A total of 210,000 gallons of oil leaked Thursday from the Keystone pipeline in South Dakota, the pipeline’s operator, TransCanada, said.
Crews shut down the pipeline Thursday morning, and officials are investigating the cause of the leak, which occurred about three miles southeast of the town of Amherst, said Brian Walsh, a spokesman for the state’s Department of Environment and Natural Resources.
This is the largest Keystone oil spill to date in South Dakota, Walsh said. The leak comes just days before Nebraska officials announce a decision on whether the proposed Keystone XL Pipeline, a sister project, can move forward.
In April 2016, there was a 400-barrel release — or 16,800 gallons — with the majority of the oil cleanup completed in two months, Walsh said.
About 5,000 barrels of oil spilled Thursday.
“It is a below-ground pipeline, but some oil has surfaced above ground to the grass,” Walsh said. “It will be a few days until they can excavate and get in borings to see if there is groundwater contamination.”
There were no initial reports of the oil spill affecting waterways, water systems or wildlife, he said.
TransCanada said it was working with state and federal agencies.
“The safety of the public and environment are our top priorities and we will continue to provide updates as they become available,” the company said.
The Environmental Protection Agency is monitoring the situation and will provide resources and assistance if needed, a spokesman said.
“EPA is aware of the spill and is receiving periodic updates from the state of South Dakota, which is overseeing response activity at the spill site,” he said.
Concerns about the spill
The Keystone Pipeline system stretches more than 2,600 miles, from Hardisty, Alberta, east into Manitoba and then south to Texas, according to TransCanada. The pipeline transports crude oil from Canada.
The proposed Keystone XL Pipeline, which would stretch from Hardisty to Steele City, Nebraska, would complete the proposed system by cutting through Montana and South Dakota.
The sections of pipeline affected stretch from Hardisty to Cushing, Oklahoma, and to Wood River, Illinois, the company said.
The spill occurred in the same county as part of the Lake Traverse Reservation. The leak location is not on Sioux property, but it is adjacent to it and has historical value, said Dave Flute, tribal chairman for Sisseton Wahpeton Sioux Tribe.
“We want to know how long is it going to take to dig this plume of contaminated soil and how can we be reassured, without a doubt, that it has not and will not seep into the aquifer,” he said.
Flute, along with the tribal emergency management director and the manager of the tribal office of environmental protection, arrived Friday morning at the staging area of the leak site to meet with representatives from TransCanada. Flute said he was out there to offer assistance and to understand the cause of the leak and the environmental impacts it might pose.
“We want to find out, was there a crack in the pipe? We don’t know. We want to get that information,” Flute said. “More importantly, and to stay positive, they did clean up the site, they did contain it.”
Environmental activist group Greenpeace said the spill shows the new pipeline in Nebraska should not be approved.
“The Nebraska Public Service Commission needs to take a close look at this spill,” said Rachel Rye Butler of Greenpeace. “A permit approval allowing Canadian oil company TransCanada to build Keystone XL is a thumbs-up to likely spills in the future.”
The approval followed years of intense debate over the pipeline amid hefty opposition from environmental groups, who argued the pipeline supports the extraction of crude oil from oil sands, which pumps about 17% more greenhouse gases than standard crude oil extraction. Environmentalists also opposed the pipeline because it would cut across the Ogallala Aquifer, one of the world’s largest underground deposits of fresh water.
Tar sands oil is much thicker and stickier than traditional oil, significantly complicating cleanup efforts. The fact it’s thicker also means it needs to be combined with other hazardous materials to allow it to be transported in pipelines.
Native American groups have argued the pipeline would cut across their sovereign lands.
Trump said the new pipeline will be a big win for American workers, but critics say it won’t be, because most of the jobs would be temporary.
Dakota Access pipeline
TransCanada said Thursday that the section of Keystone pipe that was leaking was isolated within 15 minutes after a drop in pressure was detected.
That pipeline, which runs through both Dakotas and two other states, drew fierce resistance from the Standing Rock Sioux tribe in North Dakota, the tribe’s allies and environmentalists.
Opposition to the pipeline sparked monthslong protests, with as many as 10,000 people participating during the peak of the demonstrations. Clashes with police at the protests turned violent at times, with one woman nearly losing her arm after an explosion last November.
So … that was fast. US natural gas stakeholders barely had time to congratulate themselves for pushing coal out of the power generation market, and it looks like karma is already getting the last laugh. Low-cost renewable energy is beginning to nudge natural gas aside. In the most recent and striking development, California’s massive 262-megawatt Puente gas power plant proposal has been shelved, perhaps permanently.
Electricity Consumers Push Back On Natural Gas
Reporter Ivan Penn of the LA Times has the scoop on the Puente project, and he teases out several powerful forces at work against natural gas.
