trysail
Catch Me Who Can
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trysail
Catch Me Who Can
- Joined
- Nov 8, 2005
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http://www.bloomberg.com/apps/news?pid=20602099&sid=an_jMkuLBE68
Exxon $600 Million Algae Investment Makes Khosla See Pipe Dream
By Kambiz Foroohar
June 3 (Bloomberg) -- Inside an industrial warehouse in South San Francisco, California, Harrison Dillon, chief technology officer of startup Solazyme Inc., examines a beaker filled with a brown paste made of sugar cane waste. While the smell brings to mind molasses, this goo, called bagasse, won’t find its way into people-pleasing confections.
Instead, scientists will empty it into 5-gallon metal flasks of algae and water. The algae will gorge on the treat -- filling themselves with fatty oils as they double in size every six hours, Bloomberg Markets magazine reports in its July issue.
Down the hall, past a rainbow of algae strains arrayed in Petri dishes, Chief Executive Officer Jonathan Wolfson shows off a gallon-size bottle of slightly viscous liquid. After drying the algae, wringing out the oil and shipping it to a refinery, this is the prize: diesel fuel that Wolfson says is chemically indistinguishable from its petroleum-based equivalent and which has already powered a Jeep Liberty and a Mercedes Benz sedan.
“We’ve produced tens of thousands of gallons, and by the end of 2010, I hope I can say we’ve produced hundreds of thousands,” Wolfson, 39, says. “In the next two years, we should get the cost down to the $60 to $80-a-barrel range.”
At that price, Solazyme’s algae fuel would compete with $80-a-barrel oil.
In Japan, the U.K. and the U.S., green energy advocates and some well-heeled investors are obsessed with perfecting a way to turn the scum that coats ponds, lakes and fish tanks into a substitute for gasoline, jet fuel and diesel.
Huge Payoff?
Algae, mostly single-cell photosynthetic organisms that usually elicit a “yuck,” can yield 30 times more oil than crops such as soy. Algal oil doesn’t need much processing before it can power a car, truck or jet engine, says Matt Carr, a policy director at the Biotechnology Industry Organization, a Washington-based advocate for biotech companies.
Algae have advantages over producers of other so-called biofuels. They don’t compete for land with a crop that feeds people and animals. Corn-based ethanol, the first viable biofuel, produces just two-thirds as much energy as gasoline and corrodes pipelines and car engines, says Anthony Marchese, a mechanical engineering professor at Colorado State University, who is taking part in a $48 million Department of Energy research project.
Supporters say algae overcome these disadvantages while eating twice their weight in carbon dioxide, reducing what some scientists say is a leading cause of global warming.
“The potential payoff is huge,” Carr says.
Gates Jumps In
Microsoft Corp. co-founder Bill Gates and Venrock Associates, the Rockefeller family’s venture capital firm, along with the U.K.’s Wellcome Trust Ltd. and Chicago’s Arch Venture Partners, have poured $100 million into Sapphire Energy Inc., which is trying to produce gasoline from algae.
U.S. President Barack Obama talked up alternative fuels during his 2008 campaign, vowing to push for the country to use 60 billion gallons of advanced biofuels such as algae and cellulosic ethanol made from wood chips or grasses by 2030. The DOE has provided more than $185 million in grants for algal biofuels.
The U.K. government-funded Carbon Trust, which aims to trim carbon emissions, is providing 8 million pounds ($11.7 million) to nine universities for algae research. In Japan, Toyota Motor Corp., the world’s largest carmaker, and oil refiner Idemitsu Kosan Co. may join a research program with the University of Tsukuba, northeast of Tokyo, to turn algae into fuel.
Exxon’s Bet
Exxon Mobil Corp. threw its weight behind algae in July 2009. The oil giant, often a target of environmentalists for dismissing concerns about global warming, is investing $600 million.
Exxon is working with La Jolla, California-based Synthetic Genomics Inc., a company founded by J. Craig Venter, who in 2000 mapped the collection of human genes. Venter’s team is working on changing the genetic code of some algae to make it easier to extract the oil.
“We spent two years evaluating all kinds of biofuels, assessing their scalability, technical challenges, environmental impact and commercial viability,” says Emil Jacobs, Exxon Mobil’s vice president of research and development. “Algae had the best potential,” he says, noting that it doesn’t compete for land with food crops.
Operative Word
Potential is the operative word. No one has produced enough algae fuel commercially to run a family’s SUV, let alone make a dent in the more than 200 billion gallons (760 billion liters) of gasoline, diesel and jet fuel that the U.S. uses every year.
The Carbon Trust is funding research to make 70 billion liters by 2030, equivalent to 6 percent of current global diesel use. To do that, algae ponds would have to cover an area larger than Wales or New Jersey, says Ben Graziano, technology commercialization manager at Carbon Trust.
Algae proponents differ on growing methods. Open ponds, the choice of most researchers, rely on photosynthesis. Algae grow and fill with oil as they use sunlight to convert carbon dioxide into sugar and chemical energy. Ponds, though, can get infested by pesky, low-oil native organisms or become the targets of microscopic aquatic creatures.
Solazyme is trying fermentation, producing its algae without light in metal vats. This requires adding sugar or other feedstock before the algae are dried and the oil extracted.
While people may curse the algae that pop up unbidden in their swimming pools, the organisms are expensive to produce commercially because electricity, water and chemicals all cost money. Today’s estimates range from $400 to $600 to produce one barrel of algae oil.
‘Billions of Dollars’
“It may take billions of dollars to set up the infrastructure,” says John Benemann, a biofuels consultant who worked on a 17-year DOE algae study. Companies would need thousands of acres of ponds, pipes to feed in carbon dioxide and fresh water and a link to refineries.
“I don’t know of an oil company that is quaking in their boots worried about algae,” Benemann says.
Chevron Corp. fits that category. Although the second- largest U.S. oil company has a deal with Solazyme to produce algae fuels and funds university research programs, it doesn’t see algae taking over the world.
“Global energy demand is going to increase 40 percent by 2030,” says Jeffrey Jacobs, vice president of Chevron Technology Ventures. “It is not feasible for biofuels to replace conventional fuels.”
Investments Climb
Silicon Valley pioneer Vinod Khosla is among the biggest investors in green technologies. His Khosla Ventures has bets on cellulosic ethanol company Range Fuels Inc. and LS9 Inc., which designs microbes to produce nonpolluting biofuels.
Khosla says algae fuel is a pipe dream.
“We looked at two dozen algae business plans and have not found one that was a viable plan,” says Khosla, speaking from his Menlo Park, California, office.
Ever since the Organization of Petroleum Exporting Countries shocked the world with embargoes and price increases in the 1970s, companies and investors have searched for fossil- fuel alternatives.
In 1978, with drivers fuming over gasoline lines, the Aquatic Species Program, part of the DOE under President Jimmy Carter, studied making diesel-like fuel from the lipids that algae accumulate in their cells. After 17 years, the group concluded that algae couldn’t compete with oil that then averaged about $20 a barrel. President Bill Clinton closed the program in 1996.
Congressional Mandates
Now, green-energy advocates say climate change makes the quest for petroleum alternatives imperative. In the first quarter of 2010, venture investments in clean energy jumped 83 percent from a year earlier to $1.9 billion, San Francisco- based Cleantech Group LLC says.
“With a focus on global warming, we are seeing investors showing interest in a broad range of clean technologies,” Cleantech President Sheeraz Haji says.
The U.S. Congress wants to speed the switch from fossil fuels. The Energy Independence and Security Act of 2007 calls for refiners to use 36 billion gallons of biofuels in gasoline blends by 2022. That’s triple the current amount, which is mostly in the form of corn-based ethanol. Fifteen billion gallons would be starch-based ethanol, with the rest from sources such as algae and switch grass.
The U.S. military, which accounts for about 80 percent of the federal government’s energy demand, is exploring biofuels after spending more than $20 billion on jet, diesel and other fuels for its fleets in 2008.
Cutting Oil Imports
The Defense Advanced Research Projects Agency, the Pentagon’s venture arm and the outfit that’s credited with developing the Internet, is funding a $35 million research program to find a way to make jet fuel from algae that costs less than $3 a gallon by 2013.
“The attraction of algae is that it fills the need to develop renewable energies and cut foreign oil imports,” says George Santana, director of research at Greener Dawn Corp., a San Diego-based firm that promotes renewable energy. “To replace foreign oil, you need to fill up your tank with biofuels.”
Exxon Mobil says it may take as long as 10 years before any algae biofuel reaches motorists. That hasn’t stopped the company from covering itself in green colors.
Soon after signing the deal with Synthetic Genomics, Exxon ran ads featuring a scientist named Joe Weissman: “We are making a big commitment to finding out just how algae can help meet the fuel demands of the world,” Weissman tells the TV viewer.
‘Pays Off Politically’
While Exxon’s $600 million investment is the largest of its kind in algae, it’s infinitesimal for a company that brought in $301.5 billion in revenue last year and plans to spend $28 billion on oil wells, floating platforms and refineries this year.
“For Exxon, the algae bet pays off politically; it helps their public relations and their image,” says Robert Bryce, author of “Gusher of Lies” (PublicAffairs, 2008), a book about the ethanol industry.
Philip New, who heads the alternative fuels unit at BP Plc, says investments in algae’s potential may never be recouped. BP is investing in ways to make ethanol from sugars, which he says offer greater promise.
“We looked at algae and the numbers do not make economic sense,” New says. “Ours is not a greenwash.”
Exxon spokeswoman Cynthia Bergman says the company’s investment and partnership with Synthetic Genomics show Exxon is serious about algae.
BP’s Oil Spill
BP, which is at the center of a massive oil spill in the Gulf of Mexico, has run ads touting its alternative energy investments. In 2000, the London-based company changed its logo to a green, yellow and white sunburst.
BP has poured $500 million into a joint venture called Tropical Bioenergia SA to produce Brazilian ethanol from sugar cane. It has also invested $112.5 million in Verenium Corp. of Cambridge, Massachusetts, to research producing ethanol from agricultural waste and saw grass.
Netherlands oil giant Royal Dutch Shell Plc has investments in ethanol made from sugar cane. In February, it entered a $12 billion joint venture with Brazil’s Cosan SA Industria & Comercio and plans to produce 5 billion liters a year.
“Second-generation biofuels may take another decade,” says Luis Scoffone, Shell’s vice president of alternative energies. “Cost of production will be a factor in determining which technologies win.”
‘Expensive to Produce’
Even so, Shell hasn’t written off algae. It’s building a research plant with HR BioPetroleum Inc. on Hawaii’s Kona coast near commercial algae farms. Here, oblong ponds grow algae for nutritional supplements such as omega-3 fatty acids and protein powders.
Although advocates say that most algae need only sunlight, carbon dioxide and water -- including saltwater -- to grow, the reality is more complicated. Algae are less productive below 15 degrees Celsius (59 degrees Fahrenheit). In the heat, the organisms require constant refreshing. Most ponds have electric paddles to circulate the algae-filled water.
“Open ponds need a lot of water, a lot of electricity,” says Robert Rapier, chief technology officer at Kamuela, Hawaii- based Mercia International, a bioengineering holding company. “Algae are expensive to produce.”
Enormous Projects
Jason Pyle, CEO of Gates-backed Sapphire Energy in San Diego, says the challenges of algae are like those in farming: increasing yields and protecting crops from pests. Sapphire plans to build a 300-acre (120-hectare) plant in New Mexico, which will be completed in 2013. The company says it’s a first step toward producing 1 billion gallons of diesel and jet fuel by 2025.
“These are large projects and take enormous amounts of time and capital,” Pyle, 38, says.
Not far away, Exxon Mobil is building a research facility at Synthetic Genomics headquarters. By the end of next year, the oil company plans a 10-acre site filled with ponds and clear containers called bioreactors, intended to speed up growth. The key is getting different algae strains to work beyond the lab, Exxon’s Jacobs says. To commercially produce algae-based fuel will require billions of dollars.
“If we can pull it off, it will have a significant impact,” Jacobs says.
Freshman Dreams
About 500 miles to the north, Solazyme cofounders Wolfson and Dillon, 39, are sidestepping the challenges of algae ponds. The pair met in 1989 at Emory University in Atlanta and discovered mutual interests in the outdoors and the environment. During that freshman year, Dillon, who was studying biology, and Wolfson, a political science undergrad, agreed to form a biotech company one day.
That off-the-cuff promise began to take shape in 2003. The two raised money from friends, family, New York-based Harris & Harris Group Inc. and Berkeley, California-based Roda Group and started growing algae in open ponds. They wound up with little to show.
