About 150 tourists are reportedly being held hostage in Peru. Locals are demanding a response to oil spills that have polluted their river.
Paola Rosa-Aquino, Natalie Musumeci – November 4, 2022
A man shows oil contamination inside Block 192, a dormant Amazon oil field in Peru.Reuters
Locals from a Peruvian area of the Amazon rainforest have reportedly taken up to 150 tourists hostage.
Those detained reportedly include citizens from the US, UK, Spain, France, and Switzerland.
Locals took the hostages in protest of repeated oil spills plaguing the region, RPP Noticias reported.
Locals from an Indigenous tribe in a Peruvian area of the Amazon rainforest have taken up to 150 tourists, including Americans, hostage in protest of repeated oil spills plaguing the region, according to a local report.
Ángela Ramírez, who was among those taken hostage on Thursday while traveling by boat near Cuninico in the Loreto province of Peru, told local media that those taken captive include elderly people, pregnant women, and a one-month-old baby.
“They told us that it was because they wanted attention from the state, in search of a solution for oil spills that have happened 46 times, which led to the death of two children and a woman,” Ramírez told RPP Noticias.
The people being held include Peruvian nationals as well as citizens from the United States, the United Kingdom, Spain, France, and Switzerland, Ramírez told the news outlet.
The woman said that it has been indicated that the hostages could be held for up to eight days. No one had been harmed.
Ramírez’s mother, Araceli Alva, told RPP Noticias that her daughter had been traveling with cyclists through the Peruvian jungle last week. Ramírez decided to leave by boat via the river on Thursday and was taken, Alva said.
Ramírez issued a plea on her Facebook story, saying, “The sooner they’re heard, the sooner they’ll let us go. Help me share, we are well physically. Help me help them be heard,” according to the news outlet.
Watson Trujillo Acosta, the leader of the Cuninico community behind the action, told RPP Noticias that the tourists were taken hostage “in a radical and indefinite manner” in order “to be able to attract the attention of the government.”
“They are in a safe place on the banks of the Marañón River gorge in front of the native community of Cuninico,” said Acosta, who claimed 70 tourists and nationals were taken, according to the news outlet.
Acosta said that his community is seeking “a state of emergency [to] be declared due to the constant [oil] spills that have been taking place in our territory.”
He also wants the Peruvian government to lead an investigation into the matter.
The US Department of State and Peru’s Ministry of Foreign Affairs did not immediately respond to requests for comment about the situation by Insider on Friday.
It’s an outrage that Saudis use Arizona’s water for free. I’ll work to stop it
Kris Mayes – November 4, 2022
Arizona should not be giving its water away to the Saudi Arabians, or anyone else for that matter. Yet, for the past seven years, the attorney general and governor have allowed a Saudi company to pump out more than $38 million worth of groundwater from La Paz County for free.
That’s right. Arizona is giving away its groundwater for nothing to one of the richest nations on Earth – and to the severe detriment of Arizonans.
It is an outrage and a scandal at a time when the Saudi government is deliberately raising the price of gasoline for U.S. citizens by cutting back OPEC oil supplies.
As attorney general, I will work to put an end to these sweetheart Saudi deals.
Below-market leases short Arizona schools
As first disclosed in The Arizona Republic last June, the State Land Department has leased state trust land to the Saudi-owned Fondomonte corporation for $25 per acre, so that the Saudi company could grow alfalfa and send it back to Saudi Arabia to feed that country’s cows.
More unbelievably, the state is allowing this company to pump groundwater for free. The $25/acre land lease is well below market rates, and the water being given away comes from the Butler Valley Basin and Vicksburg – areas that Arizona cities may very well need to rely on for their water needs in the near future.
To comply with the Gift Clause, a government expenditure must (1) serve a public purpose, and (2) the consideration the public has paid must not far exceed the value received.
As stated by the Arizona Supreme Court 38 years ago, the deal between the government and the private entity cannot be “so inequitable and unreasonable” that it amounts to providing a subsidy to the private party.
Giving away more than $38 million of groundwater for free is both inequitable and unreasonable. Agreeing to lease state land to a Saudi company for only one-sixth of the market price for similar land is probably inequitable and unreasonable as well. Pursuant to the Arizona Constitution, money that is generated from state trust land leases must go to benefit Arizona K-12 schools.
Wells are going dry, complaints unanswered
Ground water is used to irrigate an alfalfa field, April 7, 2022, at Fondomonte’s Butler Valley Ranch near Bouse.
Four months ago, the La Paz County supervisors filed a complaint with Attorney General Mark Brnovich concerning the below-market Fondomonte lease and the groundwater giveaway. To date, Brnovich has done nothing, not even respond to the county supervisors.
Moreover, several years ago, more than 500 La Paz County residents signed a petition that they hand-delivered to Gov. Doug Ducey’s advisers, voicing their outrage about the free groundwater giveaway.
Recently, I traveled to Vicksburg and met with La Paz County Supervisor Holly Irwin, who showed me the Fondomonte farm in that western Arizona community. Alfalfa fields stretch for miles, and commercial wells can be seen from the road gushing the state’s precious and irreplaceable water at thousands of gallons per minute.
Irwin also took me to a nearby Baptist church whose well has been dewatered. She told me that many of her constituents living around the Fondomonte farms have had their wells sucked dry by the Saudi-owned farms.
Records at the Department of Water Resources show that the Saudis are drilling deeper and deeper wells, which will likely cause residential wells to go dry.
During my first week as attorney general, I will request an auditor general’s audit of all industrial-scale leases of state trust land where water is being pumped to determine if the rates are below market and how much school funding has been lost as a result.
If such abuses have occurred, I will work to ensure that the companies are required to restore the proper funding to the state and our schools.
I will also proactively advise the Arizona State Land Department on an ongoing basis that leasing water at rates that are significantly below market rates could represent a violation of the state’s Gift Clause and that the leaseholders could face efforts to recover undercharges in the future.
Arizona’s water supplies have never been more threatened.
Lakes Mead and Powell are less than 150 feet from “dead pool” status and hydrologists believe they will hit dead pool sometime in 2023. It is time for Arizona’s leaders to act like they care about Arizona more than a country thousands of miles away that is trying to harm America.
I will do that as Arizona’s next attorney general.
Kris Mayes is the Democratic candidate for Arizona attorney general. She served two terms on the Arizona Corporation Commission.
Big agriculture warns farming must change or risk ‘destroying the planet’
Dominic Rushe – November 2, 2022
Photograph: Jeff McIntosh/AP
Food companies and governments must come together immediately to change the world’s agricultural practices or risk “destroying the planet”, according to the sponsors of a report by some of the largest food and farming businesses released on Thursday.
The report, from a taskforce within the Sustainable Markets Initiative (SMI), a network of global CEOs focused on climate issues established by King Charles III, is being released days before the start of the United Nation’s Cop27 climate summit in Egypt.
Many of the world’s largest food and agricultural businesses have championed sustainable agricultural practices in recent years. Regenerative farming practices, which prioritize cutting greenhouse gas emissions, soil health and water conservation, now cover 15% of croplands.- ADVERTISEMENT -https://s.yimg.com/rq/darla/4-10-1/html/r-sf-flx.html
But the pace of change has been “far too slow”, the report finds, and must triple by 2030 for the world to have any chance of keeping temperature rises under 1.5C, a level that if breached, scientists argue, will unleash even more devastating climate change on the planet.
The report is signed by Bayer, Mars, McCain Foods, McDonald’s, Mondēlez, Olam, PepsiCo, Waitrose and others. They represent a potent political and corporate force, affecting the food supply chain around the world. They are also, according to critics, some of those most responsible for climate mismanagement with one calling the report “smoke and mirrors” and unlikely to address the real crisis.
Food production is responsible for a third of all planet-heating gases emitted by human activity and a number of the signatories have been accused of environmental misdeeds and “greenwashing”. Activist Greta Thunberg is boycotting Cop this year having called the global summit a PR stunt “for leaders and people in power to get attention”.
