Also, I apologize that the “NewVerso” story, which was to be posted in July, will have to be delayed.

The following story, NaturalResilience, is a great short report! It covers several items that I wanted you to see, but did not have time to write about. The author does it better than I would have anyway.  A few teasers follow but please read this report.

…BP, a company that spent the last decade and a half burnishing its reputation as an environmental paragon, apparently to the detriment of its capacity to manage old-fashioned oil production safely.

…All this, just when things were going so well in the oil-spill business. The number and collective size of oil spills (over 7,000 tonnes) has declined in each of the last four decades.

Speaking of microbes, do not underestimate nature’s powers of recovery. After most big oil spills, scientists are pleasantly surprised by how quickly the oil disappears and the marine life reappears….Indeed, the sea floor in the Gulf is rich in `cold seeps’ — communities of tube worms and other organisms that live off oil naturally seeping from beneath the seabed. (The annual flow of oil through such seeps is about half the total spill.) Hundreds of these clusters of clams and tube worms have been found since the 1980s in the deep waters of the Gulf of Mexico, living off the microbes that eat the oil.

The final lesson is that the environmental threats that matter are the slow, continuous ones, not the telegenic sensations like oil spills. BP’s spill is known to have killed just over 1,300 birds so far. Just one wind farm, at Altamont Pass in California, was until recently known to kill perhaps 1,300 birds of prey every year. [The wind] industry kills far more rare birds per joule of energy produced than oil does.

Two years ago Kevin Mason (Equity Research Associates) and I offered a special multi-client report in which we provided a long-term perspective on the publication paper grades. We analyzed the markets and made both supply and demand forecasts for the key grades (newsprint, SC-A, coated groundwood, and coated free sheet).  A number of the companies that purchased the report two years ago have asked for an updated long term forecast.

We are going to provide a new report this September, but not exactly a sequel. A key emphasis will be on the impact of electronic communication.  In order to gain expertise on the new technologies, we brought a third partner into the mix. We are very pleased to be working with mediaIDEAS, a leading publishing technology and research firm, which investigates and reports on the development of the e-reader, electronic tablets, smart phones, etc.

The special report we are preparing will review how electronic communication has impacted paper demand over the last two decades, and more importantly, what can be expected over the next 10 years. We will also cover, of course, all the traditional factors that relate to paper demand as well – including environmental issues, recycling, international trade, consolidation, economic and energy issues, etc.

A two-page promotion that provides more specifics can be found by clicking on the following link: The Impact of Digital Media and E-reading Platforms on Paper Demand 2010-2020. There is a reduced cost for those who order before July 31, so get your orders in soon.

 Thanks very much for your support.

 verle sutton

Helium

The following passages are from How BP Gulf Disaster May Have Triggered a ‘World-killing’ Event.

Ominous reports are leaking past the BP Gulf salvage operation news blackout that the disaster unfolding in the Gulf of Mexico may be about to reach biblical proportions.

251 million years ago a mammoth undersea methane bubble caused massive explosions, poisoned the atmosphere and destroyed more than 96 percent of all life on Earth. [1] Experts agree that what is known as the Permian extinction event was the greatest mass extinction event in the history of the world. [2]…

Those subterranean seas of methane virtually reshaped the planet when they explosively blew from deep beneath the waters of what is today called the Gulf of Mexico…

The bottom line: BP’s Deepwater Horizon drilling operation may have triggered an irreversible, cascading geological Apocalypse that will culminate with the first mass extinction of life on Earth in many millions of years.

The warning signs of an impending planetary catastrophe—of such great magnitude that the human mind has difficulty grasping it-would be the appearance of large fissures or rifts splitting open the ocean floor, a rise in the elevation of the seabed, and the massive venting of methane and other gases into the surrounding water.

Such occurrences can lead to the rupture of the methane bubble containment—it can then permit the methane to breach the subterranean depths and undergo an explosive decompression as it catapults into the Gulf waters.  [6]

All three warning signs are documented to be occurring in the Gulf…

Perhaps if humanity is very, very lucky, some may find a way to avoid the mass extinction that follows and carry on the human race.

