, found that even after swabbing with bleach, alcohol and other biocides, 8% of high-touch surfaces (tray tables, door handles, remote controls) in hospitals still test positive for superbugs.
Brian Cruver, founder of Xenex, in Austin, Tex., aims to stomp the killers in their tracks. His weapon: a rolling, 3-foot-tall machine (think R2-D2 from Star Wars) called the Xenex that bathes hospital rooms with intense, millisecond pulses of ultraviolet light from a high-wattage strobe light. The UV penetrates bacteria and either scrambles their DNA, preventing reproduction, or kills them outright. Xenex also has motion sensors that shut it off in case someone opens a door; 30 minutes of that UV exposure would cause mild sunburn.
Cooley Dickinson started using the Xenex in early 2011. So far only eight patients have developed C. diff, and none has died. (No other cleaning procedures were changed.) It’s a similar story at Moses H. Cone Memorial Hospital, in Greensboro, N.C., which in the first half of 2011 eliminated superbug infections in its intensive care unit altogether, down from 14 cases in the same period a year ago. At roughly $1,500 a day in treatment and room expenses, Moses Cone figures it has saved $2.4 million thus far. Nationwide dealing with hospital-acquired infections runs $30 billion a year. “We feel like we’re working against the clock to grow as fast as we can,” says Cruver, 39. “Every day there are people getting sick unnecessarily.”
Cruver got his first dose of the health care industry as a consultant at William M. Mercer. An M.B.A. at the University of Texas eventually landed him at Enron, where he traded bankruptcy risk and had a front-row seat for the company’s collapse. His book, Anatomy of Greed: The Unshredded Truth from an Enron Insider, later became a TV movie. Cruver then cofounded Giveline.com, an online retailer that gave a portion of every sale to charity. It struggled, so he went scouting for more startup ideas.
In early 2009 Cruver met Dr. Mark Stibich and Dr. Julie Stachowiak, who were studying Russian methods of fighting tuberculosis using UV light. UV rays have a long disease-fighting history; today they sanitize water, air, food, even surgical wounds. But killing bacteria in an entire room is tricky—there are just too many nooks and crannies, and common UV lamps don’t emit a broad enough spectrum of UV wavelengths to whack the worst bugs.
Stibich showed that a high-energy form of UV called UV-C could kill C. diff, in either its active state or as a dormant spore protected by a tough seedlike shell. “If you kill C. diff, you kill everything else,” he says. A high-wattage UV-C light might sanitize an entire room quickly. Many bulbs create light by sending an electric charge through argon or neon gas; fluorescent and UV lights often use mercury vapor. But too much mercury can be toxic, and mercury-based lamps can take an hour to disinfect a room. Xenex uses harmless xenon gas to blast a broad spectrum of UV wave- lengths in all of ten minutes. Says Cruver: “It’s the difference between leaning against a wall and hitting it with a jackhammer.”
Cruver brought the idea to Morris Miller, founder of Rackspace Hosting, a large data-storage company, whom he had met doing a talk show for his Enron book tour. Miller, the son of a physician, and other investors agreed to pitch in $5 million—enough to order some devices (first made by Russian medical supplier Melitta, now made in the U.S.) and to set up a 5,000-square-foot warehouse in Austin. Because the Xenex isn’t used on patients, it didn’t require FDA approval. The first units rolled out in mid-2010.
This year Xenex, now with 30 employees, has sold or leased machines to two dozen hospitals at roughly $80,000 a pop, including unlimited replacement bulbs. (The U.S. has more than 5,000 hospitals; Cruver figures they each need at least two Xenex machines.) Next steps include beefing up his direct-sales force and wooing distribution partners. A big win: Sodexo, the facilities-management giant, headquartered in Paris, says it plans to use the Xenex as part of its standard hospital-cleaning service.
Proving that the Xenex can prevent new patients from getting infected would supercharge Cruver’s top line, but it will cost him to get there. In 2012 MD Anderson will launch a new one-year, $500,000 study on patients treated in Xenex-disinfected rooms.
Meanwhile, competition lurks. Lumalier, in Memphis, Tenn., has made a name selling slower, mercury-based UV emitters. Johnson & Johnson and others have systems that spray aerosolized hydrogen peroxide, a messy process that takes a couple of hours. “The biggest challenge is overcoming the way they’ve disinfected for 30 years,” says Cruver. “What they do now is the seat belt. Xenex is the air bag.”
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72655d5a3659d0ccb4ed5a2ed3fdff36 | https://www.forbes.com/sites/christopherhelman/2011/12/07/the-worlds-happiest-and-saddest-countries/ | The World's Happiest (And Saddest) Countries | The World's Happiest (And Saddest) Countries
Gallery: The World’s Happiest (And Saddest) Countries 42 images View gallery
What is happiness? Charles Schulz, the creator of Peanuts, wrote, "Happiness is a warm puppy." John Lennon had a different take: "Happiness is a warm gun."
Whatever happiness is to you, there's some conditions under which it most readily blossoms. You need enough money to acquire a puppy or a gun, and enough free time to exalt in its warmth. You need the peace of mind that Big Brother isn't about to come around the corner and take your gun (or puppy) away from you. And because fun things are even more fun when shared with others, you'll be even happier if you have a family that encourages your passion, or at least a local chapter of the NRA or Kennel Club to hang out with.
A few years ago the directors of the Legatum Institute (part of billionaire Christopher Chandler's Dubai-based Legatum Group) were thinking about the wealth of nations. “We found ourselves asking two questions,” says spokesman Julian Knapp. “First, why have some nations -- given a similar start -- become more successful and wealthier than others? And having recognized that life is about more than simple material satisfaction, the second question: why are some nations happier and more satisfied than others?” Indeed why had Ghana and South Korean, having shared similar GDP’s in the 1950s, gone in such different directions, with Korea’s now $39,000 per capita and Ghana’s just $3,000.
After studying 40 years of data and outcomes, they settled on eight areas – the ingredients of prosperity: economy, entrepreneurship, governance, education, health, safety, personal freedom and social capital. Then they looked for reliable data from the likes of the Gallup polling organization that would let them rank countries on their performance in these areas. Add up the scores and you get the Legatum Prosperity Index.
In its recently released 2011 index, billed as an "inquiry into global wealth and well being," Legatum ranks 110 countries on their overall level of prosperity. These countries comprise 93% of global population and 97% of GDP.
View the 20 happiest and 20 saddest countries here.
At No. 1 for the third year in a row: Norway. What's it got that the rest of the world doesn't? For one thing, a stunning per capita GDP of $54,000 a year. Norwegians have the second-highest level of satisfaction with their standards of living: 95% say they are satisfied with the freedom to choose the direction of their lives; an unparalleled 74% say other people can be trusted.
Cynics say Norway's ranking is a fluke, that it's a boring, godless (just 13% go to church), homogeneous place to live, with a massive welfare state bankrolled by high taxes. Without massive offshore reserves of oil and gas that it exports to the world through state-controlled Statoil, Norway's GDP would be far smaller.
Natural resources help: Australia, which ranks third, is benefitting greatly from selling its coal, iron and natural gas to China. And yet some of the most resource-reliant nations, like Kuwait and the United Arab Emirates, are far down the list. There's clearly more to it than oil and ore. Joining Norway and Australia in the top 10 are their neighbors Denmark, Finland, Sweden and New Zealand. Equally small and civilized Switzerland and the Netherlands are also up there. Rounding out the top 10 is the United States at 10th and Canada (sixth).
What do these nations have in common? They are electoral democracies, for one. People are naturally happier when they feel like they have a say in how their countries are run. They also have abundant civil liberties (consider decriminalized drugs and prostitution in the Netherlands), though if your happiness is a warm gun you'll be happier in the U.S. than in Europe. There are few restrictions on the flow of capital or of labor. Legatum's scholars point out that Denmark (No. 2), for example, has little job protection, but generous unemployment benefits. So business owners can keep the right number of workers, while workers can have a safety net while they muck around looking for that fulfilling job.
Legatum's researchers note that Australia's rise from fifth in 2009 to third place exemplifies these positive traits. The Aussies have abolished trade protections, freed labor markets, reformed strict immigration laws and become one of the world's most flexible economies.
Of perhaps utmost importance, nearly all the nations in the top 10 are adept at fostering entrepreneurship and opportunity. Legatum's researchers concluded that a country's ranking in this area is the clearest proxy of its overall ranking in the index. This means low business startup costs, lots of cellphones, plenty of secure Internet servers, a history of high R&D spending and the perception that working hard gets you ahead. The U.S. stands out with a fifth-place rank in entrepreneurism and first place in health, thanks to the world's highest level of health spending, great vaccination levels, clean water, plentiful food and beautiful scenery.
As for the least happy, least prosperous, saddest countries? Sub-Saharan Africa remains the most miserable part of the world, with eight of the bottom 10. This year the Central African Republic edged out Zimbabwe at the bottom. CAR ranks dead last in entrepreneurship, education and health. The 4.4 million people in the Texas-sized, landlocked, tsetse fly-ridden country don't have much hope. Any wealth generated by the export of diamonds and resources goes into the pockets of an elite few. Government programs are virtually non-existent. Half of all adults are illiterate. More than 10% of newborns die in their first year. It's little better in Robert Mugabe's Zimbabwean kleptocracy.
The two non-African countries in the bottom 10 are Pakistan (No. 107) and Yemen (No. 106). Considering that the data for 2011 was gathered before Yemen's revolution and Pakistan's worsening violence, look for one of them to fall below Ethiopia (No. 108) next year.
It's worth noting that there are some countries plagued by autocrats or natural disasters that don't show up on the list. Burma, Cuba and North Korea don't allow pollsters in to survey citizens. Other restive countries where sufficient data was unavailable are Libya, Iraq, Afghanistan, Somalia and Haiti.
Perhaps the biggest disappointment in the three years of the Legatum Index is India. Since 2009 it has dropped 13 spots to 91st place. Per capita GDP is low at $3,600. Health care is extremely poor with high malnourishment and infant mortality and low vaccination rates. It lags in education with a literacy rate of 64%. In social capital, India ranks 104th; only 60% say they can rely on family or friends in a time of need. Only 21% find other people trustworthy. Social inequality perpetuated by a caste system means low levels of entrepreneurship and opportunity.
View the 20 happiest and 20 saddest countries here.
Compare that with China (No. 52), which this year passed the U.S. in Legatum's economic subindex rankings for the first time. GDP per capita is $8,300. Vaccination rates and infant mortality are better. Primary education is widespread with a literacy rate of 93%. Social capital is stronger, with less inequality; 60% find others to be trustworthy. The drawback is that China is not free, birthrates are controlled and the authorities limit public discourse (though India increasingly censors the Internet too). The only areas in which India beats China are in personal freedoms and governance, though India's legendarily thick red tape is a headache for entrepreneurs.
Improved investment in health care and education will be vital in boosting India's ranking in the long term. Until then, the numbers appear to show that India is no match for China in terms of underwriting happiness for the average citizen.
India might well wish it had Europe's problems. Yet although Europe holds 14 of the top 20 slots in the index, not all is peachy. Ireland and Belgium have sagged two spots in the rankings since 2009; Italy and Greece are down four spots. Citizens in a number of European countries expressed flagging confidence in their governments as parliamentary power over economic decisions has been ceded to Brussels. Legatum's researchers also noted surprise at a drop in personal freedom rankings in Finland and Sweden, which show slightly less tolerance for immigrants and minorities. Expect worse results for Europe next year.
It's important to note that prosperity/happiness is not a zero-sum game; every country can improve simultaneously. Legatum notes that during the past three years scores have increased for 87 of 110 countries even if their overall ranking hasn't risen at all. For instance, the more cell phones and Internet connectivity a country has the more opportunities they have to create networks. According to Legatum's report, we all get more out of Facebook and Twitter than we realize: "Social networks are an asset that produces economic and wellbeing returns."
For the most beleaguered countries, every little bit matters. An extra thousand dollars a year of income might not mean a lot to a Norwegian, but in the Central African Republic, where the average person gets by on $2 a day, it's huge. Happiness there isn't a puppy or a warm gun, it's not having to bury your newborn before his first birthday.
View the 20 happiest and 20 saddest countries here.
Follow me on Twitter @chrishelman.
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d694525df268982fccf7cc4e63a94cc4 | https://www.forbes.com/sites/christopherhelman/2012/03/10/fukushimas-refugees-are-victims-of-irrational-fear-not-radiation/ | Fukushima's Refugees Are Victims Of Irrational Fear, Not Radiation | Fukushima's Refugees Are Victims Of Irrational Fear, Not Radiation
This is a guest editorial by Dr. James Conca, an international expert on the environmental effects of radioactive contamination.
(note: for the author's response to the host of comments generated by this original piece, please see his follow-up.)
Every time I eat a bag of potato chips I think of Fukushima. This 12-ounce bag of chips has 3500 picoCuries of gamma radiation in it, and the number of bags I eat a year gives me a dose as high as what I would receive living in much of the evacuated zones around Fukushima. But unlike the Fukushima refugees, I get to stay in my home. We live in a nuanced world of degree. Eating a scoop of ice cream is fine, eating a gallon at one time is bad. Jumping off a chair is no big deal; jumping off a cliff is really stupid. The numbers matter. It's the dose that makes the poison. There is a threshold to everything.
The radiation in those potato chips isn't going to kill me. Likewise, no one is going to die from Fukushima radiation. Cancer rates are not going to increase in Japan. The disaster wasn’t hidden like the Soviets did, so that people unknowingly ate iodine-131 for two months before it decayed away to nothing. No one threw workers into the fire like lemmings because they didn’t know what to do.
Where do I get off downplaying the effects of the Fukushima disaster? I've been studying the environmental effects of radioactive contamination for three decades, working at America's national labs and nuclear waste repositories. My enduring frustration: the extreme supposition that all radiation is deadly and that there is no dose below which harmful effects will not occur.
This idea, known as the Linear No-Threshold Dose hypothesis (LNT), was adopted in 1959 as the global regulating philosophy and remains entrenched against all scientific evidence. It is an ethical nightmare. And it will destroy Japan’s economy.
It‘s keeping 100,000 Japanese citizens as refugees, as it did almost a million Ukrainians. It will waste $100 billion that’s needed to rebuild the devastation from the tsunami, not protect against a large intake of potato chips. It will cause more injury to Japan’s already beleaguered population and damaged economy, for no benefit.
We set thresholds to protect people against harm, and we’ve done a good job. The Clean Water Act, the Clean Air Act, seat belts, coal flue scrubbers, all have saved millions of lives and made the quality of life better for everyone. But thresholds need to be set with reason. We don’t stop driving just because 50,000 people still die on the roadways each year, or stop heating our homes because 1,000 people die every month from coal particle inhalation. We try to make it safer and we deal with things as they occur.
For radiation this philosophy has failed. The LNT theory has been long since disproven. We are bathed in radiation every day and we know that low levels of radiation or even ten times background levels have never hurt anyone. It doesn’t cause cancer. Yet the global fear of nuclear energy and radiation has diverted billions of dollars from more serious health issues. The amount of funding the U.S. spent since 1990 protecting against what, in many parts of the world, are background levels of radiation, could have immunized the entire continent of Africa against its three worst scourges. Instead we saved not one life. This is an ethical issue. The science is easy, the politics are not.
As a scientist, this is disturbing. Fukushima’s a mess but it’s an economic mess, not a fatal one. There are areas around Fukushima that need to be cleaned up and they will, with technologies we’ve developed just for this purpose. In this new global economy, Japan’s response will not only affect Japan. Amid the Fukushima hysteria Germany has decided to shut down its nuclear reactors and import more natural gas from Putin and more nuclear energy from France and the Czechs. This does not make sense, either economically, politically or with respect to safety. If Germans or Japanese are that worried about radiation then a more sensible course of action would be to stop eating potato chips, beets, brazil nuts and bananas, all of which are relatively high but ultimately harmless sources of radiation.
Japan shouldn't sacrifice the lives of the 63,000 evacuees from Fukushima Province to this ideology. A recent survey by the Mainichi Daily News showed a little over a third feel they cannot return to their homes ever, and a little under half want to return now. We need to give them the right choice. Fear is more of a killer than radiation.
Dr. James Conca is an international expert on the environmental effects of radioactive contamination and other contaminants such as heavy metals and organics. He has a PhD in Geochemistry from CalTech (1985) and has been working on nuclear waste and nuclear energy for 27 years, in positions in Academia, the National Labs and industry.
See the author's response to comments on this piece here. And for some more nuclear reading, check out my recent article Nuke Us: The Town That Wants America's Worst Atomic Waste. And follow me on twitter @chrishelman.
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a8d089fe56fe03f39a31e5e1a610a8dc | https://www.forbes.com/sites/christopherhelman/2012/03/21/how-shipping-king-john-fredriksen-found-a-port-in-the-storm/ | How Shipping King John Fredriksen Found A Port In The Storm | How Shipping King John Fredriksen Found A Port In The Storm
This story appears in the April 9, 2012 issue of Forbes Magazine.
Shipping titan John Fredriksen’s $11 billion fortune has soared while the tanker industry has been tanking. His secret offers a lesson for every industry.
John Fredriksen
In the shipping industry John Fredriksen is known as the Viking King. The hard-nosed son of a shipyard welder who grew up on the wrong side of Oslo, Norway, Fredriksen got his start running cargoes of fish, became an oil trader in Beirut and made his first fortune in the early 1980s as what his biographer called “the Ayatollah’s lifeline,” moving Iranian crude during the Iran-Iraq war. His tankers were hit by Iraqi missiles three times. Since then Fredriksen has built the world’s biggest oil tanker fleet, operated by his public company, Frontline, and has amassed one of the world’s biggest fortunes—$11.3 billion at last count, making him the 75th-richest person in the world.
His most impressive feat, though, is still in the making. Shipping is cyclical, but there’s been no cycle like this one. Five years ago when the economy, and oil imports, were soaring, tankers were chartered for as much as $96,000 per day, and Fredriksen, earning his moniker, declared that the shipping business was the best it had been since the time of the Vikings. By last year lower demand and resurgent U.S. oil production saw those same tankers renting for closer to $20,000. Fredriksen’s longtime right-hand man, Tor Olav Trøim, provided the historical update: Shipping hadn’t been this bad since Europe was gripped by the Black Death. “The market,” Fredriksen tells me, “has collapsed totally.”
Yet Fredriksen’s fortune is up 180% in the past three years. The Viking King, it turns out, embraced two of the most classic rules of a cyclical business: He socked away cash during the good times and diversified mightily, buying assets on the cheap.
So it’s no matter that the shipping business is in the toilet. Over the past decade Fredriksen has taken out more than $3 billion in dividends from Frontline and sister companies like Ship Finance International and Golden Ocean. He’s reinvested that cash in new companies like Marine Harvest, the world’s largest salmon farmer; Golar LNG, which ships liquefied natural gas; and Seadrill, which operates deepwater oil-and-gas drill ships.
Seadrill is Fredriksen’s most wildly successful investment. He founded the company in 2005 and built it by acquiring established drillers and building dozens of new rigs, which now compete with the likes of Transocean to bore the deepest holes in the seas. The best rigs are leased out to oil companies for upwards of $600,000 per day. “There’s already a shortage of deepwater rigs,” says Fredriksen, pointing to increased drilling off Brazil, western Africa and the Gulf of Mexico. Seadrill’s shares now account for nearly half—$5 billion—of Fredriksen’s fortune and delivered nearly $400 million in dividends last year.
And because nearly all his vehicles are publicly traded, Fredriksen has taken outside investors along for the ride. “You have to share with others and treat them fair,” he says. “It’s like investing with Warren Buffett,” fawns Trøim.
Those investments look extra-prescient given Frontline’s struggles. Last year the company lost $530 million; shares collapsed by 85% on fears that the company would run out of cash to pay bondholders, let alone the $400 million it owes for new ships it preordered in the good years.
But even here Fredriksen is acting smart. In December Fredriksen announced that he would personally bail out Frontline, pledging $500 million of his own cash to cover losses. “It’s not something we wanted to do, but something we had to do,” says Fredriksen. A lot of his competitors didn’t have that option: Last November General Maritime, the tanker operator controlled by Peter Georgiopoulos, filed for Chapter 11 bankruptcy protection. Genmar, which had taken on too much debt in recent years to finance acquisitions, is now fighting with creditors over the terms of a restructuring.
In contrast, Fredriksen’s backstop was just temporary. In December he broke Frontline in two. The new entity, called Frontline 2012, was spun off to hold the fleet’s prime assets—the newest ships—and most of the debt. While the old ships require $30,000 per day to break even—uneconomical given the current $20,000 rates—the new ships can operate for between $4,000 and $10,000. Enough to turn an operating profit and handle the debt. “It’s a strange thing,” says Fredriksen. “If you build today you have the lowest capital cost and the lowest operating cost.” To capitalize Frontline 2012, Fredriksen in mid-December raised $285 million in a private placement and co-invested with outsiders dollar-for-dollar. “The alternative—massive equity dilution or bankruptcy—was much, much worse,” says Douglas Mavrinac, managing director at Jefferies & Co.
Meanwhile, the old Frontline, saddled with the older ships, has had its debt ballast lifted. It might be able to survive on its own if tanker rates have bottomed out. Eventually the old Frontline will likely go to the scrap heap along with its tankers: “It’s very ugly,” says Trøim, predicting that virtually every ship built between 1990 and 2005 will be scrapped in the next five years and shippers will balk at taking delivery on ones they ordered at $150 million when they’re now worth $80 million.
Instead of slogging through this mess, Fredriksen, 67, could relax and enjoy the comforts of his mansion in London’s Chelsea (the one for which Russian billionaire Roman Abramovich offered him $200 million) while grooming his heirs, daughters Cecilie and Kathrine, to take his place.
Yet, says Trøim, he leads a peripatetic life, splitting time between London, Spain, Barbados, Bermuda and Norway and a few weeks a year in Singapore to tour shipyards. He’s a citizen of tax haven Cyprus. And while the Fredriksen sisters sit on the boards of Seadrill, Frontline and Golar, they’re unlikely to fill Dad’s shoes. “We are trying very hard to get them interested in the business,” says Fredriksen. “I’m not pushing them; it’s a man’s business.”
Fredriksen isn’t the most encouraging role model. “He treats himself so hard,” says Trøim. “He is extremely competitive. He is never satisfied with his successes. I think of something John’s wife once said to him: ‘Life is not a penalty.’” Since she died in 2006, Fredriksen has only sped up his activity. “I’ve been doing this for 50 years,” Fredriksen says. “If I stopped I would probably drop dead.”
To gear up for what promises to be the buying binge of a lifetime, Fredriksen recently sold more than $1 billion worth of Seadrill shares. So as not to send the wrong message to Seadrill’s lesser investors, Fredriksen gave the buyers a put option to sell the shares back to him at the price they paid. Tellingly, his acquisition vehicle will likely be the newly formed Frontline 2012. He’s in no rush, expecting the industry’s “Black Death” to last another five years before turning around.
He’s done this before. Back in 1997 he sucked up the junk bonds of Golden Ocean, a Vancouver-based bulk shipper that went bust after the Asian collapse. Paying as little as 17 cents on the dollar for bonds, Frontline grabbed control of 17 ships for just $65 million cash and later spun out Golden Ocean again for a hefty return.
You can’t invest in Frontline 2012 yet; a public listing remains a ways off. But you can piggyback on Fredriksen’s other companies, including newly formed Archer Ltd., which specializes in the engineering and drilling of both onshore and offshore oil and gas wells and is listed on the Oslo Stock Exchange. Archer started as a spinout from Seadrill in 2007 and doubled in size last year with the acquisitions of Allis-Chalmers Energy and Great White Energy. The goal is to build Archer into a leading oil services company within three years, says Trøim. Expect a U.S. share listing sometime soon. Just don’t expect this shipping king to relax—or to buy a yacht. “A yacht? No, I never have time,” says Fredriksen. “I prefer to stay ashore.”
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b551b92d6426222ac34ada689baffa2b | https://www.forbes.com/sites/christopherhelman/2012/06/04/bakken-bazhenov-shale-oil/ | Meet The Oil Shale Eighty Times Bigger Than The Bakken | Meet The Oil Shale Eighty Times Bigger Than The Bakken
Drilling the Bakken. (Image credit: AFP/Getty Images via @daylife)
Everyone has heard about the Bakken shale, the huge expanse of oil-bearing rock underneath North Dakota and Montana that billionaire Harold Hamm thinks could yield 24 billion barrels of oil in the decades to come. The Bakken is a huge boon, both to the economic health of the northern Plains states, but also to the petroleum balance of the United States. From just 60,000 barrels per day five years ago, the Bakken is now giving up 500,000 bpd, with 210,000 bpd of that coming on in just the past year. Given the availability of enough rigs to drill it and crews to frack it, there's no reason why the Bakken couldn't be producing more than 1 million bpd by the end of the decade, a level that could be maintained for halfway through the century.
But as great as the Bakken is, I learned last week about another oil shale play that dwarfs it. It's called The Bazhenov. It's in Western Siberia, in Russia. And while the Bakken is big, the Bazhenov -- according to a report last week by Sanford Bernstein's lead international oil analyst Oswald Clint -- "covers 2.3 million square kilometers or 570 million acres, which is the size of Texas and the Gulf of Mexico combined." This is 80 times bigger than the Bakken.
Getting access to the Bazhenov appears to be a key element in both ExxonMobil and Statoil's big new joint ventures with Kremlin-controlled Rosneft. Exxon's recent statement says the two companies have agreed "to jointly develop tight oil production technologies in Western Siberia."
No wonder. The geology of the Bazhenov looks just as good if not better. Its pay zone averages about 100 feet thick, and as Clint points out, the Bazhenov has lots of cracks and fractures that could make its oil flow more readily. The couple of test wells that he cites flowed at an average of 400 barrels per day. That's in line with the Bakken average.
This Siberian bonanza might be news to most of us, but it's old news to Big Oil. The conventional oil fields of Siberia have been producing millions of barrels a day for decades -- oil that originated in the Bazhenov "source rock" then slowly oozed up over the millenia. From the looks of it, geologists have been looking at the Bazhenov for more than 20 years.
It's only in the last five years that the technology and expertise has been developed that will enable drillers to harvest it. Lukoil's president Vagit Alekperov said a year ago that his company was also experimenting with the shale.
Analyst Clint figures that it won't be hard for Big Oil to export their shale-cracking techniques to Siberia. They will be challenged, however by summer weather in Siberia, which softens the ground enough to prevent drilling for much of the season. If Russia can get its act together to deploy 300 drilling rigs to the play, Clint figures Bazhenov could be producing 1 million bpd by 2020.
This would, of course, have huge geopolitical implications. Russia, though it doesn't have as many proved reserves as Saudi Arabia, had been outproducing the Saudis for years, averaging about 10 million bpd to Saudi's 9 million bpd. This year, the Saudis are said to have surpassed Russia, leading some pundits to speculate that Russian oil supply had peaked and was set to begin spiralling down.
Gallery: The World's 25 Biggest Oil Companies 25 images View gallery
Developing the Bazhenov could reverse that decline. Unlike the Kremlin's much ballyhooed plan to drill for oil in ice-packed Arctic waters, the beauty of the Bazhenov is that it is onshore and it underlies an area that is already criss-crossed with pipelines serving mature, conventional fields. No need for expensive icebreakers, cold-weather drillships and subsea pipelines.
If Harold Hamm is convinced the Bakken will give up 24 billion barrels, a play 80 times bigger like the Bazhenov would imply 1,920 billion barrels. That's a preposterous figure, enough oil to satisfy all of current global demand for 64 years, or to do 5 million bpd for more than 1,000 years. Rosneft, says Clint, has already estimated 18 billion barrels on its Bazhenov acreage. Either way, it looks like they'll still be working the Bazhenov long after Vladimir Putin has finally retired and the Peak Oil crowd realizes there's more oil out there than we've ever imagined.
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c2b47e71e21a4acb01b38b665b23d21e | https://www.forbes.com/sites/christopherhelman/2012/06/22/the-arithmetic-of-shale-gas/ | The Arithmetic Of Shale Gas | The Arithmetic Of Shale Gas
There are a few societal costs to the development of shale gas, such as the potential contamination of groundwater, complications in treating and recycling water used in fracking. Then there's air pollution from leaking methane (a potent greenhouse gas) and from the diesel-powered rigs and trucks involved in drilling. If you live too close to a drilling rig you'll find it's noisy too.
But all things considered, the benefits of shale gas appear to far outweigh any costs. Many utilities are finding that burning natural gas to generate electricity is cheaper (and cleaner) than coal. Cheaper supplies of fuel and feedstocks benefit U.S. industry, especially manufacturers and chemicals makers which after years of looking for cheap gas abroad have been reinvesting in the U.S. Homeowners benefit from cheaper heating and cooling and electricity. Drilling for gas has created hundreds of thousands of jobs during this economic malaise and it's generated billions of dollars of lease payments and royalties to landowners.
A group of Yale economics graduates, many of them energy industry executives, led by Yale Professor Emeritus Paul W. MacAvoy, were curious about whether they could quantify the economic benefit that shale gas has on America. So they recently set out to do a cost-benefit analysis, valuing and balancing the pros against the cons. They've released their findings in a paper called "The Arithmetic of Shale Gas."
I've parsed all the complicated academic equations so you don't have to. Their conclusion: the benefits of continued shale gas development are enormous and dramatically outweigh even worst-case scenario costs of pollution and clean-up.
Some specifics. Consider that back in 2008, before the shale boom really took off, the nominal price of natural gas (that is, the price at the Henry Hub in Louisiana) averaged $7.97 per mcf. In 2011, the price averaged $3.95 per mcf. Multiply that price drop of $4.02 per mcf by the 25.6 trillion cubic feet the country consumed in 2008 and you find that thanks to the shale boom, America is paying $103 billion a year less for natural gas. (With gas prices falling even further since 2011, in 2012 the benefit will be even greater.)
Had drillers not cracked the code on shale gas, the United States would instead have been forced to do what the experts expected five years ago: import massive quantities of gas, in the form of LNG from countries like Qatar, Australia, even Russia. Import-dependent nations like Japan and Korea pay upwards of $14 per mcf for LNG -- more than triple U.S. prices. If the U.S. had to supplement domestic supplies with imports, the extra costs could have easily added $50 billion a year to the national natgas bill.
As the report's authors write: "It is startling to acknowledge that consumer benefits from the technology of shale gas drilling and new gas production can be expected to exceed $100 billion per year, year in and year out, as long as present production rates are maintained."
But it's not enough to just look at the benefits. What about the costs?
The authors collected as many reports as they could find describing "accidents, misuse of technology and poor well design and installation." A 2011 report for the Secretary of Energy counted 19 times that water from fracking operations spilled out of thousands of wells drilled. None of these instances included groundwater contamination. The Oklahoma Corporations Commission, which regulates the 100,000 oil and gas wells that have been hydraulically fractured in Oklahoma had zero documented instances of groundwater contamination. The EPA has reported two instances of groundwater contamination from fracking in Wyoming, though the agency has been roundly criticized for its methods.
Despite any evidence showing that drilling and fracking cause spills or pollution with any frequency, the authors decided to calculate the costs for a scenario that assumes 100 spills a year out of 10,000 new wells drilled each year. They figure that if 5,000 gallons of polluted frack water were to spill into a field, the cost to scrape up a hypothetical 5,000 cubic yards of contaminated soil and dispose of it at an offsite landfill would be on the order of $2.5 million. Furthermore, if a potable water well were polluted by fracking, the cost to haul in a potable water supply and drill a new water well would be about $5,000. Given 100 incidents in a year, the clean-up costs associated with fracking accidents would be roughly $250 million.
Comparing this $250 million a year in damages against the $100 billion in savings, and "economic benefits, as estimated in as limited methodology as is reasonable, exceed costs to the community by 400-to-1."
(The study authors don't attempt to quantify the costs of gas leaking into the atmosphere and don't factor in any legal costs incurred in settling with landowners whose water is polluted. I would have hypothesized a worse worst-case scenario that would tack on an additional $2.5 million per incident in legal settlements and/or fines, to bring the total to $500 million a year. In that case, the benefits outweigh the costs by only 200-to-1.)
The study group also looked at the potential benefit to consumers of replacing oil consumption with gas -- most likely via cars that run on compressed gas or LNG. It takes roughly 6,000 cubic feet of gas to get the energy equivalent of one barrel of oil. The authors assume an average natgas price of $5 per mcf (nearly double today's price) and an average oil price of $100 per barrel (about $20 more than today). Thus, you need $30 worth of natgas to replace $100 of oil, a savings of $70 per barrel. Replacing just 1 million barrels per day of oil demand with natural gas would save $70 million a day, or nearly $26 billion a year.
Their conclusion, of course: not even inflated costs associated with unrealistically high incidences of pollution can come close to balancing the societal benefits of the shale gas boom.
In addition to Prof. MacAvoy, the other members of the Yale Graduates in Energy Study Group include Robert Ames, Solazyme Corporation; Anthony Corridore, Lafarge North America; Joel N. Ephross, Duane Morris LLP; Edward A. Hirs III, Hillhouse Resources, LLC and University of Houston; and Richard Tavelli, private energy consultant.
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7b6ac26d733eb9459c9f650f3f414d46 | https://www.forbes.com/sites/christopherhelman/2012/09/05/justice-dept-hammers-bp-for-gross-negligence-in-gulf-oil-spill/ | Justice Dept Hammers BP For Gross Negligence In Gulf Oil Spill | Justice Dept Hammers BP For Gross Negligence In Gulf Oil Spill
Deepwater Horizon, April 2010. (Photo credit: Wikipedia)
The Department of Justice has filed a scathing brief accusing BP of gross negligence in the Deepwater Horizon explosion and subsequent 2010 Gulf of Mexico oil spill. Among a litany of condemnations, DOJ's attorneys assert that the behavior of BP executives in the days leading up to the disaster "would not be tolerated in a middling size company manufacturing dry goods for sale in a suburban mall."
The brief (timed, not coincidentally, to help make President Obama look tough on BP going into the home stretch of the presidential race) was filed in U.S. District Court in Louisiana where BP is in the process of settling the civil damages case brought by a giant group of fishermen, hoteliers and citizens damaged by the spill. BP has urged the court there to make a final approval of a $7.8 billion settlement with plaintiffs. The DOJ's brief comes as the court is set to make a final pronouncement about the fairness of the settlement. This could throw a wrench into those proceedings; after reading the government's litany of digs on BP there is a chance that the plaintiffs could reject that settlement amount as too low.
The government attorneys state that they moved to file their commentary on the settlement proceedings by BP's "plainly misleading representations" concerning the extent of its liability and the extent of environmental damages. The brief criticizes BP for, among many other things, downplaying the plight of sick dolphins in Barataria Bay, La, of dead and dying deep-sea corals and of coastal marshes still matted with oil. They reiterated that in the upcoming trial set to begin January 2013, "The United States intends to prove gross negligence or willful misconduct."
BP is doing damage control today, and submitted this statement in response:
In its filing, the U.S. Government made clear that it does not oppose the settlement reached by BP and the PSC resolving economic loss and property damage claims stemming from the Deepwater Horizon oil spill. The settlement received the Court's preliminary approval on May 2, 2012, and both BP and the PSC believe the settlement is fair, reasonable and adequate and meets all the legal requirements for final approval by the Court. Other issues raised by the Government simply illustrate that disputes about the underlying facts remain. BP believes it was not grossly negligent and looks forward to presenting evidence on this issue at trial in January.
Whether or not BP was grossly negligent will be a huge issue in the government's case against the oil giant. If gross negligence is found, it would quadruple the base damages that BP could be forced to pay under the federal Clean Water Act. The CWA holds that each barrel spilled (and not captured) is subject to a fine of $1,100 — if the spill is accidental. If a court finds that the spill was caused by gross negligence the fine rises to $4,300 per barrel. Applied to the roughly 4.9 million barrels believed to have spilled from Macondo, that's the difference between $5.5 billion and $21 billion.
The brief lays out an abridged version of the government's case for a gross negligence finding. They start with some embarrassing emails between John Guide, the BP engineer responsible for the ill-fated Macondo well, and David Sims, his boss. Guide explained in one email that Macondo was a very difficult well, that the drilling crew was "flying by the seat of our pants" under a "huge level of paranoia" that was "driving chaos." Guide concluded that "the operation is not going to succeed if we continue in this manner."
Guide's email was "a clarion cry of impending disaster," writes the DOJ attorneys, who question why BP's internal investigators didn't make any reference to it in their report on the events leading up to the disaster.
DOJ says BP purposefully ignored any lessons to be learned from the 2005 Texas City refinery explosion that killed 15. They criticize David Sims for not following up on Guide's warnings. They criticize Sims for meeting with Robert Kaluza (another of BP's leaders on the Deepwater Horizon rig) just hours before the explosion, yet not even asking Kaluza what about the operation was so stressing him out.
BP had sent out 15 extra "centralizers" to be installed in the well to complete the well cementing, but Guide then ordered that those centralizers not be used. In a cavalier email quoted in the brief, Guide concluded, "But, who cares, it's done, end of story. Will probably be fine."
The brief reserves its greatest criticisms for the "negative pressure test" that was the last work conducted on the well. The test is relatively simple, but to simplify it further, think of it this way: before the Deepwater Horizon could finish its job and disconnect from the well the drillers needed to make sure the cement job had been done right and that the well was in stasis, that is, there should be no oil or gas flowing through it. If the well is trying to flow it will show up in pressure gauges on the rig. A negative pressure test isn't successful unless there's no pressure reading at all. But at the Macondo test, sensors did show a pressure anomaly from the well. Despite acknowledging the pressure reading and agreeing that it was worrisome, BP's supervisors Don Vidrine and Mark Hafle dithered. The DOJ asserts that it should have been a no-brainer for BP to run the test again, but they didn't. Ordering a retest would have begun with the closing of the rig's blowout preventer, which would have stopped the flow before the blowout.
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Gallery: BPs Deepwater Capping Stack 12 images View gallery
BP has said in recent months that it hopes to settle with the government the question of negligence and the amount of fines without going to trial. BP spokesmen have told me the company believes that at least some of the billions it has spent to clean up the mess should go to offset fines. BP considers the clean up efforts largely complete. But the DOJ challenges this too.
"The fact that a section of shoreline is no longer considered suitable for response action does not mean that it is not suffering continuing injury from the Spill. For example, an important consideration in deciding on appropriate response action is whether a cleanup technique will cause more harm than good."
The DOJ asserted that BP is wrong to say the Gulf's ecosystem has gone through a robust recovery -- in reality there is far more damage than meets the eye, and more cleanup to be done.
In a note this morning, Credit Suisse oil analyst Kim Fustier wrote that the DOJ's tough language "suggests to us that a settlement acceptable to BP is not imminent, and lowers BP’s chances of settling in the low end of the $15-25bn range. Hence, if it cannot get to a satisfactory agreement we think it might be best for BP to continue to litigate, which would maintain the Macondo overhang for longer than we’d hoped."
Fustier figures that BP has paid out $30 billion in damages and clean up costs so far, and that if both government attorneys and lawyers in the civil cases can convince juries that BP acted with gross negligence the final financial hit for the Macondo disaster could top $55 billion.
BP shares bottomed out near $27 in the depths of the disaster; by midday Wednesday they were trading down 2.50% on the NYSE at $40.50.
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dc1e21cfc619c1c9438746c1e563c8b3 | https://www.forbes.com/sites/christopherhelman/2012/09/06/venezuela-seizes-u-s-vessel-on-suspicion-of-arms-trafficking/ | Venezuela Holds U.S. Vessel And Crew On Suspicion Of Arms Trafficking | Venezuela Holds U.S. Vessel And Crew On Suspicion Of Arms Trafficking
Hey, I got your guys. (Image credit: AFP/Getty Images via @daylife)
Updated 11 a.m. Friday
The Venezuelan government has seized a U.S. flagged ship and detained its captain for more than a week.
Since August 29 the ship Ocean Atlas has been at port in Maracaibo, Venezuela, where it docked to unload a cargo of equipment. Yet after four hours in port, the ship was boarded and searched by armed security personel, and the captain was detained on suspicion of trafficking in arms or drugs. The captain has been identified as Jeffrey Michael Raider, 45, of Texas.
The rest of the crew of 15 Americans has remained on board under guard. According to a well-placed source arrest warrants have been issued for all of the crewmembers, who are to be taken off the ship for questioning.
Incredibly, my Forbes colleague Jeff Bercovici has been in touch over email with one of the crewmen, Russell Macomber, who has managed to post updates to his Facebook account while under detention.
In a sardonic tone, Macomber even relayed that when Venezuelan authorities raided the Ocean Atlas they stole cartons of cigarettes, ate the crew's ice cream and let their dogs defecate on the deck. Macomber writes that he would like nothing more than an airdrop of Budweiser. (Read Jeff's post and Macomber's account here.)
Officials at the ship's operator, Intermarine, did not immediately respond to Forbes' requests for information. Nor did officials at American Maritime Officers, which is believed to have provided the crew for the ship. A spokeswoman at the Venezuelan embassy in Washington said she would look into the incident.
A spokesman for the Seafarers Union confirmed the seizure to Forbes and said, "The SIU is working feverishly to help resolve this situation and to ensure the safety of all mariners aboard the Ocean Atlas. We are staying in touch with the crew and will continue doing so.”
A U.S. Embassy official in Caracas also confirmed the incident to Reuters earlier today.
The seizure of the ship could become an international incident if not resolved soon. A month ago Venezuela detained a U.S. citizen entering from Colombia. President Hugo Chavez accused the man of being a mercenary and part of an "imperial" plot to oust him. So far there has been no public comment from Chavez about the Ocean Atlas detention.
If Chavez seeks to hold onto the valuable vessel it wouldn't be the first time he stole something from an American company. In 2010 he nationalized 11 oil rigs operating in Venezuela and owned by Helmerich & Payne. Chavez at the time said the rigs were "of public utility."
Not much is known about the captain of the Ocean Atlas. Jeff Raider is believed to be a 1989 graduate of Texas A&M who previously served as first mate on the Maersk Alasaka.
The 12-year-old Ocean Atlas is one of a very small number of U.S.-flagged heavy-lift vessels. Its cranes can lift 400 tons and its giant holds are ideal for hauling hauls boats, generators, and oilfield equipment. It often moves cargoes under contract with the U.S. government or for projects financed by the U.S. Export-Import Bank, which requires U.S. flagged ships to carry any cargoes it has financed. In 2010 it made 18 trips between New York and Brazil, hauling new subway cars for the Big Apple.
A decade ago the ship carried oilfield equipment to Iraq. And according to a backgrounder on Globalsecurity.org, it also made a special trip to Libya:
The Department of State requested that the vessel be quietly diverted to Libya, where under special security cover, the vessel was loaded in its entirety with equipment from Libya's nuclear and other WMD programs arsenal. They included specialized centrifuges used in the processing of uranium to weapons grade, equipment from a uranium conversion facility, and Libya's five SCUD-C long-range missiles. The cargo was discharged at an undisclosed U.S. East Coast port. The Libyan cargo move was truly a spur-of-the-moment operation.
The ship became the first U.S. vessel to dock in Libya in 20 years.
So was Ocean Atlas carrying weapons this time, on another top secret U.S. mission? No, says Macomber; nothing but three rifles in case they needed to ward off pirates when traversing the Gulf of Aden.
For more on this story check out: American Sailor Held In Venezuela Uses Facebook To Ask For Help, Prayers, Beer.
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9fe5b5c0d4bc0fddf7167710ae3101eb | https://www.forbes.com/sites/christopherhelman/2012/10/19/wild-ride/ | Wild Ride: The Sordid Saga Of How Formula One Racing Came To Texas | Wild Ride: The Sordid Saga Of How Formula One Racing Came To Texas
The vision guy got iced out. The bond trader and the billionaire took over. Will the new track be done in time? This is the sordid saga of how Formula One racing came to Texas.
Bobby Epstein guns his Cadillac Escalade up a 130-foot incline, banking left into the hairpin of Turn 1. What's terrifying at 180 mph in a Formula One race car is, at one-quarter the speed in an SUV, a soothing break from reality. If he rolled down his window the chairman of the Circuit of the Americas racetrack would be bathed in the dust and noise of 1,000 workers and heavy machines hustling to prepare the 1,100-acre site for the inaugural United States Grand Prix, just five weeks away. The smooth asphalt blowing by quietly beneath us is just about the only thing fully completed.
The pressure is on: 100,000 tickets for the three-day race weekend, Nov. 16-18, have already been sold. The race promises to be a boon for Austin, better known for Willie Nelson, the University of Texas and South by Southwest. The grandstand looks impressive, as does the Paddock Club--12 suites at 10,000 square feet each--primed for well-heeled swells who'll pay at least $4,200 for the chance to watch 56 laps of the 3.4-mile track from just above the pits. Austin has cooked up the typical self-justifying statistics--the track will boost local business by $300 million a year, according to a study--and Epstein's figures are still more ebullient ($500 million).
Yet for all the excitement, Epstein, a 47-year-old bond trader whose idea of a good time is driving his RV around the country, finds himself something of a hostage. He never intended to end up as the biggest investor in a $450 million sports debacle or the central character in a two-year soap opera that pitted him and a San Antonio billionaire against a small-time race promoter.
But here he is, stopping his Escalade in the middle of the track to make sure I get a close look at the 251-foot-tall tower that will provide 100 people a bird's-eye view of the whole shebang. Building it was his idea, part of a project into which he's now personally sunk an estimated $50 million or more.
"When the stands fill with people it will feel a lot better than how it feels today," he admits. "If you had told me up front there would be that many hurdles, I either would have been better prepared or I don't know if we would have done it."
The only-in-Texas saga of how F1 came to Austin starts with a guy named Tavo Hellmund. The son of a race promoter, he grew up locally, aspiring to be an F1 driver, and raced stock cars in the U.S. and Formula Three in Europe. His real dream was to bring Formula One to Austin.