“We are at a critical tipping point where something must be done,” said the taskforce chair and outgoing Mars CEO, Grant Reid. “The interconnection between human health and planetary health is more evident than ever before.” Big food companies and agriculture must play a big part in changing that, said Reid. “It won’t be easy but we have got to make it work,” he said.
Agriculture is the world’s largest industry. Pasture and cropland occupy around 50% of the planet’s habitable land and uses about 70% of fresh water supplies. The climate crisis is challenging the industry across the world but the group’s call for change comes as the industry – which employs 1 billion people – is facing supply chain issues in the wake of the coronavirus pandemic and soaring inflation. It also comes amid mounting skepticism about promises to change from companies that have contributed to climate change.
These current issues must not detract from the need for change, the report argues. “With the inflationary environment and widespread supply chain disruption, it would be easy to reduce our focus on the longer-term challenge of scaling regenerative farming. But we believe it’s vital we maintain a sense of urgency. We must take action now to avoid more acute crises in the future,” its authors write.
Sunny George Verghese, chief executive of Olam, one of the world’s largest suppliers of cocoa beans, coffee, cotton and rice, said: “We cannot continue to produce and consume food and feed and fiber in the way we are doing today unless we don’t mind destroying the planet.
“The only way out for us is how we transition to a more resilient food system that will allow us to meet the needs of a growing population without the resource intensity we have today.”
The report studied three food crops, potatoes, rice and wheat, and has made policy recommendations it will present at Cop27.
The taskforce’s members are working to make the short-term economic case for change more attractive to farmers. “It’s just not compelling enough for the average farmer,” said Reid. More widely the report argues industry and government must also work harder to address the knowledge gap and make sure farmers are following best practices. Third, all parties involved in the agriculture industry from farmers to food producers to government, banks and insurers need to align behind encouraging a shift to more sustainable practices.
“It involves change for all the players including the government, private, public companies and others. No one player can do this on their own, this has to be a collaboration of the willing. What needs to happen now is action and delivery,” said Reid.
Over the next six months, the group will assess how they can spread the taskforce’s work with the aim of establishing a common set of metrics for measuring environmental outcomes, establishing a credible system of payments for farmers for environmental outcomes, easing the cost of farmers transitioning to sustainable practices, ensuring government policy rewards farmers for greening their business and encouraging the sourcing of crops from particular areas converting to regenerative farming.
Devlin Kuyek, a researcher at Grain, a non-profit organization that works to support small farmers, said it was increasingly difficult for big agricultural and food companies to ignore climate change. “But I don’t think any of these companies – say a McDonald’s – has any commitment to curtail the sales of highly polluting products. I don’t think PepsiCo is going to say the world doesn’t need Pepsi.”
Kuyek pointed out that Yara, another signatory to the report, is the world’s largest supplier of nitrogen-based fertilizers, “which are responsible for one out of every 40 tonnes of greenhouse gas emitted annually”.
“It’s pretty disingenuous,” said Kuyek. “Small, local food systems still feed most of the people on the planet and the real threat is that the industrial system is expanding at the expense of the truly sustainable system. Corporations are creating a bit of smoke and mirrors here, suggesting they are part of the solution when inevitably they are part of the problem.”
Considering the controversial histories of some of the companies involved in the report, Verghese said he expected criticism and scrutiny. “All companies have to stand up to the scrutiny of being attacked if there is real greenwashing. There is no place to hide,” he said. “As far as Olam is concerned we are very clear on our targets, we have had the confidence to make these targets public. All of us have progressed along the sustainable journey. It is not that we have not made mistakes in the past but as we have become better at this we are willing to be subject to scrutiny.”
Both Reid and Verghese said the scale of the issues the world’s food supply is facing cannot be underplayed but that more governments and companies were becoming convinced of the need for urgent change. “I believe change can be made,” said Verghese. “I am optimistic. The fact that these kinds of coalitions are emerging is very positive. We are all otherwise very strong rivals and competitors. We hate each other’s guts, we don’t come together on anything unless there is a huge crisis. Everyone is recognizing there is a huge crisis. We need to come together.”
He was accused of stealing huge amounts of water over 23 years. Here’s why no one noticed
Dale Kasler, Ryan Sabalow – November 1, 2022
JOHN WALKER / jwalker@fresnobee.com
California’s water police struggle to track where water is flowing and whether someone is taking more than they’re supposed to.
A criminal case unfolding in the San Joaquin Valley underscores how the federal government seems to have similar problems.
Prosecutors say they uncovered a massive water theft that went on for 23 years without anyone noticing.
Earlier this year a federal grand jury indicted Dennis Falaschi, the former general manager of the Panoche Water District in the western San Joaquin Valley, on charges of conspiracy, theft of government property and filing false tax returns.
Falaschi’s alleged crime stemmed from the federal government’s operation of the Central Valley Project, the system of reservoirs and canals that dates to President Franklin Roosevelt’s administration.
According to prosecutors, Falaschi engineered a brazen scheme to steal $25 million worth of water from the U.S. Bureau of Reclamation, operator of the Central Valley Project. More specifically, Falaschi stands accused of having his underlings siphon water from the Delta-Mendota Canal, the main conduit for delivering federal water to farms along the west side of the San Joaquin Valley and part of Silicon Valley.
He then billed Panoche customers for this stolen water and used the proceeds to pay “himself and other co-conspirators exorbitant salaries, fringe benefits and personal expense reimbursements,” the indictment says.
How Panoche Water District legal trouble started
Falaschi’s legal troubles began in 2017, when the state controller’s office released an audit showing that the financial controls at Panoche were too lax. Among other things, staffers were allowed to use district credit cards to buy Oakland A’s and Raiders season passes, and tickets to a Katy Perry concert.
A month later, Falaschi left Panoche. Then in 2018 the state attorney general’s office charged him and three other former district employees with embezzling $100,000 from Panoche and illegally burying toxic chemicals on district property. Prosecutors said Falaschi allegedly used the embezzled funds to buy a pair of slot machines and some kitchen appliances, among other things. That case is still pending.
The latest indictment covers a scheme that, according to prosecutors, began in 1992 and wasn’t discovered until April 2015 when a canal maintenance worker saw a whirlpool above the equipment that prosecutors say Falaschi had hidden in the canal to siphon off the water.
The theft lasted long enough to enable Falaschi to grab a total of 130,000 acre-feet of water — enough to fill about 13% of Folsom Lake, prosecutors said.
Last year district officials made a civil settlement over the missing water, agreeing to pay $7.5 million to the federal government and another $1 million to an umbrella agency, the San Luis & Delta-Mendota Water Authority, which buys water from the feds.
The indictment came months after the civil settlement. The grand jury says Falaschi had several of his employees install a valve mechanism in the canal — submerged below the water line — near the district’s headquarters in Firebaugh.
Falaschi, who now lives in Aptos, could receive up to 24 years in prison if convicted.
He has pleaded innocent to the criminal charges. In a statement, his Fresno lawyer Marc Days blasted the feds for prosecuting Falaschi “over a leak from the government’s rotted pipe which the government failed to repair,” and for relying on the statements of “unreliable and incompetent witnesses motivated by their own self-interest.”
Days said the amount of water the federal government accuses Falaschi of taking pales in comparison to some of the other leaks from the same canal.
He said area farm districts receive “massive amounts of unmetered water,” including one leak that Days alleges siphons off 200 cubic feet a second, an amount that in a year would surpass the water prosecutors allege Falaschi stole over those two decades. The federal government, Days claims, has known about the problems but fails to do anything to prevent them.
Mary Lee Knecht, a spokeswoman for the Bureau of Reclamation, declined comment because of the pending case.
Why missing water goes undetected
Falaschi’s successor at Panoche, Ara Azhderian, said it’s no secret that water goes missing throughout the Delta-Mendota system. Evaporation alone takes a significant toll, he said.
