Fraser Assails Sheehan on Anti BioMass Efforts

An Environmental Wolf in Sheep’s Clothing:

Leading Anti-Biomass Proponent Tied to Oil/Gas/Coal and Mining Industry 

Journalist, Genevieve Fraser

By Genevieve Fraser

 Margaret Sheehan, a lawyer with EcoLaw, a volunteer group promoting renewable energy policy and chair of the Stop Spewing Carbon Campaign, which sponsored a proposed 2010 ballot initiative aimed at stripping biomass-derived energy of its label as renewable, has ties to world-wide oil, gas, coal and mining industries as well as with the world's largest producer of vinyl compounds and a leading North American producer of polyvinyl chloride (PVC), through her association with the Sheehan Family Foundation, according to tax records on file at the National Center for Charitable Statistics. 

Along with shares from corporations such as Merck and Abbot Laboratories, the Foundation has millions of dollars in shares tied to fossil fuels and other polluting industries.  The Foundation also receives major donations from family members and the L. Knife & Sons, a family owned corporation.  Their tax records can be viewed electronically athttp://nccsdataweb.urban.org/orgs/profile/043197325?popup=1#forms  

The Sheehan Family Foundation was established in 1992, according to a Foundation press release, “Its mission is to protect the environment and enhance the quality of education including youth serving programs.”  Though the Foundation has a geographic focus in eastern Massachusetts, it has expanded in recent years to include Haiti and other international projects.   Grants made by the Foundation from 1992 to 2007 totaled over $10 million.  But despite the obvious good it does, many of the Foundations financial dealing run counter to its expressed mission.

The Foundation’s mining interests include 2,200 shares from the Newmont Mining Corporation, recipient of the “Hall of Shame 2009 Public Eye Award” for its Akyem project in Ghana. “According to the jury it had destroyed unique natural habitats, carried out forced resettlement of local people and polluted soil and rivers,” the Public Eye states.  Newmont was also the subject of a 2005 Frontline expose of South American activities, “Peru – The Curse of Inca Gold.”  That same year, the company was cited for illegal toxic waste dumping in Indonesia. The Foundation sold its shares in 2007.

 

The Foundation also has maintained over 10,500 shares of the Southern Copper Company which is 75 percent owned by Mexican mining conglomerate Gropo Mexico. The company is a major producer and refiner of copper, molybdenum, zinc, silver, lead, and gold, and operates mines and smelters inMexico and in Peru, in the Andes mountains southeast of Lima.  In 2003, a lawsuit was filed (02-9008. Docket No.)  under the Alien Tort Claims Act (“ATCA”), 28 U.S.C. in which plaintiffs claimed that the defendant's conduct violates the “law of nations”-commonly referred to as “international law” or, when limited to non-treaty law, as “customary international law.” They brought personal injury claims “alleging that pollution from SPCC's copper mining, refining, and smelting operations in and around Ilo caused plaintiffs' or their decedents' severe lung disease.  Plaintiffs in this case are residents of Ilo,Peru, and the representatives of deceased Ilo residents. In particular, they asserted that defendant infringed ---upon their customary international law “right to life,” “right to health,” and right to “sustainable development.”  

Harvard Forest logging operation

Anti-biomass activist Margaret Sheehan is a native of Plymouth and former Executive Director of the Sheehan Family Foundation which has also provided grants to theManomet Center for Conservation Sciences as well as hundreds of thousands of dollars to environmental organizations such as The Nature Conservancy, Massachusetts Audubon Society, the Environmental League of Massachusetts, and Earthwatch among others. 

In 2008, with Sheehan serving as Executive Director, the Sheehan Family Foundation lists their “net value of non-charitable use assets” at $7,655,764, according to their 2009 tax return.  A significant portion of these assets were derived from sales of coal, oil and gas industry stocks.  In 2007, the Foundation’s 24,970 shares of Exxon Mobile stock sold for $2,016,55; their 1,295 shares of Chevron Corporation stocks commanded a sale price of $104,718, while their 1,240 Occidental Petroleum Corporation shares netted $61,510.  


By 2008, the Sheehan Family Foundation sold 5,125 shares of Yanzhou Coal Mining Co Ltd stocks which they had held since 2006 for $77,573, but the sale listed a net loss of $21,758.  The Chinese-based company, the forth largest inChina, is mainly engaged in coal production, preparation and processing, marketing and railway transportation.  According to their website, two large coalfields of Yanzhou and Jinig East owned by the Company contain six large-scale modern coal mines. In 2007, the Company produced 34.66 million tones of raw coal, of which 7.25 million tones were exported.  Though China’s coal mining industry is considered to be the largest and deadliest in the world in terms of human safety, the Yanzhou Company claims that they are in compliance with all safety regulations; however, pollution emanating fromChina’s coal burning power plants is notorious.


Despite the 2007 coal, oil and gas divestments, the following year the Foundation lists 4,400 shares of ConocoPhilips corporate stock with a book value of $348,844.  ConocoPhilips boasts of extracting hydrocarbons fromCanada’s oil sands which constitutes “one of the largest proven oil reserves in the world,” according to their website. 


In 2009, The Nature Conservancy received a $110,000 contribution from the Foundation, while the Massachusetts Audubon Society received a $160,000 grant.  This was in addition to the hundreds of thousands from years past. For example, in 2008, The Nature Conservancy received $210,696 from the Foundation, and MA Audubon received $80,000; whereas, in 2007, The Nature Conservancy received $85,000, and MA Audubon received $80,000.  Whether or not these funds impacted their receptivity to Sheehan’s anti-biomass message and whether or not these environmental organizations knew of the source of much of the Foundation’s wealth can only be assessed by the many agencies who were the recipients of the Foundation’s largess.