"I live and breathe racing," says Hellmund, an intense 46-year-old who alternates spitting out profanities and tobacco juice. "And there's nothing I wanted to see more in my entire life than a Formula One Grand Prix here in my own hometown."
In 2007 Hellmund sketched out a track design, inspired by the best turns of tracks like Brazil's Interlagos, England's Silverstone and Turkey's Istanbul Park. He brought the plans to Bernie Ecclestone, the billionaire chief executive of Formula One--and a friend of his father's.
Ecclestone has long been keen to increase the sport's presence in the U.S. In the rest of the world F1's races generate $2 billion in revenues, bolstering prospects for an initial public offering that could raise $7 billion--or more, if F1 can get U.S. investors excited. Back in 1982 there were three Formula One races in the U.S. But they faded away as Nascar and its oval tracks ascended; the leftover twisty tracks were unable to keep up with the safety needs of ever more ambitious race cars. The last U.S. race was at the Indianapolis Motor Speedway in 2007.
After what he says were maybe a dozen meetings and many more phone calls, Hellmund eventually coaxed a contract out of Ecclestone that granted him the rights to run a Grand Prix in Austin for ten years. On some big conditions: He had to build a track, plus pay Formula One $23 million a year in sanctioning fees.
With that guarantee Hellmund turned around and cut what he thought was a solid deal with the state of Texas to tap the Major Events Trust Fund (used to help attract perceived economic boons like the Super Bowl) to pay those $230 million in sanctioning fees over ten years.
Hellmund priced out how much it would cost to build a raceway--between $200 million and $250 million, he guesstimated--and then set out to find some local deep pockets.
He quickly found Epstein. Little known outside of Austin, Epstein established himself as a bond trading researcher at Dain Rauscher; in 1992 he started and then sold his own broker-dealer, and then founded Prophet Capital Management in 1995. His hedge funds now manage $2 billion.
Epstein, who had been to only one F1 race prior to his involvement, is a thin, cerebral guy from Dallas, who regularly lunches at Wild Bubba's Wild Game Grill near the track (try the longhorn burger). When he met Hellmund, Epstein was looking for something to build on land he owned outside of town; his plan to build 1,200 homes succumbed to the real estate crash. Hellmund's F1 contract and state-subsidized windfall looked appealing.
One thing Epstein didn't want was the spotlight, so he sought out a higher-profile partner with experience in cars and sports. Billy Joe "Red" McCombs was a natural fit. The billionaire built up a chain of auto dealerships in San Antonio before making his $1.3 billion fortune as an early investor in Clear Channel Communications. At various times he's owned the Minnesota Vikings, San Antonio Spurs and Denver Nuggets. "When you think about sports, showmanship and Texas, it's a short list that leads you to Red," says Epstein.
At 84 and in the process of handing over his empire to his daughters, McCombs was more averse to risking millions on a wild ride, but he liked Epstein and he liked the project. "It's something that I ordinarily wouldn't do, but I recognized that the people who had it didn't have a chance to get it done," he says, referring to Hellmund. "Didn't have a chance."
In July 2010 Hellmund, McCombs and Epstein started a new partnership, Accelerator Holdings. In exchange for a 20% share, Hellmund would chip in his F1 contract and another deal to host a MotoGP motorcycle race, both to be underwritten by those millions in state funding. For their 80% McCombs and Epstein pledged to raise a minimum of $190 million by Mar. 31, 2011.
But what looked good on paper went south--quickly. The parties have differing versions, but documents and conversations with people in the know weave a fairly consistent narrative.
What's clear is that in plunging ahead with groundbreaking in December 2010, McCombs and Epstein made two blunders familiar to all those who've ever fallen blindly in love with a business idea: They began investing their money and reputations before they figured out how to make a profit, and they neglected to tie up legal loose ends.
When the Mar. 31, 2011 day of reckoning arrived, Epstein and McCombs were not ready to inject $190 million into the risky project. Hellmund says he was eager to assign his contracts as soon as his partners fulfilled their financing obligations and proved they had access to enough cash to get the job done.
Meanwhile, the clock was ticking: Ecclestone had already penciled in June 17, 2012 as the date of the inaugural U.S. Grand Prix at Austin. Both sides had leverage. Hellmund's partners were already pregnant with the project, having put up a few million to start construction. Epstein and McCombs knew Hellmund had little option but to cooperate and sign over his contracts?--where else could he hold his race?
But despite being bound together, the marriage soured. Hellmund claimed he was barred from seeing any financial statements and cut out of decision-making, even the hiring of Steve Sexton, former president of Churchill Downs, as the Circuit of the Americas' new president. He also griped that his promised salary of $500,000 and position as the chairman of the U.S. Grand Prix failed to materialize. (The company denies all of these claims.)
"He wanted to run the business as a race, versus running it as a multidimensional company," says Epstein, referring to Hellmund and the decision to bring in Sexton, despite his lack of car racing experience. Under Sexton the track made a deal with Live Nation to bring concerts to the 15,000-seat amphitheater on-site. What's more, the grandstand area can be transformed into a soccer pitch or tennis court.
Those close to the relationship say that Hellmund's behavior became more erratic. Track employees say weeks passed during which they never saw him in the office. Sources say Hellmund was convinced that his e-mail was being hacked, that he was being followed, that his partners were trying to cheat him. Hellmund declines to comment on any of this.
The project lurched forward despite the legal limbo and dysfunction. Costs skyrocketed. Expensive soil remediation was required, and a gas line had to be moved. The city council endorsed the project on the condition that the track put up $5 million to fund green technologies. At $450 million the track will cost double Hellmund's original estimate.
Slow, underfunded construction meant there was no way the track would be ready by the June 2012 race day. Ecclestone agreed to move the race to November. But he was running out of patience; Ecclestone still hadn't received the $23 million sanction fee to make Hellmund's contract valid--and Hellmund still hadn't signed it over to the partnership.
But although moving the race date bought them time, it messed up the deal with the state, which by law couldn't hand over cash more than a year before the event.
Then late last summer the dysfunction came to a head. Hellmund claims he had cobbled together a new group of investors to replace Epstein and McCombs. "I offered to buy them out," says Hellmund. "They refused." Epstein says they "never received a verifiable offer from Mr. Hellmund." Epstein and McCombs instead agreed to pay Hellmund $18 million for his shares in the track--and for his F1 and MotoGP contracts.
Yet again, a deal didn't get done. "We were prepared to pay a large sum of money for valid contracts," says Epstein, regardless of whether the sanction fees had been paid. Sources say Epstein went to London to clear the buyout with Ecclestone, who might have thought it odd that the man who dreamed of a Grand Prix in Austin and had been touting himself as the face of the project would want to walk away from it. Ecclestone's response: Work it out with Hellmund.
But they didn't. Worse, on Nov. 15, 2011, Texas Comptroller Susan Combs, bowing to political pressure, announced that no taxpayer handout would be paid before the race at all. They would have to find another way to underwrite the sanction fee.
In November 2011 Epstein and McCombs halted construction. It made no sense to keep building if they didn't legally have a race to run the following November.
Epstein again approached Ecclestone, seeking to persuade him to cancel Hellmund's contract (which was in breach for nonpayment). And again Ecclestone stood by his friend's son, reportedly accusing Epstein and McCombs of "trying to steal" the race from Hellmund. He also publicly threatened to pull the race entirely.
In the end Ecclestone agreed to issue the Circuit of the Americas its own ten-year contract--at a price. He upped the annual sanction fee to $25 million instead of the previous $23 million. "Bernie is a master negotiator," says Epstein.
"I've made a big effort to make sure this race happens," Ecclestone tells FORBES. "I never had any problems or doubts. The doubts were all on their side."
The circus didn't end there. Epstein had succeeded in getting a new F1 contract without paying off Hellmund. But Hellmund still had his interest in the company.
Even though their contracts called for disputes to be resolved in arbitration, Hellmund sued his partners in March, accusing Epstein and McCombs of willfully ignoring the terms of their contracts. Rather than get bogged down in a court fight, Epstein and McCombs finally settled with Hellmund in mid-June--for considerably less than the $18 million proposed payout, according to sources familiar with the deal. Asked about Hellmund's payout, Epstein says, "I'm willing to be patient for success, and not everybody is willing to be patient."
Now, with the race finally at hand, some semblance of normalcy has returned. Hellmund is out. McCombs, too, has dialed back his involvement and capped his equity contributions but is believed to be a guarantor behind much of the track's debts. Epstein, meanwhile, has attracted more than a dozen new equity investors, including Paul Mitchell/Patrón billionaire John Paul DeJoria. Racing legend Mario Andretti was hired as the public face of the track.
The state's largesse also seems poised to return. After meeting with Texas Governor Rick Perry at the Italian Grand Prix this year, Epstein says he's finalized a deal by which Texas will reimburse the track for the F1 sanctioning fee after each year's race, once the receipts from the horde of F1 fans have been tallied up. In time Epstein hopes to build a hotel and research center on-site, as well as garages for the rich and fast to park their Lamborghinis and Ferraris.
"I never envisioned taking charge of the project," says Epstein, much less infusing all that cash. Worth it? "Bonds are great. They don't talk back. They work on weekends. They don't require you to go talk to the city, the county, the state," he says. "But the emotional satisfaction and the mental challenge that I get from a project like this is nothing I've experienced before."
And Hellmund? He says he's currently pursuing a new Formula One contract with partners in Mexico--an idea that would put him in direct competition with Epstein and McCombs, who are counting on racing fans to trek north of the border.
Come race day, though, he promises he will be trackside. "I spent my whole life figuring out how to bring F1 to Austin," says Hellmund. "I wouldn't miss it for the world." And what about his former partner, Epstein?
Hellmund's only response: "Who?"
Follow me on twitter @chrishelman.
HIGHEST-PAID DRIVERS
Formula One’s top three earners rank among the world’s 25 best-paid athletes.
Fernando Alonso
(Ferrari)
2011 earnings: $32 million
F1 points ranking (as of Oct. 10): 1
Michael Schumacher
(Mercedes)
2011 earnings: $30 million
F1 points ranking: 13
Lewis Hamilton
(McLaren)
2011 earnings: $28 million
F1 points ranking: 4
Sebastian Vettel
(Red Bull)
2011 earnings: $14 million
F1 points ranking: 2
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fb4d38c85bc79612cf5e70d238e61f9b | https://www.forbes.com/sites/christopherhelman/2012/12/31/big-oil-faces-700-million-water-pollution-suit-in-new-hampshire/ | Big Oil Faces $700 Million Water Pollution Suit In New Hampshire | Big Oil Faces $700 Million Water Pollution Suit In New Hampshire
ExxonMobil and Citgo, the U.S. refining arm of Venezuela's state oil company, are set to go to trial against the state of New Hampshire. The state is seeking $700 million from the oil companies to compensate for groundwater pollution caused by gasoline additive MTBE. A story from the AP today gets into some of the details of the legal saga, but conveniently omits the fact that the state will be hard pressed to pin the blame on the oil companies for this pollution. In fact, the federal government mandated in the 1990s that MTBE be blended into gasoline to increase octane and improve combustion. This despite the fact that studies had already shown how easily MTBE could pollute groundwater. The federal MTBE mandate was finally phased out in 2006, long after its dangers were known and after the state of California had unsuccessfully appealed to the EPA to end the mandate. There's a ton more about the history of MTBE litigation here. Other oil companies have settled MTBE claims with states rather than wage expensive court battles. Exxon, however, is willing and able to go to the mat over MTBE, and hopes to convince a jury that actual MTBE pollution is not as bad as claimed.
There's been a lot of belly-aching over the hydraulic fracking of shale gas formations, despite a complete paucity of evidence that it has caused any material pollution of groundwater. MTBE, however, has a real history of pollution -- thanks to the EPA mandating its use. Just something to keep in mind.
2 Oil Giants Face Trial in New Hampshire Water Pollution Suit - NYTimes.com.
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6f238e865818692ed8d8f0d0407a1341 | https://www.forbes.com/sites/christopherhelman/2013/04/08/forbes-disruptors-2013-jonathan-wolfson-of-algae-innovator-solazyme/ | Forbes Disruptors 2013: Jonathan Wolfson Of Algae-Innovator Solazyme | Forbes Disruptors 2013: Jonathan Wolfson Of Algae-Innovator Solazyme
Jonathan Wolfson's dream in 2003 was to prove that algae could prove a viable substitute to petroleum. Today, the company he founded, Solazyme, is arguably the leader in the algal fuel race.
But there's a lot more to the company, which is why we selected Wolfson and Solazyme for inclusion in our recent tally of the most Disruptive Names In Business 2013.
They company has had a number of breakthroughs with algae-based fuel. In 2011 United Airlines was the first to fly a jet with algae-based fuel, and agreed to buy 20 million gallons a year of it from Solazyme.
That same year the U.S. Navy bought a load of algae-based diesel to fuel a destroyer. According to the Navy the algae-fuel produces far less exhaust than conventional blends.
Several filling stations in the Bay Area, where Solazyme is based, even offered motorists a test of algae-based diesel.
These are more concrete results than what Craig Venter of Synthetic Genomics has achieved in his algae-oil venture with ExxonMobil.
But something happened on the way to discovering the secret to green diesel. Solazyme has discovered all sorts of other novel uses for algae. A lot of that has to do with the novel ways in which they grow the green gunk.
When Solazyme started off, the idea was to grow algae in big ponds where it could soak up sunlight. But through experimentation the founders soon determined a better way was to grow algae in the dark, in big vats, into which they feed carbohydrates like sugar.
In testing myriad strains of algae, Solazyme found that it can mimic many kinds of common oils, from cocoa butter and palm oil to olive oil or even pork lard.
“This is disruptive technology," says Wolfson. "Not only can we make renewable oils, but all of these oils--from a palm kernel replacement, to a heart healthy food oil--can be produced out of one single fermentation plant in simply a matter of days all by switching out the microalgae strain.
These were all-new opportunities. And because Solazyme's costs of making this algae-fuel are still higher than what they can sell it for (at least until they can scale up) the company has raised cash for non-fuel algae projects -- including $200 million in its May 2011 IPO and $115 million in convertible preferred notes in January.
"We realized early on that we needed a business model that would allow us to use the power of our technology to produce any kind of microalgae and to enter higher-value markets," says Wolfson. He's taken this novel ability to tailor specialized oils to a variety of big partners.
With Unilever it has a deal to make high-grade algae oil for use in food and soaps. In a joint venture with agri-giant Bunge, Solazyme is building a plant in Brazil that will feed low-cost Brazilian sugarcane into its algae vats to make speciality oils on a larger scale.
Solazyme is also working with ADM, and in Iowa has retrofitted ADM's massive industrial fermenters to instead house algae that it feeds with leftover leaves and stalks from the corn harvest.
Perhaps the most promising innovation is something they call "alguronic acid," a compound that Solazyme says it "stumbled onto," then realized that it protects both algae and human skin. A year ago the company started making anti-aging skin products under the brand name Algenist -- which is now sold at the stores of cosmetics giant Sephora.
Margins on anti-aging serum are a heap better than what Solazyme can hope to glean from selling transport fuel (which costs roughly twice as much to produce than conventional diesel or jet fuel).
Solazyme has its detractors. Because it relies on biomass like corn stalks and other carbohydrates to grow its algae in the dark (rather than relying on free sunlight), it's not exactly living up to the carbon-negative algae dream. Plus, Wolfson has a long way to go in proving that his company's concepts can make money -- a prerequisite for having any hope of changing the world. Last year Solazyme posted a net loss of $83 million last year on sales of $44 million.
But Wolfson says that Solazyme will continue to grow rapidly and that he has a "clear path to 120 million gallons a year of oil production, and we intend to be competitive in all our target markets, including fuel."
Though Solazyme shares are down 30% in a year, investors do have some reason to believe that the food and face cream can keep it going until it finally cracks the price barrier on cleaner, greener fuels.
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c0c0415cf8f46b20af649cbae3cdfd39 | https://www.forbes.com/sites/christopherhelman/2013/04/29/7-reasons-why-oil-prices-wont-plunge/ | 7 Reasons Why Oil Prices Won't Plunge | 7 Reasons Why Oil Prices Won't Plunge
Oil well pump jacks (Photo credit: Richard Masoner / Cyclelicious)
The United States is in the midst of a miraculous supply boom that has seen domestic oil output soar by more than 1 million barrels per day in the past year to the highest levels in decades. U.S. oil output is now at 6.5 million bbl per day, in third place after Saudi Arabia and Russia (both at roughly 9.8 million bpd). And the growth shows no sign of slowing down.
Add to that the slow and steady recovery of the Iraqi oil industry, plus the likelihood that the shale-cracking techniques perfected in the U.S. will be exported to the likes of China and Russia, and it looks like the world's oil demand will be easily met for years to come.
So it's little wonder that oil prices have been falling in recent months, with WTI at $93 and Brent crude down to $103 from a peak of $116 in February. Which way from here?
Well, analysts Oswald Clint and Rob West at Sanford Bernstein, though not wildly bullish on oil prices, believe there are seven good reasons why we will not see a sustained plunge in crude (but they call them "seven sources of hidden oil market elasticity").
1. Decline rates at mature fields
It's conventional wisdom that the output of mature oil fields declines at a rate of 5% to 10% a year, slowly fading away over time but never giving up the ghost entirely. The Bernstein analysts earlier this year conducted a study of 3,100 oil fields that debunked that myth. They found that some fields decline much faster. The decline rate in the Gulf of Mexico, for instance, is 23%, with the North Sea is about 10%. Russian fields fare a little better, at a 3.5% decline rate. Even if the average decline rate worldwide is just 5%, that means the industry needs to develop a new Saudi Arabia every two years, just to stay even.
2. Motorists are sensitive to gasoline prices
Data from the Dept. of Energy and the Federal Highway Administration shows that the number of miles that American motorists drive is inversely correlated wtih gasoline price increases. As gas prices rose 25% in early 2008, the number of miles driven dropped by roughly 3.5%. When gas prices fell 35% into the 2009 recession, miles driven jumped up 2%, year over year. There's not enough new Priuses or Teslas on the road to change this yet: if gas prices fall, demand for gas will increase.
3. European imports
Despite weak markets, European refiners can be expected to buy more when prices fall. This is what they did when prices dipped last year -- buying an additional 1.2 million bpd. Europe's crude oil inventories are also about 10 million barrels below 5-year averages, so importers there would likely be buyers on a price dip.
4. China inventories
The Bernstein analysts note that in 2012 China increased the rate at which it built up its oil inventories, adding 240 million barrels in 2012 after 140 million in 2011. When oil peaked in February China cut back its oil imports to the lowest level in five months, indicating that if prices fall they'll pick up the pace.
5. Rising marginal costs
Despite the enormous growth in the U.S., the costs of getting that oil out are growing at unprecedented rates. Bernstein figures that the cost of producing the last barrel rose from $89 in 2011 to $114 in 2012. About 95% of U.S. production was done at a marginal cost of $71 a barrel. Part of the marginal cost calculation involves non-cash expenses like depreciation, but over the longer term a corporation will not survive if its marginal production costs are higher than the going price of crude.
6. U.S. stripper wells
The first to go will be stripper wells. These are marginal wells that produce less than 15 barrels per day. But there's a lot of them, enough to produce 1 million bpd when the price is high. Production costs are often high on stripper wells because they often bring up a lot of water along with the oil, and water can be expensive to treat and get rid of, especially when you don't have economies of scale. Most of these wells become uneconomic at oil prices less than $90.
7. OPEC
The cartel has a stated production cap of 30 million barrels per day. But member states are producing more like 30.4 million today. But the OPEC nations need prices of $90 to $100 to balance their budgets and keep their people happy with government spending. They will adhere to quotas in order to get prices back up. The Saudis have proven that they can be very disciplined when it comes to cutting output. In 2009 when oil prices crashed they scaled back by 1.5 million barrels per day. They also tend to export less when prices are low, and keep the oil in the kingdom.
Overall, the Bernstein guys believe that these seven criteria would be enough to tighten global oil supplies by 1.5 million barrels per day if Brent crude were to fall to $90 -- that would be enough tightness to bring prices back above $100. Invest accordingly.
Check out my archive of Forbes stories, and follow me on Twitter @chrishelman.
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5e1186f8a290ad43a4384948e4664e7a | https://www.forbes.com/sites/christopherhelman/2013/05/25/fun-facts-for-roadtrip-season-why-were-using-less-gasoline-than-ever-but-killing-each-other-more/ | Fun Facts For Roadtrip Season! Why We're Using Less Gasoline Than Ever (But Killing Each Other More) | Fun Facts For Roadtrip Season! Why We're Using Less Gasoline Than Ever (But Killing Each Other More)
(Photo credit: Wikipedia)
Memorial Day weekend marks the start of the summer driving season. It's the weekend of the Indianapolis 500, and -- if you happen to be in the jet set -- of the running of Formula One's Monaco Grand Prix. There's no better time to take measure of the state of America's love affair with the automobile. And no better way to celebrate that with a roadtrip. In the United States more than 31 million Americans will hop into their cars for a getaway this weekend, with the average trip adding nearly 700 miles to the odometer. For folks staying closer to home, a common destination will be the auto dealership. Dealers forsee big sales this weekend, with the industry on track to move 15 million cars in 2013, up 6%.
All told, over the three-day weekend Americans will drive on the order of 25 billion miles. In doing so we'll burn through about 1.25 billion gallons of gasoline and diesel. We'll shell out a collective $4.6 billion for all that go-juice.
Gasoline might still seem perennially expensive to anyone who remembers paying less than a buck a gallon back in the 1980s. But today's average nationwide price of $3.67 for a gallon of unleaded is 4 cents cheaper than a year ago. California, with its mandated ultra-low-emissions gasoline, naturally pays the highest price at $3.95 a gallon. Surprisingly, the second-highest is the Midwest, at $3.87, up 24 cents over this time last year due to a series of refinery outtages.
Americans reduced their driving by about 10% during the recession, but appear to have bottomed out. Total miles driven in the past year is expected to be up .13%, or about 3 billion miles, to 2.9 trillion. That's barely changed from a decade ago.
What has changed, however, is how much gasoline we're using. A lot less. According to the Energy Information Administration, the average daily demand for gasoline in January and February of this year was 8.3 million barrels per day (about 350 million gallons). That is way below the all-time high point of 9.6 million bpd in July of 2007. To find a two-month period when we used less gasoline than that, I had to look all the way back to early 2001.
Refiners however, are keeping their plants operating at capacity. So the result is that the United States has what can only be called a gasoline glut. We've got enough gasoline left over that the U.S. is now exporting the stuff at an unprecedented rate of about 500,000 barrels, or 21 million gallons, per day. What's more, we're meeting more of our supply needs with domestic oil supplies, having slashed crude imports in half. That's keeping tens of billions of dollars a year from flowing out of the country.
And it's going to get even better. Americans drive 240 million cars and light trucks. At current sales volumes of 15 million units a year we'll replace the entire fleet in about 16 years. And because cars keep getting more fuel efficient, by the time we've done so U.S. gasoline demand could be slashed by a further 25%. According to the Michigan Transportation Research Institute the average car sold this year gets 24.5 miles per gallon. That's a record, and up 20% over 2007.
Fuel efficiency standards are only going higher. The Obama administration has finalized new rules that will mandate 54.4 mpg for cars and light trucks by 2025. That's double the efficiency of the average car today. What's more, these more efficient cars will be a great hedge against rising oil prices. Given that the average driver logs 13,500 miles behind the wheel each year, if your car gets 20 miles a gallon then you're burning through 675 gallons of gas and spending roughly $2,500 (at current gas prices) for the pleasure. Trade for a car that does twice the mpg and gas would have to cost more than $7 a gallon before your budget noticed the difference.
One ironic drawback: as our cars become more efficient, our highways could become crummier and crummier. That's because highway improvements are funded primarily through money collected in taxes on gasoline -- currently 18.4 cents per gallon for gasoline and ethanol and 24.4 cents for diesel. The fewer gallons we need, the less is collected in taxes, and the less available to pay for the roughly $45 billion a year we spend on highway construction and repair. As a result, the Federal Highway Trust Fund is going broke. According to the nonpartisan Congressional Budget Office, the account will rack up a $6 billion shortfall in 2015, growing each year to a $92 billion hole by 2023. Congress has been, and can continue to direct money to fill the gap. Increasing gasoline taxes will not be politically palatable, considering that it is a regressive tax, inflicting the most pain on lower income families with less fuel efficient cars who live farther away from work. But the cash gotta come from somewhere. So every time you crunch through a pothole this weekend, think about what makes more sense: charging higher gas taxes or slapping a hefty federal sales tax on high-end luxury cars?
Higher taxes aside, it's not only getting cheaper to drive, but safer as well. Unless you're a stupid teenager. A recent headline fretted that highway deaths increased last year by 5.3% to 34,080, the first increase since 2005. The increase was enough to push up the motor vehicle fatality rate from 1 death per 100 million miles driven to 1.16 deaths. Some blame attention-addled youths, figuring that texting while driving causes as many as 3,000 deaths a year, more than drunk driving. The deadliest state to drive in, with 2,500 car and motorcycle fatalities: Texas.
Any highway death is terrible, and if the recent fatality rate trend doesn't reverse itself concerned citizens might end up pushing for more draconian laws on cell phone use in cars. But there's truly no need to get too worked up about highway deaths. It's clearly never been safer to be in a car. The most dangerous time to drive was way back at the dawn of the automotive age. Consider that in 1921 two dozen people died per 100 million miles driven. Though more and more people died as car ownership expanded (peaking at more than 54,000 dead in 1972), what matters is that the fatality rate per 100 million miles driven has plunged, down to 1.16 per 100 million miles today. With computer-aided breaking and even driverless cars, that rate will fall further.
The best way to stay safe on the highway this summer? Stay in your car. Motorcyclists make up a disproportionate share of highway fatalities -- 15% of the total, or 5,000 last year. Per mile traveled, motorcyclists are 30 times more likely to be killed in a traffic accident than are car passengers.
The death toll is no doubt heightened by the fact that 31 states have no helmet laws. As a civil libertarian, I'm no advocate of such laws -- if people think it's worth dying to enjoy the thrill of the wind in their hair and bugs in their mouth, that's up to them.
Motorcyclist Philip Contos might wish he hadn't been so stubborn. In 2011 he was riding bareheaded during a protest of New York's helmet law when he lost control of his bike, hit his head on the road and died from a skull fracture.
So there you have it -- plenty of stuff to argue about on that long roadtrip. Your talking points:
-- Ain't America great! We've got oodles of gasoline and thanks to efficient cars we'll be using less and less of it in the years to come.
-- How to fix the Federal Highway Trust Fund? Higher gas taxes or taxes on luxury cars? Discuss.
-- Whatever happened to the good ol' days when teenagers died from drunk driving instead of texting?
-- Should the government protect people stupid enough to ride motorcycles by forcing them to wear helmets, or let them be free to kill themselves?
-- What's better: Indycar or Formula One?
Enjoy the ride!
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1449311280ebdf35f5dac0fabec9984e | https://www.forbes.com/sites/christopherhelman/2013/06/19/will-summer-blackouts-doom-the-texas-boom/ | Will Summer Blackouts Doom The Texas Boom? | Will Summer Blackouts Doom The Texas Boom?
NRG's Green Mountain Energy wind farm. (Photo credit: Wikipedia)
Texas has been an economic powerhouse in recent years. Gross domestic product in the Lone Star State, which hit $1.2 trillion before the recession, is now closing in on $1.4 trillion. The oil and gas industry has been booming. The housing market in Houston is the hottest in the country.
In terms of population and economic heft only California is bigger. And yet Californians are moving to Texas in droves. In part to take advantage of the Lone Star's low unemployment rate -- just 6.4% versus California's 9%. There's no state income tax here either. According to the U.S. Census Bureau 8 of the 15 fastest growing cities in America are in Texas.
Texas's biggest drawback in the state vs. state debate? The weather. Californians (along the coast at least) enjoy those lovely ocean breezes and perfect summer days. While Texans like to claim that our mild winters make up for summers that last for five months and regularly feature 100 straight days of 90 degree temperatures.
Ah but Texans are accustomed to struggling against nature, to scratching out an existence on dusty ranches and oil fields. Besides, beating the heat is why God made air conditioning. No surprise that Texas uses more electricity (by far) than any other state.
But all that growth is stressing out the Texas power grid. Electricity demand in the state was up 1.7% in 2012 and is expected to grow another 2.3% in 2013. There's not enough new power plants coming on line to keep up. That's why the North American Electric Reliability Corp. (NERC), which keeps tabs on the nation's power grids, says that Texas faces the biggest threat of rolling blackouts during the peak summer air conditioning season.
The Electric Reliability Council of Texas (ERCOT), which manages the Texas grid said in May that it expected record peak demand for electricity of 68,383 mw this year. This is above the record August 2011 peak of 68,299 mw.
If the 550 power plants in the region are able to handle the load this summer it will be by only a hair. ERCOT forecasts that its summer reserve margin will be just 8.1%.
This means that at the hottest time of the year, when air conditioners are running full blast, Texas will only have a cushion of about 6,700 mw of capacity. That's not much wiggle room, considering that on any given day some 2,500 mw of power plants are offline for one reason or another. And even if there is sufficient power within the state, sometimes transmission lines get too congested to carry it where it needs to be.
NERC considers a 15% cushion to be the bare minimum. The only other regional power market in anywhere near as tough a spot is the southern California portion of the massive western grid where the decommissioning of the San Onofre nuclear power plant has left a 2,200 mw hole in the generation market and where wildfires perennially threaten transmission lines.
But unlike ERCOT, which is like an island wholly cut off from neighboring grids, the southern California grid can at least import power from its neighbors. NERC figures that southern California has a reserve margin of around 18%.
The regulators that run ERCOT and the politicians that ultimately structured the system know there's a problem. And with demand expected to grow to 76,000 mw in 2023, the problem is only going to get worse. The solution is simple: build more power plants while incentivizing lower consumption.
But how to do that is another matter. ERCOT can't order power companies to build more plants. The restructuring of the Texas power market in 1999 dismantled the oligopolgy of big electric utilities and introduced real competition into the power grid.
ERCOT is an "energy only" wholesale power market -- that means that the only part of the market that the regulators really regulate is the maximum wholesale price that generators can charge for their kilowatts during peaks.
Any decisions on whether to invest in new power plants are left up to investors. This is good in that it maximizes free market forces.
Yet a little more regulation might not be such a bad thing. Most other electric grids across the country also maintain markets in generation capacity. Utilities in those regions regularly enter into deals years in advance to buy power from generators at particular times and prices -- this gives the generators another cash stream that supports construction of additional power plants.
Some Texas regulators like the idea of launching capacity markets, others don't. The downside is that it would put more costs on ratepayers -- who have to foot the bill for those long-term contracts and shoulder the risk of price volatility.
Discussions on how to tweak the structure of ERCOT have gone nowhere fast. Meanwhile, what to do about the near-term need for power?
One thing ERCOT has done is to raise the cap on wholesale electricity prices so that when the sun blazes down power plants will have every incentive to fire up. From $4,500 per mwh last year, the price cap is ratcheting up to $9,000 per mwh in 2015.
This will help keep operators like Luminant (a division of Energy Future Holdings ) in the market. CEO John Young has said that low prices for natural gas have made it cheaper for gas-fired generators to make electricity. That's hurt the economics for Luminant's fleet of coal-burning plants. Luminant had mothballed two coal units but has brought them back on line for the summer months.
But other coal-burners have been taken out of commission, and most are unlikely to be replaced. One new coal-fired unit that came on line this year, the 925 mw Sandy Creek plant near Waco, had been under construction since 2008 and plauged by lawsuits from the likes of the Sierra Club. Plant owner LS Power, in a 2011 settlement with the Sierra Club, agreed to more stringent emissions controls at Sandy Creek and also agreed to call off plans to build coal plants in Arkansas and Georgia.
Nuclear (with about 12% market share) is on hold here as well after the Nuclear Regulatory Commission in April blocked NRG Energy 's plans for two new reactors at its South Texas Project -- the commission argued that a foreign entity -- Japan's Toshiba -- would hold an unlawful controlling stake in the finished project. NRG is appealing.
For now natural gas (43% share) will have to pick up the slack. And yet independent power providers are reluctant to go whole hog into building gas-fired plants because they're skittish about the long-term volatility in natural gas prices. One company that has plunged in is Panda Power Funds, a private equity group that is building twin 760 mw gas-fired plants between Austin and Dallas. They should be ready for summer 2014.
"It takes at least four to five years to develop and build a power plant," says Bill Pentak, v.p. of public affairs with Panda Power. "If the state waits to put incentives in place until the power is needed, there won’t be just a power shortage — there’ll be a five year power shortage."
The Lower Colorado River Authority is also building the 540 mw Ferguson unit in Llano County, but that is primarily a replacement for an old decommissioned plant.
Then there's wind. With 10,400 mw of installed wind capacity ERCOT has more wind generation than any other state in the union (twice the amount of #2 Iowa). There's another 3,000 mw of wind set to be built by 2015. But the trouble with wind is that it's just not reliable. ERCOT counts windfarms' contribution to the total generation pool at just 8.7% of maximum capacity, or roughly 1,000 mw. Those turbines simply don't turn very fast on scorching summer afternoons when the air is still.
As for solar? It has a lot of room to grow. The amount of solar power sent into the Texas grid was up 265% last year -- to provide a total of less than .5% of ERCOT's electricity. Total solar capacity in the state was 81 mw at last count. That's 5% of the size of the gas-fired plants that Panda Power is building.
ERCOT is trying other means to reduce load on peak days. It already has a program whereby big commercial and industrial users can get paid to reduce their usage on a half-hour notice. And this year it has launched a pilot project expanding that deal to residential users. Communities can get in on the project if they can round up enough homeowners to reduce power use by 100 kw on a half-hour notice. With some 6 million smart meters installed at Texas homes already, the potential for conservation could be huge. In March, when the days are cool, daytime residential use in Texas is about 8,500 mw. In August it soars to about 35,000 mw -- more than half the total.
Thunderstorms and hurricanes are by far the biggest cause of power outtages across the country. But those are acts of God. If Texas ends up with rolling blackouts during a heatwave this summer or next it won't be God's fault, rather it will be the fault of men dragging their feet on fixing a system before it's too late.
I know it's not the Texan way, but if we all keep our thermostats just a couple degrees higher this summer the grid might just survive meltdown!
Gallery: America's Worst Corporate Air Polluters 10 images View gallery
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67cc2f91a739e919b3d8437583eab4ff | https://www.forbes.com/sites/christopherhelman/2013/07/17/anadarko-unshaken-by-its-deepwater-horizon-legacy-builds-big-in-the-gulf-of-mexico/ | Anadarko Stars In Gulf Of Mexico Building Boom | Anadarko Stars In Gulf Of Mexico Building Boom
Among the giants. A tour group walks toward Chevron's deepwater Jack and Big Foot platforms. For... [+] more pictures of the massive platforms under construction in Ingleside, Texas, click on the photo above. (Image Credit: Forbes/Chris Helman)
On Tuesday a U.S. district judge in Houston found that Anadarko Petroleum must face up to a lawsuit by investors who allege that the oil and gas giant misled them in the wake of BP's Deepwater Horizon explosion. Anadarko held a 25% stake in the ill-fated Macondo well. Yet company officials said at the time that Anadarko neither had a hand in designing the well nor was in overseeing the drilling operation and so couldn't be held responsible for it. Investors seemed placated that any financial hit would be minor. And yet months later Anadarko settled its share of cleanup costs with BP for $4 billion -- not an immaterial amount. (More on the new ruling from Bloomberg, here.)
Thus the legacy of the Macondo disaster continues to hang over Anadarko -- America's third-biggest non-integrated independent oil company (trailing ConocoPhillips and Occidental Petroleum), with revenues north of $15 billion and daily production volumes of roughly 275,000 barrels per day.
But don't think for a second the nightmare of Macondo has stopped the company from investing in the Gulf of Mexico.
***
Last Thursday morning at 6 a.m, I was heading toward Ingleside, Texas, on the Gulf coast near Corpus Christi. The GPS in the car couldn't find the Kiewit Offshore Services fabrication yard. It was still dark out; I started to worry about getting there on time at 6:30 for a tour of Anadarko's new deepwater platform Lucius.
Then out of the pre-dawn gloom I saw what looked like a great mound of lights in the distance. The objects were so much bigger than anything for miles around that looking at them while driving was like looking at the moon when it's low on the horizon -- everything in the foreground moves around, while the moon just hangs there behind it all. No need for GPS -- I knew that's where I needed to go.
The sky lightened, and as I arrived at the yard the great structures revealed themselves. They were oil production platforms in various states of completion. The biggest one is 400 feet tall from the bottom of its base to the top of its crane -- the height of a skyscraper. In the months to come these behemoths -- owned by Anadarko, Chevron and Royal Dutch Shell -- will be towed hundreds of miles out into the Gulf of Mexico. For now, they are on display as marvels of mega-engineering -- billions of dollars of technology ushering in the future of the Gulf of Mexico oilpatch.
It's a refreshing sight. BP's Macondo oil spill in 2010 cast a pall over the entire Gulf of Mexico. The drilling moratorium and "permitorium" postponed investment for more than a year. Since that time a lot of capital that would have flowed into offshore developments has stayed onshore, to drill and "frack" all those shale fields. With all the attention over the Bakken and Eagle Ford and Marcellus etc, we've almost forgotten the enormous potential of the deepwater.
The Gulf of Mexico currently produces 1.3 million barrels of oil per day. That's down from 1.7 million bpd at its peak in 2009, before BP's disaster. But with the help of these steel behemoths, and more to come, it's likely that Gulf output will not only return to that peak, but surpass it.
Our minders on the Ingleside media tour explained that because we were there to look at Anadarko's Lucius platform we were dissuaded from taking pictures of other companies' assets. Sorry for being bad guest, but when objects are this big and awesome, it's impossible to look away. So we gaped at these five platforms in the works (you can find many more photos here):
-- Anadarko's Lucius truss spar. This floating skyscraper bigger than the Eiffel Tower will be installed about 250 miles south of New Orleans, in 7,100 feet of water. Expected production capacity: 80,000 barrels of oil and 450 million cubic feet of natural gas per day.
-- Chevron's Jack/St. Malo semi-submersible. It will head out 280 miles south of New Orleans to produce the Jack and St. Malo fields, with expected production of 170,000 barrels of oil and 40 million cubic feet of gas per day. Project cost: roughly $7.5 billion.
-- Chevron's Big Foot tension leg platform. It will have a production capacity of 75,000 bpd of oil and 25 million cubic feet per day of gas and is destined for the Big Foot field 225 miles south of New Orleans in 5,000 feet of water. Project cost: roughly $4.1 billion.
-- Shell's new tension-leg-platform, dubbed Olympus, will be heading out this summer to the Mars field, 130 miles south of New Orleans. It is expected to produce 100,000 bpd at its peak.
-- Hess's Tubular Bells spar. It's still in earlier stages of construction at the Gulf Marine yard, but when completed this spar is expected to produce 45,000 bpd and cost roughly $2.5 billion. Chevron is a 43% partner with Hess.
Added up, if all this equipment is deployed without a hitch and works at maximum capacity, the cumulative production will be more than 450,000 barrels per day of oil and tens of millions more cubic feet of gas. Total cost for these five giants, including drilling wells and laying pipelines, will be well in excess of $20 billion. But that's not outrageous when you consider that revenues from all those volumes (at $100 oil) will be on the order of $17 billion a year.
Some of these developments are a long time in coming. Chevron discovered Jack in 2004. It was a landmark find, proving that there were potentially huge reserves deeper under the sedimentary salt layer than geologists had ever thought possible before. Today geologists think this Lower Tertiary trend contains more than 15 billion barrels of recoverable oil. Chevron soon followed up Jack with the discovery of St. Malo. Big Foot came later in 2006.
Other recent discoveries in the Gulf include Shell's Appomattox, with 500 million barrels, Chevron's Moccasin with 200 million barrels and the even bigger Coronado, and BP's Mad Dog, which is now thought to have as much as 4 billion barrels. BP has already put one platform in place to tap Mad Dog, and is building a second.
The discovery of Lucius almost didn't happen. The exploration block had been in the inventory of Kerr-McGee, which Anadarko acquired in 2006. In 2009 Anadarko's geologists realized that they only had three months left on their lease. If they didn't drill it by then, control of the block would revert to the U.S. government, for re-leasing. Oil companies are continuously weighing where to invest money to drill next. It's a big decision when you're choosing between onshore wells that cost less than $10 million to drill versus deepwater wells at a minimum of $50 million (to more than $150 million). Oftentimes if prospects don't look quite juicy enough, companies will let leases expire rather than put up the capital to drill them.
But Anadarko's geologists were convinced they couldn't pass it up. ExxonMobil had made a massive natural gas discovery nearby -- the Hadrian field. Seismic imaging showed promising structures just to the north of Hadrian. So they decided to go for it.
Usually the process of lining up all the permits and getting a rig into place would take a year. But they did it in three months. "We knew if we found hydrocarbons it was going to be substantial. We didn't know if it would be oil or gas. We were pleasantly surprised," says Shandell Szabo, the geologist behind the discovery.
They found a "payzone" 900 feet thick. Better yet, it's a world-class reservoir made up of highly permeable unconsolidated rock with plenty of nooks and crannies for oil to flow through. No fracking required. Anadarko has determined that they will be able to produce the entire reservoir with just six wells.
Imagine that -- 6 wells, each of which are expected to produce 15,000 bpd and keep up that rate for years until the 300 million bpd has been recovered. Compare that with shale oil from the giant onshore fields like the Bakken and Eagle Ford, where the best wells may come online at 3,000 bpd but then decline in volume by 50% a year.
It's those huge volumes that make the deepwater so economically compelling and worthy of building such enormous structures to harvest them. This truss spar "is the largest that Anadarko has built," says Don Vardeman, Anadarko's v.p. of global projects, who has engineered seven spars before this one. In simplest terms you can think of a spar as a kind of a like a giant beer can speared onto the top of the Eiffel Tower. The steel superstructure that sits below the water is designed to keep the above-water platform stable even in big waves and strong storms. Lucius will be one of the world's biggest spars. "Having a higher capacity required us to have a larger hull. The size of the hull determines the amount of payload you can carry." Most of that payload consists of the massive "topsides" section, which includes the oil and gas processing systems, engines with thousands of horsepower to compress the oil and gas to push it through pipelines to shore, as well as living quarters for the several dozen men who will operate the platform.
In a twist, the equipment on the Lucius spar needs to not only be robust enough to process the oil and gas from the Lucius field, built is also will be handling big volumes of natural gas from ExxonMobil's nearby Hadrian field.
Anadarko's Gulf of Mexico chief Darrell Hollek says he expects the Lucius hull to be floated out to sea in mid August. Once the spar is in place it will be filled with ballast, causing its base to sink below the waves. It's then anchored to the seafloor with three tethers made of polyester rope. Then in the first quarter of 2014 the completed topsides will be slid on rails off of the Kiewit yard and onto a massive barge. Then will come the high-risk "ballet" of mating up the topsides with the hull. In the middle of the ocean, in 7,000-foot waters, a ship with giant cranes will lift the topsides off of its barge and slowly lower the topsides onto the spar's hull. Anadarko built the hull in Finland and the topsides in Ingleside, and "the two pieces have to align perfectly," says Vardeman. "It's a little bit of a challenge."
A challenge that these engineers thrive on. "This is just amazing good fun," says Vardeman. "We have some amazing people to work with, and the challenges are just the best."
What's more, the geologists say the initial discoveries at Lucius and Hardian will just be the start. Once the more shallow (if you can call 20,000 feet down shallow) reservoir has been flowing for a while, Anadarko's plan is to drill deeper, aiming for the same Lower Tertiary trend where Chevron's Jack/St. Malo is situated. The hope is to keep hydrocarbons flowing through Lucius spar for decades to come.
Lucius is just the start of Anadarko's work in the Gulf over the next five years. In what they call a "design one, build two" approach, Anadarko will deploy a near-identical spar to its deepwater Heidelberg discovery. Heidelberg is thought to hold 400 million barrels, or more. Anadarko has already farmed in a deep-pocketed partner for Heidelberg in Japanese oil company Marubeni, which agreed to put up $860 million to cover Anadarko's share of drilling and development costs in exchange for 12.75% of the project. The shipyard in Finland that built the hull for the Lucius spar has already begun constructing a duplicate hull.
And after Heidelberg, says Vardeman, they may have so perfected this spar technology that they'll go ahead and build numbers 3 and 4. In recent months Anadarko and its partners drilled their second well into a discovery called Shenandoah. Completed in March to a depth of 30,000 feet, the well found a high-quality reservoir of more than 1,000 feet thick, full of oil. The expectation is that Shenandoah contains more than 1 billion barrels of oil.
Beyond the Gulf of Mexico, in recent years Anadarko has made mammoth discoveries of natural gas off the coast of Mozambique, enough to support construction of a giant liquefied natural gas project. It's also busy in deepwater blocks off Ghana and Sierra Leone.
Under recently departed CEO Jim Hackett, Anadarko had a great 10-year run. At $88, Anadarko shares are near record highs, having more than tripled since Hackett began building the company a decade ago. Hackett, 59, decided to celebrate his retirement this year by attending divinity school at Harvard University and becoming a director at private equity giant Riverstone Holdings. Hackett was replaced by Al Walker, a former investment banker who previously served as Anadarko's CFO and COO.
One of Hackett's landmark moves at Anadarko was the acquisition of Kerr-McGee for $18 billion in 2006. But Anadarko not only inherited Kerr-McGee's vast inventory of Gulf acreage (including what later became Lucius), it also got its environmental liabilities. For years now, Anadarko has been mired in a court fight over a legacy of toxic pollution left behind by a Kerr-McGee spinoff called Tronox. The chemical company went bankrupt in 2009. Plaintiffs claim that Kerr-McGee had larded up Tronox with liabilities and knew it was going to collapse -- meaning Anadarko should now be on the hook for funding cleanup. Anadarko has claimed that Kerr-McGee executives honestly believed that at the time of the Tronox spinoff it was a strong enough company to stand survive on its own and cover all its liabilities. Court arguments ended months ago, now all that's left is for Judge Allan Gropper of U.S. Bankruptcy Court in the Southern District of New York to present his ruling. Anadarko's ultimate financial hit could be more than $14 billion (though the company considers that highly unlikely).
