“WHAT YOU SEE IS ALL THERE IS.”

This past years, as I have watched the world recover from a severe recession, I have come up with the phrase, “The Manhattan complex”. The Manhattan complex is what I see radio and broadcasters do; they look out the window and think they see the world. Or they read the New York Times or the Wall Street Journal and think they know what is going on in the world. When reporters travel they fly to a location, stay in a four or five star hotel and report what is happening in the world.

But they really haven’t seen the world. They are led to believe WYSIATI.

The other day I fell into this mindset at a social gathering. A young couple was telling me how the loved their new 2006 Prius with only 104 thousand miles on it. Their only complaint was the view backing was restricted. The comment I was about to make, “isn’t your back up camera adequate?”.

Then I came to my senses before I spoke! My 2010 Prius has a backup camera. Momentarily, I believed, because I have a backup camera, all Prius cars must have a backup camera. Momentarily, I was a believer of WYSIATI.

After a 35 year career with 3M and operating a corn-soybean farm, I was convinced that my depth of experience was pretty good. Then I become a director for the Minnesota Corn Growers and involved with National Corn growers. I soon become aware of how little I had seen. After nearly eighty years of experience, I now wonder how much I don’t know.

Meeting with fellow farmer from all parts of Minnesota and every state in the US, I was able to discuss farming methods, national farm policy, agronomic research and research on how to add value to farm production. I was sent to Washington to discuss farm policy. Every day was a learning experience.

What I have learned is that the most powerful tool, was the question! As we listen to today political discussion, we hear simplistic sound bits, never a question. We are told what “we” believe or should believe. And much is based on fear and hate.

Past leaders were very effective at gaining power using demagogy and WYSIATI. Both are tools of politicians. From Wikipedia I conclude with a quote from George Bernard Shaw.

“But though there is no difference in this respect between the best demagogue and the worst, both of them having to present their cases equally in terms of melodrama, there is all the difference in the world between the statesman who is humbugging the people into allowing him to do the will of God, in whatever disguise it may come to him, and one who is humbugging them into furthering his personal ambition and the commercial interests of the plutocrats who own the newspapers and support him on reciprocal terms.”

VISION 2020 FIFTEEN YEARS AGO

The other day I was looking for a telephone number from my days as a Director for the Minnesota Corn Growers and I came across a report I wrote about energy from a workshop I attended fifteen years ago. Lifted from the report: “People attending the four day workshop were from US Department of Energy, US Department of Agriculture, researchers from Industry, university researchers, commodity staff personal (Corn and Soybean), Washington lobbyist and a lone farmer”. Me!

The purpose of this workshop was about the dwindling supply of liquid fossil fuel and what role agriculture would play in the energy economy. I will discuss two conclusions that were made: 1) Corn at $1.51 is not sustainable and 2) Fossil fuel would be price regulated by 2010.

So how does these future conjectures look fifteen years later?

Looking at the price of corn, the May 2012 future price is $6.55, and farmers are buying green paint by the ton and competing in a bidding war for good farmland up to $10,000 per acre. Why? Because of the use of corn for ethanol, overproduction was reduced and despite the increase of yields from 150 bushels per acre to 175 and pushing toward 200 in southern Minnesota. Was this foreseen 15 years ago? Did this have anything to do with energy prices?

Yes, and no. It was expected increasing use of corn would increase the price, but the price of gasoline has been steady and has dropt when weighed against the price index. Yes we did see $4.00 gasoline in 2006, but that was caused by a mismanaged war in the Middle East and had nothing to do with potential supplies.

So what happened with the expert opinions made at the Vision 2020 conference? Simply the lack of vision of the developing technologies. I will use examples to illustrate the point.

