Wolf Richter   www.testosteronepit.com

The arm-wrestling between the US, Switzerland, and Swiss banks over funds that US citizens have stashed away in Swiss bank accounts has been going on for years to the point where the Swiss are now actually cracking down on US citizens, or at least aide them in circumnavigating the reporting requirements. In Germany, a similar fight has broken out, albeit with more consideration for the rich. Other governments, desperate for moolah, are also going after their own with funds in Switzerland. Turns out the Swiss themselves, long praised by their politicians for their tax compliance, do what others do: evade taxes—which is part of the human DNA. In Switzerland, however, it’s “officially silenced to death.”

Now Margret Kiener Nellen, Swiss National Council member, former President of the Finance Commission, and member of the center-left Social Democratic Party, has thrown down the gauntlet when she declared with some bravado, “The Federal Government, cantons, and municipalities are deprived annually of 18 billion.”

With bravado, because there aren’t any real numbers. And that’s part of the problem. To arrive at a number at all, she had to do her own calculations; neither the Federal Tax Administration (ESTV) nor the Finance Directors of the cantons have current estimates, laments Kiener Nellen. They purposefully don’t have them.

“The extent of tax fraud by the Swiss has no numbers,” declared ESTV boss Urs Ursprung before a parliamentary commission when some politicians wanted to find out. In June, however, Finance Minister Eveline Widmer-Schlumpf fired him for his involvement in a scandal over the acquisition of a data system.

So Kiener Nellen did her own math, as inadequate as that might appear. The basis was a 2006 study, “Tax Evasion in Switzerland,” by economists Lars P. Feld und Bruno S. Frey, that concluded that 23.5% of gross household income remained underground. She applied an annual tax rate of 20%, a “conservative” estimate, to the household income of 2009 as published by the Federal Statistics Agency. Hence her 18 billion Swiss francs.

Other countries aren’t that shy about studying the extent of tax evasion. In France, it costs the state €50 billion annually, according to an inquiry by a Senate commission. Another study estimated that €600 billion in French assets were hidden in tax havens. And so France is half-heartedly trying to get its hands on some of that dough.

Germany’s planned tax agreement with Switzerland would allow Germans to declare their hidden assets, pay taxes on them at a relatively low rate, and avoid prosecution. Recalcitrant tax evaders have six months to move their assets out of Switzerland, and thus beyond the scope of the agreement. The deal caused a ruckus in some corners due to its leniency.

Germany also acquired five CDs for €8.9 million. They contain, it is said, data of German clients at Swiss banks. The CDs became a casus belli in Switzerland and scared the bejesus out of tax evaders. Despite rumors that they didn’t actually exist, they allowed the government to collect €2.5 billion—a Google-esque return on investment—at least in part from people who turned themselves in. Fear is a strong motivator, along with greed. But it’s just a rounding error: €500 billion in German assets are estimated to be hidden in Swiss banks.

The Swiss bank secrecy laws were “designed for dictators” and the upper crust, “not for normal mortals,” a commenter pointed out. Workers “get paystubs, and every rappen is declared and taxed.”

Hence the unfairness of tax evasion. When Kiener Nellen demanded some answers in 2010, the Federal Council said that tax ethics in Switzerland had deteriorated significantly between 1988 and 1996, but because there have been no studies since then, it was unknown if the trend continued. Then the topic was pushed aside because “rich tax evaders are part of their voter base”—the reason why crackdowns in the US, Germany, and other countries took decades before they began to grow fangs. Politicians don’t want to step on the toes of rich donors voters.

But Kiener Nellen doesn’t mind stepping on toes, apparently. She is demanding new measures from the Federal Council and from the ESTV to fight tax evasion by the Swiss. “Tax fraud is theft from the people,” she said. Upon which a commenters replied, “The only theft from the people is executed by the state itself. Through overly high taxes without compensation.” Priceless.

And so it goes. Switzerland, surrounded by the over-taxed Eurozone and its debt crisis, is keeping a wary eye on it. So they listened with some anxiety as Jean-Claude Juncker, head of the Eurogroup, was jabbering on TV about Greece’s exit when suddenly dark pessimistic floodgates opened. Read.... Top Euro Honcho Juncker: “Europeans are dwarfs.”

And here is.... The Eurozone Crisis Between Euro-Morons And Zombie-Bankers, by George Dorgan.