In addition to coal, oil and gas companies, the Sheehan Family Foundation maintains millions of dollars worth of shares in companies that provide infrastructure and transport to these industries.  Their vast holdings include DryShips, Inc., owner and operation of a world-wide drybulk carrier and offshore oil deep water drilling operations; National Oilwell Varco, a multinational, Texas-based corporation which manufactures land-based and off-shore oil drilling rigs as well as all the major mechanical components for such rigs; Pioneer Natural Resources Co., an Irving, Texas-based oil and gas company that has expanded internationally and has made major investments in Tunisia and South Africa and is also active in Alaska; and Pride International, Inc., which provides contract drilling and related services to oil and gas companies worldwide and operates a global fleet of 26 rigs. In 2009, SeaHawk Drilling was added to the Sheehan Family Foundation assets. 

On November 10, 2009, Sheehan sent a letter addressed to the president of the ManometCenter, John M. Hagan regarding the “Biomass Study.”  The Manomet biomass report was released seven months later on June 10, 2010, without peer review, and became the basis of the Administration’s about-face regarding their support of biomass as a green, renewable energy resource. 

In her letter to the Manomet director, Sheehan closed with the following, “...As I indicated in my phone message to you, I am a native of Plymouth and former Executive Director of the Sheehan Family Foundation of Kingston, which has provided grants to MCCS over the years.  It would be unfortunate if MCCS proceeded with this study without an understanding of full range of public health and environmental impacts of biomass burning as a means of generating electricity.  Even though these impacts may be beyond the scope of work for the study, the study is intertwined with critical policy and regulatory issues that effect the future of our citizens and the planet.”

An electronic copy of the Sheehan correspondence to the MCCS director was submitted to Ian Bowles, Secretary of Energy and Environmental Affairs,Commonwealth of Massachusetts, by electronic mail, and to his Chief of Staff at EOEEA, Jane Corr.  The correspondence has since circulated widely.

Following the firestorm of support and protest which erupted after the release of the Center’s “Biomass Sustainability and Carbon Policy Study,” Manomet released a statement which reads, in part, “There has been much press coverage of our study about using forest biomass for energy in Massachusetts.  This study was commissioned and funded by the Massachusetts Department of Energy Resources (DOER).  Many of the resulting press articles have oversimplified the results.  Indeed, a key lesson of the study is that understanding the greenhouse gas (GHG) impacts and benefits of using wood for energy is more complex than most people have assumed, and that a lifecycle assessment is needed in order to assess these GHG costs and benefits...”

“One commonly used press headline has been ‘wood worse than coal’ for GHG emissions or for ‘the environment.’  This is an inaccurate interpretation of our findings, which paint a much more complex picture.  While burning wood does emit more GHGs initially than fossil fuels, these emissions are removed from the atmosphere as harvested forests re-grow.  ....the timing and magnitude of the recovery is a function of forest productivity, land management choices, and technology and fuel characteristics...”

Despite the Manomet Center’s attempt to clarify the report and end the controversy surrounding its release. The Stop Spewing CarbonCampaign collected over 130,000 signatures from Massachusetts’ voters, and Sheehan, as Chair of the Campaign issued a statement on July 7, 2010.  “Today, Secretary of Energy and Environmental Affairs Ian Bowles issued a letter saying his agency will change our state laws to bring them in line with current science and public policy requiring biomass incinerators to meet strict standards for forest protection, greenhouse gas emissions, and efficiency,” Sheehan stated. 

“This is a groundbreaking development that means an end to commercial biomass electric power plants in Massachusetts.  Science confirms that the greenhouse gas emissions of burning forests are worse than coal and there’s no reason to subsidize this form of energy,” Sheehan said.  Sheehan had won the battle and so withdrew the 2010 Ballot Petition from consideration.

On May 2, 2011 Final regulations were issued by the Massachusetts Department of Energy Resources which would severely restrict Renewable Energy Credits (RECs)—a taxpayer and ratepayer funded subsidy under the state Renewable Portfolio Standard (RPS)—for biomass electricity.  Meg Sheehan once again took credit for the DOER restrictions.

Proposed Palmer Renewable Energy: Springfield Biomass Plant

On May 17, 2011, union laborers were out in force to jeer biomass opponents who were holding a protest rally on the steps of Springfield City Hall during a public hearing on a proposal to revoke a special permit granted in 2008 to Palmer Renewable Energy (PRE).  Despite a written legal opinion presented by City Solicitor Edward Pikula — who warned the 13-member City Council that it doesn’t have “just cause” to revoke a special permit issued in 2008 for a proposed 35-megawatt biomass power plant — the City Council voted 10-2 against the project.

“We’ve got $5 million in development costs invested here,” Lawyer Frank Fitzgerald, speaking for Palmer Renewable Energy stated. “And we’ve played by the rules.” The economic benefits to the City of Springfield were estimated to be in excess of one million dollars a year, and would have provided 50 full-time employment opportunities.  PRE plans to litigate the matter which may prove quite costly to the city.

Along with creating havoc within the biomass industry, the regulatory restrictions have had a significant economic impact on the wood products industry which claims that if they are to avoid “high grading,” cutting only the most valuable trees, they need to integrate forest improvement cuttings to the mix.  Biomass, when harvested within the forest is typically low grade wood that can be costly to remove unless there is a market for it. The use of biomass as a fuel source creates an economic value that helps justify the cost of its removal. 

Foresters and the wood products industry also argue that sustainably harvested wood allows for new growth and provides vitally needed wildlife habitat.  Most species are wholly or partially dependent on early successional or young forest growth.  Also, diseases and insects are now infesting the forest.  Over 90% of the Massachusetts forest is now mature forest cover (older trees).  These woods are badly in need of thinning with infested wood burnt and destroyed, not left in place or transported and sold as wood chips or other products.

Biomass is also created from power line and roadside cuttings as well as land clearings for development.  When disposed of in landfills, woody biomass generates methane, a major greenhouse gas.  Decomposition in forests also releases CO2.

Meanwhile fossil fuels, which are not sustainable because they were created eons ago and are not a living, breathing part of our atmosphere, continue to spew carbon, hydro-chemicals, radionuclides and heavy metals that impact air quality, soil and water.  Though renewables such as hydro, wind, solar, biomass and geothermal are now part of the energy mix, for the most part, fossil fuels still power electrical generation, cars, buses, trucks, trains, planes, boats, plus most of our homes and industry in the United States and across the globe.   

