[ Both examples of political unrest conclusively demonstrated to have been financed & orchestrated by U.S. executive govt branch as policy imposed on falsely haracterized inclement conditions at behest of a sitting president lifelong dependent on the oil industry for his personal dynastic fortune ]

Apart from such global concerns, however, one thing is certain: The price at the pump will fall if either the supply increases or the demand decreases. To increase supplies, the oil industry would like to erect more platforms off California's coast and drill for oil in wilderness areas of Alaska. But these ideas raise serious environmental & quality-of-life issues. More refineries in the state (there are 13 now; one, the Shell refinery in Bakersfield, may close this fall) would certainly ease gasoline supplies.

But for a variety of economic, environmental, and political reasons, no new refineries have been built anywhere in the U.S. in more than 20 years. Oil companies find it economically advantageous to build refineries closer to large, producing oil fields. But since the domestic oil reserves are on the decline, this means new refineries will likely be built in other countries, Garfield says. Atty General Lockyer called on California's public officials to streamline the permitting process so that oil companies can construct more storage facilities & pipelines. Gov. Schwarzenegger wants an exemption from restrictive federal rules on gasoline blending so gasoline could be more easily imported when supplies are tight. The demand side of the equation might show more promise. If more motorists purchased fuel-efficient passenger cars, for example, it would help ease demand for gasoline. Hybrid gasoline/electric power trains also might help. Beginning this year, GM will sell full-size hybrid pickups that promise fuel- economy gains of 12 to 15 percent, Ford will market a compact hybrid SUV that averages 35 to 40 mpg in city driving, and Lexus will offer a hybrid SUV that boasts a 33 percent fuel-economy gain. Looking at least a decade into the future, fuel-cell vehicles powered by hydrogen could help do away with high gasoline demand altogether. Fancy new technology aside, California motorists could have a more immediate effect on demand by simply driving smarter.   Drive slower. Each 1 mph increase over 55 mph causes a 1 percent decrease in fuel economy.   Keep tires properly inflated. A single tire underinflated by as little as 2 psi increases fuel consumption by 1%.   Use the car's air conditioner less. An air conditioner can cut fuel economy by up to 21% "By taking a series of small steps, motorists could make the difference between an adequate supply and a shortage," Hackett says. Which would mean the difference between stable gasoline prices & spikes. Exxon's profit miss drags on Dow   Stocks fall back as the oil giant earns $11.7 billion in the second quarter but misses analysts' expectations. Deutsche Bank has a huge profit decline. A revised report on GDP shows weaker-than-expected growth. GM may sell Hummer. 7.31.08   C. Blaine, E. Strott ExxonMobil posted the biggest quarterly profit ever today. But it wasn't enough for Wall St, a big reason why stocks were mostly lower this afternoon. Exxon shares fell 3.5% to $81.44 this afternoon after the co. said it earned $11.68 billion, or $2.22 per share, a 14% increase from the $10.26 billion, or $1.83 per share, a year ago. But, excluding one-time items, ExxonMobil earned $2.27 per share for the quarter, missing analysts' expectations of $2.52. So, the stock sold off. The net profit topped Exxon's own previous record for quarterly profit by a U.S. company: $11.66 billion, set in the fourth quarter of 2007. … The recent surge in oil prices has been both good and bad for Exxon since it both produces and refines oil. But like other oil companies, Exxon is having trouble keeping production up: It pumped just 3.8 million barrels a day in the quarter, the lowest daily average in three years. Meanwhile, as the price of the crude oil it uses to make gasoline and other fuels rose, refining profit fell 54% to $1.56 billion. Analysts were less than thrilled about Exxon's results. "It was a disappointment," Macquarie Research analyst Jason Gammel told CNBC, adding that the miss was in the exploration and production part of ExxonMobil's business. ExxonMobil spent $7 billion on exploration in the quarter, a 38% increase from the same quarter a year ago. "Exxon was hurt this quarter by sharp declines in production in most regions. The comparison versus the second quarter last year for crude oil and liquids was down in every region around the globe," Gene Pisasale, money manager at PNC Capital Advisors, told Reuters. Exxon is "spending $25 billion a year, and they aren't even breaking even now in terms of production growth", Pisasale said. [ meaning Hubbert's curve is accurate ] Crude oil in New York closed down fell $2.69 to $124.55 a barrel this afternoon on concerns that slowing economic growth will further weigh on demand. Oil jumped $4.58 a barrel, or 3.8%, to $126.77 on Wednesday after the Energy Dept reported a surprising decline in gasoline supplies. Another factor putting upward pressure on oil was the news that Israeli Prime Minister Ehud Olmert won't run for re-election in September, a development that raises concerns about the peace process in the region. The economy grew at a 1.9% annual rate in the second quarter, the Commerce Dept said today in its revised report on gross domestic product. Economists had expected GDP to have risen 2.4% last quarter. The economy got a boost from the $78 billion in tax rebate checks that went out during the quarter, but that isn't expected to last long, one expert said. "As the stimulus spending wears off, with the backdrop of a weak labor market, consumer spending will take a leg down", RDQ Economics chief economist John Ryding told Bloomberg News. "That's when you might get a conventional GDP recession." GDP grew at a revised 0.9% pace in the first quarter, falling from a previous reading of 1% growth. In separate economic news, initial jobless claims rose by 44,000 last week to a level of 448,000, the Labor Dept reported this morning. Govt will report on July unemployment tomorrow morning. Uplifting economic news re Chicago Purchasing Managers Index rise to a reading of 50.8 in July, up from a reading of 49.6 in June. Readings above 50 indicate expansion. GM, like rivals Ford Motor and Chrysler, has been slammed by the soaring price of oil and gasoline, as consumers shift away from big money-making sport-utility vehicles to more fuel-efficient cars. GM recently announced further restructuring plans, including efforts to sell $4 billion in assets. Wall St Journal reported yesterday that GM will cut 15% of its salaried U.S. workforce by November. GM shares were down 0.5% to $11.34 this afternoon from a 2007 Q4 high of $42.

Save 2 gallons of gas a week 7.04   Carol Thorp Westways California has nearly 23 million registered drivers, and if each one saved two gallons of gasoline a week, we could reduce the state's consumption from 45 million gallons per day to 38 million, 5 million gallons less than the amount produced daily. Reduced demand would relieve the pressure on supplies, which in turn, would lead to lower prices at the pump. The Auto Club suggests the following 10 ways to save gas: Carpool or use public transit. Leaving your vehicle at home one or two days a week is a quick way to meet the 2 gallon goal. Slow down. Speeding uses more gasoline. In particular, avoid jackrabbit starts and abrupt braking. Combine errands so you can do most of your shopping on one trip or in one locale. Shop online. Save trips to the store by shopping, banking, buying stamps, and paying bills online. Drive the smaller car. If you have both an SUV & a fuel-efficient sedan, use the smaller car for daily commutes and even for longer trips. Walk or ride a bike to do errands or for recreation. Get some exercise & save gas. If possible, telecommute one day a week. Carpool to get the kids to school. Set up a schedule with other parents so one parent picks up several children. Maintain your vehicle. Keep your vehicle oiled, lubed, and tuned up, and keep tires inflated. A well-maintained vehicle saves on gasoline. Keep junk out of the trunk. More weight you carry in vehicle, more gas you use. Gas prices high but not high enough   A stiff tax increase and $4-a-gallon fuel could end Americans' addiction to gas-hogging SUVs and curb dependence on OPEC. But don't count on politicians to line up for higher taxes.   5.26.07   David Kiley BusinessWeek Auto Beat blog The average price of a gallon of gas is now above $3. That's affecting some car buyers' choices, as it has done whenever gas prices have spiked in the past two years. But it's still not high enough to spur the needed transformation of the U.S. auto fleet to much higher average fuel economy. Gasoline taxes are one obvious measure that would move the U.S. to energy independence from the Organization of Petroleum Exporting Countries and substantially limit U.S. exposure to the political and ideological whims of the Middle East and Venezuela. Republicans running for the White House are lining up to take pledges for no new taxes, no matter how badly they are needed. Connecticut is actually rolling back its state gas tax by 5 cents a gallon to throw a bone to voters. Democrats are showing no more courage, though they are talking more about the need for greater fuel economy. Presidential hopeful Sen. Chris Dodd D-CT is pushing for carbon taxes on auto makers. But he has said recently that "direct" taxes on consumers/voters aren't (politically) feasible. Per congressional staffers and one prominent Democratic congressman, polling data going back to the 1980s shows that no tax increase would be more unpopular with voters than a gas-tax increase. Europe has an average fuel economy for its new-car fleet of more than 40 miles per gallon. The European Union years ago amassed support among members for high taxes on gasoline, which drove a swift migration from big cars to smaller cars and to diesel fuel. The result: less dependency on OPEC and cleaner air in the cities. Per a congressional staffer, to get a gas-tax increase across to the American voter, the president would have to drive a bipartisan effort, with the Democratic & GOP congressional leadership standing behind him as he addressed the country in a series of speeches explaining the need for a higher gasoline tax, and that both parties would have to sign an agreement that neither side would use the tax against the other party in ads or rhetoric, an unlikely event. Rhetoric today is about hydrogen by 2030, ethanol and biofuel, carbon taxes and such. It's all about everything that puts higher fuel economy off for perhaps 2 decades. If a gas tax of $1 to $1.50 per gallon on today's gasoline, legislated a price floor on oil of $50 per barrel to keep gasoline above $4 per gallon, there would be mass trading of SUVs and pickups for smaller, more-fuel-efficient vehicles. There would be a rapid flight of popularity for vehicles that ran on clean diesel fuel. Auto companies would like to see this gas-tax strategy adopted. Most environmentalists support the gas tax, too. It's a proven way to achieve rapid fuel economy. Auto makers just want some predictability in the marketplace, like they got in Europe, so they know what vehicles to make for American tastes and demands. They build big SUVs and high-horsepower vehicles because that's what the public wants when gas prices are low. Gasoline prices have surged in recent weeks to a record nationwide average of more than $3.20 per gallon, surpassing the previous record of $3.07 per gallon set in September 2005, according to the U.S. Energy Information Administration. As gas prices rise, owner loyalty in the large-pickup and midsize- and large-utility-vehicle segments drops, according to data gathered by the Power Information Network between February and April. Owner loyalty is measured by the percentage of owners in any given segment who trade for another vehicle in the same segment. "We're seeing a broad, long-term but gradual movement to smaller vehicles," says Power Information Network industry analysis sr dir. Tom Libby. "For example, during periods of high gas prices over the past 2 years, we've seen movement from larger to smaller SUVs. However, the total SUV pie remains largely intact." Additionally, sales of small vehicles, including cars and light trucks, as a percentage of new-vehicle retail sales, have risen from 26.3% in the first quarter of 2004 to 31.8% in the first quarter of 2007.

But consumers won't trade SUVs they don't need until gasoline is permanently more than $4 per gallon. The people who really need those vehicles for ranching and boat towing will buy them no matter what.
The new tax money could go to tax offsets for lower- and lower-middle-income consumers and to invest in new energy infrastructure in the U.S. This is not an original idea, but the gas tax could be called a "patriot tax" to exempt it from political wrangling.

FERC nat.gas rate hearing refines complex issue 6.3.01   Ricardo Alonso-Zaldivar L.A.Times Wash.D.C.   Did a Texas energy conglomerate named El Paso gouge defenseless California electric utilities by charging many times the going rate for natural gas at a time when the utilities had nowhere else to turn? For 3 weeks and counting, this question has generated mountains of testimony and exhibits in a trial-like hearing before the Federal Energy Regulatory Commission. "This case has proven to be much more complex than anyone imagined," FERC Chief Judge Curtis L. Wagner Jr. said in a letter Thursday to the agency's governing board. The hearing has produced no smoking gun proving that 2 subsidiaries of the TX energy co. squeezed Southern California's gas supply to fatten their parent company's bottom line. But the California regulators and utilities that brought the case do not have to prove that El Paso hatched a plot to game the market, lawyers in the case say. The standard of proof in civil proceedings, a preponderance of the evidence, is much lower than in a criminal trial. FERC usually relies on economic analysis and circumstantial evidence to determine whether a company behaved like a monopoly. 3 key questions have emerged in the El Paso case:   Are Southern California natural gas prices performing as would be expected in a normal market?   Was a March 2000 contract in which one El Paso subsidiary won the right to ship a large volume of gas through a pipeline system owned by another subsidiary in consumers' interest?   Have the El Paso companies behaved like monopolists? The market: At the end of March 2000, the average weekly price for immediate delivery of natural gas at the Arizona border was $2.86 per million British thermal units, 16¢ higher than at West Texas producing basins, according to Natural Gas Week. (A typical Southern California home consumes 1 million BTU in five or six days.) Natural gas prices rose steadily around the country in 2000. In Southern California they surged to unprecedented levels. Around Christmas, the average weekly price was $12.71 per million BTU in Chicago and $11.89 in New York. In Los Angeles it stood at $19.13. Economic theory says that higher prices provide an incentive for producers to increase supply, which in turn brings prices back down. Prices went down quickly around the country, except in Southern California, where they stayed high. "There is a disconnect between economic theory and what has happened here," said Regina Speed-Bost, a lawyer monitoring the trial for the city of Los Angeles, which supports California regulators and electric utilities. El Paso witnesses testified that one explanation for the continuing high prices in Southern California is a lack of pipeline capacity within the state. Interstate pipelines can deliver 7 billion cubic feet a day, but pipelines within the state can carry only 6.7 billion cubic feet. So some gas flowing to the border can't get through. But the biggest price increases haven't occurred within California. Rather, the biggest markups were between El Paso's Texas gas wells and the California line. Last week, the price of gas was marked up $8.86 per million BTU between Texas and the California border but only 49¢ more from there to L.A. The deal: The California Public Utilities Commission, Southern California Edison and Pacific Gas & Electric are pointing fingers at two El Paso subsidiaries: El Paso Natural Gas Co., which owns pipelines, and El Paso Merchant Energy, which sells natural gas. In March 2000, El Paso Merchant bought the right to ship up to 1.2 billion cubic feet of natural gas a day through El Paso Natural Gas pipelines for $38.5 million. The volume represents about 17% of California's average daily consumption and about 30% of the flow on El Paso's system. Patricia Shelton, president of El Paso's pipeline subsidiary, testified the pact was "a Plain Jane deal." "We had an open [bidding] season in early 2000," she said. FERC rules permit such contracts between affiliates, but some FERC officials call them invitations for price markups. El Paso executives deny any withholding or insider dealing. "We never had any belief that we could manipulate a market as large and as complex as California," testified Ralph Eads, president of El Paso Merchant, the gas-selling arm. William A. Wise, the chief executive of El Paso Corp., the parent company, acknowledged on the witness stand that he approved the contract. But he said he never immersed himself in its details. Though FERC's board had earlier ruled that the contract between the El Paso companies was proper, Wagner has asked board members for guidance on reopening the question based on testimony at the hearings. A question of conduct: FERC forbids the withholding of energy supplies to increase prices, but Southern California Edison and PG&E allege that is precisely what El Paso did. The utilities analyzed El Paso business records and concluded that Merchant failed to ship gas on the El Paso pipeline even when prices at the California line would have guaranteed a profit. Edison said that from June 1 to Nov. 30, 2000, Merchant withheld an average of 45% of its daily capacity to deliver Texas gas to pipelines owned by Southern California Gas at the Arizona border. PG&E compared Merchant's efforts to sell pipeline capacity it wasn't using with the efforts of other shippers on the El Paso system. When shippers have space they don't intend to use, they typically offer it for sale. PG&E found other shippers sold 98% of their unused capacity, while Merchant sold 7%. PG&E concluded that Merchant made unattractive offers because it didn't want the capacity used. But Eads, who oversees El Paso's energy marketing ventures, said Merchant entered into long-term, fixed-priced contracts called "hedges" for much of the shipping rights it bought from the El Paso pipeline. He said Merchant made a profit of $184 million on the contract with its sister company, but it could have made $700 million more if it hadn't hedged. "It's certainly not rational to hedge if you think you can drive prices up," Eads testified. PG&E bankruptcy creates massive conservation pact   5.17.04   Terence Chea AP San Francisco   Pacific Gas & Electric Co.'s bankruptcy left millions of Californians with higher energy bills, but the utility's financial debacle has been a boon to the state's environment. As part of its bankruptcy settlement, San Francisco-based PG&E agreed to permanently protect more than 140,000 acres of wilderness, and provide $100 million for environmental programs, in what is being hailed as one of the state's biggest conservation deals in decades. "These are tremendously important lands," said San Francisco-based Trust for Public Land Sierra Nevada program dir. David Sutton, advocate for the land's preservation. "It's a really important contribution to parks and open space throughout the state." When PG&E declared bankruptcy 3 years ago, many environmentalists worried the 99-year-old utility would be forced to sell off its watershed lands to private developers or energy contractors. Under an agreement reached with the California Public Utilities Commission, nearly 1,000 parcels of land, mostly in the Sierra Nevada & Cascades, will be preserved permanently as wildlife habitat, open space and public recreation areas. The deal allows California to "keep these lands for public use not just for our generation but for generations to come," said PUC President Michael Peevey. The properties, which PG&E values at $300 million, either will be donated to govt agencies or nonprofit groups, or protected through conservation easements that ensure the land won't be developed for private use. PG&E acquired most of the 141,729 acres over the past century for its hydroelectric operations. Nearly one-quarter of the electricity PG&E sells is generated by hydroelectric facilities owned by the utility or its contractors. The land is made up of 981 parcels in 21 counties stretching from Mount Shasta near the Oregon border to the Carrizo Plain near Bakersfield. About 85,000 acres are in the mountain regions of Shasta & Plumas counties. The properties contain important sources of drinking water, old-growth forests, world-renowned fishing streams, and a variety of wildlife & fish habitats. Most of the lands are situated along the American, Feather, Pit and Yuba rivers. The land is home to 68 power facilities and 99 reservoirs that PG&E will continue to operate, even if the ownership of the land is transferred to other agencies. Over the years, PG&E has allowed public access to the lands, which are used by 350,000 people each year for fishing, hiking and camping, said PG&E power generation dir. Randy Livingston. The fate of each parcel will be decided by the newly formed Pacific Forest and Watershed Lands Stewardship Council, which is made up of 17 representatives from govt agencies, industry groups and environmental organizations. The council, which met for the first time in last month, has 3 years to develop a plan for each piece of land and 7 years to carry out the plan. Under its bankruptcy reorganization, PG&E also agreed to create a $70 million fund, paid for by PG&E ratepayers, to restore & maintain the land. It also will provide $20 million to acquire and maintain urban parks & recreation areas and $10 million to help disadvantaged urban youths experience the wilderness. The utility emerged from bankruptcy last month after distributing more than $10 billion to hundreds of creditors. The bailout will be paid for mostly by PG&E's 4.8 million customers, who will pay above-market power prices for several years to come. Sempra to settle energy crisis suit, pay $580 million 1.5.06   Craig D. Rose SD UT Seeking to close a case that could have bankrupted the company, Sempra Energy agreed yesterday to pay $580 million to settle a class-action suit alleging it rigged natural gas supplies around the time of the state's power crisis in 2000 and 2001. Plaintiffs in the antitrust case, representing millions of Southern California utility customers, said the proposed agreement is worth $1.9 billion if the changes Sempra has agreed to make in its business practices are included. The settlement is still subject to approval by courts in California and Nevada. An independent analysis of the settlement won't begin until today, when the agreement is made public. Included in the benefits estimated by plaintiffs are $570 million in cost reductions and contract changes Sempra says it has unilaterally made in its controversial long-term electricity sales agreement with the state. Direct cash payments by Sempra would total $375 million, including about $165 million in lawyers' fees and costs. How the cash earmarked for customers would be distributed is yet to be determined, but the funds would be paid out over 8 years. California Superior Court Judge Ronald Prager announced the proposed settlement yesterday in a downtown courtroom, where the trial in the case began in October and was expected to continue for weeks. Both sides called it a victory. For Sempra, the settlement would end a case that held the potential for $23 billion in damages against the company, under a California law that allows for trebling of damages when antitrust activities are found. The case focused on actions by the San Diego utility co. subsidiaries, Southern California Gas Co. and San Diego Gas & Electric. "You don't know what a jury is going to do, particularly in light of the concerns arising from the energy crisis," co. chair &, until recently, chief executive Stephen Baum told analysts in a conference call. Baum is to retire at month's end. "An adverse jury verdict would have been fatal to the company, and we're not in the business of betting the company," Baum said. Baum also said the proposed settlement would put "the major pieces" of litigation related to the energy crisis behind the company. Sempra noted that the settlement agreement included its vigorous denial of any wrongdoing. However, a spokesman for state Attorney General Bill Lockyer said the state was determined to pursue 2 crisis-related lawsuits it recently filed against the company and regulatory remedies for abuses it alleges Sempra committed during the crisis. "We are going to continue pursuing the litigation and regulatory matters until Sempra provides full justice to California ratepayers," said atty general spokesman Tom Dresslar. Additionally, it's unclear whether litigation over Sempra's long-term power supply contract will end as a result of the company's unilateral offer of discounts. State officials overseeing the agreement did not return calls seeking comment yesterday. California has filed suit against Sempra, alleging the contract violates federal law barring unreasonable power prices. Lawyers for the plaintiffs, which included the cities of Los Angeles and Long Beach, said the agreement would not only bring monetary relief but structural changes in the natural gas market. The class in the case also includes all customers of SDG&E, a defendant in the case. Atty Pierce O'Donnell, who led the plaintiffs' case in the courtroom, said he was gratified by the "historic changes in the operations and business practices of these major utilities that will promote competition, lower energy costs and material benefit to energy consumers for decades to come". However, Utility Consumers' Action Network exec. dir. Michael Shames said a quick reading of the respective summaries of the deal indicated it offers little for consumers. "It is a fairly modest amount of money spread over so many customers it will be hard to recognize any impact from this settlement," Shames said. He said he will be looking with "great trepidation" at structural changes in the gas market proposed by the settlement because, he said, the plaintiffs didn't consult with consumer advocates in fashioning the proposals. On the other hand, Shames said, "It's interesting that a company would pay more than $500 million to resolve something it vigorously denies." Many of those business-practice changes, including such things as consolidating natural gas purchases for Southern California Gas Co. and San Diego Gas & Electric, must win approval from the California Public Utilities Commission. Commission President Michael Peevey said yesterday the proposed agreement appeared to offer "significant economic benefits" to consumers. However, he said, the PUC would be subjecting proposed business-practice changes to "careful review." At the heart of the plaintiffs' case was the allegation that Sempra's utility companies, SoCal Gas & SDG&E, conspired with El Paso Natural Gas Co. to restrict the supply of gas into this region. In 2003, El Paso settled a case making similar allegations on terms California officials valued at $1.6 billion. By restricting natural gas supplies, according to the plaintiffs' allegations, Sempra not only inflated prices of that commodity but substantially inflated the price of electricity during the 2000-01 energy crisis when power prices soared and California consumers ultimately paid what state officials have estimated as tens of billions of dollars in overcharges. Because most electricity in the state is generated from plants burning natural gas, increasing the fuel's cost increases the price of electricity. A key incident, according to the plaintiffs, occurred in 1996 when 11 executives of companies involved in the alleged conspiracy gathered in a Phoenix hotel room without staff or counsel present. The plaintiffs said the conspiracy to rig natural gas supplies was hatched there. Sempra said the meeting was an effort to lower prices for consumers by eliminating excess natural transportation capacity it had been obligated to buy. Nine of 11 people at the session had testified at the trial about the meeting, denying allegations of a conspiracy. Robert Cooper, lead counsel for Sempra, said he was prepared to bring testimony of the remaining two to dispute the allegations. However, the plaintiffs presented evidence that they said indicated the former rivals in the gas business began to cooperate after the session. A sampling of 7 jurors queried after their release from the case found that 4 had formed no opinion yet on the merit of the conspiracy allegations. One juror said he was leaning toward accepting the plaintiffs' allegations; another said he was leaning toward rejecting the allegations. Still another said she was still focused on the hotel-room meeting. "I wanted to know more about the Phoenix meeting," juror Aida Sturtevant said. "Why would so many important people come together and not accomplish something?"

