Aubrey McClendon's greed coming to fruition

The post-McClendon Chesapeake Energy looks like a tempting "buy" target precisely because it's still dealing with an overexploration hangover. Of course, as we speak, he's gone from inflating one bubble to another, trying to inflate the spreadsheets of American Energy Partners.

Is he one of the brashest people in a brash energy world? Yes. One of the most creative? Hell, no. 

One of the most "creative"? Of course. If I were an investor, I wouldn't give him a fucking dime, ignoring the allegation that he stole Chesapeake trade secrets.

McClendon's lucky that people don't generally understand the realities of shale gas, and that he either doesn't understand them himself, or he's a very good bullshitter.

Fracked natural gas wells in shale formations come online like the Spindletop oil well gusher of 1901. Then they decline in a dizzying bell curve just 3 years or so later. And, the fracking process doesn't get out that much more gas than otherwise expected.

Oh, fracking does stimulate overall production somewhat. But the biggie is that it rapidly increases the rate of production.

McClendon himself didn't appear to understand this in his Chesapeake salad days. I think he DID understand that in his post-salad days though, and he realized he was SOL unless he could get investors to back what had become a Ponzi scheme.

That said, he had a theoretically clean slate at AEP. And now he's running a Ponzi scheme from ground zero. And, runs twice as many incorporation shell games as the typical energy company or the typical media group.

And, he ripped off the city of Seattle seven years ago, too.

Back to Chesapeake, though.

It either didn't learn its lessons, post-McClendon, or else it's leading lights have decided to carry on the Ponzi scheme on their own. In either case, no sympathy here.

Michael Lind, off base on peak oil

Sometimes Michael Lind is great; sometimes he's thought provoking. Occasionally he's irritating. This time, he's all three. He may be right on the abundance of natural gas, but he's "out there" on oil.

In sounding like Daniel Yergin, and in making claims for both crude oil and natural gas that even Exxon won't, he's sounding like a utopian, or Kurzweil, or Michael Shermer.

It's clear that he's overstating the case for future oil reserves. He also, while perhaps quite right on natural gas reserves, overlooks the difficulty of converting an entire infrastructure, and not just an occasional filling station, to natural gas pumping. Finally, he ignores the costs of that, and how much more quickly running cars on natural gas would draw down those reserves.

That said, he is right that hyper-abundant natural gas will put the use of renewables for electricity in doubt. But, if so, especially post-Fukushima, why is he touting nuclear power in the story? He comes off perilously close to being an anti-environmentalist.

Finally, he ignores global warming entirely in this whole long piece. Big fail.

Andrew Leonard, his Salon colleague, has the right reaction today; WTF?

Lind now weakly claims he's "not a global warming denialist." No, just a pooh-pooher of how bad it's going to get.

Right here:

If there were really a clear and present danger of catastrophic overheating ...

Now, "present" isn't in the next 5 years, perhaps. But, a 3F rise by 2050, in the lifetimes of many of us here right now? I'd call that "present" enough. And, catastrophic enough.

Michael Lind, put down the shovel.

Oh, and STOP LYING. Andrew Leonard never called you a global warming denialist, despite your claim in your second column.

Is China sitting on a mountain of natural gas?

Quite possibly, if U.S.-style fracking of shale moves there. Try about 15 times the proven reserves of the United States.

Cheaper energy, possibly, than America, will keep manufacturing cheap and the burgeoning Chinese middle class happy.

Shale natural gas coming to Europe

The same shale-drilling techniques that are used in Texas and Pennsylvania could soon find a home in Germany and Italy. These and other western European countries would love to be less dependent on Russian gas supplies.

Atmos chief full of gas — and some myth

Robert Best, president and CEO of Atmos Energy, the nation’s largest gas-only utility company, spoke to the Best Southwest Chamber of Commerce — an umbrella group of south suburban Dallas chambers of commerce — at its quarterly luncheon today.

Much of Best’s talk was based on what he called the “eight myths” of natural gas.