In fact, Azhderian said Falaschi’s alleged scheme likely went unnoticed for so long due to the sheer size of the Delta-Mendota Canal and the volume of water it delivers.
Two million acre-feet of water moves through the canal in a typical year, and the canal is nearly 117 miles long.
“When you think about the system and how long it is, how big it is,” he said, “… it was such a small amount in the scheme of things as to be undetectable.”
Others say the problems along the canal — whether through massive leaks or by alleged thefts — highlight just how difficult it is to keep tabs on the state’s most precious resource.
“We really don’t know where our water is going,” said Jeffrey Mount, a water expert at the Public Policy Institute of California. “Where it really breaks down for us now is in this ever-tightening water world where we’re having to deal with less. Major chunks of it, we don’t know where it goes and who’s using how much.”
Who we elect on Nov. 8 to send to Washington as the state’s first new U.S. senator in more than a decade will likely matter for generations to come.
Despite the muck that has been lobbed this election season, it is crystal clear to our board who between Congressman Tim Ryan and author and investor J.D. Vance is best suited to replace Republican U.S. Sen. Rob Portman.
With the U.S. Senate split 50-50 and few seats in play, Ohioans — many still feeling the impacts of the global COVID-19 pandemic — will help decide the Senate’s balance of power.
One thing is for sure, pocketbook issues will and should influence those decisions.
Culture wars may dominate most of the news out of the Ohio Statehouse, but Ohioans are far more concerned about putting food on the table and dealing with high prices than what bathroom a transgender child is allowed to use or whether or not a sixth grader can read Toni Morrison’s “The Bluest Eyes.”
Nearly a third of likely Ohio voters are primarily concerned about inflation and its effect on the economy than any other issue, according to a September USA TODAY Network Ohio/Suffolk University Political Research Center poll.
Columbus is seen as the state’s economic bright spot, but things do not shine even here for everyone.
More than 53% of likely voters who took part in that September poll said economic conditions here are “fair,” but 23% of voters called conditions “poor.”
Nearly 45% of those voters said their standard of living is worse now than four years ago. This comes as little surprise.
The things he has said about the economy are vague and out of a playbook that focuses on energy independence, bashing the Biden administration on spending and inflation and commending the Trump administration’s trade policy.
He’s been light on details and comprehension of what Ohioans need and want.
“I think this is largely a self-inflicted wound. Global commodity prices are always going to shift here and there in ways that you can’t control. But if you look at things like the Keystone pipeline, shutting down that on day one, if you look at the really low number of oil and gas permits the Biden administration has granted, I think that we’ve really shot ourselves in the foot when it comes to energy prices.”
Ryan has focused his economic message on finding bipartisan solutions, taking on China and stopping “stupid” political fights to end “decades of disinvestment, unfair trade and outsourcing, and policies that have boosted the wealthiest and the biggest corporations at the expense of working people.”
Ryan was asked how he would help Ohioans facing financial hardships during a joint meeting with members of our board and others in the USA TODAY Ohio Network.
Vance was invited but declined to participate in the meeting which included questions submitted by readers from around the state.
Ryan told our board that “political people” get themselves in trouble when they think that things are OK because fundamentals of the economy like wages and unemployment seem good.
Tax cuts are needed for individuals and small businesses because those fundamentals are not being felt by Americans, he said.
“We’ve been to all 88 counties. We are going everywhere. It can be a home health care worker, it can be a construction worker— the gas prices are crushing people (as well as) food and general supply chain stuff,” he said. “You have got to put money in people’s pockets right now.”
“Inflation is a global problem. It is a little bit better here than it is in other places, but that does not eliminate the fact that people are being hurt. (There should be) a straight tax cut. Do what we did with child tax credit, advance it. The earned income tax credit, advance it. And then a general tax cut.”
What about the culture wars and social issues?
J.D. Vance shakes hands with former President Donald Trump during a rally at the Delaware County Fairgrounds on April 23, 2022.
News out of Ohio’s Statehouse and words out of J.D. Vance’s mouth leave many with the impression that Ohio is more extreme on social issues than multiple polls indicate.
Ohio needs representation in Washington that appreciates and recognizes the richness and potential of all people — not just those of one particular party or the other.
The 38-year-old “Hillbilly Elegy” author once trashed Trump, but has bent over backwards to win favor with the Trump family. How deep is Vance’s devotion?
Vance, who has taken up for a host of extremists and been flippant about the Russia invasion of Ukraine, does not deserve to replace Portman, a fellow Republican, in the U.S. Senate.
He is no Howard Metzenbaum, George Voinovich, John Glenn, Sherrod Brown, Mike Dewine or Rob Portman.
As senators they worked across party lines in the name of Ohioans. They did not fling insults to win political points, peddle in the “great replacement theory” conspiracy that there is an immigrant invasion or imply a woman should stay with her abusive husband for the good of the kids.
Columbus and the rest of Ohio need a statesman who will stand up for the people of the state.
The 49-year-old, 10-term congressman ran against Democratic leader Nancy Pelosi in 2017 for House minority leader. He has publicly criticized her for a list of issues that include so-called ‘congressional day trading,’ House members using their positions to get rich in the stock market.
“I love the president,” Ryan said at the time. “He’s done a lot for manufacturing. He’s helped us in Youngstown, and he understands the value of manufacturing. But on this particular issue, he is not fully seeing what we should be doing with the American economy.”
What’s important to Ohio?
Ryan supports issues many Ohioans say are important to them: including expanding the economy and supporting seniors, abortion access, affordable health care including mental health, affordable housing, upholding democracy, ending racial disparities and increasing equality for those in the LGBTQ community.
During that recent meeting with the editorial boards, he expressed understanding that Ohio’s future growth cannot be placed squarely on the shoulders of Columbus, which is experiencing the challenges that come with rapid growth including an affordable housing shortage.
Representing forgotten Ohioans
When asked about the $20 billion Intelsemiconductor plant planned for Licking County, Ryan said he’d work with CEOs to make sure the prosperity spreads.
“We need you to locate these suppliers around the state. We have so many forgotten communities that have great people, great culture. Iconic cities,” he said.
He said he’d work with the governor and JobsOhio to help identify and secure the resources and infrastructure cities like Marietta and Portsmouth need to land big employers.
Ryan says he has met with people all over the state, including those in Republican leaning so-called red counties.
“We have to represent these people too … Go get their vote. Go tell them what you’re going to do for them. Go tell them you care about them. We’ve done that. That’s the kind of leader Ohio wants.”
A lot is at stake this election as Republicans and Democrats battle for control of the U.S. House and the Senate.
The person Ohio sends to Washington to replace Portman will help decide what we will become.
That person should be capable and willing to represent all of us.
That person should put the good of Ohioans above political aspirations and loyalty to party.
Endorsement editorials are our board’s fact-based assessment of issues of importance to the communities we serve. These are not the opinions of our reporting staff members, who strive for neutrality in their reporting.
How Xi sacrificed China’s future in pursuit of total power
Szu Ping Chan – October 30, 2022
People watch a live broadcast of China’s President Xi Jinping – STR/AFP
They called it the Shanghai diet. Every morning during the two-month lockdown in China’s most populous city, Maggie found herself in a bidding war for spinach and pak choi.
At 8am, supermarkets would update apps with what was available on their virtual shelves that day. A rush to snap everything up would ensue.
“It was like a competition,” the marketing executive says from her Shanghai apartment. “Most of the food would be gone within seconds.”
While she was rarely left empty-handed, rationing meant most of her meals during the 70-day enforced confinement were either missing meat, vegetables or sometimes both. Maggie and her husband often did without. But they wanted to ensure their three-year-old son had enough to eat during the spring lockdown. “I actually lost a few kilograms,” she says jokingly.