“We tried direct photosynthesis but couldn’t figure out how we were ever going to take it to a commercial scale,” Wolfson says. “There were too many problems.”
The two went back to investors. This time, they focused on algae that grow in the dark, as in swamps. Standing in front of a whiteboard, Wolfson explains the process in layman’s terms:
“We put algae in a tank and feed them sugar, such as sugar cane waste, and they make oil and we take the oil out. There’s a lot of science involved, but it’s a bit like making beer.”
‘Green Sludge’
Every few months, Wolfson’s team mails 10-milliliter vials containing millions of frozen algae cells to one of three plants for fermenting. At the Cherokee Pharmaceuticals LLC site in Riverside, Pennsylvania, which used to make antibiotics and food additives, scientists mix a teaspoonful of algae stock with water, cellulosic waste like the bagasse in Dillon’s beaker and such trace elements as potassium.
The tanks keep the brew at about 30 to 40 degrees Celsius. After a few days, there are enough cells to fill a 75,000-liter fermentation tank. By making modifications that Wolfson declines to discuss, the algae convert the sugar into fatty lipids.
“We end up with a green sludge that has a high percentage of oil content -- over 75 percent,” Wolfson says. He won’t divulge how Solazyme extracts the oil except to say that the sludge goes into standard plant-oil extraction equipment similar to that used for soy or canola oil.
‘Silver Buckshot’
Solazyme, which has raised $76 million from VCs such as New York-based Braemar Energy Ventures and Menlo Park-based Lightspeed Venture Partners, has a contract with the U.S. Navy to provide 1,500 gallons of jet fuel. It also received $8.5 million to deliver 20,000 gallons of fuel for Navy ships.
Wolfson says he needs $150 million to build a commercial plant to produce 100 million gallons a year. He predicts that algal oil will cost $60 to $80 a barrel within 12 to 24 months.
“We don’t have a business in fuel until we are at parity with fossil fuels,” he says. “There is no silver bullet for our problem of replacing fossil fuels; maybe a silver buckshot.”
Fans of algae are betting that the tiny organism can produce giant strides for going green.
Exxon $600 Million Algae Investment Makes Khosla See Pipe Dream
By Kambiz Foroohar
June 3 (Bloomberg) -- Inside an industrial warehouse in South San Francisco, California, Harrison Dillon, chief technology officer of startup Solazyme Inc., examines a beaker filled with a brown paste made of sugar cane waste. While the smell brings to mind molasses, this goo, called bagasse, won’t find its way into people-pleasing confections.
Instead, scientists will empty it into 5-gallon metal flasks of algae and water. The algae will gorge on the treat -- filling themselves with fatty oils as they double in size every six hours, Bloomberg Markets magazine reports in its July issue.
Down the hall, past a rainbow of algae strains arrayed in Petri dishes, Chief Executive Officer Jonathan Wolfson shows off a gallon-size bottle of slightly viscous liquid. After drying the algae, wringing out the oil and shipping it to a refinery, this is the prize: diesel fuel that Wolfson says is chemically indistinguishable from its petroleum-based equivalent and which has already powered a Jeep Liberty and a Mercedes Benz sedan.
“We’ve produced tens of thousands of gallons, and by the end of 2010, I hope I can say we’ve produced hundreds of thousands,” Wolfson, 39, says. “In the next two years, we should get the cost down to the $60 to $80-a-barrel range.”
At that price, Solazyme’s algae fuel would compete with $80-a-barrel oil.
In Japan, the U.K. and the U.S., green energy advocates and some well-heeled investors are obsessed with perfecting a way to turn the scum that coats ponds, lakes and fish tanks into a substitute for gasoline, jet fuel and diesel.
Huge Payoff?
Algae, mostly single-cell photosynthetic organisms that usually elicit a “yuck,” can yield 30 times more oil than crops such as soy. Algal oil doesn’t need much processing before it can power a car, truck or jet engine, says Matt Carr, a policy director at the Biotechnology Industry Organization, a Washington-based advocate for biotech companies.
Algae have advantages over producers of other so-called biofuels. They don’t compete for land with a crop that feeds people and animals. Corn-based ethanol, the first viable biofuel, produces just two-thirds as much energy as gasoline and corrodes pipelines and car engines, says Anthony Marchese, a mechanical engineering professor at Colorado State University, who is taking part in a $48 million Department of Energy research project.
Supporters say algae overcome these disadvantages while eating twice their weight in carbon dioxide, reducing what some scientists say is a leading cause of global warming.
“The potential payoff is huge,” Carr says.
Gates Jumps In
Microsoft Corp. co-founder Bill Gates and Venrock Associates, the Rockefeller family’s venture capital firm, along with the U.K.’s Wellcome Trust Ltd. and Chicago’s Arch Venture Partners, have poured $100 million into Sapphire Energy Inc., which is trying to produce gasoline from algae.
U.S. President Barack Obama talked up alternative fuels during his 2008 campaign, vowing to push for the country to use 60 billion gallons of advanced biofuels such as algae and cellulosic ethanol made from wood chips or grasses by 2030. The DOE has provided more than $185 million in grants for algal biofuels.
The U.K. government-funded Carbon Trust, which aims to trim carbon emissions, is providing 8 million pounds ($11.7 million) to nine universities for algae research. In Japan, Toyota Motor Corp., the world’s largest carmaker, and oil refiner Idemitsu Kosan Co. may join a research program with the University of Tsukuba, northeast of Tokyo, to turn algae into fuel.
Exxon’s Bet
Exxon Mobil Corp. threw its weight behind algae in July 2009. The oil giant, often a target of environmentalists for dismissing concerns about global warming, is investing $600 million.
Exxon is working with La Jolla, California-based Synthetic Genomics Inc., a company founded by J. Craig Venter, who in 2000 mapped the collection of human genes. Venter’s team is working on changing the genetic code of some algae to make it easier to extract the oil.
“We spent two years evaluating all kinds of biofuels, assessing their scalability, technical challenges, environmental impact and commercial viability,” says Emil Jacobs, Exxon Mobil’s vice president of research and development. “Algae had the best potential,” he says, noting that it doesn’t compete for land with food crops.
Operative Word
Potential is the operative word. No one has produced enough algae fuel commercially to run a family’s SUV, let alone make a dent in the more than 200 billion gallons (760 billion liters) of gasoline, diesel and jet fuel that the U.S. uses every year.
The Carbon Trust is funding research to make 70 billion liters by 2030, equivalent to 6 percent of current global diesel use. To do that, algae ponds would have to cover an area larger than Wales or New Jersey, says Ben Graziano, technology commercialization manager at Carbon Trust.
Algae proponents differ on growing methods. Open ponds, the choice of most researchers, rely on photosynthesis. Algae grow and fill with oil as they use sunlight to convert carbon dioxide into sugar and chemical energy. Ponds, though, can get infested by pesky, low-oil native organisms or become the targets of microscopic aquatic creatures.
Solazyme is trying fermentation, producing its algae without light in metal vats. This requires adding sugar or other feedstock before the algae are dried and the oil extracted.
While people may curse the algae that pop up unbidden in their swimming pools, the organisms are expensive to produce commercially because electricity, water and chemicals all cost money. Today’s estimates range from $400 to $600 to produce one barrel of algae oil.
‘Billions of Dollars’
“It may take billions of dollars to set up the infrastructure,” says John Benemann, a biofuels consultant who worked on a 17-year DOE algae study. Companies would need thousands of acres of ponds, pipes to feed in carbon dioxide and fresh water and a link to refineries.
“I don’t know of an oil company that is quaking in their boots worried about algae,” Benemann says.
Chevron Corp. fits that category. Although the second- largest U.S. oil company has a deal with Solazyme to produce algae fuels and funds university research programs, it doesn’t see algae taking over the world.
“Global energy demand is going to increase 40 percent by 2030,” says Jeffrey Jacobs, vice president of Chevron Technology Ventures. “It is not feasible for biofuels to replace conventional fuels.”
Investments Climb
Silicon Valley pioneer Vinod Khosla is among the biggest investors in green technologies. His Khosla Ventures has bets on cellulosic ethanol company Range Fuels Inc. and LS9 Inc., which designs microbes to produce nonpolluting biofuels.
Khosla says algae fuel is a pipe dream.
“We looked at two dozen algae business plans and have not found one that was a viable plan,” says Khosla, speaking from his Menlo Park, California, office.
Ever since the Organization of Petroleum Exporting Countries shocked the world with embargoes and price increases in the 1970s, companies and investors have searched for fossil- fuel alternatives.
In 1978, with drivers fuming over gasoline lines, the Aquatic Species Program, part of the DOE under President Jimmy Carter, studied making diesel-like fuel from the lipids that algae accumulate in their cells. After 17 years, the group concluded that algae couldn’t compete with oil that then averaged about $20 a barrel. President Bill Clinton closed the program in 1996.
Congressional Mandates
Now, green-energy advocates say climate change makes the quest for petroleum alternatives imperative. In the first quarter of 2010, venture investments in clean energy jumped 83 percent from a year earlier to $1.9 billion, San Francisco- based Cleantech Group LLC says.
“With a focus on global warming, we are seeing investors showing interest in a broad range of clean technologies,” Cleantech President Sheeraz Haji says.
The U.S. Congress wants to speed the switch from fossil fuels. The Energy Independence and Security Act of 2007 calls for refiners to use 36 billion gallons of biofuels in gasoline blends by 2022. That’s triple the current amount, which is mostly in the form of corn-based ethanol. Fifteen billion gallons would be starch-based ethanol, with the rest from sources such as algae and switch grass.
The U.S. military, which accounts for about 80 percent of the federal government’s energy demand, is exploring biofuels after spending more than $20 billion on jet, diesel and other fuels for its fleets in 2008.
Cutting Oil Imports
The Defense Advanced Research Projects Agency, the Pentagon’s venture arm and the outfit that’s credited with developing the Internet, is funding a $35 million research program to find a way to make jet fuel from algae that costs less than $3 a gallon by 2013.
“The attraction of algae is that it fills the need to develop renewable energies and cut foreign oil imports,” says George Santana, director of research at Greener Dawn Corp., a San Diego-based firm that promotes renewable energy. “To replace foreign oil, you need to fill up your tank with biofuels.”
Exxon Mobil says it may take as long as 10 years before any algae biofuel reaches motorists. That hasn’t stopped the company from covering itself in green colors.
Soon after signing the deal with Synthetic Genomics, Exxon ran ads featuring a scientist named Joe Weissman: “We are making a big commitment to finding out just how algae can help meet the fuel demands of the world,” Weissman tells the TV viewer.
‘Pays Off Politically’
While Exxon’s $600 million investment is the largest of its kind in algae, it’s infinitesimal for a company that brought in $301.5 billion in revenue last year and plans to spend $28 billion on oil wells, floating platforms and refineries this year.
“For Exxon, the algae bet pays off politically; it helps their public relations and their image,” says Robert Bryce, author of “Gusher of Lies” (PublicAffairs, 2008), a book about the ethanol industry.
Philip New, who heads the alternative fuels unit at BP Plc, says investments in algae’s potential may never be recouped. BP is investing in ways to make ethanol from sugars, which he says offer greater promise.
“We looked at algae and the numbers do not make economic sense,” New says. “Ours is not a greenwash.”
Exxon spokeswoman Cynthia Bergman says the company’s investment and partnership with Synthetic Genomics show Exxon is serious about algae.
BP’s Oil Spill
BP, which is at the center of a massive oil spill in the Gulf of Mexico, has run ads touting its alternative energy investments. In 2000, the London-based company changed its logo to a green, yellow and white sunburst.
BP has poured $500 million into a joint venture called Tropical Bioenergia SA to produce Brazilian ethanol from sugar cane. It has also invested $112.5 million in Verenium Corp. of Cambridge, Massachusetts, to research producing ethanol from agricultural waste and saw grass.
Netherlands oil giant Royal Dutch Shell Plc has investments in ethanol made from sugar cane. In February, it entered a $12 billion joint venture with Brazil’s Cosan SA Industria & Comercio and plans to produce 5 billion liters a year.
“Second-generation biofuels may take another decade,” says Luis Scoffone, Shell’s vice president of alternative energies. “Cost of production will be a factor in determining which technologies win.”
‘Expensive to Produce’
Even so, Shell hasn’t written off algae. It’s building a research plant with HR BioPetroleum Inc. on Hawaii’s Kona coast near commercial algae farms. Here, oblong ponds grow algae for nutritional supplements such as omega-3 fatty acids and protein powders.
Although advocates say that most algae need only sunlight, carbon dioxide and water -- including saltwater -- to grow, the reality is more complicated. Algae are less productive below 15 degrees Celsius (59 degrees Fahrenheit). In the heat, the organisms require constant refreshing. Most ponds have electric paddles to circulate the algae-filled water.