According to a recently released report by the International Energy Agency (IEA), “Energy-related carbon-dioxide (CO2) emissions in 2010 were the highest in history.”

“After a dip in 2009 caused by the global financial crisis, emissions are estimated to have climbed to a record 30.6 Gigatonnes (Gt), a 5% jump from the previous record year in 2008, when levels reached 29.3 Gt. In addition, the IEA has estimated that 80% of projected emissions from the power sector in 2020 are already locked in, as they will come from power plants that are currently in place or under construction today,” the report stated.

In terms of fuels, 44% of the estimated CO2 emissions in 2010 came from coal, 36% from oil, and 20% from natural gas, according to the IEA.

And though Margaret Sheehan talks an environmental talk, she has, through the Foundation, financially supported to the tune of millions and millions of dollars, companies that pollute the earth in every conceivable fashion. 

Take for instance the Foundation’s 100,000 shares of the Geon Company, the leading producer of vinyl compounds, including polyvinyl chloride (PVC), that have been linked to exposures in the womb.  Hyperactivity, learning disabilities, asthma, reproductive health issues, obesity and a host of other ills including cancer are believed to be linked to these products. 

As for the environmental impact of coal, oil and natural gas extractions which destroy forests, remove mountaintops, and pollute our waters, these concerns have been the subject of thousands of research projects, books and articles, and now movies such as “Gasland” which explores the many problems associated with choosing natural gas as an alternative to oil.  Yet the Sheehan Family Foundation supports these and other industries such as the cigarette giant Philip Morris (SFF owned 5,147 shares valued at 223,945 in 2008) that have pitted adverse impacts to human health and the planet against the greater good of increased profits.

What Sheehan’s real motives are only time will tell. But for the record, humans have been building with, cooking with, and heating with wood since the dawn of creation. Our homes, furniture, paper and a myriad of other products are created with wood.  If the impact of woody biomass is as bad as Sheehan and her cohorts claim it is man would be extinct!

Published at www.FarmFieldForest.org

--------------------------

Genevieve Fraser, a resident of Orange, MA, is a professional writer, former Exhibits Developer for the New England Science Center, and Environmental Technical Writer. In 1984-85, Genevieve was the state-wide coordinator for the Massachusetts Acid Rain Awareness Weeks and received an Environmental Commendation from the Massachusetts Secretary of the Environment for her efforts. In 1997, she was commissioned by the Commonwealth to write the EcoTheater drama, "Giants in the Wilderness with John Muir," which toured as part of the Centennial Celebration of the Massachusetts State Forest and Park System. 

Contact FraserGenevieve@gmail.com or cal (978) 544-1872 for further information.

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Bio-Mass Rules Go To Far?

by Morris Housen
CEO & President
Erving Paper Mills

Erving Paper Mills operates 24 hours a day, 355 days per year and has done so continuously since 1905.
We employ 120 people in Central Massachusetts and we buy almost all of our purchased goods and
services from other Massachusetts / New England companies. As a 120 tons per day manufacturer of
recycled napkin, toweling and tissue paper, our operations are energy intensive. In fact, each year we
use almost 50 million kilowatts of electricity (enough to power 4,500 average homes) and about 2.9
million gallons of oil (enough to heat 4,000 average homes).

Erving Paper Mills is committed to environmental stewardship. Every day, we recycle 9 truckloads of
wastepaper that would otherwise go to a Massachusetts landfill. We constantly manage our system
of pumps and motors to ensure that they are optimized for energy efficiency and we recycle the water
used in our production process in order to minimize our ecological footprint.

The time has come for all of us, including Erving Paper Mills, to transition away from fossil fuels and
towards local renewable fuel sources. To this end, in late 2008, our plant commissioned an exhaustive
study to look at energy alternatives. The study found that a biomass-powered combined heat and
power (CHP) system would meet our needs perfectly. Biomass delivers a solution that is both the most
economically viable solution and, unlike solar and wind power, leverages the only renewable source of
energy that can provide a continuous stream of power within a reasonable amount of real estate. We
would need 46 acres of solar panels or 15 industrial-sized wind turbines and a steady 30 – 55 mph wind
to meet our electricity needs alone.

What is biomass? Biomass is organic material, primarily waste wood and brush that is generated during
proper forest management and unusable as timber, which can be used to power an industrial facility
such as ours. The shift is analogous to switching from heating one’s house with oil to heating one’s
house with a wood-burning stove. Yet, we would not just heat our factory, but actually power our
entire process with waste wood. In Central New England, we are surrounded by a natural, abundant,
sustainable and renewable supply of waste wood, clearly a compelling energy source for us.

Two months ago, in September, the Massachusetts Department of Energy Resources (DOER) released

draft rules on the qualification of biomass as it relates to the state’s renewable energy portfolio. The
original purpose of these rules was to properly incentivize the more efficient and appropriate use of
biomass and other alternate fuel sources. Unfortunately, due to political meandering, the effect of the
rules as currently drafted will prevent us and others like us from moving away from fossil fuels. Even
though, biomass (32% efficient) is more efficient than wind (25%) or solar (17%) power, its use is being
singled out and unfairly targeted by legislators. Efficiency benchmarks are being established that will
restrict biomass installations in the Commonwealth.

We strongly urge Massachusetts lawmakers to amend the draft rules. We suggest that the
Commonwealth implement an efficiency standard that is achievable for alternative energy sources
like biomass and provide a full renewable energy credit for CHP facilities. We also suggest that
thermal RECS be introduced that will specifically incentivize CHP plants Without attending to these
changes, the ability of Erving Paper Mills and Massachusetts companies like ours to transition away
from fossil fuels will be severely hampered. Our companies will be less competitive, economic value
to the Commonwealth will be lost and an opportunity to reduce our carbon footprint will have been
squandered.

