A Wrong Step
By Julie Gozan
Breeding Disaster: France’s Nuclear Power Program
By Olivier de Marcellus
An Interview with the American Petroleum Institute’s Dr. Michael Canes
Jobs in the Mist
By Holley Knaus
Chevron: The Big Oil Boys
By Philip Mattera
Names In the News
The Overworked Society
Your November issue quoted extensively from a report by Citizen Action which claimed - inaccurately - that motorists are paying more for gasoline in areas where large oil companies have allegedly gained market control.
The report has been examined for the American Petroleum Institute by two experts - Dr. Edward W. Erickson, a professor of economics at North Carolina State University in Raleigh, and Dr. Craig M. Newmark, an associate professor of economics at the same university.
"The report by Citizen Action," the professors found, "is fundamentally wrong. It examines only a few pieces of information. It discusses these pieces of information entirely out of context. It then analyzes this information superficially. ...
"Market-driven pricing in gasoline retailing is more complicated than Citizen Action acknowledges. The assumption that prices in some cities were higher because of the major oil companies’ ‘control’ overlooks many other possible explanations. Land prices and labor costs vary widely among cities. Transportation costs vary by locality. So do local regulations regarding pollution, which affect the cost of retailing gasoline."
Indeed, the professors’ comprehensive statistical analysis for states shows that differences in costs as reflected in regional cost of living indices explain most of the regional variation in gasoline prices. Measures of gasoline market share explain almost none of the regional variation in gasoline prices. The professors also pointed out that "many of the numbers in the Citizen Action report are actually inconsistent with the conclusions they wish to draw.
"For example, in their State Appendices they report market share data for eight states that are discussed in the report. In six of the eight states, independents’ (smaller oil companies) market shares actually increased. In 1985, the average market share of independents was 27.2 percent. By 1990, the average market share of independents increased to 29.3 percent. These data contradict the assertion that reduced market shares for independents have led to reduced competition in gasoline markets."
The professors concluded that the Citizen Action report is "selective, superficial and flawed" and therefore "is not an appropriate guide for public policy."
I believe the consuming public should know that U.S. gasoline markets have served them well. In 1991, when adjusted for excise taxes and inflation, average pump prices paid were near the low end of the range of prices paid since 1920. Moreover, in the period since 1967, the increase in the price of gasoline as measured by the Consumer Price Index is much less than the average for all items.
Director, Policy Analysis,
American Petroleum Institute
The director of the Honduran forestry department made the announcement the day after 3,000 demonstrators gathered in Tegucigalpa to protest the contract. Dara O’Rourke, of the Seattle-based Task Force on Multinational Resource Corporations, says there was "absolutely unprecedented opposition" to the contract in Honduras, as a coalition of indigenous people, environmentalists, business people and labor organizers came together to protest the Stone deal.
O’Rourke is concerned that Stone will attempt to renegotiate the contract, perhaps under the name of a subsidiary since so much opposition to the contract was directed against Stone in particular. The Task Force is also concerned about another secret deal the Honduran government is negotiating with the North Carolina-based Wellington Hall company over rights to harvesting Honduras’s mahogany forests.
The Philippine government "is satisfied with the compromise" the settlement represents and hopes the Philippine Congress will approve it, says Macarthur F. Corsino, political and public affairs chief consul at the Philippine Embassy in Washington, D.C. He adds that the government still contends that Westinghouse did engage in bribery.
Despite the large sum it is to pay the Philippines, Westinghouse, which continues to deny its involvement in any bribery scheme, may benefit from the settlement, which awards the company a contract to operate the plant. The Philippine government will invest $400 million in plant repairs, $300 million of which will be repaid by Westinghouse from its share of revenues after the plant is opened in three years. Burns & Roe, which acted as a subcontractor on the Philippines project, was not required to make any payments, and may continue to work on the plant with Westinghouse.
The effort to start up the plant is disturbing. It is located five miles from an active volcano and within 25 miles of three geologic faults, and nuclear specialists say the plant is also unsafe as a result of poor Westinghouse construction. But Corsino says the government is confident there is "no real danger" of the plant suffering earthquake-related damage. Bringing the plant on-line, he says, is necessary "to benefit the people who are suffering from the energy crisis" in the Philippines.
Westinghouse declined to comment on the settlement or the safety of the plant.
Jay Feldman, director of the National Coalition Against the Misuse of Pesticides (NCAMP), says that the administration’s position will help move bills aimed at allowing federal preemption of local regulatory power through Congress. Currently, in states that do not have preemptive power over local government, communities can adopt a range of ordinances on pesticide use such as restricting spraying near schools or water supplies or requiring advance notification and public postings warning of pesticide use. Eighty towns have passed ordinances laying out guidelines and restrictions on pesticide use.
Feldman calls the Bush administration decision "an attack on local democratic decision-making." Bush’s position "is contrary to basic principles [providing for local control] which are intended to protect the health and environment" of local communities.
- Holley Knaus
It should begin with a national commitment to rapidly implementing existing energy efficiency technologies. The transition from fossil fuels and nuclear power to renewable energy sources, such as solar, wind and biomass, should begin immediately, even as massive resources are shifted into renewable energy research. Down the road, the goal should be decentralization, with energy sources located as close to end-users as possible.
Unfortunately, the framework of the U.S. energy debate has been set by the Bush administration’s National Energy Strategy, which is essentially a plan to accelerate the country’s current deadly course. Ignoring all existing and emerging evidence of the catastrophic environmental effects of reliance on fossil fuels and nuclear power, the administration and its Congressional allies, especially Senator Bennett Johnston, D- Louisiana, are seeking to shore up the oil, coal and nuclear power industries.
Many of the administration’s proposals are designed to prolong the life of the otherwise-decaying nuclear power industry. One of the most insidious proposals would limit (eliminate being the real goal) citizen participation in nuclear-power-plant licensing by enacting a "one-step" licensing process.
Every currently operating U.S. nuclear power plant went through a more open two-step process, as required by the Atomic Energy Act of 1954. Citizens were able to participate in a public hearing before the Nuclear Regulatory Commission (NRC) granted a plant a construction license and in another hearing before it gave the plant permission to go on line.
In 1989, the NRC changed the rules of the game to block citizen involvement. Under the NRC’s licensing rules, a utility could apply to the NRC for a site permit up to 20 years before it develops concrete plans to build a nuclear plant, and have its reactor design certified as acceptable by the NRC 15 years before construction. When the utility finally decides to begin construction, citizens would have a right to a hearing on the utility’s application for a combined construction and licensing permit, but not on site or design issues, since the NRC would have already resolved those questions.
A three-judge panel of the District of Columbia Circuit Court of Appeals struck down many portions of the NRC’s rule. The entire Court of Appeals has reheard the case, and a decision is now pending.
But one-step licensing could become law even if the appeals court rules against the NRC’s 1989 procedure, through the legislative process. It is currently a provision of the Senate’s Energy Bill.
The perils of the one-step process are clear. A 1984 report from the NRC’s Atomic Safety and Licensing Board panel to the Advisory Committee on Reactor Safeguards detailed more than 20 reactor safety improvements resulting from the hearing process. Among the public contributions cited by the panel were: improvements in the steam generator system at Minnesota’s Prairie Island facility; upgrading effluent-treatment systems at Michigan’s Palisades plant and Illinois’s Dresden facility; and new regulations to improve the protection of safety equipment against fires at all plants. In addition, utilities’ awareness of the public scrutiny to which the hearing process subjected them undoubtedly helped temper their recklessness.
Yet even with the scrutiny afforded by the two-step process, the nuclear industry has built up an atrocious safety record. A recent report from the Washington, D.C.-based Safe Energy Communications Council cites a December 1991 NRC document which indicates nuclear power plants are beset by 787 safety problems - these are ones identified by the pro-nuclear NRC - that utilities have failed to address.
The one-step process will make it even easier for the nuclear industry to demonstrate its callous disregard for safety and the potential consequences of a major nuclear accident.
The nuclear industry and its friends in government know that it is citizen protest and attention to safety matters that has led to the industry’s current predicament, with no nuclear plant ordered after 1973 ever coming on line. With the one-step process, the industry hopes to do an end-run around the major obstacle to its continued survival.
The 40-year U.S. experience with nuclear power has been an unmitigated disaster. One-step licensing is a step in the wrong direction.
Instead, U.S. nuclear energy policy should be reversed. Citizens should support, and Congress should adopt, legislation introduced by Rep. Peter Kostmayer, D- Pennsylvania, (now in the House Interior Committee’s Energy Bill), which, while inadequate, would at least allow citizens the right to a hearing before a nuclear facility began operating if they could present significant new information not previously considered by the NRC. But Kostmayer’s legislation should only be seen as a brief, interim measure, to be kept in place until Congress requires the rapid phase-out of nuclear power.
The conference also adopted a "Charter of the Indigenous-Tribal Peoples of the Tropical Forests."
The historic new alliance unites for the first time Indians from Amazonia, Central America and the southern cone of South America, "pygmies" from Africa, tribal peoples from India and Thailand, indigenous peoples from the Philippines , "Orang Asli" and Dayak peoples from Peninsular Malaysia and Borneo, indigenous peoples from Indonesia, as well as Melanesian peoples from New Guinea.
The new alliance is needed, say the forest-dwelling peoples, to confront those who are responsible for destroying their forests and undermining their livelihoods and who are already united and organized. A new unity among the peoples of the tropical forests is needed to ensure that their rights are respected in international policymaking regarding the rainforests.
The Charter, which sets out the alliance’s demands, goals and principles, advocates a new approach to development and conservation in the tropical forests based on securing the rights of the forests’ original inhabitants.
"There can be no rational or sustainable development of the forests and of our peoples until our fundamental rights as peoples are respected," the Charter declares.
The alliance demands respect for the human rights of forest-dwelling peoples and above all for their rights to determine their own ways of life and ways of organizing. The forest-dwelling peoples’ representatives at the conference called for an end to the violence, slavery, debt-peonage and land-grabbing which they endure and for the disbanding of the private armies and militias against them.
In place of large-scale development projects, logging and mining, the Charter advocates an alternative development approach involving small-scale community initiatives under the control of the people who live in the forest. The Charter condemns the damage caused by logging as "a crime against humanity" and calls for the suspension of logging concessions on indigenous territories.
The Charter also sets out in detail the common demand of all those in the alliance to the ownership of their traditional territories. The peoples insist that only once they have secure ownership and control of their territories can they be sure of a future and live in balance with their environment. The development they seek should be based on their traditional knowledge; should first meet their basic needs to ensure self-reliance and independence and only then should be oriented toward generating a surplus for the market, using suitable technologies.
Moreover, recognizing that "landlessness outside the forests puts heavy pressure on their territories and forests," the Charter calls for land reforms to secure the livelihoods of those who live outside the forests.
The new Charter also challenges the Western model of conservation, which entails designating areas as off limits to human beings.
Part of the five-page Charter declares that:
"Conservation programs must respect our rights to the use and ownership of the territories we depend on. No programs to conserve biodiversity should be promoted on our territories without our free and informed consent as expressed through our representative organizations.
"The best guarantee of the conservation of biodiversity is that those who promote it should uphold our rights to the use, administration, management and control of our territories. We assert that guardianship of the different ecosystems should be entrusted to us, indigenous peoples, given that we have inhabited them for thousands of years and our very survival depends on them."
Delegates at the meeting made clear that it is time that conservationists come up with policies that are more sensitive to the needs and rights of local peoples. Many of the indigenous delegates cited examples where national parks had extinguished their rights to resources and denied their right to self-determination. National park laws, they noted, often prohibit activities fundamental to the livelihoods of forest dwellers and thereby generate serious conflicts between indigenous peoples and park authorities.
The new alliance is led by a coordinating committee made up of seven indigenous organizations representing seven tropical forest regions - Central America, Amazonia, South America’s southern cone, Africa, Continental Asia, Malaysia-Indonesia and the Pacific. The alliance, which already brings together the legitimate representatives of several million forest dwellers, aims to involve other indigenous and tribal forest-dwelling groups whose representatives were unable to attend the meeting.
One of the first acts of the alliance was to denounce the uncontrolled logging in Sarawak and the continuing arrests and detention of the native people. In January, Ibans from Hachan and Kenyah from Belaga were arrested. Even while the conference was deliberating, news came through of a Kelabit being detained under the security laws and of heavy pressure being put on the Penan of Long Ajeng to halt their blockade of logging company roads.