One key element is consumer pushback. At first glance, the proposal doesn’t seem overly controversial. The proposed plan, a project of NRG Energy, does not involve constructing a new facility. It would have replaced two existing gas units at the company’s existing Mandalay power generation facility in Oxnard, California.
All things being equal, the proposal would provide at least some degree of environmental benefit, because the new units would use 80% less water for cooling than the existing ones.
However, criticism of the new gas project was intense. Penn sums it up: earlier this month, a two-member review committee of the California Energy Commission took the rare step of issuing a statement recommending that the full Commission reject the plans after receiving “hundreds of messages protesting the project as another potential pollution threat to a community already overwhelmed by electricity-generating plants.”
The Rates Are Too Damn High
Aside from concerns about local air quality, Penn also cites an LA Times investigation indicating that the state’s energy policy has over-estimated the demand for natural gas power plants, resulting in artificially high rates:
“The commissioners’ recommendation followed Los Angeles Times investigations that showed the state has overbuilt the electricity system, primarily with natural gas plants, and has so much clean energy that it has to shut down some plants while paying other states to take the power California can’t use. The overbuilding has added billions of dollars to ratepayers’ bills in recent years.”
According to Penn, NRG officials maintain that older plant retirements by 2021 make replacement imperative to build up now.
At current costs, local ratepayers won’t get much relief if old power units are replaced with wind or solar.
My Beach, My Choice
Land use issues and environmental justice issues also come into play. NRG’s Mandalay power generation facility is located on the beach, and as NRG acknowledges, in 2014 the City of Oxnard enacted a moratorium on coastal development.
That complicates development plans within the power plant site, though NRG emphasizes that the final decision rests with state-level regulators.
Among those objecting to the plant from outside the local community is billionaire investor Tom Steyer, who co-authored an op-ed about the proposed facility raising the environmental justice issue:
“…in our state, not all beaches are created equal. That becomes painfully clear if you drive 50 miles north of Los Angeles to Oxnard, where the beaches have been seized by corporate polluters, marred by industrial waste and devastated by three fossil-fuel power plants that sit along the shoreline.
“Oxnard has more coastal power plants than any other city in the state, and not coincidentally, its population is predominantly Latino and low-income….”
Oxnard residents — and no doubt, real estate developers — are looking forward to transitioning coastal property out of industrial use altogether. Here’s LA Times reporter Dan Weikel on that topic:
“Many residents of this predominantly Latino city with a population of 205,000 say they are fed up with the degradation. Their growing dissatisfaction with the condition of large sections of beach has coalesced into an effort to deindustrialize and restore the shoreline of this city that is framed by Ventura and Camarillo and wraps around the town of Port Hueneme.”
So, What’s The Solution?
The Puente project has been suspended, not canceled. However, chances of revival are slim. Although the most recent study affirms that renewable energy is a more expensive choice currently, Steyer points out that the redevelopment of Oxnard’s beachfront could be balanced out by new economic activity related to tourism and recreation.
That opens up a whole ‘nother can of worms, as waterfront development typically drives up the cost of housing, squeezing former residents to outer rims with longer commutes and fewer resources.
Sticking to the energy cost issue, the basic problem comes down to local energy vs. long distance transmission.
NRG makes the case that local energy generation is more reliable. That’s a fair assessment as a general principle, as the old model of centralized power plants falls out of favor. Local and on-site generation is becoming a consensus argument among energy experts, regardless of the power source.
On the other hand, the risk involved in transmitting electricity from remote wind farms and solar power plants could be offset by local storage sites, where the growing microgrid movement would come into play.
New tools for financing energy efficiency improvements could also help tamp down local energy demand and ease the way for a more interactive grid that enables consumers to tweak their electricity consumption to help prevent outages.
Cities like Oxnard can also tap into a growing renewable energy knowledge base that leverages local opportunities for renewable energy development and energy efficiency improvements.
Most of all, the Trump administration’s willy-nilly approach to oil and gas development — for example, a new proposal involving drilling along the Pacific coast — raises the stakes for citizens far outside of the communities dealing with local land use issues, leading to a groundswell of support for alternatives.
Talk to a Big Oil executive these days, and the chances are they’ll steer the conversation toward gas.
“In 20 years, we will not be known as oil and gas companies, but as gas and oil companies,” Patrick Pouyanne, chief executive officer of French giant Total SA, told a conference in St. Petersburg last month.
Pouyanne and his peers have pitched the fuel as a bridge between a fossil-fuel past and a carbon-free future. Gas emits less pollution than oil and can be burned to produce the power that grids will need for electric cars.
But with the cost of renewable technologies falling sharply, some are warning that the outlook may not be so rosy. Forecasters are beginning to talk about peak gas demand, spurred by the growth of alternative power supplies, in the same breath as peak oil consumption, caused by the gradual demise of the internal combustion engine.
