Archive for February, 2011

Preventing Insider Trading and Market Manipulation in Wholesale Energy Markets

Late last week, international law firm WilmerHale published a very thorough review of the European Commission’s (EC) recently proposed rules aimed at preventing abuse in wholesale energy markets.

Image by William Maver. Some rights reserved.

The proposal hopes to close gaps in the “existing regime” that were found upon inspection by the Committee of European Securities Regulators and the European Regulators Group for Electricity and Gas (at the request of the EC). While the EC’s  Market Abuse Directive and the Markets in Financial Instruments Directive prohibit manipulation in financial markets, these Directives fail to cover the 75% of energy transactions that occur outside of energy exchanges.

According to the EC’s press release, the new rules specifically prohibit:

  • use of inside information when selling or buying at wholesale energy markets.
  • transactions that give false or misleading signals about the supply, demand or on prices of wholesale energy market products
  • distributing false news or rumours that give misleading signals on these products.

While the EC claims to be unaware of any particular cases of price manipulation in the EU, they are quick to make an example of the US. Amaranth Advisors LLC, an American hedge fund, “accumulated massive natural gas holdings in the form of derivatives […], pushing up prices and making huge profits. It is assumed that an Amaranth-style market manipulation would inflate gas and electricity bills of European businesses and industrial users by some Euro 1 billion.”

At least we had the rules to deal with it (eventually) – 18 CFR § 1c became effective in January 2006 after the passage of the Energy Policy Act, and was made famous (well, in certain circles) by the case against Amaranth and subsequent enormous settlement in 2009. Let’s hope for the EU’s sake that their new rules have a more preventative effect.

Wild Horses Can’t Be Broken: BLM’s Proposed Reforms to Wild Horse and Burro Management

The Bureau of Land Management (BLM) yesterday announced the acceleration of proposed changes to the management of wild horses and burros on public lands.

Photo by Chris Willis. Some rights reserved.

BLM estimates that more than 30,000 wild horses and burros currently roam on BLM managed rangelands across the U.S.

But it wasn’t always this way. In the 1971, the Wild Free-Roaming Horses and Burros Act declared these “living symbols of the historic and pioneer spirit of the West” to be “fast disappearing” and mandated their protection by the BLM.

Were overpopulation to occur in a given area, the Act instructed the Interior Secretary to “immediately remove excess animals from the range.” But so successful were the BLM’s protection efforts that five years later Congress had to amend the Act to authorize BLM’s use of helicopters to gather all the “excess” animals.  As wild burros and horses have no natural predators, some herds were found to be doubling every four years. The increasing number of wild animals was putting a strain on the rangeland’s natural resources and ecological balance.

Nowadays, as many of the excess horses as possible are put up for adoption, though adoption rates have not been able to keep pace with the number of horses gathered from the rangelands. There are currently more than 40,000 unadopted horses in short-term or long-term holding pastures. The cost of caring for these foster horses is not insignificant. In 2008, the GAO published a report that concluded that the long-term sustainability of the Wild Horse and Burro Program faces several significant challenges.

On the heels of the GAO report, the FY 2010 Department of the Interior, Environment, and Related Agencies Appropriations Act directed the BLM to prepare a comprehensive, long-term plan and policy for wild horse and burro management. Which is exactly what BLM did. In June 2010, the BLM released their Wild Horse and Burro Program Strategy Development Document for public comment, which drafted “goals, objectives and possible management actions” for sustainable management of the wild animals.

The document – which touched on sensitive issues such as the euthanization of excess horses – drew more than 9,000 passionate responses. It was these comments that prompted the BLM’s proposed “fundamental reforms” to the management plan. In a few days, the BLM plans to release an analysis of the comments and a more detailed proposed implementation strategy online. The public will again be invited to comment on the strategy up until March 30, 2011.

Climate Change: Something to Sneeze At

Has something been aggravating your allergies? Could be climate change, according to a study released Monday in Proceedings of the National Academy of Sciences. The team of scientists behind the study (including a plant physiologist from the USDA) found that from 1995 to 2009, the length of the ragweed pollen season had increased up to a staggering 27 days in various locations as far north as Saskatoon, Canada, and as far south as Austin, Texas. Ragweed is infamous for the severe allergic attacks caused by its pollen.

Photo by AnA oMeLeTe. Some rights reserved.

According to the corresponding USDA press release, the increased pollen season is correlated to a delay in the onset of the first fall frost, as well as general seasonal warming shifts. Such drastic changes to the growing season raise a lot of questions about crop production in the near future and underscore the importance of the USDA’s efforts to stay ahead of the climate curve. You can follow the USDA’s “objective, analytical assessments of the effects of climate change and proposed response strategies” on their Climate Change Program Office website.

