Monday, March 5, 2012

Latest from: CleanTechnica

Latest from: CleanTechnica

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106 U.S. Coal Plant Retirements Since 2010

Posted: 05 Mar 2012 10:31 AM PST

 

Last Wednesday was a big milestone for people who care about public health and a livable climate. Two utilities announced the planned closure of nine coal plants in Illinois, Ohio, Pennsylvania and New Jersey, bringing total retirements (executed and planned) since January 2010 past the 100 mark to 106.

Two plants in Chicago owned by Midwest Generation, the Fisk Plant and the Crawford Plant, had been a key target for local activist groups. These two plants have been in operation since the early 1900′s and were last updated in the late 50′s and 60′s. Along with violating"grandfathered" (i.e. lax) air quality standards and causing hundreds of emergency room visitseach year, the two plants represented the largest source of local greenhouse gas emissions in 2010.

Local and national activists groups, along with the Mayor of Chicago, Rahm Emanuel, put intense pressure on Midwest Generation to shut the plants down.

The second set of plant closures come from the wholesale power provider GenOn Energy, which said it will close 3,140 MW of aging plants in Ohio, Pennsylvania and New Jersey. All of the plants are coal, except for one that is oil-fired. GenOn said new air quality regulations would make it difficult for the company to keep the plants operating.

A confluence of factors is making it very difficult for owners of coal plants — particularly old coal plants — to compete. A combination of high domestic coal prices, low natural gas prices, new air quality regulations, coordinated activist pressure, and cost-competitive renewables are making coal an increasingly bad choice for many power plant operators. Along with the 106 announced closures, 166 new plants have been defeated since 2002.

So just how much of an impact have these factors had on coal closures? Bruce Nilles, director of Sierra Club's Beyond Coal campaign sent along these numbers:

EXISTING COAL (ANNOUNCED/RETIRED SINCE JAN 1 2010)

  • 106 coal plants, 319 units
  • 42,895 MW (13% of fleet)
  • 150 million MWh (8% of fleet)
  • 162 million tons/year of CO2 (9% of fleet)
  • 921,417 tons/year of SO2 (16% of fleet)
  • Average age: 55 years old
  • (For plants with available data – Data from Clean Air Task Force): 2,042 pre-mature deaths, 3,229 heart attacks and 33,053 asthma attacks prevented each year (about 15% of total health impacts from fleet).  All together these plants retiring will save about $15.6 billion in health care costs.

So what's going to happen to the lights when all that coal gets phased out? According to a group of forward-thinking power providers, there's already enough unused combined cycle natural gas capacity installed to make up for over 100 GW of closures.

Of course, with questions about the life-cycle emissions of natural gas still unanswered, it remains to be seen how environmentally effective all that gas will be. But with record amounts of investment pouring into renewables and efficiency, and progressive utilities calling increasingly cost-competitive solar "the next big thing in the industry," the forces are coming together to close the gap.

This article was originally published on Climate Progress and has been reposted with permission.

Coal power plant via shutterstock

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Samsung — 2012 ENERGY STAR Partner of the Year

Posted: 05 Mar 2012 10:21 AM PST

 
ENERGY STAR awards were announced last week, and there were a ton of them. I imagine all of the companies that won award deserve some praise and recognition for their work and products. But I also imagine that would bore our readers a bit and would mean leaving out some other important stories. But there was one news release regarding these announcements that especially caught my attention — Samsung Electronics was named 2012 Partner of the Year in the Product Manufacturing Category by the EPA.

samsung energy star award

Samsung, in its news release on the matter, noted that it has “960 ENERGY STAR-qualified models across multiple product categories, including more televisions than all other consumer electronics brands” and that it “was selected out of the 20,000 participating ENERGY STAR organizations for its outstanding contributions in ongoing employee, retailer, and distributor training programs, as well as consumer education campaigns, recycling efforts, and labeling practices.”

I think Samsung really is a leader in this field (and actually have a Samsung TV, partly for that reason) and I think it’s worth giving the company a little recognition for its leadership.

