Monday, February 28, 2011

Updated Pennsylvania Gas Oversight Hiring Leads Nation, NYT Part 6

[NOTE TO READERS: Please read first the post entitled: "Statement regarding Sunday NYT February 27th Drilling Article."  I am the former Secretary of the Pennsylvania Department of Environmental Protection.  This post is one of 7 posts that examines the NYT reporter's narrative of lax regulation and lax oversight of the in Pennsylvania.]

No state that has had shale drilling or gas drilling can match or come close to the substantial hiring increases for the gas oversight staff that Pennsylvania implemented since 2008 to the best of my knowledge. 

But to say that Pennsylvania has lead the nation in gas oversight staff hiring would severely damage the reporter's narrative of his February 27th Gas Drilling story that Pennsylvania has lax oversight and lax regulation. The reporter brands Pennsylvania in the piece as an "extreme case," when building his narrative of lax regulation and oversight. Yet  he ignores this "extreme case" of Pennsylvania leading the nation in seriously addressing oversight staffing. 

The reporter gives the briefest of mentions to staffing by mentioning in a sentence with other points a "doubling the number of regulators."  In the main article, that is it.

No mention that Pennsylvania's regulatory staff hiring record to increase staff is exceptionally strong, in fact unmatched.

Pennsylvania increased its staff from 88 to 202.  The article does not provide the actual staffing numbers.

 By my math a "doubling" of 88 would be 176.  DEP did more than a doubling or more than a 100% increase.

The hiring commenced in early 2009.  It continued twice more in 2010. 

Two new offices for the gas regulatory staff were opened.  One in 2009 in Williamsport  and one in Scranton in 2010.

Again, no state approaches this record to my knowledge.  But the reporter could not say that the state that led the nation in increasing oversight staff had lax oversight.  That would be jarring to most readers.

And how did Pennsylvania pay for this substantial increase in gas oversight staff?  Especially when the near depression that followed the Lehman Brothers bankruptcy on September 15, 2008 caused state tax revenues to decline sharply.

DEP used emergency rulemaking powers.  Governor Rendell authorized me in 2008 shortly after I became Secretary to use emergency rulemaking powers to raise the fee charged Marcellus well drillers when they applied for a drilling permit.  The fee was raised typically to $5,000 to $10,000 for a Marcellus well drilling application.  The exact amount depended on the depth of the well.

Fee revenues increased from considerably less than $1 million per year to more than $10 million per year.  All this fee income was dedicated to new drilling oversight staff.

And that is how Pennsylvania led the nation in gas oversight hiring.  To my knowledge no other state approaches this record.  You would of course have no idea that Pennsylvania led the nation in hiring regulatory staff and little idea at all about any of this from reading the February 27th NYT story.

UPDATED How the NYT Drilling Article Makes Space Choices and Misleads, NYT Part 5

[NOTE TO READERS: Please read first the post of February 27th entitled: "Statement Regarding Sunday NYT February 27th Drilling Article." I am the former Secretary of the Pennsylvania Department of Environmental Protection. This post is one of a series of 7 that follow the Statement and examines the reporting and the reporter's narrative of lax regulation and lax oversight of gas drilling in Pennsylvania.]

In the main 5 page story, a huge amount of space, as the reporter relentlessly builds the case for the narrative of lax regulation and oversight in Pennsylvania, there is one sentence that is not consistent with the narrative: "Recently, Pennsylvania has tried to increase its oversight, doubling the number of regulators, improving the well-design requirements and sharply decreasing how much drilling waste many treatment plants can accept or release." 

Even this sentence is cleverly constructed.  "DEP has tried to increase its oversight..."

May be we were able to do so. Or may be were not. But we tried, according to the NYT.  Actually inspections at Marcellus sites increased 100% in 2010, as one of many data points not reported.  Sounds like more than trying.

The staff increases began in early 2009.  Not so recently.  They continued in 2010 when DEP hired twice at the direction of Governor Rendell and me. 
DEP increased staff from 88 in September 2008 to 202 in January to 2011.  The article never gives the staffing numbers.  It says "doubling."  Doubling of 88 would be 176.   Again DEP gas oversight staff increased to 202. 

The above sentence also uses vague language and does not convey what was taking place in the actual law making and rulemaking process and when it was taking place.  Starting in 2009 2 major public rulemakings with proposed rules and much process began: the drilling wastewater rule and the gas well standards rule.  The publication of the drilling wastewater proposed rule in 2009 was a factor driving forward the development of drilling reuse and recycling technology.  These major rulemakings impacted industry behavior before they were completed and impacted DEP permitting before they were completed, as is explained shortly.

The above sentence completely ignores the requirement established in 2008 for drilling companies to file a water plan with the application to drill.  Water plans must specify how much water will be used and where it will be obtained.  If the withdrawal is from a river or stream, the stream is assumed to be in a drought condition when deciding whether to permit the withdrawal.  Only if the withdrawal would not damage the stream in drought is the withdrawal allowed.  It is a tough, protective requirement.

The Water Plan requirement was implemented, because DEP documented 2 cases that year of gas drilling companies withdrawing so much water that the withdrawal harmed the streams.

As soon as that problem was identified, DEP acted to put in place the water plan requirement.  That action contradicts a theme of lax regulation and lax oversight so the reporter does not mention the Water Plan requirement for applications to drill.

After this one sentence, then its back on message and back with a vengeance to the narrative of lax oversight as the article moves to its conclusion.

But this gets even more interesting.  Not in the main article, but in something called the "document reader" to which I doubt very many readers find their way, the reporter writes this: 

"In response to repeated problems with T.D.S.'s a salty mix of dissolved minerals and elements from drilling wastewater, in the Monongahela River, state officials wrote new regulations intended to stop this contamination. On August 21, 2010, a new and strict regulation took effect that state officials say ensures that no water supply is at risk for not meeting the safe drinking water standard for total dissolved solids. The state Department of Environmental Protection has actually been incorporating this standard into permits since the mid-2009.  The new regulation requires new or expanding dischargers to meet the T.D.S. standard of 500 milligrams per liter in the water they release into rivers. Existing dischargers are allowed to maintain their output levels so long as the receiving stream does not approach the T.D.S. limit.  However, these new regulations do not place any binding limits on contaminants like radium.

So here we find a materially different portrait of state regulation.  We also find out that the "state Department of Environmental Protection has actually been incorporating this [new tough drilling wastewater] standard into permits since mid-2009."  DEP actually implemented this standard for permitting more than a year before the rulemaking went final in August 2010.  Excuse the sarcasm: more lax regulation and lax oversight.

While back at the story that the overwhelming number of readers read, readers are told that DEP "Recently tried to increase its oversight..." 

Very different portraits.  One version holds up the narrative of lax regulation and oversight.  The other begins to develop a more complex, fuller picture, does it not?  One is in the main article.  The other is in the "document reader."  For sure, choices have to be made about space.  It is interesting to see how this reporter makes them.

UPDATED "Local" equals "State" in NYT Story, Part 4 of NYT.

[NOTE TO READERS: Please read first the February 27th post entitled: "Statement Regarding Sunday NYT February 27th Drilling Article." I am the former Secretary of the Pennsylvania Department of Environmental Protection.  This post is one of a seven part posting series that examines the reporting and the reporter's narrative of lax regulation and oversight of drilling in Pennsylvania.]

Now let's look at how the reporter wrote about the high Total Dissolved Solids (TDS) recorded on the Monongahela River during October to December 2008 that exceeded the secondary drinking water standard of the Safe Drinking Water Act.  Secondary drinking water standards are for pollutants that impact the color, odor or taste of water but are not considered a health threat. They are important.

Throughout the February 27th main article, the reporter uses the words "regulators," "state regulators," "federal regulators" and "E.P.A" and normally to make clear who was not doing its job.  But there is a single exception. 

To quote the piece at page 2:  "And recent incidents underscore the dangers.  In late 2008, drilling and coal-mine waste released during a drought so overwhelmed the Monongahela that local officials advised people in the Pittsburgh area to drink bottled water."

These two sentences about a major event have multiple problems if accuracy and fairness is the goal but work perfectly for a narrative of lax Pennsylvania state regulators and regulation.

First, no where in the piece does it mention that the water coming into Pennsylvania from West Virginia was already at the maximum secondary safe drinking water standard.  It is also true that the concentration increased further as the water proceeded down the Monongahela into Pennsylvania.

I further challenged the reporter and specifically said that two things about this description.  I said that you did not report that the DEP issued emergency orders in October, 2008 to municipal sewage treatment systems on the Monongahela and elsewhere that we learned were taking drilling waste without DEP permission and discharging it without treatment to cut their volumes immediately by 95%.  This was substantial and immediate regulatory action.  It showed a major response from state regulators and contradicts the narrative of lax oversight. 

In addition DEP contacted mining companies and won their agreement to reduce mine discharges in another effort to reduce the TDS levels.

We also took other actions that are part of the public record, including contacting state regulators in West Virginia about the high TDS levels as the Monongahela flowed into Pennsylvania, as well as the Army Corps of Engineers to see if it could increase the release of water from some facilities it controlled to raise the volumes of water on the Monongahela .

Second, I told the reporter that it was not "local officials" who issued a drinking water advisory to the public when data indicated that TDS levels were above the secondary standard for TDS.  The Pennsylvania Department of Environmental Protection did or "state regulators" as used every where else in the article.

PA DEP/state regulators did its job of alerting immediately the public to the fact that the water was above the secondary drinking water standard.  DEP/state regulators also took aggressive action.

