DrumBeat: May 31, 2006

Now for some wise words from the readers of The Oil Drum...
Almost ready.

My plan to reduce US Oil consumption by 10% in 10 to 12 years (and more after that) using mature existing technology.

A bad hyperlink and two phrases need changing.

But I am impatient to give out the draft link.


Any thoughts ?

Alan, it is unlikely that we will build enough rapid transit systems in 10 to 12 years to make much difference. I say "will" rather than "could" simply because cities will build rapid transit systems only when enough people demand them and governments are willing to pay for them. Events dictate the actions the people will take, not dire warnings from us doomers. People, in general, pay absolutely no attention to anything we say so even a perfect plan by you or I will make no difference whatsoever. Anything we write will be totally ignored. However not to worry, US oil consumption will be reduced by an awful lot more than 10% in 12 years. After all, we cannot possibly consume oil that doesn't exist. That is, world oil supply will drop by a lot more than 10% during the next 12 years.
You underestimate the demand for more Urban Rail today.   The Bush Administration has cut back FTA matching funds from 80% to 50% in an effort at birth control (with better policy success than in Iraq).

Miami has it's plans and funding in place to put 90+% of the population within 3 miles of a station.  It will just take 25 years with 50% FTA matching.

Denver likewise has a funded plan for 117 miles of light rail & commuter rail.

Salt Lake City (that noted hotbed of liberal activism) will have a vote soon to triple taxes so that they can build their 30 year plan sooner.

San Jose is desperately trying to figure out how to get BART down to them with available funds.

Northern Virginia is likewise trying to figure out how to pay for a 24 mile extension of DC Metro to Tysons Corner and Dulles airport and a bit beyond.

Maryland would like an extension of DC Metro's Green Line to BWI airport.

New Orleans has a wish list a mile long, but we are broke.

Seattle wants to extend their light rail line, now under construction, both north and south.

Like wise, Phoenix has its' first 20 mile Light Rail line under construction and funding for much more over 20 years.

St. Louis has hopes and plans.  So does San Diego, Houston, Sacremento, Portland, New York City, and many more cities.

Increase FTA funding from 50% to 90% (that was fed matching % to build the Interstate highways) if a city follows the federal process and 75% FTA matching if they "just build it" and I can assure you, with VERY high probability, that you will see an explosion of new Urban Rail.  All of the above plus others that are not now on the map (Kansas City, Cincinatti and Tampa come to mind) will be built.  As oil problems persist and increase, the pace will increase.

Don't mean to double post, but here in STL we are finishing a light rail project that added an interchange in the system.  It was the first ever since we only have one rail line, that is until this one finally opens.  There is one problem though, it is a year behind schedule and nearly 40% over budget.  I think this would be normal around the country as they build these.  
Actually, that is an oddity so far in light rail projects.

The Canal Streetcar Line in New Orleans came in at %150 million rather than the budgeted $160 million.  Late from original estimate but a month earlier than revised date.

Latest Dallas expansion came in under budget and there was a big fight on whether to use the extra $ for three more LRVs (rolling stock) or expand an overbooked Park & Ride lot.  They bought the LRVs because they needed the extra seats and said that potential pax could take the bus to the station instead of Park & Ride (heresy in Dallas !.

Minneapolis and Los Angeles Gold Line Phase I came in under budget with extras to equal being exactly on budget.

The Cross Country Line in St. Louis is the most over budget light rail line that I am aware of.  Some Rapid Rail (subway) projects have come in way over budget.

The link to the lightrailnow site is greatly appreciated.  It makes a lot more sense than the overblown Energize America thing that was seen a week or so ago.

In general, there is too much hype about speed -- bullet trains and maglev, etc.  That's fine for long intercity runs such as., New York - Chicago, Chicago - NW coast, Miami - New Orleans -LA.  That's OK but it's for the longer term. (if there is a longer term).

I'm gratified that there are many projects already moving for local area transit, such as you and others have listed.  Much more is needed.  For Downtown - suburban - satellite towns, the objective should be: convenient and dependable access, get where you want to go in a reasonable time, safely and with comfort.

There are many millions of commuters and shoppers who will migrate from SUVs and older cars when these systems become available.  Only by having public transit in place can we expect a "soft landing" as the oil crunch tightens.

-- Mort.

I hope the Ottawa LRT expansion doesn't come to a screeching halt.  Construction hasn't even started and there's already a 26% cost overrun; two mayor candidates are calling for a halt until after the November election.  More on this here

Mayor Candidate Terry Kilrea's anti-LRT website is here.

Comments, Alan?

Ottawa tried to go with Bus Rapid Transit only and it has reached it's limits (although a change in commuting patterns has not been good in Ottawa).

I have not followed the developments closely, but before Katrina, there was debate on whether to tunnel though downtown or take the surface route.  That alone would explain the uptick in prices.

IMHO, tunneling was the better option.  Faster service (>lower costs, higher revenue long term) and keeps people out of the weather (>higher ridership).

But if bad cost estimation was the cause, then your authority needs some help.

In any case, Ottawa should approach TTC (Toronto) for expert help (they used to be great, now just "good").  Perhaps hire some retired TTC folk.


I hope you are correct. Certainly oil will drive rail hard. However, in California a high speed rail line for passengers between Frisco and Los Angeles has been delayed and delayed (again this year). It is/was to be routed through the Central Valley and take two hours between those two cities.

EnergyBizinsider has an article today on rail and coal shipments (sorry, I do not have a link but contact me if you want the entire essay):

The rail industry's return on investment has risen from 2 percent in the 1970s to 7 percent today. With the industry's improved financial condition, the rail companies are investing an average of $6 billion a year in infrastructure and equipment.

Rail operators say that it takes billions to upgrade their systems. And these investments are risky because it takes time to go through the regulatory and construction processes. And by the time any improvements are made, the entire economic scenario could change. That's why they advocate tax credits as a way to lessen their risks.

I believe tunnels are one of the stumbling blocks preventing US railroads from being electrified. Freight containers are typically double-stacked on railcars, leaving insufficient room on the tunnel ceiling for a high voltage wire. Raising the ceiling by blasting is very expensive.
It might be expensive to blast open the top, but lets look at this way.  Lets say we can retrofit a line through a tunnel coming out of the west.

When diesel prices climb higher it starts to look real cost effective to widen a hole to run every piece of equipment cheaper, than to continue to pay higher and higher prices for diesel.

You could get real detailed and determine the cost per foot of a tunnel.  Using that we can get a total cost.  That's all the sunk cost there is.  Once it's built, it costs little more to maintain.  So if the ton mile cost to me starts getting really high due to petrol prices, then why not sink the cash now to use a new tunnel indefinatly?

In the end what is a better option to move freight across the country?  It's surely not steam.

Almost always the best way to enlarge a tunnel is to dig out the floor and lower it.  The approaches sometimes have to be reworked a bit.

But this is relatively easy to do, digging down rather than blasting up.

Laying a 3rd rail (electric) in the tunnel can be an option.  Few people will wander into a railroad tunnel (just not healthy).  Little if any liability if they die once inside (it happens occasionally).

Another thought:

It's my understanding that it takes a mile to stop a train going 60 mph with full brakes,  Why couldn't they just pull down the contact bar, and coast through the tunnel.  At just about any speed they should be able to make it to the other side before coming to a full stop.  Either that or add an engine (electric locomotive) to the end of the train.

I thought about this, but assumed it would be dangerous to totally leave the grid for a period of time.
At the moment on electrified lines (at least in the UK, anyway), there are gaps between the supply from different substations. While these are not long (around 10 - 20 yards), and are still connected to the overhead line (the section gap is made of insulating material), technically the train has left the grid for a short time.
Occasionally, a train comes to a stop in the middle of one of these sections, and can't get started again, but it doesn't happen often.
Just add enough batteries to the loco to drive it through the tunnel; think of a cross between an over-the-road electric loco and a Green Goat.
Add a cable loop and tow it through.  Think like a blacksmith!
How do you make cables work in e.g. the spiral tunnels in Kicking Horse Pass, BC?

Folks say that dual-voltage locos can use third rails inside tunnels and overhead wires outside.  That works for me.

My solution for difficult problems with electric power in tunnels would be to contact SBB (Swiss Rail) and several of the companies that Japan Rail was split up into.  Both have LOTS of experience with tunnels.

Why reinvent the wheel ?

For some reason, americans don't like to spend billions on railways, but have no problems spending billions on highways. I think it's a cultural thing--you can drive your own vehicle on any highway but you can't do that on railways.

I agree that the US rail system should be electrified, regardless how much it costs. A cheap way to built high-speed rail lines is to run them along existing freeways, either in the median or by taking out a couple of lanes. The overpasses are already in place and the guideway is already graded and curved for relatively high speed. I can't understand why Jeb Bush doesn't like that idea.

