CNN: Mayor Julian Castro awards a million dollar contract to a South Korean company [Archive]

SA210

10-22-2012, 05:57 PM

Mayor Julian Castro awards a million dollar contract to a South Korean company over an American. Ted Rowlands reports.

CNN Video
http://cnn.com/video/data/2.0/video/bestoftv/2012/10/19/exp-erin-san-antonio-mayor-julian-castro-backs-deal-sending-millions-abroad.cnn.html

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Mayor upset over solar story

Mayor Julian Castro calls CNN story misleading

San Antonio Mayor Julian Castro had some harsh words for a CNN report Monday.
Referring to a report that aired on Friday on CNN’s “Erin Burnett: Outfront," (http://www.cnn.com/video/?collection=Erin_Burnett_Out_Front&hpt=hp_tvvideo#/video/bestoftv/2012/10/19/exp-erin-san-antonio-mayor-julian-castro-backs-deal-sending-millions-abroad.cnn) Castro said it was the "most inaccurate report that I’ve ever seen regarding anything that San Antonio has done in public policy.”

The report examined City Public Service’s deal with OCI Solar to bring hundreds of jobs to San Antonio.

In the report, reporter Ted Rowlands said that the city has decided to send hundreds of millions of dollars in profits to South Korea rather that keep the money in the United States.

http://www.ksat.com/news/Mayor-upset-over-solar-story/-/478452/17087556/-/xtvkqjz/-/index.html

boutons_deux

10-22-2012, 06:48 PM

Castro has good points about what CNN left out of the the story. So much was left out that it looks like a hit piece, or resume padding.

scott

10-22-2012, 07:41 PM

Drachen

10-22-2012, 08:53 PM

That damn CNN, it is so obvious that they are just a liberal propaganda machine.

Nbadan

10-22-2012, 09:04 PM

Fucken funny to here the wing-nut echo-chamber try and spin this attack on Castro by the 'liberal CNN'

Their heads were spinning...

Nbadan

10-22-2012, 09:05 PM

Of course, there is no truth to any CNN rumors....the firm that got the contract will bring those jobs to SA,,,

Winehole23

10-23-2012, 02:31 AM

Doesn't this country like to trumpet the virtues of free trade? Or only when it's convenient?When there's a political axe to grind, free trade stops at the water's edge.

Winehole23

10-23-2012, 02:32 AM

lol Spurstalk libertarians

ElNono

10-23-2012, 02:33 AM

lol Spurstalk libertarians

Pretty much. The champions of the free market now demand tariffs and protectionism. Not so free after all?

CosmicCowboy

10-23-2012, 08:18 AM

The bigger question is why the fuck we are paying 11 cents a KW when we can produce electricity with NG for 2 cents a KW?

This is just another "Lets promote Julian Castro's political career" tax on San Antonio citizens.

boutons_deux

10-23-2012, 08:25 AM

"NG for 2 cents a KW"

where do you get that number?

CosmicCowboy

10-23-2012, 08:55 AM

"NG for 2 cents a KW"

where do you get that number?

Do you realize that CPS is currently delivering electricity to your computer at 9.5 cents a KW and this deal is to buy electricity AT THE SOURCE (undelivered) for 11 cents a KW?

CosmicCowboy

10-23-2012, 09:02 AM

Total cost of building a NG power plant, operating the plant, buying natural gas, and then decommissioning the plant at the end of it's life cycle is 3.7 cents a kwh at $2.60/mcf. San Antonio has a virtually endless supply of cheap NG from the eagle ford shale.

boutons_deux

10-23-2012, 09:02 AM

Do you realize that CPS is currently delivering electricity to your computer at 9.5 cents a KW and this deal is to but electricity AT THE SOURCE (undelivered) for 11 cents a KW?

yes, solar is more expensive but has fewer externalities, just like wind, than coal and NG, externalities that are always excluded from coal and NG pricing but are paid for by taxpayers and with their health.

When LNG terminals are done, watch US NG price approach world price. Why would NG produces sell domestically for 1/3 the world price? They won't.

btw, I see the foundation crews putting in concrete footings for the electrical transmission towers along IH10 to bring wind power from W Tx.

Where do you see that NG electricity costs $0.02/Kwh?

CosmicCowboy

10-23-2012, 09:10 AM

http://www.forbes.com/sites/jamesconca/2012/06/24/actual-energy-costs-are-driving-us-towards-a-natural-gas-nation/

However, the most recent low cost of gas from the fracking craze gives a significantly lower life-cycle actual cost of:

$6.3 billion + $26 billion + $5 billion + $20 million = $37.3 billion or 3.7¢/kWhr at $2.60/mcf

Winehole23

10-23-2012, 09:16 AM

it might be a bit unrealistic to count on NG prices remaining at current levels indefinitely, CC.

CosmicCowboy

10-23-2012, 09:21 AM

it might be a bit unrealistic to count on NG prices remaining at current levels indefinitely, CC.

Even at $4 gas (historical average) cost per KWH is only 5.1 cents.

How is this a smart move for San Antronio?

boutons_deux

10-23-2012, 09:24 AM

http://www.forbes.com/sites/jamesconca/2012/06/24/actual-energy-costs-are-driving-us-towards-a-natural-gas-nation/

It's hard to find international gas prices, but one source said US is $3/unit while Europe pays Russian $10/unit.

The US domestic NG price will rise, but internationally, it's complicated, esp with the current pegging of NG prices to oil prices.

http://energy.aol.com/2012/08/27/experts-say-us-lng-export-volumes-could-be-limited/

Lots of NG drillers/producers going bust now, and are saddled with contracts that require them to keep producing royalties no matter what. Big shakeout coming, with NG price rising

Winehole23

10-23-2012, 09:26 AM

How is this a smart move for San Antronio?I'm not sure it is, but your two cent quote looks pretty silly in light of what you just said.

ElNono

10-23-2012, 09:29 AM

The bigger question is why the fuck we are paying 11 cents a KW when we can produce electricity with NG for 2 cents a KW?