Anadarko shareholders are accustomed to legal uncertainty hovering over their company. Once the Tronox and the Deepwater Horizon litigation is done it will lift the haze of uncertainty that hangs over the company, even if it does cost billions that Anadarko (with just $3.7 billion cash on the balance sheet) doesn't have. Removing that uncertainty is what will open up Anadarko for a takeover.
It has been an open secret for years that ExxonMobil is eyeing Anadarko. If it happens shareholders just have to hope that it's more accretive to earnings than Exxon's $40 billion acquisition of XTO Energy. XTO was, for ExxonMobil, a long-term investment in America's shale plays. Plunging natgas prices paired with high shale drilling costs have so far delayed Exxon from gleaning much of a return on XTO. Exxon and Anadarko are already working together on the Hadrian field. Exxon has expressed interest in buying a piece of a Mozambique LNG build-out. And Exxon is currently building its biggest worldwide corporate center in near Houston in The Woodlands, just a couple miles down the highway from Anadarko's headquarters. I'm told that Exxon didn't plan big enough for its 10,000-worker development -- it's already renting out extra office space around the Woodlands. Meanwhile, Anadarko is building a second skyscraper at its headquarters. All that real estate synergy should make it easier to join the two companies.
Of course none of the Anadarko team at Ingleside last week had any comment about that.
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cbaff460a09f412594d4d68bac03bcee | https://www.forbes.com/sites/christopherhelman/2013/08/06/anti-frackers-win-chesapeake-gives-up-new-york-gas-leases/?ss=business:energy | Anti-Frackers Win - Chesapeake Gives Up New York Gas Leases | Anti-Frackers Win - Chesapeake Gives Up New York Gas Leases
Tower for drilling horizontally into the Marcellus Shale Formation for natural gas, from... [+] Pennsylvania Route 118 in eastern Moreland Township, Lycoming County, Pennsylvania, USA (Photo credit: Wikipedia)
If the people of a state don't want the royalties and economic growth and jobs and truck traffic that come with oil and gas development, you can't force it on them.
That's the conclusion made by Chesapeake Energy . According to this new story by Reuters, Chesapeake has given up trying to fight against New York's ban on high-volume fracking and is allowing its leases in the state to expire.
The company has no intention of drilling wells in the Marcellus shale formation of New York if it's not allowed to frack them.
Chesapeake had tried to extend many New York leases, which had been initially signed more than a decade ago, on the grounds that the state's fracking ban was akin to an act of god.
A New York state court said it couldn't continue to hold them.
Oil and gas leases typically run for a period of five to 10 years. If a driller makes a find on the land and begins producing it within the allotted period then it can hold the land "by production."
If it doesn't put the land into production by the end of the lease term, it has to surrender the lease.
According to the Reuters story, some of those New York leases included bonuses of as little as $3 an acre. That's a far cry from the thousands per acre that companies like Chesapeake paid at the height of the shale land grab.
Reuters said one landowner hoped to re-lease the land to another driller for $3,000 an acre, while another had no intention of ever leasing her land again.
Given the headaches that oil and gas companies have had in New York, and the plentitude of shale reserves they have ready to drill across the rest of the country, don't expect anyone to rush in and re-lease the old Chesapeake acreage until the end of New York's fracking moratorium looks like a sure thing.
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04e0cf901941aed451769b0cb67b1063 | https://www.forbes.com/sites/christopherhelman/2013/09/12/the-war-on-coal-goes-global-china-bans-new-plants-as-obama-epa-plans-killer-regs/ | The War On Coal Goes Global: China Bans New Plants As Obama EPA Plans Killer Regs | The War On Coal Goes Global: China Bans New Plants As Obama EPA Plans Killer Regs
(Photo credit: Wikipedia)
That's one way to do it. China's State Council has announced that it is banning the construction of new coal-fired power plants near Beijing, Shanghai and Guangdong. The goal is to cut air pollution in the country's eastern megalopolises. The hope is that by 2017 Beijing residents will be breathing in 25% less fine particulate matter than in 2012. China's annual coal consumption surpassed 1 billion short tons per year in 1988 and has exploded since then, to an estimated 4 billion tons this year.
By shifting new power plant construction to natural gas, nuclear and solar, China hopes to bring its reliance on coal down below 65% of total power generation, from about 70% today (the U.S. gets about 35% of its electricity from coal). That shift is underway, with dozens of nuclear plants under construction. The expectation is that China's nuclear capacity will grow from 12.5 gigawatts now to 50 GW by 2017.
Meanwhile, the Obama Administration is seeking to mimic the Chinese playbook. The Environmental Protection Agency has reportedly drafted a proposal to block new coal power plants in the U.S. unless they are outfitted with technology to capture and sequester carbon dioxide. Such technology exists, but it is so prohibitively expensive in terms of capital costs that no investor would dream of taking the risk.
The proposed limits would be 1,100 pounds of carbon dioxide emissions per megawatt-hour for coal-fired plants and 1,000 pounds per mWh for natural gas-fired plants.
Natural gas technology would meet the proposed standards. The average "combined cycle gas turbine" emits just under 800 pounds of carbon dioxide per mWh.
But just how impractical are those emissions limits on coal? Hugh Wynne, analyst with Bernstein Research, writes in a note today that the most efficient coal-fired steam turbine generators put into service the past five years have average emissions rates of 1,900 pounds per mWh.
Trapping carbon dioxide and injecting it deep underground can be done, but according to Wynne it would nearly double the capital costs of a coal power plant to roughly $112 per mWh of capacity.
There's one coal plant with carbon capture technology being build in the U.S. right now. Southern Company's Kemper County plant in Mississippi will gasify pulverized coal into a mixture of carbon dioxide and synethic natural gas. The natgas it burns to power a turbine while the carbon dioxide will be injected down into an old oil field to help loosen and push up more crude oil. As the oil comes out, the carbon dioxide remains trapped in the interstices of the reservoir.
Naturally, this mode of carbon sequestration only makes economic sense when there's a big oil field nearby.
No doubt other novel technology will emerge to help reduce the carbon emissions of coal. One idea involves pumping smokestack emissions through beds of lime water. The chemical interaction of the carbon dioxide and the lime (calcium oxide) forms calcium carbonate.
The EPA rules haven't been finalized yet, but the draft proposals represent just the newest salvo in Washington's war on coal.
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d20067cbbc0121b303e2921dfddefb24 | https://www.forbes.com/sites/christopherhelman/2013/10/07/the-clever-gimmicks-behind-t-boone-pickens-new-green-fuel/ | The Clever Gimmicks Behind T. Boone Pickens' New 'Green' Fuel | The Clever Gimmicks Behind T. Boone Pickens' New 'Green' Fuel
T. Boone Pickens has been a visionary in using natural gas to fuel America. (Photo credit:... [+] Wikipedia)
The T. Boone Pickens-backed Clean Energy Fuels has launched a "new" kind of clean and green automotive fuel called Redeem. You wouldn't know it from the breathless coverage of this product in the New York Times, but there's nothing new in the chemical and physical composition of this -- it's simply compressed natural gas. CNG has been marketed in the U.S. since at least 1980. Around the world there's some 17 million cars and heavy vehicles that run on the stuff.
So what's different about Redeem? Because of where the natural gas ostensibly comes from, it's greener than your average CNG. This is landfill gas, a byproduct of rotting trash. They like to call it "biomethane" to somehow distinguish this gas from methane drilled and fracked out of the earth. Nevermind that all that more common methane was also formed by the biological decomposition of dead plants that lived millions of years ago rather than garbage entombed a couple years ago.
Does it make sense that landfill gas is greener than regular natural gas? When burned to make a vehicle go it generates just as much carbon dioxide. But state regulators in Calfornia have determined that landfill gas is the absolute greenest fuel there is. This is based on the assumption that were it not captured and used, this landfill gas would simply escape the dump and waft up into the atmosphere -- where pound-for-pound the methane has a global warming impact 24 times worse than carbon dioxide.
Consider New York City's Fresh Kills landfill. Once the world's biggest dump, it used to emit an estimated 15 billion cubic feet of greenhouse gases a year, perhaps 2% of world methane emissions. But now that methane is captured -- on the order of 10 million cubic feet of natgas per day, enough to heat about 22,000 homes. Waste Management turns gas from the Altamont landfill in California into about 13,000 gallons of fuel a day -- enough to keep 300 garbage trucks running. (Good story on those efforts, here.)
How much of a premium to Redeem buyers have to pay for this green benefit? Nothing. Clean Energy (NASDAQ:CLNE) says they'll sell the stuff at the same price as CNG from conventional natural gas -- which is about 50 cents cheaper than buying the equivalent energy in the form of gasoline or diesel.
But here's the little secret: it only makes sense that Clean Energy is selling Redeem at the same price as "regular" CNG -- because it is the same stuff. Don't be fooled into thinking that most of the molecules of Redeem CNG really came from a landfill.
Sure, Clean Energy is procuring landfill gas from dump operators across the country, and it owns and operates two plants, in Texas and Michigan, that process landfill gas. But as the company states in its fact sheet, that gas is simply injected into the nation's natural gas pipeline grid, where it's intermingled with all the other conventional gas flowing down the pipes to plants that turn it into CNG.
The ultra-green nature of Redeem is really just an accounting gimmick. The more gas that Clean Energy's traders can procure from landfills (as well as methane-rich wastewater plants and dairies) across the country, the more CNG it can slap with the Redeem label. But on the molecular level, it's exactly the same stuff.
"In effect," says Clean Energy, "the process is equivalent to depositing $100 at an ATM in New York and withdrawing it the next day at an ATM in California."
These are the kind of green gimmicks that grow out of carbon cap-and-trade schemes like the one managed by the California Air Resources Board. It costs Clean Energy Fuels more to procure and process and market this landfill gas, but the company makes up that difference by generating and selling carbon credits, both under California's system, as well as the federal Renewable Fuels Standard. A spokesman says that as of now only Clean Energy is benefitting from the credits, but if a big fleet operator wanted to forge a long-term supply deal, the company could figure out how to share the green benefit.
I applaud Clean Energy for figuring out the angle and taking advantage of it.
A natural gas-powered trash truck. (Courtest Clean Energy Fuels)
So how green is this artificially green fuel? According to data used by California regulators, gasoline generates 95.86 grams of carbon dioxide equivalents per megajoule of energy released. Compressed natural gas averages about 68 grams per megajoule. Ethanol made from corn grown in America averages about 65 grams of CO2 per megajoule. Ethanol from Brazilian sugarcane does about 25 grams per megajoule. Then we get down to landfill gas. According to California, when you take into account the methane prevented from escaping into the atmosphere, compressed landfill gas emits just 11.26 grams of CO2 per megajoule. In terms of carbon footprint, no automotive fuel is better.
According to Clean Energy, a company that operates a fleet of roughly 1,500 vehicles that would otherwise consume 1 million gallons of gasoline a year, could reduce their California-calculated emissions by 9,700 tons a year by switching to Redeem. Switching just to "regular" CNG would only save about 3,000 tons of emissions. Considering that California's carbon emissions from transportation are running at about 160 million tons per year, that's a real step in the right direction.
However you want to calculate emissions impacts, there's no excuse not to trap as much landfill methane as possible -- and to trade it into the market (California) where it's most valuable. Redeem is a clever way to do this, and the fact that Clean Energy is selling Redeem at the same price as regular CNG is commendable. But it's worth knowing when a "green" product is really just the same old thing in a new label.
As T. Boone Pickens said in a recent op-ed on the subject, "With renewable natural gas, we have planted yet another tree in America's energy garden -- one that is 100 percent renewable and leverages a fuel that's cleaner, cheaper and American. And it -- along with all domestic natural gas -- will help remove America's shackles from its Middle Eastern oil addiction."
Clarification: In the hours after I published this article today there's been a number of comments describing this piece as a hatchet job on Clean Energy and Mr. Pickens. I don't see the validity of these criticisms, and I don't think they read the piece carefully. How could they misconstrue a line like: "I applaud Clean Energy for figuring out the angle and taking advantage of it."
So I'll try to clarify my position here: After I read the incomplete New York Times article last week I was left with the impression that Redeem actually contained methane molecules from landfills. I wondered how this could be the case, so I looked into it. Turned out that the CNG sold as Redeem is identical to conventional CNG. As far as I could tell no one had pointed this out yet. But just because I pointed this out does not imply that I think Redeem is anything other than a great idea. By putting a higher price on landfill gas it incentivizes landfill owners to capture and sell the gas rather than allow it to escape into the atmosphere. If Clean Energy can utilize this mechanism to sell more CNG and further expand the use of natural gas as a transportation fuel, that's great. I do think Redeem is "clever" and I think it is a "gimmick" to sell regular CNG as cleaner CNG. Neither of these words is inherently derogatory or intended to be derogatory. I have nothing but respect for Mr. Pickens.
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0d58c21d2ac375086e981fdec85d8f94 | https://www.forbes.com/sites/christopherhelman/2013/10/30/mexicos-enrique-pena-nieto-is-leading-an-oil-revolution-worth-billions/ | Mexico's Enrique Peña Nieto Is Leading An Oil Revolution Worth Billions | Mexico's Enrique Peña Nieto Is Leading An Oil Revolution Worth Billions
A Mexican Revolutionary (Image credit: AFP/Getty Images via @daylife)
By Christopher Helman and Agustino Fontevecchia
Despite the drug war and immigration morass, America's southern neighbor is on the cusp of its greatest economic transformation in a century, thanks to the courageous oil reforms of its new president, Enrique Peña Nieto.
It has been another year of horrible headlines for Mexico. Three hurricanes wracked the country, causing historic floods that killed hundreds and caused billions in damage. The drug war continues, with more than 60,000 killed since 2006 as cartels vie for their cut of $10 billion a year in narco-cash. More than 200,000 illegal immigrants from Mexico are still deported by the U.S. each year. And after rebounding from the 2008 crash, and even luring away manufacturing jobs from China, Mexico has seen its annual economic growth rate sag to less than 1.5%.
Yet there is reason for hope. In the shadow of all this hardship a radical transformation of Mexico's economy is on the horizon. Under the leadership of new President Enrique Peña Nieto, the country's congress will by the end of this year almost certainly pass a constitutional amendment to open up its oil and natural gas sector to private investment. By this time in 2014 the likes of ExxonMobil, PetroChina and Norway's Statoil could even have contracts in place to start exploring for Mexico's untapped oil and gas bounty.
"The opportunity to accelerate our economy is inside of our country--it's in the decisions that we will make as a nation," said Peña Nieto in a recent speech.
Emilio Lozoya, chief executive of state oil company Petróleos Mexicanos (known as Pemex), agrees with his boss. "We are very confident that in the very short term an energy bill will be approved," he says. "More than a dream come true, it is something that is long overdue."
How big could Peña Nieto's oil reforms be for Mexico's economy? Not only will it be bigger than the revolution in shale drilling and fracking has been in the U.S., says Duncan Wood, director of the Mexico Institute at the Woodrow Wilson Center: "This will be the most significant change in Mexico's economic policy in 100 years."
Despite massive reserves, Mexico has one of the world's most notoriously closed-off oil industries. The Mexican constitution makes it illegal for anyone but Pemex to even own a barrel of oil. If you're a farmer in Mexico and oil is discovered underneath your land, not one drop of the black gold is yours--it belongs to the state, to the people. There are no private companies operating oilfields in Mexico, no risk-based production sharing contracts or joint ventures with any international oil companies. This could not be more different from the U.S., where private ownership of mineral rights is taken for granted.
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Without reforms, much of Mexico's estimated 30 billion barrels of oil and 500 trillion cubic feet of natural gas (about the same as Brazil) will simply remain locked in the ground. Pemex, despite being one of the world's biggest oil companies, does not have sufficient technical expertise to explore and develop promising prospects in the deepwater Gulf of Mexico or in the tricky shale layers just south of the border from Texas' booming Eagle Ford fields. What's more, Pemex has virtually no hope of acquiring or borrowing such expertise under the status quo, which allows the company to enter into only service contracts.
Big Oil companies like ExxonMobil or Chevron won't even consider taking on the massive risks of drilling complex wells without a guaranteed cut of whatever oil and gas they find. And with Mexico relying on Pemex revenues to fund a third of the federal budget, Pemex is chronically starved of the capital it needs to develop the expertise to do it itself.
No wonder Lozoya is excited for change. "You will have industrialization in Mexico that didn't exist before," he said recently. "After all, we share the same geology as the USA."
IN 1938 PRESIDENT LAZARO CARDENAS, in response to rampant profiteering by American oil companies, nationalized the sector and gave the oil back to the people. Resource nationalism worked all right for Mexico through most of the past 75 years--especially through the 1980s and 1990s as Pemex developed the supergiant Cantarell field in the Gulf of Mexico.
Discovered by fisherman Rudesindo Cantarell, who spotted oil bubbling up in the Gulf in 1972, the Cantarell field was one of the world's biggest, with production volumes peaking at 2.2 million barrels per day in 2003.
That year also marked Mexico's oil peak at 3.4 million barrels per day. After that Cantarell more or less gave up the ghost. In perhaps the steepest-ever decline of a giant oilfield, Cantarell has since plunged to 450,000 barrels per day. Pemex has sought to replace Cantarell's barrels, but new developments have been smaller, trickier and far more expensive to develop. Pemex's total daily production has fallen to 2.5 million barrels.
This has left a smaller cut for the cash-starved government. In 2005 oil and gas revenue accounted for 41% of government revenue. That fell to about 30% last year as Pemex had to fork over $69 billion out of its $127 billion in revenues to the government. Feeding the bureaucratic maw has left Pemex woefully starved of the capital it needs to reinvest and grow. Its balance sheet is weighed down with $52 billion in long-term debt net of cash (in contrast, ExxonMobil and Chevron have no net debt). Lozoya would like to boost capital spending 50% to $37 billion a year, but that would (in the short term) reduce the government's take, requiring budget cuts or new taxes.
A generation of politicians recognized that something had to change. Presidents Carlos Salinas, Vicente Fox and Felipe Calderón all expressed a desire to open up Pemex but never got far. Calderón managed to push through something called the "integrated service contract" whereby Pemex has been able to bring in foreign oil companies like Halliburton to provide drilling services. But that's clearly not enough.
"Mexicans started to believe that there was a problem," says Wood. So the question soon became "What is the right way forward?"
ENRIQUE PENA NIETO'S ASCENT to become Mexico's most powerful man was part of a meticulously planned career. The oldest of four siblings born to an electrical engineer and a schoolteacher just outside of Mexico City, Peña Nieto was a bad student who sat in the back of the class to play chess with a friend, covering the board with a book to trick his teachers.
Armed with a law degree, an M.B.A. and his good looks, he began his career in politics working for his uncle, Arturo Montiel, who was governor of the populous Mexico state, the country's largest, with 13.5% of the population and a $100 billion annual economy. Peña Nieto became governor in 2005, using every opportunity to get in front of the cameras and showcase his successes.
A turbulent personal life almost proved his undoing. First Peña Nieto was rocked by revelations that he sired a child out of wedlock. Then in 2007 his wife died suddenly after a seizure induced a heart arrhythmia. In 2010 he married telenovela star Angélica Rivera in a wedding that was on the cover of every tabloid magazine in Mexico.
But as governor Peña Nieto proved himself a pragmatist, forging alliances and delivering crowd-pleasing infrastructure projects. He emerged as the great hope of the PRI, the Institutional Revolutionary Party, which ruled Mexico for seven straight decades until being unseated in 2000. After two presidents from the right-leaning PAN (National Action Party) failed to revitalize the country, angry, exhausted voters were ready to give the PRI another shot. Peña Nieto ran for president on promises of ending the drug wars and revitalizing the economy and won a narrow victory in 2012 with just 38% of the popular vote.
Within days of taking office Peña Nieto put his pragmatism on display, bringing together leaders of the PRI, PAN, leftist PRD (Revolutionary Democracy Party) and Green Party to forge the "Pacto Por Mexico"--a political compact enshrining a blueprint for reforms. In a whirlwind year the congress has tackled reforms to fix the public school system, to bring more competition to the telecom sector and to improve tax collection, among other things.
Some proposals, like a fat tax on sugary drinks, have faced resistance. Teachers have staged massive street protests against education reforms; their union boss, Elba Esther Gordillo, was jailed on corruption charges. But all told, Peña Nieto's consensus-building leadership has made a mockery of what passes for governance in Washington, D.C. "We ran on a platform about reforms," says Lozoya, who was part of the president's transition team. "And we have passed in the past ten months more reforms than in many, many years before added together."
Yet, despite the hunger for change, the Mexican public remains deeply wary about privatization, and it's easy to see why. Deregulation of the telecom industry there led to the rise of Telmex, which created the fortune of Carlos Slim Helú--the richest man in the world. The fact that he made his fortune off the privatization of a monopoly is anathema in a country where so many millions still live in poverty.
Sixty percent of the people are against allowing foreign companies to invest in Pemex, says Daniel Yanes, director at pollster Buendía & Laredo in Mexico City. "If they brought it to a [popular] vote they would lose," he says of Peña Nieto's plans.
No wonder in his speech introducing his oil reforms, Peña Nieto summoned the ghost of Cárdenas and put a different spin on his legacy. Though lionized as the president who changed the constitution to nationalize Mexico's oil industry, Cárdenas nonetheless had, in his final days in office in 1940, modified the laws in order to allow Pemex to enter into production-sharing and profit-sharing contracts with private, Mexican-owned companies. Cárdenas' successor, Manuel Avila Camacho, took it a step further and created a secondary law enabling Pemex to enter into such partnerships with foreign-owned oil companies, as long as Pemex controlled a majority of the venture.
What few remember now is that this sensible production-sharing arrangement endured until 1959 when President Adolfo López Mateos modified those laws again. López Mateos killed the upside potential for Pemex's private partners and eliminated their incentive to take risks by requiring that Pemex pay them not "in kind"--with a set percentage of extracted oil--but in cash.
So Peña Nieto proposes to cancel the restrictions put on Pemex by López Mateos and to return Mexico's oil laws "back to the way it should be"--without provoking a popular backlash. His proposed amendments say all oil and gas in place belong to the state and Mexico is not going to grant "concessions" that confer any right of ownership. He also proposes that Mexico's congress set policies dictating the development of those resources.
These changes are designed to be as simple as possible to garner the required two-thirds vote in Congress for constitutional amendments. "In essence all Peña Nieto asks is a clean slate at the constitutional level upon which the politicians will then apply the details of policy," says Jose Valera, an attorney at Mayer Brown in Houston. The "secondary legislation," as it's called, requires just a simple majority to pass and will be the real guts of the changes to the Mexican oil patch.
The end result won't be anywhere near as liberal as in the U.S., of course, where property owners have rights to the minerals under their land. But it will move Mexico more in the direction of Brazil and Norway, which have big state-sponsored oil companies in Petrobras and Statoil, and also welcome foreign capital to invest in exploring and developing their oilfields.
Peña Nieto will have to negotiate with Mexico's other political groups to get anywhere. Mexico's major leftist party, the PRD, is in favor of Pemex keeping more of the cash it generates but against any foreign involvement.
"The energy reform presents a grave danger for Mexico," declared leftist firebrand Andrés Manuel López Obrador, in a recent speech. "The masses don't know that they are going to take the energy sector, which is akin to bleeding Mexico to death, leaving us empty-handed." He has mobilized street protests against the oil reform. Still, the PRI and the PAN party, along with some PRD allies, should be able to muscle through the amendments. "The PRI is looking for greater consensus, Peña Nieto is looking for greater consensus, but when they have to do it, they will," says Gabriel Lozano, JPMorgan's chief Mexico economist.
While Big Oil is interested, there's good reason that BP, ExxonMobil, Chevron and Statoil all reply with a "no comment" when asked their opinion of Mexico's reforms. "Anything that an international oil company would say positive about oil reforms would be used by the opposition to undermine them," says one company insider. A potential sticking point: Even after the reforms are passed, Mexico's constitution will still declare that only the state may claim ownership of oil and gas in the ground. So the big question is how to enable private oil companies entering into risk-based contracts with the government to book those same hydrocarbons on their balance sheets as reserves.
This matters, because if oil companies can't claim the future value of those barrels, then they can't use them as collateral to raise the cash they need to drill them up and get them to market. "The question is, can a solution be found where supermajors don't take possession of the oil so they don't violate the Mexican constitution but get a call on the utilization of reserves?" says Neil Brown, the former top Republican staffer on international energy policy. "The Exxons and Chevrons won't be able to take ownership of physical oil; what they need to have is a call on that oil to be disposed or sold."
Peña Nieto's administration has been talking with oil companies and with the Securities & Exchange Commission and has proposed allowing international companies to record their economic interest in risk-sharing contracts in such a way that under SEC rules they can book reserves even though the state will technically retain full ownership of the oil. Oil companies don't care who "owns" the stuff as long as the lawyers, regulators and accountants say they get to book it as an asset.
SO WHAT WILL HAPPEN to Pemex? Though top executives at Pemex--including 39-year-old CEO Lozoya--are intimately involved in the process of taking the shackles off, not even they expect Pemex to be the only game in town when it comes to developing Mexico's oil and gas. Rather, the plan is to create a new ministry that will oversee Pemex and auction off exploration blocks to private operators. "We hope large international players will come and join forces with Pemex or directly with the government if they decide so, both on the service and the operational side," says Lozoya. "This will strengthen Pemex significantly. We are strong believers that competition will make us much more transparent and more efficient."
The entry of other companies to work with and even compete against Pemex would invigorate the sector. Pemex doesn't have sufficient technical capacity to go after oil in the ultradeep Gulf waters, for instance. What's more, the company is dragged down by bloated staffing, including a health care arm with 12,000 employees. As a result Pemex has among the lowest rates of productivity--measured in barrels of oil per worker--of any company in the world. Pension liabilities are an enormous $100 billion. "Pemex needs a tremendous restructuring. We need to change the culture of the company," says Lozoya. "People are not paid for results here."
Understanding the power of the Pemex workers union to throw sand in the gears of reform, Peña Nieto has been careful not to run afoul of workers. Instead of pursuing corruption charges against powerful union boss Carlos Romero Deschamps (despite ample indications of improper indulgence), the PRI instead made him a senator. "The union is perfectly aligned with the proposals. Their rights are not at risk," says Fernando Alonso, a partner at Elias-Calles y Alonso de Florida. Lozoya says the goal is for Pemex to grow so fast that he can create plenty of new work to keep his bloated staff busy. Meanwhile, Mexico's entrepreneurs, including Carlos Slim, have formed drilling companies to work under contract for Pemex. The hottest spot has been in the offshore drilling business. Nowhere in the world are jack-up rigs for use in coastal waters in such high demand; shallow water drilling remains a core competency for Pemex. The leader among Mexico's indigenous offshore drillers appears to be Grupo R (controlled by Ramiro Garza Cantú), which has what's thought to be the biggest fleet of shallow-water drilling rigs in Mexican waters and has five new rigs on order at a cost of roughly $1 billion. Guillermo Vogel Hinojosa, vice chairman of Tenaris-Tamsa, has positioned himself as Mexico's primary steel pipe manufacturer.
As for Slim, his Grupo Carso provides substantial drilling services to Pemex and earlier this year inked a $415 million, seven-year contract to lease a drilling platform to Pemex. In 2011 Carso acquired 70% of Tabasco Oil, which drills in Colombia and also owns an 8% stake in Argentina's state-controlled oil company, YPF.
As former President Calderón explained in a September speech, there have been thousands of wells drilled into the Eagle Ford shale field in south Texas but only a few dozen on the Mexico side. The low-hanging fruit is just waiting there. "The oil does not respect the borders," he said.
Calderón and his predecessors may have pushed for real oil reforms, but it's Peña Nieto who will get the spot in the history books. "Everyone had realized the problem, but nobody wanted to tackle the challenge of constitutional reform," says Steven Otillar, attorney with Akin Gump in Houston. "Rather than 'Oh my gosh, how fast this is going,' it's more like 'Thank God we're finally there.' "
For more, check out our exclusive Q&A with Pemex CEO Emilio Lozoya. And continue the discussion on twitter @chrishelman.
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bb86c398af110091433052f832706849 | https://www.forbes.com/sites/christopherhelman/2013/11/20/a-new-billionaire-emerges-from-devon-energys-6-billion-deal-for-geosouthern/ | A New Billionaire Emerges From Devon Energy's $6 Billion Deal For GeoSouthern | A New Billionaire Emerges From Devon Energy's $6 Billion Deal For GeoSouthern
Updated Nov. 21
Today Devon Energy agreed to buy GeoSouthern Energy's holdings in the Eagle Ford shale for $6 billion in cash. The deal involves 82,000 net acres in the Eagle Ford, which currently produce 53,000 barrels of oil (and equivalent gas) per day. The estimated recoverable reserves on the land amounts to 400 million barrels. It's a great move for Devon, giving the Oklahoma City-based company plenty of running room to grow its oil production beyond its already ramping Permian and Woodford plays.
What was missing from the early stories on the deal in the WSJ, Reuters, NYT and Bloomberg this morning was any mention of who owns GeoSouthern and will be receiving this windfall.
Blackstone, in a statement today, said that its stake in the assets is valued at $1.54 billion -- the private equity giant put up some $1 billion to fund GeoSouthern's drilling efforts in the region. That means the rest of the cash -- about $4.5 billion -- will flow to GeoSouthern. This is the first time that most have heard of GeoSouthern. The closely held company, based in The Woodlands, Tex. has managed to stay out of the limelight for more than 25 years now. But a deal like this will attract attention, and not just to the company, but to its founder and CEO George H. Bishop.
Bishop, 77, has long been a suspect on Forbes perennial hunt for billionaires to put on our Forbes 400 list. GeoSouthern is, according to data from the Oil & Gas Financial Journal, one of the biggest privately held producers of oil and gas in the United States, with volumes of about 30 million BOE (barrels of oil or natgas equivalents) per year. He formed GeoSouthern in 1981, and has been in the oil and gas business since at least the late 1970s.
Back in the 1980s Bishop really got his start drilling an oil formation that stretches across Texas called the Austin Chalk. This was long before the revolution in directional drilling that gave birth to the shale boom. But working the Austin Chalk put Bishop in the right place at the right time. The deeper Eagle Ford shale is the "source rock" for the Austin Chalk. That is, the oil and gas originally formed at those depths and gradually crept up over the eons.
GeoSouthern was one of the very first companies, back in 2007, to grab meaningful blocks of acreage in Lavaca and Dewitt counties -- the heart of the Eagle Ford. At that time GeoSouthern was in a joint venture in the region with Aref Energy, a Kuwaiti company, as well as Weber Energy out of Dallas. I'm told that Bishop was skeptical about the prospects of the Eagle Ford after partner Ben Weber drilled a couple of lackluster wells. Thankfully, they kept at it. Aref's position was later acquired by Petrohawk Energy, which itself was bought by BHP Billiton Petroleum for $15 billion in 2011.
From nothing back then, today the Eagle Ford is the fastest growing oil play in America, surpassing 1 million barrels per day. A lot of the credit for GeoSouthern's success there goes to Margaret Molleston, who sources say runs the day-to-day operations of GeoSouthern. She previously worked at Anadarko Petroleum before joining GeoSouthern in 2006. "Meg Molleston is the one who made this happen," says someone in the know.
So how much is Bishop worth? Well over $1 billion. Because the company is privately held, it is unknown whether there are any other equity holders besides Blackstone (Molleston might have a piece), or the extent of its borrowings. Last year the company closed on a $1 billion line of credit.
Even if we were to make the conservative assumptions that GeoSouthern was carrying $2 billion of debt, that would net out to $2.5 billion in cash to the company out of the $4.5 billion from Devon. And even if Bishop only owns 50% of the equity in GeoSouthern (unlikely), his personal cut would be on the order of $1.25 billion, before taxes.
And there's more to GeoSouthern than just the assets sold to Devon. It also owns and operates significant acreage outside of the Eagle Ford, including the Austin Chalk of East Texas and the Brookshire Dome Field. It also operates subsidiaries such as Triad Drilling and American Fluorite. If estimates of GeoSouthern's production volumes are accurate, the deal with Devon didn't involve even half of the company's production. In addition to the oil and gas, Bishop also owns the Eagleford Restaurant in Cuero, Tex., where he has a ranch, and is also an owner of the River Ridge Golf Club just west of Houston.
All told, George Bishop could have a net worth in excess of $4 billion. We'll need to do some more digging before we figure out where he belongs on the next Forbes 400 list.
I placed a call to Bishop's office this morning requesting an interview, but haven't heard back yet. I'm sure he's just a little busy. Meanwhile, if you have any stories to share about this new oil and gas billionaire, drop me a line at chelman@forbes.com.
Gallery: The World's Biggest Oil Companies 21 images View gallery
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5ec0469d8787b3f57970a075375c97d4 | https://www.forbes.com/sites/christopherhelman/2013/11/25/iran-deal-could-lead-to-scuttling-of-the-great-u-s-oil-boom/ | Iran Deal Could Lead To Scuttling Of The Great U.S. Oil Boom | Iran Deal Could Lead To Scuttling Of The Great U.S. Oil Boom
In the short term, the Iran deal will ease the political risk premium baked into oil prices. In the medium term a comprehensive deal could add 1 million or more barrels per day to the market. In the long-term a gush of Iranian oil could soften oil prices enough to kill the economics of America's tight oil boom.
In Monday trades, after the weekend signing of an interim resolution between the U.S. and Iran, the price of benchmark Brent crude slid about 1.5% to $109 per barrel. West Texas Intermediate crude was down about 1% to $94 per barrel in mid-morning trades.
These modest declines are a reasonable reaction to the deal signed over the weekend. No one is expecting any flood of Iranian crude back to the market. The White House insists that sanctions on Iran's oil and banking sectors remain in place and that the international community will "continue to enforce these sanctions vigorously."
But successful diplomacy reduces geopolitical risk. Although any military strike on Iran's nuclear facilities was exceedingly remote before the deal (President Obama was not about to start another war in the Middle East), it is now virtually inconceivable for at least the six months during which the U.S. and the rest of the P5+1 group of nations will negotiate what the White House refers to as a "long-term, comprehensive solution that addresses all of the international community's concerns." Israel, despite Prime Minister Benjamin Netanyahu's condemnation of the deal as "an historic mistake," is unlikely to attack Iran unilaterally during this time.
How much geopolitical risk is baked into the price of a barrel of oil? At the height of former President Ahmadinajad's bellicose anti-Israel rhetoric and threats to blockade the Straits of Hormuz, it was understood that as much as $20 per barrel represented a risk premium. About that much could quickly melt off of benchmark prices in the days and weeks to come, bring crude oil down from about $100 a barrel in the U.S. into the $80 range.
But what about the price impact of an uptick in longer-term supplies? This interim deal naturally makes the chances of a long-term deal more likely, so traders will naturally price in marginally higher exports from Iran starting in six months or so. That could soften prices even more.
Since the toughest sanctions were imposed in 2012, Iran's oil production has declined 900,000 barrels per day, according to analysts at Tudor, Pickering & Holt. Much of that production is heavy oil. Saudi Arabia has adeptly replaced those Iranian barrels in the market by boosting their own production by roughly 1 million bpd. But when it comes time for Iranian oil to come back onto the market, the Saudis (though no friends of Iran), would likely dial back their exports to make room.
But how much room will the Saudis be willing to make in the years ahead? Iran has the reserves to add millions more in supplies. It would take awhile. As Bill Herbert, analyst at Simmons & Company, points out in his morning note, "sustainably increasing production levels well above 3 million bpd for a consistent period of time will most likely require substantial foreign investment from global IOCs and western service companies."
Some of those IOCs -- like Exxon Mobil , Chevron and Total -- have jumped at the opportunity to invest in untapped oil fields just over the border from Iran in the Kurdish region of Iraq. The fields there have proven to be enormous, the flow rates prodigous, the ease of recovery unmatched anywhere else in the world. Iran's potential is even greater.
Given sufficient investment in drilling and infrastructure, there are ample oil reserves in Iraq and Iran to add another 5 million bpd to global oil supplies within 10 years. In addition to those two, there remains roughly 1 million bpd of Libyan production offline due to continued unrest there. Nigeria too has at least 250,000 bpd shut in. Solve political and security problems in those countries and the world could suddenly be awash in excess oil supply.
Over the long run the easing of sanctions against Iran spells trouble for the economics of the tight oil plays that have sprung up across the United States in recent years. The Eagle Ford and Permian Basin and Bakken need sustained high oil prices to make the economics of expensive drilling and steep decline rates pay off. It's no coincidence that America's great oil and gas renaissance has coincided with sanctions on Iran and unrest in Libya. The concern for U.S. drillers is that successful Middle Eastern diplomacy could end up being the worst thing for their business. If crude oil benchmarks were to fall to $75 a barrel and stay there for a couple months you'd see drilling rigs across Texas and North Dakota fall silent.
The U.S. onshore oil industry has been perhaps the brightest spot in what passes for America's economic recovery. How ironic that it could end up being a casualty of the Middle Eastern peace process.
Gallery: The World's Biggest Oil Companies 21 images View gallery
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adfffb9106a4e5b36d02ed7ea99b735e | https://www.forbes.com/sites/christopherhelman/2014/01/13/the-billionaire-behind-suntorys-16b-bid-for-spirits-giant-beam/ | The Japanese Billionaire Behind Suntory's $16B Bid For Jim Beam | The Japanese Billionaire Behind Suntory's $16B Bid For Jim Beam
In the 2003 film Lost In Translation, Bill Murray's character went to Japan to film whiskey commercials with the tagline "For relaxing times, make it Suntory Time."
Over the weekend Suntory announced its planned $16 billion takeover of American whiskey giant Beam . If the deal goes through as planned, Suntory Time will soon refer not just to Suntory's famed Japanese whiskeys like Yamazaki and Hibiki, but also to Jim Beam, Maker's Mark and even Laphroaig scotch.
The family that will control these brands is the second-richest in Japan. According to Forbes research, Suntory is controlled by 18 members of the combined Saji and Torii clan, descended from Shinjiro Torii, who founded the company now known as Suntory back in 1899.
The family enjoys a net worth calculated by Forbes last year at $10.7 billion. The head of the family, and chairman of Suntory, is Nobutada Saji, 68, whose individual stake in Suntory we estimated last year to be worth $1.4 billion.
Nobutada Saji's father Keizo was the adopted son of founder Torii, but as is customary in Japan he was given his adoptive mother's family name. He grew the business from 1961 to 1990. Nobutada has run the operation since his father's death 1999.
Inspired by company motto "Yatteminahare," translated as "Go for it," Saji has pushed Suntory into some big deals in recent years, including the $4 billion takeover of Orangina Schweppes Group in 2009 and the $600 million buy of Frucor Beverages, in 2008. Last year Suntory bought Lucozade and Ribena soft drinks from GlaxoSmithKline for about $1.7 billion. He pursued a merger with rival Kirin Holdings , but that deal fell apart in 2010. Last year Suntory held an IPO of its soft drinks business, raising $4 billion.
Suntory's annual sales are in the neighborhood of $20 billion, with net income believed to be on the order of $500 million.
Shares of Beam Inc. shot up 24% today to $83.07 in late morning trading. Suntory's bid is $83.50 per share in cash, valuing the company at more than 20 times EBITDA.
The two companies have been getting to know each other for awhile. In 2012 Beam entered a marketing alliance with Suntory under which Suntory distributed Jim Beam and Maker's Mark in Japan. Because Suntory's whiskeys are more similar to scotch than to Beam's famous American bourbons, the brands should complement rather than compete with each other.
Suntory's whiskeys have become more popular in the United States in recent years as Suntory has sent more product into the U.S. market. Quality helps as well. In my opinion, Suntory's single malt Yamazaki, and blended Hibiki and Hakushu whiskeys can stand up to any fine scotch when it comes to complexity of character and drinkability. Suntory's first master distiller, Masataka Taketsuru, studied in Scotland and located his distilleries in some of Japan's most "Scottish" locales.
If you haven't tried them before, but do enjoy a peaty scotch (like those from Islay), look for the Hakushu. The Whisky Advocate says the peatiness of Hakushu compares with that of the well known Bowmore single malt. As for Laphroaig, that richest and most peaty of Scotch whiskeys from Islay -- it now joins the Suntory stable.
The other famous Beam brands include Courvoisier, Gilbey's, DeKuyper, Skinnygirl, Sauza, Hornitos, Knob Creek, Basil Hayden's, Booker's, Baker's, Old Crow, Canadian Club, Pinnacle and Old Overholt.
For some real Suntory Times, check out this 1974 Sammy Davis, Jr. Ad For Suntory Whiskey
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22d93b2673562a37a6b00f613e9ad2df | https://www.forbes.com/sites/christopherhelman/2014/03/03/what-ukraine-needs-is-an-american-style-shale-gas-revolution/ | What Ukraine Needs Is An American-Style Shale Gas Revolution | What Ukraine Needs Is An American-Style Shale Gas Revolution
Natural gas was the origin of the crisis in Ukraine. The country serves as a transit point for about 6 billion cubic feet per day of Russia's natgas exports into Europe. That's about 2.2 trillion cubic feet per year, or 14% of Europe's total supply.
More than just serving as a middleman for Russian gas, Ukraine is like the dealer who got hooked on his own supply. Under the terms of its last supply deal, Gazprom agreed to sell gas to Ukraine at $7.70 per thousand cubic feet, a 33% discount to what European customers pay (but a big premium to U.S. gas prices of roughly $4.50 per mcf). Moscow even agreed to gradually buy $15 billion of new Ukrainian bonds, to keep the country from defaulting on other debts.
Yet even at that discounted price, Ukraine has had a tough time paying Gazprom's invoices. Earlier today Russia suggested that if Ukraine didn't pay its $1.5 billion gas bill Gazprom might just shut off the valves and renege on those price discounts. Since 2006, Putin has twice cut off the gas to Ukraine, most recently in 2009.
Edward Chow at the Center for Strategic and International Studies, wrote in this essay last December that Ukraine's being "addicted to cheap gas ... has blocked the modernization of its industry, economy and politics."
Ukraine has been a junkie for Russian gas. Putin clearly had no problem with that; it is in Russia's interest to keep Ukraine and Europe hooked on Russian gas at prices just low enough to quash incentives to drill and frack for shale gas. Russia's state-run news and propaganda outlets have for years disseminated articles critical of fracking and supported opponents of the technique, despite its 50-year track record of proven efficacy and scant mishaps.
Even Ukraine's ousted President Yanukovich, despite his dealmaking with Russia, had clearly acquiesced to pressure to explore Ukraine's other energy options. Last year Ukraine signed natural gas exploration deals with Royal Dutch Shell as well as Chevron, which pledged to invest as much as $10 billion if adequate supplies of shale gas were found. The government said it hoped the two companies' projects would add more than 50% to Ukraine's current domestic natgas supply. Ukraine could hold more than 40 trillion cubic feet of recoverable shale gas, enough to satisfy decades of demand.
Now with Yanukovich gone it's as if Putin has taken the Crimea as a kind of hostage -- collateral to hold against what Ukraine owes Russia for gas. A few billion dollars in IOUs is, of course, a less than flimsy pretext for thuggery. Which is why the Kremlin's propaganda machine has been spreading lies about how his soldiers are there to save Ukraine's ethnic Russians from right-wing crazies.
The desperation of Putin's actions underscore the threat that shale gas development really does pose to Russia's gas-fueled diplomacy.
Even if Gazprom were to cut off gas supplies to Ukraine, there is no real fear of a gas shortage in Europe, according to Bernstein Research. This winter has been a warm one in the region (as witnessed by the balmy temps for the Sochi Olympics), so demand for heating has not been as great. Thus, natural gas volumes in storage are higher than average, at about 50% of capacity.
What's more, even if Russia did halt shipments through Ukraine, there's enough extra space in the Nord Stream pipeline running from Russia into Germany to pick up about half of the slack.
The rest of any shortfall could likely be met with greater imports of superchilled LNG. Europe has been building more gas storage in recent years precisely to balance out Russia's influence and to position itself to receive LNG not just from established gas giants like Qatar, but also from giant new projects in Australia, a host of planned export terminals in the U.S. and even new developments in the works offshore Israel.
Analyst Oswald Clint, of Bernstein, said in a note today that several big oil and gas companies are positioned well to benefit from higher gas prices on the continent. BG Group ships a lot of LNG and has a higher percentage of its supply free to be sold on the spot market. While Shell is also a big LNG player. Statoil, meanwhile, is the company with the highest leverage to European gas, with Bernstein figuring that 47% of its net income last year came from European gas production and marketing.
As for oil, Ukraine uses about 300,000 barrels per day, with roughly 80,000 bpd sourced domestically. There the country is also beholden to Russia; Rosneft already owns Ukraine's second-biggest oil refinery, and is in process of acquiring the biggest.
That's too bad, because now would have been the perfect time for the Obama administration to lift the ban on American oil exports so that we could send a few million barrels of American "freedom oil" to Ukraine.
In Monday trading, shares of Statoil advanced 2.5%; Shell was down 1.4%; while Total (which has a gas venture with Russia's Novatek) declined 2%. BP, which owns about 20% of Kremlin-controlled Rosneft, was down 3%. Gazprom's ADRs plunged 11%.
Gallery: Vladimir Putin 40 images View gallery
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14ad4fea3dcf86af209e7bd529b6651b | https://www.forbes.com/sites/christopherhelman/2014/04/24/solar-is-booming-but-will-never-replace-coal/ | Solar Power Is Booming, But Will Never Replace Coal. Here's Why. | Solar Power Is Booming, But Will Never Replace Coal. Here's Why.
