Sunday, 17 August 2008

Hillbillies making millions out of American gas rush

Southern landowners cash in as technology opens up vast new fields, reports James Doran
The Observer,
Sunday August 17 2008

Judy was, until very recently, a normal 61-year-old great grandmother from rural Arkansas who taught English at the local middle school and spent her spare time taking care of five troublesome terriers.
Now, in a story reminiscent of the 1960s sitcom The Beverly Hillbillies, she has joined a rapidly growing group of millionaires cashing in on a natural gas gold rush that is sweeping the American south.
The Haynesville Shale is a massive geological formation 12,000 feet below the soil of rural north-west Louisiana that is said to contain enough natural gas to supply much of America's needs for the next decade and beyond. It has been known about for years, but only recently has the technology been available to exploit it to the full.
The world's biggest natural gas exploration companies, including Shell, Conoco, Chesapeake, Petrohawk and EnCana, have descended on the vast area between the Arkansas border and Shreveport, Louisiana, to tap what most experts agree is a reservoir of about 240 trillion cubic feet of gas.
Local farmers own the land above these massive gas pockets, as do a large number of householders and some speculators, and there are large tracts owned by the State of Louisiana. And if the gas giants want to get their equipment drilling working in time to cash in they are having to pay up - big time.
'The reality is there is a lot of people making some pretty damn serious money down here thanks to this natural gas,' said Don Briggs, president of the Louisiana Oil and Gas Association.
And Judy - who wants to withhold her last name for fear of attracting too much attention to her newfound wealth - is one of them.
Judy's parents were farmers on the outskirts of Bossier City, Louisiana until her father passed away when she was seven. 'I inherited half the farm that day, I was an only child,' Judy said. 'I inherited the rest in 1991.'
She vowed never to sell the land, even though half of it was virtually worthless swampland. But then, in March this year, her telephone at home in Arkansas started ringing non stop with gas company reps and land brokers offering to buy or lease her land.
"First they were offering me $200 an acre, then $500, but I am not stupid," Judy said, 'I told them that if their gas was so precious they would have to come up with something better.'
After a couple of months of stiff negotiating she walked away with a cheque for about $4.5m, and she didn't even have to sell her land. 'I leased the land to Chesapeake for five years, after which they have to put it back exactly as they found it,' Judy said.
Much of the land that sits above the Haynesville Shale had a lease value of about $300 an acre until this spring, when a ferocious bidding war broke out. Now the same tracts of land are commanding prices as high as $25,000 and $30,000 an acre, so locals say.
And by the time the big gas companies have finished, there will be plenty more hillbilly millionaires like Judy. 'It is possibly the fourth largest gas discovery in the world and the largest in the United States,' said Briggs. 'It's big.'
But drilling the shale is an expensive business. 'The shale lies like blankets - flat blankets of geologic formations on top of each other,' Briggs said. 'You drill down 12,000 feet, on average, make a right angle and go up to another 4,000 feet. It's incredible technology.'
With the record amounts being paid for leases, bonuses and up to 25 per cent royalties, 'a lot of millionaires are being made every day,' Briggs added.
Given that most of the rest of the country is grappling with the credit crunch and impending recession, the country folk of Louisiana and Arkansas are rightly celebrating their newfound prosperity. Those not fortunate enough to own land above the shale are benefiting from the jobs and investment flooding into the area.
'I would say 74 wells are working in the area now, 50 more than are normally working in all of north Louisiana,' Briggs said. 'Probably by the end of the year there will be 100, and by the end of next year, 200. That's an incredible amount of activity.'
As for Judy, she is not letting her millions go to her head. 'I think I will get my bathroom renovated, finally,' she said, 'and then I will give some money to my three sons, my eight grandchildren and my great grandchild.'
And then of course there are the dogs, all five of whom are yapping at her feet. 'I might get them some new toys, it depends if they are good or not.'