The conference noted that some of the same logging companies operating in Sarawak are also involved in logging Indian lands in Amazonia. Among these is Samling Timber Sdn Bhd, which has just formed a consortium in Guyana to log 1.6 million hectares - equivalent in size to a quarter of the reserved forests of Sarawak.
Similar resolutions were also issued calling for an end to palm oil and colonization schemes on the island of Siberut in Indonesia, a recognition of indigenous peoples’ rights to their territories in Peninsular Malaysia, Panama , Nagaland, West Papua, Argentina , the Philippines and Thailand .
In mid-March, indigenous members from South America, Africa and Asia, representing the alliance, traveled to Holland, New York and Washington to present themselves to the international community. In Holland, they met with the Minister for Overseas Development, as well as members of the Dutch and European parliaments, before traveling on to New York to participate in a preparatory meeting for the United Nations Conference on the Environment and Development (UNCED), to be held this summer.
Ariel Araujo, a Mocovi Indian from Argentina whose organization was appointed by the Alliance to coordinate its interaction with the United Nations, says, "We are hoping that Maurice Strong, the Secretary General [of UNCED], can strengthen the commitment of UNCED to ensure effective indigenous participation both in the UNCED process itself and in its outcome. So far, we have not seen a real commitment by the UNCED to such participation. We are looking for real changes in the UNCED documents, and in particular the Agenda 21 [the environmental declaration of principles being formulated by UNCED], to ensure that indigenous peoples’ points of view are taken into account and their rights are respected."
- Marcus Colchester/World Rainforest Movement
Yankee Atomic halted power generation at Yankee Rowe in October 1991, two days before the U.S. Nuclear Regulatory Commission was planning to shut it down. The NRC had been prompted by a Union of Concerned Scientists’ petition which alleged that the reactor’s steel containment vessel had become brittle and could potentially rupture, leading to a massive radiation release.
Yankee Atomic said it closed the plant because the costs of undertaking tests to determine the reactor vessel’s safety were too great. "Yankee was faced with the prospect of spending more than $23 million in the next six months to complete very sophisticated testing and analysis on the plant’s reactor vessel," said Dr. Andrew Kadek, president and chief executive officer of the company. "The technical criteria we must meet and the path we must follow to restart the plant are not sufficiently defined to justify spending that amount of money."
Yankee went to great pains to attribute the shutdown decision to economic, not safety, concerns. "The decision to close the plant was not based on technical or safety issues," said Kadek. "It was based on the cost of restarting the plant and the availability of lower cost power."
But Robert Pollard, a nuclear safety engineer with the Union of Concerned Scientists, says safety and economic issues cannot be divorced. "Safety costs money," he says, and Yankee decided it could not afford to ensure the plant was safe.
The shutdown may have ramifications for the entire nuclear industry. Yankee Rowe’s 40-year operating license was due to expire at the end of the decade, and many in the industry had hoped that the NRC would extend the license, paving the way for the current generation of nuclear power plants to continue operating well into the next century.
Whether the Yankee Rowe closure will herald a wave of shutdowns as nuclear facilities grow older is uncertain, however. Pollard says he does not "know any other plant in as bad shape" as Yankee Rowe, but he notes that other facilities of the same type (pressurized-water reactors) "will have to confront embrittlement."
For local activists, the shutdown was a tremendous victory. Dale Macleod, of the Citizens Awareness Network, a Western Massachusetts anti-nuclear group, says that local organizing efforts against the plant likely contributed to Yankee’s decision to close the plant and that area residents are "obviously pleased" with the announcement. He says local activists plan to continue their work, seeking to publicize the damage Yankee Rowe has done to people’s health (he blames the plant for an "incredible incidence of birth defects and cancers" in the area) and to the environment.
But the main issue facing local activists and Yankee Atomic alike is what to do with the facility.
In announcing the plant’s closure, Yankee Atomic said it was preparing for "an orderly decommissioning of the facility."
Pollard believes there will be "no rapid decommissioning," however. He says it is not known precisely how to decommission a nuclear plant, and that there is no apparent source for the funds to undertake the effort, unless they are provided by taxpayers. Spent fuel and coolant water should be unloaded from the plant, he says, and then the plant should be guarded for 30 to 50 years while the plant’s radioactivity decays. Yankee Rowe is going to "be there for some period of time yet," Pollard asserts.
Macleod says he hopes Pollard is correct, but fears Yankee may "push hard on [the decommissioning] issue to set a standard" of immediate decommissioning for the nuclear industry. That would be "a crazy idea," he says, and far more unsafe than letting the plant’s radioactive material decay. Macleod promises local activists will strongly oppose any efforts to immediately dismantle Yankee Rowe.
All of the options for dealing with Yankee Rowe are "daunting," says Macleod. Even leaving the facility untouched or encapsulating it while its radioactivity breaks down - the safest option, according to anti-nuclear activists - is not safe, just less unsafe than the alternatives.
Thus the shutdown of Yankee Rowe highlights an unpleasant reality. Even if they are able to steer energy policy in new directions, citizens throughout the United States - and much of the world - will have to live for many years with many of the consequences of the fateful corporate and government decisions to embark on a nuclear energy course.
- Robert Weissman
by Julie Gozan
ON NOVEMBER 27, 1991, the California-based solar energy firm Luz International Limited announced that it had filed for bankruptcy. Luz, the employer of 1,800 people, designed, financed, constructed and operated the world’s nine largest Solar Electric Generating Systems (SEGS), which generated 95 percent of the world’s solar electricity.
The news of Luz’s failure dismayed many solar advocates, to whom Luz represented a successful merger of business interests and social responsibility. The Luz plants showed that solar thermal and other "alternative" energy sources can provide environmentally sound power. Since going into operation in 1984, Luz’s existing nine SEGS, when compared to an oil plant, have displaced 1.2 billion pounds of CO2 (the leading greenhouse gas) and 750,000 pounds of nitrogen oxides (which irritate lungs and promote smog) per year.
According to V. John White, executive director of California’s Coalition for Energy Efficiency and Renewable Technologies (CEERT), the founders of the Luz corporation were "very committed" to environmental objectives. "They were almost desperate for environmental considerations to become more important to the public," he says. "They were really almost visionary in that way."
The Luz bankruptcy may be a sign of the times for solar energy. The U.S. market for nonconventional energy opened in the 1970s, when government support for fuel alternatives helped nourish the development of alternative energy technologies. Renewable energy advocates sought to distribute clean power to homes and communities independent of the big energy companies and utility grids. But the Department of Energy (DOE) favored solar projects that were large-scale, high technology and compatible with utilities, and decentralizing solar technologies were underfunded and underdeveloped. Although Luz’s SEGS would probably have been greeted warmly by the DOE in the 1970s, the political climate had changed dramatically by the time of their start-up. The Reagan administration slashed research budgets for solar and ended any serious governmental commitment to developing alternative energies. The 1980s and 1990s have been a hostile period for solar development, with even those solar technologies that do not pose a threat to utilities’ control of energy distribution suffering.
The alternative energy obstacle course
Luz’s collapse reflects the abundance of political, financial and technological problems facing the solar energy industry in the 1990s. Mike Lotker, formerly the vice president of Luz International Limited, points out that, while the company’s management made "serious mistakes in managing growth and opportunities," it faced an an extraordinary number of difficulties. "A large number of barriers in the areas of taxation, regulation, policy and the marketplace itself resulted in a situation where Luz management had to perform flawlessly in order to succeed," he says.
One such barrier was the annual expiration of federal energy tax credits which provide tax reimbursements for investments in alternative energy projects. Luz, despite the size and significance of its projects, could not obtain access to long-term financing for relatively low-risk ventures, and was forced to operate like a small business. The corporation functioned on a yearly cycle of lobbying Congress to extend the tax credit, getting site approval from the California energy commission, raising capital from investors, and then building a plant before the year’s end, when the tax credit would run out.
In 1989, Luz was forced to complete this process within an even shorter period when the extension on the federal energy tax credit was cut to nine months. Luz was left with seven-and-a-half months to build a $280 million plant. Relying on overtime work and other crash measures, Luz suffered a $30 million cost overrun which swallowed two thirds of its remaining capital.
On November 27, 1991, the same day that Luz announced its bankruptcy, Congress passed HR 3909, a bill which extended a 10 percent tax credit on investments in solar and geothermal from December 31, 1991 to June 30, 1992. But the six-month extension was too little, too late. Investors had been scared off by the on-again, off-again nature of tax incentives for solar projects, and Luz lost its construction financing.
A second barrier which confronted Luz was the size limitations on solar plants imposed by the Public Utilities Regulatory Policies Act (PURPA). PURPA was initially seen as a boon to the renewable industry, because it required resistant utilities to purchase electricity generated by alternative energy sources. But in order to assure conventional fuel producers that solar and other alternative technologies would not take unfair advantage of the guaranteed market created by PURPA, lawmakers set a cap on the amount of energy that a solar plant could generate or sell. The size allotment, first set at 30 megawatts in the late 1970s, was eventually increased to 80 megawatts.
Luz, which had the capacity to build SEGS which would generate 200 megawatts, or enough energy to meet the electricity needs of 200,000 homes daily, was forced to build plants below this optimum usage and incurred losses during the 1980s that it was never able to recover. Luz had to "dump" solar energy rather than harness it so that the company’s production would remain within PURPA’s boundaries.
Furthermore, in contracting with California utilities, alternative energy producers were bound by California’s Energy Pricing Policy, which ties the price of renewable energy to the current price of natural gas or oil, whichever is cheaper. At the time of the Luz bankruptcy, improved technology had lowered the cost of generating solar energy to eight cents per kilowatt-hour, less than a third of its cost in 1984. Yet it still could not compete with gas and oil prices, which dropped steadily throughout the 1980s. In 1991, natural gas was at one fifth of its 1981 price, and, between 1981 and 1989, the price of oil plummeted from $40 a barrel to $18 a barrel, or five cents per kilowatt-hour. As natural gas and oil prices dropped, so did Luz’s revenues.
In order to compete with oil and gas, solar power must match the hidden government subsidies to conventional fuels. Oil and gas receive the equivalent of a 25 percent tax credit, according to alternative energy advocates. Among the subsidies are an immediate tax write-off for drilling costs and "percentage depletion" for the cost of the pipes, pumps and tanks to complete a well. These bonuses for conventional fuel "are so ingrained in the system that we don’t notice them, but they are already in the budget," says Chip Loeb, vice president of Chronar Solar Corporation in Princeton, New Jersey.
Nuclear power, which receives more than 70 percent of the Department of Energy’s funding outlays for technology-specific development, has a similar advantage over solar. According to Peter Grinspoon, an energy campaigner at Greenpeace, it costs almost 13 cents per kilowatt-hour to produce nuclear energy. At this high cost, nuclear energy would be completely priced out of the market; only numerous government subsidies - for waste management, disaster insurance, research and development - make it competitive.
An additional difficulty Luz encountered was the property tax assigned to solar companies, which unlike oil and gas producers, must build their facilities above ground. Former California Governor George Deukmejian is responsible for the veto of a property tax exemption for solar energy projects.
Faced with so many obstacles, Luz found that its solar thermal technology could not compete with fossil fuels and nuclear energy.
While Luz represents but one corporation in the renewable energy industry, its downfall could have a significant impact on the perceived marketability of solar energy. Alexander Ellis, vice president of marketing at U.S. Windpower in San Francisco, is "concerned about Luz’s collapse, in that it could affect the public’s view of renewables in general."
V. John White of CEERT contends the Luz bankruptcy will deter other companies from investing in solar. "The Luz bankruptcy has caused the elimination of the next 300 megawatts of solar," he says.
The 1970s: solar in the nuclear model
To those who have tracked solar energy’s precarious relationship with utilities and the federal government over the last 20 years, the fate of Luz is not surprising.
The origin of national policy interest in renewable energy can be traced to 1973, when a startling rise in oil prices quadrupled the price of oil to $12 a barrel. A similar increase in 1979 brought oil prices to nearly $40 a barrel. Long lines at gas stations, the burden of unprecedented inflation and concern about international trade relations made discussion of developing alternative energy sources unavoidable.
