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Tag: tar sands

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Capex compression is a term we use to describe the reduction of upstream spending by the oil companies when their exploration and production costs are rising faster than their oil revenues. That’s what’s happening today. Hess is divesting continue reading…

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[W]hy are petroleum prices so high? Although some commentators are quick to blame oil companies or speculators, the main factor keeping the price of oil above $100 a barrel is supply. Yes, OPEC frequently reminds us that the oil market is continue reading…

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High value crude oil — the good stuff with 5.8 million BTU per barrel that we can make into diesel and gasoline and a million other things — has been generally holding on to a global production plateau since 2004. Global production will fall continue reading…

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An observation worth noting … and pondering, from Chris Nelder:

I really didn’t think I’d have to say this again, but peak oil is about data, and specifically data about the production rate continue reading…

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An observation worth noting … and pondering, from Kjell Aleklett:

The IEA now considers that conventional crude oil production reached its maximum in 2008 and that it will decline by 2035. We, the IEA and IHS CERA all agree that crude oil production from currently producing fields is declining by 0.4 Mb/d per year  [see Update below] and that the oil industry will not be able to compensate for this decline with new conventional crude oil production. We see that the total of current production and planned new production from the Canadian oil sands gives a level of possible production in 2020 of 3.2 Mb/d. This means that 15 years of expansion of Canadian oil sands production does not replace even one year’s decline in production from existing conventional crude oilfields. At the same time we can note that it is doubtful if, in 2020, there will be sufficient refinery capacity to handle 3.2 Mb/d.
Canada’s oil sands will not stop Peak Oil.

The news isn’t any matter from shale (tight) oil production in the Bakken and Eagle Ford basins, either—Happy Talk from industry shills noted and notwithstanding. And the Arctic? Seriously?

Denial remains a strategy, as does barreling headlong into a wall. Not the best of choices, but they remain available.

Math being what it is; reality being what it is; and geology being what it is as well, perhaps we might persuade at least a few more “leaders” in industry, media, and government to start explaining reality to the public so that more of us can get on with the essential business of planning?

Update (04.21.13): Thanks to Jeff O. who noted the typo in the quote above [which I’ve now boldfaced]. That should read “… declining by 4.0 Mb/d per year…”

~ My Photo: Seals in La Jolla, CA – 02.24.06

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Last week, I ran a couple of posts (here and here) about an especially-egregious example of the Cornucopians’ magical world of energy abundance (with its by-now obligatory preference to trip lightly over anything other than a few cherry-picked and out-of-context facts).

I’ve already had my say on that article’s most glaring offense: the particularly shameful/shameless failure to mention that fracking for oil and gas also involves a fair amount of chemicals (whose properties are rarely-disclosed) as part of the production process.

A different spin results when a reader moves from an initial understanding that “water and sand” appear to be the only “ingredients” to the truth that fracking actually requires “water, sand, and chemicals.” Not too difficult to understand the reasons for the omission. Not too difficult to judge the behavior, either. Wouldn’t want to answer any of the obvious questions that come to mind when “chemicals” become part of the discussion, Right?

Before I let that awful effort go, I just had to clean up a bit more of the mess it offered.

What does this mean?:

Canadian production is expected to increase to 6.5 million barrels per day, and even Mexico is now expected to join the North America energy renaissance under a new government interested in exploiting its resources….

First up: Who expects Canadian production to increase? How soon? Any potential obstacles?

I’m curious because this PDF, courtesy of the Canadian Association of Petroleum Producers, seems to suggest that Canada has a ways to go.

The Executive Summary page shows total 2011 production of 3 million barrels per day. An accompanying chart indicates a 2030 landing for that 6.5 million barrel per day forecast. I wonder why that information didn’t show up in the article? No explanations about investment obstacles either … or pretty much anything else one might consider as supporting evidence to give credence to the forecast. Standard M O.

Given that depletion in existing conventional oil fields occurs pretty much ‘round-the-clock at anywhere from 4 million barrels per day to approximately twice that amount, 6.5 million barrels per day [guaranteed, Right?] nearly 20 years from now … not so special.

And are we assuming Canada is going to sell it all to us? Canadian citizens might have different ideas in mind.