Eco-town plan is the pits, say former miners

Isabel Oakeshott

Caroline Flint, the housing minister, faces a backlash in her own constituency after it emerged that a former mining community she represents is likely to be selected for one of the first eco-towns.
Whitehall insiders predict that plans for 5,000 new environmentally friendly homes on the site of an old coal mine in the deprived area of Rossington, Doncaster, will get the go-ahead next year. It is one of three eco-towns regarded as likely to be built.
Flint maintains that the developers are not being given preferential treatment and has appointed a junior minister to deal with the proposal to avoid accusations of a conflict of interest.
Local residents, however, insist that the scheme is fundamentally flawed and have accused Flint of hypocrisy. They question her commitment to the environment, highlighting her support for a new airport offering cheap flights just three miles from the site of the proposed eco-town.
Terry Wilde, chairman of Rossington parish council, said: “This is a completely harebrained idea. Who on earth is going to buy these houses? This is a very low income area. What is needed is more council housing.”
Flint is examining a shortlist of eco-town proposals, whittled down from more than 60 applications. Just 10 remain on the shortlist, after a string of developers pulled out.
Gordon Brown’s flagship project for a series of new eco-towns by 2020 has been dogged by setbacks, forcing Flint to revise the government’s timetable. Ministers privately admit they failed to anticipate the scale of public hostility to the plans, which lawyers have warned could be open to high court challenges. The Local Government Association believes that bypassing normal planning procedures to create the new towns is unlawful.
Whitehall insiders now say most of the 10 proposals on the shortlist have little hope of being built, with just two or three considered “really serious”.
The three leading contenders are Rossington, in Flint’s Don Valley constituency; Whitehill and Bordon in Hampshire, the only scheme that is being led by the local authority; and Marston Vale, in Bedfordshire, which has significantly less local opposition than other proposals.
Other sites still considered as options are Middle Quinton, near Stratford-upon-Avon, and Weston Otmoor, in Oxfordshire.
The Middle Quinton scheme is opposed by thousands of locals and actors including Dame Judi Dench. At Weston Otmoor, the family of the tennis star Tim Henman have led protests.
The developers behind the Rossington proposal insist an eco-town would dramatically regenerate the area, which has suffered high unemployment and social deprivation since 2000 following the closure of the coal mine and local textile factories.
However, many of the town’s 13,000 residents fiercely oppose the scheme, warning that they will not be able to afford the new housing and there will be no jobs to sustain the new town.
They question Flint’s environmental credentials, pointing out she promoted cheap flights by backing a new airport in Doncaster in 2005. At the official opening ceremony, she described the £80m Robin Hood Airport as a “dream” for local people.
A spokesman for Flint said it would be “premature” to suggest any one proposal will get the go-ahead.

RES to double workforce after landing Hungarian deal

The renewables firm is linking with Budapest-based Thermo KFT
John Penman

A Stirling-based renewables company is to double its workforce after tying up an innovative collaboration agreement with a Hungarian-based design team
Renewable Energy Scotland — which designs, supplies and installs heating systems that convert low-level energy stored in the ground, air, and water into heating and hot water — is linking up with Budapest-based Thermo KFT to gain access to its team of designers.
RES, based in Stirling University’s Innovation Park, is close to completing a new round of investment funding. Thermo KFT already works with major European companies including Deutsche Telekom.
“They are one of the best in Europe, where these systems are much more common than in the UK,” said RES managing director Harry Burt.

The move will allow RES to sign larger commercial contracts. The company has so far mainly focused on installing systems for houses, although it is working on a hotel project in the east of Scotland.
Ground, air and water pumps are popular in Europe, especially in Scandinavia, because they can create three times the amount of energy it takes to run the machines and they have very little impact on the environment. They can also cut energy bills dramatically.