Then, there's the obvious step of not double-stacking the flatbeds with the containers. No blasting required to retrofit the tunnels for the wires. Of course, is the fact that trains can now laul less freight per train. Didn't they have to blast the tunnel ceilings higher to accomodate the double stacked flatbeds in the first place?

Locomotives can use wires over the track except for tunnels. They could also use a third rail like Chicago's and New York's subways. (of course, lawyers will enter a holding pattern by tunnel entrances like the vultures they are)

When double-stacks were becoming common, they did not blast the roof of the tunnel to increase clearance.  Instead, they removed the track and then lowered the floor of the tunnel by whatever amount of additional clearance was needed.
We had similar issues in UK - tunnels were old and too low to accommodate overhead wires.  A couple of solutions have been applied (apart from raising the tunnels).  Modern signalling has allowed efficient single track working to replace dual track in some tunnels thus track can be moved to center which is where the greatest height clearance is; this option effectively increases the gauge permitted thru the tunnel.  The second option is to lower the trackbed in the tunnels thus providing extra clearance for the wires.
You don´t raise the ceiling, you dig out the ground and lower the track, that has been down in countless tunnels in Europe.
Financial Times Deutschland article about U.S. railroad congestion:


Brother Kornhoer,

What is ironic about this, and it is a good article about the state of things, is that rail just about died completely in the USA thirty years ago. The creation of CSX was getting somebody off of life-support. Rail has made an incredible comeback in the last 20 years in this nation, though passenger service is still lagging, that is quite good.

And now Rail is the future. . .  

P.S. this thread has been very good on rail - thanks to AlanfromBigEasy!

I live in Denver--which is a city with many problems, lots of sprawl.  Our light rail system, however, is already fair, and will soon be excellent.  Take a look at the FasTracks Plan, for an illustration.  When complete, the vast majority of the population will have a very realistic transporation alternative.  Personally, I'm looking forward to the station (1/2 mile from my house) opening this November, as it will take me within 2 blocks from my work.

However, a comedian I saw recently may have framed the real problem with light rail best:  "Women are the real cause of high gas prices because if you ride the bus or the light rail you can't get laid."  Sure, gross overstatement and oversimplification, but the bottom line has some merit--as long as it is a desirable status symbol to drive your Escalade to work, even though you could ride the light rail for less money and time, people will still strive for the gas-guzzler.  That attitude is what needs to change...

This is true but futile. You may as well ask the high school cheerleaders to stop vying for the quarterback and go for the chess nerds instead.

Asking women to stop being attracted to symbols of the ability to secure resources is like asking men to stop being attracted to young women with the 70/30 hip-waist ratio thing.

The reality is a true Powerdown requires women to be attracted to dumbasses who can't work well with others as these are the type of guys who fail in their ability to acquire resources.

In other words be attracted to men like George W. Bush, a guy who has completely failed in all attempts to make money on his own. (make money = pull energy out of the environment.)

Ladies of TOD, are you willing to make the sacrifice?



You are correct. People discuss the whole "hitting a brick wall" or "last man standing" scenario we're headed towards as if it's still to be decided.

Someone else here put it best, we're going to do exactly as we're doing until we can't and then we won't.

I agree, which is the source of much of my pessimism.  I have a great deal of confidence that we CAN solve all of our problems.  I also have a great deal of confidence that we WON'T solve the vast majority of our problems.  They will, of course, solve themselves.  Koombaya...

10,000 years from now when some new form of human(s) have evolved due to all the radiation and pollution that will get unleashed as we slide down the backslope of the global energy production curve, the cheerleaders will still be fucking the football players and the "hippies" (for lack of a better word) will still be waiting for the great "paradigm shift" to happen.



Kim Stanley Robinson called it Gotterdammerung capitalism, which I always thought was a nice way of putting it.



Hey, can we get a William Safire-type definition on 'Gotterdammerung?' Great word. Seymour Hersh uses it to describe the first Nixon/Kissinger approach to Vietnam. Are its roots in Wagnerian opera?
There is a Wagner work with that name.

"The term Götterdämmerung is occasionally used in English, referring to a disastrous conclusion of events."


Hello Matt,

The FIRST NERD: I bet the caveman who invented fire on demand by friction or banging flintrocks together was very popular with women.  "Hey Grok, get your rocks off over here.  I am cold and want to snuggle by a warm campfire."

Bob Shaw in Phx,AZ  Are Humans Smarter than Yeast?


Sadly, that guy's descendants (he has many, I'm sure) are busy working for weapons makers figuring out better ways to blow stuff up. That is the descendants of his that are part of our tribe.

If there in that other tribe, their busy helping people figure out how to blow themselves up.



My personal experience is that (some) women perceive powerdown men as  the kind who would make good fathers - because of their obvious foresighted altruistic (in fact, maternal) self-sacrificingness - and they will consent (quite Darwinianly) to have a child with you, as long as you look after that child and don't expect them to stick around.

(A lot of peak oil philosophy, by the way, is asking men to take on women's roles and styles of concern, and the reason women don't seem much interested may be they are already doing it.)

2 comments to this:

  1. Interestingly, Ive been approached in last month by two women who just want my sperm as a donor and are willing to sign legal contract saying I have no obligation whatsoever - I think our Darwinian impulses, refined and intensified through natural selection, are not at the 'cognitive' level, but rather deeper at the feel good neurotransmitter behavioral level - to assess these proposals is probably unique in our history (I am strongly leaning towards not doing it, primarily for the weirdness of it, but it was certainly flattering)

  2. I think the energy subsidy of 57 boe for the average american has promoted equal rights in more in one or two generations than any period of pre fossil fuel history. I expect Peak Oil will reverse much of that. It has been scientifically shown that women are slightly smarter than men and men are better (slightly) spatially but other than that pretty cognitively equal. However, men are on average bigger and stronger. Those traits in an energy constrained world will tend towards doing more physical labor, and our more traditional roles of the past may reassert. Huge energy avialaibity has been a great equalizer in western society.  And of course, when I say 'on average' I mean it in the same way that men are taller than women, 'on average'. The two distributions overlap but the mean is higher for men (on height).

I have no doubt won numerous new friends with this post, but its just my opinion and felt like voicing it.

Regarding your second point: where would Amelia Earhart have been without fossil fuels? Probably back on her family's farm in Kansas churning butter and pumping out kiddies. Read somewhere she was pretty handy with a shotgun though so maybe she would have been out hunting also.



RE: 2, I think you may be right, but not for the reasons you state.

Men are "superior" to women in cultures that are under population pressure.  Because the number of females determines the fertility of a population.  One male can keep several females pregnant, but one female can only have one baby a year, no matter how many mates she has.  Farmers usually want to increase the size of the herd, so they kill the males and keep the females.    

But historically, our herd has been too big.  Killing the females helps control population size.  And obviously, it's a lot easier to do that if females are perceived as being weaker, less intelligent, less valuable, less human.  

Sexual inequality is what allows female infanticide. which has been the traditional method of birth control through much of human history.

Deliberate infanticide has always been much rarer than you suggest, and never exclusively, or even overwhelmingly, of females.
Breastfeeding has been a much more important form of birth control.
Breastfeeding is most effective among foraging societies.  

Once people took up agriculture, the population exploded, both because farming supports higher population density and because it resulted in more closely-space births.

The foraging lifestyle is actually quite good, but it requires such a low population density that the dieoff would have to be quite severe.  I don't see things getting that bad.

"In other words be attracted to men like George W. Bush, a guy who has completely failed in all attempts to make money on his own. (make money = pull energy out of the environment.)"

To have not made money on his own he is the leader of the most powerful nation on earth and I'll wager he has a bigger house than you.  He obviously can work with others he got elected. How many people make money on their own.  I make good money as a medic, but without a medical director I can't work.  Lawyers depend greatly on their staffs don't they.  Since the dawn of time we have been communal.  Hunting and foraging and farming in groups.  It is hard for one person to do anything alone.  My fiance does not care what car I drive...and honestly I don't want to share my DNA with someone that shallow.  

The quarter back types fill the same Alpha Male slot you claim and George Bush has.  Thats why chicks dig powerful men...back in cave man days they got bigger better shares of the hunt if they gave it up to the best hunter.  How is your command presence?  Can you inspire people to do great things?

GWB inspires you?
If you're a satirist or misanthrope he might.
He doesn't inspire me, but he makes me feel smarter.
That must be hard to do. So give him some credit. Just kidding, relax :)
I'm a bit confused by your post. I'll clarify my point: if women want to help promote Powerdown, they need to mate/partner with men who are either unwilling or unable to make money, as each dollar represents (on average) a certain number of BTUs of energy. (US economy is 100 quads of energy divided by $11 trillion dollars = BTU per dollar average.)

My "command presence" is probably average to above average. Once the Peak Oil NYC folks post the speeches (mine included) from the Energy Solutions conference you can judge for yourself.