In a long-term outlook published last month, Bloomberg New Energy Finance predicted that gas’s market share in global power generation will drop from 23 percent last year to 16 percent by 2040, and that gas-fired power generation capacity will start to decline after 2031. BP Plc has highlighted “risks to gas demand” as a key uncertainty, including the possibility that consumption plateaus by 2035, “squeezed out by non-fossil fuels.”
If those forecasts play out, it has huge implications for Total, BP and other oil majors already grappling with a possible surge in electric car use. Gas-exporting nations most notably Russia, Qatar and Australia will also be exposed. The global gas industry, based on multi-billion dollar pipelines and export plants, has decades long investment cycles and decisions being made today rely on rising demand until the middle of the century.
The energy transition is “fundamentally a force that cannot be stopped,” Royal Dutch Shell Plc Chief Executive Officer Ben van Beurden said last month. “It is both policy and public sentiment, but also technology that is driving it.” Oil demand will probably peak in the 2030s or 2040s, he said, while “gas will not peak before the 40s if not in the 50s.”
Shell is still betting heavily on the future of gas after last year’s $50 billion purchase of BG Group Plc, but it’s also planning to spend $1 billion a year on new energy technologies such as renewables.
“There’s no question that gas usage declines over time,” Geisha Williams, CEO of PG&E Corp, the largest investor-owned utility in the U.S., said at a conference in San Francisco. “But I don’t think it’s overnight. I think it’s something that we have to manage.”
Until recently, the energy industry had been hoping that natural gas would play the role of a bridge fuel between polluting coal and emissions-free renewables. That’s because producing electricity from gas generates around half the carbon dioxide emissions that burning coal does. The International Energy Agency predicted a “golden age of gas.”
But rapid changes in the economics of renewables, combined with low coal prices, have put that outlook in doubt. The IEA last week predicted global gas demand for power generation would rise just 1 percent a year in the next six years, down from 4 percent a year in 2004-2010.
Driving the shift has been a sharp decline in the cost of building new renewable power –- which, unlike generating electricity from coal or gas, is almost free to run after the initial capital investment has been made.
“Wind and solar are just getting too cheap, too fast” for gas to play a transitional role, said Seb Henbest, lead author of the BNEF report.
The consultant estimates that onshore wind and solar power are already competitive with coal and gas in Germany, and that within five years they will be cheaper to build than new coal and gas plants in China, the U.S. and India. By the late 2020s, it will start to even be cheaper to build new onshore wind and solar power than run existing coal and gas plants.
The trends that are undercutting optimism about the global gas outlook are already playing out in Europe. Natural gas demand remains well below a 2010 peak, as greater energy efficiency, rapid adoption of renewables and resilient coal consumption cut into its market share.
The IEA does not see European gas demand returning to its 2010 high. In its base case scenario, European gas demand would be at the same level in 2040 as in 2020.
Still, most forecasts anticipate strong growth globally for natural gas demand for two decades or more. In the U.S., plentiful cheap supplies thanks to the shale boom helped gas displace coal as the primary fuel for power generation for the first time last year.
The IEA sees global natural gas demand growing almost 50 percent by 2040. Exxon Mobil Corp. sees a 44 percent increase. BP’s base case forecast is for a 38 percent increase in demand by 2035.
Several things could upend those predictions.
Much of the forecast growth in gas demand is dependent on China and India adopting policies that favor gas rather than coal in an attempt to improve air quality. The Chinese government, for example, has set a goal of getting as much as 10 percent of its energy from gas by 2020 and 15 percent by 2030, up from 6 percent in 2015. The country also plans to more than double import capacity by 2025. If that doesn’t happen, gas demand could peak sooner.
And the power sector, while the largest single source of natural gas demand, only accounts for 40 percent of the market. By contrast, nearly 60 percent of global oil use is as a transport fuel and vulnerable to the rise of electric vehicles.
“The future of oil is down to whether electric vehicles take off or not; the future of gas is quite nuanced,” said James Henderson, director of natural gas at the Oxford Institute for Energy Studies. “Gas producers are talking about how to adapt to a different type of gas market.”
While the outlook for wind and solar for power generation appears limitless, renewables will have a harder time replacing fossil fuels in other sectors. The IEA last week said industry will drive gas demand’s 1.6 percent a year growth through 2022 as it replaces crude oil as a raw material for petrochemical manufacturing, especially in the U.S.
“Gas will play a significant role in the decades to come,” Johannes Teyssen, chief executive officer of EON SE, told Bloomberg on May 24. “Coal will decline much, much faster, but gas probably needs also to accept that its own role will not grow to eternity.”