The reporter in an email responded: "In that passage we use the term local officials to contrast with federal officials.  In other words we are referring to meaning the PA DEP."

In my vocabulary, there are federal, state, and local officials and federal, state, and local governments.  I suspect many readers read the section and concluded what I did: local officials and not state regulators warned the public.

The section of this article omits strong oversight actions by DEP and uses word choices that would cause many readers to think that "local" meaning local government officials warned the public. 

The DEP/state regulatory advisory was also written after consultation with the Pennsylvania Department of Health.  Since the drinking water standard that was being exceeded was a odor, taste, and color standard and not a health based standard, the advisory did not directly tell people to drink bottled water.  It in fact explained the standard and the odor, taste, color issues, and then said a consumer may want to use bottled water if they have concerns.  The two sentences above do not accurately convey this point and difference.

To be clear, though the TDS standard is a secondary standard under the Safe Drinking Water Act, the PA DEP treated the exceedance of TDS on the Monongahela as a serious event and took major regulatory and oversight action then.

 I had been Secretary for about a month when this event took place, and it triggered my concern about the need to change Pennsylvania's rules concerning discharges of TDS loaded waste into our streams.  New rules restricting the discharge of such waste were proposed in 2009 and final rules became law in August 2010.

UPDATED Oversight/Regulatory Actions Galore Omitted by Reporter, NYT Part 3.

[NOTE TO READERS: Please read first the February 27th post entitled: "Statement Regarding Sunday NYT February 27th Drilling Article." I am the former Secretary of the Pennsylvania Department of Environmental Protection. This post is one of a 7 part posting series examining the reporting and reporter's narrative of lax oversight and regulation of drilling in Pennsylvania.]

It certainly is helpful to a narrative of lax oversight and regulation to exclude from the main article just about all the oversight and regulatory activity taken by the Department of Environmental Protection. But that is the main method of this Reporter to produce his narrative of lax oversight and regulation of drilling in Pennsylvania

The Department of Environmental Protection from just January 1, 2008 to June 30, 2010 issued 1400 violations to Marcellus drilling companies. You will not find that number anywhere in the New York Times Article.  As I have said, many times it is a lot of violations and represents too many spills, leaks, and other problems.  It documents active enforcement of the regulations by DEP.  It contradicts the narrative of lax oversight and regulation.

Instead of the 1400 total violations number, what you find is a calculation by the reporter that tells the readers: "From October 2008 through October 2010, regulators were more than twice as likely to issue a written warning than to levy a fine for environmental and safety violations."  So the total number of violations issued is not an indicator of enforcement that readers should know but the ratio of warning to fines is.  This is a clever way to conceal a very large number that is inconsistent with a narrative of lax oversight and regulation.

The main article also does not report at all on major regulatory, oversight and enforcement actions of  DEP that were covered extensively by media in Pennsylvania and elsewhere.  Here is a partial list:

1. No mention of the strong regulatory and enforcement action against EOG for a 2010 gas well blowout.  DEP ordered EOG and a subcontractor to cease drilling, to cease fracking, and to cease completing wells for weeks and conducted a thorough investigation that led to a detailed order to EOG about drilling practices as well as a directive to the entire industry.  EOG and the subcontractor paid a significant fine.  DEP also directed the entire industry to follow the safety and operating requirements imposed on EOG.    This case drew state and national media coverage. It strongly contradicts a narrative of lax oversight.

2. No mention of DEP orders to other companies to stop drilling and to stop fracking for as long as a year.  These orders imposed expense of many millions of dollars.  To discuss them would have contradicted the narrative of lax regulation and oversight.

3. No mention of DEP actions/orders to require the plugging of gas wells that caused gas migration at great expense to the drilling company and the mineral owner.  These actions also imposed expense running into many millions of dollars.  To mention them would contradict the narrative of lax regulation and oversight.

4. No mention of DEP actions/orders to require the repair of gas wells that required companies cumulatively to have tens of millions of dollars of expense.  To mention them would contradict the narrative of lax regulation and oversight.

5. No metion of DEP actions/orders to companies themselves to pay for cleaning up spills and leaks at substantial expense. These actions requiring companies to pay for clean up imposed expense of many millions of dollars.

6. No mention of the DEP enforcement case with Cabot Oil and Gas that drew enormous media attention. To do so would contradict the narrative of lax regulation and oversight.

7. No mention of DEP winning a settlement that paid 19 families on average $200,000 or twice their market value as a result of gas migrating from an oil well to their private water wells.  The 19 impacted families kept their properties and mineral rights in addition.  As of when I left office, methane had been removed form 14 of the 19 families water wells.  To mention this enforcement activity would have contradicted the narrative of lax oversight and regulation.

8. No mention of the state police/DEP Fracnet operations to stop and inspect drilling trucks.  These inspections put out of service about 40% of the trucks inspected.  To mention this action would have strongly contradicted the narrative of lax regulation and oversight.

9.  No mention of major fines levied in 2010 against several companies.

10.  No mention of the 5,000 inspections of Marcellus drill sites in 2010 alone, a 100% increase over 2009. 

The list of major regulatory, oversight, and enforcement actions that this reporter and article ignores goes on and on. Above is the tip of the iceberg.

Had the reporter  interviewed me he would have heard the above list and more from me. It took a determined effort to ignore the massive regulatory, oversight, enforcement activity conducted by the DEP at the direction of Governor Rendell and myself.

But had he not ignored the real record, how could he have written his lax regulation and lax oversight narrative?

Updated: Not Interviewed But Quoted, Errors and Omissions of the NYT, Part 2

[READERS NOTE: Please read first the Statement that I issued on February 27th. See the post entitled: "Statement regarding Sunday NYT February 27th Drilling Article."  This post is one of a 7 part series examining the reporting and the reporter's narrative of lax regulation and oversight in Pennsylvania.]

The reporter for the NYT February 27th article never spoke to me before publication.  He did not interview me for the piece.  Though not interviewed, I am quoted.  Here is the section:

"'There are business pressures' on companies to 'cut corners,' John Hanger, who stepped down as secretary of the Pennsylvania Department of Environmental Protection in January, has said. 'It's cheaper to dump wastewater than to treat it.'"

I probably said that somewhere at some time in some context, but I did not say it to this reporter in the context of this story.

He says that he asked for an interview with the DEP staff but never got it.  I have done hundreds or thousands of interviews.  My former DEP staff knew that I was totally accessible and to make sure that requests for interviews reached me. 

I know of no other reporter in the 28 plus months that I served as Secretary who did not get an interview with me after supposedly requesting it.  This reporter stands alone to my knowledge.  Is his version of events up to January 18 impossible? No.  But count me as skeptical.

What adds to my skepticism is that the reporter says he made no effort to contact me from January 18th when I left office to February 27th when the article was published.  He did not contact me to confirm the words that he pulled from somewhere and stuck in my mouth for this story. 

Instead according to the reporter, he contacted the new administration at DEP on January 21st asking that it confirm my words. He did not ask the new administration for my contact information that was readily available.  Governor Corbett replaced Governor Rendell on January 18th. 

Interestingly, the reporter did contact  former Secretary John Quigley of the Department of Conservation and Natural Resources, the agency that runs the state forests and state parks, after he left office.  He interviewed for about an hour former Secretary Quigley. 

Secretary Quigley informs me that the representation by this reporter of that interview and his views as expressed to the reporter in this article is highly selective and misleading.

The reporter said after publication on sunday that once I left office my perspective was not relevant and that he had read other interviews. 

But in an email on Sunday before I talked with him, he says: "I just read your blog post. It's very informative and candid." 

Well, Mr. Reporter, which is it?  Is it that my perspective is irrelvant as you said to me on sunday?

Or is my perspecitve "very informative and candid," as you wrote to me in an email after reading the blog and before we connected on the phone.

Had you bothered to contact me at least from January 18 to February 27th, your readers would have had the benefit of my "very informative and candid" perspective.

I find it amazing when this reporter is writing a narrative of lax oversight and regulation in Pennsylvania for essentially the period that I served as Secretary of the Department charged with regulating the industry that my perspective is not relevant or that other interviews by other reporters at other times on other topics sufficed.  And it turns out that the emails show the Reporter does not believe his own slimy, verbally stated reason for not interviewing me.

You be the judge.

UPDATED NYT Gas Drilling Errors and Omissions in Drilling Article, part 1: "STRONGER."

[NOTE TO READERS: Please read first the February 27th post entitled: "Statement Regarding Sunday NYT February 27th Drilling Article." I am the former Secretary of the Pennsylvania Department of Environmental Protection. This post is one of a series examining the reporting and the reporter's narrative of lax regulation and lax oversight].

The Sunday New York Times Article was replete with errors and omissions to advance its narrative of lax regulation and lax oversight of gas drilling in Pennsylvania.  I am going to document these errors and omissions one-at-a-time in separate posts and many of the posts are now on this blog. 

I have concluded that they cumulatively provide a strong case of bad faith journalism.  The article excludes information completely or from the main story, used misleading words to conceal important points, and consistently shaped information to advance the narrative of "lax regulation."  Others can make their own determination at the end of the series.

And what would be the motivation for such bad faith journalism?  The reporter got a huge front page story on the New York Times Sunday paper, a significant professional accomplishment.  It is the talk of many around the nation. 

The timing is also interesting.  This story about lax regulation of drilling appeared on Sunday, the Oscar awards day.  The article appeared on NYT website with a story about an anti-drilling celebrity activist from New York.  Gasland, nominated for an Oscar, and the controversy about it was some of the sizzle about this year's Oscars, and the envelope was going to be opened on sunday.

