karxarias: May 2010

BP Suspends "Top Kill" For Second Time After Trying Two Junk Shots. Less Than 10% of Injection Fluids are Staying Inside the Leaking Pipes

As I reported yesterday, the "Top Kill" attempt to stop the oil flow using mud had failed, and BP would now try to use a "junk shot" to close the leaks in the pipe using various debris.

The New York Times is now reporting that the junk shot approach is not going well:

The company [again] suspended pumping operations at 2:30 a.m. Friday after two “junk shot” attempts, said the technician, who spoke on the condition of anonymity because he was not authorized to speak publicly about the efforts.

"The suspension of the effort was not announced, and appeared to again contradict statements by company and government officials that suggested the top kill procedure was progressing Friday."
***
The technician working on the effort said that despite the injections at various pressure levels, engineers had been able to keep less than 10 percent of the injection fluids inside the stack of pipes above the well. He said that was barely an improvement on Wednesday’s results when the operation began....
“I won’t say progress was zero, but I don’t know if we can round up enough mud to make it work,” said the technician. “Everyone is disappointed at this time.”

Update: It appears that BP is starting preparations for its next fix-it scheme.

As FT's oil spill blog reports:

The ROVs are definitely up to something:

Update: LMRP 3.28pm BST (10.28am EDT; 9.28am CDT)

A couple of TOD commenters believe some of the recent footage shows the Lower Marine Riser Package, which BP says it is preparing in parallel with the top kill efforts. One points out that the camera in the screen shot below seems to say LMRP (see text at the centre).

As BP explains today:

In parallel with the ongoing top kill operation, preparations have been made for the possible deployment of the lower marine riser package (LMRP) cap containment system.

Deployment would first involve removing the damaged riser from the top of the failed BOP to leave a cleanly-cut pipe at the top of the BOP's LMRP. The cap, a containment device with a sealing grommet, will be connected to a riser from the Discoverer Enterprise drillship, 5,000 feet above on the surface, and placed over the LMRP with the intention of capturing most of the oil and gas flowing from the well.

The LMRP cap is already deployed alongside the BOP in readiness for potential deployment. If it is decided to deploy this option, this would be expected to take some three to four days.

In addition to these steps, planning is being advanced for deploying, if necessary, a second BOP on top of the original failed BOP.

Third Giant Underwater Oil Plume Discovered

The New York Times reported on May 15th:

Scientists are finding enormous oil plumes in the deep waters of the Gulf of Mexico, including one as large as 10 miles long, 3 miles wide and 300 feet thick in spots. The discovery is fresh evidence that the leak from the broken undersea well could be substantially worse than estimates that the government and BP have given.
“There’s a shocking amount of oil in the deep water, relative to what you see in the surface water,” said Samantha Joye, a researcher at the University of Georgia who is involved in one of the first scientific missions to gather details about what is happening in the gulf. “There’s a tremendous amount of oil in multiple layers, three or four or five layers deep in the water column.”
The plumes are depleting the oxygen dissolved in the gulf, worrying scientists, who fear that the oxygen level could eventually fall so low as to kill off much of the sea life near the plumes.

AP reported on May 27th that scientists had found a second giant plume deep under the water. The plume is 22 miles long and 6 miles wide.

Today, the Washington Post is reporting that a third giant underwater plume has been discovered:

A Louisiana scientist said his crew had located another vast plume of oily globs, miles in the opposite direction.
James H. Cowan Jr., a professor at Louisiana State University, said his crew on Wednesday found a plume of oil in a section of the gulf 75 miles west of the source of the leak.

Cowan said that his crew sent a remotely controlled submarine into the water, and found it full of oily globules, from the size of a thumbnail to the size of a golf ball.... Cowan said the oil at this site was so thick that it covered the lights on the submarine.

"It almost looks like big wet snowflakes, but they're brown and black and oily," Cowan said. The submarine returned to the surface entirely black, he said.

Cowan said that the submarine traveled about 400 feet down, close to the sea floor, and found oil all the way down. Trying to find the edges of the plume, he said the submarine traveled miles from side to side.

"We really never found either end of it," he said. He said he did not know how wide the plume actually was, or how far it stretched away to the west.

As I have previously pointed out, the use of dispersants by BP may be making matters worse. The Washington post article notes:

Cowan's finding underscores concerns about oil moving under the surface, perhaps because of dispersant chemicals that have broken it up into smaller globules. BP officials have played down the possibility of undersea oil plumes.

This discovery seems to confirm the fears of some scientists that -- because of the depth of the leak and the heavy use of chemical "dispersants" -- this spill was behaving differently than others. Instead of floating on top of the water, it may be moving beneath it.

That would be troubling because it could mean the oil would slip past coastal defenses such as "containment booms" designed to stop it on the surface. Already, scientists and officials in Louisiana have reported finding thick oil washing ashore despite the presence of floating booms.

It would also be a problem for hidden ecosystems deep under the gulf. There, scientists say, the oil could be absorbed by tiny animals and enter a food chain that builds to large, beloved sport-fish like red snapper. It might also glom on to deep-water coral formations, and cover the small animals that make up each piece of coral.

"You're almost like a deer in the headlights when you're watching this. You don't know what to say," Cowan said. He said the oil's threat to undersea ecosystems "is really starting to scare us."

Update: ABC news has filmed vast underwater plumes of oil. See this and this.

Rumor: Secretary of the Navy Wants to Sink a Battleship On Top of the Oil Spill

A rumor circulating in Louisiana's state capitol, Baton Rouge, has it that:

Secretary of the Navy Ray Mabus has reportedly floated the idea of sinking a battleship directly on top of the Macondo well in order to drop 80,000 tons on it and crush the drill pipe and the blowout preventer alike.

I proposed this idea on May 15th (using a barge) and submitted it to BP. BP says that it has received 17,000 suggestions to date, so mine is not necessarily unique.

