Wednesday, December 19, 2012

Fall of oil exec Roger Parker marked by risky bets gone bad

originally appeared in The Denver Post:

Roger Parker appeared to have it all in 2007. He lived in a historic, $9 million mansion in Cherry Hills Village amid Denver's business and sporting elite. He golfed with John Elway. He traveled by private jet to gamble in Las Vegas and golf in Palm Springs.
Also that year, Parker completed the deal of his career. The chief executive of Denver-based Delta Petroleum sold a $684 million, one-third stake in the growing company to Tracinda Corp., owned by billionaire investor Kirk Kerkorian.

The transaction would be Parker's undoing, marking the start of a remarkable downfall. It played out, friends say, as a close business associate discovered that Parker, then married, was having an affair with his wife.
Parker and Delta struggled with risky bets gone bad. Tracinda forced Parker out after about a year and eventually took Delta into bankruptcy. It pursued Parker for more than $7 million from an unpaid loan but recently found just $46 in his retirement account and $10,000 in his brokerage account.

On Nov. 27, the U.S. Securities and Exchange Commission accused Parker of tipping off his close friend and another, as-yet-unidentified friend ahead of the Tracinda deal, allowing them to reap hundreds of thousands of dollars in ill-gotten gains. Some of his gains were used to finance use of a private charter jet company for business and personal use.
Two Cherry Hills homes — one Parker bought in 2004 for $9 million and the one it replaced, recently signed over to his ex-wife — are for sale.
An attorney for Parker did not respond to requests for comment for this story. He has not yet responded to the SEC's claims.

Interviews with friends, associates and businessmen, as well as scores of public documents, paint a picture of Parker, 51, as ambitious and aggressive, someone who set out early on a path toward multimillion-dollar success and social prominence.
He achieved both — with the help of a network of well-placed friends — but he took big risks along the way, spent lavishly and seldom settled for second-best.
Roger was a guy who thinks it all works out in spades, according to Delta's former chief operating officer.  At one point, he speculated aloud he would be worth $200 million someday.

Fast success
Parker was a standout student at the University of Colorado business-school program in mineral land management. It trained students to be the property-acquisition brains behind the geologic science that identified potentially drillable resources.
But the 1980s, with the petroleum industry tanking, wasn't the best time to aspire to be an oilman.
There were no jobs, recruiting was down 80 percent, and the only ones likely to find a job after the collapse were those with experience, or new grads, according to an associate who graduated with Parker in 1983. But Roger got involved from the start. While we were all in school, he was getting a feel for the business, getting connections and experience. Parker found fast success from hard work.

Only a couple years out of school, he had the big house, all the trappings of success, according to one source.
That happened at Ampet Inc., a small oil-and-gas company formed by Parker mentor and a family friend, a Breckenridge attorney, and his lawyer father, Parker's parents were investors in the business.
The younger Parker and the junior partner would remain business associates for years, beginning with Parker's seat as executive vice president of Ampet while still a student at CU, records show.
While Parker worked at Ampet, his business partner and an associate formed Delta Petroleum in 1984. Parker was first listed on Delta documents as secretary in 1987.

Golf friendships

Two months later, Parker's father, was nominated to the U.S. District Court bench in New Mexico by President Ronald Reagan.
The elder Parker eventually served as federal chief judge in New Mexico until 2003. Along the way, he invested in oil and gas — including Delta — and as of 2010 was drawing royalties on several Colorado wells, some in the range of $500,000 to $1 million, according to financial-disclosure records required of all federal judges.
Roger Parker's relationships reach deep into Denver's business community and stretch across years.

Boisterous in laughter and quick with a joke, Parker was often found hanging with pals at Elway's, in part because of a friendship with the former Broncos quarterback. Both exceptional golfers, Elway and Parker sometimes partnered in charity events, friends said.
Efforts to reach Elway through the Denver Broncos were unsuccessful.
One of Parker's closest friends is a CU graduate in mineral land management with Parker.
The two are avid golfers — with memberships at Cherry Hills and Castle Pines, among others — and big boosters of CU's athletic program, forming the elite Buff Club Cabinet with others including Van Gilder.
The CU graduate has found a level of success that eluded his friend. He recently sold his Cordillera Energy Partners III for $2.8 billion to the company where he started, Apache Corp. Efforts to reach the college friend for comment were unsuccessful.

Drive for status
Parker, twice divorced, enjoyed living large, primarily through houses, golf-club memberships and jets, friends say.
His drive for status was evident in a years-long pursuit of a home at the very pinnacle of Denver society.
Parker sold his first Cherry Hills house and moved into a two-story Tudor he built in 2001 next to the Cherry Hills Country Club. He borrowed $1.6 million to build it and borrowed another $9 million on it over the years. But friends said he was disappointed with the outcome.
In 2004, Parker bought a $9 million mansion from old-money oilman's family along the exclusive Cherry Hills Park Drive. Next door lived the Broncos head coach, and across the street was their legendary money manager.
But Parker was unable to sell the Tudor home, and it remains on the market. The mansion he bought from the oil family — one of the oldest in that area — also is for sale.
Parker acquired a quarter interest in use of a Citation 10 jet, and he sold half of that to Delta.

On a golf trip to Palm Springs, Parker and friends stopped in Las Vegas — the Bellagio and Venetian were among his favorite haunts — to play the tables. Parker believed he could break the house in blackjack, one associate said.
Parker isn't flashy, most comfortable wearing shorts and tennis shoes, driving an SUV, listening to Aerosmith and drinking rum and Coke, friends said.

Parker often does business with friends. One of those is Denver power broker and Parker's personal and business attorney. Earlier this year, Parker pledged 100,000 shares in Prospect Global Energy as collateral to his attorney's law firm for personal legal help, state corporation filings show. At the time, the shares were worth $1 million. Today, they're valued at $167,000.

His attorney who is not representing Parker in the SEC's insider-trading case, would not comment for this story.
One of the attoney's sons, is vice chairman and co-founder of the Denver company, which mines potash.
A Prospect investor who founded Hexagon Investments in 1992, also is a friend of Parker's. He would eventually loan $24.7 million into Parker's latest venture, Recovery Energy, according to financial filings. Efforts to reach the investor for comment were unsuccessful.

Lucrative introduction
Parker was introduced to Kerkorian by a former chauffeur who entered the oil-and-gas business after marrying the former Denver Post owner. The chauffeur, now a Las Vegas resident, had done business with Delta as far back as 2003.
For the introduction — and the resulting sale of a 35 percent ownership share of the Denver company — Davis landed about $5 million worth of Delta shares. Kerkorian would allege later in a settled lawsuit that Parker had secretly arranged contracts and business arrangements for Davis as part of the deal.
Tracinda bought in at $19 a share — Parker had pushed off an initial $17 bid and pressed for more — on New Year's Eve 2007. The $684 million purchase pushed the company stock up 19 percent in one day. It would eventually hit $24.78 from $15.51, when the Tracinda deal was announced.

The SEC alleges in its civil suit that in the months and days before the Tracinda investment was firm and made public, he sent dozens of text messages about it to his business associate. Insiders said Parker didn't even tell some of his closest board members and company executives about the impending deal.
In a related case, his business associate was indicted on criminal insider-trading charges that he allegedly made about $86,000 on the information. He has pleaded not guilty. The SEC alleges that another unnamed individual who is friends with him and Parker racked up a $730,000 payday on Delta stock.
The government has not accused Parker of profiting from the information.
Delta and Parker had encountered the SEC before. In 2006 and 2007 — prior to the Tracinda deal — the government investigated alleged backdating of stock options that were awarded to Parker and other executives. The SEC later dropped its inquiry, and a pair of shareholder suits alleging the practice were settled.

Margin call

Following the merger, it didn't take long before Parker's business plan — a no-hedge, keep-drilling approach — would weigh on Delta's books and, eventually, its stock price.
Several company insiders say Parker's steadfast refusal to hedge some of the company's natural-gas and oil assets against a potential price drop was its most critical undoing. Typically, energy companies hedge by agreeing to sell a portion of their future production at a set price or range.