“Open ponds need a lot of water, a lot of electricity,” says Robert Rapier, chief technology officer at Kamuela, Hawaii- based Mercia International, a bioengineering holding company. “Algae are expensive to produce.”
Enormous Projects
Jason Pyle, CEO of Gates-backed Sapphire Energy in San Diego, says the challenges of algae are like those in farming: increasing yields and protecting crops from pests. Sapphire plans to build a 300-acre (120-hectare) plant in New Mexico, which will be completed in 2013. The company says it’s a first step toward producing 1 billion gallons of diesel and jet fuel by 2025.
“These are large projects and take enormous amounts of time and capital,” Pyle, 38, says.
Not far away, Exxon Mobil is building a research facility at Synthetic Genomics headquarters. By the end of next year, the oil company plans a 10-acre site filled with ponds and clear containers called bioreactors, intended to speed up growth. The key is getting different algae strains to work beyond the lab, Exxon’s Jacobs says. To commercially produce algae-based fuel will require billions of dollars.
“If we can pull it off, it will have a significant impact,” Jacobs says.
Freshman Dreams
About 500 miles to the north, Solazyme cofounders Wolfson and Dillon, 39, are sidestepping the challenges of algae ponds. The pair met in 1989 at Emory University in Atlanta and discovered mutual interests in the outdoors and the environment. During that freshman year, Dillon, who was studying biology, and Wolfson, a political science undergrad, agreed to form a biotech company one day.
That off-the-cuff promise began to take shape in 2003. The two raised money from friends, family, New York-based Harris & Harris Group Inc. and Berkeley, California-based Roda Group and started growing algae in open ponds. They wound up with little to show.
“We tried direct photosynthesis but couldn’t figure out how we were ever going to take it to a commercial scale,” Wolfson says. “There were too many problems.”
The two went back to investors. This time, they focused on algae that grow in the dark, as in swamps. Standing in front of a whiteboard, Wolfson explains the process in layman’s terms:
“We put algae in a tank and feed them sugar, such as sugar cane waste, and they make oil and we take the oil out. There’s a lot of science involved, but it’s a bit like making beer.”
‘Green Sludge’
Every few months, Wolfson’s team mails 10-milliliter vials containing millions of frozen algae cells to one of three plants for fermenting. At the Cherokee Pharmaceuticals LLC site in Riverside, Pennsylvania, which used to make antibiotics and food additives, scientists mix a teaspoonful of algae stock with water, cellulosic waste like the bagasse in Dillon’s beaker and such trace elements as potassium.
The tanks keep the brew at about 30 to 40 degrees Celsius. After a few days, there are enough cells to fill a 75,000-liter fermentation tank. By making modifications that Wolfson declines to discuss, the algae convert the sugar into fatty lipids.
“We end up with a green sludge that has a high percentage of oil content -- over 75 percent,” Wolfson says. He won’t divulge how Solazyme extracts the oil except to say that the sludge goes into standard plant-oil extraction equipment similar to that used for soy or canola oil.
‘Silver Buckshot’
Solazyme, which has raised $76 million from VCs such as New York-based Braemar Energy Ventures and Menlo Park-based Lightspeed Venture Partners, has a contract with the U.S. Navy to provide 1,500 gallons of jet fuel. It also received $8.5 million to deliver 20,000 gallons of fuel for Navy ships.
Wolfson says he needs $150 million to build a commercial plant to produce 100 million gallons a year. He predicts that algal oil will cost $60 to $80 a barrel within 12 to 24 months.
“We don’t have a business in fuel until we are at parity with fossil fuels,” he says. “There is no silver bullet for our problem of replacing fossil fuels; maybe a silver buckshot.”
Fans of algae are betting that the tiny organism can produce giant strides for going green.
trysail
Catch Me Who Can
- Joined
- Nov 8, 2005
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- 25,593
http://www.bloomberg.com/apps/news?pid=20601110&sid=a9igEwVLWUPk
BP Spill Shows a Profit Buying 2018 Oil, Selling Spot
By Alexander Kwiatkowski and Margot Habiby
June 7 (Bloomberg) -- The oil market is signaling that prices have nowhere to go but up as the biggest spill in U.S. history curbs drilling and makes it more expensive to develop new fields.
Crude’s premium for delivery in eight years compared with today’s price rose 86 percent since the BP Plc-leased Deepwater Horizon rig in the Gulf of Mexico exploded April 20. Oil for December 2018 is $21 a barrel more than next month, compared with $11 before the disaster. More regulation may add $5 to the contracts in coming years, according to Deutsche Bank AG.
President Barack Obama extended a ban on new deepwater permits and exploration by Royal Dutch Shell Plc in the Alaskan Arctic for six months, putting off limits as much as 23.2 billion barrels of potential resources, equal to 76 percent all reserves proven in the U.S. The number of rigs drilling in the Gulf of Mexico plunged 50 percent last week to the lowest level in 16 years, Baker Hughes Inc. reported June 4.
“The president said stop drilling, and now we are seeing the result,” said Adam Sieminski, chief energy economist at Deutsche Bank in Washington. “Before all is said and done, we’re going to lose more rigs in the Gulf.”
A one-year worldwide delay in deepwater drilling may cut 500,000 barrels a day from 2013 supply, according to Sanford C. Bernstein analysts. While that’s less than 3 percent of daily U.S. consumption, it’s almost enough to fuel Argentina, Latin America’s third-biggest economy.
Future Oil Costly
Oil for delivery in December 2018 traded at $92.78 a barrel on the New York Mercantile Exchange on June 4, compared with $71.51 for July 2010 delivery, a premium of $21.27. That spread has grown by $9.82, or 86 percent, since April 19, the day before the accident.
To profit from a wider premium, investors would need to buy a December 2018 futures contract and sell one for nearer delivery, and then reverse those trades once the spread expands.
As prices approach $100 for delivery in 2018, the latest contract on the Nymex, crude for this year is sinking on concern Europe’s debt crisis will derail the global economic recovery. July oil fell 14 percent in May, the most for one month since December 2008. Prices tumbled 4.2 percent on June 4 after a government report showed that the U.S. added fewer jobs than forecast last month and as the euro fell to a four-year low against the dollar, reducing the appeal of commodities.
Share Slump
BP shares have collapsed, losing 33 percent of their value since April 19 amid mounting costs of the clean-up and damage to the company’s reputation. The slump has been felt across the industry, leading to a 14 percent decline so far this year in the MSCI World Energy index.
The prospect of higher costs and a crackdown on drilling are driving up future prices because world demand in 2015 will rise 2.3 percent from now to 88.4 million barrels a day, according to the International Energy Agency in Paris.
U.S. output may be cut by 150,000 to 200,000 barrels a day next year because of new limits, Deutsche Bank’s Sieminski said. The total can feed as much as 35 percent of Exxon Mobil Corp.’s refinery in Baytown, Texas, the largest in the U.S.
BP estimates its production may be reduced by 75,000 barrels a day in 2015 because of delays.
Those amounts are too little to drive up the cost of crude, said Mike Wittner, head of oil research at Societe Generale SA in London.
$101 Forecast
“In the big picture, I don’t think a half million barrels a day of more or less non-OPEC production is really going to change the global balance,” Wittner said in a telephone interview. “It is still going to be Asian-led demand growth bumping up against a maturing supply base. The big picture does not really change.” Wittner forecasts oil averaging $101 a barrel next year.
Brazil has given no signs that limits will be placed on Tupi and related deepwater oil fields, the biggest discovery in the Americas since Mexico’s Cantarell in 1976.
The fewer barrels pumped in the U.S., the more refiners need to turn to the 12-nation Organization of Petroleum Exporting Countries and other foreign suppliers. To meet rising demand, OPEC would activate unused fields, curtailing capacity the world needs during times of disruptions, such as wars and hurricanes. A 500,000 barrel-a-day drop in global output in 2013 would put a greater burden on OPEC, Bernstein analyst Neil McMahon said in a May 28 report.
“Although this may seem small in a global context, such a situation would decrease OPEC spare capacity, especially in the second half of the decade, which would lead to an increase in the oil price,” according to the report.
Deep Waters
The world is growing more dependent on deepwater finds, focusing attention on hard-to-access fields such as Brazil’s Tupi and BP’s Thunder Horse in the Gulf of Mexico. Reservoirs lying more than 1,000 meters (3,280 feet) below the sea surface will make up almost 4 million barrels of daily global production by 2018, more than six times the level this year, according to Bernstein estimates.
OPEC accounted for 41 percent of U.S. imports last year, down from 46 percent in 2008, according to the Energy Department, in keeping with the goals of Obama and previous American presidents to curb dependence on foreign nations.
“Much of our future supplies were supposed to come from deepwater drilling,” David Hufton, managing director of London’s PVM Oil Associates Ltd., the world’s largest broker of over-the-counter crude trading, said in a note. “The environmental risks are now all too apparent.”
Obama Reacts
The spill has dumped as much as 19,000 barrels a day into the Gulf, according to government scientists, after the initial explosion killed 11 workers and sank a $365 million rig. BP has spent about $1.25 billion to stop the flow and scour crude from the Gulf, it said today.
“We owe all those who’ve been harmed, as well as future generations, a full and vigorous accounting of the events that led to what has now become the worst oil spill in U.S. history,” Obama said in the White House Rose Garden on June 1.
Oil producers around the world are preparing for stricter regulation. Norwegian government members are calling for an immediate stop to deepwater drilling offshore, while Russia may tighten its rules, according to Energy Minister Sergei Shmatko.
More regulation means more expenses to consumers through higher commodity prices. Insurers are charging 50 percent more for policies covering oil rigs following the explosion, according to Moody’s Investors Service.
“The marginal costs for new supplies have taken a big upturn,” said PVM’s Hufton. “It is surprising that forward oil prices have not reacted more aggressively.”
BP Spill Shows a Profit Buying 2018 Oil, Selling Spot
By Alexander Kwiatkowski and Margot Habiby
June 7 (Bloomberg) -- The oil market is signaling that prices have nowhere to go but up as the biggest spill in U.S. history curbs drilling and makes it more expensive to develop new fields.
Crude’s premium for delivery in eight years compared with today’s price rose 86 percent since the BP Plc-leased Deepwater Horizon rig in the Gulf of Mexico exploded April 20. Oil for December 2018 is $21 a barrel more than next month, compared with $11 before the disaster. More regulation may add $5 to the contracts in coming years, according to Deutsche Bank AG.
President Barack Obama extended a ban on new deepwater permits and exploration by Royal Dutch Shell Plc in the Alaskan Arctic for six months, putting off limits as much as 23.2 billion barrels of potential resources, equal to 76 percent all reserves proven in the U.S. The number of rigs drilling in the Gulf of Mexico plunged 50 percent last week to the lowest level in 16 years, Baker Hughes Inc. reported June 4.
“The president said stop drilling, and now we are seeing the result,” said Adam Sieminski, chief energy economist at Deutsche Bank in Washington. “Before all is said and done, we’re going to lose more rigs in the Gulf.”
A one-year worldwide delay in deepwater drilling may cut 500,000 barrels a day from 2013 supply, according to Sanford C. Bernstein analysts. While that’s less than 3 percent of daily U.S. consumption, it’s almost enough to fuel Argentina, Latin America’s third-biggest economy.
Future Oil Costly
Oil for delivery in December 2018 traded at $92.78 a barrel on the New York Mercantile Exchange on June 4, compared with $71.51 for July 2010 delivery, a premium of $21.27. That spread has grown by $9.82, or 86 percent, since April 19, the day before the accident.
To profit from a wider premium, investors would need to buy a December 2018 futures contract and sell one for nearer delivery, and then reverse those trades once the spread expands.
As prices approach $100 for delivery in 2018, the latest contract on the Nymex, crude for this year is sinking on concern Europe’s debt crisis will derail the global economic recovery. July oil fell 14 percent in May, the most for one month since December 2008. Prices tumbled 4.2 percent on June 4 after a government report showed that the U.S. added fewer jobs than forecast last month and as the euro fell to a four-year low against the dollar, reducing the appeal of commodities.
Share Slump
BP shares have collapsed, losing 33 percent of their value since April 19 amid mounting costs of the clean-up and damage to the company’s reputation. The slump has been felt across the industry, leading to a 14 percent decline so far this year in the MSCI World Energy index.
The prospect of higher costs and a crackdown on drilling are driving up future prices because world demand in 2015 will rise 2.3 percent from now to 88.4 million barrels a day, according to the International Energy Agency in Paris.