The search for oil offshore southern Jamaica continues as a second series of exploration activities, specifically 2D seismic surveys, are expected to begin before the end of this week.
The exploration activities, which are being underatken by Tullow Oil — an independent oil and gas exploration and production company based in the United Kingdom — as part of a Production Sharing Agreement that it signed with the Petroleum Corporation of Jamaica (PCJ) in 2014, are forms of marine surveys conducted to identify sub-surface structures that may contain hydrocarbon (oil and gas) deposits.
The search is expected to cover a marine area of approximately 32,065 square kilometres of the Walter Morant area, comprising of 11 individual blocks.
In 2015, Tullow Oil conducted a series of exploration activities, including a bathymetric (sea floor) survey, soil sampling and an environmental survey, to assess priority habitats and species, fishing activity and seabed habitats in the area. Tullow Oil acquired 3,000 kilometres of 2D seismic data in the first quarter of last year and is now planning to acquire an additional 670 kilometres of 2D seismic data to further develop an understanding of the area.
The upcoming surveys will be conducted by seismic company Seabird Exploration, through the use of its specially outfitted vessel, the Harrier Explorer, and will focus on gathering data on an area between Blower Rock at Pedro Banks and the offshore seas south of Clarendon.
“We’ve seen some of the sheens from the oil seeps that helps us understand that there might be a source kitchen and that is one of the components necessary. You need to have a kitchen… and we are hoping to go ahead and confirm that, through the seismic programme,” Non-Op Business Unit Manager at Tullow Oil Eric Bauer told the
Jamaica Observer yesterday during a tour of the Harrier Explorer, which was docked at the port of Kingston.
Minister of Science, Energy and Technology Andrew Wheatley, who got a tour of the vessel, stated that he was impressed that they have reached the stage where they are going into 2D seismic studies, which he said will help further the search towards finding prospective oil or gas deposits in the selected area.
“We are cognisant of the fact that it’s a process, but we just want to use the opportunity to keep the Jamaican public informed. It’s a partnership between Government and Tullow, but also a partnership between the Government and people, because we want our citizens to be aware.
“We are now at the stage where we are doing the 2D seismic study and this is going to take around six days for the collection of data, and that data will be analysed over a one-year period and if it is positive enough, we move to the 3D seismic survey,” he told the press.
He explained that the 3D seismic survey gives a more detailed idea as to the layer of land, and if that comes up positive, then they will move towards the actual drilling of the first exploration well.
Wheatley also expressed his appreciation to both Tullow and Seabird Exploration for their efforts to balance environmental consideration along with the country’s own development, through their environmental protection efforts and by forming relationships with fishermen and other relevant stakeholders.
Party chief for the Harrier Explorer, David Healy, also underscored the importance of local involvement, highlighting that one of the two support vessels that will be accompanying the Harrier Explorer is a local one.
“We will need both as it’s very important to have not just somebody who knows the job that we do… but local knowledge is very important as well. So it’s always important for us to bring in as many local people as we can, because they know (the) area, what’s happening and when it happens,” Healy explained.
“When you speak to people, we don’t want them to think that we are just going to come in there and destroy their fishing areas or anything of the sort, we also have to protect our own stuff, and so it’s beneficial to both of us if we can work together, so it’s good support,” he said.
From left: Renford Smith, Marcus Grant and Alan Searchwell connecting the electrical components of a solar panel at the Wigton Renewable Energy Training Lab in Rose Hill, Manchester, recently.
As the debate intensifies over the possible rate increases which could face Jamaicans as more and more customers leave the Jamaica Public Service Company’s (JPS) grid, there are calls for a collaborative approach to the issue.
Manager of the Grid Performance Department at the JPS, Lincoy Small, says the various stakeholders must engage in dialogue to find an approach to provide the cheapest source of electricity to Jamaicans.
According to Small, it cannot be a matter of either renewable energy (RE) or staying on the JPS grid but a combination of the two.
“JPS is not telling people that renewable is not the way to go, because JPS even operates renewable facilities, but the key thing is to get them (grid and RE) working together in tandem to come up with the best synergy of what is best for the customer and what is best for the country,” said Small.
His comments came as Robert Wright, president of the Jamaica Solar Energy Association, told The Sunday Gleaner he has no desire for Jamaicans to leave the JPS grid.
Wright said he strongly believes RE should be maximised and not just limited to large systems scattered across the island, but smaller systems distributed right across the country.
“When you have these smaller systems spread across the country it provides for better grid stability, and also it allows for more people to participate in clean energy as opposed to simply relying on large solar farms,” said Wright.
But Small said, based on experience due to the unpredictability of RE, the JPS sometimes has to resort to load shedding when customers jump on and off the grid.
He reiterated that JPS’s customers could face additional cost if the impact of RE on the grid is not handled carefully.