Is Castro stopping you or anybody from building a NG plant and competing? The reality is energy is priced to what the market will bear, not the absolute minimum. But if you think you can come up with a better deal, what's stopping you?

CosmicCowboy

10-23-2012, 09:31 AM

I'm not sure it is, but your two cent quote looks pretty silly in light of what you just said.

You REALLY want to nit pick an "off the top of my head" variance of 1.7 cents and NOT address that 3.7 cents kwh < 11 cents kwh?

CosmicCowboy

10-23-2012, 09:32 AM

It's hard to find international gas prices, but one source said US is $3/unit while Europe pays Russian $10/unit.

The US domestic NG price will rise, but internationally, it's complicated, esp with the current pegging of NG prices to oil prices.

http://energy.aol.com/2012/08/27/experts-say-us-lng-export-volumes-could-be-limited/

Lots of NG drillers/producers going bust now, and are saddled with contracts that require them to keep producing royalties no matter what. Big shakeout coming, with NG price rising

We aren't buying gas internationally fucktard. We are sitting right on top of billions of cubic feet.

CosmicCowboy

10-23-2012, 09:36 AM

Is Castro stopping you or anybody from building a NG plant and competing? The reality is energy is priced to what the market will bear, not the absolute minimum. But if you think you can come up with a better deal, what's stopping you?

That doesn't even make sense. I'm talking about simple economics and you are spouting blue team bulllshit. It's really quite simple.

3.7 cents KWH < 11 cents KWH

What part didn't you understand?

Winehole23

10-23-2012, 09:36 AM

You REALLY want to nit pick an "off the top of my head" variance of 1.7 cents and NOT address that 3.7 cents kwh < 11 cents kwh?I think I did. assuming NG prices will remain stable at historically low levels may not be a safe assumption.

CosmicCowboy

10-23-2012, 09:40 AM

I think I did. assuming NG prices will remain stable at historically low levels may not be a safe assumption.

And I addressed your objection and said if prices rise to historical norms that cost rises to 5.1 cents which is still less than halk the 11 cents he just agreed to pay. This is not theoretical. This is like a new green tax. When CPS costs to generate electricity rise then prices will rise on your monthly bill.

Winehole23

10-23-2012, 09:51 AM

And I addressed your objection and said if prices rise to historical norms that cost rises to 5.1 cents which is still less than halk the 11 cents he just agreed to pay.It's well known that green energy isn't cost efficient. Reading this contract as sop to progressives or as positioning for higher office -- i.e., as a deal without any tangible benefit for SA but with a very tangible premium -- seems plausible to me. However, it was puzzling to me that you undermined this very reasonable point by fiddling with the numbers in a misleading way. Even referring to the historical mean is a bit misleading: looking at the last ten years, there's plenty of volatility there.

CosmicCowboy

10-23-2012, 10:01 AM

It's well known that green energy isn't cost efficient. Reading this contract as sop to progressives or as positioning for higher office -- i.e., as a deal without any tangible benefit for SA but with a very tangible premium -- seems plausible to me. However, it was puzzling to me that you undermined this very reasonable point by fiddling with the numbers in a misleading way. Even referring to the historical mean is a bit misleading: looking at the last ten years, there's plenty of volatility there.

The fact is that we are sitting right on top of billions and billions of cubic feet of natural gas so supply is not an issue.

If they made purchasing this solar energy totally optional at a higher cost for those that supported it I wouldn't have as much of a problem with it.

Winehole23

10-23-2012, 10:07 AM

The fact is that we are sitting right on top of billions and billions of cubic feet of natural gas so supply is not an issue.in a globalized commodity market, does it much matter wrt to prices where the supply is?

CosmicCowboy

10-23-2012, 10:10 AM

in a globalized commodity market, does it much matter wrt to prices where the supply is?

Natural gas is not a global commodity without expensive processing. It is transported by pipelines which are local.

coyotes_geek

10-23-2012, 10:14 AM

If they made purchasing this solar energy totally optional at a higher cost for those that supported it I wouldn't have as much of a problem with it.

Austin tried that. Built a $200 million dollar solar facility under the idea that Austin greenies would volunteer to pay a higher rate to buy power from that plant. Needless to say the plan failed miserably.

Not saying that I'm against solar or wind in any way, just that the idea of getting customers to volunteer to pay a higher rate to cover the additional costs for it doesn't work.

Das Texan

10-23-2012, 10:16 AM

I really dont get why San Antonio or for that matter any city in the state of Texas refuses to truly take advantage of the natural gas under its soil.

Since we wont allow natural gas to be exported really, why not just put it to use, which would help the economy.

Building natural gas plants would make too much sense, which is why it wont happen.

When gas prices are at their historic lows, you tap into that source of energy. But yet, we dont. Makes smart sense.

Winehole23

10-23-2012, 10:16 AM

Natural gas is not a global commodity without expensive processing. It is transported by pipelines which are local.so, the gas companies give us a break for being close by?

CosmicCowboy

10-23-2012, 10:20 AM

Austin tried that. Built a $200 million dollar solar facility under the idea that Austin greenies would volunteer to pay a higher rate to buy power from that plant. Needless to say the plan failed miserably.

Not saying that I'm against solar or wind in any way, just that the idea of getting customers to volunteer to pay a higher rate to cover the additional costs for it doesn't work.

So why should we agree for CPS to pay 2 or 3 times the base cost for solar power KNOWING they are going to pass that cost on to us?

CosmicCowboy

10-23-2012, 10:22 AM

so, the gas companies give us a break for being close by?

C'mon, you are smarter than that. Yeah supply/demand, more gas available than being consumed = cheap natural gas.

coyotes_geek

10-23-2012, 10:25 AM

So why should we agree for CPS to pay 2 or 3 times the base cost for solar power KNOWING they are going to pass that cost on to us?

That's for everyone to form their own individual opinion on. If the current cost differential is most important to you, then you shouldn't like this. If you're willing to consider factors beyond the current cost differential, maybe you come up with something different.

CosmicCowboy

10-23-2012, 10:31 AM

That's for everyone to form their own individual opinion on.

EXACTLY

And solar is a PERFECT "local" solution. I'm looking at putting panels on my house, but solar is a STUPID "grid" solution.