U.S. output may be cut by 150,000 to 200,000 barrels a day next year because of new limits, Deutsche Bank’s Sieminski said. The total can feed as much as 35 percent of Exxon Mobil Corp.’s refinery in Baytown, Texas, the largest in the U.S.
BP estimates its production may be reduced by 75,000 barrels a day in 2015 because of delays.
Those amounts are too little to drive up the cost of crude, said Mike Wittner, head of oil research at Societe Generale SA in London.
$101 Forecast
“In the big picture, I don’t think a half million barrels a day of more or less non-OPEC production is really going to change the global balance,” Wittner said in a telephone interview. “It is still going to be Asian-led demand growth bumping up against a maturing supply base. The big picture does not really change.” Wittner forecasts oil averaging $101 a barrel next year.
Brazil has given no signs that limits will be placed on Tupi and related deepwater oil fields, the biggest discovery in the Americas since Mexico’s Cantarell in 1976.
The fewer barrels pumped in the U.S., the more refiners need to turn to the 12-nation Organization of Petroleum Exporting Countries and other foreign suppliers. To meet rising demand, OPEC would activate unused fields, curtailing capacity the world needs during times of disruptions, such as wars and hurricanes. A 500,000 barrel-a-day drop in global output in 2013 would put a greater burden on OPEC, Bernstein analyst Neil McMahon said in a May 28 report.
“Although this may seem small in a global context, such a situation would decrease OPEC spare capacity, especially in the second half of the decade, which would lead to an increase in the oil price,” according to the report.
Deep Waters
The world is growing more dependent on deepwater finds, focusing attention on hard-to-access fields such as Brazil’s Tupi and BP’s Thunder Horse in the Gulf of Mexico. Reservoirs lying more than 1,000 meters (3,280 feet) below the sea surface will make up almost 4 million barrels of daily global production by 2018, more than six times the level this year, according to Bernstein estimates.
OPEC accounted for 41 percent of U.S. imports last year, down from 46 percent in 2008, according to the Energy Department, in keeping with the goals of Obama and previous American presidents to curb dependence on foreign nations.
“Much of our future supplies were supposed to come from deepwater drilling,” David Hufton, managing director of London’s PVM Oil Associates Ltd., the world’s largest broker of over-the-counter crude trading, said in a note. “The environmental risks are now all too apparent.”
Obama Reacts
The spill has dumped as much as 19,000 barrels a day into the Gulf, according to government scientists, after the initial explosion killed 11 workers and sank a $365 million rig. BP has spent about $1.25 billion to stop the flow and scour crude from the Gulf, it said today.
“We owe all those who’ve been harmed, as well as future generations, a full and vigorous accounting of the events that led to what has now become the worst oil spill in U.S. history,” Obama said in the White House Rose Garden on June 1.
Oil producers around the world are preparing for stricter regulation. Norwegian government members are calling for an immediate stop to deepwater drilling offshore, while Russia may tighten its rules, according to Energy Minister Sergei Shmatko.
More regulation means more expenses to consumers through higher commodity prices. Insurers are charging 50 percent more for policies covering oil rigs following the explosion, according to Moody’s Investors Service.
“The marginal costs for new supplies have taken a big upturn,” said PVM’s Hufton. “It is surprising that forward oil prices have not reacted more aggressively.”
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Eight Questions (and Provisional Answers) About the BP Spill
By Peter Coy and Paul M. Barrett
June 11 (Bloomberg) -- The sea is slow to reveal its secrets, and so is BP Plc. The regulators and other companies caught up in the Gulf of Mexico oil disaster are almost as opaque.
Whether motivated by the need for self-protection, the desire to get it right before releasing information, or the inevitable fog of a shape-shifting crisis, the sometimes conflicting statements released by BP, the Minerals Management Service, and others have left a raft of unanswered questions, as reported in the June 14 issue of Bloomberg Businessweek. How much oil is spewing into the Gulf each day? How much damage is it doing, and will the ecosystem ever recover? Who made the decisions that led to this nightmare?
The woman in charge of measuring the spill, Marcia McNutt of the U.S. Geological Survey, invoked the Rumsfeldian phrase “unknown unknowns” on May 27 while explaining why her Flow Rate Technical Group was having trouble figuring out how much oil was billowing from BP’s broken well (12,000 to 19,000 barrels a day was the May 27th estimate, which was increased to 20,000 to 40,000 barrels a day on June 10).
The same uncertainty surrounds environmental impacts. “I don’t think anyone knows, no matter what they say,” says Nicholas Fisher, a professor of marine science at Stony Brook University in New York. “People want clean, simple answers to clean, simple questions, but we don’t have them.” What follows is a careful attempt to take stock: asking the important questions and laying out the best current thinking on them. At the very least, we should all know what we do not know.
Will oil reach the U.S. East Coast?
This may be the first big question with a definitive answer -- and that is likely to be yes, according to a computer simulation released June 3 by the National Center for Atmospheric Research in Boulder, Colorado.
A detailed animation available on the center’s website shows oil swirling slowly around the Gulf until it gets picked up by the Loop Current, a flow of warm water that snakes into the Gulf and then moves east. Scientists say the Loop Current could carry the slick at a speed of about 100 miles (160 kilometers) a day around the tip of Florida -- potentially soiling the Keys, Biscayne Bay, and Miami Beach -- and up the East Coast to the vicinity of Cape Hatteras, North Carolina.
At that point, according to the computer simulation, most of the oil heads east toward the open ocean -- some reaching across the Atlantic almost to the British Isles, home of BP. The simulation didn’t attempt to predict when that might occur. Oddly, the planet might be better off if oil does escape to the Atlantic, where it will be diluted.
The Boulder animation shows concentrations of oil close to the coasts of Florida, Georgia, and the Carolinas about 4 percent as dense as those near the wellhead, dropping to one ten-thousandth farther out in the ocean. Atlantic beachgoers won’t like it, but the Loop Current could diminish the harm to the Gulf.
Will part of the Gulf of Mexico be a Dead Zone?
Big oil spills of the past are poor guides to the Deepwater Horizon disaster because all of them occurred in shallower water. This time, with the leak at 5,000 feet, a great deal of the oil hasn’t reached the surface. Scientists say that under the immense pressure at that depth, much of it has turned into a diluted mist of hair-width droplets that are staying submerged in vast clouds.
As recently as June 6, BP Chief Executive Officer Tony Hayward said there was no evidence of such plumes in the Gulf. On June 8, however, the National Oceanic & Atmospheric Administration announced that they had indeed been found thousands of feet down. Biologists have little experience with undersea plumes. “This is going to be groundbreaking science,” says Roger Helm, chief of the environmental quality division of the U.S. Fish and Wildlife Service.
Microbes that customarily feed on oil seeping from the seabed are expected to consume most of this oil, but that creates its own problems: The bugs use up oxygen needed by other sea creatures, potentially creating dead zones devoid of animal life, says Frank Muller-Karger, professor of biological oceanography at the University of South Florida. Marine biologist Rick Steiner says two-thirds of the fish and wildlife species injured in the Exxon Valdez spill 21 years ago have yet to fully recover. Stony Brook’s Fisher says that the spill might promote bacteria that convert inorganic mercury into toxic methylmercury, which is taken up in the flesh of fish and other seafood.
How did this happen -- and who’s to blame?
Investigators have begun to assemble the chain of errors that led to the disastrous April 20 explosion that sank the Deepwater Horizon drilling rig, killing 11 crew members and causing oil to pour out of the ruptured riser pipe. What’s not yet clear is who at BP and inside the federal government made the wrong decisions.
The slide toward disaster was greased when BP sought and received permission to use pipes and casings in the well that deviated from the company’s own policies. Then the company obtained an exemption to test the blowout preventer on top of the well at a lower pressure than federal rules required. BP pressed ahead even though, as e-mails released by House investigators show, employees had worried six weeks before the explosion that workers were struggling to control the well. If the government had refused to bend its rules, or if BP had not sought exemptions in the first place, the Deepwater Horizon accident might not have occurred.
What’s unknown is whether the people who asked for and those who granted exemptions were defying orders or believed they were carrying out their superiors’ wishes. Those questions are certain to be explored by investigators and plaintiffs’ lawyers. BP said it was recommitting to safety after a 2005 refinery explosion in Texas City, Texas, that killed 15, and a 2006 oil pipeline leak in Prudhoe Bay, Alaska. It implemented a safety-oriented “operating management system” across 80 percent of company operations in 2009 and was rolling it out to the rest of the company this year.
According to BP’s annual sustainability review, the system “provides a single framework for all BP operations to follow, covering all areas from process safety, to personal health, to environmental performance.” The unanswered question is why this brand-new system failed so utterly.
Is there a chance the relief wells won’t work?
Drilling two relief wells to stop the flow of oil is almost certain to get the job done, just not necessarily right away. “It’s been done thousands of times,” says Nansen Saleri, chief executive officer of Quantum Reservoir Impact in Houston. “Where the uncertainty lies is how much time it is going to take.” That’s because it’s fiendishly difficult to intercept the broken well, which is narrower across than a soccer ball, by drilling another well more than two miles beneath the ocean floor.
Both relief wells might miss -- as other emergency wells have -- requiring a second, third, or fourth try, says Dave Rensink, president-elect of the American Association of Petroleum Geologists. It took Mexico’s state-owned oil company, Petróleos Mexicanos, or Pemex, nine months to plug its Ixtoc I well after an explosion and fire in 1979. The company’s first relief well failed, so it had to drill a second. Eventually more than 140 million gallons of crude spilled into the Gulf of Mexico. Last year, a blowout at a rig off the Australian coast, owned by Thailand’s national oil company, PTT Exploration & Production, required five attempts before it could be plugged by a relief well 10 weeks after the spill began.
“Technology has improved, but it can take a while,” energy banker Tudor Pickering Holt said June 7 in a note to investors. If the well is intercepted in August, as planned, stopping the flow may take another two weeks. BP must not only cement the well shaft, but also plug the well bottom so oil and gas no longer flow into the hole.
How will the oil spill lawsuits proceed?
It may take months, but the 200-and-counting leak-related lawsuits will be consolidated into one or more megacases -- excruciatingly complex proceedings teeming with litigants and lawyers -- and a single federal judge will emerge as the Solomon of the Spill. One man apparently angling for the job is U.S. District Judge Carl J. Barbier, a former head of the Louisiana plaintiffs’ bar and thorn in the side of business. Barbier, who has been hearing preliminary legal motions, announced this month that he preemptively sold his oil-industry bonds to eliminate any “perception of a conflict in these cases.”
Whoever ends up presiding over what may become one of the most convoluted courtroom struggles in U.S. history will wield extraordinary authority. Many plaintiffs’ lawyers want to do battle in New Orleans, where Barbier sits; corporate defendants prefer Houston, U.S. headquarters of the oil industry.
A federal panel in remote Boise, Idaho, will make the geographic call in late July. Six of the 12 federal trial judges in New Orleans have recused themselves because of oil-industry investments or other connections to the controversy. Not Barbier, who was appointed by President Bill Clinton in 1998. “We think Judge Barbier would be a fine judge to preside over this unprecedented litigation,” says Louisiana lawyer Burton LeBlanc of the firm Baron & Budd. The Louisiana Association of Business & Industry would be “skeptical” of such a selection, says vice-president Ginger Sawyer. Her group opposed Barbier’s appointment to the bench, noting his lobbying against legislation aimed at restricting civil lawsuits.
In 2002, the U.S. Supreme Court vindicated the judge’s refusal to step down from a tobacco-liability case, despite the cigarette industry’s allegation of bias. The justices said he had no conflict.
Will anyone go to prison?
Although outraged Americans would like to see people hauled off in handcuffs -- for negligence, for obfuscation, or just as payback -- the road from scorn to prison in cases of this kind is prohibitively long. Jail terms are “very rare,” says Noah Hall, a law professor at Wayne State University in Detroit and former attorney with the National Wildlife Federation. On June 1, U.S. Attorney General Eric Holder said the Justice Dept. had opened criminal and civil probes, although he didn’t say which companies are being investigated. Holder said the government is looking into potential violations of the Clean Water Act and other environmental laws.
Even if criminal charges are filed, such cases are typically settled with guilty pleas and the payment of fines. Hall says that prison terms, when they are imposed, are usually limited to cases of “spiteful, intentional acts,” such as dumping a known toxic substance into a waterway. Following the Exxon Valdez oil spill in Alaska in 1989, Exxon pled guilty to misdemeanors and was hit with $125 million in fines and restitution. (The ship’s captain, Joseph Hazelwood, was convicted of a minor charge and did community service.) In the BP case, “based on everything public,” Hall says, “I’m not sure we’ve seen enough that would warrant jail time.”