Since proposing the idea, I have learned more about the geology of the oil-rich Gulf region. As I wrote on May 22nd:

Does the Geology of the Spill Zone Make It Harder to Stop the Oil Spill?
We can't understand the big picture behind the Gulf oil spill unless we know the underwater geology of the seabed and the underlying rocks.
For example, if there is solid rock beneath the leaking pipes, with channels leading to various underground chambers, then it might be possible to seal the leaking risers and blowout preventer, with the oil flowing somewhere harmless under the floor of the ocean.
On the other hand, if there are hundreds of feet of sand or mud beneath the leaking pipes, then sealing the spill zone might not work, as the high-pressure oil flow (more than 2,000 pounds per square inch) might just shoot out into the water somewhere else.
We don't know the geology under the spill site. BP has never publicly released geological cross-sections of the seabed and underlying rock. BP's Initial Exploration Plan refers to "structure contour maps" and "geological cross sections", but all detailed geological information, maps and drawings have been designated "proprietary information" by BP, and have been kept under wraps.
However, Roger Anderson and Albert Boulanger of Columbia University's Lamont-Doherty Earth Observatory describe the basic geology of the oil-rich region of the Gulf:
Production in the deepwater province is centered in turbidite sands recently deposited from the Mississippi delta. Even more prolific rates have been recorded in the carbonates of Mexico, with the Golden Lane and Campeche reporting 100,000 barrel per day production from single wells. However, most of the deep and ultra-deepwater Gulf of Mexico is covered by the Sigsbee salt sheet that forms a large, near-surface “moonscape” culminating at the edge of the continental slope in an 800 meter high escarpment.
***
Salt is the dominant structural element of the ultra-deepwater Gulf of Mexico petroleum system. Large horizontal salt sheets, driven by the huge Plio-Pleistocene to Oligocene sediment dump of the Mississippi, Rio Grande and other Gulf Coast Rivers, dominate the slope to the Sigsbee escarpment. Salt movement is recorded by large, stepped, counter-regional growth faults and down-to-the-basin fault systems soling into evacuated salt surfaces. Horizontal velocities of salt movement to the south are in the several cm/year range, making this supposedly passive margin as tectonically active as most plate boundaries.
***
Porosities over 30 percent and permeabilities greater than one darcy in deepwater turbidite reservoirs have been commonly cited. Compaction and diagenesis of deepwater reservoir sands are minimal because of relatively recent and rapid sedimentation. Sands at almost 20,000 feet in the auger field (Garden Banks 426) still retain a porosity of 26% and a permeability of almost 350mdarcies. Pliocene and Pleistocene turbidite sands in the Green Canyon 205 field have reported porosities ranging from 28 to 32% with permeabilities between 400 mdarcies and 3 darcies. Connectivity in sheet sands and amalgamated sheet and channel sands is high for deepwater turbidite reservoirs and recovery efficiencies are in the 40-60% range.
See also this.
The BP oil spill leak is occurring in Block 252 of the "Macondo" Prospect in the Mississippi Canyon Area of the Gulf. The Mississippi Canyon Area is very typical of the Gulf oil region.
If the geology at Block 252 is like that described by Anderson and Boulanger for the Gulf oil region as a whole, then it might be difficult to stop the oil gusher without completing relief wells (which will take a couple of months). Again, if there are salt layers right under the sea floor, high porosity near the surface or salt movement, then sealing the leak by plugging the risers and blowout preventer might not work. The oil pressure is coming up at such high pressures that sealing the leaking equipment at the level of the seabed might just mean the oil will flow out somewhere else nearby.
The government must publicly release details of the geology under the spill site. The American people - and people in Mexico, Cuba and other countries which might be affected by the spill - have a right to know what we're dealing with.
Until it does so, people will not have be understand what is going on. And failing to release such information may prevent creative scientists from around the world from coming up with a workable solution.

On the other hand, a geologist with over 20 years in the oil industry tells me:

Macondo is not a sub-salt prospect. It's in between allochthonous salt bodies that have not formed a continuous canopy as exists further west. Also, obviously, it's a great reservoir, but it's middle or possibly lower Miocene in age, not Plio-Pleistocene.

***

The near-surface sediment is young and unconsolidated muck. Shallow water-flow is a big issue here (that is overpressured unconsolidated sands, sometimes with biogenic gas or just overpressured brine -- a very unstable near-surface section.

The bottom line is that I very strongly (and respectfully) suggest that the Secretary of the Navy - or anyone else considering these types of proposals - study the geological cross-sections and all other information regarding the geology beneath the seabed where the oil is leaking before deciding whether this idea will fix the problem or make things worse.

For example, Rex argues:

The Gulf floor is soft sediments for hundreds or more feet down. If the pipe isn't tightly sealed by this process, the oil will be leaking into this sediment and start coming up all over the place.

As I learned in geology class in college, you have to start with a solid understanding of the geology before figuring out how any action will affect the environment.

And for crying out loud, have a submarine check out this rumor to either debunk or confirm it.

"Top Kill" Has FAILED In the Attempt to Plug the Oil Leak Using Mud ... Now BP Will Try to Add Some "Junk" to the Mix to Try to Seal the Holes

Here's the scoop: BP's attempt to stop the oil spill using the "Top Kill" method has failed.

How do I know?

Well, as the New York Times notes:

BP officials, who along with government officials created the impression early in the day that the strategy was working, disclosed later that they had stopped pumping the night before when engineers saw that too much of the drilling fluid was escaping along with the oil.

Indeed, BP stopped pumping "mud" for more than 16 hours (the material gushing out of the leaking riser didn't stop during that time).

Basically, BP has failed in trying to drive enough "mud" down the well to provide enough weight to tamp down the oil gushing out. It didn't work.

Indeed, BP's "re-starting" Top Kill really means that Top Kill Version 1.0 was tried and failed, and now BP will try Top Kill Version 2.0 - adding "junk" to the mix.

Unless BP can get very lucky and plug the holes with miscellaneous junk, Top Kill 2.0 won't be any more effective than Operation Sombrero.

As the Guardian explains:

Doug Suttles, BP's chief operating officer, insisted that the operation was going to plan, but admitted: "What we do know is that we have not yet stopped the flow."
He said BP engineers would soon use additional materials to try to plug the well, suggesting heavy mud deployed so far would not work on its own.

And the Guardian's oil spill blog (a great resource which I just discovered) notes:

6pm CDT: Doug Suttles makes an appearance on CNN ....

Asked by CNN what had happened, Suttles said: "Too much of the mud is exiting the riser as opposed to going down the well bore." This could be fixed in several ways, including the infamous "junk shot", using a more viscous mud type, or finally restarting pumping at very high rates.