  I've thought about your link between BTU's and $ and think it is post hoc.  If I quit work and sit at home this does not help powering down.  I still eat consume etc.  If enough people do this then there will be a collapse as nothing gets done.  If I direct my time energy and money toward sustainable/ecological decisions then less of my money promotes fossil fuel consumptions and I still work.  Why is Powerdown so neccesary to you? If (big if and difficult to make happen) everyone recycled and had garden plots and made small decisions every day to benefit the enviornment/future, we would lower our consumption of nonrenewables significantly.  Maybe I am not understanding your logic (I would not want to understand something which my paycheck depends on)



amen bro.........

I like the plan.  I read it last night and this morning again.  I work in the RR industry and I'm looking into some specific details.  Like I wonder what the capital cost would be to electrify the lines.  You would first need a best guess @ the cost per track mile.  I suppose that would vary depending on location, location, location.  However the idea is to go everywhere we can, so the focus should be on energy intense areas first and spread out.  

I'm sure the cost would rise as you go farther out, but you would need a real estimate of what the average track mile will cost and then we need a total cost once we know how much track is currently there.  Not to mention there are 8 different classes of tracks.  Are we electrifying all of them?  If so, we need to prioritize these.

Next what would it cost to retrofit a fleet of engines that shouldn't be scrapped?  I think the over all plan is doable, and it's big enough to make a lot of people think it can't be done.  This is the challenege that we should embrace and tackle.  10 years does seem short even at a breakneck speed due to the lack of power plants to support this.  I think the powerplants will be the limiting factor intially and would last for a long time.  I think starting now we could start to become self sufficient in more like 20 years.  

Partial response to some of your points.  

Brookville is the only US manufacturer of small locos (GE & EMD (former GM) make the big ones).  Their VP of engineering, Larry Conrad, has told me that they could rework many diesel electric locos into all electric locos and would welcome the work.  How many, how fast ?  Add $$ and the answer will come out.

He did remark that all electrics were simpler than diesel electrics.

I have heard (~2002 data) that it costs $2 million/track mile to string overhead wire.  I don't think this # included power supply stations.  Recent copper price increases have undoubtably increased that #.

Tunnels are "interesting" from a cost POV.  Locos can switch from overhead to 3rd rail "on the fly" but 3rd rail has voltage limitations.  A soluble problem IMO.

I would talk to SBB when you get serious.  They definitely know what they are doing !  Also some of the Japan Rail people (I know the foremost US expert on Japanese rail).

I can contact someone that worked on Amtrak's electrification of NEC New Haven-Boston line. No doubt done with the efficiency and cost effectiveness for which Amtrak is noted.

And Black Mesa and Lake Powell (a 78 mile single track electric rail line in AZ) is worth a phone call.

The Russians are going crazy electrifying today.  Much could be learned from them.

It is my understanding that there are differences in design philosophy for Swiss vs. Japanese vs. Russian overhead.

So it's $2M avg per miles and cost has probably increased roughly 20%.  So the new price SHOULD be somewhere around $2.4M.  I called FRA and the gentleman said we have 233779 track miles.  Only 143000 route miles.  So I'll take the smaller numbers since electrifying can be done cheaper on a two main line track.  So $2.4M * 143000 = $343,200,000,000.  That's not too bad, I'll even round it to $350B to make it easy to talk about.  

I will agree that this is a total picture that probably won't come to fruition.  Wouldn't it be easier in many cases to simply add new tracks in high density areas rather than run lines into far flung places?  If we made this a 20 year project it might get done under $1 Trillion, but I doubt it with inflation over those 20 years.  It would take a lot of gov't money and a lot of pain for the people to want this.

First things first.

AFAIK, UP & CSX share three tracks coming out of WY coal fields that they beat to death and are looking at the possibility fo a 4th track.

UP is clogged from Los Angeles to El Paso and is in the middle of double tracking that line.

Los Angeles to Omaha Nebraska is double tracked (some triple I think) and is clogged and being beaten to death.

San Francisco to Los Angeles is at capacity.

Electrifying just these four lines (which adds a bit of capacity) would electrify a very good % of UP's total ton-miles and save a lot of fuel.  Only 4,000 or so route miles.

Then look at other options (Phoenix-Tuscon spur, Montana coal fields line, El Paso- Houston-New Orleans,  Omaha-St. Louis-Chicago and so forth) that are worth doing in the first wave.

Start with the biggest "bang for the buck" first and then work down from there.

If, in 10 year, UP has electrified 22% of their route miles carrying 3/4 of their ton-miles, so be it.

I wonder about the economics of electrifying a short line that carries 4 or 5 trains a week.  But leave those questions till MUCH later.

"So it's $2M avg per miles and cost has probably increased roughly 20%.  So the new price SHOULD be somewhere around $2.4M.  I called FRA and the gentleman said we have 233779 track miles.  Only 143000 route miles.  So I'll take the smaller numbers since electrifying can be done cheaper on a two main line track.  So $2.4M * 143000 = $343,200,000,000.  That's not too bad, I'll even round it to $350B to make it easy to talk about."

Just one Iraq War cost aught to do it...

3rd rail in UK normally works on 750 volts DC.  There are greater transmission losses than for 25kv overhead wires but it shouldn't be an issue over shorter distances i.e. just for tunnels.  After all the whole of the London subway network is 3rd rail together with the vast majority of the extremely busy overground rail network to S of London.

Switching between 3rd rail and overhead power supply takes place all the time in UK, for example the thru Thameslink services between Bedford and Gatwick Airport which use overhead wires north of the Thames and 3rd rail south of it.  Not least the high speed Eurostar services still use 3rd rail power supply between Fawkham Junction and Waterloo pending completion of the final section of the Channel Tunnel rail link next year.  For 90% of the distance to Paris / Brussels they use overhead wires as route is on new high speed dedicated track but Eurostar trains have to use c150 year old routes for the final section into London until 2007.

"And Black Mesa and Lake Powell (a 78 mile single track electric rail line in AZ) is worth a phone call."

I sense a bit of irony on this one. That line is [almost?] exclusively used to haul coal to the Navaho Power Plant in Page.

Alan, you have undoubtedly thought long and hard about the advantages of electrified rail. It certainly seems like the optimum answer where transportation by ship or barge is not available. ... but a real world question: Wouldn't just moving long haul freight from trucks to railroads get us most of the way there?

One other comment: I had a long discussion with a friend of my brother who was deeply involved with the Salt Lake City Trax. For fairly obvious reasons I remember the exact date --- the evening of 12/31/1999. I thought the SLC light rail was a good idea but would never really work until it became a much more extensive network than was actively being pursued. Goes to show that I am not exactly a visionary. I think that you are and I appluad you for your reasoned advocacy. :-)

I think the future is intermodal shipping; mainly rail & truck.  Although with time, more shippers will go all rail.

In my other paper on Light Rail Now (hyperlinked in the 10% reduction paper) I talk a bit more about that.  I also talk about a pax & freight semi-high speed rail network.

Yes, Black Mesa & Lake Powell is 100% coal.  They decided that ir was cheaper to go electric on their captive shipper.

Thanks for the compliment :-)

R. W.,

"Wouldn't just moving long haul freight from trucks to railroads get us most of the way there?"

Just entails a 4X or 5X increase on what we are doing right now. That is not a "just". That is a whole lot!

Using 2002 data, rail ton-miles will have to increase by 73% in order for half of the trucking ton-miles to shift to rail.

Compounded annual growth of 5.7% + economic growth (or shrinkage) for ten years will "get you there".

On a global basis, this is a modest rate of growth (see China) needed for the goals of my paper.

On one side, some of the shift has already happened since 2002.  On the other side, the traffic patterns of multimodal shipping are different from coal, grain, lumber, steel, etc. and they require much more capacity at multimodal transfer centers.

Some bottlenecks will appear and will take time and $ to remove.  However, most of these bottlenecks will be track that has been torn up in the last 30 or so years.  Opening up the bottlenecks will just require putting back what was torn up.

As one example, Union Pacific used to have double tracks between Los Angeles and El Paso.  To save on taxes and maintenance, they went to a single track decades ago.  Today, they are adding track back as fast as possible.

AFAIK, years ago they had some single track bridges along the LA-EP route with double track on both shores.  They are looking at building a second bridge in those spots.


It might seem like a minor quibble, but I'd ditch the `6000 princes in luxury' comment. You want the audience to remember the other statistics you've mentioned and you also risk offending prospective investors in American Rail, be they the princes themselves or pals thereof.

I don't disagree with the comment at all but it did poke me in the eye.