Watchdogs take a hit in state's power ills Ex-federal officials say oversight of California's deregulation suffered due to a push for free-market competition 6.3.01   Judy Pasternak, Alan C. Miller L.A.Times Wash.D.C.   California was the first test, and right from the start economists at the Federal Energy Regulatory Commission saw trouble coming. Their bosses were worried too. In hindsight, some admit they could have done better. But 5 years ago, when California officials were rushing to deregulate electricity, the federal watchdog charged by law with overseeing the process and guarding against runaway prices decided not to bark. In their zeal for free-market competition and their ideological commitment to shifting authority away from Washington to the states, FERC's commissioners brushed aside their qualms and let the process roll forward. "There were a lot of issues that got swept under the rug," said economist Carolyn A. Berry, who headed FERC's analysis of the California plan. "We were trying to point out the ugly warts, but it wasn't our job to set policy." Former FERC Chairman James J. Hoecker, who presided over the approval, said the agency "should have been far less deferential." John Rozsa, a state legislative analyst who played a key role in the deregulation law, laughed when he heard that. "FERC wanted it badly," he said. Today, FERC stands accused of failing to exercise its oversight, enforcement and political muscle just when they were needed most. The agency, critics on the inside and outside agree, helped launch a radical economics experiment without sufficient preparation, adequate staff or a clear sense of how to carry out its mission. With fully half the states considering deregulation, the story of what a previously obscure federal agency did not do has become more than a case study in regulatory shortcomings. It has become a warning shot across the bow of the whole country. FERC has approved deregulation plans in New England, New York and the mid-Atlantic states. At stake is a reliable supply of a commodity that fuels virtually every home and workplace in America. California's example is hardly encouraging: months of blackouts and an electric bill that has rocketed from $7 billion in 1999 to as much as $50 billion this year. Now the commission is caught in what some see as an identity crisis, divided and uncertain as politicians in California and Washington call for mutually contradictory action. "I think the commission needs to decide what it wants to do when it grows up," said Hoecker, who headed the agency during a critical period ending in January. His own leadership, he concedes, was not always all it might have been. Without question, there is ample blame for everyone, not just FERC. Certainly in California, state officials devised a flawed deregulation scheme and then insisted on carrying it out. Some power company executives have extracted windfall profits. Politicians have wilted when things went awry. And, as FERC officials continually point out, its authority is limited to wholesale markets. State officials are responsible for the local utilities and other retailers selling power to consumers. Nonetheless, it is FERC that Congress charged with overseeing electricity markets and assuring "just and reasonable" prices. How did FERC choose the course it took? What factors influenced its decisions? Certainly energy companies, consumer advocates, lawmakers and others lobbied the agency. Yet even FERC critics say such influence was not dominant. FERC is not insulated from lobbying, but David Nemtzow, president of the Alliance to Save Energy, a coalition of business, consumer and environmental leaders, said: "They are less sensitive to those forces than a lot of other players." Rather, this seems to have been a case of govt decisions driven by ideology. The commissioners, both Republicans and Democrats, were wedded to the idea that deregulation at the wholesale level would lead to lower retail bills. The market, they believed, would inexorably produce greater competition, greater efficiency and falling prices. To Mark Cooper of the Consumer Federation of America, the primary problem was "their excessive faith in the market." Even after price spikes occurred across the Midwest and in California as early as 1998, FERC officials dismissed suggestions the surges might reflect market instability or manipulation. And as California's situation worsened, FERC's response was shaped by a continuing commitment to market forces with a minimum of govt intervention--witness its April order allowing temporary price caps but only in narrowly defined emergencies. In the last few months, under enormous pressure, FERC has ordered a dozen companies to justify high prices or refund $124.5 million to California utilities for January and February. It won an $8-million settlement from Williams Cos. of Tulsa, Okla., which it had accused of shutting power plants last spring to drive up prices. Williams did not admit guilt. Detractors, including California officials, howl that FERC's actions are too little too late. They have called for a range of solutions, from flat-out price caps, as in the old days of full regulation, to much higher rebates from generators caught price-gouging, to retractions of individual firms' permission to charge market-based rates. If the agency chose to wield all of its authority, it also could force witnesses to testify under oath and subpoena tapes of phone calls among power traders, and even force the state to change the way the market operates. Curtis L. Hebert Jr., the free-market champion who succeeded Hoecker as chairman, insisted "FERC is being vigilant in its efforts to ensure just and reasonable rates, while at the same time ensuring" that it fosters new energy supplies. "I would vehemently disagree with anyone who says otherwise," he added, noting he transferred 75 attorneys, half of the agency's litigators, into market oversight. Still, a consensus that it's time for aggressive action seems to be forming among commissioners, including two nominees confirmed by the Senate last month: Patrick H. Wood III and Nora M. Brownell. Wood, a Texas utility regulator nominated by Bush and probably FERC's next chairman, said the agency needs to evolve into a "market cop with a great big old stick," adding: "There is a role that only the federal govt can take. … The free market ain't a free and full market yet." Already named FERC's special liaison for California, Wood remains dedicated to market principles but vows to take a fresh look. Commissioner Linda Breathitt, a Democrat, also talks of change. And commissioner William L. Massey describes agency officials as naive in their past actions, in contrast to what he calls the "very sophisticated players" on the industry side. If some commissioners are starting to sound more like watchdogs, that's partly because they feel the tug of two conflicting ideas in their mandate to open markets while assuring fair prices. Americans have always loved the way capitalism gives opportunities to the shrewd and energetic. At the same time, the country has repeatedly turned to govt regulation when it thought particular industries, such as the railroads, waxed too powerful. How well FERC deals with this intrinsic conflict and meets its challenges may have a sizable effect on the country's energy future. Frightened by events on the West Coast, some states have slowed their progress toward deregulation. Others have decided not to try at all, at least for now. "If the commission wants to have competitive markets," Hoecker said, "it's going to have to pull the bacon out of the fire." Though it traces roots back to the Federal Power Commission and development of hydroelectric power in the 1920s, FERC began its present incarnation in the 1980s, with the Reagan administration's deregulation campaign.FERC undertook to deregulate natural gas, then, spurred by a Democratic Congress and the first President Bush, it moved on to electricity. The problem is that electricity and its markets differ significantly from natural gas. Electric power cannot be stored to meet future shortages, as gas can. Its markets are more volatile. And the effect of shortages or price spikes cascades through the economy much faster. Without anyone quite realizing it, FERC was sailing into uncharted waters. Moreover, as FERC's staff took up the original California deregulation plan, it faced a significant constraint: The commissioners had made a conscious call to let the state have its way most of the time. As state officials saw it, so much power was available for the Western electrical grid that prices would surely come down. FERC economists, on the other hand, saw myriad problems. For example, the state's scheme called for generators to submit blind bids with a separate quote for each hour of the coming day. With any power plant, the unit cost is highest when a generator is started up and declines as it runs. So the price charged for later hours should be lower than for the first, but only if the operator can sell both the beginning and the later hours. Under the California blueprint, though, bidders could not be sure which hours the purchaser might buy. That meant bidders would have to load the higher start-up costs into each hour throughout the cycle to make sure those costs were recovered. By contrast, the mid-Atlantic market requires the power purchaser to add separate payments to cover start-up costs. Other issues were deferred rather than solved before FERC granted approval, including such questions as how to manage congestion on the grid and what the transmission rights should be for municipalities that generated and sold power. State legislative aide Rozsa argues that such matters were not crucial and that the biggest flaw in the plan--the insistence that the system operator not have any generators of its own, was conceived with FERC guidance. Both FERC and the state, he said, had "an exaggerated sense of their knowledge and ability." As the California launch, originally scheduled for January 1998, drew near, FERC's nervousness increased. As late as the Christmas holidays, the state was still tinkering. The agency ordered the state to provide 2 weeks' written notice before taking the final step, even though FERC had already approved the plan. When California finally "went to market," FERC analysts snickered at the timing: The first electricity auction was held March 31 for power to be delivered the next day, April Fool's Day. As for the commissioners, "We were somewhat naive," Massey said. "The commission believed there was so much inefficiency built into the old-fashioned ƒ regime that any new market would be better." With the nation's largest state deregulating, FERC began blessing plans on the East Coast. Hundreds of companies lined up for permission to charge market rates in various open trade zones. FERC, according to its rules, was supposed to reject any firm that held a big enough share in a market, generally defined as about 20%, to influence prices for a sustained period. But doing the necessary market analyses proved impractical. For one thing, the rising workload was overwhelming the staff, which had shrunk by more than 25% from its 1980 high of 1,600 employees. The agency, as critics see it, simply buckled. "Once it got going, it took over," Berry said of the momentum behind deregulation. "FERC was handing out [permission] to anybody who walked in." FERC economist Steven A. Stoft was infuriated. He wanted to start cautiously, opening one small market, testing before expanding nationally. "To put in markets everywhere, to affect a lot of people, to just wait and see how it turns out, that's completely irresponsible," said Stoft, who now lives in California and is writing a book for regulators about how to design markets. At first, the staff Cassandras seemed wrong. Prices generally headed down. But during the summer of 1998, prices spiked twice--once in the Midwest, once in California. In the Midwest, several aging nuclear plants shut down for maintenance just as a heat wave sent air conditioners into overdrive. Wholesale electricity rose past $7,000 per megawatt-hour, 100 times normal. Consumers and politicians screamed. The weather cooled and new supply came in fast. Prices ebbed. To consumer groups and several FERC economists, the sudden increase suggested the worst can happen. Hoecker and FERC member Vicky Bailey drew a different lesson, as did a staff investigation: The market worked to correct an unusual confluence of events that was unlikely to recur. About the same time, a strange thing happened in California's reserve market, where the state's independent system operator pays generators with extra capacity to stand ready to meet unexpected surges in demand. So few companies offered to sign such contracts that the ISO sometimes had little choice but to accept whatever bid came in. It was just a matter of time before someone took advantage. One day in that summer of 1998 someone did: The only offer to provide reserve power was an astronomical $9,999 per megawatt-hour. To some, it was proof that the California market could--and would--be manipulated. "I was horrified," Berry said. FERC quickly granted California's request for permission to cap prices in the reserve. The authority quietly expired in November. There was no outcry about this spike because reserve costs are spread around to the states' utilities, thus diffusing their effect. "Of course, it should have been a warning that the sellers were several steps ahead of us," commissioner Massey says. In a memo last June, Ron Rattey, a senior FERC economist who has been with FERC since 1975, complained that the staff was "impotent in our ability to monitor, foster and ensure competitive electric power markets." He added in an interview: "FERC doesn't want todiscover that the policy changes it's making aren't working." Commissioners at the quasi-judicial agency are forbidden by law from privately discussing pending cases. So companies and Congress must officially content themselves with filing briefs, writing letters and testifying at hearings. No such restraints apply to the issue of who sits on the commission. There, the jockeying for influence can be intense. Commissioners are appointed by the president and confirmed by the Senate to staggered five-year terms, with a limit of three members of a political party on the panel. The president can also designate at any time which commissioner serves as chairman, a position that bestows broad authority over the FERC's agenda and staff. When Bush took office, he picked Hebert, then the lone Republican on the commission, to the chairmanship and named his choices for the two vacancies. It was unclear whether Hebert would keep the chair once Bush's nominees were confirmed. Soon afterward, Hebert talked by telephone with Kenneth L. Lay, who heads Enron Corp., a Houston-based energy marketing giant that recently saw its profits triple in a year. FERC policy decisions could have a huge influence on its future. Enron spokesman Mark Palmer says Lay, whose friendship with Bush is well known, was returning a call from Hebert. Palmer says Hebert wanted Lay's support for remaining chairman. Hebert told a FERC official, who heard the new chairman's end of the conversation, that Lay offered support but only if the chairman changed his views in ways that would aid Enron. The official says he heard Hebert decline and characterizes him as offended. The discussion was first reported in the NYTimes. Lay has never been shy about offering advice, nor about courting political access. He golfed with President Clinton, and Palmer wrote a letter to Clinton's personnel chief touting Hoecker for chairman. The Enron executive's ties with Bush bind especially tight; Lay raised and donated hundreds of thousands of dollars to Bush's campaigns and related efforts. Power companies also scouted candidates for the two slots. Enron went so far as to send the White House a list of a dozen people Lay considered qualified (the two new commissioners were on it). In the end, however, the evidence suggests that such lobbying mattered less than the faith in free markets and less federal intervention shared by two presidents and just about every recent FERC member. "FERC is filled with true believers," Rozsa said. The agency's recent California orders underline the point. In December, FERC concluded the market was dysfunctional and ordered a limited version of the price caps that free marketers abhor. Still, prices remained above $300 a megawatt-hour, 10x the pre-crisis average. So in April, FERC concluded it had to take further action.But the new version of price caps, approved 2 to 1, actually narrowed the circumstances under which they could be imposed, though it gave the state more flexibility. Even temporarily, the commission would not abandon its market principles. "I was reluctant to stop in my tracks," said Breathitt, the swing vote. She didn't want "to go back to a form of regulation that this commission and I had departed from five or six years ago." U.S. court raps FERC, paves way for refunds $1 billion at issue from 2000-01 energy crisis 8.3.06   Dean Calbreath SD UT A federal appeals court yesterday cleared the way for state power customers to get more than $1 billion in refunds from a wave of overcharges during the California energy crisis of 2000-2001. But it is unclear how much the final refund to consumers will be, because the matter has been left to the discretion of the Federal Energy Regulatory Commission, or FERC. Yesterday, a three-judge panel of the 9th U.S. Circuit Court of Appeals said FERC had acted in an “arbitrary, capricious” manner by blocking Californians from seeking refunds for overcharges incurred during the earliest months of the crisis. The court accused FERC of “abuse of discretion” by barring refunds for overcharges that occurred before 5.2.00, 5 months after the crisis began. It said FERC must consider imposing penalties for overcharges that began before that date. “Thank God for the courts,” said former Gov. Gray Davis, who presided over the state during the energy crisis. “The courts have repeatedly reversed FERC's decisions and have forced it to take a more sympathetic view toward the ratepayers. This is clearly good news for the ratepayers of California.”

State and municipal agencies have obtained $3 billion in consumer refunds for overcharges that occurred during the energy crisis, when Enron and a handful of other companies manipulated the state's newly deregulated energy market. It is estimated that Californians were overcharged between $8 billion and $10 billion during the crisis.

Yesterday's ruling did not give the state agencies everything they were asking for. Among other things, the ruling let stand FERC's decision to bar the Dept of Water Resources from seeking refunds for more than $1.7 billion in overcharges. During the energy crisis, the department had been used as a conduit to buy electricity for California utilities, which were being driven into bankruptcy by the high energy prices.
“It was a mixed bag,” said state Atty General Bill Lockyer spokesman Tom Dresslar, who helped lead the legal challenge against FERC. “The court took off the table more than it put back on. We're very delighted that the court found FERC acted capriciously, but we're disappointed that the ruling didn't do as much as we hoped.”

FERC officials took a more benign view of the ruling, which was intended to help resolve 200 complaints brought by utilities, state and municipal agencies and power companies.
“This was a very complicated and litigated proceeding that involves hundreds of appeals of dozens of FERC orders,” said FERC spokesman Bryan Lee. “We're still reviewing the court's findings, but at first blush, the commission views this as a balanced interpretation of the law. In many instances, the court upheld what the commission has done, although in other instances, they held that we should have gone further.”

The dispute dates back to an energy crisis that began in the late spring of 2000 and ended during the early spring of 2001. At the height of the crisis, Californians faced sky-high electricity prices and rolling blackouts, largely because of market manipulation by Enron and other energy companies that were trying to maximize their profits in the newly deregulated market.
The crisis began in San Diego County, the first region to introduce a deregulation program passed by the Legislature and signed by then-Gov. Pete Wilson. Electricity prices immediately skyrocketed. Energy suppliers such as Enron tried to explain away the price jumps, saying that supplies were tightening.

It was later discovered that some of the suppliers, including Enron, were purposely limiting supplies to drive prices high and maximize profits. As the rest of the state deregulated that summer and fall, prices soared so high that the state government asked FERC to impose price caps and order energy companies to provide refunds for any overcharges caused by market manipulation.
Although FERC eventually agreed to seek penalties, it said it would seek no refunds for overcharges that occurred before Oct. 2, 2000, 60 days after the state petitioned for help. FERC said 60 days was a standard time frame between when a petition is filed and when penalties should be imposed.

“The people in San Diego were the first to suffer during the crisis; nobody suffered more than San Diegans, but FERC stiffed them,” Davis said. “There was no rationale for that. It was like telling a bank robber that you can keep all the money that you steal for the first 60 days, but anything you steal after 60 days you have to give back.”
Two years ago, in a ruling on another issue related to the energy crisis, the 9th Circuit challenged FERC's use of the 60-day rule. Yesterday, the court ruled that FERC had “abused its discretion” by using Oct. 2 as its starting point. FERC must now determine how to comply with the ruling.

“The problem is that this decision merely gives us the right to go back to FERC to ask for the money, and that's a relatively unsympathetic venue,” said San Diego's Utility Consumers' Action Network head Michael Shames. “It's sort of like getting punished by your mother, and then going to your father for help and he just sends you back to your mother. It leaves the door open, but there's no guarantee that we'll get a better result.”

Hackers Victimize Cal-ISO 6.9.01   Dan Morain L.A.Times SACRAMENTO   For at least 17 days at the height of the energy crisis, hackers mounted an attack on a computer system that is integral to the movement of electricity throughout California, a confidential report obtained by The Times shows. The hackers' success, though apparently limited, brought to light lapses in computer security at the target of the cyber-attack, the California Independent System Operator, which oversees most of the state's massive electricity transmission grid. Officials at Cal-ISO say that the lapses have been corrected and that there was no threat to the grid. But others familiar with the attack say hackers came close to gaining access to key parts of the system, and could have seriously disrupted the movement of electricity across the state. Democratic and Republican lawmakers were angered by the security breach at an entity that is such a basic part of California's power system, given its fragility during the state's continuing energy crisis. One called the attack "ominous." An internal agency report, stamped "restricted," shows that the attack began as early as April 25 and was not detected until May 11. The report says the main attack was routed through China Telecom from someone in Guangdong province in China. In addition to using China Telecom, hackers entered the system by using Internet servers based in Santa Clara in Northern California & Tulsa, OK, the report says. James Sample, the computer security specialist at Cal-ISO who wrote the report, said he could not tell for certain where the attackers were located. "You don't know where people are really from," Sample said. "The only reason China stuck out is because of the recent political agenda China had with the U.S. … An ambitious U.S. hacker could have posed as a Chinese hacker." The breach occurred amid heightened Sino-American tensions after the collision between a Chinese military jet and a U.S. spy plane. In early May, there were hundreds of publicly reported computer attacks apparently originating from China. Most of those incidents involved mischief; anti-American slogans were scrawled on govt Web sites. The attack on the Cal-ISO computer system apparently had the potential for more serious consequences, given that the hackers managed to worm their way into the computers at the agency's headquarters in Folsom, east of Sacramento, that were linked to a system that controls the flow of electricity across California. The state system is tied into the transmission grid for the western U.S. "This was very close to being a catastrophic breach," said a source familiar with the attack and Cal-ISO's internal investigation of the incident. On May 7 & 8, as the infiltration was occurring, California suffered widespread rolling blackouts, but Cal-ISO officials said Friday that there was no connection between the hacking & the outages, which affected more than 400,000 utility customers. "It did not affect markets or reliability," said Stephanie McCorkle, a spokeswoman for Cal-ISO. Officials of the agency made no public acknowledgment of the attack until Friday when contacted by The Times. The agency did, however, call the FBI, which is investigating. McCorkle said Cal-ISO did not make a public disclosure about the hacking "because it didn't impact the reliability of any of our internal networks. It didn't have a negative consequence and would not have impacted the public or market participants." After the attack was discovered, the report says, investigators found evidence that the hackers apparently were trying to "compile" or write software that might have allowed them to get past so-called firewalls protecting far more sensitive parts of the computer system. The attackers focused on parts of the grid agency's computer system that are under development. In what may have been the most significant lapse, the system being developed was not behind a firewall, a security element designed to keep out those who are not entitled to access. Additionally, so-called tripwires that might have alerted agency security personnel to the unauthorized entry were nonexistent. Nor were there logs within the system that might have identified users entering the system as the infiltration was occurring, the report notes. What's more, dozens of ports into the computer system were open, when only a handful should have been available. "All servers should be hardened regardless of their role or location in the network," the report says. "Only ports that are required to be open should be opened; all others should be disabled." Complicating the investigation, workers at Cal-ISO rebooted their computers when the machines balked, apparently in response to the infiltration. "This action limited our ability to discover all files and activity that may be related to this compromise," the report says. Sample, the security engineer who wrote the report, downplayed the potential threat and said the attack was "something that we've been anticipating." "It was a compromise, not really an attack," he said. State legislators were not comforted by such distinctions. "That's really amazing on 2 counts: that there were computers not behind a firewall and it took 17 days to discover," said state Sen. Debra Bowen (D-Marina del Rey), who chairs her chamber's Energy Committee. Bowen, who was informed of the breach by The Times, called it a "serious matter" and said she was "very concerned to learn about this from the L.A. Times, rather than from the ISO itself." The lack of official notification, she said, adds to her skepticism about whether the agency has been forthcoming. "It is embarrassing, so I can understand they would not want to talk about it," Bowen said. "We're going to ask some questions." The Independent System Operator, established in 1998 when the state opened the newly deregulated electricity market to competition, is an essential component of the state's electricity system. The purpose of the nonprofit entity is to balance the flow of electricity across the state and make last-minute power purchases to match demand and avoid blackouts. The Legislature reconfigured the agency earlier this year, giving Gov. Gray Davis the power to appoint the five-member board that oversees it. "It is troubling that it happened," said Sen. Tom McClintock (R-Thousand Oaks). "It is disturbing that it took so long to be corrected. And it is galling that it was not reported to the Legislature." McClintock labeled as "ominous" the possibility that the attack came from China. He said he is preparing a request for all documents related to the breach and is considering requesting a formal legislative inquiry. ISO board member Mike Florio, who represents consumers, said he had a vague recollection that the board was informed of the attack. But he also was surprised to learn some of the details. "We hire people to deal with this stuff," he said, "and they said they dealt with it."

FERC at a Glance 1920: The Federal Power Commission created to oversee development of hydroelectric power. 1977: Power Commission replaced by the Federal Energy Regulatory Commission to oversee interstate transmission of natural gas, oil and electricity and regulate wholesale electric rates. 1992: Congress gives FERC authority on electricity, opens door to full-scale deregulation. 1996: FERC approves California deregulation plan. 1998: Prices spike briefly; FERC puts temporary price caps on California's emergency reserve. 2000: FERC orders staff investigation of market conditions nationwide, declares California market seriously flawed in November; in December, a form of price caps introduced. 2001: Rolling blackouts hit California. FERC orders $124.5 million in refunds from power companies alleged to have overcharged utilities. Agency says California price caps can apply in narrowly defined circumstances Source: Federal Energy Regulatory Commission; Times reports Federal Energy Regulatory Commission   FERC Members Chosen by Bush Patrick H. Wood III, GOP   Nominated by Bush, March 27; confirmed by Senate May 31. Personal: Native of Port Arthur, TX   Age: 38   Term: Expires 6.30.05 Career: Chairman of the Public Utility Commission of Texas, 1995-2001. Attorney for the law firm Baker & Botts in Washington, 1989-1991. Legal advisor to FERC member Jerry Langdon, 1991 to 1993   Education: Texas A&M University, B.S., 1985. Harvard Law School, J.D., 1989. Nora M. Brownell, GOP   Nominated by Bush, March 27; confirmed by Senate May 31. Personal: Native of Erie, PA   Age: 53   Term: Expires June 30, 2006 Career: Pennsylvania Public Utility Commission, 1997 to 2001. Senior vice president at Meridian Bancorp, 1992- 1996. Current president of the National Assn. of Regulatory Utility Commissioners   Education: Attended Syracuse University, 1966-1969 FERC Members Chosen by Clinton Curtis L. Hebert Jr., GOP   Nominated by Clinton, 1997. Named chairman by Bush in January. Personal: Native of Pascagoula, MS   Age: 38   Term: Expires 6.30.04 Professional career: Chairman of the Southern District of the Mississippi Public Service Commission, 1994 to 1996. Member of the Mississippi House of Representatives, 1988-1992   Education: University of Southern Mississippi, B.S., 1985; Mississippi College School of Law, J.D., 1990. Linda Breathitt, Democrat   Nominated by Clinton, 1997. Personal: Native of Lexington, KY   Age: 49   Term: Expires 6.30.02 Professional career: Chairwoman of the Kentucky Public Service Commission, 1995-1997. Past president of the Southeastern Assn. of Regulatory Utility Commissioners. Executive director of Kentucky's Washington office, 1980-1993.   Education: University of Kentucky, B.A., 1975. William L. Massey, Democrat   Nominated by Clinton, 1993, 1998 Personal: Native of Little Rock, AR   Age: 52   Term: Expires 6.30.03 Career: Practiced law in Washington, 1989 to 1993. Served on the presidential transition team for the Dept of Energy, December 1992. Served as chief counsel to Sen. Dale Bumpers (D-Ark.), 1981 to 1989.   Education: University of Arkansas School of Law, JD, 1973; Georgetown University Law Center, master of laws, 1985. Compiled by Sunny Kaplan L.A.Times Q&A Differences in the approaches of the 3 most senior members of the Federal Energy Regulatory Commission were apparent during recent interviews with The Times. Following are excerpts: How do you define FERC's role as a regulator of wholesale electricity? HEBERT:   "What the commission has attempted to do here since I've been chairman is to provide a balance--making certain that we have just and reasonable rates and, at the same time, making certain that we have given proper opportunity to build out infrastructure and to add much-needed supply so as to correct the flawed market that California has put in place." BREATHITT:   "It is being an effective referee. It's being a cop on the beat. It's being a nurturer of competition. It's being an arbiter of disputes. And it's overseeing a level playing field. And, also, its role, more than we've seen in the past, is going to be a place to listen to the energy consumer." Is FERC effectively monitoring wholesale electric markets and enforcing "just and reasonable" rates? HEBERT:   "I think FERC is using any and all tools available to it to adequately monitor the markets, continue to look 24 hours, seven days a week for market manipulation, and ensure just and reasonable rates. I would vehemently disagree with anyone who says otherwise." MASSEY: "We need more people dealing with the monitoring function. The monitoring function requires skills that are precise. I think we need more people involved in hard-nosed investigation work ƒ everyone here realizes we still have to do better in that regard." BREATHITT:   "This is new to us. We've been monitoring markets in an old way. We have to get better at monitoring markets within the current framework." Should FERC revise the test it uses to determine whether a power generator has "market power"? HEBERT:   "Obviously, if I thought we needed to change it, we would have." MASSEY:   "We have this old horse-and-buggy methodology for determining whether generators have market power. Everybody passes, nobody ever fails. If we've learned nothing else, it's that the screen is not sensitive enough to pick up the exercise of market power in California. ƒ I don't know how you can say you see no reason for change." Have wholesale power generators exercised market power to manipulate rates in California? HEBERT:   "I know there are several people in the state of California that continually make remarks, some of them that are completely unnecessary [about manipulation of markets].