***

7.30pm CDT: The Washington Post has more details on BP's stop-start top kill process, and mentions that BP is considering a "junk shot" tonight:

Doug Suttles, BP's chief operating officer, said that on Wednesday the company had blasted high-pressure mud into the leaking well two times, trying to force the oil down in a procedure compared to using one firehose against another.
After doing it twice, Suttles said, the company stopped about midnight Wednesday, and spent Thursday assessing the plumes still shooting out of broken machinery. He said that company officials believed the two efforts had probably made some progress.
"I think some people believe it has. Some people believe it's less obvious it has," Suttles said. "What we do believe we've done is successfully pumped some mud, some of this drilling mud, into this wellbore."
But, Suttles said, oil was still coming out, despite these efforts: "What we do know is that we have not yet stopped the flow."
He said the company would try the procedure again Thursday evening and might add chunkier debris such as rubber balls to the mix in hopes of clogging the leaking pipe. That procedure is known as a "junk shot."

Prominent Oil Industry Insider: "There's Another Leak, Much Bigger, 5 to 6 Miles Away"

Matt Simmons was an energy adviser to President George W. Bush, is an adviser to the Oil Depletion Analysis Centre, and is a member of the National Petroleum Council and the Council on Foreign Relations. Simmon is chairman and CEO of Simmons & Company International, an investment bank catering to oil companies.

Simmons told Dylan Ratigan that "there's another leak, much bigger, 5 to 6 miles away" from the leaking riser and blowout preventer which we've all been watching on the underwater cameras:

I have no idea whether or not Simmons is right. The government should immediately either debunk or admit his claim.

If accurate, the bigger leak could have been caused by the destruction of the well casing when the oil rig exploded. That is Simmons' theory.

Or it could be caused by a natural oil seep, although the odds of a seep of that size occurring right around the time of the Deep Horizon disaster is nearly zero.

There is another possibility.

It is well-known that there were previous accidents at the Deepwater Horizon rig. For example, as AP notes:

From 2000 to 2010, the Coast Guard issued six enforcement warnings and handed down one civil penalty and a notice of violation to Deepwater Horizon, agency records show.
On 18 different occasions during that period the Coast Guard cited the vessel for an "acknowledged pollution source."

And as 60 Minutes reports:

[Mike Williams, the chief electronics technician on the Deepwater Horizon, and one of the last workers to leave the doomed rig] said they were told it would take 21 days; according to him, it actually took six weeks.

With the schedule slipping, Williams says a BP manager ordered a faster pace.

"And he requested to the driller, 'Hey, let's bump it up. Let's bump it up.' And what he was talking about there is he's bumping up the rate of penetration. How fast the drill bit is going down," Williams said.

Williams says going faster caused the bottom of the well to split open, swallowing tools and that drilling fluid called "mud."

"We actually got stuck. And we got stuck so bad we had to send tools down into the drill pipe and sever the pipe," Williams explained.

That well was abandoned and Deepwater Horizon had to drill a new route to the oil. It cost BP more than two weeks and millions of dollars.

"We were informed of this during one of the safety meetings, that somewhere in the neighborhood of $25 million was lost in bottom hole assembly and 'mud.' And you always kind of knew that in the back of your mind when they start throwing these big numbers around that there was gonna be a push coming, you know? A push to pick up production and pick up the pace," Williams said.

Asked if there was pressure on the crew after this happened, Williams told Pelley, "There's always pressure, but yes, the pressure was increased."

But the trouble was just beginning: when drilling resumed, Williams says there was an accident on the rig that has not been reported before. He says, four weeks before the explosion, the rig's most vital piece of safety equipment was damaged.

It is therefore possible that there has been another ongoing leak which BP has tried to cover up.

BP Using 30 Year-Old Playbook in Responding to Oil Spill?

Rachel Maddow claims that a top kill type maneuver - pumping in cement and saltwater - was tried during the giant 1979 Ixtoc oil spill, but didn't work.

Maddow also says:

The precursor to the same company operating the Deepwater Horizon drilling well - Transocean - operated the Ixtoc rig

The cause of both oil spills was the same: a malfunctioning blowout preventer

The location of the spill was the same: the Gulf

The sizes of both spills were massive

A "top hat" operation was attempted unsuccessfully. During the Ixtoc spill, it was named "Operation Sombrero"

Chemical dispersants derived from kerosene were used to try to hide the extent of both spills

A "junk shot" was tried in 1979, using steel balls (it didn't work)

Indeed, nothing worked to stop the Ixtoc spill until the relief wells were completed ... 10 months later.

In other words, as Maddow points out, the technology for drilling deeper has progressed, but the technology for stopping oil gushers hasn't really improved one bit, because all of the funding has gone into drilling deeper, and none of the funding has gone into increasing safety.

Liveblogging Top Kill

Thursday 5/27: Top Kill efforts delayed, because too much mud is escaping out of the leaking equipment along with the oil.

Last thoughts of the day: the Wall Street Journal notes:

The plume of mud is "a good sign," suggesting that the fluid is exerting enough pressure to stem the flow of crude and natural gas, said Don Van Nieuwenhuise, a professor of petroleum geosciences at the University of Houston. "If the pressure wasn't great enough it would be mud and oil."

On the other hand, Rachel Maddow points out that a top kill type maneuver - pumping in cement and saltwater - was tried during the giant 1979 Ixtoc oil spill, but didn't work. She also says the company operating the drilling well (Transocean), the cause of the spill (malfunctioning blowout preventer), the location of the spill (the Gulf), the large size of the spill, the use of "top hat" (then called "operation sombrero"), the use of chemical dispersants made from jet fuel, and junk shots all occurred in 1979 as well. Maddow says that nothing worked until the relief wells were completed 10 months later. In other words, while the technology for drilling has improved (we can drill much deeper), the technology for stopping oil gushers hasn't really improved.

5:29: Suttles said that BP will know the operation is a success from (1) visual observations and - more importantly - (2) pressure data. Specifically, when pressure data over a period of time shows that no oil is flowing up in the well, then BP will know the operation is a success

5:07: BP Chief Operating Officer Doug Suttles says at Coast Guard press conference that it is too early to know if Top Kill will be successful. Will take 24 hours to find out. So far, it's going according to plan. 7,000 of barrels of mud have been pumped so far, up to 65 barrels per minute. Increase in volume at the riser was expected. One of the ROV's video cams is obstructed by all of the mud.

