What the frack? Coal seam gas development in NZ

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NZ oil & gas producer Todd Energy has responded to criticisms that its fracking process used to extract coal-seam methane is a threat to life. ‘Fracking’ or hydraulic fracturing has emerged as a controversial process on the basis of claims made from mature producing basins around the world. Todd Energy argues that its operations are at “great depth and away from freshwater aquifers”. You can view the company’s 177-page submission to the Parliamentary Commissioner for the Environment, Jan Wright, who is due to report by year-end. It is important to acknowledge that the legitimate concerns to fracking need to focus upon the particular application of the user. Broad generalisations cannot be made. For instance, Todd Energy is drilling to a depth of 3.5km (see presentation), so there is little prospect of any waters at these depths contaminating human ‘surface’ activity. Having said that, it would be preferable to avoid any contamination by:

1. Minimising the use of chemicals which can contaminate

2. Using chemicals which have a benign impact on the environment, or which otherwise are so chemically unstable that they breakdown in the natural environment

The problem is that Todd’s approach is conventional oil & gas exploration; even if it uses fracking methods to increase recover. The problem is that relatively shallow methods have a different impact because:

1. Their impact has an effect on the near-surface hydrological system

2. Their chemicals are coming into contact with near-surface fluids

3. The number of holes being drilled is far different

4. The amount of water released into surface runoff

The implication is that it’s really a ‘straw argument’ to package all fracking as ‘akin to Todd’s’, just as its inappropriate for the green movement to castigate the use of all fracking. Sadly, there appears to be a propensity for vested interests to polarise the debate. In fairness to Todd; they do make the disclosure that their position will differ from other users of fracking technique. We might expect them to distance themselves from practices and practitioners which they would regard as ‘unsafe’ for legal reasons.

There are several different applications of near-surface fracking:

1. Methane extraction from shallow coal measures

2. Hydrocarbon extraction from shallow oil shale deposits

The Todd suggests that the industry is in the process of developing ‘non-toxic alternatives’ that will have a benign impact on the environment. That would have to strike people as entirely unsatisfactory because these chemicals might be retained in groundwater. It matters little whether they account for 1% or 10% of the water used; if they are toxic, then they need to be better assessed before they are used in the environment.

The arguments that fracking can cause earthquakes is a moot point because any such ‘stimulation’ could only have averted a bigger event; and for that reason, any ‘dubious impact’ is more likely to be beneficial rather than adverse, since it would be entail releasing energy build up prematurely. 

The argument by Todd that “oil and gas explorers seek to avoid seismic faults, partly because they could lose hydrocarbons they are targeting into such faults”, strikes me as a dubious argument when explorers generally have a poor understanding of the location of fault structures, as the Canterbury earthquake recently demonstrated. This is not to say that major faults cannot be identified; but that methods of detecting faults rests largely on the application of geophysical seismic surveys, and such surveys will only detect faults where there is a significant offset indicated by offsetting ‘reflector beds’ in survey profiles. 

Attacks upon critics as ‘vested interests’ is silly because the oil & gas industry is just as ‘vested’; and as I have shown, their lack of critical, objective thinking upon their own arguments is a testament to their ‘shared’ lack of respect for facts, along with opponents in the green movement. We cannot under-estimate the significance of fracking in terms of boosting the oil and gas extraction from existing fields. This however is not reason to contaminate areas if there are alternative options. Clearly conventional exploration at 3,000-4,000m doesn’t present an immediate threat, but neither is it a compelling argument for contamination. In the defence of these companies, the 1-3% chemical mix will be further diluted at depth. It might be prudent however to avoid contaminating these deeper reservoirs, for are they not the intended destination for future CO2? The implication is that rupture of these deep reservoirs due to CO2 emplacement for global warming mitigation might result in these contaminated waters coming to the surface. We need to know the toxicity of these chemicals. My own view at this time is that there is a lack of compelling evidence for significant anthropogenic global warming at this time; so carbon sequestration is not justified. Matters might change in future.