Delta's former COO and chief geologist, said Delta could have hedged through 2015 but didn't. We'd still be around today if it had.
When shares in Delta dropped below $4 in November 2008, it triggered a margin call on Parker's brokerage account because he had pledged shares as collateral for loans.
Tracinda loaned Parker $7.5 million to cover the shortfall. It said in legal filings it wanted Parker to pay attention to Delta instead of his failing personal finances.
By January 2009, the situation was, in one insider's viewpoint, desperate. He was the eternal optimist of gas prices coming right back, the insider said.  They didn't.

By May 2009, Kerkorian had had enough. Three board members asked Parker to resign as chairman and CEO. Parker couldn't get along with new co-chairman Daniel Taylor, a Kerkorian board appointee.
Parker left with a severance payday of about $7 million.

New venture
Parker wasn't unemployed for long.
With the help of friends, he staged a comeback through a new venture, Recovery Energy.
While Reiman was the money lender, the oil-and-gas properties that made up Recovery's inventory came from Davis. Van Gilder provided the office space.
Parker paid for much of it with shares in the new company, a tactic he had used before.
Filings show the company's production and revenues followed a downward trend. Revenues in 2010 were $9.76 million but only $8.36 million in 2011. Oil and gas production in the second quarter of 2012 was down 24 percent from 2011.
Interest expenses in 2011 almost equaled the value of the oil and gas the company produced.

Parker engaged in an unusual practice with his Recovery shares that may have been intended to land a bigger payday or ward off a creditor such as Tracinda.
Normally, executives try to obtain the shares they are granted as quickly as possible, a process known as vesting.  Parker, however, amended his employment agreement 14 times over more than two years to push back the date when his Recovery shares would vest and come into his possession.

Tracinda in late August won a judgment for the $7.5 million loan — now $7.7 million — against Parker, who argued he'd been shorted about $5 million in an effort to sell the last of his Delta stock in 2009.

Tracinda has been following Parker with garnishment orders to collect — first on his pension account and then his securities account. Total garnered: $10,745.
It followed with a garnishment order at Recovery for Parker's salary, roughly $21,000 a month, and is making a grab at about 1.3 million of Parker's Recovery shares.
Parker resigned from Recovery on Nov. 14, just ahead of another garnishment effort by Tracinda. SEC notices show his business partner began selling Recovery stock heavily just after.
Two weeks later, the SEC named Parker a co-defendant in its insider-trading lawsuit against another associate.
Friends said he left town on a trip when the case was about to be made public.

Tuesday, December 4, 2012

Ecuador Seeks Damages from Chevron Oil Spill

Chevron Corp. (CVX) is facing its first test of whether farmers and fishermen from the Amazon rainforest will collect $19 billion in environmental damages from the world’s fourth-largest oil company.

A group of 47 Ecuadoreans have asked Ontario’s Superior Court of Justice to seize Chevron assets in Canada, ranging from an oil sands project to offshore wells, to satisfy a 2011 court ruling in the Latin American nation that ordered the company to pay for oil pollution dating to the 1960s. Chevron said the Ecuadorean judgment is outside Ontario’s jurisdiction and that the ruling resulted from bribery and fraud.

A hearing in Toronto today marks the Ecuadoreans’ inaugural step in a global collection effort that includes seizure attempts in Argentina and Brazil. The Ecuadoreans estimated Chevron has $12 billion in Canadian assets, a figure that equates to almost half of the company’s 2011 profit. An adverse Ontario ruling for Chevron would put at risk fuel-manufacturing and oil-production operations across Canada.

Robert Sweet, who helps manage $150 million at Horizon Investment Services in Hammond, Indiana, said it is a cause for concern, and as with all ecological disasters will take a long time to resolve.

The company’s presence in Canada dates back to the 1930s and includes an oil-refining complex in British Columbia, an Alberta oil-sands venture, offshore wells in the Atlantic Ocean, and cash held in Canadian bank accounts.

Every Strategy

San Ramon, California-based Chevron was on the losing side of last year’s ruling by a provincial Ecuadorean court that blamed decades of toxic soil and water contamination on Texaco Inc., which Chevron acquired in 2001. Texaco was found to have discharged into the environment saltwater and other byproducts of oil drilling. Texaco quit the country and its equipment was taken over by the Ecuadorean state oil company in 1992.

The $19 billion ruling handed down last year by a court in Lago Agrio, a town near Ecuador’s border with Colombia, held Chevron accountable for health and environmental damages resulting from chemical-laden wastewater dumped from 1964 to 1992.

The Ecuadorean plaintiffs, from the remote northern Amazon River basin, are seeking enforcement of the judgment outside their home country because Chevron has no refineries, oil wells, storage terminals or other properties in the nation. Pablo Fajardo, their lead lawyer in Ecuador, said during a February 2011 conference call with reporters he would use every strategy and manner at his disposal to collect the award.

Corporate Veil

In a Nov. 23 filing, Chevron argued the Ontario court has no jurisdiction to grant the Ecuadorean judgment because the company’s Canadian units are indirect subsidiaries with independent boards separated from the U.S. parent by several levels of ownership.

The Ecuadoreans face an “uphill battle” because they must convince the court that Chevron and its Canadian operations should be treated as one entity rather than separate companies, said Barry Leon, a partner and head of the international arbitration group at Perley-Robertson, Hill & McDougall LLP in Ottawa.

Chevron rose 0.8 percent to $106.35 at 9:35 a.m. in New York today. The shares have increased 9.1 percent in the past year.

Pending Arbitration

According to Chevron Chairman and Chief Executive Officer John Watson, the Ecuadoreans’ lawyers have blackmailed judges, bribed judges, falsified evidence, falsified expert witnesses, ghostwritten expert opinions and ghostwritten court judgments. If the plaintiffs were confident in the “integrity” of the ruling, they would seek enforcement in U.S. courts with jurisdiction over the parent company, Kent Robertson, a company spokesman, said in an e-mailed statement.

Alan Lenczner, the Toronto attorney from the firm Lenczner Slaght Royce Smith Griffin LP representing the Ecuadoreans, when reached by phone declined to comment on the case.

Leon said  it is likely that the initial decisions will be appealed.

Chevron doesn’t disclose how much it spends on legal fees.

The Hague

Chevron is awaiting a ruling in a related case before the Permanent Court of Arbitration, the 113-year-old panel based in The Hague that handles trade disputes between corporations and nations. Chevron filed the arbitration claim in 2009, accusing the government of Ecuador of reneging on a 1998 contract that absolved Texaco of Amazonian pollution claims. Three days of hearings in the case concluded yesterday, Robertson said.

Chevron’s campaign to avoid payment suffered a setback last month when the U.S. Supreme Court upheld a lower-court decision that rejected the company’s request for a pre-emptive block on collection efforts in Chevron’s home country. The lower court had ruled that it didn’t have authority to thwart payment when the Ecuadoreans hadn’t yet filed such a claim in the U.S.

Unfair Influence

Following the filing of their Canadian seizure request in May, the Ecuadoreans sought similar forfeitures in a Brazilian tribunal in June and in Argentina earlier this month. A judge in Buenos Aires ordered some Chevron bank deposits held in escrow while the case is pending, Enrique Bruchou, a lawyer for the Ecuadoreans, said in an interview on Nov. 7.

Today, in paid statements published in two Argentine newspapers, Chevron urged the local court to release its money from escrow and indicated the company intends to pursue a legal defense identical to that employed in Canada. “Chevron Argentina has never had operations in Ecuador and has no relation with the fraudulent trial in Ecuador,” the company said in the newspapers Clarin and La Nacion.

Transparency International

Chevron has accused the Ecuadorean government of unfairly influencing court proceedings that led to the $19 billion ruling and alleged that a damage assessment provided by a court- appointed expert was ghostwritten by consultants and lawyers hired by the plaintiffs.