AlanfromBigEasy, I e-mailed you the text of that article in Barron's Online I mentioned yesterday. It should have appeared in your e-mail at Juno an hour or two ago.
Thank you for your kindness and consideration :-)  I will read it this evening.
I hope the US moves in the direction you suggest.  My fear, however, is that Americans will chose instead to maintain surburbanism and private vehicles at all costs.  I think as gas prices continue to rise, americans will actually start to chose conservation.  They will accomodate rising fuel prices through conservation without seeking any long-term fix.  Although gasoline consumption is considered "inelastic", I think Americans could decrease their driving by 10% without too much pain.  Some may switch to a 4 day work week, others will vacation closer to home, many will learn to consolidate car trips.  A renewal of the 55 mph speed limit would decrease liquid fuel consumption by at least a few percent.  Over ten to twelve years, we can probably improve our measly 22 mpg average fuel efficiency by at least 10% (that would only be 24 mpg).  My point is that I think Amercians will continue the current set-up as long as possible and not move toward long-term fixes.  This may delay the real pain by 10 or 20 years but when it comes, it will be even more devastating.  

The above scenario assumes the post-peak decline will be 2 or 3% per year.  If it is, then conservation will be able to accomodate the decline for some time (and also allow us to avoid long-term solutions).  If there is a brisker rate of decline, then TS will really HTFb.

Yes.  Even if we go towards EVs and plug-in hydrids, the lack of gain in efficiency will bite us again "in a generation" (as I wrote earlier).

On the bright side, a large # of US cities want more Urban Rail.  Perhaps a minority of Americans personally want it as well.  But if we build, quickly, what cities and that minority want, (and electrify our railroads) then we have an insurance policy against the day that, as you put it, TSHTF-b.

Very few reasonable people are against more Urban Rail and electrifying our freight railroads as part of the solution.

And I easily admit, these two steps are only part of the solution (although I think of them as silver .22s amongst the silver BBs :-)

Ideally, of course, we'll do increased rail and mass transit along with massive conservation.
Where will the electricity come from?  It's not going to all come from a plant hooked directly into this thing, so is the power need for these trains going to be consumed from plans within the state or will there need to be a cross state political (more B.S.) arrangement?
SBB (Swiss Rail) owns all of it's own power stations (all hydroelectric BTW) and generates 16 2/3 Hz power for operations.

UP could buy from the local utilities or even generate it's own.  Easiest to sell idea is to just buy power.  UP would only take a few % of local needs except in remote West.

Amtrak runs a 50 kV AC line above the overhead contact wire from Boston to DC.  They used to own their own power plants ,but these are almost gone.

Land based wind turbines are limited by the size of cranes that will fit onto rural roads and bridges.  A railroad can carry a much larger crane than a road can.  An isolated branch line on the Great Plains could support a string of large wind turbines, set up and serviced (new blades every decade or so) by a humongous crane.  One crane would service thousands of wind turbines.  Probably better if this branch was not electrified, but it could also serve as a electrical trnasmission corridor.

Throw in a few pumped storage units and UP could be a major generator that supplied it's own needs + a surplus to sell 95% of the time.

Again, Step 1, just buy the electricity.

IMO (from talking to suburbanites), they will be switching to fuel efficient autos. Very little effort has been put into fuel economy by the auto companies (so far) so I am optimistic they can get the numbers up there when necessary. As an aside, read an article the other day where an aftermarket Mustang is getting 20 mpg on the highway (and delivers 800 hp).
Hello, this is my first comment in TOD.

What do you think about an increase in the Weekly Petroleum Status Report of tomorrow?

The imports of gasoline, 1.6 MB, are sustainable?, or are temporaly...

In Japan the refinery capacity is low (by maintenance). The global capacity, can support this?

And the summer season is here...

I think, can the oil touch 90$??? , and my answer is YES, later in August.

Oil could touch anything in the short run, but the forward contracts may have already priced "demand destruction" fairly accurately.
I've been impressed by your read on things of late. What are you seeing changing specifically in forwards that convince you of this?
I think the market went up until we saw real demand destruction occuring (a chuck at $50, then $60, then $70) -- I've literally noticed more motorcycles and bicyles on the road; and my yard service guy is now driving a pickup instead of his flatbed truck; my housekeeper says that she has started combining trips, etc. It appears that there was a lot of "latent" waste out there to destroy.

Since the markets didn't know where this destruction price would be, a lot of players made bets on higher prices (remember the activity in the $100 call market? and the "superspike" comments). The backwardation that existed in 2005 flipped to contango, so there's a negative roll "yield" now. Going forward, "longs" are fighting that roll yield AND demand destruction.

This is similar to the comments made by McClendon of CHK about demand destruction in the natural gas market over $8 -- a few conference calls ago he said that demand disappeared over $8.

My thinking is about what happens if building permits go from 2.0 million back down to 1.5 million (1999, 2000, 2001 levels)? A half-million less houses would start. That would certainly affect demand.

These are exactly the type of comments that many of us like to see here. Right or wrong, you put forth specifics that can be used as aimpoints for discussion and debate. Wanted you to know your knowledge and expertise are appreciated. Hope you'll stick around. Thanks again.
Also forgot, the "risk" that the Iraqi govt actually holds and avoids civil war, the U.S. drawdown of troops, etc.
Just to point out the obvious, it is a lot warmer recently.  Wouldn't that contribute the most to more motor bikes on the road, at least when you first realized that more bikes are on the roads?
I do hesitate to use anecdotal evidence, but the increase in "moped/scooter" devices on the rural highways around here is exceptional. It would be better to check the yoy sales numbers, etc.

Ah, here we go...

Scooter Boom: High gasoline prices have fueled a boom in scooter use in the U.S., the Associated Press reports. "The funniest thing is pulling into a gas station behind an SUV and seeing them pay 75 bucks" to fill their gas tank, one New York City scooter enthusiast says. It takes about $5 to fill the tank of a typical Vespa-like vehicle.
True but not for the weather, they would be travelling another way.  I only say this because I live in the midwest where we see some extremes.  Literally it can get to 105 and this at 100% humidity, so it's more like 115 or so.  Then we can get dumped on in the winters with some heavy snow.  

So yes sales are up, but in the winter how much will they be driving?  I owned an 04 gsxr750 for those who know what that is.  Beside the fact that nothing on the road could touch me I was getting nearly 40~45 mpg and this at cruising speeds around 80 mph.  I loved it even though it was premium gas.  Now I couldn't enjoy that benefit except maybe 6 mos out of the year, hence the reason I got rid of it.  I will say I was thinking more along the lines of a true motor cycle, rather than a vespa so I stand corrected.  Vespa's probably do make a lot of sense for many people.

Getting back to anecdotal -- I actually noticed the increase in the winter, but it was also an unusually warm winter. There was no snow accumulation in mid-state NC this year.

I can image cities enacting "no car" zones eventually. Delivery trucks would have hours, but the rest of the time would be all scooters, bicycles, Segways, touk touk taxis, public buses, etc.

Copenhagen Denmark is talking about banning private cars (they do not have SUVs) from the "Old City" either now or when they build Phase II of their Metro; a ring around the older part of the city.  Some discussion about whether to allow taxis.

Service, delivery & gov't vehciles allowed.

The imports of gasoline, 1.6 MB, are sustainable?

No gasoline usage is sustainable, by definition, period. Well, except if we use 2 trillion barrels every 300 million years or so.

George Olah says that we can make as much gasoline as we need, if that's what it came to. Although he'd prefer that we make methanol. Dr. Olah, nobel laureate in chemistry, has a book out about just this issue -- of course we'll needs loads of wind turbines or Stirling Engines to create the electricity!
Ive personally spent hundreds of hours looking at possible answers to whats coming (in addition to the givens: more wind, conservation, efficiency,etc) Methanol seems to be the one darkhorse. But its damn poisonous... I need to learn more about it. Havent read his book yet - do you recommend it?
The Olah book was good. A lot of chemistry. He is an expert at hydro-carbons specifically. His suggestion to convert to a methanol economy is thoroughly detailed (including poisoning issues, environmental issues, distribution issues, etc). It's very comprehensive.

To get the electricity that he says we'll need, I think that CSP aka Stirling Engine technologies will provide the answer -- and you can see my calculations posted here on TOD with this link. Consentrated Solar Power

The fact that SAIC and Boeing are working on these also leads me to believe that something good will happen. A company called Stirling Energy Systems is under contract to construct an installation that is more than all other U.S. solar projects combined.

I know someone associated with Sterling and apparently the (current) problem is that the required maintenance and downtime are way higher than pro-forma - I guess thats to be expected in a new technology. thanks for your thoughts - Ill add Olah book to my growing list. It will be read right after the 1970s classic "Heating Your Home with Coal"
Downtime and mantenance are high not because the tech is new.  It isn't - Those crank stirlings had hundreds of millions poured into them in the auto program and other places for at least 30 years.  The problem is very well known to every stirling engr, and  it is solvable- the seals leak.  They leak gas out and oil in.  The solution is not to keep messing with seal designs but  to get rid of the need for oil.  Use free piston stirlings working on gas bearings without oil.  They have proven life of many tens of  thousands of hours. They scale up to any size,. You can verify this by looking it up on NASA space power sites. Damned if I know why  the SES people don't do this.