4:35: Coast Guard will give an update on the Top Kill effort at 5:00 p.m. Central Time.

4:06: CNN reports :

BP Chief Executive Officer Tony Hayward said Wednesday it will be 24 hours before authorities will know whether the "top kill" effort to plug the runaway oil leak in the Gulf is working.
Speaking from a command center in Houston, Texas, nearly four hours after the effort began, Hayward said the operation was going according to plan, but cautioned against trying to reach any conclusions based on the video shots from the stricken well a mile below the surface.

"It's unlikely to give us any indication of what's really going on," he said. "Increases or decreases are not an indicator of success or failure at this time. We will be continuing for at least another 24 hours, and it will be 24 hours before we will know whether or not this has been successful."

Earlier, Louisiana Gov. Bobby Jindal had said he expected to know Wednesday night whether BP's "top kill" attempt to plug the runaway oil well in the Gulf of Mexico is working.

3:46 Volume spewing from riser seems to be increasing noticeably. It could be that spill is worsening, or it could be that the volume of mud being pumped into the well by BP is being increased.

3:41: Color of material shooting out of risers is getting darker. Either the type of mud being used is changing, or the mud-to-water ratio is changing.

3:25: The water has noticeably darkened around the BOP (see for example the second feed from left on the top row of the CNN feeds). Remember, this is more than a mile underwater, so no daylight reaches spill zone. I'm not sure whether leak volume has increased, chemical composition has changed to a darker substance or something has changed on the video cam itself.

3:15: Increased turbidity (cloudiness in the water) surrounding the BOP. New leak?

3:06: CNN is reporting that - according to BP - there is no news (either good or bad) to report on the procedure.

2:29: CNN now has a single webpage with 8 different feeds. Each feed is small, but you can get an overview from starting with CNN's site.

2:00: Please note, it is very difficult for laypeople to have perspective on whether Top Kill is working or not. Things could very well look worse before they get better.

For example, BP is trying to pump a lot of mud down the line at high pressure. This could be spewing back up through the riser, before the whole spill is shut down.

1:50: Definitely numerous, light-colored plumes shooting up from the riser and seabed.

1:43: Either new leaks are springing from the seabed itself, or the color of the leak is changing to a lighter color and we can see more detail of the leaks from the riser.

1:29: This is the moon landing moment of this generation. People around the world are watching live feed of the attempt to stop the oil leak.

1:25: Red clots of matter raining down from somewhere. I'm not sure where.

1:24: Riser leak looks worse, and more methane hydrates. This is not necessarily unexpected, as shutting off most of leak from BOP could increase pressure of oil in riser.

1:07: Methane hydrates (snowflake like methane crystals, also known as "clathrates") spewing from the riser. Not in worrying amounts, it is just interesting to watch. For more on methane hydrates, see this.

12:53: I've added two PBS website feeds, showing the leaking riser. Obviously, the riser is still gushing.

12:43: Technical problems with video cams. I'll take a quick break and see if they fix them.

12:26: The underwater cameras have been inspecting the BOP for some time. To my untrained eye, it looks like much of the BOP is still intact, although I noticed a small leak, and some equipment breaks.

The camera panned around, and there are still 1 or 2 big gushers coming from elsewhere (One of them looks like the main leaking riser which has been filed over the past couple of days, although it's hard to tell).

Noon: A Coast Guard spokesman just said could take 3-4 days to know if top kill is working. Similarly, AP notes:

BP spokesman Steve Rinehart said the company will pump mud for hours, and officials have indicated it may be a couple of days before they know whether the procedure is working.

Indeed, as BP notes on its live cam webpage:

Throughout the extended top kill procedure – which may take up to two days to complete - very significant changes in the appearance of the flows at the seabed may be expected. These will not provide a reliable indicator of the overall progress, or success or failure, of the top kill operation as a whole.

11:52: Remember, BP has two purposes in video inspections:

(1) To see what is happening now, in terms of stopping the oil spill, and to see which equipment is likely to break of spring a new leak;
and
(2) Documenting for use in future lawsuits, to determine whether BP, Transocean, Halliburton or someone else was the primary negligent party.

11:50 a.m. Pacific Standard Time: BP is implementing the Top Kill method on the oil spill right now.

I can see it on the live video feed (I am providing feed from fives websites, as they some sites are periodically going down):

WKRG's Website

wkrg_oil_spill on livestream.com. Broadcast Live Free

Congressman Markey's Website

BP's Website

PBS' Website

AP notes:

Bob Bea, an engineering professor at the University of California at Berkeley, said the procedure carries a high risk of failure because of the velocity at which the oil may be spewing.
"I certainly pray that it works, because if it doesn't there's this long waiting time" before BP can dig relief wells that would cut off the flow, Bea said.

For more on Professor Bea, see this.

Godspeed ...

Updates to follow.

For running comments from oil industry insiders, see The Oil Drum.

Top Bond Vigilante: Fiscal Austerity May Not Work

Bill Gross manages the world's largest bond fund (Pimco: managing more than a Trillion Dollars).

As such, he has to be considered one of the world's top bond vigilantes.

But Gross says in his latest investment outlook that austerity may not work to lower sovereign debt:

Granted, sovereign debtor nations are now saying all the right things and in some cases enacting legislation that promises to halt growing debt burdens. Not only Greece and the southern European peripherals, but France, the U.K., Japan, and even the U.S. are sounding alarms that might eventually move them towards less imbalanced budgets and lower deficits as a percentage of GDP.

Still, credit and equity market vigilantes are wondering if in many cases sovereigns haven’t already gone too far and that the only way out might be via default or the more politely used phrase of “restructuring.” At the now restrictive yields of LIBOR+ 300-350 basis points being imposed by the EU and the IMF alike, there is no reasonable scenario which would allow Greece to “grow” its way out of its sixteen tons. Fiscal tightening, while conservative in intent, leads to lower and lower growth in the short run.

Tougher sovereign budgets produce government worker layoffs, pay cuts, reduced pension benefits and a drag on consumption and the ability of the private sector to accept an attempted hand-off from fiscal authorities. Recession becomes the fait accompli, and the deficit/GDP ratio moves ever higher because of skyrocketing risk premiums and a plunging GDP denominator. In many cases therefore, it may not be possible for a country to escape a debt crisis by reducing deficits!