But, as Citigroup’s Edward Morse was reported as saying: “The U.S. could in theory need to import only from Canada within five years.” Pigs, in theory, could fly, too.

How much production should we look forward to from Mexico, given that it has “a new government interested in exploiting its resources?” How many barrels per day does “interested in exploiting” work out to be? When should we expect that supply to come on line? Is June too early? [June in a decade or two, I mean.]

Of course, there’s that little problem about successfully converting exploitable resources into … you know, actual production. Usually, that involves taking care of a consideration or two, first. [That whole investment, testing, proper technology, staffing, quality, etc., etc. set of issues.] But why explain any of that to readers, Right?

What’s more offensive: making an unwarranted assumption that readers are too ignorant to ask questions, thinking they don’t deserve enough respect to be properly informed, or the arrogance of the already-informed in thinking they can get away with this? Payback, as they say, is a bitch.

Before my head officially explodes, one more observation regarding a rather creative commentary and explanation included in the article:

Some energy analysts are concerned that the new ‘unconventional’ supply is limited and will be quickly tapped because some of the impacts of the new drilling are unknown and the history is so new.

Actually, the reason energy analysts are concerned is because of those whatchamacallits … facts. Must be nice to live in a world where facts, studies, evidence, and truths can all be ignored whenever it’s convenient. “Gee, fracked wells deplete, too? Faster than conventional supplies? Wow! Resources aren’t reserves? Reserves aren’t automatically produced? It costs more? Water concerns? Environmental issues, too? Who knew?

An especially thorough, well-researched, and terrific report by J. David Hughes/Post Carbon Institute should provide the parties to this nonsense an explanation or two about why energy analysts are concerned. Perhaps someone might show those fine people that Internet thing … you know, the Google.

Then again, why would investors and readers want to know more before committing themselves to business endeavors or policy support, Right?

Silly me … I always thought being kept in the dark was useful only when someone wants to go to sleep.

* My Photo: morning sky in Ft. Lauderdale – 02.08.13

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The “vast”, “massive” resources of Alberta, Canada’s Athabasca tar sands—one of the Technology Fairy’s Answers-to-our-Petroleum Prayers—received a bit of a jolt recently. It appears that yet another fact-free but feel-good story about energy independence has been tweaked by damned facts.

A Rigzone article discussed a series of demand, supply, and capacity factors which have reportedly made Canada’s oil the “cheapest in the world.” As a result, the oil and gas industry in Canada is taking a significant financial hit, with the expectation that this is “likely to get worse in the first half of 2013 before it improves.”

The authors’ conclusion raises obvious consequences which are rarely explained to the public:

Until this production glut is resolved, Canada’ crude oil will continue to sell at a steep discount to other benchmark crude oils, costing Canadian producers significant cash flow. That means there is a growing likelihood that as this wide price gap continues producers will be forced to reduce their expenditures compared to what they would spend otherwise. That could be bad news for the Canadian oil and oilfield service industry in the second half of 2013 if the pricing gap doesn’t shrink.

Fossil fuel exploration and production is not a process one starts by turning a key or flicking a switch. Curtail efforts now, wait for finances to improve, and then begin to ramp up production once again is not an overnight endeavor. Delaying production is not a good thing if supplying is one’s objective.

This problem did not materialize yesterday. As Nathan Vanderklippe reported back in September from Alberta’s Joslyn North Mine Project:

[T]he oil sands’ next chapter is suddenly in the midst of a major rewrite. Joslyn itself has become a symbol of both the eager ambition the world’s oil companies have brought to northeastern Alberta, and the question marks surrounding how those ambitions will be realized. The economics of Joslyn, along with two other projects that are pillars of oil sands growth, have been placed under review by partner Suncor Energy Inc. The company has abandoned lofty growth targets in favour of a rigid focus on costs, and has even said it could abandon some projects.

Although the article states that production growth is not expected to halt completely, Vanderklippe did indicate that “the oil sands industry is being forced to contemplate how profitably it can build new projects.” The article is a great read, highlighting a number of other considerations which tend to get glossed over by those touting that energy independence is just around the corner. Facts continue to suck!