Could BP go bankrupt?
Estimates of the potential spill liability for all parties range into the tens of billions of dollars. Credit Suisse has said the disaster may cost BP alone as much as $37 billion over time, almost double this year’s likely profit. That’s raised questions about whether the British oil company will cut its dividend or put one or more of its units into bankruptcy proceedings to protect them from legal claimants and other creditors.
The cost of BP credit default swaps soared on June 9, reaching nine times their pre-spill level. Contrary to headline- grabbing predictions of doom, a Chapter 11 filing by BP seems unlikely, says Barry Adler, a bankruptcy expert at New York University Law School. “Despite the spill, this is a company with valuable assets and strong cash flow; it’s hard to see BP reaching insolvency.” Like many very large companies, BP is self-insured, meaning that it will pay claims out of its own pocket. “We are generating far and above the cash we need to satisfy all of the things we can see,” BP CEO Tony Hayward said in early June.
If evidence of egregious wrongdoing surfaces, that could alter the bankruptcy outlook for BP. A civil jury assessing punitive damages or prosecutors seeking to make a point with enormous criminal fines could push the company toward insolvency. “The uncertainty of potential punitive damages or the credit risk that might come with serious criminal liability could change the picture,” Adler notes. Politics and public perception will also come into play.
The Obama Administration could pressure BP into a reorganization, possibly via bankruptcy court, in which parts of the company were sold off and its leadership replaced. “If we get to the fall and the Loop Current has taken the oil around Florida, bankruptcy becomes a more viable option,” says Baron & Budd’s LeBlanc.
Is a climate and energy bill more or less likely to pass?
Here’s a harsh political reality: The disaster that dramatizes the need to get America off oil makes it harder to pass a bill to help it do so. Before the spill, President Barack Obama tried to win Republican support for climate and energy legislation by tying it to expanded offshore drilling. That tactic is dead. Obama’s new idea is to harness public anger and link a climate-and-energy bill to measures making offshore drilling safer. On June 2 he said the spill sends Congress an urgent signal to complete this work.
The House has already passed a climate bill; it’s far from clear that the Senate’s version will include a cap on carbon emissions -- the most important and politically difficult provision. Also unclear is whether Obama will really fight for the cap, as he promised on May 26. Majority Leader Harry Reid has asked eight Senate committee chairmen to submit language for a new bill by the July 4 recess. The Senate’s third-ranking Democrat, Chuck Schumer of New York, recently suggested that the Senate bill would omit the carbon cap, and that the sponsors of a climate bill, Massachusetts Democrat John Kerry and Connecticut independent Joseph Lieberman, could offer it as an amendment. Isolated in that manner, the cap would surely fail.
On June 8, Senator Lindsey Graham of South Carolina, the only Republican to help draft the Kerry-Lieberman bill, came out against it more forcefully than ever. The next day, he threw his support behind a weaker rival bill -- one with no cap. Kevin Book, a managing director at ClearView Energy Partners, says Obama may need to win back Graham’s support to get 60 votes for a filibuster-proof bill. For environmentalists, this is one crisis that may well go to waste.
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Failed AAA Rated Rembrandt on Wall Street Spurs Opacity Outcry
By Christine Harper, Shannon D. Harrington and James Sterngold
June 21 (Bloomberg) -- Corowa Shire, home to Australia’s biggest hog farm and a three-hour drive from Melbourne, couldn’t be farther from Wall Street.
That didn’t stop the local council, which represents about 11,000 people, from investing A$1 million ($878,900) in one of the most esoteric inventions cooked up by the financial industry, a constant proportion debt obligation, or CPDO, with the catchy name “Rembrandt.” The top-rated note, linked to credit-default swaps on investment-grade companies, lost 93 percent of its value in two years.
“How do you have an AAA rated instrument go belly up as quickly as that one did?” asks Ian Rich, director of corporate services for the council, which is suing its financial adviser, Local Government Financial Services Pty, over the losses. “We’re very straightforward now in our investments. We’re really only investing in term deposits with major banks.”
Wall Street’s penchant for concocting opaque products -- investments that lacked real-time pricing data and were so complex they could only be created and analyzed using computer models -- played an important role in the worst financial crisis since the Great Depression and one that regulatory reform proposals will struggle to curtail. While banks say they’re meeting demand from investors for higher returns, critics say it’s time to rein in instruments that confuse buyers, carry hidden risks and whose main purpose is generating fees.
‘Bewilderment Machine’
“I don’t think it’s the job of the financial community to bewilder its clients,” said Nicholas Brady, 80, who served as U.S. Treasury Secretary under former President George H.W. Bush. “They were making so much money they just wanted to keep the bewilderment machine churning.”
A community like Corowa never had a chance of understanding what it bought. Even if it had a model, “you really had to spend months and months playing with it and understanding exactly all of the moving parts to be able to see where the failings were,” said David Watts, a London-based strategist at CreditSights Inc. who was an early skeptic about the notes.
Over the last decade the financial industry justified the rapid growth in products such as CPDOs, collateralized debt obligations and credit-default swaps by arguing that they were sold to qualified investors who understood the risks and were able to bear them. Their view was echoed in July 1998 Senate testimony by then-Federal Reserve Chairman Alan Greenspan, who said that “regulation of derivatives transactions that are privately negotiated by professionals is unnecessary.”
Citigroup, AIG
A decade later his assessment was proven wrong when some of the industry’s most sophisticated participants, including Citigroup Inc. and American International Group Inc., were bailed out of bad bets on contracts whose risks they underestimated. By using government funds and cutting interest rates, politicians and central bankers laid the cost on taxpayers, savers and people living on fixed incomes.
The damage from opaque, complex products extended to communities and schools, such as Alabama’s Jefferson County and Harvard University, which paid hundreds of millions of dollars to cancel interest-rate swaps. The early 2008 collapse of the $330 billion market for auction-rate securities, products that were touted as safe, cash-like investments, led to losses for investors including the state of Hawaii.
New Rules
Now the U.S. Congress and policy makers around the world are considering ways to make the financial system safer. New rules aim to force privately negotiated derivatives -- contracts whose value is tied to securities or specific events such as changes in interest rates or the weather -- onto exchanges or clearinghouses, where investors will have more information about prices. Banks would also be required to hold more capital against instruments deemed too complicated to trade openly.
The U.S. Securities and Exchange Commission, the Financial Industry Regulatory Authority and the Basel Committee on Banking Supervision are considering proposals that would limit the risks from some complex products, as well as curb their growth.
The stakes for Wall Street are high. Its profit growth in recent decades has depended on an ability to devise new and increasingly opaque products.
As competition and technology eroded margins from selling stocks and bonds, the outstanding notional value of over-the- counter derivatives climbed to $614.7 trillion at the end of 2009 from $88.2 trillion 10 years earlier, according to the Bank for International Settlements. That’s more than seven times the notional amount of exchange-traded futures and options outstanding, BIS data show, and more than 10 times the world’s annual gross domestic product.
Over the same period, financial-industry profits in the U.S. surged to $414.1 billion, or 36 percent of all domestic corporate profits, from $224.9 billion, or 29 percent, according to U.S. Commerce Department data.
‘Exotic Instruments’
“The more complex, generally speaking, the more profit there’s going to be for the derivatives dealer,” Warren Buffett, the billionaire investor who controls Berkshire Hathaway Inc., told the Financial Crisis Inquiry Commission on June 2. As contracts like interest-rate swaps became commonplace and profit margins eroded, banks “embedded more exotic instruments, and that’s where the money was,” Buffett said.
One of those exotic instruments, a synthetic collateralized debt obligation known as Abacus, is at the center of a lawsuit brought by the SEC against Goldman Sachs Group Inc. Unlike regular CDOs, created by pooling bonds, loans or asset-backed securities whose cash flows derive from payments on mortgages or other types of debt, synthetic CDOs package credit-default swaps, which are themselves derivative side bets on the value of debt instead of the debt itself.
Misleading Investors
The government suit alleges New York-based Goldman Sachs misled investors by failing to tell them a hedge fund that planned to bet on the deal’s failure had played a role in selecting the underlying swaps. Goldman Sachs has called the case unfounded, saying that the buyers were sophisticated investors capable of analyzing the contracts independently.
Trading stocks listed on exchanges was once a lucrative business for Wall Street. That changed on May 1, 1975, when regulators abolished fixed commissions and opened the markets to price competition. The move accelerated brokers’ efforts to create more complicated, less commoditized investments.
One avenue was through private placements, a way for companies to raise funds by selling unregistered securities to accredited buyers with limited disclosure.
Rule 144a
Private placements were first permitted under the Securities Act of 1933. In 1990, the SEC adopted Rule 144a to make offerings more appealing to qualified institutional buyers, known as QIBs, who had more than $100 million in assets, by eliminating a two-year holding period.
The SEC also passed Regulation S that year, permitting firms to sell securities to foreign buyers without registering them in the U.S. Goldman Sachs’s Abacus CDO was offered to Germany’s IKB Deutsche Industriebank AG under Regulation S and to New York-based ACA Management LLC under Rule 144a.
“There was a feeling that the commission had been tight- fisted with the rules before then and that the markets were sophisticated enough for people to analyze these private offerings,” said David Martin, a partner at Covington & Burling LLP in Washington and head of the SEC’s corporate finance division from 2000 to 2002.
Junk Bonds, CDOs
Rule 144a and Regulation S opened the door to a proliferation of products traded outside public exchanges, including junk bonds and asset-backed securities. Global sales of asset-backed securities, including bonds linked to mortgages, commercial real estate loans and CDOs, climbed to more than $2.68 trillion in 2006 from $51.5 billion in 1990, according to data compiled by trade magazine Asset-Backed Alert.
By 2000, CDOs backed by corporate loans and junk bonds, almost all of them done as private placements, were a fast- growing segment of the asset-backed securities market. Global issuance of all types of CDOs jumped to a peak of $482 billion in 2006 from $5.7 billion in 1995, the magazine’s data show.
When the economy soured in 2001, one company that took a hit was American Express Co.’s financial advisers unit, which was later spun off to become Ameriprise Financial Inc. It recognized about $1 billion in pretax losses in the first half of the year from junk bonds and CDOs made up of junk bonds.
“What you’re seeing now in the Abacus transaction is similar to what happened in junk bonds and the CBO and CLO market,” said Satyajit Das, a Sydney-based former derivatives banker at Citigroup and Merrill Lynch & Co. and author of “Traders, Guns & Money,” referring to CDOs backed by bonds or loans. Those losses “should have given people an inkling that maybe this was a little more complicated than people thought.”
13 Boxes, 14 Arrows
Instead, Wall Street created more complicated products, such as CDOs that bundled pieces of other CDOs or credit-default swaps. In the case of Abacus, the pool was made up of credit- default swaps on 90 residential mortgage-backed securities with the second-lowest investment-grade rating, according to a Goldman Sachs sales document. Each of the 90 securities contained thousands of loans and was described in a prospectus that ran hundreds of pages. A one-page diagram of the structure in the document showed 13 boxes connected by 14 arrows.
Goldman Sachs, the most profitable securities firm in Wall Street history, is also being sued by Australian hedge-fund company Basis Capital over another synthetic CDO known as Timberwolf bought by its Basis Yield Alpha Fund (Master). Basis says that Goldman Sachs benefited from the market’s opacity and that the investment bank, whose internal e-mails showed an executive called the deal “shi**y” the same week Basis was completing its purchase, hoped to profit from a bet against it.
‘Little Ability’
“Because Timberwolf and similar CDOs were not publicly traded and were illiquid, BYAFM had little ability to obtain information about prevailing prices” for the deal, the fund’s complaint says. “In contrast, Goldman, because of its market position, was uniquely knowledgeable not only about Timberwolf but about the market for CDOs in general.”
Goldman Sachs said in a statement on June 9 that Basis made its investment at market levels it deemed attractive, that the fund had agreed not to place any reliance on Goldman Sachs and that Goldman Sachs had itself lost “several hundred million dollars” on Timberwolf securities.
Investors were tempted into such purchases because they promised the same low risk as owning high-quality debt like U.S. government bonds with better returns. That enabled fund managers to beat AAA rated benchmark indexes, said Das, who began his financial industry career in 1977.
‘Beat the Index’
“If you’re going to sell somebody any structure -- I learned this 25 years ago -- you don’t really need to talk about the product,” Das said. “You simply need to say, ‘Your index is this, and if you do this over the next quarter or two quarters, you’re going to beat the index by X.’”
It wasn’t only the clients who couldn’t resist the promise of boosting returns without adding risk. Financial companies including Citigroup, Merrill Lynch and Zurich-based UBS AG also lost billions after buying and holding onto the AAA rated portions of CDO debt.