Winehole23

10-23-2012, 10:31 AM

Yeah supply/demand, more gas available than being consumed = cheap natural gasthe inference that NG prices will remain stable for the lifetime of the power plant is, well, just an inference and maybe not even a very plausible one. the historical volatility of oil/NG prices seems to cut against it.

coyotes_geek

10-23-2012, 10:34 AM

EXACTLY

And solar is a PERFECT "local" solution. I'm looking at putting panels on my house, but solar is a STUPID "grid" solution.

Agreed. Solar for rooftops, wind for grid.

CosmicCowboy

10-23-2012, 10:37 AM

the inference that NG prices will remain stable for the lifetime of the power plant is, well, just an inference and maybe not even a very plausible one. the historical volatility of oil/NG prices seems to cut against it.

Fracking has changed the game. South Texas is loaded with natural gas.
http://www.rrc.state.tx.us/eagleford/EagleFordGWGProduction.pdf

Winehole23

10-23-2012, 10:46 AM

CosmicCowboy

10-23-2012, 11:06 AM

not disputed.

I do dispute however that we can know what future prices on a global market will be with any reasonable degree of certainty. the supply may be reliable, but demand isn't; the rest of the world can be hard to predict.

If we were talking fractional differences, yes, but not voluntarily choosing to buy energy now at 3X our current cost to produce.

boutons_deux

10-23-2012, 11:22 AM

"It's well known that green energy isn't cost efficient"

it's well known the external costs of carbon and nuclear energy are underestimated or excluded.

Das Texan

10-23-2012, 11:34 AM

Since you cant really export natural gas outside of the US, then its really a moot point what prices in Europe are.

Gas prices are at historical lows.

Even at the historical average, you are looking at a better deal than a solar plant.

Even at slightly above the historical average you are looking at a better deal than a solar plant.

Its not until you get to the stupidity of 2007-2008 when you are starting to look at a solar plant being a good deal and that period was an historical anomaly.

Solar is good, dont get me wrong. If you want to invest in solar that builds solar panels for residences, great deal for South Texas. Especially if you then offer incentives for people to obtain said solar panels. This will do a great job of alleviating future pressure off the power grid.

But to flat out talk about global natural gas prices (for liquified) natural gas and how they may affect future prices here, you have a number of factors to occur which are currently frankly impossible.

The amounts of natural gas available in Texas alone is amazing. And its not really even being brought to the surface due to the historically low prices today. With a proper mix that utilizes natural gas possibly as its #1 energy source of this region, you have a strong and very solid energy plan for South Texas for decades to come and at great rates for the citizens.

boutons_deux

10-23-2012, 11:40 AM

"Since you cant really export natural gas outside of the US, then its really a moot point what prices in Europe are."

There are 10 applications for licenses to build LNG terminals around the US, so you CAN export NG. Libya's been doing it across the Med to Europe for many years.

btw, Keystone Pipeline coming the way TX coast is so the Canadian oil and products can be exported. Will have NO effect of US gas, etc prices. Property owners get the risks of destruction of their property from the inevitable numerous pipeline spills while corps get all the profits.

Winehole23

10-23-2012, 11:40 AM

Since you cant really export natural gas outside of the US, then its really a moot point what prices in Europe are.http://articles.chicagotribune.com/2012-10-21/business/sns-rt-us-usa-lng-campaignbre89l009-20121021_1_gas-exports-cheniere-s-sabine-pass-natural-gas

Th'Pusher

10-23-2012, 11:43 AM

Even at $4 gas (historical average) cost per KWH is only 5.1 cents.

How is this a smart move for San Antronio?

Castro is clearly factoring in the enevitable carbon tax.

Das Texan

10-23-2012, 11:50 AM

Until those licenses are approved its very difficult to export natural gas currently.

And I know you CAN export it, its not a matter of it being done or not.

Its simply a matter of the United States really allowing for it to be done.

boutons_deux

10-23-2012, 11:56 AM

Until those licenses are approved its very difficult to export natural gas currently.

duh

http://www.nola.com/business/index.ssf/2012/04/louisiana_terminal_proposed_fo.html

http://www.cheniere.com/LNG_terminals/sabine_pass_lng.shtml

http://www.sempralng.com/

etc, etc.

LNG exporting will be huge, as indicated by the license applications.

Why wouldn't it be? NG supply exceeds US demand, so the exporters have plenty of product.

Das Texan

10-23-2012, 11:59 AM

I apologize we can export natural gas to 19 nations currently.

They are

Australia
Bahrain
Canada
Chile
Colombia
Costa Rica
Dominican Republic
El Salvador
Guatemala
Honduras
Israel
Jordan
Korea
Mexico
Morocco
Nicaragua
Oman
Peru
Singapore

Mexico makes the most sense, but they are fucking morons who refuse to allow the pipelines to be connected.

Das Texan

10-23-2012, 12:00 PM

The Department of Energy has said they arent really interested in granting exports to additional nations at this time.

So until the political climate is changed (which it could in a few months), dont plan on seeing this huge exportation of natural gas to places like China.

Das Texan

10-23-2012, 12:01 PM

And I agree it would be huge and would put more money in my pocketbook.

But I'm not holding my breath.

Das Texan

10-23-2012, 12:03 PM

Regardless of your stance. CNN are fucking morons for omitting numerous facts from their original story.

yet another example of CNN failing miserably at any real news coverage.

MannyIsGod

10-23-2012, 12:39 PM

Even at $4 gas (historical average) cost per KWH is only 5.1 cents.

How is this a smart move for San Antronio?

What are the historical averages for oil?

MannyIsGod

10-23-2012, 12:46 PM

You guys should take a look at the San Antonio average income. At some point if you don't invest in bringing areas of higher technology to San Antonio I'm not sure you can expect anything other than a bleak long term future for the city compared to other cities of similar size in the nation. There are many factors to consider outside of the simple power cost of building a solar power infrastructure in your city.