Wolf Richter   www.testosteronepit.com

With impeccable timing, it seeped to the surface that a group of ten experts at the German Finance Ministry is studying ways to deal with a Greek exit from the Eurozone. Though rumors about a “Plan-B” had been circulating for months, the leak provided details. A Finance Ministry spokesperson clarified helpfully on Friday, rather than denying it, that the group has been in existence for over a year. Impeccable timing because it happened as Greek Prime Minister Antonis Samaras was arriving in Berlin for his begging and charm expedition. German Chancellor Angela Merkel must have smiled. The heat was on.

They should be soul mates, Samaras and Merkel, both belonging to conservative parties. But during the prior government when he led the opposition, he fought tooth and nail against her sacrosanct structural reforms. So their schmooze on Friday must have been quite something. But at the press conference, she said, “I want Greece to remain part of the Eurozone.” And she knew of “no one in the governing parties who doesn’t want that.”

Yes, she said that! Despite the onslaught of politicians in her government who over the past months promoted Greece’s exit—even hours before the meeting, on ZDF’s morning TV show. Maybe Merkel didn’t watch it. “We cannot provide more money,” Volker Kauder, Chairman of her CDU/CSU parliamentary group, told Germans nationwide. And Greece’s exit, he added, would be “no problem for the euro.”

Nevertheless, she soldiered on: “Commitments must be kept.” And warned, “Words must be followed by deeds.” She was “deeply convinced” that the Samaras government would do “everything” to solve the problems, but any decision would have to wait “for the Troika report.”

Ah-ha. Inspectors the EU, the ECB, and the IMF will spend much of September combing through Greece with a fine-toothed comb to come up with a report, the big report, the one that would determine if Greece deserved more bailout billions. The report would be so big that every politician, even Merkel, could hide behind it. No one would want to be the one to kick Greece out. But the faceless Troika report issued by a triple-layered, non-democratic bureaucracy could take the heat [read.... Greece Prints Euros To Stay Afloat, The ECB Approves, The Bundesbank Nods, No One Wants To Get Blamed For Kicking Greece Out].

She laced her speech with meaningless expressions of support but didn’t commit to anything. It was a good beginning, she said, but much work remained to be done—sounding like a broken record.

But she can’t change her tune easily. In a poll released on Friday, 72% of Germans were against giving Greece the third bailout package that would be required if Greece were given more time to implement its reforms; 67% were against giving Greece more time, and 61% thought Greece should return to the drachma. So a switcheroo would be costly for her.

“We’re a very proud people, and we don’t want to be dependent on borrowed money,” Samaras said when it was his turn. “We don’t want more money. We need time to breathe.” Then he lamented the “toxic declarations” by a “high-ranking politician”—a jab at vice-Chancellor Philipp Rösler, Volker Kauder, or any of the others. How could they publicly discuss that Greece would revert to the drachma? That’s why no one wanted to invest in Greece. It was rendering the privatization of state-owned enterprises impossible. Greece needed investment, not austerity, he said.

So Merkel grabbed his balls and yanked: She’d been reading the Greek tabloids..., she said—the papers that had been depicting her with Hitler mustache and Nazi uniform—as if to say, look, this is politics ... tit for tat. Then she jabbered about “two realities” in Germany and Greece that would have to be brought back together.

He deemed the discussion “especially constructive.” For Merkel, it was “intensive.” In other words, they hadn’t agreed on anything. Samaras packed up his bags empty-handed. Nothing would happen before the Troika report. And then Merkel could hide behind it. She has been on record from day one that she wanted Greece to remain in the Eurozone. No one could blame her. Greece would run out of money, default, and revert to the drachma on its own. And voters couldn’t blame her for throwing more of their money at Greece to keep it in the Eurozone another year or two. So maybe she’d hang on to power, something almost no head of state has been able to do in the debt crisis.

Yet, hope is once again gushing through the system that the debt crisis could be wished away by a nod from Merkel, a wink from the Bundesbank, or a click of the mouse at the ECB. But in Greece there has been an incident.... Euro Optimism Surges, A Greek Tax Revolt Flares Up: It’s Decision Time, Again.

And here is.... The Eurozone Crisis Between Euro-Morons And Zombie-Bankers by George Dorgan.

Wolf Richter   www.testosteronepit.com

Central banks are designed to be “independent,” and they shroud themselves in secrecy. But they have formidable and, when it comes to money, “unlimited” powers that they harness for the benefit of their clientele, banks. And hiding behind their veil of secrecy are shenanigans that rarely seep to the surface, but when they do, they just get worse and worse. And the latest is a sordid bribery and kickback scandal at the Reserve Bank of Australia (RBA) that appeared to be neatly contained to two subsidiaries, until now.