On some of the myths he was totally true, or nearly so, that they are indeed myths. On some, he was partially true. And on one, he was mythmaking himself.

Let’s take that last one first.

Best said offshore wells don’t leak. Of course, as the Congressional GOP pushes to open up more offshore oil and gas drilling, this is a pet claim.

Fact? I don’t know about gas wells, but yes, oil wells in the Gulf of Mexico do leak under storm conditions. They did during Katrina, and Ike is going to give us another test.

Best was true on liquid natural gas not being a serious part of the answer, though he fudged when he said we have “60 years of gas” here without talking about Peak Natural Gas. He was also true on clean coal not being so clean.

He was semi-true on conservation and alternative fuels not being significant parts of our power answer. That’s based in part on how you define “significant.”

Also, given that nobody who gets gas heat is likely to modify their house to have electric heat, why he needed to fudge the alternative energy supply issue, I don’t know.

For more news from south suburban Dallas, go to Today Newspapers, your south Dallas County news source.

Boone Pickens only halfway gets Peak Oil

Yes, it’s nice to have someone in the oil patch as famous and rich as T. Boone Pickens sounding the alarm about Peak Oil (overlooking his Swift Boater sponsorship four years ago, and his weaseling out of being called out on it last month, but, he’s clueless about how to address Peak Oil.

Natural gas cars? North America hit Peak Natural Gas earlier this decade; the world will likely do so by 2030, so that’s an obvious nonstarter.

The Snooze writer isn’t much better, ignoring the fact that more LNG cars would push the cost of gas higher.

As well as both Pickens and Ms. Souter ignoring how much NG prices have already spikes this year, in oil’s wake.

The economics of scarcity

Jim Jubak provides an in-depth analysis of why prices are skyrocketing on food, oil and about anything else you can name. It’s called scarcity economics, he says.

However, a better name might be Peak Product economics,, based on things like Peak Oil, Peak Copper and Peak Natural Gas. Or “Peak Economics” for short.

Jubak does note that some of his “scarcity economics” is based on Peak Product economics, like Peak Copper:

Scarcity markets aren't created overnight. Potential buyers need to be bloodied by repeated experience on both the supply and demand side. Consumers of copper know that for each of the past six years, the copper industry has failed to deliver projected increases in supply.

In 2008 and 2009, according to UBS AG, the industry will fall short again. The bank projects production a shortfall of 800,000 metric tons over those two years.

But, it’s not just oil or certain metals. It’s fertilizers that may be Peaking, too, and, surprisingly, not because of the expected arrival of Peak Natural Gas in 25 years or so.

You can see scarcity economics at work in today's fertilizer market, for example. Potash of Saskatchewan produces potash and nitrogen fertilizers. But with the world short 1.2 million metric tons of potash in 2008 and desperate for nitrogen fertilizer, Potash is seeing its already high margins soar to astounding heights. In announcing its first-quarter earnings, the company projected that margins in 2008 will be roughly 3.5 times as high as in 2007.

Think that’s insane? As long as scarcity economics rules the fertilizer market, there’s a good chance Potash will get its price, and other fertilizer makers will go along for the ride. The global scarcity has made high-cost, government-subsidized producers in India the price setters in the market: If you’ve got to have supply, you'll pay any price, right? That price and not Potash’s production costs are now setting the market price.

Supply contracts for potash for the second half of 2008 are up for negotiation in Japan and India. Japan paid just $120 a ton for potash in its contract for the first half of 2008. China recently signed a long-term contract for $576 a ton. That was a $456-per-ton price jump. And even with that increase, the Chinese didn’t get all the potash they wanted. The country is now looking at a shortfall that some experts peg as high as 40 percent, just when China is trying to increase food production to cut inflation in domestic food prices.

Did you just hear the sound of rice, corn and wheat prices soaring even higher?

As for Peak Oil, he notes what I’ve blogged elsewhere, that Russian production is slipping and Mexican production is slumping.

Fasten your seat belts for America’s sled ride downhill.