The Carter Administration added energy tax credits to investment tax credits and implemented PURPA. California offered the largest incentives for commercialization of alternative energy, and rapid development of cogeneration and small power production facilities ensued in the state. These policies were primarily motivated by concerns about energy security, not environmentalism.
During the late 1970s, the federal government and large energy corporations sought to keep the development of the solar industry under their control and away from small businesses which were trying to make inexpensive solar power widely available at the community level, according to Ray Reece, author of The Sun Betrayed: A Report on the Corporate Seizure of U.S. Solar Energy Development, published in 1979.
What Reece labeled the "corporate solar strategy" involved the creation of a solar industry in the image of fossil fuel and nuclear energy companies. Centralization was the key goal [see "Citizen Power vs. Big Business Energy"]. Reece argued that solar energy development in the 1970s was largely controlled by government agencies, universities, corporations and utilities that had direct financial and professional interests in creating and funding a successor to the aerospace program. Energy research shored up the defense establishment, as the "federal solar bureaucracy" funnelled millions of dollars to aerospace corporations, corporate think tanks and corporatized universities. Utilities sought to downplay the viability of solar power, but to the extent it was developed, they sought to promote the centralizing technologies which would plug into the grid system.
In 1975, two years after the OPEC boycott which drove up oil prices, Congress created the federal Energy Research and Development Administration (ERDA). ERDA, which later became part of the Department of Energy, solicited grant proposals for solar and other alternative energy projects, but it ignored the committed contingent of scientists, engineers and academics who had researched and developed simple solar systems for individual and community use in the 1960s and 1970s. Instead of funding the projects submitted by this largely counter-culture vanguard, ERDA mainly supported scientific research conducted at large universities or corporations. In 1976, ERDA spent $94 million on solar applications, but small businesses received only $6.7 million of that total. Given the government’s definition of a small business as a company with up to 1,000 employees, it is clear that community-based and smaller, non-profit organizations were not the recipients of ERDA’s largesse.
In 1977, Science magazine criticized large aerospace companies for "making solar after the nuclear model." It stated that the "massive engineering projects" undertaken by these companies "seem to have in mind the existing utility industry - rather than individuals or communities - as the ultimate consumer of solar equipment."
Solar and the precarious 1990s
The last decade has delivered the earlier prophecies of solar centralization. The Reagan and Bush administrations’ hostility to renewable energy development - the federal renewable research and development budget was slashed from $856.9 million in 1979 to less than a tenth that amount in 1990 - fostered insecurity among independent solar companies and intensified their dependence on utilities. Almost all independent solar companies are now oriented toward working with utilities.
What Reece called a multinational and government "conspiracy" to suppress energy decentralization by tying solar to utility grids is now unabashedly acknowledged by those in the existing renewable energy industries as a practical strategy for developing solar in the United States. Many solar thermal, photovoltaic, geothermal and wind companies promote utility involvement as the only way to create a domestic market for alternative energy.
Gilbert Durant, vice president of a photovoltaic company called Utility Power Group, explains, "There should be no fear of the utilities trying to take over technology from smaller companies: that’s what we’re trying to promote."
"We want the utilities to be good customers," says Mike Lotker, Luz’s former vice president and now director of utility business development at Siemens Solar Industries, Inc., a U.S. photovoltaics company that is 51 percent owned by the German Siemens Corporation and 49 percent owned by a German utility.
Alexander Ellis, vice president of marketing for U.S. Windpower, a California subsidiary of Kenetech Corporation , believes that renewables "will have to prove worthy of utility acceptance" if they are to succeed.
These companies are quick to chastise Luz for its expectation that solar technology should receive the same government support as fossil fuels and nuclear energy. James Brown, President of Solar Cells Inc., an Ohio-based company, says, "the greatest need for photovoltaics is a long-term commitment on the part of the utilities to purchase photovoltaic energy. That’s what we want, not tax credits."
Edward C. Schmidt, President and CEO of Alpha Solar Company, argues that although his own company does receive government subsidies, "a tax credit is a different matter. I’m amazed that Luz could expect that from the American public."
Direct utility involvement in solar is also increasing. California Edison announced in August 1991 that it will head up a "consortium" of utilities to open a $39 million solar plant in 1994, just over half of which will be financed by the federal Department of Energy. The planned facility, in Daggett, California, is located at the site of Luz’s former "Solar One" plant. Jeff Perlman, an Edison engineer with the solar project, believes that their "Solar Two" will be able to compete with conventional power plants "without the help of tax credits or other government support," the initial DOE $20 million notwithstanding.
According to Loeb, among independent solar companies which would like to maintain their independence, "there is a fear that the utilities will swallow them up, like the energy companies did in the eighties."
The future’s not so bright
The immediate prospects for solar are not bright, but the enormity of global warming and other environmental problems associated with fossil fuels and nuclear energy is so great that some public and private commitment to solar is almost assured. Several governmental programs, while not panaceas, could encourage some development of solar and other renewable energy forms.
o The California Public Utilities Commission (PUC), in response to pressure from alternative energy companies and environmentalists, claims that, by the summer of 1992, it will have implemented a new program that could even the score for renewable energy. Scott Thompson, the PUC’s senior engineer, describes a system in which the Commission will solicit bids from all energy producers. A distribution contract will be awarded through the utility to the bidder who offers energy at the lowest price.
What makes the plan different, according to Thompson, is that an energy plant will be granted a higher rate if it qualifies as a "clean power producer" once it wins the bid. "The small power producer can decide to bid lower than its actual cost, knowing that if it wins, it will then have a higher rate awarded to it," he says.
Tandy Manes, president of Luz Partnership Management, is not holding his breath. "I don’t believe that the PUC will increase rates on alternative energy." Andrew McCuen of SeaWest solar and wind company in San Diego says that his company would still be unable to compete with natural gas. "Even at the most optimistic, a renewable would get 15 percent for being a clean power producer. That might sound like a lot, but it’s not enough. It still doesn’t get us down to a nickel per kilowatt-hour."
o The Clean Air Act, which requires utilities to take the cost of pollution abatement into account when charging for electricity, has made the geothermal energy distributed by companies like California Energy more competitive. More comprehensive legislation will be needed, however, if alternative energy is going to be used to heat homes, and not solely for luxury extras like the photovoltaic-powered electric moon roof that is being developed for sports cars.
o Senator Thomas Daschle, D-South Dakota, chair of the Senate’s energy and agriculture subcommittee, has proposed a bill, the Renewable Energy and Energy Conservation Act, which would provide a renewable energy production tax credit for solar, wind, geothermal and biomass energy and increase investment credits to 20 percent with an extension of five years.
According to Wit Fosburgh, legislative assistant for Daschle, the bill would give "more room for creativity" to the solar industry, which has "been on the ropes since the mid-eighties when Reagan killed the tax credits."
Loeb agrees, but is skeptical about the bill’s chances for passage. "I can’t see that such an unsupportive administration, in the middle of a budget crisis, would now change its policies so dramatically. But I certainly have my fingers crossed."
As does Siemens’ Mike Lotker. "The lack of this legislation is what caused the Luz bankruptcy. It is absolutely necessary if we are to have a level playing field with fossil and nuclear, if we are to have a long term policy. You won’t see any more Luz-type projects if a bill like that is not passed."
o The most effective way to stimulate the solar market, according to Dr. Barry Commoner, director of the Center for the Biology of Natural Systems at Queens College of the City University of New York, might be through targeted government purchasing. If the federal government replaced the $120 million of dry cell batteries that it purchases annually with a photovoltaic system, it would double the capacity of the solar industry. This would allow companies to reduce the price of photovoltaics by one third, making them more accessible to the public, Commoner says. The same model could be used for all applications of renewable energy technologies, increasing cost effectiveness and environmental benefits.
However, unless major changes take place in the renewable industry - through a progressive government purchasing program that encourages the growth of independent companies and investment in decentralizing technologies, for example - the solar industry is likely to be dominated by utilities and solar energy is likely to be distributed through centralized utility grids. Although many environmental benefits might be retained even if solar is distributed in this manner, the hope for community empowerment that would be realized with energy decentralization will be lost. The technology will remain under the control of utilities, alongside conventional fuel and nuclear power. Consumers will not be able to direct technology towards minimum waste of resources, minimum damage to the ecosystem, maximum stimulation of employment opportunities and improved public health.
"THEY CAN’T PUT A METER ON THE SUN." This catchphrase of the alternative energy movement of the 1970s captured the hope of activists that alternative energy technologies could break big business’s stronghold over the energy supply.
Virtually all conventional energy systems are regional, national or global in scale; a consumer has little choice but to buy electricity from a utility monopoly or gasoline from the oil oligopoly. The alternative energy movement in the 1970s envisioned alternative energy systems being implemented on a smaller scale, giving citizens direct control over energy production. Today that vision has largely been lost; while retaining its environmental concerns, the mainstream of the alternative energy movement has virtually abandoned its community empowerment agenda.
Despite being relegated to the back burner by both government and industry, small-scale technologies are viable and continue to develop. Small-scale technologies are geared to households, communities and small businesses. They are often owned by the consumers of the energy they produce. Alternative technologies that are appropriate for small-scale use include:
o Passive solar technologies. These technologies may be as old as buildings. They include catching the heat of the sun, sheltering, shading, heat storage, daylighting and other methods that reduce the need to supply energy to a building. Combinations of old and new passive solar technologies can drastically reduce a building’s energy needs.
o Windmills. They have been used for centuries to pump water. More recently, windmills have been used to provide electricity for households or small groups of households.
o Solar thermal technologies. On the small-scale level, this means using the heat of the sun to heat or cool a building or to heat water. Such direct thermal technologies tend to be far more efficient than using electricity for heating and cooling.
o Photovoltaics. These can be installed on rooftops and in yards. They convert sunlight directly to energy.
o Methane. Technologies exist to convert almost any kind of biomass, including sewage and many other kinds of waste, to methane - the primary constituent of natural gas. Renewably generated methane could be burned in small cogenerators, providing heating or cooling as well and electricity. Methane also has the advantage of being easy to store.
In many cases, these technologies can be used effectively in combination, to make a complete system. Many current small-scale systems use natural gas for emergency backup. As renewable use increases, it should be possible to replace the natural gas with renewably generated methane.
Another advantage of small-scale energy systems is that they can be used for cogeneration. When electricity is produced, about two thirds of the energy input is converted to "waste" heat. In a large power plant, this heat is indeed wasted. Cogeneration technologies, however, put this heat to use. In small-scale systems, electricity is generated near the consumer, which means that excess heat can be used profitably. Virtually any small-scale electric generating system can be used for heating, and in many cases for cooling. Cogeneration greatly increases the overall efficiency of the generating process.
Renewable technologies promoted by the U.S. government and by big business have mostly been large-scale projects, not easily adaptable to community control. Luz International provides an example; its large collectors feed power into a utility grid many miles away from most of its end-users. Other examples include large hydroelectric dams, "farms" of huge windmills designed to feed into electric utility grids and massive geothermal projects which tap the heat deep beneath the earth. Such projects provide greater energy security than conventional energy sources, but they do little to assist community empowerment or self-reliance.
And while large-scale renewable energy projects are environmentally safer than conventional sources, they frequently are environmentally damaging in their own right. Stories of damage done by large dams now come from every corner of the globe. Huge wind farms in California have killed large numbers of birds, including federally protected hawks and eagles; Montana residents are now bracing for a fight to prevent or limit windpower development in their state. Critics say that huge solar projects envisioned by large-scale solar advocates will dramatically alter fragile ecosystems. And on the island of Hawaii, indigenous people recently won a bitter fight against a proposed massive geothermal project which they said would have severely damaged their culture as well as the ecology of the island.
- Jonathan Dushoff
NOTWITHSTANDING THE COLLAPSE of Luz, a number of solar companies have achieved
some financial success, particularly in the field of photovoltaics, which involves the direct
conversion of sunlight into electricity without the need of turbines or generators used by
solar thermal facilities.
Research on applications of photovoltaics, which have shown potential use for aerospace technology, has been more warmly received - and subsidized - than other renewables. Despite U.S. Agency for International Development and multilateral lending agencies’ promotion of fossil fuels and large-scale electrical systems in developing nations, photovoltaic electricity has found a tremendous market in the Third World, in part because of its compatibility with existing power grids. According to Peter Cowles, director of the Solar Energy Industries Association, the national trade organization of the photovoltaics and solar thermal manufacturers and component suppliers, "the U.S. photovoltaics industry sells over $300 million worth of solar technology, half of which is exported to the Third World."
