Recently in Environment Category

Two disasters in two months have highlighted the often unseen cost of our dependence on fossil fuels.  The news of the BP oil spill in the Gulf of Mexico pushed the news about the death of 29 coal miners at Massey Energy's Upper Big Branch mine.  That is until the government announced that it was starting a criminal probe of the company's operations there.

But with or without a criminal probe, these accidents highlighted what is at risk when companies go after oil that's deep beneath the surface of the sea or coal that's buried deep underground.

There are, of course, the deaths of the people who worked either at the rig or at the coal mine.  Between the two disasters, 40 people lost their lives.  And there's the financial cost of the disasters.  Massey expects to take a $212 million hit due to the explosion at the Upper Big Branch mine.  There will be $80 to $150 million for benefits to the families of the miners, rescue and recovery efforts, insurance deductibles, and other contingencies.  An additional $62 million will cover the cost of the equipment damaged in the explosion and mineral rights.

And the financial cost to BP is estimated at $33 million a day as it struggles to stop the flow of oil into the Gulf of Mexico.  Already, 100 lawsuits have been filed against the company and 6,700 compensation claims are working their way through the process.

But putting aside the lives lost and the money lost by shareholders, there's another cost.  And that's the cost to the environment.  We're getting an up close look at what risks are involved when one of these rare but horrible disasters occurs.

It's estimated that 210,000 gallons of oil is leaking into the Gulf of Mexico every day from the BP oil rig leak.  That amount of oil obviously has a big environmental impact, and we're seeing it start to hit the states near the oil spill.  At risk from the spill are the coastlines of Texas, Florida, Mississippi, Louisiana, and Alabama.  The wetlands near New Orleans, where millions of migratory birds nest and fish spawn, are threatened.  And the huge seafood industry in the Gulf Coast, which provides the country with much of its oyster and shirmp harvest, is in danger as well.

According to environmental groups, the timing of the disaster is one of the things that's most troubling about it.  "For birds, the timing could not be worse. They are breeding, nesting and especially vulnerable in many of the places where the oil could come ashore," said the director of bird conservation for the Louisiana Coast Initiative.

And obviously, oil on the beach is something that's not attractive to tourists, so beach towns throughout the Gulf Coast are at risk of having their tourism business drop off.

It's clear we need to continue to drill for oil and dig for coal in the near future.  But there are cost associated with these fuel sources, and the BP and Massey disasters highlighted those.  The risks to people drilling and digging for coal and the risks to the environment are additional reasons why a green energy push makes sense for the country in the long run.  Sure, someone will likely die of heat exhaustion while installing a solar panel or fall off a windmill tower.  But at least that death won't be the start of something that threatens an entire region of the United States.

An article in Barron's highlighted the problems the United States is facing in trying to move towards alternative energy.  The article suggested that investors looking to focus on alternative energy turn to China, not the United States.

The reason?  According to the article, the alternative energy market in the United States could take a decade to ramp up, but it's going full force in Asia.  Governments in Asia have already mandated that their power generators move to solar and wind, but the United States won't even attempt to do so until later this year.  And it's possible that since this is an election year, the cap and trade legislation that will spur the use of non-greenhouse gas emitting power sources will be kicked down the road until 2011.

That would mean that the gap between the United States and China, which is already the leader in solar and wind power, would only grow.  "China is the leader in solar and wind power and will surpass our installed base in two years," a spokesman for American Superconductor, which inked a contract to install turbines off China's shores, said.

According to American Superconductor, the United States lags far behind other nations in providing long term incentives.  The Obama administration provided the industry with $2.3 billion in green tax credits, but those were gone very quickly.  The administration is seeking an additional $5 billion in tax credits and is promoting them as a job creation tool.

The administration, according to the American Wind Energy Association, is at least taking steps to promote alternative energy.  Developers are putting together studies that show proposed wind farm sites off the coasts of New Jersey and Delaware.  And the Interior Department is requiring the National Park Service to determine quickly whether or not the waters off Nantucket Sound are going to be listed in the National Register of Historic Places.

Actions like this caused the American Wind Energy Association to deem interior secretary Ken Salazar "our main champion."  However, while Salazar may be pushing the cause of wind energy, the United States is just starting to move forward while China is already putting up nearly three dozen windmills off its coast.

The United States needs to stop taking baby steps and move forward aggressively.  Green energy is not just an environmental issue, it's a national security issue.  We cannot allow the country that's going to be our biggest competitor to take too much of a lead in this field.

In a move that we've seen take place before -- most recently in the pharmaceutical industry -- a giant company decided to purchase a smaller company in order to acquire its assets.  In the pharmaceutical industry, that's generally done so that the acquiring company can get the drugs that the smaller company has in production or in development.

In today's merger, Exxon is acquiring XTO Energy in order to acquire its natural gas assets.  The deal, which is an all stock deal for $31 billion, would provide Exxon with access to XTO's natural gas reserves at a time when natural gas prices are low.

The combination of the worst downturn since the Great Depression and large discoveries of natural gas have left its producers facing difficulties in getting the capital needed to expand and develop their resources.  XTO took advantage of this, acquiring many other companies, but it piled on debt in the process.

But, it gained control of major portions of unconventional gas reserves, such as those that are trapped in shale rock.  XTO controls an estimated 45 trillion cubic feet of natural gas.  With its purchase, Exxon is making a bet that gas prices will recover.  Part of this may be due to pressure to reduce greenhouse gases, as natural gas releases far less of the gases that are responsible for climate change.

When even the world's biggest oil company decides it's time to add cleaner buring natural gas to its assets, the handwriting is on the wall.