An Ignoble Experiment

2. NY putting clean energy industry to work

A motion has been presented in the City of Los Angeles to significantly reduce carbon pollution -- the first of its kind introduced in a major U.S. city. The motion was introduced immediately after the city's endorsement of the Environmental Protection Agency's (EPA) Clean Power Plan, which aims to curb emissions from fossil-fueled power plants across the nation.

The motion, presented by Los Angeles District 5 Councilmember Paul Koretz, calls for the city to reduce its overall carbon output by 80 percent below 1990 levels by 2050. It also requests that the Los Angeles Department of Water and Power (LADWP) -- the largest publicly owned utility in the nation -- subscribe to a timeline that achieves carbon reductions that are 80 percent below 1990 levels by 2030.

"The climate crisis is no longer out there. It's here. It's now, and the extreme weather events are costing communities billions of dollars in damages," Koretz said. "With our international community stuck on the issue, cities need to step up. I want Los Angeles to lead the way toward a safer, more resilient, low carbon future."

In recent years, the Los Angeles Department of Water and Power (LADWP) has taken significant steps to reduce emissions by increasing its energy efficiency programs -- building the nation's largest rooftop solar program, and committing to eliminate coal from its energy portfolio. After a historic agreement last year to divest from out-of-state coal plants in favor of clean energy, LADWP is already on track to reduce its emissions by 60 percent below 1990 levels by 2025.

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By Barbara Vergetis Lundin

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3. Rio Grande Valley, TX booming with economic opportunity

In New York, 14 regional workforce development organizations have been chosen to help deliver energy efficiency skills training needed by the clean energy industry. NYSERDA provided more than $25 million for workforce development training between 2006 and 2011, and plans $51 million more for 2012 through 2016. By partnering with the New York State Energy Research and Development Authority (NYSERDA), more than 14,000 people across New York State are expected to receive the training over the next two-and-a-half years.

Training programs driven by employer demand and aligned with industry needs help companies become more competitive and maintain jobs in New York State.

"By working alongside industry leaders to train a high-tech workforce, we are empowering further growth in the state's growing clean energy economy," Governor Andrew M. Cuomo said in a statement. "Clean energy companies have made clear their desire to do business in New York State, and these training opportunities will help deliver the skilled personnel they need to be competitive for years to come."

The training courses will focus on upgrading skills of existing workers, including energy efficiency job estimators; heating, ventilation and air conditioning (HVAC) technicians; plumbers; electricians; and weatherization crew members who work on clean-energy projects in the residential, multifamily and commercial/industrial sectors.

Online, classroom and hybrid courses will provide skills in priority energy efficiency areas, market sectors and technologies -- including new construction, existing homes and commercial buildings, HVAC, building software modeling, lighting, weatherization and air sealing techniques, and climate change resiliency.

New York State has supported energy efficiency and renewable energy workforce development and training initiatives since 1998 -- training more than 30,000 participants. The state has a network of more than 70 clean energy training providers across the state, including community colleges, State University of New York (SUNY), City University of New York (CUNY), Boards of Cooperative Educational Services (BOCES), unions, and non-profit training entities.

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By Barbara Vergetis Lundin

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4. Increasing costs squeezing oil industry

An economic energy boom is happening in Texas -- from an international gas pipeline and federal government approval for a liquified natural gas (LNG) port facility to wind farms.

The Rio Grande Valley is situated in the midst of two of the largest energy fields in North America, the Eagle Ford Shale of Texas and the emerging Burgos Basin of northern Mexico. The area has seen an increase in employment and spending as a result of the 42 inch international pipeline from the Eagle Ford Shale currently under construction. When complete, it will deliver $7.5 million of natural gas daily to Mexican power plants.

Starr County in the western end of the Rio Grande Valley was chosen as the location for one the largest wind energy projects in the state of Texas -- estimated at more than a half billion-dollar investment and add 400 jobs to the area, dramatically increasing spending in the local economy and infusing further investment.

At the opposite end of the Valley, the U.S. Department of Energy (DOE) has approved the construction and operation of an LNG export and liquefaction facility. Engineering work is already underway to construct the plant on the north shore of the Brownsville Ship Channel. Another pipeline to be built from the Eagle Ford Shale to the port will deliver gas for liquefaction and loading.

"We currently have five projects that have land options for LNG Export Terminals at the Port of Brownsville," said port Director Eduardo Campirano. "Those are significant, significant investments. One project alone during construction will produce 3,000 jobs, so you are talking about projects that are in the billions of dollars in private investment. In addition to the LNG projects, cheap natural gas will attract industry to the region."

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- see this report

Read more about: liquified natural gas, gas pipeline
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By Barbara Vergetis Lundin

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5. DOE conditionally commits to U.S. offshore wind industry

Despite stronger oil prices, corporate returns on average capital employed (ROACE) are lower than in 2001, when oil prices were less than $30 per barrel, according to research from information and insight provider IHS.

Credit: Meredith W./Wikimedia Commons

"Our IHS study, which assessed energy company performance and capital returns, included more than 80 oil and gas companies," said Nicholas D. Cacchione, director at IHS Energy and a lead researcher on cost and energy company performance. "Collectively, these companies averaged an 11 percent ROACE in 2012 and 8.6 percent in 2013, both of which are weaker than the ROACE achieved in 2001 when the WTI (West Texas intermediate) crude oil price hovered at just under $27 per barrel. The WTI crude oil price averaged $94 per barrel in 2012 and $98 per barrel in 2013."

This has left industry stakeholders scratching their heads.

"The culprit is cost escalation," explained Cacchione. "While returns have increased in recent years, costs have accelerated at a rate that has squeezed margins. The more than $60-per-barrel increase in global oil prices since 2002 has been offset by significantly higher costs, and to a lesser degree, weaker U.S. natural gas prices. Margins have basically been frozen."

Looking at the upstream sector, lifting costs have more than quadrupled since 2000 to greater than $21 per barrel. Finding and developing costs have followed a similar trend, reaching nearly $22 per barrel of oil equivalent (BOE) in 2013. Government fiscal take (based on financial disclosure), which excludes the impact of royalty volumes in the upstream sector -- increased from 49 percent of pretax profits in 2000 to 60 percent in 2013.

"The integrated oil companies earned a 15 percent ROACE since 2000, which is substantially higher than the 11 percent posted by pure E&P (exploration and production) companies," said Lysle R. Brinker, director of company research at IHS Energy. "The outperformance by the integrated oil companies can largely be attributed to their geographically and functionally diversified portfolios, which benefit from capital spending programs that are generally more disciplined. They are also aided by the lower-cost basis of the legacy assets that often comprise a large portion of their operations."

As a result, companies are increasingly scrutinizing cost containment and capital spending at all levels, and exercising greater discipline around the return on their capital investments.

"Every investment has to pass muster on several fronts before it will be funded, since there is significant internal competition for that capital," Brinker said.

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Read more about: Nicholas D. Cacchione, IHS
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By Barbara Vergetis Lundin

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