There are kernels of truth in this story but it reads more like a parody. It is true that scientists believe that methane bubbles have caused great damage and some believe that the Permian Extinction was caused by methane, but a meteor is more likely.

Some of the science is very bad. The claim that previous methane bubble calamities, including the Permian extinction 251 million years ago occurred in the Gulf was an egregious error. There was no Gulf of Mexico 251 million years ago. The continents were not positioned or shaped to resemble what we see today.

That all of these “signs” are occurring in the Gulf,  but have been kept secret,  is just not believable. But then again President Obama went North on his vacation. He is certainly keeping his distance.

So what are coated groundwood producers training their customers to do? They are forcing customers to protect themselves by inserting dummy orders into the system. And, in these situations, customers make certain that they error on the high side of what will be needed. This distorts demand, of course, and forces backlogs out to ridiculous levels.

In addition, since allocations are not in place, and there are only soft limits on order entry (of repeat customers at least), those paper buyers that can build inventories (predictable roll sizes) are now doing so. It is just common sense. Why pay $60/ton more for paper in Q4 if you can purchase it in Q3. This pushes out lead times even further.

In addition, some customers who order paper in inconsistent intervals, or who were slow on the dummy-order trigger, find themselves locked out – not because consumption is so strong – but because capacity has been managed so poorly. This poor management has, in effect, driven out legitimate coated demand, replacing it with dummy orders and unneeded customer inventories.

If customers understood that they had a specific (and limited) allocation, and could be confident that those tons were waiting for them each month, then backlogs would more closely reflect actual market conditions.

My first job in our industry was with Ecusta Paper in the late 70’s. The company was primarily a cigarette paper maker, but also had a printing papers division, which is the product I sold. The company had an interesting experience during an extremely tight market in 1975. Every summer the mill shut down for a week. Maintenance on the paper machines and other equipment was scheduled during this period, but all other employees had the week off. In July of 1975 the market was so strong that the company had a 12-month backlog (for its uncoated lightweight printing paper grades) when the mill went down for the July holiday week. However, market conditions changed suddenly the week the machines were down. By the time the mill was to start up again, there were not enough orders left in the system to restart the printing paper machines.

In 1996 the situation was not quite so dramatic, but order entry fell like a rock once buyers recognized that the tight market was over and paper was readily available. Customers cancelled dummy orders, and began to live off of their inventory savings. Demand plunged.

We are not going to see another 1975, or even another 1996, but the soft market that follows the current pricing uptrend will be very tough for the producers to deal with. This boom and bust cycle is inevitable, but producers could greatly reduce the impact if they managed their businesses better. But that is not happening this time around, and I can’t imagine why.

Coated Free Sheet Review: The dynamics of the coated free sheet market are quite a bit different. The small producers (West Linn and Appleton) seem to be doing a good job of being selective and intentionally keeping their backlogs down to reasonable levels.

The major three producers have mixed backlogs but the average is much lower than in coated groundwood. A friend in the business estimated that NewPage was at 30 days, Verso 30-60 days, and Sappi 60 days. If anyone from these mills wants to correct these estimates, let me know.

Why would the coated free sheet market be more in control than coated groundwood? Well, we have several clues as to what might be the cause. First, coated free sheet shipments were higher in June (371,000 tons) than any month since October of 2008. These shipments were not inflated through inventory reductions (mill inventories actually rose 15,000 tons). Coated capacity has been reduced quite a bit since 2008, and other capacity has been moved from coated free to uncoated free, so it is surprising that the coated free sheet mills could produce that much tonnage. Unless, that is, some of the uncoated production has been moved back to coated. We believe that this is probably occurring, and is keeping coated free sheet backlogs less extreme.

The second clue that our theory might be accurate is that NewPage coated free sheet backlogs seem to be lower than its competitors. This could be due to (1) better management of backlogs, (2) customers prefer other suppliers, or (3) the company is able to accept more coated free sheet business as it reduces its uncoated volume. Number 3 seems most likely. NewPage controls nearly 50% of the coated free sheet capacity and they are, by far, the largest swing producer of uncoated free on coated free machines.

The third clue is that on June 29 NewPage reduced its uncoated free sheet payment terms from 2%, the standard industry practice for this grade, to 1%. It is likely that NewPage reduced its payment terms in order to discourage sales of this grade and open the way for more coated free sheet.