The bets soured when mortgage-backed securities underlying the deals declined in value after defaults on subprime home loans made to unqualified borrowers prompted downgrades of the debt. Only a few market participants saw the trouble brewing, including Goldman Sachs, whose executives began looking for ways to bet against securities tied to subprime debt in late 2006.
“Banks should be limited in how many of each instrument they’re allowed to trade,” said Paul Wilmott, a London-based author and quantitative-finance instructor who has also been a critic of the industry’s over-reliance on mathematics and statistics. “Otherwise it’s dangerous, and it’s not just dangerous to your bank and your clients, it’s dangerous to innocent people as well.”
Rembrandt CPDO
That’s what residents of Corowa Shire discovered after their local council bought Rembrandt CPDO notes in November 2006 that were issued by ABN Amro Holding NV, a Dutch bank later split up and sold to banks including Edinburgh-based Royal Bank of Scotland Plc. The deal helped lead to RBS’s collapse and takeover by the U.K. government.
ABN Amro created the first CPDO earlier that year, an AAA rated note called Surf yielding twice the rate of other bonds that were barely investment grade. It did this by selling credit-default swaps on two indexes of 250 North American and European companies with investment-grade ratings. Credit-default swaps act like insurance because the seller collects premiums in exchange for promising to pay the buyer if the reference securities, in this case corporate bonds underlying the index, suffer losses or a default.
AAA Rated Notes
CPDOs were allowed to sell protection on bonds with a value of up to 15 times the cash in the investment pool. Leverage was adjusted depending on the performance of the underlying swaps, and companies with deteriorating ratings were purged from the index every six months.
The Rembrandt CPDO offered investors AAA rated notes that paid 1.9 percentage points above Australia’s three-month bank- bill swap rate, or about 8.25 percent at the time, according to a suit brought by 10 councils in Australia’s federal court against Local Government Financial Services, which manages money for towns in New South Wales.
Rich, 48, who oversees Corowa’s $14 million in investments, said he depended on LGFS for all of his information about Rembrandt. LGFS is suing ABN Amro and ratings company Standard & Poor’s, asserting that it was misled. LGFS Chief Executive Officer Peter Lambert didn’t respond to an e-mailed message.
All But Worthless
ABN Amro, in a defense document received by the court on June 2, denies it engaged in any misleading or deceptive conduct and says LGFS had “sole responsibility” for determining whether the Rembrandt notes were appropriate investments. Paul Nicols, a partner at law firm Allens Arthur Robinson in Sydney who is representing ABN Amro, declined to comment on the case.
Frank Briamonte, a spokesman for McGraw-Hill Cos., which owns S&P, said the claim is “without legal or factual merit, and we will defend ourselves vigorously against it.”
The Dutch bank wasn’t alone in selling CPDOs. From 2006 to 2007, firms including UBS, JPMorgan Chase & Co. and Lehman Brothers Holdings Inc. created their own notes, selling more than $4 billion of them to investors in six currencies, according to data compiled by CreditSights.
By the end of 2008, the securities were all but worthless. Banks, hedge funds, insurance companies and other fixed-income asset managers rushed to buy default protection through the derivatives indexes underlying the CPDOs, sending the cost of the indexes to record highs and deflating the value of the notes. The Australian councils that bought Rembrandt received less than 7 cents on the dollar after the value fell to a level that triggered an unwinding of the deal to prevent a total loss, according to the lawsuit.
‘Not Informed’
The councils “were not informed that the proceeds of the notes would become the subject of a complex derivatives contract, whereby ABN Amro London would use the proceeds of the notes to take a notional position against a portfolio of credit- default swap indexes,” said Amanda Banton, a partner at law firm Piper Alderman in Sydney, which represents the councils.
CPDOs were the “most egregious example of this wave of financial innovation, but it’s different in degree not really in kind,” said Frank Partnoy, a professor at the University of San Diego School of Law and a former derivatives trader and author of “Infectious Greed: How Deceit and Risk Corrupted the Financial Markets.”
“Most financial innovations benefit Wall Street banks, not the ultimate savers or borrowers,” he said.
Derivatives Reform
U.S. lawmakers will this week continue negotiating over reform legislation that aims to prevent a future financial calamity, including limiting the risks created by complex, hard- to-value instruments.
Lenders, with the exception of some mortgage providers, may be forced to hold a stake in asset-backed securities or CDOs that they offer to investors. That would lead them to suffer losses along with clients when products lose value.
The legislation also would bring most of the over-the- counter derivatives market under regulation for the first time, requiring the most actively traded contracts to be moved through central clearinghouses and traded over regulated platforms that would increase price transparency.
For derivatives that are too complex to be cleared, regulators will require dealers and major market participants to hold “substantially higher” capital against the trades, according to a bill approved by the Senate that’s now being reconciled with one passed by the House of Representatives.
Too Many Exemptions
Still, Stephen Cecchetti, a former Federal Reserve official now head of the monetary and economic department at the Bank for International Settlements in Basel, Switzerland, warned in a June 16 speech in New York against allowing too many exemptions.
“The argument typically advanced in favor of non- standardized OTC derivatives is that markets need tailored hedging tools,” Cecchetti said. “I would argue, however, that one can design standardized contracts for nearly all risk types and that standardized contracts are very good hedging tools.”
Another move toward greater transparency was the SEC’s approval in February of a proposal by the Financial Industry Regulatory Authority, the self-regulatory industry group known as Finra, to end an exemption that allowed asset-backed securities to trade without reporting prices to Trace, which publishes corporate bond trades. Starting next February, traders must report prices, though Finra won’t decide whether to make them public until it has studied the data, Finra said.
Basel Rules
Revised bank capital guidelines agreed to by the Basel committee last year, which could be implemented by the end of 2011, will increase how much capital banks must hold against securitized assets, especially those that repackage the assets.
“It’s going to severely deter that whole business,” said David Kelly, a former counterparty credit-risk manager at Citigroup who is now director of credit-product development at derivatives-valuation firm Quantifi Inc. in New Jersey.
Some industry veterans doubt that the proposed laws and regulations will make a significant difference. Richard Breeden, who led the SEC from 1989 to 1993 when Rule 144a was issued, said at a conference in Washington last week that new rules won’t matter unless regulators gain the courage to make banks smaller and less profitable. Alan “Ace” Greenberg, the 82- year-old former chairman of Bear Stearns Cos. who is now a vice chairman emeritus at JPMorgan, told an audience at New York’s 92nd Street Y last week that he doesn’t expect regulation to damage the industry.
‘Little Cancers’
“I really don’t,” said Greenberg, who has worked on Wall Street since 1949. “Regulation never hurt our business.”
While CPDOs survived only briefly, other types of complex products continue to thrive after the financial crisis. One area that’s still growing is structured products, registered securities that combine features of bonds and derivatives and are sold in small, illiquid batches, often to retail investors.
Sales of structured products to U.S. retail investors may set a record this year, with $21.5 billion sold through June 8, according to StructuredRetailProducts.com, a database used by the industry. Sales fell to $33.9 billion last year after peaking at $37.6 billion in 2008.
“Even investors that got burned are back buying these things,” said Marilyn Cohen, president of Envision Capital Management in Los Angeles, who manages $270 million in fixed- income assets. “They’re like little cancers in finance.”
Proponents of the notes argue that they’re registered securities with full disclosure to investors and that they offer buyers tailored bets that they couldn’t get elsewhere. And while many of the notes are sold to retail investors, others are limited to institutional buyers.
Contag Beta
One example of a structured note sold to an institutional investor is JPMorgan’s May 10 sale of $150 million of one-year notes whose returns are linked to an algorithmic trading system for commodity futures known as the J.P. Morgan’s Contag Beta Alternate Benchmark Class A Excess Return Index. The index measures hypothetical returns achieved by using a set of rules for trading in and out of 19 commodity-futures contracts.
Justin Perras, a spokesman for JPMorgan in New York, declined to comment.
“There are a lot of unanalyzable financial products -- including some stocks -- but it’s ultimately the responsibility of the end-user investor to understand, or retain someone who understands, what they own,” said Orin Kramer, general partner of hedge fund Boston Provident Partners LP, who is on leave from his role as chairman of New Jersey’s Investment Council, which oversees the state’s pension fund.
John C. Bogle, the 81-year-old founder of the Vanguard Group of mutual funds who has argued for tougher financial oversight, said investors have been fooled into believing they benefit from Wall Street innovations rather than bear the cost.
“The financial system subtracts value from society,” said Bogle. “Wall Street represents a cost that takes away from the proven long-term returns available in the market. That’s the reality.”
http://noir.bloomberg.com/apps/news?pid=20601085&sid=ana_DCpXgsSI
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Bankers Who Broke Big Dig With Swaps Gone Awry Get Paid for Fix
By Michael McDonald
June 30 (Bloomberg) -- The same bankers who sold Massachusetts interest-rate swaps that blew up the debt financing for the so-called Big Dig road and tunnel project in Boston -- costing taxpayers $100 million -- are getting even more money to fix what they broke.
UBS AG bankers showed up at the Massachusetts Turnpike Authority in 2001 with a solution to a growing deficit at the state agency overseeing the $15 billion project. The bank gave the authority $29.1 million for an interest-rate swap linked to $800 million of Big Dig bonds, an agreement meant to cut the cost of paying back the debt and cover part of the budget shortfall. JPMorgan Chase & Co. and Lehman Brothers Holdings Inc. made similar deals.
The deal with UBS backfired as credit markets faltered two years ago, costing toll payers $36.3 million in extra interest and leading the Zurich-based bank to demand as much as $400 million to end the arrangement when the Big Dig bonds’ insurer lost its top credit ratings.
“There was really no mention of any downside of these swaps,” said Christy Mihos, a turnpike board member from 1999 to 2004 who voted for the UBS agreement. “It was portrayed as a no-brainer that we could not lose.”
The same Wall Street banks that triggered the worst financial collapse since the Great Depression also helped government borrowers from Greece to California paper over deficits with derivative deals promising savings on borrowings. Many of the agreements failed when credit markets seized up in 2008 and swap payments from banks no longer covered rising debt costs.
Swap Betting
States, cities and nonprofits have spent about $5 billion unwinding the transactions since then, said Peter Shapiro, managing director of Swap Financial Group in South Orange, New Jersey, an adviser to state and local governments.
“Use of these types of derivatives is making a bet,” said Joseph Giglio, a business professor at Northeastern University in Boston and former head of municipal securities at Chase Manhattan Bank. “If it seems too good to be true, it is.”
The fallout from the Big Dig swaps didn’t stop Massachusetts from giving new business to many of the same banks and officials who arranged them.
Governor Deval Patrick, 53, hired UBS in September 2007 to advise him on overhauling the state’s transportation finances. The agreement came about nine months after he named former UBS banker Henry Dormitzer undersecretary for administration and finance. The former UBS banker was a member of a team that sold the firm’s swap to the turnpike, according to Mihos.
Buried Bodies
“If you want to find out where the bodies are buried, you’ve got to go talk to the gravedigger,” Patrick, who’s seeking re-election this year, said in an Oct. 29 interview in Boston regarding his use of UBS as an adviser.
Dormitzer, who left the Patrick administration in 2008, declined to comment when reached by telephone.
Massachusetts also hired Paul Ladd, a former turnpike official who authorized the UBS swap in 2001, as part of an investment-banking team that refinanced about $2 billion of Big Dig debt this year.
The state signed up underwriters that would get Massachusetts the best price on its bonds, said Jay Gonzalez, the governor’s secretary of administration and finance.
“Whether or not a particular individual happened to work at the firm that has some history or another was not an overriding concern,” Gonzalez said in an interview. “We wanted to make sure we got the breadth in the underwriting team with the banks that were capable of selling hundreds of millions of dollars worth of bonds that have a real story behind them.”
Downtown Transformation
The Massachusetts Turnpike Authority was created in 1952 to oversee a 138-mile (229-kilometer) section of what is now part of Interstate 90. In 1997, the Boston-based agency was put in charge of the Big Dig, the most expensive public works project in U.S. history, which transformed the city’s downtown by replacing an aging elevated highway with tunnels.
While the project’s cost was estimated at about $5 billion when work began in 1991, expenses soared, sparking federal and state probes and criminal charges against contractors. No charges were brought related to the bond sales and derivatives.
To help cover budget shortfalls, the authority took the projected savings from swaps as upfront payments instead of waiting for them to accrue over time, according to Fitch Ratings. It collected $5.3 million from JPMorgan in 1999, $29.1 million from UBS in 2001 and $35 million from Lehman in 2002, according to its annual report.
