Green Ink is returning to civilization.

Meanwhile, Environmental Capital is taking the long weekend off. We will be back next week with more posts on all things climate, energy, renewable and so forth.

Enjoy the time off. Oil prices are dropping and rhetoric is rising. We’ll be back to cover it on Monday.

Photo Credit.

Drilled, baby, drilled.

Baker Hughes is out with its weekly rig count, and for the third time in a row, the number of drilling rigs running in the U.S. is up from the previous week. At 928, the count is now up 5% from its June 12 nadir.

That’s still less than half the 1,921 rigs that were running at this time a year ago (the count eventually peaked at more than 2,000), but the recent increase has led some analysts to speculate that the unprecedented collapse in U.S. drilling activity has begun to reverse.

Most of the new drilling is targeting oil, not gas, which makes sense given the diverging paths of the two commodities. Oil prices have stalled recently, but they’re still almost double their low in December, and $70 oil is enough to make most drilling projects profitable. Oil drilling is up more than 25% in the past month.

Gas drilling is a different story. After plummeting more than 50% between September and April, the gas rig count has been pretty much flat since May, and even ticked up slightly this week. And some of the hottest gas plays, such as Louisiana’s Haynvesville Shale and the Marcellus Shale in Appalachia, have seen drilling pick up in recent weeks, even as gas prices have continued to fall.

Why are companies continuing to drill at such lousy prices? Well, for one, they need the revenue. But another factor is that many producers have raised cash in recent weeks, either by selling shares, issuing debt or, most recently, selling assets. All that money has taken some of the financial pressure off companies, and made it easier for them to resume drilling. Of course, that only adds to the downward pressure on prices.

That’s good news for consumers and for oilfield services companies eager to put their rigs back to work. But not so much for producers themselves, who keep discovering new shale plays full of gas that no one seems to want. Well, almost no one .

Photo credit.

Associated Press

The winds of (funding) change?

But there is reason to believe the U.S. situation is better than the numbers indicate – and the European situation is worse.

Asset financing in the U.S. totaled a measly $1.6 billion in the second quarter of 2008, down 66% from a year earlier. (Of course, it’s up from $300 million in the first quarter.) Ethan Zindler, head of North American research at New Energy Finance, says he expects deals are simply waiting for the U.S. Treasury Department to finally issue rules on its grant program and for the Energy Department to detail its loan guarantee program. “The market is on hold until these rules come out,” he says.

The upshot is that some deals that may have been concluded in the second quarter are on hold until the federal government speaks, creating the potential for a deal boomlet in the third quarter. Treasury says the rules are due in July.

Across the pond in Europe, banks financed a whopping $14.4 billion in new projects – the largest quarter on record. But this was due to the lumpiness of large projects. A few big projects got money in the second quarter, says Angus McCrone, New Energy Finance’s chief editor. “It is certainly not the case that European project finance is booming,” he says.

So, what happened? The London Array got $3 billion in financing in May. That’s the big E.ON and Dong Energy project that Royal Dutch Shell left last year. Another big U.K. offshore wind farm, Statoil’s Sheringham Shoal got funding. Neste Oil is pushing ahead with a big biodiesel plant. Two big solar deals got financing, including a photovoltaic plant in Germany that LDK Solar and Q-Cells are building.

Overall, money is flowing back into renewable. Globally, investment is clean energy hit $24.3 billion, down 33% from a year earlier, but up 83% from the frozen-solid first quarter. The glass is therefore half-empty, or half-full, depending on your perspective.

Associated Press

No anniversary party for him.

Oil prices dropped more than $2 a barrel to below $67 in trading in New York Thursday, beaten down by dismal economic news and word that the Organization of Petroleum Exporting Countries discipline is shaky.

First news out of the U.S., the world’s largest consumer of crude oil: the unemployment rate is up to 9.5%, the highest since Ronald Reagan’s first term in office; and the federal government reported payrolls tumbled. Our Dow Jones Newswires colleague noted there were “widespread declines across manufacturing, construction and professional services, a grim reminder that the path to economic recovery will be bumpy.” (Sub. req’d.) The jobless rate in the Eurozone is also at 9.5%, a 10-year high. More unemployment means more insecurity, less spending and less fossil-fuel consumption.