Unfortunately, U.S. corporate control of solar technology exports does not encourage autonomous solar development projects within the countries that receive aid which requires them to purchase goods from U.S. producers. However, Third World access to solar resources is a positive change from the energy projects typically promoted by the lending agencies, including the building of tremendous dams.
Masat Izu, vice president of film technology at the Michigan-based Energy Conversion Devices Inc., says his company is optimistic about the "interest of the government and international funding agencies such as the World Bank" in photovoltaic technology. Energy Conversion Devices has covered all its bases, however, maintaining a contractual partnership with Pacific Gas and Electric and other utilities.
by Olivier de Marcellus
GENEVA, SWITZERLAND - The chances have never been better than they are now of permanently shutting down France’s Superphoenix fastbreeder at Malville on the Rhone River. The fastbreeder has been stopped for nearly two years following a series of accidents; in order to reopen, it must get approval from the Direction de la Sureté des Installations Nucléaires (DSIN, the French government’s reactor safety agency) and from the country’s prime minister before July 3.
Forcing the closure of Superphoenix would be a major victory for anti-nuclear forces opposed to the French all-nuclear energy program. Superphoenix is not just a single nuclear plant; it is also the trump card in the French nuclear establishment’s international strategy and a key element in the industry’s plans to perpetuate itself. With Superphoenix, the French are front-runners in the field of fastbreeders (which theoretically "breed" more fuel than they use), and fastbreeders are the nuclear industry’s only hope of prolonging world uranium resources for more than one or two generations. (All pro-nuclear scenarios, such as U.S. President George Bush’s recent plan, call for a shift to fastbreeders toward the middle of the next century.) Shutting down Superphoenix, following the closing of the German fastbreeder at Kalkar, would be a major political and technical step toward abandoning nuclear power altogether, in France and worldwide. This helps explain why France’s state power company, Elecricité de France (EDF), is defending Superphoenix, despite its record-breaking history of breakdowns - it has operated at full power for less than six months of its six-year existence - and its great cost - the bill is over $9 billion for a site that is still not finished or in working condition. Including fuel reprocessing costs would push the bill even higher.
It does not appear likely that Superphoenix will win the necessary approvals. The DSIN has stated that, before authorizing a startup for Superphoenix, it wants to understand the mysterious and potentially dangerous variations in reactivity that have been plaguing Phoenix (Superphoenix’s predecessor) for the past two years. And despite heavy pressure from the nuclear lobby, the government is loath to override safety considerations for an increasingly controversial project. Concern with environmental issues and nuclear energy in particular is rapidly rising in France, evidenced most recently by the nearly 15 percent of the vote won by green parties in the country’s March regional elections.
If the DSIN and the prime minister do not endorse Superphoenix, it will have to go through the long relicensing process, which includes public hearings, and that would probably finish off the project.
Didier Anger, national spokesperson for the French Green Party, says that unofficial ministry sources estimate that there are "three chances out of four" that the French government will at last abandon this very expensive, unsuccessful and unpopular project.
A formidable monopolistic machine
The French nuclear program is the most extreme example of the quasi-military style of centralized administration the French state inherited from the monarchy and Napoleon. There is no place for separation of powers, democratic process or independent watchdogs in the French system.
France’s nuclear program (civil and military) was developed by an elite government bureaucracy, the Atomic Energy Commission (CEA), acting on executive orders issued without any parliamentary involvement. EDF maintains a monopoly over all electric and gas power. Plant safety is controlled by the Ministry of Industry, but it relies on experts from the CEA. Until the Chernobyl accident, monitoring of radioactivity was the responsibility of another bureaucracy, which is so pro-nuclear that it denied the presence of the Chernobyl cloud over France. The CEA, rather than the universities, even provides training in nuclear engineering, which helps minimize the number of nuclear engineers who might be critical of the industry.
The French government undertook a dramatic expansion of the country’s civilian nuclear program after the 1973 oil shock, provoking widespread opposition. But the government crushed the grassroots movement. In 1977, the police brutally dispersed a march of 60,000 protesters at the Superphoenix site, killing one person and wounding 100 others. In 1981, the Socialist Party came to power with a promise - quickly betrayed - to close Superphoenix and open a debate on nuclear power. The extra-parliamentary opposition was co-opted or disheartened. Some turned to sabotaging power lines, others continued organizing, but the pro-nuclear consensus between the major parties pushed the whole nuclear question out of the political arena, and, until the 1986 Chernobyl disaster, most newspapers refused to publish any critical commentary on nuclear power.
An invisible cloud
The first cloud in the nuclear industry’s sky came from Chernobyl. Many journalists relayed assurances from a pro-nuclear profesor that there was "no significant increase in radioactivity" over France and "no reason to take preventative measures," only to discover that all neighboring countries were destroying large stocks of vegetable and dairy products and refusing entry to French products. The scandal sparked the creation of France’s first independent lab monitoring radioactivity, the CRIIRAD, which has since discovered several significant hazards (notably an unguarded, plutonium-contaminated nuclear waste dump - where children were playing - left by the CEA at St. Aubin, near Paris).
The spell was broken. Despite the media blackout, small anti-nuclear grassroots organizations began to reemerge, and public opinion turned steadily against the industry.
The nuclear industry suffered another black eye in the late 1980s, as it searched for nuclear waste dump sites. At three of four potential sites, farmers, environmentalists and local notables (concerned about the bad publicity that a dump would give to their area and its products), joined together to rout all police efforts to open worksites for preliminary construction surveys. As many as 15,000 protesters occupied sites, invaded offices and seized equipment. Attacked with tear gas, farmers fought back with tractors spraying pig manure. In 1990, then-Prime Minister Michel Rocard was forced to announce a one-year moratorium on new waste dumps and to organize, in June 1991, the country’s first real parliamentary debate on a nuclear issue.
A chance in a million, or five percent?
In February 1990, public confidence in the safety of the reactors themselves took a serious blow. Environmentalists leaked an alarming secret report, written by EDF safety chief Pierre Tanguy, to the press. The report discussed serious premature aging problems and three important design defects common to the whole series of 1500-megawatt pressurized water reactors (PWRs). Because EDF has standardized reactors in order to cut costs, these defects would normally imply immediate and costly retrofits in all of the French nuclear reactors of this type, causing lost production time all across the country. But with 70 percent of France’s electricity produced by nuclear plants, it is impossible to stop all the defective plants at once, and defective reactors have continued to operate.
Worst of all, a re-evaluation of accident probabilities in light of operating experiences showed that the risk of a serious accident was at least 20,000 times higher than what had been previously estimated. After Chernobyl, EDF abandoned its earlier claims that a breach of confinement would be "impossible," but Tanguy’s public estimate of the risk of a serious accident was on the order of one in a million. In the secret report, however, Tanguy concluded, "the probability of seeing such an accident [requiring, at a minimum, off-site restrictions on drinking water and foodstuffs] on one of our reactors during the next 10 years may be several percent." (The figures Tanguy cites add up to 5 percent.)
It seems that the likely political fallout of a potential accident scares EDF more than the health hazard itself. Tanguy expressed concern that an accident would provoke "very strong pressure to immediately stop all the reactors of the same type, if not all the nuclear reactors."
Tanguy also described the risk of accident as an important financial issue. EDF claims to produce very cheap nuclear electricity, and often sells it below cost. (EDF says it costs between 4 U.S. cents a kilowatt-hour for base production and 12 cents for peak production, but it also sells to Pechiney Aluminum for 1 cent and less.) This "dumping" has led the company to run up a debt of approximately $37 billion, an amount equivalent to one-and-a-half times its total sales - and Poland’s entire foreign debt. In fact, EDF would be bankrupt were it not for the French state’s guarantee, which also holds down interest rates. Tanguy is worried that the first serious accident would pull the financial rug from under EDF’s feet: "The financiers know that it is the nuclear character of our production, and not our intrinsic value as an enterprise, that assures us a good position on the financial markets. And it is very clear for them that an incident in a nuclear plant would jeopardize this position."
Tanguy’s fears are justified. He refers to and confirms the gravity of several close calls:
o When an electrical breakdown in 1984 left a reactor at Bugey, on the Rhone, without any power to operate safety equipment and systems, the operators turned to a diesel generator that failed to work. Luckily, the second (and last) generator started up. An EDF technician commented, "Lucky that the weather was warm, [because] in winter those diesels often don’t light up at all."
o At the St. Laurent des Eaux plant, a cold snap froze the water from the river used to cool the plant. The army arrived just in time to break up the ice with dynamite.
o At Vandellos, in Spain, a French-designed Graphile-gas reactor suffered a major fire in 1989. Putting it out, the firemen also short-circuited the electrical controls in what the International Atomic Energy Agency called "the worst nuclear accident since Chernobyl." Spanish authorities minimized the "incident," but scrapped the reactor.
Superphoenix - stillbirth of a fastbreeder
The two French fastbreeders, Phoenix and Superphoenix, were named for the mythical bird, perpetually reborn from its own ashes, because theoretically fastbreeders prepare their own fuel. Functioning on plutonium, they can at the same time transmute non-fissile uranium 238 into plutonium - thereby enormously multiplying the world’s (and particularly France’s) modest nuclear fuel reserves. When President Carter stopped the U.S. program, the French saw a chance to be the frontrunner in a strategic race. Fastbreeders are also an abundant source of military-grade plutonium, which is highly valued by a French military that hopes to become the nucleus of a European nuclear strike force. The technicians’ alchemical dream thus blended with state ambitions to blind the authorities to the incredible costs and risks of the plutonium fuel cycle.
Economically, the Superphoenix has been a major disaster. The reactor itself has already cost $9 billion, six times its initial price tag, and it is not finished or in working condition. EDF claims that the reactor will eventually produce electricity for only about twice the cost of standard PWRs, but it admits now that commercial models won’t be viable until the middle of the next century.
Even that price estimate is misleading, however, since it does not take into account the costs of the whole fuel cycle, in particular reprocessing. Economist Dominique Finon of the University of Grenoble conducted an extensive independent analysis of the plutonium fuel cycle. He concluded that reprocessing costs roughly 10 times more than stocking used fuel without reprocessing. In fact, Finon says that "it would probably cost less to extract uranium from seawater" than it does to reprocess it.
The dangers of fastbreeders are so great that many otherwise pro-nuclear physicists oppose them. Superphoenix houses more than 6 tons of plutonium, a human- made element that is perhaps the most toxic substance in existence. It loses only half of its radioactivity in 24,000 years, and inhaling as little as a millionth of a gram can cause cancer. CRIIRAD has already detected traces of plutonium from the reactor in the Rhone River. Fastbreeder reactors are also the only reactors in which there can actually be an atomic explosion. An study conducted by Professor Jochen Benecke of Berlin University concluded that "it is impossible to affirm scientifically that the quantity of energy released would be less than the resistance of the confinement." He concludes that "a brutal rupture of the confinement, having as a consequence a catastrophic liberation of radioactivity, cannot be excluded."
These dangers are inherent in Superphoenix’s design, and were known before construction started. The actual experience with Superphoenix has added a long list of breakdowns to the list of dangers, and demonstrated that the reality of fastbreeding is considerably less elegant than the idea. An incredible series of "impossible" accidents have occurred, two of which had been allotted an official probability of occurring "not more than once in 10,000 to 100,000 years." The accidents included: sodium leakage and destruction of the fuel transfer and storage drum (leaving the reactor incapable of evacuating or storing damaged fuel rods); the fall of a crane weighing several tons on the dome of the reactor; a sodium leak in the secondary circuit; cracks in the reactor vessel; and collapse of the roof (under a heavy load of snow!) onto one of the turbo-alternators, cutting off the plant from the electricity grid.
Understandably, the DSIN safety authorities have become unusually and publicly critical. Last summer, after the belated discovery of the problem in the secondary circuit, the DSIN director stated, "There is a question as to the operator’s control of the reactor." DSIN is demanding that three problems be resolved before it will authorize a new startup.