The fact that well-casings fracture and release their contents into the environment is reason for concern. The question is – is it significant. We must acknowledge that oil & gas producers don’t want pressure loss; so one would expect them to fix any leakage. The question is whether they tolerate leakage. We might well argue that Todd’s activities are more dangerous because there is the possibility of its casing failing over a longer distance, and might the stresses be greater upon casings at 1500-2000m as opposed to 300m. The secrecy with respect to drilling fluids is also a reason for concern; though it may simply reflect the extortive influence that the green movement has over industry. Todd argues that deep fracking has not resulted in any evidence of groundwater contamination in the last 20 years. It strikes me as likely that no one is looking for such contamination, so such empirical evidence is misleading. The question is whether it drilled any holes in the 300m near-surface environment to attempt to detect contamination. I doubt it because it had no reason to look. i.e. No motive to hold itself accountable. In fairness, the contamination may or may not be there, and need only be explored, if in fact a casing ruptured and released large amounts of drilling fluids. I wonder at which point these fracking chemicals are added? Have they demonstrated that the well retains integrity before they add the chemicals?

We might want to consider the following news given the fact that coal seam gas industry is a huge business in the USA, accounting for about 12% of the nation’s gas production. That is a lot of holes. The USA has mature experience with fracking and the nation has a large population; so the muted and belated criticism of the industry might speak to the safety of contemporary practices. Doesn't the sourcing of domestic water supplies from groundwater not raise a safety concern; both now and in the future? In man Are US pastures contaminated by the chemicals used in drilling fluids? This should be the first question given the size of the US industry. 

If there is ever a nuclear war which poisons all surface water with nuclear fall-out; the spectre of deep pure water might be a compelling value proposition....do we really want to contaminate it today because we cannot find a current application for that water. The world changes; and we need foresight to anticipate the implications of our actions. I'm just as worried by the green arguments as the corporate arguments.

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Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Safety is a dirty word for ETS scheme

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The NZ government has found a rationalisation not to adopt the Emissions Trading Scheme (ETS). The reality is that aside from these pragmatic reasons, it was never committed to adopting it, and was always relying upon the rejection of Julia Gillard's ETS scheme as a justification for its belated cancellation. With Julia Gillard fighting a strong opposition in Australia, vulnerability given her weak polls, there is good reason to think the policy will be dropped.

Of course we are not supportive of the ETS because we rejected the quality of science underpinning the claims. The reality is that this is a 'snow job' by liberal-leaning scientists. We need to understand that 86% of scientists are liberals sympathetic to environmental causes. They are people lacking critical thinking skills, lacking knowledge of economics, and in many cases the education to grasp that capitalism, markets, nor selfish materialism is the problem. What they don't realise is that - their anti-intellectualism is the problem....but since an apprehensive community is inclined to accept 'better safe than sorry' arguments, we are destined to be lead into a pursue of 'appearances' as a basis for decision-making.

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Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

The Greens Party policy in NZ

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What is really surprising is that the Greens Party of NZ actually offers the best outline of its policy - see its website here. Presentation however is one thing; so let's look at the detail.

1. Equal tax burden - they want to adopt an ecological tax.

This strikes me as a silly idea, and its hard to fathom how they would achieve an 'equal tax', or what it would look like. They also want to have a $10,000 tax free exemption; which strikes me as realistic given the amount of rates ($2,000 per annum) that people pay, however this needs to be better spent.

2. Capital gains tax - they don't say what their tax rate would be - but it would exclude the family home and it is probably greater than Labour's 15%. John Key argues that taxing assets with a capital gains tax will result in people 'gifting' assets to their kids or sticking them in corporate structures. It is a fair criticism.

3. Monetary policy - The Greens are actually the only party I reviewed which is against asset price bubbles it seems. I laud them for that; the question is how they intend to prevent it.

Of course the problem with the Greens is that they are a party which is 'untested', so who knows what they could do in power.