Lawyers for the Ecuadoreans including Stephen Donzinger have accused Chevron of engaging in a campaign to discredit them, entrap an Ecuadorean judge that presided over the case and set up dummy corporations in Ecuador to hide Chevron’s alleged role in testing soil samples from the pollution sites.

Ecuador ranked 120th out of 183 nations in Transparency International’s 2011 corruption-perception index, where No. 1 New Zealand is perceived to be the most honest. Albania, Liberia and Lesotho were perceived as less corrupt than Ecuador, according to the index.

In February 2011, Chevron filed a racketeering lawsuit that’s ongoing against the Ecuadoreans and their lawyers in New York for “leading a fraudulent litigation and PR campaign against the company.”

Exxon Mobil Corp. (XOM) is the world’s biggest oil company by market value, followed by PetroChina Company Ltd. and Royal Dutch Shell Plc (RDSA), according to data compiled by Bloomberg.

New Flex-Fuel Could Damage Engines

story first appeared in Detroit Free Press

The AAA says the Environmental Protection Agency and gasoline retailers should halt the sale of E15, a new ethanol blend that could damage millions of vehicles and void car warranties.

AAA, which issued its warning today, says just 12 million of more than 240 million cars, trucks and SUVs now in use have manufacturers' approval for E15. Flex-fuel vehicles, 2012 and newer General Motors vehicles, 2013 Fords and 2001 and later model Porsches are the exceptions, according to AAA, the nation's largest motorist group, with 53.5 million members.

AAA President and CEO Robert Darbelnet tells USA TODAY that he believes unfamiliarity with E15 among Americans provides a strong possibility that many may improperly fill up using this gasoline and damage their vehicle."

BMW, Chrysler, Nissan, Toyota and VW said their warranties will not cover fuel-related claims caused by E15. Ford, Honda, Kia, Mercedes-Benz and Volvo said E15 use will void warranties, says Darbelnet, citing potential corrosive damage to fuel lines, gaskets and other engine components.

Gasoline blended with 10% ethanol has become standard at most of the nation's 160,000 gas stations, spurred by federal laws and standards designed to use more renewable energy sources and lessen the nation's dependence on foreign oil. Pushed by ethanol producers, the EPA approved the use of E15 -- a 15% ethanol-gasoline blend -- in June over objections from automakers and the oil industry. It's been available at a handful of outlets in Kansas, Iowa and Nebraska since July.

EPA stickers affixed to gas station pumps say E15 is safe for use in virtually all vehicles 2001 and newer. (USA TODAY made repeated requests for EPA comment.)

But AAA -- in an unusual warning for a travel organization -- says the sale and use of E15 should be stopped until there is more-extensive testing, better pump labels to safeguard consumers and more consumer education about potential hazards.

Bob Dinneen, CEO of the Renewable Fuels Association, says E15 is safe for virtually all post-2001 vehicles, based on extensive government-sponsored testing.

But the American Petroleum Institute says a three-year study by automakers and the oil industry found that E15 is a consumer safety issue for a majority of drivers with pre-2012 vehicles.

The National Association of Convenience Stores says it's also worried about the effect of E15 on station pumps and fuel lines.

Scott Zaremba, who has been selling E15 blends at several of his eight Zarco 66 stations in Kansas since July, says no customers have complained. He's fueling his 2001 Chevy pickup with the E15 blend.

Sea Level Debate Continues

story first appeared on

Echoes of Superstorm Sandy remain from Manhattan's once-flooded streets to Maryland's battered boardwalks to New Jersey's washed-away beaches.

No surprise. The Eastern Seaboard — or any coastal region — occasionally finds itself in the cross hairs of ferocious ocean storms. But it may have taken Sandy to drive home the added threat that scientists have been warning about for years: a rise in the sea level.

More of the same could lie ahead, suggest ocean scientists such as U.S. Geological Survey oceanographer Asbury Sallenger. The storm triggered the expected arguments about global warming's role, but that debate aside, the new constant for any storm is the increasingly important role likely to be played by sea level. In a study out Tuesday, climate scientists led by Stefan Rahmstorf of Germany's Potsdam Institute report that since 1993 sea level has risen worldwide at a rate 60% higher than predictions. The findings appear in the Environmental Research Letters journal.

Sallenger says sea-level rise is accelerating along the East Coast

The real question, Sallenger and other ocean experts say, is what effect rising sea levels, which are accelerating along a "hotspot" stretching from Cape Hatteras, N.C., to Maine, will have on storms hitting these places.

In June, Sallenger and colleagues reported in the journal Nature Climate Change that sea-level rise along the U.S. Atlantic Coast has been climbing at a rate three to four times higher than the global average since 1950. About 1.5 inches per decade now, it doesn't sound like a lot. But each inch counts, and New York Harbor's water level is 11 to 16 inches higher than it was a century ago, Sallenger says.

The accelerating sea-level rise springs partly from "subsidence," where groundwater withdrawals to sate thirsty towns and farms along the coast cause the ground to sink, and partly from warming waters in the North Atlantic, the study suggests. Warmer water simply takes up more space than cold water.

Not to be forgotten is that teetering infrastructure poses as much of a problem as global warming, says Alan Weisman, author of The World Without Us.

Most climate scientists would see Superstorm Sandy as a largely natural event, not something born as a result of global warming, says Texas Tech climate researcher Katharine Hayhoe. But she acknowledges that the storm, sea-level rise and climate change are hard to disentangle.

A water level that's a few inches higher pales in comparison with a 14-foot storm surge in Lower Manhattan, but those few inches meant the surge was higher than it might have been otherwise.

And was the storm surge stronger because of climate change? Indeed. Warmer ocean temperatures could have provided up to 20% greater power for the storm, so climate change's role isn't necessarily an either-or question, Hayhoe says.

Most climate projections that look ahead to the coming century see hurricanes that look stronger, but are fewer in number. Why? Warmer waters strengthen storms but stronger winds above the equatorial oceans wreck the stillness that burgeoning tropical storms need to become ferocious hurricanes.

MIT hurricane expert Kerry Emanuel says that while he does expect increased hurricane damage in the U.S. as the climate warms, Sandy is not a pure example of a hurricane. It was a hybrid event that started as a tropical storm, grew into a hurricane, and morphed into an intense nor'easter. He says climate science doesn't have enough data to say whether these hybrid storms like Sandy will become more or less frequent.

It also doesn't matter, Emanuel writes in the current Foreign Policy magazine, because the real problem is sea-level rise.

The 2007 Intergovernmental Panel on Climate Change estimated that warming alone, which expands ocean waters, would raise sea levels worldwide by almost two feet over the next century. Add in future melting glaciers in Greenland and elsewhere, and sea level could rise more than 3 feet by then, NASA climate scientist James Hansen and Stanford's Ken Caldeira reported at last year's American Geophysical Union meeting in San Francisco.

Sallenger believes the "hotspot" study suggests this worsening will continue, yet he acknowledges other researchers are taking a more "wait-and-see" attitude.

Also worth noting, a 2009 study led by Environmental Protection Agency analyst Jim Titus concluded that 60% of the East Coast's coastal land is zoned for more development, while less than 10% is zoned for wetlands that soak up storms.

At the same time, dikes, or seawalls, are an unlikely remedy for the entire East Coast, says civil engineer Robert Traver of Villanova (Pa.) University. Of the 25 most-densely populated counties nationwide, 23 are coastal ones. "We can't build barriers around everything," Traver says.