Among the DSIN’s demands is an explanation for why the Phoenix reactor has experienced sudden drops in reactivity. They were first attributed to a bubble of argon leaked into the reactor core, leading the CEA itself to admit that "a nuclear excursion [a euphemism for an explosion] ... is theoretically possible." It contended, however, that "the bubble would have had to be much more voluminous" for an explosion to have occurred. The incidents occurred again, however, just a few months after argon filters were changed on Phoenix and Superphoenix. The new hypothesis (deformation of the fuel rods) remains unproven, but also has serious safety implications. Yet EDF’s Tanguy dismisses their importance. "The incidents didn’t occur on Superphoenix," he says, "and I don’t see why they would."
A burned-out bird?
Despite the media blackout in France, opposition to Superphoenix, long based in Switzerland (Geneva is only 45 miles away), has gradually grown. A recent poll in the Isere (the area where Superphoenix is located) indicated that 69 percent of the population believed that building Superphoenix had "been a mistaken decision" and that 78 percent thought the Superphoenix might become "a second Chernobyl."
On February 20, 1992, the European Committees Against Fastbreeding and Reprocessing, together with the French Greens and the Swiss Socialist Party, issued an open letter, signed by over 300 European elected officials, to the French Prime Minister Edith Cresson, calling on her to close the plant permanently. For the first time in 10 years, an initiative critical of the project was reported on television. The opposing groups are also asking that information submitted to the DSIN be made available to independent experts. Already, the ministers of Industry and Environment have stated publicly that they are in favor of closing Superphoenix. Even its strongest defenders now realize that the French nuclear program is going to be subjected to much more public debate and scrutiny than ever before.
THE FASTBREEDER LOBBY is in trouble, facing difficulties throughout the world.
Germany’s Kalkar is abandoned. The British prototype at Dounreay may not be re-funded
after 1994. It was shut down in June 1991 and repair is proving very expensive. The
Scottish nuclear industry has abandoned reprocessing as too expensive. In Japan, the
Monju prototype, scheduled to start operation at the end of the year, has run into
problems with the primary and secondary coolant circuits, and has difficulty producing
fuel pellets that meet safety standards. (Substandard pellets can swell and crack fuel
cladding, leading to radioactive leakage.)
With national programs stalled, the fastbreeder lobby has reacted by trying to organize international cooperation, particularly around the European Fast Breeder project.
But the opposition is also beginning to organize at the global level.
The Japanese Citizen’s Nuclear Information Center attracted worldwide international attention by sponsoring an international conference denouncing the ecological dangers and military interests behind the Japanese program.
The European Committees Against Fastbreeding and Reprocessing is trying to expand its campaign against Superphoenix to include action against the French CEA’s involvement in a scandalous fastbreeder project near Chelyabinsk in the Urals. It would be built in a reprocessing complex that has already emitted massive amounts of radiation. Radioactivity of cow manure in the area is up to 800 times background levels. French nuclear specialists, however, apparently have no qualms about working with their Russian colleagues who have created (and kept secret) this incredible situation. Local authorities and activists are organizing an international conference in Chelyabinsk in May, in collaboration with the Russian Academy of Natural Sciences. The opposition is calling for plutonium fuel reprocessing to be outlawed.
-Olivier de Marcellus
An interview with Dr. Michael Canes
DR. MICHAEL E. CANES IS VICE PRESIDENT OF STATISTICS, ANALYSIS AND INFORMATION SYSTEMS AT THE AMERICAN PETROLEUM INSTITUTE (API), THE TRADE ASSOCIATION OF THE U.S. PETROLEUM INDUSTRY. HE HOLDS A PH.D. IN ECONOMICS FROM THE UNIVERSITY OF CALIFORNIA AT LOS ANGELES, AN M.S. DEGREE FROM THE LONDON SCHOOL OF ECONOMICS AND AN M.B.A. FROM THE UNIVERSITY OF CHICAGO. HIS TECHNICAL PUBLICATIONS AND ARTICLES HAVE APPEARED IN THE AMERICAN ECONOMIC REVIEW, THE MIDDLE EAST REVIEW AND MANY OTHER JOURNALS.
Multinational Monitor: What do you believe is the connection between burning fossil fuels and the greenhouse effect?
Michael Canes: Different fossil fuels have different impacts on global warming. The main fuels produced by our industry, oil and gas, fall somewhere in the middle to the lower end of fossil fuel impacts, relative to coal. And our belief is that natural gas, at least as it is utilized in the United States, would probably be better than some other alternatives.
Our general position on global warming is that there is a lot left to be done to try to understand what is happening and what likely will happen, that the models that have been constructed are not complete.
We support basically the policies that the United States has been following of doing a lot of things that are economically sensible that will help [offset] global warming, but not just because of global warming.
MM: How do you think the U.S. government should respond to the greenhouse problem?
Canes: Our industry would say put a lot of money into finding out a lot more about this. Obviously the potential impacts here are very great, but the vacuums in knowledge are also very great. It is not correct to say that we know already what is going to happen. We must act to get information quickly. We may one day have to take a lot of actions here, if the research indicates such actions are warranted. But we are not persuaded of that, because the models that are relied on to forecast global warming in the next century have proven to be inaccurate in predicting what has happened to date. And that shakes one’s confidence that we really have much understanding now. You know, there are things like cloud cover and the effects of the oceans that must be accounted for, and then there is the actual temperature change over the past century or so relative to what the climate models would predict. These are not things that I am an expert on, but I understand enough about them to know that the theory is incomplete and predictions to date quite inaccurate.
MM: What level of certainty do you think needs to be achieved before major programs to limit emissions are undertaken?
Canes: It is a question of how much action to take. As I said, we agree with U.S. policy: let’s do the things that reduce greenhouse gases that are sensible to do anyway.
Along those lines, steps should be taken not just in the United States, but in other countries as well. Eastern European countries have been burning soft brown coal for years, pretty much without restraint. There may be much more efficient ways to deliver energy services in some of those countries and at the same time to curtail emissions.
In terms of taking very active measures in the United States, such as large carbon taxes and things like that, the experience from the last 20 years or so teaches us that that would be very costly.
We have examined data from this period on what happens when effectively you are forced to use less energy by much higher prices. That is, higher prices for energy have induced less energy use, particularly in the early 1980s and late 1970s. We have looked at the growth rates of the U.S., Western European and Japanese economies to see what impact those energy price increases had on growth rates. The fact of the matter is that the U.S. growth rate from 1973 to 1986 declined by something like seven-tenths of a percent per year from the growth rate over the previous 13 years. Growth went from just over 3 percent a year in the United States to about 2.5 percent a year. Similar phenomena occurred in Europe and in Japan . The growth rate slowed in every country after energy prices rose. It is not all due to that one factor, but nevertheless, it was an important contributor.
So, putting a higher price on carbon, which means putting a higher price on energy, likely will have some impact on economic growth. Therefore, you want to be quite sure that you know the extent of the problem before you take measures like that.
MM: The criterion "be sure you know the extent of the problem" is a very difficult one to pin down. What level of certainty do you think it would take to justify dramatic action?
Canes: Well, perhaps that is a matter of judgment that individuals might differ on, but it would seem that you would want the climate models to be able to predict much better than they have to date. Again, the models and predictions they have made up to date have been basically falsified by the evidence of the past 50 years. The patterns do not accord with what those models have predicted. So one would like to see a little more confidence that our understanding, as reflected in the way we construct these models, can account for what is being observed. And of course I mean more than just saying emissions are occurring and therefore there will be heating, which is largely what the predictions have been. So far, that does not accord well with what has been happening.
MM: There is an emerging consensus among climatologists that global warming is likely to occur, or is occurring. Given the severity of the consequences, doesn’t it make sense to take steps now, rather than to wait, when it might be too late?
Canes: Is it really true that climatologists have generally reached a consensus on this? I have read a fair amount of commentary on this, and it turns out there are significant numbers of physicists and other people who have knowledge in this area who basically say what I am saying: that is, we don’t have very much knowledge yet about this. They may differ in their judgments about whether we ought to be more prudent or less prudent. Sometimes it comes down to their estimates of the costs of actions. But I would assert that most climatologists would say there is very significant uncertainty here. Very few would say we know, with a great deal of confidence, what is going to happen.
MM: But even with a level of uncertainty, given the growing belief that global warming is likely to happen and the massive consequences if it does, doesn’t it make sense to err on the side of caution? The ozone situation seems to offer a useful parallel. For many years, industry said there was not sufficient evidence to act on the ozone depletion problem. Now we are going to feel the consequences for not having acted earlier.
Canes: It is not the industry so much that is saying there is uncertainty [about global warming] - industry spokesmen may say that, but they are not the ones who are studying this question. They are basically citing the work of other people, including academics, government scientists and others in the scientific world.
MM: What steps do you think are appropriate, by the government or the private sector, to improve energy efficiency?
Canes: Many of our companies have subscribed to the Environmental Protection Agency’s Green Lights program, in which they are trying to find more efficient ways to light their facilities. There have been attempts in refineries to become more energy efficient. A lot of this was induced by higher prices back in the 1970s; over a period of 15 or 16 years, we measured an improvement of close to 30 percent in energy per unit of output. So actions have been taken and are being undertaken.
Many of our companies feel that government programs to expedite the turnover of the automobile fleet would help energy efficiency in the transportation area, since older cars are less fuel efficient.
MM: Does API have a position on automobile fuel efficiency (CAFE) standards?
Canes: The position of the Institute has been that we are open on the question, but we would not accept a diminution of safety.
MM: How important is opening of the Alaska National Wildlife Refuge (ANWR) to the oil industry?
Canes: It is enormously important. From our perspective, there are enormous gains this country can make through opening ANWR if in fact oil is found there. These gains range from an impetus to national growth to jobs that would be created in Alaska and elsewhere to energy security benefits to positive effects on the U.S. balance of trade. The prospective magnitude of such gains compares favorably with those from Prudhoe Bay. We believe the magnitude of these gains is overwhelming relative to the environmental impact we are likely to have in ANWR.
With regard to such impacts, first of all, we would defend our record in Prudhoe Bay. Second, oil drilling technology has advanced from the early days at Prudhoe Bay. We now use a much smaller area to drill for and extract oil. So we think the environmental impact in ANWR would be small. For that reason, our view is that it is extremely important that the public be persuaded that ANWR should be opened. If we are unable to seek new oil supplies there, where in our view the potential gains are extremely large relative to the potential costs, it is going to be very difficult to open up any new area.
MM: Many Alaskan indigenous people have expressed opposition to the development of ANWR, which they say could devastate their way of living. How does the oil industry stand on this issue?
Canes: I am not expert on all the feelings of the Native peoples of Alaska, but my understanding is that there is something of a split there. Some of the Natives have supported the opening of ANWR and a particular group, the Gwich’in, have opposed it. But, during the debate over ANWR, a memo came to light that had been produced within the Gwich’in community that said they were willing to lease their own lands for oil exploration at an earlier date, but that they had not been able to find a taker. This certainly suggests that economic interest may have played a role in their position.
MM: Does API have a position on the proposed U.S.-Mexico free trade agreement?
Canes: Yes, we are supportive of the agreement. We are free trade-oriented and support free trade in a number of different contexts. We supported the American-Canada free trade agreement, and we support this one.
We argue that energy ought to be on the table, just like any other area. We would like to see investment in energy resources in Mexico as one of the items that is under discussion. We understand the constraints; there were similar kinds of constraints in Canada, when that free trade agreement was arranged. Experience has suggested that over time the Canadians have become more relaxed about foreign investment in energy resources, and we would hope that the Mexican experience would be similar to that.
MM: Do you anticipate Mexico will agree to allow foreign investment in oil?
Canes: That is another area I know a little about, but not a lot. My understanding is that the Mexican constitution forbids the sale or lease of oil resources to foreign entities. One of the questions has been, given that constraint, are there other kinds of contractual arrangements that can be made that would allow American investment to take place in Mexico without literally owning the Mexican oil? These might include profit- sharing or arrangements under which returns to investors would depend upon the extent of any finds, even though ownership would remain vested in a Mexican entity.
Separately, on a slightly different front, the Mexicans have been relaxing restraints on foreign investment in the petrochemical industry. And so even while investment in crude oil resources has remained tightly constrained - and may continue to be for a while - it may be possible to relax the restraints in some of the other parts of the industry.
Our view, and perhaps even the view in Mexico as well, is that they have a very powerful interest in developing their natural resources. They are trying hard to industrialize and create wealth for their people, and the development of an energy base is very crucial to that. If that is so, being able to secure investment capital from the United States is going to help their development.