After highlighting a number of cost factors which are forcing these reassessments—not the first time this has happened—the article referenced comments made by a former oil industry executive about these efforts:

[Jim] Carter is not the only one suggesting a pause might be needed in the oil sands, a time to pare back the big numbers industry has long promoted – how many barrels a day they would produce in five and 10 years time, and how many billions they would spend to get there – and focus instead on how much inefficiency it can shed.
In part, that’s because larger factors, including concerns about oil prices, have had a real impact on the viability of future oil sands projects….
Plus, there is the concern that some of the best oil sands lands have been developed.

This latter issue is not restricted to the tar sands. Similar concerns are expressed about the tight oil reserves here in the U.S. [see this terrific piece by Roger Blanchard], and the fact that many of the “best” conventional crude oil fields are on the downside of production is why we discuss Peak Oil!

Adding in legitimate considerations about the labor supply, quality of technology, wear and tear on existing machinery, returns on both energy expended and investments in projects of this magnitude, decisions to pursue or abandon projects are no easy matters. As the article pointed out:

[T]he most expensive new projects require crude prices of $90 (U.S.) to bring home a reasonable return

Higher prices there mean higher prices at your local gas station. Reducing the number of projects means reducing potential supply. Guess what that does to prices?

Perhaps we might consider all of these factors more carefully, and shine a bit less of a spotlight on the fact-free Happy Talk about “vast” this and that? Just a thought….

* My Photo: Good Harbor Beach, MA during Hurricane Sandy – 10.31.12

 

 

 

 

An observation worth noting … and pondering, from Nick Hodge.

For me, the scenario is plain and simple…
If there were ample amounts of crude oil and peak production wasn’t an issue, we wouldn’t be spending billions upon billions to find and try to extract the harder and harder to get stuff, some of which isn’t even oil, but an oil substitute made from bitumen or kerogen.
If there were ample amounts of crude oil, we wouldn’t need the tar sands.
If there were ample amounts of crude oil, we wouldn’t be fighting Russia for Arctic mineral rights.
If there were ample amounts of crude oil, Brazil wouldn’t be drilling holes in mountains of salt miles below the ocean’s surface.
But there aren’t.

So the consequences seem fairly self-evident, don’t you think?:

* we are spending more money to explore and produce over a longer period of time inferior qualities of substitutes in harder-to-reach places (we because oil exploration isn’t free, the industry isn’t Santa Claus, and we are the ones who in the end pay the price)
* and for what it’s worth: Canada’s environment and its citizens are suffering untold harm by the ravages of tar sand production [Google: “photos alberta tar sands” and check out the images)

So now what?

* My Photo: California Pacific Coast Highway – Sept 2004

In his presentation to Montana Energy 2012, Michael Economides told Montanans, ‘You are already a superpower in oil production. You have already defied the trends and once again showed the can-do attitude of this industry, smashing the myth of the ‘peak oil’.
‘You have redefined and defied the trends suggesting strongly the future of energy is oil and gas and not solar and wind.’ [1]

Yeah! We’re Number One!

Kinda gives you the chills, doesn’t it?

In an article noteworthy mostly because of its introduction of the word (?) “bizerk” (sic) and the phrase (?) “cut the mustered” (also sic), this cute tug at red, white, and blue American hearts was otherwise free of factual reasoning for “making the whole myth of peak oil a shambles,” according to Mr. Economides.

Why one might ask? Well, according to this article, “The reason places like Montana and Canada stand at the leading edge of the industry is because of conditions that exist in other countries, which are mostly hostile to the US.” That certainly clears things up! And of course “supplies have always increased and continue to meet a demand that only grows” because finite resources uh … uh … are secretly infinite, I guess.

As if that rationale alone wasn’t enough: “Many of these countries are ‘a shambles,’ ‘corrupt,’ and unstable. ‘It is hard to produce oil when people are shooting at you,’ said Economides.” That settles that! (Although I’ll agree completely that doing most anything is likely harder when one is being shot at it … pretty sure it’s not limited to just oil production.)

Just one tiny little problem to pass along before we order our Montana is a Superpower T-shirts. According to the U.S. Energy Information Administration earlier this year:

Montana Crude Oil Production is at a current level of 1.823M, down from 1.963M last month and down from 1.867M one year ago. This is a change of -2.64% from last month and -8.79% from one year ago.