The lockdown created an atmosphere of fear. “Everyone felt scared. Not of the virus. But about being sent to these makeshift Covid hospitals,” says Maggie, who didn’t want her surname to be used.
“You didn’t know where you’d be taken to, or how long you’d be there. Some people had their flats broken into in the middle of the night and were taken away. Or their homes were ‘sanitised’ when they were in quarantine and a lot of their belongings were ruined. I didn’t believe this would happen in Shanghai.”
But she believes she’s lucky. A white-collar job meant she could work from home. Others haven’t been so fortunate.
The world’s strictest lockdown has destroyed both lives and livelihoods – and there is no guarantee it won’t come back. But its architect has just become China’s most powerful ruler since chairman Mao.
New Politburo Standing Committee members Xi Jinping, Li Qiang, Zhao Leji, Wang Huning, Cai Qi, Ding Xuexiang and Li Xi meet the media following the 20th National Congress of the Communist Party of China – TINGSHU WANG /REUTERS
Total control
Handed an unprecedented third term in office earlier this month, his political position unassailable and his every utterance carefully studied by adoring supporters, Xi Jinping is in total control of his country.
His power, and the sense that he is determined to enforce China’s cultural and military dominance even at the expense of prosperity, has sent a chill through domestic investors and the world order alike.
Proof of Xi’s apparent lack of interest in the economic consequences of his actions can be seen in the Communist leader’s choice for his second in command.
Striding out behind President Xi Jinping at the country’s recently ended Communist Party Congress last weekend, Li Qiang has become a symbol of China’s future.
Li Keqiang, the market-orientated premier, has been sidelined. As have central bank governor Yi Gang and China’s top trade negotiator Liu He. Technocrats are out. Loyalists are in.
“China has paid a high price economically in order to maintain low Covid infection,” says Vera Yuen, a lecturer in economics at the Hong Kong University Business School.
“That zero-Covid policy is likely to continue. That will affect China’s connectivity with the rest of the world.”
The emphasis at the congress on security, science and technology over economic growth and reforms also frightened investors. Not only was Xi unrepentant about lockdowns, but his tighter grip on power has paved the way for him to rule for life.
Ken Rogoff, former chief economist at the International Monetary Fund (IMF), says this will put China on a path of slower growth and greater isolation.
“If you take the post-financial crisis period running to 2020, the IMF says China contributed more than a quarter of global growth,” he says.
“That’s phenomenal. But when China slows down, it’s going to have huge ripple effects. In Europe for example, which is very dependent on selling industrial and luxury goods to China.”
Economic struggles
The IMF warned this month that repeated lockdowns meant the Chinese economy would grow by just 3.2pc this year because of strict Covid controls. An ongoing property crisis has also triggered a wave of debt defaults.
Rogoff, now a Harvard economics professor, said that the economy will struggle to hit 3pc growth for many years. If he is right, the economy will struggle to overtake the US in nominal terms in the next few decades – a task that will become increasingly difficult as its population gets older.
Economic growth isn’t everything. But pulling back from the rest of the world is also likely to accelerate China’s slowdown.
Rogoff says Xi’s “Made in China 2025” initiative, which is designed to reduce Beijing’s dependence on foreign technology, will also struggle.
“China’s talking about catching up in technology. President Xi talked about that a lot. But it’s hard to see how that’s going to work when you’re cracking down on entrepreneurs. State-owned enterprises are not going to be making technological breakthroughs.”
They’re the basic building blocks inside all modern technology. Smartphones, laptops, televisions. Aircraft, cars, cruise missiles. All are powered by tiny chips that make it all possible: semiconductors.
There’s only one dominant manufacturer. And it’s based in Taiwan.
The island, which drives just 1pc of global economic output, punches well above its weight because it’s cornered a large share of the market. Just under 40pc of the world’s processor chip manufacturing capacity is Taiwanese, while its high-end dominance is even greater. Ninety-two per cent of the most advanced semiconductors are made by Taiwan Semiconductor Manufacturing Company (TSMC).
While TSMC’s boss recently warned that advances in the technology are slowing down, nowhere else has been able to catch up yet. China has tried. But after a decade, it’s largely failed. Its global share of the market for semiconductors remains stuck below 20pc, according to Capital Economics.
“It hasn’t increased at all, despite all the money Beijing has spent trying to lure Taiwanese engineers to come over to China to help them,” says Gareth Leather, senior Asia economist at the consultancy.
“I think it just proves how difficult it is for others to replicate what Taiwan has done since it gained this comparative advantage,” he adds.
A decade behind Taiwan
It will take a long time to change this reliance. Precision engineering means building a semiconductor factory takes between two and three years, suggesting the rest of the world is at least another decade behind Taiwan.
Rogoff says it will take this long for the US to catch up, and even longer for China.
“It is remarkable what the Chinese have done,” he says.
“There are certain areas in technology where they are pretty easily on par with the United States. But in terms of private sector commercial activity, they’re behind and cutting themselves off. It’s not a recipe for growth. It’s very worrisome.”
The US is also doing its best to slow China down. It introduced strict export controls on semiconductors made with US technology in October, and also limited exports of manufacturing tools and advanced technology.
Chips for use in artificial intelligence and supercomputers can now only be sold to Beijing with a hard-to-obtain licence. Washington also introduced tough vetting standards for US citizens who want to work with Chinese chip producers. The aim is to stop China looking under the bonnet and stealing America’s intellectual property.
These developments mean the world will rely on Taiwanese semiconductors for longer, which also raises the stakes if geopolitical tensions boil over.
China’s Communist Party knows this. Beijing enshrined opposition to Taiwanese independence in its constitution last weekend, in another thinly veiled threat towards an island that has been governed independently since 1949.
Analysts fear a Chinese attack on Taiwan risks drawing the US into a war.
“If there was a war between Taiwan and China, you could potentially see a complete decoupling of trade between China and the US,” says Leather.
This would put $600 billion (£518 billion) of annual trade between the countries at risk. China is still by far America’s largest goods trading partner, with $559.2 billion sent to US shores in 2020, with machinery, toys, furniture and clothes the biggest imports.
Catastrophic consequences
And this has severe consequences for the rest of the world. “If you think about all the goods that we import from China, suddenly cutting them off would have quite catastrophic consequences for the global economy,” Leather says.
He believes a full-blown war is unlikely. “It is possible to imagine another scenario, for example, where China might, for example, want to have a blockade around Taiwan,” he says.
You’d assume that in this scenario, basic trade between the US and China would continue. But a semiconductor shortage would become apparent quite quickly.
Capital Economics says shortages will push up prices of everything from cars to computers around the world, as they did during the pandemic. It estimates that a 50pc rise in semiconductor prices would add around 2.5 percentage points to global inflation at a time when prices are already in danger of spinning out of control.
Countries such as the Czech Republic, Hungary and Germany, which are key carmaking hubs, will suffer most from shortages, alongside Taiwan and South Korea.
Leather adds: “Without ready access to the fastest chips, innovation in areas such as artificial intelligence will slow.”
China may have sent missiles over Taiwan in August to send a message, but Leather believes it will maintain a cautious approach because the leadership has seen how a war can leave a country ostracised.
“Given how badly the war in Ukraine has gone for Russia, I think it will make the Chinese think very, very carefully about what they’re going to do with Taiwan,” he says.
“All the sanctions that the US has introduced has made China realise how difficult it could be.”
Creeping control
shanghai zero covid policy – ALEX PLAVEVSKI/EPA-EFE/Shutterstock
If there’s any doubt over Beijing’s desire to control citizens’ lives, look no further than the city’s Weather Modification Office. Officials here literally try to make it rain. And they’ve succeeded. There were clear skies during the July 1 Communist Party centenary celebrations thanks to a “cloud-seeding operation” that sprayed chemicals in the sky to bring downpours forward.
This idea of creeping control has also spread to Beijing’s grip on Hong Kong.