In addition, we support science-based forest sustainability standards and believe that the proposed 15%
limit on what can be counted as biomass is arbitrary and does not allow for site-specific conditions to
be taken into account. We believe that a better approach would be the recommendations made by the
Forest Guild in the Manomet Study.

Erving Paper Mills is fully committed to deepening our investment in the local community and to
providing environmental stewardship by transitioning away from fossil fuels towards a renewable,
locally-sourced alternative that will not only lower our future emissions but also make us more
competitive. This is exactly the type of energy strategy that the DOER and the Patrick Administration
should want to encourage. Unfortunately, the rules, as currently proposed, would not allow us to make
this transition. A significant change is needed so that the final rules will take our situation and that of
companies in a similar situation into account.

Sincerely,
Erving Paper Mills, Inc.
Morris Housen
CEO & President

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Published on Tuesday, July 27, 2010 by robertreich.org

The Great Decoupling of Corporate Profits from Jobs

by Robert Reich

Second-quarter earnings reports are coming in, and they're making Wall Street smile. Corporate profits are up. And big American companies are sitting on a gigantic pile of money. The 500 largest non-financial firms held almost a trillion dollars in the second quarter, and that money pile is growing larger this quarter.  Profits that plummeted in the recession have bounced back. Big businesses have recovered almost 90 percent of what they lost.
So with all this money and profit, they'll start hiring again, right? Wrong - for three reasons.
First, lots of their profits are coming from their overseas operations. So that's where they're investing and expanding production.
GM now sells more cars in China than it does in the US, but makes most of them there. The company now employs 32,000 hourly workers in China. But only 52,000 GM hourly workers remain in the United States - down from 468,000 in 1970.
GM isn't just hiring low-tech assembly workers in China. Last week the firm broke ground there on a $250 million advanced technology center to develop batteries and other alternative energy sources.
You and I and other American taxpayers still own over 60 percent of GM. We bought GM to save GM jobs, remember?
GM officials say no American taxpayer money is being used to expand in China. But money is fungible. Because of our generosity, GM can now use the dollars it doesn't have to spend in the United States meeting its American payrolls and repaying its creditors, for new investments in China.
Second, big U.S. businesses are investing their cash in labor-saving technologies. This boosts their productivity, but not their payrolls.
Last Friday, for example, Ford reported a $2.6 billion second-quarter profit. The firm is already more than two-thirds the way to equaling its record 1999 profits. But due to labor-saving technologies, Ford now has half as many employees as it did a decade ago.
Wall Street analysts are happy with Ford's "commitment to keeping capacity in check," according to the Wall Street Journal. Ford shares rose 5.2 percent Friday. "Keeping capacity in check" is the Street's way of saying "no new hiring." In fact, the Street is advising investors to sell the stocks of companies that talk openly of expanding capacity.
Finally, corporations are using their pile of money to pay dividends to their shareholders and buy back their own stock - thereby pushing up share prices.
Last Friday, GE announced it would raise its dividend by 20 percent and reinstate its share-buyback plan. It's GE's first dividend increase since the company cut its dividend in early 2009. As a result, GE shares are up more than 5% in the past few days.
Bottom line: Higher corporate profits no longer lead to higher employment.  We're witnessing a great decoupling of company profits from jobs. 
The next supply-side economist who tells you companies need more incentive (i.e. lower taxes) before they'll hire is living on another planet.
The reality is this: Big American companies may never rehire large numbers of workers. And they won't even begin to think about hiring until they know American consumers will buy their products. The problem is, American consumers won't start buying against until they know they have reliable paychecks.

© 2010 robertreich.org

Robert Reich is Professor of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written twelve books, including The Work of Nations, Locked in the Cabinet, and his most recent book, Supercapitalism. His "Marketplace" commentaries can be found on publicradio.com and iTunes.

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Time For Transaction Fee?

   July/August 2010 ATLANTIC MAGAZINE

Monsters in the Market

In today’s exchanges, strong programs prey on weak ones, humans are hard to find, and the SEC struggles to keep up.