Thursday, November 29, 2012

Upkeep of New Orleans Levee

Story first appeared on

In the busy and under-staffed offices of New Orleans' flood-control leaders, there's an uneasy feeling about what lies ahead.
By the time the next hurricane season starts in June of 2013, the city will take control of much of a revamped protection system of gates, walls and armored levees that the Army Corps of Engineers has spent about $12 billion building. The corps has about $1 billion worth of work left.
Engineers consider it a Rolls Royce of flood protection - comparable to systems in seaside European cities such as St. Petersburg, Venice, Rotterdam and Amsterdam. Whether the infrastructure can hold is less in question than whether New Orleans can be trusted with the keys.
The Army Corps estimates it will take $38 million a year to pay for upkeep, maintenance and operational costs after it's turned over to local officials.
Local flood-control chief Robert Turner said he has questions about where that money will come from. At current funding levels, the region will run out of money to properly operate the high-powered system within a decade unless a new revenue source is found.
There's a price to pay for resiliency, the levee engineer said from his office at the Southeast Louisiana Flood Protection Authority-East.
On Nov. 6, New Orleans voters were faced with one of their first challenges on flood protection when they voted on renewal of a critical levee tax. The tax levy was approved, meaning millions of dollars should be available annually for levee maintenance.
Bob Bea, a civil engineer at the University of California, said the region must find additional money to keep the system working properly.
Many locals remain uneasy, even though Turner's agency is a welcome replacement for local levee boards that were previously derided.

After Katrina, the locally run levee boards that oversaw the area's defenses were vilified, and quickly replaced by the regional levee district run by Turner.
Congressional investigations found the old Orleans Levee Board more interested in managing a casino license and two marinas than looking after levees. Though the Army Corps of Engineers had responsibility for annual levee inspections, the local levee boards were responsible for maintenance. Still, the boards spent millions of dollars on a fountain and overpasses rather than on levee protection. And there was confusion over who was responsible for managing the fragmented levee system, U.S. Senate investigations revealed.
Still, experts generally agree the old levee board's failings did not cause the levees to collapse during Katrina. Poor levee designs by the corps and the sheer strength of Katrina get the lion's share of the blame.
Since the Flood Control Act of 1936, the Army Corps has given local or state authorities oversight of water-control projects, whether earthen levees in the Midwest or beach walls in New England.

New Orleans is an unusual case because the area is inheriting the nation's first-of-its-kind urban flood control system.

The nation has spent lavishly on fixing the system in the seven years since Katrina flooded 80 percent of New Orleans and left 1,800 people dead.

Ensuring it remains that way could be tricky. The biggest headaches are several mega-projects with lots of moving parts, all needing constant upkeep. The corps is building them across major waterways that lead into New Orleans.
Take for instance the 1.8-mile-long, 26-foot-high surge barrier southeast of the French Quarter that blocks water coming up from the Gulf of Mexico across lakes and into the city's canals. Water from this direction doomed the Lower 9th Ward and threatened to flood the French Quarter. Maintaining this giant wall alone will cost $4 million or more a year.

There is a mounting list of to-dos.
Already, lightning has knocked out chunks of wall. Grass hasn't grown well on several new stretches of levee. Louisiana State University grass experts have been called in to help seed them.
There are recurring problems with vibrations and shuddering on a new floodgate at Bayou Dupre in St. Bernard Parish. The corps has plans to overhaul the structure in the spring before handing it over to local control. And there will be the inevitable sinking of levees and structures, as always happens in south Louisiana's naturally soft soils. Over time, levees will have to be raised.
Col. Ed Fleming, the New Orleans corps commander, said his outfit will work to ensure the transition to local control is smooth.

United States Wealth Rises

Story first appeared on

The nation's oil and gas boom is driving up income so fast in a few hundred small towns and rural areas that it's shifting prosperity to the nation's heartland, a USA TODAY analysis of government data shows.

The 261 million people who live in cities and suburbs still haven't recovered earning power lost in the economic downturn. Average income per person fell 3.5% in metropolitan areas between 2007 and 2011 after adjusting for inflation, according to data released Monday by the federal Bureau of Economic Analysis.

By contrast, small-town America is better off than before: Inflation-adjusted income is up 3.8% per person since 2007 for the 51 million in small cities, towns and rural areas.

The energy boom and strong farm prices have reversed, at least temporarily, a long-term trend of money flowing to cities. Last year, small places saw a 3% growth in income per person vs. 1.8% in urban areas.

Small-town prosperity is most noticeable in North Dakota, now the nation's No. 2 oil-producing state. Six of the top 10 counties are above the state's Bakken oil field.

The Boise area's rank in income per person plummeted from 139th to 251st among metro areas from 2007 to 2011, the biggest drop of any place except Las Vegas, which suffered largely because of high-tech layoffs and a real estate price collapse.

VIDEO: Inside a North Dakota 'Man Camp'

Other findings:

-- Richest. The Bridgeport-Stamford, Conn., metro area had income of $78,504 per person in 2011, making the New York suburb the most affluent place in the USA for the past decade. The oil community of Midland, Texas, was next, followed by the high-tech metro areas of San Francisco and San Jose.

-- Poorest. Three Texas metro pockets were poorest: McAllen, Brownsville and Laredo. Income per person in McAllen: $21,260. Lake Charles, La., was poorest among metro areas having 200,000 or more residents.

-- Surprising. Rochester, N.Y., moved up faster in the income rankings than any big metro area, despite suffering layoffs when hometown company Kodak went bankrupt. Rochester ranked No. 43 in income among the 102 metro areas of 500,000 or more, climbing 21 positions since 2007.

-- High-paying jobs. The oil county of Sutton, Texas, saw wages and benefits double to $115,775 per job from 2007 to 2011, BEA reports. Only New York City's Manhattan had higher-paying jobs last year.

-- Benefits. Three Kentucky counties — Owsley, McCreary and Wolfe — are the only places that rely on government programs such as Social Security, food stamps and Medicaid for more than half of income.

The BEA's data is the government's most comprehensive report on income in the nation's 3,000 counties. It includes wages, benefits and investment income, plus government programs such as Medicare, Medicaid and food stamps. The Census Bureau does not county benefits, food stamps, Medicare or Medicaid as income.

Wednesday, November 28, 2012

Strip Club Blown Away in Natural Gas Explosion

story first appeared in Lost Angeles Times

A natural gas explosion that tore through a strip club in western Massachusetts on Friday night scattered brick and glass for blocks, injured more than a dozen people and displaced dozens of apartment dwellers.

About 40 apartment units have been condemned, at least one neighboring building will have to be demolished and others will be inspected Saturday morning after what Springfield Police Commissioner William Fitchet called the most devastating gas explosion in his 40 years in the city. Despite the destruction, it appeared no one was killed.

About an hour before the 5:25 p.m. explosion, the local utility company, Columbia Gas of Massachusetts, started receiving calls from people who smelled gas in downtown Springfield. Crews arrived within 30 minutes and determined the odor was coming from Scores Gentlemen's Club.

By then, State Fire Marshal Stephen Coan said, gas had accumulated to an explosive level inside the building. Customers, employees and dancers were soon rushing to safety.

Debbie, a dancer at Scores who didn't want her last name used, told the Republican, a local newspaper, that she was performing on stage when she was told to evacuate.

As she gathered her clothes, Debbie told the newspaper, the manager told her to get out.

The manager hurried people over to the Mardi Gras Champagne Room across the street, the Republican reported. After barely half an hour, the building exploded.

The blast was heard for miles, rattling the community and sending glass shards flying.

Coan credited local firefighters with saving lives.

Most of those injured were first responders trying to stop the gas leak or others urging people to take cover. City officials said at least 18 people were injured: nine firefighters, four Columbia Gas workers, two Springfield police officers, one city water and sewer maintenance worker and two civilians. Firefighters suffered cuts and back injuries, and one was injured falling into a sewer after the blast, Springfield Fire Commissioner Joseph Conant said.

Stephanie Simmons, a waitress working two blocks away from the explosion, described the blast to the Republican newspaper. She said it felt like an earthquake or a large explosion.

Springfield building, electrical, plumbing and housing workers are scheduled to go building to building Saturday morning to assess the damage around the blast. At least three buildings around the club were severely damaged. Officials said they were considering controlled demolitions Friday night.

Tenants in nearby apartments will have to find somewhere else to sleep while building officials determine whether the buildings can be declared safe.

The Massachusetts Emergency Management Agency was activated after the explosion, and workers will help find shelter for displaced residents, Lt. Gov. Tim Murray said.