Hungarian deal boosts RES propects

Renewable Energy Sources has signed a deal with Hungarian heat pump designer Thermo Kft, one of Europe’s leading heat pump designers
John Penman

A frozen Norwegian lake was the unlikely setting for Harry Burt’s conversion to renewable energy.
Until then, his career had been spent almost exclusively in the construction sector, working as a senior director with companies such as Miller Group and Bovis.
But on a visit to view a specialist Norwegian house, he was intrigued to discover its heating was generated from under the frozen lake.
“I had actually parked my car on the lake next to a jetty and asked about the heating system and was astonished to be told that it came from under my car,” recalled Burt.
Ground, air and water-source heat pumps convert low-level energy stored in the ground, water and air to provide heating, cooling and hot water for homes and commercial properties. The principle is similar to how fridges operate. They are relatively common in Europe but not the UK.
Heat pumps dominate the Swedish market due to the colder climate and need for reliable cost-effective heating. Two out of three consumers there choose heat pumps when changing heating systems.
Burt knew of the principle behind heat pumps but was surprised they could operate at such low temperatures. In fact, it is possible for air-source heat pumps to extract useful heat from the air at temperatures as low as minus 15°C.
For every unit of electricity used to power the pump, 3-4 units of heat are produced, making it a hugely efficient way of heating a building.
“We were used to low energy bills in the UK until very recently so there’s been no incentive to use much more efficient systems, but the story in Scandinavia is totally different,” he said.
“They have been doing this sort of thing for years and the result is that heat-recovery systems are an integral part of their residential and commercial buildings.”
Now, driven by rapidly increasing energy costs and government legislation which will require residential and commercial property sellers to include energy ratings, interest in heat-recovery technology in the UK is on the rise. In his office at Stirling University’s Innovation Park, Burt is ready to play a major part in exploiting that interest.
Although he saw the gap in the market, Burt admits he did not predict that by the time his firm Renewable Energy (Scotland) was up and running, the cost of energy would be so high and dominating the newspaper front pages.

“It helps focus people’s minds on the cost of heating their homes and offices and there seems little prospect of prices coming sharply down,” he said.
Now, just a year after starting RES — which employs seven people — he is on the verge of finalising a round of funding designed to propel the company to its next stage. Staff numbers will double by the end of this year.
Its backers have been mainly high net worth individuals. But although it remains relatively small, a target of £4m turnover by 2010 has brought it onto the radar of Scottish Enterprise’s Fast Track Growth programme.
RES has signed a deal with Hungarian heat-pump designer Thermo Kft, giving it instant access to Kft’s designers. Kft is one of Europe’s leading heat-pump designers.
RES aims to train and develop installers and engineers, which will allow it to significantly boost the number of systems it instals and maintains and to target commercial contracts for the first time. It is now installing a system for a hotel in the east of Scotland.
“These commercial deals can be worth up to £500,000 a contract so you can see the potential for growth,” he said.
To find how big that potential is, Burt has commissioned Stirling University to study the size of the market. The results will stay private to give him a commercial edge, but his confidence suggests he believes it will back his judgment.
That judgment has been backed by others. The Energy Savings Trust’s recent report into growth potential for micro generation, which includes solar, biomass and windpower as well as heat pumps, suggested there was potential for 500,000 units by 2015 and 2-3 million by 2030. Heat-pump systems are part of that mix.
“I am loath to talk about the size of the potential market. It could be huge and there are many options for micro generation but I think that none has the advantage of heat pumps, which can create three times the energy it costs to run them,” said Burt.
The systems are not cheap. A typical air-based system for a big house costs around £9,000, but grants can cut costs by a third. Payback, through sharply reduced bills, is possible in a few years. Burt recognises that even then, the figure is steep.
“When you are talking about a retro-fit, it is expensive. But in most cases it may be that someone is replacing a boiler at the same time, so that would cost a couple of thousand pounds in itself,” said Burt.
“But it has to be considered in the context of continually high energy prices and the need to reduce our carbon footprint. Commercial properties will have to consider their energy ratings from next year. The collaboration with Thermo Kft gives us the clout to bid for major commercial contracts,” he said.
All the major housebuilders are looking at ways of building more energy-efficient homes but the market now is tough. Burt hopes that by the time it comes back, he can persuade them RES should play a part.
But RES is just one player in a field that is rapidly becoming attractive to others. All the major central heating boiler manufacturers are investing in research for the design of heat pumps. Burt believes the Hungarian deal, government legislation and rising gas bills give RES the edge on rivals.
“The timing is in our favour,” he said. “In six months, this will be a totally different company and then in another six months, totally different again.”