By Timothy Lavin

On the third floor of Citigroup’s Manhattan headquarters, at the far end of a trading floor overlooking the Hudson River, Young Kang, Citi’s global head of algorithmic products, leans over a terminal and monitors the progress of a canny and powerful beast named Dagger. Bred and trained in secret by Citi’s financial engineers, Dagger can stalk through more than 20 markets, public and otherwise—hunting for anomalies, buying and selling, prowling through mountains of historical data—all at the behest of Citi’s clients. Amid the trading-floor din, Dagger fulfills its duties in flickering silence, with a speed and acuity no human can match.
“It’s self-learning,” Kang says. “The numbers keep updating, the strategy keeps adjusting itself. It gets smarter.”
And it makes a lot of money. Algorithms like Dagger can exploit the smallest inefficiencies in the market. They can parse trades in millionths of a second. Some species can detect other algos embarking on predictable trading strategies, and ruthlessly adjust their techniques. They’re growing ever more complex, subtle, and sophisticated. And as they become more popular, they’re creating some serious headaches for regulators.
By some estimates, algorithms now trigger 70 percent of all trades in U.S. equities. The speed and volume of everyday trading have propelled the market into a new and esoteric dimension, and rendered traders in the pits largely obsolete. Average daily share volume on the New York Stock Exchange increased by 181 percent between 2005 and 2009, while the time required to execute a trade on its electronic systems dropped to 650 microseconds.
Such changes have a lot of people worried, including the Securities and Exchange Commission. It released a wide-ranging paper earlier this year seeking suggestions on how to restructure the entire equity market, and created a Division of Risk, Strategy, and Financial Innovation in part to help monitor new technologies. A market collapse in early May—in which automated-trading systems exacerbated a sell-off that drove the Dow down more than 900 points in less than an hour, before it quickly recovered—gave two worries new public salience: that the proprietors of these algos may not be in full control of their creations, and that the strategies they pursue are, in some cases, fundamentally warping the financial markets.
In January, the NYSE fined Credit Suisse $150,000 for “failing to adequately supervise the development, deployment, and operation of a proprietary algorithm.” The fine was a pittance, but more troubling was that the bank didn’t even know that its malfunctioning algo (which sent hundreds of thousands of cancel-and-replace requests for orders that hadn’t been made) had crippled some of the NYSE’s trading stations until regulators called them the next day. This spring, a newsletter from the Federal Reserve Bank of Chicago warned: “Although algorithmic trading errors have occurred, we likely have not yet seen the full breadth, magnitude, and speed with which they can be generated. Furthermore, many such errors may be hidden from public view.”
Bernard Donefer, a finance professor at Baruch College and the author of a study in the most recent Journal of Trading called “Algos Gone Wild,” contends that the speed of these equations, and their ability to reach so many markets simultaneously, could turn even a minor coding error into a spiraling disaster. “Another 1987,” he told me, referring to the epic crash caused in part by simpler automated-trading schemes. This view puts Donefer in the minority in the financial community, which tends to have more faith in firms’ internal risk controls. But he thinks that without better regulation, more algo-gone-wild scenarios are inevitable. He notes that while controls at big firms, like Citi, are generally exemplary, second- and third-tier firms present a graver risk.
The SEC wants to hire a lot more staffers, both for its new risk division and for its trading division, and it is considering new methods of tracking algorithmic trades; Donefer and others have suggested a tagging system for the biggest traders, which the SEC says is on the table. The commission also may soon outlaw a practice called “naked access,” in which some broker-dealers offer their clients direct access to exchanges—allowing them to potentially bypass risk controls—in pursuit of faster trading.
A more widespread worry, now getting increased attention from regulators and Congress, is a strategy known as high-frequency trading. Employers of this technique apply algorithms and other automated technology, along with real-time market data, to buy and sell so quickly (in microseconds) and in such quantities (millions of trades a day), that they engorge themselves on penny differentials in prices. These traders argue that they supply the market with needed liquidity and tighter spreads. Regulators tend to agree, for the most part; free markets have always rewarded better information, speed, and creativity. But this technology unloads on such a massive scale, and so quickly, that they fear it could feed a dangerous and self-reinforcing volatility.
At least a few high-frequency traders have learned to make a killing by detecting the more simplistic algo strategies deployed by basic pension funds and mutual funds, buying the next stock the funds plan to buy, and then selling it to them at a higher price. This may not be illegal, but it’s almost certainly unfair to the funds’ investors. “It is increasingly clear that there are quite a number of high-frequency bandits in the high- frequency-trading community who pump up volume statistics, front-run investor orders, increase transaction costs, and hurt real liquidity,” David Weild, an adviser at Grant Thornton and a former vice chairman of Nasdaq, told me. *
These changes in trading technology raise a more fundamental question: If the majority of trades racing back and forth are simply lines of code swapping with other lines of code, moved by indicators obscure to even the mortal authors of the algorithms themselves, what exactly is the financial market? “The market structure’s totally changed, and it’s distorted what we do,” says Joe Saluzzi, the co-head of equities trading at Themis Trading and a vocal opponent of some high-frequency strategies. “The machine thinks for itself.”

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Published on Wednesday, June 16, 2010 by Creators Syndicate

BP Is a Corporate Criminal

by Jim Hightower

Gosh, how quickly things turn. One day, you're a strutting peacock — the next day, you're just another gasping, oil-covered bird.
In early April, BP was strutting about in full corporate splendor, showing off the $9 billion in profits that it had soaked up in just the first three months of this year. It was also basking in a corporate re-imaging campaign, depicting itself as a clean-energy pioneer and declaring that BP now stood for "Beyond Petroleum."
Since its Gulf of Mexico well blew out on April 20, however, BP has proven to be beyond belief. The wider and deeper that this catastrophe spreads, the more we discover just how oily this giant is.
From the time it was known as the Anglo-Persian Oil Company and set out to grab and control the rich petroleum reserves owned by what is now Iran, BP has been a recidivist global criminal. In the past three decades, it grew huge by swallowing such competitors as Standard Oil of Ohio, Amoco and Arco. Along the way, it has been implicated in bribery, overthrowing governments, plunder and money laundering, plus having established one of the worst safety and environmental records in an industry that is notoriously reckless on both counts.
And now, its rap sheet grows almost daily. In fact, the Center for Public Integrity has revealed that the oil giant's current catastrophic mess should come as no surprise, for it has a long and sorry record of causing calamities. In the last three years, the center says, an astonishing "97 percent of all flagrant violations found in the refining industry by government safety inspectors" came at BP facilities. These included 760 violations rated as "egregious" and "willful." In contrast, the oil company with the second-worst record had only eight such citations.
While its CEO, Tony Hayward, claims that its gulf blowout was simply a tragic accident that no one could've foreseen, internal corporate documents reveal that BP itself had been struggling for nearly a year with its inability to get this well under control.
Also, it had been willfully violating its own safety policies and had flat out lied to regulators about its ability to cope with what's delicately called a major "petroleum release" in the Gulf of Mexico.
"What the hell did we do to deserve this?" Hayward asked shortly after his faulty well exploded. Excuse us, Tony, but you're not the victim here — and this disaster is not the work of fate. Rather, the deadly gusher in the gulf is a direct product of BP's reckless pursuit of profits. You waltzed around environmental protections, deliberately avoided installing relatively cheap safety equipment, and cavalierly lied about the likelihood of disaster and your ability to cope with it.
"It wasn't our accident," the CEO later declared, as oil was spreading. Wow, Tony, in one four-word sentence, you told two lies. First, BP owns the well, and it is your mess. Second, the mess was not an "accident," but the inevitable result of hubris and greed flowing straight from BP's executive suite.
"The Gulf of Mexico is a very big ocean," Hayward told the media, trying to sidestep the fact that BP's mess was fast becoming America's worst oil calamity. Indeed, Tony coolly explained that the amount of oil spewing from the well "is tiny in relation to the total water volume." This flabbergasting comment came only two weeks before it was revealed that the amount of gushing oil was 19 times more than BP had been claiming.
Eleven oil workers are dead, thousands of Gulf Coast people have had their livelihoods devastated and unfathomable damage is being done to the gulf ecology. Imagine how the authorities would be treating the offender if BP were a person. It would've been put behind bars long ago — if not on death row.