Over the next two days, Columbia Gas crews will spread across downtown to drill holes in the streets and take measurements for gas leaks. Tests Friday night didn't reveal any other leaks, company spokeswoman Sheila Doiron said.

She said the company had no records of gas leaks in the Scores club or elsewhere in the area for the last 10 years.

On Nov. 10, a natural gas explosion in Indianapolis killed a married couple and left more than 30 houses uninhabitable. Authorities have opened a homicide investigation into that blast.

Thursday, November 8, 2012

Richmond Refinery Repaired with New Chrome Alloy

story first appeared on

RICHMOND -- Chevron will use chrome alloy to replace all the piping in the sections of its Richmond refinery that were damaged in an Aug. 6 fire that hobbled the fuel factory and curtailed its production, the energy giant said in a letter it released Wednesday.

The chrome alloy pipes could address one of the key issues that contributed to the fire. Chevron has notified industry officials that thinning and corrosion in pipes at the refinery may have caused pipe failures ahead of the accident and fire, according to the letter issued by Nigel Hearne, general manager of the Richmond refinery. Hearne sent his letter to the city of Richmond and the Bay Area Air Quality Management District. The new chrome alloy pipes are constructed of similar materials to that of ball screws. Ball Screw Repair specialists know the value of product materials and the benefit of precision craftsmanship.

The fire knocked out the refinery's crude unit No. 4, which processes and distills crude oil and is deemed to be the heart of the plant. Since the fire, the Chevron refinery has been operating at around 60 percent capacity and has primarily blended gasoline.

Hearne wrote in the letter that he is optimistic they can com plete the planned repairs and restart in the first quarter of 2013.

San Ramon-based Chevron intends to replace damaged support structures, pressure vessels, tanks and pumps, along with the chrome alloy pipe replacement. The company also intends to repair the cooling tower, motor control center, and fix an array of instruments and electrical systems.

City manager Bill Lindsay said it was helpful to have the planned repairs laid out. He said they'd continue evaluating permit applications and hoped to process permits expeditiously.

City officials also were encouraged about the Chevron plans to replace the pipes that may have corroded with pipes made with chrome alloy. Chrome is often used in manufacturing Walk-in Coolers and other refrigeration equipment because it resists rust.

Lindsay also said that the new materials in Chevrons pipe replacement is significant. From what he understands, they are created with materials better suited for the conditions that lead to the accident.

United Steelworkers Local 5, which represents 600 employees at the Chevron refinery, is also following the repair and replacement efforts closely.

Mike Smith, a representative for Local 5 said their main focus is safety. Specifically, he said, the safety of the workers, the environment and the community. If he feels things are going the wrong way, he assures he'll be vocal.

The refinery has the capacity to handle 244,000 barrels of crude oil a day. Soon after the fire knocked the refinery offline, gasoline prices spiked in the Bay Area. Prices have retreated somewhat since then, however. The refinery's restoration could offer welcome relief for California drivers since the plant is one of the largest refineries in the nation.

The average price of gasoline was $3.94 a gallon on Thursday, which was 2.1 percent above the $3.86 average price in the hours before the early August fire. When Bay Area prices rocketed to a record high average of $4.70 a gallon in early October, those per-gallon prices were about 22 percent higher than the fire.

Solar Power More Available at Night

story first appeared on

UNION CITY -- DayStar Technologies has struck a deal to buy a company whose technology could solve a problem that has chilled the solar energy industry: How to make solar power available for electricity usage at night when the sun is gone. While wind power is available day and night, solar is obviously limited to daylight hours. Wind Turbine Repair services make sure energy is renewable by keeping wind turbines in good operating order.

DayStar is planning to buy Premier Global Holdings. Premier Global has rights to a patent pending for a solar conversion unit that can generate and store solar energy within a single unit. Terms of the deal weren't disclosed.

The technology is based on photosynthesis, a process that's similar to the way plants convert light to usable energy.

Union City-based DayStar believes the technology can reduce overall power usage in an electricity grid.

Monday, October 8, 2012

Heavier snow fall may be expected for the Northeast this winter

original story in USA TODAY

A forecast by AccuWeather expects a snowier than average winter for the 50 million Americans living in the Northeast and Mid-Atlantic region.

The AccuWeather forecast predicts that the Northeast and mid-Atlantic will have more snow than they did last year, and cities such as New York, Philadelphia, Baltimore, Washington and Charlotte are among those that should receive more snow than usual.

Meanwhile, in the drought-scorched central and northern Plains and upper Midwest, the news isn’t good: Below-average snowfall and above-average temperatures are forecast. According to the latest U.S. Drought Monitor, 98% of Wyoming, Colorado, North Dakota, South Dakota, Nebraska and Kansas are enduring drought conditions.  The dryness will extend into the Northwest, adding to drought worries there.

A weak El Niño climate pattern is expected to be one of the major drivers of the USA’s weather this winter, according to an AccuWeather meteorologist. While earlier forecasts said El Niño (a warming of Pacific Ocean water that affects weather around the world) would be moderately strong, it’s now expected to be weak.

One of the hallmarks of an El Niño winter is a stormy weather pattern for the southern tier of the USA, expected this year.

Across the South, the rain will be mostly welcome, but severe weather could be an issue.

Potent storms formed by the clashing of cooler air to the north and milder air farther south will act as the trigger for the severe weather, which could produce tornadoes, high winds and flash flooding.

A snowy winter in the Northeast would be a dramatic switch from last year: During the winter of 2011-12, New York City received only 7.4 inches of snow, far below its typical total of just over 2 feet. Washington shoveled a paltry 2 inches, well below the city’s average 14.5 inches, according to the National Weather Service.

For the early part of the winter, the unusually warm Atlantic Ocean water should moderate the cold shots of air blowing in from the west, which also would reduce snowfall. However, later in the winter, as the water cools, there is the potential for big snowstorms in the Northeast.

January and Februay will be the best chance for the big snowstorms.

Monday, August 13, 2012

Beverage Companies Pay Millions to Conserve Water

Story first reported from USA Today

WEST COLUMBIA, Texas – Fifty miles outside the nation's fourth-largest city is a massive field of waist-high grass, buzzing bees and palm-size butterflies, just waiting to be ripped up by a developer.

But rather than develop this pristine remnant of coastal prairie, vast enough to house more than 300 football fields, the Dr Pepper Snapple Group is investing hundreds of thousands of dollars to ensure it remains untouched.

The project is part of the company's $1.1 million investment in the Nature Conservancy, designed to benefit five Texas watersheds — including Nash Prairie outside Houston — from which its bottling plants draw water.

The money will go toward preservation, such as reseeding the grass, to restore and expand an ecosystem that once covered 6 million acres from southwest Louisiana through Texas. The projects will improve water quality and quantity by preserving the prairies' sponge-like attributes.

For Dr Pepper and other beverage companies engaged in similar work, the impetus is their bottom line — conserving water guarantees long-term access to the most crucial ingredient in their products.

"If there's not fresh water, there's no business — it's just that simple," says Laura Huffman, state director of the Nature Conservancy in Texas. "It is their number one infrastructure concern. … Water tops the list, above roads, above energy, above all else, because if you don't get water right, you're not making anything."

The biggest players — from Coca-Cola and Pepsi to Miller and MolsonCoors — as well as smaller, regional beverage companies, list water as a risk in long-term plans.

In 2006, 18 companies created an alliance called the Beverage Industry Environmental Roundtable to tackle water, energy and other issues that could affect the industry's growth. There is no total available for how much money has been invested in water conservation projects the past five years, but experts believe it's more than $500 million.

"At the heart of it … is their bottom line," says Thomas Lyon, a professor at the University of Michigan who researches connections between industry and the environment. "Water is a finite resource, and they desperately realize that it could become a major problem."

About a decade ago, when strategic planning started to highlight water constraints, many companies streamlined processes and installed more efficient technologies in factories and plants, conserving millions of gallons of water and millions of dollars.

About five years ago, the corporations began partnering with environmental groups, funding projects to bring water to people in developing countries, such as India, China and Africa, where water is most scarce and infrastructure is often deficient.