San Antonio has been hobbled by small time thinking for my entire life. The only time I've seen it be proactive is with the stupid ass Alamodome. Sometimes you have to pay for things to become a more complete city and you have to invest in yourself to improve. Even if they are partially driven by bigger political ambitions, ideas like this can be a damn good thing for San Antonio.

MannyIsGod

10-23-2012, 12:47 PM

What are the historical averages for oil?

More specifically what does a graph of the historical price of oil by year look like?

ElNono

10-23-2012, 02:21 PM

We aren't buying gas internationally fucktard. We are sitting right on top of billions of cubic feet.

That doesn't even make sense. I'm talking about simple economics and you are spouting blue team bulllshit. It's really quite simple.

3.7 cents KWH < 11 cents KWH

What part didn't you understand?

What part of 'energy is priced to what the market will bear, not what the minimum is' you didn't understand?

That you could produce energy cheaper doesn't automatically mean that it will be sold cheaper locally.

TeyshaBlue

10-23-2012, 02:25 PM

What part of 'energy is priced to what the market will bear, not what the minimum is' you didn't understand?

That you could produce energy cheaper doesn't automatically mean that it will be sold cheaper locally.

A lower price will be the most likely outcome of a market surplus. You know this, EN.

CosmicCowboy

10-23-2012, 02:29 PM

What are the historical averages for oil?

We aren't talking about oil we are talking about natural gas. It may come out of the same hole in the ground but it's very different. Kind of like the difference between a fart and a shit.

ElNono

10-23-2012, 02:35 PM

A lower price will be the most likely outcome of a market surplus. You know this, EN.

I would agree with that in most cases, but not necessarily with the oil market. I've just got back from south america, and the demand for natural gas and oil-related products over there (and I hear central america is pretty much the same) is spiking considerably. As a matter of fact, the US exported oil-based products in the billions just to Argentina alone last year. What people need to realize is that the US already pays very little for oil products, and that the worldwide market pays a lot more for the same thing.

TeyshaBlue

10-23-2012, 02:42 PM

I would agree with that in most cases, but not necessarily with the oil market. I've just got back from south america, and the demand for natural gas and oil-related products over there (and I hear central america is pretty much the same) is spiking considerably. As a matter of fact, the US exported oil-based products in the billions just to Argentina alone last year. What people need to realize is that the US already pays very little for oil products, and that the worldwide market pays a lot more for the same thing.

There are similarities between the oil and nat gas markets. But they do not move in synch nor should they be used as predictors of behavior for the other. In many ways, they are very different animals.

ElNono

10-23-2012, 02:47 PM

There are similarities between the oil and nat gas markets. But they do not move in synch nor should they be used as predictors of behavior for the other. In many ways, they are very different animals.

Maybe so, but international demand is fairly high on both and they both share similarities as far as pricing goes. Don't take my word for it. (http://www1.realclearmarkets.com/facts_and_fallacies/by_the_numbers/2012/03/natural_gas_prices_worldwide.html)

MannyIsGod

10-23-2012, 02:58 PM

We aren't talking about oil we are talking about natural gas. It may come out of the same hole in the ground but it's very different. Kind of like the difference between a fart and a shit.

I'm not talking about the differences in the sources but the fact that both are limited natural resource and that the historical price average is a really shit way of trying to see what the future price may be.

CosmicCowboy

10-23-2012, 02:59 PM

Maybe so, but international demand is fairly high on both and they both share similarities as far as pricing goes. Don't take my word for it. (http://www1.realclearmarkets.com/facts_and_fallacies/by_the_numbers/2012/03/natural_gas_prices_worldwide.html)

Oil is easily transported internationally. Natural gas is not EASILY transported internationally.

MannyIsGod

10-23-2012, 03:02 PM

Is the biggest barrier to NG transport overseas an engineering problem or a legislative one? Honest question.

TeyshaBlue

10-23-2012, 03:04 PM

Is the biggest barrier to NG transport overseas an engineering problem or a legislative one? Honest question.

Legislative I believe. There are numerous applications for export, but no approvals at this point.

CosmicCowboy

10-23-2012, 03:05 PM

TeyshaBlue

10-23-2012, 03:06 PM

Natural gas has to be converted to liquid natural gas to transport it overseas. That involves refrigerating it to minus 265F and holding it at that temperature in cryogenic containers until it reaches it's destination where it is allowed to return to a gaseous state for use.

That's not a problem. Just put the gas in touch with my ex. That should cool it right the hell down.

MannyIsGod

10-23-2012, 03:08 PM

Natural gas has to be converted to liquid natural gas to transport it overseas. That involves refrigerating it to minus 265F and holding it at that temperature in cryogenic containers until it reaches it's destination where it is allowed to return to a gaseous state for use.

But we have solutions able to do this, correct? If the main problem with exportation of a very valuable resource we have a lot of is legislative then I don't see that standing up for a very long time and certainly not for decades. Money talks.

CosmicCowboy

10-23-2012, 03:11 PM

But we have solutions able to do this, correct? If the main problem with exportation of a very valuable resource we have a lot of is legislative then I don't see that standing up for a very long time and certainly not for decades. Money talks.

It's an expensive process, Manny. Thus when El nono wants to talk about $10mcf gas somewhere else compared to natural gas in a pipeline in Texas that was produced 50 miles away it really is an apples and oranges comparison. There are currently only 8 LNG compression stations in the US and they literally cost billions to build.

MannyIsGod

10-23-2012, 03:13 PM

TeyshaBlue

10-23-2012, 03:14 PM

It's an expensive process, Manny. Thus when El nono wants to talk about $10mcf gas somewhere else compared to natural gas in a pipeline in Texas that was produced 50 miles away it really is an apples and oranges comparison. There are currently only 8 LNG compression stations in the US and they literally cost billions to build.

Hence my two different animals descriptor.

There's a shit ton of processing to move NG. You just pump oil in a pipe to move it.

TeyshaBlue

10-23-2012, 03:14 PM

CosmicCowboy

10-23-2012, 03:17 PM

When those babies go "boom" they REALLY go "boom'

http://home.vicnet.net.au/~auranet/dampier/web/Varanus_Isl.jpg

TeyshaBlue

10-23-2012, 03:17 PM

There's an upper limit on price that the market dictates. Right now, the processing expense definately does matter.