‘Humongous Deficit’
“It’s easy to sit back now and say it was a terrible decision,” said Jordan Levy, a board member from 1997 to 2004 who voted for the swaps. “We were sitting there with this humongous deficit and they presented us a way out.”
In a swap transaction, two parties exchange payments, typically a floating one for a fixed. State and local governments usually sold variable-rate bonds and negotiated with banks to leave them paying fixed interest that was lower than prevailing municipal rates.
In addition to the expenses of the UBS swap, the authority paid $408,000 of extra interest since 2002 on a JPMorgan derivative linked to $100 million of Big Dig bonds, said Cyndi Roy, a spokeswoman for the state’s administration and finance office. The contract is set to last until 2029, according to a copy of the agreement.
The turnpike also had to set aside as much as $19.6 million of cash as collateral against the JPMorgan contract as central banks slashed benchmark rates amid the credit crisis, according to bond documents.
Justin Perras, a JPMorgan spokesman in New York, declined comment.
Lehman Payment
The authority paid $3.2 million to end the Lehman Brothers swap after the New York-based bank declared bankruptcy. Lawyers for what remains of the firm are disputing the amount paid, according to bond documents. The turnpike was told by bankers in 2007 that terminating the derivative contract could cost as much as $43 million.
The UBS swap backfired in January 2008 when the exchange of payments began. The agency, rated close to below-investment grade at Baa2 and Baa3 by Moody’s Investors Service, was unable to refinance $800 million of its bonds into floating rates to match the agreement. It paid an extra $49.9 million in interest through the end of March this year and received $13.6 million from the bank, Roy said.
The UBS burden worsened last year when a unit of Ambac Financial Group Inc. that insured both the Big Dig bonds and the swap lost its top credit ratings. UBS sought a payment to end the swap, which the state said would cost as much as $400 million.
$100 Million
The demand forced Governor Patrick to step in. The Democratic-controlled Legislature dissolved the turnpike authority and pledged $100 million a year from a sales-tax increase to a new transportation agency so it could refinance the bonds. UBS dropped its payment claim and Patrick refinanced all of the highway’s Big Dig debt, including a sale of $800 million of floating-rate bonds to match the bank’s swap.
Doug Morris, a spokesman for UBS in New York, declined to comment.
“I’m glad the governor is cleaning up these messes,” Mark Montigny, a Democratic state senator from New Bedford who last year sought a formal probe of the turnpike swaps, said in an interview. “However, until we investigate and assign blame and find out if in fact there is criminal behavior or at a minimum serious civil recovery, then we learn nothing.”
The governor’s new transportation department in November hired Bank of America Corp., JPMorgan Chase, Barclays Plc and Citigroup Inc. to refinance the turnpike’s Big Dig bonds, paying the underwriters $7.7 million for securities sold in March and May this year, according to sale documents.
Working With Massachusetts
Ladd, the turnpike’s former chief financial officer who authorized the UBS swap, according to a copy of the contracts, represented Charlotte, North Carolina-based Bank of America working with the state to sell the bonds, said Jonathan Davis, the official who oversaw the offering.
Ladd left the turnpike in 2002 and is based in Boston. He declined to comment in a telephone call.
Paul Haley represented Barclays in a role similar to Ladd’s, Davis said. Haley was the Lehman Brothers banker who sold the turnpike a swap in 2002, according to Mihos, and a former chairman of the Massachusetts House Ways and Means Committee. He joined Barclays when the London-based bank bought Lehman’s investment banking and trading operations after its bankruptcy. He declined to comment.
‘Brink of Ruin’
The state used Mintz, Levin, Cohn, Ferris, Glovsky & Popeo PC, the turnpike’s bond counsel on the derivative, according to Mihos and Levy, as its disclosure counsel. John Regier, a lawyer at the Boston-based firm, said it verified the accuracy of information on the state’s finances given to investors for the bond sale and had nothing else to do with the transaction.
“The turnpike authority was on the brink of ruin because of the financial decisions made earlier this decade,” said Mary Connaughton, who served on the turnpike’s board from 2005 to 2009 and is running for state auditor this year as a Republican. “It doesn’t make sense to bring back the same old players.”
http://noir.bloomberg.com/apps/news?pid=20601103&sid=aRgwgCC8ORsA
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Prehistoric Whale Ate Other Whales For Breakfast
by Christopher Joyce
http://media.npr.org/assets/news/2010/07/01/whale_custom.jpg?t=1277911287&s=2
Obviously, either you can't read or your reading comprehension is seriously compromised. Thus far, you haven't gotten anything right. Face it, your main problem is that you're a dope.
Until you demonstrate an ability to process English, I'm not going to respond to fabricated nonsense arising in lieu of your ability to read. End of convo.
by Christopher Joyce
http://media.npr.org/assets/news/2010/07/01/whale_custom.jpg?t=1277911287&s=2
Obviously, either you can't read or your reading comprehension is seriously compromised. Thus far, you haven't gotten anything right. Face it, your main problem is that you're a dope.
Until you demonstrate an ability to process English, I'm not going to respond to fabricated nonsense arising in lieu of your ability to read. End of convo.
Last edited:
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http://online.wsj.com/article/SB100...ml?mod=WSJ_LifeStyle_Food#articleTabs=article
No Age Limit on Picky Eating
By SHIRLEY S. WANG
No Age Limit on Picky Eating
By SHIRLEY S. WANG
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The BP Spill: Has the Damage Been Exaggerated?
By Michael Grunwald / Port Fourchon, La. Thursday, Jul. 29, 2010
President Obama has called the BP oil spill "the worst environmental disaster America has ever faced," and so has just about everyone else. Green groups are sounding alarms about the "Catastrophe Along the Gulf Coast," while CBS, Fox and MSNBC slap "Disaster in the Gulf" chryons on all their spill-related news. Even BP fall guy Tony Hayward, after some early happy talk, admitted the spill was an "environmental catastrophe." The obnoxious anti-environmentalist Rush Limbaugh has been a rare voice arguing that the spill — he calls it "the leak" — is anything less than an ecological calamity, scoffing at the avalanche of end-is-nigh eco-hype.
Well, Rush has a point. The Deepwater explosion was an awful tragedy for the 11 workers who died on the rig, and it's no leak; it's the biggest oil spill in U.S. history. It's also inflicting serious economic and psychological damage on coastal communities that depend on tourism, fishing and drilling. But so far — while it's important to acknowledge that the long-term potential danger is simply unknowable for an underwater event that took place just three months ago — it does not seem to be inflicting severe environmental damage. "The impacts have been much, much less than everyone feared," says geochemist Jacqueline Michel, a federal contractor who is coordinating shoreline assessments in Louisiana. (See pictures of the Gulf oil spill.)
Yes, the spill killed birds — but so far, less than 1% of the birds killed by the Exxon Valdez. Yes, we've heard horror stories about oiled dolphins — but, so far, wildlife response teams have collected only three visibly oiled carcasses of any mammals. Yes, the spill prompted harsh restrictions on fishing and shrimping, but so far, the region's fish and shrimp have tested clean, and the restrictions are gradually being lifted. And, yes, scientists have warned that the oil could accelerate the destruction of Louisiana's disintegrating coastal marshes — a real slow-motion ecological calamity — but, so far, shorelines assessment teams have only found about 350 acres of oiled marshes, when Louisiana was already losing about 15,000 acres of wetlands every year.
The disappearance of more than 2,000 square miles of coastal Louisiana over the last century has been a true national tragedy, ravaging a unique wilderness, threatening the bayou way of life and leaving communities like New Orleans extremely vulnerable to hurricanes from the Gulf. And while much of the erosion has been caused by the re-engineering of the Mississippi River — which no longer deposits much sediment at the bottom of its Delta — quite a bit has been caused by the oil and gas industry, which gouged 8,000 miles of canals and pipelines through coastal wetlands. But the spill isn't making that problem much worse. Coastal scientist Paul Kemp, a former Louisiana State University professor who is now a National Audubon Society vice president, compares the impact of the spill on the vanishing marshes to "a sunburn on a cancer patient." (See TIME's graphic "100 Days of the BP Spill.")
Marine scientist Ivor Van Heerden, another former LSU prof who's working for a spill response contractor, says "there's just no data to suggest this is an environmental disaster. I have no interest in making BP look good — I think they lied about the size of the spill — but we're not seeing catastrophic impacts," says Van Heerden, who, like just about everyone else working in the Gulf these days, is being paid out of BP's spill response funds. "There's a lot of hype, but no evidence to justify it."
The scientists I spoke with cite four basic reasons the initial eco-fears seem overblown. First, the Deepwater Horizon oil, unlike the black glop from the Valdez, is comparatively light and degradable, which is why the slick in the Gulf is dissolving surprisingly rapidly now that the gusher has been capped. Second, the Gulf of Mexico, unlike Prince William Sound, is balmy at more than 85 degrees, which also helps bacteria break down oil. Third, heavy flows of Mississippi River water helped keep the oil away from the coast, where it can do much more damage. Finally, Mother Nature can be incredibly resilient. Van Heerden's assessment team showed me around Casse-tete Island in Timbalier Bay, where new shoots of spartina grasses were sprouting in oiled marshes, and new leaves were growing on the first black mangroves I had ever seen that were actually black. "It comes back fast, doesn't it?" Van Heerden said. (See 12 people to blame for the Gulf oil spill.)
Van Heerden is controversial in Louisiana, so I should mention that this isn't the first time he and Kemp helped persuade me the conventional wisdom about a big story was wrong. Shortly after Hurricane Katrina, when the Army Corps of Engineers was still insisting that a gigantic surge had overwhelmed its levees, they gave me a tour that debunked the prevailing narrative, demonstrating that most of the breached floodwalls showed no signs of overtopping. Eventually, the Corps admitted that they were right, that the surge in New Orleans was not so gigantic, that engineering failures had drowned the city. But there was still a lot of resentment down here of Van Heerden and his big mouth, especially after he wrote an I-told-you-so book about Katrina. He made powerful enemies at LSU, lost his faculty job, and is now suing the university. Meanwhile, he's been trashed locally as a BP shill ever since he downplayed the spill in a video on BP's website.
Read more here: http://www.time.com/time/nation/article/0,8599,2007202,00.html#ixzz0v4ue1TEk
By Michael Grunwald / Port Fourchon, La. Thursday, Jul. 29, 2010
President Obama has called the BP oil spill "the worst environmental disaster America has ever faced," and so has just about everyone else. Green groups are sounding alarms about the "Catastrophe Along the Gulf Coast," while CBS, Fox and MSNBC slap "Disaster in the Gulf" chryons on all their spill-related news. Even BP fall guy Tony Hayward, after some early happy talk, admitted the spill was an "environmental catastrophe." The obnoxious anti-environmentalist Rush Limbaugh has been a rare voice arguing that the spill — he calls it "the leak" — is anything less than an ecological calamity, scoffing at the avalanche of end-is-nigh eco-hype.
Well, Rush has a point. The Deepwater explosion was an awful tragedy for the 11 workers who died on the rig, and it's no leak; it's the biggest oil spill in U.S. history. It's also inflicting serious economic and psychological damage on coastal communities that depend on tourism, fishing and drilling. But so far — while it's important to acknowledge that the long-term potential danger is simply unknowable for an underwater event that took place just three months ago — it does not seem to be inflicting severe environmental damage. "The impacts have been much, much less than everyone feared," says geochemist Jacqueline Michel, a federal contractor who is coordinating shoreline assessments in Louisiana. (See pictures of the Gulf oil spill.)
Yes, the spill killed birds — but so far, less than 1% of the birds killed by the Exxon Valdez. Yes, we've heard horror stories about oiled dolphins — but, so far, wildlife response teams have collected only three visibly oiled carcasses of any mammals. Yes, the spill prompted harsh restrictions on fishing and shrimping, but so far, the region's fish and shrimp have tested clean, and the restrictions are gradually being lifted. And, yes, scientists have warned that the oil could accelerate the destruction of Louisiana's disintegrating coastal marshes — a real slow-motion ecological calamity — but, so far, shorelines assessment teams have only found about 350 acres of oiled marshes, when Louisiana was already losing about 15,000 acres of wetlands every year.
The disappearance of more than 2,000 square miles of coastal Louisiana over the last century has been a true national tragedy, ravaging a unique wilderness, threatening the bayou way of life and leaving communities like New Orleans extremely vulnerable to hurricanes from the Gulf. And while much of the erosion has been caused by the re-engineering of the Mississippi River — which no longer deposits much sediment at the bottom of its Delta — quite a bit has been caused by the oil and gas industry, which gouged 8,000 miles of canals and pipelines through coastal wetlands. But the spill isn't making that problem much worse. Coastal scientist Paul Kemp, a former Louisiana State University professor who is now a National Audubon Society vice president, compares the impact of the spill on the vanishing marshes to "a sunburn on a cancer patient." (See TIME's graphic "100 Days of the BP Spill.")