But this might not even be the worst news for oil bulls. Months of big OPEC production cuts have been a primary factor for the sweeping recovery in crude prices. But that hardnosed disciplined is wavering as a steady stream of increased production from some of the cartel’s members quietly enters the market.

A Dow Jones Newswires’ survey Thursday shows output from OPEC’s 11 quota-bound members rose a third straight month in June. Led by Iran and Venezuela, output was up almost 300,000 barrels a day, or 1%, compared with March.

OPEC compliance with a trio of large output reductions announced late last year is now at 76%, down seven percentage points, since March, according to the survey. Some other industry reports though have OPEC compliance near just 70%.

“Creeping OPEC production serves to underscore the underlying weakness (of the market) and that (prices) likely got ahead of themselves,” says PFC Energy analyst David Kirsch.

Moody’s, the credit rating agency, says Thursday its forecast for the global integrated oil industry is “negative” as it expects economic recovery in 2010 to be “slow and painful, crimping worldwide demand for oil and natural gas at a time when inventories are near record highs.”

Of course, it bears repeating that weakness in crude-oil markets doesn’t mean strength for renewable sources of energy. Biofuels as well as wind and solar still need energy prices to be high to help them claw their way to profitability. A collapse in oil prices will be bad news for boosters of carbon-lite fuel.

– This post was written by Spencer Swartz, Oliver Klaus and Russell Gold.

Associated Press

Don’t expect him to stop.

Unfortunately for the drivers, the tolls hadn’t been lifted summer vacation. Rather, the turnpike is no longer accepting cash. Drivers with a TollTag transponder (east coasters: Think EZ Pass. Californians: FasTrak) breeze through the tolls just like always. Everyone else will get a bill in the mail (cameras take a picture of vehicles’ license plates). A handful of other highways in Texas have similar systems in place.

The agency in charge of the highway, the North Texas Tollway Authority, cites convenience and safety as its top reasons for the switch. But there’s an environmental angle too:

Constant starting and stopping of vehicles adds to air pollution. Transitioning to all-ETC will eliminate the stopping, starting and idling associated with cash toll lanes. By promoting a continuous flow of traffic at consistent speeds, the NTTA promotes air quality in the region.

So does eliminating toll booths really cut down on emissions? The answer appears to be a qualified “yes.” A 1998 study in Orlando, Fla., found that installing an electronic toll collection system at the Holland East Toll Plaza there cut carbon monoxide emissions by 7.29% and hydrocarbon emissions by 7.19%. The reduction came even though the number of vehicles passing through the tolls during peak hours increased by 30%.

The downside: Nitrogen oxide emissions increased by 33.77%, apparently because cars were able to drive faster with the electronic tolls. (The Orlando road kept some cash lanes, so the impacts—positive and negative—would presumably be even greater in a totally cash-less system such as Dallas’.)

In theory, cashless tolls could pave the way for a more radical move: congestion pricing. Authorities could hike tolls during busy periods, encouraging commuters to car-pool or take public transportation (not that the Dallas area is big on public transit).

No one in Dallas is pushing that idea right now, but you never know. A markets-based approach to traffic control sounds a little like emissions trading—an idea first used in the U.S. under the 1990 Clean Air Act. A bill signed into law by none other than the Dallas highway’s namesake, George H.W. Bush.

Update: As reader Dennis Simmons points out, a proposed expansion of the LBJ Freeway in Dallas would, in fact, include congestion pricing on certain lanes, although other lanes would remain free. More information about the project can be found here.

Lost in the shuffle are a number of provisions that seem pretty banal but could have a more direct impact on the way we use energy at home and work.

A prime candidate for an energy audit

Take building codes. The bill mandates that upon passage, all states move to adopt standards for residential and commercial structures that are at least 30 percent better than two widely accepted energy codes. [See update below.] The requirements get more strict over time, and states would get lots of money from the federal government to enforce them.

The measure would update the patchwork of state and local codes, some of which rely on standards that are a decade or more out-of-date. States that fail to comply could have the federal standard thrust upon them.