"Under our global Planet First initiative, we are working to manage our operations sustainably while developing not only the most innovative technology, but also the most energy efficient products,” Yangkyu (Y.K.) Kim, President and CEO of Samsung Electronics North America, said. ”The four Eco-Design and Sustainability Awards we received from the Consumer Electronics Association earlier this year, together with this strong recognition from the EPA is appreciated as validation of the hard work and dedication of Samsung people around the world."

Here’s more on some of Samsung’s green efforts:

Building on its multi-year partnership with the EPA, Samsung actively promoted "Change the World, Start with ENERGY STAR." The company encouraged consumers to pledge small, yet important, steps to fight global climate change at Samsung events including the Consumer Electronics Show (CES), the World Cyber Games, and at Boys & Girls Club of America events. Over the past 20 years, American families and businesses have saved nearly $230 billion on utility bills and prevented greenhouse gas emissions equal to that from more than 350 million vehicles with help from ENERGY STAR.

Samsung will formally receive its award at the upcoming ENERGY STAR award ceremony Washington, D.C. on March 15, 2012. This award ceremony will mark the 20th anniversary of ENERGY STAR.

More on Samsung’s green efforts.

(I know this post might have come across as a little sales-y, so I’ll just note that this was not sponsored in any way — just a fan of the company.)

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CleanTechnica Video

Posted: 05 Mar 2012 09:57 AM PST

 
Important Media (our parent network) has a professional videographer on board creating 30-second videos/ads for each of the network’s sites. There isn’t a specific plan for these videos at the moment, but they’re fun and worth taking a look at, in my opinion. The CleanTechnica video was just created at the end of last week and is here:

Green Building Element’s was also created at the time. Have a look:

And, if you haven’t seen the network video yet, it’s here:

You can keep an eye on the Important Media blog to see more as they roll out, if you’re interested.

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American Schools At Head Of Class In National Sustainability Efforts

Posted: 05 Mar 2012 09:48 AM PST

 

Businesses are often cited as the standard for turning sustainability efforts into profit margins, but two recent developments suggest schools are at the head of the class in reducing emissions reductions and turning energy efficiency into cost savings. As government budgets tighten, places of learning are turning into places of sustainability.

This trend is most apparent in America's public schools. Dedicated funding for the nation's K-12 education system seems to get further reduced with every federal, state, and local government austerity measure. Faced to do more with less, schools are turning to energy efficiency in large numbers.

To that end, 84 percent of the 210 U.S. organizations recently recognized in the Environmental Protection Agency's 2011 ENERGY STAR Leaders program are listed in the "K-12 education category." To receive this recognition, school districts must have either achieved at least a 10 percent increase in overall energy efficiency, or have their entire portfolio of buildings ranked within the top 25 percent of energy performance nationwide.

Most promising, the movement toward high-efficiency education is found in almost every state. ENERGY STAR Leader school districts are located in 36 states and every region of the country. Minnesota is the surprising leader of the pack, with 31 school districts, followed closely by more traditional efficiency leaders New York State and California.

The single biggest efficiency leader was Indiana's Decatur County Community Schools, which reached the remarkable 60 percent efficiency improvement level in 2011, the first organization of any kind to hit that mark. The school's actions have already saved over $1 million in energy costs and 3,000 metric tons of CO2 — equivalent to the annual emissions of 600 vehicles.

While the efforts of K-12 schools are significant, they are not alone. America's colleges and universities are also taking steps to increase the use of renewable energy and reduce their emissions. The American College & University Presidents' Climate Commitment (ACUPCC), an agreement between 674 higher education institutions, recently released a report quantifying their environmental impact.

ACUPCC efforts have significantly reduced participant carbon footprints. Of the participating schools, 599 have submitted greenhouse gas inventories, which reported collective emissions of 28 million metric tons. 451 have submitted climate action plans, 306 institutions have set a climate neutrality target by 2050 or before, and 93 have pledged neutrality by 2030. In addition, the ACUPCC network has purchased nearly 1.3 billion kilowatt-hours (kWh) of renewable energy credits, the third-largest single buyer in the U.S.