In other words, when a highly-indebted nation implements fiscal austerity and slashes spending, it can increase unemployment and slow spending, deepen the country's recession, and thus cause creditors may look at the country's economy as more risky, thus requiring more of a risk premium, so that the cost of funding it's debt increases.

As Joe Weisenthal notes:

This isn't just a theoretical point. Countries have already experience this (see: Ireland).
And we're back left wondering whether anyone has any understanding of sovereign debt.

Ireland cuts its spending, and its debt problem gets worse.

If austerity isn't the answer, and given that massive new borrowing at high interest rates isn't the answer? what should countries experiencing a sovereign debt crisis do?

For starters, the ability to create credit to loan to the beleaguered countries should be taken away from private banks which charge huge fees to their own governments for doing something which every sovereign nation has the inherent power to do itself.

Max Keiser: Big Banks Allocate Losing Trades to Clients, Keep Winning Trades for Themselves

Max Keiser - journalist, former Wall Street broker and options trader, and inventor of the software which is now being used for high frequency trading - claims that the big banks retroactively allocate losing trades to their clients, and keep the winning trades for their own proprietary trading desks:

This is the second time in the couple of weeks that Keiser has made this allegation. When he first brought this up, Keiser said that he has first-hand knowledge of this unlawful activity because - when he was a trader - he and everyone else did the same thing.

Complete List of Differences Between Obama and Bush

Here is a complete and comprehensive list of all of the substantive differences between Presidents Barack Obama and George W. Bush in guaranteeing safe oil drilling, reining in risky financial speculation and market manipulation, protecting citizens against obtrusive spying, fighting wars, standing up to big corporations, reducing government secrecy, and other fundamental issues:

Postscript: Of course there are many superficial differences, such as appearance, style and label of "Democrat" or "Republican".

Is the Oil Spill Our Dust Bowl?

The dust bowl lengthened the Great Depression.

Many experts say that we're in another depression (which may even be worse than the 1930's).

The Gulf oil spill is substantially impacting the economy. Is the Gulf oil disaster -which is destroying fisheries, shrimping and tourism in the Gulf - our dust bowl?

You may assume that the dust bowl was a natural phenomenon. However, it was largely caused by poor farming practices which led to soil erosion.

Is It True that Alternative Energy Is Too Expensive?

Many people assume that alternative energy is simply too expensive, and not competitive with oil and other conventional means of energy.

While some alternative writers allege that the big oil companies have artificially increased alternative energy prices by buying up promising alternative energy technologies - for example supposedly helping to kill first-generation electric cars by buying up promising battery patents so they couldn't be used in electric models - we don't even need to go down that rabbit hole.

Specifically, a 2008 report for Congress by the Congressional Research Service entitled "Renewable Energy R&D Funding History: A Comparison with Funding for Nuclear Energy, Fossil Energy, and Energy Efficiency R&D" notes:

Over the 30-year period from the Department of Energy's inception at the beginning of fiscal Year (FY) 1978 through FY2007, federal spending for renewable energy R&D amounted to about 16% of the energy R&D total, compared with 15% for energy efficiency, 25% for fossil, and 41% for nuclear. For the 60-year period from 1948 through 2007, nearly 11% went to renewables, compared with 9% for efficiency, 25% for fossil, and 54% for nuclear.

In other words, renewable energy research and development received a small fraction of the R&D funding for nuclear and fossil fuels. This has skewed the market, making conventional energy sources cheaper and alternative sources more expensive.

In addition, when the externalities of environmental, military and terrorism costs are taken into account, conventional energy production is much more expensive than most people realize.

For example, as I wrote yesterday, the government has decided that deepwater oil drilling in the Gulf and other fragile and hard-to-drill regions - and securing oil in Iraq and other foreign regions - are in our national security and national energy policy interests (remember that Alan Greenspan, John McCain, George W. Bush, Sarah Palin, a high-level National Security Council officer and others all say that the Iraq war was really about oil).

Nobel prize winning economist Joseph Stiglitz says that the Iraq war alone will cost $3-5 trillion dollars.

And economist Anita Dancs writes:

Each year, our military devotes substantial resources to securing access to and safeguarding the transportation of oil and other energy sources. I estimate that we will pay $90 billion this year to secure oil. If spending on the Iraq War is included, the total rises to $166 billion.

In addition, experts say that the Iraq war has increased the threat of terrorism. See this, this, this, this, this, this and this.

The bottom line is that if alternative energy R&D was funded at the same level as conventional energy, and when the externalities of environmental, military and terrorism costs are taken into account, it is not clear that alternative energy is really substantially more expensive than conventional energy. At the very least, if the playing field were leveled, alternative energy could become cost competitive in the relatively near-term future.

The Big Picture: Why Is It So Hard to Stop the Oil Gusher, and Why Was Such Extreme Deepwater Drilling Allowed in the First Place?

The government failed to properly ensure that BP used adequate safety measures, BP and their contractors were criminally negligent for the oil spill, and BP has tried to cover up the problem. See this.

But why hasn't BP stopped the leak?

Some people assume that BP hasn't stopped the oil leak because it's people are wholly incompetent.

Others have asked whether BP's $75 million liability cap is motivating it to stall by taking half-hearted measures until it's relief well drilling is complete.

But there is another possible explanation: the geology - as well the deepwater pressures - at the drilling site makes stopping the leak more difficult than we realize.

Does the Geology of the Spill Zone Make It Harder to Stop the Oil Spill?

We can't understand the big picture behind the Gulf oil spill unless we know the underwater geology of the seabed and the underlying rocks.

For example, if there is solid rock beneath the leaking pipes, with channels leading to various underground chambers, then it might be possible to seal the leaking risers and blowout preventer, with the oil flowing somewhere harmless under the floor of the ocean.

On the other hand, if there are hundreds of feet of sand or mud beneath the leaking pipes, then sealing the spill zone might not work, as the high-pressure oil flow (more than 2,000 pounds per square inch) might just shoot out into the water somewhere else.

We don't know the geology under the spill site. BP has never publicly released geological cross-sections of the seabed and underlying rock. BP's Initial Exploration Plan refers to "structure contour maps" and "geological cross sections", but all detailed geological information, maps and drawings have been designated "proprietary information" by BP, and have been kept under wraps.