Even though national building codes portend a bigger federal role in an area that has long been regulated at the state and local level, the provisions haven’t been nearly as divisive as the breaks for agribusiness.

Supporters of the measures, like the Alliance to Save Energy, say that strengthening building codes is low-hanging fruit. Buildings use almost 40 percent of all energy in the United States. The Alliance’s Code Coalition Director, Bill Fay, adds that plenty of homes have been built to these levels of energy efficiency without breaking the bank.

One group, however, is already crying foul: the National Association of Home Builders. “That’s simply too far, too fast,” NAHB Chairman Joe Robson said of the legislation’s requirements in a press release.

Robson’s alternative: more time, more incentives for energy efficient appliances (of which there are several in the bill), and more voluntary initiatives like NAHB’s own National Green Building Program.

That may sound sensible. But voluntary programs, like EnergyStar’s home program, are toeing a delicate line as of late, writes Jeffrey Ball in the WSJ (sub. req’d). The Environmental Protection Agency would like to strengthen the requirements to make the seal more meaningful. Yet tougher rules might mean that fewer home builders participate because of added cost.

No doubt there will be more wrangling on the issue as the bill winds its way through the Senate, which is also considering setting a national energy code for buildings.

Update: The two widely accepted energy codes referenced here are the 2006 International Energy Conservation Code (for homes) and the American Society of Heating, Refrigerating and Air Conditioning Engineers 90.1 2004 (for businesses). A handful of states have already adopted more up-to-date versions of these codes and therefore may not have to improve by a full 30 percent. Hat tip to Aleisha Khan from the Alliance to Save Energy for pointing this out.

Associated Press

Hussain Al-Shahristani, Iraqi oil minister, for now.

He’s been grilled in recent weeks by Iraqi MPs, some of whom accuse him of trying to sell off the family silver to foreign oil companies. He’s been sharply criticized for Iraqi oil production slipping the past year. Then he spearheads Iraq’s first oil licensing round in three decades on Tuesday and the results were underwhelming.

Baghdad, under Mr. Shahristani’s tutelage, managed to award just one of eight oil and natural gas fields on offer to around 30 foreign oil companies. (A BP PLC-led consortium was the sole winner). After all of Shahristani’s assurances that he was putting Iraq’s dilapidated oil sector back on its feet, that’s a pretty grim showing, especially for an industry that quickly needs many billions of dollars of investment.

So can Mr. Shahristani survive? Iraqi Prime Minister Nouri al-Maliki is still backing him at the time of this writing and likes the minister’s clean-cut reputation, but it wouldn’t be a surprise if Mr. Shahristani is soon shown the door.

He has had three years of work as oil minister and led government efforts spending several billions of dollars to put life back into Iraq’s petroleum industry. Yet oil output in Iraq, with the world’s third biggest proven crude reserves, has been sliding along with crude exports. That’s not all his fault. Iraqi bureaucracy is thick and it takes many layers of decisions before things actually happen.

Still, a big criticism of Mr. Shahristani from analysts and company officials privately is that he’s often played to Iraq’s nationalist fringe, telling local media how he’ll protect the country’s resources from foreign exploitation. He’s also pushed many financial demands on companies, such as $2.6 billion in so-called “soft loans”; those loans are basically aimed at plugging Iraqi government coffers which have been drained by weaker production and, until recently, weak oil prices.

“It’s indicative of how unrealistic the ministry has been,” says Raad Alkadiri, a senior analyst at PFC Energy, a consultancy, of Mr. Shahristani’s steep demands on companies that helped sink today’s bidding round.

Mr. Alkadiri says politics – and the power disputes that Middle Eastern oil seems to breed – could further thwart the Iraqi oil licensing process the closer the country gets to parliamentary elections in January.

Mr. Shahristani may still redeem himself. The government has asked companies to quickly resubmit their bids and there’s an oft chance he could push for sweeter terms – though how does he and the government then explain that to the BP-led consortium which agreed to very stringent terms Tuesday?

Exelon heeds the street stenciling.

Let’s put to the side for a minute that Exelon is trying to acquire NRG Energy, which is developing two reactors not far off near Bay City, Texas, and perhaps developing four nuclear reactors in South Texas was overkill.