So how does a nearly 9% decline make Montana a “superpower in oil production”? According to this chart, in 2011 Montana was producing about 66,000 barrels of crude oil per day. The United States is using somewhere in the neighborhood of 18 – 19 million barrels of oil per day. So Reality Math tells us that supplying .00356% doesn’t exactly make one a “superpower,” or even a power, or even a pow….Pretty safe bet that whatever unconventionals Montana managed to scrape up didn’t make much of a dent in that percentage contribution. Just more damned facts getting in the way of perfectly good sound bites! (Of course, in Fact-Free Math-Isn’t-Useful World, those numbers tell us instead that Montana supplied exactly 63.826% of our oil needs.)

Raising a point argued by many others disinclined to consider what’s really happening with crude oil production and what’s not happening with unconventional oil production such as shale oil and tar sands, the article adds: “Economides expressed disappointment with the US Geological Survey and the degree to which they fail to take increasing prices into account in making their projections regarding supply. Increased prices increase the amount that producers can afford to invest, which puts into production resources that they previously considered uneconomical to recover.”

I find it a source of never-ending amusement that these “increased prices” are never viewed from the perspective of the end users: you and me. Higher prices allowing for investments in the exploration of previously untapped (and inferior, more expensive, more costly, etc., etc.) unconventional reserves is one end of a stick. Higher prices paid by you and me is the other end, and we don’t actually think that’s such a good thing….Imagine that!

“Economides predicted that $100 a barrel oil is the new norm.” Well isn’t that such good news!

And there’s more!

Economides pointed out that going back decades in the US, oil, gas and coal – the fossil fuels – have consistently contributed 87 percent of the fuel used in the country. He said that the day will come when his great, great grandchild ‘will stand here and tell you that 87 percent of the US fuels come from hydrocarbons,’ said Economides, ‘There are no alternatives to oil and gas.
And, that comes even with the increased demand for fossil fuels. In 1973, ‘the world energy demand was 60 percent of what it is today,’ and in 2030 it will be 50 percent more than what it is today,’ but still 87 percent will come from oil, gas and coal. ‘Production from other energies may grow, but they will not be where the 87 percent is going to come from.’

That is some kind of math … nothing to substantiate it and clearly unlike anything I ever learned, but definitely some kind of math!

So how does that work? We have depleting conventional oil fields; production of unconventional and inferior (and more costly, etc., etc.) substitutes not even matching depletion rates (see this, for example); increasing demand; decades more demand and use, and yet we’re to believe that supply will still magically meet demand for another … hundred and fifty years or so? Seriously?

A few months back, Mason Inman had an interesting observation (duly noted by others, including Robert Hirsch/The Hirsch Report – see Category sidebar) about the same kind of math (apparently from the same Fact-Free Talking Points handbook), with a concluding sentence that puts a nice bow on the discussion:

OPEC members in the Middle East have reserve numbers that are—to put it politely—magical. These countries’ figures for ‘proved reserves’ only go up or stay flat—and never go down. Kuwait’s ‘proved reserves’ stayed at 96.5 billion barrels from 1991 to 2002, and then have crept upward from there. From 1989 to today, Saudi Arabia’s ‘proved reserves’ have barely budged, creeping up slightly from 260.1 to 264.6 billion barrels. Meanwhile, these countries have produced tens of billions of barrels of oil. It’s as if a huge corporation told auditors that their bank account always held exactly $572 million dollars, for decades. It’s not believable [my emphasis]. [2]

But if you still aren’t convinced, we have this: “‘How can you have too much of a good thing?’ he asked, pointing out the importance of Canada, as a friendly country, and a dependable source of oil for the US.” Doesn’t it just warm your heart when the deniers mention Canada the Friendly Country as our primary supplier? It’s exactly how I felt as a child when I heard about Casper the Friendly Ghost … just all warm and fuzzy! Who needs reality and facts when you can just smile about friendly things….

Lest you’re thinking I believe the entire article was pure nonsense, I did agree with this, although with a caveat as to the first point:

Economides questioned every alternative energy option as being an ineffective alternative to fossil fuels.
He called ethanol a scam, because it takes 1.6 gallons of gasoline to produce one gallon of ethanol – not to mention the negative impact on food prices.