Now let's examine the strange omission from the article of the independent review of Pennsylvania's hydraulic fracturing regulatory program done by STRONGER (see  STRONGER is a public-private and government collaboration to provide independent professional reviews of state oil and gas drilling regulatory programs.

The Pennsylvania Department of Environmental Protection invited in May 2010 STRONGER to do a review of its program.  As STRONGER says in its written report that we "volunteered" to have our program reviewed.  The previous STRONGER review of Pennsylvania's drilling program was done in 2004.

STRONGER issued a 26 page report of its findings on September 24, 2010.  It is a largely positive review that concluded "the program is, over all, well-managed, professional and meeting its program objectives."  It drew substantial press coverage when issued.

[An earlier version of this post stated that the Sierra Club was a member of the STRONGER review team; the Sierra Club has submitted a comment that states it was an observer not a member of the review team; please review the comment and also STRONGER's description of those involved in the review of the Pennsylvania regulatory program.]

When I challenged the article's failure to include STRONGER the reporter first gave as the reason why it was not included the word "dated."  I was floored.  He did not say that he was unaware of it.  He said that it was out of date. 

The report was issued on September 24th, 2010.  The report is available on STRONGER's home page under the button "Recent Reviews."

The report is the only independent, professional examination of the Pa regulatory program during the time period that the reporter is working.  But it appears not in an ocean of ink.  Why?

The report is inconsistent with a poor, lax regulatory program or the article's narrative.  Some readers would have found it credible had it been included.  The narrative ruled so the STRONGER report never was mentioned.

Sunday, February 27, 2011

Statement regarding Sunday NYT February 27th Drilling Article

No compromises can be made about the safety of drinking water.  The Sunday NYT article raises serious issues that must be definitely resolved immediately. 

The most serious issue raised by the NYT is whether or not unhealthy levels of radium are in the drinking water as a result of gas drilling wastewater.

Good reasons exist to believe that the answer is no, including the new drilling wastewater disposal rule that went into effect in August 2010 and the now widespread use of recycling technology to manage at least 70% of drilling wastewater.  But belief is not good enough.

We must not drift into a war of competing theories or studies.  We need the facts.  Pennsylvanians deserve nothing less.

The Pennsylvania Department of Environmental Protection should order today all public water systems in Pennsylvania to test immediately for radium or radioactive pollutants and report as soon as good testing allows the results to the public.  Only testing of the drinking water for these pollutants can resolve the issue raised by the NYT.

Moreover, once the results comeback and no matter what the results are, testing should continue on a regular basis at least at the 65 public water systems identified by the NYT. 

Why did I not take these steps when I was Secretary is a fair question?  One answer is that a much stronger rule governing drilling wastewater discharges became final in August 2010 that limited future drilling wastewater discharges (See below for much more detail).

But the main reason is that I was not presented with information in the manner that the NYT does in this article. The NYT references confidential reports, anonymous statements supposedly made by EPA scientists, and other material that I have never seen until this article.  I was informed by agency radiation experts that the radiation levels were not a threat to truck drivers, workers at sewage treatment facilities or the public.   To be clear the buck stopped with me up to January 18th, 2011 and I believe the agency staff were handling this issue in a serious, careful manner.  I still believe that to be in the case

But as I said, beliefs are not good enough.  Now only testing can resolve one way or another the issue about radium that the NYT raises.

Having said that, some further points about the article need to be made. 

1. The piece looks at a three year period and characterizes regulation in Pennsylvania as lax. Lax regulation is the theme or narrative of the piece and virtually all elements and word choices of the article are consistent with that theme. 

Buried late in this enormous piece is a paragraph that states that the rules today are much stronger.  Shortly after I became Secretary on September 2nd, 2008, I concluded Pennsylvania's rules governing gas drilling and protecting our waters needed to be strengthened.  I directed 4 new policies or rules be drafted and completed as soon as possible.  All now have been.

2. The 4 strengthening regulatory packages that were barely or not all mentioned in the NYT article included:

First, finalizing protective water withdrawal policies requiring at the time of the drilling application the submittal of a water plan that insured water withdrawals would not damage streams even during droughts.

Second, I ordered a major rule to end Pennsylvania's decades long practice of allowing unlimited amounts of drilling wastewater untreated for total dissolved solids (salts etc) into rivers and streams and won passage of this rule over opposition from the gas industry, the coal mining industry, the Pennsylvania Chamber of Business and Industry, and other supporters of the gas industry. 

The new drilling wastewater rule became effective in August 2010 and applies to all sources of TDS pollution, including mining and industrial sources.  The rule, however, singles out drilling wastewater for the strongest requirements.  The 2010 rule requires new or existing drilling wastewater plants that expand to treat drilling wastewater to the Safe Drinking Water Standard for TDS if it is returned to a river. 

The rule does allow plants that had been operating for many decades to conditionally do so if they do not expand and if the river to which they discharge has TDS levels below 75% of the Safe Drinking Water standard of 500 mg/liter.  The NYT erroneously suggests that the existing plants if they do not expand can continue operating under the rule no matter their impact on the receiving stream.  False.  If the receiving stream has TDS increase as a result of the existing plants discharge or other reasons, these existing plants will have to modify how they operate and possibly cease operations.

The drilling wastewater rule is hugely important and must be enforced fully.

Third, I ordered a strengthening across the board of the rules governing drilling well design, materials, construction, monitoring, testing, and disclosure of chemicals.  This rule became effective on February 5, 2011 after being begun in 2009. They are state of the art standards.  They must be followed and enforced.

Fourth, we enacted a 150 foot buffer requirement from all development for High Quality streams, Pennsylvania's best waters.  About 22,000 miles of streams receive this protection or one-quarter of all of Pennsylvania's streams.  This rule commenced in 2009 and was final in November 2010.

3. I also concluded in 2008 that the DEP gas staff was too small so we more than doubled the drilling staff from 88 to 202 positions.  This substantial staffing increase was paid for by using emergency rulemaking powers to raise the drilling application fee to $5,000 to $10,000 per Marcellus application from the ridiculous amount of $100 that had been set in 1984 and never raised.  We hired in 2009 and twice in 2010.  We opened a new drilling staff office in Williamsport in 2009 and another in Scranton during 2010. 

Pennsylvania is the only state that has hired substantial or any staff for its drilling operation.  The NYT does not say that, because it does not fit its narrative of lax Pennsylvania regulation.  Indeed, the reporter deliberately did not include a long list of actions by DEP that represented strong enforcement.

4. On these first 3 points, in a sea of ink, the NYT article just says: "Recently Pennsylvania has tried to increase its oversight, doubling the number of regulators, improving well-design requirements and sharply decreasing how much drilling waste many treatment plants can accept or release."  Yes, indeed.  See the above for some of the details.

5. The NYT piece makes errors when discussing the 2008 high TDS levels on the Mon River.  The NYT fails to state that it was state regulators, the Pennsylvania Department of Environmental Protection, at my direction that issued Drinking Water Advisories to the public when TDS levels on the Mon River exceeded the Safe Drinking Water Act secondary drinking water standards.

6. The NYT piece does not state clearly or fully that in October 2008 that DEP issued orders to municipal sewage plants discharging to the Mon River or its tributaries to cut by 95% its drilling wastewater volumes.  Those orders were not lifted.  The order to cut by 95% drilling wastewater discharges applied to any municipal treatment plant that had been taking drilling wastewater without a specific permit to do so.

Reporting accurately and fully this action plus that DEP issued the Public Water Advisory would not fit with the article's determined narrative of lax regulation.  Some themes just cannot be moved no matter what.

7. Near the end of the piece the article argues that DEP has lax regulation.  Its major evidence for that proposition is that DEP issues twice as many warning as fines for violations.

Here is what the NYT completely and apparently willfully ignored or placed outside of the main story due to the famous space limitations.  It is quite a coincident that the facts or points that were ignored completely or not included in the main story are the ones showing strong regulation.

1. Telling its readers that DEP has issued 1400 violations to the industry just for the period from January 1, 2008 to June 30, 2010.

2. Telling its readers that DEP has issued to companies orders to stop drilling for weeks and months;
other orders to companies to stop fracking for weeks and months; orders to companies to pay fully for all spills and leaks.  These orders cost companies tens of millions of dollars and greatly exceed the amount of fines.  Fines run into the millions, but the Legislature should raise the maximum amount of fines.

3. Telling its readers that DEP required Cabot Oil and Gas to plug wells and repair wells at the cost of many millions of dollars to remedy a gas migration that impacted 19 water wells.

4. Telling its readers that DEP won a settlement with Cabot that paid the 19 impacted families on average $200,000 per family or twice the market value of the property, while allowing families to keep their property and their mineral rights. Payments and yet another major fine exceeded $4 million in this single action. These payments were won even for 14 of the 19 properties were testing indicated that methane had been removed from the water supplies. 

5. Telling its readers that DEP and the State Police do major truck inspection operations, pulling drilling trucks over for inspection.  That these repeated operations have put about 40% of the drilling trucks inspected out of service.

6. Telling its readers that the DEP gas drilling regulatory program was reviewed in 2010 by an Independent Auditing organization called STRONGER that includes reviewers from industry, other states, and environmental organizations.  The DEP regulatory program received high marks.  Of course the reporter did not include the fact of this independent audit in the story.

These are facts and important ones for the public to know and for a good reporter to report.  There are still more that could be shared with a reporter interested.