The first is the more efficient use of liquid fuels. When evaluating agriculture tractors, the test at Nebraska uses a number called HP-hr/gal, an indices of efficiency. A John Deere 4020 (about a 100 horsepower) gasoline got 7.8 HP-hr/gal and diesel, using less refined fuel (less energy to refine) would get 11.8 HP-hr/gal. A 2012 8335R John Deere tractor (about 300 horsepower) gets 18.9 HP-hr/gal. T

That is 250% increase over the gasoline 4020 and 150% over the 4020 diesel. These efficiencies are only part of the story growing a bushel of corn. Because off less herbicide use, less tillage is used. Because of GPS on the new the 2012 John Deere, tillage overlap is eliminated as well as planting overlap, further increasing savings. Since corn yields have increased further efficiency are gained. Now we get more corn per acre with less energy input.

The efficiency in agriculture tractors also has taken place in trucks hauling freight. A truck that was getting 4 miles per gallon now gets 6 miles per gallon. But this technology is having effect on automotive transportation in general. It is the development of the high-pressure electronic fuel injection and the piezoelectric valve.

In the year 1997 we had mechanical fuel injection and manifold injectors for gasoline engines. Neither was very efficient. In the year 2000, high pressure (25,000 psi) electronic fuel injection and the piezoelectric valve diesel engines was introduced to the United States in the Mercedes Benz and Volkswagen cars. See my own experience in preceding Blog entry. But this is the beginning. Today we can buy several cars that hover or exceed 40 MPG. None were available in 1997.  And with the employment of spark ignition engines utilizing precisely timed direct injection into the cylinder, efficiency has significantly increased. This is best reflected in the 2013 Ford Fusion.  With the least complex car mileage is 36 MPG, and with a fully equipped hybrid-plug in MPG equivalent are about 80. This is a luxury car with power front seats, GPS (with GPS you get lost less often), two cell phone connections to the car phone.

Another example of energy efficiency was reported in the Minneapolis Star Tribune. It was about a trucking company using natural gas in trucks hauling freight. At 25,000 psi natural gas is a liquid and can be used like diesel fuel in a compression ignition engine. And there are many more examples of efficiency to alleviate the energy shortage forecasted fifteen years ago.

Also unseen fifteen years ago was a change in production of energy. The biggest impact was from a technological development called “fracking”. I will not explain the process (just google fracking) but I will explain the impact on energy production.  First, it has increased the production of natural gas to the point it has driven the price down to the point of “to cheap to produce”. The fracking process is also used in oil extraction. The fracking process and drilling technology has opened up the Williston Basin in North Dakota. 

In the Williston Basin production has increased from 246,000 barrels a day two years ago, too 800,000 barrels today, and forecasted to produce 1,000,000 barrels per day or 8% of the world daily production. 

And recent data off daily gasoline usage has shown a reduction in 2011, despite a growing economy.  This is technology at work.

Energy is not price regulated. It is priced at what people will pay and what competition allows. It is also easy to imagine, if technology had not increased the efficiency of fuel used for production and transportation, we would be paying  $6.00 for a gallon of gasoline.  That would be price regulation.

JOBS, JOBS, JOBS

I have just figured out that I am part of the the job growth problem that the Elite Media, Fox (the Murdock tele network) and talk show host discuss in aeternum.

I have a hobby of keeping a historical calendar and collecting data. The other day as I was browsing some old files I ran across an mileage log for my 1996 Chrysler Minivan. Average mileage for that vehicle was about 18.2 MPG. I now own a Prius that gets about 42 MPG. Driving a average of 30,000 per year.

All this saving has to be costing jobs.

And the reduction of carbon in the air will make people live longer putting a further burden on the Social Security system.

Mea Culpa!

2012 and 2011 LEFTOVER

As I spent Sunday morning watching the “talking heads” on Fox and NBC, one word they don’t seem to have in their vocabulary, is investment. This has been bothering me in all of 2011. This was again bought to my attention as the “talking heads” up dated the listening nation on the Republican primary in Iowa this first day in 2012. Not once did I hear the word “Investment”.

As “Activities for Learning, Inc.” (AFL) prepares plans and budgets for 2012 we project cash flow. We do not separate expenses and investments. In my own thinking, I see a difference, as a company we don’t discuss it. But what is the best way to develop a company culture that plans investments, expenses in relation ship to cash flow.  Definitions are further confused by accounting rules as I will explain later.