Solar power has been growing like crazy. Last year the solar industry installed a record amount of solar capacity. The impact can be seen in the data. According to the Energy Information Administration, in 2012 there were 3.5 million megawatthours of electricity generated by solar photovoltaic panels. In 2013 that more than doubled to 8.3 million Mwh. And to think that a decade ago the U.S. generated just 6,000 Mwh from solar PV. Solar is closing in on price parity with the likes of coal -- with full-cycle, unsubsidized costs of about 13 cents per kilowatthour, versus 12 cents for advanced coal plants.
So is the solar revolution finally here? Not quite. Even after a decade of rampant growth solar energy still barely moves the needle in the U.S. energy mix. In fact, solar merely equals the amount of electricity that the nation generates by burning natural gas captured from landfills. And it's only slightly more meaningful than the 7.3 million Mwh we get from burning human waste strained out of municipal sewer systems.
Indeed, when you factor in all the sources of energy consumed in this country, captured solar power amounts to well less than 1 quadrillion Btu out of an annual total of 96.5 quadrillion.
The biggest sources are the old standbys. Oil still reigns supreme at 36 quadrillion Btu, natural gas at 26 quads, nuclear 8. Hydropower and biomass bring up the rear at 2.6 and 2.7 quads. Wind is just 1.5 quads. And coal -- the great carbon-belching demon of the global energy mix -- its contribution is 19 quads. That's nearly 8 times all the nation's wind and solar generation combined.
This is all important to keep in mind in light of pending efforts by the EPA to initiate draconian new regulations governing carbon dioxide emissions from coal-burning power plants. Coal is responsible for about 1.7 billion metric tons a year of carbon dioxide out of the 5.3 billion ton annual total.
The assumption, by policy makers like President Obama, is that the country can cut carbon emissions by closing coal plants, while making up for the lost electricity by burning more natural gas and building more solar and wind. Indeed, natural gas has taken a bite out of coal. In 2013, coal production from U.S. mines fell to 995.8 million short tons. The last time it was that low was in the late 1980s. Coal production peaked in 2008 at 1.17 billion short tons.
President Barack Obama removes his jacket before speaking about climate change, Tuesday, June 25,... [+] 2013, at Georgetown University in Washington. The president is proposing sweeping steps to limit heat-trapping pollution from coal-fired power plants and to boost renewable energy production on federal property, resorting to his executive powers to tackle climate change and sidestepping the partisan gridlock in Congress. (AP Photo/Charles Dharapak)
The fall off in demand has seriously wounded America's biggest coal mining companies. Over five years shares in Peabody Energy are down 36%, Arch Coal down 67% and Alpha Natural Resources off 78%. Contrast that with shares in SolarCity , up 400% in just 18 months.
But coal is certainly not dead. Not even close to it. "When even the president is anti-coal, it's like you're fighting City Hall. But the truth will prevail," says Andrew Redinger, managing director at KeyBanc Capital Markets, which has done investment banking work for coal utilities and solar developers alike. "I see coal making a comeback. The best thing for coal will be when we start exporting natural gas."
This winter showed that "declaring the death of coal is premature," says Bob Yu, analyst at Bentek, a division of Platts. "Winter was a reminder that natural gas is used for heating. Coal consumption was up a lot this winter because of natural gas demand by retail buyers."
Consider what happened last winter during the death grip of the polar vortex. In January, shortages of natural gas in the Northeast caused prices to spike above $100 per mmBTU in some markets. Electricity spot prices in the Mid-Atlantic region spiked as high as $2,000 per megawatthour for a brief period. Natural gas was in such high demand for residential furnaces that electricity providers couldn't even get what they needed for their power plants. Some providers had to turn to emergency back up generators that burn far more expensive petroleum. So much for that glut of shale gas.
Natural gas prices have already jumped three-fold in two years. And coal-to-gas switching has already reversed. From making up 40% of the national electricity mix in the first quarter of 2013, coal's share rose to 41.4% in the first quarter of 2014. Natural gas dipped from 25.6% of total power generation a year ago, to 23.8% in the first quarter of 2014.
This will slow what has been a gradual move away from coal. Power companies have been shutting down old coal-burning plants ahead of tougher emissions regulations, with 4.7 gigawatts of coal capacity retired in 2013, following 10.3 GW retired in 2012. Another 60 GW of additional closures are expected by 2020. Analyst Yu says, "that may seem like a lot, but not in relation to the entire grid mix." The plants being closed are old ones, not yet outfitted with the expensive "scrubbing" technology that can reduce harmful emissions by 90%, even when burning low-quality, sulfur-laden coal.
At big electric utilities in the Midwest, where coal still provides more than 70% of fuel, the costs of turning coal into power are so low that we'll see very little switching over to natural gas -- especially with gas prices having tripled in two years. In fact, the question is whether or not shale gas drillers will have the wherewithal to fill up depleted gas storage ahead of next winter. We should be ok. After all, the forecasts are of more than ample natural gas supplies as far as the eye can see. Once pipeline bottlenecks are sorted out, there should be more than enough gas wherever it's needed.
So what would it take for America to replace every coal-fired power plant (amounting to 19 quads of energy a year) with natural gas and solar? Let's think about it. Assuming a natural gas turbine building boom, paired with a ramping up of gas power plants to full capacity, we could reasonably boost power generation from gas by 50% in five years, providing about 13 quads. To make up the rest of coal's share with solar would require boosting the amount of electricity we get from solar about six-fold to around 50,000 megawatthours per year. Achieving that would require 20% compound annual growth in solar installations for 10 years. Or about a 9% CAGR for 20 years.
This is doable, for awhile. Electricity generation from solar PV generation nearly tripled from 2009 to 2010. It more than doubled in 2011. And more than tripled in 2012. Achieving such a growth rate is easy when you're tiny, but the bigger the base the tougher it gets. Wind power is a good model -- it managed to grow 19% last year from a much bigger base, to 168 million Mwh. But keep in mind that both wind and solar have to overcome the challenge of geography -- developers install systems in the most windy and sunny spots first. The worse the location, the more panels or windmills you need to get the same amount of electricity. That's why it's less important how many megawatts of solar capacity gets installed, and more important how much actual electricity that gets generated by those panels.
For all the talk of "grid parity" the simple reality is that even combined with far more power generation from natural gas, renewable alternatives will need decades to push out coal. And the irony will be that as demand for coal lessens, it will become cheaper and cheaper, making it even more attractive for the coal-burning power plants that survive the coming cull. The direct cost of generating electricity from coal is 2.5 cents per Kwh.
It's refreshing to see that even some respected veteran environmentalists have shown themselves to be in touch with reality when it comes to coal. Armond Cohen, executive director of the Clean Air Task Force, has focused for 30 years on reducing the environmental impact of the global energy system. Yet in an essay published late last year, he stated that "coal is not going away."
Coal will be central to economic modernization in the developing world, where most energy supply will be built in the next three decades. Coal will also have a significant residual role in much of the OECD. Coal is not going away. We need to begin to use it without emitting significant carbon dioxide, and quickly. If we don’t, the risk to global climate is immense, and likely irreversible. It’s that straightforward. People who wish otherwise, and simply hope for the demise of coal, are not facing the facts. (…) Let me be clear: But for the environmental challenges, this expansion of coal-fired power boom is a good thing; reliable energy is a correlate of economic growth and human development. But let me be equally clear: The carbon associated with this expansion is unacceptable and puts us on a collision course with our global climate.
Coal has gotten immensely cleaner over the past generation. And new and better ways will be found to extract energy from coal without sending its dangerous byproducts into the environment. It's scalable and reliable in ways that renewable energy sources simply aren't. In short, unless we're willing to put up with blackouts that freeze grandma in the winter and melt her in the summer, coal will remain a mainstay of U.S. power generation for decades to come.
VIDEO: North Dakota: Fueling A Boom
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b5fea094acdc8e15a9c5d3efafbc1220 | https://www.forbes.com/sites/christopherhelman/2014/05/08/china-thwarts-u-s-containment-with-vietnam-oil-rig-standoff/ | China Thwarts U.S. 'Containment' With Vietnam Oil Rig Standoff | China Thwarts U.S. 'Containment' With Vietnam Oil Rig Standoff
Two weeks ago on his trip to Asia, President Obama drew another red line, declaring that a group of islands, claimed by both Japan and China, were covered by America's security treaty with Japan. In the Philippines, Obama inked a 10-year agreement to increase U.S. forces there.
Though the president made a point of not visiting China on what some dubbed a "China containment tour," he insisted "We're not interested in containing China."
The Chinese don't appear to believe him. This week Beijing decided to assert its aggression in the region.
On May 3, China's state-controlled oil giant Cnooc moved a deepwater drilling rig to a spot just 120 miles off the coast of Vietnam, smack dab in the middle of oil and gas exploration blocks that Vietnam claims as its own and where PetroVietnam and ExxonMobil have discovered big oil and gas reserves.
Vietnam has demanded that Beijing call it off. In the past day Chinese and Vietnamese vessels have been in a standoff near the rig, with Chinese ships reportedly spraying water at the Vietnamese. On May 4, Chinese ships reportedly rammed Vietnamese vessels.
Chinese media quoted a government spokeswoman as insisting that not only had the rig been positioned in Chinese waters near the Paracel Islands, but that Beijing urged Vietnam to stop interfering.
U.S. State Department spokeswoman Jen Psaki said Tuesday that Cnooc's actions were "provocative and unhelpful to the maintenance of peace and stability in the region."
China's spokeswoman said, according to Xinhua news service, that the U.S. is in no position to make irresponsible remarks on China's affairs.
The $1 billion Cnooc 981 rig was the first advanced drillship built in China. ((AP Photo/Xinhua, Jin... [+] Liangkuai, File)
Indeed how could anyone seriously believe that the Obama Administration would do anything to thwart the Cnooc rig's operations. Obama failed to take action when his own red line was crossed in Syria. Vladimir Putin's cronies laugh at U.S. sanctions imposed after the Crimea takeover. Iraq is hurtling toward civil war. Iran is ever closer to the bomb.
Ernest Bower and Gregory Polling of the Center For Strategic & International Studies summed it up in their analysis yesterday (see their entire piece, with maps, here):
The implications of these developments are significant. The fact that the Chinese moved ahead in placing their rig immediately after President Obama’s visit to four Asian countries in late April underlines Beijing’s commitment to test the resolve of Vietnam, its ASEAN neighbors and Washington. Beijing may also be attempting to substantially change the facts on the seas by moving while it perceives Washington to be distracted by Russian aggression inUkraine, developments in Nigeria, and Syria. If China believes Washington is distracted, in an increasingly insular and isolationist mood and unwilling to back up relatively strong security assertions made to Japan and the Philippines and repeated during President Obama’s trip, these developments south of the Paracel Islands could have long term regional and global consequences.
Analysts in China see it pretty much the same way. In an op-ed in China Daily, Liu Weidong wrote:
Although Obama claimed the U.S. was not trying to contain China, what he has done shows clearly it is. ... The U.S.' intention of returning to the Asian-Pacific region is to achieve a balance in favor of the US, and that was the main goal of Obama's Asia trip this time. But this is an unbalanced approach because it is in favor of the countries that have disputes with China, so China is forced to seek a counterbalance. Obama's unprecedented promise to support Japan in the territorial dispute with China over islands in the East China Sea is enough to show the US' concern over China's new legally established Air Defence Identification Zone in the East China Sea. Also facing frustrations in Syria and Crimea, the US is becoming unreasonably tough with China in a bid to maintain its image as the undisputed global leader. Objectively speaking, the U.S.' rebalancing strategy in the Asia-Pacific region is aimed at achieving a strategic balance between China and Japan that will prevent war between them but also prevent their reconciliation. It will also make both countries woo the US, which will help reinforce the U.S.' dominant position as an "offshore balancer".
It's not the first time China has invaded the Paracel Islands with a drilling rig. It did the same thing back in 2012, at which time Cnooc Chairman Wang Yilin said, "Large deepwater drilling rigs are our mobile national territory and strategic weapon for promoting the development of the country's offshore oil industry." Taking him literally, it means that Cnooc's drilling rigs are akin to ships in the Chinese Navy.
No one expects the Obama administration to respond to China's aggression. But it's worth keeping in mind that in its $19 billion acquisition of Canada-based Nexen last year, Cnooc acquired some 200 exploration leases in the Gulf of Mexico. Those leases were altered as a condition of U.S. approval of the deal, with Cnooc forced to give up operatorship of the blocks. But if Cnooc really considers its drilling rigs "mobile national territory" then perhaps the Federal Bureau of Ocean Energy Management should apply some special scrutiny when Cnooc and its partners request permits to drill off U.S. shores.
Gallery: The World's Biggest Oil Companies 21 images View gallery
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f8de72b7ac80c5bc60434a917e7edb1d | https://www.forbes.com/sites/christopherhelman/2014/05/30/ahead-of-new-anti-coal-regs-obama-streamlines-lng-exports/ | Ahead Of New Anti-Coal Regs, Obama Streamlines LNG Exports | Ahead Of New Anti-Coal Regs, Obama Streamlines LNG Exports
Next week, the Environmental Protection Agency is set to announce draconian new rules that will seek to clamp down on carbon emissions from coal-fired power plants. This will mark only the latest salvo in the White House war on coal. So it only makes sense that this week the Obama administration would want to tweak the optics and front-run the critics by showing that they are proponents, more or less, of natural gas.
Yesterday the U.S. Department of Energy announced a new method for vetting proposals for the export of liquefied natural gas. In a departure from its past "first-come, first-served" practice, the DOE will now only consider proposals that have been subjected to the extensive environmental impact studies required by its sister agency, the Federal Energy Regulatory Commission.
The Obama administration is touting this change as evidence of its commitment to developing America's capacity to export our plentiful, clean-burning shale gas to the world. By not wasting DOE staffers' time perusing half-baked proposals that don't have a chance of getting built, the new policy could potentially speed up the approvals process. There's currently 25 projects in the queue.
"Projects that have completed the [environemental impact] review are, generally speaking, more likely to proceed than those that have not," said Jason Bordoff, director of Columbia Unversity's Center on Global Energy Policy and a former White House advisor, in a statement Thursday.
This policy change will enable the Obama administration to combat the perception that it was dragging its feet on LNG exports. “I have long warned that the United States faces a narrowing window of opportunity to enter the global gas trade," said U.S. Sen. Lisa Murkowski (R-AK.) in a statement yesterday. "Projects have languished in the so-called ‘queue’ awaiting approvals from two separate agencies in a parallel process that often did not function well."
But how big a deal is this, really? It's unlikely that this change will have any material impact on how many LNG terminals eventually get built. There's already been three big projects approved, which together would have the capacity to export on the order of 7 billion cubic feet of natgas per day (roughly 8% of current supplies). With natgas prices having trebled in the past two years, and outright shortages hitting the Northeast during last winter's Polar Vortex, there's a very real question as to how much exports would be too much. (Charif Souki, CEO of Cheniere Energy , which is building the first export terminal, doubts there will ever be more than three projects built.)
So why did DOE announce this policy change now? It's all about the optics. On Monday, Obama's Environmental Protection Agency is set to release a set of draconian new carbon dioxide emissions standards governing the nation's electric power plants. These new rules are widely expected to force operators of coal-fired plants to invest in expensive technology to reduce emissions -- and to effectively ban the construction of new coal plants.
It only makes sense that the administration wants to front-run its anti-coal edicts with a pro-natgas policy.
In tandem with its Thursday announcement, the DOE also released a "life cycle greenhouse gas perspective" comparing the overall carbon impact of foreign countries burning American LNG versus burning their own coal. Factoring in all the carbon emissions from every step in the supply chain, from drilling wells, to chilling and shipping gas, to burning it in power plants, the report concluded that regionally mined coal has a significantly higher carbon intensity than does LNG. U.S. gas shipped from New Orleans to Rotterdam, and burned in Europe generates 629 kilograms of carbon dioxide per mWh, they determined. Compare that to coal mined in Europe, which generates 1,089 kg per mWh. Same story on the New Orleans to China route: 660 kg of CO2 per mWh for U.S. LNG, versus 1,089 kg for Chinese-mined coal.
These are important numbers for the administration. If their goal is to reduce global carbon emissions, then exporting LNG from the United States to offset consumption of regional coal supplies is a good thing.
Don't expect the carbon absolutists to be satisfied. In a statement yesterday Sierra Club attorney Nathan Matthews said, "The Sierra Club applauds the Department of Energy for proposing to end the practice of conditionally approving LNG export applications before an environmental review has been conducted, as well as recognizing the need to consider LNG's entire emissions footprint, from the wellhead on. It's never made sense to evaluate LNG exports without knowing the impact they would have on the environment and on our climate, so this announcement is a step in the right direction."
LNG tanker. (Photo credit: kenhodge13)
The Sierra Club, of course, would like to stop fracking and coal mining and have us all live in the dark without heating or air conditioning while lamenting that solar power and wind turbines are nowhere close to being scalable enough to meet our electricity needs.
Thankfully the White House is a little more pragmatic. President Obama has touted the economic and environmental benefits of America's natural gas revolution. He's been careful in his speeches not to demonize the process of hydraulic fracturing, without which this gas boom would not be possible. The administration's message -- as will be underscored by the EPA's moves next week -- is clear: we support the natural gas boom, and LNG exports, because it gives us the opportunity to kill off coal.
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c5b68c2e99cc244cd1b5af01c09e7275 | https://www.forbes.com/sites/christopherhelman/2014/06/02/obama-epa-issues-coal-killing-rules-to-cut-carbon-emissions-30-percent/ | Obama EPA Issues Coal-Killing Rules To Cut Carbon Emissions 30 Percent | Obama EPA Issues Coal-Killing Rules To Cut Carbon Emissions 30 Percent
Today the Environmental Protection Agency released a long-anticipated rule proposal that seeks by 2030 to reduce America's carbon dioxide emissions 30% from 2005 levels. (The full proposal can be found here.)
The primary mechanism for the reduction will be tough emissions limits on coal-fired power plants. The effect of the rule will most likely be the dramatic expansion of natural gas as a fuel for power generation. When burned, gas emits just half the carbon of coal.
States will have until June 30, 2016 (with the potential for some extensions) to come up with a plan on how to implement the rule and reduce their average emissions per megawatt-hour of electricity. If they refuse to play ball -- as Texas Gov. Rick Perry has threatened -- the EPA says it will impose its own plan.
In a departure from wording in the Clean Air Act, under which EPA derives its carbon-controlling authority, achieving reduction targets needn't be accomplished solely by targeting power plants. Rather, emission offsets can be established outside the "fence line."
As such, it will up to the states to figure out the best way to cut its average carbon emissions per megawatt-hour by creating carbon-reducing smorgasbords. You could see the rollout of new cap-and-trade schemes, deployment of more solar panels and wind turbines, subsidies for weatherization and more.
Bruce Huber, associate professor of law at Notre Dame, says that by giving states this "unprecedented degree of flexibility" the EPA has properly addressed the magnitude of the issue and made it more likely that the plan would succeed. "Furthermore, by using 2005 as the baseline year for measuring the required emissions reductions, the EPA essentially gave credit to all those states that have already reduced carbon emission substantially since that date," says Huber.
The good news is that U.S. emissions are already about 15% below those 2005 levels -- so we're halfway there.
The bad news? That first 15% of carbon reductions has consisted of low-hanging fruit. The next 15% won't be nearly so easy.
More bad news? Costs. The U.S. Chamber of Commerce figures the plan could scotch $50 billion a year in GDP and prevent the creation of more than 220,000 jobs per year. The hit to household disposable income would be more than $550 billion a year.
On the other hand, the Natural Resources Defense Council figures the rule will create more than 250,000 jobs (someone's got to install all those solar panels and windmills) and will lead to lower energy bills over time.
The EPA reportedly estimates that investments needed to meet the emission limits will cost about $8 billion a year, but would save 6,600 lives and more than $50 billion a year in health care costs tied to air pollution.
Casualties of the plan? Coal miners and owners of coal-fired power plants. Don't expect their shares to sell off on today's rule revelation though -- EPA has been telegraphing its plans for months, so the bad news is baked in.
As I wrote about in April, it is clear to analysts that coal will bear the brunt of this anti-carbon crusade, while natural gas will be the big winner. Coal-fired power plants are responsible for about 25% of all greenhouse gas emissions in America. Per megawatt-hour, coal plants emit about 1 metric ton of carbon dioxide. Compare that to natural gas turbines, which emit just .4 metric tons per mWh.
Hugh Wynne, analyst at Bernstein Research, has figured that switching from coal to gas will be the most cost-effective method of achieving the EPA objectives. He notes that the nation's natural gas power plants are currently operating at an average of just 45% of capacity. Ramping this up to 90%, while reducing coal-fired generation by the same amount, would have the effect of reducing carbon emissions by 550 million metric tons per year. That's equal to about 25% of power generation emissions, or about 8% of total U.S. greenhouse gas emissions.
So ramp up the gas turbines and, voila, we're about halfway to the goal.
Will these rules kill coal?
Not any time soon. That's because America simply uses too much coal for us to get rid of it quickly. According to the Energy Information Administration, the amount of energy that the nation gets from burning coal is nine times what we get from solar and wind, combined.
Eliminating coal from the power generation mix without replacing it with other baseload electricity sources would lead to blackouts during times of peak demand in summer and winter. Policies that cause Grandma to freeze to death usually don't last long. In fact, there's good reason to believe that now is the time to buy coal.
Craig Moyer, partner at law firm Manatt, Phelps & Phillips, says that the proposed rules could end up being a boon to Native American tribes that own large coal-fired power plants situated on tribal lands that are outside the jurisdiction of the EPA. "I don't see a proliferation of new coal plants on Tribal lands, but those located and operating in Indian country now can be expected to live a full and long life, perhaps with expansions and extensions," says Moyer.
Keep in mind that just because the federal government mandates something doesn't always mean it is going to happen. Remember the Renewable Fuel Standard, passed in 2007, which mandated that oil refiners blend ever increasing amounts of cellulosic ethanol (made from biomass rather than corn) into their gasoline supplies. Nevermind that no one had figured out how to economically produce cellulosic ethanol -- refiners were supposed to blend 6.6 million gallons of it in 2011 and 8.65 million gallons in 2012. When 2011 came around the total production of cellulosic ethanol was zero gallons. In 2012 it was about 20,000 gallons. The U.S. Court of Appeals last year ordered the EPA to bring its mandates in line with reality.
Don't believe the hype that these new EPA rules will destroy the economy or send electricity prices sky high. Back in the 1990s the EPA introduced rules to stop acid rain by slashing the emission of sulfur dioxide and nitrogen oxide. Critics thought it couldn't be done, but ingenious engineers came up with new and better ways to scrub the pollutants out of the smokestacks. Andrew Weissman, senior energy advisor at law firm Haynes Boone, says that a key to getting rid of acid rain a generation ago was the creation of a cap-and-trade program for those emissions. Weissman, who helped pioneer emissions trading in the 1990s says that a national trading program is "a proven mechanism to use the full force of competitive markets to drive down costs" while avoiding disruptions to the power grid.
Maybe he's right, but I'm very wary of the creation of a complicated carbon market ripe for gaming by clever traders. Both Australia and Europe have struggled to implement effective carbon trading regimes.
Regardless, innovators will undoubtedly come up with new methods to provide us with creature comforts without all the carbon emissions. New LED-based lightbulbs provide light nearly identical to incandescents but use 80% less electricity. New windows are being manufactured that automatically tint themselves to block direct sunlight, saving money on air conditioning. New batteries and other energy storage devices will enable renewable power sources to be better integrated into the grid. Cars will continue to be made more fuel efficient.
And don't count out nuclear power. Idiotic policymakers in Japan and Germany may have turned to mothball nuke plants after the Fukushima disaster, but nuclear has a long track record of safe operation, and the next generation of reactors will be far safer than the last. Fukushima was a terrible tragedy, but remember that it wasn't the earthquake or the tsunami that caused the meltdowns but the foolishness of locating backup diesel generators where they could be swamped by flooding.
No nuclear plant will ever make that mistake again. China is currently building dozens of Toshiba's new AP1000 reactor design that employs passive safety designs that all but eliminate any chance of a meltdown. And further down the line thorium-based reactors will be even safer.
We can do it. But it will cost more. Which is what President Obama has been saying for years. Recall this quote from an interview with the San Francisco Chronicle about his carbon cap-and-trade plan, from all the way back in January 2008.
"Under my plan of a cap-and-trade system, electricity rates would necessarily skyrocket," Obama told the Chronicle. "Coal-powered plants, you know, natural gas, you name it, whatever the plants were, whatever the industry was, they would have to retrofit their operations. That will cost money. They will pass that money on to consumers."
Promise made, promise kept.
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dc1175d584b231ff53bdb1fc35e46168 | https://www.forbes.com/sites/christopherhelman/2014/07/02/dean-kamen-thinks-his-new-stirling-engine-could-power-the-world/ | Segway Inventor Dean Kamen Thinks His New Stirling Engine Will Get You Off The Grid For Under $10K | Segway Inventor Dean Kamen Thinks His New Stirling Engine Will Get You Off The Grid For Under $10K
For the new issue of Forbes Magazine I wrote an article about David Crane, the visionary CEO of NRG Energy . When I met Crane for lunch a couple weeks ago, no sooner had we sat down than he began singing the praises of this new contraption he had in his basement. The machine -- which can generate 10 kilowatts of continuous power, fed by Crane's natural gas line -- is a new iteration of an old creation, the Stirling engine. This version, called the Beacon 10, was created after a decade of engineering by famed inventor Dean Kamen.
I caught up with Kamen (who is best known for creating the Segway scooter) over the phone last week to ask him about the device. "We've turned his basement into an extension of our laboratory," said Kamen. "It's certainly not a machine made for the typical home, but he has a gigantic swimming pool and a huge house."
With the Beacon 10, says Kamen, "you don't have to feel guilty heating up the pool." That's because of the highly efficient nature of the Stirling engine. First conceived in 1816 by Scottish minister Robert Stirling, the device in its simplest form consists of applying an external heat source to a closed cylinder where the cyclical expansion and compression of air inside the cylinder drives the pistons up and down. Unlike your car, where fuel is combusted inside the engine, the Stirling is an external combustion engine; it can work with any external heat source.
The Stirling is quieter than an internal combustion engine, and it's more efficient because the heat is retained inside the engine by to do more work rather than allowed to escape to the environment.
Kamen's Beacon 10 Stirling engine. (Courtesy Deka Research)
Though Stirlings are highly efficient, they haven't caught on because it takes them a while to warm up and they can't change power output quickly. That makes them unworkable for cars and trucks, but potentially ideal both for power generation and water heating. More than just a backup generator, these machines, depending on the price of natural gas, could also provide round-the-clock power to a home or business. Beats solar panels.
Booms, Busts And Billionaires: An eBook From Forbes Find out what’s happened to the oil industry--and where it’s headed next.
Kamen's contribution has been in engineering his Stirling with the most high-performance materials. He started off using skilled welders to put together key parts of the engine made out of exotic alloys. More recently he's figured out how make those pieces with even more precision using 3-D printing. Crane says a key element in Kamen design was the perfection of a little plastic membrane that looks like a condom. The Beacon, which weighs about 1,500 pounds and is the size of a washing machine, also includes a battery system, which can be integrated with other distributed generation systems like solar panels.
So what's Kamen's vision for the future of these things? Well the one in Crane's basement is far too big for the average American home, generating 10 continuous kilowatts, while most of us only draw about 2 kw. "I love bulldozers, but I wouldn't put one in my garage," quips Kamen.
Kamen believes that aside from mansion owners, the Beacon 10 is just right for businesses like laundries or restaurants that use a lot of hot water. With commercialization partner NRG Energy, he's so far deployed roughly 20 of the machines.
Kamen expects to put them into production within 18 months. "Within two years I would expect high-end builders to be installing them."
But the 10 kw models are just the beginning. It won't be long before Kamen has a smaller version ready for commercialization. He's already been running a 2.5 kw Beacon at his New Hampshire home for four years.
Why not offer the smaller version first? "A 2-kilowatt machine would make one-fifth the power, but wouldn't cost just one-fifth the money," says Kamen. That's why he and NRG will be relying on high-tech early adopters, such as Tesla owners, to buy the first run.
As for cost? Kamen thinks that the 10 kw versions can be manufactured and installed for roughly $10,000 or about $1 per watt. That, however, wouldn't cover development costs, overhead, or profit margin.
It will be up to Crane's NRG to determine what to charge for these Beacon machines. A big part of NRG's plan isn't to sell them at all, but lease them. Leasing equipment to homeowners and businesses is the same model that NRG and solar-installer upstart SolarCity have applied to solar panels. The homeowner leases them for 20 years or so, and agrees to pay NRG a fee per kwh that their own roof generates. If the panels make excess juice, then NRG can make money selling it onto the grid.
The idea is to try the same thing with the Beacon machines. Once the adoption rate is high enough, NRG will be able to network dozens of the devices across a region together. Depending on natural gas prices and levels of electricity demand, there could be times when NRG would send a signal to all the Beacon machines in a region to ramp up to full output and send the excess power onto the grid. "We don't think we should be just selling a box," says Kamen. "We think we should be part of a system of the future, powering the evolution of microgrids."
Kamen certainly didn't set out to create a product for the United States. "I have a passion to help the developing world," he says, and originally intended his research into Stirling engines to help bring electricity for the first time to dark corners of the world. The beauty of the Stirling is that it can run off of any heat source. "We have powered them using cow dung in Bangladesh, and even by burning olive oil," Kamen says.
He's frankly been surprised that the United States has emerged as a potential market. "It took 100 years to build the power grid. The core of it is the most critical infrastructure in the country," he says. And yet, "I didn't know the grid was going to get more fragile, and that people were going to get nervous about hurricanes. I didn't know natural gas was going to fall in price precipitously."
In time, he says, the prices of these devices should come down. The adoption rate should be similar to other home appliances that once seemed exotic but are now second nature, like air conditioners, refrigerators, hot water heaters and central heating. The Beacon could eventually replace two of those appliances -- the furnace and hot water heater -- says Kamen.
So in 10 years will everyone have one?
"I'd say yes. Ten years from today the probability that you are depending on wires hanging on tree branches is as likely as that you'll still be installing land lines for telephones. Close to zero."
Kamen and his Segway. (Credit: Dan Herrick/ZUMAPRESS/Newscom)
Gallery: How Much Energy Does Your iPhone (And Other Devices) Really Use? 16 images View gallery
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8ef7da6d7c1bd379086810854a61d6ec | https://www.forbes.com/sites/christopherhelman/2015/01/06/investors-freak-as-saudi-inaction-could-sink-oil-to-20-a-barrel-time-to-buy/ | Investors Freak As Saudi Inaction Could Sink Oil To $20 A Barrel. Time To Buy? | Investors Freak As Saudi Inaction Could Sink Oil To $20 A Barrel. Time To Buy?
OPEC is not going to come to the rescue. It is up to American producers to cut oil supplies.
The world is freaking out over oil. After falling 6% on Monday, U.S. crude slipped another 4% Tuesday to close at $47.92. Brent crude is now down to $51.10. This is the lowest price since early 2009, when oil bottomed at $35 less than nine months after hitting a record high of $147.
The Dow Jones Industrial Average fell 331 points Monday and another 130 Tuesday. Many reports have blamed oil for the stock market weakness, but that doesn't really make much sense. All else equal, low oil prices are a boon to economic growth. And besides, considering how high the Dow has risen, 330 points just ain't what it used to be -- merely a 1.8% move. Back in 2008 the Dow suffered 11 days with losses of 4% or more.
Indeed, it's the pain being borne by energy investors that is dragging down the market. Energy makes up about 10% of the large-cap universe. On Monday the average energy company was off 4%. Weaker, debt-saddled companies fared far worse. Swift Energy was down 18%, SandRidge Energy fell nearly 13% and Halcon Resources lost 10%.
When a commodity falls 50% in price so quickly, bargain hunters emerge. On Monday a self-described "degenerate gambler" and Forbes staffer asked if now was the time to take a flyer on USO -- the United States Oil Fund exchange traded fund that ostensibly tracks oil prices -- in expectation of an eventual upturn.
No, I told him. Don't buy USO. In fact, if I'm going to bet on oil, that ETF is the last thing I'd buy. It makes far more sense to buy shares in the companies that produce it, for the simple reason that a leveraged commodity producer's earnings modulate with a greater amplitude than the swings in the price of their underlying commodity. In other words, oil company shares tend to be more volatile than oil itself.
Look at the five-year or 10-year chart on the USO fund, and compare it with those of three champions of the American oil boom: EOG Resources , Pioneer Natural Resources , and Continental Resources . In good times the ETF has lagged on the upside. And in bad times, like recently, it has lost even more than those other companies' shares.
If you're thinking about buying into this market, you want to own well run companies with low-cost core acreage in the best oil fields. Because once this era of oil price volatility is over and the market returns to a new normalcy it will be American tight oil producers that assume the role of "swing producers," bringing stability to the market.
Booms, Busts And Billionaires: An eBook From Forbes Find out what’s happened to the oil industry--and where it’s headed next.
Much of the value of these American companies is in their flexibility to tailor their drilling programs to prevailing prices. It used to be that big oil companies had to invest billions of dollars over several years in massive projects before they could start getting oil out of the ground. But the shale oil boom has changed that. These companies, and many others, now have lots of options and can quite quickly ramp up or dial back drilling operations in response to prices.
It used to be that OPEC controlled the world oil market while Saudi Arabia was the designated swing producer. But with the rise of new American oil, that has changed. Henceforth, it will be American oil producers that supply the world's marginal, high-priced barrels, and American producers that will need to have the discipline (without collusion of course!) to keep from over drilling.
This reality hasn't quite been accepted by oil companies still waiting for OPEC to take action and cut its own production. Which is why oil prices (and stocks) likely have another big leg down from here.
How far? At least $40. Maybe even $20.
But don't take my word for it.
Two weeks ago, while most of us were getting merry and happy, the Middle East Economic Survey landed an exclusive interview with Saudi oil minister Ali Naimi. (I encourage everyone with an interest in oil markets to read the full interview for free here.)
In the interview, Naimi said in no uncertain terms that neither the Kingdom nor OPEC has any intention to cut production. He said that Saudi production costs are no more than $5 per barrel, and that marginal costs of development are "at most" $10 per barrel.
Thus, Naimi said, "As a policy for OPEC, and I convinced OPEC of this [...] it is not in the interest of OPEC producers to cut their production, whatever the price is." He added: "Whether it goes down to $20, $40, $50, $60, it is irrelevant."
Naimi declared that this is absolutely a battle for market share. It's unfair, he said, to expect OPEC, the lowest-cost producer, to reduce output, when there are so many higher cost barrels in the world especially on the margins of America's tight oil plays. Some U.S. shale oil is economic at $20, he said, but much more requires $80.
Said Naimi: "Is it reasonable for a highly efficient producer to reduce output, while the producer of poor efficiency continues to produce? That is crooked logic. If I reduce, what happens to my market share? The price will go up and the Russians, the Brazilians, U.S. shale oil producers will take my share."
Oil companies worldwide have already cut their capital spending and drilling budgets. Considering that conventional oil fields decline in production by about 6% a year, on average, while shale oil wells decline 50% in their first 6 months, it is only a matter of time before supply and demand come back into balance.
There could be a lot more pain before then because many cash-strapped petro-states and highly leveraged oil companies need all the dollars they can get, regardless of how much oil they need to sell to get it.
Iraq's output is growing fast and will keep growing because Baghdad (and Erbil) need cash to defend and rebuild their country.
Likewise, Russia is pumping more oil than at any time since the fall of the USSR -- and will keep it up at any price above operating costs (which are far higher than Saudi and Iraq, btw) in order to bring in the hard currency it needs to prop up its Potemkin economy.
Cash-strapped Venezuela and Iran are in the same boat.
And it's no different with most American drillers. As long as a well has already been drilled and fracked, the capital sunk into the ground, it will be allowed to keep flowing, because the company that owns it needs to generate whatever cash it can to keep creditors at bay.
As for financially stronger producers, many of them still have price hedges in place, whereby their financial counterparties are paying them $20 or $30 more than spot for their oil -- giving them the incentive to just keep drilling.
According to the U.S. government's Energy Information Administration, even as drilling budgets are slashed, U.S. oil production should continue to grow this year, surpassing 10 million bpd.
But eventually, the gig will be up. Rigs are already being mothballed, hedges will roll off, supplies will tighten, WTI discounts to Brent will shrink, bankruptcies and defaults and consolidations will occur, and the price of oil will go back up again. Said Naimi, "The bet is about the timing of the price rise, not about if it will occur."
So back to that advice for betting on oil. If you like individual holdings, now would be the time to start assembling a basket (I would go with APC, EOG, CLR, PXD and CVX) and dollar-cost averaging into a position with eyes wide open to the likelihood that prices still have a ways to fall. An easier way to do it: dollar-cost average into a good mutual fund. I like Vanguard Energy Fund (VGENX) with its no load and 38 basis points in annual fees. Good luck.
Gallery: Where the World's Oil Will Come From 9 images View gallery
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8570de161c124abc77e9964d86a0ca4d | https://www.forbes.com/sites/christopherhelman/2015/02/13/oil-rig-count-continues-plunge-down-30-percent-from-november/ | Oil Rig Count Continues To Plunge, Down 30 Percent From November | Oil Rig Count Continues To Plunge, Down 30 Percent From November
According to the Baker Hughes rig survey, America's oil and gas drillers laid down 98 rigs last week, 84 oil rigs and 14 gas rigs. The number of rigs drilling horizontal wells into shale formations topped out at 1,372 in November. This week it's down to 1,025. That 30%+ reduction is in line with the average 30% capex reductions announced by America's independent drillers, with some like Continental Resources and Pioneer Natural Resources cutting capex by 50% and 45%, respectively.
The declines in rigs haven't yet translated into lower U.S. oil production. This week domestic production was 9.2 million barrels per day, up 49,000 bpd over last week. But growth in U.S. oil output has slowed. Last week's numbers showed a decline in production of 36,000 bpd.
But with those rig counts falling so fast, why hasn't oil output rolled over and started trending down yet? Because despite the cutbacks, there's still more than a thousand rigs working out there. That's a lot of rigs continuing to drill new wells. The nation is currently on what will turn out to be several months of an undulating plateau in oil production -- before a big drop.
Continental Resources recently put out a presentation that shows their figuring on what would happen to oil production out of the Bakken under two scenarios. In scenario 1, there are no cuts to the number of Bakken rigs, and output from the field continues to climb from about 1.2 million bpd now to almost 1.5 million bpd in mid 2016. In scenario 2, operators cut Bakken rigs by 50% over the six months to June 2015. In this scenario oil output continues to climb slightly until April 2015. Then it tops out and declines gradually to hit 1,050,000 bpd in June 2016.
What to make of that? This is only the calculations of one oil company, but the implication is that dropping 50% of the rigs from the Bakken would result in a reduction in output from current record levels of about 13% by mid-2016.
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Of course it's dangerous to try to extrapolate that reduction to the rest of the country, but cutting 13% off total U.S. oil output would bring us down from 9.2 million to 8 million bpd in mid 2016. Adding in what Energy Aspects consultancy expects to be at least 500,000 bpd of reductions from high-cost barrels in Russia this year, and we could be well on our way to removing the excess supply that has cratered the oil markets.
Another point to make on those rig counts. A Bloomberg article this afternoon asserted that oil rig counts may not matter anymore, that oil supplies might just keep on growing despite the 30% reduction. Their rationale: look at natural gas rig counts. From early 2009 to the present, the number of rigs drilling for natural gas has fallen from about 1,500 down to less than 500. During that time, however, the volume of natural gas produced in America has continued to grow from 26 trillion cubic feet in 2009 to more than 30 trillion cubic feet last year. The article suggested that the continued increase in gas supply is because rigs drilling for gas have simply gotten that much more efficient. They figured that the same thing is likely to happen with oil, concluding that "the oil rig count doesn't have much bearing on production."
This is baloney. Yes rigs have gotten more efficient, and the deep cuts by drillers will end up forcing service companies to cut their prices, bringing down production costs. But what the Bloomberg guy didn't mention is that the reduction in gas rigs over the past five years was driven almost entirely by the fact that every oil well also produces large amounts of associated gas. When your oil rigs make a lot of gas, what do you need gas rigs for?
My point is that given the same reduction in rig count, oil production is simply not going to follow the same trajectory as gas production. Oil supply will peak out late this year and fall off into 2016.
Update: a reader pointed out the fact that Bakken producers end up flaring a lot of the associated gas they produce, so maybe oil drilling isn't creating as much extra gas supply as I assume. I looked at some numbers from a report by SNL Financial, which showed that back in 2010 about 120 million cubic feet of gas was being produced in the Bakken per day. That has since grown to about 1.3 billion cubic feet of gas per day. During that time the absolute amount of flared gas has increased, but the percentage of gas flared has declined from about 44% of total produced gas to about 26%. However you look at it, there is vastly more associated gas from the Bakken being sent into the market today than five years ago.
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d75d21ce0dabc4ac5a7798fec2ba9242 | https://www.forbes.com/sites/christopherhelman/2015/02/17/chesapeake-sues-mcclendon-alleging-theft-of-trade-secrets/ | Chesapeake Sues McClendon, Alleging Theft Of 'Trade Secrets' | Chesapeake Sues McClendon, Alleging Theft Of 'Trade Secrets'
Today Chesapeake Energy sued American Energy Partners, the new company created by its embattled former CEO Aubrey McClendon. The complaint, filed in Oklahoma County District Court, alleges that in his waning days as CEO of Chesapeake, McClendon squirreled away massive amounts of data, containing "highly sensitive trade secrets." After his departure from Chesapeake, in April 2013, McClendon set up his new company, American Energy Partners, and leveraged that data to make a series of deals to snap up more than 100,000 acres across the Utica shale play. According to Chesapeake's complaint, "these purchases involved the same acreage evaluated in the data stolen by McClendon."
According to the complaint:
"McClendon committed this theft by requiring his assistant to print highly sensitive maps and prospect data, which he took with him as he left Chesapeake. He also included a blind carbon copy to his own private e-mail account on e-mails which contained the same highly sensitive and valuable information."
Chesapeake alleges that even before McClendon was gone from the company -- pushed out after extensive revelations of self-dealing, conflicts of interest and even what prosecutors say was collusion with the head of a rival firm -- he was using his possession of confidential information to lure in investors for his new venture. Chesapeake is seeking the return of all confidential data as well as payment of compensatory and punitive damages.
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Since he founded AEP, McClendon has reeled in and deployed more than $7 billion in capital, using it to acquire acreage in the Utica, Marcellus, Woodford and Permian plays. Most of the equity, roughly $3 billion, has come from Houston-based Energy & Minerals Group. AEP has also issued billions of dollars in debt.
McClendon responded to the allegations in an email to reporters today, basically saying that Chesapeake is just chewing on sour grapes. McClendon, as one of his perks since the time he founded the company in 1989, until his departure, had the opportunity to invest alongside Chesapeake in every well it drilled. As a result he was and continues to be Chesapeake's biggest partner, with a personal working interest in thousands of wells. Among the terms of his deal to leave Chesapeake, the company agreed to continue give him information on all these wells.
According to McClendon's statement:
· Mr. McClendon was entitled to own and use the information in his possession by contractual right; · Mr. McClendon’s agreement with the company clearly gives him broad and deep information rights consistent with past practices; · Chesapeake has given Mr. McClendon almost 20 terabytes of information in accordance with the terms of the Separation Agreement; and · Mr. McClendon has paid Chesapeake nearly $2.5 billion in connection with the jointly owned properties and is still a working interest owner in more than 16,000 Chesapeake wells, making him the company’s single largest partner.
McClendon stated that not only is he entitled to have and use all the information he has, but that Chesapeake had welched on its end of the deal by refusing to hand over information on wells for which he has paid more than $100 million for his share of drilling expenses.
“It is beyond belief that the company that I co-founded 25 years ago and where I worked tirelessly to build it into one of America’s largest and most successful oil and gas producers has now decided to add insult to injury almost two years to the day after my resignation by wrongly accusing me of misappropriating information. Under my agreements with Chesapeake, I am entitled to possess and use the 20 terabytes of information I own. It is a sad day to see Chesapeake stoop so low as to sue its co-founder for having information that was earned, paid for and provided through my contracts with Chesapeake.”
For AEP's first big acquisitions, in late 2013, McClendon spent about $1.7 billion to acquire 100,000 acres in the core of the Utica play.
That may have seemed like a lot to start with, but McClendon was only getting started. In February 2014 hsa acquired 200,000 acres in the Oklahoma Woodford (with 6,000 bpd of production) for nearly $700 million. June 2014 he acquired 75,000 acres and 175 million cubic feet per day of production in the Marcellus and Utica for $1.75 billion. Also that month he acquired 63,000 acres in the Permian basin with 16,000 bpd of production, for $2.5 billion. He has also deployed about $500 million to acquire non-operated working interests nationwide.
In hindsight, it has become clear that McClendon, and AEP, acquired much of this acreage at the top of the market. According to data from U.S. Capital Advisors, shares in publicly traded companies dedicated to the Utica are down 30% in over the trailing 12 months, while the Marcellus is down 27%, the "Mid Con" (rough analog to the Woodford) is down 43%. The Permian is a relative bright spot, down just 1% in the past year. Given American Energy Partners high amount of leverage, it will be quite some time before McClendon's private equity backers can expect a return on their investment.