Keep bugging them to release their mean time to failure data.  That might shame them enough to get off their ass and start doing it right.  I hate to see a great opportunity to do something important in solar energy being trashed because of what seems to me to be blind stubbornness.  I would love to be proven wrong here.

I have posted a pro-E85 essay from ethanol advocate Joseph Miglietta:

Joseph Miglietta On E85

It is in response to my recent essay on E85. I don't plan a formal rebuttal, but will get around to posting something in the comments section (although he has already received one substantive rebuttal in the comments).

As soon as I get a bit more time, I am going to pull together an essay comparing Brazil and the U.S. With all of the talk about the "Brazil miracle", I think it is time to inject a dose of reality into the situation.


Robert - Ive been thinking about the Brazil ethanol numbers. While using sugarcane is surely worlds better than using corn, I think they too are guilty of a double counting, or 'mis-counting'.

Lets take the commonly used 8:1 EROI number in the media. To me that means they start with 100 MJs and produce 800 MJs. I believe what they are doing is starting with 100 MJs, getting 50 MJs of electricity from the sugarcane bagasse, and producing 400MJs of ethanol. The 8:1 arises because they reduce their 'input' from 100MJs to 50 MJs because they feed the bagasse back in to the process loop. These numbers are not precise but are illustrative. Is this your understanding as well?


p.s. Hawkeye Holdings, the nations third largest ethanol producer, filed for a $350 million IPO today.

I will have to read through the papers I have and see. That is exactly how the USDA has done their acocunting. I know that 8:1 sounds very high. I guess one could calculate how much it could theoretically given the solar insolation and photosynthetic efficiency typical of plants.

I have an essay on Brazil ready to go. I am about to put it in the queue here.

Maybe I need to file an ethanol IPO. My business plan is that if I raise enough money from the IPO, I might think about building an ethanol plant.


RR - you are starting to sound like a chemical engineering version of AlphaMaleProphetofDoom...
Interesting article at the Asian Tribune: Oil Boom Threatens to Trigger Arms Spree

United Nations, 31 May, (IPS): The unprecedented rise in oil prices -- from an average of 22 to 28 dollars per barrel in early 2005 to over 70 dollars last week -- is expected to trigger an increase in arms purchases by some of the world's leading oil-producing nations, including Saudi Arabia, Algeria, Venezuela, Iran, Nigeria and the United Arab Emirates (UAE).

If history has a way of repeating itself, a significant portion of the growing petrodollars will spill over into the coffers of the world's five leading arms merchants: the United States, France, Britain, China and Russia.
After the first Gulf War in 1990-1991, U.S. weapons exports doubled to more than 30 billion dollars, around the same time that oil prices peaked at 40 dollars a barrel, says Frida Berrigan, senior research associate at the New York-based World Policy Institute's Arms Trade Resource Centre.

"In the midst of the 'oil crisis' of the early 1970s, Iran and Saudi Arabia alone accumulated 40 billion dollars in cash revenues, much of which they spent on weapons," Berrigan told IPS. She said that during 1973-1974, those two countries plus Kuwait spent more than four billion dollars just on U.S. weaponry alone.

The unprecedented rise in oil prices -- from an average of 22 to 28 dollars per barrel in early 2005 to over 70 dollars last week -- is expected to trigger an increase in arms purchases by some of the world's leading oil-producing nations, including Saudi Arabia, Algeria, Venezuela, Iran, Nigeria and the United Arab Emirates (UAE).

The last time oil was at 22 dollars per barrel was in February of 2002 and the last time it was at 28 dollars per barrel was in September of 2003. Prices opeaned in January 2005 at about $42.50, and has never been lower. By late February of 2005 prices were in the low 50s.


I don't mean to nitpick but I do wish people would check their data before posting their guesses. I know this is not your data Mike, but the folks at IPS should be more careful.

Mike A,

Not only is this true but it will give a boost to the economies of the selling states. Usually what is bought is not top of the line, but often the older stuff just one generation behind the latest.

Also on Iran and the ethnic tensions, see Christian Science Monitor:

Ethnic Persians make up a little more than half the total population of 69 million, but there are sizable minorities - in addition to the Azeris there are ethnic Arabs, Baluchis, and Kurds, for example. Some of these groups, furthermore, practice Sunni Islam instead of the Shiite branch of Islam, the state religion. The Iranian Constitution guarantees the rights of ethnic and religious minorities, but in reality the central government emphasizes the Persian and Shiite nature of the state.


On the Iranian note I have been wrong in some earlier posts. Iran does indeed have some refinery capability, which tells me I should listen more to my common sense than what I read on the NET!

Gareth Smyth, The Financial Times:
A leading Iranian parliamentarian on Sunday warned President Mahmoud Ahmadi-Nejad he would need to spend an extra 5bn Dollars this year to pay for subsidies on sales to motorists of imported petrol and diesel to avoid politically sensitive rationing.

Kamal Daneshyar, head of the parliament's energy commission, told Reuters the government needed to withdraw the money from the Oil Stabilisation Fund (OSF), which collects windfall oil revenue for contingencies and investment. He later told the FT this was in addition to the $2.5bn (€2bn, £1.3bn) already allocated in the budget for the year March 2006-March 2007.

But the allocation of OSF funds to maintain subsidies would fly in the face of Mr Ahmadi-Nejad's promises to maximise spending on capital projects, especially in Iran's regions.

Current government spending is already due to rise 20.5 per cent in the current year, according to Iran Economics, the leading Tehran monthly. With inflation put officially at 13.5 per cent, this represents a significant increase in real terms.

The fiscal pressure over petrol imports results from the antiquated state of Iran's refineries and subsidies which keep the price for motorists at 9 cents a litre.

Despite having the world's second-largest proven crude oil reserves, Iran imports around 40 per cent of its petrol. So while rising global oil prices boost Iranian coffers and are celebrated by Mr Ahmadi-Nejad, the subsequent rise in imported petrol prices has become a domestic issue.

Little progress has been made on a $15bn plan to revamp five existing refineries, build three new ones, and so increase production over five years from 40m litres a day to 92m litres.

Yes, those shiny new weapons did Mohammed Reza Pahlavi a whole lot of good.
Given the computerization of modern weapons, I wonder how many third world countries trust that weapons bought from the US would work against the US should it be the aggressor?  Pretty simple matter to put hidden software in place that responds to coded signals intended to cause the weapon to go off course just enough to be a near miss.  Who'd know or be able to prove it?  Just imagine the difficulty proving that a weapon with dozens of computerized black box modules hasn't been rigged.

Does anyone know how many high tech weapons China is selling to the rest of the world?  I would think they'd be developing their defense industry aggressively since it allows them to stock their own fort as well.

My guess is that China and Iran are happy weapons for oil trading partners.  I also doubt Iran will buy many weapons from the US.

There are no great american gun manufacturers anymore that the world clamors for.  Winchester is up for sale right now if anyone wants to buy it.  Isn't this the company that paved the West?  Yeh well it's done.

http://www.stltoday.com/stltoday/business/columnists.nsf/davidnicklaus/story/57BC537F8B87D2AE8625717 100107E21?OpenDocument

I don't really buy modern firearms but [for the sake of discussion] how about Ruger? [Sturm Ruger & Company] Great 22 semiauto pistols and long guns; rugged revolvers; and the M77 bolt guns among others. I understand that the firearms operation is doing quite well, while the investment casting operation which at one time was the bulk of the company is not faring as well.

Iran is right there with Venezuela on buying weapons from not USA! But Saudi Arabia and the Gulf States are good to the USA.

China does have an export trade of fighters mostly to 3rd world countries, and mostly improved Mig-21's. Small fast patrol boats - a few for export, guns, artillery, and some tanks. Think inexpensive here, which is a lot of appeal to Africa for example.

Actually the trading patterns on weapons are quite interesting. So, for example, Pakistan and China have a long standing arrangement involving fighters and tanks. They do joint design work too. China actually has the biggest tank with the biggest gun in the world, though I am sure its electronics are not up the USA standards. And this is because India lies between them and don't forget China and India still have a disputed border - fought a war over it in the 1960's. India got crushed in it.

And Iran and North Korea, well, mini-subs, missiles, and nukes are a well trodden trade trail between them.

I'm interested in this. I have a thing for tanks. Can you throw me some links on the model and specs?
That with a "logic bomb" in the fighter jets' "car computer" is a good point. I thought of that idea to keep a lid on Israeli aggression. That way, if they get carried away, you disable the planes and send in repo pilots who can re-enable them and reposess them.