A security law introduced two years ago changed the lives of many Hong Kongers, and left a profound impact on the rule of law in the former British colony.
Thousands of international businesses have left or are considering leaving the city, while more than 100,000 Hong Kongers have been granted visas to the UK through a new scheme introduced last year.
Beijing has noticed the brain drain. Hong Kong’s new chief executive John Lee has been given access to a $3.8 billion fund to lure big business and top talent back to the city, but many have grown weary of repeated lockdowns and the uncertain political climate.
His plans largely failed to reassure investors. The Hang Seng share index is down almost 40pc this year alone. The Shanghai Composite index is down 20pc.
“Talent is leaving Hong Kong, mainly due to the stringent Covid-19 policy,” says Vera Yuen.
“This means its economic growth is more dependent on the Chinese economy than ever. More diversification and internationalisation will be needed for the city to continue to shine.”
Those left are also feeling the impact of slower global growth.
“Business hasn’t been that great,” says Herbert Lun, managing director of Wing Sang Electrical, which makes hair dryers and curling irons that are mostly sent to the US. Lun is based in the city and he also employs 500 people at a factory in Shenzhen.
“Traditionally, manufacturing in China would peak at around June, July, August for the Christmas season. And the rush would run through to September,” he says.
“This year, we haven’t actually seen a peak. Since about May a lot of our suppliers and competitors have seen a lot of cutbacks and slowdowns. Everybody’s buying just enough to cling on.”
Lun has been forced to cut his prices to remain competitive, even as the cost of production has gone up sharply.
He says more Chinese businesses are looking to branch out overseas, where pay is lower and workers more abundant. He even considered it himself.
“It used to be all ‘made in China’,” he says. “Now it’s made everywhere. And so we have to make decisions that are best for our companies. And we have been focusing more on automation to essentially that labour shortage out of our equation.”
Rising rates
Rising global interest rates also make it harder to do business. Hong Kong’s monetary policy runs in lockstep with the US Federal Reserve because of a peg that keeps its currency in a tight range of 7.75-7.85 per US dollar.
“I think that’s going to depress a lot of investment going forward. If we look at past experience, where we had drastic rate increases, that always led to some sort of financial crisis in the rest of the world,” says Rogoff.
“Everyone is being a little bit more careful about taking on debt going forward and doing a little bit less investment. All of this is going to have a chilling effect on the economy. And I think that’s where the biggest uncertainty is going to be. How long is this rate hike cycle going to last? And how high will interest rates go?”
Rogoff believes the policy pivot will also transform the economy. “We’ve hit peak China,” he says.
“Historically China’s priority has always been giving people growth. And if you give people growth, they accept intrusion into other parts of their lives. But now growth is going to play second fiddle.”
Rogoff has led warnings about the dangers of a widespread collapse in Chinese property prices. While much attention has been focused on the country’s biggest cities, he says the smaller so-called “tier 3” cities, which account for more than three quarters of China’s housing stock and 60pc of economic output, have suffered from the biggest rates of overbuilding.
Any house price crash will most certainly begin here.
Against a gloomy global backdrop, all this suggests China may no longer be the powerhouse it was.
For decades, it served as the engine behind 90pc of economic growth in East Asia and the Pacific. But analysts at the World Bank now believe the economy will expand by just 2.8pc this year. Growth in the rest of the region is expected to average 5.3pc.
This puts China’s growth rate behind its neighbours for the first time since 1990.
While India continues to expand at a rapid pace, overtaking the UK as the world’s fifth largest economy this year, its trade links are far less established than its eastern neighbour. This leaves no obvious contender to pick up China’s mantle.
Either way, China’s fortunes will continue to be intertwined with the rest of the world.
Unsustainable situations
Economists at Axa believe a “crash-landing” scenario, where the world is plunged into a deep recession like the global financial crisis, will push China’s exports down by 20pc and result in a 3.5pc hit to the economy.
Unlike 2008, Beijing won’t be there to spend the world out of trouble.
But economists like Rogoff have warned about China’s troubles and its Great Wall of debt before. They were wrong then.
More than two decades after it joined the World Trade Organisation, China remains the world’s factory and a leader in payments technology. Rogoff concedes this, but adds that while a downturn may not be imminent, it is inevitable.
“There’s a famous saying from my thesis adviser, Rudi Dornbusch, that unsustainable situations go on for longer than you think,” he says.
“And when they collapse, that happens faster and harder than you think. It’s very hard to call the timing of these things. And China has seen remarkable growth. Their infrastructure is better than in almost any advanced economy. But you can’t keep the economy growing by just building more and more of it.”
Vaccines and lockdowns remain a crucial factor going forward. “Outbreaks have continued to flare up and mobility control has persisted,” says Wei Yao, an economist at Societe Generale.
“We think China needs much more preparation for a smooth exit, especially a much higher vaccination rate among the vulnerable. Currently, the three-dose vaccination rate for people aged over 60 remains insufficient and has been stagnant since summer.”
Commuters wearing face masks ride bicycles along a street in the central business district in Beijing – Mark Schiefelbein/AP
The shops and schools are back open in Shanghai, but many believe the city is far from open for business.
More than half of the Chinese companies surveyed by the US Chamber of Commerce in Shanghai believe the country’s economic management is in decline. Its poll last week showed a fifth are cutting back on investment as a direct result of its zero-Covid policy.
For Maggie, who was confined to her apartment yet again last week as part of the city’s aggressive contact tracing policy, nothing will ever be the same again.
“It has changed my life completely,” she says. “I can’t plan any more. I live with uncertainty every day. I worry my son will be taken away on his own to a quarantine hospital.”
She reflects on the future: “In our society, being obedient is very important. For your career, or to get ahead. It’s not about doing the right thing for other people, it’s about following the rules.
“But many people in Shanghai have completely lost their trust and faith in the authorities now. I always believed that Shanghai, my city, would get better. I thought we had better transparency, more justice and less corruption. I’ve lost this belief now.”
Will DeSantis run for president? The candidate I saw during the Florida debate is worrisome.
Carli Pierson, USA TODAY – October 30, 2022
If there were a recipe to make another Florida Gov. Ron DeSantis it might go something like this: Grab some playground bully off the shelf with a heaping teaspoon of science denial, a swig of race-baiting and a lump of LGBTQ bigotry for good measure.
If it sounds nasty, that’s because it is (recipe and politics).
As a former Floridian who visits as often as possible, and because I have close family that still lives there, I care deeply about what goes on in the Sunshine State and worry about where DeSantis is heading politically.
Not everyone agrees with me. During the first and only gubernatorial debate with former Republican Gov. and now Democratic Congressman Charlie Crist on Monday night in Fort Pierce, DeSantis got a concerning amount of applause for his hateful, misleading and divisive comments. Before the debate, DeSantis was also leading in the polls and has proved to be popular in Florida.
After the debate, he went back to being favored to be a GOP candidate running against former President Donald Trump (should he run) in the 2024 presidential election. It’s with that in mind that I’m writing about the debate. What kind of candidate would DeSantis be for the 2024 campaign? And, God forbid, what kind of president?
The debate was a good window into that.
Crist and DeSantis at gubernatorial debate
What DeSantis said during the debate
I didn’t ever imagine myself saying this because I am an atheist, but as I watched Monday night’s debate, I found myself praying Crist becomes governor again. No matter how much I dislike millionaires getting into politics, DeSantis’ far right ideology makes me nervous. But how will more centric and independent voters feel about his rhetoric?
DeSantis made some really troubling comments during the debate. He also has a record of troubling, bigoted leadership that has no place in 2022 America, or 2024:
►When asked by local news anchor Liz Quirantes about his “Stop WOKE” Act and his Florida Parental Rights in Education Act – which critics have called the “Don’t Say Gay” law because it bans classroom instruction on sexual orientation and gender identity for students in kindergarten through third grade – DeSantis went on a tangent dog-whistling about keeping Florida free. He also stooped to his habitual race baiting saying, “I don’t want to teach kids to hate our country,” and claimed that it was false that the United States was built on “stolen lands.”