BP Oil Spill Continues to Impact Gulf Residents

Photo by Mark O'Neil. Some rights reserved.

Though much of the world seems to have moved on from the 2010 Deepwater Horizon oil spill, the struggle continues along the Gulf of Mexico. Last week, the Gulf Coast Claims Facility (GCCF) announced its final rules governing payment options and final payment methodology after receiving more than 1,440 comments from individuals and businesses. These comments range from pleas to move forward quickly to a 24-page comment from BP PLC itself, saying that Kenneth Feinberg’s allocation of the $20 billion damages fund has been overly generous.

In a recent press release, the Gulf Coast Restoration and Protection Foundation announced that qualified workers will have a second opportunity to apply for financial assistance this spring, stating that “up to 9,000 people might qualify for awards ranging from $3,000-30,000.”

There is another mammalian population that seems to be suffering from the fallout of the spill that cannot even apply for restitution. The Institute for Marine Mammal Studies (IMMS) announced this week that dead baby dolphins have been washing ashore at ten times the normal rate. Some 26 dolphins, many aborted before they reached maturity, have been found along the Mississippi and Alabama coastlines in recent weeks.

Though experts have not officially linked the spike in death rates to the oil spill, this is the first birthing season for dolphins since the oil spill last year. As institute director Moby Solangi told reporters, “this is more than just a coincidence.”

Mortality rates in the Gulf Coast dolphin population tripled last year; with a gestation period of 11 to 12 months, the baby dolphins now being found were conceived at least two months before the Deepwater Horizon exploded.

Meanwhile, in light of the continued unrest in Libya (the world’s 17th-largest oil producer) and the surrounding area, key House Republicans are urging the Obama Administration to move forward with the issuing of offshore oil-and-gas drilling permits. BP has announced this week that it will pay $7.2 billion for a stake in India’s rapidly expanding oil industry; the historic partnership with Reliance Industries Limited is slated to combine Reliance’s project management expertise “with BP’s world-class deepwater  exploration and development capabilities.”

Bi-Partisan energy bill would regulate household appliances, save consumers billions in utility bills

Photo by Flickr user d00d. Some Rights Reserved.

Senator Jeff Bingaman’s (D-N.M.) announcement today that he would not be running for re-election is already causing speculation as to how this will affect the Democrat’s chances of holding a slim majority in the Senate after 2012. Before his exit, though, the five-term Senator, who is also the Senate Energy and Natural Resources Committee Chairman, has more pressing energy matters on his desk.

Bingaman’s office last Friday proposed a bill, one of many bi-partisan energy bills that flooded Congress this week as they prepare to take a week-long recess, dubbed the “Implementation of National Consensus Appliance Agreements Act of 2011” (or INCAAA). INCAAA would provide funding to make a wide range of commonly used home appliances (air conditioners, heaters, refrigerators washers & dryers, etc.) more energy efficient. It would also serve to regulate standards for outdoor lighting, swimming pool heaters, and drinking water dispensers.

According to a post on the NRDC’s blog championing the bill as a “win-win-win scenario” for consumers, manufacturers and efficient energy advocates alike, the standards set by the bill would save $43 billion for consumers annually, plus enough energy to provide for 4.6 million typical American families. This would amount to net savings of $300 billion, or $2800 per American household, by 2030, an impressive statistic that looks even more appealing when you factor in the creation of new jobs and the net positive environmental effect. In a statement made on the House Floor last week, Bingaman said that the bill and its bi-partisan support “represents government at its best, as a catalyst, bringing together stakeholders on consensus solutions to complex problems.”

A helpful section by section summary of the bill is available on the Senate committee’s website, for those interested in a closer examination of it’s particulars.

Why Derelict Government Buildings are Like Brownfields, Why that Matters, and Why Paintballers are Paying Attention

Here’s a follow-up on last week’s “Don’t Forget to Turn Off the Lights Before You Leave,” our post about President Obama’s June 2010 directive to the federal government to dispose of unneeded and underutilized property — and about the GAO’s subsequent Testimony, released last week, reporting that the process was hitting a lot of speed bumps.

As the Presidential Memo has it, the disposal of property offers both economic and environmental benefits: the program’s primary hoped-for outcomes are to “eliminate wasteful spending of taxpayer dollars, save energy and water, and further reduce greenhouse gas pollution.” That is, the focus is on the unnecessary consumption of resources.  But I would argue that there is another, perhaps even more important, environmental angle.

Photo by SomeDriftwood. Some rights reserved.