The temptation is sure there. That means that buyers will look for a more "trustworthy" arms dealer like China who doesn't overdo the computers. The alternative is to have the planes and stuff reprogrammed by a third party, like computer geeks from India. It's the equivalent of getting a "hot rod chip" for your car's computer. And you eliminate the repo code.

It seems like the oil-for-guns theory will be demonstrated in  a brand new oil province, East Timor.  The army has just had a shootout with police.  Perceptively the oilcos have decided not to pipe the oil and gas onshore where it can be sabotaged.  I think the first royalty cheque was $A200m and that will increase with output. The locals won't see any physical oil, more likely a queue of arms dealers.
A question from a friend of mine.

Does anybody have any advice to give someone who has, unexpectedly, inherited some working interests in oil wells?

They would be, mostly, in the Smackover region.

Are there resources out there for getting a non-oil person up to speed on how to evaluate this type of thing?  (Risks, value, etc.)

The Oil Drum being the first stop, of course.

  The current operator of the wells may have some information on the reserves. Are the wells in the vicinity of Smackover Arkansas or in the Smackover formation? To get a rough idea of the value take the production sales price and subtract the lease costs not forgeting about Ad Valorem taxes ect, then multiply by the number of months that the leases should be productive and calculate the present value of the revenue. It all ends up being fairly subjective. Also, are there any more formations that might be productive? How much acreage did the wells earn? What rights did the owners of the interest earn to drilling new wells, if any?
  For selling the interests first get the division order from the oil company that purchases the oil and write a letter to each of the other participants and see if they would like to purchase the interests. The operating agreement probably gives the lease operator the right of first refusal. You might also see if the operator will trade the working interest for overriding royalty which bears none of the costs but gives a share in the production.
  You might also have him/her give me a call at 409.392.7497 or email me bobebersole2004@yahoo.com.
Thanks.  I'll pass your reply along.  You'll probably be getting an email.

Her biggest fear is they go into decline and end up being a financial drain and she can't unload them.  Though they are profitable, right now.

That could certainly happen. The real problem may end up being her personal liability for plugging and cleanup costs. Most wells are in Limited ( liability ) Partnerships for that reason, or in Corporations. And the lack of liquidity and high risk of losing money is why the SEC limits to whom an operator can sell working interest. The flip side is that no one is going to pay what they think the wells are worth, they want to make a profit.
  I personally don't see the possibility of many more wells being plugged unless prices fall substantially-below $30.00 a barrel. Almost any well will continue to ooze a couple of barrels a day-$4200 a month at today's oil prices-and if the Operator knows his business and keeps his costs down should make a little profit. I've got several reentries I'm working on because I expect prices to double by 1988 with the halfwits we have in Washington. But, who knows, maybe Antartica will melt and become one giant oilfield or Santa Claus will bring us all 10 Trillion Barrels for Xmas! Five cent a barrel oil again.
Get a good attorney.



I will add one thing: In his book, Deffeyes says he advises against owning an oil well unless you really, really know what you're doing. I think, as OMB pointed out, the cleanup costs and similar liabilities can get nasty. Deffeyes' advice was to invest in an oil and gas royalty trust.



That pit I feel in my stomach, the one I get from an attorney saying, "Get a good attorney", do you think that's genetic?  Or, a learned response?  :-)

How ironic, the inheritance that bankrupted the heirs.

Wonder how one refuses an inheritance?  Sigh.  Talk to an attorney?

Thanks.  I do appreciate the feedback.

It's a primal response.  Back in the hunter gatherer days, that pit-in-the-stomach feeling was there to tell you there was some rapid bloodthirsty animal looking to eat you somewhere near by.

"Insert generic attorney reference here"



There are many things worse than owning working interests in profitable oil wells in 2006. These things are marketable and probably marketable at a price of $30,000 to $40,000 [or maybe a whole lot more] per bbl per day of settled low cost production. Note that these numbers are well below the discounted cash flow, but a bird in the hand [with the aggrevation in the bush] is perceived to be better than the other way around. Sorry about the metaphor, but it seemed apt at the time. :-)
R W Reactionairy,

Interesting.  I'm curious.  How did you come up with that valuation?


I want to thank everyone for such wonderful comments in this thread.  You folks are great!

It was a range of numbers my operator gave me a few months back. Basically compute a monthly cash flow number [including a reserve for occasional rework or major repair -- things do break down over time.] Multiple that by a number of months.

Cheap properties might sell to result in a 24 month payout [probably a screaming buy if there a no undisclosed issues -- there usually are]. Expensive properties -- the sky is probably the limit but for a reasonably motivated seller for a property with no upside maybe twice that in terms of months to payout? I suspect that Bob and many other's have a better feel for the market a present that I do.

Ultimately what is is worth is either the value of the stream of revenue earned prior to abandonment net of expenses [which will only be visible in the rear view mirror] ... or whatever the market will bear in a buyout. If I were in your friend's position, and the operator and the property itself were solid, I wouldn't be in a hurry to sell, but there are obviously many factors to consider.

One more question.  What does low cost production mean?

For instance, let's say you have you're getting a check for $10K/month and your paying out $6K/month.  Is that high?  Or, low?  Or middlish?

Any rules of thumb?

Probably fairly high given that prices are up. Although costs of pumping and maintaining wells are up, the price conponent of the revenue side can [as we have seen over the last few years] be very volitile.

Net revenue will fluctuate upward or downward in proportion to the posted price multiplied by the percentage remaining for the producer after the royalty payment to the mineral rights holder and the state severance tax. Most of the stuff I am involved with this works out to roughly 75 cents on a dollar of reveue from a dollars change in the posted price. [BTW the posted price is a general information item -- oil quality, transportation issues and negotiation can result in prices higher of lower than the posted price.

What this means is something that you can compute at various oil prices by holding the monthly costs level and changing only the price conponent of the revenue stream.

Being a long term bull on prices, I wouldn't expect this well to start to deliver a negative cash flow anytime soon, but I know nothing about the expect rate of decline etc. As described above it isn't that difficult to compute a break even point. This would be a good starting point in answering your own question.

On last thing. Don't rely completely on monthly costs as occasional rework / major repairs / the annual property tax [aka "ad valoreum" tax in Texas as mentioned by Bob] etc must be included to get a true picture of costs. BTW, as is obvious to readers of this site, depletion / decline is real, but based on geology some production can continue for decades with only minor declines. It simply depends. Hope that helped.

Very helpful, thanks.
If I had it to do all over again, I might opt for investment via trusts. If oil prices remain strong, most will do well.

However, bear in mind that all trusts are not created equal. Canadian Trusts are often chartered to explore and produce new prospects, so they have more potential upside, but also more potential risk. Canadian trusts are also subject to withholding that makes them less attractive for IRAs.

Read the terms of the trust as they are are specific to that trust. For example, IIRC Prudoe Bay does not convey rights to the natural gas that will ultimately be produced nor does it grant continuing rights to revenue from oil after production drops below a specified level.

Before I would get an attorney, I would retain a consultant to evaluate what you or your friend actually has. I have spent a little time attempting to evaluate well logs and about all I tell you is that at least with the older logs it is both a science and an art and I am neither a scientist nor an artist. :-)

Having said that, my general advice is to examine the decline curves, the water cut and the history of operating costs of your production. Also determine how other wells in the area have produced over time from the same formation. Analogous situations are often helpful. ollectively these things will tell you a lot about what you need to know the prospects for continued production ... but as Bob indicated, you should also see if there is any upside in the form of zones that may be productive that have never been perforated or which were abandoned in favor of a more productive option in times of lower prices.

On to a lighter note. :-) .... Most of the bad things that can happen have probably happened to me. Road wash outs, lightening strikes, casing collapses, salt water spills, oil spills, grass fires, wind damage to power lines, damage to pumps and engines due to pumper negligence, and even a river shifting course leaving an idle well bore [bought as part of a package] several feet out in the Canadian River.

It is hard to generalize, but the salvage value of the casing, tubing, rods, pump and pumping unit, and tanks generally exceeds the plugging and remediation cost. Accordingly, that particular concern would not be high on my list of potential difficulties.

One other thing of considerable importance: Check out the operator. Try to determine if they are solvent, in any event make certain that they are carrying the insurance specified in your operating agreements. Also, although working interests do not generally equate to partnerships, flakey or insolvent co owners can make the whole a deal a lot less fun.

OPEC Spare Output Capacity to Triple, Barkindo Says

May 29 (Bloomberg) -- OPEC's spare oil output capacity may triple by 2010 as member countries spend $100 billion on exploration and production projects, acting Secretary General Mohammed Barkindo said.

Spare volume by the Organization of Petroleum Exporting Countries' member could increase to 6 million barrels a day from about 2 million barrels a day currently, which is concentrated in Saudi Arabia, the U.A.E. and Nigeria, Barkindo said today in an interview in Caracas.

OPEC's spare oil capacity may triple by 2010...

