Wednesday, June 19, 2013

Energy and Synergy

A French steel firm, Vallourec, has just invested $1 billion in a new tube plant in eastern Ohio. Why invest in the US rather than France? Because the US shale gas industry is the customer for the steel tubes manufactured by the Ohio plant, and there is no shale gas industry in France because the Hollande government has banned even experimental drilling of shale, to say nothing of actual productive development of shale fields.

To be sure, there are environmental concerns associated with the extraction of shale gas, but the technology has been improved and the point of experimental drilling was to demonstrate that the concerns of environmentalists could be met. But instead of authorizing the experiments, Hollande, in a misguided attempt to avoid riling his Green allies, simply banned the effort. Meanwhile, under Sarkozy, the government wasted money trying to keep open aging steel plants whose customers were disappearing: new statistics show a sharp drop in automobile purchases across Europe over the past year. But the Vallourec story shows that there is no shortage of French capital willing to invest in steel production, but only where growing demand for steel can be predicted--as is the case in the burgeoning shale beds in the United States. As one Vallourec executive says, "shale is revolutionary." Unfortunately, the Hollande government seems determined to block the revolution.


Alastair said...

As an American resident in France I am very glad that Shale gas extraction (Fracking) has been banned. Not only has it been exmpted from the Clean air and Clean water acts in the US (making it not the business of the corporations to properly assess the damage) but there are already signs that the bonanza of "cheap" gas will last only 10 or so years and then decline, leaving ruined water tables (watch the Marcellus shale especially) in its wake.
Short-termism is killing the USA, literally in this case.

Massilian said...

we was all wrong and reactionnary nitwits defending the all out of date gallic "cultural exclusion", we also areas dumb and cowardly as our president about the splendid opportunities offered by fracking. We are hopeless. We certainly don't deserve all the attention we get. Really.

Mitch Guthman said...

Needless to say, I agree with both Alastair and Massilian. But I would go further in proposing what I think is an excellent test of the truthfulness of these claims that fracking, for example, has no environmental (including health) consequences.

Here's my suggestion to break the deadlock over things like fracking:

I propose that we enact laws prohibiting such activity from being conducted by corporations or being fully covered by insurance. There is precedent for this in similar laws prohibiting corporations from engaging in certain ultra-hazardous activities and in laws prohibiting insurance for socially undesirable or morally reprehensible activities.

If there was a market for the fracking, it could be undertaken on the same basis as Lloyd’s of London sell insurance, namely, in through syndicates in which individuals participate and to which they pledge all of their wealth. If the very rich people behind these enterprises genuinely believe that they are totally free of risk, then they can engage in fracking but only to the extent that they and their families will pay if that assessment of risk is wrong.

I think it would very quickly become clear that the assurances we’re being given about many programs such as fracking and pipelines are lies. I guess is that none of the executives of these energy companies or their important shareholders would be willing to risk their own money backing activities that they know will probably have massively destructive environmental consequences.

Let these advocates for fracking put their money where their mouths are; then we’ll see just how believable all their studies are. My bet is that energy companies (or, more precisely, syndicates of rich energy executives) would instantly loose all interest in fracking if they had to pay from their own pockets when things go wrong.