4. Conservative 'green' policies - My concern about the Greens is that they strike my as another green 'Conservative' party. Why? They doubtlessly will have no intellectual framework for advancing their values. i.e. Promotion of national brands strikes one as nationalism, but maybe they have a 'local' desire for sustainability. This is of course the problem. What value is not sustainable?

5. Nationalist policies - They want to restrict land ownership and trade on silly nationalistic terms.

6. Human rights - They can be lauded along with the other parties for their support for political rights; but repudiated by their lack of protection for economic rights.

7. Climate change - The idea that 'our greenhouse gases must be cut as quickly as possible' strikes one as a policy which is intended to enslave humanity.

Interesting, despite some favourable aspects to the Greens, they contain elements of the worst aspects of the other parties, i.e. The dogmatism of Conservatism, the ignorant welfare statism of Labour, and the nationalism of the ACT Party. They offer a clearer outline of their policies than all the other parties, but then perhaps that is where it ends in terms of coherence. The greatest risk of a Green Party is not knowing what they are capable of in power. They are an untested quantity.

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Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Timing to buy in New Zealand

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Europeans, Americans and Japanese will love Queentown, NZ...well maybe you will hate the fact that there are already a lot of you already here. Its enough to ruin a place. :)

The good news is that you have a good reason to come to the land of 'milk and honey'.....your currencies are being debased faster than you can say 'Holy cow'. This is just one appealing aspect about NZ. It is a relatively hard currency.....and whilst income growth here is sluggish, that will change in i'd say around 5-10 years for a number of reasons related to resource development, but also its services-related potential. Yes, NZ is going to find a place in the business outsourcing arena, though it will have to improve its accent and telephony infrastructure. In the meantime, expect a currency gap to widen with Australia.

NZ does appeal. The population is flat...but that will change. This is why I think buying in 3-5 years time makes a lot of sense. All the better if you can debt leverage the property and perhaps spend your 'quiet' summers near before you retire here. Why? Well, summer is quiet here. You just have to decide if you like winter here. Given you are coming from Europe, Japan or the USA, you will struggle less with that question that if you are coming from Australia.

In 10 years, I think NZ's fortunes will turn around. I expect some major resource developments which are going to see a major change in the terms of trade, business investment, population retention, and currency ascension. Yep, and some government will take all the credit...when it was all me. Yes me. I was the one who pulled the lever first. I'm holding the smoking gun!

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Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Rural life in Australia and NZ

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I very much enjoy living in NZ. By many measures living in Australia is a far more pleasurable experience, and perhaps the fact that net migration favours Australia is perhaps evidence enough of that.....nevertheless I am currently living in NZ. The question is why?

Each person is different - they each have their own personal context. The things I most appreciate about NZ was:

1. Cheap housing - it was an opportunity to buy very cheap housing at a time when the USD was very low (0.53-0.55) against the NZD. Its now 0.73, so it was a good financial decision.

2. Climate - NZ climate is fairly similar since its an elongated island, however it gets colder as you go south of course. If you are coming from Chicago or the UK, it will be a pleasant change. For most Australians or anyone coming from a tropical climate, winter might be intolerably cold. I find it bearable from Sept to April, however most people stay indoors I guess in winter. It is also very wet. In Wanganui it rains a lot, and its often very windy. The good news is that it tends to rain overnight, which is rather peaceful if you have an uninsulated roof, and 0.5mil houses in NZ don't have insulation. The winds are fresh, which makes them refreshing if you are well-clothed. I constantly hear that Wanganui has the mildest climate anywhere. This is a statistically deceptive piece of inflation. It is because clouds accumulate over the land at night keeping the place relatively warm overnight. The mildness is a result of cloudiness. A feature people might not applaud during the day. In Sydney, I do not miss the sun. In Wanganui, I am lucky if I see the sun for days. In the last 2 weeks I have seen about 5 hours of sun and received about 1500mm of rain. Based on two years living here, that is not unusual. We did have an usually dry and sunny Spring last year. Winter was particularly wet with gail winds.