© 2010 Creators.com

National radio commentator, writer, public speaker, and author of the book, Swim Against The Current: Even A Dead Fish Can Go With The Flow, Jim Hightower has spent three decades battling the Powers That Be on behalf of the Powers That Ought To Be - consumers, working families, environmentalists, small businesses, and just-plain-folks.

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The Myth of Free Enterprise

Image by gorgeoux via Flickr

Published on Saturday, May 29, 2010 by CommonDreams.org
'Business Good. Government Bad.'

by Bruce Luske
I just read Arthur C. Brooks' precious recent Washington Post polemic, "America's new culture war: Free enterprise vs. government control," and I want to comment on his one-size-fits all libertarian prescription for every conceivable social ill. As political scientist David Michael Green observed, it can be expressed in a bumper sticker:

"Business good. Government bad."

Please join me in repeating this line aloud twice, making sure to punctuate each rendition with a parrot's whistle.

You've got it! Simple, isn't it?

This ubiquitous "master narrative" has prevailed for over 30 years as the exact cause of our current economic meltdown and overall societal disintegration; namely, a run-amock thoroughly deregulated so-called "free market."

I want to go on record here by saying that I and virtually all Americans love Brooks' grand IDEA of huge numbers of small businesses imaginatively innovating and competing in every area of American life.

But the problem with this exceedingly attractive proposition (in the abstract) is that as an empirical matter the "Biggest Fish" (transnational corporations) have long since eaten most of the "little fish" (small and medium businesses).

The alluring libertarian dream of the "free market" no longer exists--indeed, never has existed--since the matter of which businesses thrive and expand and which do not has always been a product of governmental policy. A good historic case in point are the railroads in the 19th century.

Today's "free market" is in reality an oxymoron as a wholly owned and controlled creature (Frankenstein?) of the largest international corporations served by the federal government as the "corporate state."

A simple metaphor: The corporations are the "dog" and the federal government is the "tail." The right, Tea Partiers, their assorted allies, and a largely misled populace refuse to acknowledge and/or to understand this dominant truth of contemporary American society.

I can't think of a more poignantly compelling example than the federal government's utter dependency on the BP corporation that caused the Gulf catastrophe to control attempts to plug the gusher as well as the accompanying narrative fed to the corporate media in the attempt to "spin" the disaster in the least damaging way for BP as possible.

But it ain't gonna work this time. Now even the Gulf state Bubbas who used to fish and swim in the Gulf are starting to get it.
Bruce Luske has been the resident sociologist at Marist College in Poughkeepsie, New York since 1993, and welcomes all responses to this piece - bluske@frontiernet.net.

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A New Deal for Local Economies

Image by NatalieMaynor via Flickr

Published on Sunday, May 2, 2010 by YES! Magazine
A New Deal for Local Economies
More local, durable economies are already taking root. We can help them along by changing the way we regulate businesses, plan cities, and finance the communities we want.

by Stacy Mitchell

Let me begin by sharing some good news. Scattered here and there, in my country and in yours, the seeds of a new, more local, and more durable economy are taking root.
The Power of Local



Locally grown food has soared in popularity. There are now 5,274 active farmers markets in the United States. Remarkably, almost one of every two of these markets was started within the last decade. Food co-ops and neighborhood greengrocers are likewise on the rise.

Some 400 new independent bookstores have opened in the last four years. Neighborhood hardware stores are making a comeback in some cities. Most students graduating from pharmacy school report that they would rather open their own drugstore than work for chain. Last April, even as Virgin Megastores prepared to shutter its last U.S. record emporium, more than a thousand independent music stores were mobbed for the second annual Record Store Day, a celebration of independent record stores that drew hundreds of thousands of people into local stores, became one of the top search terms on Google, and triggered a 16-point upswing in album sales.

Driving is down in U.S. over the last two years, while data from a dozen metropolitan regions show that houses located within walking distance of local businesses have held value better than those isolated in the suburbs, where the nearest gallon of milk is a five-mile drive to a superstore.

In city after city, independent businesses are organizing and building an increasingly powerful counterweight to the big business lobby on issues as varied as tax policy and global warming. Local business alliances have now formed in over 130 cities and collectively count some 30,000 businesses as members. These alliances are calling on people to choose independent businesses and locally produced goods more often, making a compelling case that doing so is critical to rebuilding middle-class prosperity, averting environmental catastrophe, and ensuring that our daily lives are not smothered by corporate uniformity.

And there is growing evidence that these initiatives are succeeding. During the 2009's slow holiday season, a nationwide survey by the Institute for Local Self-Reliance found that independent businesses actually outperformed chain competitors. What accounted for this relative good fortune? Many of those surveyed said that more people are deliberately seeking out locally owned businesses.

But here's what is perhaps the strongest—and, undoubtedly, the most bizarre—evidence to date that people's priorities are changing: Many massive, globe-spanning corporations are now trying to figure out how they can be "local" too.

Hellmann's, the mayonnaise brand owned by the processed-food giant Unilever, is test-driving a new "Eat Real, Eat Local" marketing campaign. Frito-Lay is using farmers to pitch its potato chips as local food. Barnes & Noble, the world's top seller of books, has launched a new campaign under the tagline, "All bookselling is local." Winn-Dixie, one of the largest supermarket chains in the U.S., has a new slogan: "Local flavor since 1956." The International Council of Shopping Centers, a global consortium of mall developers, is pouring millions of dollars into television ads urging people to "Shop Local"—at their nearest mall.

Most astounding of all, Starbucks, a company that has spent untold millions developing one of the most recognizable brands on the planet, is now beginning to un-brand some of its outlets. The first of these reopened as "15th Avenue Coffee and Tea" in Seattle. Unless you read the fine print on the menu, you would quite easily assume it was an independent coffee house.