Once again, I question the NewPage strategy – on two counts. Messing with payment terms is not the best way to discourage sales. This decision was probably made at some level above the sales group. This just annoys customers and does not benefit NewPage. The best way to reduce business is to select the least profitable accounts and raise their prices, and/or freight rates, and/or backlogs, and force them to go elsewhere. Why annoy all your customers equally and lose business you want to keep – either now or when the market softens and customers have an opportunity to move their business.

Then there is the question of whether NewPage should increase coated free shipments this summer by decreasing uncoated free shipments. Moving tons to coated free sheet has the advantage of higher margins at the present time, in addition to the fact that the company should be able to retain some of this business when a market reversal occurs. This might be the best strategy. However, making additional tons available over the summer will allow customers to build inventories and escape payment of the next price increase. In addition, allowing inventories to grow so easily will reduce (by some unknown period of time) the length of the strong market.

The letter that will follow below  is a fascinating historical snapshot of the Nixon White House, and of early global warming hysteria. It is written by John Erlichman and provides Nixon with an overview of this new potential problem. I am not being critical of Nixon (on the global warming matter that will follow); the idea was new at the time. But still, for Erlichman to suggest going to Hugh Heffner for advice shows that the man was not thinking clearly.

The letter is from the Nixon library. My friend Kevan Khanamirian found it in a link contained in the following story, 1969 Climate Predictions Miss by a Mile .

The primary purpose of this post is just to provide this little fun historical item. Secondarily, however, we will take this opportunity to point out that global warming climate change forecasts have been proven wrong consistently, and yet the projections don’t change much. The 1969 projection that follows was for a 7 degree temperature climb and 10′ rise in ocean levels by 2000. By the mid-80s the forecast was similar, but the date had been pushed out 2020, and by 2000 the crisis had moved out another 50 to 100 years. It is true that carbon emissions keep increasing, but it should be obvious to everyone by now that carbon emissions do not impact climate as the global warming advocates promise.

 MEMORANDUM

THE WHITE HOUSE

WASHINGTON

September 17, 1969

FOR JOHN EHRLICHMAN

As with so many of the more interesting environmental questions, we really don’t have very satisfactory measurements of the carbon dioxide problem. On the other hand, this very clearly is a problem, and, perhaps most particularly, is one that can seize the imagination of persons normally indifferent to projects of apocalyptic change.

The process is a simple one. Carbon dioxide in the atmosphere has the effect of a pane of glass in a greenhouse. The C02 content is normally in a stable cycle, but recently man has begun to introduce instability through the burning of fossil fuels. At the turn of the century several persons raised the question whether this would change the temperature of the atmosphere. Over the years the hypothesis has been refined, and more evidence has  come along to support it. It is now pretty clearly agreed that the C02 content will rise 25% by 2000.  This could increase the average temperature near the earth_‘ s surface by 7 degrees Fahrenheit. This in turn could raise the level of the sea by 10 feet. Goodbye New York. Goodbye Washington, for that matter. We have no data on Seattle.

It is entirely possible that there will be countervailing effects. For example, an increase of dust in the atmosphere would tend to lower temperatures, and might offset the C02 effect. Similarly, it is possible to conceive fairly mammoth man-made efforts to countervail the C02 rise. (E. g., stop burning fossil fuels. )

In any event, I would think this is a subject that the Administration ought to get involved with. It is a natural for NATO. Perhaps the first order of business is to begin a worldwide monitoring system. At present, I believe only the United States is doing any serious monitoring, and we have only one or two stations.

Hugh Heffner knows a great deal about this, as does also the estimable Bob White, head of the U.S. Weather Bureau. (Teddy White’s brother.)

In addition to the Hugh Heffner reference, I loved the line, “we have no data on Seattle”, as if the survial of Seattle in a doomsday scenario is of some significance.

But that legacy is rapidly changing. The Black Liquor scandal and other similar government initiatives, have demonstrated that the current Congress and President have stooped to levels of corruption and political favoritism that would have been intolerable during previous administrations – during times when the mainstream media actually served a purpose.