"Yes, yes, yes, yes, and what if the core is made of cheese? This is all best guess commander. That's all science is, is best guess..." (sorry famous quote from a movie)

As it could also go the other direction as they spend $100 billion on exploration and production projects...


Heavy Sour Crude spare capacity is not nearly as impressive as Light Sweet spare capacity. There current spare capacity is heavy sour and it does not seem that the refineries are too excited about high sulfur crude.
We my as well get excited about oil shale and tar sands while were at it! Hocus Pocus
Demand destruction can do as much for spare capacity as drilling!
Explain this phrase "Demand Destruction" to a newbie such as myself... I have not a clue as to what this means... of course I can google it, but I will await your kind response :)
Some divide reduced consumption of oil into two types; conservation or Price elasticity of Demand is one type.  Demand destruction is the other.

DD is the nasty forced conservation,  Unemployed people drive far less,  Closed factories use less energy.  Dead 3rd worlders use no oil at all.

Other people mix conservation/price elasticity with the nasties and call them both Demand Destruction.

Thank You for the explanation sir :)

OPEC's spare oil capacity may triple by 2010...

 A skeptic might say this is true...from 100,000 bpd to 300,000 bpd....

Yes. This is what I thought at first. Low base effect.
Nigeria: Residents Protest Power Outage, Beat Up Officials

SOME residents of Abeokuta, the Ogun State capital yesterday stormed the Lantoro office of the Power Holding Company of Nigeria [PHCN] to protest non-supply of electricity in their areas in the last seven days and beat up some officials of the company.

The PHCN office was vandalized and two vehicles belonging to some staff of the company had their windscreens smashed during the protest.

The protesters said to be from Lantoro, Oke Aregba and Idi-Aba areas were said to have arrived about 8.30am chanting war songs and insisted on seeing top officials of the electricity company whom they wanted to explain to them why there has been no supply to their areas in the last seven days.

While the gateman was said to have refused to open the gates, one of the police security guards was said to have fired a canister of tear gas to disperse the crowd.

The protesters were said to have been infuriated by the development and resorted to hurling stones before forcing themselves into the premises and beating up every body in sight.

Abeokuta is the historic capital of the Yoruba people and the birthplace of current (till next year) president Obasanjo.
Here's something I haven't heard talked about: Many (if not most) nuclear power plants are built very near the ocean (in order to take advantage of plentiful water for cooling). If global warming causes a large rise in ocean levels, won't that put most of these plants underwater? Oops, there goes an important non-greenhouse-gas energy source just when we would need it most.
Climate change is definitely a concern when it comes to infrastructure of all sorts.  

The drought in the southwest affected nuclear power plants, because water levels dropped so much their intake pipes were left high and dry.

won't that put most of these plants underwater?

Well, that is why Price-Anderson exists...to shield the corporations from the libality.

Other ways the water can rise (then fall):

  1. Ice shelf collapse
  2. Tital wave from earth crust shift
  3. Meteor hit
  4. The loose rock on that island falls into the sea.  (40 foot waves in Boston is what could happen)

Then you have the gov. backed flood insurance.
 ....In his office in Washington DC, Rich Cizik, vice-president of the National Association of Evangelicals, the largest such umbrella group in the US, is also feeling battered. His mistake has been to become interested in the environment, and he has been told that is not on the religious right's agenda.

    ...."It is supposed to be counterproductive even to consider this. ... Twenty-five church leaders asked me not to take a political position on this issue but I am a fighter," he said.

    Another Washington lobbyist on the religious right told the Guardian: "Rich is just being stupid on this issue. There may be a debate to be had but ... people can only sustain so many moral movements in their lifetime. Is God really going to let the Earth burn up?"


It's not the heat, it's the stupidity.

I've been scratching my head at the fact that the armeggedon-obsessed religious right have NOT seized on PO and Climate Change. After all, we're talking apocolyptic stuff here...don't they WANT the rapture to happen? And I'm sure Jack Van Impe could find something in the Good Book about Peak Oil if he just looked hard enough (and lord knows he's up to the task!)
They don't WANT the rapture to happen

They want us to BULEIVE the rapture will happen. And they want us to live with this thought all our lives so that we are, well controllable.

Getting to something real is not in the interest of the faith.

It does no good to argue that the Rapture is a 19th century invention which over 1800 years of Christian theologians somehow overlooked. Christian fundamentalism is also a late 19th century invention of evolution denialists.
Christians used to say that extinction was impossible because God would not let one of his creatures go extinct.  Many extinctions later and you don't hear them saying this anymore.  Crazy to hear them saying the same thing about global warming and oil depletion now.
I routinely get emails from people using my site (http://www.lifeaftertheoilcrash.net) to prove to their non-saved friends that the "end is near" and they had better get right with God so they will be raptured out or they will suffer as the oil crash hits.



As far as I am concerned, they want it to happen....and as soon as possible.  I think that most of them, however, are focused on "armageddon" being brought about by nuclear holocaust and general pestilence, not something as boring as peak oil or climate change.  Of course, that assumes that peak oil and climate change will lead to something like "armageddon" and whether one believes in the "second coming."  I don't believe either, although I do believe that peak oil and climate change will bring "difficult times."  
Heck, I can't wait for it to happen either.  They're a pain in the ass, and the sooner they rapture outta here the better off the rest of us will be.
Think about how few real believing christians there are out there.  It's not even going to put a dent in the overpopulation problem...
   I don't think it is the real christians causing problems.  Just as it is not the "good" moslems.  Fundamentalism tastes bad in every flavor.  Not a lot of extremists bhuddists out there though....


Strange that these gentlemen are not willing to let God solve on his own "problems" like gay marriage or secular public education.
They only take this laissez faire attitude with regard to trivial matters, like the fate of the whole planet.
God helps those who help themselves to nukes first.

(And of course, those who stop the "them who hate our freedoms" from also getting nukes. That's just basic Rapture 101. Needs no repeating.)

Got an email from the "Glenn Beck" show on CNN to come on and discuss oil. I said no thanks, call richard heinberg or mike ruppert.

Thought you folks might be interested. Beck is pretty right wing. Interesting to see where he takes this.



Man, you should have done it.  You could have worn a long hooded cloak, and carried a scythe, that would have been hilarious.
Seriously though.  Maybe you should have pointed him to Roscoe Bartlett.  A right-winger like him would be treated much more respectfully on the show.
How about Al Bartlett?
Yeah, you're right. I didn't think of Roscoe off the top of my head.

I hope they put Mike on. You see the big difference between Mike and me is Mike's crazy, albeit in a good and absolutely necessary way. Here's how and why:

Imagine we're back in the caveman hunter gather days. Somebody runs into the cave and says, "holy mother of god there is some gigantic beast out there and I think it's fixin to eat all of us!!!  Hey Matt, you want to go out there and check it out?"

My response would be "hell no bitch. I'm staying right here where it's safe."  

Mike would go check it out.




I wouldn't even have to change clothes.



Why turn it down? The publicity would help raise your profile. Use it as an opportunity to sell your book and push your website (free advice is worth what you pay for it).  
Brian T,

There are different types of peak oil activists. There are those who secretly wish to be dictator and are simply using the fear inspired by this issue to turn themselves  into a local "shot-caller." For them, a spot on CNN would further their (personal) agenda for obvious reasons. Then there are those who wish to get jobs as policy analysts. A CNN spot would help them too as it would make them look "respectable."

Me? I simply want to make enough money so I can finance an apocalyptic religious cult . . . I mean "multicultural eco-commune" out in the woods. For me, it's best I keep my head relatively low. In American culture, you're not something to be worried about until you're on televsion.



This from MSNBC

Operators of the mines, which have helped make Canada the largest supplier of oil to the United States, believe they can find technological solutions to the environmental problems.


Is Canada really the largest supplier of oil to the US?  I thought Venezuela had that honor.

Yep, Canada is #1.  According to the DOE's Annual Energy Review 2004, table 5.4, US oil imports in 2004, in thousands of barrels/day:

Canada: 2,118
Mexico: 1,642
Saudi Arabia: 1,556
Venezuela: 1,521
Nigeria: 1,119

Lou, I had a post last year that cited DoE numbers that had Canada and Mexico as dead even, but the link to the data's broken...(it's not in the ASPO report I linked to).

US Oil Suppliers (Mb/yr)

Canada 584
Mexico 584
S.Arabia 548
Venezuela 475
Nigeria 402
Iraq 256
Angola 110
UK 110
Algeria 73
Kuwait 73

(Source: US DoE and ASPO)


Speaking of IRAN, does anyone know what happened to the oil bourse which was to begin trading in Euros this month??
Re:  Iran

I was just listening to Chris Matthews, and he had the same response I did to the news item regarding Iran, i.e., the US will negotiate if you drop your nuclear weapons plans.  Chris said that it sounds like an ultimatum, and I agree.  It kind of reminds me of the ultimatum to Hussein that he had to leave Iraq within about 24 hours or so.