Corporations desperately want to turn the local economy movement into nothing more than a cheap marketing trick they can appropriate for their own ends. These attempts at imitation are unnerving. But in the end I think this new variation on corporate green-washing—let's call it local-washing—will backfire. In the meantime, I'm heartened by what it says about the current consciousness. After all, these companies spend enormous sums on market research—they would not be doing this unless they had detected a sizeable shift in public attitudes.

Changing the Rules

While signs abound that people are rediscovering the benefits of an economy rooted in community and small-scale enterprise, all of this activity, though widespread, is still quite modest. It exists largely on the margins and is unlikely to coalesce into a wholesale reorganization of our economy unless we change the rules.


About ten years ago, the Institute for Local Self-Reliance launched the New Rules Project to develop and advocate for policies that would democratize ownership, refashion the economy for long-term sustainability, and nurture strong, self-conscious, and self-governing communities. To get the economy we want, I believe that three areas of policy reform are especially critical.


1-. the Curse of Bigness

Resilience depends on diversity, but banks and businesses just keep getting bigger. We need regulations that create real competition.



2-Planning for Local Economies

Our city planning policies promote megastores and urban sprawl rather then healthy, local economies. We can reshape those policies to support neighborhood businesses that slow the pace of life and encourage people to get to know each other.



3-Reconnecting Capital with Community

Our investments tend to fund consolidation and speculation. But new models are emerging that allow us to finance the economy we really want.

Stacy Mitchell is a senior researcher with the New Rules Project, a program of the Institute for Local Self-Reliance that challenges the wisdom of economic consolidation and works to advance policies that build strong local economies. She edits a monthly bulletin, the Hometown Advantage, and is the author of Big-Box Swindle: The True Cost of Mega-Retailers and the Fight for America's Independent Businesses, which was named one of the top ten business books of the year by Booklist.

This is an excerpt of a lecture delivered at the Bristol Schumacher Conference in Bristol, England. Full citations available here.
This work is licensed under a Creative Commons License

Corporations With Benefits?

Published on Wednesday, April 14, 2010 by CommonDreams.org
Corporations With Benefits

by Joyce Marcel

Margaret Thatcher once said, "There is no such thing as society: there are individual men and women, and there are families."

Maybe her view came from reading too much Ayn Rand at an impressionable age, but Thatcher's idea that the individual is all, unfettered commerce is king and that government -- taxes, regulations and anything except traffic lights and conscription of some other guy to fight for your right to be rich -- is a Big Evil, came to prevail. The common good? She sneered at it.

Thatcher came to mind because I've been reading about these new "benefit companies," or B Corps. Similar to "friends with benefits," these are corporations that allow new companies to write all kinds of social responsibility into their corporate charters.

A law supporting B Corps is currently moving through the Vermont Legislature. A similar law has been introduced in Maryland, and is expected to be discussed soon in New York State, Colorado, North Carolina, Pennsylvania and Washington State.

According to the Web site Bcorportation.net, B Corps. use "the power of business to solve social and environmental problems." They are unlike traditional responsible businesses because they "meet comprehensive and transparent social and environmental performance standards; institutionalize stakeholder interests; and build collective voice through the power of a unifying brand."

They also appear to offer protection against hostile and not-too-hostile-but-not-too-benign-either takeovers.

"You also embed your values into your corporate governing documents so they can survive new investors, new management and even new ownership," the Web site says.

In Vermont, the B Corp. bill is being promoted by in part by Ben Cohen and Jerry Greenberg, who lost control of their ice cream company when it was bought out by the giant Unilever. They say that if the bill had been in effect 10 years ago, they wouldn't have been forced to sell. They are being disingenuous, however, because they had gone public before Unilever took an interest. And once they were a public company, they were swimming with the sharks; why were they surprised that they occasionally got bit? And were eventually torn limb from limb and eaten?

Personally, I'm not against capitalism. I'm a big fan of what I call market capitalism, by which I mean something different from what Milton Freedman and the other free-market worshipers mean.

I'm a fan of the markets I adored when I lived in the Third World. You grow some potatoes, I grow some tomatoes, Juan over there decides to kill one of his cows. Around 4 in the morning, before the jungle gets too hot, we meet and sell our wares. I use the money I make selling tomatoes to buy a potato and a piece of the cow. We trade gossip, we buy, we sell, we go home, we make stew, we eat, we work, we live.

Yes, this is a naive and simplistic view of economics, but it's also a transparent one. And it illustrates that even in commerce, there has always been a common good.

The rugged individual who hacked a fortune out of the wilderness? He's a myth. No one makes it on their own. The government funded the transcontinental railroads, built the canals and put in the highways. People like Vanderbilt and Rockefeller exploited what the government gave them. Eventually, the government tried to regulate rapaciousness and succeeded during certain points in our history. Then Reagan, Clinton and the two Bushes gave away the store.

The more people who were put out of work by corporate America, the higher the stock prices, the greater the Dow, the greater the CEO executive salary, and the greater the CEO executive ego. We eventually ended up with rampant speculation, the destruction of the American economy as we know it, and now this "jobless recovery."

So a law that helps companies create themselves with built-in benefits and protections for their employees might be a very good thing. Also good: employee-owned companies, companies that protect the environment, companies that take a stand against corporate greed.

Vermont is a natural place for this kind of corporation. Many companies here already believe in the triple bottom line of profit, people and planet. Many of Vermont's large companies, for example, are employee-owned, including King Arthur Flour, Pizzagalli Construction, Carris Reels and Chroma Technology. Others, like Seventh Generation, lead the way in social responsibility. The nonprofit organization Vermont Businesses for Social Responsibility has over 300 members; it supports the new law.

Of course, the new law raises questions. Is it even necessary, since there are so few public companies here? Will investors be attracted to a company that is not entirely focused on maximizing stockholder value? If the need arises, how can a company with such restrictive by-laws be sold? Will the law attract out-of-state companies to incorporate here - thus boosting the Vermont economy? How does the state protect against the kind of hypocrisy that is rampant in the current rush to brand companies as "green"? Do we create the social responsibility police?