But, in regard to corruption, we haven’t seen anything yet. The government takeover of our health care system, in combination with energy subsidies and other proposed climate change legislation, will lead to an explosion of fraud and political corruption. The opportunities for cheating, and the lack of oversight, will be extraordinary.

Corruption associated with climate change legislation will, however, be an international activity. It is interesting that the United Nations, known for its own out-of-control corruption, has blown the whistle on its key climate change program - Reduced Emissions from Deforestation and Degradation (REDD). REDD is designed to redistribute wealth to the poorer nations. In exchange for billions of dollars of “assistance”, the developing nations agree to limit logging, stop developing palm oil plantations, or disturb forests in other ways, such as building power plants in forested areas, etc. The plan at this time is for $10 billion/year of REDD funds to flow to developing countries by 2020.

These aid payments provide incentives for the poor to remain poor and dependent on the developing world. It is an international welfare system. That is not how the program is described, but that is the intent. The UN wants to stop harmful development that could result in more carbon emissions. It is another dedevelopment program – just like the President has planned for us in the U.S.

This is wrong on just about every level, but a key problem is that most of the billions of dollars being transferred to the developing world will end up just where the trillion dollars in the President’s stimulus package went – to politically connected individuals and organizations. These funds will not result in permanent jobs or provide the poor with opportunities to escape poverty. Economic development is required for that miracle to take place.

The UN  is concerned, however, that nations receiving REDD aid are planning to take the money, but then ignore commitments to end projects as promised. What a surprise.

The next passages are from; United Nations Warns that Corruption is Undermining Grants to Stop Logging.

A revolutionary scheme backed by the World Bank to pay poor countries billions of dollars a year to stop felling trees is the best way to stop logging and save the planet from climate change, according to wealthy countries and conservationists, yet documents seen by the Observer show the plan is actually leading to corruption and possibly more logging…

Under Redd, 37 mainly tropical countries have requested more than $14bn (billion) in grants from rich countries by 2015 in return for cutting their carbon emissions from logging and other forestry activities. This is expected to lead to an income of more than $10bn a year by 2020 when a global carbon offset scheme is running.

The carbon money flowing from rich to poor countries will then theoretically dwarf international aid and could reduce global emissions by 17-20% – more than that emitted by all the world’s transport.

But analysis of the 16 forestry reform plans so far submitted by Redd countries to the World Bank shows that many intend to abuse the system in order to collect the money while carrying on logging as usual.

Documents seen by the Observer show that the Democratic Republic of Congo wants to open up 10 million hectares (25m acres) of new logging concessions as part of its plan. The country, which is ranked as one of the most corrupt in the world, argues that it will reduce emissions by planting more trees elsewhere.

Guyana intends to use some of its Redd money to pay a property dealer from Florida to build a road and a major hydroelectric plant in some of its most densely forested areas. Indonesia has said it will impose a moratorium on the conversion of its extensive peat forests to palm plantations, but only after 2013, allowing logging companies to ravage its forests until then. Other countries are setting the present rate of deforestation deliberately high or are ignoring all present logging, so that they can be paid to do nothing.

The environment groups, which include Global Witness, Greenpeace International, Fern and Rainforest Foundation, also fear that Redd is being used by governments to victimise and steal the carbon rights of people who live and depend on the forests.

Last month police arrested a UK-based businessman alleged to have paid government officials and others in return for the emission rights on 20% of Liberia‘s forests. Interpol said last year the chances were “very high” that criminal gangs would seek to take advantage. Peter Younger, Interpol environment crimes specialist and author of a report for the World Bank on illegal forestry, said: “Alarm bells are ringing. Redd is simply too big to monitor. The potential for criminality is vast and has not been taken into account.”

Simon Counsell, director of Rainforest Foundation, said: “Redd has been touted as the quickest and cheapest way of preventing climate change, but what we are seeing are expensive and ill-conceived plans that fail to address the underlying causes of deforestation, and might make things worse. Redd needs to be taken out of the hands of the World Bank, and a new global institution [must be] established to rigorously oversee payments to tropical countries on the basis of the actual amount of logging or deforestation that is averted.”