For that reason alone, domestic nat gas prices will continue to undercut the world pricing.

ElNono

10-23-2012, 03:17 PM

Oil is easily transported internationally. Natural gas is not EASILY transported internationally.

Natural Gas is already exported internationally, and it's only growing. Here are the numbers for the last few years (http://www.eia.gov/dnav/ng/ng_move_expc_s1_a.htm).

Simply put, the prices are just much more attractive overseas.

MannyIsGod

10-23-2012, 03:17 PM

There's an upper limit on price that the market dictates. Right now, the processing expense definately does matter.

I'm not saying it doesn't matter. I'm saying it only matters within the context of the amount of money that can be made. A more expensive process doesn't necessarily mean less money back from a transaction if the ultimate margin is large enough. In energy I damn well expect this is the case.

MannyIsGod

10-23-2012, 03:20 PM

Natural Gas is already exported internationally, and it's only growing. Here are the numbers for the last few years (http://www.eia.gov/dnav/ng/ng_move_expc_s1_a.htm).

Simply put, the prices are just much more attractive overseas.

This is exactly my point.

I'm not familiar with how energy companies do this, but there is also the fact that there may be pressure to produce less than full capacity until you see a price increase or a greater ability to ship it overseas. If I have a product I can make much more profit on by waiting 5 years to sell I would imagine the pressure for me to sell less of that product in the near term would be strong. This is pure speculation on my part, however.

CosmicCowboy

10-23-2012, 03:20 PM

I'm not saying it doesn't matter. I'm saying it only matters within the context of the amount of money that can be made. A more expensive process doesn't necessarily mean less money back from a transaction if the ultimate margin is large enough. In energy I damn well expect this is the case.

Manny, I am not against solar. I am, in fact, installing PV panels on my house before the CPS rebates expire. I am against grid based solar. It's a TERRIBLE application.

TeyshaBlue

10-23-2012, 03:23 PM

I'm not saying it doesn't matter. I'm saying it only matters within the context of the amount of money that can be made. A more expensive process doesn't necessarily mean less money back from a transaction if the ultimate margin is large enough. In energy I damn well expect this is the case.

The market price ceiling is the upper arm of the vise. The production/shipping costs is the lower arm. Squeezed in the middle are the profits. Right now, that vise caps profit.

In the crude oil markets, this isn't the case as there are infinitely more transportation and processing options than are available for nat gas.

MannyIsGod

10-23-2012, 03:26 PM

Thats not the point I'm arguing. I'm generally in favor of distributed solar as a great supplement to grid power but that doesn't mean I'm fully against large solar installations completely. But like I said thats not my point.

My point is that using the historical average of NG as some sort of upper limit on the price is a really bad idea. Up until fairly recently the long term historical average of oil and other forms of energy production was very low. That has change and one only needs to look at South and East Asia as to the incoming tide of even further increase. We should not be trying to lie to ourselves about future energy costs from NG or any other non renewable form of energy.

And while NG is lower in emissions than coal, it still emits quite a bit of CO2 into the atmosphere when burned. Many want to act as though this is not a real issue but I am positive that line of thinking is going to come to an end in the next 10-15 years.

TeyshaBlue

10-23-2012, 03:30 PM

I'm not even considering the historical average. I'm looking at the current $10 range for nat gas. That price approaches export profitability. Approaches.

MannyIsGod

10-23-2012, 03:34 PM

Then why are exports increasing as EN pointed out?

TeyshaBlue

10-23-2012, 03:36 PM

See approaching.

Also, not all exports are equal. Exporting nat gas to South America <> to exporting nat gas to Russia.

ElNono

10-23-2012, 03:43 PM

Also, not all exports are equal. Exporting nat gas to South America <> to exporting nat gas to Russia.

Russia is a net nat gas producer and one of the main sources of nat gas for europe. However, their own demand is increasing and so they're making US nat gas exports attractive. See: US exports to the UK and Spain the last two years.

CosmicCowboy

10-23-2012, 03:47 PM

BTW, for those that are interested, a 5 KW system costs about $23,000. CPS currently rebates 33% of the total cost (that will end when they shoot their wad on solar farms). Here's how the math works.

Total cost for 5KW system $23,000
Less 30% tax credit $ 6,900

subtotal $16,100
minus CPS rebate $7,590.

Total out of pocket $8,510 financed 10 years at 6% would be $95 month

It will generate about $68 dollars of electricity per month at current rates. I would negative cash flow $27 a month for the first 10 years, then positive cash flow $70 a month (at current rates) for the next 15 years after that.

MannyIsGod

10-23-2012, 03:50 PM

See approaching.

Also, not all exports are equal. Exporting nat gas to South America <> to exporting nat gas to Russia.

There's a country a little south of Russian on a series of islands that may prove to be a huge place to export NG to.

-we don't want them using Iranian oil
-they need to make up a shortage due to the nuclear disaster

MannyIsGod

10-23-2012, 03:51 PM

MannyIsGod

10-23-2012, 03:52 PM

See approaching.

Also, not all exports are equal. Exporting nat gas to South America <> to exporting nat gas to Russia.

Also it doesn't matter where the gas goes. If its going somewhere other than the US that is raising demand and thereby the price.

CosmicCowboy

10-23-2012, 03:55 PM

Most people can't afford that even if it is a net gain in the future.

$27 dollars a month?

TeyshaBlue

10-23-2012, 03:57 PM

Also it doesn't matter where the gas goes. If its going somewhere other than the US that is raising demand and thereby the price.

Transportation and cryogenic costs say "Hi!".

CosmicCowboy

10-23-2012, 03:57 PM

Most people can't afford that even if it is a net gain in the future.

Will they be afford to pay their utility bill after CPS marks up that 11 cent KW solar energy to 16 cents KW and their utility bill goes up 60%?

TeyshaBlue

10-23-2012, 03:58 PM

There's a country a little south of Russian on a series of islands that may prove to be a huge place to export NG to.