"This is the first major U.S. sector to commit to climate neutrality, and the first time since WWII that higher education in the U.S. has collectively stepped forward to take on a major societal challenge without waiting for some external entity to request it or fund them," said Dr. Anthony Cortese, president of Second Nature, the lead supporting organization of the ACUPCC.

Indeed, well-established alumni and funding networks have had a major impact — ACUPCC signatory schools have secured an average of $2,343,787 from outside sources to fund sustainability efforts.

Image courtesy of Izismile

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IKEA NOT Selling $86,500 Prefab Home, But..

Posted: 05 Mar 2012 09:43 AM PST

 

Reports around the interwebs, from Huffington Post to CNET, have been announcing that IKEA teamed up with ideabox to manufacture and offer an $86,500, 745-square-foot, 1BR/1BA prefab home to customers in the Portland, Oregon area. This was reportedly unveiled at the Portland Home & Garden Show last week.

Turns out, it is a teaming up, but it’s really just ideabox offering a prefab home that was designed around IKEA furniture, with some help from IKEA Portland designers. “IKEA has not launched and is not selling prefabricated homes in the United States. Any reports saying otherwise are not accurate,” IKEA said in a statement.

One of our U.S. stores, IKEA Portland, has participated in a collaboration with an Oregon-based prefab studio – ideabox (www.ideabox.us) – where a version of one of ideabox's pre-fab homes is being sold with IKEA items (ie., wardrobes, kitchens, etc.). Interior designers from IKEA Portland helped furnish the interior of this particular home, and an example was on display at the recent Portland Home & Garden Show. Each home of this type sold by ideabox will include those same IKEA products that the local prefab studio will have purchased from IKEA Portland.

To make clear: IKEA is neither the manufacturer nor the retailer of these prefabricated homes. Any specific interest in this particular home, the ideabox concept or its prefab products should be directed to Jim Russell at ideabox: (503) 510-4789.

Why is this on CleanTechnica? Well, first of all, this home is rather small, already making it very energy efficient. Also, reports have indicated that the home features many eco-friendly materials and energy-efficient appliances. This all seems to be true, and it makes the news just as relevant and almost as exciting as if it were actually IKEA manufacturing and offering the homes. “Almost” since it seems that would more easily lead to mass production and sales, but maybe Ideabox can go that route anyway.

Of course, it would be great if the house were greened up just a bit more, and would be totally awesome if it were offered with solar panels.

Here’s more from Ideabox on the home:

Swedish inspired, wide open living, functional, no wasted space, and full of personality!

Working with IKEA Portland designers, we designed aktiv around IKEA systems. In the kitchen, IKEA offers a lot of flexibility in kitchen cabinets. We designed the layout, and our clients can select the colors. IKEA appliances offer state-of-the-art cooking, so we included an induction cooktop and convection oven. A counter depth refrigerator keeps food fresh, and cabinet faced dishwashers provide seamless functionality. Proven by millions walking on them in IKEA stores, aktiv offers IKEA flooring, a perfect match for active Northwest lifestyles.

Every bit an ideabox, from the energy efficiency to the cool assembly of materials, aktiv by ideabox truly is modern living made remarkably easy!

Now, while this is really more of an ideabox home than an IKEA home, maybe the news hubbub around it will inspire IKEA to design and manufacture some small, energy-efficient homes. Given IKEA’s love for solar power and electric vehicles, I imagine it could create a pretty awesome little eco-friendly home!

Photos via ideabox

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Wind Power Project News (3 Stories)

Posted: 05 Mar 2012 09:00 AM PST

wind turbines texas

1. 67-MW Colorado Highland Wind project to come online in 2012. “Tri-State Generation and Transmission Association has signed a 20-year power purchase agreement to buy the electricity from the state's newest planned renewable energy resource, the 67-megawatt Colorado Highlands Wind project,” GE, which will be providing the project with its wind turbines, notes. “The facility will be built on a 5,200-acre site in northeast Colorado's Logan County, within the service territory of Tri-State member co-op Highline Electric Association, and is scheduled to be operational by the end of the year.”