Securency International Pty Ltd, jointly owned by the RBA and Innovia Films, develops polymer materials for Australia’s banknote technology used in 27 countries. Note Printing Australia (NPA), a wholly owned subsidiary of the RBA, manufactures polymer banknotes. In May 2009, Age newspaper broke the scandal: eight former executives of Securency and NPA had paid millions of dollars in bribes and kickbacks to officials in Vietnam, Malaysia, and Indonesia between 1999 and 2004 through middlemen, including a Malaysian arms dealer, in order to win contracts for manufacturing bank notes. Forced to deal with the ruckus, Securency asked the Australian Federal Police to investigate.

In July 2011, finally, after two years of foot-dragging, and after international pressure to do something, the Federal Police arrested six former executives of Securency and NPA—Australia’s first prosecution under its foreign bribery laws.

On Aug 19, 2012, former Securency CFO David Ellery pleaded guilty to one charge of false accounting—he admitted to concealing a $79,502 payment to a Malaysian agent—and was given a six-month suspended sentence. In return, he handed over hard drives, provided details, and agreed to become a prosecution witness. In her ruling, the Judge lashed out against the company for its “corporate culture” where “staff were discouraged from examining too closely the use of, and payment arrangements for, overseas agents,” and where “secrecy and a denial of responsibility for wrongdoing” prevailed.

So justice reluctantly tiptoed around the lower levels. Suspicions that top officials at the RBA knew about the corruption were waved away by Governor Glenn Stevens. He testified before a parliamentary committee in 2011: he and others at the RBA learned about the scandal by reading the papers. Deputy Governor Ric Battellino—retired since February—sat right next him.

But at least Battellino knew since June 2007! A 5-page memo that ABC obtained from “sources” at the RBA, and made public yesterday, proves it. That June, NPA’s Brian Hood told Battellino in a secret meeting about the corruption issues. He later composed and sent the now surfaced 5-page memo to Battellino, detailing multi-million-dollar payments to overseas agents who in turn made payments to officials and politicians in Vietnam, Malaysia, Indonesia, and Nepal. Hood stated that he’d tried to address these issues within NPA but was told to “back off.”

Battellino reacted. Instead of calling the Federal Police to investigate, the RBA engaged a law firm to do an audit that gave the company a clean bill of health. Whistleblower Hood was axed in 2007, along with the foreign agents and some of NPA’s management. Despite the memo, the RBA, of course, continues to reject the “implication that the governor or other officers of the bank have misled” the parliamentary commission.

Central banks are special creatures, and investigating them turns out to be the hardest thing in the world. While pressures have been rising for an independent inquiry, Parliament voted against it last year, and may do so again.

But the RBA is not alone. Similarly sordid allegations have entangled Ewald Nowotny, Governor of the Austrian National Bank and member of the ECB’s Governing Council [read... Austrian Central Bank: Bribery, Kickbacks, Money Laundering]. At the Swiss National Bank, an insider trading scandal caused its chairman, Philipp Hildebrand, to resign. And in the US, an audit of the Federal Reserve System by the Government Accountability Office shed some light on the dizzying conflicts of interests and cronyism at the New York Fed when it decided who got which billions during its multi-trillion-dollar bailout mania [read.... The GAO Audit of the Fed Doesn’t Call It ‘Corruption’ but it Should].

Piercing the veil of secrecy surrounding central banks is tough. While Ron Paul [His Legacy, A Complete Fed Audit?] and others have long pushed for regular Fed audits, not much has been accomplished beyond the GAO audit. Inspector General Neil Barofsky was looking after TARP to prevent fraud and abuse, though it was handing out peanuts compared to the trillions the Fed was handing out—secretly and unobserved. Read.... All Heck Breaks Loose on CNBC, TARP Gets Sanctified, Bank Bailouts Get Whitewashed, And The Fed Escapes Scot-Free.

Wolf Richter www.testosteronepit.com

Euro optimism is once again gushing through the system on the hope that the debt crisis could be wished away with a nod by German Chancellor Angela Merkel or with a wink by the Bundesbank in direction of the European Central Bank, which is dying to print unlimited amounts of moolah to buy sovereign bonds—and old bicycles, if it has to—in order to force yields down for debt-sinner countries like the US Spain and Italy.

There is even hope that sudden German “flexibility” might solve the Greek debacle when Prime Minister Antonis Samaras heads to Berlin for his session with Merkel, based on indications in Germany that those with the power to say “no” are getting cold feet. But there was an incident in Greece that they should bear in mind.