Good way to know if Bush is really, really crazy--he attacks Iran on June 6, 2006--6/6/6.  

WASHINGTON (AP) - The United States said Wednesday it would join in face-to-face talks with Iran over its disputed nuclear program if Tehran first agreed to put challenged atomic activities on hold, a shift in tactics meant to offer the Iranians a last chance to avoid punishing sanctions.

Iran dismissed the offer as "a propaganda move."

Indeed, interesting times ahead... especially if Putin follows Iran's lead and dumps the dollar:

In his State of the Nation speech to parliament,, he (Putin) announced that Russia was planning to make the ruble "internationally convertible"


All major global currencies are internationally convertible. Putin's "threat" is to make the ruble trade  like many other currencies. The Thai Baht, for example, is internationally convertible, but no one is shaking in their pants about that are they?

The whole obsession with bourses and and currency plots is grasping at straws. In the greater scheme of things this news is super trivial (a stage just above meaningless).

All this comment about Iran and Russia "dumping the dollar" is a triumph of wishful thinking over logic or understanding of global markets.

No. You are using wishful thinking over logic. The Petrodollar status that the greenback currently holds is very important to the US economy. If you are not aware of this, research the subject.
Your comment doesn't even mean anything. The U.S. dollar doesn't hold any petrodollar status. Petrodollar is a term for dollars that are paid in exchange for oil and held by oil exporters.

I remain convinced that you and the other bourse cultists are clinging to this out of faith. If you could put together any argument that didn't have its only fact wrong, I am sure you would have done so.

In other words, the dollar does have "petrodollar status" -otherwise the terms "petroeuro", etc. would be current.
Oil producing countries hold currencies according to a predesigned strategy according to a number of factors, especially risk and return and exchange rate management.

Presumably these countries want to hold a diversified portfolio and do hold a lot of Euros. So there are in fact PetroEuros. On the day that the oil exporters want to hold more Euros than dollars - which may happen - there will be even more PetroEuros than there are Petrodollars.

But this is all based on a decision by countries regarding what currency they want to hold assets in, not the currency symbol before the oil price.

The term Petrodollar is in wide circulation because of the prominence it played in the economic problems of the 1970s - as well as the obsession the conspiracy minded have with this issue.

Nonsense. Currently, if you want to buy SA oil, they are requesting payment in greenbacks.If SA decides tomorrow that they will be requiring payment in Euros, it will affect the USA economy big time. I don't even know why you are debating this (BCR wouldn't agree with you).
Go back and look at the extensive discussions on the oil price on this site as well as Daily Kos and Econbrowser, where it has been debunked repeatedly.


I would go back and find all the links but it is late night where I live and I am going to bed. I'll be happy to pick this up again.

If a transfer of dollars is required for oil, it only requires the participants to hold dollars momentarily. It is the long-term holding of dollars, not the price of a commodity that underpins the dollar.

Who is BCR?

Uugggh! I fell for you, man. Smekhovo and Brian are the latest Bourse newbies. Let them go back and read the debates, or else bring something new to the table. You've done enough.
Thank you. Actually I enjoyed the earlier discussions with Lads, LevinK and others, who were intelligent and informed. These two just want to insult and run.

I was pretty sure that once I posted a link and waved a tiny bit of evidence they would scurry off and take their attacks to other threads where they can try to shut down anyone who doesn't buy into their little doom fantasies - which they have done.

I'm still willing to debate this issue with anyone who wants to base the discussion on facts.

I didn't scurry off. Your mind is closed shut on this topic. What is there to discuss?
IMO, I have posted enough on this site to make it evident that I am not in the "doomer" camp. However, by your description "doomer" probably includes anyone that does not agree with all decisions by BCR.    
Why don't you link to a few of your posts on this subject. I haven't seen anything substantive out of you yet.

I asked a few posts ago who BCR is but now guess it is one of the nicknames for Bush, Rumsfeld, Cheney. If so, you are wrong about my opinion. After the third grade you don't judge what people think of others by how many nicknames they can make up for them.

Did you read the Econbrowser link, or do you prefer not to hear an educated discussion on the Iran Oil Bourse? Bet I can guess.

June 6th, right. Maybe the opposing camp will have done some homework by then. If not, we'll look like Brazil in this year's World Cup (I hope).
I will agree that it's not in any of the major countries best interests to "dump the dollar."  However it only takes one more blow to the status of the dollar.  We haven't had national debt's grow this fast.  We haven't had trade inbalances this large.  Do you have a clue as to what the unfunded liabilities that SHOULD be on the books?  It's somewhere between 40-50 Trillion dollars.  That's what we don't talk about when it comes to prescription drug coverage and medicare.  

There is NO ONE who is addressing this issue.  We've got a Fed that monetizes the debt through caribbean intermediary banks by "unconvential means" that Bernanke promised to use. Then we are lied to about how bad it really is. We've never been in this state of total denial in the face of looming financial crisis.  Now tell me, as a country do you want to be the first to get out of the way or the last one holding the bag?

France is happy that they converted dollars to gold at $35/oz.

When the UK was gathering together $1 billion in US $ to redeem (yes, once upon a time major nations did not have tens and hundreds of billions of greenbacks lying around) the US found out and stopped converting $ into gold.

It's interesting to point this out.  I have read multiple accounts of when the US abandoned the gold standard.  The earliest is 1933 through a bank law.  However following WWII and the Bretton Woods agreement, it was agreed that cash was convertible to gold.  So we did have a defacto gold standard until 1971.  France recognized this weakness and wanted all our cash converted to gold for payments up until the point Nixon realized we would be totally broke without our gold so we abandoned it again.  Now we got this worth less piece of paper.  
I have discussed the dollar, oil price, and bourse issues at great length on this site and never disputed the point that you bring up. My point has never been that the dollar is invulnerable or that currency U.S. policy makes any sense - it doesn't.

The U.S. government is a far greater threat to the dollar and the Iranian or Russian governments.

You summed it up perfectly.
It's more obvious pre-positioning.  Soon the UN will have shown it's inability to act, we will have demonstrated our sincerity by going the "last mile" (spurned by those evil wretches) - and well, there just won't be any choice, will there?  I still can't believe people fall for this crap, even though I know they will.  

It's just like the opening scenes in one of those vigilante movies, where the good guy hero has all these awful things happen, so as to justify all the awful things he's about to do.

A couple of other thoughts:

I'm starting to wonder if the Russians might not really want us to do Iran, at least if doesn't get too out of hand.  We and the Iranians get beat up, the price of oil goes through the roof - could all be benefit for them.  If it wasn't for the oil price issue, I'd bet much of the rest of the world wouldn't mind seeing us go at it either - no one much likes either of us anyway.

And the Iranians would have to be fools to negotiate seriously with the Bush administration (no sign of that).  Certainly they noticed how things went down next door, and how real could an offer of negotiation be that begins with "first you totally capitulate, then we talk"

I think you are correct. An attack on Iran will definitely drive a wedge between the USA and Europe, which is good for Russia. It is even possible that it could cause the UK to distance itself from the USA.
From this article comes:
In May 2006, Minister of Economic Affairs and Finance Davud Danesh-Jafari said the Oil Ministry has a two-month deadline for presenting the Articles of Association of the Iranian Oil Bourse. Danesh-Jafari said that the Euro had not yet been finalized as the legal tender of transactions in the oil bourse, and the final decision about that depends upon the Oil Ministry's proposed IOB Articles of Association

It's supposed to be opening on the island of Kish. Meanwhile the Russians are planning a market denominated in rubles.

There was a discussion a little while ago about increased carbon dioxide concentrations being beneficial to plants. There is now concern over rice. IRRI scientists are saying that if CO2 levels doubled, then rice yields would fall by 0.15 tonnes per hectare. There are projects to create rice plants capable of withstanding higher temperatures as well.

link :-

Maybe mentioned earlier somewhere, but I see Ford are now offering $1000 of free fuel to new car buyers:


How much longer can Ford and GM do this when they are already losing money so fast?  Do they think people expect current oil prices to be a temporary glitch and something like this will tide them over if they buy a gas-guzzler?  Look like desperation to me.  I read lat year that some analyst expected an even chance of one of the "big three" going under by the end of the decade.  At this rate it might be two.

"Do they think people expect current oil prices to be a temporary glitch and something like this will tide them over if they buy a gas-guzzler?"

I guess that they do think this. However, it doesn't matter much in terms of the offer. I am sure they immediately hedge any oil exposure they get. So the $1000 gas offer costs them $1000 plus (very small) transaction costs regardless of price direction.

So they question becomes: Does anyone out there really "expect current oil prices to be a temporary glitch"? And the answer is obviously yes, a lot of people do. Oil futures markets are deep and am sure Ford is having no problem finding people willing to take the other end of their forward contracts.