Lastly, though I am quoted in the piece, this reporter never interviewed me prior to the publication of the sunday article. The reporter claims that he told DEP staff that he wanted to interview me.  I was never told so and have not confirmed the request. As Secretary, I was interviewed hunreds and probably thousands of times.  I made myself totally accessible to reporters.  My staff knew that I was available to reporters. This reporter today says he asked Governor Corbett's administration at DEP on January 21st, three days after Governor Rendell and I left office, to confirm the quotation that the reporter strung togehter from some other source.  The words that I find myself saying in this piece were said by me somewhere at some time and in some context but they were not said in the context of an interview for this piece. The reporter never called me after January 18th for any purpose including to confirm the quotation that he put together for me.  The reporter did not ask the new administration for my contact information after I left office.  He made no attempt to reach me from January 18th until the piece was published, including again to confirm the quotation he uses.  The reporter did make effort to contact my former colleague Secretary Quigley after he left office and did interview former Secretary Quigley about a week ago. 

Update II

Secretary Quigley was a superb Secretary of the Department of Conservation and Natural Resources, the agency charged with managing state parks and state forests.  He oversaw gas leasing of state forest land and did a great job in difficult circumstances, including writing a very protective lease for gas drilling on state forests. Secretary Quigley has unmatched dedication and knowledge about the state forests and parks.

Some confusion exists about the jurisdictions and roles of DCNR and DEP. The DCNR does not regulate the oil and gas industry in Pennsylvania. DEP does. The Department of Environmental Protection enforces the state Oil and Gas Act, the state clean streams law, the federal Clean Water Act, the federal Safe Drinking Water Act, the federal and state clean air laws, the state waste management laws and other provisions of law that apply to gas drilling.  DEP promulgates all rules and regulations governing oil and gas drilling.

I suspect that I will have more to say on this soon.

Saturday, February 26, 2011

Gasland And The Oscars

Despite Josh Fox having real roots in Pennsylvania, and though normally I root for all things Pennsylvanian, I am not pulling for Gasland to win an Oscar for Best Documentary.

I gave Josh an extended interview when I was the Secretary of the Department of Environmental Protection that he heavily edited to include in the film.  As Mom says: "You got to love the super close-ups of your darling face."

While treating my face fairly, the film presents a selective, distorted view of gas drilling and the energy choices America faces today.  If Gasland were about the airline industry, every flight would crash and all airlines would be irresponsible. In Gasland, the gas industry is unsafe from beginning to end and is one unending environmental nightmare with no benefits.

Gasland seeks to inflame public opinion to shutdown the natural gas industry and is effective. In pursuing this goal, Gasland treats cavalierly facts both by omitting important ones and getting wrong others. 

As just one example, Gasland wrongly says the budget for the Pennsylvania Department of Environmental Protection was cut by 25% and that hundreds lost their jobs in 2009.  That was a useful mistake for Gasland to make, because it builds falsely the argument that natural gas drilling is not regulated.

In fact, more than 70% of the DEP budget in 2009 came from either federal funds that were stable or increasing or from fees/fines that were stable or increasing as well.  The budget cuts were restricted to the 30% of the total budget that came from state taxpayers and amounted to a total of 9%, a far cry from the 25% total budget cut Gasland falsely claims.

When the Lehman Brothers collapse on September 15, 2008 led to a near depression and a decline in state tax revenues, I began a push to increase fees by $50 million to help meet or expand DEP's vital permitting and enforcement duties.

And what was the first fee that Governor Rendell and I raised after I became Secretary on September 2nd, 2008?  The fee for applying for a gas drilling permit.

The drilling application fee in 2009 jumped to as much as $5,000 to $10,000 per application for Marcellus wells from a ridiculously low $100 that had been set in 1984 and never raised.

Revenues from application fees increased from less than $1 million per year to more than $10 million per year. All that revenue went to more than doubling the size of the gas drilling oversight staff.  Additional gas staff were hired in 2009 and again in 2010, increasing the number of state employees that solely regulated the gas industry from 88 to 202.

You will not find any mention in Gasland of the drilling fee increase or the hiring of more gas regulatory staff.

The 9% budget cut did require laying off 97 (not hundreds as Gasland suggests) state employees in December 2009, and for each one of those workers the lay-off notice was a personal and family crisis.

But none of the 97 positions were in the gas oversight staff. None were inspectors or had enforcement duties in any programs, because I directed that enforcement duties in the entire agency were immune from budget cuts. DEP's workforce temporarily declined from 2,830 to 2,727 positions but returned to the pre-layoff number starting in the July 1, 2010 budget. 

You will also not find any mention in Gasland of the 4 new, strengthening regulatory packages--water withdrawal policy, wastewater disposal rule, 150 foot buffer for High Quality streams rule, and gas well drilling standards rule--that were in process as early as 2008 at my direction and completed by 2010.

Each of these rules greatly increased the strength of rules governing gas drilling and the protections of our water.  For example the drilling wastewater rule that went into effect on August 2010 and was used in permits during 2009 required any new drilling wastewater treatment plant or any existing drilling wastewater treatment plant that expanded to fully treat drilling wastewater, including for Total Dissolved Solids (salts) to the Safe Drinking Water Standard, prior to discharge.  Existing plants were conditionally allowed to continue operating as long as the receiving streams had water quality levels below 75% of the Safe Drinking Water Act's 500 mg/liter standard.  This rule stopped Pennsylvania's decades-long practice of allowing unlimited amounts of drilling wastewater untreated for TDS to be discharged to rivers and streams.

In response to the draft drilling wastewater regulation that was issued in 2009, the drilling industry developed technology that allowed it to reuse or recycle drilling wastewater.  By 2010 approximately 70% or higher of drilling wastewater that returned to the surface was being recycled by the industry. 

You will find none of that regulatory development in Gasland.

Nor will you find in Gasland any mention of the1400 violations to industry that DEP staff  issued from January 1, 2008 to June 30, 2010.

Nor will you find the October 2008 DEP orders to municipal sewage treatment plants on the Mon River and elsewhere that were taking drilling waste without DEP permission to cut by 95% their drilling waste volumes.

Nor will you find any mention of the orders to stop drilling or to stop fracking or to pay to clean up spills or leaks.  Nor will you find any mention of orders to plug gas wells and spend millions repairing wells.

And you won't find any mention in Gasland of the DEP and state police random stops of gas drilling trucking traffic that put as many as 40% of the drilling trucks out of service.

All these actions are true but inconvenient to the Gasland narrative that gas drilling in Pennsylvania is not  regulated so they don't make it into the film.

But perhaps the biggest of Gasland's many problems is that it does not discuss the alternatives to natural gas.  If not natural gas, then what?

The reality today is that only more coal and oil, both of which are dirtier than natural gas, could replace the 24% of America's electricity made from natural gas and the 51% of homes heating with natural gas. Since coal and oil pollute more in their production and combustion, using more natural gas to replace them decreases mercury, soot, smog, and heat trapping pollution. That is true for at least the next 10 years. 

Consider what the past and current use of coal and oil has wrought.

Gasland does not show the 5,000 miles of streams in Pennsylvania polluted by acid mine drainage or the 180,000 acres of abandoned mine land that are being slowly reclaimed at great expense.

Gasland does not show mountain top removal coal mining or any of the 500 mountain tops already removed and 1200 miles of streams buried. 

Gasland does not show the soot, smog, and mercury pollution coming right now from the one-third of USA coal plants that are more than 40 years old and operating with few or no pollution controls. 

Gasland does not discuss the oil spills that have damaged ecosystems around the world   Just one out-of-control oil well in the Gulf devastated it.  No gas well could do such damage.

Gasland does not tell viewers that one-out-of-six American women have elevated levels of mercury so that their babies would have lower IQ, and that the mercury in their bodies comes from burning coal.

Gasland does not tell viewers natural gas has no mercury emissions, or natural gas creates less soot or smog than coal or oil that kills or sickens hundreds of thousands of Americans every year.

Gasland does not tell viewers that burning coal emits more heat trapping pollution that is raising temperatures slowly but surely around the world than natural gas does

America does not run on clean fuels today but instead on mainly coal and oil.  Natural gas is cleaner than coal or oil and can quickly replace large amounts of both for electricity generation, heating, and transportation.  America should be doing that for our economy, national security, and environment.

Of course, natural gas has impacts and is not the full, only, or ultimate solution.  It must be strongly regulated, rules enforced, and rules strengthened further if needed.

And we must accelerate deployment of even cleaner technologies like wind, solar, and others. More must be invested in energy conservation, the cleanest and cheapest option. 

Yet those who say renewables could replace here and now gas, coal, and/or oil are unfortunately wrong, totally wrong (I will address further this point in a separate post).  I say that as someone who has led the charge for more wind, solar, energy conservation in Pennsylvania, and Pennsylvania now has 20 wind farms operating or being built and over 4,000 functioning solar projects.  More of both are being built and both have higher growth rates than any other generation technology.

Another fact is that shale drilling has created enormous natural gas supplies and has driven down the price of natural gas by 20% in the last year and 70% since 2008, even as oil skyrockets 40% in one year.  These sharply lower prices are vital, a true blessing, for poor and middle class families who had $3,000 heating bills in 2007 and 2008 when natural gas cost three times what it costs today.  Heat in winter is a necessity, but even now some go without.

The much lower price of natural gas means that it is available for the equivalent of $1.40 per gallon when gasoline now hits about $3.30 a gallon.  To capture the economic and environmental benefits of natural gas we must use it to replace dirtier and now more expensive oil and gas.