First, my definition of investment. If money spent has a residual value greater than one year it may be an investment. Some examples of are: education, training of employees, building, molds, and of writing books. To make this confusing, non could be an investment. Without job skills it is an expense. My favorite debate on expense versus investment is inventory. Accounting rules say it an asset (Investment). If just in time  (JIT) inventory management is used it is an expense, all inventory cost are in “Cost of Goods Sold”.

To update myself onto a more standard definition of investment I put this string into Google search “expense verses investment”. Among the many trash returns I found a web Blog by Gordon Hestor on page http://www.gordonhester.com/?p=591. On this page there is an earlier blog post yielding this is very rich diagram in figure one.

Figure 1

The message in Mr. Hestor’s blog is that investment alone can be an expense unless it is marketed and is well managed.

I would like to elaborate on his flow chart with a Venn diagram shown in figure below. 

While Mr Hestor may have emplied in fiqure one what fiqure two shows, to assure success of Innovation, Marketing, Management must overlap and are effective when a company culture emphasising team is developed. To illustrate, which category is shipping? In reality it falls in all three. If a untrained person in shipping packs a incorrect item, innovation is erased, a customer is unserved, and money spent provides no return to the company.

This brings us back to the discussion of expense versus investment, cash flow forecasting and budgeting. To effectively manage a company there are times it is essential to operate with a negative cash flow.  AfL works toward JIT inventory management. It turns inventory three to four times a year on the average. Because of inventory  lead time AfL have to operate with negative cash flow when building inventory. While classical accounting say inventory a asset, It is in fact a expense.

Spending money to develop a JIT system where a order is received in the morning, built and shipped in the afternoon, would be an investment. To achieve this goal will take several investments with each step returning cash for the next investment.
A final point needs to be made. The best investment in money and time for me was my education. Not just my BSME but my continued development of knowledge and skills. I cannot produce a chart to show return on investment. Not all investments are measured in dollars and cents.

Keystone XL Pipeline Exposed

Keystone XL Pipeline Exposed

A better title to this Blog maybe “Keystone XL Pipeline Confusion” But first I’ll write about the expose. I have been confused by where the push is from for the Keystone XL pipeline and who is opposing it. Experience from my corn grower advocate work, I learned what you hear is not what is really happening. Or you can kill a program by supporting it. As a advocate I learned that from the trips to Washington to “communicate” with our “hired gun” i.e. lobbyist.

My confusion on the Keystone XL pipeline was amplified when I attended the North Dakota Energy Expo in Bismarck. One of the keynote speakers was Senator Hoeven, recently elected, replacing retired Senator Dorgan. The first part of his speech was enthusiastic and informative when he talked about the Bakken oil play. But his voice changed as he closed his speech promoting the Keystone XL pipeline ,like a school Boy  reciting something he memorized. It was obvious he was handed a script and still had not developed the skills to sound like he meant it. But who handed him the script?

I have been suspicious that Koch brothers were behind the Keystone XL pipeline. I know the Koch brothers own the refinery at Rosemont Minnesota and the crude oil comes from the oil sands of Alberta Canada. A Google search confirms the Koch Brothers have huge investments in the Alberta oil sands and the Keystone XL pipeline would supply crude to refineries in Kansas and Oklahoma, refineries owned by the Koch brothers. This can be easily verified by using this string in Google search “Koch industries Canada oil sands”.

The methods for someone of Koch Bros wealth to influence congress are many. The rewards from the oil sands are many. And it is widely known the Koch Bros contribute large amounts of money to any organization that promotes anti environmentalist activity. They probably will continue this activity until their homes in the Hamptons are flooded by glacier melts.

For those not familiar with the oil sand extraction, it requires huge amounts of energy to extract, which is highly polluting process. The crude oil is very low motor fuel yield and refining  results in high CO2 emmisions. For info use Google with this string “oil sands crude energy balance”. 

A disclaimer: the web site  from energy balance are written by people who take swipes at corn ethanol. They ignore two important facts. 1. Ethanol is about one half of the energy of the corn, the other half is a high protein poultry, hog or cattle feed. 2. All the carbon in corn is recycled carbon and the corn growing is renewable. Remove oil from the ground, burn it, its gone.