DeSantis isn’t mature enough to be governor or president
DeSantis, like others in his party, seems to be unable to realize that he is (and would be if elected) the governor of all Floridians, not just the ones who agree with him. But his radical positions send progressives, moderate Democrats and even independents running in the opposite direction.
That won’t stop if he decides to run for president.
DeSantis’ inability to answer Crist’s question about whether he would serve the full term, if elected, made it painfully clear that he doesn’t care about being governor – he wants to be president. Rather than answering the question honestly, he mumbled something and then reverted to his inner playground bully by calling Crist a “worn-out old donkey.” A “yo mamma” joke would probably have had the same effect: Rally the base; make everyone else cringe.
DeSantis doesn’t really want to be governor for much longer and he doesn’t want to listen to American voters – he wants to be president so he can push his radical agenda from the White House.
Carli Pierson, a New York licensed attorney, is an opinion writer and a member of the USA TODAY Editorial Board.
EPA closed a refinery that rained oil. Now it’s a ‘ticking time bomb.’
Maxine Joselow, The Washington Post – October 28, 2022
WASHINGTON – An oil refinery in the U.S. Virgin Islands that the Environmental Protection Agency shut down in spring 2021 now poses the risk of a fire, explosion or other “catastrophic” releases of “extremely hazardous substances,” the agency found in a report released this week.
The idled plant on St. Croix, formerly known as the Limetree Bay refinery, experienced a series of accidents over the course of last year that spewed noxious fumes and showered oil droplets onto nearby homes, sending some residents to emergency rooms. Now deteriorating conditions at the massive facility, which was sold in a bankruptcy auction in December, pose a major test of the Biden administration’s commitment to environmental justice.
In September, the EPA conducted an inspection of the refinery and observed “significant corrosion” of equipment including valves, pipes and pressure relief devices, the agency said in a letter sent to the owners’ lawyers Oct. 13 and made public this week.
“These conditions demonstrate a risk of imminent release of extremely hazardous substances,” the EPA said in an inspection report. “Because of this degree of corrosion, the vessels, piping, and/or valves may fail, resulting in a catastrophic release.”
Local residents question why federal officials have not done more to protect the health of this Caribbean island’s largely Black and Brown population.
“This report is equally alarming and affirming to those of us in the civic sector who have been sounding the bullhorn about the dangers posed by this refinery for years,” Deanna James, president of the St. Croix Foundation, said in an email. “Since 2019, St. Croix Foundation and our nonprofit partners have been on a lonely advocacy journey trying to compel policymakers to consider alternatives to this ‘ticking time bomb’ on our shores – to no avail.”
Elías Rodríguez, a spokesman for EPA Region 2 – which oversees New Jersey, New York, Puerto Rico, the U.S. Virgin Islands and eight Native American tribes – said the agency is “continuing its vigilant oversight” of the refinery.
“EPA takes very seriously our duty to ensure that the facility complies with federal environmental rules designed to protect people,” Rodríguez said in an email. “EPA will use its authorities to protect the protect the health and safety of the facility workers and those who live in nearby communities.”
The refinery, which received approval to operate during the Trump administration, has come under closer scrutiny since Biden took office. The EPA shut down the facility in May 2021 after residents across the island reported feeling nauseous and ill from the release of gaseous fumes.
In particular, EPA inspectors voiced concern about equipment containing ammonia and liquefied petroleum gas. Exposure to high levels of ammonia can cause a burning sensation in the eyes, nose and throat and can result in lung damage or death, according to the Centers for Disease Control and Prevention.
After the facility’s previous owners filed for bankruptcy in July 2021, a bankruptcy judge approved the plant’s sale for $62 million in December to West Indies Petroleum and Port Hamilton Refining and Transportation.
Reached by phone on Thursday, Fermin Rodriguez, vice president and refinery manager for Port Hamilton Refining, said the company is “working with EPA and we’re providing all of the information that they requested. And we’re going to have independent inspectors here this week to validate what they indicate in the report.”
In a news release issued Wednesday, the company sought to reassure local residents and indicated that it plans to restart the refinery when it is safe to do so.
“[D]espite recent reports of concerns about the safety of the facility, the company continues maintaining the facility it purchased in January of this year in preparation for a safe start-up,” the company said. “. . . As we have stated before, the safety of our refinery employees and the safety of the community is our number one priority.”
In June, West Indies Petroleum denied its ownership interest in the facility, despite having won the bankruptcy auction. Representatives for the firm could not be reached for comment.
Judith Enck, who was tapped by President Barack Obama to lead EPA Region 2, expressed alarm that the agency waited nearly three weeks after the inspection to send the letter to the plant’s attorneys.
“This is not a situation where you politely exchange letters between lawyers,” said Enck, who now heads the Beyond Plastics advocacy organization. “This is a serious situation that needs the attention of the highest levels of EPA.”
Enck called on EPA Administrator Michael Regan to “cancel his weekend plans” and immediately board a flight to St. Croix, where she said the agency must inform residents of the imminent threats to their health. A recent survey found that roughly 20,000 people live downwind of the refinery, while in an earlier 2019 analysis, the EPA noted that 75 percent of residents of adjoining neighborhoods are people of color and 27 percent live below the poverty line.
Rodríguez, the EPA spokesman, said the agency took three weeks to send the letter because “time was required, especially with a facility of this size and complexity of the issues involved.”
Jennifer Valiulis, executive director of the St. Croix Environmental Association, lives about two miles from the plant and questioned whether the federal government would act with more urgency if the situation were unfolding in the contiguous United States.
“Not only are the surrounding communities primarily Black and Brown, but also as a territory, we have a different status in that we don’t vote for the president,” Valiulis said. “We don’t have a voting member of Congress. And so we have less ability to advocate for ourselves.”
Oil giants sell thousands of California wells, raising worries about future liability
Mark Olalde, Co-published with ProPublica – October 27, 2022
Aera Energy wells in Ventura. The joint venture between Shell and Exxon has announced plans to sell thousands of California gas and oil wells to the German assett management group IKAV. (Myung J. Chun / Los Angeles Times)
The price of oil produced in California this year reached its highest level in a decade. President Biden is releasing millions of barrels of oil from the Strategic Petroleum Reserve to keep prices in check. And fossil fuel companies’ earnings are so high that Gov. Gavin Newsom has called for a windfall tax on their profits.
It might seem like a lucrative time to drill for oil in the Golden State. Yet, some of the world’s largest oil companies, several of which have done business in the state for more than a century, are selling assets and beginning to pull out of California.
Even with strong cash flow in the short term, producers have more to gain from offloading wells and the associated liability — chiefly expensive environmental cleanup — than from pumping more oil and gas, experts say.
“This is the kind of deal you see when an industry is in its twilight,” said Andrew Logan, senior director for oil and gas at Ceres, a nonprofit focused on sustainability in companies and markets.
Some industry experts, lawmakers and environmentalists are concerned about the recent deals, noting that the sales shift environmental liability from corporate powerhouses to less-capitalized firms, increasing the risk that aging wells will be left orphaned, unplugged and leaking oil, brine and climate-warming methane. They see a threat that the state’s oil industry could repeat a pattern seen in other extractive industries like coal mining and lead to taxpayers bearing cleanup costs.
California Assemblymember Steve Bennett, a Democrat who has long worked on oil policy, has seen oil companies in his Ventura district walk away from environmental liability. “It gets passed on to a smaller company and to a smaller company until someone declares bankruptcy and the public is stuck with the cleanup bill,” he said.
IKAV enters the fray
Supermajors Shell and ExxonMobil recently agreed to sell more than 23,000 wells in California, which they owned through a joint venture called Aera Energy, to German asset management group IKAV for an estimated $4 billion. Aera accounts for about a quarter of California’s oil and gas production, largely from pumping in Kern and Ventura counties.