MM: Do you anticipate merger-and-acquisition action in the oil industry continuing on the scale of the 1980s?
Canes: Of course I don’t know the answer, but right now the trends are that there will be further mergers. Our experience has been that when an industry expands, you see a lot of new entry and new firms. When an industry is in a contraction phase, you see the opposite. That is when you tend to see merger activity go on because you suddenly have excess capacity relative to demand. And this is a contracting industry at this time.
We are contracting in the upstream. Production is falling, there is a drop-off in investment and the drilling rate is very low, probably the lowest since World War II. So there is consolidation going on among producing and exploring firms, and also in the firms that supply equipment to the exploring and producing industry.
We are also seeing contraction in refining and in distribution. We are seeing refineries closed, unable to compete because of a lot of new requirements for investment in environmental protection. And so we are seeing consolidation there, too.
MM: How do you think consolidation affects the industry, both from the producer and consumer perspectives?
Canes: It is a question of what is causing it to happen. If it is that costs are such that you simply can’t support the previous number of firms, then, from an industry perspective it is absolutely necessary. The only real options are that firms can go out of business, with their assets on the auction block, or they transition over a longer period to some much reduced state. One way or another assets are going to be taken out. It is a just of question of what process is going to do it.
From a consumer perspective, having less petroleum produced in the United States means that we are going to put increased demands on the world market. All experience teaches that America is one of the big players in the world market. If we demand more from the world market, we use more of the available capacity, and ultimately it puts everyone at a higher risk of disruption and higher prices.
With regard to refining and other processing or distributing facilities, one very important trend in our society has been to demand more environmental protection. But whether it is reformulated fuels or more protections from refinery emissions, we are in effect mandating higher costs per refinery. So, we will pay a price to secure what we want. The question is whether we are going to get socially worthwhile environmental improvements. Surely we will get some reductions in emissions, but are they going to be worth it for the prices we are going to have to pay? We are estimating that the first phase of reformulated gasoline that the EPA is requiring will raise costs several cents a gallon - maybe five to ten cents a gallon, something like that. And a possible second phase, as it may shape up based on recent developments in California, would raise costs 15 to 20 cents a gallon, something like that. So costs are going to rise, consumers are going to pay more, but in return they will get cleaner air. Let’s hope the gains justify the costs.
MM: The Oil, Chemical and Atomic Workers union argues that petrochemical companies’ increased debt loads, brought on by merger-and-acquisition activity, has caused cutbacks in safety expenditures, which in turn has led to a series of petrochemical plant explosions. Do you think that is the case?
Canes: From what I know about it, I don’t think so, no. Any time you are dealing with energy facilities, you always have the potential for accidents because energy is explosive by its very nature.
But the data we have, which cover refineries, show no such trends with regard to accidents and deaths. At most they show a kind of a leveling. We are unable, over the last several years, to find any trend of increasing accident or mortality rates, even though refining has been subject to many of the same forces as petrochemicals.
From one perspective you could say we are not achieving the kinds of gains we would like in cutting down facility-related accidents and so on. On the other hand, there is no trend upward either.
So, from the data we have, I would simply dispute the charge that things have gotten a lot less safe. There is no evidence of that.
IN NIAGARA FALLS, NEW YORK, the New York Power Authority (NYPA) sells the cheapest electricity in the United States to the area’s major industrial employers. In the last 13 years, NYPA has awarded more than $2.1 billion in economic development power grants to Niagara companies. The 10 companies which have been granted two thirds of this low-cost power are receiving an average subsidy of $22,580 per worker per year.
Niagara Falls has been losing jobs as plants close down, relocate to other countries to exploit cheap labor or are bought out and consolidated. Members of the Oil, Chemical and Atomic Workers union (OCAW) and other Niagara Falls workers says the area’s natural resources are being squandered. They challenge the way the cheap energy is being allocated, saying much of it is currently used by plants in "sunset industries" which will soon close their doors or by corporations which concentrate their electricity-intensive operations in the Niagara area but locate other work elsewhere.
The powerful and the powerless
NYPA operates the Robert Moses and Lewiston hydro-power stations which are downriver from Niagara Falls. In the 1950s, after Niagara Falls’ old power plant was washed away by the Niagara river, the state authorized NYPA to sell power at reduced rates to area industry. NYPA currently sells 695 megawatts of "economic development power" to about 90 companies.
Companies that receive NYPA power grants pay approximately .5 cents per kilowatt-hour (kwh). An average homeowner in the area pays 10 cents per kwh, and a nearby utility, Niagara Mohawk Power Company, charges heavy industrial users about 5 cents per kwh.
According to a January 1992 Labor Institute report, "Low Cost Power Subsidies to Industry in the Niagara Falls, NY Region: Why Cheap Power Isn’t Saving Jobs," the average subsidy covers two thirds of the payroll costs at these companies. At the chlorine company, Niachlor, the subsidy for every employee is about $60.00 per hour. At SKW Alloys, the subsidy amounts to over $18.00 per hour for every employee. "Theoretically," says the report, "a subsidy this large would provide a powerful economic stimulus" which would result in industrial expansion and a growing job base, or at least in steady levels of employment.
But, in fact, Niagara Falls has lost 40 percent of its industrial jobs since 1978. Sixty percent of OCAW members in the area have lost their jobs due to plant closings and layoffs.
"Most of the low-cost power recipients are simply profit maximizers who are enjoying a free lunch because nobody said they couldn’t," says the Labor Institute report. The Labor Institute’s Richard Miller, who also works as a policy analyst for OCAW, criticizes NYPA for not using its low-cost power to promote long-range economic development in the area.
Companies in electricity-intensive industries like chlorine production are staying in Niagara Falls to take advantage of the subsidy. According to Miller, two chlorine companies - the new Niachlor facility (owned jointly by Olin and Du Pont ) and Occidental - receive close to 25 percent of NYPA’s low-cost power. For these companies, says Miller, "the largest cost is electricity. It swamps labor costs." Yet the U.S. market for chlorine is saturated and fading, says Miller, and not an industry on which the region should pin its hopes.
Other companies, those that do not rely as heavily on electricity, have closed down or moved out of the region, or, Miller adds, have continued to perform energy-intensive operations in Niagara while shipping out labor-intensive work. "They’ve cut employment," says Miller, "but are still using the cheaper power."
According to OCAW, the principal flaw in the the NYPA contracts is that they are not tied to continuing capital reinvestment in the western New York area.
Carborundum Corporation , for example, has cut its local workforce from 2,500 to 500 in the past 15 years. The Labor Institute report says, "Carborundum has been one of the biggest beneficiaries of low cost power, but chose to diversify outside of New York and outside the United States, while continuing to benefit from subsidies for the remaining electricity intensive operations." The report blames NYPA as much as Carborundum for the cutbacks, noting, "Carborundum simply played by the rules."
NYPA could not be reached for comment on OCAW’s charges.
Companies are manipulating the power subsidies in other ways which hurt workers, as well. In the late 1980s, Olin urged workers at its chlor-alkali plant to lobby NYPA to transfer part of Olin’s power grant to Niachlor, a newer chlor-alkali plant. According to OCAW, workers agreed to support the change because they were told that Olin would then renegotiate its own power grant on more favorable terms. After NYPA agreed to the Niachlor transfer, however, Olin closed down its own plant, laying off about 90 workers.
Amendments to the Power Authority Act require NYPA to link expansion power allotments to job commitments. Companies which have applied for expansion power grants after 1987 have been required to maintain 80 or 90 percent of a job quota as a condition of receiving power. However, OCAW’s Gary Horab says that the "very vague" wording of these contracts allows companies to find ways around maintaining the quotas.
One way around the quotas is to subcontract out work, usually to non-union and lower paid labor. While subcontracting may provide jobs in the community, it "does nothing for [job] security within the plant," meaning "a lot of expertise is lost," Horab contends. Horab says that some of the Niagara Falls companies are including subcontractors in their headcounts to maintain quotas for power allotments.
NYPA’s failure to enforce the quotas is also a problem, according to Miller and Horab. Horab says that NYPA, under pressure from OCAW, announced that it will audit three firms a year. At that rate, it will take about 30 years to audit all firms receiving Niagara Falls’ low-cost power.
A proposal for tied aid
OCAW believes low-cost power can be the basis for successful regional development - if it is allocated more carefully and strategically.
OCAW’s major recommendation is that power subsidies be tied to continuing capital investment. Miller suggests that companies pay a portion of the subsidy into a "reinvestment fund" from which the money will be returned only if the company makes new capital investments. Unused funds (those that are not reinvested by industry) would be contributed to a worker superfund which would provide up to four years of income and tuition for education or retraining of displaced workers.
OCAW also supports the creation of a Western New York Power Allocation Board to allocate, regulate, monitor and enforce the expansion and replacement power contracts. Horab suggests that the board should be made up of representatives from industry, labor, local governments and public interest organizations.
OCAW would also like industry to be required to implement maximum feasible energy conservation measures so that currently wasted low-cost power can be freed up for job creation. To discourage hoarding, NYPA now requires companies to use up 80 to 90 percent of their allotment. The Labor Institute report notes that, with power so cheap, the return on conservation is limited, leading power to be wasted on poorly designed processes. Horab says he knows of plants in Niagara Falls operating with broken windows and no insulation. Companies have "never been rewarded not to use power," he says.
Workfare for business?
NYPA recently proposed increasing the replacement power rate to 2 cents per kwh. Industry has filed a suit against NYPA in federal court, arguing that the Niagara Redevelopment Act prevents NYPA from raising rates above actual operating costs. Horab says most companies could weather the increase, since, even with the increased rate, NYPA would be providing industry with the cheapest hydro-power in the continental United States.
According to OCAW, if the rate increase goes into effect, industrial customers will pay an additional $47 million per year for electricity. The union is proposing that this additional sum be used to set up the reinvestment pool. Horab also suggests that NYPA explore "more effective ways of monitoring the pulse of the world market" in working to attract new industry to the area.
Hydrogen fuel - made by splitting off hydrogen from water molecules - is one example of the type of industry NYPA might try to attract to western New York with low-cost hydro-power as an incentive. Canada is now developing a hydrogen project, which will eventually sell hydrogen to Germany to fuel a bus fleet in Hamburg. The creation of hydrogen fuel requires hydro-power, and the Labor Institute report proposes a pilot hydrogen project for Niagara Falls.
"As a public benefit corporation, NYPA has the duty to justify the process by which it gives away nearly $250 million per year, so that this social capital can be directed towards projects that benefit Western New York communities, workers and the environment," concludes the Labor Institute report. "In theory," says Miller, NYPA’s low-cost hydro-power "is a public benefit," but it is currently being used, he charges, as a form "of corporate welfare" that brings little back to the community.
by Philip Mattera
CHEVRON, THE TENTH LARGEST Fortune 500 industrial firm in 1991, is in many ways a typical major oil company. It traces its history back to John D. Rockefeller’s Standard Oil trust; it has benefited from the Middle East’s massive petroleum reserves; it capitalized on the mergers-and-acquisitions wave that swept the oil industry in the 1980s; and it has a dismal environmental record.
Known until 1984 as Standard Oil of California, Chevron has been one of the more conservative of the oil majors but has periodically made dramatic moves. The first of these came in the 1930s, when the company began exploration in Saudi Arabia - which had been shunned by some of the larger oil players - and ended up discovering the biggest petroleum reserve in the world.
In 1984, Gulf Oil brought in Chevron as a white knight to save it from a hostile takeover threatened by raider T. Boone Pickens, Jr. The subsequent $13.2 billion Chevron buyout of Gulf stands as the second largest merger in corporate history. Recently, the company has fought the bureaucracy in the former Soviet Union to move ahead with a plan - the largest Western project in the country - to explore for oil near the Caspian Sea.
During the 1860s, a hard band of entrepreneurs made numerous attempts in California to repeat Edwin Drakes’ 1859 discovery of oil in Pennsylvania, which gave rise to the U.S. petroleum industry. Although widespread drilling failed to yield dramatic results, these entrepreneurs kept the faith while fighting among each other over leases and deeds. Among them was San Francisco businessman Charles N. Felton, who in 1879 formed the Pacific Coast Oil Co. (PCO) and soon brought in other oil players such as Frederick B. Taylor and Demetrius G. Scofield.