Still, this is a good new direction for business, and I'll be interested to see how it plays out. After all, even Thatcher herself, the grande dame of rugged individualistic free market capitalism, later said, "It is not the creation of wealth that is wrong, but the love of money for its own sake."

Someone asked Gandhi what he thought about Western civilization, he said, "I think it would be a very good idea." I say the same to the idea of corporate responsibility.

Joyce Marcel (joycemarcel.com) is a journalist and columnist in southern Vermont. You can reach her at joycemarcel@yahoo.com.

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Speculation Fuels Oil Price

Cover via Amazon

Published on Friday, April 2, 2010 by McClatchy Newspapers
What's Driving Up Oil Prices Again? Wall Street, Of Course

by Kevin G. Hall

WASHINGTON - Oil consumption has fallen, demand from U.S. motorists for gasoline is flat at best and refiners that turn crude into fuel are operating well below capacity. Yet oil prices keep marching toward $90 a barrel, pushing gasoline toward $3 a gallon in many markets, and prompting American drivers to ask, "What gives?"

[]
Blame it on the same folks who brought you $140 oil and $4 gasoline in 2008: Wall Street speculators.

Experts attribute much of the recent rise in prices to flows of speculative money into oil markets. These bets are fueled by investor expectations that the U.S. and global economies are poised to return to growth and thus spark increased use of oil. Strong growth in China supports the narrative of rising oil consumption and tightening supplies.

"The thinking goes that rising stock (market) prices implies expanding business activity, implies growing energy demand, implies rising oil prices. I think you can make that case, but it's awfully weak," said Michael Fitzpatrick, vice president-energy for MF Global, a financial firm that brokers the sale of contracts for future delivery of oil.

While there are signs of U.S. economic recovery, such as a slight uptick in consumption and strong manufacturing data, there are plenty of ho-hum signs too, including dismal construction spending and continued high unemployment.

"I just don't think if you look across the entire spectrum of the macro-economy that it creates a picture of a growing body of incontrovertible evidence that there is a strong, sustainable recovery. I just don't see it," Fitzpatrick said. "I think it should be closer to the range we were seeing in late summer and early fall, $67 to $72" a barrel.

On the last day of July, oil traded at $67.50 a barrel and gasoline sold at a nationwide average of $2.52 a gallon for regular unleaded. On Thursday, oil prices settled at $84.87 on the New York Mercantile Exchange, and regular unleaded gasoline averaged $2.80 a gallon and more than $3 on the West Coast, according to the AAA.

"It's the story we've been talking about . . . . It's really about oil being an attractive investment for investors right now," said Troy Green, a AAA spokesman. "You've seen quite a bit of money flooding into the oil markets because of that."

What's different about today's price run-up from two or three years ago is that oil is now in ample supply.

"If you look at the fundamentals right now, there is certainly an abundance that is available (of oil) to the market for the next 12 months or so. It's not a near-term supply shortfall," said David Dismukes, the associate director of the Center for Energy Studies at Louisiana State University in Baton Rouge.

U.S. motorists and businesses consumed 18.69 million barrels per day (bpd) of petroleum product last year. That's projected to rise slightly this year to 18.89 million bpd. However, it remains far below peak consumption of 20.80 million bpd in 2005.

The latest data from the Energy Information Administration, the statistical arm of the Energy Department, shows that as of mid-March, U.S. refiners were operating at 81.1 percent capacity. They're making eight gallons of gasoline for every 10 they're capable of producing, a clear sign that demand is down.

Perhaps the only argument that would justify rising prices is that global consumption is expected to grow by 1.6 million bpd to 86.6 million bpd this year, according to the Paris-based International Energy Agency.

Even so, there's 6 million bpd of oil that's shut-in, a technical way of saying that recoverable oil is being left in the ground by the world's oil producers.

"When you look at inventories and shut-in capacity, (oil) prices today are above what those would indicate," said Daniel Yergin, the author of "The Prize: The Epic Quest for Oil, Money & Power," the recently updated Pulitzer Prize-winning book that chronicles the history of oil.

When oil traded above $140 a barrel nearly two years ago and pundits warned that the world was running out of oil, Yergin suggested that a glut of oil would come onto the market in 2010 and beyond. The 6 million bpd of oil now on the sidelines suggests that he was right.

Today's spare production capacity is three times what it was in 2004 and 2005, when supply actually was tight.

The Organization of Petroleum Exporting Countries signaled this week its concerns about rising prices by not calling for hard enforcement of production quotas by its members. That suggested the cartel will tolerate an open-spigot policy by its 12 members as needed to stabilize prices.

"While OPEC was silent on any threat to the recovery, speculation continues that the cartel is deliberately allowing members to exceed production quotas in order to limit upward price pressure," wrote analyst Matt Robinson, in a research report Thursday by forecaster Moody's Economy.com.

Rising oil and gasoline prices are deja vu all over again for Michael Masters. The hedge fund manager has crusaded for legislation that would prevent so much speculative money in the oil markets.

Wall Street is "gaming" the price of oil, he warns.

"If you're a bank, and you know there is going to be a large amount of investor inflows into the commodities market, you are going to position yourself ahead of them . . . You want to be a seller at a higher price," explained Masters, noting that large Wall Street banks invest for themselves in these markets even as they also broker the oil investments of others.

What's abundantly clear, he and others argue, is that an oil contract's price today has little to do with the supply of and demand for oil.

"It's a capital asset now. Once the majority of participants are capital-asset folks, common sense would tell you it's going to be traded like a capital asset . . . and consumers pay," Masters said. "It wasn't that way in the past."

What can be done?

The Commodity Futures Trading Commission is weighing a proposal to put global limits on how many oil contracts any one market player can buy or sell, and legislation to revamp financial regulation that's expected to pass Congress this year could force greater disclosure by oil traders to regulators.

Neither, however, promises imminent relief at the pump.

ON THE WEB

Oxford Institute study on oil prices 2002-2009
© 2010 McClatchy Newspapers

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