However, Roger Anderson and Albert Boulanger of Columbia University's Lamont-Doherty Earth Observatory describe the basic geology of the oil-rich region of the Gulf:

Production in the deepwater province is centered in turbidite sands recently deposited from the Mississippi delta. Even more prolific rates have been recorded in the carbonates of Mexico, with the Golden Lane and Campeche reporting 100,000 barrel per day production from single wells. However, most of the deep and ultra-deepwater Gulf of Mexico is covered by the Sigsbee salt sheet that forms a large, near-surface “moonscape” culminating at the edge of the continental slope in an 800 meter high escarpment.
***
Salt is the dominant structural element of the ultra-deepwater Gulf of Mexico petroleum system. Large horizontal salt sheets, driven by the huge Plio-Pleistocene to Oligocene sediment dump of the Mississippi, Rio Grande and other Gulf Coast Rivers, dominate the slope to the Sigsbee escarpment. Salt movement is recorded by large, stepped, counter-regional growth faults and down-to-the-basin fault systems soling into evacuated salt surfaces. Horizontal velocities of salt movement to the south are in the several cm/year range, making this supposedly passive margin as tectonically active as most plate boundaries.
***
Porosities over 30 percent and permeabilities greater than one darcy in deepwater turbidite reservoirs have been commonly cited. Compaction and diagenesis of deepwater reservoir sands are minimal because of relatively recent and rapid sedimentation. Sands at almost 20,000 feet in the auger field (Garden Banks 426) still retain a porosity of 26% and a permeability of almost 350mdarcies. Pliocene and Pleistocene turbidite sands in the Green Canyon 205 field have reported porosities ranging from 28 to 32% with permeabilities between 400 mdarcies and 3 darcies. Connectivity in sheet sands and amalgamated sheet and channel sands is high for deepwater turbidite reservoirs and recovery efficiencies are in the 40-60% range.

The Giant Banks, Federal Reserve and Treasury Have All Blackmailed America

As I wrote last October:

Congressmen Brad Sherman and Paul Kanjorski and Senator James Inhofe all say that the government warned of martial law if Tarp wasn't passed. And Rahm Emanuel famously said:

Never let a serious crisis go to waste. What I mean by that is it's an opportunity to do things you couldn't do before.

Last year:

Senator Leahy said "If we learned anything from 9/11, the biggest mistake is to pass anything they ask for just because it's an emergency"

The New York Times wrote:
"The rescue is being sold as a must-have emergency measure by an administration with a controversial record when it comes to asking Congress for special authority in time of duress."
***
Mr. Paulson has argued that the powers he seeks are necessary to chase away the wolf howling at the door: a potentially swift shredding of the American financial system. That would be catastrophic for everyone, he argues, not only banks, but also ordinary Americans who depend on their finances to buy homes and cars, and to pay for college.
Some are suspicious of Mr. Paulson’s characterizations, finding in his warnings and demands for extraordinary powers a parallel with the way the Bush administration gained authority for the war in Iraq. Then, the White House suggested that mushroom clouds could accompany Congress’s failure to act. This time, it is financial Armageddon supposedly on the doorstep.
“This is scare tactics to try to do something that’s in the private but not the public interest,” said Allan Meltzer, a former economic adviser to President Reagan, and an expert on monetary policy at the Carnegie Mellon Tepper School of Business. “It’s terrible.”

Not Just Government

But it's not just government . . .

If the too big to fails say that the world economy will crash and there will be martial law unless they are bailed out, politicians - most of whom don't understand finance or economics - will believe them, and sound the alarm themselves.

As Karl Denninger wrote yesterday:

[S]ounds like "Bail me out or I will crash everything."
Isn't that analagous to walking into a bank, opening one's coat to reveal an explosives-laced belt, and saying "gimme all the money or everyone dies!"

I noted in November:

In the 1974 comedy Blazing Saddles, Cleavon Little plays the new sheriff in an old Western town. The sheriff is African-American, and when he rides into town for the first time, the [racist] townspeople pull out their guns and are about to shoot him.
But he quickly puts a gun to his own head, pretends he's scared of his own gun, and says "BACK OFF OR THE AFRICAN-AMERICAN GUY GETS IT!!!" The townspeople are dumb and fall for it, suddenly terrified that he'll kill himself. Here's the scene.
That's what Wall Street is doing with the bailout.
The fat cats on Wall Street are saying "give us a lot of money, and buy all of our bad debt for a lot more than its worth, or Wall Street will get it and we'll go into a depression!"
Are Americans stupid enough to fall for it?
In a recent interview, William K. Black uses the exact same Blazing Saddles sheriff-bank analogy.
Miles Kendig has a different - but parallel - analogy for the giant banks:
In essence, what we have here folks is a characterization of the banks and the government that has assumed the risk profile of these banks as some sort of 1,000 pound men, unable to move without assistance. They have suckered everyone else into the idea that if anything is done to move these overweight, unhealthy "persons" to health they will have a heart attack and kill us all since they sit upon the crossroads of commerce and have sold most folks the idea that they are the heart of the nation and indeed the world. Given these "objective" circumstance the government is not only beholden to the 1,000 pound persons, but is one of them itself, will do everything to make the rest of us carry them so as to save them the indignity of actually addressing their morbid obesity and the cycle of codependency that enables them all to remain so fat.
Any way you look at it, the too big to fails are not needed and they are dragging our economy into a black hole. Like the sheriff in Blazing Saddles or Kendig's 1,000 pound men, they are playing us for fools.
[Yves Smith] shared another analogy with me: a man with 15lbs. of Semtex strapped to his waist. She says "any surprise people in the vicinity are very attentive to his desires?"

As Bloomberg notes today:

The vote was another victory for the Fed, which months ago faced one of the biggest challenges to its power and independence in its 96- year history as lawmakers responded to public anger over bailouts of Wall Street firms. The amendment Ensign supported was included in the financial regulatory bill the Senate approved yesterday.
“The Fed’s authorities seemed to be under serious threat,” said David Nason, a former assistant U.S. Treasury secretary who’s now a managing director at Promontory Financial Group LLC, a Washington-based consulting firm. Instead, the Fed “appears to have regained its footing and now appears to be emerging with at least as much authority and likely more.”
***
The Senate bill contains most of what Fed officials sought. In addition to preserving their bank-supervisory powers, it maintains a ban on congressional audits of interest-rate decisions that some lawmakers had sought to strip away.
***

The outcome puts Fed Chairman Ben S. Bernanke in a stronger position to withdraw record monetary stimulus as the economy recovers ...