“So we are accepting solar power from the customers and as soon as something happens it drops off, and does so much quicker than the grid can even respond on some of those occasions, and as a result you have to be running expensive machines that are quicker to deal with those sun drop-offs or have to shed people’s light,” argued Small.
“And if you run these expensive machines or shed people’s light it means the overall cost to run the grid is going to be absorbed by the customer; you are going to have to pay for a more expensive energy source.”
The JPS executive said the company is actively seeking to incorporate new technology to deal with the loss of the intermittent renewable resources.
But Wright argued that the good news for Jamaicans is that the cost of RE is declining rapidly, enabling it to compete with traditional sources of energy.
“A system that a typical household would need in Jamaica two years ago would cost $1 million; that same system today cost $500,000, so we have seen a significant drop in prices,” said Wright.
“Also what is revolutionary is that the cost of batteries has gone down a lot, so now, even more than before, we will be able to offer that to residential customers at an affordable price.
“What is becoming more available now are systems called micro-inverters, and these allow you to install a very simple rooftop system which is cheaper, faster to install and is more appropriate for affordable housing developments, and so on.”
But Small countered that with solar and wind on average only available for 20 and 35 per cent of the day, respectively, and the cost of buying and replacing batteries being expensive, it might be cheaper for customers to get their power from the JPS grid when RE is not available.
“It (solar) is a good thing to have, but it cannot be operated in isolation, and that is something a lot of people in the solar business not telling their customers,” said Small.
“Because even if you get a panel or a wind turbine and you get the battery, you are going to need a grid to at least charge up that battery for the 80 per cent of the time you are without solar or the 65 per cent of the time you are without wind.
“Plus, you will have to be replacing the battery every two to three years for full value, and batteries cost much more than solar panels.”
Small said the JPS is focused on supplying power as cheaply as possible so persons can take the cheap power from the grid rather than go buy a battery and use the solar power and the wind when it is available.
With Jamaica being a signatory to the Paris Climate Change Agreement, the utilisation of more RE forms part of the National Energy Policy which sees the country aiming to have 30 per cent RE penetration by 2030.
The country is currently at approximately 10 per cent of the quota, with roughly 300 net billing customers (those who have solar systems which allows them to consume energy and sell surplus) and around 10 larger customers.
Solar power is now cheaper than coal in some parts of the world. In less than a decade, it’s likely to be the lowest-cost option almost everywhere.
In 2016, countries from Chile to the United Arab Emirates broke records with deals to generate electricity from sunshine for less than 3 cents a kilowatt-hour, half the average global cost of coal power. Now, Saudi Arabia, Jordan and Mexico are planning auctions and tenders for this year, aiming to drop prices even further. Taking advantage: Companies such as Italy’s Enel SpA and Dublin’s Mainstream Renewable Power, who gained experienced in Europe and now seek new markets abroad as subsidies dry up at home.
Since 2009, solar prices are down 62 percent, with every part of the supply chain trimming costs. That’s help cut risk premiums on bank loans, and pushed manufacturing capacity to record levels. By 2025, solar may be cheaper than using coal on average globally, according to Bloomberg New Energy Finance.
“These are game-changing numbers, and it’s becoming normal in more and more markets,” said Adnan Amin, International Renewable Energy Agency ’s director general, an Abu Dhabi-based intergovernmental group. “Every time you double capacity, you reduce the price by 20 percent.”
Better technology has been key in boosting the industry, from the use of diamond-wire saws that more efficiently cut wafers to better cells that provide more spark from the same amount of sun. It’s also driven by economies of scale and manufacturing experience since the solar boom started more than a decade ago, giving the industry an increasing edge in the competition with fossil fuels.
The average 1 megawatt-plus ground mounted solar system will cost 73 cents a watt by 2025 compared with $1.14 now, a 36 percent drop, said Jenny Chase, head of solar analysis for New Energy Finance.
That’s in step with other forecasts.
GTM Research expects some parts of the U.S. Southwest approaching $1 a watt today, and may drop as low as 75 cents in 2021, according to its analyst MJ Shiao.
The U.S. Energy Department’s National Renewable Energy Lab expects costs of about $1.20 a watt now declining to $1 by 2020. By 2030, current technology will squeeze out most potential savings, said Donald Chung, a senior project leader.
The International Energy Agency expects utility-scale generation costs to fall by another 25 percent on average in the next five years.
The International Renewable Energy Agency anticipates a further drop of 43 percent to 65 percent for solar costs by 2025. That would bring to 84 percent the cumulative decline since 2009.
The solar supply chain is experiencing “a Wal-Mart effect” from higher volumes and lower margins, according to Sami Khoreibi, founder and chief executive officer of Enviromena Power Systems, an Abu Dhabi-based developer.