British Energy stalemate puts new nuclear reactors at risk

Tim Webb
The Observer,
Sunday August 17 2008

The on-off £12bn takeover saga of British Energy risks delaying plans to build new nuclear reactors on government-owned sites, it has emerged.
The Nuclear Decommissioning Authority (NDA), the government-backed body, is waiting to launch a formal auction of land surrounding its sites.
It had planned to invite energy groups to table bids at the beginning of the month when nuclear generator British Energy looked certain to accept a takeover by French group EDF. But the £12bn deal fell through at the eleventh hour. Low-level talks between the companies are continuing but it is not clear when, or if, the takeover can be resurrected, plunging the government's plans for nuclear new build into chaos.
The NDA must hold off until the ownership of the nuclear generator is resolved, because this would affect who would bid for its own sites.
British Energy's land is the most suitable for a new fleet of reactors, partly because it has better grid connections, but the NDA locations - which include Sellafield in Cumbria - are also likely to play a part.
The NDA invited general expressions of interest for its sites last April. As well as EDF, German groups Eon and RWE are among those interested.

Wave power all at sea until tide turns

Richard Wilson

Extract all the wave power you can from the Atlantic coast of Scotland and it would add up to the equivalent of about four nuclear power stations, says David MacKay, professor of natural philosophy in the physics department at Cambridge University. “It’s a very large amount. A ballpark estimate of what is required to get Scotland off fossil fuels is either 10 nuclear reactors, or 10,000 wind turbines.”
In terms of raw power, MacKay estimates that waves approaching Scotland’s coastline represent 30 gigawatts (GW). The tides beneath the surface have even more power — 60GW says MacKay. He calculates that 12.5GW of electrical power could be extracted from tide and wave — almost half of Scotland’s total energy consumption of 26GW.
With the UK government setting a target of 15% for clean energy by 2020 — and the Scottish Nationalist government an ambitious 50% target — the sea can no longer be considered as too challenging in which to work.
So why are we not forging ahead with this technology? The world’s first commercial wave farm has been developed and built by an Edinburgh firm, Pelamis Wave Power. Three of their football-pitch-sized turbines are bobbing about in the Atlantic — but off Portugal, not Scotland.
The government in Lisbon offers enough subsidy to make it commercially viable. The UK government — energy matters are reserved to London — is less encouraging, according to leading scientists.
This is despite the fact that the European Marine Energy Centre, a testing site for wave and tidal power, is based in Orkney. Its presence here, along with the work of our universities, makes Scotland a world leader in research into this vital alternative power source. But we need government help to transform our scientific and technical expertise into a commercial industry.
The UK government set up the Marine Renewables Deployment Fund, with a budget of £42m, to help firms develop projects, but no scheme has yet qualified for a grant. The Scottish government has been more supportive, with all of its £13.5m funding allocated.
Jim Mather, the energy minister, has described marine power as “the heart of our ambitions to develop a vibrant renewables sector”. John Griffiths, a non-executive director of the Orkney centre, is clear where blame lies. “In 1999 everybody was saying that come 2005 we should be moving towards a range of commercial tidal and wave devices. That time has gone and among the things that have held up progress has been a huge emphasis on wind. Some of the inertia has been evident from Westminster compared to the Scottish government. There is a dearth of funding in wave and tidal power.”
Turbines at sea are less controversial than windmills, whose presence has upset many communities. Islanders on Lewis who successfully opposed a giant windfarm have backed a recent application for a wave power station operated by Wavegen, an Inverness-based technology company, and Npower Renewables.
Orkney is to test a number of projects, such as Ocean Power Technology’s PowerBuoy system. Another, OpenHydro’s tidal turbine, was connected to the national grid last May, generating electricity to power up to 100 homes. But progress is slow when financial support is muted.
“The sea is a harsh environment,” says Peter Fraenkel, technical director of Marine Current Turbines, which installed a device in Northern Ireland’s Strangford Lough. Looking like an upside down windmill, the structure has the potential to generate electricity to power 1,140 homes. “The sheer force of fast moving water is horrendous,” says Fraenkel. “It takes modern engineering capabilities to come up with solutions. Marine power subsidies are not as generous as they should be.”
Some say Britain is making the same mistakes as in the early years of wind power. “We don’t have a wind industry because in the early days of wind turbine development it wasn’t taken seriously by government,” says Fraenkel. We did not invest in the technology, allowing Danish and German firms to develop it. Now they are making money across the globe.
Tide and wave power will need government help to become commercially viable. Otherwise they too could be developed abroad, and we will miss the chance of a lucrative industry offering highly skilled engineering and manufacturing jobs.
A man particularly aware of Britain’s neglect of renewables is Professor Stephen Salter, generally regarded as the pioneer of wave power. He invented a device in the 1970s called Salter’s Edinburgh Duck, which could extract 90% of energy from waves. But the UK government withdrew funding from wave power in 1982, many believe because of the influence of the nuclear industry.
“We’ve got a good resource and there was a lot of good engineering in the early days,” says Salter, professor of engineering design at Edinburgh University. “We can make ships, so we should be able to make these.”
Salter wrote an energy review document for the SNP two years ago that suggested previous calculations of the energy potential of the Pentland Firth, the deep body of water that separates the Orkney Islands from Caithness and is renowned for the strength of its tides, were underestimated.
He believes that if turbines can be designed to work on the bottom of the sea bed, 70m down, and be placed close together, up to 20GW of energy could be extracted from the firth.
Yet having spent 35 years in the field, he, too, is dismayed by the lack of drive from Westminster. “Marine power should be getting a different flavour of subsidies because the wind people are now building in such quantity they are getting their price reduction,” he says. “If we just go on the way we are, nobody will do anything except wind. I think there are still people around who don’t want it to work and who want to go to nuclear.”
Britain boasts almost half of Europe’s tidal stream sites — where the underwater currents can be used to drive turbines — and 47% of Eu-rope’s wave resource. Des Browne, secretary of state for Scotland, is robust in his defence of the UK government’s input, arguing that Britain has the “most comprehensive package of support measures for marine energy anywhere in the world.” He says Westminster is determined to commercialise the technology and has committed more than £100m since 2000. This includes the renewables fund that has still to allocate grants to marine projects and the new Energy Technologies Institute, based at Loughborough University.
“Wave and tidal power . . . could be key for sustainable UK electricity generation in the long term, and provide huge commercial opportunities. We want to lead the way, and that’s why we are undertaking a feasibility study on whether to support a barrage or another project to exploit the tidal power of the Severn estuary,” he said.
Griffiths is less convinced. “The government put into research and development for nuclear something like half a billion a year, for about 17 years,” he says. “If they had put 10% of that [into wave and tidal power] every year since 1999, the marine power situation would look different.”