If they have information and real evidence, this commission wants to know about it … But this anecdotal evidence that they bring forward and is not real is not helpful."
MASSEY:   "In a capacity-short market where they need all the generation, even a small company can exercise market power. I'm not talking about some kind of conspiracy. I'm talking about the kind of conduct you would expect from a tough, hard-nosed, profit-maximizing company that owns generation."

Did FERC's April 26 order imposing price caps in California during emergency hours go far enough?
HEBERT:   "I embrace the order; I think it will make a real difference. And I wish there was some way to take California through the experience without the price mitigation and show the proof that the price mitigation is going to bear in trying to level out prices while at the same time giving signals to build out infrastructure and needed supply."
MASSEY:   "I don't think we've moved quickly enough. Generally, our solutions have been too little too late. We've been hoping the market will settle down, and it just hasn't … we should have imposed a timeout … on that market to cool it off."
BREATHITT:   "I wanted it to mitigate against high prices. I wanted it to have a market orientation. And I wanted it to be effective in controlling what I thought would be high prices this summer. ƒ We did control prices on April 26."

Has FERC resolved the question of "just and reasonable" rates in California?
HEBERT:   "When it comes to just and reasonable rates, you cannot just pick a price at which no one should pay over, or be allowed to pay over, because you have to give the proper opportunity for infrastructure and supply. … We are addressing it and we will fully address all the legal arguments on it in these rehearings pending on recent California orders."
BREATHITT:   "This order, I think, will produce just and reasonable rates given the shortage of supply in California."
MASSEY:   "We haven't really defined it. I would define it as cost-of-service regulation or price disciplined by a well-functioning market. We don't have either of those."

"Osama bin Laden did not comprehend that his actions serve American interests, writes Israeli Uri Averny's 2.14.01 column in daily Ma'ariv. Former member of the Israeli Knesset Averny, noted peace activist, added, "If I were a believer in conspiracy theory, I would think that bin Laden is an American agent. Not being one I can only wonder at the coincidence." Averny argues that the war on terrorism provides a perfect pretext for America's imperial interests. "If one looks at the map of the big American bases created for the war, one is struck by the fact that they are completely identical to the route of the projected oil pipeline to the Indian Ocean."
The Asia Times reported in January that U.S. is developing "a network of multiple Caspian pipelines," and that people close to the Bush administration stand to benefit. For example, proposed Baku-Ceyhan pipeline, linking Azerbaijan through Georgia to Turkey, is represented by the law firm Baker & Botts. The principal attorney is James Baker, former secretary of state and chief spokesman for the Bush campaign in the Florida vote controversy.

In 1997, now disgraced Enron Corp. conducted the feasibility study for the $2.5 billion Trans-Caspian pipeline being built under a joint venture between Turkmenistan, Bechtel Corp. and General Electric, the article noted. Many other connections too numerous to recount here make the rest of the world skeptical about our war on evildoers.

alternative   Calif. AB 58 fuel cell autos elite co-opt local archive solar ponds & recycled alternatives SEEN Earthpulse Orbo Steorn Tom Bearden From Fryer to the Fuel Tank power down headlines Incoming asteroids, power-beaming satellites 10.1.07   Leonard David Imaginova … The Pentagon’s National Security Space Office (NSSO) is expected to unveil an interim report on satellite based solar power. Study findings on power-beaming satellites are scheduled in Washington, D.C. next week. Innogy, Greenpeace blow wind power trumpet 8.1.01   Reuters London   British energy utility Innogy Plc. and environmental campaigner Greenpeace on Wednesday launched a direct marketing project to boost public demand for British offshore wind projects. Innogy's retail arm, npower, announced that from this week, householders anywhere in the UK can opt to receive electricity bills under a new "clean" energy brand called Juice. For every unit of electricity they use, a unit of power produced by renewable sources will be fed to the national electricity grid. Juice is the first consumer energy product to be sanctioned by Greenpeace, npower said, and unlike other green offerings it will not carry a premium price. Eventually the North Hoyle Wind Farm, which Innogy is developing seven kilometers off the coast of North Wales, will supply all Juice customers. Its turbines will not be in action until 2003. So until then, Juice customers' demand will be "matched" by other clean British sources, onshore UK wind farms and a hydro-based plant in the Welsh mountains of Snowdonia. Green electricity tariffs were introduced in the UK in 1999 to help meet the govt's targets for reducing greenhouse gas emissions, which are believed to cause damaging climate change. But so far the take-up has been low, with just 18,000 customers compared with 80,000 in Germany and 400,000 in the Netherlands. Npower said it hopes Juice will add a further 50,000 households, equivalent to North Hoyle's production capacity, to the list. There will be 30 wind turbines at North Hoyle with a total 60-90 megawatts of installed capacity. Their production will save about 180,000 tons of carbon dioxide from entering the atmosphere, npower said. The British govt wants to see 10 percent of UK electricity supplies coming from renewable sources by 2010, compared with the current 2.8 percent. Wind power is by far the fastest growing renewable sector in Britain and the wider world. In Denmark offshore turbines already supply 15 percent of the nation's electricity needs. On Tuesday the British govt set up a working group to help small, environmentally friendly electricity generators overcome obstacles to their development. Critics of Britain's New Electricity Trading Arrangements (NETA) system for trading wholesale electricity introduced this year say it makes life difficult for wind producers because it imposes penalties on suppliers that cannot accurately predict what they will produce. Kamen seeks patents for clean quiet Stirling engine 4.16.02   Denis Paiste Union Leader New Hampshire   … enhanced "Stirling engine" design represented in a pair of patent applications filed by Dean Kamen and DEKA Research & Development Corp. in Manchester. "The technology itself has been in development for many years," said Segway LLC chief engineer J. Douglas Field, which started out at DEKA in Manchester's Millyard. … DEKA's goal "is to make a real world engine and as a result, they are moving forward with designs that allow high volume production," he said. A Stirling engine, unlike the common internal combustion engine, is an external combustion engine, in which the power source is not directly inside the cylinder driving a piston. A Stirling can run quieter, cleaner and more energy efficient. The engine works by using heating & cooling to regulate the expansion & compression of helium gas, which can produce enough energy to drive a piston. "The gas is sealed inside the machine," Field said. "The machine runs a lot cleaner. It doesn't require the kind of maintenance an internal combustion engine would require. "What makes the engine run well is the difference in temperature between the hot side & the cold side," he said. Because the burner runs substantially hotter than surrounding air, it isn't affected by very cold or very hot weather. "There's an actual burner on the engine, but it's on the outside of the cylinder," he said. "A lot of the technology DEKA has developed is around unique ways to transfer that heat efficiently." Because the fuel in a Stirling engine is burning outside of the cylinder, there isn't a time limit to burn up the fuel, Field said. With an internal combustion engine, there is a very short time to burn the fuel. "Think of this as more of a continuous, steady burning furnace rather than a bunch of little explosions, one in which you can get much more complete combustion," he said. More complete combustion means lower levels of pollution. Our small machines have been demonstrated to produce less pollution than a gas burner on a stove," Field said. In a pair of patents, Kamen & colleagues offer new designs for controlling the fuel-air flow in a Stirling engine and a new design for a heat exchanger between the combustion chamber & the cylinder, which would typically be filled with helium. The patents also cover new manufacturing processes for producing the heat exchanger. … Non-polluting engine for Segway ? 4.16.02   NYTimes … can be powered by heat from any fuel and is virtually non-polluting. … At least 3 Stirling engine patents have been issued to one of Mr Kamen's companies. The interesting thing about the latest application is that it covers the manufacturing of the engine, not just the design. American Stirling pres. Brent Van Arsdell, educational company that sells non-industrial Stirling engines to physics professors & enthusiasts, said: ''This patent was filed by a person who is going into production. He's fairly confident of his design.'' The Stirling engine is not a new concept. Mr Robert Stirling, a Scottish minister, applied for a patent for his ''economiser'' in 1816. Many versions of engines inspired by the Stirling design have since been built. But no company has produced a mass-market version successfully. … A second pending patent application from Mr Kamen's company suggests that his engine can run on fuels ranging from cow dung to nuclear material and everything in between, including propane, natural gas, methane, butane and petroleum. Fuel cell vehicles at the Tokyo motor show 3.20.06   Captain Japan TokyoDV Video Log In his memoirs, Henry Ford wrote of the Captain: “His one slight adjustment to my original assembly circle was the key to our success.” The rest, as they say, is history. At the 2005 Tokyo Motor Show in a white smock and clutching a stack of notes, Nobutaka Takahashi stares down at the internal skeleton model of Nissan’s X-Trail fuel cell vehicle (FCV) on display at the 2005 Tokyo Motor Show. Since the industrial revolution spawned only the internal combustion engine and not a provision for a $70-a-barrel rate for oil, alternative fuel vehicles are the talk of this year’s show. For Takahashi, a member of Nissan’s research and development team, this is his baby. “It is difficult to design and lay out the parts so that everything fits into the car,” he says of his eco-SUV, shaking his head. Take the hydrogen tank. Finding an appropriate location for a container the size of a large beach ball can be cumbersome. Such are the challenges that lie ahead for the pioneering work of the designers of the veihcles that will perhaps represent the future direction of the automotive industry. For FCVs, centrally located fuel cell stacks host chemical reactions between stored hydrogen and oxygen from the air to create the electricity that drives the motor. Water and heat are the only by-products, making FCVs eco-friendly modes of transportation. Aside from a digital dash display reporting various technical information, the design of the X-Trail is similar to a standard SUV: 5 seats, 4 doors, and plenty of room for passengers. The major differences are in the operation. Unlike its combustion cousins, turning over the ignition of the acqua blue X-Trail results in little noise. Motion of the wheels begins with a tap of the accelerator and the 85 kW electric motor receiving A/C power from a fuel stack. For the newest X-Trail, top speeds of 145 km/h and a cruising range of over 500 km are possible. An automatic air conditioning system refrigerated by carbon dioxide keeps passengers comfortable. Ever since Nissan first started experimenting with fuel cells back in 1996, advancements have been steady. The latest fuel cell stack has been improved vastly over prevoius versions of the X-Trail with its components being integrated and size being shrunk by 60% but with its power output remaining the same. A change in the winding pattern of the carbon fibers of the high-pressure hydrogen storage tank has allowed for a doubling of its pressure and a 30% boost in its hydrogen storage capacity. This has increased the vehicle’s driving range. Energy is stored in a lithium-ion battery pack, something Takahashi says sets the X-Trail apart from its competitors. “This is our selling point,” he boasts. The battery is a laminated lithium-ion cell that represents a substantial improvement over the prevoius cylindrical shape found in past versions of the X-Trail. As a result, the weight and volume is 50% less. A thinner cell construction has also improved cooling efficiency. Not to be outdone in this new market, Honda unveiled its concept fuel cell car, the maroon FCX. With two hydrogen tanks above its rear axle, this sleek sedan features the option of supplying residences with heat and electricity. Also entering the fray is Suzuki with its Ionis concept minicar, an FCV with its stack set beneath the cabin floor to allow for a large interior space. In the past few years, Nissan has been leasing its eco-baby to oil refiner Cosmo Oil Co., the city of Yokohama, and the prefecture of Kanagawa at a rate of 1 million yen a month. Even with oil prices having doubled over the past five years, FCVs will still have to wait their turn. Since costs for development of the X-Trail is at a prohibitively high 120 million yen each and public awareness of the technology relatively small, Takahashi acknowledges that it will be some time before his project becomes widespread. “The market is very small right now because there is little demand,” Takahashi says. “We are not needed yet.”	4 options for industrial societies during the next decades: Last one standing   competition for remaining resources; Power down   cooperation, conservation amp; sharing; Waiting for magic elixir   wishful thinking, false hopes & denial; Building lifeboats   community solidarity & preservation. per Power Down 8.15.04 Richard Heinberg military   "military planning for end of the grid" Army of the future makes its own fuel in the field 6.26.01   Environmental News Network Future U.S. Army operations in the field could rely on alternative fuels and biological methods to produce electricity, says a blue-ribbon committee of university and industry scientists. A report by the National Research Council's Board on Army Science and Technology found that fuel that can be produced on the spot from waste plant materials. By 2025 soldiers could make fuel and electricity where they are, instead of relying on long supply chains to transport energy to them, the report predicts. "The Army needs to be investigating surrogate fuels, such as ethanol and biodiesel, and make sure their engines can run on a variety of fuels," says Michael Ladisch, professor of agricultural and biological engineering at Purdue University and chair of the 16 member National Research Council (NRC) committee. "Actually, I think this can be done with a minimal amount of modification. They're in pretty good shape in this area." Scientists are already making fuel from waste plant materials such as cellulose and hemicellulose. Grasses, surplus grains, spoiled food, food wrappers, paper or cotton cloth could be converted into fuel. "In theory, these materials could be produced in the field, if the theater of operation were in a temperate zone, and used as fuels," the report states. Robert Love, study director for the National Research Council, says, "The real issues for the Army are the ability to simplify logistics requirements, to remain flexible with battlefield fuels, and to capitalize on alternative fuels, such as methane, instead of restricting ourselves to fossil fuels," he says. Military officials glimpsed the near term future of non-fossil fueled transport in 1999 when manufacturers demonstrated a hybrid electric High Mobility Multipurpose Wheeled Vehicle (HUMVEE) at Fort Gillem, GA. The vehicle, more powerful and quicker than the standard military Humvee, can accelerate faster and climb steeper grades at higher speeds. Powered by 55-kilowatt magnet motors attached to each wheel, the vehicle draws electric energy from advanced, sealed lead acid batteries and a 55-kilowatt alternator, which is integrated with a high efficiency diesel engine. But this is only an interim solution because batteries are bulky and very heavy. Biological systems may be the answer, the NRC committee suggests. "Right now the Army is dependent on batteries, and they can't take seriously other energy sources such as solar power," Love says. "One of the things the report investigated was photovoltaic energy, and how bioelectronics might make it possible to increase the efficiency of converting sunlight to usable energy. If you put this together with fuel cell storage techniques, this would have a large impact on how the military operates, especially for small unit operations," he says. NRC Board on Army Science & Technology recommends that the Army investigate how plants convert photons to energy because plants are so good at pulling energy from the natural environment. Plants convert 98% of the sunlight they receive into energy. By comparison, current solar energy systems are only 10% to 15% efficient, with the most efficient reaching conversion rates of 32%. The NRC report suggests that coupling the light-harvesting capabilities of plants with protein-based devices could lead to solar energy systems capable of converting solar energy at 40% to 50% efficiency. Ladisch & Love also envision protein based solar photovoltaic coatings on the Kelvar military helmets that could produce enough energy to power a soldier's electronics. Equipment and vehicles could also be coated with protein based solar converters to produce a constant stream of electricity. A side benefit of such technology, the report notes, is that the protein coatings would make whatever they coat more difficult to detect by electronic means since they would mimic the natural environment. Although using non-petroleum sources of energy would have obvious environmental and social benefits, Love says this didn't factor into the committee's considerations. He said, "Obviously there are always spin-offs of military innovation, but the committee was concerned with what would improve the operations of the Army." Unlocking the power of the body electric Tiny batteries capture energy derived from motion & heat for military & civilian 12.27.01   Dave Wilson L.A. Times American soldiers' … commando abilities devour power. … weapon & ammo. … couple of pounds of batteries … in many cases, a battery can be more important than a bullet. … researchers are trying to capture electricity derived directly from human bodies to power portable devices. Although much of the research has been aimed at military applications, low-end civilian uses for this technology will appear soon, perhaps even next year. … For decades, the normal movements of the human body have powered some smaller gadgets. The best example is a self-winding watch, which uses the frequent motion of the human arm to wind a spring and keep the clock mechanism moving. Several researchers, such as Joe Paradiso, head of the responsive environments group at the MIT's Media Lab, have installed tiny power generation equipt in shoes. Every step generates a burst of electricity. Properly controlled, that's the sort of thing that could power a radio. "The trick here is storing the electricity in some kind of battery, so that the power doesn't stop if you're not walking around," Paradiso said. Other … ways to tap energy created by the human body. One of the most common methods is based on a well-understood principle that the difference in temperature between two objects can be converted into electricity. Advanced Power Solutions Inc. of Palm Beach, FL, said its tiny thermoelectric generator will be used in a wristwatch that may be on the market next year. The generator creates electricity based on the difference in temperature between skin & air. "Beyond the life-and-death decisions on the battlefield, which is the focus of much of the research today, many people think this kind of technology will help us conserve energy in the future," said Henry W. Brandhorst, director of the Center for Space Power and Advanced Electronics at Auburn Univ. NASA is funding the center's power research for use on space missions. … consumer devices such as mobile phones & electronic organizers. … possibility of making medical devices largely self-contained. … The technology's most profound effect may be in the way people design and interact with portable devices. Battery power dictates size & shape … pagers clip to a belt instead of being worn as rings or shirt buttons is the size of the batteries needed to power them. Clothing that collects & stores electricity, and gadgets designed to draw power from that system, form really will follow function. Engine on a chip promises to best the battery 9.19.06   Nancy Stauffer MIT researchers are putting a tiny gas-turbine engine inside a silicon chip about the size of a quarter. The resulting device could run 10 times longer than a battery of the same weight can, powering laptops, cell phones, radios and other electronic devices. It could also dramatically lighten the load for people who can't connect to a power grid, including soldiers who now must carry many pounds of batteries for a three-day mission, all at a reasonable price. The researchers say that in the long term, mass-production could bring the per-unit cost of power from microengines close to that for power from today's large gas-turbine power plants. Making things tiny is called microelectromechanical systems or MEMS, and grew out of the computer industry's success in developing and using micro technologies. "40 years ago, a computer filled up a whole building," said Aeronautics & Astronautics dept. prof. Alan Epstein. "Now we all have microcomputers on our desks and inside our thermostats and our watches." Epstein and a team of 20 faculty, staff and students are looking to make personal power. "Big gas-turbine engines can power a city, but a little one could 'power' a person," said Epstein, whose colleagues are spread among MIT's Gas Turbine Laboratory, Microsystems Technology Laboratories, and Laboratory for Electromagnetic and Electronic Systems. An engine needs a compressor, a combustion chamber, a spinning turbine and so on. Making millimeter-scale versions of those components from welded and riveted pieces of metal isn't feasible. So, like computer-chip makers, the MIT researchers turned to etched silicon wafers. Their microengine is made of six silicon wafers, piled up like pancakes and bonded together. Each wafer is a single crystal with its atoms perfectly aligned, so it is extremely strong. To achieve the necessary components, the wafers are individually prepared using an advanced etching process to eat away selected material. When the wafers are piled up, the surfaces and the spaces in between produce the needed features and functions. Making microengines one at a time would be prohibitively expensive, so the researchers again followed the lead of computer-chip makers. They make 60 to 100 components on a large wafer that they then (very carefully) cut apart into single units. The MIT team has now used this process to make all the components needed for their engine, and each part works. Inside a tiny combustion chamber, fuel and air quickly mix and burn at the melting point of steel. Turbine blades, made of low-defect, high-strength microfabricated materials, spin at 20,000 revolutions per second, 100 times faster than those in jet engines. A mini-generator produces 10 watts of power. A little compressor raises the pressure of air in preparation for combustion. Cooling, always a challenge in hot microdevices, appears manageable by sending the compression air around the outside of the combustor. "So all the parts work. We're now trying to get them all to work on the same day on the same lab bench," Epstein said. Ultimately, of course, hot gases from the combustion chamber need to turn the turbine blades, which must then power the generator, and so on. "That turns out to be a hard thing to do," he said. Their goal is to have it done by the end of this year. Predicting how quickly they can move ahead is a challenge. If the bonding process is done well, each microengine is a monolithic piece of silicon, atomically perfect and inseparable. As a result, even a tiny mistake in a single component will necessitate starting from scratch. If one component needs changing, e.g. the compressor should be a micron smaller, the microfabrication team will have to rethink the entire design process.
New battery packs powerful punch 7.4.07 Paul Davidson USA Today Until recently, large amounts of electricity could not be efficiently stored. Thus, when you turn on the living-room light, power is instantly drawn from a generator. A new type of a room-size battery, however, may be poised to store energy for the nation's vast electric grid almost as easily as a reservoir stockpiles water, transforming the way power is delivered to homes and businesses. Compared with other utility-scale batteries plagued by limited life spans or unwieldy bulk, the sodium-sulfur battery is compact, long-lasting and efficient. Using NaS batteries, utilities could defer for years, and possibly even avoid, construction of new transmission lines, substations and power plants, says Cambridge Energy Research Associates analyst Stow Walker. They make wind power, wildly popular but frustratingly intermittent, a more reliable resource, and provide backup power in case of outages, such as the one that hit New York City last week. Power demand is projected to soar 50% by 2030 and other methods of expanding the power supply are facing growing obstacles. Congress is likely to cap carbon dioxide emissions by traditional power plants to curtail global warming. Communities are fighting plans for thousands of miles of high-voltage transmission lines needed to send electricity across regions. American Electric Power (AEP), one of the largest U.S. utilities, has been using a 1.2 megawatt NaS battery in Charleston WV, the past year and plans to install one twice the size elsewhere in the state next year. Dozens of utilities are considering the battery, says NGK Insulators consultant Dan Mears, Japanese co. that makes the devices. "If you've got these batteries distributed in the neighborhood, you have, in a sense, lots of little power plants," Walker says. "The difference between these and diesel generators is these batteries don't need fuel" and don't pollute". The NaS battery is the most advanced of several energy-storage technologies that utilities are testing. The oldest and most widespread form of energy storage in the USA, pumped hydroelectricity, collects water after it spins a turbine and uses a small amount of electricity to send it back and repeat the process. Lead-acid batteries, kind used in cars, were installed by Southern California Edison in 1988. Though inexpensive, they typically fill warehouse-size buildings and last about 5 years. The acid that connects positive and negative electrodes corrodes components. An NaS battery, by contrast, uses a far more durable porcelain-like material to bridge the electrodes, giving it a life span of about 15 years, Mears says. It also takes up about a fifth of the space. Ford Motor pioneered the battery in the 1960s to power early-model electric cars; NGK and Tokyo Electric refined it for the power grid. Since the 1990s, Japanese businesses have installed enough NaS batteries to light the equivalent of about 155,000 homes, says Electricity Storage Association head Brad Roberts. In the USA, AEP is using the 30-foot-wide by 15-foot high battery to supply 10% of the electricity needs of 2,600 customers in north Charleston, says AEP distributed energy manager Ali Nourai. The batterycharged by generators from the grid at night, when demand and prices are low, and discharged during the day when power usage peaks. By easing strains on the grid, especially on the hottest summer days, the battery lets AEP postpone by about 7 years the roughly $10 million upgrade of a substation and reduce the chances of a blackout, Nourai says. After it upgrades the substation, AEP can move the battery to another location. "Our vision is to have (batteries) throughout our system," he says. A more intriguing goal is to wring more energy out of the wind farms that are cropping up across the country. Wind typically blows hard at night when power demand is low, producing energy that cannot be used. When demand peaks midday, especially in the summer, wind is often sporadic or absent. NaS batteries could let AEP store wind-generated power at night for daytime use. Next year, AEP plans to install another NaS battery in West Virginia to provide backup power in case of an outage, first such application of the technology, Nourai says. The battery would kick in automatically, so customers would see no disruption. Other utilities are planning or considering the technology. In Long Island NY, a group of utilities plans this summer to install an NaS battery at a bus depot. The battery is charged at night, when power prices are low, and discharged during the day to pump natural gas into tanks to provide fuel for the buses, says New York Power Authority Mike Saltzman. That cuts electric costs for the bus company and eases stresses on the grid. Pacific Gas & Electric is leaning toward installing a much larger, 5-megawatt battery by 2009, enough to power about 4,000 homes, says PG&E's Jon Tremayne. The biggest drawback is price. The battery costs about $2,500 per kilowatt, about 10% more than a new coal-fired plant. That discourages independent wind farm developers from embracing the battery on fears it will drive the wholesale electricity prices they charge utilities above competing rates, says American Wind Energy Association spokeswoman Christine Real de Azua. Mass production, however, is expected to drive prices down, Mears says. He predicts NaS batteries will start to become widespread within a decade. Meanwhile, other storage devices are gaining traction, too. A group of Iowa municipal utilities plans to use wind turbines to compress air during off-peak hours that will be stored in an underground cavern. The air would be released at peak periods to run turbines and generate power for about 200,000 homes. Another technology, the flywheel, has a massive cylinder that can spin for days after being started by a generator. The cylinder can then activate a turbine to supply electricity for a few seconds or minutes when it's needed, for instance, to head off an interruption to a computer center from a lightning strike. "We'd like to see storage ubiquitous," says Dept of Energy energy storage head Imre Gyuk, of for the, which helped fund the AEP project. "Stick it any place you can stick it." posted commentary Altairnano's Nanosafe batteries. They maintain up to %80 capacity up to 25000 charge cycles and currently cost $2 per kilowatt. With mass production the cost is expected to go down to $1/kw. Not to mention NaS batteries run at an internal temp of 300c. Do they need cooling?   re water storage Conventional pumped hydro uses 2 water reservoirs, separated vertically. During off peak hours water is pumped from the lower reservoir to the upper reservoir. When required, the water flow is reversed to generate electricity. Pumped storage is the most widespread energy storage system in use on power networks. Its main applications are for energy management, frequency control and provision of reserve, not that it MAKES power, but that is stores energy more cost or energy efficiently than other options. If you already have the water handy, and the tank/storage (lake, whatever), the other options for storing energy (batteries, capacitors, compressed gas, fuel cell, etc.) are really hard to justify both on cost and energy storage efficiency. Some high dam hydro plants have a storage capability and can be dispatched as a pumped hydro. Underground pumped storage, using flooded mine shafts or other cavities, are also technically possible. Open sea can also be used as the lower reservoir. A seawater pumped hydro plant was first built in Japan in 1999 (Yanbaru, 30 MW). Pumped hydro was first used in Italy and Switzerland in the 1890's. By 1933 reversible pump-turbines with motor-generators were available. Adjustable speed machines are now being used to improve efficiency. Pumped hydro is available at almost any scale with discharge times ranging from several hours to a few days. Their efficiency is in the 70% to 85% range. There is over 90 GW of pumped storage in operation world wide, which is about 3 % of global generation capacity. Pumped storage plants are characterized by long construction times and high capital expenditure. Biggest limitation of our current power network, as this article does touch on, is matching instaneous power needs with production, as cost effective options to "smooth out" demand are pretty piecemeal, and not cheap. All metal bases batteries are doomed since the reactions used to produce electricity, slowly (or quickly) degrade them to the point they are unusable. Any perceived sustainable economy based on metal ion batteries is terminally flawed. While its true that most batteries can be refurbished/recycled, but not at an economicaly cost with out cheap fossil fuels. Sodium sulphur batteries could rupture and catch fire.
New technique creates cheap, abundant hydrogen: report   11.12.07   AFP Chicago   US researchers have developed a method of producing hydrogen gas from biodegradable organic material, potentially providing an abundant source of this clean-burning fuel, according to a study released Monday. The technology offers a way to cheaply and efficiently generate hydrogen gas from readily available and renewable biomass such as cellulose or glucose, and could be used for powering vehicles, making fertilizer and treating drinking water. Numerous public transportation systems are moving toward hydrogen-powered engines as an alternative to gasoline, but most hydrogen today is generated from nonrenewable fossil fuels such as natural gas. The method used by engineers at Pennsylvania State University however combines electron-generating bacteria and a small electrical charge in a microbial fuel cell to produce hydrogen gas. Microbial fuel cells work through the action of bacteria which can pass electrons to an anode. The electrons flow from the anode through a wire to the cathode producing an electric current. In the process, the bacteria consume organic matter in the biomass material. An external jolt of electricity helps generate hydrogen gas at the cathode. In the past, the process, which is known as electrohydrogenesis, has had poor efficiency rates and low hydrogen yields. But the researchers at Pennsylvania State University were able to get around these problems by chemically modifying elements of the reactor. In laboratory experiments, their reactor generated hydrogen gas at nearly 99 percent of the theoretical maximum yield using aetic acid, a common dead-end product of glucose fermentation. "This process produces 288 percent more energy in hydrogen than the electrical energy that is added in the process", said Bruce Logan, a professor of environmental engineering at Penn State. The technology is economically viable now, which gives hydrogen an edge over another alternative biofuel which is grabbing more headlines, Logan said. "The energy focus is currently on ethanol as a fuel, but economical ethanol from cellulose is 10 years down the road," said Logan. "First you need to break cellulose down to sugars and then bacteria can convert them to ethanol." One of the immediate applications for this technology is to supply the hydrogen that is used in fuel cell cars to generate the electricity that drives the motor, but it could also can be used to convert wood chips into hydrogen to be used as fertilizer. The study appears in the Proceedings of the National Academy of Sciences.	Researchers convert chicken fat to fuel 11.29.05   AP Hoping to find an efficient way to help power automobiles and trucks, researchers at the University of Arkansas say they have developed a way to convert chicken fat to a biodiesel fuel. "We're trying to expand the petroleum base," said chemical engineering grad student Brian Mattingly. "Five to 20 percent blending of biodiesel into petroleum-based diesel significantly reduces our dependence on foreign oil." Mattingly's research allows biodiesel producers to assess different materials to see what works best. Producers will be able to choose the best way to convert different grades of chicken fat into fuels. Chemical engineering prof. R.E. Babcock said chicken-fat fuels are better for the environment and the machines. "They burn better, create less particulate matter and actually lubricate and clean things like cylinders, pistons and fuel lines," Babcock said. Traditionally, biodiesel producers have used refined products like soybean oil because they are easier to convert to fuels. However, the refining process makes soybean oil more expensive, and fuel producers must compete with grocers for the oil supply. Chicken fat can be a less-expensive substitute because it is available at a low cost. However, fatty acids in raw chicken fat can lead to the creation of soap during the various chemical processes. In his studies, Mattingly used high-quality fat (less than 2 percent fatty acid content) and low-quality, feed-grade fat (6 percent fatty acid content) obtained from Tyson Foods Inc. plants in Clarksville and Scranton. The high-quality fat is more expensive than the feed-grade fat, but both are less expensive than soybean oil. It took different steps to refine the different fats, but it could be done, Mattingly said. "The project demonstrated that there is a very fine line between facilitating an adequate reaction and generating so much soap that the biodiesel yield is diminished," Mattingly said. "Basically, deciding which method to use comes down to economics." Michael Popp, an associate professor of agricultural economics, said it is too early to tell if making biodiesel fuel from chicken fat is economically feasible.