The speed at which the price of solar will drop below coal varies in each country. Places that import coal or tax polluters with a carbon price, such as Europe and Brazil, will see a crossover in the 2020s, if not before. Countries with large domestic coal reserves such as India and China will probably take longer.
Coal industry officials point out that cost comparisons involving renewables don’t take into account the need to maintain backup supplies that can work when the sun doesn’t shine or wind doesn’t blow. When those other expenses are included, coal looks more economical, even around 2035, said Benjamin Sporton, chief executive officer of the World Coal Association.
“All advanced economies demand full-time electricity,” Sporton said. “Wind and solar can only generate part-time, intermittent electricity. While some renewable technologies have achieved significant cost reductions in recent years, it’s important to look at total system costs.”
Even so, solar’s plunge in price is starting to make the technology a plausible competitor.
In China, the biggest solar market, will see costs falling below coal by 2030, according to New Energy Finance. The country has surpassed Germany as the nation with the most installed solar capacity as the government seeks to increase use to cut carbon emissions and boost home consumption of clean energy. Yet curtailment remains a problem, particularly in sunnier parts of the country as congestion on the grid forces some solar plants to switch off.
Sunbelt countries are leading the way in cutting costs, though there’s more to it than just the weather. The use of auctions to award power-purchase contracts is forcing energy companies to compete with each other to lower costs.
An August auction in Chile yielded a contract for 2.91 cents a kilowatt-hour. In September, a United Arab Emirates auction grabbed headlines with a bid of 2.42 cents a kilowatt-hour. Developers have been emboldened to submit lower bids by expectations that the cost of the technology will continue to fall.
“We’re seeing a new reality where solar is the lowest-cost source of energy, and I don’t see an end in sight in terms of the decline in costs,” said Enviromena’s Khoreibi.
Last week, I wrote that OPEC needs friends and a miracle to re-balance the oil market. Could President Trump be that unwitting buddy, providing the miracle by tearing up the nuclear agreement with Iran and removing almost a million barrels a day of supply at a stroke?
Trump’s number one priority is to dismantle the “disastrous” deal — although his to-do list might have changed since saying that back in March. As luck would have it, that daily million barrels is about the same size as the cut OPEC needs to make, as I calculated last week.
Can he do it? Yes, despite assertions to the contrary from Iran’s President Rouhani and a slew of analysts. Here’s how:
The Joint Comprehensive Plan of Action, as the deal is snappily titled, wasn’t ratified by Congress, but brought into force by President Obama via executive order. Trump could rescind that. The fall-out would be messy, but it could be done (in theory).
There’s another way too, enshrined within the agreement itself. The dispute resolution mechanism allows any signatory to refer a perceived breach of the deal’s terms to the joint commission created to oversee the accord. If the complaining party isn’t satisfied with the outcome and believes the breach constitutes “significant non-compliance”, it can refer it to the U.N. Security Council. The Security Council would then vote — and here’s the killer blow — – not on whether to re-impose sanctions, but on whether to “continue the sanctions lifting.”
That might not sound like a big difference, but it’s critical. By framing the vote this way, the U.S. could, in theory, veto the resolution. All the U.N. sanctions on Iran would then be re-imposed. Simples.
That just leaves EU sanctions, which prohibited — among other things — the importing of Iranian oil into EU countries. We might expect some sort of European backlash against unwinding the deal, but it might not be very effective.
The tortuous process of re-establishing Iran’s oil trade with Europe shows that only too clearly. Although there were willing buyers and a very willing seller, the difficulty came in finding insurers who would underwrite the transactions, or shippers to carry the crude. All the big re-insurers had at least some U.S. involvement and they were extremely hesitant to pick up the business — even with the apparent backing of the Obama administration. They would drop the business like a scalding hot potato if the new president killed the deal. End of Iranian oil flows to Europe.
Elsewhere, important Asian buyers were threatened in the past with the loss of access to the U.S. banking system to persuade them to cut their purchases of Iranian. This tactic would probably work again.
Of course, Iran would treat the move as grounds to abandon its own commitments. Coming shortly before Iran’s presidential election in May, it would be a huge boost to Tehran’s hardliners. You’d expect life to become more difficult for the Americans in Iraq, where it’s engaged alongside Iranian-backed militias in ousting Islamic State from its last stronghold in the country — another Trump priority.
But at least the crude price would recover, which would be great for U.S. oil, if not so good for motorists. I guess the new president will have to choose who to please.
At least one local environmentalist has hit back at Sally Porteous, custos of Manchester, over her arguments urging the Government’s authorisation of a coal plant for a US multibillion-dollar investment into the Alpart alumina plant in St Elizabeth.
The Chinese-owned Jiuquan Iron and Steel Company (JISCO) is planning to spend US$3 billion or J$387 billion for the upgrade of Alpart’s alumina plant in Nain and expansion into a special economic zone. More than 3,000 people are expected to be employed over the six-year period of initial investment.