Australia has of course greater climatic variability and balance. Tasmania's climate is similar, but Sydney is mild 9 months a year, with a pleasant rainfall of 1200mm. Other areas tend to be drier.

3. People: People vary of course but I find people generally very friendly. There is a high crime rate, so I find people only relate through groups or group activities. I have joined Toastmasters and a philosophy group in town, and enjoy those. I think NZ still retains those small-town values that it always has. I think even rural towns in Australia have lost that warmth....unless they are very small, dying towns, in which you are probably less inclined to live.

4. Activities & nature: NZ does have splendid natural settings. I find the problem however is that it is inconveniently divided by an expensive ferry shuttle, and the low road density, and the under-provisioning for use of those natural features is a problem. They are many trails in Australia all over the country. In NZ, there are very few, and they are poorly marked. Australia is beautiful too of course in a very different way, but the distances make seeing everything an obstacle. Sydney and Melbourne are well positioned to enjoy a lot, but its all spread out. For NZ, unfortunately the more temperate climate is on the North Island (Bay of Plenty & Napier), but the splendid mountains are on the South Island.

5. Income and cost of living: Australia and NZ have fairly similar costs of living. The recent increase in GST in NZ, probably gives Australia a 15% advantage. But Australia has a 30% advantage on pay rates, so clearly wins by this measure. Australia offers a wider diversity of job opportunities too, which means you are more likely to get the job you are trained for, and thus more likely to get the salary you are 'worth'.

If I make this article purely about comparing rural living in Australia and NZ, then one has to acknowledge that you will pay a lot more to live near a major city in Australia. In NZ, you can get a $60-80K house within a few 100kms of a major city, in Australia its 5-6 hours. This is because these city people like their lifestyle farms, so you have to get out of commuting distance. i.e. Land releases are restricted severely because your job as a tax slave in Australia is to keep the economy pumping along. Restricted land releases artificially keep land prices high. Why? The greater land prices are, the harder you have to work to pay it off....or live in the distant rural areas.

For me, living in NZ has been a very desirable experience. I do intend to live here for a few years, at least until I can become a dual citizen, and then I will make a reassessment. I will I think always have a house here, and perhaps I will commute between Australia and NZ. But I find Japan very special as well, and I have family in the Philippines.

Oh! I don't believe it. The rain has stopped! The clouds have parted, and its time to leave. :)

I must say the opportunity to experience a new country was part of the appeal of NZ. I'm not disappointed, however Australia overall does offer a more desirable experience. I do however have a lot of frustration with the way the country is governed, so I choose not to live there for now. Australia must have the unfairest tax system in the world, a punitive government, and unprincipled politicians who make unilateral decisions to impose or change taxes at a moments notice. You cannot plan for anything. I have seen criminals show greater empathy and respect for people's rights...if we ever had them.

Oh! Too late...after editing...the sun has disappeared.

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Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Liberals would make Hitler proud

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Wanganui NZ is the host to the United Nations 'Peace with Justice' conference. Basically the conference is stacked with politicians, liberals, bureaucrats and the like....all people detached from reality by virtue of other people' money, whether its a rich grandfather, government salary, a non-representative political system, or simply another form of default, whether a history of family abuse or self-loathing. Why do I say that? Well this is the basis upon which these people exist. Their scheme on this occasion is 'Peace with Justice'. Their stated purpose is:

"A world without weapons of mass destruction and with climate change solutions that put people at it’s centre".

The problem with this cause is that they will not achieve their goal. Why? It is not a reasonable objective; its based on false premises; and these are precisely the type of people who will achieve nothing. They are not the solution, they are the problem.

Let's explore some of their issues. Nuclear weapons have contributed more than anything in the current world to the protection of people. Why? Nuclear weapons protects potential victims. People are potential victims of collectivism; that is any philosophy which subjugates facts to perceptions, or any 'majority' who professes to represent the majority. It is no coincidence that organisations like this are alligned with socialists, animal liberationists, welfare advocates, climate change doomsdayers. They have a common scheme - humanity is evil, he has to be restrained from his selfish ways, and the common good involves ....the pursuit of peace, climatic steady-state and justice. Sounds good...but the devil is in the detail.