Now the confusion I mentioned in the opening paragraph. Since I attend many energy conferences, I get E mails from many sources. The latest was about lithium in the Canadian oil sands. A large amount of lithium will be used would be used for batteries in electric powered cars. Only known source of lithium is in South America. Is the oil sands lithium propaganda or fact? Or is this about some high paid Koch Industry publicist?

THE ELECTRICAL GRID

The first oil well I saw on my trip to Williston was just west of Stanley ND, 80 miles east of Williston. It was flaring off the natural gas. Energy is being consumed to pollute.

All but one oil well location was capturing the natural gas. It was located just east of Williston. A compression ignition CAT engine with a generator, was connected to the well using the natural gas as a fuel. In 2008 the plan was to capture all of the natural gas and use it to make electricity. Combined with wind and coal energy, North Dakota now has a electrical surplus. The Great Recession further amplified the energy surplus.

Another factor is the changing electrical demand. Efficiency programs inspired by global warming concerns are being implemented. As an example, five years ago the lighting in my office was 300 watts. Today the lumens are the same with only 78 watts. In the rest of our house incandescent are being replaced with CFL bulbs that use sixty percent less electricity. This is happening in many homes. We are using less electricity per household.

It is hard to find numbers on electrical production but electrical power is traded as a commodity. Therefore it is easy to see what electricity costs are in different area’s. Base load price is six to eight cents on both coasts and one cent in North Dakota. Peak load prices are as high as twenty-five cents and more.

Why isn’t North Dakota electrical power shipped east or west? Infrastructure! There are five grid areas in the United Stated not connected. A surplus of Electrical energy cannot be shipped across country. There is no incentive for more energy production in North Dakota if it cannot be sold at a profit. Therefore natural gas is flared and energy is wasted and only pollutes.

The solution is technically simple and but politically complex. At the 5^th Annual North Energy a typical United States grid map was shown. The question from the floor was why wasn’t this implemented. The answer given was “no one is in charge.” This is an over simplification of the problem. A better answer is many are in charge, with personal agenda’s, and when a leader that emerges they are immediately politically and personally persecuted. The leaders of this persecution are people like Koch Brothers, Peabody Coal, Harold Hamm of Continental Industries and many others.

The benefits of a National Grid are many and will be the topic of next Blog.

The solution? The next time we vote look up the monetary contribution received by a candidate. And if received by a energy company you could have identified a politician who is owned by that energy company.

THE 5TH ANNUAL NORTH DAKOTA ENERGY EXPO

I had attended the Third Annual North Dakota Energy Expo and now the Fifth Annual North Dakota Energy Expo. My interest in energy goes back to my days as Plant Engineer at 3M Hutchinson, where I was able to reduce energy consumption by nearly fifty percent. That was some forty years ago! That interest in energy conservation was carried through my farming career where I promoted the production and use of ethanol.

Most energy conferences are about a specific form of energy, such as, solar, wind, biomass, coal, gas and oil. The ND Energy Expo is about all. This year we also heard about clean coal technologies at Washburn.

This year the Expo was held at Bismarck State College in an unfinished building called “National Energy Center of Excellence” with a panoramic view of the Missouri River. While the sun made PP presentations fade the view was spectacular and a photo through the window does not due it justice. This center will be finished this year.

I will start my report on the conference by defining two words used often in the presentations: “play” and “fracking”. “Play” defines an area in an oilfield where there is a lot of activity. “Fracking” is a method used to facilitate oil removal.

The Expo started out with opening remarks by the governor of ND (Dalrymple-R), and the two Senators (Conrad-D and Hoeven-R). While all energy produced in North Dakota was mentioned it was clear that the conference emphasis would be about oil production. All three politicians emphasized cooperation on policy issues between parties, contrasting Washington DC. Hoeven gave the best speech with the exception of the comments about the Keystone pipeline project. His comments were on the Keystone pipeline was identical to other comments and speeches I have heard on the subject. It was obviously handed to him by the Keystone project lobbyist. He even neglected to draw any benefit to North Dakota.