However, a proposal to use a coal-fired plant has angered environmentalists, forcing the Government to come out declaring that any decision on whether to use coal is almost two years away.
Speaking last week at a Gleaner Jobs & Growth Forum in Manchester, Porteous did not hold back.
“While I listen to, and respect, the environmentalists, I sincerely hope that it is not going to be a case of crying wolf and preventing an enormous opportunity for Jamaicans to get work.
“From what I understand, they will not be using coal from China, they will be using coal from Colombia. The Alpart plant itself would be run on oil, and the coal they are going to be using for the coal plant will not emit any worst emissions than oil,” she added, noting that she recently met with Chen Chunming, the JISCO chairman.
But Diana McCaulay, chief executive officer of the Jamaica Environment Trust (JET), said Porteous’ analysis is not deep enough, and so, too, is her view that coal is cleaner than oil.
“People are entitled to their views. But coal is a 19th-Century technology. It is time for us to move forward, and it is time for us to take the position that we want development and we want industry and we want business and we want jobs for our people, but not at the expense of public health and the climate.”
She added: “Jamaica is incredibly vulnerable to climate change. To say that you’re willing to take this risk for some short-term jobs, I find mystifying.”
Jamaica has been going through decades of low growth, double-digit unemployment and crippling debt levels that have created the circumstances for a loan agreement with the International Monetary Fund.”
NOT FIRST TIME
It is not the first time a local official has waded into controversy over securing needed investment for the country. Last year January, in the face of a hotel investment being derail over breaches, Robert Pickersgill, then environment minister, in lifting a cessation order remarked that he took note of the “the substantial value of the project to the Jamaican economy, which outweighs all other consideration”.
In September, Mining Minister Mike Henry said a decision on the coal proposal was at least 18 months away.
Global environmental advocacy group Greenpeace has said constructing the plant would violate the Paris climate agreement aimed at limiting global warming.
Porteous maintained that the Chinese investment represents an opportunity to bring well-needed economic growth to central Jamaica.
“This is the centre of the island’s only chance for revival. We have nothing else. We’re not near a beach, the north coast is taking care of itself very, very well, and I can see very great business going into Kingston.
“We have the opportunity of a lifetime with JISCO coming to take over that plant,” she said.
The Manchester Chamber of Commerce said it is already taking steps to get the parish ready to claim some of the spinoff benefits.
“We’re currently in discussions with investors to try and lure them and encourage them to come into the development of the parish to aid in the development of the parish, especially as it related to three main areas,” said Michael Gottshalk, the chamber’s manager of communications and public affairs.
He said housing to accommodate the expected influx of workers, entertainment and parking are at the top of the list.
Governor of the Bank of Jamaica (BOJ) Brian Wynter and Financial Secretary Everton McFarlane have come out defending the costly ‘insurance’ Jamaica has taken out against oil prices as the expiration date nears and a new one is being prepared for Parliament’s approval.
Hedging is an investment position used to reduce substantial losses that could be incurred based on actual or perceived fluctuating developments.
Last year June, Jamaica entered an arrangement with Citibank, which covers the period from June 2015 to December 2016, and for which the bank has been paid approximately J$3.3 billion (US$27.9 million) in premiums. The arrangement involved three contracts.
Under the arrangement, Jamaica would get a payout if oil prices exceed US$66 per barrel. Up to yesterday, the West Texas Intermediate crude rate used under the hedge put the latest oil prices at US$51.60 per barrel.
McFarlane told Parliament’s Public Administration and Appropriations Committee (PAAC) yesterday that the Parliament would be approached to approve funds to extend the hedge as no provision was made in the 2016-2017 National Budget, approved in May.
“In the coming Supplementary Estimates, we are looking to find the resources so that we’re covered a longer period of time,” he said. He added in a Gleaner interview later that “the details as to the period to be covered and the level of coverage are to be finalised in short order.”
He said the resources would come from budgetary reallocations.
NUMBER OF BARRELS DECLINING
The BOJ Governor also noted that with just two months to go under the last contract, the number of barrels has been declining.
“We’re not covering the full monthly amount now. This is the tail end of what was being hedged over a year ago. It’s a little under 200,000 barrels per month, whereas when you’re covering (fully), you’d be up there at about 700,000 or 800,000 barrels per month,” he said.
Concerns had been raised that because prices have remained low, Jamaica was losing millions under what some critics held was an unnecessary hedge.
PAAC member Franklyn Witter, using similar concerns, questioned whether the risks that gave rise to the hedge still existed.
“You have a projection over the medium term for oil to remain within $52 per barrel, so given that projection, why do you think it would be important to continue with the hedge?”