A victory for solar energy
8.28.02   David Hochschild VoteSolar.org

Calif. state leg. AB 58 (2002) solar net metering bill lets large solar energy systems connect to the electric grid. Utility-sponsored amendments were close to becoming law and would have prevented large solar systems from coming on-line. Defeated because of emails, phone calls and faxes, last night the bill came out of conference committee very favorable to solar energy; solar systems up to one megawatt can connect to the grid, receiving full value for the electricity they produce.

This is a tremendous boost to the solar energy movement, a model for other states, and proof that bringing public pressure to bear on elected officials works. It wouldn't have happened without public support and the cooperation of a host of environmental groups. AB 58 now goes to vote Friday in Assembly and Senate where expected to pass easily and be signed by the governor.
Assemblyman Fred Keeley D - Boulder Creek sponsored AB 58 and succeeded in shepherding it through a difficult committee.

nuclear   links & Martian Cold War relics munitions Nagasaki thyroid ITER CAN Greenpeace     Hartsville TN ¹ ²   Explosion hits at San Onofre   6.25.01   SD UT San Onofre   An explosion knocked out a transformer at the San Onofre Nuclear Generating Station here yesterday, but the blast did not affect either of the plant's reactors, said Gil Alexander, Southern California Edison spokesman. "Basically, a small piece of equipt just popped," he said. "It affected some wires coming out of the reactors. But there was no loss of service." The San Onofre plant provides power for 2.75 million households in Southern California. It is jointly owned by S.Calif. Edison, San Diego Gas & Electric and the cities of Riverside & Anaheim. San Onofre safety meeting open to public 6.9.01   SD UT SAN ONOFRE   Those interested in the safety record of the nuclear power plant over the past year can attend a public meeting Monday. The meeting, hosted by the federal Nuclear Regulatory Commission, is scheduled for 4 p.m. in Building E-50 at the San Onofre Nuclear Generating Station. The building is east of Interstate 5, off Basilone Rd. The public will be allowed to observe the meeting, but not participate. Nuclear Regulatory Commission officials will be available afterward to answer questions. For information on Monday's meeting, call San Onofre spokesman Ray Golden 949.368.9880. San Onofre plant safety information San Onofre nuclear plant gets thumbs up for safety 6.12.01   Bruce Lieberman SD UT San Onofre   The federal govt has given the nuclear power plant here passing grades for safety during the past year, saying it protected the public from deadly radiation while providing power to millions of S.Californians. Officials with the Nuclear Regulatory Commission discussed the performance review at a public meeting yesterday at the San Onofre Nuclear Generating Station. "San Onofre overall preserved public health & safety," said Charles Marschall, project branch chief for the commission's Region IV, which includes California. March 31 marked the end of the first year for the commission's new safety review system, which grades nuclear power plants based on risks to public safety. The commission's old review system, which required power plants to comply with specific regulations, was criticized by plant operators as subjective. In the latest review of San Onofre, federal inspectors said they found nothing that would have endangered the public. They reviewed several categories of performance, including the plant's ability to remove heat from its two reactors, the integrity of its reactor coolant systems, worker exposures to radiation, and the plant's emergency preparedness. Inspectors did find several violations of federal regulations, although all of them had "very low safety significance." Among them was the misalignment of a valve that rendered inoperable an auxiliary supply of coolant water to the plant's Unit 3 reactor. The violation was discovered during a federal inspection of the plant after a Feb. 3 electrical fire resulted in damage to the reactor's turbine generators. The reactor was shut down for repairs until June 1. Inspectors characterized the finding as a "noncited violation" because "a makeup water source was available and all other emergency cooling equipment remained operable." Unit 3 also was just coming back on line, so its nuclear reactor was not as hot as if it were running at full power. S.Calif. Edison, which operates the plant, has since repaired the valve. NRC won't block fuel storage at San Onofre 6.16.01   SD UT The federal govt has denied a Vista woman's petition to block storage of spent nuclear fuel from the San Onofre nuclear plant in outdoor vaults. But it will look further into a seismic study that suggests S.Calif. Edison, which operates the plant, may have underestimated earthquake risk at San Onofre. The Nuclear Regulatory Commission decision was part of a letter sent yesterday to anti-nuclear energy activist Patricia Borchmann. She filed a petition with the commission in April. In denying it, the commission said, in part, that it cannot take action because Edison has not yet applied for a federal license to store the fuel outdoors. Borchmann argued moving the fuel & storing it in the vaults would be too risky. She cited a Harvard study published in Oct. that concluded a magnitude 7.6 earthquake could strike offshore from San Onofre. The plant was built to withstand a 7.0 quake. "The staff concluded that you have identified issues regarding the seismic analysis of (the plant) that warrant further NRC attention," director E. Wm Brach of NRC's spent-fuel project office in Wash.DC, said in letter to Borchmann. "I think it's overdue. I'm glad they finally are looking at the most recent geologic evidence there is," she said. Nevada OK'd for nuke waste Bush will back Enery chief Abraham's plan to centralize storage in Yucca Mountain 2.15.02   H. Josef Hebert AP Washington   President Bush, citing national security concerns & years of scientific studies, will approve Yucca Mountain in Nevada for long-term disposal of thousands of tons of highly radioactive commercial & govt nuclear waste, administration officials say. Once the president acts, possibly as early as today, Nevada has said it would file a protest and under a 1987 law Congress then would have to sustain the president's decision by a majority vote of both houses. The process could take 4 or 5 months. Energy Sec. Spencer Abraham late Thursday formally recommended the site 90 mi northwest of Las Vegas as the place to bury radioactive waste that has been piling up at the nation's commercial nuclear reactors and at U.S. defense facilities, beginning as early as 2010. As much as 77,000 tons of waste could be entombed there. In a letter to the president, Abraham said a review of 20 years of scientific studies has convinced him that the waste can be kept in volcanic rock 950 feet beneath the Nevada desert without risk to public health or the environment. "I could not & would not recommend the Yucca Mountain site without having first determined that (it will) ...protect the health and safety of the public," Abraham said. Rejecting critics' claims that the science has not clearly shown the wastes can be contained for thousands of years at the Nevada site, Abraham said his conclusions were "based on sound scientific principles." The Yucca Mountain site, which also will have to get approval from the Nuclear Regulatory Commission if a decision is made to proceed, is expected to handle thousands of tons of used reactor fuel rods now kept at 103 commercial power reactors in 31 states as well as highly radioactive defense waste now being stored in 8 states. Some of the radioisotopes will remain deadly for more than 10,000 years. Abraham notified Nevada a month ago that he would recommend the site to the president. Sen. Harry Reid, D-NV, called Abraham's recommendation "a hasty, poor and indefensible decision" at a time when "the science does not yet exist" to ensure the wastes can be contained for thousands of years. Abraham said "compelling national interests", made even more apparent by the Sept. 11 terrorist attacks, require development of a remote centralized disposal site. More than 161 million people live within 75 miles of one or more of these sites" now holding the waste, he said.

San Onofre blast released no radiation   But motorists on I-5 weren't so sure   6.26.01   Bruce Lieberman SD UT San Onofre   Charlene Engel was driving with a few friends up Interstate 5 Sunday when she saw flames & smoke shoot suddenly skyward from the nuclear power plant. Pieces of silvery material were fluttering through the air and drifting toward the freeway. Traffic began speeding up. "Everybody sort of saw it and thought, 'Oh my God, have we just been irradiated or what?' " said Engel, a Rancho Bernardo artist. In fact, the explosion of a transformer was far outside the twin reactors at the San Onofre Nuclear Generating Station, and posed no radiation danger, Ray Golden, a plant spokesman, said yesterday. But Engel & her friends, who were heading to the Los Angeles County Museum of Art for a Winslow Homer exhibit, didn't know that. "You don't actually know how things are hooked up, so you don't want to hang around," Engel said. "We moved north pretty quickly." Santee resident Richard Carrico, whose niece was driving him to Dana Point, said the fireball rose about 50 feet. "My God, I thought she was going to faint," said Carrico, 93. No one was injured in the explosion, which occurred at 11:03 a.m. and was followed by a fire that lasted about 40 minutes. The transformer was destroyed, but no other equipt at the plant was damaged and the twin reactors continued to operate at full power without interruption, Golden said. Yesterday, San Onofre investigators were still trying to figure out why the transformer failed. They should have some answers, and a new transformer installed, in about a week. The transformer was one of 54 in the plant's switching yard used to reduce the voltage of a sample of outgoing electricity. The so-called "potential transformers" step down the current sample to 115 volts so instruments can test the amperage & wattage. Electricity leaves San Onofre at 238,000 volts in transmission lines. The explosion scattered shards of ceramic & aluminum debris, and 90 gallons of burning insulation oil, hundreds of feet, Golden said. Pieces of the transformer, some as large as one foot square, landed on Old Highway 101. Plant operators feared debris would land on I-5, but the California Highway Patrol did not report any there, a dispatcher said. The CHP received several 911 calls from drivers reporting a fireball. The last time a potential transformer exploded at the plant's switching yard was in 1994, Golden said. Plant workers discovered that corrosion caused by ocean air rusted the transformer's carbon-steel casing, allowing water to enter and contaminate the insulation oil. After that, the plant replaced four transformers and repaired 3. All are periodically washed down with high-pressure fire hoses to prevent corrosion, Golden said. He would not speculate on the cause of the latest explosion, or whether it could lead to the replacement of other transformers. "If the root cause shows that it needs to be repaired or replaced, it will," he said. Although Sunday's explosion did not shut down the plant or release any radiation, it was the latest in a string of mishaps this year. On Feb. 2, a faulty circuit breaker ignited a fire and cut off lubricating oil to Unit 3's turbine generators, causing about $45 million in damage and shutting the reactor down for 4 months. On May 30, a portable crane dropped 40 feet to the ground when a sling on a large gantry crane failed. On June 6, workers inadvertently overfilled a 300-gallon steel bin with hydrazine, a toxic chemical used to purify water in the plant's cooling systems, spilling about 20 gallons. Golden said the 4 accidents this year do not indicate that the plant is unsafe. "We perform hundreds, if not thousands, of work activities a day," he said.   San Onofre cranks up reactor   Unit 3 could be making power as early as today 6.1.01   Bruce Lieberman & Karen Kucher SD UT San Onofre   The nuclear power plant's Unit 3 reactor was reactivated early yesterday, 4 months after a fire shut it down and deprived the state's power grid of enough electricity to supply 1 million households. Getting the reactor reconnected to the grid, which may occur as early as this morning, could not happen at a better time. Yesterday, California endured its second consecutive day of power alerts and came to the brink of rolling blackouts. State grid managers blamed high temperatures across the state and unexpected drops in power imports for the close call. Energy use dropped in the afternoon, however, as a cooling marine layer moved in. "Mother Nature is helping us out big-time right now," said Jim McIntosh, director of grid operations for the California Independent System Operator. If the situation had not improved, 500 megawatts of electricity statewide would have been cut off, enough to supply as many as 500,000 homes. Unit 3's return to service, which had not been expected until mid-June, means the state will have an additional 1,120 megawatts of electricity as it enters summer. "We've been working hard to get the plant back on line to meet the summer demand," said Ray Golden, a spokesman for the San Onofre Nuclear Generating Station. Yesterday morning, plant operators had restarted Unit 3's nuclear reactor and were testing its repaired turbine generator. By last night, the reactor was operating at about 18 percent power, but the plant had not yet begun sending electricity to the grid, Golden said. "Depending on how things go, we'll have to make adjustments or synchronize to the grid. … We could be on line" as early as this morning, he said. If all goes well, the reactor could be at full power by Sunday morning, Golden said. San Onofre has been operating only one of its two nuclear reactors since Jan. 2, when workers shut down Unit 3 for a scheduled refueling and routine maintenance. (The plant's oldest reactor, Unit 1, is being dismantled.) As operators were powering up the Unit 3 reactor Feb. 3, a fire ignited outside in a switching room. The fire, caused by a faulty breaker, did not result in any release of radiation but triggered an automatic shutdown of the reactor. It also cut electricity to an oil pump that lubricates its fast-spinning steam turbines. Two backup systems also failed. Without oil, the turbine generator, a 1,000-ton, 300-foot-long assembly of four steam turbines and an electrical generator, spun down from 1,800 revolutions per minute to zero in about four minutes. Normally, operators keep the turbines spinning slowly for 24 hours before stopping them. The lack of oil scored the generator's rotors and damaged its bearings. Since then, more than 300 people, San Onofre workers, personnel from Bechtel Group Inc. and Alstom, the manufacturer of the turbines and generator, have worked around the clock to repair damaged components, Golden said. A 200-ton, 40-foot-long portion of the generator had to be shipped by rail to an Alstom plant in Arlington, Va. The trip took two weeks each way. New bearings were manufactured at Alstom plants in England and France. The work cost between $40 million and $50 million, but nearly all of that was covered by Edison's insurance carrier. In February, Edison reported to the Federal Securities and Exchange Commission that it would lose between $80 million and $100 million in revenue because of the shutdown. Living without the reactor also has been hard on Southern California, which endured rolling blackouts earlier this spring. Some of them probably could have been avoided if San Onofre had been running at full power. Together, the plant's two reactors produce as much as 20 percent of the electricity used by 15 million Southern Californians. San Onofre is one of two nuclear power plants in the state. Diablo Canyon, on the Central California coast, also operates two reactors.

Although nearly 8,200 megawatts of power-generating capacity in California remained unavailable this week because of planned and unexpected repairs at power plants, grid operators said the supply situation has been looking a little brighter. One reason is that one of two reactors at the Diablo Canyon nuclear plant slowly came on line this week after a refueling shutdown. The reactor was shut down in late April. It is expected to reach full capacity of 1,150 megawatts by early Saturday, 5 days ahead of schedule, said a spokesman for Pacific Gas and Electric Co. Together, San Onofre & Diablo Canyon produce about 18% of the electricity generated in California. San Onofre is operated by Edison, which owns about 75 percent of the plant. SDG&ECo. owns a 20% share, and the rest is owned by the cities of Anaheim & Riverside.

Bush urges more nuclear plants and building refineries on bases
4.27.05   Maria Newman NY Times

President Bush said today that he wanted U.S. to build more nuclear power plants, turn unused military bases into refineries and raise sales of more efficient cars to make America less dependent on foreign fuel sources. The president, in an address to a conference of the Small Business Administration in Washington, said that he knew that people were concerned about the rising prices of oil.
It was the second time this week that he addressed the topic, a tacit acknowledgement that the issue is beginning to weigh on U.S. economy and on Mr. Bush's public approval ratings. The president told his audience at the Washington Hilton that at a recent lunch with soldiers at Fort Hood, near his ranch in Crawford TX, one of the troops asked him why he simply did not lower gas prices.
"Obviously, gasoline prices were on his mind," Bush said. "I said, I wish I could. If I could, I would. I explained to him that the higher cost of gasoline is a problem that has been years in the making."

"Over the past decade, our energy consumption has increased by more than 12 percent, while our domestic production has increased by less than one-half of 1 percent," he added. "It's now time to fix it."
The president listed several strategies to respond to soaring gasoline prices, but all would take years to realize.
Three administration officials said on Tuesday that the White House would seek to have Bush's proposals incorporated into the energy bill that has already been passed by the House. The Senate is drafting an entirely new bill, partly out of concern that the House version is too generous to large oil companies and others in the energy sector. Today, Bush today called on Congress to give him an energy bill by summer.

The president also talked about using technology to find more sources of energy here at home. He said he wanted to encourage the construction of more nuclear power plants.
"Today's technology has made nuclear power safer, cleaner and more efficient than ever before," he said. "Nuclear power is now providing about 20 percent of America's electricity, with no air pollution or greenhouse gas emissions. Nuclear power's one of the safest, cleanest sources of power in the world, and we need more of it here in America."
The president said the United States had not ordered a new nuclear power plant since the 1970's, while France has built 58 plants in the same period and gets more than 78 percent of its electricity from nuclear power.
"Time for America to start building again," he said.