Society cannot make good decisions without looking at the facts as they are.  Gasland does not do that.

In the last year, I have interacted with Josh Fox.  While some of his critics would not agree, I believe he has good intentions.

Mr. Fox is giving voice to real concerns and speaking for some people that really have been negatively impacted by drilling who should not be ignored. He would be a more convincing and responsible voice if he were more careful.  Indeed we all should strive to be more careful.

Yet, I also believe that his critics that include me would do well to focus on a basic truth: the natural gas industry is industrial and must be strongly regulated.  Again, rules must be enforced and strengthened if necessary. 

The natural gas industry can be safer and cleaner and should always fix problems right away when they occur. 

Natural gas is cleaner than coal and oil, but it is not as clean or safe as it can be.  Achieving operational and environmental excellence is a challenge first and foremost for the industry, but it is one that everyone --government, industry, communities, environmental groups -- should help meet.

PA Economy Among National Leaders

As reported at pages 3-4 of the yesterday's Wall Street Journal, Pennsylvania is among the top state economies.  The WSJ ranks Pennsylvania 4th and 12th on two key indicators measuring the 50 states economic recovery and management of debt. 

The WSJ data are consistent with Bureau of Labor Statistics numbers that show Pennsylvania created the 3rd most jobs during 2010 in the USA, while New Jersey ranked 50th.

The WSJ measured each state's pension and long-term debt liabilities as a percentage of state GDP and compared current tax revenues to pre-financial crisis state tax revenues.  State tax revenues collapsed following the disastrous national policies that led to the Lehman Brothers bankruptcy on September 15th, 2008 that froze credit markets, triggering a global collapse of consumer demand, rapidly rising unemployment, and a near depression.

The WSJ calculated that Pennsylvania's current tax revenues are 97% of the pre-crisis level, tied for 4th with Vermont, and only North Dakota, New Hampshire, and South Dakota doing better.  The recovery of tax revenues is another indicator demonstrating the strength of Pennsylvania's diverse economy and of business opportunities here.   As jobs are created, businesses invest, and consumers increase demand, tax revenues rise. On average across the nation state tax revenues are now 89% of their pre-crisis level.

The worst performing states were Louisiana at 72% of pre-crisis revenues, South Carolina at 75%, Florida and Georgia at 79%.  Texas and New Jersey ranked poorly with 86% of pre-crisis revenues.

Nationally states pension and long-term debt liabilities average 7.3% of state Gross Domestic Product (GDP).  How does Pennsylvania compare?  Loud, shrill, highly ideological voices say Pennsylvania is bankrupt and massively in debt.  Is it so? 

Pennsylvania's debt to GDP ratio is a low 4%, well below the national average, ranking 12th. Hawaii and Mississippi ratio is the highest at 16%.  Connecticut, West Virginia, Kentucky, Massachusetts, Rhode Island, Illinois, New Jersey, New Mexico, Oregon, Oklahoma, South Carolina, Maine all have ratios of 10% or higher.

Those are the facts.  Ideologues chanting that Pennsylvania has a bad business environment and government is always-the-one-and-only-problem won't like them and so will just ignore them.  The odds on that?  100%.

Friday, February 25, 2011

Electricity, Gas, Oil: How Much to Go a Mile?

I paid $3.27 per gallon for gasoline this morning at what had been the cheapest gasoline in town, a Hess station.  At that gasoline price, a 25 miles per gallon car costs 13 cents just for fuel per mile to operate.

What if I had filled up with natural gas or had a Volt or electric car, what would have been my per mile cost?  For the natural gas vehicle, assuming 25 mpg, my fuel costs would have been less than 6 cents per mile.

A Volt running on electricity would have cost 2 to 3 cents per mile.

Gasoline is now $3.27 at my home; CNG is available for $1.40; Plugging in the car and running on electricity drives the fuel cost below $1 per gallon equivalent.

Our oil habit is expensive.

Tough Love Makes GM Profitable

General Motors emerged from bankruptcy court, where the Obama Administration forced it, the beneficiary of a tough love makeover that radically cut costs and made it profitable as long as the US car market has annual sales of approximately 10 million vehicles. Yesterday, GM announced a profit of $4.7 billion in 2010, its best year since 1999 and first profitable year since 2004.

Since 1970 GM had been in the process of slowly dying, a company that once had 50% of the US car market could not compete against Koreans and others that barely made a car in 1970.  GM was so inefficient that it lost money even when the national car market boomed with annual sales of 16 million vehicles, as was the case for the first 6 months of 2008.

When the near depression following the Lehman Brothers bankruptcy on September 15th cratered consumer demand, car sales plummeted from a rate of 16 million cars to a depression level of just 9 million vehicles sold.  GM couldn' turn a profit in a booming market and burnt through its remaining cash when the market crashed.

President Bush provided an interim bailout to keep GM and Chrysler on life support at the end of his Administration, leaving the big decision about what to do with both companies to President Obama.  The President tapped Pennsylvania native, Ron Bloom who had worked with the United Steel Workers, to figure out whether and how GM and Chrysler could be restructured and returned to profitability.

Bankruptcy court and a tough, even brutal restructuring that forced changes that GM had refused to make for decades was the only recipe for profitability.  Dealerships were closed and politicians attacked.  Brands were closed and politicians attacked.  Major labor concessions were made and politicians attacked. 

Forget the scalpel.  Bankruptcy court and Ron Bloom took out an ax and chopped. 

The results are now in.  As one analyst said, as long as car sales are above 10.5 vehicles, "GM can print money."

Those who said the government restructuring of GM could not work were wrong. This position was simple, pure anti-government ideology so those who took it will never admit they were wrong.  Reading their confident, wrong predictions is, nonetheless, enlightening. 

Moreover, the GM restructuring is a large lesson  about the role of government, markets, competition, and public-private partnerships that has broad applicability to winning the future and competing with China to make things.  America will be ruined if it stops manufacturing.

The question now becomes, will GM's  new Board and managers be able to run this company efficiently?  Is it positioned to gain major market share in now the world's largest car market: China?  Can it prosper in a world of high gasoline prices?

The Chevy Volt looks better and better the higher oil prices go.

Thursday, February 24, 2011

Electric Competition Heats Up

Electric competitors increased by 4 times the amount of electric load they served between January 1, 2009 and January 1, 2011, the date when rate caps and so called stranded cost charges ended nearly completely.  Rate caps plus stranded cost charges made market entry impossible until they expired.  About 25% of Pennsylvania's total electric demand as of January 1, 2011 was supplied by electric competitors.

At the start of this year, retail electric competitors supplied 9,223 megawatts of power to Pennsylvania's consumers, up from the 2,450 megawatts they supplied in 2009.  Competitors won the increased load mainly in PPL service territory where the rate cap ended a year earlier on January 1, 2010. 

By January 1, 2010, the PPL load supplied by a competitive electric supplier jumped to 2,460 megawatts from just 28 megawatts in 2009.   Then, by January 1, 2011, competitive electric suppliers were serving 4,848 megawatts or 65% of the total PPL load. 

More than 50% of the total state load that was supplied by a competitor as of January 1, 2011 was located in the PPL service territory. 

Prior to PPL's rate cap termination, rate caps concluded in DQE as early as 2002 and Penn Power in 2007.  Competitive electric suppliers in the  DQE and Penn Power service territories in January 2011 supplied 54% and 56% of the load respectively.  Both DQE and Penn Power are comparatively small service territories.

Rate caps just ended this New Year in the PECO Energy, Allegheny Power, MetEd/Penelec service territories.  The April 1st 2011 data will be watched to see how much load has switched there in the first quarter following the end of the rate caps.

Since much higher percentages of large users rather than small consumers are now supplied by competitive electric suppliers, the percentage of total load switched is considerably higher than the percentage of all customers served by a competitor. A total of 706,113 customers are served by competitive electric suppliers as of January 1st or roughly 12%.   Of all customers served, 582,097 are residential. 

The percentage of residential customers shopping by January ranged from 0 in Allegheny Power to 35% in PPL.  As of January 1st, 2011 nearly all the residential shopping had taken place in PPL, DQE, and Penn Power service territories.  Considerable shopping may be reported in the PECO Energy service territory in the April 1st, 2011 data where as many as 20 competitors are offering service to residential customers.

Industrial load shopping ranged from a low of 16% in Allegheny Power service territory to a high of 96% in Penn Power service territory.  Ranking second with 92% of industrial load switched was PPL.

This posting will be the first of a series about Pennsylvania's retail electric markets.


Wednesday, February 23, 2011

Marcellus Production Data Off The Charts

While oil market stresses and convulsions cause oil prices to jump 40% over the last 12 months, the production data for Pennsylvania Marcellus wells exceed even high expectations.  Production is roaring even though natural gas prices are low, low, low (see post Oil Up 40%; Gas Down 20%).

Data reported to DEP show that Marcellus wells produced at least (not all companies have reported) 256 billion cubic feet of gas in just the last 6 months of 2010 and from only 1,147 producing wells.  Not all of those wells produced for the entire 6 month period.  Just one Cabot well yielded an incredible 2.4 billion cubic feet in the reporting period. 

Annual Pennsylvania gas production for 2011 will easily exceed 600 billion cubic feet, given the trends in this report.  When will the Commonwealth join the 1 trillion cubic feet club?  2012 looks likely.

Many wells seem likely to produce over their life 3.75 to 5.3 million mcf (thousand cubic feet).  One mcf has a market price of about $4 today.  As recently as July 2008, the market price was $13 per mcf. 