Christofferson Robb hedge fund to sell Thanet windfarm in Kent

Danny Fortson

THE Christofferson Robb hedge fund is in talks to sell one of Britain’s largest proposed offshore wind farms less than a year after it bought the project.
Utilities and financial buyers have bid for the £800m Thanet wind farm, off the coast of Margate in Kent, after its owner began negotiations with potential partners about the building and financing of the project. The 300MW site is expected to begin operation next year and will provide power for up to 240,000 homes, increasing the UK’s total offshore wind power capacity by 30%.
“We need a lot of debt and equity to finance this and in the course of those discussions parties have said they would like to buy it all,” said Mark Petterson of Warwick Energy, the site developer. Christofferson Robb declined to comment.
The developers have increased the value of the project in the past year, gaining planning consent, debt commitments and a connection slot to the national grid. The hedge fund paid £47m for the site last year but is expected to pocket as much as £80m if it sells.

Due to the soaring price of building offshore wind farms, construction is expected to cost up to £800m, a level beyond the means or expertise of either Warwick or Christofferson Robb. “These assets get traded preconstruction because developers just don’t have the means necessary to actually build them,” said Mortimer Menzel, a partner at Augusta & Co. “Whoever buys it is basically buying the right to build it.”
The talks come at a busy time for the industry. The Crown Estate is preparing for the auction of 11 offshore wind-farm sites.
Expressions of interest are due by the end of this month.