We could also raise all the issues that hound the nuclear revival – where to store the waste and the economics. (We have already, if you’re interested.)

What caught our attention was the second part of what Mr. Rowe said. The death knell is that Exelon wasn’t on the shortlist of energy companies to receive $18.5 billion in federal loan guarantees. It’s worth noting that NRG is on the government’s loan list, putting Exelon on the list if the acquisition goes through.

This all underscores a critical issue in the fast-changing energy economy – and it seems to be as true for nuclear power as it for advanced biofuels or even wind and solar: the roll of governments is critical today, more critical than at any time, perhaps, in decades. Governments from the U.S. to Japan to China and the E.U. are picking winners and backing certain energy sources.

Whether this will accelerate an energy transformation – or delay it – remains to be seen.

Photo credit.

Associated Press

Bids were cast, but success was elusive.

Public, transparent auctions for eight oil and gas fields yielded only one successful bid – by a consortium led by BP PLC and including China National Petroleum Co. While other bids were offered, only this consortium was willing to match the Iraqi Oil Ministry’s $2-a-barrel fee for revitalizing older fields.

At first glance, this seemed like an ideal opportunity for oil companies to return to an oil-rich country. Oil companies are struggling to find big new fields to work on. For the past few years, they have faced declining opportunities around the world as resource-rich nations have locked them out.

The Baghdad bidding was a departure from this recent trend of shut doors. It was the first oil-sector opening in Iraq for big Western companies since 1972, when the industry was nationalized. Iraq has huge untapped reserves – 115 million barrels, third behind Saudi Arabia and Iran, according to BP’s annual statistical review. And many of these fields haven’t been upgraded for years. It was an ideal situation for Big Oil.

Except that geology and opportunity aren’t enough for the industry. The industry has historically insisted on contracts that allow it to own some of the underlying oil – known as reserves. The industry doesn’t like to work as a glorified contractor, doing the work of revitalizing oilfields for a set margin per barrel.

Still, many companies did offer bids on the 20-year technical contracts. They wanted to be seen by the Iraqis as cooperative, in order to have an opportunity to bid when better contracts became available down the road. But sought to fatten the margins in order to compensate for the political risk and accepting contract terms they didn’t like. Exxon Mobil, for instance, sought a $4.80 fee for every barrel of increased production at the Rumaila field. The Iraqi oil ministry asked for $2, leading Exxon to apparently walk away. A BP-led consortium agreed to the $2-a-barrel fee.

Iraq – and oil minister Hussain al-Shahristani – didn’t get want they wanted: widespread interest from foreign oil companies to come in and help restore production from large, but neglected fields. Seven fields – many of them large – couldn’t attract bidders willing to match Iraq’s terms.

Iraq tried to force the oil business to change its approach to business, and give up decades of contracts that give them ownership of foreign reserves. It doesn’t appear to have worked.

Associated Press

Coasting, literally, to victory.

But this story from the New Hampshire Motor Speedway certainly caught out attention. For those readers who aren’t racing fans, here’s what happened on Sunday. Joey Logano, a 19-year-old rookie on the NASCAR circuit, won a major race. In a sport defined by gas-guzzling speed, rain fell leading to a yellow flag and slow driving. Mr. Logano, with four-time Cup champion Jeff Gordon closing in on him, needed to hold on to his lead until the race was called after 273 laps due to bad weather. And that meant conserving as much fuel as possible to avoid a pit stop.

Yup, he took a page out of extreme hypermilers – the folks who try to stretch their fuel mileage as far as possible. Here’s how he described it on NPR’s All Things Considered: “I was just trying to save as much fuel as I can by cutting the motor off and coasting as long as I can,” he said. He was about five laps from running out of gas when the race was called.

A month ago, writing about the Indianapolis 500 and French driver Nelson Philippe’s “i drive green” car, we asked: “The Indy 500 already tried to burnish its green credentials … What’s NASCAR doing?”

Here’s your answer: NASCAR is giving a lot of publicity to hypermiling, or ecodriving if you prefer, in the form of a 19-year-old rookie who by dint of a lot of luck, more than a little skill and a smart crew chief took home his first victory. Courtesy of driving in a way to get the best gas mileage possible.