PCO’s early drilling achieved some success, and within a few years the company had built pipelines from producing areas such as Moody Gulch in Santa Clara County to a refinery it constructed in Alameda, across the bay from San Francisco. The refinery was the largest facility of its kind west of Cleveland. PCO also built the first steel tanker in order to carry crude from the town of Ventura, near the Pico Canyon fields north of Los Angeles, to the Alameda refinery.
During the 1880s, PCO faced increased competition, most notably from the Standard Oil empire, which was shipping oil from the East via ships traveling around Cape Horn. Using its Iowa subsidiary, Standard moved to capture much of the market for kerosene, gasoline, naphtha and other products. Then, in the 1890s, as oil was discovered underneath Los Angeles, Standard entered the production end of the business in the West, both through buying existing operations and creating new ones. In 1900, PCO decided to give up the battle and sell out to Standard. Six years later the Rockefeller empire consolidated its West Coast holdings as Standard Oil Company (California).
In 1906, the federal government brought an antitrust suit against the Standard empire. After five years of legal proceedings, the Supreme Court ordered the breakup of the Rockefeller Trust into some 30 separate companies, including Standard Oil (California).
Once independent, California Standard stepped up its exploration activities, sending drilling parties to Argentina, Colombia, Ecuador, Mexico and the Philippines. In 1926, the company merged with Pacific Oil Co., a subsidiary of Southern Pacific, and began calling itself Standard Oil of California, or Socal for short.
During the 1930s, Socal focused its exploration efforts on the Middle East, first by obtaining a concession in Bahrain. The effort paid off, but the company already had its eye on a much larger territory: the nearby kingdom of Saudi Arabia. Socal’s more powerful competitors, Standard Oil of New Jersey and Royal Dutch/Shell, had shown little interest in the Saudi territory, which was part of the region covered by the 1928 Red Line Agreement, a pact in which the leading producers agreed to cooperate with one another on any projects within the confines of the old Ottoman Empire.
Socal was not part of the Red Line arrangement, so it was free to explore in Saudi Arabia on its own. In 1933, King Ibn Saud granted the company a concession that turned out to contain the largest oil reserves in the world. The oil was so plentiful that Socal brought in Texaco to form a joint marketing company which they dubbed Caltex. Even that was not sufficient, so in 1944 the two companies formed the Arabian American Oil Co., or Aramco, which soon took on Jersey Standard and Socony as partners.
After World War II, the company grew along with the development of the West Coast, but it also expanded its refining and marketing operations to the Eastern Seaboard. In 1961, Socal merged with Standard Oil (Kentucky), the leading marketer in five Southern states. The company continued its foreign exploration and production in places such as Indochina, Libya, Nigeria and the North Sea, but it remained highly dependent on the output from Saudi Arabia. The Saudi government took control of the operations within the country’s borders in 1980.
The California company was slow to join the diversification trend among the oil majors. It finally made its move in 1979 with a takeover bid for the mining giant AMAX. When the board of AMAX rebuffed Socal, it backed off. The same thing happened two years later, when Socal came courting again with a higher bid.
Socal next assumed the industry spotlight in 1984, amid the challenges being posed by maverick oilman T. Boone Pickens, Jr. to the petroleum giants. When Pickens set his sights on Gulf Oil, the Pittsburgh company turned to Socal as a white knight. Socal, which changed its name to Chevron during this period, ended up acquiring Gulf for some $13.2 billion.
Gulf had its beginnings in the discovery of oil in Texas in the first years of the century. The Mellon family of Pittsburgh helped finance the pioneering J.M. Guffey Petroleum Co. and built a refining operation at Port Arthur on the Gulf of Mexico. In 1907, the two operations were combined as Gulf Oil, which became a formidable competitor to the Standard Oil trust. Gulf later was among the U.S. companies to participate in the Iraq Petroleum Company and was a party to the Red Line Agreement. It won a concession in Kuwait in partnership with Anglo-Iranian (now British Petroleum). In the 1970s, Gulf was rocked by revelations that it had made large, illegal campaign contributions in the United States and payoffs to government officials abroad. The scandal resulted in the resignations of several top executives.
Chevron’s purchase of Gulf was hailed for greatly expanding the company’s production capacity and its marketing network, but it also created a huge debt load. To help relieve the burden, Chevron sold just under half of Gulf’s Canadian operation to the Reichmann family of Toronto for $2.5 billion.
In 1988, Chevron purchased Tenneco’s oil and gas reserves in the Gulf of Mexico. The following year Chevron found itself the subject of a possible takeover after Pennzoil used much of the $3 billion it won in its legal battle with Texaco to buy a block of Chevron stock. The California company turned back Pennzoil by getting a large portion of stock into friendly hands through an employee stock ownership plan.
Meanwhile, Chevron has sought to shore up its slipping profitability by selling off marginal oil properties and eliminating several thousand jobs.
Chevron today - spanning the globe
Chevron is an integrated petroleum company. It is the largest combined oil and natural gas producer in the lower 48 U.S. states, largely due to its extensive operations in the Gulf of Mexico. The corporation also carries out exploration and production activities in Canada , Angola , Australia , Indonesia , the United Kingdom portion of the North Sea and the South China Sea. Its reserves at the end of 1990 were 2.8 billion barrels of crude oil, condensate and natural gas liquids and 9.3 trillion cubic feet of natural gas. Production in 1990 totaled some 838,000 barrels of crude oil and natural gas liquids per day.
The company is a partner with Texaco in the Caltex Group of companies, which explores for and produces oil in Indonesia and refines and markets in Asia, Africa, Australia and New Zealand .
Chevron operates 12 refineries in the United States, one in Canada and one in the United Kingdom. Its affiliates, including Caltex, operate an additional 14 foreign facilities.
Chevron’s global operations have generated strong criticisms from all over the globe.
o Anti-apartheid activists long denounced the company for maintaining operations in South Africa despite calls for disinvestment by the African National Congress and other representative Black South African organizations and leaders. Ironically, after its purchase of Gulf, Chevron came under fire from some U.S. conservatives for maintaining investments (inherited from Gulf) in Angola.
o In Papua New Guinea , Chevron is developing two oil fields which the company expects will yield 130,000 barrels a day by late 1992. Papua New Guinea is receiving a small royalty - 1.25 percent - for its oil, and the traditional landowners of the areas where Chevron is drilling will receive only one third of that, according to Colleen Murphy-Dunning, New Guinea campaign coordinator of the San Francisco-based Rainforest Action Network.
Murphy-Dunning, who recently returned from a stay in Papua New Guinea, reports that the local people are "really upset and totally disillusioned with Chevron." She says the landowners express anger that Chevron is not delivering infrastructure services, such as health clinics and water, that it promised them. They are also concerned about environmental issues associated with Chevron’s operations and how the operations threaten their culture. Papua New Guinea landowners have a history of violent closures of corporate resource-extracting operations, and Murphy-Dunning says many of them are now preparing for such actions against Chevron.
Chevron did not respond to requests for answers to Murphy-Dunning’s allegations.
o Soviet officials awarded Chevron drilling rights to the oil-rich Tengiz field in Kazakhstan in 1991. Analysts believe Tengiz may hold 25 billion barrels of oil, more than two times as much as Alaska’s Prudhoe Bay. The tentative terms of the Soviet-Chevron deal came under heated attack in the Soviet Union, where critics blamed government officials for entering into a sweetheart arrangement with Chevron. A story in the Moscow News called the agreement "a dirty deal designed to turn a huge Soviet oil reserve into a black hole without yielding a profit" to the Soviet Union.
The deal fell apart, however, with the breakup of the Soviet Union, as the power to negotiate over Tengiz devolved to the Republic of Kazakhstan. Now Chevron is dickering with the Kazakhstan government over terms for drilling, with Kazakh officials reportedly driving a harder bargain than Chevron expected.
A Chevron spokesperson declined to comment on the state of the ongoing negotiations.
Environmental rhetoric and reality
"Chevron’s approach to environmental issues is aggressive and far-sighted," says Lloyd Elkins, Chevron vice president for environmental affairs, trading and logistics. "In our view, just complying with the law is not sufficient. We are committed to looking ahead, anticipating change and developing innovative solutions to environmental concerns."
Chevron has a long way to go before its record matches that rhetoric, however.
Despite a much-ballyhooed company program devoted to the reduction of toxics, Chevron facilities in California have a poor record of compliance with environmental regulations. According to a study of EPA data by the Citizens Fund, Chevron was responsible for the forty-fourth largest volume (8.5 million pounds) of toxic releases into the air among the country’s manufacturing companies in 1989 (the latest figures available).
The company has one of the industry’s worst oil spill records. "Big Spillers," a 1989 study produced by Essential Information, found that Chevron reported the largest spill volume - 2.8 million gallons - in the years 1984 to 1988 of all the major U.S. oil companies. The report’s authors omitted an 11 million gallon leak by Chevron’s El Segundo, California refinery because they could not obtain precise data for the period examined. The leak occurred over a 10-year period.
Some of Chevron’s worst problems have been in Richmond, California, where it has a refinery, a pesticide plant and other facilities. A local group called Citizens for a Better Environment published a report in 1989 that acknowledged that Chevron had reduced waste-water discharges at the facility but said that toxic air emissions were still at unacceptably high levels. In 1988, the company paid $550,000 to settle a state lawsuit brought in connection with toxic emissions at the plant.
An explosion and fire in 1989 at the Richmond refinery severely burned three workers. A U.S. Occupational Safety and Health Administration inspection following the accident found that workers who were responsible for assisting firefighters had not been provided with even basic safety equipment. OSHA later fined the company $275,000 for more than 100 willful and serious violations.
Chevron’s chemical-producing subsidiary has also drawn the ire of environmentalists. For example, Chevron Chemical produces paraquat, one of the Pesticide Action Network’s "Dirty Dozen" pesticides.
Same as the rest
Chevron’s mission statement declares, "We will continuously strive to become better than the best." But there is no evidence of that commitment in its record - Chevron is just another big oil company, scanning the world for petroleum and profits, with little regard for the social consequences of its operations.
Chevron’s Rap Sheet
A SAMPLING OF CHEVRON’S RECORD of crime, violence and mendacity during the last dozen years:
o The state of Alaska is preparing to go trial in mid-April 1992 against Chevron, Exxon , Mobil and Texaco over disputed oil royalty payments. The state alleged in 1977 that the companies undervalued their oil and overvalued transportation costs. In the last year, the state has settled the same charges against BP for $185 million and against Arco for $287 million.
o The U.S. Internal Revenue Service charges that, from 1979 to 1981, Chevron, Mobil, Exxon and Texaco, partners in Aramco, routed oil from Saudi Arabia - which they acquired at as much as $6 a barrel below the market rate - through foreign subsidiaries and marked up the price there to avoid paying U.S. taxes on profits from selling the oil. Chevron and the other companies deny the allegations, but may face bills for as much as $8 billion in back taxes. Mobil received a back-tax bill of $300 million in January 1992, and potentially will owe an additional $1 billion in interest charges.
o In December 1991, the U.S. Environmental Protection Agency (EPA) reached the biggest settlement in the history of the Superfund program with 178 companies, including Chevron. The companies agreed to pay at least $130 million for the cleanup costs at a California landfill polluted with as much as 300 million gallons of hazardous waste.
o In September 1991, a Texas federal court approved a $111.4 million partial settlement of a class action suit by former Gulf Oil employees against Chevron (which purchased Gulf in 1984). The employees claimed that they, not Chevron, were entitled to surplus monies in Gulf’s pension fund.
o In August 1991, Chevron and three other companies agreed to pay the state of California and the city of Long Beach $180 million to resolve charges that they conspired to pay government entities artificially low prices for crude oil. Chevron continues to deny the charges. "This is yet another example of lawsuits being filed for such exorbitant amounts that innocent companies have no prudent alternative to pay what is in effect legal ransom," Chevron chair Ken Derr said.
o In 1991, Chevron agreed to a $214,000 fine imposed by Orange County, California for violations of underground oil storage tank monitoring requirements.
o In May 1991, Chevron settled a class action discrimination suit filed by black and Latino oil workers for $1.5 million. Chevron did not admit to having discriminated against the workers, leading more than half of the class to object to the settlement.
o In May 1988, the California Regional Water Quality Control Board ordered Chevron to conduct an $86 million cleanup of the water below its El Segundo refinery. Officials estimate up to 252 million gallons of fuel had leaked from the refinery into the underground water table.