Noting that no oil refineries had been built in the United States since 1976, the president also said that he would encourage the building of new refining facilities on closed military bases, though he did not detail where or how many. He also said he wanted to encourage more exploration of the Arctic National Wildlife Refuge for oil and natural gas.
"Technology now makes it possible to reach ANWR's hydrocarbons by drilling on just 2,000 acres of the 19 million acres of land," he said. "Because of the advances in technology, we can reach the oil deposits with almost no impact on land or local wildlife."

Bush also talked about a tax credit for gas-electric hybrid automobiles and for use of clean diesel, both addressed in his budget earlier this year. The hybrid tax break was left out of the energy bill passed by the House last week.
The Senate minority leader, Senator Harry Reid, Democrat of Nevada, called President Bush's initiatives "little more than half-measures and wrongheaded policies that will do nothing to address the current energy crisis or break the stranglehold that foreign oil has on our nation," Associated Press said.
Reid said that a plan by Senate Democrats would offer more tax incentives, double the $8 billion approved by the House, and funnel more of the money to renewable energy sources and energy-efficiency measures.

Native Americans, allies resist expansion of Utah nuke wasteland
6.1.05 Megan Tady New Standard

East of the reservation sits a storage facility for nerve gas. South of Skull Valley is the coal-burning Intermountain Power Project. To the northwest sits a low-level radioactive waste disposal site called "Envirocare." North of the valley chugs the Magnesium Corporation Plant, deemed the country’s worst polluting plant of its kind by the Environmental Protection Agency for the chlorine gas and hydrochloric acid it spouts into the air.
But that is not all. In 1968, the Dugway Proving Grounds tested VX nerve gas on traditional Goshute hunting grounds, causing the death of 6,000 sheep grazing in Skull Valley. Over 7,000 fighter jets based in the nearby Hill Air Force Base fly over the reservation every year to drop bombs for target practice on the Wendover Bombing Range.

With little outside economic opportunity and land already poisoned, the Skull Valley Band of Goshutes became an easy target for another project that would help the United States with its biggest hot potato: high-level radioactive waste. In 1996, Private Fuel Storage, a conglomeration of 8 nuclear powerhouses, began courting the tribe to shelter 44,000 tons of irradiated nuclear reactor fuel on their land. Touted as an interim storage site for waste on its way to permanent storage at Yucca Mountain, a yet-to-be-built and highly contested storage facility in Nevada, the reservation would play host to 80 percent of the country’s nuclear waste for 40 years.
That same year, Leon Bear, the Washington’s federally recognized chairman of the Goshutes, signed a lease with PFS for an undisclosed but lucrative amount, and an 8 year licensing process has ensued. Many of the Goshutes claim the lease is illegitimate, given that Bear’s leadership is consistently disputed by tribal members. Bear has been indicted on federal charges for tax evasion and embezzlement of tribal funds.

Bear did not respond to interview inquiries for this article. But in a 2001 interview with the Nuclear Information and Resource Service (NIRS), a networking center for citizens concerned about nuclear power and radioactive waste, he said: "We can’t do anything here that’s green or environmental. Would you buy a tomato from us if you knew what’s out here? Of course not. In order to attract any kind of development, we have to be consistent with what’s around us." Now in the final stages of approval, the waste dump is edging closer to reality as activists opposing the site launch last-ditch efforts to thwart the project. Resistance to the waste dump has been fierce and divisive. Some members of the tribe contest the site, while a minority of the tribe has sided with Bear to welcome the dump, which has promised enough jobs to allow some members to come back to the reservation. Skull Valley is 45 miles from Salt Lake City, and Utah lawmakers have been vociferous in their resistance to the dump. Joined by local and national public interest groups, the opposition is citing environmental racism, ecological and health hazards, risks to national security and the possibility that the temporary site will become a de facto permanent dump as reasons to reject the project. PFS, however, claims the dump would provide a revenue stream for the tribe, as well as infrastructure, health care and local jobs. Over 420 organizations have signed a letter urging the U.S. Nuclear Regulatory Commission (NRC), the body that will make the final decision regarding placement of the dump, to reject PFS’s license application. "We are the caretakers of this land," said Sammy Blackbear, an outspoken leader for tribal opposition to the dump, and a resident of the Skull Valley reservation. "Our ancestors took care of it, and we have an obligation not to ruin it." In April Utah filed for a motion of reconsideration with the Atomic Safety Licensing Board (ASLB), the judiciary arm of the Nuclear Regulatory Commission (NRC), based on one of the last standing contentions against the site: the possibility of an aircraft crash or stray missile into the nuclear canisters from the F-16 flights made from the air force base. As most, experts have deemed the chances for a crash or strike to 4 in 1 million. The ASLB ruled in favor of PFS on May 24, sending the final decision, and the fate of the Skull Valley Goshutes, to the NRC. As though personally on trial, Bullcreek, Blackbear and others await their sentencing, which could be handed down any day: life with or without a radioactive backyard. The Skull Valley dump is not the first time Native Americans have been approached to house U.S. nuclear waste, but marks a trend by govt & the industry to target the population. In 1987, Congress created the Office of the Nuclear Waste Negotiator, which subsequently contacted federally recognized tribes attempting to convince them to host the dump. "The govt has no place to put their waste, so they’re turning to indigenous lands as the last place they can go," Bullcreek asserted. When the government-funded project failed, the commercial nuclear power industry stepped in, again with the intent of finding what anti-nuclear activists call "nuclear sacrifice zones." Currently, nuclear waste is stored on site at the 66 nuclear power facilities pock-marking the country. The nuclear power industry has strong motivations to find somewhere else to store the waste as the country looks for alternatives to coal &^amp; gas fired energy. "Yucca Mountain was plan A and PFS was plan B," Kamps said. "They’ve put PFS on the fast track because plan B is now plan A. The nuclear industry needs to have the illusion of a waste solution to sell the public. They want to build new nuclear reactors and keep using the old ones. But they have a big PR problem of needing a place to put the waste." Govt also has an incentive to find a home for the nuclear waste, as it is legally bound to provide a permanent depository for radioactive waste and spent nuclear fuel for nuclear energy companies. When the opposition to the Skull Valley dump cited environmental racism as a major argument against PFS, the Nuclear Regulatory Commission refused to hear their arguments, on the grounds that the tribe was being fairly compensated with a profitable contract from PFS. "Native Americans are the most politically and economically vulnerable population in the country, which is part of why this is so shameful," Kamps says. "We call this the small pox of the nuclear age, only it’s more sophisticated. It’s dumping the most hazardous poison ever created by humans on a population of color that didn’t benefit from its creation." Native American reservations are also attractive to companies like PFS because their sovereignty exempts them from state environmental regulations. "They target reservations because they don’t have to go through the red tape they do when they’re dealing with white people," Blackbear said. "This wouldn’t be happening in Salt Lake City." Blackbear, who has often been asked why he doesn’t just take his share of the money from PFS and leave the reservation, is defiant. "Why should we move?" Blackbear said. "What does that say? We’re not the type of people to just pack up and move away." Both Blackbear and Bullcreek said the waste dump threatened to further erode their culture and traditions. "As Native Americans, we need to stick up for what we believe is right," Bullcreek said. "From the beginning, they’ve tried to take away our land, our language and our identity, but there were many people that wouldn’t let them do it. That’s the reason why we are saying no to the nuclear waste dump." Health risks from accidents and daily exposure to radioactive waste are severe. Irradiated fuel emits gamma rays that pass through human tissue and can cause cancer, reproductive failure and genetic deformities. In the event of an accident, a radioactive cloud is often invisible, odorless and tasteless, and fallout can contaminate water and food that will remain deadly for centuries. Both Bullcreek and Blackbear’s houses would be less than 2 miles from the proposed waste dump. "If there was an accident, gamma materials would float downwind and deposit on the ground," said Marvin Resnikoff, sr associate at Radioactive Waste Management Associates, an independent consulting firm that advises on the technical aspects of radiation exposure and radioactive waste. "It would be like having an x-ray machine on the ground that you can’t turn off. You would be exposed to high levels of radiation as long as you stayed there, causing a strong likelihood of getting cancer." Resnikoff developed the petition against the waste dump for the state of Utah. Along with the environmental and health risks posed by the dump, opponents are also worried about the threat to national security. Opponents of the PFS project predict that the radiological risks for the Goshutes could last longer than 40 years. While the Skull Valley dump is billed as an interim storage facility for waste en route to Yucca Mountain, the fate of that proposed repository, also slated for construction on Native American land, is uncertain. Substantiating the claim that PFS would turn into a permanent site is the recently passed House Energy and Water Appropriations Bill. The bill provides $10 million to the DOE to begin focusing on federal interim storage facilities, signaling a shift away from the Bush Administration’s dedication to Yucca Mountain. Even more problematic for the Goshutes is language in the nonbinding Nuclear Regulatory Commission report that says, "Should these or other [Dept of Energy] sites prove impractical, the Dept should investigate other alternatives for centralized interim storage, including other federally owned sites, closed military bases and non-federal storage facilities." PFS is the only non-federal storage facility in the licensing process. "This has PFS written all over it," Kamps said. Despite the complications surrounding Yucca Mountain, PFS is adamant that the Skull Valley site will be temporary."I understand their concern because Yucca is so iffy," Sue Martin, public affairs consultant for PFS, said in an interview with The NewStandard. "But there are several reasons why their concerns aren’t really valid. The facility isn’t designed to be permanent. Everyone agrees that a permanent facility should be deep underground." Martin also said the lease signed with the Goshutes was only for 25 years, with a possible extension for another 25 years, and that financial incentives would drive private utility companies to close the facility as quickly as possible. Martin said the utility companies would be footing the bill for PFS, whereas if it is stored on a federal site, the govt will pick up the tab. "The utility company that stored the fuel will continue to own it," Martin said. "They have an obligation to be responsible for it until they turn it over to the federal government. They are liable under the licensing contract." The Goshutes and the state of Utah aren’t the only ones at risk from the waste dump. PFS plans to transport 4,000 nuclear waste loads to Skull Valley via train routes that traipse through cities and towns all over the country. "Why are they interested in putting communities at risk?" Kemp asked. "Who does this really benefit? This is really a case of industry running amok over people’s interests and safety." Comparisons have been drawn between the risk of nuclear waste cargo on trains and the train accident that occurred in the Howard Street Tunnel in Baltimore in 2001. The train caught on fire in the tunnel after an axel broke and punctured a container of hazardous materials. The wreckage burned for 5 days and caused the evacuation of parts of the city. Shortly after that accident, Resnikoff, with co-worker Matthew Lamb, wrote a report on the subject of nuclear fuel shipments. They estimated that had the Baltimore train been carrying nuclear waste, 390,388 residents in the area would have faced exposure to radiation. An estimated 4,972 to 31,824 of them would have died from cancer over the next 5 decades. The report projected the cleanup costs would have totaled $13.7 billion. The nuclear industry has tried to calm fears about transporting waste, saying that the Holtec casks are designed specifically to protect radioactive materials. But according to Oscar Shirani, a 23-year nuclear industry vet, the casks are "nothing but garbage cans." Shirani, who was the lead auditor for Exelon, Exelon, the largest nuclear energy corporation in the United States, blew the whistle on Holtec following a quality assurance review of their casks. In his audit, conducted in 2000, Shirani cited nine major quality assurance failures in a 199-page report explaining the deficiencies. "Every cask I touched had a problem," Shirani told TNS. The NRC had previously reviewed and accepted the casks. When Holtec did not recognize Shirani’s report, he threatened to issue a "stop work order" on the casks. Before he could, Exelon removed Shirani from his department and subsequently fired him. Shirani is suing Exelon and continues to fear the consequences of the Holtec casks. "The public should know they are sitting around time bombs," Shirani says. "The dry casks are in our backyards. If one of them leaks or bursts… we don’t even need a terrorist attack or a 747 to crash. The structural integrity of the casks is unknown. There are a lot of unknown answers." 33 nuclear energy companies are currently using the Holtec casks to store their waste on-site at plants around the country. PFS nevertheless claims to be certain of the project’s safety. "We filed an application for this site back in 1997, and the licensing process has been going on for almost 8 years," Martin said. "That tells you that this is a very rigorous process. All the arguments against the site have failed and we’ve been issued a favorable environmental impact statement. When all is said and done, the public should feel confident in how safe this will be." As the NRC moves closer to making a final decision to approve the PFS waste dump, groups working to halt the process are offering alternatives to the Skull Valley site and finding creative ways to stop the dump altogether. "We’re concerned about the safety and security of all nuclear waste storage sites," Kemp said. "But we should keep them where they are and work on increasing safety and security instead of dispersing these toxins throughout the country. We need to keep transportation to a minimum, and if we move it, we should move it only once." Kamps believes the best solution is to phase out nuclear power and stop producing nuclear waste. "If we don’t, we are just going to double or triple the waste we have," Kamps says. "For the waste that exists now, even if PFS opens in 2007 and Yucca in 2010, it will take many years to transport. There are also limits to how much each site can hold. So it needs to be protected where it’s at right now." Members of the tribe and other concerned citizens of Utah plan to contest the NRC’s prior ruling against the environmental racism argument. Blackbear and twenty other co-plaintiffs have filed a lawsuit against the US Bureau of Indian Affairs, alleging that it violated its trust responsibility by approving the lease after only three days of consideration. Utah's congressional delegation is also pushing legislation that would create a federally recognized wilderness area 50 miles west of Skull Valley, effectively cutting off PFS’ rail route to the waste dump. According to Connie Nakahara, an attorney working on the case for the state, Utah has filed a petition of review to present to the NRC. Nakahara also said Utah is prepared to pursue other legal avenues if the dump is approved, including an appeal with a federal appellate court. Resnikoff, however, is not as optimistic. "The die has been cast," he remarked. "It’s very difficult to stop a facility once the decision goes to the NRC board."

Nuclear waste outpaces solutions   Plants use outdoor storage casks while waiting for govt to find a longer-term solution. Some fear it won't.   6.12.05   Ralph Vartabedian L.A. Times Morris IL   Along the headwaters of the Illinois River, engineers at the Dresden nuclear power station have erected 2 dozen steel & concrete silos that rise 20 ft above the Midwest plain. The gray structures are unremarkable except for what is loaded inside: Each contains roughly 13 tons of high-level nuclear waste that has been accumulating at the plant since the Eisenhower administration. With nowhere to go, the waste will most likely remain in place for decades. Dresden's reactors have produced one of the largest stockpiles, 1,347 tons, of civilian nuclear waste in the nation. With the plant churning out nearly 48 tons more waste each year, engineers are preparing to double the size of the outdoor storage pad this summer. The plant has the same problem as nearly all of the nation's 103 commercial reactors: They were never designed to store waste long-term and are now forced to deal with large quantities of spent uranium fuel rods that produce high levels of radiation. The problem reflects decades of miscalculations and missteps by federal govt, which promised at the dawn of the nuclear age to accept ownership of the waste. The plan to build a waste repository at Yucca Mountain in the Nevada desert has faced so many political, legal and technical problems that it's impossible to project when, or even if, it will be built. As a result, the most lethal waste product of industrial society is being handled outside any federal policy and without any roadmap for how it will be managed in the future, according to industry officials, nuclear waste experts, lawyers and academicians. "It is a statement of reality," acknowledges Energy Dept deputy secretary Clay Sell. "Is it the right policy? No." The deep storage pools traditionally used to safely keep nuclear waste are filling up at most plants. Utilities have turned to outdoor storage in so-called dry casks as the de facto standard for dealing with waste. From California to South Carolina, utilities have loaded 700 of the steel & concrete casks, and scores of additional casks are scheduled to be filled this year. It is a stopgap measure that has averted a shutdown of the nuclear power industry. But it means leaving all of the roughly 50,000 tons of civilian nuclear waste spread across the nation for the next half-century or more. Storing the waste at power plant sites is creating significant economic, environmental, legal and security challenges, including the potential for it to become a terrorist target. A recent study by the National Academy of Sciences found that the waste stored in pools was most vulnerable, but the outdoor casks also were potential targets. Such an attack could trigger an environmental catastrophe. "These are the ultimate dirty bombs," said Institute for Policy Studies & former Energy Dept official sr scholar Bob Alvarez. "Let's not pretend the way we are storing this waste is safe & secure in an age of terrorism." Utility executives & govt officials sharply dispute such allegations, saying the plants have multiple layers of protection from any attack. Exelon Corp., the nation's largest nuclear utility, has erected heavy barriers & security towers at Dresden that are staffed around the clock by guards with automatic weapons. Though the nuclear industry has a good record for preventing radiation leaks during normal operations and dry casks are widely regarded as safe, many outside experts say their biggest fear is that future generations may lack the willpower and financial capability to safeguard tons of radioactive waste dispersed across the nation. Waste is already stored in casks at 5 shuttered nuclear plant sites. "We are muddling into an alternative plan by default," says longtime nuclear industry attorney Joe Egan who now represents Nevada in fighting Yucca Mountain. Nuclear waste has also created a legal mess. The Energy Dept is facing more than 4 dozen lawsuits by the utility industry for its failure to take the waste. Damages could reach $56 billion over the next 3 decades, according to powerful nuclear utilities trade group Nuclear Energy Institute. At the Energy Dept, Sell argues that deep geologic storage of the waste at Yucca Mountain would be the best technical solution. He believes the project will eventually be completed. But the loss of a key court case last year and political resistance in Congress have put the dump at least 14 years behind schedule. Without a dump, utilities have few options short of shutting down their reactors and eliminating 20% of the U.S. electricity supply that comes from nuclear power. Without a solution to waste, the proposal by President Bush to start a new era of nuclear plant construction could go nowhere. Indefinite storage of nuclear waste at current reactor sites is a bitter pill for many politicians, particularly those from environmentally fragile areas such as Lake Michigan, which is ringed by nuclear plants. "I want the waste off the shores of Lake Michigan," said Rep. Fred Upton (R-MI), whose district includes 2 nuclear plants built on the lake's eastern boundary. "Ultimately, there is a safety problem." Nuclear waste at power plants will remain radioactive for hundreds of thousands of years. The fission of uranium inside reactors produces heat for electricity production. Afterward, the uranium fuel rods are far more radioactive than when they entered the reactor. To maximize storage capacity for the spent fuel rods, the nuclear industry devised a way to pack them more closely in the 50 ft deep storage pools than initially planned. Critics say this kind of dense packing poses a safety risk, however. If terrorists were to puncture the pool wall and drain the water, the rods could ignite and disperse lethal amounts of radiation, according to a recent report by the National Academy of Sciences. Even with dense packing, the pools are running out of space. 20 years ago, nuclear plants began removing the oldest fuel rods, which have radioactively decayed somewhat, and started storing them in massive outdoor storage casks like the ones at Dresden. Officials at Nuclear Regulatory Commission "anticipate that there will be an increase in the number of casks being loaded over the next few years," said the commission's spent fuel project office dir. E. William Brach. The logistics of nuclear waste ensure it will be around a long time. Even if the federal govt gets a license to operate Yucca Mountain, the earliest it could accept waste shipments would be 2012. By that year, more than 60,000 tons of civilian nuclear waste would be spread across about 3 dozen states. It would take about 50 years to work down the backlog, according to Princeton University nuclear expert & former White House national security advisor Frank von Hippel. That's because under current plans Yucca could process a maximum of 3,000 tons of waste annually, while nuclear power plants would be generating 2,000 new tons of waste each year. That means a net reduction of just 1,000 tons each year, he said. "We have to assume that these casks will be around for a very long time," Von Hippel said. "It will take quite a while to move them, even if we had someplace to send them today." In any case, "on the day Yucca Mountain opens" it would be too small to handle all the waste, acknowledges Energy Dept official Sell. There is no Plan B. Under federal law, the department can pursue only Yucca Mountain. Further complicating matters are the divided lines of authority between the Nuclear Regulatory Commission and the Energy Dept. The commission regulates waste at plant sites and authorizes dry cask storage but has no role in national policy for disposing of nuclear waste. That policy responsibility rests with the Energy Dept, which has no voice or authority in the use of dry casks. In the vacuum, a private consortium is planning to build an above-ground storage site for hundreds of casks on an Indian reservation in Utah. Despite state opposition, it is getting approval from the nuclear commission. Meanwhile, utilities see dry cask storage as a cheap and safe, if not permanent, solution. Holtec International, one of the leading suppliers, says its casks can safely store waste for at least 100 years without leaking, according to company marketing manager Joy Russell. The regulatory commission typically licenses the casks for 20 years but last year renewed Dominion Electric's license for 40 years, another signal that the waste would remain in place for a long time. Holtec's casks are constructed of 2 concentric rings of 1-inch-thick steel, separated by 27 inches of concrete that is poured at the power plant site. The casks sit on 2 ft thick concrete pads, requiring no electricity, water or instrumentation. Inside, the spent fuel continues to radioactively decay, generating heat that is vented out the sides. The only maintenance involves periodic painting and keeping up the radioactive warning labels on the steel shells. On the inside of the casks, the waste is so radioactive it would deliver a fatal dose in minutes, but the outside can be touched. "An individual can stand right next to the cask," Brach said. "There is a dose, but it is a minimal dose." There have been some relatively minor accidents around the nation involving the casks, including one case in which a welding spark ignited hydrogen gas inside a cask. The ignition dislodged the cask's lid but did not cause other damage. Antinuclear groups, such as the Washington-based Nuclear Information and Resource Service and the Chicago-based Nuclear Energy Information Service, say the casks should be better protected. In Germany, for example, the casks are inside hardened buildings. Govt tests at the Army's Aberdeen Proving Ground in Maryland showed that a shoulder-fired missile could penetrate a cask wall, causing some radioactive fuel to disperse. "We don't want this 10-pin bowling alley out in the open," said Dave Kraft, an antinuclear activist for more than 20 years. "Anybody with a shoulder-fired missile could hit one of these things from outside the plant." Though utilities defend the safety of the casks, they also are demanding that the federal government take the waste. Exelon, formerly Commonwealth Edison, filed one of the 56 suits against the Energy Department when the agency failed to meet its legal commitment to open Yucca Mountain by 1998. It is the only company to settle so far, accepting $600 million for its costs over the next 10 years, according to Adam H. Levin, Exelon director of spent fuel. "We expect at some time that the Energy Department will perform," he said. Across the river from the Dresden plant in the Village of Channahon, a residential building boom is occurring, attracting people who make the hour-and-a-half commute to jobs in Chicago. "You can see the nuclear waste right across the river," said Joe Petrovic, who lives in a subdivision near the plant and builds homes in the area for a living. "The plant hasn't scared anyone from buying a home there." The plant is in Grundy County, which has 3 nuclear power plants as well as a large independent waste storage pool operated by General Electric Co. It probably has more nuclear waste than any county in the nation, though such statistics are not kept by the Nuclear Regulatory Commission. "I don't see the casks as a problem," said Grundy County Administrator Alfred Bourdelais. "Maybe in 200 or 300 years, but today there isn't any more risk from those casks than there is from the plant, and it has a really low risk." Such local acceptance of cask storage worries experts who say that in the future the casks will become a poor permanent solution. Kevin Crowley, a nuclear expert at the National Academy of Sciences who helped guide an investigation into the vulnerability of spent fuel storage, said the casks would become a risky legacy if left in place too long. "The major uncertainty," he said, "is in the confidence that future societies will continue to monitor and maintain such facilities."

Putin signs laws permitting importation of nuclear wastes   7.12.01   RFE/RL President Vladimir Putin on 11 July signed into law a group of measures allowing the importation of spent nuclear fuel for permanent storage, Russian & Western wire services reported. At the same time, Putin called for the creation of a special commission to supervise the process, which is to be chaired by Nobel Prize-winning academician Zhorez Alferov and will consist of presidential administration and govt officials as well as Duma deputies. The same day, Putin signed into law legislation limiting smoking in public, guaranteeing the right of Russians to hold referenda, and an act on ratifying a convention on paying sailors, Interfax reported. But controversy far from over. Even though officials say no nuclear wastes are likely to be imported immediately, opponents of such imports expressed outrage on 11 July at Putin's endorsement of them. Environmentalist groups said they would protest on Red Square on 12 July, Interfax reported. Yabloko leader Grigorii Yavlinsky said that Putin's action was "a political mistake" and that he will pursue plans to arrange a referendum on the issue, Russian agencies said.