2. Ofgen and the UK’s Department of Energy and Climate Change (DECC) have published a new report on how the nation could save bundles of money on offshore wind power development. In particular, but simplified, “a more co-ordinated approach in line with government targets to build 11GW-18GW of wind farm capacity by 2020 could save between £500m and £3.5bn,” the UK’s Business Green reports.

3. Investment in North American wind energy is to hit $145 billion by 2017, a new report by Pike Research finds. “Although the North American wind energy industry lags in key areas compared to Europe and Asia, falling costs and larger, more efficient turbines are helping give rise to a sense of cautious optimism. Home to the second largest wind market in the world – the United States – the region saw a total of 5,784 megawatts of wind capacity installed in 2010. Although 2011 was another difficult year for the industry, today the region accounts for more than 22% of the world's total installed wind capacity.According to a recent report from Pike Research, installations in the region will pass 125 GW by 2017 – more than doubling from 2011 to 2017 – with onshore installations accounting for more than 97% of that total. Overall, the cleantech market intelligence firm forecasts that approximately $145 billion will be invested in onshore and offshore wind energy installations between 2011 and 2017 in North America.”

Wind turbines in Texas via shutterstock

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SDG&E Now Getting Over 20% of Energy from Renewable Energy Sources

Posted: 05 Mar 2012 08:35 AM PST

 

San Diego Gas & Electric (SDG&E) reported on March 1st that “20.8 percent of the energy delivered to retail customers in 2011 was provided by renewable energy sources, such as wind, geothermal, biomass, hydroelectric and solar facilities.” That’s 9% more than in 2010! Can you imagine if the country as a whole were so progressive?

“Of the overall 20.8 percent in retail renewable sales, geothermal, biomass, biogas, and solar projects accounted for almost 40 percent of the power.  About 60 percent of this total can be attributed to wind power,” SDG&E wrote.

Of course, SDG&E isn’t stopping there. It’s got new renewable energy projects coming on-line in 2012.

“In 2011, SDG&E signed 17 new power contracts with mostly solar and wind energy sources, representing 1,482 megawatts.   These contracts put SDG&E in a position to maintain California’s 20 percent renewable portfolio requirements in the 2011 to 2013 time frame and achieve the 25 percent renewable power requirement by 2016.  SDG&E is on track to meet the state’s mandate that 33 percent of its retail sales be produced from renewable energy projects by 2020….

A key factor contributing to the 2012-2013 development of new renewable power projects in California’s Imperial Valley is the anticipated completion of the Sunrise Powerlink transmission line later this year.”

Looking good.

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Energy Efficiency Spotlight Could Save U.S. $1 Trillion, Create 3.3 Million Jobs

Posted: 05 Mar 2012 08:06 AM PST

energy efficiency report

When I first started writing about energy and, in particular, energy policy, energy efficiency wasn’t at the top of my list for the most important thing to support, promote, or put money into. I knew it was good and knew it deserved to be in the mix, but I didn’t initially realize how much potential was sitting in this option. In the past year or so, it has risen to the top of my energy priorities list, perhaps the very top. However, really, the point is that a mix of energy efficiency and clean energy is the full package we need. That said though, energy efficiency certainly doesn’t get the spotlight wind and solar energy get, despite deserving it. Maybe a new Deutsche Bank and Rockefeller Foundation report  will help to change that.

The report, "United States Building Energy Efficiency Retrofits," finds that new types of financing models that more strongly encourage households and businesses to invest in energy efficiency could end up saving the U.S. approximately $1 trillion. Additionally, it could create over three million jobs. From the report:

In the United States alone, more than $279 billion could be invested across the residential, commercial, and institutional market segments. This investment could yield more than $1 trillion of energy savings over 10 years, equivalent to savings of approximately 30% of the annual electricity spend in the United States. If all of these retrofits were undertaken, more than 3.3 million cumulative job years of employment could be created. These jobs would include a range of skill qualifications, and would be geographically diverse across the United States. Additionally, if all of these retrofits were successfully undertaken, it would reduce U.S. emissions by nearly 10%. The potential employment and climate benefits presented by energy efficiency retrofits have led the Rockefeller Foundation to explore a program initiative in this area, and to partner with Deutsche Bank Climate Change Advisors to produce this research report as a publicly-available resource for all interested stakeholders.