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0e124baea60934a2a098841af96b51b2 | https://www.forbes.com/sites/christopherhelman/2015/02/27/welcome-to-houston-texas-still-americas-economic-miracle/ | Welcome To Houston, Texas - Still America's Economic Miracle | Welcome To Houston, Texas - Still America's Economic Miracle
The numbers don’t lie: Since 2000, Texas has created 2.1 million jobs, more than double any other state – that’s 30 percent of all the jobs created in the U.S. of A. Seven of the top 10 cities for projected job growth through 2015 will be in Texas. Analysts predict during the next five years, Texas will record an annual job growth rate of 2.7 percent – the fastest and best in the country. And corporate America likes what it sees in Texas: Apple is hiring nearly 4,000 more workers for its Austin facility, brokerage Charles Schwab is leaving California in droves for Austin and El Paso , and Toyota is packing up its North American headquarters, saying “sayonara” to California, and moving to the Dallas metroplex. Naturally, Texas has always held a decided geographic advantage of both land (268,820 square miles) and access to the sea (the port of Houston consistently ranks 1st in the United States in foreign waterborne tonnage; 1st in U.S. imports; 1st in U.S. export tonnage and 2nd in the U.S. in total tonnage). Factor in our proximity to Latin America, abundant natural resources (with more than 2 million barrels per day of oil production, Texas could be an OPEC state), a temperate climate, no state income tax and affordable housing, and you have an economic competitive advantage. To use a football comparison, that gives Texas the ball on the 50-yard line. Meanwhile, on West 43rd Street in Manhattan, the arbiter of economic fact and infallibility, New York Times columnist Paul Krugman is busy calling the lone star economic success “The Texas Unmiracle.” Like a preacher in the old town square, Krugman exhorts “…the Texas miracle is a myth…the Texan experience offers no useful lessons” on how to restore national full employment. Let’s count the ways that’s just wrong. I can hear the detractors immediately shout that with oil in the $50 per barrel range, Houston’s facing a world of hurt in the months ahead. Not true. The Houston of 2015 will drive Texas’ economic engine through many more industries than oil and gas. Benefitting from one of the most business friendly states in the U.S., Houston is now about economic diversity. Houston today embraces more than 150 companies involved in aircraft or space vehicle manufacturing, space research and technology and their total output ranks as one of modern Houston’s largest internationally traded commodities. Breakthrough research and development is taking place in every key biotech cluster: agricultural, biomedical, oncology, environmental, genomics, medical, devices and nanotechnology. The Greater Houston Partnership, creator of the “Houston. City With No Limits” campaign, enthusiastically will tell you that once the Great Recession ended, Houston needed only 22 months to recover all the jobs lost. It was the fastest recovery in the nation among the top 25 major markets. Indeed, Houston’s job growth has outpaced that of the nation’s major metros for most of the past four and a half years. Houston’s job base overall has grown faster than virtually any large metropolitan region in the country over the past decade, a result of the state government’s refusal to over-regulate starting and running a business. Since December 2008, Houston has added 9.8 percent to its job base, the highest percentage of any of the top 25 metros in the country, followed by Dallas at 8.2 percent. New York is only up by 3.5 percent, Los Angeles, 1.2 percent, and Chicago, 0.9 percent. Employment in Philadelphia remains below its 2008 level. With the energy boom and expanding trade, most economists expect Houston’s growth trend to continue, if not accelerate, through 2015. Houston is one of only two major metros (the other being Seattle) that can boast it has more manufacturing jobs now than prior to the recession. Local manufacturing owes its resurgence to the energy industry. The two sectors directly tied to the industry—fabricated metals products and machinery manufacturing—have added 33,100 jobs, or one in every 10 the region has gained since January ‘10. Energy and trade growth are setting off a manufacturing boom in the Houston area. “Houston is the Chicago of this era—like the old Chicago,” remarks David Peebles, who runs the Texas office of Odebrecht, a $45 billion engineering firm based in Brazil. “In the sixties you had to go to Chicago, Cleveland and Detroit. Now Houston is the place for new industry.” As CEO of the only firm specializing in Texas land investments, I have watched Texas’ economic and population growth with equal parts amazement and excitement. The demand for land to provide housing, businesses and infrastructure throughout the state, coupled with a shortage of developed land parcels to meet this demand, has made Texas real estate the optimal investment. The “Texas story” of economic prosperity is playing out now in a way not seen since the California gold rush. In fact, Texas’ economic and population growth has ignited the USA’s first land rush of the 21st century. At conferences and other industry gatherings, I argue with my “coastal” friends that this Texas phenomenon is making other states obsolete; fully one-third of the jobs in the U.S. are now created in Texas. Considering the quantifiable flight of capital, both intellectual and monetary, fueling Texas’ new knowledge-based economy, is it any surprise the bi-coastal, old-school power brokers are confounded by Texas’ one-two punch of a new economy and a demographic revolution? To make my case with the non-believers, I point to two economic indicators I watch closely: 1) Building Permits — the City of Houston permitting activity in September ’14 totaled $1.2 billion, the highest monthly total on record and a 161.9 percent increase from the $469.7 million in permits issued in September ’13, and 2) Home Sales— Houston-area realtors sold 90,124 homes in the 12 months ending September ’14, a 4.4 percent increase over the 86,324 homes sold in the comparable period in ’13, according to data released by the Houston Association of Realtors. That’s one home sold every 7.2 minutes since January of 2010. Business Insider in July of 2014 published an article headlined “18 Facts that make Houston the Best City in America,” noting especially “…the Bayou City is an economic juggernaut. It's by far the country's No. 1 job creator and home to 26 Fortune 500 companies. A paycheck goes farther here than anywhere else in the country, and it has a medical center larger than downtown Dallas.” Not long after that, the arbiter of sophisticated exploration, Conde Nast Traveler, asked the question “Is Houston the New ‘It’ City?” During the recent boom, Forbes ranked Houston as the “Coolest Place to Live in America” and included it among a select few on its list of “America’s New Brainpower Cities.” Site Selection Magazine recognized Houston as the “Top Metro for Relocations and Expansions” two years in a row, and The New York Times labeled Houston as one of the top destinations to visit in ’13 (apparently that research team didn’t consult with “nothing to see here” Paul Krugman). No less an iconoclast publication than Architectural Digest is taking note of the 713 with an article detailing “How Houston Reinvented Itself as a Cultural Powerhouse,” detailing how, in a few short years, “the Texas city has become an artistic and culinary center, attracting visitors from across the globe.” And if you’re one of those east-west coast gustatory elitists, The New York Times’ food critic Pete Wells wrote that Houston has become "one of the country's most exciting places to eat." In racial and ethnic composition, the greater Houston metro area reflects demographic shifts the migration experts have long forecast. In addition, a report by the Kinder Institute for Urban Research & the Hobby Center for the Study of Texas named Houston the most racially and ethnically diverse large metropolitan area in the U.S. In 2014, the Census Bureau now shows there is no longer a majority ethnic group in Houston. Today’s Houston is 35.3 percent Hispanic, 16.8 percent Black, 6.5 percent Asian, 39.6 percent Anglos and 1.8 percent mixed or unknown race. Among U.S. metro areas, Houston ranks fourth in total Hispanic population, seventh in black population, and ninth in Asian population. International migration represents approximately one-fourth of the region’s total population growth over the past decade. Rice University Professor Stephen Klineberg Ph.D., shared with me recently that “Houston is the city where the multi-ethnic culture of America is going to be worked out. Right now, Houston is at the forefront of the ethnic transformation going on across the country. The picture demographers give us of what America will look like in 2050 is the picture of Houston today. As America becomes a microcosm of the world, Houston is leading the country in a transformation from its European origins to a true world city, and in the process, supplying our ‘knowledge economy’ with intellectual capital for not only the oil and gas industry, but also in medical research, information technology, aerospace and manufacturing.” Historically, Houston depended on migrants from rural areas and the rest of the south. But Houston now draws a growing number of newcomers from dense, expensive regions - greater New York, the San Francisco Bay Area, metropolitan Boston, metro Chicago and greater Los Angeles. Between 2000 and 2013, metro Houston’s population expanded 35 percent and Dallas-Ft. Worth’s by nearly 30 percent. In contrast, New York, Los Angeles, Boston, Philadelphia and Chicago grew only in the range of four and seven percent. Consumer dollars go farther in Houston. 2012 ACCRA Cost of Living Index shows that Houston’s overall after-taxes living costs are 7.8 percent below the nationwide average, largely due to housing costs that are 14.6 percent below the average, not to mention low development regulations. In the context of the 29 metropolitan areas with more than 2 million residents, Houston’s cost of living advantage is even more pronounced. Houston’s housing costs are 33.5 percent below the average for the large metro areas, and its overall costs are 16.8 percent below the average for this group. In “Opportunity Urbanism: Creating Cities for Upward Mobility,” published by Houstonians for Responsible Growth and the Greater Houston Partnership, author Joel Kotkin notes astutely that “Indeed, increasingly, New York as well as San Francisco, London, Paris and other cities where cost of living has skyrocketed, are no longer places of opportunity for those who lack financial resources. Instead they thrive largely by attracting people who are already successful or living on inherited largesse. They are becoming, as journalist Simon Kuper puts it, ‘the vast gated communities where the one percent reproduces itself.’” Kotkin puts additional clarity on one of Houston’s secrets to its renaissance with a nod to keeping the price of housing below prices paid in other marquee cities. “This gives the region a built-in advantage—particularly in terms of talent attraction over time compared to major competitors such as New York, the San Francisco Bay Area, greater Los Angeles and Chicago. Lower homes prices and rents allow Houstonians more options about where and how to live. Houston’s ability to nurture both existing and new business has helped expand economic opportunity for its citizens. Personal household income has risen 20 percent since 2005 in Houston compared to 14 percent for New York, 11 percent for Los Angeles and less than 9 percent for Chicago.” Kotkin also nails it about the great “Texas equals low wages” myth when he writes that “Despite the assertions of Paul Krugman, among others, that the Texas urban economy is based on low wages, the fact is Harris County’s average household income is above the national average; close to that of Boston. But once the cost of living is factored in, Houston does far better for its citizens compared to any of the legacy cities. And contrary to assertions of being a low wage ‘race to the bottom’ economy, Houston household income has grown faster since 2000 than virtually any of the country’s major metropolitan areas. Greater Houston has outperformed not only ‘legacy’ cities like New York, Chicago and Boston, which are renowned as centers for high-wage jobs, but other ‘opportunity regions’ such as Atlanta, Dallas-Ft. Worth and Phoenix.” Don’t get me wrong. With all that’s right with Texas and Houston, I’m also well aware of the major challenges facing this city. Surprisingly, for a metro area nearing seven million residents, crime is not the number one concern: it’s traffic, education and the skills gap in the middle work force that lead the hand wringing. The Greater Houston Partnership launched a Regional Workforce Development Task Force in the summer of 2013. Composed of 79 members, it represents large employers and lays bare their concerns about workforce and economic development, education, and social services. You can read the group’s plans to combat these issues in a report it published in April of 2014. The formation of this group, and the strides it aims to make in the next five years is symbolic of Houston’s “gritty spirit” and total lack of pretension when it comes to getting dirty to solve problems. As put by Dr. Klineberg, “In the old world, success was predicated on our location near the oil fields of East Texas. Now that the city knows it can’t rely just on oil, it has put into place strategies for success in a new kind of economy. What Houston has is that can-do spirit. People who live in Houston, believe in Houston. This city has grit.” That, my friends, is why, in the paraphrased words of an American folk hero, “You (non-believers) may go to Hell and I will stay in Houston.” Jim McAlister IV is President and CEO of Rockspring Capital, a Houston-based real estate private equity firm whose strategy is to acquire opportunistic real estate, land parcels and residential lots with all-cash in high growth areas within the Texas Triangle – Houston, Austin, San Antonio and Dallas/Ft. Worth. Established in 1973, the firm has offices in Houston, Austin, San Antonio, Calgary and Edmonton.
Gallery: The Best Cities For Manufacturing Jobs 10 images View gallery
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ec059789adc29336d454b70b564e9b2f | https://www.forbes.com/sites/christopherhelman/2015/03/26/stop-propping-up-zombie-oil-companies/ | Stop Propping Up Zombie Oil Companies | Stop Propping Up Zombie Oil Companies
"This city is in a deep state of denial," says a Houston broker who's lived through three oil slumps before. We're standing in a grand meeting room at the Houston Country Club, surrounded by well heeled Houstonians in evening wear. Construction cranes still dot the Houston skyline; every day more ground gets broken for another high-rise residential tower. "Everybody says it's going to be different this time -- the city's more diversified than it used to be. But oil still supports everything here, whether they believe it or not."
Perhaps most stunning: the number of lifelines thrown to troubled oil companies in recent weeks. Investors seem to be worried that they're going to miss the opportunity to buy at the bottom, to grab a piece of a company that most likely wasn't generating any free cash flow even when oil was at $100. Maybe the deep pockets that have passed out more than $10 billion in equity and billions more in loans in recent weeks know for a fact that oil prices are about to shoot back up. But I doubt it.
This week Linn Energy announced a $1 billion equity commitment from Quantum Resources, while Whiting Petroleum put to rest the rumors it's on the auction block by announcing a $1.9 billion equity offering. Encana , which overpaid for Athlon Resources at the top of the market, somehow attracted $1.5 billion in new equity. Laredo Petroleum raised $750 million, Concho Resources $650 million, Oasis Petroleum $400 million and Rosetta Resources $200 million. Even Goodrich Petroleum , its shares down 90% from last year, grabbed $50 million in new equity and sold $100 million in debt. Comstock Resources issued $700 million in new bonds in recent weeks. It's freshly subordinated debt has plunged in value to trade at a yield of 36%.
(AP Photo/Hasan Jamali, file)
Booms, Busts And Billionaires: An eBook From Forbes Find out what’s happened to the oil industry--and where it’s headed next.
Energy XXI managed to sell $1.25 billion in second-lien notes at 12%. In doing so they subordinated their existing $750 million in senior notes. Those notes were trading at a yield of less than 2% last April; now they yield 26% (according to Finra's TRACE site). Juicy, huh? Only if EXXI survives. Its shares are down 85% from last June, when it paid $2.3 billion to acquire rival EPL Oil & Gas at the peak of the market. Without higher oil prices there's little chance the company will be able to generate any profits from its vast collection of mature oil fields in the shallow waters of the Gulf of Mexico.
"This is a leading indicator of an underappreciation of risk," one baffled New York hedge fund manager told me Monday. He's concerned about the potential devastating effect that a wave of high yield bond defaults and oil company bankruptcies could have on the broader economy.
As economist Ed Yardeni explained in his Monday note: "Repeat after me: Easy money is deflationary. I know that's hard to believe since we've all been taught that easy money is inflationary, [but] easy money can also stimulate supply, especially in recent years because producers overestimated the ability of easy money to boost the demand for their goods and services. Easy money allows "zombie" companies to stay in business, thus boosting supply, even though they are losing money."
The hard reality is this: propping up zombie oil companies is only going to make the downturn last longer. A new investment cycle is unlikely to begin until investors are willing to recognize their losses, shut down the woefully uneconomic operators and allow the strongest companies to consolidate. Too bad big egos will prevent that from happening any time soon.
We really shouldn't be surprised. The Great American Oil Boom was built on easy money. And with the chance of a Federal Reserve rate hike diminishing, that easy money isn't going away. Indeed, why stop now when the edge of the cliff is so tantalizingly close and we're running so fast? With yields on Treasuries heading toward zero and investors looking everywhere for decent yields, the oil bubble will just keep on inflating until it well and truly pops.
Not all the aforementioned companies are zombies. But there are sure a lot of them trudging through the oilpatch today. It's these zombies that Saudi Arabia is looking to kill off by refusing to cut their oil production and make way for rampant U.S. supply growth. The Saudis can make massive profits even at $20 oil. The new generation of American shale drillers couldn't even generate free cash flow at $100 oil. They've been outspending their cashflow for years. Enough already.
Chew on these numbers. U.S. oil and gas companies have $850 billion in outstanding bonds, according to this report from the Bank of International Settlements. That's out of a $6 trillion total U.S. corporate bond market. This oil and gas indebtedness has surged in recent years, more than doubling since the last oil downturn in 2009. That's twice the growth rate of overall corporate bond issuance.
It's a similar story in the rest of the world, with $2.5 trillion total oil and gas indebtedness outstanding, more than 2.5 times what it was a decade ago.
On top of all that -- the BIS report estimates that in 2014 there were $1.6 trillion of syndicated bank loans to oil and gas companies outstanding, up from less than $600 billion a decade ago.
It all adds up to more than $4 trillion in oil and gas bonds and loans. Much of this debt is naturally backed oil in the ground and cash flows from selling it. So how much $100 oil would you need to sell just to generate $4 trillion in REVENUES? Answer: 40 billion barrels. How much $50 oil would you need to sell? 80 billion barrels. How many barrels of oil did the world use in the past year? 35 billion barrels.
The thing is, much of the debt taken on by smaller shale oil producers will never be paid back unless oil prices go significantly higher than $100 -- because even at $100 oil they weren't generating any free cashflow.
According to BIS:
Much of this debt has been issued by smaller companies, in particular those engaged in shale oil exploration and production. Indeed, while the ratio of total debt to assets has been broadly unchanged for large US oil firms, it has on average almost doubled for other US producers - including smaller shale oil companies. These firms borrowed heavily to finance the expansion of production capacity, often against the backdrop of negative operating cash flow. Indeed, shale investment accounts for a large share of the increase in oil-related investment. Annual capital expenditure by oil and gas companies has more than doubled in real terms since 2000, to almost $900 billion in 2013.
Bernstein Research points out that historically the E&P business has recycled 85% of its cashflow into new capital spending. But beginning in 2012, when the shale boom really got booming, companies began outspending their cashflow. In the fourth quarter of 2014, as oil prices deteriorated, that spending-to-cashflow deficit widened to 128%, the worst period of outspending since the last plunge in 2009.
It's easy for oil company CEOs to rationalize this away. Their explanation has always been something along the lines of: "Sure we're not generating free cashflow now, but that's because we're investing for the long term, just wait a few years until we have a big enough base of production and the cash will really flow." But we have waited a few years and now the cashflow deficit is bigger than ever. A much-touted 30% decrease in drilling costs isn't going to make enough of a difference.
The oil boom has been great for the U.S. It's put hundreds of thousands of people to work and contributed to vastly more plentiful and affordable gasoline than we would have thought possible a decade ago. Along the way it has been a big shot in the arm to the entire U.S. and global economy as we've emerged from the Great Recession.
Other bubbles were great too. The Internet Bubble of 2000 ushered in a brave new world of computing that has changed the world forever. And the sub-prime housing bubble of 2007 sure generated a lot of jobs for homebuilders and commissions for realtors. The Dutch Tulip Mania helped create a lot of pretty new flowers. It may be hard to see the oil bubble in the same light as other bubbles because there seems to be considerably more in the way of hard assets backing a share of an oil compapny than there was behind a share of Pets.com.
But are zombie oil companies really worth any more than Pets.com? Oil that costs too much to get out of the ground is worth about the same amount as a sock puppet and a flashy website that no one uses. Take a look at the 2014 10-k filing for Goodrich Petroleum, which has burned through mountains more cash than was ever thrown at Pets.com. Over the past five years Goodrich has generated $800 million in cumulative net losses on about $1 billion in oil and gas sales. Last year Goodrich made $333 million in capital expenditures. A full 79% of that was directed towards the Tuscaloosa Marine Shale trend of Louisiana and Mississippi where the company has 460,000 acres. The TMS, as it's known is one of the most marginal of the new oil and gas plays. No doubt Goodrich found some oil there, but at current prices it's simply not worth drilling for. Goodrich has more than $600 million in debt. And after recording a non-cash impairment charge of $332 million last year (reflecting the impact of lower oil prices on the value of its reserves), its balance sheet shows stockholders' equity of -$16 million. At $3.30, Goodrich shares are down 90% from their 52-week high. This is one of those "zombie" companies that Ed Yardeni was talking about. And yet two weeks ago investors, including the junk bond managers at Franklin Advisers, gave Goodrich $50 million in new equity and $100 million for new debt.
We've already seen the beginning of a wave of defaults and bankruptcies in the oilpatch. Quicksilver Resources' collapse was a long time coming. Others include WBH Energy, American Eagle Energy, Lucas Energy, Connacher Energy, Southern Pacific Resource and Sabine Oil & Gas, which is fighting with creditors over claims that it defaulted on nearly $600 million in debt.
More to come. A director of oil and gas financing at a big bank in Houston told me last week that he and his peers are currently in the throes of some ugly borrowing base redeterminations. Obviously, how much money an oil company can borrow against reserves depends upon the value of those reserves. With prices collapsed, a lot of tight oil now isn't worth drilling at all -- it's worthless. Companies are busting the terms of their bonds and bank loans left and right -- it's common for borrowing covenants to require a company to keep their total indebtedness to within four times their annual EBITDA. But banks are waiving that requirement, for now. "We don't know how to run an oil company; we don't want to run an oil company," says the banker. "Hopefully oil prices come back up this summer." If not, by the time the next set of borrowing base determinations come around in October, there will be blood in the streets as many zombie companies will finally have no choice but to give up.
Egos will naturally get in the way. Private equity giant KKR in 2011 led a group that bought Samson Resources for $7.2 billion. It was a great deal for Tulsa's Schusterman family that owned Samson, but has turned out terrible for KKR, as Samson is said to have lost $3 billion since 2011, including more than $400 million in 2014. It's saddled with nearly $4 billion in debt. But KKR isn't about to recognize losses on Samson unless it's forced to. Lenders have waived covenants as the company attempts to restructure.
Business is booming for restructuring experts like John Young, senior managing director at Conway Mackenzie in Houston. He's working with a number of oil and gas companies that have already fallen on hard times, as well some service companies and manufacturers, for whom "orders have dried up completely" as drillers cannibalize their fleets of mothballed rigs rather than buy new parts.
"We're in the front end of the downturn," says Young. "We're living in a new world only 90 days old." As a result, some are still laboring under the illusion that this downturn is temporary, that we'll be going back to $100 in no time. But many more are waking up to reality. So if you invest now your capital will be deployed longer and you'll need bigger results to generate decent return on investment.
The finest minds have no idea where oil is going. Most analysts I talk to think that U.S. oil production is set to top out later this year and fall into 2016 -- an understandable result of drillers laying down more than 700 rigs and slashing capex by $65 billion. Yet this morning a group of sharp penciled analysts from energy consultancy WoodMackenzie told our gathered group of reporters that they thought U.S. production would not only continue to grow in 2015 but in 2016 as well.
Despite continued U.S. supply growth, WoodMac somehow expects prices to recover to around $65 by the end of this year. Their crystal ball is admittedly cloudy though, said WoodMac V.P. Alan Gelder. Soft economic conditions could erode oil demand, cratering prices further. U.S. refiners can likely "chew up" all the excess oil building up in storage, but what if they can't? And then there's Iran. The Iranian government says it could quickly add 1 million bpd to its current 1.1 mm bpd of exports. Skeptical analysts at Energy Aspects said in a report this week that 300,000 bpd extra is more likely. That's still a material addition. And don't expect the Saudis to cede market share to Iran.
The range of possibilities are endless. Look, it's nice that some CEOs are finding new sources of funding to help their zombie companies survive this downturn, but these tight oil drillers already sucked up a trillion dollars and still can't live within their cashflow.
If you're a small-fry investor looking to get into oil now, you must be utterly convinced that oil prices will soon go high enough that they won't need to come back to the trough for more cash. If you're not convinced, then stay out of the way, watch the zombies die, and save your investment dollars for the survivors.
Gallery: World's Biggest Oil Companies - 2015 22 images View gallery
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66a4f1f14d82d8f1e5a924ac8262bc78 | https://www.forbes.com/sites/christopherhelman/2015/07/30/nimby-nation-the-high-cost-to-america-of-saying-no-to-everything/ | Nimby Nation: The High Cost To America Of Saying No To Everything | Nimby Nation: The High Cost To America Of Saying No To Everything
Patricia Begrowicz of Onyx Specialty Papers. (Credit: Franco Vogt for Forbes.)
Fueled by legal advocacy groups, cries of Not In My Backyard are quietly costing the United States economy trillions. The ability of America to flourish is at stake.
By Christopher Helman and Daniel Fisher
For more than 50 years Onyx Specialty Papers of South Lee, Mass. has carved out a niche selling unusual, high-value products like the Kevlar-reinforced paper used in automobile clutch plates. The company's twin 100-foot-long paper machines sit in a 150-year-old brick building on the Housatonic River, churning out 12,000 tons of paper a year.
Pat Begrowicz and a business partner bought Onyx from industry giant Mead Westvaco in 2009. She cashed in her kids' college funds to do so. Now she's wondering whether that was such a great idea. The problem isn't labor (starting pay for manufacturing jobs at her 155-employee company is $20 an hour) or even raw materials costs or markets. It's energy.
Massachusetts has the third-highest electricity costs in the lower 48 states, after Connecticut and Rhode Island. Begrowicz pays about 14 cents per kilowatt-hour, more than double the national average of 6.5 cents. As a result, she figures she pays $1.2 million a year more than she needs to in order to run her machines. She takes a hit on natural gas as well, which Onyx burns to produce steam for the big revolving steel cylinders that dry the paper pulp slurry. Gas prices in Massachusetts, which also drive the high cost of electricity, are two times higher (about $11 per thousand cubic feet) than the national average. "I can't recoup it," she says, shaking her head.
The painful irony, of course, is that America sits in the midst of a historic natural gas boom that has seen prices plunge more than 75% since 2008. Just 200 miles to the southwest of South Lee lies the Marcellus Shale natural gas field of Pennsylvania, the biggest in America. From nothing a decade ago the Marcellus now produces 16.5 billion cubic feet of natural gas per day, about 20% of the national total. Pipeline companies are itching to extend their lines to bring plentiful gas into Massachusetts; Kinder Morgan has already signed up long-term buyers for the gas it would haul in via its stalled $3.3 billion Northeast Direct line.
Booms, Busts And Billionaires: An eBook From Forbes Find out what’s happened to the oil industry—and where it’s headed next.
But that's not going to happen, at least not anytime soon. Despite the fact that Western Massachusetts' GDP plunged 3.6% from 2007-13 (while the U.S. overall expanded 5.6% over the same time), opposition by small, well-organized groups to any new pipeline remains as ferocious as it is irrational. "We want to prevent the overbuilding of gas infrastructure and overreliance on gas, for economic reasons and climate reasons," says Kathryn Eiseman, head of Massachusetts PipeLine Awareness Network advocacy group. Yet thanks to her group and others like it, in January 2014 New England's power companies, lacking gas to make electricity, resorted to burning 2.7 million barrels of emergency fuel oil--more expensive and far more toxic, pumping out twice as much carbon dioxide as natural gas. So much for "economic and climate reasons."
Call such irrationality the NIMBY tax--the unnecessary, exorbitant and more and more common cost of getting anything done in America. From subways to bridges to power lines and pipelines, the nation's land, water and key infrastructure is increasingly being held hostage by a growing thicket of regulation, sophisticated opposition and a me-first philosophy that regards development, no matter the public good, as a potential assault on the sacred. From housing construction caps in San Francisco and the Keystone XL pipeline in Nebraska to bridge and subway construction in New York City and port expansion in Savannah, Ga., NIMBY has delayed, killed or inflated the expenses of more than 500 projects nationwide over the last decade at a cost to the economy of more than $1 trillion annually, FORBES conservatively estimates, though in truth those numbers are likely far higher.
The problem is being exacerbated by a furious wave of regulation-writing in Washington. According to the Government Accountability Office, the Obama Administration enacted 499 major rules across all federal agencies in its first six years, up 43% from the first six years of the George W. Bush White House. The GAO defines "major" regulations as having an annual effect of more than $100 million on the economy or significant impacts on prices, productivity, employment or international competitiveness. This summer, new regulations issued by the Environmental Protection Agency expanded the waterways over which it has some say by 4.6 million miles, infuriating landowners across the nation.
"What has happened by accident is that the legal approval system has evolved to be so complicated that any person who doesn't like a project can exercise a legal veto," says Philip K. Howard, whose new book, The Rule of Nobody, documents the madness. The effect, Howard says, is "bureaucratic mental illness." It's the kind of sickness that now threatens a country that was once defined by advancement and progress.
Of course, it was not always like this. From the global trade booms brought about by the Erie and Panama canals to Depression-era electrification programs that lifted millions of Americans out of poverty and darkness to the rollout of the Interstate Highway System, which transformed the country into a single, seamless economy, the history of the United States was once the history of watershed infrastructure projects, completed quickly, and the opportunities they created.
But by the 1960s the pendulum had swung too far, most famously in New York, where an unparalleled public construction boom driven by the Triborough Bridge & Tunnel Authority's bare-knuckle chairman, Robert Moses, overshot the mark, destroying neighborhoods and rending the city's social fabric, igniting a revolt against the bulldozer-driven "urban renewal" movement of the time.
Meanwhile, Americans woke up to the reality that rampant industrialization was destroying the environment. In 1962 Rachel Carson published Silent Spring, which led directly to the banning of the toxic pesticide DDT. In 1963 the Clean Air Act was passed in part to alleviate L.A.'s noxious smog. In 1970 President Richard Nixon created the Environmental Protection Agency. That same year was the first Earth Day. In 1978 toxic horrors were discovered under a new housing development at Love Canal, N.Y., leading to the 1980 creation of the Federal Superfund program to clean up industrial disasters. That same year marks the first recorded usage of the phrase "Not in My Backyard."
It didn't take long for newly minted NIMBYs to realize the tools they had been handed. The law that created the EPA required all sizable federal project plans to include an environmental impact statement. Courts decided that it wasn't enough to declare what the impacts would be--agencies also had to inform the public on how they intended to address those impacts. The problem, though, is that every agency can weigh in on environmental impacts, but no single agency has authority over the process, allowing environmentalists to litigate over every word in every impact statement. Richard Geddes of the American Enterprise Institute says one local transportation official told him that "if I take $1 of federal money for a state transportation project, it can add 11 years to the process."
Forty-five years later the unanticipated result is a sophisticated NIMBY-industrial complex of activists and lawyers that has grown increasingly proficient at weaponizing all this well-intended regulation to stall even green projects and explode their costs.
Take Vermont, where New England NIMBYs sought to block an electric transmission project that would bring zero-carbon hydropower to the region from Canada. The plan, proposed by the company Transmission Developers, owned by Blackstone Group, is to build a 1,000-megawatt line under Lake Champlain to Ludlow, Vt., where it would patch into the grid near the decommissioned Vermont Yankee nuclear plant (closed in 2014 due to pressure by activists who--you guessed it--didn't want a reactor operating in their backyard).
But if you think subbing hydropower for nuclear power would satisfy the region's NIMBY forces, think again. Boston's Conservation Law Foundation intervened because of the plan's "impact on the aquatic environment" and potential competition with renewable projects in New England. Greg Cunningham, CLF vice president and director of its Clean Energy and Climate Change program, explains that hydropower "is not a zero-carbon resource, so that needs to be accounted for." Dams, he says, create sediments that release higher levels of CO 2 in their early years, and the land behind the dam needs to be clear-cut of CO 2 absorbing trees to make way for the reservoir. Faced with the potential for endless litigation, Transmission Developers CEO Don Jessome cut a deal with the NIMBYs: Drop your opposition and in return we will invest nearly $300 million over 40 years on Conservation Law Foundation pet causes like solar and wind.
This group offers a perfect example of the sophisticated way the NIMBY industry works today. While it doesn't stand to make any money directly from this settlement unless Transmission Developers violates its terms, that's hardly the norm for this lawyer-driven organization, which frequently sues small businesses for alleged violations of environmental laws. A scan of federal court records shows it has filed 14 such suits in the last two years and more than 100 since 1987, including a string of cases against marinas, used-car lots and other companies the Conservation Law Foundation accuses of polluting lakes and rivers. In most cases the foundation initiates the complaint based upon an aerial inspection and negotiates a "consent decree" filed with the court under which the nonprofit agrees to drop its charges in exchange for tens of thousands of dollars in legal fees payable to it and similar-size donations to environmental groups it selects.
Most of the targets FORBES contacted declined to talk on the record, citing confidentiality agreements, but one did: John Jalbert, owner of Methuen Motor Mart in Methuen, Mass., who agreed in April 2015 to pay the Conservation Law Foundation $30,000 over three years and another $20,000 in the form of donations to a local group. Jalbert's crime? His lot is situated next to the Merrimack River, and the foundation determined from a Google Earth photograph he might be polluting the river with oil and other substances from his cars--even though Jalbert says he has berms to protect against it and the consent agreement doesn't require him to do anything more than agree not to pollute in the future.
"They came at me like a bulldog," says Jalbert, even though he says no one from the foundation ever visited his location. (CLF says it did.) He refused to pay additional "monitoring fees" the group ordinarily charges its targets. "Thank God I fought 'em on that, or they'd be down at my business every year, ringing my bell for money."
This group and other organizations like Riverkeeper and WildEarth Guardians leverage the "citizen suit" provisions Congress inserted into federal environmental laws to allow neighbors and others to sue over pollution. It can also feel like a shakedown--it's cheaper, after all, for a small businesses to pay $20,000 to $50,000 in fees to make something go away, rather than fight a small army of environmental lawyers.
"It's quite lucrative," says Francis Veale, who represented Jalbert. "They come in under the banner of they're the white knights, but when you're going to put a small guy who employs five to ten people out of business, that's not so good." Cunningham, of the Conservation Law Foundation, counters that the organization merely ensures adherence to federal environmental laws and sues companies when they are out of compliance with necessary permits.
Lawmakers on both sides of the aisle, and even some activist groups, to their credit, recognize there's a problem. The American Recovery and Reinvestment Act of 2009 included language that encouraged faster permitting, though there's little evidence it succeeded. This year Senators Rob Portman (R.-Ohio) and Claire McCaskill (D.-Mo.) introduced the Federal Permitting Improvement Act of 2015, which would streamline the environmental approval process and interagency coordination. The bill has bipartisan support and is even backed by the National Resources Defense Council.
And then there's the Responsibly and Professionally Invigorating Development (RAPID) Act, which would speed permitting and remove duplicate processes. It passed the House last year. "Everybody agrees that approving critically important economic projects should be simple," says bill sponsor Representative Tom Marino (R-Pa.).
Even the Supreme Court did its part, ruling in June's Michigan v. Environmental Protection Agency decision that the agency should not be imposing draconian new air pollution rules (on mercury emissions in this case) without first considering the costs of implementation.
But just as quickly as red tape appears to get cut back, NIMBY lawyers find more ways to tie everything up. The latest legal tactic is so-called Title V litigation, based on a provision of federal law requiring the EPA to approve or deny a clean air permit application within 18 months. The EPA misses that deadline more than 80% of the time, and groups like the Sierra Club and WildEarth Guardians use the delays to try to block gas compressor stations and other critical elements of the energy grid.
Title V "is the basic air permit you need to build anything," says William Kovacs, senior vice president for environment, technology and regulatory affairs with the U.S. Chamber of Commerce. "That sets in motion how the environmental groups control the EPA," Kovacs says. "It's missing the deadline that gives the environmental groups their leverage." The EPA did not respond to requests for comment.
WildEarth has filed 53 suits in federal court since 2012, including one targeting 13 compressor stations and other gas-processing facilities owned by Anadarko, Whiting Petroleum and other companies. The Sierra Club has used Title V suits to try to block permitting for a dozen coal-fired electric plants.
"The battle over fracking upstream is over, so the focus is on the blood vessels now," says lawyer Michael Krancer, a partner at Blank Rome and former Pennsylvania Secretary of Environmental Protection. "The Achilles' heel is compressor stations and pipelines. It's no longer a battle about what's happening drilling-wise."
What's more, the EPA is still adding additional levels of permitting. It recently pushed through the so-called Waters of the United States Rule, which basically expands the bodies of water under its jurisdiction from 3.5 million miles to 8.1 million miles, by including streams and ponds that may overflow. The effect of the rule will be to slow projects down while developers figure out complex hydrology.
That's music to the ears of Tonya Bonitatibus, executive director of Savannah Riverkeeper, who says she is fighting to block Kinder Morgan from developing a natural gas pipeline in Georgia in part because it crosses wetlands and rivers. "When they go to put this pipeline through, what they actually want to do is build a giant trench with a road on top of it. When you cut that bog or swamp in half like that, you essentially kill it. Even if it's not a spill, there's still damage."
Richard Kinder, the billionaire cofounder of Kinder Morgan, insists he's willing to work with local activists to find a way to make the project work and points out that it will increase environmental safety by getting millions of gallons of jet fuel and diesel off the region's highways each year, where it is now being shipped by truck. "This will make that whole area more competitive," he says. "That's exciting."
Bonitatibus insists she's also open to a compromise but doubts it will happen, citing the company's "arrogance." "They would probably be further along if they worked within our culture," she says, arrogantly. "There are ways to go about it. Can they afford it? Probably not."
Can we afford it? It's a question 21st-century America needs to start asking itself. And soon. F
With additional reporting by Corinne Jurney.
JUST SAY NO
Who says Americans can't agree on anything anymore? Here's a portfolio of megaprojects from across the nation, all stalled by NIMBY power.
Gallery: Megaprojects Stalled By NIMBY 9 images View gallery
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3c461e38c24d289c52def918de50c1c0 | https://www.forbes.com/sites/christopherhelman/2015/10/28/saudi-sabotage-will-oil-giant-scuttle-climate-accord/ | Is Saudi Arabia Trying To Scuttle Climate Accord? | Is Saudi Arabia Trying To Scuttle Climate Accord?
Sometimes what diplomats don’t say is more revealing than what they do.
That seemed to be the case this weekend, when Secretary of State John Kerry flew to Saudi Arabia to discuss pressing issues with King Salman and other top officials. In addition to reviewing regional security issues, the U.S. readout of these meetings announced that both sides “pledged to work together in advance of the upcoming COP 21 climate conference in Paris,” referring to the twenty-first U.N. conference on climate change this December.
However, Saudi Arabia’s description of the meetings made no mention of such a pledge. This omission by Saudi officials seems like no mere coincidence and could validate existing fears that the kingdom is trying to sabotage talks aimed at reaching a global accord to fight climate change.
When climate negotiators gathered in Bonn during September for preparatory discussions, German broadcaster Deutsche Welle reported that “Saudi Arabia is attempting to water down the treaty as much as possible.” DW’s article carried the provocative title “Led by Saudi Arabia, Persian Gulf oil countries resist tough climate agreement.” The article claimed that Riyadh was using its influence with Arab states, oil producers, and the “Like Minded Group of Developing Countries” that represents over 50% of the world’s population to resist possible regulations on the uses of fossil fuel.
US Secretary of State John Kerry (L) meets with Crown Prince Mohammed bin Nayef of Saudi Arabia (R)... [+] in Diriyah Farm, Saudi Arabia, on October 24, 2015. US Secretary of State John Kerry travelled to Saudi Arabia for talks with King Salman expected to focus on the four-year-old conflict in Syria. CARLO ALLEGRI/AFP/Getty Images
Understandably, any restrictions on oil production would have major implications for the Saudi economy. Even with the recent crash in oil prices, the International Monetary Fund expects oil income to comprise over 80% of Saudi Arabia’s central budget revenue for the year 2015. But the Obama administration is right to encourage Saudi Arabia to at least engage constructively.
The day after DW’s investigation was published, Saudi Arabia’s king happened to be visiting President Obama at the White House. The president had just come back from Alaska to “shine a spotlight” on climate change, warning that “we’re not acting fast enough.”
Auspiciously, a joint statement from their meeting indicated they “discussed the challenge of global climate change and agreed to work together to achieve a successful outcome at the Paris negotiations in December.” But while President Obama said in their public remarks that he “look[ed] forward” to cooperation on climate change, King Salman declined to mention the issue when he was up next.
This would not the first time Saudi Arabia has been accused of trying to sabotage an agreement to fight global warming.
According to the Washington Post, the late King Abdullah's “chief envoy to climate talks was a global-warming skeptic who boasted of his success at scuttling climate treaties.” The newspaper noted in January that “Saudi officials have taken on the role of spoiler in international negotiations for a climate treaty, joining with other major petroleum producers in demanding politically untenable conditions” such as “billion-dollar compensation packages.”
In 2008, a former staff member for the U.N.’s Climate Change Secretariat published an academic paper entitled “Striving for No: Saudi Arabia in the Climate Change Regime.” As the New York Times put it, her journal article made the case that Riyadh’s climate change diplomacy is “a classic case of parties… getting involved in a process primarily to obstruct it.”
To be fair, last year the CEO of Saudi Arabia's state-owned oil company joined with other fossil fuel executives to launch what they called the Oil and Gas Climate Initiative. Their group met again in Paris this month to insist that petroleum firms are part of the solution, not part of the problem, pointing to efficiency gains through such techniques as carbon capture and reduced gas flaring.
Some environmentalists, however, dismissed the initiative, arguing for example that “arsonists don't make good firefighters” and pointing out that many of these same firms “have spent years lobbying to undermine effective climate action.”
Saudi Arabia's minister of petroleum and mineral resources has expressed an aspiration to one day export electricity from solar power instead of shipping crude oil overseas, and at the 2012 U.N. Climate Change Conference he paid lip service to the idea of joint action to fight global warming. However, for the foreseeable future his government’s efforts to diversify energy sources at home are largely focused on freeing up more oil for export, not substituting renewables for existing production of lucrative crude.
Meanwhile, Saudi Arabia is the only member of the G20 that failed to submit a plan to the United Nations on reining in greenhouse gas emissions by the October 1st deadline. In fact, none of the GCC states submitted a plan on time, and like Saudi Arabia its neighbors Qatar, Kuwait, and Bahrain still had yet to do so by this Wednesday. Qatar, which hosted the United Nations talks just three years ago, had the world’s highest greenhouse gas emissions per capita according to the World Bank through at least 2011.
Sadly, experts warn that the Gulf states’ citizens may bear the brunt of some of climate change’s worst expected consequences.
A new study in the peer-reviewed climate change journal from the publishers of Nature found that many Gulf cities will likely experience such extremes of heat and humidity at times as to be uninhabitable outdoors by the end of the century. What today would be one of the hottest days of the year in Abu Dhabi, Dubai, Doha, Dhahran, or Bandar Abbas is expected to be “approximately a normal summer day” after 2070 there according to the paper’s authors. Other researchers warn that already scarce supplies of potable water in the kingdom will dwindle as a result of global warming and that deadly flooding events are likely to increase in frequency and severity.
The Obama administration is raising climate change with Saudi Arabia at the highest levels, even as other concerns such as religious incitement and human rights abuses are being downplayed. It may become clear in just several weeks if that sacrifice was worth it – and whether or not we have been burned.
David Andrew Weinberg is a Senior Fellow at the Foundation for Defense of Democracies.
Gallery: World's Biggest Oil Companies - 2015 22 images View gallery
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9b4113ade291543157ed5d1b2a2047cb | https://www.forbes.com/sites/christopherhelman/2015/11/04/walmarts-everyday-renewable-energy/ | How Walmart Became A Green Energy Giant, Using Other People's Money | How Walmart Became A Green Energy Giant, Using Other People's Money
Wal-Mart, long a bogeyman of the left, is making one of their long-held dreams a reality: affordable green energy deployed on an industrial scale.
The roof of the Wal-Mart in Mountain View, Calif. is covered with solar panels. Depending on the time of day they provide 15% of the power needed to run the store. Last year President Barack Obama stopped by here to give a speech about his energy plan. Standing before shelves filled with discount lightbulbs, Obama held up Wal-Mart as an exemplar of corporate responsibility.
"A few years ago you decided to put solar panels on the roof of the store. You replaced some traditional lightbulbs with LEDs. You made refrigerator cases more efficient. And you even put in a charging station for electric vehicles," said Obama. " More and more companies like Wal-Mart are realizing that wasting less energy isn't just good for the planet, it's good for business. It's good for the bottom line."
And it's great p.r. for a company that has been lambasted for a range of corporate sins, from low wages and deplorable working conditions to accusations of predatory pricing and monopolistic behavior (naturally they deny these things). But if Wal-Mart's energy initiative sometimes smells a little like greenwashing, the Bentonville, Ark.-based giant (2014 sales: $480 billion) is far too savvy to lose money on it. Rather, the retailer has off-loaded the capital investment--and all the risk--onto partners, like SolarCity, that minimize their exposure by taking full advantage of the federal government's generous subsidies for investing in alternative energy.
‘We’re not in the sustainability business, we’re in real estate.’ Wal-Mart’s green maven David... [+] Ozment. (Photo by Matthew Mahon, for Forbes.)
Wal-Mart has installed 105 megawatts of solar panels--enough to power about 20,000 houses--on the roofs of 327 stores and distribution centers (about 6% of all their locations). That's enough to make Wal-Mart the single biggest commercial solar generator in the country. And it intends to double its number of arrays by 2020.
It's all part of a goal that former CEO Lee Scott set in 2005 for Wal-Mart to be powered entirely with renewable energy. Wal-Mart uses an incredible amount of electricity. Worldwide power demand is roughly 29,000 gigawatt-hours per year (FORBES estimate). The U.S. probably accounts for about half of that--enough to power about 1.5 million average homes. FORBES also estimates Wal-Mart's U.S. electric bill to be around $1 billion per year.
Booms, Busts And Billionaires: An eBook From Forbes Find out what’s happened to the oil industry—and where it’s headed next.
It's not at all clear it'll meet that goal, even though subsequent CEOs have reiterated it year after year. Wal-Mart now gets 26% of its worldwide power from green sources, including wind, solar, fuel cells and hydropower. That's barely better than renewables' overall 13% share of U.S. generation. "To make it harder on ourselves," says David Ozment, Wal-Mart's energy chief, "everything we do has to make business sense."
If Ozment were worried about making the business case for green energy, he could just follow the lead of other retailers like Kohl's and Starbucks , which brag of running their operations 70%-plus carbon-free. But they do so by buying carbon credits or "offsets" to balance out their greenhouse-gas emissions. Were Wal-Mart to follow this approach it could offset its 20-million-ton-per-year carbon dioxide footprint for about $200 million. Ozment dismisses that as an accounting gimmick. "Buying credits would be an added cost item rather than what we do, which is lowering costs," he says. Instead, Wal-Mart has reduced its energy costs per square foot of retail floor space by 9%.
