Atomic Insights

Atomic energy technology, politics, and perceptions from a nuclear energy insider who served as a US nuclear submarine engineer officer

Flush With Cash – Where Did Climate Activists Get So Much Money?

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The Economist recently published a column titled Climate politics: Flush with cash. So what? that described the results of a recent study by Matthew Nisbet, an researcher at American University in Washington, DC. According to Nisbet, groups classified in the environmental category spent almost $400 million on climate change and energy issues in 2009.

The study and the article go on to try to figure out what the groups got from that expenditure other than a big backlash and a large measure of distrust from people who believe that there is not enough evidence of damage from human activity to cause them to change their behavior.

There is a lively discussion associated with the column. One of the topics that has only been lightly mentioned, however, is identifying the sources of all of that cash. Here is one of my contributions to the discussion. I wrote it in response to another comment that accurately recognized just how much equity the natural gas producers have in the climate discussion.

@Dr. Music who wrote:

“The article misses the fact that the smarter fossil companies work hand in glove with the “greens” on expanding the markets for natural gas — ostensibly to fight coal but really to fight nuclear.”

You are correct. I have to sadly agree that the strategy is “smart” from the money grubbing point of view, but it is a strategy that is killing the geese who have laid trillions of golden eggs for the petroleum companies for many decades. Though the sub-prime loan originators bear a lot of the blame, the rapid rise in oil and natural gas prices through the period from 2000-2008 played a major role in the economic collapse. As the cost of commuting and heating/cooling large suburban homes in new communities in Florida, Nevada, and California increased, more and more people began having difficulty making payments. The value of those newly developed homes began to fall because there were fewer and fewer people who were capable of buying them. The honest, hard working people that are similar to those that have been my neighbors in American suburbs for my entire life refused the “liar loan” path and simply stayed closer to jobs in cities.

Hundreds of billions taken out of the economy and concentrated in the national treasuries of Russia, Saudi Arabia, Kuwait, Qatar, Nigeria, and Iran cannot be good for our general welfare, but it is terrific for the bottom lines at ExxonMobil, Shell, Chevron, and BP – all of which are multinational petroleum companies that produce about as much energy each year in the form of natural gas as they do in the form of crude oil.

I believe they are using their massive oil profits right now to keep the price of natural gas artificially low so that they can kill the Nuclear Renaissance. The “smart” ones who can run the numbers and recognize how to manipulate the law of supply and demand in their own favor know that allowing nuclear energy to thrive once caused them about 15 years of painfully low prices as the production from nuclear plants grew from zero in 1956 to more than 12 million barrels of oil per day equivalent in 2000. That is like having to absorb the energy output of another Saudi Arabia plus another Kuwait. I believe that is a major reason why oil and gas prices were low around the world from 1985-2000.

Here is my evidence for the crude oil supported price war against nuclear energy. ExxonMobil spent more than $41 billion to purchase a shale oil gas producer called XTO in 2010. In the last quarter of 2010, ExxonMobil reported that XTO had contributed $36 million to its quarterly profits. That is an annualized Return on Investment (ROI) of about 0.35%, but the man briefing the results to analysts during Exxon’s quarterly conference call stated that the company was “pleased” with the purchase.

I can read between the lines – the company knows that the current low prices will not last very long. Once the nuclear renaissance is sufficiently hamstrung and the companies have laid off all of the engineers and technicians hired to build the new plants, the price of natural gas will take off like it did in the period from 2000-2008. It will be exceedingly difficult to reassemble the teams needed to build those nuclear plants that could have been built, however, so the economy will suffer with the vast transfers of wealth from all of us to just a few.

That giant company – ExxonMobil – only employs 80,000 people. Its annual, after tax profits are about $500,000 per employee and its revenue is closer to $4,000,000 per employee. Just think about how the numbers work for Russia, Saudi Arabia, and Iran.

One more thing that I thought about as I was posting this was the benefit that established energy firms get from any amount of policy paralysis. If discussion and debate continues, no action gets taken to change our current course and speed. Since our current economy runs primarily on coal, oil, natural gas, and existing nuclear power plants it will continue to run primarily on coal, oil, natural gas, and existing nuclear power plants until a strong force can begin to change the momentum. It is an inertia problem not unlike trying to change the speed or course of a supertanker.

Wind, solar, geothermal, waves, biomass and energy efficiency are weak and unreliable tools – even when combined. The petroleum producers know it. That is why they encourage others to focus on those tools while bashing nuclear energy – the only powerful tool in the available toolbox.

I mention that as food for thought for anyone who wants to dispute my theory by asking why oil and gas interests (a term that includes traders, bankers, transporters, pipeline construction companies, railroads, petroleum companies and even some entire countries) would provide cash to organizations that also seem to fight against their interest in continuing to burn massive quantities of fossil fuel.