This follows a Deutsche Bank report I posted a story about in January which showed great energy savings potential, billions of dollars worth, in energy efficiency retrofits in multi-family housing. Numerous studies by the American Council for an Energy-Efficient Economy (ACEEE) on the matter have come to similar findings.

And how to tap into this potential? The report identifies a few top, non-traditional models that could be used (one of which, PACE, we’ve been promoting for years):

… a status quo bias, asymmetric information and structural barriers in the real estate industry have traditionally resulted in low levels of demand by home and building owners. Over recent years, a number of financing models have emerged which offer the potential to scale investment in these markets and overcome both the supply and demand side barriers. Utilizing the work done by the World Economic Forum as a reference point, we profile these models, including the Energy Services Agreement (ESAs), Property Assessed Clean Energy (PACE) and On-Bill Finance (OBF), in addition to examining the largest historical provider of energy efficiency upgrades, the Energy Services Companies (ESCOs).

Each of these models merits consideration, and we believe that a robust market will offer multiple options to building owners seeking third-party investment in building retrofits. The ESA model appears to be especially promising in the near term, given its potential to scale without policy or regulatory requirements. A number of firms have already demonstrated early traction utilizing this structure.

While parts of the market are poised to grow independent of government policy, an enabling policy environment could further accelerate adoption and facilitate greater, or more rapid, scale. Enabling policies go beyond subsidies to include measures such as building data disclosure requirements. Some models and market segments, such as single family residential and affordable multifamily, are more policy dependent than others.

energy efficiency models deutsche bank

Here’s a little more from the report summary on these models:

  • Over the past few years, there have been new emerging financing structures, such as Energy Service Agreements (ESAs), Property Assessed Clean Energy (PACE), and On-Bill-Finance options, which offer significant potential to address historical barriers and achieve scale across the different market segments.
  • These provide additional options beyond Energy Service Companies (ESCOs), which operate primarily in government markets (which include both commercial and institutional segments).
  • PACE has potential as a model for all segments, but it requires significant regulatory support and acceptance from the mortgage industry. On-Bill Finance could be utilized with enabling regulation or used as a mechanism to enhance other financing models across the three building market segments.
  • In particular, we believe that the Energy Service Agreement structure offers significant near term potential to scale quickly and meet the needs of both real estate owners and capital providers in the commercial and institutional market, without the requirement for external enablers such as regulation or subsidy.

For more, check out the full report.

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Even Conservatives Love Clean Energy

Posted: 05 Mar 2012 07:17 AM PST

 
I’m in the congressional district of Vern Buchanan, Florida’s 13th congressional district. Buchanan is a Republican and, these days, that means he’s quite fossil-fuel-friendly and opposed to clean energy. Somehow, I got on Buchanan’s mailing list at some point in the last few years. Something his team loves to do is focus emails around a hot topic and poll. Often the wording of these polls is insanely biased and leads an uninformed person to vote a certain way. With his base probably more attentive to FOX News than the Daily Show, I don’t know how much difference it makes. I actually stay subscribed out of curiosity and to better understand the methods such politicians use and the way they frame things to continue the spreading of misinformation around the U.S.

Again, with his mailing list base being mostly his previous supporters, poll results often line up with the agenda of FOX News. So, when I received a recent one on how to make America more energy independent, and “Invest in alternative energy sources, such as solar, wind and bio-diesel” ranked rather high, I was a little surprised. Really, only ‘a little’, because I already know that people across the political spectrum support clean energy. But, from my previous experiences with Buchanan’s polls, it was a bit of an uplift. You can see a screenshot below of the results as of my submission, but be sure to note that the completely loaded question was: “Gas prices have surged to $3.58 a gallon nationally – the highest February on record. What do you think is the single most important action we should take to make America more energy independent?