These critics are correct that the program will not have the desired effect. But it should be killed, not given to some other bureaucracy to manage. It won’t work no matter who is in charge.

The forests in developing nations should be managed in a sustainable manner – as they are in Europe and North America. Carbon emmissions may or may not increase as a result, but carbon emmisions are not the problem. The problem to solve is how best to utilize the natural resources of developing countries so their ecomomies can show  long-term growth, and provide opportunities for the poor to work themselves out of poverty.

At the same time our government continues to pass out hundreds of billions of dollars to politically connected friends, family members, labor unions, and other special interest groups, President Obama is deciding how and who will pay for these political payoffs and political favors.  His President’s commission has informed us  that it won’t be pretty –  US deficit Reduction Painful, Commission Chiefs Warns.

Restoring U.S. fiscal balance is going to be a painful process that mostly requires spending cuts, but also some tax increases, the leaders of President Barack Obama’s deficit commission said on Wednesday.

Erskine Bowles and Alan Simpson made clear at a U.S. Chamber of Commerce event that the bipartisan panel is eying tax breaks, including the popular mortgage interest deduction, as well as slashing government spending in its effort to recommend ways to cut the estimated $1.4 trillion federal deficit.

“It is all going to be very painful,” Bowles said.

The new taxes and reduced deductions are scheduled to be implemented in 2011 or 2012. This will be an additional depressant on the economy.  Consider just one item; if the mortgage interest tax deduction is eliminated, the impact on home values, and home sales, will be enormous.

The leaders in the scientific community tend to be naturalists. There are other labels and descriptions of this philosophy, but basically, they believe that nothing exists outside of the four dimensions (three plus time). They jealously protect science from any supernatural contamination. I have a different philosophy, but it is certainly appropriate to limit the scope of science to natural phenomena.

Problems develop, however, as theories are developed from new scientific learning and new understandings. Scientists generally filter all new evidence through their philosophy of naturalism, and it often makes them look ridiculous. This long introduction will lead us to an example of that.

Scientists involved in cosmology today now understand that Sagan was totally wrong about the earth. I doubt that any reputable scientist in the field today would argue that the earth is ordinary. Rare Earth, written by Ward and Brownlee, and published in 2000, changed the paradigm. Since then, new evidence has been overwhelming.  The earth is, in fact, quite special.

Scientists will argue that the earth is not designed, but those in the field today understand that everything about the progression that the earth has taken over the last 4.5 billion years strikes of “apparent design”. Even today Rare Earth is a remarkable story. The major developments that occurred over those 4.5 billion years always appeared to set the stage for the next era. And during that entire time, events progressed in a manner that prepared the earth for multicellular life, and then eventually for advanced life.

Some scientists still cling to The Principle of Mediocrity because it fits their philosophy, and frankly, they are not up to date with the evidence. Besides, that the earth is special requires some explanation of all that apparent design. An egregious example of clinging to this outdated theory was published in Miller-McCune, by John Perlin. The story is called The Tree That Changed the World, subtitled, Two planets diverged in a solar system, and the successful one took a path more wooded.

The author makes the ridiculous assertion that Venus and the Earth are similar planets, and the difference between the climate we enjoy and the hellishness of Venus, is the fact that trees evolved on earth. The sub-plot here is the environmental message that we better take care of our trees or we will end up like Venus.

Astronomers for the longest time have regarded Venus as the planet most resembling Earth. Having almost the exact size as Earth and being almost as close to the sun has led many to call it Earth’s twin.

The clouds always covering the Venusian landscape are another compelling example of Venus’ affinity to Earth. Pioneering astronomer Svante Arrhenius hypothesized great rains pouring from these clouds nurtured lush rain forests below. But when various space probes penetrated the Venusian atmosphere, this belief burst. Astronomers found an inferno rather than a tropical paradise.

Here they discovered the ultimate greenhouse effect: Although the carbon dioxide-laden atmosphere allowed sunlight to pass through, when the solar rays hit the surface of Venus and changed into heat waves, they could not escape the carbon dioxide cover. So the heat had nowhere to go and accumulated at the surface, where temperatures exceed 800 degrees Fahrenheit.