o In April 1988, Chevron agreed to put $100,000 into land conservation to settle a Sierra Club lawsuit over the company’s dumping of pollutants into Santa Monica Bay from its El Segundo refinery. The settlement followed a January 1988 settlement of a related EPA suit. In that instance, Chevron agreed to pay $1.5 million for waste-water discharges into the Santa Monica Bay. EPA had charged Chevron with 880 violations of the federal Clean Water Act since 1981.
o In March 1987, the EPA warned Mineral Wells, Texas townspeople not to drink tap water after a corroded Chevron pipeline leaked 16,800 gallons of fuel which was washed by rain into the creek from which the town gets its drinking water.
o In September 1985, an El Paso, Texas federal court assessed a $6 million fine against Chevron for the company’s violation of federal and state standards for the emission of sulfur dioxide.
o In November 1984, the Supreme Court let stand a $60,000 jury award to an agricultural worker who died in 1982 after exposure to the Chevron-manufactured herbicide, paraquat. The man’s children argued the paraquat label did not properly warn that the chemical could be absorbed through the skin.
o In October 1984, Chevron paid the state of California $250,000 for marketing more than 9 million gallons of high-sulfur gasoline in violation of state air quality standards.
o In May 1984, Chevron agreed to pay $15 million to settle a lawsuit filed by the survivors of two workers killed in an August 1980 fire at the company’s Honolulu gasoline storage tank facility. A jury had earlier awarded $27.7 million to the survivors.
o In July 1981, Chevron agreed to pay $82.5 million to settle U.S. Justice Department allegations that it overcharged consumers while oil price controls were in effect between 1973 and January 1981. Chevron did not admit to any wrongdoing.
o In a 1981 trial, Chevron admitted that its station leaked thousands of gallons of gasoline into the sewer lines serving residents of Northglenn, Colorado. The gasoline triggered explosions and forced three evacuations in 1980. In a July 1981 partial settlement to a lawsuit filed by Northglenn residents, Chevron agreed to purchase the homes of 42 families for $6 million, approximately twice their value.
In October 1991, when the Indian Supreme Court upheld the $470 million settlement of damage claims against Carbide by the government of India on behalf of the gas victims, it reinstated the criminal case against Carbide and its top officials.
"Although Carbide accepted the jurisdiction of the Indian courts in 1986 when it got the case transferred from the Federal District Court in New York and again accepted the terms of the Indian Supreme Court just last October, it has apparently decided to flout those parts of the Supreme Court decision it does not like," says Ward Morehouse of the Bhopal Action Resource Center in New York.
Anderson, who has retired from Union Carbide, and the other defendants were ordered again to appear for the trial’s resumption in late March 1992.
Union Carbide Vice President and General Counsel Joseph Geoghan says, "Union Carbide Corporation has never appeared before an Indian criminal court and never agreed to submit to the criminal law jurisdiction of the Indian courts. Neither the corporation nor its past chairman, Warren M. Anderson, are otherwise subject to criminal jurisdiction in India. Union Carbide India and Indian citizens have appeared before the court."
Phil Lerman, managing editor of the Fox Television Network’s popular America’s Most Wanted show, says he would consider doing a story on Union Carbide and Anderson, but it would depend on the circumstances of the case. "Do we have a fugitive here?" Lerman asks. "If Warren Anderson is found in this country, are the police going to arrest him? Is he going to be extradited?"
"The first lawsuit’s damages are limited to union dues - this one concerns lost wages," according to Connie Malloy, president of OCAW’s Elkhart local. Both actions are based on IRS Section 936, which grants U.S. firms 100 percent tax credits on profits made by Puerto Rico subsidiaries - but does not allow companies to shift jobs from the United States to Puerto Rico .
The lawsuit alleges that an AHP plant in Puerto Rico received nearly all of the production formerly located in AHP’s Great Valley, Pennsylvania plant, as well as substantial portions of production from AHP’s Rouses Point, New York plant. The Great Valley main manufacturing building, which had 700 production jobs, today has fewer than 100 remaining manufacturing workers. The lawsuit further alleges that another AHP plant in Puerto Rico absorbed most of the production of AHP’s Elkhart, Indiana plant. That plant, which employed 775 people, closed last November.
"I have been embarrassed, pained and humiliated and frightened by the subsequent retaliation by SCOA [Sumitomo Corporation of America , a trading company] for my testimony before the House Subcommittee," Kimberly Carraway testified before the House Employment and Housing Subcommittee.
In September 1991, Carraway, a sales assistant for Sumitomo in Chicago, told the Employment and Housing Subcommittee about several instances of sexual harassment including: being asked by her Japanese supervisor for photos of herself in a swimsuit; discovering a G-string on the floor near her boss’ desk; being exposed to pornographic calendars with the Sumitomo logo; and having to deal with sexist remarks.
After testifying before the committee, Carraway was placed on fully paid leave for four days. When Carraway returned to work, her job responsibilities were significantly reduced, her overtime was limited, she received threatening letters and phone calls and was ostracized by the rest of the office.
"We do not believe that four days of fully paid leave constitutes retaliation," Kenji Miyahara, president and chief executive officer of Sumitomo, testified. Concerning the threatening letters and phone calls, Miyahara said, "the company condemns such actions, and cannot reasonably be held responsible for them."
- Ben Lilliston
The Overworked American:
The Unexpected Decline of Leisure
By Juliet B. Schor
New York: Basic Books, 1991
Reviewed by Robert Weissman
IT IS NOT OFTEN THAT U.S. CRITICS OF CAPITALISM are able to appear on a network news program and say, "The system is not working."
But Juliet Schor’s provocative, compact and accessible The Overworked American: The Unexpected Decline of Leisure has enabled her to do just that.
Her basic proposition is that people in the United States are working significantly more than they did 20 years ago. As a result, she argues, leisure time has fallen and the U.S. quality of life has suffered.
Analyzing a variety of sources, Schor concludes that the average fully employed person in the United States worked 162 more hours a year - at both paid employment and household labor - in 1987 than in 1969. This is the equivalent of an extra month of labor a year. Men worked 166 hours more and women 160 hours more.
The average fully employed person spent 163 more hours a year on the job in 1987 than in 1969. Women spent an additional 305 hours a year on the job, and men an additional 98 hours.
Time spent on household work has also undergone dramatic changes during the last two decades. Fully employed men spent 68 hours more on household work in 1987 than in 1969. Fully employed women spent 145 hours a year less.
The increases in work time come as technological developments have rapidly pushed up workers’ productivity (the amount the average worker produces during a given period of time). U.S. workers’ productivity has more than doubled since 1948.
Productivity increases offer a choice. A society can choose to keep working hours constant and increase production (and consumption) levels. It can choose to cut back work time and maintain a constant level of production. In the case of the United States, Schor points out, "We could now produce our 1948 standard of living (measured in terms of marketed goods and services) in less than half the time it took that year. We actually could have chosen the four-hour day. Or a working year of six months. Or, every worker in the United States could now be taking every other year off from work - with pay."
The United States has chosen to reap the benefits of productivity increases almost solely in terms of increased consumption. "In 1990, the average American owns and consumes more than twice as much as he or she did in 1948, but also has less free time," Schor notes.
The reason for this, she argues, is due primarily to a series of biases built into the capitalist system in favor of longer work time, and secondarily to the U.S. consumerist culture.
The argument that capitalism lengthens work time contradicts widely held notions of peasant societies in which work is all pervasive. Relying on previous research (mainly concerning medieval England), Schor asserts that "before capitalism, most people did not work very long hours at all. The tempo of life was slow, even leisurely."
The amount of time devoted to work skyrocketed with the growth of capitalism. The work day became longer, and most of the numerous holidays of medieval culture disappeared.
The driving force behind the lengthening day was capitalists. Early in capitalist history, workers were paid by the day, which gave employers an incentive to lengthen the work day. The "putting-out" system, in which workers were paid for each piece of work they did, also contributed to longer hours, since employers set piece rates so low that workers had to put in long hours just to survive.
In the twentieth century, a new set of factors led capitalists to prefer long hours. First, as manufacturing became more mechanized, the business interest in seeing equipment put to intensive use increased. Employers prefer relying on fewer workers working longer hours because they cannot count on finding additional workers with sufficient skill or experience, Schor contends. A second factor was associated with the advent of Henry Ford’s $5-a-day wage - more than twice the prevailing wage at competitor companies. The high wages reduced labor militance because workers placed a high value on these jobs (meaning, in economic terms, that they had a high "employment rent"). Long hours - if they bring higher pay - increase jobs’ rent, and thereby strengthen workplace discipline. Third, in the post-World War II era, the structure of fringe benefits has led employers to favor longer hours. Although overtime work from hourly employees is rewarded with time-and-a-half pay, it brings no additional fringe benefits, a major cost to employers. Finally, among salaried workers, overtime is free time for employers, giving them a strong incentive to demand long hours.
From the worker perspective, things look very different. Individual workers have very little power in setting their hours. This was true in the early years of capitalism, when peasants were thrown off their land and faced with the choice of working on capitalists’ terms or starving, and it is true today, when it is extremely difficult to maintain a "normal" standard of living on anything less than full-time work and pay.
Of course, an individual worker could choose to forsake a "normal" standard of living, and Schor acknowledges that the consumerist culture plays a large part in workers’ decision to accept higher consumption levels instead of shorter hours as the reward for increasing productivity. But she rejects the view that this reflects workers’ choices. It is not the case that workers get what they want, she argues. Rather, they want what they get - they adjust expectations in response to prevailing circumstances.
Citing various opinion surveys, Schor argues that while workers are unwilling to give up their present material standard of living for less work time, they express a strong preference for sacrificing future increases in their material standard of living in favor of more free time.
The experience of Western Europe shows that that "human nature" does not automatically lead to choosing increased consumption instead of increased leisure. Due to the efforts of strong trade union movements, West German workers put in eight less weeks of work a year than their U.S. counterparts and Swedes 11 weeks less.
The U.S. labor movement also has a long history of fighting for shorter working hours, an effort which culminated with the attainment of the 40-hour work week, and Schor credits the labor movement with being responsible for the big decline in working hours between the Civil War and World War II. But fighting for a shorter work week largely dropped off the U.S. labor agenda after World War II.
Schor makes an excellent case that working hours have lengthened, provides convincing reasons for why they have and makes clear that there are in fact options to the long work day. She is careful to note that, as the first major examination of these issues, The Overworked American offers tentative explanations and raises questions as much as it provides answers.
The book is weakest, at least in my view, in explaining why these are matters of concern.
Shortening the work week is the great undiscussed answer to the now chronic U.S. problem of unemployment and underemployment. Yet Schor avoids explicitly pointing to unemployment as a justification for reducing working hours, and she does not call for a shorter work week. Her recommendations to cut work time - which include forcing employers to specify the normal or expected work week of salaried workers, ensuring that part-time workers receive fringe benefits and replacing overtime pay with "comp" time (meaning workers get an hour off tomorrow or next week for an hour extra worked today) - would ensure that individuals would have the choice to work less, but not necessarily that enough would do so to create enough job openings for the burgeoning ranks of the unemployed and underemployed.
The only apparent reason for Schor’s decision to not cite unemployment as a reason to cut work time is related to her discussion of labor’s support for the 30-hour work week during the Depression. Labor’s justification for the shorter work week was undercut by the sharp decline in unemployment after the outbreak of World War II. Perhaps Schor does not want to tie her proposals to unemployment for fear it might subside or to the labor movement, due to its its weaknesses.
The other potentially urgent rationale for cutting work time is the need to limit consumption, especially in the United States, for ecological reasons. Schor discusses the interconnections between consumerism and long working hours at length, but only in passing does she tie consumerism to impending environmental catastrophe.
Schor rests her case for shorter working hours on the need for leisure, on the need to devote more time to the pursuit of happiness - off the job, at home and at work. This is certainly a legitimate concern, but it is not as compelling as the other potential reasons to cut work time.
Indicting capitalism for failing to improve people’s levels of satisfaction even while raising material standards of living is in some ways a trenchant critique of the system. But, as Schor acknowledges, efforts to cut working hours will face strong resistance from business and only have a chance of succeeding with the strong support of social movements. Urging society to opt for leisure for its own sake lacks the sharp-edge of other potential justifications of cutting work time, however, and is unlikely to appear high on the agenda of labor, environmentalists or any other organized social force.
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