Wal-Mart has cut costs by doing what it does best--using its heft to convince its suppliers to risk their own capital to get Wal-Mart what it wants. It gives access to its roof space to SolarCity or other installers, which pay to put up the panels (at a cost of about $1.2 million for the average array). SolarCity then sells the power generated to Wal-Mart under a long-term deal--at a price often cheaper than what the local electric utility would charge. "The value proposition is really obvious," says Ozment, a 66-year-old career electricity exec who has been at Wal-Mart since 2003. "Why put up our own capital?"
At a dozen California locations SolarCity is even sweetening the setup--installing backup batteries developed by Tesla Motors . They'll help Wal-Mart save even more by storing up solar power from the sunniest parts of the day, then dribbling it out in the late afternoon when demand-driven electricity prices are highest. Wal-Mart has a similar setup with Bloom Energy, whose innovative fuel cells called "Bloom boxes" use a cleaner electrochemical process to transform natural gas into electricity. Today 42 Wal-Marts in California have Bloom boxes. They save Wal-Mart 20% compared with grid power and emit around 35% less carbon than large-scale power plants.
Constellation, a division of power-generation giant Exelon , is putting up an estimated $200 million to install 20 megawatts of Bloom boxes, enough for roughly a quarter of the power needed at around 80 Wal-Mart stores . But this kind of financing arrangement won't work everywhere. That's because America's green energy revolution has been built on a foundation of subsidies. There's the federal investment tax credit, which allows investors to deduct 30% of the cost of building these systems. And in California there are hundreds of millions of taxpayer dollars available in green rebates and grants.
The bad news for Wal-Mart and the entire green energy industry is that the federal green energy tax credit is set to expire in 2017. Ozment isn't worried. After all, Wal-Mart is accustomed to putting the hard squeeze on its suppliers. "It's an opportunity for utilities to rethink their business model," he says. "There's no reason there can't be an adjustment." F
Gallery: How Much Energy Does Your iPhone (And Other Devices) Really Use? 16 images View gallery
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fffbafd772ad13797eadad86050c6c84 | https://www.forbes.com/sites/christopherhelman/2016/01/19/at-the-breaking-point-will-irans-return-mark-the-bottom-for-oil/ | At The Breaking Point: Will Iran's Return Mark The Bottom For Oil? | At The Breaking Point: Will Iran's Return Mark The Bottom For Oil?
The breaking point can’t be that far off now. At $29 a barrel for West Texas Intermediate crude America’s oil industry in collapse. Prices are already below the full-cycle costs for all of America’s unconventional shale plays. And plummetting prices are quickly closing in on producers’ “cash cost” floor, where they have to lay out more to keep pumps and separators running than they make selling the product. Plenty of small stripper wells have already been shut in, while natural declines at the headline fields of the Great American Shale Boom are becoming precipitous.
According to data from the U.S. Energy Information Administration, the Eagle Ford region in south Texas saw peak production above 1.7 million barrels per day about a year ago. That’s since fallen below 1.2 million bpd. And the curve is steepening. Total U.S. crude oil output peaked at nearly 9.7 million bpd in April 2015 and is down to about 9.2 million now. It will drop a lot more if these prices persist. There remains about 4.8 million bpd of shale oil still in production, but facing natural decline rates of more than 15% per year -- enough to erase some 600,000 bpd of U.S. production this year.
The sad truth is that $29 is generous compared with the $1.50 per barrel that Koch Industries ’ Flint Hills refinery is offering for high-sulfur sour crude from North Dakota. Even South Texas light sweet crude is only fetching $19 per barrel from Flint Hills. In Canada, oil sands crude is now fetching less than $10 a barrel. That price was finally too much for Canadian Oil Sands , which yesterday agreed to be acquired by Suncor for $2.9 billion -- a third of what the company’s stock was valued at back in 2014.
The Middle Eastern oil giants can survive these prices, with Kuwait, Saudi Arabia and Iraq still profitable into the low $20s, according to Rystad Energy. Saudi exports are trending at 7-month highs. Rystad figures Iran's break even price is in the high $20s. Even so, a report today from the U.S. Energy Information Administration figures that Iran will increase output from 2.8 million to 3.1 million this year, and 3.6 million in 2017.
Supply and demand will balance out eventually. And demand remains strong, set to grow 1.2 million bpd this year, according to the International Energy Agency, to more than 96.5 million bpd. Even Chinese demand will grow, though at a slower pace of 250,000 bpd this year, compared with 300,000 bpd in 2015, according to the Energy Aspects consultancy. Once the excess is burned off prices will eventually return at least to a level that incentivizes producers to drill enough wells to satisfy demand.
What’s unclear is what else will transpire between now and “eventually.” There are more than 50 oil and gas producers generating negative EBITDA, even after slashing their capital spending. Many are living on borrowed time, their fates dependent upon the whims of oil prices and the generosity of their bankers and bondholders. A couple of dozen, like Quicksilver Energy, Swift Energy and Goodrich Petroleum have finally been sent to into bankruptcy or restructuring. Other zombies will soon follow them into oblivion, including SandRidge Energy, Penn Virgina, W&T Offshore, Callon Energy and Linn Energy. Today Clayton Williams shares lost 23%, while Energy XXI was down 29%.
There’s no way out for these guys absent an oil price spike. They can’t even scrounge for time by selling assets in this market (the CFO of a healthy private-equity-backed oil company explained to me last week), because once it’s clear a company is headed into insolvency the bondholders will balk at any move that could benefit shareholders at their expense. Furthermore, no company with a strong balance sheet is going to step in and buy an entire company right now because even if a troubled company does have a smattering of good assets, they are also bloated with a lot of crummy assets and too much debt. Why buy a whole company now when in a few months you’ll be able to snap up the few pieces you want when they come up for auction?
The underappreciated story in the oil bust is what’s happening at the banks. Lenders like Wells Fargo and J.P. Morgan have made tens of billions of dollars in secured loans to oil companies. Some, like BOK Financial and Regions Financial have begun to increase loan-loss provisions. BOK, the parent company of Bank of Oklahoma, last week announced fourth quarter credit losses of $22.5 million, compared with previous guidance of no more than $8.5 million. BOK, chaired by Tulsa billionaire George Kaiser, has a reputation as a very conservative lender. As The Ox (@adoxen) summed up on Twitter last week: "Canary in the Oil Well. If $BOKF is having problems you can bet Every bank is pretty much now in 'holy-crap' mode."
Meanwhile, the Dallas branch of the Federal Reserve has reportedly urged banks to be patient, forget about marking loans to market and to not force insolvent shale drillers into bankruptcy. Should we be worried that this kind of behavior portends a second coming of the subprime mortgage collapse that led to the 2008 credit crunch? Back then the reasoning was that the best way out of the housing collapse would be to bulldoze a couple million houses. Today the best way out of the oil bust would be to put a match to half a billion barrels of stockpiled oil.
Of course bankers don’t think apocalypse 2.0 will come for them. When oil was closer to $40 than $30 I spoke with two bankers who have overseen billions in loans to oil companies. Both said there’s nothing for bankers to gain by pushing oil companies into default because then they’d have to run the companies until they could find someone to buy them. Banks won’t capitulate, said one. Balance sheets may be turning to rubble, but the banks will continue to work companies as long as they are worth more alive than dead and they are honest. Almost all of them, he said, are both. Three months from now might be a different story.
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80686fac061c464e9ac3128ebc854e76 | https://www.forbes.com/sites/christopherhelman/2016/02/01/harold-hamm-expects-60-oil-says-america-will-double-output-again/ | Harold Hamm Expects $60 Oil, Says America Will Double Output Again | Harold Hamm Expects $60 Oil, Says America Will Double Output Again
The fracking tycoon has cut capex at Continental Resources , but refuses layoffs. He says he'll need all his staff for the new boom to come.
Any hope of Russia and Saudi Arabia agreeing to an oil production cut is nothing but a daydream. Industry layoffs are continue. The U.S. rig count has reached a new low, down to 591 from 1,285 at the peak. Even Chevron reported a surprise loss for the fourth quarter — when oil prices were at least a little higher than now. More than $60 billion worth of outstanding oil company debt is already in distress or default, with another $50 billion rated B, or well below investment grade. Particularly disturbing for equity investors: according to Bernstein Research the average U.S. exploration and production company are still priced as if oil prices were $58 a barrel. West Texas Intermediate closed last week at $33.62.
At times like this it helps to turn to a reliable bull. So last week I paid a visit to Harold Hamm at the Oklahoma City headquarters of his Continental Resources. Hamm (as detailed in this 2014 Forbes cover story, and this follow-up a year ago) has been one of the true pioneers of the Great American Oil Boom. At the peak of his fortunes Hamm’s controlling stake in Continental was worth upwards of $18 billion. It’s since fallen back to $4.5 billion.
We sat down for a chat the day after Hamm announced that Continental would slash its 2016 capital spending to $920 million — a 66% cut from last year’s level. His objective is for Continental to live within its cash flow for the first time in years. Assuming an average oil price of $40 a barrel, Continental expects its new plan to generate excess cash flow of $100 million in 2016.
“Some people didn’t pull back as fast as they should have,” says Hamm. “They are pulling back now.” Hamm’s move represents capitulation of a sort. In late 2014 he decided to sell off all of Continental’s oil price hedges for $400 million, betting that prices would soon recover. They didn’t, and Continental missed out on about $700 million in proceeds that those hedges would have generated. No surprise, he’s even more bullish now. Prices are “unsustainable,” he says. “People aren’t making any money.”
These bad days won’t last. America’s oil output has already turned down from 9.6 million barrels per day to 9.2 million bpd. Hamm, backed up by analysis from his resident team of data eggheads, expects the declines to accelerate as drillers capitulate. Each passing month will shave another 125,000 bpd off U.S. output — adding up to about 1.5 million bpd this year. As it happens, that’s almost precisely the same amount of oversupply currently sloshing around world markets, according to Energy Aspects, a consultancy.
The U.S. isn’t the only oil giant with declining production. Mexico, Norway, the North Sea, Nigeria and Angola have all seen production sag. Cash-strapped Venezuela is struggling to maintain output, while Libya is suffering the wholesale destruction of its once mighty oil infrastructure at the hands of ISIS. Hamm pulls out color photocopies of Libyan oil storage tanks exploding with billowing flames and black smoke. “Those are half-million barrel tanks getting blown up by ISIS. You can see the fires burning from space.” On the other side of the ledger are Kuwait, Iraq, Saudi Arabia and Russia, which are all producing at or near record levels. And Iran, of course, is now returning to the oil market in a big way. Hamm thinks growth out of Iran will be limited to about 300,000 bpd this year. “That’s old oil fields,” he says. Yes Iran has a lot of oil, but their state oil company hasn’t had the luxury of treating its major fields as carefully as the Saudis have managed its supergiants like Ghawar, which has been undergoing a carefully engineered water flood for decades.
At these low prices, just maintaining output will be a real challenge. “There’s a lot of confusion about supply and demand and how fast the oversupply will be diminished,” says Hamm. When companies stop investing in new drilling they have no choice but to face natural decline rates on the order of 6% a year. And that’s in conventional fields. Unconventional oil, like that fracked out of tight rock in the Bakken or Eagle Ford, will decline 15% or more. Worldwide, those natural declines erase about 5 million bpd of our 94 million bpd supply, every year. If investment dries up the supply simply won’t be there to meet future demand. WoodMackenzie, an energy consultancy, figures $380 billion in worldwide oil and gas capital spending has already been deferred — thus removing more than 3 million bpd of medium-term oil supply.
Booms, Busts And Billionaires: An eBook From Forbes Find out what’s happened to the oil industry—and where it’s headed next.
Natural declines will work off the excess supply. Then the glut of inventories will be chewed down. The market will not just rebalance, but even get tight again. “I think by the end of this year we could have $60 oil,” he says. Hamm is so confident that Continental can hold on until then, his company is perhaps the only independent (i.e. non integrated giant) oil producer that has not yet done a round of layoffs. “We are committed to job retention,” he says, in part because of his bad memories of the devastating downturn in the late 1990s. “We cut wages, laid off 10% and laid down every rig we had,” he recalls. “I’ve always regretted we had to lay off as many people, and I don’t want to do it again.”
It’s not just altruism. Hamm believes that he’ll need all that talent, and then some, for the next boom to come. He has a vision for the future of American oil: “We’ve doubled it. We can double it again,” he says. In the five years since the tight oil boom began in 2010, America’s drillers added 1 million bpd of incremental production every year. Hamm thinks that given a high enough oil price that we can return to that growth rate, and keep it up for a decade — long enough to boost U.S. oil supply to 20 million bpd. Sounds preposterous, right? How could all that American shale oil possibly compete with cheaper stuff from the Saudis, Iraqis and Iranians?
It won’t have to, says Hamm. American oil only needs to out compete the even more expensive barrels like those from the deepwater, oil sands and Arctic. The oil bust has set the stage for this American boom by making frackers more resourceful. A couple years ago the average well in the Bakken cost $12 million, he says. Now it costs half that. A year ago experts figured drillers needed sustained oil prices of about $80 a barrel to justify developing tight oil. Now, according to WoodMackenzie, most shales are profitable to drill at $50. And that breakeven will continue to fall as technology improves, says Hamm. “There’s been a fundamental change in this business,” he says. “Instead of being high-cost production, American shale is now mid-cost production.”
If Hamm is right, then it means that American oil independence is well within reach. And it helps explain why Hamm over the past year put so much time and effort into convincing Congress to repeal the oil export ban. He took more than 20 trips to Washington, D.C., sat down with dozens of senators and congressmen, and presented his case for why the ban had to go. At first it seemed to be nearly a pointless effort. Of course it makes no more sense to block trade in oil than it does to ban exports of wheat or corn or pork bellies. But how could lifting the ban possibly make a difference to domestic oil producers, given that the U.S. still requires net imports of some 5 million barrels per day?
The difference is this: the oil produced from America’s oil shales is light and sweet. That means it is low in sulfur and easy to refine into gasoline and other fuels. Of America’s 18 million barrels per day of refining capacity, only a third of it is optimized to process light, sweet crude, according to the Oil & Gas Journal Refinery Survey. The rest of the refineries are optimized to handle heavy, sour crude, which is intrinsically harder to refine and contains a lot of pesky sulfur. Many of those heavy, sour refineries have exclusive deals to import crude from the likes of Venezuela, Mexico, Canada and Saudi Arabia. Indeed, Venezuela’s PDVSA owns several U.S. refineries operated by its Citgo subsidiary. Mexico’s Pemex owns the Deer Park refinery in Texas. Saudi Aramco has a big refining JV with Royal Dutch Shell called Motiva. Those, and others, have no interest in buying Hamm’s high-quality crude from the Bakken or Oklahoma unless they can extract a steep discount.
“Nobody understood what the refining situation was. We couldn’t sell the best oil in the world because the refineries are owned by international suppliers,” says Hamm. He was so effective in spreading his story throughout Capitol Hill that North Dakota Rep. Kevin Cramer calls Hamm, “the world’s greatest lobbyist.” Hamm, for his part, gives a lot of credit to new House Speaker Paul Ryan: “Without him I guarantee this would not have happened.”
There won’t soon be a flood of shale oil shipping out from U.S. ports — international prices would need to be about $5 higher per barrel than WTI to justify the arb — though several shipments have gone out already, if only to test the waters. “It starts with a trickle, then the market builds confidence,” says Hamm. “Those guys are going to keep importing their crappy oil, but now our barrels can go where they need to go and be refined more efficiently.”
At 70 years old, Hamm says he has no intention of retiring. And with 75% of Continental’s shares under his control, he is master of his own fate. He says Continental has years worth of drilling locations left to attack in the Bakken and many more in the so-called SCOOP and STACK and Springer shale plays in Oklahoma. But with his confidence in the future trajectory of the American oilpatch, this self-made billionaire is thinking now is prime time to think about how to take Continental to the next level. “Historically Continental has made acquisitions in times like this,” he says.
Yes, the time to buy is nigh. There are plenty of good options. According to Bernstein Research, the current share price of Hamm’s Continental Resources is discounting an oil price of $36 a barrel, while Devon Energy implies $40 oil, Marathon Oil $43 a barrel and Anadarko Petroleum $45. Shares in those four companies are down an average 56% over the past 12 months.
So, I ask Hamm, are there any parts of the country where you’d be particularly interested in acquiring acreage?
“Certainly,” he smiles.
For another bullish take from an oil and gas billionaire, check out my current Forbes Magazine cover story on Trevor Rees-Jones: 7 Years, 7 Deals, $7 Billion.
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7a308690949a83092883cf2f50bac598 | https://www.forbes.com/sites/christopherhelman/2016/02/18/despite-stillborn-deal-saudi-russian-petrodiplomacy-could-reshape-the-future-of-oil/?utm_source=followingweekly&utm_medium=email&utm_campaign=20160222 | Despite Stillborn Deal, Saudi-Russian Petrodiplomacy Could Reshape The Future Of Oil | Despite Stillborn Deal, Saudi-Russian Petrodiplomacy Could Reshape The Future Of Oil
Keep talking guys. Energy ministers from Qatar, Saudi Arabia, Venezuela and Russia met in Qatar this... [+] week. / AFP / Olya Morvan (Photo credit OLYA MORVAN/AFP/Getty Images)
The Saudi-Iran grudge match still hangs over the oil patch.
Saudi Arabia and Russia, the world’s two largest oil exporters, finally reached an agreement on Tuesday to raise the price of oil, committing with Qatar and Venezuela to cap future production at January levels. But the petropower accord may never see the light of day, since it is conditional on other major producers accepting similar caps.
Rather than cutting production below current levels, Riyadh and Moscow offered to hold production more or less steady, ignoring – or perhaps because of – the fact that they are each pumping oil at near-record levels. As the head of commodity markets strategy at BNP Paribas aptly pointed out: “by freezing at the high-water mark, you’re entrenching the surplus,” at least until demand expands over time.
Iran may scuttle the deal, since its wants to reclaim market share from its Gulf rival, Saudi Arabia. The Saudis bumped up production several years ago to facilitate tougher sanctions against Tehran’s illicit nuclear program. Now the Iranians want their market share back.
Because Russia is the largest petroleum exporter outside of the OPEC oil cartel, Tuesday’s four-way accord represents one of the most significant OPEC/non-OPEC agreements in years. But Tuesday’s deal still faces significant constraints, including the shallowness of its provisions and the challenge of enforcement, not to mention the make-or-break Iranian angle.
Iraqi and Iranian Production Plans
The biggest likely obstacle to Tuesday’s accord is its conditional nature. A statement by Russia’s Ministry of Energy made clear that the four countries’ commitment to freeze oil production at last month’s levels is conditional on whether other producers join in as well. And as Frankfurt’s Commerzbank cautioned on Tuesday, “if Iran and Iraq are not part of the agreement, it’s not worth much.”
Saudi Arabia and Qatar can be expected to bring along other major producers in the Gulf Cooperation Council, including OPEC members Kuwait and the United Arab Emirates (which have already signaled tentative support for the accord), as well as Oman, which has previously pledged its backing for coordinated efforts to raise the price of oil.
Yet as the Emirati energy minister cautioned on Wednesday, his country’s buy-in depends on all OPEC members joining up along with Russia. Not only do Iraq and Iran represent OPEC’s largest producers today after the Saudis, they also represent the members with the most significant plans to bump up production in the months and years ahead.
Baghdad produced a record 4.35 million bpd in January, but the Iraqis are also hoping to expand that number to 6 million bpd by the end of the decade. Iran, which produced 2.7 million bpd in December 2015 before sanctions were lifted, has announced plans to pump 5.7 million bpd by 2018. It is difficult to envision any caps being taken seriously if these two growing producers refuse to sign on.
The Iraqis have indicated some flexibility in this regard, announcing that they are open to freezes and “ready to agree with any decision” that addresses the drop in oil prices. On Wednesday, Iraq’s oil minister reiterated that Iraq supports “any decisions” that would help raise petroleum prices and help balance supply and demand, according to a statement on his ministry’s website.
But the Iranians are another matter entirely. In reaction to the deal in Doha, Iranian Oil Minister Bijan Zanganeh warned that “Iran will not overlook its quota” in seeking to claim his country’s due share of the market. His country’s OPEC representative emphasized that Saudi Arabia, Russia, Qatar, and Venezuela had increased their production by 4 million bpd when Iran was chafing under international sanctions, arguing that it’s now “their responsibility to help restore balance on the market. There is no reason for Iran to do so.”
Now that most sanctions have been lifted, Tehran wants to reclaim its prior share of global oil markets. Saudi Arabia, on the other hand, significantly increased production in 2012 at America’s request so that the market could better withstand nuclear-related oil sanctions against Iran. Now, Riyadh seems to view that extra market share as its due, and refuses to go back to the status quo ante for the benefit of its regional rival, which it rightly views as the largest state sponsor of terror.
Qatar and Venezuela’s oil ministers dashed off to Tehran on Wednesday for several hours of meetings with their Iraqi and Iranian counterparts in hopes of ironing out a broader deal. Qatar holds OPEC’s rotating presidency, and Venezuela’s vulnerable economy is in freefall thanks to over a year of falling oil prices.
But their entreaties came up short. Markets climbed some after the meeting, when Zanganeh offered positive blandishments for the deal. But he also refused to offer any concrete concessions, paralleling his country’s rigid but effective approach to negotiations on the nuclear file. Indeed, an OPEC official from the Gulf concluded that Zanganeh’s vague comments were actually “not very encouraging.”
There is impetus on all sides, to agree to something, anything. I recently came back from meetings in five Gulf countries, and I cannot overemphasize how much concern I encountered, even among some of the richer GCC states, at oil’s recent dip into the $25-35/bbl range. The fear among many of these energy producers is arguably becoming existential, causing decision-makers to wonder just how viable their economic model will be for the long term. What’s new is that oil producers are getting genuinely uncomfortable with their current predicament and are searching for ways to change the market environment.
What about Syria?
Will the stress of dirt cheap oil end up helping or hurting the situation in Syria. The fact that Russia and Saudi Arabia now agree on anything at all is somewhat surprising given that the two countries are on opposite sides of that conflict. Russia’s military intervention there was a game changer for bolstering Syria’s Assad regime. Meanwhile, Saudi Arabia’s rebel clients in Syria are being devastated by Russian airstrikes, most recently around the northern city of Aleppo.
It would be reasonable to wonder whether a consensus between Moscow and Riyadh on oil volumes might presage a broader détente between the two powers. However, barring further evidence it seems more likely that the accord in Doha represents an ongoing conscious effort by Russia and the Arab Gulf monarchies to cordon off the Syria debacle from harming other areas of their relationship.
In the months since Russia’s Syria intervention – and despite being on opposite sides of that conflict – senior officials from Saudi Arabia, the UAE, Kuwait, Bahrain, and Qatar have all flown to Russia for meetings with Putin. In the case of Kuwait, it was the ruler’s first visit to Moscow in roughly a decade if not more.
Outwardly, those visits have seemed surprisingly amicable and in most instances even resulted in new pledges of cooperation on trade or investment. In the cases of Bahrain and Qatar, the meetings also featured an exchange of lavish gifts, such as a falcon, a Turkmen stallion, and a sabre made of Damascus steel. Just this past month, the UAE and Oman also hosted Russian FM Sergei Lavrov in their capitals.
Thus, rather that representing some sort of new alignment on Syria, it seems more probable that Moscow and Riyadh are pursuing a limited tactical understanding where their interests do align, namely trying to bring up the price of oil.
Even if Russia and OPEC can work together, enforcement would be a major challenge to any accord. For example, Russia violated the spirit of at least two past agreements to curb production after oil prices fell in 2001 and in 2008. Qatar has now pledged to monitor compliance, but there is little reason to believe it will succeed this time around.
Broader Implications
Looming in the background of all this petrodiplomacy is U.S. oil production. Russia and Saudi can't hold on to their market share, while allowing Iraq and Iran to gain market share, unless America's share drops. And despite 60 oil and gas companies having filed for bankruptcy and double that likely if prices remain low, America's output remains stubbornly high at 9 million bpd. What's more, any rise in oil prices would spur renewed drilling in America's shale fields.
OPEC is arguably weaker than ever before, struggling to reach a common strategy even as the largest outside exporter, Russia, offers to cut a deal with the cartel. Foreign petropowers remain eager to raise the price of oil at the expense of industrialized democracies such as the U.S., where the transport sector remains more than 90% dependent on fossil fuels.
Meanwhile, these petroleum-dependent autocracies are worried about their longterm survival. And they may slowly be coming around to the understanding that any lasting petrodeal between the Saudis, Russia and Iran will need to accept the reality that America's new share of the global oil market may not be as fragile as they hoped.
David Andrew Weinberg is a Senior Fellow at the Foundation for Defense of Democracies. He holds a Ph.D. in Political Science from the Massachusetts Institute of Technology and previously served as a Professional Staff Member at the House Committee on Foreign Affairs.
Gallery: World's Biggest Oil Companies - 2015 22 images View gallery
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4c1229391cedf3eddfbab3c9394b4c99 | https://www.forbes.com/sites/christopherhelman/2016/03/01/the-federal-indictment-of-aubrey-mcclendon/ | The Federal Indictment Of Aubrey McClendon | The Federal Indictment Of Aubrey McClendon
Former Chesapeake Energy CEO Aubrey McClendon has been indicted by the DOJ for conspiring with another oil and gas company to rig bids for prospective acreage in Oklahoma. The indictment alleges that McClendon orchestrated a conspiracy whereby Chesapeake and an another unnamed company agreed not to bid against each other for acreage, in exchange for each company giving the other a JV interest in the prospects acquired. Unfortunately the indictment is incredibly thin on details, and doesn't mention Chesapeake Energy by name -- referring to it only as "Company A." Big question: who was this other Oklahoma City-based company involved in the alleged conspiracy and referred to as "Company B?" Other big operators in OKC at the time included Continental Resources , Devon Energy , and SandRidge Energy (then run by Chesapeake co-founder Tom Ward).
IN THE UNITED STATES DISTRICT COURT FOR
THE WESTERN DISTRICT OF OKLAHOMA
UNITED STATES OF AMERICA,
Plaintiff,
vs.
AUBREY K. McCLENDON
Defendant.
I N D I C T M E N T
The Federal Grand Jury charges:
Introduction
At all times relevant to this Indictment:
1. The defendant, AUBREY K. McCLENDON, was employed by Company A as its Chief Executive Officer, President, and as a Director until at least March 2012.
2. Co-conspirator 1 was employed by Company B as its Chief Executive Officer and Chairman of the Board of Directors until at least March 2012.
3. Company A was a corporation organized and existing under the laws of Oklahoma with its principal place of business in Oklahoma City, Oklahoma. Company B was a corporation organized and existing under the laws of Delaware with its principal place of business in Oklahoma City, Oklahoma.
4. In the business of oil and natural gas exploration and production, companies frequently compete to purchase leasehold interests. A leasehold interest grants a lessee the right to develop the land and to explore for and extract oil and natural gas for a set length of time. Typical oil and natural gas leases span three to five years. If a lessee drills on the land during that time period, the lease is considered “held by production” for as long thereafter as oil and gas or either of them is produced from these lands.
5. In addition to competing for leasehold interests for undeveloped land, companies also compete to purchase producing properties. Producing properties are tracts of land with one or more wells that are actively producing oil and/or natural gas. A lessee may sell its interest in the producing property, which typically includes both the underlying leasehold interest and the infrastructure, to another oil and gas company.
6. Company A and Company B were engaged in the business of oil and natural gas exploration and production and were actual and potential competitors in the acquisition of leasehold interests and producing properties in northwest Oklahoma, including the leasehold interests and producing properties subject to the charged combination and conspiracy.
COUNT 1: Conspiracy to Rig Bids
7. Beginning at least as early as December 2007 and continuing until at least as late as March 2012, the exact dates being unknown to the Grand Jury, in the Western District of Oklahoma, the defendant, AUBREY K. McCLENDON, and his co-conspirators knowingly entered into and engaged in a combination and conspiracy to suppress and eliminate competition by rigging bids for certain leasehold interests and producing properties. The combination and conspiracy engaged in by the defendant, AUBREY K. McCLENDON, and his co-conspirators was in unreasonable restraint of interstate commerce in violation of Section 1 of the Sherman Act (15 U.S.C. § 1).
8. The charged combination and conspiracy consisted of a continuing agreement, understanding, and concert of action among the defendant, AUBREY K. McCLENDON, and his co-conspirators, the substantial terms of which were to suppress the prices that Company A and Company B paid to acquire certain leasehold interests and producing properties in the Western District of Oklahoma by eliminating competition between Company A and Company B for the purchase of these leasehold interests and producing properties.
9. The charged combination and conspiracy began on or about December 27, 2007 when the defendant, AUBREY K. McCLENDON, contacted Co-conspirator 1 and proposed eliminating the head-to-head competition between Company A and Company B for the purchase of certain leaseholds and producing properties in northwest Oklahoma by agreeing not to submit bids for these leaseholds and producing properties in order to keep prices down. The defendant, AUBREY K. McCLENDON, and Co conspirator 1 agreed that Company B would refrain from submitting bids for these leaseholds and producing properties in order to keep prices down and in exchange for Company B receiving a share of the leaseholds and producing properties purchased by Company A at Company A’s cost.
10. The defendant, AUBREY K. McCLENDON, and his co-conspirators continued to rig bids for the purchase of additional leaseholds and producing properties in northwest Oklahoma in a similar manner, as described below, until at least as late as March 2012.
11. Various corporations and individuals, not made defendants in this Indictment, participated as co-conspirators in the offense charged herein and performed acts and made statements in furtherance thereof.
12. Whenever in this Indictment reference is made to any act, deed, or transaction of any corporation, the allegation means that the corporation engaged in the act, deed, or transaction by or through its officers, directors, agents, employees, or other representatives while they were actively engaged in the management, direction, control or transaction of its business or affairs. Manner and Means of the Conspiracy
13. For the purpose of forming and carrying out the charged combination and conspiracy, the defendant, AUBREY K. McCLENDON, and his co-conspirators did those things that they combined and conspired to do, including, among other things:
(a) engaging in communications concerning certain leasehold interests and producing properties, and the prices therefor, in the Western District of Oklahoma;
(b) agreeing during those communications that Company A and Company B would not compete against one another for certain leasehold interests and producing properties in the Western District of Oklahoma either by one company not submitting offers or bids to certain owners of leasehold interests and producing properties, or by one company withdrawing previously submitted offers or bids to certain owners of leasehold interests and producing properties in exchange for a share or a subset of the leasehold interests and/or producing properties purchased by the other company at the acquisition cost;
(c) submitting offers or bids, withholding offers or bids, or acting to withdraw previously submitted offers or bids, to owners of certain leasehold interests and producing properties in the Western District of Oklahoma in accordance with the agreement reached;
(d) acquiring certain leasehold interests and producing properties in the Western District of Oklahoma at collusive and noncompetitive prices and then providing the non-acquiring co-conspirator a share or a subset of the leasehold interests and/or producing properties at the acquiring co-conspirator’s cost; and
(e) employing measures to keep their conduct secret, including, but not limited to, agreeing not to reveal their anticompetitive agreement to the owners of the leasehold interests and producing properties at issue in this Indictment, and instructing their subordinates to do the same.
Trade and Commerce
14. During the period covered by this Indictment, the business activities of defendant, AUBREY K. McCLENDON, and his co-conspirators in connection with the purchases of leasehold interests and producing properties that are the subject of this Indictment were within the continuous and uninterrupted flow of, and substantially affected, interstate trade and commerce, including:
(a) entering into and executing transactions for the purchase of leasehold interests and producing properties that include purchasers and sellers from different states;
(b) transferring or causing the transfer of substantial sums of money across state lines in connection with purchases of leasehold interests and producing properties; and
(c) selling oil and natural gas in interstate commerce.
All pursuant to Title 15, United States Code, Section 1.
Read McClendon's response to the charges here.
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722f5ef30df794f6c506160024b8596a | https://www.forbes.com/sites/christopherhelman/2017/01/27/green-energy-features-big-in-trumps-top-50-infrastructure-projects/ | Green Energy Features Big Among Trump's Top 50 Infrastructure Projects | Green Energy Features Big Among Trump's Top 50 Infrastructure Projects
President Trump orders federal fast track of Keystone XL and North Dakota Access Pipeline. (Credit:... [+] Shawn Thew / Pool via CNP /MediaPunch/IPX)
Energy projects on Trump's "Priority List" could add 9 gigawatts of clean power.
A list emerged this week; it appears to have been prepared for then President-elect Trump, and is titled: “Priority List: Emergency & National Security Projects.” It’s 50 pages for 50 infrastructure projects — quick facts on a host of highways, bridges, powerlines and airports, the construction of which would naturally make America greater, cost $140 billion, and require enough engineering and construction work to keep the equivalent of 24,000 people employed for 10 years.
Surprisingly, the list contains no mention of a Great Wall on the Mexico border, nor the Keystone XL or Dakota Access pipeline projects. The one pipeline project on the list is the Atlantic Coast Pipeline, which would move natural gas from Pennsylvania’s Marcellus shale down to the Southeast. Owned by Dominion Resources, Duke Energy and Southern Company, the pipeline would cost about $5 billion and provide 10,000 job years.
Also on Forbes:
The rest of the energy infrastructure projects are surprisingly green and may give a glimmer of hope to renewable energy fans worried about the potential for Trump to roll back the Clean Power Plan and promote coal and oil over the likes of wind and solar.
Project #9. The $2.5 billion, Plains and Eastern Electric Transmission Lines, which would carry 4 gigawatts of Oklahoma wind power 700 miles to the southeast via direct current. Developed by Clean Line Energy Partners (CFO Dave Berry appeared on the 2012 Forbes 30 Under 30 list).
Project #16. TransWest Express, a $3 billion 3-gigawatt line, backed by billionaire Phil Anschutz, which would move power from a Wyoming wind farm to Arizona, California and Nevada. The project is deep into the permitting process. Would provide 3,000 jobs.
Project #17. That Wyoming wind farm, to be built on is called Chokecherry & Sierra Madre Wind Energy. Plans call for 1,000 wind turbines, at a cost of $5 billion. The Bureau of Land Management this month approved the first 500 windmills. Generates 1,000 jobs.
Project #21. The Champlain Hudson Power Express is a $2.2 billion, 1 gigawatt line that would carry Quebecois hydropower in New York, helping to replace power from the Indian Point nuclear plant. The line would be laid in the Hudson River.
Project #12. A $4 billion program to upgrade the 20 gigawatts of hydroelectric plants operated by the U.S. Army Corps of Engineers to achieve additional generation and efficiency. 550 direct jobs.
Project #49. Energy Storage and Grid Modernization. Utility scale batteries to store renewable energy. GTM Research figures energy storage will grow 8 fold to 2.1 gigawatts by 2021.
Taken together, these projects would add about 9 gigawatts of zero-carbon, renewable power to the American grid. That’s about as much power as you’d get out of 5 big coal-fired power plants, or enough for roughly 5 million homes.
Power industry analysts Hugh Wynne and Eric Selmon at Sector & Sovereign Research have parsed the energy projects on the list. They note that most of the projects on the list have not requested any federal funding. And although the Trump administration has not indicated what kind of support they would want to throw behind these projects, it’s expected that Trump could urge expediated federal permits, rights of way, and even federal loan guarantees to reduce borrowing costs.
The addition of such large scale renewable generation projects will crowd coal out of the market. As will efforts by states to enact their own carbon emissions. Even if Trump does scuttle the coal-unfriendly Clean Power Plan, renewable energy should continue to grab market share.
Gallery: 2017 30 Under 30: Energy 30 images View gallery
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dad2eb45b7e01925c72ce26f3d2264c7 | https://www.forbes.com/sites/christopherhelman/2017/03/28/trump-in-the-name-of-american-energy-independence-scraps-obamas-climate-plans/ | Trump, In The Name Of American Energy Independence, Moves To Scrap Obama's Climate Plans | Trump, In The Name Of American Energy Independence, Moves To Scrap Obama's Climate Plans
Just rescinding a few Obama orders. (Photo by Andrew Harrer-Pool/Getty Images)
The Trump administration says it believes that climate change deserves attention, just not at the expense of jeopardizing America’s economic growth.
President Trump is heading to the EPA today to sign an executive order that will seek to scrap Obama’s Clean Power Plan, rescind his Climate Action Plan, end a moratorium on federal leasing of coal reserves, and halt pending rules from the EPA and Bureau of Land Management that would have cracked down on methane emissions from oil and gas fields and sought to regulate hydraulic fracturing.
There's more. With a dash of his pen, Trump will nullify current federal estimates of the “social cost of carbon” ($36 per ton!) — because he disagrees with Obama’s definitions. And he will relieve federal bureaucrats of the Obama-imposed burden of having to take into account their every decision’s contribution to global warming.
Replacing that will be Trump’s new request, according to a senior White House official, that federal bureaucrats help identify obstacles their departments may be putting in the way of domestic energy production. Gleanings will inform a more cohesive strategy on energy policy in about six months time.
Trump’s policy objective is clear: to encourage the production of more American oil, gas, coal, and all other forms of energy, which can help make America more energy independent. Trump’s reasoning is generally misunderstood. According to the senior White House official, President Trump is not a "climate denier." He believes in manmade climate change. Where Trump differs with Obama and the environmentalist movement is in what the real magnitude of climate change will be, the impact of it, and the urgency of acting now.
The Trump administration says climate change deserves attention, just not at the expense of jeopardizing America’s economic growth. Today’s orders do not seek to remove the United States from its obligations under the 2015 Paris Agreement on climate change. That deal remains under review.
Obama’s Clean Power Plan was to be the mechanism by which the U.S. lived up to the Paris agreement. Yet a multitude of states and business groups saw the CPP as government coercion, a greenwashed command-and-control scheme that overrode state control over their power sectors and forced the closure of dozens of coal-fired power plants.
In its stead, Trump’s policy on fighting climate change appears to be all about keeping the (blind?) faith that market forces will be more effective in spurring clever engineers to devise whiz-bang methods of reducing emissions while making money at the same time. Thankfully, a wave of market-based innovation is already happening. The revolution in fracking for shale gas has spurred so much switching away from more carbon-intensive coal that U.S. emissions have dropped 15% since the 2007 peak, to about 5.2 billion metric tons of CO2 per year.
More carbon reductions will come. Consider the advances in solar over the past decade, the growth in wind, the revolution underway in batteries and fuel cells. Add to that novel methods of combustion that capture their own emissions. One that should be right up Trump’s alley is the breakthrough Allam Cycle. It promises to capture emissions from coal or natural gas plants at no extra cost, then send the carbon dioxide off by pipeline to be injected down into old oil fields. The carbon dioxide gets trapped forever deep in the rock, while simultaneously pushing up some more of that good ol’ American crude oil.
Read more about it: Revolutionary Power Plant Captures All Its Carbon, At No Extra Cost
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02145e06aa4374d03a67ed3aac487e05 | https://www.forbes.com/sites/christopherhelman/2017/06/12/unloved-immelt-out-at-general-electric-shares-surge/ | Unloved Immelt Out At General Electric; Shares Surge | Unloved Immelt Out At General Electric; Shares Surge
"To the team, I just say I love you all," said Immelt in his outgoing comments today. Video posted by GE.
Well, they won’t have Jeff Immelt to kick around anymore.
Investors today cheered General Electric’s decision to move on from CEO Jeff Immelt after 16 unfulfilling years. It was “not a trivial decision,” said Immelt in a video conference this morning. The new CEO is Jeff Flannery, 55, most recently the head of GE’s healthcare unit. It was “absolutely the right time to do it,” Immelt said. Investors might wish he had done it sooner. Shares of GE were up 4% at midday.
Immelt is unloved by investors, and for good reason. GE shares were at $40 when he took over in September 2001. Today they're at just $29. Over the past 10 years GE is down a cumulative 22% while the S&P 500 has gained 58%. He’s been on “worst CEO” lists for years. Underwhelming first-quarter results capped off a tough tenure.
Nelson Peltz and his Trian Fund Management was an especially voiciferous critic who has pushed GE in recent years to do more to simplify and streamline its industrial businesses. Immelt was deferential to GE’s shareholders in his comments during a video conference today. “I always knew my name wasn’t over the door. You owned the company,” he said, looking almost teary-eyed. A Trian spokeswoman had no comment on GE today. The fund in the past has lauded Immelt's efforts to overhaul GE, but has insisted there is much more to be done.
The incoming CEO, Flannery, said this morning that he’s going to lead a “deep review with a sense of urgency and come back in the fall with a broader set of recommendations.” Flannery started at GE Capital in 1987, worked on LBOs and ran GE’s workout group. In 2013 he became head of corporate business development and spearheaded the $13.5 billion Alstom acquisition and the sale of GE Applicances, for $5.4 billion, to Haier. “Clearly there’s areas we need to improve on. No one’s happy with the stock price right now. … We know we can do better,” said Flannery.
Can't do much worse. Poor Immelt. He was always measured against an impossible benchmark in Jack Welch, the irascible mastermind of corporate chess, who racked up a 3,500% gain during his 20 years at the helm.
Welch set Immelt up for failure. The 2008 financial crisis exposed the Potemkin village of stability at GE Capital; GE shares plunged below $10. The rise in Shadow Banking ate into returns. So did being declared a “systemically important financial institution.”
Immelt rightly saw that GE had no reason to be so exposed to a capital intensive, low growth business. GE has sold about $200 billion of GE Capital assets. It’s no longer considered Too Big To Fail. Immelt also jettisoned NBC to Comcast for $30 billion. And he effectively sold off GE’s highly cyclical Oil & Gas business, merging it with Baker Hughes and paying a $7.4 billion special dividend to old Baker Hughes shareholders. The new Baker Hughes will have its own listing, with 62% of shares owned by GE.
Immelt refocused the company on its industrial businesses: making and maintaining vital equipment like power turbines, jet engines, trains, oil and gas equipment, wind turbines and healthcare imaging machines like MRIs. GE in 2014 paid $13.5 billion for French power giant Alstom. It invests $4 billion a year in R&D. Tying it all together is GE’s new-ish industrial Internet Of Things platform called Predix.
Another push has been into additive manufacturing, i.e. 3-d printing, with lasers and metal, on an industrial scale. New techinques enable GE to make new fuel injection nozzles for turbines that will improve the efficiency of the equipment, enabling a turbine to get 10% more power or thrust out of the same amount of fuel. That saves fuel, reduces emissions, and opens up a wonderland of opportunities to reengineer and maintain countless industrial components — a nice recurring revenue business. Last year GE paid $1.4 billion for SLM Solutions of Germany and Arcam of Sweden.
“What we became was more resillient,” said Immelt today. “The foundation we have has never been stronger." So far neither the overhaul, nor a $50 billion share buyback, have lifted GE stock above where Immelt found it back in 2001. Shareholders can only hope that Flannery will now be able to start harvesting some fruit. "What happened in the past doesn't matter," said Immelt. "It's all about owning the future."
During the video conference Flannery said his childhood hero was his dad (who ran a small bank), that he wishes he could be a good blues guitarist, that his favorite band is the Allman Brothers, and that his family has a new black lab. They’ll move to Boston.
For more on Immelt's departure, check out Antoine Gara's post this morning.
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8e480adc9ef7adc2cc2ed55f6d2d9fc4 | https://www.forbes.com/sites/christopherhelman/2017/10/17/the-richest-people-in-texas-2017/ | Forbes 400: The Richest People In Texas, 2017 | Forbes 400: The Richest People In Texas, 2017
Forbes 400, 2017 Jamel Toppin
Because Texans are obviously the most important subset of the billionaires who make up the Forbes 400 list of wealthiest Americans, I have conveniently culled them here for easy perusal.
Fun fact for your next cocktail party: the newest Texan to join the Forbes 400 ranks is Bert "Tito" Beveridge, founder of Tito's vodka. The 55-year-old entrepreneur will sell close to 60 million bottles this year, enough to earn him an estimated net worth of $2.5 billion.
Overall, America's rich just keep getting richer -- thanks in large part to Internet Bubble 2.0. The Forbes 400 net worth cut off this year was a record-high $2 billion. In Texas, low oil prices have flatlined the growth in some fortunes, like that of San Antonio natural gas tycoon Rod Lewis and business legend Red McCombs. They may still be billionaires, but they're no longer rich enough to make the Forbes 400. Another conspicuous absence from this Texas rich list is Charles Butt, the scion of the family behind the beloved HEB supermarket chain. Because of company stakes held by other family members, we've reassigned the Butts as a family fortune, estimated at $10.7 billion.
There's certainly plenty of Texans who have deep enough moneybags to be in the Forbes 400 but don't show up yet because our intrepid reporters (including Noah Kirsch, Michela Tindera, Max Jedeur-Palmgren, Igor Bosilkovski, Yinan Che, Deniz Cam and Andrea Murphy) haven't yet nailed down the numbers beyond a reasonable doubt. If you have a secret billionaire dossier you want to share, drop me a line at chelman@forbes.com.
1. Alice Walton
$38.2 billion
Age 68
Millsap, Tx.
The Richest Woman In The World is the only daughter of Wal-Mart founder Sam Walton. Rather than working in the family company with brothers Rob and Jim, she went into investment banking before leaving to pursue her passions for art and horses, and decamped to her ranch in Millsap (pop. 409), an hour west of Fort Worth. Driven to bring world-class art to Arkansas, in 2011 she opened Crystal Bridges museum in Bentonville. It features works by the likes of Warhol, Rothko and Norman Rockwell. Brother John died in a 2005 plane crash. The extended Walton family still own more than half of Wal-Mart.
2. Michael Dell
$23.2 billion
Age 52
Austin
The PC company that Dell started in his University of Texas at Austin dorm room at 19 is now a hardware and storage juggernaut, Dell Technologies. Last year Dell managed a coup when he merged his privately-held Denali with publicly-traded EMC Storage in an estimated $60 billion deal. Dell now owns 66% of Dell Technologies, but the majority of his fortune is in his private investment firm MSD Capital, which has stakes in hotels like the Four Seasons Maui and Applebee's and IHOP chain operater DineEquity. In May Dell donated $1 billion to his nonprofit the Michael and Susan Dell Foundation, and following Hurricane Harvey in August, the Houston native pledged $36 million to fund area relief efforts.