Interestingly, Buchanan doesn’t mention EVs. However, he includes electricity-generating sources that generally aren’t related to gas prices in any way but through EVs. not very clear and probably had people scratching their heads or just shooting straight to an oil option, since they know how oil is related to gas prices (well, they know it’s related — probably don’t actually know how they are related). Nonetheless, an answer hardly related to transportation, except through the unmentioned link of EVs, is doing pretty well. Here’s that screenshot:

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The Natural Gas Fracking Bubble & Scam (Fracking Ponzi Scheme?)

Posted: 05 Mar 2012 06:55 AM PST

 
Rolling Stone, which is, surprisingly, one of the best mainstream publications around when it comes to environmental and energy matters, in my humble opinion, published a knock-out piece on the natural gas fracking boom… and “bubble”/”scam” that has taken the U.S. (and other countries) by storm in recent years. The full piece is worth a read, but I thought I’dpull a few key quotes out of it for you if you don’t have time for the full 4-pager. Additionally, before dropping those quotes, I think it’s important to note the recent study by former Microsoft executive Nathan Myhrvold and climate scientist Ken Caldeira showing that we really need to skip natural gas and go straight, 100% into clean energy in order to avert climate catastrophe in the second half of this century. But, now, onto other relevant matters regarding natural gas’ overhyped wonders:

Energy Ponzi Scheme

“Fracking, it turns out, is about producing cheap energy the same way the mortgage crisis was about helping realize the dreams of middle-class homeowners. For Chesapeake, the primary profit in fracking comes not from selling the gas itself, but from buying and flipping the land that contains the gas. The company is now the largest leaseholder in the United States, owning the drilling rights to some 15 million acres – an area more than twice the size of Maryland. McClendon has financed this land grab with junk bonds and complex partnerships and future production deals, creating a highly leveraged, deeply indebted company that has more in common with Enron than ExxonMobil. As McClendon put it in a conference call with Wall Street analysts a few years ago, ‘I can assure you that buying leases for x and selling them for 5x or 10x is a lot more profitable than trying to produce gas at $5 or $6 per million cubic feet.’”

“According to Arthur Berman, a respected energy consultant in Texas who has spent years studying the industry, Chesapeake and its lesser competitors resemble a Ponzi scheme, overhyping the promise of shale gas in an effort to recoup their huge investments in leases and drilling. When the wells don’t pay off, the firms wind up scrambling to mask their financial troubles with convoluted off-book accounting methods. ‘This is an industry that is caught in the grip of magical thinking,’ Berman says. ‘In fact, when you look at the level of debt some of these companies are carrying, and the questionable value of their gas reserves, there is a lot in common with the subprime mortgage market just before it melted down.’ Like generations of energy kingpins before him, it would seem, McClendon’s primary goal is not to solve America’s energy problems, but to build a pipeline directly from your wallet into his.”

Not So Much Available As Once Thought.. & Comes with Unexpected Problems

“In January, the Energy Department cut its estimate of the amount of gas available in the Marcellus Shale by nearly 70 percent, and a group affiliated with the Colorado School of Mines warns that there may be only 23 years’ worth of economically recoverable gas left nationwide. Even worse, new studies suggest that because of fugitive emissions of methane from wellheads and pipelines, natural gas may actually be no better than coal when it comes to global warming. ‘I was an early optimist about natural gas,’ says Robert Kennedy Jr., who sits on a panel that’s advising Gov. Andrew Cuomo on whether to allow drillers like McClendon to expand into New York. ‘But after looking into it, I now believe that, without tighter regulations and stricter oversight, the shale-gas boom could turn out to be an economic and environmental disaster.’”

Rolling Stone goes into the environmental concerns not related to global warming a lot more, but I think these are things most people are well aware of. But, for more details on that, most of Page 3 of the article is on that.