Every alternative energy option IS an ineffective alternative, and will continue to be as long as we make certain that we conduct no research and make no investments in discovering what the potential might be (and no guarantees, to be sure). Nope, let’s just make sure the profitable oil companies remain profitable, while we explain no truths about a finite resource, downplaying the fact that if every day you have less of Product X than the day before and more demand every day for the same Product X, the rules of math (and geology) will nonetheless be set aside and all will be well forever.

A fine story indeed, warm-hearted and all good things … except that it’s all bullshit. Other than that, no objections.

So what’s it going to take for more people to “get it” and fewer people to keep passing out nonsense as fossil fuel gospel. A couple of clues to assist: Who benefits? Who loses?

Not that difficult to figure it out … and a damn good reason to start thinking and planning.

More to come….

Sources:

[1] http://www.bigskybusiness.com/index.php/business/economy/2488-making-shambles-of-oil-peak-myth’; Making ‘Shambles’ of ‘Oil Peak Myth’ by Evelyn Pyburn – 04.18.12
[2] http://www.energybulletin.net/stories/2011-09-26/%E2%80%9C-quest%E2%80%9D-questioned-series; “The Quest” questioned – the series by Mason Inman – 09.26.11 [Original article: http://failinggracefully.com/?p=2850 ]

Whether or not Peak Oil is true cannot possibly be in doubt. Within anything other than a geological frame of time, oil is a finite substance. When it is burned, it is gone. Without stretching our brains very far, it is easy to conclude that anything that is finite and consumed will someday be gone.
Peak Oil, then, is really an observation, not a theory. [1]

If only! What most four-year olds would agree is not much more than minimal common sense continues to confound some, who just cannot bring themselves to accepts facts and a reality contrary to a carefully-crafted storyline where facts are inconvenient at best.

The latest foray into the fact- and stats- and context-free world of denying the obvious comes here, courtesy of a Canadian economist (whose basic premise about the invalidity of Peak Oil seems tempered by the many troublesome production facts contained in her essay). What follows are assessments and observations she offered in leading to her conclusion:

[O]il production in the U.S. is surging….This new energy boom is the result of technological developments that have made the release of oil from shale rock not only feasible, but very profitable at oil prices around $100 or more a barrel….
Shale gas has been big energy news for several years as hydraulic fracturing has unlocked huge reserves of natural gas….
[N]ew fracking technologies and horizontal drilling has led to the biggest oil boom in many years….
The beneficiaries of this shale oil and gas boom are many and diversified both by region and by sector. With an estimated 3,000 new wells slated to be drilled in the next year, it is positive for job creation. Already, the depressed housing industry is stepping up production to house the growing number of oil workers and their families….
Combined with the increasing availability and low price of natural gas, rising domestic oil production is providing a boon to U.S. construction and industrial production. The price of land in these regions has skyrocketed and many small landowners have pocketed huge leasing windfalls….Demand for sand, used in the fracking process, has also surged …  sand mines are multiplying rapidly. Boom towns are sprouting up….Retailers, as well, benefit, as do bankers….
Manufacturing plants are returning to the U.S. to take advantage of cheap natural gas and relatively low unit labour costs, spurring major investments in petrochemical and steel production….Households are also benefiting from lower bills for heating and electricity….There is a growing demand for gas-powered electricity….The U.S. trade balance is also supported by these developments.

And not one single statistic, fact, (or context) to substantiate any of this! I suppose it’s possible to be even more vague, but this is a pretty good effort as is. “[O]il production in the U.S. is surging;” “hydraulic fracturing has unlocked huge reserves;” “The beneficiaries of this shale oil and gas boom are many and diversified;” “the depressed housing industry is stepping up production to house the growing number of oil workers,” etc., etc., etc.

Seriously?!

Lots and lots of Happy Talk—unquantifiable, context-free buzzwords from the official Denier’s Playbook—but what does any of that actually mean? How do we plan effectively, as we must, to add others to the ranks of “many and diversified beneficiaries”? [And just as a for-instance, how “many and diversified” are we talking about? Nine? Sixty-four? Three hundred and two? But hey, “demand for sand” is surging, and all of this “is positive for job creation”!]