The Pennsylvania production data make it unlikely indeed that gas prices will return to those levels.  Indeed this data is consistent with a price range for gas of $3.50 to $6 over the next 5 years or more.

Approximately 6,800 Marcellus well drilling permits have been issued to date, with tens of thousands more in the future essentially guaranteed.

Pennsylvania will produce 2 trillion cubic feet and more by around 2014 or possibly earlier. Prior to the Marcellus boom natural gas production in the Commonwealth was less than 200 billion cubic feet for a full year. Pennsylvania will produce at least 10% of USA natural gas production.  Almost certainly more.

At today's prices, all that gas is cheaper and cleaner than oil and coal.  Yet, oil provides 90% of our transportation fuel and one-third of coal electric power capacity is more than 40 years old, inefficient, and with few environmental controls to prevent pollution that causes substantial human illness and mortality.

Our thinking must be accelerated about how expanding the use of gas to power vehicles and power plants can yield immense public health and national security benefits.

US Export of Cash for Oil Jumps

For every dollar the price of oil increases and is sustained for a year, the USA exports about an additional $4.5 billion for our oil habit. 

Brent oil has skyrocketed by $30 or 40% over the last year and West Texas Intermediate has jumped $15 per barrel.

Using the Brent benchmark of $106, Uncle Sam will spend about $480 billion for foreign oil over the next year.

The $30 Brent increase over the last year means that we will send overseas about another $135 billion per year.

Our economy cannot afford these prices.  They explode our trade deficit that kills jobs here in America.

Just look at heating oil prices.  The have been higher this February than in the February of 2008: the year of nose bleed oil prices.  Many families are paying $3.58 or higher for heating oil or $3,000 per winter. 

On a pre-tax basis, a median income family must allocate 6% of its income to heating oil.  On an after tax basis, oil heating bills could require about 10%.  All that income going for oil and most of it heading overseas means less for other goods and services right here. High oil prices cripple our economy.

Oil up 40%; Natural Gas Down 20%

Looking at the year ago prices reveals startling trends in the key Henry Hub gas as well as the West Texas Intermediate and Brent Oil benchmarks.

One year ago Henry Hub Gas was $4.92 for a thousand cubic feet and yesterday $3.88 or down $1.04, about 20% from last year.

Brent oil one year ago was $76.56 and yesterday $106 or up 40%.  WTI was $78.56 a year ago and $93.57 yesterday or up about 13%.

Oil is up 40% at Brent and Natural Gas is down 20%. The prices have completely delinked. So why are we using oil for 90% of our transportation fuel?

Natural Gas Price Snooze As Oil Skyrockets

Though yesterday West Texas Intermediate oil  skyrocketed 8.5% to $93. 57 and Brent oil reached $106, Natural Gas prices barely moved. 

Henry Hub natural gas closed at $3.88 for a thousand cubic feet, a bargain basement price.  Natural gas has completely delinked from the oil price.  But we are hooked on the more expensive, dirtier fuel. 

CNG for vehicles is available for $1.40 per gallon equivalent, while gasoline prices reach $3.19 on average nationally and are going higher.  In California gasoline will soon be $4. At that point, the savings could be $2.60 per gallon equivalent.

These comparative prices and the fact that only 120,000 vehicles in the USA run on natural gas demonstrate total market failure that must be fixed by a Pennsylvania and national policy to substitute gas, electricity and biodiesel for oil.

Looking at prices one year ago for these key energy prices is equally startling

Tuesday, February 22, 2011

Pathetically Over A Barrel

"Deja Vu all over again," as Yogi Berra must be saying, with the USA pathetically more over an oil barrel than ever, as markets for the black gold go bonkers again.   The Brent price hit $105, its highest for 30 months, and the NYMEX crude future jumped $6.62 or 7.68%. 

Thirty-seven years after the first Arab oil embargo in 1973 went a long way toward wrecking our economy, a tribal chief in Libya says Libyan oil will be cut off to the West, unless the West stops Qaddafi from murdering his citizens with machine guns, fighters, and naval craft. With Libya producing about 1.6 million barrels per day, the 17th largest producer in the world, and nerves in the oil market already on edge, the threat of a tribal chief was enough to cause a near frenzy.

The only thing surprising about the cut off threat is that it came from someone trying to stop his murderous government from murdering and was not made by the murderous government.  But just wait a bit more for that to happen.

So what is the West's response to the threat of a cut off? The International Energy Agency sends forth a spokesman to say a combined 1.6 billion barrels of oil is in reserves in the USA, Japan, Britain, and Germany and can be used to stabilize oil markets if supplies are disrupted.  My goodness the whole West has laid away oil equal to less than 3 months usage by Uncle Sam alone.

PATHETIC, STUPID, DANGEROUS!  No more oil Deja Vu all over again. It's past time to stop importing oil and laying it away.

Every dollar increase in the barrel of oil means exporting about another $4.5 billion to feed our oil addiction and drives up our crippling trade deficit that is the biggest single American job killer.  Pennsylvanians are already paying $3.58 per gallon for heating oil or $3,000 for a winter's supply when the median family income is $49,000.  Our economy and families can't stand the price.

And to top up this toxic tank, our health and environment is being damaged by a fuel that is dirtier and more expensive than available substitutes (See CNG: Saving $1.85 per gallon). Madness!

In the coming weeks, I will unveil a plan to make Pennsylvania Energy Independent and to stop using imported oil by 2015 to 2020.  Pennsylvania must show America how to break the oil addiction, end Oil Deja Vu All Over Again, and no longer be pathetically over a barrel!

Monday, February 21, 2011

Big Questions For the Day

See the previous post about heating oil prices to see why warning lights are flashing and sirens are blaring.  Two dictatorships down and how many will go?  And what does it mean for oil prices and the American economy? Questions abound:

What are the odds that the Saudi royal family is deposed in 2011?  Whatever the odds were prior to the Tunisian and Egyptian revolts, the chances of a new government in Saudi Arabia by the end of this year are much higher now.

What do you think the odds are of a successful uprising in Saudi Arabia?  My own guess is 1 in 3 and increasing everyday.

What do you think the odds are of a successful uprising this year in Iran are?  My own guess is 1 in 10 but also rising everyday.

In both nations, the militaries will be pivotal.  Will they remain united?  Will they remain united and follow orders to shoot thousands? Or will they splinter and turn on their political masters?

Would a successful revolution in Iran lower or increase oil prices?  How about Saudi Arabia?

I would love to get your thoughts.

Heating Oil Prices Reach Record February Highs

Warning lights are flashing and sirens are blaring.

Residential heating oil prices hit $3.59 per gallon this February.  Many consumers are spending $3,000 or more to heat homes this winter.  About 30% of Pennsylvania homes use oil to keep warm and 90% of our transportation fuel is oil.

Stunningly the February 2011 heating oil price exceeds the February 2008 price of $3.30.   At that time oil was on the way to $147 per barrel by July, 2008.

The current price is 73 cents or about 25 per cent higher than one year ago when residential heating oil cost $2.86.

And how much did one have to pay for heating oil two years ago, as the country's GDP collapsed by 6% in the first quarter of 2009, after plummeting by 5% in the fourth quarter of 2008?  As national leaders struggled to prevent a depression, residential heating oil sold for $2.20 in February 2009.   Today's price is 63% higher than the depressed 2009 price.

With heating oil now priced higher than in February 2008, the year when oil hit record levels by July, does anyone else see the flashing RED light and hear the blaring sirens?

Global economic growth has begun to stretch oil supply.  Escalating political risk to supply adds to upward price pressure as popular uprisings topple governments in Tunisia and Egypt and challenge dictatorships in Iran, Yemen, Libya, and Bahrain.  While answers are non-existent, questions abound.

Will the Shia of Saudi Arabia remain passive to their royal Sunni rulers?  Will Iranian style dictatorships that may well use oil as a weapon replace governments in Egypt, Tunisia, Libya, Yemen, Bahrain, and even Saudi Arabia?  Will instead popular uprisings lead to pro-western democratic governments in Iran itself and other key nations?  Or will something between these two poles emerge?  What do these scenarios mean for the price of oil?

I don't know what comes next in any of the countries of the Middle East.  I suspect nobody has more than an educated guess.

But I will hazard this prediction: no matter what politically happens in the Middle East, whether it is religious dictatorship or democracy or something in between, the political changes will lead new governments to drive oil prices higher, if not use oil as an outright weapon to bring the West to its knees.

Thirty-seven years after the first Arab oil embargo America is now a bigger sitting duck, importing more oil than ever.  See the Post "CNG: Saving $1.85 per gallon" to see what a travesty our situation is.

Sunday, February 20, 2011

Blowout Year For Wind in PA and USA

Pennsylvania wind production increased by 95.5% and national wind production rose by 28.1% for the period January to November 2010 compared to January to November 2009, according to Energy Information Agency data. Nationally wind energy is providing enough power for twice the number of homes in all of Pennsylvania or more than 10 million households.

Pennsylvania's percentage production increase was among the very best in the nation, ranking officially 7th.  A few states like Arizona had higher percentage increases in 2010 but because they had virtually no wind production in 2009.

PA wind farms produced 1.644 billion kilowatt-hours in the first eleven months of 2010, jumping from 841 million kilowatt-hours in the first 11 months of 2009.

Nationally wind produced 85.8 billion kilowatt-hours in the first 11 months of 2010, up from 66.9 billion kilowatt-hours in same period of 2009.  Everyone of those kilowatt-hours had zero air emissions; no mercury, soot, smog pollution; no water withdrawals; and no water discharges.  No mining and no drilling.