That angle is brought to light when we compare the government building situation to the EPA’s program on brownfields.  A “brownfield” is likewise a property that is in disuse or disrepair — the “expansion, redevelopment, or reuse of which may be complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminant.”  (See our October 22 post on the topic.) The EPA’s program is designed to “help revitalize former industrial and commercial sites, turning them from problem properties to productive community use.”

The point isn’t merely that brownfields and neglected government buildings are similar. It’s that the way the EPA frames the problem of brownfields is applicable to both. As the EPA says about brownfields, “Cleaning up and reinvesting in these properties increases local tax bases, facilitates job growth, utilizes existing infrastructure, takes development pressures off of undeveloped, open land, and both improves and protects the environment.”

In other words, brownfields aren’t just bad because they’re eyesores or may be a source of toxicity. They’re also bad because they adversely affect the communities in which they take up physical and psychic space. They contribute to urban blight, and thus to urban (and suburban) sprawl. They are a drag on the larger project of rehabilitating distressed communities.  This is not merely an environmental issue; it is an issue of environmental justice.

Here is how EPA administrator Stephen L. Johnson described the brownfields project at a conference a few years ago:

[L]ast year I visited an inner city neighborhood. And I saw first-hand, that through the work of community leaders, where once stood abandoned buildings and derelict lots, now there is an urban oasis. By replacing plots of rubble with grass and trees, this community is turning urban blight into urban pride, reducing the environmental effects of stormwater runoff, and keeping rainwater out of the city’s overtaxed sewer system.

And just as we see with Brownfields reclamation, advances in the urban environment have led to advances in the urban economy. Through this collaboration, property values have increased by as much as 30 percent. Who would have thought that a little grass could produce such results?

For those of us with front and back yards, a patch of grass might not seem like a big deal. But when I was visiting that neighborhood, I noticed two young girls who were riding their bikes around one of the rehabilitated lots. Where there was once a plot littered with abandoned cars and trash, there is now safe, grassy land for the children of that community to play.

Now, it’s true that vacant and aging government buildings may not be a blight in the same way as plots of land “littered with abandoned cars and trash.”  Yet what that distinction misses is that both spaces have the potential to be transformed into positive, beneficial places.

And that brings up a final, crucial point.  Even if the government does succeed in “disposing” of many of these properties, a happy outcome along the lines of what Stephen Johnson describes above is not a foregone conclusion. Interestingly, one of the few blogs to comment on the recent GAO report is 68caliber.com — which represents, of all interests, paintballers.  This “just might prove to be potential value to paintball businesses,” the blogger writes, in regard to the possibility of some prime real estate opening up.  That’s not (necessarily) to suggest that having paintball centers in urban areas would be a detriment, environmental or otherwise.  But it is a reminder that how these derelict buildings are reinvented could be just as important as whether they are reinvented.

Chevron Company Found Guilty in Historic Environmental Lawsuit

Photo by Peter π. Some rights reserved.

On Tuesday, Chevron Corporation was ordered by Ecuadorian courts to pay $9 billion in damages for massive environmental contamination of the Amazon rainforest. The lawsuit was filed in 2003 by Ecuadorian citizens, many of whom are representatives of multiple indigenous groups from northeastern Ecuador. The litigation was originally brought against Texaco Petroleum Company in a Manhattan court some 18 years ago, and was inherited by Chevron when it acquired Texaco in 2001.

Critics like Amazon Watch and Rainforest Action Network say that Texaco “dumped 18.5 billion gallons of toxic wastewater into streams and rivers, spilled some 17 million gallons of crude oil, and left behind more than 1000 waste pits that continue to leech toxins into surrounding soil and water. The pollution has caused a spike in cancer rates and decimated the cultures of various indigenous groups in the area.”

But Chevron denies these allegations. In the company’s most recent quarterly report, it states that Texaco Petroleum subsidiary Texpet carried out a $40 million remediation program, after which the Ecuadorian government granted “a full release from any and all environmental liability arising from the consortium operations.”  Disclosure of this litigation is qualified with the claim that “Chevron believes that this lawsuit lacks legal or factual merit.”

In a recent press release, Chevron states that much of the evidence provided in this suit “shows an elaborate criminal scheme involving fraud, extortion, collusion, forgery and witness tampering,” and is already taking steps to prevent enforcement of the ruling: the company was granted a temporary restraining order against the plaintiffs, barring them from taking enforcement action. Chevron has also filed a racketeering suit against the plaintiffs’ legal team.

In the history of environmental damage cases, this judgment is second only to the $20 billion BP Gulf spill settlement; it is also the first time a foreign court has held an American corporation accountable for its environmental impact abroad. Chevron will appeal the decision; the Ecuadorian judge who issued the verdict says that Chevron has 15 days to issue a public apology after which the fine will be doubled.

 

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