Moscow promises energy exports to China 7.19.01   Michael Lelyveld RFE/RL Boston   Russia has announced an ambitious series of pipeline plans for energy exports to China as part of the Moscow summit between presidents Vladimir Putin and Jiang Zemin. But the long list of projects would require investments totaling tens of billions of dollars, raising questions about the financing needed to join Asia's biggest energy producer with its biggest consumer to the south. On 17 July, Russia and China announced only one framework agreement for an oil pipeline that would stretch across Mongolia from the Siberian city of Angarsk, near Irkutsk. The line, to be built by Russia's pipeline monopoly Transneft and the Yukos company, would carry 20 million tons of oil by 2005. The 2,400-kilometer project would cost $1.7 billion, AP said. But the Russian gas monopoly Gazprom publicized far more sweeping plans for an entire "Unified System of Gas Pipelines of Asia" for exports to China from Siberia. Sergei Zhvachkin, president of Gazprom's eastern division Vostokgazprom, said the company would build at least three lines. The magazine "Russkiy fokus" reported that the first would run from the Tomsk region, the second from Irkutsk, and the third from Yakutia along the route of the China Eastern Railway to Shanghai. Gazprom has also been promoting a $15 billion pipeline project from its Arctic gas fields in the Yamalo-Nenetsk region. In addition, the company has been competing to build a 4,100-kilometer gas pipeline within China from its western Xinjiang province to Shanghai. On one level, the announcements may offer nothing new. All the pipelines from Siberia were previously included in a draft cooperation agreement with China in August of last year. Western oil industry officials with interests in the region also voiced skepticism this week about how soon Russia will turn any of its plans into reality. One official who spoke on condition of anonymity said: "I've seen a lot of summit meetings. There has always been something about the pipelines, and then it's back to business as usual." In the case of Gazprom, it seems unlikely that the company will be able to finance its plans on its own. Gazprom has been planning a pipeline from the Yamal peninsula to Europe for over six years. There are also questions about how much gas China can use in the near term, despite its population of 1.3 billion. So far, gas accounts for less than 3 percent of China's energy needs, which are met largely by coal. Beijing is increasingly worried about its reliance on imported oil from the Middle East. But that concern is unlikely to ease if it becomes dependent on Russian imports instead. The country's imperative is to curb its use of coal and to build its west-to-east gas pipeline from Xinjiang, giving it a chance to decrease dependence on high-polluting fuels and imports at the same time. While experts see great potential for exports from Russia's giant Kovykta gas field near Irkutsk, the oil industry official said that only the west-to-east project is part of China's current five-year plan. A Kovykta pipeline is not. The line from Kovykta is estimated to cost up to $6.5 billion, while field development could cost $6 billion more, the Reuters news agency reported last month. But analysts believe that major energy links to China are inevitable at some point. Fiona Hill, a fellow in foreign policy studies at the Brookings Institution in Washington, said: "Caution is absolutely right. These are ambitious ideas." But Hill also sees a good chance that some of the projects will take place in time. One reason is that the Russian govt has made energy exports to China a political goal, Hill said. Another reason is that some of the Siberian gas fields are so far from Western markets that they may have no other economic outlet. Hill said: "They have these resources. They have to do something with them." For now, Russia's plans may be a list of everything that could be done rather than what it can do. But there seems to be no doubt that China will look to the north unless it can find more energy at home.

geopolitical   Caspian   more international energy

BERLIN   As if Pres. GWBush needed any more reminders of ways in which his policies & priorities were at odds with those of key Western European allies, Germany took a major step toward banning nuclear power plants this week. Bush recently emphasized in his energy plan that not only must the U.S. see to the upkeep of its 103 nuclear power plants, but it needs to look at building more. Is the Bush administration's pro-nuke stance one more sign of a dangerous rift in thinking with the Europeans? Maybe, but many experts believe that if the world is serious about facing the problem of global warming, Bush is the one on target in this case, since nuclear power generates far less carbon dioxide than burning fossil fuels.
Some argue that Bush's widely noted skepticism on global warming, just two months ago, could make him an ideal crusader on the issue if he's serious about his conversion. "Bush could end up being for global warming the equivalent of what Nixon was for China relations," said UCBerkeley's Nuclear Engineering Dept chair Per F. Peterson. Public disagreements over the 1997 Kyoto agreement on reducing greenhouse-gas emissions have generated repeated sparks during Bush's visit to Europe this week. But some critics charge that the Europeans should temper their criticism of the U.S. approach, so long as they have not ratified Kyoto themselves, especially when they are pursuing policies that will make it more difficult to reduce emissions.

Germany currently generates 30% of its electricity through nuclear power. It plans to make up for that loss by asking people to conserve more of their energy consumption, potentially a difficult sell, and by developing new technologies. The experts are skeptical they can do that and also make progress on the Kyoto reduction targets. "I don't know where Germany will get the power that will take the place of nuclear," said American Nuclear Society former president Ted Quinn. "If they are criticizing Pres. Bush for not meeting Kyoto, then the German govt is unfortunately going a similar direction." The German govt reached an agreement with major utilities earlier in the week on a plan to gradually close down all of Germany's nuclear power plants. Even if Parliament ratifies the step, as expected, it would take decades to phase out nuclear power completely, although some plants could close in the next few years. Still, the time frame of the project leaves room for skeptics to argue that this is about politics more than policy. For Germany's so-called '68 generation, and esp. for the Green Party, nuclear power has long been a key issue, and the current governing coalition of the Greens & center-left Social Democratic Party had vowed to act on the issue.
"They're not serious enough to actually shut the plants down," said UCBerkeley's Peterson. "It's amazing to me that Germany is not shutting down coal plants first. I'm flabbergasted. Germany has lots of coal, and it's much worse for the environment. "I think this is more of a practical & expedient political solution than it is a mechanism for ever actually shutting down the plants. The main problem is that in the practical sense, they can't shut down the plants. They need the energy." Berlin-based Heinrich Böll Foundation environmental operations head Jörg Haas said Germany's self-image is on the line. As the first major industrialized nation in Europe to act on phasing out nuclear power, he said, it hopes to set an example both on nuclear power & the environment, and may still ratify Kyoto, along with other European countries.

"We are still in the bargaining stage about the conditions of the exact details," he said. "It would be imprudent for the EU to ratify without having concluded these negotiations. You need to have some bargaining power and (cannot) ratify irrespective of what will be the outcome of the negotiations. "There is no doubt that Europe is prepared to ratify. It's not a question that Europe does not want to ratify. This is quite, quite different than the U.S. position." No question. But the politics of global warming remains highly emotional, much like the politics of nuclear power. Just how the complex interplay between the two works out might not be easy for anyone to predict. Speaking Wednesday in Washington before a forum on energy efficiency, VP Cheney reiterated administration support for more nuclear power beyond the current 20% of the total energy use in U.S. He also replied to the hostile questioning of a heckler who criticized the administration for its decision on Kyoto.
"If you're really concerned about global warming & carbon dioxide emissions, then we need to come over here and aggressively pursue the use of nuclear power, which we can do safely & sanely, but for 20-some years now has been a big no-no politically," Cheney said, according to Reuters. "Some of the same people who yell loudest about global warming & carbon dioxide emissions are also the first ones to scream when somebody says, 'Gee, we ought to use nuclear power.'"

What, me worry? 12.19.02   Michael C. Ruppert FTW … Peak Oil is here. The world is starting to run out. There is no more oil to find and what's left can't be put into your gas tank or our power generating stations quickly. Global production capacity is stretched like a rubber band about to break and the slightest hiccup in world oil production will crash the global economy like a Styrofoam cup under an elephant's foot at a Rave party. … To make it simple, the problem is this: In spite of microscopic fig leaves stating that OPEC will ramp up production to meet oil needs, the fact is that OPEC just can't do it. Goldman Sachs knows it. James Baker knows it. Bush knows it. … The planet is currently consuming a billion barrels of oil every 12 days. Peak Oil is here now. What difference does it make if Saudi Arabia & OPEC might be able to add 5 million barrels a day? It's who gets it that matters. India & Pakistan have announced a version of panic buying to build up their reserves before the war. This places a further strain on production capacity. With the invasion, if the Iraqi supply is interrupted for just a month then the markets will see the light and there will be a capitulation sell-off on Wall St that might take the Dow down to 4000. Ten million could be unemployed inside of 6 months. U.S. reserves are at 27 year lows and the administration is prepared to open up our Strategic Petroleum Reserves (SPR) which can sustain the US for about 75 days. Tap into the SPR and what do you think prices will do? If prices double or triple what do you think will happen to your job? Your checkbook? Gas prices have not yet begun to rise. This is what FTW has been saying since Oct. 2001. Now think for a moment what happens if the U.S. backs down, as I think it should. 36% of all the proven recoverable reserves in the world are in Iraq & Saudi Arabia. Not all oil reserves are recoverable. Only lunatics believe that wells, pipelines and refineries are already in place and paid for in the smaller fields that have not been developed. A perceived American power vacuum would unleash a polite, at first, but ultimately frantic, scramble for Saudi & Iraqi oil in the full knowledge that whoever loses out will be the first civilization to collapse; the first of many.

Venezuela & Iraq enhance prospects of oil shock intl perspective: Gulf War 2 unlikely to repeat GW1 2.11.03   Marshall Auerback PrudentBear.com "The combined effect of Venezuelan & Iraqi disruptions has the potential to be the biggest shock in oil market history, even allowing for offsetting supply increases by other players." Jim O'Neill, Goldman Sachs The financial markets remain incredibly complacent about an oil market which is tighter and more geopolitically threatened than it may have ever been in decades. There is still a widespread belief that the market is amply supplied with crude, that the U.S. will fight a war that will go as easily as the first Gulf War or Afghanistan, that foreign oil companies will invest and Iraqi oil production will soar after the 101st Airborne sorts out Saddam Hussein. But capacity utilisation in global oil is almost as high as it has ever been. Crude oil inventories are lower relative to consumption than at any time in recent decades. In 3 of the 6 largest oil-producing countries oil supplies are at risk due to geopolitical factors. In Iraq, a U.S. invasion appears to be imminent and Saddam may have mined all of the oil wells, according to various reports from Pentagon intelligence sources. There is ongoing political instability in Saudi Arabia, the world's largest producer. Venezuela's oil dependent economy is staggering under the weight of a labour dispute, which has disrupted oil exports. In this context, a war in Iraq could tip the balance in favour of a sharply rising oil price, which in turn could be the nail in the coffin of a teetering global economy. The prospects of an oil shock are therefore as high as they have been in decades. According to a recent report by Goldman Sachs, "More Perfect Storm than Desert Storm", low global oil stocks and reduced exports from strike-torn Venezuela have boosted prices by more than 30% since late November 2002. Venezuelan 'outage' has cost 125 million barrels of production, already the fifth biggest supply shock in history, 'which almost entirely explains the current high level of prices', according to the study. If the strike continues for a further 2 months and an Iraq war lasts a similar time, the cumulative outage will be 600 million barrels, far more than the 400 million taken off the market in the Arab-Israeli war. Since this report was completed, the work stoppage affecting the Venezuelan oil industry has begun to dissipate. But tightness in the global oil markets remains much as Goldman described in its analysis. The Venezuelan govt has sacked almost 10,000 striking workers and is labouring in its efforts to reactivate oil wells & refineries.

Since he swept into power in a landslide 4 years ago, former paratrooper Hugo Chavez has been a persistent irritant for the American govt, but so long as his govt kept the oil flowing, any acrimony between the 2 countries remained at a reasonably low intensity. Although not directly implicated in the 2001 coup attempt against the Chavez govt, the Bush administration made little effort to conceal its approval of the impending change in administration.

American govt is now paying for this lack of discretion given Chavez's successful return to power, during which he dismissed dissident officers largely favourable to US objectives. The army is now largely supportive of the govt, giving Mr Chavez a whip hand in regard to developments in the oil market .
The basis for the current dispute between the workers of Petroleos de Venezuela (PDVSA) and the govt has been the govt's announced plans to divide PDVSA into 2 operating companies and essentially eliminate its presence in Caracas. In reality, this is above all else a political showdown between Venezuela's country's upper social class, which has shut down oil production in an attempt to unseat President Chavez, who was duly elected and who has the support of the masses. Because Chavez appears to have the full support of the military and the vast majority of the population, the lock-out is being gradually eroded and workers are returning.

However, given the age of Venezuela's oil fields it is unlikely that the 2 new operating companies which will handle the country's oil production can operate at anything like the 3.0 mmbd capacity of PDVSA before the strike, according to energy analysts Groppe, Long, & Littell. GLL also note that Venezuelan fields are mature and Venezuelan crude is heavy. The host rock is often "sandy". This means that it may take a long time to bring shut-in wells back on stream.
No one knows how great this lag might be, as it depends on geologic & engineering issues for which there are no clear precedents as well as on the amount of investment that will be thrown at the problem by a govt in chaos.

In addition to the problems of Venezuela, one also has to consider the position of the oil market in the context of the increasingly tenuous position of the ruling House of Saud. Saudi Arabia is still the world's largest producer, but the extreme Islamic movement associated with Wahabi dominates domestic institutions and has greatly influenced thinking & sentiments of a disenfranchised populace with extremely high unemployment and declining per capita incomes.
The ruling royal family, which has enjoyed the lion's share of oil wealth, is perceived as corrupt, and repression of domestic discontent is high. Saudi oil production too is at risk because 1) conflict as has materialised in Venezuela is possible (given comparable social divisions and the corresponding extreme distribution of wealth between the country's elites & its downtrodden masses) and 2) there is a terrorist threat by a global Islamic extremist movement that originated in Saudi Arabia.

Despite the precarious position of the oil market, financial markets remain extraordinarily sanguine in regard to the prospects of another major oil shock. There remains the perception of an amply-supplied crude market being artificially propped up by a "war premium". This outlook is symptomatic of a broader ingrained optimism which sees the impending war itself as the proximate cause of the trouble even though most stock markets peaked almost 3 years ago, well before Saddam became an issue.
At its most basic level, there lies an unstated desire for war in order to rid the markets of the bearish uncertainty supposedly engendered by the threat of war. This is not to suggest that today's market practitioners are all blood-thirsty warmongers. Instead, what appears to be "priced" into the markets is an image of conflict (largely absorbed by tv images of Gulf War I or Afghanistan) that now bears almost no resemblance to the bloody chaotic experience that has historically been war's gory reality.

If the first Gulf war conflict or the more recent Afghan experience has engendered such tremendous complacency, it becomes harder to argue that concerns over Iraq have been a major factor in discouraging investment, as Greenspan appeared to suggest today in the text of testimony to the Senate Banking Committee:
"The intensification of geopolitical risks makes discerning the economic path ahead especially difficult. If these uncertainties diminish considerably in the near term, we should be able to tell far better whether we are dealing with a business sector & an economy poised to grow more rapidly, our more probable expectation, or one that is still laboring under persisting strains & imbalances misidentified as transitory."

We are inclined to the latter option outlined by the Fed chair: a global economy still "labouring under persisting strains & imbalances misidentified as transitory." We have great sympathy with the view expressed by market commentator Richard Russell to the effect that Iraq has become the "hook", which has induced the public to hang on to their shares, despite the increasingly ominous political/economic backdrop and the catastrophic losses already sustained by most who have tenaciously held on throughout the 3 year bear market.
Widespread perception of a relatively cost-free battle and corresponding fear of missing a "war rally" has become the factor precluding a final capitulation sell-off in Russell's view, rather than fears of a bloody, messy, economically disruptive conflict holding up pent-up investment demand.

For those who believe in the image of a bloodless techno-war, the recent Columbia shuttle disaster should provide pause; it provided a horrific illustration of the limitations of modern technology, the profusion of which on the American military side has persistently been cited as the leading basis for a quick, decisive victory over a poorly armed Iraqi army.
The more one draws comparisons to the period preceding GW1, the less comforting appears the precedent. As the US contemplates a second Gulf war, it faces unprecedented terrorist threats, fraying transatlantic alliance (incl perhaps the biggest split in NATO's 50 year history), and antagonistic relations with virtually the entire Islamic world. None of these conditions pertained in 1990/91.

Nor is the economic backdrop remotely comparable: consumers in the US, Europe and Japan still have record levels of debt, accumulated long before any prospect of war with Iraq became a reality. To quote Morgan Stanley's chief economist, Stephen Roach:

"The world economy has changed a lot since 1990-91. Perhaps the most significant change has been the emergence of a lopsided, US-centric global growth dynamic. In the late 1980s, there was much greater balance to the global economy than there was in the late 1990s. Back in the earlier period, the industrial world was drawing support from 3 engines, the US (3.4% average GDP growth over the 1985-90 interval), Japan (4.8%), and even Europe (3.0%). The developing world was benefiting from the East Asian "miracle"(8.1% average growth over the 6 year period ending in 1990) as well as from moderate growth in Latin America (2.9%).
Drawing its sustenance from multiple sources of growth, the world had more legs to stand on in the event of a shock. Nor was the global economy of the late 1980s plagued by serious external imbalances. In 1990, for example, current-account deficits (and surpluses) in the broad global economy amounted to only about 0.5% of world GDP … In fact, never before has the modern-day world economy been saddled with such extraordinary disparities between outsize current-account deficits & surpluses. In retrospect, the balanced global economy of the late 1980s was well positioned to withstand the pressures of a shock. By comparison, today's unbalanced world is at a distinct disadvantage in coping with such a disturbance"

"Two Different Worlds" 2.10.03

But over the longer term, it is unrealistic to expect huge amounts of additional Iraqi oil to come flooding onto the market. A recent working paper co-sponsored by the Council on Foreign Relations and the James A. Baker III Institute for Public Policy makes many of the same points that we have expressed in the past in regard to the difficulties in vastly increasing Iraqi oil production to offset existing tight supplies in today's oil markets:

"Notwithstanding the value of Iraq's vast oil reserves, there are severe limits on them both as a source of funding for post-conflict reconstruction efforts and as the key driver of future economic development. Put simply, we do not anticipate a bonanza.

The U.S. approach should be guided by 4 principles:

  Iraqis maintain control of their own oil sector;

  a significant portion of early proceeds is spent on the rehabilitation of the oil industry;

  there should be a level playing field for all intl players to participate in future repair, development, and exploration efforts; and

  any proceeds are fairly shared by all of Iraq's citizens. If de-politicized, the UN oil-for-food distribution mechanism is a useful starting point for distributing oil revenues throughout the country.

It is also important to note that Iraqis have the capability to manage the future direction of their oil industry. A heavy American hand will only convince them, and the rest of the world, that the operation against Iraq was undertaken for imperialist, rather than disarmament, reasons. It is in America's interest to discourage such misperceptions.
While Iraqi technocrats are likely to be attracted to American technology & assistance, U.S. should be prepared for negotiations with future Iraqi representatives on foreign participation to be prolonged & hard- fought. In addition, Iraq's highly experienced, nationalistic oil executives will be motivated by Iraqi national interests and are unlikely to agree to one-sided terms that transfer effective control of Iraq's oil reserves to foreigners.

How quickly Iraq's oil production capacity of 2.8 million barrels per day (bpd) can be increased depends on several variables, such as the political environment that develops after the war and the price of oil. U.S. policy should be informed by a realistic assessment of how Iraq will attract the estimated $30 billion to $40 billion in new investment it needs to rehabilitate active wells and to develop new fields.

Iraq's oil industry is unlikely to be able to immediately deliver recovery in oil production and, depending on damage sustained during hostilities, may find its ability to export oil reduced. It is in dire straits with existing production levels declining at a rate of 100,000 bpd annually. Significant technical challenges exist to staunching the decline and eventually increasing production.
Returning to Iraq's pre-1990 levels of 3.5 million bpd will require massive repairs & reconstruction of major export facilities, costing several billions of dollars and taking months, if not years. Service contractors are likely to secure most initial oil sector contracts. The best-case projections of 6 million bpd will take several years to achieve and depend on a multitude of factors incl ongoing intl oil market conditions.

Any damage done to the industry during conflict will have to be addressed immediately in order to ensure that oil revenues continue to flow back to the Iraqi people. American military planners must be well-briefed on Iraq's oil infrastructure, in order to avoid inadvertently harming Iraq's recovery.
Finally, the legality of post-sanctions contracts awarded in recent years will have to be evaluated. Prolonged legal conflicts over contracts could delay the development of important fields in Iraq and hamper a new govt's ability to expand production. It may be advisable to pre-establish a legitimate (preferably UN-mandated) legal framework for vetting pre-hostility exploration agreements."

"Guiding Principles for U.S. Post-Conflict Policy in Iraq" Dec. 2002 www.bakerinstitute.org

Along with Merrill and CS First Boston, remaining defendants include Barclays Bank, Deutsche Bank, Toronto-Dominion Bank, Royal Bank of Canada and Royal Bank of Scotland. Goldman Sachs Group Inc. also has been named a defendant for its role as an underwriter of Enron securities.
Plaintiffs claim that several of the banks set up false investments in clandestinely controlled Enron partnerships, used offshore companies to disguise loans and facilitated sales of phantom Enron assets, allowing Enron executives to deceive investors and artificially inflate its securities prices.

The settlement with CIBC does not mandate corporate governance reforms, but Lerach said it would help deter banks from abetting fraud in the future.