Shell and ExxonMobil say the deal will strengthen their businesses.
But Greg Rogers, an attorney and accountant who researches the oil and gas industry, said the deal allows the sellers to shed decommissioning costs. “You got bad assets with big liabilities, and you can get rid of both at the same time. That’s a win for Exxon and Shell,” he said.
IKAV will inherit a portfolio littered with wells past their prime. Nearly 9,000 Aera wells were idle as of early October, meaning about 38% of the company’s unplugged inventory isn’t producing oil or gas, according to state data.
In an email, Aera spokesperson Kimberly Ellis-Thompson said the company is capable of managing its large portfolio of idle wells. “Since 2019, when new idle well management program regulations were published, we have met or exceeded the requirements for retiring idle wells,” she said. The company has decommissioned and plugged nearly 1,000 wells on average every year since then, she said.
IKAV, Aera’s soon-to-be new owner, manages about $2.5 billion in energy-focused assets. News releases on the Aera sale quoted Constantin von Wasserschleben, IKAV’s chairman, as saying, “We advocate a co-existence between renewable and conventional energy for decades to come.”
As the world increasingly shifts to cheaper renewable energy to address climate change, IKAV has been snapping up oil and gas wells from supermajors exiting the market. The firm, which once focused exclusively on renewable energy, began expanding into oil and gas in 2020 when it purchased BP’s gas assets in the San Juan Basin, spanning New Mexico and Colorado. The deal was part of BP’s push to divest $10 billion in assets, including aging American gas fields.
BP declined to comment.
If it’s not profitable to return wells to production, they need to be plugged. But if a company doesn’t plug its wells before walking away, wells are orphaned and the cleanup costs ultimately fall to taxpayers and current operators through fees.
For example, the Greka group of companies left more than 750 wells for California to plug when its wealthy owner began pushing his businesses into bankruptcy in 2016 and retired to his Santa Maria winery. And a subsidiary of one of the country’s largest mining companies, Freeport-McMoRan, left dozens of likely orphaned wells, state records show, even though the company brought in nearly $23 billion in revenue last year.
Greka’s CEO didn’t respond to a request for comment, and a Freeport spokesperson said the company is working with the state to verify details about its orphaned wells.
To minimize the government’s exposure if wells are orphaned, producers must put up a bond, typically held as cash or a surety policy. The bonds act like a security deposit: The company gets its bond back if it cleans up its mess, but the government keeps the money if the company orphans its wells.
Newsom has called for an end to all oil extraction in the state by 2045, but his administration has yet to use another tool to hold producers responsible for cleanup.
California has the authority to ask for an additional $30 million in financial security from a single operator but only requires Aera to hold a $3-million bond. As a result, Aera’s bonds cover less than half a percent of the $1.1 billion that ProPublica estimates it would cost the state to plug the wells based on the average cost to California for past well plugging. (That estimate does not include the additional cost of full surface remediation.)
California Oil and Gas supervisor Uduak-Joe Ntuk said in a statement that his agency reviews bonds for all oil companies in the state but did not say whether the amount of Aera’s financial security would be increased through the sale.
Aera, Shell and ExxonMobil did not respond to a question about the gap between their bonds and the estimated cost to plug their wells. IKAV did not respond to requests for comment. In an email, ExxonMobil spokesperson Meghan Macdonald said that “when we make divestments, we always try to work with partners like Aera and IKAV who are also committed to a lower-emissions future.”
Costs vary widely, but states have paid $100,000 or more to plug wells — and the same to clean up surface pollution — meaning there’s a significant gap between what’s needed and what California has available in bonds.
“If they don’t have the financial resources when it comes time to plug those wells, there’s a possibility that the public will be left holding the bag and paying those costs even though it’s the company that made the profit from selling the oil,” said Hollin Kretzmann, an attorney with the Center for Biological Diversity.
Who will be liable?
More than 240,000 wells have pierced the state since the late 1800s, when Southern California’s first producing well spouted oil near where Dodger Stadium now stands. Of those, more than 5,300 are “orphan, deserted, and potentially deserted wells,” according to data the California Geologic Energy Management Division published in September.
Many on that list belong to individuals who died long ago or companies that dissolved in the shuffling of corporate paperwork. However, some responsible parties are still around but are no longer legally liable after offloading their wells through sales and bankruptcies.
So who will be responsible for cleanup?
California is unique because state law allows regulators to call on former operators such as Shell and ExxonMobil to help pay for plugging onshore oil wells if they are later orphaned, even by a different owner. But companies have escaped responsibility under this stronger legal standard by exploiting loopholes such as a porous bankruptcy code.
Some experts question whether Shell and ExxonMobil would be required to pay if the wells they are selling to IKAV are ultimately orphaned, saying their ownership of the wells through a separate company, Aera, might shield them from liability.
“Exxon and Shell do not directly operate those wells. There’s corporate structuring going on in between,” Rogers said. And IKAV now adds another layer of corporate paperwork, holding the wells it acquired in New Mexico, Colorado and California through companies that were registered in Delaware shortly before the sales.
Alongside Aera, two other companies — California Resources Corp. and Chevron — account for the vast majority of California’s oil and gas production, and they too are shrinking their positions in the state. California Resources, which has been in and out of Chapter 11 bankruptcy in recent years, sold most of its Ventura Basin operations in November 2021. Chevron recently sold its California headquarters and plans to consolidate some of its unused Bakersfield office space as it shifts employees to Texas. Reuters reported in early October that Berry Corp., another large oil company that for many years has operated in California and Utah, was considering selling.
Berry did not respond to a request for comment.
Shell acknowledged its California wells were overvalued, suggesting the wells are even nearer to the end of their economic life than previously predicted. The company is wiping as much as $400 million off its books through the sale via an impairment charge.
Shell has been shedding assets in part to hand off associated greenhouse gas emissions. A 2021 Dutch court ruling ordered it to significantly reduce emissions, although the company has appealed the ruling. Zoe Yujnovich, the company’s upstream director, said in a news release about the sale of Aera that Shell will instead be “focusing on positions with high growth potential.”
For its part, ExxonMobil plans to focus on oil and natural gas that costs less to extract, Liam Mallon, president of ExxonMobil Upstream Co., said in a news release announcing the sale to IKAV.
Large public companies are handing off oil and gas assets around the country. Between 2017 and 2021, more than a quarter of oil and gas mergers and acquisitions took public companies private, with private equity often involved, according to a study conducted by the Environmental Defense Fund. The report voiced concern that private companies are less transparent and have less incentive to protect the environment.
California is just the beginning
With more than 2 million unplugged oil wells believed to be scattered across the U.S., California is the tip of the iceberg.
A massive boom in American oil and gas production over the past 15 years spurred by technological advances in hydraulic fracturing and horizontal drilling unlocked previously inaccessible geologic formations. But the shale revolution and current market highs buoyed by Russia’s invasion of Ukraine won’t last forever.
Longtime petroleum reservoir engineer Dwayne Purvis laid out the reality at a recent conference. This shale revolution revitalized only some oil fields, and more than 90% of the country’s unplugged wells are either idle or minimally producing and unlikely to make a major comeback, according to his research.
“The bulk of the wells are producing from plays where there is no hope of another deus ex machina,” Purvis said, referencing nearly depleted oil fields.
The oil industry also faces an impending decline in demand from the shift to renewable energy and the trend toward banning the sale of new internal-combustion engine cars, as well as plans to phase out drilling in metro areas.
“The overall industry is being assaulted right now through policy changes at the state and federal level. That’s the story writ large,” Rogers said. “The industry is dying.”
Olalde reports for ProPublica.ProPublica is a nonprofit newsroom that investigates abuses of power.