McFarlane responded that the risks still existed and that “Jamaica’s interest in continuing the hedge is based on the loss of foreign exchange that can entail or the budgetary loss that may arise in the event of significantly higher prices”.
Wynter, meanwhile, noted that investors have questioned how Jamaica would cope when oil prices increase even if other risks are low.
“There are several different answers to give. One answer is to build the Net International Reserves up by an extra billion so that we have it sitting down. The other extreme is to pay the $20 million or $30 million, still a lot of money, which, if nothing happens, you lose the premium, but if that event occurs, you get the payout that someone else has to have to pay you.
“We do look at what makes more sense,” he added. “Accumulating reserves is good for all sorts [of] reasons, but it’s also costly. So what we’ve done is try to strike the balance.”
The hedge has been funded by a special consumption tax on fuel.
The Private Sector Organisation of Jamaica has supported it.
No date has been given for the tabling of a supplementary budget, which the Finance Minister Audley Shaw has indicated will be coming.
In January, while on opposition benches, Shaw said the administration may have been ill-advised in pursuing the hedge.
History is made! #MontrealProtocol countries agree to curb powerful greenhouse gases in largest climate breakthrough since Paris.
“The amendment to the Montreal Protocol on Substances that Deplete the Ozone Layer endorsed in Kigali today is the single largest contribution the world has made towards keeping the global temperature rise ‘well below’ 2 degrees Celsius, a target agreed at the Paris climate conference last year,” the UN agency said in a statement Saturday.
According to the agency, the agreed reduction in HFCs could prevent up to 0.5 degrees Celsius (0.9 degrees Fahrenheit) of global warming by the end of this century. The deal was reached at a Meeting of the Parties to the Montreal Protocol, which started Thursday. Several high-profile leaders attended the meeting, including US Secretary of State John Kerry.
“It is not often you get a chance to have a 0.5-degree centigrade reduction by taking one single step together as countries — each doing different things perhaps at different times, but getting the job done,” Kerry said in a speech Friday.
“If we continue to remember the high stakes for every country on Earth, the global transition to a clean-energy economy is going to accelerate.”
The European Union also welcomed the deal. Miguel Arias Cañete, EU commissioner for climate action and energy, described it as “huge win for the climate” and the first step toward delivering on promises made on climate change in Paris in December.
The agreement in Kigali comes only days after enough countries ratified the Paris Agreement on climate change — which calls for the world to become carbon neutral this century — to become international law.
“Last year in Paris, we promised to keep the world safe from the worst effects of climate change. Today, we are following through on that promise,” said Erik Solheim, executive director of the UN Environment Program.
President Barack Obama also hailed the Kigali deal.
“Today’s agreement caps off a critical 10 days in our global efforts to combat climate change,” the US leader said. “In addition to today’s amendment, countries last week crossed the threshold for the Paris Agreement to enter into force and reached a deal to constrain international aviation emissions.
“Together, these steps show that, while diplomacy is never easy, we can work together to leave our children a planet that is safer, more prosperous, more secure and more free than the one that was left for us.”
Growing demand for cooling
The rapid increase in HFC emissions — put by the UN agency at 10% a year — is due in part to a growing demand for cooling, particularly in developing countries with hot climates and an expanding middle class, the agency said.
The agreement includes provisions for hot countries to reduce their use of HFCs at a slower rate. Developed countries will start to reduce the use of HFCs by 2019, while developing nations have been given a longer time frame in which to freeze their use of the damaging gases.
Funding for measures to reduce HFC use and research into alternatives is to be finalized next year, the UN agency said.
Kerry recalled how the world’s nations had worked together on climate change since first meeting in the 1980s in Montreal in a bid to protect the world’s fragile ozone layer from ozone-depleting chemicals such as chlorofluorocarbons.
“Thanks to the cooperation and the courage that we summoned at that critical time almost 30 years ago, the hole in the ozone layer — which had been growing at an alarming rate, and which was the reason that we came together — that hole is now shrinking, and it’s on its way to full repair,” he said.
“So we proved that we can make a difference. We proved that science has a value. We proved that if we come together in a forum like this, we can actually do things that affect the entire planet.”
Kerry also acknowledged that HFCs had turned out not to be the best solution for the problem of ozone depletion.
“We replaced the ozone depleting substances, but we came to understand the hard way that HFCs may be safe for the ozone layer, but they are disastrous for our climate, in many cases thousands of times more damaging than carbon dioxide,” he said.
Used in everyday household items such as refrigerators and air conditioners, he said, “in a single year, these substances emit as much CO2 equivalent as nearly 300 coal-fired power plants.”
The head of Rwanda’s climate change unit, Faustin Munyazikwiye, also welcomed the world’s commitment on HFCs after long hours of negotiations in Kigali.