Regents report Spring 02   Eric S. Evenskaas '03 Nightcap In February, Univ. of California was named lead plaintiff in the class-action lawsuit against the collapsed energy giant Enron Corporation and their accounting firm Author Anderson LLP. Though UC lost $144.9 million in Enron stock, that figure represents less than 0.3% of UC's total portfolio, which still managed to grow by $2.7 billion in the final quarter of 2001. The trial is set to begin in December. Univ. named lead Enron plaintiff 2.15.02   Kristen Hays AP HOUSTON   The University of California Regents will lead the charge for big-time investors and individual shareholders collectively suing current and former Enron Corp. officials for more than $1 billion gained in stock sales before the company imploded last year. U.S. District Judge Melinda Harmon designated the university late Friday as the head decision-maker in a massive securities-fraud lawsuit against current and former executives and directors of the company. "We take up this responsibility with the deepest sense of obligation not only to the UC family of employees, retirees and students, but to the millions of Americans who invested in good faith with Enron,'' said James E. Holst, general counsel for the university. Milberg Weiss Bershad Hynes & Lerach LLP, the law firm representing the university and Amalgamated Bank, stands to collect the most in attorneys' fees for taking on the lion's share of work in the case as well. The firm could generate fees reaching hundreds of millions of dollars if an Enron judgment comes close to last year's record $3.2 billion settlement that Cendant and its accounting firm made with stockholders. That case stemmed from a 1998 scandal involving the then-Connecticut company that became the largest financial fraud case ever brought by the Securities and Exchange Commission. "Millions of Americans invested in Enron because of the confidence they placed in the business practices of the company and the public information provided by its senior executives and accountants,'' said Milberg Weiss partner William Lerach of San Diego, who has spoken for the regents and Amalgamated in hearings before Harmon. "On behalf of the University of California as lead plaintiff and working in concert with all the plaintiffs, we look forward to vigorously pursuing the shareholders' case,'' he said. The fees provide a big incentive for law firms competing to be lead counsel representing lead plaintiffs in large class-action lawsuits, said Henry T.C. Hu, a corporate law professor at the University of Texas School of Law. The lead plaintiff doesn't get a bigger slice of the judgment pie. But the university will have more power to plan strategy and direct the case, Hu said. "From a monetary standpoint there's nothing in it for the lead plaintiff,'' Hu said. "You don't get any more money than your prorated share. But that law firm will be putting in a lot of time, and it could be very attractive financially.'' The original class-action fraud case was filed in Houston on behalf of Amalgamated and several investment funds days after Enron filed for bankruptcy on Dec. 2. Amalgamated lost $10 million in the meltdown, and sought $25 billion in damages. The suit is seeking $1.1 billion gained by current and former Enron executives and directors who sold stock from October 1998 through November last year. Other plaintiffs that lost more money have since joined the suit, including:   The Florida State Board of Administration and the New York City Pension Fund. Combined loss: $443 million.   University of California Regents. Loss: $145 million.   Pension funds for the states of Georgia, Washington, Ohio and Alabama. Combined loss: $416 million. Lawyers representing shareholders and former employees also since joined the suit. Employees watched their Enron-stock loaded 401(k) accounts evaporate as the company collapsed. Milberg Weiss had argued that as a single plaintiff, the regents would be able to better manage the case than multiple pension funds. Amalgamated did not seek the lead plaintiff designation. The Florida and New York City funds argued they should be lead plaintiffs. Both lost more money than others in the running. A spokesman for the Boston-based law firm Berman DeValerio Pease Tabacco Burt & Pucillo, which represents those funds, said lawyers were unavailable for comment Friday because they hadn't yet seen Harmon's 87-page ruling. Congress presses Enron probe 1.23.02   H. Josef Hebert AP WASHINGTON   Congress is pressing its investigation into Enron Corp.'s stunning collapse by trying to sort out conflicting accounts of document shredding at the energy company's outside auditing firm. But key witness Arthur Andersen LLP auditor David Duncan who handled the Enron account, isn't talking publicly without immunity from prosecution, although he met for more than 4 hours with House investigators last week. Duncan, one of 4 Andersen executives planning to appear before the House Energy & Commerce investigations subcommittee on Thursday, will "rely on his constitutional right not to testify" under the Fifth Amendment, one of his lawyers said. The Enron saga was unfolding Thursday on both sides of the Capitol. As the House panel pursued the document destruction at Andersen, the Senate Govtal Affairs Committees planned to question former regulators & other experts on whether the govt failed to exercise proper oversight of Enron. The Securities & Exchange Commission started looking into Enron's accounting in mid-Oct., after the co. reported a Q3 loss of more than $600 million. The agency's inquiry eventually included demands for financial documents from Enron & Andersen. Enron's slide into the biggest bankruptcy in U.S. history on 12.2.01 left thousands of employees without jobs and their retirement savings all but gone because the funds had been tied largely to now-nearly worthless Enron stock. Other investors & creditors also have lost hundreds of millions of dollars. At least 11 congressional committees plan hearings on the collapse of what once was the nation's 7th largest corporation. The Enron case also is causing political anxiety at the White House because of Enron Chair Kenneth Lay's close ties to President Bush and the company's free flowing contributions to the Bush campaign. 1.23.02 late, Lay announced in Houston that he was resigning as chairman & chief executive of Enron, a decision urged by the company's board & its creditors. While reports emerged this week of document shredding at Enron's Houston headquarters as well, the focus of the House subcommittee, for the time being, is on the destruction of Enron-related papers at Anderson at a time last fall when the energy giant was descending toward bankruptcy. Last week, Andersen fired Duncan because of his role in Enron- related document destruction in Oct. & Nov., just as Enron's problems were publicly emerging and the SEC began a formal investigation. But Duncan has claimed to investigators that he was following company guidance on document destruction laid out in an 10.12.01 e-mail from Andersen corp. atty Nancy Temple at the firm's Chicago HQ. Temple & Andersen's professional standards group managing dir. Dorsey Baskins Jr. were expected to be quizzed by the House panel as to why the memo was written and on the firm's normal paper shredding policies. The company claims the Temple memo was routine and aimed only to combat the "pack- rat" mentality of many accountants. Duncan's interpretation of the 10.12.01 memo reflected a sinister view, one supported by another Andersen manager, Michael C. Odom, who also has told investigators he viewed the memo as unusual. He also has been subpoenaed to testify. And a new Andersen document, obtained from committee sources Wed., also suggests the Temple directive was more than routine. In the 10.24.01 memo from a manager, employees were told the document shredding was so important that it should be pursued even "on an overtime basis, if necessary for the remainder of this week or for however long it takes." But if lawmakers had hoped to hear from Duncan, they have been disappointed. Robert Giuffra Jr., one of Duncan's attorneys, informed the subcommittee Wed. that the Duncan has not had time to prepare, has not had access to critical documents and will testify only if given immunity, as is his right under the Fifth Amendment. "Mr. Duncan seeks the full disclosure of the truth" and will continue to cooperate with the congressional investigations as well as those by the Justice Dept & the SEC, Giuffra wrote. Kenneth Johnson, a spokesman for the full committee, said the panel did not want to impede a criminal investigation at the Justice Dept, so it rejected the immunity request as well as a request by Duncan that he not be required to appear. "We're not giving anyone a free pass," Johnson said. "Mr. Duncan met with our investigators for more than 4½ hours. We find it strange that he's unwilling now to repeat his story before the committee under oath." Enron bosses gave millions to bin Laden & Taliban They were hoping to cut deal on oil pipeline 3.7.02   Devlin Barrett AP   abridged Houston   Enron Corp. gave Taliban rulers millions of dollars in bid to strike energy pipeline deal in Afghanistan. Enron executives met with Taliban officials in Texas; also uncovered that some Enron money wound up supporting bin Laden & al Qaeda terrorist network. "Enron would do business with the devil if it would make the company money." said a congressional committee investigating company's collapse. Enron's international division sr dir. until the company's collapse, Atul Davda, confirmed: "Enron had intimate contact with Taliban officials." Enron secretly employed CIA agents to carry out its dealings overseas. CIA insider disclosed: "Enron proposed to pay the Taliban large sums of money in a 'tax' on every cubic foot of gas & oil shipped through a pipeline they planned to build." Enron paid more than $400 million for a feasibility study on the pipeline and "a large portion of that cost was pay- offs to the Taliban," said the CIA source. Enron wooing of the Taliban continued after al Qaeda agents bombed 2 American embassies in Africa in 1988. 3 days after 9.11.01, Enron CEO Kenneth Lay continued to wait for the Taliban to give up bin Laden as the Bush administration was demanding. Citigroup pays $1.66 billion in Enron case 3.27.08   AP Citigroup agreed to pay $1.66 billion to creditors of Enron who lost money when the energy trader collapsed in 2001. Citigroup was the last remaining defendant in what was known as the "Mega Claims" lawsuit, a bankruptcy suit filed in 2003 against 11 banks and brokerages. The filer, called Enron Creditors Recovery Corp., alleges that with the help of banks such as Citigroup, Enron kept creditors in the dark about the company's financial troubles by using shady accounting. Yesterday's settlement plus previous bank settlements and Enron's subsequent release of $1.7 billion held in reserves gives those creditors more than $5 billion, Enron said. That amounts to 37.4¢ on each dollar the creditors had tied up in Enron, according to Enron. [ nee ano 5.5 ] New Enron allegations hit jpMorgan Chase, Citigroup   12.9.02   M.Goldstein The Street.com The nation's 2 biggest banks, Citigroup & J.P. Morgan Chase, say they learned their lesson about fancy financing after being raked over the coals for Enron. Skeptical lawmakers on Capitol Hill aren't so sure. Senate subcommittee will hold an all-day hearing Wednesday to see if the banks really are changing their ways in the aftermath of one of the nation's biggest corporate scandals, and discuss the need for possible stiffer regulation. In advance of the hearing, lawmakers released a new batch of information that paints a highly unflattering picture of several previously undisclosed business deals between the two big banks and Enron. The release of the information and news of the hearing helped drive down shares of Citigroup & J.P. Morgan. In afternoon trading, Citigroup's stock was down $1.40, or 3.7%, to $36.15, while shares of J.P. Morgan dropped 93¢ or 3.8%, to $23.50. The selloff in both stocks is reminiscent of the way Wall St reacted this summer, when the Senate Permanent Subcommittee on Investigation held a similar hearing to examine $8 billion in prepaid oil & gas deals involving the banks, Enron, and several offshore shell companies. Lawmakers denounced the oil & gas deals arranged by the banks as "sham transactions" that helped Enron inflate its revenue. The Senate subcommittee again is making similar claims about these additional financing deals involving the banks and Enron's fledgling pulp & paper trading business. A 35-page investigative report compiled by the Senate subcommittee concludes the banks were willing participants in "sham contrivances" that aided Enron's "deceptive accounting or tax strategies." And Enron rewarded the banks with millions in fees and "favorable consideration in other business dealings." The report highlights a number of internal bank emails & recent interviews with bank employees that show some of them had grave doubts about the transactions. In some instances, the bankers even questioned their superiors about reasons for going forward with deals. In one particularly pointed email, for instance, a Citigroup employee writes: "Sounds like we made a lot of exceptions to our standard policies. I am sure we have gone out of our way to let them know that we are bending over backwards for them … let's remember to collect this IOU when it really counts." In an interview with committee investigators, a J.P. Morgan employee testified that the bank had marketed a complicated & questionable tax-avoidance strategy it set up for Enron to at least 15 to 20 other companies. The 4 deals in question, which have bizarre names like Slapshot, Fishtail, Baccus and Sundance, were part of a strategy by Enron to move the assets of its pulp & paper trading business off its balance sheet, while at the same time inflating revenue by an estimated $112 million and saving some $65 million in taxes. The committee report tries to explain the deals in a series of mind-numbing flowcharts that resemble some Rube Goldberg-like contraption. Committee investigators also question whether the banks' investments in some of these deals were ever at risk. In the Fishtail transaction, for instance, the report notes that J.P. Morgan was permitted to defer "any actual investment in the venture until a later date,'' a move that effectively rendered it a "sham joint venture." The Fishtail deal was conceived as a joint venture between J.P. Morgan and the now- infamous LJM2 Partnership in a special purpose entity that purported to buy Enron's pulp & paper business for $200 million. LJM2 was the $390 million partnership run by Enron's former CFO Andrew Fastow, since indicted on fraud charges. Enron relied on LJM2 to buy & sell some of the assets that no one else wanted. At the hearing, a number of officials from the banks & regulatory agencies are expected to testify, incl Office of the Comptroller of the Currency's senior deputy comptroller for large banks Douglas Roeder and Federal Reserve's supervision director Richard Spillenkothen. Testifying for Citigroup will be newly appointed chief executive of corporate & investment banking Charles Prince. He's expected to say that under policies enacted by the bank this summer, it's doubtful that Citigroup would participate in those kinds of deals now. A J.P. Morgan spokesman said the nation's second-largest bank also had taken steps this summer to bolster its corporate governance practices and heighten the bank's internal review of all its sophisticated lending deals. "While we don't think we did anything illegal, we would not do this transaction today,'' the spokesman said. Subcommittee's chair Sen. Carl Levin D-MI said his goal is to gather testimony from bankers & regulators in an attempt to gauge just how much things have changed since Enron. "Wednesday's hearing will give us the opportunity to hear what they & federal regulators are doing so we can determine what the federal govt must do in addition to deter these kinds of acts," said Levin, in a prepared statement. It's doubtful Levin will get a chance to follow through on the hearing. Next year, he'll be replaced as chair when the Republicans take control of the Senate. Royal Dutch/Shell pay $120m to settle SEC fraud case   8.25.04   WebCPA Wash.D.C.   Foreign-based oil co. Royal Dutch Petroleum Company and The "Shell" Transport & Trading Co. plc agreed to pay $120 million to settle fraud charges brought by the Securities & Exchange Commission related to their overstatement of 4.47 billion barrels of previously reported proved hydrocarbon reserves. Without admitting or denying SEC's findings, Shell agreed to a cease & desist order finding violations of the antifraud & other provisions of the federal securities laws, and to pay $1 disgorgement and a $120 million penalty in a related civil action that the commission filed in U.S. District Court. Shell also agreed to commit an additional $5 million to develop and implement an internal compliance program under direction & oversight of the group's legal director. Shell simultaneously agreed to pay £17 million to settle a market abuse enforcement action initiated by the Financial Services Authority, primary U.K. financial market regulator. SEC's staff coordinated its investigation closely with FSA & Autoriteit Financiële Markten, primary Netherlands financial market regulator. "The degree of international & interagency cooperation in this case has been extraordinary, and sets an important precedent for investors that regulatory efforts to police the financial markets will transcend national borders," SEC Enforcement Div. dir. Stephen M. Cutler. "As our investigation continues, we intend to focus on, among other things, the people responsible for Shell's failures," said SEC Ft Worth TX office administrator Harold F. Degenhardt. SEC charged Shell overstated proved reserves reported in its 2002 Form 20-F by 4.47 billion barrels of oil equivalent, approximately 23% and that Shell overstated the standardized measure of future cash flows reported in this filing by approximately $6.6 billion. According to the SEC order, Shell also materially misstated its reserves replacement ratio for 5 year period from 1998 through 2002.

Future of Enron asset PGE is still foggy 7.11.03   Gillian Flaccus AP PORTLAND, OR   The future of one of Enron's key assets, Oregon's largest utility, was still uncertain Friday even after the fallen energy giant formally divulged its plans to emerge from bankruptcy. Enron said it was leaning toward distributing stock in Portland General Electric to its creditors, who are owed an estimated $67 billion, but the Houston-based co. said it hasn't ruled out selling the utility. "We are still considering 2 scenarios, both of which wind up in the same place for PGE,'' said Enron spokesman Mark Palmer. "Either way, PGE will be independent of Enron, out from underneath this very distressing situation.'' The city of Portland is interested in buying the utility and running it as a publicly owned entity, although its bid was rejected by the co. City officials could also approach creditors about a potential sale. "The city is considering all of its options,'' said Portland Mayor Vera Katz spokesman Tommy Brooks. One of those options includes exercising its power of eminent domain by moving to condemn and take over PGE's assets, said Portland-based watchdog Citizens' Utility Board exec. dir. Bob Jenks. Under Enron's proposed reorganization plan, which must be approved by NY bankruptcy court, creditors would divvy up billions of dollars in proceeds from asset sales & auctions and receive equity in 2 new companies: domestic pipeline co. CrossCountry Energy Corp. & intl power & pipeline co. Prisma Energy Intl Inc. Depending on how the bidding process plays out, PGE could be a third co. in which creditors would receive equity. The co. would have an independent board of directors, but would retain PGE's current management. "We feel that those are both good options because at the end of the day, we're separated from Enron and we would continue to be an independent co. headquartered in Oregon,'' said PGE spokesman Kregg Arntson. Enron spokesman John Ambler said the decision about PGE had been held up by the bidding process. PGE has been on the market 10 months without attracting any adequate bids, he said. But Ambler dismissed concerns that the utility's liabilities from the Enron bankruptcy could be scaring bidders away. He also said expenses incurred by those liabilities would not be passed on to ratepayers under PGE's possible new ownership. "There's some limited thing like pensions & tax liabilities that are known & controllable that PGE might have to deal with,'' Ambler said. "I think the bidders are aware of those and factored those into their bids.'' Portland officials & watchdog groups consider distributing Enron stock to creditors as the worst case scenario for the city's electricity users, who could see higher rates as the result of trickle down expenses from lawsuits & further instability. "It's hard to see what ratepayers get out of the deal,'' Jenks said. Enron, Fortune 500 #7 in 2000, went bankrupt Dec. 2001 amid crippling revelations of hidden debt, inflated profits and vastly complicated accounting schemes designed to support its facade of robust financial health. Thousands of employees abruptly lost their jobs and co. stock became worthless. Ex-Enron employee hawking manual 1.16.01   Kristen Hays AP HOUSTON   Getting laid off from Enron Corp. turned Matt Mitchell into an entrepreneur. One of his 2 copies of a broadband risk management manual used by the former energy giant, which contains tips on increasing creditworthiness & timing of reported earnings, is the priciest of 120 Enron-related items for sale in eBay online auctions. "It's not entirely deceptive, but it isn't showing what's actually happening," Mitchell said Tuesday of risk management techniques employees learned from the manual, which he hopes to sell for at least $150. The auction ends Friday. Other items for sale on the site range from freebies that Enron gave employees, such as golf balls, baseball hats and paperweights with the company logo, to a commemorative Enron stock certificate. One seller is even hawking the company's 64-page code of ethics. Enron spokeswoman Karen Denne said former employees can sell Enron artifacts with the company's blessing. "The whole situation is unfortunate, and we've always had resourceful, innovative employees. This is just the latest demonstration," she said. Mitchell, 29, was among hundreds of employees laid off from Enron's money-losing broadband services unit in July last year, six months before 4,500 lost their jobs in December the day after Enron filed the largest bankruptcy in history. He worked as a sales engineer for Enron for 14 months, consulting with traders who made telecommunications-related trades. Mitchell found another job for less pay with a small software company in Houston in Sept. and watched his former employer imploded in a whirlwind of questionable accounting practices, deflated shares and erosion of investor & trader confidence. Stock that traded near $80 a year ago was delisted from the NYSE Tue., having stagnated at less than $1. Mitchell said he thought the risk management manual might generate a snicker or two and pique interest from some bidders. He said risk management techniques used for energy and electricity trading were tweaked to apply to broadband in the manuals. "This was just old information rewritten," Mitchell said. "It does not go into specific laws about what you can do with taxes and ownership, but there are cases of where it focuses on what you can do and accepted accounting practices that are allowed." For example, the manual said companies can re-categorize expenses "in such a manner as to improve the perceived financial performance." Mitchell said layoffs were common for broadband employees working for an unprofitable venture, but they benefited from the company's severance plan. Those laid off after the bankruptcy filing received $4,500 each, as approved by a U.S. bankruptcy judge in New York. Mitchell received nearly $40,000 as entitled under company policy, as did others laid off before Enron's demise. "I was one of the lucky ones," Mitchell said. "I was lucky enough to get another job, with a substantial pay cut, in September. I feel worse for all my co-workers, who had no notice whatsoever and no idea it was coming." He said he plans to use his severance to open a coffee shop. "I got the idea from the coffee stands in the (Enron) lobby there," he said. "There were always lines. I figured it must be a good business." Enron CEO Kenneth L. Lay Resigns 1.23.02   Kristen Hays AP HOUSTON   Embattled Enron Corp. chairman & CEO Kenneth L. Lay resigned Wed. from the bankrupt energy company but will remain on the company's board. Lay, 59, transformed Enron from a regional pipeline company into one of the world's largest energy-trading firms. But more recently, he has been blamed for much of what went wrong at Enron. "I want to see Enron survive, and for that to happen we need someone at the helm who can focus 100% of his efforts on reorganizing the company and preserving value for our creditors & hard-working employees," Lay said in a statement released Wed. night by Enron. Lay said the many investigations into Enron's activities take up too much of his time and make it difficult to concentrate fully on what is most important to Enron's stakeholders. His resignation came the day before 2 congressional committee hearings related to Enron's downfall were to begin. "He's resigned & he's rich and I'm out of a job & I have no money," said Michelle Cormier, 33, who was fired Dec. 3 from Enron Energy Services after 16 years. "He has something to fall back on." Enron said its board of directors was working to find a "restructuring specialist" to help with its efforts to emerge from bankruptcy. That person will serve as Enron's acting CEO. Sanders Morris Harris securities analyst John Olson (Houston) said Lay's resignation was inevitable. "He recognized that he was becoming such a lightning rod of controversy that he simply needed to sever himself from the firm for the mutual benefit of Enron & himself," Olson said. Lay took over as CEO at Enron in Feb. 1986, 7 months after it was formed by the merger of Houston Natural Gas & InterNorth Inc. In Dec. 2000, Jeffrey Skilling was named CEO, but Lay remained chairman. The company's shares hit a 52-week highof $84.78 on Dec. 28. Skilling abruptly resigned in Aug. 2001, reportedly for personal reasons, amid a slumping stock and Lay resumed his role as CEO. Some company watchers said it was the first outward sign that the company was ailing. Just months ago, Enron was the country's 7th biggest company in revenue. But investors & traders alike evaporated amid revelations of questionable partnerships that helped keep billions of dollars in debt off its books and the company's acknowledgment that it overstated profits for 4 years. The company filed for bankruptcy in December, leaving thousands of employees out of work and stripping much of their retirement savings after Enron temporarily barred them from selling company stock from their Enron- dominated 401(k) accounts. 11 House & Senate committees are investigating Enron, while the Justice Dept & SEC pursue their own less-visible probes. Lay is expected to testify before 2 congressional committees on 2.4.02. Enron's lead outside auditor was subpoenaed to testify before Congress on 1.17.02 about his role in the destruction of financial documents, but his lawyer said he would refuse unless the House panel grants him immunity. Arthur Andersen auditor David Duncan warned Enron's chief accounting officer last October that the wording of the company's draft press release announcing huge Q3 losses could be misleading for investors, according to a memo Duncan wrote for the files on 10.15.01 that was obtained by investigators. The memo says his advice, made after consulting with Arthur Andersen attorneys, was ignored. One of the attorneys was Nancy Temple, who also was subpoenaed to testify at Thursday's hearing. According to another document, Temple asked Duncan to delete her name and any reference to having consulted with the Arthur Andersen attorneys from his memo. "If my name is mentioned it increases the chances that I might be a witness, which I prefer to avoid," Temple wrote. Congress can compel witnesses to show up but cannot force them to answer potentially incriminating questions without granting them immunity from criminal prosecution. Duncan already has talked to committee investigators. Chicago-based auditing firm Arthur Andersen fired Duncan last week for his role in the extensive destruction of Enron-related documents that took place after federal regulators began investigating possible accounting improprieties. Attorneys for shareholders suing some current & former Enron executives & board members have asked a federal judge to bar Arthur Andersen from shredding more documents related to its audits of the company. In addition to the House Energy & Commerce Committee hearing on document destruction by Arthur Andersen employees, Senate Govtal Affairs Committee also is holding a hearing Thursday. The Senate hearing will focus on whether & how the system of federal regulations can be strengthened to prevent another Enron-style meltdown. Witnesses include Arthur Levitt, who was SEC chairman through most of the Clinton administration. Praise for Bush policy questioned 3.2.02   S.Florida Sun-Sentinel   Tamara Lytle 202-824-8255 & Lori Horvitz WASHINGTON   Gov. Jeb Bush, who staked much of his legacy on improving education in Florida, a few weeks ago gleefully touted a study praising his school policies. The report by the Manhattan Institute think tank "provides further evidence that Florida is truly making a positive difference in providing greater educational choice for Floridians and improving student academic achievement," Bush said in a Jan. 22 statement shortly after the study was released. What he didn't mention was that the chairman of the Manhattan Institute also is a top executive of Alliance Capital Management, a Wall Street investment firm that lost almost $300 million of Florida's pension money by investing in Enron stock as it tumbled. Another Alliance Capital executive, Lewis Sanders, also serves on the think tank's board.     origins & oracles faith based patronage stifling loudmouth wives AVOT That relationship has led to conflict-of-interest questions about Bush's role in protecting Florida's pension fund, because he is one of 3 trustees charged with overseeing the state's retirement system. The Florida pension fund kept Alliance Capital on the job, earning millions in fees, even though it had invested poorly for 18 months. Alliance Capital was fired in December after its disastrous decision to invest more & more in Enron stock as the price was dropping. Now critics are saying Alliance Capital should have been fired sooner and are suspicious that Bush may have not done enough to monitor the company connected to such a glowing report of his education plan. The study, released Jan. 22, was one of 2 in the past year by the conservative-supported Manhattan Institute praising Bush's education reforms. It singled out Florida as one of the country's leaders of school choice under Jeb Bush. "When you have political oversight of things like state pension funds, the fact the governor is getting political support from them, it definitely raises a question of whether there was a quid pro quo there," said Bill Allison of the nonpartisan ethics watchdog Center for Public Integrity. "It looks like the ulterior motive was cozying up to the governor of Florida to keep a business arrangement beneficial to them going." … The Manhattan Institute studies were written by think tank sr fellow Jay Greene of Ft Lauderdale. Florida's State Education Dept paid for part of the February study; the think tank also contributed. The chairman of the think tank is Roger Hertog, also vice chairman of Alliance Capital. Greene said he doesn't know Hertog and was not pressured to report favorably on Bush's plan. "He may be chairman of the board of the Manhattan Institute but he's not my boss in any real sense," Greene said. Ripples from Enron's fall keep spreading 12.02.02   Melissa Davis The Street.com This time last year, energy executives pulled out their calculators and began tallying up their exposure to Enron's sudden plunge into bankruptcy. In short order, Enron's trading partners delivered specific predictions. El Paso gauged its damage at $50 million. Dynegy, which had just scrapped plans for an Enron buyout, set its exposure at $75 million. Williams & Duke conceded that they could lose as much as $100 million each. Given the lavish multibillion-dollar valuations the companies carried in a marketplace still agog with visions of vast trading profits, the price tag didn't seem too steep. Indeed, many of Enron's rivals expected to recoup their losses and then some by gobbling up market share in a business that sprouted out of the 1990s belief that private enterprise could solve virtually any problem. With newly created energy trading operations simultaneously relieving pressure on the nation's decaying electricity grid and churning out massive profits, analysts saw in Enron's demise a win-win situation for investors. "We feel that all energy merchants, incl Dynegy, Williams, Duke and El Paso, will ultimately benefit from Enron's collapse," Prudential analyst Carol Coale said just ahead of Enron's bankruptcy. But a year later, it's apparent that Enron was merely the first casualty in the now deeply distressed energy-trading business. Of the 4 competitors mentioned by Coale, only Duke still operates a major trading business, and it's a money-losing venture. The others, now saddled with mounds of junk-rated debt and cash flows that have slowed to a trickle, are struggling for the means to fund more routine & affordable operations like energy production & transportation. All the energy-trading companies have seen their stocks decline sharply. Meanwhile, huge trading divisions lay near ruin, sullied by questionable business & accounting practices that have triggered myriad govt investigations. Dynegy already paid $3 million fine to end a high-profile SEC probe. All the same, Duke remains stubbornly committed to the fallen trading business. "We're very proud of our trading & mktg operation," CFO Robert Brace told investors, even after the division's dismal Q3. "We're not looking at pulling back." Duke spokesman Randy Wheeless has since reinforced that commitment. "We have one [division] that's not doing that well," Wheeless said of the trading unit. "But with any kind of modest upturn, it will return to its very healthy ways." Some merchant energy critics insist that excesses underlying the industry that Enron built will continue to plague investors for years to come. These days, energy companies are lucky to collect a sliver of profit from the electricity they sell. Once-mighty power producers like Calpine & Mirant spend nearly as much fueling their power plants as they earn for the electricity those plants spit out.   [ Socialism's logic trumps free market mythos. ] They describe this decline in "spark spreads," and the resulting erosion of profits, as unthinkable a year ago. But the thinking back then was still influenced by the heady rise of Enron. Although most industry players acknowledged even then that huge profit margins, like those realized during the California energy crisis, were unsustainable, they assumed that sinking margins had already hit "reasonable" levels. But their own bank accounts, fattened by the recent volatility, should have told them just how violently energy prices can swing. At its cheapest, during a brief period on the day California launched deregulation, wholesale electricity was actually free. Roughly 100 days later, Dynegy set a new tone for the business. Exploiting a loophole in California's deregulation system, Dynegy offered to sell standby power to the state for a whopping $9,999 MW/hour (compared to pre-deregulation rates of $10 a mwh), an offer that, by law, California was forced to accept. Official records show that this strategy allowed Dynegy, together with 2 other energy companies, to reap $8 million in profits for simply keeping their power plants on call for 5 short hours. The high-stakes California power business, likened by some at Enron to a giant video game, had only just begun. Crafty energy traders honed their skills to near perfection by the time the "perfect storm" of extreme weather & power imbalances hit California in 2000. The average merchant energy stock would double that year. Dynegy tripled, ranking among top NYSE performers. Enron, noted as much for its political clout as its aggressive business strategy, ended the year within dollars of its all-time $90 high. The stock, celebrated by most analysts as a phenomenal investment, was less than a year away from being worthless. Hijacking deregulation During Enron's heyday, critics of the company could barely find an audience. Apache, onetime owner of Dynegy's predecessor, screamed aplenty about shenanigans in the industry. But the company has only recently gained a platform before Congress & other powers that were once under Enron's financial thumb.