The problem is that peace is not the standard of value, life is; as well as any measure which protects it. In such issues the basic unit of consideration is the individual, thus such groups ought to be seeking to enshrine individual rights. On this issue the UN is ambivalent because whilst the various UN Declarations and other conventions attempt to protect individual rights, they do so with dubious vigour. These were the noble objectives of the UN in the post-WWII period. Today the values of the organisation are clouded by collectivist philosophy which has seen Keynesian style policies. i.e. Governments running a sequences of credit-financed boom & busts, whilst underfunding regulation of CEOs, etc who bring the market into disrepute. This was of course the intention - to discredit markets, the selfishness of market participants, when it was all orchestrated by governments to keep them in power. The focus of the UN on justice, peace and global warming is a side-show to deliver collectivist - the basic form of socialism. By no means is socialism dead. In every generation it is reinvented. This generation is disparaging global warming and animal rights.

Interestingly, I have never heard an animal rights advocate show any concern for farmers who raise animals. Their interests are 'collateral damage', as they seek to use their political influence over the uninformed, uncritical thinking electorate to extort political concessions from government. Hardly a cause likely to deliver peace, but was that ever their objective. How can you have peace without a discussion of values. Why the focus on peace. If they are seriously interested in peace, they ought to be focused on solving problems, i.e. conflict resolution. In that respect, they do not have the capacity because they are the problem. They lack the values, the cognitive (critical thinking) capabilities and objective to deliver. Instead they, along with liberals in the media and government-sponsored academics are inducing a sense of guilt, social obligation and peer group pressure which is actually pushing us towards collectivism. They are so concrete-bound they know not what they do.

On my global warming blog you can read about the misinformation about global warming. The reason that no politicians are pushing emissions trading anymore because they are awakening to the fact that its a huge scam perpetrated by academics with no respect for objectivity. On my politics blog you can likewise learn why governments are not the solution but the problem, and why such non-government organisations (NGOs) like UNANZ are simply an extension of the same con job. Finally you can more about how society is being conned into recognition of rights for animals, with a greater zeal than Adolf Hitler. Why do you think Hitler wanted to elevate the rights of animals. Do you think it was love of animals or loathing of humanity? Such is the sense of life of these pithy liberals who are not going to deliver freedom, they are going to give greater powers to government to take it away, whether to protect animals (i.e. more regulation), protect the environment (i.e. more regulation) or peace (more rights). The problem is not that they want to protect these things, the problem is they want to protect people with arbitrary rights which will only destroy your prospects of achieving rights.

Most people will fail to grasp the intelligence of this article.... a testimony to your lack of conceptual integration. Read on....these is plenty more explanation. Rome was not built in a day. The thing to remember is that any arbitrary defined right is not a protection, its an obligation or a noose around your head. Grasp that and you will grasp your political legacy and future. When your right to education or whatever constitutes a claim on other people, it is apparent the whole concept of rights has been soiled. Government is a middleman who needs to justify its existence. It does not want to solve problems, it exists by burying you in them. Just like a stockbroker wants to buy & sell stock for you, the government corners both sides of the market, by creating the problem, and creating the perception of being a solution....have you ever seen that happen by the hand of government. Complex problem? Certainly, they have the majority fooled.

Australians retiring or moving to NZ

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I have been living in NZ now for a year. In the process of being here we have bought a home in a rural regional town with a complete range of services. I am 40yo, and have a Filipino partner with me, and we find the place rather idyllic. I am a writer, my partner does online product marketing. There is no question in my mind that if you are an income-earner, the best place to live is Australia; at least if you are earning money from the usual form of salaried employment. Those people earning foreign exchange (say USD abroad), then NZ makes a lot of sense because of the weak NZD, and the 4-year tax concession the NZ tax office gives to new immigrants with offshore income. I have written all about this in my NZ Property Guide. You can learn more by reading my property blogs, however the book offers a more comprehensive and detailed guide.