The partnerships help everyone: Environmental groups receive much sought-after funding; cash-strapped governments tackle projects they can't afford; and beverage companies can market themselves as "green" by conserving the most crucial resource on Earth and ensuring the future of their business.

While the companies are taking steps to conserve water and, in many cases, cut energy use and greenhouse gas emissions, they still contribute to a larger global problem: They bottle many of their products in plastic. By some estimates, 2.5 million plastic bottles are trashed every hour in the United States— and fewer than 30% are recycled.

Between 2008 and 2010, 69% of the alliance's 1,600 manufacturing facilities cut water use 9% — or 10.3 billion gallons, enough to supply New York City for eight days.

To combat the toll on the environment, Dr Pepper cleaned bottles with air instead of water on 56 production lines in 2010, and by 2015, it hopes to cut water use and wastewater discharge 10% for each gallon of finished product.

"As a beverage company, water is in everything we do, it's a primary ingredient," says Tim Gratto, Dr Pepper's vice president of sustainability.

Coca-Cola has committed to improving water efficiency 20% by the end of this year and becoming water neutral — returning to the environment any water used. The company is already returning 35%.

"We know the importance of water to the world and the planet, and we know the importance of water to our business," says Bea Perez, the company's chief sustainability officer, explaining that the company's long-term plans define water "as a life blood … but also as a risk."

For Pepsi, the wakeup call came when it laid out four possible scenarios for 2030 and discovered water was the greatest risk in each. Last year, Pepsi met its goal of becoming 20% more efficient by 2015, saving the company some $17 million in water expenses over five years, says Dan Bena, the company's director of sustainability.

Pepsi's other goal is to provide 3 million people with access to clean drinking water by 2015, and it has partnered with environmental groups to focus on rural areas in parts of the developing world.

Each day, Bena said, 200 million hours are spent hauling water to communities that have no plumbing — more hours than all employees at Wal-Mart, UPS, McDonalds, IBM, Target and Kroger work in a week.

If you free up that time, he said, people can work more, making money that could potentially be spent buying Pepsi products.

And for beverage companies, that's the point.

"If you don't address it, it's a significant risk," Bena said. "If you do proactively address it … you turn them into opportunities."

Most companies partner with environmental groups that have the scientific knowledge to guarantee success.

The partnership between Coca-Cola and the World Wildlife Fund expanded its focus in 2007 from rivers and streams near the company's Atlanta headquarters to preserving high-profile waterways, such as Central Europe's Danube River and the Yangtze, Asia's longest river, said WWF CEO Carter Roberts.

"As a society, we're going to have a huge crash if all these companies don't take action at the same time," Roberts says.

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Thursday, August 9, 2012

Anglo CEO Doubles Down on New Mines Amid Falling Demand

Bloomberg News:

Driving northeast from Santiago, the road corkscrews toward the shark’s-grin skyline of the Andes Mountains. In winter, Santiago’s smart set plies this route, heading for virgin-powder days and pisco-sour nights at La Parva ski resort. Most have no inkling that in a high mountain valley just over the ridgeline, excavators the size of houses have sculpted the mountainside into a steeply terraced pit 1,800 feet deep, Bloomberg Markets magazine reports in its September issue.

This is Los Bronces, one of the world’s richest copper mines. Anglo American Plc (AAL), the London-based company that owns Los Bronces, spent $2.8 billion from 2007 to 2011 to double the size of the mine. And Los Bronces is just one of four megaprojects that Anglo Chief Executive Officer Cynthia Carroll has initiated or pushed through construction since she took over in 2007 -- each representing a wager in excess of $1 billion on the continued rise of China, India and other emerging markets.

Los Bronces is also at the center of a legal battle between Anglo and Codelco, the Chilean state-owned mining company. The dispute -- over whether Anglo can block Codelco from exercising an option to buy half of Anglo’s Chilean subsidiary -- has spooked Anglo investors and weighed on the company’s share price, which dropped more than 15 percent from the time the controversy erupted in October to August 8.

Chile is just one trouble spot for Anglo American, which took in revenue of $31 billion last year from mining metals and minerals in more than 30 countries. Anglo also owns a 45 percent stake in diamond giant De Beers -- and has recently agreed to increase that stake to 85 percent.

Share Swoon

Anglo has spent or authorized spending of $21.7 billion in the past five years to ramp up production while simultaneously cutting billions in costs. Yet on August 8, Anglo’s shares traded at nearly 20 percent less than when Carroll became CEO and at 45 percent below their May 2008 peak.

Anglo angered shareholders by suspending its 2009 dividend rather than delay capital spending on Carroll’s four megaprojects: Los Bronces, nickel and iron mines in Brazil and an iron mine in South Africa. While the dividend has been restored, the stock has been hurt by the Codelco fight and by cost overruns and delays in Brazil. Profits in Anglo’s platinum mining division have fallen sharply. Most important, China’s economic growth has slackened, calling into question Carroll’s big bets and pushing down profits.

On July 27, Anglo announced that first-half earnings fell 46 percent to $3.7 billion. That day, the company’s shares fell 3.6 percent.

Merger Pressure

With Anglo’s stock in a swoon, the proposed merger of Swiss commodities trader Glencore International Plc (GLEN) with mining powerhouse Xstrata Plc (XTA), announced in February, had analysts speculating that Anglo might be ripe for a takeover. In 2009, the company rebuffed a bid from Xstrata. “It’s like a game of chess,” says Doug Blatch, head of equity trading at Investec Asset Management in South Africa. “It’s all about who makes the next move.”

Blatch cautions that Anglo’s underperforming business units and weakening demand from China make a takeover less likely than it seemed in February. Yet, he says, Anglo’s low valuation could make it a tempting target. Its market capitalization in mid-July was less than half that of London-based rival Rio Tinto Plc (RIO) and less than a third that of Melbourne-based BHP Billiton Ltd. (BHP)

Anglo isn’t interested in the merger speculation, says Carroll, 55, in her office with views of Big Ben and Whitehall in London.


“We’re not consumed with anticipation around Glencore- Xstrata,” she says, adding that the merger will not reshape the mining industry or affect Anglo’s competitiveness. “I don’t think it makes any difference whatsoever.”
Carroll’s appointment in 2007 shattered multiple glass ceilings at Anglo. She was the first woman, the first non-South African and the first person from outside the company’s own ranks to occupy Anglo’s top post. Born in Princeton, New Jersey, Carroll moved to Anglo after almost two decades at Canadian aluminum manufacturer Alcan Inc., where the mother of four rose to become president of the company’s primary metals group, a business with $10 billion in revenue and operations in 21 countries. She built and ran aluminum smelters, oversaw ingot sales and sold smelting technology.

Carroll holds bachelor’s and master’s degrees in geology, and she spent five years prospecting for oil and gas for petroleum company Amoco Corp. before enrolling in Harvard University’s MBA program in 1987.

Charming the Chairman

Carroll took over Anglo American from CEO Tony Trahar in March 2007, after Trahar, then 58, decided to step down earlier than analysts had expected. Anglo’s board conducted a hunt outside the company, and an executive search firm proposed Carroll, who coincidentally had charmed Mark Moody-Stuart, Anglo’s then-chairman, during a chance meeting at the World Economic Forum in Davos, Switzerland.

At Anglo, Carroll inherited a company undergoing a back-to- the-future transformation. Ernest Oppenheimer, the son of a German-Jewish cigar merchant, founded Anglo in 1917 to mine gold in South Africa’s East Rand, a hilly region near Johannesburg. During apartheid, currency controls forced the company to invest mostly within South Africa, and Anglo became a sprawling conglomerate with divisions in a dozen fields, from brewing to banking.

Following apartheid’s collapse in 1994, the company began selling non-mining businesses. In 1998, it also began spinning off its gold-mining operations and branched out of South Africa, acquiring mines in South America and Australia. It moved its headquarters and its primary stock listing to London in 1999 to attract global investors.