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Comments

  3. While only peripheral to this topic it should be noted that nuclear energy in Canada is going to have a rough time for the next few years. The federal elections have returned a majority Conservative government which is in the pockets of Big Carbon, and an Opposition of rabidly antinuclear New Democrats. The Liberal party, once supporters of nuclear energy, have been reduced to a powerless rump in the House and may well not survive as a national party unless it can attract a dynamic leader to help rebuild it.

    • Bad news for pro-nukes in Scotland too — Thursday’s elections to the devolved Scottish Parliament gave an overall majority to the anti-nuclear, pro-“renewables” Scottish National Party.

  4. The report is full of lies. It’s been analyzed here, here, and here, and here.

    Really, if you want to make a credible pro-nuke argument, pushing the claims of wildly inaccurate reports isn’t going to help.

    • @PeakVT:

      If you read carefully, you will see that I did not express any opinions about the report itself. What I did was to agree that there is a substantial amount of cash available and to try to point out where some of that cash might be coming from.

      One of the purposes of Atomic Insights is to help people understand and analyze the statements that people make about nuclear energy. At least some of the people who oppose nuclear energy do it for very logical, numeric and selfish reasons. It competes directly against the fuel sources that pay their salaries or provide their dividends and capital gains.

      If you do not believe that nuclear competes against other energy sources and has the ability to affect the price at which they sell and the volumes that they sell, please explain the following headline from Reuters this morning:

      Canadian Natural Gas Falls as Nuclear Plant Starts Ease Demand

  5. DV82XL, the nuclear industry in Canada has been in a rough patch for two decades. The good news is that Ontario may actually build reactors, unless Harper fears any distraction at all from an oil-sands-supporting industrial focus for Ontario.

    Some pricing of carbon dioxide would remove part of this noxiousness, by de-emphasizing the political, and emphasizing the economics.

    • I agree that things haven’t been rosy for the industry here in Canada for awhile, but this new political alignment could not be worse. Hopefully the new planned builds in Ontario will go ahead, but the fate of AECL has been sealed at this point, I would think.

    • Maybe someone in the new government should remind them about the advantages of using CANDU reactors for SAGD extraction of oil from the Alberta tar sands. Perhaps that’ll prop up Canada’s nuclear industry, albeit for the expedient reason of keeping Big Carbon strong.

  7. This article reminds me of the famous quote in the movie All the Presidents Men: “Follow the money !”

    I guess there is a lot of dirt to uncover, which will lead to the fossil fuel industries. Too bad we don’t have journalists like Bernstein and Woodward anymore.

    • I suppose we have to make do with curious and angry bloggers instead of curious and aggressive investigative journalists.

    • That’s one of the downsides of the internet — it has reduced the price of information (by improving its copyability) to the point that some enterprises (such as long-form investigative journalism) were rendered economically non-viable.

  8. Rod – as always, thanks for the post. There’s history to back up and illuminate your thesis. Robert Bryce, in his book >Power hungry: the myths of “green” energy and the real fuels of the future, devotes chapter 22 to “A Very Short History of American Natural Gas and Regulatory Stupidity”.

    He details how the growth of natural gas threatened coal:

    By the late 1950s, gas looked ready to rob even greater market share away from coal. But just as that energy transition was beginning, natural gas became a favored target for federal regulators. And the hodgepodge of regulations that resulted would hamstring the U.S. gas industry for decades.

    He describes the effect of federal regulation of interstate natural gas sales – including natural gas shortages in 1973 and 1977. The 1977 shortages resulted in business closures, school closures, and layoffs. He continues:

    The mistaken belief that the United States was running short of natural gas was politically advantageous for the coal producers, who were eager to limit competition from the oil and gas business. And those coal producers had powerful friends in Congress, including, but not limited to, Senator Robert Byrd, the powerful Democrat from West Virginia.

    In 1978, Byrd and his allies convinced Congress to pass two bills that would haunt the gas industry for years: the Powerplant and Industrial Fuel Act and the National Gas Policy Act. The most important provision of the Fuel Use Act was that it prohibited the use of gas for electricity generation.

    (emphasis added)

    That last statement is what really caught my eye. Coal threatened by gas, and legislating it out of competition. Fast forward to 2011; old opponents are now allies against the common threat of high-quality energy suppliers.

    Bryce’s book is interesting but he’s coming at it from a journalistic background and IMO he doesn’t do justice to nuclear energy. He does include comprehensive notes for each chapter citing his sources, which is good; the sources unfortunately don’t include much peer-reviewed primary science. It looks like many of them would connect to the science in their references.

    Keep slugging, Rod!