And Tyler Durden provides details of how the Fed blackmailed Congress into expanding the Fed's powers:

A reader provides us with the following letter he received from Senator Mikulski in response to dissatisfaction expressed about Bernanke's reconfirmation. The response from the Senator demonstrates [that the Fed is pressuring] gullible and incompetent senators ... to pass law after law that is only in the Fed's, and thus Wall Street's interests, as the alternative would always be a "market nose dive" ....
Thank you for getting in touch with me about Ben Bernanke's nomination to chair the Federal Reserve. It's great to hear from you.

***

I was advised that rejecting his nomination would cause markets to nose dive, which would hurt retirees and families saving for their future. I am not enthusiastic in my support. But I think Mr. Bernanke understands the job that he still has to do.

***

Sincerely,
Barbara A. Mikulski
United States Senator
And for the counterpoint, here is an example of a Senator who does not fall for the Fed's racket:
Dear Friend:

Thank you for contacting me. I appreciate hearing your thoughts about President Obama's decision to nominate Ben Bernanke for another four-year term as Chairman of the Federal Reserve (the Fed). I voted against approving Mr. Bernanke, who was nevertheless confirmed by the Senate by a vote of 70-30.

***
While I have heard the concerns of many that the failure to confirm Mr. Bernanke would have damaged the financial markets and jeopardized our economy recovery, I do not believe that anyone, including Mr. Bernanke, is too big to be replaced. We should not hold our economy hostage to the Wall Street threat that total economic collapse is the sure result of not doing everything they want.

Thanks again for contacting me. Please do not hesitate to do so again about this or any other issue that may concern you.

Sincerely,

Tom Harkin
United States Senator

Cap and Trade: A Gigantic Scam

As I pointed out in December:

James Hansen - the world's leading climate scientist fighting against global warming - told Amy Goodman this morning that cap and trade not only won't reduce emissions, it may actually increase them:

The problem is that the emissions just go someplace else. That’s what happened after Kyoto, and that’s what would happen again, if—as long as fossil fuels are the cheapest energy, they will be burned someplace. You know, the Europeans thought they actually reduced their emissions after Kyoto, but what happened was the products that had been made in their countries began to be made in other countries, which were burning the cheapest form of fossil fuel, so the total emissions actually increased...

See also this and this.
Environmental groups such as Friends of the Earth and Greenpeace are also against cap and trade (and see this and this), as is the head of California's cap and trade program for the EPA.
Hansen also told Goodman that (notwithstanding Paul Krugman's assertions) most economists say that cap and trade won't work:
I’ve talked with many economists, and the majority of them agree that the cap and trade with offsets is not the way to address the problem.
As I have previously pointed out:
The economists who invented cap-and-trade say that it won't work for global warming
European criminal investigators have determined that there is a tremendous amount of fraud occurring in the carbon trading market. Indeed, organized crime has largely taken over the European cap and trade market.
Former U.S. Undersecretary of Commerce for Economic Affairs Robert Shapiro says that the proposed cap and trade law "has no provisions to prevent insider trading by utilities and energy companies or a financial meltdown from speculators trading frantically in the permits and their derivatives."
Our bailout buddies over at Goldman Sachs, JP Morgan, Morgan Stanley, Citigroup and the other Wall Street behemoths are buying heavily into carbon trading (see this, this, this, this, this, this and this). As University of Maryland professor economics professor and former Chief Economist at the U.S. International Trade Commission Peter Morici writes:
Obama must ensure that the banks use the trillions of dollars in federal bailout assistance to renegotiate mortgages and make new loans to worthy homebuyers and businesses. Obama must make certain that banks do not continue to squander federal largess by padding executive bonuses, acquiring other banks and pursuing new high-return, high-risk lines of businesses in merger activity, carbon trading and complex derivatives. Industry leaders like Citigroup have announced plans to move in those directions. Many of these bankers enjoyed influence in and contributed generously to the Obama campaign. Now it remains to be seen if a President Obama can stand up to these same bankers and persuade or compel them to act responsibly.
In other words, the same companies that made billions off of derivatives and other scams and are now getting bailed out on your dime are going to make billions from carbon trading.
One the largest boosters for cap and trade invented credit default swaps - which were supposed to increase financial stability, but instead were a large part of the reason that the world economy crashed last year

Jeanne Roberts provides an update at environmental website Celsius:

The E.U. carbon emissions trading fraud is huge, but perhaps nothing compared to the potential for cheating that will become available in the United States once Waxman-Markey, or some similar scheme for reducing carbon emissions, emerges from the Senate to become law.

***

As Bloomberg notes, a carbon trading market organized around derivatives (sometimes known as credit default swaps, or CDS) is “open to manipulation,” in the words of billionaire hedge fund investor George Soros.

In fact, some old-school environmentalists see the whole carbon trading scheme as not a way to curb climate change, but merely a way to make the rich even richer at the expense of the rest of us. As Larry Lohmann, the founding member of the Durban Group for Climate Justice, says, “Dishonesty is rife throughout the carbon offset market.”

In January, investigators from Belgium said that in some E.U. countries, 90 percent of the market volume in carbon trading was based on criminal activities.

Now's The Time To Switch to Alternative Energy

As Robert Redford writes this week:

Thursday, May 20, 2010, marks one month since BP's oil rig exploded in the Gulf Coast ....
This is the clearest picture we could have of our failed national energy policy -- which extends over many decades and administrations.

It's not just the one BP oil rig. For example, since the Deepwater Horizon oil drilling rig exploded on April 20th, the Obama administration has granted oil and gas companies at least 27 exemptions from doing in-depth environmental studies of oil exploration and production in the Gulf of Mexico. Then there are the 12 new oil and gas drilling rigs launched in the U.S. this week.

And a whistleblower who survived the Gulf oil explosion claims in a lawsuit that BP's operations at another oil platform risk another catastrophic accident that could "dwarf" the Gulf oil spill, partly because BP never even reviewed critical engineering designs for the operation. And see this.

Indeed, if Alan Greenspan, John McCain, George W. Bush, Sarah Palin and others are right, the costs of our failed energy policy might be much higher, as it would include various military costs as well.