Byzantine Heirarchy

Almost a decade later, Carroll found Anglo burdened with a Byzantine hierarchy, she says. Within weeks, she eliminated the layer of three business unit chairmen that stood between her and the managers actually running Anglo. During the next two years, she replaced 12 of the 13 senior executives who reported directly to her.

In 2009, she began an efficiency drive that the company says has created $3.2 billion in value by, among other things, consolidating purchasing operations and tailoring products such as coal mixes more closely to customers’ needs. Carroll also eliminated 26,000 jobs across the company.

Carroll has reorganized Anglo around the mining of seven core metals and minerals: iron ore, metallurgical coal, thermal coal, copper, nickel, platinum and diamonds. Her plan is to put Anglo in a position to double production across this portfolio by 2020.


Much of Carroll’s strategy is predicated on the idea that the world is in the midst of a commodities supercycle: a rise in demand, lasting for decades, for all kinds of commodities in emerging markets. For the short term, that flies in the face of economic slowdowns across the map.

China’s gross domestic product growth has decelerated to a projected 8.2 percent for 2012, the slowest in 13 years, according to the World Bank. As a result, China’s demand for steel, once increasing at twice the rate of the country’s overall economy, is now lagging GDP growth, says Sebastien Boifort, a portfolio manager at hedge fund Passport Capital LLC.

China’s copper imports are down 30 percent from a December 2011 peak.

At the same time, India’s growth has fallen to less than 7 percent from 8.43 percent in 2010, while metals and mineral demand from developed economies remains weak. Anglo competitors Rio Tinto and BHP Billiton are scaling back on capital expenditures and selling noncore assets in response. On July 27, Anglo said its capital expenditures for 2012 would be $5.5 billion, 21 percent less than originally planned.

China Market

Carroll dismisses the idea that the slowdowns in China and India imperil Anglo’s strategy. She says that India, once thought to possess almost limitless iron ore, has begun importing it. China still needs steel, metallurgical coal and base metals to build up its infrastructure, she says.

Sharief Pansarey, an analyst at Old Mutual Investment Group in Cape Town, which holds about 2.4 percent of Anglo’s shares, supports Carroll’s overall strategy.

“They have great assets, so all that is really required is for them to see the projects through and then reap the benefits,” he says. “We feel comfortable with the upside as well as the risks.”

Carroll’s most expensive gamble is Minas-Rio, an iron ore project that spans the eastern Brazilian states of Minas Gerais and Rio de Janeiro. Anglo paid companies controlled by Brazilian billionaire Eike Batista a total of $5.1 billion in two transactions in 2007 and 2008 for the mine and the right to build an export terminal at the Atlantic port of Acu.


At the time, Anglo planned to spend an additional $2.6 billion completing the open pit mine, an ore processing plant, the terminal and a 330-mile (525-kilometer) pipeline to carry iron ore slurry to the coast. The project, Anglo said, will boost Anglo’s total iron ore output at least 55 percent when the first phase of production starts in 2015.

The project has run into a series of snags, and the completion date has been pushed back at least three years, to the second half of 2014. Officials from Brazil’s Public Ministry have obtained four injunctions against Anglo, challenging licenses for the building of power transmission lines and other facilities the company had been granted by regulators.

Anglo says the legal actions are without merit and it is seeking to resolve them through the courts. Carroll also met Brazilian President Dilma Rousseff on July 26 to try to smooth the path to the project’s completion.

Long Payback

Meanwhile, construction costs have jumped to a projected $5.8 billion.

Citigroup Inc. (C) analyst Heath Jansen estimates that Minas- Rio won’t pay back its capital costs until at least 2028. Anglo declined to comment on Jansen’s estimate.

“Minas-Rio is our single biggest disappointment in the company,” Pansarey says.

Peter Davey, an analyst at Standard Bank Group Ltd. in London, is blunter: “I think the thing that will make or break Cynthia is Minas-Rio.”

Carroll acknowledges the project has been more difficult than anticipated. Still, she bristles at suggestions from critics such as Jansen that Minas-Rio is a white elephant.

“They’ll be eating their words in a few years’ time,” she says.

Rising Reserves

While development costs have increased, she says, so too have estimates of the mine’s reserves, to 5.8 billion tons of ore from 1.2 billion tons. The mine will deliver ore to China at $55 per ton, a price competitive with that being sold by Brazilian miner Vale SA and Rio Tinto, she says.

“I don’t think the market understands this project,” Carroll says. “It’s not pie in the sky.”

Investors also fret about Anglo American Platinum Ltd. (AMS), or Amplats, Anglo’s platinum subsidiary. With a 40 percent global market share, the company is the world’s largest producer of the metal, which is used to make catalytic converters, fuel cells and jewelry.

Amplats employs 40 percent of Anglo’s 145,000-strong workforce and constitutes more than 25 percent of its assets. Yet the platinum business generated only 8 percent of Anglo’s profits in 2011, down from 28 percent in 2008. One reason is that demand from European automakers has been slumping, driving down prices. Platinum traded at $1,409 an ounce on August 8, 37 percent below its March 2008 peak.

Shuffling Deck Chairs

Investors are baying for radical action.

“If they are just going to reshuffle the deck chairs on the Titanic, that is a nonstarter for me,” Davey says.
He says Anglo must close low-margin platinum mines in South Africa. The country’s politics make that difficult. The company sold minority stakes in platinum mines to local businesses and communities to comply with post-apartheid black economic empowerment laws.
Peter Major, head of mining at South Africa’s Cadiz Corporate Solutions, which advises companies on acquisitions and divestments, says Amplats may be too big to manage inside Anglo American.
Carroll says the division isn’t for sale.

“This is not about spinning off platinum,” she says. “But we are looking at the entire value chain.”
In late July, after the platinum subsidiary missed its first-half earnings estimate, Amplats CEO Neville Nicolau resigned and the company announced it would suspend its dividend, curtail production and cut spending.

Unwelcome Blow

With Minas-Rio and Amplats weighing on Anglo, the Codelco dispute was an unwelcome blow. The controversy stems from Anglo’s $1.3 billion acquisition of Los Bronces, a second Chilean mine and a smelter from Exxon Mobil Corp. (XOM) in 2002.

Exxon had bought the assets from state-owned mining company Enami in 1978. Exxon feared the government might nationalize foreign-owned resource companies. So to protect itself, it gave Enami an option to buy 49 percent of Exxon’s mining company. The option could be exercised every third January.

When Anglo bought Exxon’s mining unit, the option, with slightly changed terms, transferred to Anglo’s Chilean subsidiary, Anglo American Sur SA.

Enami sold the option to Codelco in 2008.

Anglo tried to buy Codelco’s option, offering the state- owned miner $1 billion in August 2011.

“We rejected it on the basis it wasn’t enough,” says Codelco CEO Thomas Keller, who was chief financial officer at the time.

Codelco Option

In October 2011, Codelco announced it intended to exercise its option in January of this year, using a $6.75 billion loan from Japan’s Mitsui & Co. toward the purchase. Under the deal’s terms, Codelco could repay Mitsui $4.9 billion of the loan in shares equal to 24.5 percent of Anglo American Sur. Codelco would thus be getting a quarter of Anglo Sur for as little as $1.9 billion.

Carroll announced on Nov. 9 that she had completed a better deal. In a move that she said would protect shareholder value, she sold 24.5 percent of Anglo Sur to Japan’s Mitsubishi Corp. (8058) for $5.4 billion. That valued the subsidiary at $22 billion, double the price implied by Codelco’s option.

Codelco sued. Anglo countersued. Initial attempts at negotiation failed. The dispute looked like it was headed for a years-long journey through the Chilean courts. The court case is now suspended while the parties make a new attempt to reach a settlement.

Anglo’s market value declined by $7.3 billion from the time the dispute broke out in November 2011 to August 6.

Right and Wrong

“Regardless of who’s right and who’s wrong, I think the concern is, how did you end up in this situation in the first place?” Citigroup’s Jansen says.