Chesapeake Energy Flipping Land Like Flipping Pancakes… & Going Deep Into a Ponzi Hole

The article is largely focused on one company, and the man behind it, in particular. That would be Chesapeake Energy and Aubrey McClendon. Again, the full piece, for context and more info, is worth a read, but here’s a key summary of what Chesapeake Energy & McClendon are all about:

“At Chesapeake, McClendon operated more like a land speculator than an oilman. ‘Our approach is to go in early, quietly and big,’ says Henry Hood, who directs Chesapeake’s land purchases. ‘We like to get our deals signed before anybody knows what we’re up to and tries to run up prices.’ But buying up such huge swaths of land requires huge chunks of cash – and the money often comes not from gas production, but from selling off land or going into debt. After Chesapeake drills a few wells in a region and ‘proves up’ the reserves, it hawks the leases to big oil and gas companies looking to get into the shale-gas game. In 2010, it pocketed $2.2 billion by selling land it bought in Texas for $2,000 an acre to one of China’s largest oil companies for $11,000 an acre. ‘That’s a five-to-one return on investment,’ says Jeff Mobley, Chesapeake’s senior vice president for investor relations.”

“In recent years, the company has also sold off the future proceeds it expects to receive from thousands of wells – a complex financing deal that enables it to borrow cash now without counting the debt it will owe when it has to drill the wells later. The very first deal, made with Deutsche Bank and a Swiss investment firm, brought Chesapeake more than $1 billion in return for 15 years of future production from 4,000 wells. ‘It’s not illegal, but most gas and oil companies don’t do it,’ says Bob Brackett, an analyst with Sanford C. Bernstein & Co. ‘Chesapeake’s poor credit rating pushes them to turn to unconventional financing.’”

“To make its operations even riskier, leaseholders like Chesapeake are required by law to drill on the land within three to five years after acquiring the rights or wind up forfeiting the lease. ‘The more land they acquire, the more capital they have to spend upfront,’ says Deborah Rogers, a former investment banker who learned just how precarious Chesapeake’s business model was when she looked into the firm’s financial statements after the company sunk wells near her property in Texas. ‘Then they have to drill it or lose it, which further adds to capital costs. And the more they drill, the more gas they produce, which lowers the price of gas and further reduces their revenues. In the end, this drilling treadmill is difficult to sustain for long – especially if the wells under­perform, or the resource turns out to not be as valuable as they thought.’”

“… McClendon’s worst enemy may not be environmentalists or coal companies, but his own recklessness. He played a leading role in creating the fracking bubble by hyping the promise of endless natural gas and sweet-talking Wall Street into funding a massive land grab. If the bubble bursts, Chesapeake’s stockholders won’t be the only ones who pay the price – the shock waves will be felt throughout the economy, from homeowners who rely on natural gas for heat to manufacturers who were betting on it to power their new factories. Thanks to McClendon’s gambles, Chesapeake is struggling to cover $10 billion in long-term debt.”

Already Hitting Shaky Ground

“This sort of gambling suits McClendon, who is known for placing big bets – and sometimes losing big. During the financial meltdown in 2008, McClendon was forced to sell off 94 percent of his stock in Chesapeake – some 33 million shares – for $550 million to meet a margin call on his personal investments. (Only a few months earlier, the stock had been worth $2 billion.) Despite the dramatic setback, Chesapeake’s board boosted McClendon’s annual salary to $112 million, making him the highest paid CEO at any S&P 500 company at the time. The pay hike, which sparked a shareholder lawsuit, was scorned by Wall Street analysts. ‘McClendon clearly thinks of Chesapeake as his own personal piggy bank,’ says one. In the end, that piggy bank may prove to be empty: In February, Chesapeake announced that, because of low gas prices, its revenues will fall $3.5 billion short of its expenses this year.”

& What about Truly Clean Energy?

To throw in another key threat, and this one is not in the Rolling Stone piece, truly clean energy (i.e. wind, solar, and geothermal energy) are increasingly cheap and competitive. In many places, they are already competitive with or cheaper than natural gas. Now, with natural gas prices expected to rise considerably in the years to come, out-competing these other three options without going under is going to get might hard. Can natural gas do it? I certainly don’t think so, unless heavily subsidized and supported by the government. And why would the government do that? (I think I’d prefer not to know.)

Images: Water balloon bursting via Simon Shaddock; Bubble bursting via richter.bz

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