As I reported in the Wind Turbine Prices Tumble post, wind farms can be built in Pennsylvania for a 20-year 5.5 cents per kilowatt-hour power purchase agreement. 

Moreover all that electricity production lowers wholesale electric market prices (more supply equals lower market price) and is saving consumers billions across America.

Despite all those environmental and consumer benefits, wind energy and wind farms are not immune from opposition. But opponents have failed to stop wind's enormous growth since an overwhelming majority of Americans want more wind energy.  Their wish is coming true.

Assuming each household uses 750 kilowatt-hours per month or 9,000 kilowatt-hours per year, wind power nationally will provide enough electricity for approximately 10.5 million homes in 2010 once the December production numbers are added.   To put that in context, Pennsylvania has about 5.2 million residential electric accounts so wind energy nationally is providing enough electricity for two times all the homes in Pennsylvania.

While these numbers will likely trigger nashing of teeth by a strange mix of wind haters, wind energy is today playing an important role in powering America. And more wind will be harvested for electricity in 2011 when production will increase further. 

For example, Pennsylvania has 4 wind farms under construction.  They will likely begin producing in the 4th quarter of 2011 or first quarter of 2012 and will boost Pa wind production to still higher levels.

The Environmental Benefits of Gas, part 1

Given that shale drilling is industrial activity that must be professionally, independently regulated to limit impacts to the environment and increase its safety, there is appropriately substantial focus on the risks it poses. Yet, there should be equal focus on how natural gas can powerfully clean our air and water and save lives.

America now gets about 45% of its electricity from burning coal, and unfortunately 100,000 megawatts or one-third of the nation's coal plants are 40 years old or older with few or no controls to prevent pollution that sickens and kills tens of thousands every year.  The USA also uses oil for about 90% of its transportation fuel and approximately 70% of that oil is imported (see post CNG: Saving $1.85 per Gallon).  Those are today's facts.

Coal and oil are dirtier fuels than natural gas and cause more environmental and human health damage in their production and combustion than gas.  One-out-of control oil well killed eleven workers, devastated the environment of the Gulf, and damaged substantially its recreation, tourism and fishing industries.  No gas well could do that kind of damage, though it could be lethal to workers.

Producing and burning coal and oil releases more pollutants like mercury, soot, heat trapping gas, and others.  Let's look at just mercury.

One out of six American women have "elevated" levels of mercury, according to the Center for Disease Control.  "Elevated" means that a woman with those levels of mercury risks lowering the IQ of any baby she has.

And how did so many American women get elevated levels of mercury in them? Burning coal in the USA and around the world caused it.

Coal plants put large amounts of mercury into the environment, and mercury is now in the food chain, specifically fish and increasingly birds.  Eating fish contaminated by mercury from coal plants is the primary cause of elevated mercury levels in American women. 

Natural gas emits essentially zero mercury.  One more time: Natural gas emits zero mercury.

This is not an argument that natural gas is perfect and has zero impact on the environment.  It is not perfect and does pose risks that demand rigorous regulation.

But compared to the fuels that now run our cars and provide 45% of our electricity, natural gas is considerably cleaner.  Ignoring that truth and not using more natural gas right now would be an environmental disaster.

The oceans of new gas that shale production has created allows substituting it rapidly for coal and oil.  Using more natural gas to reduce oil and coal usage, especially at old, polluting plants, while also accelerating the deployment of renewable technologies and boosting energy conservation, will create millions of jobs and reduce pollution that kills and sickens people.

Gas has impacts and risks but also enormous health and environmental benefits if we use it smartly.

No Super Bowl Tickets

The Philadelphia Inquirer today reports today that I declined an offer by Consol to attend the 2009 Super Bowl.  The piece quotes me as saying that I did not go because it would have been the wrong thing to do and that I supported changing Pennsylvania law to prohibit these trips.  All true.

The piece then says that I "increased" the state employees regulating the industry.  True but incomplete.  The article also says that I "strengthened" drilling regulations.  Also true but incomplete. 

Concerning staffing, Governor Rendell, DEP, and I more than doubled the gas drilling oversight staff.  No other state boosted its regulatory staff anywhere near that level to deal with the shale drilling boom.  In fact most states did no hiring.  Here are the details.

When I became secretary on September 2nd, 2008, DEP had 88 employees regulating the industry. Governor Rendell and I agreed that was inadequate so we hired in both 2009 and 2010.  By January 2011 when I left office, DEP had 202 employees full time regulating the industry.

DEP regulators also actively enforced rules, writing 1400 violations to the industry from January 1, 2008 to June 30, 2010.  Orders were issued requiring drilling companies to pay to clean up spills and leaks, to stop drilling for months, to stop fracking, and to pay twice the market value of homes where gas migrated to private water wells from gas wells.

To pay for this substantial increase in enforcement and staff at a time of collapsing state revenues, the fee charged for a Marcellus drilling permit was raised typically from $5,000 to $10,000 from a ridiculous $100 that had been set in 1984 and never raised.  Emergency rulemaking authority was used to raise quickly the fee.  All fee income was used to hire staff, open new DEP gas drilling offices in Williamsport  and Scranton and to equip fully employees.

After I became secretary, I led a comprehensive review of all drilling regulations and many rules protecting our waters to strengthen across the board.  Four major changes were made.

First drillers were required to file a water withdrawal plan at the time of their application to drill that detailed where the water came from that would be used in the drilling process. A protective standard for streams was used in reviewing proposed stream withdrawals. If water would be withdrawn from a stream, the stream was assumed to be in a drought condition and only if the withdrawal would not damage a stream in a drought condition was the withdrawal approved.

Second, a new rule went into effect in August 2010 that required any new plants treating drilling wastewater or existing plants that expanded their drilling wastewater discharges to treat for total dissolved solids to the safe drinking water standard if they were going to discharge drilling wastewater to a stream.  Drilling wastewater untreated for TDS has been discharged to streams for decades.  The volumes expected as a result of Marcellus required a major change and the regulations were greatly strengthened. 

The drilling industry responded to this rule by innovating and developing new technology to reuse or recyle drilling waste water for drilling more wells.  At least 70% of all drilling wastewater is now reused by the drilling industry.

Third, in november 2010 a new rule became effective that required a 150 foot buffer from development for the 22,000 miles of High Quality streams, approximately one-quarter of all streams in Pennsylvania.  Buffers provide the single greatest protection for streams. Pennsylvania's buffer rule is among the strongest in the nation. 

Fourth, the rules governing the design, construction, materials used, disclosure of chemicals, monitoring and testing of gas wells were strengthened across the board. Pennsylvania's rules are state of the art.  The rule became effective on February 5th, 2011.

In summary, on my watch, DEP more than doubled the gas oversight staff, raised for the first time and substantially the fee to drill to pay for staff, actively enforced our rules, and issued 4 critical sets of policies and rules to protect our waters and increase drilling safety. 

Also, on my watch, the Marcellus industry drilled 2500 wells and began producing large amounts of natural gas.  America's shale gas revolution in the Marcellus and other formations creates huge environmental opportunities too from using less coal and oil as well as cutting sharply the heating bills to the 51% of consumers using gas to get through winters.

Saturday, February 19, 2011

$6.5 Million Miscarriage of Justice Corrected, Part 2

When I was Secretay of DEP and was told that the jury in the MFS case had rendered a $6.5 million verdict against 3 current and 1 former DEP employees, shock was my first reaction.  My next thought was to second-guess my decision not to settle the case.  But despite the shocking decision, a very small amount of reflection confirmed all the reasons for not settling still existed and compelled taking every step to overturn the verdict.

Having now read Judge Slomsky's 142 page decision, which thoroughly dismantles the jury verdict and the plaintiff's case, I am more certain than ever that this is one case that cannot be settled.

Judge Slomsky grants completely the Defendants' post trial motions (again see earlier post on case regarding the work of Susan Shinkman and others).  He grants Defendants verdicts as a matter of law on the First Amendment retaliation, Due Process, Equal Protection, and state claims.

Judge Slomsky then finds that no reasonable jury could have issued the verdict, because the verdict is "against the great weight of evidence" and would be a "miscarriage of justice" if allowed to stand.  He says at page 141: " is evident that MFS sued Defendants because it resented the malodor citiations and other decisions that Defendants and their DEP colleagues made in the course of carrying out their responsibility to protect the environment and the public."

Thank goodness for post trial motions. 

Indeed, had the plaintiffs claim of First Amendment retaliation been upheld, state government would have been forced to make major changes.  Specifically state officials would have been fools to grant meetings with those applying for permits or renewals and even more foolish to produce materials to prepare for those meetings.  Don't believe that? Read on!

While events in the MFS case go back many years, to well before Governor Rendell or Secretary McGinty took office in 2003, and involve complaints of malodors by neighbors to MFS as well as enforcement actions by the Environmental Protection Agency, a MFS meeting request in October 2007 to Secretary McGinty became the foundation for a First Amendment retaliation claim by MFS.

Secretary McGinty met with MFS in December 2007, and a routine briefing memo was written about the MFS matter to prepare the Secretary for the meeting.  MFS sued the unfortunate attorney who wrote the briefing memo, alleging he retaliated against the company for the meeting with Secretary Mcginty by writing an 8 page memo that was allegedly incomplete, did not present MFS's arguments, and biased Secretary McGinty against the company. 