And the Department of Defense also apparently has some issues with extensive off-shore drilling for security reasons.

Many still believe that alternative energy is an expensive, unrealistic pipe dream.

But that is no longer necessarily true, especially when the externalities of environmental and military costs are taken into account.

Technological Breakthroughs

As I have previously pointed out:

One of the world's leading experts on trend forecasting says that producing our own energy for our homes and cars (called "micro generation") will become a huge trend in the next couple of decades.
What's he talking about?

Well, energy and food prices will keep going up. Every dollar we don't have to pay to the energy utility or food producers is a dollar we get to keep. And the technology for producing it ourselves is getting better and better.

So increasingly over the next couple of decades, we will generate our own energy and food.

***

Due to high oil prices, major breakthroughs in energy production are happening every day.

For example:
A scientist has figured out how to make and store energy by splitting water with sunlight. He says: "You've made your house into a fuel station [and we can get] rid of all the ... grids" [he's recently discovered an even cheaper way to do this]
A new generation of highly-efficient wind turbines (and see this) is being introduced which can produce much more energy
And new approaches to solar energy [see below] are making residential solar very cost-competitive
It has been discovered that alcohol made from donuts, grass and other abundant materials can run cars and all other engines [see below]
With recent breakthroughs, individuals can now generate enough energy to get off the grid and power their own homes. Indeed, some companies will even provide the equipment for you (and see this).

Indeed, an new government study shows that North Sea wind and wave power could make Britain the "Saudi Arabia of renewable energy". For more on microgeneration and solar energy breakthroughs, see this, this, this and this.

Moreover, Japan and other countries are funding large-scale projects to place solar collectors in orbit, and then send clean energy to Earth.

And as I've written before, alcohol has more alternative energy applications than you might know:

There's a secret history regarding alcohol that you won't hear on the six o'clock news:
Cars and everything else running on internal combustion engines can run on alcohol at least as well as they can run on gasoline. Indeed, engines were built back in 1870 that could run using either alcohol or gasoline

A New York Times article from 1908 (and here) enthusiastically states:

"Autoists Discuss Alcohol As Fuel; Great Future Ahead For Use In Commercial Wagons, Says Prof. Lucke. Tests With Motor Truck E.R. Hewitt Tells Engineers Of His Results With Gasoline And Alcohol In Same Engine"

Henry Ford said that alcohol was "a cleaner, nicer, better fuel for automobiles than gasoline" (James Brough, The Ford Dynasty: An American Story, p. 118, and cited in "Ford - The Men and the Machine", p. 365). The Model T Ford had a knob right on the dashboard to adjust the fuel-air mixture for either alcohol or gas

Alcohol does not corrode or shorten the lifespan of modern cars, and an inexpensive adjustment to regular cars will make them run smoothly and inexpensively on alcohol
***

Moreover, those in the know actually are using alcohol as a fuel today. For example, there are many millions of cars being driven in Brazil that run on alcohol.

And many government and car fleets are actually required to be able to run on either alcohol or gas. The car companies simply forgot to tell the American consumer that these kind of cars are available. See this and this.

Indeed, as I've previously noted, running equipment using alcohol should not increase food prices:

The leading proponents of alcohol as fuel are not talking about corn. Corn is a lousy crop for making alcohol, and there are many other crops that are much more efficient. Indeed, the leaders in this field promote growing a wide variety of crops (appropriate for whatever specific climate you live in) , and many of the crops they suggest are also valuable food crops.

And you don't even need to use plants . . . you can make alcohol fuel out of rotten fruit, stale soft drinks or donuts.

And see this and this.

And as I pointed out last year:

Heat can be used to generate electricity. This is true not only on the industrial scale, but even on the level of your home faucet. Indeed, inventors have already built home faucet kits which turn the unused heat from your hot water into electricity.

In hot climates, black thermal-electric mats could be installed on roofs to generate electricity.

Heat is a byproduct of other processes, and so nothing special needs to be done to create it. Just about every human activity and many natural processes create heat, so we just have to utilize it.

***

Another use of a free, wasted byproduct to generate electricity is piezo-electric energy. "Piezo" means pressure. Anything that produces pressure can produce energy.
For example, a train station in Japan installed piezo-electric equipment in the ground, so that the foot traffic of those walking through the train station generates electricity (turnstiles at train, subway and ferry stations, ballparks and amusement parks can also generate electricity).
Similarly, all exercise machines at the gym or at home can be hooked up to produce electricity.
But perhaps the greatest untapped sources of piezo-electric energy are freeways and busy roads. If piezo-electric mats were installed under the busiest sections, the thousands of tons of vehicles passing over each day would generate massive amounts of electricity for the city's use.
***

Scientists have figured out that solar collection is much more efficient if you focus the sunlight:

And see this.

***

One day, virtually every surface will be turned into an energy-production medium. Instead of having discreet energy-producing machines, roofs, exterior walls, sidewalks, roads and many other surfaces will be coated with "smart materials" which convert light, heat, pressure and other inputs into useful energy, which are then collected, stored and distributed as needed.

Hundreds or thousands of years in the future, mankind might even learn how to collect the virtual particles which are constantly popping into and out of existence.

Harvesting The Ocean of Energy
Perhaps the biggest evolution needed in people's thinking - in any area of life - is how we think about energy.
The current paradigm is that energy is produced expensively by governments or large corporations through gigantic projects using enormous amounts of money, materials and manpower. Because energy can only be produced by the big boys, we the people must bow our heads to the powers-that-be. We must pay a lot of our hard-earned money to buy electricity from them, and we can't question the methods or results of their energy production.
Our life will become much better when we begin to understand that energy is all around us - as an ocean of electromagnetic forces and as a byproduct of other processes in the form of heat, pressure, etc. - and all we need do is learn how to harvest it.

The Gulf oil spill disaster must not be in vain.

We must use it to finally find the vision and the will to make the switch to alternative energy.

Note: While energy conservation is not as interesting as generation, it is worth noting that power usage in American buildings could be reduced by 50%, largely by programming unused appliances to be shut off.

Moreover, approximately 6.5% of all power transmitted in the U.S. is lost through transmission line losses and other inefficiencies every year. By improving the efficiency of transmission lines, energy conservation can be greatly improved.

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