All along, Apache has blamed a handful of companies, most notably Enron & Dynegy, for poisoning a deregulation movement that could have been good for the country. Ctr for the Advancement of Energy Markets CEO Ken Malloy said the turmoil could cripple the nation's power system for years. He's seen progress on deregulation come to a virtual standstill since Enron's demise.

"We had a few companies that spent a lot of money in Washington to get legislation passed that allowed them to operate totally in secret with no regulation whatsoever," said Apache govt & regulatory affairs dir. Obie O'Brien. "They literally hijacked & corrupted the deregulation process, and they didn't even provide much of a service, except to line their own companies' pockets."
If anything, power consumers suffered more from Enron's participation in, not exit from, the energy trading business. The last blackout occurred when Enron was at the top of its game. Since then, govt investigation uncovered mounting evidence not just Enron, but also surviving companies like El Paso & Williams schemed to drive California power prices high.

This week, on the one-year anniversary of Enron's bankruptcy, El Paso must fight to prove its innocence in a pivotal hearing before the Federal Energy Regulatory Commission. The co., which once pinned its future on energy trading, recently joined the parade of battered players fleeing the business in a panic to survive.
No company except Enron managed to sell its trading division. UBS Warburg, which got Enron's prized trading arm for nothing, hardly flourished because of that "sweetheart" deal. UBS announced last month that it will pack up its business in Houston, where the taint of Enron still lingers, and focus on a much smaller trading operation in Connecticut.

Elsewhere, energy companies are taking billions of dollars in charges to shut down trading operations that nobody wants to buy. Weaker players stayed in the game too long. Some like Dynegy & Williams already skidded close to bankruptcy and still remain at risk. Others, incl debt-laden AES & Reliant Resources, are viewed by some as even more vulnerable.
Experts believe casualties are inevitable. They're just waiting to see which company will be the first to follow Enron into bankruptcy. They see the shakeout as a necessary step toward successful deregulation and a legitimate trading industry. "We absolutely need a place for buyers and sellers to come together," Malloy insisted.

But Malloy acknowledged that much of the past energy trading, like that conducted by Enron, was unnecessary. O'Brien called Enron's business strategy, once touted as the "new American business paradigm," an outright fraud. "It turned out to be the oldest way of making money, stealing it, even if it was wrapped up in a new package," O'Brien said. "They got greedy, and they got caught. Otherwise, they'd still be doing it today."

A peaceful coexistance 4.15.02   Robt X Cringely Infoworld p12 … In wake of Enron's collapse, Schlumberger is gearing to replace Enron as primary provider of broadband services to oil & gas industry w/ new broadband on demand service, … (then) extend it to other industry sectors in competition w/ telcomm providers …

Dynegy Inc. to quit energy trading 10.16.02   AP Houston   Dynegy Inc., once considered a rescue buyout of Enron Corp., announced Wednesday it is getting out of the energy trading business, its chief operating officer is resigning and significant layoffs are coming. The company also said it is decentralizing its corporate structure, making business units in power generation, natural gas liquids, regulated energy delivery and communications more autonomous. Dynegy said it will wind down outstanding energy trading contracts, but dumping the cash-hungry business cuts pressure to borrow money. The company had faced the need to renew $1.3 billion in credit over the next several months but was hindered by its below-investment-grade credit ratings. "The decision to exit this business is expected to reduce the company's collateral requirements & overall corporate expenses,'' the company said. Steve Bergstrom, holdover from the management team led by co. founder & former chief exec. Chuck Watson, who resigned in May, will resign as chief operating officer and withdraw as a candidate to replace Watson. "I fully support the steps leadership is taking to address current market conditions and position the company for the future,'' Bergstrom said. Other energy marketers grappling with the weak trading environment also have scaled back those operations with layoffs in recent months, incl El Paso Corp., UBS Warburg Energy and Reliant Resources. Williams Cos. is seeking a buyer for its trading operation. Last month Kansas City-based Aquila Inc. announced it would abandon its trading business, and earlier this month said former president & CEO Robert K. Green would step down, making way for his older brother, chair Richard C. Green Jr., to take the helm. Gelber & Associates energy markets manager Charlie Sanchez in Houston said the exits from trading by Dynegy & Aquila don't necessarily spell death for the market. "Energy markets are threatened right now, but there are a few organizations that are going strong and should be able to prevail,'' he said. "We believe that there will be some consolidation and there may be some new faces as well.'' Dynegy said the end of trading will force more layoffs, but timing and the number of employees affected will be announced "in the near future.'' Dynegy laid off 340 workers in June shortly before launching a plan to raise $2 billion to strengthen finances and improve its image on Wall St. The company said at the time it sought a partner with a strong credit rating to join the trading business, but Dynegy apparently found no legitimate takers. The company now has 5,500 workers worldwide, with 1,600 at its Houston headquarters. Regarding the decentralized structure, chairman & interim chief executive Dan Dienstbier said, "The objective of the restructuring is to maximize the potential and profitability of our existing operating divisions.'' Raymond James analyst Jon Kyle Cartwright said Wednesday the changes "make perfect sense'' because autonomous business units are easier to sell if necessary and energy trading "has all but evaporated'' in the current weak environment. "This is a company that's battling for its survival,'' he said. "It's a classic survival strategy, try to sell what's not working.'' Dynegy's shares have hovered just above or below $1 in recent weeks, down from a 52-week high of $47.20. Shares closed down 25%, or 27¢, at 81¢ Wednesday on the NYSE. Dienstbier alerted employees 3 weeks ago that more job cuts were "inevitable'' with renewed efforts to cut costs and reorganize the company's structure. "`We all deeply regret that our current situation has brought us to this difficult place,'' he said in a memorandum to workers. The changes announced Wednesday show Dynegy is continuing its struggle to restore investor confidence that withered greatly since Enron collapsed last year shortly after Dynegy abandoned an $8.4 billion buyout of its former rival. In the first 2 quarters of the year, Watson & former CFO Rob Doty resigned. The company also shut down its online trading platform in addition to the 340 layoffs. The SEC also has increased scrutiny of energy marketers for accounting and trading practices. Last month Dynegy was the first of those under investigation to settle an SEC investigation. The SEC found that the company engaged in securities fraud in a natural gas deal that improperly boosted the its cash flow and misled investors about two so- called "wash trades'' in press releases issued earlier this year. Dynegy agreed to pay $3 million to settle the claims without admitting to or denying the agency's findings. In August, Dynegy sold the 16,500-mile Northern Natural Gas pipeline acquired from Enron for $928 million as part of its efforts to raise cash. Dynegy's board also has undergone turnover as new directors were elected to replace others who resigned. FERC report whacks Williams 11.15.02   Melissa Davis The Street.com Williams has lost a fresh round in its battle to show that it is the "anti-Enron." Federal documents, kept confidential until Thursday, provide new evidence that Williams may have intentionally manipulated electricity prices during the California energy crisis of 2000. FERC released the private file which incl damaging discussions between Williams & power producer AES, after a U.S. judge ruled this week that full disclosure was in the public interest. Tulsa money manager Fredric E. Russell, upon viewing the report, immediately compared the company to Enron. "Williams has long maintained that its culture is worlds apart from Enron, and that it did not endorse or condone the manipulation of electricity prices," Russell said. "But this FERC report makes you wonder." Behind the scenes The 17-page file offers rare, behind-the-scenes glimpse of questionable marketing strategies that triggered artificial power shortages in California and gave millions of extra dollars to Williams. The data focuses on a 4 week period spring 2000 when two AES-owned "reliability" plants, whose power is marketed by Williams, went off line for questionable repairs. With price-capped electricity from those plants unavailable, California was forced to pay Williams 10x more for electricity from AES plants with no price restrictions. Among the report's most damaging contents are excerpts from phone calls between employees at Williams & AES. During these discussions, Williams appears to nudge AES to keep the plants out of service for as long as possible. Williams' outage coordinator at the time Rhonda Morgan explained in the FERC report that Williams would receive a premium for power from its other unrestricted plants. "That's one reason it wouldn't hurt Williams' feelings if the outage ran long," she said in an excerpt of a phone call. That year, Williams would go on to double its annual profits and nearly triple the income from its energy services division. Swinging away Williams, defending itself against the FERC report Friday, admitted that Morgan's phone conversation was "inappropriate." The company said it reassigned Morgan, who was later let go in a round of layoffs. But it described her as a good employee and continued to maintain its stance that it did nothing wrong in California. Russell, who liquidated a large position in Williams after losing faith in management, shook his head at the company's stubborn claims of innocence. Russell marveled that Williams, unlike many other energy traders, has yet to make sacrifices in its executive suite. He also criticized the co. top brass for continuing to collect huge salaries while laying off thousands of rank & file employees. CEO Steve Malcolm enjoys an annual salary of $4.2 million, while Wm Hobbs, leader of Williams' beleaguered trading div., picks up an even more handsome $4.7 million. "There has been no regret or no compunction on the part of Williams," Russell said. "Perhaps Williams needs to effect a cultural revolution by replacing some of the executives who can't seem to understand the significance of these events in California." The FERC report comes as a fresh blow to Williams, which celebrated a major settlement with California only days ago. The company had hoped to put the California scandal behind it by trimming more than $1 billion from the value of its long-term power contracts with the state. Just Thursday, Malcolm promised analysts that they "won't see Williams' name associated" with California investigations if the settlement goes through, as expected, next month. Critics stopped believing management long ago.Russell, for one, predicted more bad news to come. "Today's FERC report strongly hints that there are many more cockroaches still to emerge at Williams," he said. News of the report hammered Williams' stock, pushing it down 10% to $2.50 in Friday afternoon trading. AES weathered a similar pounding, falling 9% to $1.40. Both companies have seen their market value chopped by 90% since Enron collapsed into bankruptcy last year.

links   U.S. energy policy portal MSNBC industry news per CNN oil war Oil & Gas Intl Oil & Gas Journal UCAN Stop ExxonMobil Alliance Anthony C. Brown Energy, Jobs & the Economy Kenneth S. Deffeyes Poverty of Power We still live in the age of oil, in an industrial economy, not a post- industrial, intangible, space-based information economy. When asked if we are in a post-industrial economy, Glenn Pascall, senior fellow at the Institute for Public Policy & Management at the University of Washington replied, "No, we live in a knowledge- based industrial economy. By the numbers, making & selling physical products remains the dominant activity. Manufacturing employment drifts down steadily but the value of output from this sector holds steady at 25% of gross domestic product. Some analysts believe business service inputs to manufacturing account for another 25%." "10 myths of the new economy" The Death of "e" and the Birth of the Real New Economy   auth. Peter Fingar & Ronald Aronica   Meghan-Kiffer Press 2001 Oil firms: Excessive profits? 5.8.01   BBC At the beginning of 2001, the oil giants enjoyed a profits boom, prompting anger from motorists and accusations of profiteering. In the Q1 2001, BP enjoyed profits of £2.86bn, Exxon Mobil reaped £3.49bn, while Shell netted £2.69bn. Although there may be celebrations behind closed doors, the media's high profile coverage of the profits has caused the oil firms to feel distinctly uncomfortable. They have previously faced the wrath of protesters complaining of high fuel prices at the pump in scores of countries. Then the govt accused the firms of colluding with the protesters to blame fiscal policy for the high pump prices. Now, in the aftermath of the fuel protests, the oil companies stand accused of profiteering. It is a charge to which they are acutely sensitive. Shell, which soon after the fuel crisis in the UK announced record Q3 profits up 80% at $3.2bn (£2.2bn), declined to offer any senior officials for interview by news organisations at the time. A spokesman said the company only did so when half-year or full-year results were presented. Then, when the company published its full-year result, it blamed the oil producing exporting countries. "Oil prices climbed steadily during much of the year due to production restraints by the major oil exporting countries," said Shell. The appearance to outsiders is one of coyness at reporting such a strong performance at a time of such high political tension and widespread consumer anger at high fuel prices. Whatever the reason, Shell is far from the only oil co. to have kept a low public profile since Sept fuel price protests. But at the same time, usually via their websites, most have conducted detailed & vigorous defences of their positions. One of the oil companies' main points is that despite high pump prices & strong overall profits, they make very little profit selling petrol in the UK. According to Esso, UK brand of Exxon Mobil, a retailer makes only about 5p for each litre of unleaded petrol sold for, say, 84p, with the remainder accounted for by duty, VAT and the cost of production. Some 61p of each 84p litre sold goes straight to the govt in taxes. The retailer's 5p has to cover the cost of transporting the product from refinery to distribution terminal, storage and processing and onward transportation to the retail outlets. After that, the retailer has costs including credit card charges, which alone work out at more than 1p a litre, according to Esso. Intense competition among retailers in the UK over several years has additionally squeezed profit margins so tightly that now they barely exist. Shell says it has not made a profit selling petrol in the UK for the past 3 years. Most oil co. profit derives from crude oil exploration & production. But the level of their earnings is highly unpredictable, determined by the volatile movements of a single commodity on world markets. In 2000, with crude prices at record levels, profits were huge, with for example Shell reporting bumper profits of $9bn, a massive 85% rise on the previous year. But in 1998, when crude slumped to less than $10 a barrel, Shell's profits slid by 36% and Exxon's by 25%. In their results statements for 2000, when crude oil prices peaked at almost $36 a barrel, most oil firms were keen to stress they expected average crude prices to fall in 2001. Prices have indeed fallen, though only down to around the $30 mark. An additional factor to bear in mind is that the oil companies have little influence on oil prices or markets. Exxon Mobil, Shell, BP, Chevron, Texaco and TotalFinaElf together account for less than 15% of world crude oil production. The Organisation of Petroleum Exporting Countries (Opec), effectively made up of state-owned outfits such as Saudi Aramco and National Iranian Oil Co., is a far bigger player, with about 40% of world output. But even Opec has had only limited success in forcing prices up or down. This is because, aside from supply & demand, crude oil prices are determined by unpredictable factors such as the weather, major political events and market sentiment. As part of their defence of high profits, oil firms are also arguing that high crude oil prices, although good for profits in the short term, may not be in their long term interests. Shell accepts high crude prices cause anger & hardship among motorists and suggests it would be bad for co. image when this situation is sustained. In addition, high prices encourage development of alternative energy resources, which, in time, might damage the oil producers' position as the world's dominant energy suppliers. Some campaigners have said the oil firms should use some of their profits from better performing businesses, in this case exploration and production, to subsidise pump prices. The oil giants claim this would not be allowed under competition laws because smaller, independent petrol retailers would be put out of business. With tax forming such a high proportion of the pump price, there would also be no guarantee that govts, committed to reducing fuel consumption, would not just increase taxes to take up the slack. Oil companies also claim, with some justification, that greater oil & gas revenue is not the only factor behind the record earnings. Very low oil prices in 1998 prompted a wave of consolidation & restructuring in the sector as corporations sought to cut costs in the face of tumbling revenue. About 10 of the world's biggest oil companies have now merged or are merging into 5. For several, the financial benefits of getting bigger are becoming apparent. For example Exxon Mobil, the world's biggest oil company created through a massive merger in 2000, announced full-year profits totalling $17bn, hitting a world record. Shell, only oil giant to have resisted a merger or acquisition, implemented deep cost cuts of its own and a rationalisation program that sold or restructured much of its chemicals business. Given the present political situation, it seems mildly ironic that strategies firms put in place to help them get out of one tight spot, low prices, have helped land them in another, justifying their now very strong performances. But in the medium term, says Shell, returns on oil & gas investments are no better than "average" when compared with many other major industries. It points to a recent Financial Times survey of the top 10 best performing industries in Europe in the past 5 years in which oil & gas was ranked 10th behind industries such as life assurance, media, banking and pharmaceuticals. Shell bids £4.3bn for rival oil giant 4.2.02   BBC Petroleum giant Shell is poised to snap up UK competitor Enterprise Oil for £4.3bn. Shell's bid has won the backing of the board at Enterprise, UK's biggest independent oil explorer. The deal would see Shell buy Enterprise's oil reserves, of 1.5 billion barrels, for about $4 per barrel. The offer intensifies Shell's acquisition spree, which last week saw the oil major agree to pay $1.8bn (£1.3bn) for Pennzoil-Quaker State, biggest US motor oil co.Shell had previously remained isolated during the oil industry's period of intense consolidation in 1998 & 1999 which saw firms such as BP, Total, Elf, Exxon and Mobil in full- scale mergers. The level of cost cuts, mostly set to come from "operational efficiencies", will raise fears of job losses, although Shell chair Phil Watts said he only expected 100-150 Enterprise jobs to go. Enterprise chairman Sir Graham Hearne said the takeover held benefits for remaining staff. "For Enterprise employees, there is the opportunity to develop their careers as part of the Shell Group," Sir Roger said. The deal also offered "substantial" benefits to Enterprise shareholders, Sir Roger said. The bid comprises 725p cash per Enterprise share, plus acceptance of £800m in debt. Enterprise shares closed on Friday at 629p, and at 500p before the firm revealed, in January, that it was involved in merger talks.But the shares edged above Shell's bid level, to 726p, as speculation grew of a rival bid. Vittorio Mincato, head of Italian oil firm Eni last, week speculated that the group might pay up to $5.5bn for Enterprise. But observers pointed to a statement in January by British energy minister Brian Wilson, who warned that a foreign takeover of Enterprise Oil could lead to the under-exploitation of North Sea oil reserves. Analysts also doubted whether Eni would have the stomach to fight a takeover battle against Shell, already thought to be offering a full bid for Enterprise. "The price is on the high end of the scale," said David Thomas, an analyst at Commerzbank. "But [Shell] say they're going to get some synergies that more than make up for the premium that we think they're paying." Shell stock was 4p higher at 527p. Enterprise Oil was formed in 1982 by UK govt as the oil exploration & production arm of then state-owned British Gas. Enterprise was floated in 1984. The firm taps oil from 41 oil fields, largely in the North Sea, and reported pre- tax profits of £667.8m last year. The co. also on Tuesday reported a "major discovery" from drilling activities in the Gulf of Mexico.

Feds allege pricing conspiracy at El Paso Corp. Prosecutor says bogus gas trades reported for publication involved several employees. 1.14.03   Reuters Houston   A federal prosecutor said Monday that an El Paso Corp. trader charged with reporting fake gas trades was just one of several employees involved in a 2-year-old "conspiracy" to manipulate pricing indexes. The revelation came during a pretrial hearing for Todd Geiger, 38, who has pleaded not guilty to charges of wire fraud and filing a false commodity report. He is accused of allegedly fabricating 48 natural gas trades. "He is not charged in a conspiracy, but we believe he is part of a conspiracy that goes back over the past 2 years," assistant U.S. Atty. John Lewis told U.S. Dist. Judge Nancy Atlas in Houston. Geiger's atty George Murphy objected to Lewis' characterizations, and reiterated his client's innocence. Geiger, free on $250,000 bond and facing up to 5 years in prison on each count if convicted, goes to trial 3.24.03.

Houston-based El Paso, largest U.S. natural gas pipeline operator, Monday said it had uncovered more evidence that its employees had given false trade data to the same industry publication that Geiger allegedly spoke to, Platt's Inside FERC Gas Market Report. None of the employees are still working for El Paso, the company said.

El Paso said it is giving whatever evidence it finds to prosecutors and investigators at the Federal Energy Regulatory Commission and Commodity Futures Trading Commission. The material incl compact discs with recordings of 140 phone calls among El Paso employees in which plans to provide false data are discussed, Lewis said. Another includes a conversation in which Geiger, El Paso's Canadian natural gas trading desk vp, allegedly defends the nonexistent trades to an Inside FERC editor, he said.
Inside FERC, which is owned by McGraw-Hill Cos., ultimately rejected Geiger's submissions. Murphy has said that his client's alleged actions would have had no effect on prices paid for natural gas, but prosecutors argue that the attempt to manipulate prices is illegal on its face.

Lewis declined to say whether charges against others were forthcoming, or whether he would file a new indictment with additional charges against Geiger. He also would not discuss how many other employees were involved, nor whether Ralph Eads, the former head of El Paso's merchant energy & trading unit, was implicated. Eads, who could not be reached for comment, stepped down last month after the co. announced plans to eliminate its trading business.

El Paso spokeswoman Norma Dunn declined to say how many employees were involved or whether Eads was among those involved. "This was not company-condoned. This was not something that the co. thinks anyone should be doing," Dunn said.
Inside FERC, like other similar publications, uses submissions of trading data to calculate indexes of volume & pricing for commodities. The indexes are used by buyers & sellers to determine prices for such commodities as natural gas.

At least 4 other companies, Williams Cos., Dynegy Inc., American Electric Power Co. and CMS Energy Corp, admitted their employees provided inaccurate trade date to industry publications.

infrastructure
corporate welfare N.American Electric Reliability Council

FirstEnergy's power woes prompted one company to disconnect
8.19.03   CNN

American Electric Power, utility co. based in Columbus OH, said it cut itself off from FirstEnergy, which provides power to 1.4 million customers in northern OH, and that move kept power flowing to nearly all AEP's 5 million customers in 11 states during the blackout. "Automated systems on American Electric's transmission grid detected operations that were beyond parameters, things that were not normal," AEP spokesman Pat Hemlepp told CNN. "Once detected, our automated system opened breakers and stopped the flow of electricity." Hemlepp said only 14,000 AEP customers lost power during the blackout.

The spokesman said the abnormalities could have been anything from trees touching power lines to overload situations. FirstEnergy spokesman Todd Schneider told CNN that AEP "saw some of the voltage fluctuations and issues on our system and thought it was prudent. Obviously they have that option." U.S. Energy Secretary Spencer Abraham dispatched teams to Ohio for on-site investigation, and plans a meeting with Canadian counterpart Herb Dhaliwal Wednesday to launch a joint inquiry.
FirstEnergy, based in Akron OH, admitted that it lost 3 of its own transmission lines and one it co-owns with AEP in the hour preceding the blackout. FirstEnergy also said that its computer alarm systems were not functioning. Schneider, however, said that there were sudden power fluctuations in other areas & regions, incl eastern interconnection. "We don't think what happened in our territory caused the whole thing," he said.

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