And all of that fact-free Happy Talk apparently leads quite obviously to this conclusion: “This unexpected boom in oil supply puts to rest the so-called ‘Peak Oil’ debate, where adherents to this theory argued that the supply of oil is fixed and dwindling, as traditional oil wells dry up.” Yikes!

[As for the one-pseudo-factual comment above, the: “estimated 3,000 new wells slated to be drilled in the next year”, Chris Martenson offers this sobering fact: “Typical wells in the Bakken come in at an average 200 barrels of oil per day and decline about 70-75 per cent in the first year before flattening out at 30-40 barrels per day.”]

An inconvenient reminder or two: the U.S. currently uses somewhere in the neighborhood of 18 million barrels of oil each and every day; our own production is currently in the neighborhood of 50%-60% of the peak we last touched more than forty years ago; and depending on the source one relies upon, we still import 8 – 10 million barrels per day despite these magnificent efforts in the Bakken and elsewhere; (and by the way, conventional oil fields are being depleted day after day, so getting back to “even” must happen first before we can start counting on unconventional, inferior quality, more-expensive-to-produce oil from the tar sands and shale). Facts suck!

Empty pronouncements aren’t especially helpful to the tens of millions who don’t have access to the facts and the realities of energy supply and production. How is this tactic helpful to them? When the reality of Peak Oil intrudes on their happy lives, and it turns out that the “might possibly could potentially if only” promises turn out to be just as empty in practice as they are now in theory, what happens then?

In fact, we will become more vulnerable over the long run, because the renewed embrace of fossil fuels will induce us to postpone the inevitable transition to a postcarbon economy. Sooner or later, the economic, environmental and climate consequences of intensive fossil fuel use will force everyone on the planet to abandon reliance on these fuels in favor of climate-friendly renewables. This is not a matter of if but of when. The longer we wait, the more costly and traumatic the transition will be, and the greater the likelihood that our economy will fall behind those of other countries that undertake the transition sooner. By extending our dependence on fossil fuels, therefore, the current oil and gas revival is not an advantage but, as Obama said in 2008, a threat to national security. [2]

The Canadian economist then goes on to describe the reality that “infrastructure has not kept up with supply;”  “Getting the oil to the refineries is a problem and currently, refineries in the U.S. do not have the capacity to handle all of this oil;” and because “of the infrastructure problems, an increasing volume of crude oil is now transported by railway and tanker trucks, boosting employment and activity in these industries, but the costs are far higher than pipeline transport;” and then, of course “With this boom, there are a growing number of concerns. The environmental impacts, though uncertain, are troubling. Potential pollutants entering the air and water supply are of great concern. Drilling is disrupting communities, damaging roads, and increasing costs to local governments. Some are worried about the effect of drilling on earthquakes….In some regions, like parts of Texas, there are already water shortages exacerbated by the huge volumes of water needed for hydraulic fracking.”

Nope! Not seeing any problems there!

But, hey, as Bob Lutz was so helpful in pointing out, we have a “scenario of abundance” coming from the Bakken shale oil fields and Canadian tar sands. Not much in the way of explaining anything about production rates, depletion of existing fields, costs, quality, and assorted other nit-picking facts some of us rely on, but when you have a scenario of abundance, and “so much greasy, oily and gassy stuff under the surface, it seems” well … who needs facts, Right? Mr. Lutz, proud as well of his climate change-denying credentials, even relied on a “senior oil economist” in his assessment that “‘Peak Oil’ [is now] exposed as yet another Chicken-Little fallacy.”

Good to know! (And all of us fact-reliant Peak Oil proponents have been concerned all this time….Geez!)

Just when I was ready to join the reality-free world, Chris Martenson had to go and offer just a small dose of concern to those for whom reality [and the future] matters:

The only problem here is, what if that view of the future is wrong? Then what?
Everything.

Worth the risk?

Sources:

[1] http://www.chrismartenson.com/blog/dangerous-ideas/71666; Dangerous Ideas by Chris Martenson – 02.22.12

[2] http://www.thenation.com/article/166521/americas-fossil-fuel-fever;