Wednesday, September 2, 2009

A neglected form of Administrative Insurance for the future

There is an almost rhetorical question that comes up repeatedly when one talks with those demanding strong action to reduce the possible outcomes of the change in climate that are claimed to be due to increases in greenhouse gases. It is that we cannot afford not to take out insurance in case the theoretical prognostications are correct. And the argument is often made that there is little downside to this.

I was at a talk by Paul Lang, who is the Senior Vice –President for Operations of Arch Coal tonight, and he spoke of a definite and clear downside that the general public is certainly not aware of, and very likely fails to even remotely understand the consequences of. It is this.

Some 50% of the electrical energy in this country is produced from coal. In the MidWest this number rises, to 85% in Missouri, as an example. But over 100 coal-fired power stations have been cancelled or postponed because of the general attitude to coal by the current Administration and the political climate engendered by the furor over the possible AGW effects. We, this nation and the world need energy. At the moment, other than ourselves, nations such as Russia, China, India and Africa rely on coal for significant portions of their energy supply. That demand is not going to go away, and in one of the few likely accurate predictions of the Wicks Report they anticipate that coal production will rise from 4 billion tons a year to 7 billion tons a year, in order to meet this demand.

To produce the coal that the world needs, the industry must have engineers. That supply is beginning to vanish. In a typical year at the moment the industry needs about 750 new mining engineers globally. (This is not just for coal, you name the mineral – it came out of the ground and some form of mining was involved in extracting it). But globally there are about 350 students graduating. The work force in the industry is aging (over 60% of those in the industry are getting close to retirement) and then there are those below 35 in age who relatively recently joined the industry. There is a “missing generation” between the two groups, marking the years when there appeared to be no future going to work in the fossil fuel industries.

The public relations exercises that we see today that tout the “Climate Change” message project a strongly negative image of the fossil fuel industries to the general public, discouraging students, both in the United States and abroad, from going after careers in the industries involved. The nation already has had a more general problem in that less than 6.2% of incoming college freshmen in 2007 were anticipating careers in engineering. This has however recently risen with 7.5% of 2008 freshmen expressing an interest in going on to an engineering job, but given the national need, that is still a pathetic percentage.

For the fossil fuel industry the numbers are smaller and with limited demand for places, at a time where other disciplines were flourishing, University Administrations put their resources where the demand was. As a result while there are nominally about 12 accredited schools of mining, there are viably only around 6 that have what might be considered an adequate to good program. Others have below minimal levels of the faculty numbers required to teach an adequate range of courses, let alone also do the research critical to the advancement of the industry.

To maintain an industrial standard of safety that has now been achieved; to keep the production cost levels down and thus meet the prices for the fuel and electricity supplies that society expects, rather than the prices that will stagger and halt future industrial growth, and to keep the nation out of continued recession requires that the industry be staffed by engineers who know what they are talking about.

Projecting an image of a “evil” industry that will be “taxed out of existence” is fine if there is a viable alternative – but what if there isn’t? It would seem that the Administration might want to consider “insurance” in case their ideas don’t turn out to be right. In case the nation really has to fall back on coal for a viable economic future. If all the billions of dollars that are now being spent to study and suggest steps to take to lower global warming have been put in place because of insurance in case the AGW argument is correct (Joe Aldy made that point at the EIA Energy Conference in April.) then it makes sense to take out similar insurance in case the argument is wrong.

Is that likely ? Are we going to see greater investments in technology to produce fossil fuels at a greater rate, so as to meet demand and help sustain the economic recovery? Somehow I suspect that this, more realistic sort of insurance is unlikely to happen. But we shall see.

In the meantime the world still needs more qualified engineers in the fossil fuel extraction industries than those industries can find and hire. Plans will therefore be delayed, needed research will not get done, (the historic record shows that giving money to the National Labs to find answers to fossil energy problems is a highly expensive way of trying to solve the problem.) We are, therefore likely heading into a really serious problem time - isn't that insurance is supposed to help get you through?

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