Republicans Claim They Can Tame Inflation, but Economists Have Their Doubts
Jim Tankersley and Emily Cochrane – October 26, 2022
The U.S. Capitol Building in Washington on Sept. 27, 2022. (Haiyun Jiang/The New York Times)
WASHINGTON — Republicans are riding a wave of anger over inflation as they seek to recapture the House and the Senate this fall, hammering Democrats on President Joe Biden’s economic policies, which they say have fueled the fastest price gains in 40 years.
Republican candidates have centered their economic agenda on promises to help Americans cope with everyday price increases and to increase growth. They have pledged to reduce government spending and to make permanent parts of the 2017 Republican tax cuts that are set to expire over the next three years — including incentives for corporate investment and tax reductions for individuals.
They have vowed to repeal the corporate tax increases that Biden signed into law in August while gutting funding for the IRS, which was given more money to help the United States go after high-earning and corporate tax cheats.
“The very fact that Republicans are poised to take back majorities in both chambers is an indictment of the policies of this administration,” said Sen. Bill Cassidy, R-La., noting that “if you look at the spending that they did on a partisan basis, we certainly would be able to stop that.”
But while Republicans insist they will be better stewards of the economy, few economists on either end of the ideological spectrum expect the party’s proposals to meaningfully reduce inflation in the short term. Instead, many say some of what Republicans are proposing — including tax cuts for high earners and businesses — could actually make price pressures worse by pumping more money into the economy.
“It is unlikely that any of the policies proposed by Republicans would meaningfully reduce inflation in 2023, when rapidly rising prices will still be a major problem for the economy and for consumers,” said Michael R. Strain, an economist at the conservative American Enterprise Institute.
On Wednesday, Republicans on the House Ways and Means Committee held a virtual meeting where they detailed plans to make the 2017 tax law provisions permanent, billing the move as a crucial step toward improving the nation’s economy.
“As we look forward to the strong probability of an upcoming recession, there is new urgency to preserve these pro-growth policies,” said Rep. Vern Buchanan, R-Fla.
As they position themselves for the midterm elections, Republicans have also indicated that they might try to hold the nation’s borrowing limit hostage to achieve spending cuts. The debt ceiling, which caps how much the federal government can borrow, has increasingly become a fraught arena for political brinkmanship.
Multiple top Republicans have signaled that unless Biden agrees to reduce future government spending, they will refuse to lift the borrowing cap. That would effectively bar the federal government from issuing new bonds to finance its deficit spending, potentially jeopardizing on-time payments for military salaries and safety-net benefits, and roiling bond markets.
Biden has tried to push back against the Republicans and cast the election not as a referendum on his economic policies, but as a choice between Democratic policies to reduce costs on health care and electricity and Republican efforts to repeal those policies. He has accused Republicans of stoking further price increases with tax cuts that could add to the federal budget deficit, and of risking financial calamity by refusing to raise the debt limit.
“We, the Democrats, are the ones that are fiscally responsible. Let’s get that straight now, OK?” Biden said during remarks Monday to workers at the Democratic National Committee. “We’re investing in all of America, reducing everyday costs while also lowering the deficit at the same time. Republicans are fiscally reckless, pushing tax cuts for the very wealthy that aren’t paid for, and exploiting the deficit that is making inflation worse.”
The challenge for Biden is that voters do not seem to be demanding details from Republicans and are instead putting their trust in them to turn around an economy that voters believe is headed in the wrong direction. Polls suggest Americans trust Republicans by a wide margin to handle inflation and other economic issues.
In a nationwide deluge of campaign ads and in public remarks, Republicans have pinned much of their inflation-fighting agenda on halting a stimulus spending spree that began under President Donald Trump and continued under Biden, in an effort to help people and businesses survive the pandemic recession. Those efforts have largely ended, and Biden has shown no desire to pass further stimulus legislation at a time of rapid price growth.
Rep. Jason Smith of Missouri, the top Republican on the House Budget Committee, said in a statement that “the first step in combating inflation is to stop the historically reckless spending spree occurring under one-party Democrat rule in Washington, and that will only happen with a Republican majority in Congress.”
Economists largely agree that the Federal Reserve is most responsible for fighting inflation, which policymakers are trying to do with rapid interest rates increases. But they say Congress could plausibly help the Fed by reducing budget deficits, in order to slow the amount of consumer spending power in the economy.
One way to do that would be to significantly and quickly reduce federal spending. Such a move could result in widespread government layoffs and reduced support for low-income individuals — who would be less able to afford increasingly expensive food and other staples — and could prompt a recession.
“The amount of cuts you’d have to do to move the needle on inflation are completely off the table,” said Jon Lieber, a former aide to Sen. Mitch McConnell of Kentucky who is now the Eurasia Group’s managing director for the United States.
Still, Lieber said that likelihood would not sully the Republican pitch to voters this fall. “Midterm votes are a referendum on the party in power,” he said, “and the party in power has responsibility for inflation.”
Biden administration officials contend that the Republican plans, rather than curbing inflation, could worsen America’s fiscal situation.
Administration economists estimate that two policies favored by Republicans — repealing a new minimum tax on large corporations included in the Inflation Reduction Act and extending some business tax cuts from Trump’s 2017 legislation — could collectively increase the federal budget deficit by about $90 billion next year.
Such an increase could cause the Federal Reserve to raise rates even faster than it already is, further choking economic growth. Or, alternatively, it could add a small amount to the annual inflation rate — perhaps as much as 0.2 percentage points. Fully repealing the Inflation Reduction Act would also mean raising future costs for prescription drugs for seniors on Medicare, including for insulin, and potentially raising future electricity costs.
“Their plan to repeal the IRA and double down on the Trump tax cuts for the wealthy will worsen inflation,” said Jared Bernstein, a member of Biden’s Council of Economic Advisers. “On top of that, they’re also explicit that they’re coming for Social Security and Medicare, making this a terribly destructive agenda that starts by fighting the Fed and moves on to devastating vulnerable seniors.”
Conservative economists say the inflation impact of extending Trump’s tax cuts could be much smaller, because those extensions could lead businesses to invest more, people to work more and growth to increase across the economy. They also say Republicans could help relieve price pressures, by following through on their proposals to reduce federal regulations governing new energy development.
“Those things are going to be positive for investment, job creation and capacity” in the economy, said Donald Schneider, a former chief economist for Republicans on the House Ways and Means Committee and the deputy head of U.S. policy at Piper Sandler.
A budget proposal unveiled this year by the Republican Study Committee, a conservative policy group within the House Republican conference, included plans to permanently extend the Trump tax cuts and to impose work requirements on federal benefits programs, in hopes of reducing federal spending on the programs and increasing the number of workers in the economy.
“We know for a fact that federal spending continues to keep inflation high, which is why a top priority in next year’s Republican majority will be to root out waste, fraud and abuse of taxpayer money,” Rep. Kevin Hern, R-Okla., said in a statement. Hern, who helped devise the budget, called it “one of many proposals to address the dire situation we’re in.”
As they eye the majority, top Republicans have suggested that they will consider an economically risky strategy to potentially force Biden to agree to spending cuts, including for safety-net programs. Rep. Kevin McCarthy of California, who is the minority leader and is seen as the clear pick to be speaker should Republicans win control of the House, suggested to Punchbowl News this month that he would be open to withholding Republican votes to raise the federal borrowing limit unless Biden and Democrats agreed to policy changes that curb spending.
How to use that leverage has divided Republicans. Some, like Rep. Nancy Mace of South Carolina, who fended off a Trump-backed primary challenger, are supportive of that option.
But other Republicans — particularly candidates laboring to present a more centrist platform in swing districts held by Democrats — have shied away from openly supporting cuts to safety-net programs.
“Absolutely not,” Lori Chavez-DeRemer, a Republican and former mayor running in Oregon’s 5th Congressional District, said when asked if she would support cuts to Medicare and Social Security as a way to rein in federal spending. “Cutting those programs is not where I, as a Republican, see myself. I want to make sure that we can fill those coffers.”