While the Chilean government has said it won’t intervene in the dispute, Dominic O’Kane, an analyst at Liberum Capital Ltd. in London, worries that it will damage Anglo’s standing.

“The longer the dispute drags on, the greater the political risk,” he says.

The latest bad news for Carroll is a sudden and unexpected drop in demand for rough diamonds. De Beers reported on July 20 that sales fell 14 percent in the first half compared with the same period in 2011. Profit was $626 million, a 47 percent decrease.

The timing couldn’t be worse for Anglo, which agreed in November to buy the Oppenheimer family’s 40 percent stake in De Beers for $5.1 billion. The purchase will bring Anglo’s ownership to 85 percent. The nation of Botswana owns the other 15 percent. Through De Beers, Anglo will control 35 percent of the global market for rough diamonds.

Steel-toed Boots

If diamonds are no longer Cynthia Carroll’s best friend, copper and iron ore may be her nemeses. In late June, she flew to South Africa’s Northern Cape to christen Kolomela, an iron mine Anglo spent three years developing at a cost of $1.1 billion.

The mine is part of Anglo’s effort to increase South African ore production to 70 million tons from 40 million tons. As she entered the mine site, Carroll passed lines of rail cars, each loaded with 100 tons of ore, stretching 2 miles into the distance.

Mine workers sang a song composed for the occasion as Carroll gamely danced on an outdoor stage in her black pantsuit, hard hat and steel-toed work boots. She smiled at an audience that included buyers from Chinese, Japanese, South Korean and European steel companies.

The buyers call the tune, and Carroll has to hope that the music doesn’t stop.

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Is Local Food More Equally Friendly?

Story first reported from USA Today

Which is better for the environment and the economy — a tomato grown nearby or one from the supermarket?

Local food, hip among urbanites and touted at the White House, is stirring more debate as new research suggests its benefits have been oversold.

"I like the food," says Joseph Conklin, a customer at the Local Market, a store in Falls Church, Va., that sells products made within 100 miles. He says he wants to support local businesses: "You get a better feeling shopping here" than at a national chain.

Such stores are popping up nationwide, and more farmers markets are open year-round. First lady Michelle Obama has added to momentum with her well-publicized backyard garden.

Two new books, however, say local food isn't necessarily more eco-friendly, even though it travels fewer miles. They cite research showing long-distance transportation accounts for only about 4% of the greenhouse gas emissions in food production; most occur at the farm itself through the use of tractors and other equipment and materials.

So if you want to buy local food for its freshness or to support area farmers, fine, but don't do it to save the planet, conclude researchers from the Union of Concerned Scientists, an environmental group. Their two-year study, "Cooler Smarter," was published this spring.

Another book goes even further in debunking local-food "myths." Its title, The Locavore's Dilemma: In Praise of the 10,000-mile Diet, plays off Michael Pollan's best seller, The Omnivore's Dilemma.

Co-author Pierre Desrochers, a geography professor at the University of Toronto-Mississuga, says large farms growing crops suited to their region are better for the environment because they use less energy per item and grow more food on less land. He says they offer economic benefits, too: lower prices.

Desrochers, who says he has received no funding from agri-business, has no problem with hobby farmers but doesn't want government supporting local food (or, for that matter, ethanol and sugar). Though kids may learn from community gardens, he says, they're better off learning computer and job skills.

"He's advocating a contrarian stance to sell books," says Chris Hunt of Sustainable Table, a non-profit advocate for healthy, eco-friendly food. Hunt says local food may not have a smaller carbon footprint but argues small local farms are more likely to avoid synthetic hormones, fertilizers or other chemicals that can damage the environment and harm human health.

He agrees it's not feasible to rely entirely on local food but adds, "no one's proposing that."
Erin Barnett, director of Local Harvest, a directory of farms and farmers markets, says local food encourages people to eat fresher, seasonal food and offers an easier way to track safety problems.
As part of its "Know Your Farmer, Know Your Food" program, the U.S. Department of Agriculture offers grants to boost local food systems.

"Some of this is schmaltzy," says David Swenson, a regional economics researcher at Iowa State University. "How about your mechanic?" He agrees there's more economic benefit in growing large quantities of food where the climate is best: "That's why Iowa is so good at growing corn and Montana (stinks) at it."

Yet local food is about more than numbers, says Sarah Rich in Urban Farms, out in June. She toured 16 nationwide, including a one-acre rooftop garden in Queens, N.Y., and found that they anchor communities, beautify blighted areas and create havens for children. "Urban farming … can simultaneously reshape places we live and the way we eat."

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Tuesday, June 26, 2012

California Condors at Risk

Story first appeared in The Christian Science Monitor.
California condors, one of the world’s most endangered species, are poisoned by lead from hunters’ bullets “at epidemic levels,” and will not recover unless more is done to prevent it, a study released Monday concluded.

In the early 1980s, the number of California Condors had plummeted from decades of poaching and environmental hazards, but as Bill Whitaker reports, scientists are hard at work to save the endangered species from extinction.

A review of more than 1,154 blood samples taken from wild California condors and tested from 1997 to 2010 found that 48 percent of the birds had lead levels so high, they could have died without treatment.

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So far, a ban on lead bullets in the birds’ habitat appears to have had little effect, the study found.

Lead poisoning is preventing the recovery of California condors. The population is not self-sustaining.

Condors — the birds with the largest wingspan in North America — are scavengers. They eat dead deer, pigs and other animals, often that hunters have shot. They ingest bullet fragments and are poisoned.

The California Gov. signed a law in 2007 to ban hunting with lead bullets, slugs or buckshot in the condors’ range, which extends from Los Angeles to San Jose, where the birds have been seen atop Mount Hamilton. But it hasn’t worked. Birds analyzed before the law took effect had blood levels the same as birds analyzed afterward.

The reason is that a condor eat 75 to 150 dead animals a year. If just one has a lead bullet fragment, that can be enough to kill the bird.

Condors once ranged from British Columbia to Mexico. But because of habitat loss, hunting and lead poisoning, the population dwindled to just 22 nationwide by 1982.

Federal biologists captured all remaining wild condors in 1987 and began breeding them in zoos. The birds’ offspring have been gradually released back to the wild.

Today the California condor population has grown to 386. Of those, 213 live in the wild at Big Sur, Pinnacles National Monument in San Benito County, Southern California, Arizona, Utah and Mexico. The other 173condors live in captivity, at places such as the Los Angeles Zoo.

Although the population growth has been impressive, it is deceptive because it is highly dependent upon human intervention, the researchers said in Monday’s study, which was published in the Proceedings of the National Academy of Sciences.

Every free-flying condor has a radio or GPS collar to track it. Nearly all of them are captured twice a year and tested for lead. A few chicks have been born in the wild, but biologists still put out food, such as stillborn calves, for the birds to eat so their population can have a chance to grow.

Monday’s study, which also looked at lead levels in condor feathers, confirmed that lead in the birds is coming from bullets, rather than other sources such as old paint chips, by matching isotope levels of lead in bullets to lead in the condors.

Researchers were surprised by the extensive poisoning. For example, 30 percent of all condors captured every year have lead levels that, while not potentially fatal, can block reproduction and cause immune system problems.

And 20 percent of the birds captured every year have levels that could kill them if not treated with chelation, a process where condors are fed calcium-based drugs that bind to the lead and help them pass it naturally. But the process also strips nutrients, and can cause the birds to be hospitalized a month or more.

In California, the state Department of Fish and Game and some hunting and environmental groups have worked to promote the lead ban in condor habitat. Some surveys show high compliance rates. But there is little enforcement, and ranchers or hunters can still use lead bullets and shot, which are cheaper and more readily available than other types of ammunition, such as copper, with little risk of getting caught.

The Center for Biological Diversity, an environmental group based in Tucson, Ariz., and six other conservation groups sued the U.S. Environmental Protection Agency this month to force the agency to institute controls or bans on lead ammunition.

We’ve removed toxic lead from gasoline, paint and most products exposing humans to lead poisoning, now it’s time to do the same for hunting ammunition to protect America’s wildlife.

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