-we don't want them using Iranian oil
-they need to make up a shortage due to the nuclear disaster

I used Russia as an example of implied disparate transportation distances. I guess I didn't imply that well enough.

MannyIsGod

10-23-2012, 03:59 PM

Transportation and cryogenic costs say "Hi!".

Raising exports say hi. If exports increase, it doesn't matter by what manner they are processed, demand has gone up.

MannyIsGod

10-23-2012, 04:00 PM

I used Russia as an example of implied disparate transportation distances. I guess I didn't imply that well enough.

Sure, i completely acknowledge that the US faces transportation hurdles that Russia does not. That still really doesn't do much to my point.

TeyshaBlue

10-23-2012, 04:02 PM

Raising exports say hi. If exports increase, it doesn't matter by what manner they are processed, demand has gone up.

Demand has already shot up. US nat gas is still 2 bucks and change.

TeyshaBlue

10-23-2012, 04:04 PM

Sure, i completely acknowledge that the US faces transportation hurdles that Russia does not. That still really doesn't do much to my point.

I was trying to illustrate that the larger the distance, the greater the cost. We ship nat gas to Australia, which on the surface makes about zero sense. Do you believe we make as much money on a 100 mcf shipment to Australia as we do on a 100mcf shipment to the Dominican Republic?

The answer would be no. We don't. Transportation costs eat at the margins.

There is some spec buy activity that delivers cost anomalies....the Australia purchase might be one of these.

MannyIsGod

10-23-2012, 04:04 PM

Thats a fair point but all signs point to much more demand growth in the future.

MannyIsGod

10-23-2012, 04:06 PM

I was trying to illustrate that the larger the distance, the greater the cost. We ship nat gas to Australia, which on the surface makes about zero sense. Do you believe we make as much money on a 100 mcf shipment to Australia as we do on a 100m,cf shipment to the Dominican Republic/

The answer would be no. We don't. Transportation costs eat at the margins.

I think that in the future

- costs for moving it will come down
-prices for the product will go up

I didn't stay at a holiday inn express last night though and I don't work in the industry so take my opinion for what its worth: very little.

TeyshaBlue

10-23-2012, 04:07 PM

Thats a fair point but all signs point to much more demand growth in the future.

Totally agree with the demand growth. If/when the growth pushes prices farther north, exports will start to really roll I suspect. But it's not a binary solution set. Gas will sell domestically less than export market pricing.

TeyshaBlue

10-23-2012, 04:07 PM

I think that in the future

- costs for moving it will come down
-prices for the product will go up

I didn't stay at a holiday inn express last night though and I don't work in the industry so take my opinion for what its worth: very little.

Those are fair predictions, imo.

CosmicCowboy

10-23-2012, 04:10 PM

Wild Cobra

10-23-2012, 04:13 PM

I'm curious. Does Julian Castro hold a dictatorship over the contract process, or are their lowest bit considerations in place he must legally abide by?

Das Texan

10-23-2012, 04:14 PM

When are the CPS solar rebates expiring anyway?

27 bucks a month is a great deal, except I'm moving soon!

MannyIsGod

10-23-2012, 04:14 PM

Yes, WC. He lives in a castle behind and moat and doesn't have to worry about any laws regarding a contracts by the government.

Long live King Castro.

TeyshaBlue

10-23-2012, 04:22 PM

:lol
Yes, WC. He lives in a castle behind and moat and doesn't have to worry about any laws regarding a contracts by the government.

Long live King Castro.

CosmicCowboy

10-23-2012, 04:25 PM

I'm curious. Does Julian Castro hold a dictatorship over the contract process, or are their lowest bit considerations in place he must legally abide by?

He admits they did not take the lowest bid (9 cents and change was lowest bid) but the trade off was allegedly that they would bring more jobs to the city.

CosmicCowboy

10-23-2012, 04:26 PM

When are the CPS solar rebates expiring anyway?

27 bucks a month is a great deal, except I'm moving soon!

Soon. they only have a million or so left to spend and CPS is already making noise that they are going to move those residential solar commitments to large scale solar commitments.

Das Texan

10-23-2012, 04:34 PM

Fuck.

I"m going to end up getting fucked then probably.

sure as fuck aint putting them up on this piece of shit I'm in now!

Agloco

10-23-2012, 06:30 PM

I'm curious. Does Julian Castro hold a dictatorship over the contract process, or are their lowest bit considerations in place he must legally abide by?

Curious? The answer doesn't jump up and bite you on the ass?

CosmicCowboy

10-24-2012, 06:43 AM

The expense doesn't matter out of the context of the profit margin available. If the companies pumping the gas out of the Texas shales can put it on a boat in Houston to XYZ company and make more money than they can selling it in Texas where do you think they will prefer to send the gas? As energy prices continue to rise around the world they will be looking for new sources. I don't think you guys quite understand how much room for increased energy usage there is in China and India due to their large populations using relatively low levels of energy.

Even if NG itself isn't able to be exported the price will still rise if source of other energy increase in price (and they will) because more of our production of energy domestically will switch to NG and thus place a higher strain on the supply. Anyone expecting low energy prices in the future is operating in a different reality IMO.

OK, lets accept your premise that natural gas prices will rise. There are proven completed dry gas wells in the deep part of the Eagle Ford shale that are being capped as they are being completed (gas is too cheap to activate the wells) and there are some highly leveraged small exploration companies starving for cash. CPS is much better off buying up these completed wells/reserves now on the cheap as a hedge against future natural gas price increases.

MannyIsGod

10-24-2012, 08:20 AM

Thats actually a good point.

boutons_deux

10-24-2012, 08:22 AM

"buying up these completed wells/reserves"

are they for sale?

Drachen

10-24-2012, 08:36 AM

This is actually a very good point, especially as we retire coal plants and bring new NG plants online. Does the charter allow CPS to manage fuel source assets?

Drachen

10-24-2012, 08:37 AM

"buying up these completed wells/reserves"

are they for sale?

there may be no "for sale" sign hanging off of them, but you do understand what starved for cash means, right?

boutons_deux

10-24-2012, 08:59 AM

I read where many of these leases are required to keep selling NG and paying royalties even if selling NG is unprofitable. Is CPS willing to take on that kind of lease?