The biggest factors for retirees is finding the right climate. The big factors compared to Australia is the climate. The rainfall here is generally far greater than Australia so its mostly green, except where there is rain shadow effects. The biggest concern for some I think will be the hours of sunshine each year and the wind factor. If it is sunny it can still be miserably cold in NZ if it is windy. For this reason avoid places with too much wind unless you like being indoors. I also suggest buying a house with a sunroom for this reason. There are a lot of wind farms in NZ for a reason - and its not because they get huge tax concessions. In fact there are none. The wind here is reliably constant in places. So make sure you chose your retirement destination wisely.

It is not simply a place to retire. You can invest here of course. Just make sure you buy wisely and transfer money at the most opportune time. I am telling you this because you are about to get the best opportunity to buy property in NZ. People will rightly be concerned about the high prices for property in NZ. The fundamentals which have driven up property prices in Australia are the same for NZ. The difference is that NZ has less population growth and less growth in national income. For this reason, you need to target certain areas until property prices bottom. Another solution is to transfer money to NZ at the opportunity time. You can hedge your bets by buying certain stocks in NZ with favourable exchange rate exposure, e.g. Pike River Coal (PRC.ASX or PRC.NZX) exports premium metallurgical coal to Asia. It benefits from a weak NZD, so even if you move your money here, you can still hedge your bets by profiting from an increase in a non-NZD revenue stream. This stock happens to be at lows after start-up issues. see my discussion of this stock, but I suggest looking at other commodities related stocks in NZ.

Best climate & weather in New Zealand

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People often ask what is the weather or climate like in New Zealand. Often its the English or Canadians trying to escape the cold.
First some general rules.
1. It gets colder as you move south in the Southern Hemisphere
2. It gets colder as you rise in elevation
3. The diurnal temperature range (variability) of temperatures increases as you move inland

Bear in mind that weather readings are derived from weather stations, so if you are basing you decisions on city climate data, buy property in an equivalent place, i.e. A similar distance from the coast, as opposed to 10km inland because you want a rural life.

You should also appreciate that cold air sinks into the valleys at night. Its called a temperature inversion, and those areas are slow to get sun in the mornings, and early to lose sunshine in the afternoon. So avoid mountain shade, or opt for those locations with east-west trending mountain ranges or ridge lines which will not conceal sun.

Having lived in NZ for 8mths now, watching the weather and scarcely travelled around NZ in a campervan, I would suggest to you, if you don't like the cold, best to be located in towns along the coasts of the Bay of Plenty, Wanganui-Taranaki regions, Napier/Hastings regions, as they are about 4degC warmer than the South Island. Gisborne area is good too, but more remote, and Gisborne is the only reasonable size city.
Even the top of the Sth Island is very much colder, despite the fact that it has as many sunny days, if not more, than the North Island. That is based on 30 years statistics from NIWA.
Now, if you travel inland from Christchurch it will be particularly cold in the mornings/nights, and particularly hot during mid-day. I understand the appeal of the South Island, but it is colder in winter. I recommend Hastings/Napier, Wanganui (my town). The only difference is property prices. Wanganui is not overpriced. You can buy a house in Wanganui for as little as $NZ80,000 (USD48,000). Its 17degC here today thanks to a northerly, same as Auckland, which has worse weather (slightly), and its 10degC in Christchurch/Dunedin. Blenheim on the north tip of SI is a compromise at 13degC. The morning temperature is 10degC, but if there is a southerly, it can be as cold as 2degC.
Another benefit of the North Island is access to the two largest cities - Auckland and Wellington. If you fly a lot, that comes in handy, but also the inter-island ferry is expensive. Christchurch though is a growing and vibrant city, so its a good choice too, just colder. Of course there is heating, but bear in mind:
1. The prospect of a carbon tax
2. Greater heating costs in winter in the South Island