3. Andrew Beal
$10.9 billion
Age 64
Dallas
Growing up, one of his first jobs was fixing broken TVs. Beal attended both Michigan State University and Baylor University, but dropped out of both. He was busy building his first fortune in real estate, buying up apartment buildings. The Texas banker also made a tidy sum during the Great Recession, buying distressed assets while the nation's biggest banks were getting taxpayer bailouts. In recent years he's been investing in oil. A mathematics enthusiast, in 1993 he developed the Beal Conjecture, a complex mathematical problem, and offered $1 million to anyone who could solve it. (No one has yet.)
READ: More coverage of the Forbes 400
4. Richard Kinder
$6.7 billion
Age 73
Houston
After stepping down as president of Enron, Kinder cofounded pipeline giant Kinder Morgan in 1997. In 2014 he ended his career with a $70 billion megadeal that consolidated four affiliated companies into one goliath that now owns or operates 84,000 miles of pipe. The oil downturn hit the company hard; in 2015 it slashed its dividend 75%. Now removed from the day-to-day action, Kinder is focused on giving it away. The Kinder Foundation has donated tens of millions of dollars to build parks along Houston’s network of bayous and new buildings for the Museum of Fine Art. An avid reader, Kinder is a big fan of Winston Churchill: “Probably the greatest person of the 20th century in terms of the direct contributions of one individual.”
Jones at Mile High stadium Denver. September 17, 2017. (Photo by Matthew Stockman/Getty Images)
5. Jerry Jones
$5.6 billion
Age 75
Dallas
Jones bought the Dallas Cowboys for $150 million in 1989. It’s now worth $4.2 billion — and has ranked as the most valuable NFL team for the past 11 years. In 1964 Jones was co-captain of the University of Arkansas team that won the national championship. He also invests in oil and real estate and collects art, such as his prized “Coin Toss” by Norman Rockwell, acquired for $1.1 million the same year he bought the Cowboys.
6. Randa Williams
$5.5 billion
Age 56
Houston
7. Dannine Avara
$5.5 billion
Age 53
Houston
8. Milane Frantz
$5.5 billion
Age 48
Houston
9. Scott Duncan
$5.5 billion
Age 35
Houston
Thanks to a temporary repeal of the death tax, when pipeline tycoon Dan Duncan died in 2010 at 77 he became the first American billionaire to pass his fortune to his four kids tax free. Randa Williams is non-executive chairman of Enterprise Products, which owns 50,000 miles of pipeline, market cap $56 billion.
10. Robert Rowling
$5.2 billion
Age 64
Dallas
In 1996 Robert Rowling recycled $500 million of proceeds from the sale of family oil and gas fields into the purchase of the Omni Hotels chain. Since then he has more than doubled the chain to 60 locations and 21,000 rooms. More are on the way, with new projects in Boston, Louisville, Atlanta (in JV with the Braves) and near Dallas (with the Cowboys). In 2004 Rowling bought Gold's Gym, which Arnold Schwarzenegger made famous; now has more than 700 locations worldwide. A big Republican donor, Rowling would prefer to support a Pence/Rubio ticket in 2020. "Just tell the truth. It's basic." Gave $25 million to the University of Texas business school in 2013.
11. Robert Bass
$4.9 billion
Age 69
Fort Worth
With his three brothers, Robert Bass inherited a small fortune from their oil tycoon uncle Sid Richardson (d. 1959) and built it into a big one. They finally sold their oil interests in early 2017 to ExxonMobil for $6 billion. Robert ventured off on his own in 1986, creating a family office that became Oak Hill Capital Partners. Offshoots from his family investment office include billionaire David Bonderman's Texas Pacific Group. In 1988 he sold the Plaza Hotel to Donald Trump for $390 million. Today, private jet start-up Aerion is the most high-profile investment by low-profile Robert. Working with Airbus, Aerion seeks to build the first supersonic business jets. Pricetag: $120 million. In 2012 he acquired a place in Manhattan's 834 Fifth Avenue for a reported $42 million. In 2013, with his wife Anne, he donated $50 million to Duke University to support interdisciplinary studies aimed at tackling complex societal problems. Has also donated $50 million to Stanford. Their foundation is endowed with more than $90 million.
12. Ray Lee Hunt
$4.9 billion
Age: 74
Dallas
Richest child of legendary oil wildcatter H.L. Hunt. Through his Hunt Consolidated conglomerate, Ray Hunt owns oilfields in Texas, natural gas projects in Peru and Yemen, and was one of the first oilmen into Iraq after the fall of Saddam. Son and heir apparent Hunter Hunt has helped move the family business into electric power, building a utility company and a high-voltage interconnection between the grids of Texas and Mexico. The Hunts tried and failed in 2016 to take over Texas power giant Oncor. Owns an estimated 190,000 acres of land across the west.
13. Trevor Rees-Jones
$4.8 billion
Age 66
Dallas
In 1984 bankruptcy attorney Trevor Rees-Jones decided that he wanted to be the guy making the deals, not the schlub cleaning up after them. He started with nothing in the oil business but became one of the biggest winners in the shale fracking revolution. He pioneered the Barnett shale in north Texas, then moved on to the Marcellus in Pennsylvania. In seven deals over seven years Rees-Jones grossed $7 billion. Chief remains the nation's biggest privately owned natural gas producer. During the oil downturn Rees-Jones has been picking up royalty interests in the Permian Basin, which he thinks will keep paying out for decades. His Rees-Jones Foundation is endowed with $550 million and has given more than $300 million in grants, including $19 million to establish the Rees-Jones Center for Foster Care Excellence at the Children's Medical Center. "There's got to be a higher purpose to serve in this life," he says.
14. Kelcy Warren
$4.2 billion
Age 62
Dallas
The $3.8 billion Dakota Access Pipeline is only the latest addition to the Energy Transfer empire founded by Warren and Ray Davis in 1995. In June 2017, after intense protests led by the Standing Rock Sioux tribe and an executive order from President Trump, Energy Partners was able to finish the 1,172-mile line, which carries 500,000 barrels per day. As a boy, Warren spent summers working with his dad as a welder's assistant on Sun Pipeline in Texas. His fortune stems from stakes in three publicly traded companies; Energy Transfer Equity LP, Energy Transfer Partners LP and Sunoco LP. A music fan, Warren produces albums for singer-songwriters at his Austin, Texas studio, Music Road Records. With an estimated $10 million donation, Warren in 2012 won the naming rights to a new park in Dallas. He named Klyde Warren Park after his then-9-year-old son.
Gallery: 2017 400 Richest Americans Top 20 20 images View gallery
15. H. Ross Perot
$4.1 billion
Age 86
Dallas
The Perots in 2017 moved their family office into new digs on Turtle Creek in Dallas. Perot insisted that his new office be made identical to his old one out at the former HQ of Perot Systems. Known to be a sentimental packrat, Perot brought over his 6,000-object collection, including a walking stick purported to have belonged to Osama Bin Ladin. Long before his presidential campaigns (1992 and 1996), Perot was a salesman for IBM. He quit Big Blue when they wouldn't give him more computers to sell after he hit his annual quota by March. In 1962 he founded Electronic Data Systems, and netted about $1.5 billion selling it to G.M. in 1984. In 1986 he was a key investor in Steve Jobs' NEXT computer company. Later he launched Perot Systems, which Dell bought for $3.9 billion in 2009. Son of a cotton broker from Texarkana and graduate of the U.S. Naval Academy, Perot has long championed POW/MIA efforts; in 1978 he recruited military vets to rescue two EDS employees imprisoned in Iran, a saga recounted in Ken Follett's "On Wings of Eagles." "The world wants things done, not excuses," Perot told Forbes. "One thing done well is worth a million good excuses."
16. Robert McNair
$3.8 billion
Age 80
Houston
Owner of the NFL’s Houston Texans stepped up in the wake of Hurricane Harvey and pledged $1 million for relief efforts. McNair secured the NFL franchise for Houston for $700 million in 1999 and created the league's youngest expansion team. He sold his power generator company Cogen Technologies to Enron for $1.5 billion in 1999, and now invests in public and private equity. He and his wife, Janice, donate more than $20 million each year to their foundation dedicated to education. Called President Trump’s comments on NFL players kneeling “divisive and counterproductive.”
17. Dan Friedkin
$3.7 billion
Age 52
Houston
Friedkin owns Gulf States Toyota, the $8 billion (est. sales) car distributor built by his father, Thomas (d. 2017) that enjoys exclusive rights to sell Toyotas in Texas, Arkansas, Louisiana, Mississippi and Oklahoma. Also has invested in a film production studio that’s set to release its first movie, a story based on the kidnapping of oil heir J. Paul Getty III, later this year. He owns one of the largest collections of vintage military war planes and is a wildlife conservationist working to preserve 6 million acres in Tanzania.
18. Jeffery Hildebrand
$3.6 billion
Age: 58
Houston
A former ExxonMobil geologist, Hildebrand co-founded Hilcorp in 1990, later bought out his partner for $500 million. By specializing in squeezing more oil and gas out of mature fields, he has built Hilcorp into the nation's biggest privately owned oil company with operations in Texas, Louisiana, Alaska and Ohio. In 2011 and 2012 he netted about $3 billion selling oilfields and pipelines in south Texas. Reinvested in Alaska’s Cook Inlet and North Slope. In 2015 Hildebrand gave each of his 1,400 employees a $100,000 bonus after they doubled the size of his company in five years. This year he teamed with Carlyle Group to buy ConocoPhillips Colorado gas fields for $3 billion. Funded a $32 million equestrian center at Texas A&M. In Aspen, Colo. he owns a 1,000-acre ranch that used to belong to John Denver. With wife Mindy he opened Houston’s River Oaks Donuts.
Tilman Fertitta. Photographer: Jin Lee/Bloomberg
19. Tilman Fertitta
$3.5 billion
Age 60
Houston
Fertitta has turned “eatertainment” into an empire. His Landry’s restaurant brands include Bubba Gump Shrimp, Saltgrass Steak House, and every parent’s animatronic gorilla nightmare: Rainforest Cafe. Fertitta also owns the Golden Nugget Casinos, the Bentley/Rolls dealership in Houston’s Galleria, and a couple of hotels down in Galveston, where he got his start working at dad’s seafood restaurant after school. In early October the NBA approved his $2.2 billion purchase of the Houston Rockets; let the cross-marketing bonanza begin! Did you know? Fertitta, a dropout from the University of Houston, is now president of its board of regents.
20. Sid Bass
$3.4 billion
Age 75
Fort Worth
The end of an era came in early 2017 when the Bass brothers agreed to sell their oil company to Exxon Mobil for $6 billion. Sid negotiated the deal directly with CEO Rex Tillerson. Origin of the fortune was their uncle Sid Richardson, a legendary wildcatter. Over four decades they've expanded the wealth via smart investments made by former employees including Richard Rainwater (d. 2015) and David Bonderman, though a September 2001 margin call wiped out billions in Disney stock. Sid has been laying low since his 2011 divorce from super-socialite wife Mercedes. In 2015 Sid reportedly bought actor Patrick Dempsey's estate in Malibu for $15 million. He rescued Texas ice cream maker Blue Bell with a $125 million loan after a 2015 listeria outbreak halted production for months.
21. Robert Smith
$3.3 billion
Age 54
Austin
The son of African-American Ph.D's, Smith as a boy in the early days of desegregation was bussed across town to go to school. While at Cornell, Smith secured an internship at Bell Labs after calling every week for five months. He went on to work at Kraft Foods and Goldman Sachs, then launched investment group Vista Equity Partners in 2000. With consistent double-digit annual returns, Vista has grown to $30 billion under management. Smith gave $50 million to Cornell and $20 million to the National Museum of African American History. Quote: “We are only bound by the limits of our own conviction. We can transcend the script of a pre-defined story, and pave the way for the future that we design. We just need to tap that power, that conviction, that determination within us.”
Mark Cuban stands during the National Anthem prior to a Mavs-Hawks game, October 12, 2017 in... [+] Atlanta, Georgia. (Photo by Kevin C. Cox/Getty Images)
22. Mark Cuban
$3.3 billion
Age 59
Dallas
Long before Mark Cuban got famous for being that loudmouth guy on “Shark Tank” and on the sidelines of Mavericks games — he made one of the best scores of Internet 1.0. In 1995 Cuban and Indiana U. pal Todd Wagner founded Broadcast.com on the novel idea that people might like to watch video over the interwebs. They sold the company to Yahoo! in 1999 for $5.7 billion. Cuban has since spent the last decade and a half doing just about anything he wants. He owns the Dallas Mavericks and has stakes in Landmark Theaters, Magnolia Pictures and AXS TV. He starred as the U.S. president in the 2015 movie "Sharknado 3: Oh Hell No!"
23. John Arnold
$3.3 billion
Age 43
Houston
Arnold was a wunderkind natural gas trader who earned Enron $750 million the year before its collapse. From its ashes he launched his own fund Centaurus Advisors, where he churned out triple digit returns for several years. He shocked the hedge fund world upon announcing in 2012 at age 38 that he was retiring and cashing out. His net worth could be considerably higher than our conservative Forbes estimate. Arnold now focuses his brainpower on strategic philanthropy, pushing much-needed, large-scale policy reform in criminal justice, public pensions and junk science. He and wife Laura have given $500 million to the Arnold Foundation.
24. John Paul DeJoria
$3.1 billion
Age 73
Austin
In the 1970s DeJoria sold shampoo door-to-door and slept in his car. In 1980 he hooked up with Paul Mitchell. With $700 between them they launched hair care empire John Paul Mitchell Systems (still going strong with $1 billion in sales). In 1989 DeJoria and business partner Martin Crowley acquired a stake in boutique tequila maker Patrón and have grown it to sales of more than $800 million. DeJoria supports anti-poaching group Sea Shepherd Conservation Society, which in January named a new ship after DeJoria and Christened it with a bottle of Patron. Daughter Alexis competes in the National Hot Rod Association.
25. Gerald Ford
$2.9 billion
Age 73
Dallas
A classic vulture investor, Ford has long specialized in buying distressed banks and turning them around. Bought his first bank in 1975. In 2002 he had his first big score when he and billionaire friend Ron Perelman sold California’s Golden State Bancorp to Citigroup for $6 billion in stock. Ford has a 15% stake in publicly traded Hilltop Holdings, which owns PlainsCapital Bank and insurer National Lloyds Corp. He’s the majority shareholder of Mechanics Bank in California. Enjoys ranches in Kentucky and New Mexico, homes in Dallas and the Hamptons. Has donated $35 million to alma mater Southern Methodist University.
26. Ray Davis
$2.8 billion
Dallas
See Kelcy Warren above, with whom Davis first teamed in 1993 to build Cornerstone Natural Gas, which they sold to El Paso Natural Gas in 1996 before launching Energy Transfer. In 2010, Davis and XTO Energy founder Bob Simpson led a group of investors who backed Nolan Ryan to buy the Texas Rangers baseball team for $593 million. The team is now worth $1.55 billion by Forbes last count.
27. David Bonderman
$2.6 billion
Age 74
Fort Worth
“Bondo” got his start working in the family office of Fort Worth billionaire Robert Bass. There he hooked up with James Coulter and in 1992 they left to launch Texas Pacific Group, aka TPG. In their first big deal they turned a $66 million bet on foundering Continental Airlines into a $640 million profit. Today TPG manages $73 billion. Bonderman still works out of Fort Worth while Coulter is based in San Francisco. He resigned from the board of Uber in June 2017 after offending fellow boardmember Arianna Huffington with comment implying that having more women on the board would lead to more talking. For his 60th birthday Bonderman hired the Rolling Stones and Robin Williams. For his 70th it was Paul McCartney at Wynn in Las Vegas. Quote: ”Private equity is not immune to market forces. You buy in the market, you sell in the market. When nobody is buying we can't sell, when nobody is selling we can't buy."
28. Lee Bass
$2.6 billion
Age 61
Fort Worth
In early 2017 Lee Bass and his three brothers sold their oil company, originally inherited from tycoon great-uncle Sid Richardson (d. 1959) to ExxonMobil for $6 billion. A devoted outdoorsman, Lee has been instrumental in protecting rhinoceroses worldwide, and is responsible for bringing critically endangered black rhinos and white rhinos to the Fort Worth Zoo. Lee spent 12 years as commissioner of the Texas Parks and Wildlife Department. His El Coyote ranch in south Texas is home to an elite herd of Texas longhorn cattle. In 1991 Lee donated $20 million to alma mater Yale for a new program in Western Civilization. After outcry against Lee's insistence that he get to approve the program's professors, Yale canceled the program and returned the donation. The Lee & Ramona Bass Foundation is endowed with more than $50 million.
29. Edward Bass
$2.5 billion
Age 72
Fort Worth
Arguably Fort Worth's biggest booster, Ed Bass has led the drive to revitalize the Texas city, focusing on its downtown Sundance Square and $65 million Bass Performance Hall, which opened in 1998. Now under construction is a new $450 million arena -- with half its cost being borne by Bass and other donors. Once called "a Texas-bred cross between Prince Charles and Lorenzo de Medici," Ed is the Renaissance man among the Bass brothers and was once the money behind Biosphere 2. He also owns ranches in Texas and Flint Hills of Kansas where he is devoted to seeding with native grasses. Waxing philosophical during a press conference for Sundance Square, he once said, "Wealth is not, you know, a matter of money. It is a matter of being able to forwardly organize our lives in a positive way." With his three brothers, Ed inherited several million from oil tycoon great-uncle Sid Richardson (d. 1959). By the time they sold their oil interests to ExxonMobil in 2017 for $6 billion they'd already been diversifying for 40 years.
30. George Bishop
$2.5 billion
Age: 77
The Woodlands
In one of the biggest scores of the oil boom, George Bishop's Geosouthern Energy sold its south Texas fields to Devon Energy for $6 billion in late 2013. He has since redeployed capital in the Haynesville shale natural gas play in Louisiana. Believed to own Chub Cay island in the Bahamas and a golf course near Houston. Very private.
31. Bert “Tito” Beveridge
$2.5 billion
Age 55
Austin
The man behind Tito’s vodka, of which he sells an estimated 44 million bottles per year. Beveridge grew up riding horses in San Antonio. At U.T. he earned degrees in geology and geophysics. But 1997 oil and gas had driven him to the drinks trade. He launched Tito’s with $90,000 on 19 credit cards. Won the World Spirits Competition in 2001. Defensive of his rep: “If someone tells me my brand isn't a craft-distilled spirit because it's too big, I just say, 'I make it the same way I've always made it. I just have a lot more stills.”
32. W. Herbert Hunt
$2.1 billion
Age 88
Dallas
One of 15 children (by three women) of legendary oil wildcatter H.L. Hunt, Herbert in the 1970s joined with brother Nelson Bunker Hunt (d. 2014) to try and corner the world silver market. They built a consortium with rich Saudis that accumulated 195 million ounces. Then silver collapsed 80% in 1980 and the brothers fell of the Forbes 400 and into bankruptcy. Hunt endured in the oil business; his Petro-Hunt sold oilfields in North Dakota in 2013 to publicly traded Halcon Resources for $1.5 billion in cash and stock.
33. Drayton McLane
$2.1 billion
Age 81
Temple, Tx.
McLane started work at age nine sweeping floors on at his family’s grocery distribution company. A few years later he took over as CEO and ran McLane for 30 years, averaging 30% annual sales growth. That got the attention of his friend Sam Walton, who in 1991 bought McLane for $50 million plus 10.4 million shares of Walmart. Gives to Baylor and Michigan State. Sold his majority stake in the Houston Astros in 2011 to Jim Crane. Teaches Sunday school.
34. H. Ross Perot, Jr.
$2.1 billion
Age 59
Dallas
In 2017 Perot Jr. moved his dad and 250 employees into the 350,000 square foot family office he built on Turtle Creek in Dallas. It features a 100,000 gallon cistern to collect stormwater for irrigation. Perot's Hillwood real estate company sold 15 million square feet of industrial space last year and continues to build data centers for Facebook and distribution centers for Amazon. Perot developed the 18,000 acre AllianceTexas logistics center in Fort Worth, but is determined to make a lasting contribution to the Dallas skyline -- he's working with famed architect Norman Foster on a 70-story skyscraper project. Still awed by his 86-year-old father: "I got to see the American dream unfold in my living room." F
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b14d75db9cd99e148d705e012c6ff157 | https://www.forbes.com/sites/christopherhelman/2018/06/27/pared-down-g-e-will-offer-investors-a-big-bet-on-future-demand-for-natural-gas/ | Pared-Down GE Will Offer Investors A Big Bet On Future Demand For Natural Gas | Pared-Down GE Will Offer Investors A Big Bet On Future Demand For Natural Gas
Laying the groundwork. GE CEO Flannery on TV, June 26. (AP Photo/Richard Drew)
John Flannery’s breakup plan will trim General Electric down to three businesses, all of which are built around the manufacture and sale of equipment that shares the common theme of spinning around and making electricity. First wind turbines ($9 billion annual sales), then airplane engines ($27 billion), and, at the base of the business, power plants that burn natural gas ($35 billion).
Is that a shaky base on which to rebuild? A boom in solar power has gutted the gas turbine business in recent years. Last year power division profits fell 45%. But just be patient, suggests Hugh Wynne, analyst with Sector & Sovereign Research.
By jettisoning GE’s healthcare, rail and water businesses as well as Baker Hughes, Flannery is dropping ballast in hopes that a more concentrated GE can grab a mighty tailwind.
Wynne projects a building boom over the next two decades that will see global power generation capacity grow from 6,000 gigawatts to 9,600 gw (1 gw can power about a million homes). But it’s not just about adding new generation to meet new demand (running about 2% a year); it’s also about filling a looming replacement cycle for an entire fleet of old coal and nuke plants.
“There will be an enormous need for new generation capacity,” says Wynne (formerly of Bernstein Research). As the mothballings increase, Wynne sees annual construction of power plants growing from 140 GW of capacity worldwide today to more than 260 gw in 2035. Solar, wind and batteries will claim about half that (up from 40% share recently), with gas turbines likely to get at least a third.
GE’s top-line H-class combined-cycle turbine costs about $300 million and generates 500 mw (.5 gw), turning gas into electricity with upwards of 65% efficiency. By Wynne’s reckoning, there’s a market for the equivalent of about 80 such large-scale gas turbines a year worldwide, growing to more than 200 units by 2035. GE boasts an installed base of 7,000 turbines worldwide, with many under lucrative maintenance contracts. If GE can grab its share of a trebling market for big gas turbines, by 2035 that division alone could see revenues grow upwards of $100 billion a year.
The replacement cycle. SSR
Flannery said this week that the company will be reducing debt by $25 billion over the next couple years, mostly by handing off $18 billion in liabilities to the spun-out healthcare business. Enthusiasm over the breakup plan has sent GE shares up 10% to $14 in the past two days. It’s too soon to call it a relief rally, and for good reason. Even after such a modest deleveraging, GE would still have an enormous, $95 billion pile of debt against a market capitalization of about $120 billion, for an “enterprise value” of $215 billion. That’s equivalent to about 54 times GE’s expected $4 billion in 2018 free cash flow. According to Raymond James equity research, the S&P 500 trades at a current EV/Ebitda of about 13x, with a long-term average near 11x. On that measure, GE shares, even after plunging 50% in the past year, still look overvalued — and likely will until Flannery can start showing some real results.
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14c410d7f1599995feedd75d08ebcf35 | https://www.forbes.com/sites/christopherhelman/2018/11/13/forbes-400-the-richest-people-in-texas-2018/ | The Richest People In Texas, 2018 | The Richest People In Texas, 2018
By Chris Helman, Linh Nguyen and the Forbes Wealth Team
Patron tequila tycoon John Paul DeJoria and wife Eloise at Hearst Castle. Patrick McMullan via Getty Images
Because Texas is obviously the best and most important state in the Union, I take pleasure each year in presenting a subset of our annual Forbes 400 list: the Richest People in Texas. This year 38 Texans made the Forbes 400, bested only by the 84 Californians and 73 New Yorkers. The usual suspects are here, with Dell, Bass, Perot and Cuban all making news this year. Les Alexander returns to the list after selling the Houston Rockets to Tilman Fertitta for $2.2 billion. Also returning after 17 years is software investor Joseph Liemandt.
Some highlights: There are two brand-new names on the Texas Rich List this year, each with impressive stories and fortunes that are in no way rooted to those old mainstays of Texas wealth, oil and gas:
—Bill Austin founded Starkey Hearing Technologies nearly 50 years ago, and now it’s the nation’s largest manufacturer of hearing aids with $850 million in sales. Austin, 76, has donated more than 1 million hearing aids in developing countries. Starkey hearing aids have worn by Ronald Reagan, two popes and Mother Teresa. As Forbes writer Michela Tindera revealed in a feature story this year, Austin has said his passion to help people hear better was instilled in him by a higher power. “I made a deal with God,” he said at the embezzlement trial of Starkey’s former president last year. “And I have to keep my word.” Forbes estimates his fortune at $2.5 billion—for now anyway. With Starkey facing legal troubles and mounting competition, unless Austin can pull his troubled company together, this may be the only year he appears on the list.
—And then we have Thai Lee, the CEO of software reseller and I.T. provider SHI International. Lee, 59, was born in Bangkok, grew up in South Korea, then emigrated to the U.S., where she worked at Procter & Gamble and American Express before buying a software reseller that she has built into a juggernaut with $8.5 billion in annual sales. Having built her business over two decades out of headquarters in New Jersey, Lee is now developing a 400,000-square-foot office complex on 34 acres in Austin. Forbes estimates her net worth at $2.3 billion. Her controlling stake in SHI makes it America’s biggest woman-owned business. And a humble woman too: “We have no executive parking,” Lee says. “We don’t have a special executive compensation plan. We try to make sure that everybody feels valued.”
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Another highlight: The Bass Brothers. They are on a roll, having recently dished Richardson Carbon Black to Tokai Carbon for $300 million, auctioned their parents' art collection at Christies for $165 million and trading their oilfields in west Texas and New Mexico to ExxonMobil for $6 billion in stock. It was a Rex Tillerson's last deal at Exxon, and he negotiated it with Sid Bass. Some of those fields had been "in the family" since their oil tycoon uncle Sid Richardson (d. 1959) made one of the great fortunes of the early oil age. From their modest inheritance of about $2.8 million each, the brothers have built an investment empire. Bob is devoted to building the world's first supersonic private jet with Aerion Supersonic. Lee is a man of the land, operating vast ranches in south Texas, raising both longhorn cattle and thoroughbred horses. Ed is the renaissance man, whose love of architectural challenges led him to invest in both the ill-fated Biosphere project as well as the remarkable rebirth of downtown Fort Worth. They've all given generously, with Ed this year paying $160 million for the renovation of the Peabody Museum at alma mater Yale.
The Richest Texans, 2018:
1. Alice Walton
$44.9 billion UP
Age: 69
Fort Worth
The only daughter of Walmart’s founder, Sam Walton, continues to top the list as the richest Texan with a jump in net worth of nearly $7 billion from last year. Brothers Rob and Jim still work for the family company, while Alice spends her time on art and horses. She also sits on the board of the Walton Family Foundation, which disbursed $536 million in 2017, mainly to educational and environmental causes, and to projects in the Ozarks.
2. Michael Dell
$27.6 billion UP
Age: 53
Austin
Five years after Dell took his company private in a leveraged buyout, the combined Dell Technologies announced that it will seek to return to public markets. Nearly half of Dell’s fortune lies in his investment firm MSD Capital, which has stakes in hotels like the Four Seasons Maui, Grand Central Terminal and DineEquity, parent of Applebee’s and IHOP chain. Dell started the PC giant in his University of Texas at Austin dorm room at 19 years old.
3. Andrew Beal
$9.9 billion DOWN
Age: 65
Dallas
A college dropout who once had a job fixing broken TVs, Beal became the nation’s wealthiest banker by picking up distressed assets such as bonds backed by airplanes after 9/11, then cashing out at a profit. He attended Michigan State University and Baylor University, then dropped out and started Beal Bank in 1988. It now has $7.4 billion in assets. Beal bought a sprawling, 25-acre Dallas estate in 2016 for an undisclosed amount, only to sell it for $36 million in an auction less than 2 years later.
4. Jerry Jones
$6.9 billion UP
Age: 76
Dallas
Jones swapped place with Richard Kinder (No. 5) this year thanks to a $1.3 billion boost in his fortune. For the past 12 years, Jones’ Dallas Cowboys have held the title of most valuable NFL team, at $5 billion. He bought the team for $150 million in 1989. Jones made a big deal this year selling some Bakken shale oil fields for shares of Comstock Resources. He now owns more than 80% of Comstock, a stake worth about $650 million.
5. Richard Kinder
$6.6 billion DOWN
Age: 74
Houston
In April, Kinder and his wife, Nancy, donated $70 million for the restoration and redesign of Memorial Park in Houston, a large urban park with about 30 miles of trails. They have been instrumental in supporting the transformation of Houston’s network of winding bayous into a connected system of parks. They have also helped underwrite a dramatic expansion at Houston’s Museum of Fine Art. Kinder stepped down as CEO of gas pipeline giant Kinder Morgan in 2015 but remains as its executive chairman. He cofounded the company in 1997. An avid reader, Kinder is a big fan of Winston Churchill. “In my view he's a real leader. Probably the greatest person of the 20th century in in terms of the direct contributions of one individual.”
6. Dannine Avara
$6.2 billion UP
Age: 54
7. Scott Duncan
$6.2 billion UP
Age: 35
8. Milane Frantz
$6.2 billion UP
Age: 49
9. Randa Williams
$6.2 billion UP
Age: 57
The four children of Houston pipeline tycoon Dan Duncan inherited a tax-free $10 billion stake after his death in 2010, when there was a temporary repeal of the death tax. Today Enterprise Products Partners owns about 49,000 miles of pipeline, as well as crude oil and natural gas processing and storage facilities. Williams is the only one to sit on the board. The pipeline giant announced in July a plan to build an offshore terminal in the Gulf of Mexico to accommodate bigger ships for exporting crude oil to Europe and Asia.
10. Robert Rowling
$5.8 billion UP
Age: 65
Dallas
In 1996 Rowling made $500 million selling the family oil and gas fields, using the proceeds to buy the Omni Hotel chain. Since then he’s built it out into 54 locations, including new hotels in Boston, San Francisco and Nashville. In Austin the Omni Barton Creek will close for a year starting May 2019 for a $150 million makeover. Rowling is trying to sell Gold’s Gym, the fitness center chain Arnold Schwarzenegger made famous. Looking for $300 million.
11. Ray Lee Hunt
$5.3 billion UP
Age: 75
Dallas
Hunt is the richest of the legendary oil wildcatter H.L. Hunt’s 15 children, and runs Hunt Oil. Sure, he still has oil and gas in Texas, but Hunt likes to go after big game, and has invested in LNG export terminals in Peru and Yemen and oil drilling in the Kurdish region of Iraq. Hunt also chairs Hunt Consolidated, where son Hunter serves as co-CEO and helped diversify the company into electric power with publicly traded high-voltage line operator InfraREIT. Hunt and his family own estimated 190,000 acres of land across the West, including historic Hoodoo Ranch, east of Yellowstone National Park.
12. Trevor Rees-Jones
$5.3 billion UP
Age: 67
Dallas
In 7 deals over 7 years through 2012, his Chief Oil & Gas grossed $7 billion selling assets in Texas and Pennsylvania. Starting his career in the oil business in 1984 after working as a bankruptcy attorney, he became one of the biggest winners in the shale fracking revolution. During the oil downturn, he acquired passive royalty interests in oil field Permian Basin. He summers in Namibia and relaxes on his 65,000-acre ranch in Texas. The Rees-Jones Foundation has paid out more than $300 million in grants and has remaining assets of $520 million.
13. Robert Bass
Bass models the supersonic Aerion prototype. © 2014 Bloomberg Finance LP
$5 billion UP
Age: 70
Fort Worth
If all goes according to plan, in five years Aerion Supersonic will make first deliveries of its AS2 supersonic, 12-seat, $120 million business jet. En route from New York to London it will do Mach 1.4 and get you there in 3.5 hours. He's put an estimated $1 billion into Aerion since 2013. Bass is a private equity legend, his family office having birthed money management firms that handle more than $100 billion in assets, like David Bonderman's TPG, Oak Hill, and Iron Point Partners, which has an investment in T5 Data Centers. Other T5 investors include Mark Zuckerberg, Sheryl Sandberg, Reid Hoffman and Sean Parker. They are building an enormous 400 mw data center at Ross Perot, Jr.'s AllianceTexas industrial complex in Fort Worth. Bass has given mostly to education, including $55 million to Stanford, $60 million to Duke and at least $33 million to Yale.
14. Kelcy Warren
$4.9 billion UP
Age: 62
Dallas
As a boy, Warren spent summers working with his dad as a welder’s assistant on Sun Pipeline in Texas. Now, as cofounder and CEO of pipeline behemoth Energy Transfer, he controls 83,000 miles of oil, gas and petrochemical lines traversing the country. In 2012 Warren donated $10 million toward the construction of a 5-acre park in Dallas, earning the right to name it. It’s now called Klyde Warren Park, after his son. At the park’s opening ceremony, he said his son would become his heir only if he devoted one day a month to clean the park. According to park staff, Klyde has held up his part of the bargain, cleaning yoga mats and pulling weeds. A music fan, Warren produces albums for singer-songwriters at his Austin studio, Music Road Records.
15. Tilman Fertitta
$4.5 billon UP
Age: 61
Houston
Fertitta’s over-the-top Post Oak development in Houston opened in March with a 250-room hotel, a conference center, 6 restaurants and bars, and a Rolls-Royce dealership in the lobby. Across the street he also sells Bentleys and Bugattis. Fertitta owns restaurant and entertainment group Landry’s and the Golden Nugget casinos. The star of CNBC’s Billion Dollar Buyer bought the Houston Rockets basketball team last year for $2.2 billion, the highest price paid for an NBA franchise. A dropout from the University of Houston, Fertitta is president of its board of regents.
16. Robert Smith
$4.4 billion UP
Age: 55
Austin
Growing up the son of African-American Ph.D’s in the early days of desegregation, Smith became the nation’s wealthiest African-American. His private equity firm Vista Equity Partners focuses exclusively on software deals, an area that not too long ago was shunned by private equity. Vista has acquired more than 200 software companies in the last 8 years and manages $31 billion. Its funds have posted annualized returns of 22% since he launched the firm 18 years ago. While studying at Cornell, Smith secured an internship at Bell Labs after calling every week for five months. Smith is also chairman of Carnegie Hall and the Robert F. Kennedy Human Rights organization.
17. Ross Perot
$4.2 billion UP
Age: 88
Dallas
“The world wants things done, not excuses. One thing done well is worth a million good excuses.” Perot sure got things done well. While at IBM as a salesman, he quit the company when they wouldn’t give him more computers to sell after he hit the annual quota by March. In 1962 he founded Electronic Data Systems, and took home $1.5 billion selling it to G.M. in 1984. He snatched up another $800 million when Dell bought Perot Systems in 2009. When moving to the new Perot office on Turtle Creek in Dallas in 2017, he brought over his 6,000-object collection, including a walking stick purported to have belonged to Osama Bin Laden.
18. Bert Beveridge
$4 billion UP
Age: 56
Austin
Beveridge shot up 13 places from last year with an increase in his net worth of $1.5 billion. The founder of Tito’s Handmade Vodka started his nicknamesake company in 1997 using $88,000 racked up on credit cards. Last year’s estimated sales were 60 million-plus bottles of vodka, up from an estimated 45 million in 2016. Tito’s says it donates 100% of net proceeds for all items purchased in its online store to nonprofits. A geology and geophysics major at U.T., Beveridge traded oil and gas for the bottled ethanol business.
19. Dan Friedkin
$4 billion UP
Age: 53
Houston
Friedkin funds Project Recover, which looks for lost aircraft, ships and associated MIA soldiers from World War II. He also owns one of the largest collections of vintage military war planes. His philanthropy has taken him to Tanzania, where his conservation fund works to preserve 6.1 million acres of wildlife areas. In South Carolina, he and Robert McNair run a golf club that helps kids who aspire to play golf in college but lack the means to do so. Friedkin’s fortune stems from Gulf States Toyota, the $9 billion (sales) car distributor built by his father, Thomas (d. 2017). It has exclusive rights to sell Toyotas in Texas, Arkansas, Louisiana, Mississippi and Oklahoma. A film production studio Friedkin has invested in released its first movie, All the Money in the World, in 2017, receiving major award nominations.
20. Jeffery Hildebrand
$4 billion UP
Age: 59
Houston
Hildebrand, left, playing the sport of kings, and billionaires. Getty Images
This year Hildebrand stepped down from the CEO role even as his Hilcorp solidified its position as the biggest privately owned oil and gas company in America, with $4.5 billion of acquisitions in old natural gas fields and pipelines in the Four Corners region of New Mexico. In Alaska, Hilcorp plans to build a gravel island off the North Slope in the Beaufort Sea to develop the Liberty field. If all goes well, it could pump 60,000 barrels a day by 2022. A former ExxonMobil geologist, Hildebrand cofounded Hilcorp in 1990 and later bought out his partner for $500 million. In 2015 Hildebrand gave his 1,400 employees a $100,000 bonus each—a reward for doubling his company’s size in five years. Owns late singer John Denver’s spread in Aspen. He paid a record $300,000 for the Grand Champion Junior Market Lamb at this year’s Houston Livestock Show & Rodeo.
21. Mark Cuban
$3.9 billion UP
Age: 60
Dallas
After an investigation found “numerous instances of sexual harassment and other improper workplace conduct” in the Mavericks organization over roughly two decades, Cuban agreed to give $10 million to organizations supporting women. The Shark Tank star and his fellow Indiana Univeristy alum Todd Wagner sold internet radio firm Broadcast.com to Yahoo for $5.7 billion in stock in 1999. Cuban’s Fallen Patriot Fund has given over $5 million to families of U.S. military personnel killed or seriously injured during the Iraq War.
22. Robert McNair
$3.8 billion EVEN
Age: 81
Houston
Owner of the Houston Texans dropped six places from last year, mainly due to others’ jumps in net worth. In response to NFL players kneeling last year, McNair reportedly told fellow NFL team owners they cannot “have the inmates running the prison.” That caused an uproar, and he later apologized, saying he was referring to league officials. McNair bought the franchise in 1999 for $700 million after selling his power generator company Cogen Technologies for $1.5 billion. He and his wife, Janice, donate more than $20 million each year to their foundation dedicated to education.
23. Sid Bass
$3.4 billion EVEN
Age: 76
Fort Worth
Sid and his brothers, Edward, Lee and Robert, have been busy unloading assets. They got out of the dirty carbon black refining business, selling to Tokai Carbon for $300 million. And they unloaded their Permian Basin oil interests to ExxonMobil for $5.6 billion in stock. Sid negotiated the deal directly with CEO Rex Tillerson, his last before joining the Trump administration. But the most intriguing reacquisition came in late 2017 when they sold In late 2017 they sold about 30 pieces from their parents' art collection at Christies, bringing in about $160 million. The Van Gogh, 1889, “Enclosed Field With Ploughman” went for $81.3 million. The 1933 Joan Miro “Peinture” for $23.4 million. 1921 Matisse's “Le Regates de Nice,” for $16.6 million. Max Carter at Christies called the collection eclectic but of top quality. Perry and Nancy Lee Bass started their collection in the 1960s and built it through the 1990s. They bought Edouard Vuillard's "Yvonne Printemps" in 1997. Other works sold were by Serge Poliakoff, Jean-Paul Riopelle, Raoul Dufy.
24. John Arnold
$3.3 billion EVEN
Age: 44
Houston
The Enron gas-trading wunderkind stopped managing other people’s money in 2012 at age 38, shocking the hedge fund world with his retirement. But Arnold is still investing. Last year his Centaurus Renewable Energy sold a collection of solar farms. He is believed to have partnered with LLOG Exploration on deepwater developments in the Gulf of Mexico with names like “Who Dat” and “Neidermeyer”—daringly located in a lease block adjacent to BP’s 2010 Deepwater Horizon disaster. He and his wife oversee the Laura & John Arnold Foundation. With $2.2 billion in assets and Arnold pouring in an average of $150 million more a year, they have already given away $1 billion in grants to address social issues, including pension reform, criminal justice reform, and efforts to rein in drug pricing.
25. David Bonderman
$3.3 billion UP
Age: 75
Fort Worth
“Bondo” cofounded private equity giant TPG with James Coulter in 1992 after leaving Robert Bass’ family office. This year TPG exited its four-year investment in Chobani, having rescued the yogurt maker from a cash crunch. He also led a $1.9 billion deal in April to fund Du Xiaoman, the fintech spinoff of Chinese internet giant Baidu, alongside other investors such as Carlyle. Through his Wildcat Foundation, Bonderman has donated tens of millions to support wildlife conservation. For his 60th birthday Bonderman hired the Rolling Stones and Robin Williams. For his 70th it was Paul McCartney at Wynn in Las Vegas.
26. Joseph Liemandt
$3 billion RETURNEE
Age: 50
Austin
Liemandt is the founder of ESW Capital, an investment firm that purchases software companies. In 1996, at age 27, he appeared on a Forbes cover highlighting the wave of young tech entrepreneurs. Now 50, he returns to The Forbes 400 after a 17-year absence, and with a doubled net worth. Liemandt also founded Trilogy Software, a product and sales configuration software company that was prominent in the 1990s.
27. Gerald Ford
$2.9 billion EVEN
Age: 74
Dallas
Ford bought his first distressed bank, First National Bank of Post, Texas, in 1975. He continued to acquire 19 banks in 18 years. His most successful deal was in 2002, when he and billionaire friend Ronald Perelman sold Golden State Bancorp to Citigroup for $6 billion in stock. His properties include ranches in Kentucky and New Mexico, homes in Dallas and the Hamptons.
28. Ray Davis
$2.6 billion DOWN
Age: 76
Dallas
Davis owns 5% of natural gas distributor and pipeline company Energy Transfer, which he cofounded in 1995 with fellow billionaire Kelcy Warren. He stepped down as co-CEO in 2007. In 2010, Davis and XTO Energy founder Bob Simpson led a group of investors who backed Nolan Ryan to buy the Texas Rangers baseball team for $593 million. Forbes estimates the team’s value at $1.6 billion this year.
29. John Paul DeJoria
$2.6 billion DOWN
Age: 74
Austin
In the 1970s DeJoria sold shampoo door-to-door and slept in his car. Then in 1980 he and Paul Mitchell cofounded haircare company John Paul Mitchell Systems with just $700. He still chairs the board. DeJoria is a supporter of marine wildlife conservation and anti-poaching group Sea Shepherd, which named a ship after him in 2017. In April, Bacardi acquired the rest of DeJoria’s Patrón Spirits in a deal that valued the tequila maker at an enterprise value of $5.1 billion.
30. Bill Austin
$2.5 billion NEW
Age: 76
Brownsville
Forty-eight years after he bought a tiny hearing aid parts lab, Austin debuts on The Forbes 400. His Starkey Hearing Technologies is the largest hearing aid manufacturer in the U.S. Starkey’s customers have reportedly included five U.S. presidents, two popes and singer Dolly Parton. In 2015 Austin, who is CEO, fired the top ranks of his executive leadership team, unleashing a series of events that most recently resulted in a former president of the company being found guilty of federal fraud charges. Austin spends much of his time traveling to distribute hearing aids in developing countries for the Starkey Hearing Foundation, which has donated some 1 million hearing aids around the world. For the whole story read this Forbes profile of Austin by Michela Tindera.
31. Lee Bass
$2.5 billion DOWN
Age: 62 billion
Fort Worth
Lee and wife Ramona, own the expansive El Coyote and La Paloma ranches deep in south Texas, near the King Ranch, where they raise herds of longhorn cattle and conserve the land to attract and support migratory birds and wildlife. Theirs is a family of conservationists, having donated at least $30 million to the Fort Worth Zoo and tens of millions more to protect endangered rhinos and their habitat. Lee was commissioner of the Texas Parks and Wildlife Department for 12 years. Ramona and their son Perry Bass II operate a thoroughbred horse training program, which produced current contender Magnum Moon.
32. George Bishop
$2.5 billion EVEN
Age: 81
The Woodlands
Bishop’s GeoSouthern Energy sold its fields in the Eagle Ford shale to Devon Energy for $6 billion during the fracking boom in 2014. In 2015 he redeployed some capital into the Haynesville shale of Louisiana. He was an owner of River Ridge Golf Club west of Houston, which flooded in Hurricane Harvey last year, then closed for good. Also owns Chub Cay island and resort in the Bahamas.
33. W. Herbert Hunt
$2.5 billion UP
Age: 89
Dallas
With his brother Bunker, Hunt tried and failed to corner the world silver market in the 1970s, building up a hoard of 195 million ounces before the market cratered. He remains in the oil business, the first source of his wealth, with oilfields in the Bakken of North Dakota and a refinery complex in Louisiana. In 2012 he sold some oilfields to Halcón Resources for $1.5 billion. He’s one of 15 children (by three women) of the legendary oil wildcatter H.L. Hunt.
34. Edward Bass
$2.4 billion DOWN
Age: 73
Fort Worth
Big news Ed, 72, got married to Sasha Camacho, 36. She’s from San Miguel de Allende, Mexico. He had been married to Vicki. They got hitched just before Christmas and had a party hosted by Mercedes Bass at the Fort Worth City Club, so that tells us Mercedes is still part of the family (despite her divorce from Sid). Before this summer’s $160 million gift to renovate the Yale’s Peabody Museum, Bass had already given more than $100 million to the university. Bass is the Renaissance man among his brothers and was once the money behind Biosphere 2. Back home in Fort Worth he’s raising more than $300 million in private funds for the new indoor sports venue Dickies Arena that will draw more business to the revitalized Sundance Square district. Bass also chairs the Sid Richardson Foundation (started by his uncle), with assets of more than $500 million. Once called “a Texas-bred cross between Prince Charles and Lorenzo de Medici.”