Drachen

10-24-2012, 09:06 AM

I read where many of these leases are required to keep selling NG and paying royalties even if selling NG is unprofitable. Is CPS willing to take on that kind of lease?

There are proven completed dry gas wells in the deep part of the Eagle Ford shale that are being capped as they are being completed (gas is too cheap to activate the wells) and there are some highly leveraged small exploration companies starving for cash.

Now you may have a point that some base level of royalties must be paid, and I don't have an answer to that, but they are obviously not required to keep selling NG.

coyotes_geek

10-24-2012, 09:09 AM

They would have to pay on the lease regardless of whether or not the well is producing. They would not have to pay royalties if the well is not producing.

boutons_deux

10-24-2012, 09:11 AM

They would have to pay on the lease regardless of whether or not the well is producing. They would not have to pay royalties if the well is not producing.

no, the type of leases I read about required not only lease payments, but royalty payments.

CosmicCowboy

10-24-2012, 09:15 AM

First, there is an upfront fee for drilling rights for a certain amount of time. This would have already been paid by the exploration company. Royalties only come into play when the well is producing.

CosmicCowboy

10-24-2012, 09:15 AM

no, the type of leases I read about required not only lease payments, but royalty payments.

WTF does thinkprogress know about oil leases?

CosmicCowboy

10-24-2012, 09:20 AM

This is actually a very good point, especially as we retire coal plants and bring new NG plants online. Does the charter allow CPS to manage fuel source assets?

If their charter allows them to buy PV energy at the source from a foreign company for 2 cents more than they deliver it to their customers for then apparently their charter allows them to do any fucking thing they want to...:lol

Das Texan

10-24-2012, 09:23 AM

I dont know of any oil and gas lease that provides for a lease payment and a royalty payment both concurrently.

Generally the standard is to pay for the lease (lease bonus) and then the royalty as you bring it to the ground (royalty payment)

They may be talking about delay rentals or extension payments but once you have production, in that production zone you dont have lease payments anymore.

Furthermore, CC makes a great point, one I had thought about yesterday.

CPS needs to work out a deal with various companies to buy said dry gas today, possibly work out a sale agreement where so much will be bought for such a long period of time at some set price. Perhaps higher than today but as prices rise you then come out ahead.

The gas company wins as they can actually sell their product TODAY at a higher price. CPS wins because they lock in that price for whatever period of time.

TeyshaBlue

10-24-2012, 09:27 AM

no, the type of leases I read about required not only lease payments, but royalty payments.

Royalty payments are tied to production. Period.

Now in the case of royalty trust companies, there is a chance that payments can be made for a non producing well. Royalty trust companies purchase rights to nat gas deposits but don't work/produce these deposits themselves. Instead, they auction off leases to production companies and pay out the profit to shareholders...ergo a non producing well can produce some payments. But, not in a classical periodic royalty model.

Drachen

10-24-2012, 09:30 AM

I found this (http://www.kiplinger.com/magazine/archives/natural-gas-shale-royalties-leases.html#OSef165UijC9e4WG.99)

Getting in on the boom starts when a landman comes knocking. Landmen (who may be women) represent oil-and-gas companies in lease negotiations with landowners. They’ll offer an upfront payment, called a bonus, for the right to drill on a parcel of land, and royalties for gas extracted from the property, calculated as a percentage of the revenues for any gas sold. Pennsylvania, for example, mandates a minimum royalty of 12.5%. Gas companies may assemble many properties into a gas-producing unit, with landowners’ royalties based on their proportional share in the unit.

Negotiations quickly get complicated, and tales of unscrupulous landmen and naïve landowners are legion. Suffice it to say that when offered a “standard” lease and handed a pen, the worst thing to do is sign right away. Better to wait, talk to several gas companies, confer with neighbors and consult an attorney.

Timing is key. Some of the land in the Marcellus region has been leased for generations, with the leases renewed every five or ten years for a few dollars an acre. Extracting the gas didn’t become commercially viable until 2005 and later, as techniques improved. Acreage that might have been leased at $2 an acre in 2000 and $30 an acre in 2005 commanded $2,400 an acre in 2008. Some signing bonuses have reached $7,000 an acre in red-hot Bradford County, with royalties as high as 20%. “We entertained offers for five years,” says Jackie Root, a Tioga County farmer who has become a homegrown gas guru.

Read more at http://www.kiplinger.com/magazine/archives/natural-gas-shale-royalties-leases.html#OSef165UijC9e4WG.99

Read more: http://www.kiplinger.com/magazine/archives/natural-gas-shale-royalties-leases.html#ixzz2AE77DUd2
Become a Fan of Kiplinger's on Facebook

Also, CC. Buying electricity is different than owning a natural gas well.

CosmicCowboy

10-24-2012, 09:36 AM

I found this (http://www.kiplinger.com/magazine/archives/natural-gas-shale-royalties-leases.html#OSef165UijC9e4WG.99)

Also, CC. Buying electricity is different than owning a natural gas well.

You realize CPS also buys/sells/runs NG pipelines, right?

coyotes_geek

10-24-2012, 09:47 AM

no, the type of leases I read about required not only lease payments, but royalty payments.

Whoever wrote that doesn't know what they're talking about. Royalties are based on revenue. No production = no revenue = no royalties.

elbamba

10-24-2012, 09:57 AM

Whoever wrote that doesn't know what they're talking about. Royalties are based on revenue. No production = no revenue = no royalties.

Some times there are rental fees that get paid when shut-in rights are being executed or no production is taking place. This might be what he is mistaking as a royalty? Whatever fee is paid allows the Lessee to maintain its rights under the lease agreement. Typically in oil and gas leases, if there is no production for 60 - 90 days the lessee could lose its lease rights unless the rental fee is paid. I am coming into this late so I might be completely off topic.

Drachen

10-24-2012, 10:01 AM

You realize CPS also buys/sells/runs NG pipelines, right?