The two most interesting comments on opening remarks was that in the last decade of development of the Bakken oil play, there were 6000 oil wells in 2008, and now, there are 10,000. Further expansion rate will depend on infrastructure and available people. The people was the second comment, it is predicted North Dakota population will double. While numbers become vague at this point, it takes three to five people to support one production worker. Needs to be filled are teachers, doctors, retail store workers and, of course bar tenders.

Dr. Steven Koonin, Under Secretary of Science U. S. Department of Science, was the first keynote speaker. He discussed the affect the Bakken oil will have on US oil imports. He said oil imports have been reduced from 60% to 50% and that the oil from ND would have further impact. He also alluded to the fact energy use efficiency was increasing. For those not versed in the second law of thermodynamic, it is a fact that today, energy used to do useful work from oil, is only 10% taken from wellhead to use in the automotive engine. But that is changing! Transporting one person in a Prius versus a Suburban is at least twice as efficient. As more efficient cars are built less oil will be required per capita for transportation.

The next session was on people resources. I will comment on two Panelists. The first was Jan Morrison, focusing on STEM (Science, Technology, Engineering and Math) education in ND. She discussed the need for technically oil industry workers needed in the oil industry. She said most new technical workers would be from outstate ND. She made it clear ND students had great opportunities in science and math fields.

The next panelist Mellisa Blake was, who was mayor of Wood Buffalo, Alberta. Wood Buffalo is the near the oil sands of Alberta. Wood Buffalo is about 1500 miles North of Williston. She gave a picture of Williston in a few years. The focus of her speech was on development of infrastructure from education, transportation, to health care. One example she used illustrated problem of rapid population growth. For employees to get to work, was an hour and a half. Without traffic it was twenty minutes. They built an extra lane for bus travel only. As people started taking buses to work, travel time on the road was reduced to less than an hour. She used another example of housing prices. A $240,000 house in southern Alberta, an identical house in Wood Buffalo would cost $720,000. As she told this story there was a similar story in the Bismarck Tribune of a retired school teach in Williston, who could no longer afford her apartment when the rent was raised from $720 a month to $2200 per month.

A three member panel gave a presentation on fracturing. The first speaker was an expert in environmental rule making and a representative from Halliburton explained how environmental sensitive the were they were in the fracking process. The final presentation on fracking was by Kathleen Neset who is President of Neset Consulting service. She gave elegant presentation on the geology formation of the Bakken Basin and how fracking is used.

The next presentation was an environmental presentational on the Keystone pipe line benefits. I’ve heard this speech before and the message is the same: (The US pollutes a lot and Canada should be allowed to pollute a little.) Fact is, Canadian oil sand is not environmental desirable because of the extraction process excess use of energy and transportation fuel yield per barrel is very low. The Keystone project is primary reason I attended this conference. What I heard was a repeat of a lobbyist scribe.

The closing session on Monday was about the financing energy development in North Dakota. The most profound statement made was that new financing was difficult for new energy projects, other than oil, because North Dakota has an energy surplus. If changes were not made the biggest surplus would be in electrical energy. In the opening remarks on Monday, several comments were made about the lack of a comprehensive plan to connect the electrical grid east to west coast.

The electrical grid problem has been a subject of presentations and conversation at energy meetings for the last decade. Solutions opposed by many special interest group and no one is in charge. At the federal it is between DOE and Commerce. As I write this blog, an article appears in the Minneapolis Star Tribune (Sunday, November 20th) about Indiana blocking the transmission of western wind power into Indiana.

On the last day the Expo, focus was on environment. A paragraph would not do justice with this topic so I will write a follow up Blog.

A comparison of the fifth North Dakota Energy Expo to the to the Third North Dakota Energy was a comparison of what might happen to what is happening. The Third conference and previous was sponsored by now retired Senator Dorgan. Senator Hoevan, then Governor of North did not attend. The now recognized impact of energy production in North Dakota has now made this a must attend for politicians.

I am planning to attend sixth Annual North Dakota Energy Expo.