Earth has as much carbon dioxide as Venus. But instead of the gas blanketing the sky as happened on Venus, much of the carbon dioxide on Earth has been locked up inside and on the surface. This has made all the difference in the story of the two planets — one, a heaven bountiful with life, the other a hellish place where nothing animate as we understand it can survive.

Credit much of this carbon dioxide transfer from the atmosphere to the land to the rapid global spread 400 million years ago of the first (or among the first) true trees, Archaeopteris.

So we owe it all to trees. People can write whatever nonsense they want, I suppose, but it does make the Earth more hellish.

A found an article recently that highlighted just one area that makes the Earth special – the elements and the quantities of those elements that exist on Earth. Advanced life requires elements in just the proportion that happens to occur on Earth.

Earth is not at all ordinary in its assortment of elements and compounds. For the planet’s size and distance from its star, it possesses an anomalous (abnormal) amount of every measurable element and compound. Today, the list of such uniquely abundant or scarce substances includes water, carbon, sulfur, phosphorus, uranium, and thorium. Each of these anomalous amounts proves to be a vital requirement for advanced life and a significant piece of evidence that Earth was supernaturally designed for humanity’s benefit.

The previous passage is from Earth’s Unique Element Abundances. It is short, but very interesting. Please take a look.

Jim McTague wrote an insightful story in Barron’s over the week-end that demonstrated the failure of solar energy to earn its own way. Even with hundreds of millions of dollars in grants and loan guarantees, some companies will still not be viable.  

McTague also pointed out that the recipients of these huge solar energy grants were “connected” to (not the Mafia but to its more dangerous counterpart)  Congress and the President. Passages from Our Tough Luck President follow.

In this story, only government subsidies are “sustainable”.

SOLYNDRA was the first recipient of a loan guarantee under the dual auspices of the Recovery Act and Title XVII of the Energy Policy Act of 2005. The Department of Energy noted the loan guarantee was the first it had issued since the 1980s. On Sept. 4, 2009, the day of the award, Vice President Joe Biden crowed that it was “part of the unprecedented investment this Administration is making in renewable energy, and exactly what the Recovery Act is all about.” DOE Secretary Steven Chu called it “part of a broad, aggressive effort to spark a new industrial revolution that will put Americans to work, end our dependence on foreign oil and cut carbon pollution.”

The President visited the plant earlier this year.

When he [President Obama] toured Solyndra’s Fremont, Calif., factory in May, he gushed that the company was “leading the way toward a brighter and more prosperous future.”

But things have not worked out.

Solyndra, recipient of a $535 million Department of Energy loan guarantee, last month cancelled a $300 million initial public offering because auditor PriceWaterhouseCoooper said its operating losses and negative cash flow raise doubts about its ability to continue as a going concern. Ouch!

Taxpayers are on the hook for $390.5 million—73% of the loans. Some observers questioned the wisdom of the government’s deal from the start, saying the company was an inefficient, high-cost producer.

One of Solyndra’s biggest stakeholders is Argonaut Ventures I. Its majority owner is Oklahoma oil billionaire George Kaiser, who was a “bundler” of campaign funds for the Obama-Biden campaign. This means he collected contributions and sent them en masse to the candidates. Kaiser e-mailed us an emphatic “NO” when we asked if he played any role in the pursuit of the loan guarantees.

But that is not all.

… this month, the DOE awarded loan guarantees to Abengoa Solar, part of Abengoa, a Spanish outfit whose U.S. shares (ticker: ABGOY) trade in the pink sheets, and Abound, a Colorado-based photovoltaic-film maker.

Abengoa Solar got $1.45 billion in guarantees to build plants in California and Arizona. Its profits depend heavily on subsidies from the government of economically troubled Spain.

Abound Solar received a $400 million grant to ramp up production of cadmium telluride photovoltaic panels. Here’s a coincidence: Russ Kanjorski, nephew of Pennsylvania Democratic Rep. Paul Kanjorski, is a marketing executive at Abound, which got a $3 million federal grant in 2008. He previously had been a principal of Cornerstone Technologies, which got $9.2 million in earmarks from Kanjorski and then went bankrupt. A spokesman for Abound says Russ Kankorski had no role in the loan-guarantee negotiations.