Stranded fossil fuel assets: money goes in, but does it come out?

$5.5 trillion or $800 for each human on this Earth has been dumped into the fossil fuel money pit. Will most of that money never come back out, now that solar stocks are skyrocketing and foundations are banding together to dump fossil fuel stocks? Why should we let Spectra Energy and NextEra gouge a methane pipeline through our lands for their bad investment?

Kumi Naidoo wrote for EcoWatch 31 January 2014, Dirty Fuels is a Bad Idea,

By keeping their money in coal and oil companies, investors are betting a vast amount of wealth, including the pensions and savings of millions of people, on high future demand for dirty fuels. The investment has enabled fossil fuel companies to massively raise their spending on expanding extractable reserves, with oil and gas companies alone (state-owned ones included) spending the combined GDP of Netherlands and Belgium a year, in belief that there will be demand for ever more dirty fuel.

This assumption is being challenged by recent developments, which is good news for climate but bad news for anyone who thought investing in fossil fuel industries was a safe bet. Frantic growth in coal consumption seems to be coming to an end much sooner than predicted just a few years ago, with China’s aggressive clean air policies, rapidly dropping coal consumption in the U.S. and upcoming closures of many coal plants in Europe. At the same time the oil industry is also facing slowing demand growth and the financial and share performance of oil majors is disappointing for shareholders.

Nevertheless, even faced with weakening demand prospects, outdated investment patterns are driving fossil fuel companies to waste trillions of dollars in developing reserves and infrastructure that will be stranded as the world moves beyond 20th century energy.

The article is mostly about coal and oil, but it applies equally well to fracked “natural” methane gas:

Investors often underestimate their exposure to fossil fuels, particularly indirect exposure through e.g. passively managed pension funds and sovereign debt of strongly fossil fuel dependent states. Assessing exposure, requiring fossil energy companies to disclose and reduce carbon risks, and reducing investments in sunset energy technologies will lead to profitable investment in a world that moves to cleaner and smarter energy systems.

Improving competitiveness of renewable energy, growing opposition to destructive fossil fuel projects, concerns on water shortage and the imperative of cutting global CO2 emissions all point in the same direction: Governments, companies and investors should all be planning for a world with declining fossil fuel consumption—not only because it’s the right thing to do, but also because it makes economic sense. It is the direction the world will be moving to—faster than many yet anticipate.

A growing number of universities, cities, counties, religious institutions, and big foundations are dumping fossil fuel stocks. Let’s dump the Sabal Trail pipeline!


4 thoughts on “Stranded fossil fuel assets: money goes in, but does it come out?

  1. Governmental eminent domain powers have been growing for more than 115 years, to the point where courts have upheld the taking of property from one private owner for the purpose of transferring it to another, as long as it benefits the public. The Natural Gas Act delegate’s eminent domain powers to the pipeline companies, subject to court approval. However there’s no mechanism in place to dispute the taking. Things to consider: How does this benefit the public by taking land from the public? Is there an irrefutable study that shows this act of taking of private land is justifiable by needs other than capitalistic greed? Also, what about the mineral rights of the property? How many “pipes” or infrastructures can the Pipeline Company sell or lease access to other entities without any future benefits paid to the original land owners? Are all contracts wrote the same or different? What about additional easements taken to access this type of pipeline project? Does the projected pipeline run the centerline of the easement? If not, why? Why is 100’ needed for a 3’ pipe? Is there any government funding in this project to FPL? Is this a union project? How will this project employee 4500 local people? There’s only two union contractors in Lowndes County one is at Moody Air Force Base and one is at the Paper Mill and nether are local businesses. Let’s look at the numbers:
    The cost of building natural gas pipeline infrastructure varied between $30,000 and $100,000 per inch-mile from 1993 to 2007.Through 2004, increases in pipeline construction costs were generally modest. After 2004, however, costs began to escalate dramatically, nearly doubling previous levels by 2006. This was due, in part, to high world commodity prices, especially the price of steel. Costs have declined recently and the several year cost run-up is expected to only be temporary. Since all three cases have similar GDP assumptions, input costs are assumed to be the same in all cases. Construction costs are projected to decline through 2010. After 2010, costs resume a general upward pattern consistent with the pre-2004 cost trends, which are slightly less than the assumed future inflation rate of 2.5 percent per year. The cost of pipeline construction is divided roughly equally between materials, labor, and miscellaneous cost.
    In 2007, materials costs accounted for over 35 percent of total costs, but have since declined. The miscellaneous category includes engineering, surveying, administration, and environmental costs. Costs for right-of-way account for 8 to 9 percent of total construction costs. This component has recently increased at a slightly faster rate than the other components. It is projected that the labor and right-of-way components will grow slightly faster than the other components, as skilled labor remains a premium commodity and pipeline permitting and sitting continue to increase in complexity. The cost of materials is projected to increase at a rate slightly less than inflation and account for about 25 percent of total pipeline construction costs by 2030. Pipeline only, excluding compression to provide clarity, a 36-inch diameter pipeline at a cost of $100,000 per inch-mile would cost $2,400,000 per mile. Basically if this is a 5.1 Billion project the Pipe Line Builders have in there budget to pay $53,000.00 per acre to landowners According to the Natural Gas Pipeline and Storage Infrastructure Projections through 2030. Even with all this, there remains 1.7 Billion unaccounted for.

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