Marine scientist Ivor Van Heerden, another former LSU prof who's working for a spill response contractor, says "there's just no data to suggest this is an environmental disaster. I have no interest in making BP look good — I think they lied about the size of the spill — but we're not seeing catastrophic impacts," says Van Heerden, who, like just about everyone else working in the Gulf these days, is being paid out of BP's spill response funds. "There's a lot of hype, but no evidence to justify it."
The scientists I spoke with cite four basic reasons the initial eco-fears seem overblown. First, the Deepwater Horizon oil, unlike the black glop from the Valdez, is comparatively light and degradable, which is why the slick in the Gulf is dissolving surprisingly rapidly now that the gusher has been capped. Second, the Gulf of Mexico, unlike Prince William Sound, is balmy at more than 85 degrees, which also helps bacteria break down oil. Third, heavy flows of Mississippi River water helped keep the oil away from the coast, where it can do much more damage. Finally, Mother Nature can be incredibly resilient. Van Heerden's assessment team showed me around Casse-tete Island in Timbalier Bay, where new shoots of spartina grasses were sprouting in oiled marshes, and new leaves were growing on the first black mangroves I had ever seen that were actually black. "It comes back fast, doesn't it?" Van Heerden said. (See 12 people to blame for the Gulf oil spill.)
Van Heerden is controversial in Louisiana, so I should mention that this isn't the first time he and Kemp helped persuade me the conventional wisdom about a big story was wrong. Shortly after Hurricane Katrina, when the Army Corps of Engineers was still insisting that a gigantic surge had overwhelmed its levees, they gave me a tour that debunked the prevailing narrative, demonstrating that most of the breached floodwalls showed no signs of overtopping. Eventually, the Corps admitted that they were right, that the surge in New Orleans was not so gigantic, that engineering failures had drowned the city. But there was still a lot of resentment down here of Van Heerden and his big mouth, especially after he wrote an I-told-you-so book about Katrina. He made powerful enemies at LSU, lost his faculty job, and is now suing the university. Meanwhile, he's been trashed locally as a BP shill ever since he downplayed the spill in a video on BP's website.
Read more here: http://www.time.com/time/nation/article/0,8599,2007202,00.html#ixzz0v4ue1TEk
trysail
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This chart shows the relative weight in the Electoral College of a voter in each state. A voter in Wyoming casts a vote that counts more than 3 times as much as a voter in California.
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Byron In Exile
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trysail
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I'm fairly certain the key words are "eligible voters" not "population" but I confess I'm not able to precisely reproduce the New York Times figure.
I grant you that California's ~37,000,000 population divided by 55 Electoral College votes equals ~672,727. The 2008 California popular vote total in the Presidential election was 13,561,900 ( divided by 55 equals 246,580 ).
Working backwards, under the assumption that the Times got it roughly right,
410,647 × 55 = 22,585,585
Does 22,585,585 sound reasonably close to the number of voters registered in California? With 13,561,900 votes cast, that would represent a turnout of ~60% if 22,585,585 is the correct number of registered voters.
'fraid that's the best I can so for you at the moment.
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Hmmm. Do you think this might result in a rise in average temperature?
http://rossmckitrick.weebly.com/uploads/4/8/0/8/4808045/surfacetempreview.pdf
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http://noir.bloomberg.com/apps/news?pid=20601110&sid=ao2LXAqrNRbk
Glaxo Antibiotic Finding Looms Large in Market of Few New Drugs
By Ellen Gibson
Glaxo Antibiotic Finding Looms Large in Market of Few New Drugs
By Ellen Gibson
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http://noir.bloomberg.com/apps/news?pid=20601110&sid=apSfWqFuzuss
Obama Plays Venture Capitalist-in-Chief With Clean-Energy Bets
By Mike Dorning
Obama Plays Venture Capitalist-in-Chief With Clean-Energy Bets
By Mike Dorning
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What a lovely, lovely day!
I spent the day cruising The Bay in the company of a fellow I've known for more than 50 years. The weather was near-perfect at about 90° ( F., of course ) with about a 50% cloud cover and comparatively low humidity ( say 50% ). The breeze was light at about 7-8 knots out of the southeast. The temperature was hot enough to be comfortable but not too hot ( on the water ).
Departing the island's harbor, we passed my grandfather's farm ( his second home )— one of the island's most distinctive and well-known properties. This is where my father and his siblings spent the halcyon days of their childhoods. It's impossible to imagine a place that could be more of a paradise for a child in those days. It's where my father and his siblings learned to sail, ride, fish and hunt. My grandfather's various schooners were anchored in the harbor and his children's sailboats were close at hand.
Growing up, some— but nowhere near all— of my contemporaries were aware of my family's connection with the island even though my father had no direct contact following his marriage. He once drove me there and gave me a cursory tour of some of the places he haunted as a child. I remember that day clearly, despite being far too young to understand what I was seeing. Though I spent a brief amount of time on the island one summer when my aunt rented a house there, I was largely unfamiliar with the place until my early 30s when I began to cruise there on my own sailboat.
I spent a fair number of exceedingly pleasant nights aboard my boat anchored in the cove, the harbor or nearby. Only those familiar with tidewater, salt marshes, loblolly pine and the signature profile of low flat shoreline will ever be able to understand the emotional bond that scene provides a native.
The remainder of the day was spent exploring the tributaries of a single creek. Notwithstanding the fact that I've spent years in this area and was aware of the creek's existence, I'd never been there. I've seen it on the charts a hundred times and never had the time or inclination to head in there. I couldn't have been more surprised. In spite of the fact that it's no more than 7 miles from one of the country's major metropolitan areas, the scenery is indistinguishable from what you'd see in numerous other rivers that are at a greater remove from the city.
We drove by the creek on our way home. Driving an automobile to it or any of its tributaries does not do justice to an approach from the water. I'd never known how one would drive to the creek and I'd never been down any of those roads before. It's not the same but now I, at least, know how it's done.
One of the pleasures of passing up and down The Bay is observing the large commercial traffic on its way to and from the port city. I've seen thousands of large vessels before— including Nimitz-class carriers— but always from a distance. Two weeks ago, we went up to the port for a look-see and went over to have a look at the passenger ship facility. A ginormous vessel was tied up alongside the pier taking consumables aboard. Approaching from the stern, we motored alongside. She was The Sovereign Of The Seas— home port: Valletta ( Malta ). I have never seen anything on the water that close at hand and that fucking enormous in my life. I was speechless. I was stunned. The scale of the thing was utterly mind-boggling.
What at first appeared to be a 360° saucer-like bridge midships atop the vessel turned out to be some kind of entertainment venue- we never did figure out whether it was a disco or a casino or a restaurant. The vessel's slab sides rose what seemed hundreds of feet over our heads as we continued alongside— nothing but an immense white steel wall. After what seemed minutes, we finally arrived at the ship's bow. As I looked up at the damn thing I got dizzy. Because of the rake of the bow we were directly beneath the ship's prow, nothwithstanding the fact that it appeared to be hundreds of feet overhead.
I subsequently read that at the time of her 1988 launch by Royal Caribbean, Sovereign Of The Seas was the world's largest cruise ship. She is 880 feet long ( a U.S. Navy Nimitz-class carrier is 1,092 feet in length ), 105 feet in breadth and draws ~25 feet. She has capacity for 2,852 passengers and was recently sold by Royal Caribbean to another cruise ship line.
I don't think I'd enjoy sailing aboard her; it'd be like living in a floating hotel— why not just get a hotel room— what's the difference?
http://upload.wikimedia.org/wikipedia/commons/thumb/e/e2/MS_Sovereign_of_the_Seas.jpg/300px-MS_Sovereign_of_the_Seas.jpg http://upload.wikimedia.org/wikipedia/commons/thumb/b/b8/RCI_Sovereign_of_the_Seas.jpg/220px-RCI_Sovereign_of_the_Seas.jpg
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trysail
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It is easily seen that water vapor [ H20(g) ] is— BY FAR— the dominant "greenhouse" gas.
____________________________________
If the Earth’s axis of rotation were vertical with respect to the path of its orbit around the Sun, the size of the heating imbalance between equator and the poles would be the same year round, and the seasons we experience would not occur. Instead Earth’s axis is tilted off vertical by about 23 degrees. As the Earth orbits the Sun, the tilt causes one hemisphere and then the other to receive more direct sunlight and to have longer days.
The total energy received each day at the top of the atmosphere depends on latitude. The highest daily amounts of incoming energy (pale pink) occur
at high latitudes in summer, when days are long, rather than at the equator. In winter, some polar latitudes receive no light at all (black). The Southern Hemisphere receives more energy during December (southern summer) than the Northern Hemisphere does in June (northern summer) because Earth’s orbit is not a perfect circle and Earth is slightly closer to the Sun during that part of its orbit.
All atmospheric gases have a unique pattern of energy absorption: they absorb some wavelengths of energy but are transparent to others. The absorption patterns of water vapor (blue peaks) and carbon dioxide (pink peaks) overlap in some wavelengths. Carbon dioxide is not as strong a greenhouse gas as water vapor, but it absorbs energy in wavelengths (12-15 micrometers) that water vapor does not, partially closing the “window” through which heat radiated by the surface would normally escape to space.
http://earthobservatory.nasa.gov/Features/EnergyBalance/page7.php
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gotsnowgotslush
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We were sitting on the beach and enjoying the sea breeze and the bright sun and the waves.
And the pleasure craft came into view. Behemoth. Leviathan. So enormous it was monstrous.
It blotted out the view of Martha's Vineyard. It took up a piece of the sky, for itself.
Small ships are welcome decorations for the omnipresent sea.
This large toy ship reduced the majestic ocean, to a household bathtub.
It is no wonder, that it's sister ship ripped itself open, on a rocky ledge.
How can you keep track, of all that acreage?
A single Tic Tac candy for Cthulhu? Yikes
Now, I think I would lose my mind,
if I saw Cthulhu.
And the pleasure craft came into view. Behemoth. Leviathan. So enormous it was monstrous.
It blotted out the view of Martha's Vineyard. It took up a piece of the sky, for itself.
Small ships are welcome decorations for the omnipresent sea.
This large toy ship reduced the majestic ocean, to a household bathtub.
It is no wonder, that it's sister ship ripped itself open, on a rocky ledge.
How can you keep track, of all that acreage?
A single Tic Tac candy for Cthulhu? Yikes
Now, I think I would lose my mind,
if I saw Cthulhu.
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Cthulhu >>>>> H.P. Lovecraft >>>>> S.T. Joshi >>>>> H. L. Mencken >>>> "that immense protein factory"
trysail
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There has been a good view of three planets throughout the summer:
Your continuous, intentional and gratuitous use of insulting language is noted.
QUOTE:
It [ "denier" ] is just polite profanity. I think denier is the worst of the bunch, because it was deliberately crafted to associate a group with another group that denied the Holocaust occurred–and the fact that there is so much handwaving about how innocent it really is just confirms the perceived value of the term to those who like to use it.
I laugh when I get called a warmist or alarmist, because the discordance with reality is so clear to me. I get angry when I am called a denier or denialist, because I… don’t… like… being associated with neo Nazis.
UNQUOTE
It is not interested in bristlecone pines or the accuracy of the historic temperature record or the Gaspé series. It is not interested in Vostok ice cores or the intracacies of construction of paleoclimatological temperature proxies. It is not interested in physics or istotopes or atmospheric concentrations of gases.
It takes its marching orders from the commissars of the Politburo. It is consumed by astounding and unimaginable levels of envy and jealousy. It is impossible to comprehend the depth of the envy and jealousy that motivates it. It is no more interested in science than a nematode.
Were it not for the existence of scriptwriters, it wouldn't know what to say. It could be the biggest scientific scam since Piltdown Man and it wouldn't know ( or care ). It is a useful id*iot and nothing other than a political junkie.
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trysail
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The most detailed sunspot ever obtained in visible light was seen by a new telescope at NJIT’s Big Bear Solar Observatory.
Credit: Big Bear Solar Observatory
http://www.bbso.njit.edu/
Believe it or not, this is what a sunspot looks like:
http://www.cieletespace.fr/files/imagecache/img_400x_scale/files/image_du_jour/011-03410-01high.jpg
http://www.eurekalert.org/multimedia/pub/web/25046_web.jpg
http://www.eurekalert.org/multimedia/pub/web/25046_web.jpg
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