35. Thai Lee
$2.3 billion NEW
Age: 59
Austin
Thai Lee is CEO of $8.5 billion (sales) IT provider and software reseller SHI International, which boasts 17,000 customers, including Boeing and Johnson & Johnson. Lee grew the company for the past two decades out of its New Jersey headquarters, but now is building a 400,000 square foot office complex in Austin, Texas, where it currently has about 900 employees. The daughter of a prominent Korean economist, she was born in Bangkok, grew up in South Korea and moved to the U.S. for high school. Her father traveled the world promoting his country’s postwar development plan. She went to Amherst then back to Korea where she worked at Daesung Industrial in Seoul. In 1985 she graduated from Harvard Business School. After stints at Procter & Gamble working on brands like Always and Crest, then a couple years at American Express. Lee and her then-husband paid less than $1 million in 1989 for a software reseller, the predecessor to SHI. She does her utmost to keep a low profile, and to keep everyone, both customers and employees, happy. No reserved parking spot, she sits in a cubicle farm, keeps her own calendar, does her own filing. "A dollar amount could never accurately convey the respect and admiration I have for the employees of SHI," she says.
For more, check out David Ewalt's 2015 profile of Lee, The Modest Tycoon.
36. Drayton McLane
$2.3 billion UP
Age: 82
Temple
In December, McLane became chairman of Texas Central, a company that aims to build a high speed train connecting Dallas and Houston. McLane started work at age 9 sweeping floors at his family business, McLane Co., a grocery distribution company, then ran it for 32 years. He sold it to his friend Sam Walton in 1991 for $50 million and 10.4 million shares of Walmart. Later Walmart sold it to Berkshire Hathaway in 2003. He is a generous donor to his alma maters, Baylor and Michigan State, both of which have built stadiums that bear his name. McLane also teaches Sunday school.
37. Ross Perot Jr.
$2.3 billion UP
Age: 59
Dallas
Perot Jr. watched his famous father, Ross Perot Sr. make his fortune, then made his own. His most significant asset: Alliance Texas, a 20,000-acre sprawl of industrial warehouses, railyards and an airport north of Fort Worth. Amazon, Facebook and Charles Schwab, to name a few, are its tenants. He’s planning a Dallas skyscraper with famed architect Norman Foster and a flying taxi venture with helicopter firm Bell and Uber, and he intends to mine asteroids in space.
38. Leslie Alexander
$2.1 billion RETURNEE
Age: 75
Houston
Alexander returns to the ranks after 11 years as he sold his Houston Rockets NBA team to Tilman Fertitta for $2.2 billion last fall. Alexander bought the Rockets in 1993 for $85 million. He dropped out of Brooklyn Law School at age 21 after his father died, heading to Wall Street to help provide for his mother. He began managing his own money in 1980. Debuting on The Forbes 400 in 2006, he dropped off a year later when student loans securitizer First Marblehead tanked. Alexander supports the Evelyn Alexander Wildlife Rescue Center, named after his mother.
There are no doubt plenty more undercover billionaires living in the Lone Star state. If you know anyone who’s not on this list but should be, please drop me a line at chelman@forbes.com or on twitter @chrishelman.
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aa936c7669b6fdb3aac5fc6b54d742a7 | https://www.forbes.com/sites/christopherhelman/2019/01/25/as-shutdown-slows-flights-into-laguardia-maybe-its-time-to-let-artificial-intelligence-handle-air-traffic-control/ | As Shutdown Slows Flights Into LaGuardia, Maybe It's Time To Let Artificial Intelligence Handle Air Traffic Control | As Shutdown Slows Flights Into LaGuardia, Maybe It's Time To Let Artificial Intelligence Handle Air Traffic Control
Computers will inherit the keys to the panopticon. Corbis via Getty Images
Blaming a staffing shortage among air traffic controllers, caused by the federal government shutdown, LaGuardia Airport in New York today announced delays in air traffic. This won't be an issue once we have an air traffic control system operated autonomously by artificial intelligence.
It’s not just a nerd fantasy. Boeing, a few weeks ago, launched an autonomous air traffic control initiative called SkyGrid. The self-teaching system is tied in to all manner of radar data and weather forecasts and has been “trained” how to watch over the skies by being fed countless days of air traffic records. It can already safely manage the flight paths of dozens of autonomous drones, even changing paths midflight depending on conditions, says Steve Nordlund, who heads up Boeing’s NeXt division, which is backing SkyGrid.
After a century of manned air flight, “we have learned how things should operate,” says Nordlund, a licensed pilot. That goes for both the air traffic control systems and the aircraft. “AI pilots are good. I think we will see the safe integration of unmanned aircraft.” AI has some benefits in this arena. Computer learning algorithms excel at pattern recognition, path prediction, and solving for thousands of variables at once with no need for coffee breaks, or paychecks.
Boeing’s initial interest isn’t in putting human pilots and human air traffic controllers out of work. Rather, says Nordlund, they want to help enable the evolution of aircraft. Already Boeing (via its acquisition of Aurora Flight Sciences) is developing an autonomous air taxi and is among several aerospace companies in talks with Uber. He sees tens of millions of autonomous drones someday filling the skies.
Boeing in January completed its first flights of an all-new vehicle that could be the basis for an ... [+] autonomous air-taxi. Courtesy Boeing
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The scale up will start with the likes of Amazon delivering products via drone. The better the safety record, the more precious the cargo. Amir Husain, ceo of SparkCognition, the Austin, Texas, AI developer working with Boeing on SkyGrid, says that this year several companies will test autonomous control of both cargo and passenger drone flights, including a trial in Dubai, which hopes by 2021 to have autonomous air taxis. Singapore is also interested. “An ecosystem will emerge,” Husain says. "I look forward to riding in one."
They have no doubt that people will flock to ride autonomous aircraft for shorter trips, simply because it beats sitting in traffic. “For trips under 300 miles there is very little aviation,” says Nordlund, because the limiting factor has always been available pilots, who take a long time to train and are expensive. “The only way to scale these short trips in the sky is by using autonomy.”
As for those long trips, with big planes, landing in places like LaGuardia? Nordlund is careful to reassure that “humans in the cockpit are here to stay for some time.” SkyGrid, he says, is about “enhancing predictability and human decision-making.”
Maybe so, but it won't take the AI long to figure out that the best way to enhance predictability will be to take humans out of the decision-making process altogether.
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012ed2afe646cd1cf97fb42a6a30dcd3 | https://www.forbes.com/sites/christopherhelman/2019/07/05/daughters-sorority-sisters-among-7-dead-in-billionaire-chris-cline-helicopter-crash/ | Daughter's Sorority Sisters Among 7 Dead In Billionaire Chris Cline Helicopter Crash | Daughter's Sorority Sisters Among 7 Dead In Billionaire Chris Cline Helicopter Crash
Cline died July 4, just one day short of his 61st birthday. Jamel Toppin/The Forbes Collection
A helicopter crash in the early hours of July 4 has claimed the lives of coal billionaire Chris Cline and six others, including his young daughter and her friends. The accident happened after 2 a.m. Thursday when a craft believed to have been an Agusta AW139 crashed near Cline’s Bahamian retreat at Big Grand Cay.
According to reports citing Bahamian authorities, the aircraft (N32DCC) took off around 2 a.m., without filing a flight plan. An unconfirmed report said the doomed flight had embarked for Ft. Lauderdale at such an unusual hour because of an illness. Bahamian police were unable to confirm these details to Forbes pending investigation.
The victims include Cline’s daughter Kameron, and her friends Brittney Searson and Jillian Clarke, all recently graduated from Louisiana State University. Searson was a classmate of Kameron Cline both at the Benjamin School in Palm Beach as well as LSU. According to a report quoting mother Kimberly Searson, she traveled regularly with the Cline family. Jillian Clarke is remembered as a star volleyball player at Mount Carmel Academy in New Orleans. All three were sorority sisters at Phi Mu, which will hold a candlelight vigil for them Saturday.
Another young woman onboard was Delaney Wykle, of Cline’s hometown of Beckley, West Virginia. She was a recent graduate of West Virginia University and earlier in the week had passed the board exams for her nursing degree. A call to her family in Beckley was not immediately returned. All the women are believed to be 21-22 years old.
The pilot is believed to have been Geoff Painter, who co-owns Cloud 9 Aviation with David Jude, a longtime friend and business partner, who was confirmed with Cline's attorney to have been onboard. Commenters on on the Professional Pilots Rumor Network bulletin board expressed certainty that Painter was piloting the craft. Messages left for Cloud 9 and Painter were not immediately returned.
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David Jude and Geoff Painter cofounded Cloud 9 Aviation in 2005, according to a company presentation. The helicopter they are believed to have been flying has a range of 600 miles and can seat 15. Big Grand Cay is just 110 miles from Palm Beach, where Cline has owned a compound for more than 10 years.
Cline was an avid risk-taker, who owned several passenger jets, a 160-foot yacht named Mine Games, and who installed a go-cart track and 200-foot waterslide at his at his house in Beckley. He is survived by children Tanner, Logan, and Candace; and brothers Greg and Kenneth.
For more on the amazing rags to riches story of Chris Cline, check out my 2017 Forbes Magazine profile:
MORE FROM FORBESChris Cline Could Be The Last Coal Tycoon StandingBy Christopher Helman
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fafb652292507cd34e0fe312bce65a88 | https://www.forbes.com/sites/christopherhelman/2020/02/27/oil-tycoon-harold-hamm-loses-1b-overnight-amid-stock-selloff/ | Oil Tycoon Harold Hamm Loses $1B Overnight Amid Stock Selloff | Oil Tycoon Harold Hamm Loses $1B Overnight Amid Stock Selloff
Hamm speaking at the Republican National Convention, 2016. © 2016 Bloomberg Finance LP
Quintessential oil fracking billionaire Harold Hamm has seen the value of his stake in Continental Resources plunge by half since January and more than $1 billion this week amid a sell-off in company shares.
Continental shares traded at $17 midmorning Thursday, after plunging as much as 25% overnight to their lowest level in more than a decade. Analysts at Tudor, Pickering & Holt expressed concern that Continental’s capital spending budget assumes oil at $55 a barrel (versus WTI at $47 today) and would be unlikely to generate free cash flow without a recovery.
Due to a glut of oil and stubborn weakness in crude prices, Hamm’s fortune has sunk from $17.2 billion in 2018, to $12.7 billion a year ago, and is now down to $5.3 billion, according to Forbes estimates.
Hamm, who owns nearly 77% of Continental, stepped down from the CEO role late last year and now serves as executive chairman of the company he founded in 1967. That move could be a prelude to taking the company private. At today’s price, the entire public float of Continental (i.e., the shares Hamm doesn’t own) is just $1.5 billion.
Such a move might be well worth making. According to Continental’s annual report, released yesterday, the company generated net income of $770 million last year, down from nearly $1 billion in 2018, and grew oil and gas output by 18%. With earnings per share of $2.08, its price/earnings multiple is now at a relatively cheap 8.25.
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Although the coronavirus epidemic looks likely to evaporate oil demand growth this year as people fly, drive and buy less, the world still uses 100 million barrels per day of petroleum. Once the panic has passed and life begins to return to normal, it won’t take much price appreciation to significantly goose Continental’s margins.
Hamm in happier days, 2014. Forbes
Ironically, if Hamm were to take Continental 100% private, it could have the effect of knocking him out of the Forbes billionaires rankings altogether. That’s because when it comes to publicly traded stock holdings, our methodology doesn’t dock billionaires for debt held at the company level, which in Continental’s case is $5.3 billion. If Hamm were to buy up all the public float, that debt would then be deducted from the implied value of Continental’s equity—evaporating his net worth (at today’s valuations, anyway).
Hamm is far from the only oilman having a bad year. Shares in other drillers focused on North Dakota’s Bakken oilfields are doing even worse, with Whiting Petroleum down 33% today and Oasis Petroleum 14%. Natural gas bellwether Chesapeake Energy has lost 90% of its equity value in the past year and is down another 14% today, to a skimpy 27 cents per share.
Meanwhile, shares of Exxon Mobil, at $51.75, have been down 35% in the past 12 months and haven’t been this cheap since 2004, while BP is close to lows not seen since its Deepwater Horizon disaster nearly a decade ago. All the super-major oil companies sport dividend yields of at least 5%, with Royal Dutch Shell now at 8.22%. With yields on ten-year U.S. Treasurys dropping to 1.28%, those Big Oil dividends are getting more interesting every day.
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1c4f477bc3c201a1a2dafcf1461e57e6 | https://www.forbes.com/sites/christopherhelman/2020/03/18/some-hidden-energy-costs-of-working-from-home-during-the-outbreak/?sh=2d7eca428e6e | Some Hidden Energy Costs Of ‘Working From Home’ During The Outbreak | Some Hidden Energy Costs Of ‘Working From Home’ During The Outbreak
All the tools for telepresence. Getty
Electric power demand in coronavirus-wracked Italy is down 7%. World oil demand has slumped 7%. U.S. GDP is expected to contract at a 5% rate in the second quarter.
When the real world crashes, life moves online. This week millions of American office workers are experimenting with working from home. In South Korea, Italy, and Seattle telework and residential internet usage have soared 40% in just weeks. In France 80% of internet traffic is now Facebook, YouTube and Netflix, and providers are pledging to ensure “digital discipline.”
Tele-commuting is not a new thing. Of 165 million U.S. workers, 24% worked from home last year, according to the Bureau of Labor Statistics. That trend has been surprisingly steady for the past decade. Coronavirus isolation has already boosted that, and could be a watershed event for digital connecting. As bad as quarantine is for restaurants and resorts it will be good for the likes of Slack, Zoom, Webex and GoToMeeting.
Kids are also eating up bandwidth. Depending on the number of children in your isolation group, there are probably a dozen laptops and smartphones straining your wifi. Schools are closed, maybe until Fall. Well-equipped students have moved to “online learning” from home — which involves a lot of videochatting with chums. Many families already have ample equipment served by a 1,000 megabit per second connection, i.e. “gigabit,” at about $75 per month. In the age of the coronavirus, that home data conduit is the most important connection between families and the world. And it’s made telecommuting at least tolerable.
After the virus clears and we’re left with a recession, landlords may have a hard time convincing corporate tenants to keep paying pricey overhead for employees who still got the work done, remotely. It can cost $20,000, according to JLL, to kit out the average 150 square feet of office space per worker. And, depending on your city, $300 or more per employee per month for rent, plus $50 per employee per month in supplies and snacks, and $20 per month to keep the lights on, air conditioned and computers charged. During coronavirus, you, dear worker, get to cover those costs.
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Working hard. Getty
For all those potential savings to employers from telework, there’s at least one benefit to the employee as well — saving on gas. The average American commutes 30 miles per day, or about 600 miles per month at an average 25 miles per gallon. Not commuting saves wear and tear, at least $50 per month in fuel savings, and hours per week better spent bingeing on The Andromeda Strain, 12 Monkeys, and Contagion.
Telecommuting will make the rest of our driving cheaper. Extrapolate the impact of millions of people worldwide now working from home and you get a reduction in petroleum demand on the order of 7 million barrels per day, or about 7%, leading to oil prices half what they were at the beginning of 2020. According to Jim Burkhard of IHS Markit, “the last time there was a global surplus of this magnitude was never.”
Maintaining a steady supply of binge-watchable streaming video is certainly cheaper, and arguably just as important as keeping gas in a car. Researchers at Lawrence Berkeley Laboratory found in a study several years ago that the average power consumption of a desktop computer (used an average 7.3 hours per day) is 194 kilowatthours per year, while a laptop uses an average 75 kwh per year (at 4.8 hours per day). At an average residential 12 cents per kwh that’s about $40 per year for a person with two machines. Extrapolate to a family of four, including young “digital natives” all working from home, and the average home is using about $10 per month in electricity to keep its screens lit.
As for the less direct electricity cost of streaming video from distant server farms — it adds up. According to Netflix, the average stream is anywhere from 1 to 3 gigabytes per hour. According to this report on the Electricity Intensity of Internet Data Transmission, sending 1 GB over the internet requires .06 kwh. Other sharp pencils have figured the all-in power cost of streaming video at more like .3 kwh per GB.
In simpler terms: the cost during our coronavirus isolation to stream 2 high-def video streams into your home all day long comes to about $1 per day (assuming 24 GB/day of data at roughly 0.3 kWh per GB) — costs that you’re already paying to the likes of AT&T (and Hulu, Disney+, and Netflix).
So stream away. Revel in the opportunity, while your kids are trapped with you for the next month, to make them watch Magnum P.I. or The Muppet Show. Working from home isn’t going to add any overwhelming load to most systems. For all the money you’re saving your employer by working from home, at least try to get them to pay for the “gigabit” connection that makes it all possible.
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8815021948011a958e4fe7c5c9678b8e | https://www.forbes.com/sites/christopherhelman/2020/04/04/the-family-soap-company-thats-cleaning-up-in-the-fight-against-coronavirus/?sh=17c33527568a | The Family Soap Company That’s Cleaning Up In The COVID-19 Fight | The Family Soap Company That’s Cleaning Up In The COVID-19 Fight
CEO Kelly Vlahakis-Hanks in her California soap factory. Credit: John Gilhooley, courtesy Earth Friendly Products
“Skin is your largest organ,” says Kelly Vlahakis-Hanks, CEO of Earth Friendly Products. “If you’re washing it 20 times per day you want something that’s not going to irritate. If you have harsh products, you’re not going to want to use them, and that makes you more susceptible to getting ill.”
So it’s a no-brainer, she says, why people are snapping up cases of her Ecos brand soaps ($12.49 for 225 ounces) faster than Amazon AMZN , Walmart WMT , Costco and Sam’s Club can restock them.
It’s not just Ecos. Every soap maker seems to be enjoying a coronavirus demand bubble. Tim Rose is an EVP at Costco, where he’s worked for 36 years sourcing everything from soap to fruit to gasoline. “We’ve seen panic buying before, but nothing can beat this,” says Rose. “We’ve never sold as much soap.” There’s good reason why soap is the most basic and effective anti-virus countermeasure — its amphiphillic nature means that one end of a soap molecule is hydrophillic (likes to bind with water) while the other is hydrophobic and prefers to bind with proteins and lipids, like those protecting and encapsulating viruses and other pathogens.
Ecos and many of EFP’s other products are certified “Safer Choice” by the EPA. They’re biodegradable, with no petroleum-based surfactants. Instead the company uses coconut oil sourced from sustainable plantations – Vlahakis-Hanks recently visited one plantation in the south Pacific islands of Vanuatu. “We’re PH-balanced,” she says. And the Ecos dish soap has an ingredient to treat eczema. “You don’t want the skin breaking down. That makes it more vulnerable.”
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As soon as the coronavirus lockdown orders began, the Cypress, California-based EFP got its factories in California, Illinois, Washington and New Jersey declared essential businesses. Straining to keep up, Vlahakis-Hanks has added second and third shifts. Even so, they had to inform an e-commerce partner that they wouldn’t be able to fulfill the flood of 5,000 soap orders per day. As a family owned company, EFP doesn’t disclose financials; Forbes estimates annual revenues to be in the neighborhood of $150 million.
The company was founded in 1967 by Eftychios Vlahakis, known as Van. He was born in Crete, lost his father in a World War 2 concentration camp, and in 1953 at age 18 emigrated to Chicago. He studied chemistry at Roosevelt University and after school got a job formulating cleaning products. Exposure to harsh chemicals used in his work caused him headaches and skin irritation, so Vlahakis (who died in 2014) set out to make his own kinder, gentler cleaning products.
“He was way ahead of his time,” says Rick Fully, who met Vlahakis in the 1990s and has served on the company’s board. “Van understood that chemicals can be very powerful. You need to use the proper chemical at its proper strength.” The philosophy behind growing Ecos was simple, says Fully: “What else can we clean without messing up the environment and hurting everybody.”
Rose, at Costco, got to know Vlahakis when the chain began selling Ecos. “He was not the typical loud businessman. He cared. About skin, and about people.” In 2013 a movie was made of Vlahakis’s rags-to-riches life called Green Story; it features Malcolm McDowell as a bad guy conniving to force the Vlahakis character to sell his company. Kelly Vlahakis-Hanks was played by Shannon Elizabeth (American Pie 1 and 2). Her husband Eric Hanks says the movie “captures the essence” of his father-in-law, who wasn’t interested in parting with the enterprise he had spent nearly 50 years building, and certainly wasn’t interested just in making money.
Kelly, 42, had been groomed by Van to take the reins for nearly a decade, and she walks the walk. It’s been nearly 7 years since EFP went carbon-neutral and installed solar panels on their roofs. Now that the systems are paid off, they get free, green electricity. The company gives employees grants to offset costs of installing solar at home or to buy plug-in vehicles. And there’s a bonus for living within a certain radius from work. Starting pay is $17 an hour. Costco’s Rose says he’s noticed when he has visited factories that “workers are happy and proud of what they do.” Not only does it cost a lot to train new workers, says Vlahakis-Hanks, “we want to keep people. We’re proud of our corporate memory.” To keep the family connections alive, in 2018 Ecos opened a new manufacturing plant in the Vlahakis homeland of Greece to serve the European and African markets.
Some memories may be best suppressed. When Van died in 2014, legal wrangling began between Kelly Vlahakis-Hanks and her two elder half-siblings — an estranged half-sister and John Vlahakis, who for years had served as an officer of the company. In 2015, John pled guilty to a federal charge of tax fraud pertaining to his use of company credit cards, and paid $300,000 in restitution. That same year John attempted to persuade Kelly to sell Earth Friendly Products and the Ecos brand in a deal that would have valued the company at $150-200 million.
Workers on the Ecos line. Courtesy Earth Friendly Products
The siblings settled their soap opera in a 2015 arbitration. Kelly now has firm control over the company, which is about the same size as arch-rival Seventh Generation was in 2016 when Unilever bought it for $700 million. The biggest player in soap, Colgate-Palmolive CL , generated $2.4 billion in net income on $16 billion in 2019 sales last year and recently donated 25 million bars to help in fighting coronavirus.
Right now Ecos factories are running at 30% faster rate than previous peak and making up for social distancing requirements by running third shifts. Last week the company did shut down operations for a day to do a deep cleaning and give workers a chance to rest.
They’re inspired by new demand emerging in unusual markets. Costco recently introduced to its stores in China the Ecos baby-friendly detergent (certified “Safer Choice” by the EPA), which features the “Disney Baby” marketing seal of approval. A 100-ounce bottle of the stuff is about $10.49 retail, and in China it sold out so quickly there was none available at any price. Rather than disappoint discerning new parents — who are having 15 million babies a year in China — Costco placed an emergency order to Ecos. “They wanted more so bad we airfreighted laundry detergent,” says Fully.
A new Ecos soap innovation will help reduce those freight costs. Called Ecos Next, it’s a dehydrated laundry soap that comes in a box, weighs almost nothing, and looks like little sheets of paper. Ecos figured out how to dry out soap into sheets, which can be cut into pieces and packaged. One sheet per load. Saves 8 pounds per gallon in shipping weight. Could be the next step in evolution beyond the detergent “pods” popularized in recent years by Procter & Gamble PG ’s Tide. The next Ecos line extension: cleaner, gentler hand sanitizer. Says Vlahakis-Hanks, “We’re hoping that once this is over we will end up with customers we never had before.”
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19d8c64270a866e7ff9ea792269ca99a | https://www.forbes.com/sites/christopherhelman/2020/04/30/shell-slashes-dividend-we-dont-know-whats-on-the-other-side/ | Shell Slashes Dividend: ‘We Don’t Know What’s On The Other Side’ | Shell Slashes Dividend: ‘We Don’t Know What’s On The Other Side’
Ben van Beurden, 2017. © 2017 Bloomberg Finance LP
Royal Dutch Shell surprised the oil world today, slashing its dividend — for the first time since World War II — by 66%. At a press briefing, Shell CEO Ben Van Beurden explained the dramatic decision: “We live in a crisis of uncertainty at the moment; we don’t know what is on the other side.”
The move will enable Shell to plug nearly $10 billion in cash outflow per year, and do wonders for its ability to whether the downcycle. According to analyst Tom Ellacott at WoodMackenzie, this will reduce Shell’s breakeven oil price from $51 per barrel to $36. Benchmark Brent crude is trading at $25/bbl today.
Though helpful for Shell’s balance sheet integrity, slashing dividends do undercut a primary rationale for holding shares. According to Cowen & Co. data, since 2014 Shell has averaged a 6.4% dividend yield. This will drive it down to the 3% range. Shares in Shell fell 11% in Thursday morning trading — twice the declines of its peers.
That’s ok, says Reid Morrison, head of PwC’s global energy advisory business, who encourages other oil companies to follow suit. “Because it’s a cyclical business you need to design around low cycle.” It’s not a time to be stubborn, he says. “Those that pivot earliest and fastest, they’ll have a platform that can survive all cycles.”
Don’t expect Shell to reinstate its dividend any time soon, notes Jason Gabelman at Cowen, who sees Shell’s use of the term “reset” as connoting low likelihood of a return to what used to be considered normal.
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The last time an oil supermajor cut its dividend was BP in the wake of the Macondo oil spill in the Gulf of Mexico, 10 years ago. According to analyst tallys, if the other giants — Chevron CVX , Exxon, BP and Total — cut on the same scale as Shell it could reduce payouts from $41 billion to $27 billion. BP and Exxon announced this week that they would be maintaining their payouts. Chevron and Total’s decisions are expected Friday.
Shell announced that it would be shutting-in some 800,000 barrels per day of oil production out of total output of 3.7 million bpd. How long the cuts will endure is anyone’s guess. Van Beurden’s shocking admission: “We do not expect a recovery of oil prices or demand for our products in the medium term.”
He said that life on earth will “be altered for some time to come” with fear of Covid-19 inhibiting a return to our frequent flying, fast-driving lives. “Will demand ever go back to where it was? That is hard to say.”
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09856a641973e5cc0161970ef1fd6003 | https://www.forbes.com/sites/christopherhelman/2020/10/27/oil-deal-unites-father-and-son-to-form-permian-basin-powerhouse/?sh=794565853c1e | Oil Deal Unites Father And Son To Form Permian Basin Powerhouse | Oil Deal Unites Father And Son To Form Permian Basin Powerhouse
Scott and Bryan Sheffield, in the Permian Basin, 2014. Scogin Mayo, for Forbes
The mergers and acquisitions are coming hot and heavy in the wasteland of the busted oil and gas sector. The consolidation wave began in earnest with Chevron’s CVX $13 billion acquisiton of Noble Energy NBL in July. Then in recent weeks, Devon Energy DVN has acquired WPX Energy, for $6 billion, ConocoPhillips COP bought Concho Resources for $9.7 billion, and Pioneer Natural Resources PXD bought Parsley Energy for $7.6 billion. Then, over last weekend Canadian operator Cenovus agreed to acquire Husky Energy for $8 billion (in that deal, Hong Kong billionaire Li Ka-Shing, who held about 70% of Husky, will get about $2 billion in new Cenovus shares).
So, is this just a lot of rearranging deck chairs on the stricken Titanic of the global oil industry? No, more like fashioning sturdy lifeboats. What all these deals have in common thus far is asset quality. Even at a stubborn $40 per barrel, all these companies have at least some fields that can still generate positive cash-on-cash returns. “This M&A is entirely defensive,” says Adam Waterous, CEO of Waterous Energy Fund. “The industry got over capitalized. It was way too big and now it has to shrink.” That’s why we’re seeing all-stock deals with very small premiums. “The future looks tough — sellers are waving the white flag.”
One story so far stands out among the M&A — Pioneer buying Parsley, for which it will issue $4.5 billion in stock and take on $3.1 billion in debt. This represents a kind of fairytale ending for father and son Scott and Bryan Sheffield, who are the CEO of Pioneer and founder of Parsley, respectively. These princes of the Permian have witnessed nearly the entire history of the basin, made a lot of money in the process, and now consolidate their family interests in what will be one of America’s pre-eminent shale fracking champions, producing 550,000 barrels per day.
Scott Sheffield, 68, ran Parker & Parsley in the 1980s, which turned into Pioneer. From roots in the Permian basin, Pioneer began to explore. “They spent 20 years evaluating every play in the world except the Permian basin,” says Phillip Z. Pace, an investor with Chambers Energy Management. “I chased them to Alaska, Argentina, Tunisia.” No one could believe it, when, at the dawn of America’s shale fracking boom, Pioneer engineers began figuring out that they had been sitting on the moderlode all along, in the form of thin layers of oil-soaked rock waiting deep beneath the conventional reservoirs they had drilled decades before.
Bryan (now 42) after some early training at Pioneer, started his company to operate 100 decades-old oil wells drilled by his grandfather Joe Parsley. In the brief oil recession of 2009 Bryan raised funds for Parsley to buy up huge amounts of acreage in the Permian at deeply discounted prices — a tiny fraction of what it later came to be worth. In 2014 Parsley’s IPO raised $750 million. That same year shares in Pioneer topped out at an all-time high of $221 (they are $83 today).
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The new Pioneer will have a commanding presence in the Midland Basin portion of the Permian. SEC Filings
Both companies could have kept growing fast, had oil prices cooperated, but in 2016 a first oil bust put the breaks on the industry, and its go-go share prices which had made Bryan a billionaire on his Parsley shares. Since the peak, Parsley has lost 70% of its equity value, while Pioneer is down 60%. Early to recognize the need to consolidate, a year ago Parsley bought Jagged Peak Energy for $2.27 billion.
Scott Sheffield initially retired in 2016 to a ranch in Sante Fe he bought from Jane Fonda. While in 2018 Bryan also retired, handing the reins to Matt Gallagher, now 36. But Scott couldn’t stay away, and last year he returned to the CEO job.
“Buying Bryan’s company raises eyebrows,” concedes Phil Pace, one of the earliest investors in Parsley and long a friend of both Sheffields. “But acreage overlap is good enough and consistent enough,” that there won’t be much objection from shareholders. Pioneer is paying just an 8% premium in the all-stock deal.
Sheffield and Gallagher went on CNBC last week to tout the deal to Jim Cramer. “It’s all about putting the two best Permian companies with the best inventory together, and creating a larger company with a better free cash flow profile,” said Sheffield.
This will be the trend in oil mergers for a while, says another early backer of Parsley. Today investors don’t care about growth. They are disillusioned with poor returns on capital. Thus cash is king. Pioneer’s revamped business model has it living within cash flow at virtually any oil price, and returning capital to investors with variable dividends. The new Pioneer will have at least a dozen years of drilling inventory on its 920,000 acres (with no federal land holdings).
Once the deal goes through, Bryan will be a leading shareholder in Pioneer with a roughly 2% equity stake. Wil Van Loh, chairman of private equity giant Quantum, Parsley’s biggest holder, will own 4%.
Talking to analysts last week, Scott Sheffield proclaimed Pioneer’s fortitude: “I just think that there’s only going to be three or four really survivors, independents, and that’s going to be probably most likely ConocoPhillips, EOG and Pioneer and maybe Hess long term.”
Indeed it’s important for executives who have survived this year’s Covid-caused oil bust to keep in mind that it could happen again. David Johnston, oil consultant at E&Y says executives will be well served to remember what Covid-19 did to their businesses. “It’s one of those things you don’t want to forget. Everyone has short memories, that’s why there are bubbles.”
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ba9b4253b8f2a71ddc4284939e4b1167 | https://www.forbes.com/sites/christopherhelman/2021/03/30/gov-jim-justice-no-longer-a-billionaire-after-850-million-debt-to-insolvent-greensill-capital-revealed/?sh=41f01125433b | Gov. Jim Justice No Longer A Billionaire, After $850 Million Debt To Insolvent Greensill Capital Revealed | Gov. Jim Justice No Longer A Billionaire, After $850 Million Debt To Insolvent Greensill Capital Revealed
Jim Justice, governor of West Virginia and owner of the Greenbrier, photographed for Forbes in May ... [+] 2018. Jamel Toppin/The Forbes Collection
James C. Justice II, the governor of West Virginia, made a fortune in 2009 when he sold Bluestone Resources, a collection of his best West Virginia coal mines, to Russian company Mechel OAO for $500 million plus several hundred million dollars in Mechel stock. That deal was enough to push Justice into the ranks of The Forbes 400 in 2011, with an estimated net worth of $1.1 billion, later peaking at $1.7 billion.
But the coal industry has deteriorated, and with it, the Justice family fortunes. In 2015, after coal prices plunged, the Russians insisted that the Justice family buy Bluestone back. So Justice paid $5 million for his old company, but also assumed some $300 million in environmental and legal obligations. Justice—in new court documents—says that the Russians left behind a shambles. “The business had been mismanaged under Mechel ownership, burdening it with substantial reclamation, union and trade obligations.”
Despite the challenges, Jim Justice, 69, and his son James C. Justice III, or “Jay,” say in a new lawsuit against Greensill Capital that they have maintained the objective of “returning Bluestone to profitability.” Never mind that Justice long ago earned the reputation of being a businessman who never pays his bills—they just needed some more capital. Justice found a willing party in Greensill—an upstart supply chain lender, which in April 2019 extended the Justices the first of some $850 million in outstanding loans.
Greensill had good reason to want to build a relationship with Justice, because Bluestone’s metallurgical coal had a natural buyer in the form of Greensill’s biggest client—GFG Alliance. Run by U.K. entrepreneur Sanjeev Gupta, GFG manages an empire of mostly secondhand steelworks and smelters across the U.K. and around the world. Notable assets include the last major steelworks in Scotland; Britain's last aluminum smelter; the largest electric arc furnace in the U.K. for melting scrap metal. Gupta built his steel empire with $5 billion borrowed via Greensill.
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Greensill, which in March filed for insolvency in the U.K., and is now in receivership, was not a traditional lender. Rather, Greensill was an enthusiastic practitioner of supply chain finance methods such as “invoice discounting”—in which a business unwilling to wait 60 or 90 days for a customer to pay would sell its receivables to Greensill, which would cut them a check immediately, minus a fee, then collect from the customer later. It was a lending practice that founder Lex Greensill cultivated in his early days financing crops for farmers in his native Australia, where he grew up on a sweet potato farm.
Greensill attracted plenty of believers. Credit Suisse CS invested some $10 billion. Investment advisor GAM Holdings put in $2 billion. They packaged up Greensill’s supply chain-backed loans and sold them on to institutional investors. Private equity powerhouse General Atlantic invested $250 million for Greensill Capital equity in 2018. Softbank Vision Fund put in $1.9 billion. Greensill says it underwrote $143 billion in financing in 2019. A $6 billion IPO was rumored. But the Greensill experiment fell apart. After suffering steep loan losses, with big customers in default, Greensill’s packaged loan products suddenly looked far riskier than anyone believed possible. When Greensill lost its insurance coverage from Tokio Marine in early March, the house of cards toppled.
Greensill didn’t invent supply chain financing, but he did push the envelope in lending against nonexistent orders. The Justices—in their complaint filed in U.S. District Court in the Southern District of New York—describe Greensill’s method of buying “prospective receivables,” that is, amounts that “prospective buyers” would presumably agree to pay Bluestone for coal that they could reasonably be expected to order at some point in the future. It’s a risky endeavor, like extending someone a payday loan against their salary for a job that they haven’t even applied for yet. Justice disclosed that Greensill would advance Bluestone $15 million at a time for prospective receivables, i.e., fake orders from nonexistent customers. Greensill’s interest and fees for that credit would come to about $500,000. Every few months, Greensill would “roll” these loans—giving Justice new cash to pay off the old advances. Eventually, say the Justices, they and Greensill devised the “cashless roll”—no money would change hands, they'd just pay fees and interest. All told, the Justices claim to have so far repaid Greensill nearly $130 million in fees and interest out of the initial $850 million loaned. With Greensill now insolvent, it’s unlikely that Justice can continue to roll these accounts.
The Greensill case has captivated Ben Hunt, who in early March wrote a trenchant analysis of what he considers dirty doings at Greensill on his wonky Epsilon Theory site. Says Hunt, “What really surprised me about the Justice case is that it basically says, ‘We were engaged in bank fraud’”—his assessment of the legality of borrowing against fake invoices from fake customers. Justice admitted that “they make up these prospective receivables to borrow against because nobody would give them against their actual business.” Their basic complaint, says Hunt, is that Greensill lied to Bluestone about their ability to commit bank fraud over the long term, “so we’re going to sue the bank for it not turning out the way they promised. They’re going to try to make themselves the victim.”
If they were counting on Gupta being a long-term customer, those hopes are dashed. Justice claims that in mid-2020 they received their first order from GFG for a single cargo, which they delivered. Ironically, months passed, and GFG never paid. In January 2021 Gupta ordered a second cargo, but the Justices decided not to ship it, allegedly after Jay Justice had a chat with Greensill director Roland Hartley-Urquhardt, who raised “concerns regarding the credit risk of GFG.”
Jim Justice, governor of West Virginia, at the Greenbrier Hotel, photographed for Forbes in May ... [+] 2018. Jamel Toppin/The Forbes Collection
With GFG hitting the skids, and Greensill’s collapse, what were the implications for Bluestone's financing arrangement? The Justices claim they were appalled when Greensill in February 2021 demanded that Bluestone speed up the return of its borrowed money and hand Credit Suisse $300 million by the end of the third quarter, and perhaps even all of it by the end of 2021. The Justices, claiming this was the first time they’d ever heard of Credit Suisse, did not hand over any emergency cash and instead sued Greensill for “continuous and profitable fraud” committed “under the guise of establishing a long-term financing arrangement with Bluestone.”
The Justices accuse Greensill of a “bait-and-switch” maneuver: “Greensill Capital—from the start—agreed to finance Bluestone based not on the existence and collectability of Bluestone’s then-existing receivables, but rather based on Bluestone’s long-term business prospects.” Greensill was wrong to demand accelerated repayment from them because it was understood, according to the Justices, that “Bluestone would repay Greensill Capital through the eventual fruit borne from the rebuild.” Justice in the complaint says most of what they owe Greensill wouldn’t be due until 2023, or “until such time that the business could generate sufficient cash flow to begin to amortize the debt.”
So maybe never? The Governor already has a hard-earned reputation of not paying debts he owes. Coal couldn’t be less popular. No SPAC is going to come to the rescue of Justice’s coal companies, which are subject to EPA consent decrees over pollution caused by their operations, and could be subject to millions more in penalties tied to leaks of selenium-tainted water at the Red Fox surface mine. Even without those burdens it's hard to see what value remains in the Justice mines. U.S. coal production fell 25% in 2020, and 60% of all coal-fired power plants have been mothballed in the past decade. The bankruptcies are legion: Murray Energy, Foresight Energy, Lighthouse, White Stallion, Blackjewel and Rhino Resources have all gone bankrupt recently. Peabody Energy BTU is seeking to avoid a second trip through Chapter 11. Those that have made it back to the public markets trade at a depressed average price-to-sales ratio of .45.
It’s not evident what kind of coal revenues the Justice companies generate. According to Dun & Bradstreet, the James C. Justice Cos. did $173 million in revenues in 2018. A Justice subsidiary, Southern Coal (according to court documents the parent company of Bluestone), according to D&B, did $88 million in revenues. Justice attorneys declined to share any details on the coal mine assets that constitute the collateral for the Greensill loans and did not respond to a question about whether the Justices had defaulted on any of their obligations to Greensill.
Jim Justice, in a spring 2019 interview with Forbes, said that since taking back Bluestone from Mechel in 2015, he had “cleaned up $60 million of reclamation liabilities left from the Russians,” paid $30 million owed to vendors and $20 million in taxes, and rehired 250 workers. “I could have put them into bankruptcy, but I would not do that,” he said. “It takes time to fix everything and do it right, and along the way you get people who are throwing rocks at you.”
With Mechel deep in the rearview mirror, it’s only natural that Justice would look to shift blame, insisting in the complaint that Greensill is “responsible for all damages to plaintiffs caused as a result of their egregious actions.” And there will be plenty of damage, they say: “Greensill Capital’s sudden and unjustified abandonment of Bluestone, together with all of the press surrounding Greensill Capital’s fall, now present a clear and present threat to Bluestone’s business.”
There are not a lot of bright spots in the Justice family empire. Last year the PGA Tour permanently canceled its longtime stop at the Greenbrier Hotel, which Justice bought out of bankruptcy in 2009 and has struggled to renovate since devastating 2016 floods. Justice has been fighting since then with insurance adjusters and claims to have put more than $200 million into renovations, though it needs much more. Meanwhile, the hotel has become a political lightning rod in West Virginia—though federal investigators looking into Justice’s use of the Greenbrier for political purposes cleared him of wrongdoing last year.
Justice has long insisted to Forbes that the Greenbrier is worth $1 billion on its own. We'll believe that when someone comes along and pays him that much for it. Meanwhile, as Greensill’s creditors scrutinize its loans, exposures and collateral, we’ll be curious to better understand what Justice spent Greensill’s $850 million on, whether he has any of it left, and how many cents on the dollar he’ll end up settling for with Greensill’s insurers. Until more is revealed, don't expect to see Jim Justice return to the billionaires’ list.
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982fd55d047eaee090e86e871ce35de9 | https://www.forbes.com/sites/christopherhelman/2021/04/16/tax-attorney-faces-14-years-in-prison-for-allegedly-helping-billionaires-robert-smith-and-bob-brockman-dodge-the-irs/ | Tax Attorney Facing Prison For Allegedly Helping Billionaires Robert Smith And Bob Brockman Dodge The IRS | Tax Attorney Facing Prison For Allegedly Helping Billionaires Robert Smith And Bob Brockman Dodge The IRS
Robert Smith, June 2020. The Washington Post via Getty Images
It’s a new legal development for private equity billionaire Robert F. Smith and his onetime mentor Bob Brockman, already accused of the biggest tax evasion in U.S. history.
Yesterday, the U.S. Department of Justice announced the indictment of Carlos E. Kepke, a Houston tax attorney who prosecutors say conspired with Smith to hide $225 million in untaxed capital gains from the IRS between 1999 and 2014 — during the years when Smith was rapidly growing Vista Equity Partners.
Prosecutors say that Smith paid Kepke $1 million since 2007 for his services, which included assisting in the preparation of Smith’s false 2012-2014 tax returns and setting up offshore entities to aid in tax evasion.
Prosecutors allege Kepke created for Smith a limited liability company in Nevis called Flash Holdings, as well as an offshore trust based in Belize, called Excelsior Trust. Excelsior was set up to own Flash. Thus, when Smith’s portion of capital gains from Vista funds was deposited into accounts held in Flash’s name in Switzerland and the British Virgin Islands, the money could be routed to the offshore Excelsior trust, away from the eyes of the IRS.
According to the DOJ’s press release, Kepke enabled what Smith has admitted to as an illegal scheme. Thanks to Kepke’s work, “Smith was able to hide this income because Excelsior, and not Smith, was the nominal owner of Flash. Smith then allegedly failed to timely and fully report his income to the IRS.”
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An official indictment is not yet available from U.S. District Court for the Northern District of California, in San Francisco. Kepke is scheduled to be arraigned April 22. According to the announcement, he faces 5 years in prison on one conspiracy count and 3 years on each of 3 counts of preparing false tax returns. There was no answer at the number listed for Kepke’s Houston law office. A University of Texas law school graduate, he appears to have been admitted to the Texas bar in 1964.
This indictment looks to be the next step in the DOJ’s unraveling of a decade’s long financial fraud against U.S. taxpayers perpetrated not just by Robert Smith but also, allegedly, by his mentor and financial backer Bob Brockman. Brockman in 2000 agreed to put up $1 billion to fund the startup of Smith’s private equity group, which now has $73 billion under management.
Last October Smith entered into a “non-prosecution agreement” with the DOJ, in which he admitted to felony tax evasion and the wrongful use of roughly $30 million in charitable trust funds for his personal benefit. Smith agreed to fork over $139 million in taxes and penalties, and to cooperate against affiliated scofflaws like Brockman, and Kepke. U.S. Attorney David L. Anderson said at the time that despite having committed “serious crimes,” Smith’s cooperation had “put him on a path away from indictment.”
Kepke’s indictment comes as no surprise to Smith’s camp, who insist Smith is now out of legal jeopardy. “This indictment is not a new development as top Robert Smith. He resolved his situation last year with the government and this in no way affects that resolution,” says Smith attorney Emily Hughes
Indeed, prosecutors are no doubt focusing their attentions on Kepke’s primary client, Bob Brockman. Indicted by the DOJ for evading taxes on some $2 billion in gains from Vista Equity Partners investments, Brockman does not appear to be in a position to cut a deal like Smith did. Especially with Smith providing evidence against him.
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According to a December 2020 motion by Brockman’s attorneys to move his case from San Francisco to Houston, Smith has already told prosecutors that Kepke “had a central role in establishing the trusts and assisting Mr. Brockman with asset planning.”
Kepke’s name also appears in a secret 2017 memo written to Brockman by his money man and former trustee Evatt Tamine (submitted as evidence), in which Tamine writes about meeting with Smith, his attorney and Carlos Kepke in order to help cover their tracks: “I worked through their files and identified areas of concern.”
In that same memo, Tamine describes traveling to see the widow of a recently deceased Brockman confidant from whom he collected and destroyed “drives, disks or documents” with incriminating financial information.
With Smith and Tamine already cooperating against Brockman, this new indictment could be aimed at getting Kepke to talk as well.
Meanwhile in Bermuda, oversight of the multi-billion-dollar A. Eugene Brockman Charitable Trust, remains in limbo, as attorneys for Brockman and his wife Dorothy argued recently to the Bermuda appelate court that they ought to appoint a new independent trustee to oversee the trust, replacing anyone connected to former trustee Tamine. According to attorneys, Cayman Island-based trust specialist Maples Group has agreed to take on the job.
Entities owned by the Brockman trust control Reynolds and Reynolds, the provider of software solutions to auto dealerships which Brockman ran until his retirement last year. According to court documents, he and his attorneys are now focused on convincing prosecutors and court-appointed psychiatrists that he is suffering from dementia too far advanced to allow him to stand trial.
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