MFS also sued employees alleging that 2 among 92 conditions in a DRAFT permit were inserted to retaliate against it for its meeting with Secretary McGinty.

Now mind you, DEP never ordered MFS to close; never fined it; and never denied its Title V permit renewal.  Moreover, MFS had a legal right to keep operating under the "permit shield" provisions of its original operating permit as the renewal was resolved.

In fact, MFS itself voluntarily had stopped operating in February 2006, as Judge Slomsky said nearly 2 years before the meeting with Secretary McGinty.

Judge Slomsky dissects this extraordinary First Amendment retaliation claim as well as the other claims, leaving each in tatters and vindicating completely the employees.  The Judge concluded: "When regulators such as Defendants propose lawful terms in a draft permit, or draft an internal memorandum for their supervisor, or in the case of an attorney for his or her client, this conduct is not evidence of antagonism. If such conduct of a regulator could amount to antagonism under the law, it would inhibit a public employee from performing his or her duties in the best interest of the public."

But had MFS prevailed in its First Amendment retaliation claim, state officials would have been beyond foolish to schedule meetings with those seeking permits or renewals and to order the preparation of any materials for such meetings.  Doing so would have been grist for $6.5 million jury verdicts.

Thank goodness for Judge Slomsky's decision.  If you are a lawyer, I commend it to you.

CNG: Saving $1.85 Per Gallon

Gasoline on February 18th averaged $3.15 per gallon and compressed natural gas for vehicles was available for $1.40 per gallon.  Yesterday, CNG saved $1.85 per gallon or $18.50 per 10 gallon fill up. 

So how many of you were using the cheaper, cleaner, domestic fuel?  Not me either.

We hear time and again that our addiction to oil stems from the "reality" that the black gold supposedly is a cheap high.  We are told not to worry so much that 70 per cent of the narcotic comes from overseas producers:  it is inexpensive, good stuff.  A few conservatives say all that Energy Independence nattering is impractical, would cost us more dollars to fuel America if pursued, and anyway leave it to the markets to decide whether we keep importing 70 per cent of our oil.

Oceans of new natural gas (as well as sharply falling prices for solar, wind and other renewable energy technologies) mean all the broadsides against Energy Independence are Bunk. Dangerous Bunk.

The USA has so much gas available now that we can be energy independent, and energy independence would be cheaper, cleaner, and safer. Uncle Sam can replace dirty, expensive, dangerous foreign oil and need not run 40 year old or older coal plants with few or no pollution controls that sicken and kill tens of thousands of Americans every year.

Yet we remain hooked to a fuel that costs us $1.85 more per gallon, emits much more heat trapping gas, and comes from places around the world where populations are rising up against autocratic, medieval governments.

There is a massive market failure when we pay $3.15 cents per gallon and don't use an alternative fuel priced at  $1.40. 

Gasoline is up 54 cents in the last year and up $1.20 cents over two years ago. There is a massive market failure when we don't switch in droves from gasoline even as gasoline prices go higher and natural gas prices go lower.

There is a massive market failure when only 120,000 vehicles in the USA run on compressed natural gas.

Our brains are so addled by the addiction that we struggle to break free of it, even though we could halve our fuel costs, cut our trade deficity by $350 billion per year, slash heat trapping gas emissions from transportation by at least 20%, and increase the safety of America, by just moving aggressively to natural gas and other alternative transportation fuels like elctricity and biodiesel.

Boldly moving to natural gas vehicles, electric cars, and biodiesel would create millions of jobs directly and indirectly and decrease pollution.  Pennsylvania is positioned to show the way, since Pennsylvania exports gas, exports electricity, and biodiesel.

More on this later.

Friday, February 18, 2011

Bargain Basement Natural Gas Prices

This week's warm weather is pushing spot natural gas prices below $4 to bargain basement levels.  But what is happening with gas prices is much more fundamental than 60 degree temperatures during the middle of February in Pennsylvania and the Northeast.

Amazingly natural gas prices during 2010 and into 2011 are lower than in 2009.  Prices have been typically $1 or more less than the same day 12 months ago.

Falling gas prices come in the face of a growing US economy and rising global oil prices, both of which would have driven up considerably natural gas prices in the recent past. 

The American economy that saw GDP collapse in the 4th quarter of 2008 and into the first 2 quarters of 2009 is back from the brink and will have had 7 straight quarters of solid growth by April 1, 2011.  Yet, despite real economic growth, natural gas prices continue downward.

Oil prices that plummeted from $147 per barrel in July 2008 to $30 per barrel by December 2008, as the world hurtled toward a depression, have steadily marched higher as global growth resumes.  Brent oil prices have hit $100 per barrel.  But natural gas prices go lower, as oil moves higher.

Natural gas prices have delinked from oil and economic growth.  Amazing.  And why?

Huge new supplies produced by shale drilling in the Marcellus and elsewhere have made the gas market a near total buyer's market. 

The consumer benefits of the low gas prices show up in lower heating bills and in lower electricity prices.  Increasing amounts of electricity are generated from natural gas, as gas displaces coal, and natural gas now provides 24% of America's electricity as well as heating 51% of the nation's homes.

The PJM wholesale electric market has seen prices decline about 50% in significant part as a result of lower gas prices as well as more renewable energy and greater energy efficiency by consumers.

Shale gas has changed the energy world and saved consumers billions. 

Thursday, February 17, 2011

Carbon Hope II

2009 carbon dioxide emissions fell 6 per cent from 2008 levels, according to the EPA.  In turn 2008 totals fell from 2007 levels, making it 2 years of falling emissions.  EPA said the 2009 economic decline PLUS a shift from coal to cleaner natural gas were the major causes of the 2009 decrease. 

The 2009 carbon dioxide emissions fell back to 1995 levels.  Moreover methane emissions (a potent heat trapping gas) are now 5% below 1990 levels.

Discounting these 2009 numbers as a product of a near depression is tempting.  But see earlier post "Carbon Hope?" for reasons to be more hopeful.

Economic growth resumed by the third quarter of 2009.  America will have had 7 straight quarters of economic growth by April 1st this year.  More is at work than the 2008 near Depression reducing demand and energy consumption. 

Zero carbon and low carbon fuels are gaining market share.  Natural gas is displacing coal. 40,000 megawatts of wind generation is now operating.  Energy efficiency is increasing across the economy.

Yet what is sobering is how the atmospheric concentration of heat trapping gas marches on toward 450 ppm and even 500 ppm.  But for this day let's be hopeful.

$6.5 Million Miscarriage of Justice Corrected

[See Updated Post: $6.5 Million Miscarriage of Justice Corrected, Part 2]

Yesterday, federal judge Slomsky for the Eastern District of Pennsylvania rightly overturned a $6.5 million jury verdict in the MFS, Inc  case against employees of the Pennsylvania Department of Environmental Protection. The jury verdict was shocking, a miscarriage of justice, and ruined my February 17th, 2010 when I was Secretary of DEP. 

Of course, for the DEP employees who were found personally liable for doing their jobs of enforcing air pollution rules, the verdict was deeply disturbing. The case also sent a chill through the ranks of DEP, with many employees understandably worried about the implications of this case for enforcement duties. 

And within days of the verdict, not too surprisingly, some companies and individuals who did not like DEP enforcement started to threaten "MFS" suits.  A new club had been created, and it was quickly picked up and swung.

The huge award received major press coverage around the state, including front page coverage in the Philadelphia Inquirer.  Now unfortunately there has been little or no press coverage of the Judge overturning the jury verdict.

Congratulations to Susan Shinkman DEP's excellent General Counsel that quarterbacked the post-trial motions.  Most of all congratulations and a BIG THANK YOU to Mike Bedrin and the other employees who were put through the wringer for serving the public and protecting our health.

More on this important case later.

Wednesday, February 16, 2011

Wind Turbine Prices Tumble

Wind turbine prices in the USA are falling, reaching 2005 levels, pushed down by new, domestic turbine manufacturing capacity that has created a buyer's market.  Capital costs for turbines are in the range of $1,700 to $1,800 per kilowatt.

The recent downward price move reverses turbine pricing that doubled from 2003 to 2008, moving from $1,200 to $2,500 per kilowatt.  During that time, wind companies from Europe and Asia rushed to the USA to open factories here.  They came then to avoid currency risk as the dollar fell and the Euro rose in those years, to cut transportation costs, and to position themselves in the large emerging American wind power market.

America now has 40,000 megawatts of wind installed, with 10,000 megawatts built in 2009 and 5,000 in 2010.  The new wind capacity has more than met the requirements of some state renewable energy portfolio requirements for this point in time. 

The wind boom means the price of Mid-Atlantic renewable energy credits is near zero, proving wrong one more time the ideological opponents of wind and renewable standards that confidently projected enormous consumer costs.  Substantial new wind power has caused also lower wholesale electricity market prices that save consumers billions of dollars across America.

Today's turbines both have declined in price and have higher energy yields--featuring 100 meter towers as opposed to 65 meter towers that were common in 2003, bigger rotor diameters, and other improvements.

The combination of better machines and lower prices means that wind farms can be built in Pennsylvania for a 20-year power purchase agreement at 5.5 cents per kilowatt-hour. As recently as 2008 and into 2009, PPAs of 7.5 to 8.0 cents were necessary to finance most wind farms in the Commonwealth. 

Pricing at 5.5 cents for energy for the long-term is a competitive product, even given today's incredibly low gas prices.  Some companies may even be willing to merchant finance some wind projects at these prices.  Wind power is at least a prudent hedge and a sensible part of what should be a diverse energy portfolio.