No, I didn't. Do they do this to and from their powerplants? Or is this just a seperate commercial activity? Also, and I know I am getting pretty detailed here, but operating a pipeline is still different than owning a fuel producing asset. I am totally not saying you are wrong, it might be enough of a differentiator in CPS' charter. If they are allowed to, I would think that your idea should definitely be added to the portfolio.

boutons_deux

10-24-2012, 10:05 AM

Whoever wrote that doesn't know what they're talking about. Royalties are based on revenue. No production = no revenue = no royalties.

the lease holders wrote contracts that mandated both lease fees and royalty fees. is that hard to understand? the lessor have to keep selling NG to keep up the royalty payments, or lose the lease (and the investment in drilling)

TeyshaBlue

10-24-2012, 10:10 AM

So in other words, no production no royalties. yeah. We've said this before.

elbamba

10-24-2012, 10:15 AM

the lease holders wrote contracts that mandated both lease fees and royalty fees. is that hard to understand? the lessor have to keep selling NG to keep up the royalty payments, or lose the lease (and the investment in drilling)

Call it what you want but it is not a lot of money. $1,000 - $2,000.00. Further, if you are producing oil/gas you usually do not need to pay a "lease fee". You only pay this if production stops and you want to maintain your lease. If there is no product, the lease holder will usually try to sell the lease or simply walk away.

boutons_deux

10-24-2012, 10:26 AM

So in other words, no production no royalties. yeah. We've said this before.

these new types of contracts says production MUST continue so the royalties are paid. GFY

TeyshaBlue

10-24-2012, 10:30 AM

the lessor have to keep selling NG to keep up the royalty payments, or lose the lease (and the investment in drilling)

So in other words, no production no royalties. yeah. We've said this before.

TeyshaBlue

10-24-2012, 10:30 AM

Please show me an example of these "new types of contracts".

boutons_deux

10-24-2012, 10:34 AM

Please show me an example of these "new types of contracts".

Do Your Own Research
-- WC

elbamba

10-24-2012, 10:39 AM

Please show me an example of these "new types of contracts".

There is nothing new. Cessation provisions have been around for a very long time. It is standard in both oil and gas leases as well as simple easement and right of way agreements. Stop flowing product, lose your lease/easement. In O&G the time limit is usally 90 days or less. In easement agreements it is usually 365 consecutive days or 2 consecutive years.

CosmicCowboy

10-24-2012, 10:51 AM

Please show me an example of these "new types of contracts".

www.think/progress/oil.leases

coyotes_geek

10-24-2012, 10:51 AM

the lease holders wrote contracts that mandated both lease fees and royalty fees. is that hard to understand? the lessor have to keep selling NG to keep up the royalty payments, or lose the lease (and the investment in drilling)

It's not hard to understand at all. No revenue means no royalties. But as I stated earlier, they still have to pay on the lease whether they're producing or not, so no revenue does not mean there isn't any money trading hands.

They would have to pay on the lease regardless of whether or not the well is producing. They would not have to pay royalties if the well is not producing.

TeyshaBlue

10-24-2012, 10:53 AM

There is nothing new. Cessation provisions have been around for a very long time. It is standard in both oil and gas leases as well as simple easement and right of way agreements. Stop flowing product, lose your lease/easement. In O&G the time limit is usally 90 days or less. In easement agreements it is usually 365 consecutive days or 2 consecutive years.

I'm aware of cessation agreements. Boutons was claiming some "new types of contracts". But as usual, he doesn't have a clue.

CosmicCowboy

10-24-2012, 10:57 AM

No, I didn't. Do they do this to and from their powerplants? Or is this just a seperate commercial activity? Also, and I know I am getting pretty detailed here, but operating a pipeline is still different than owning a fuel producing asset. I am totally not saying you are wrong, it might be enough of a differentiator in CPS' charter. If they are allowed to, I would think that your idea should definitely be added to the portfolio.

OK, CPS purchases ng for their power plants and also purchases and resells ng to all it's consumers on it's wholly owned NG pipeline system. I buy NG from CPS for my home. So CPS is already buying and distributing natural gas, Supplying NG once the well is drilled is pretty much an autopilot procedure. You cap the well with the christmas tree of valves, put in a pipeline to the nearest distribution pipeline, put in a compressor station and a meter and open the valve. From that point on it's pretty much a guy in a pickup running around servicing and keeping the equipment operating.

Drachen

10-24-2012, 11:10 AM

OK, CPS purchases ng for their power plants and also purchases and resells ng to all it's consumers on it's wholly owned NG pipeline system. I buy NG from CPS for my home. So CPS is already buying and distributing natural gas, Supplying NG once the well is drilled is pretty much an autopilot procedure. You cap the well with the christmas tree of valves, put in a pipeline to the nearest distribution pipeline, put in a compressor station and a meter and open the valve. From that point on it's pretty much a guy in a pickup running around servicing and keeping the equipment operating.

yeah, I wasn't even thinking about the residential natgas pipelines, I figured you were talking more about the industrial type pipelines. What you describe is exactly what I thought you were proposing and like I said, I think it would be a good idea. I just know that there are sometimes strange stipulations in the charters of quasi governmental entities like CPS. Owning fuel sources seems like one of those things especially since they aren't currently doing it.

Winehole23

10-24-2012, 11:59 AM

I'm aware of cessation agreements. Boutons was claiming some "new types of contracts". But as usual, he doesn't have a clue.boutons might be referring to the "cash and carry" deals referred to three days ago in this NYT article (http://www.nytimes.com/2012/10/21/business/energy-environment/in-a-natural-gas-glut-big-winners-and-losers.html?pagewanted=all&_r=0). NYT is pretty sketchy about the structure of the deals but fairly preachy about the result. One guy basically gets the blame for the NG glut.

RandomGuy

10-24-2012, 12:09 PM

Even if he did hire a South Korean firm over an American one... are we supposed to just blindly give work to American firms for the sake of them being American?

Doesn't this country like to trumpet the virtues of free trade? Or only when it's convenient?

The latter. Duh.

Of course if he had gone with the more expensive 'Mericans, the cry would be "why is he wasting our tax dollars".

Sigh.