It started Friday on the island of Hydra, a tourist spot of 2,700 souls. Officers of the financial police checked taverns, bars, and souvenir shops for tax violations. At a seafood tavern, an inspector discovered that patrons weren’t given Value Added Tax receipts, though required by law. An old trick: cash income remains undeclared and disappears; the VAT, though collected from customers, also disappears rather than being turned over to the state.

To investigate the case, the owner was taken to the police station, where she fainted. So she was taken to the hospital under guard. Her 25-year old son who worked at the tavern and copiously insulted the inspectors was also arrested—the straw that broke the camel’s back. Enraged, people threw rocks and firecrackers at the police station, shut off water and power, and demanded that the guy be released. Others blocked the port to prevent ferries from docking so that police couldn’t transfer him to Athens. Some forced their way onto a ferry and scuffled with the crew.

The next morning, riot police from the mainland made their way through the shouting people to the police station and freed the officers of the financial police holed up in there. The owner’s son was released because he wasn’t the owner; he claimed he’d planned on issuing receipts to his patrons, or whatever. On Sunday, his mother was taken off the island. The tax revolt in Hydra came at an inconvenient time: just before the all-important meeting in Berlin. So the Greek government was quick to condemn the revolt.

But tax fraud is pandemic in Greece. The financial crimes squad (SDOE) announced today that 4,067 taverns, bars, souvenir shops, and the like on 46 islands and in prominent tourist locations on the mainland had been checked between July 6 and August 19; of which 55.7% had committed violations. It’s been getting worse, in tandem with the economy. Last year, violations were found in 53% of the establishments. And there had been other incidents of revolts, writes Angelos Stangos:

On Lemnos in 2009, outraged business owners tried to push a group of tax inspectors into the sea, obviously in an effort to terrorize them into not running another inspection on the island. The practice has manifested itself in a variety of forms over the years, with a rich array of excuses presented as to why certain people should be allowed to get away with not paying taxes.

Tax fraud from the bottom to the top of society is one of the causes of Greece’s financial problems: the money just isn’t coming in. Now, costly promises politicians made to their voters have to be broken. For years, Greeks benefitted from the artificial manna of cheap euro debt and European Union funding, but the system has run into a wall—and Merkel has an opportunity to decide if taxpayers in Germany and other countries (including the US through participation in the IMF) should fork over endless billions to fund benefits, services, and boondoggles that Greeks themselves refuse to pay for.

The other option is default. “A weapon of the weak when they reach the point of not being able to pay their debts,” said Panayiotis Lafazanis, a Greek politician. Closer to the truth than anything else emanating from his wily colleagues in parliament. The government is already selectively defaulting on its obligations, paying only salaries and pensions of civil servants. Other disbursements have been stopped. And nothing works anymore. Read.... The Greek Bailout Sham Is Getting Gummed Up.

So should Greece, as it has been suggested, follow in the footsteps of Argentina, which rose from the ashes after its default? Not so fast. To stave off another collapse, the government in Argentina is imposing ever more trade barriers and capital restrictions. Read.... Argentina’s Creeping State Control, by stilettos-on-the-ground economist Bianca Fernet.

Wolf Richter   www.testosteronepit.com

Natural gas may well be the most mispriced commodity these days. Its price has been below the cost of production for so long that the industry is suffering serious consequences with billions of dollars in losses—dolled up as “non-cash accounting charges” as to be ignored by “analysts.” The more leveraged players are trying to keep their chin above water by selling priced assets.

There has been a mad scramble to abandon drilling for dry natural gas, and what little drilling still takes place is focused on wells that also produce oil or gaseous liquids. Countless wells have already been drilled and could produce but have not been brought on line due to pipeline constraints or local prices that have collapsed [read... The Coming Unholy Alliance in Natural Gas].

And yet, even that mayhem hasn’t been enough to push the price above the cost of production. But production is now finally tapering off from record highs on a week-to-week basis, though it’s still above last year’s level. Storage levels are high for this time of the year, but are rapidly regressing towards the mean due to soaring demand, driven by the hottest July on record and power generators that have switched from coal to gas due to price. But this is just noise as natural gas continues its relentless conquest.

It started in the 1990s when highly efficient natural gas combined-cycle (NGCC) turbines arrived on the scene. For the first time, gas was able to compete with coal on cost. By 2000, there was a building boom of NGCC plants underway that, over the next ten years, nearly doubled the natural gas-fired generating capacity. And every one of these plants helped natural gas gain ground on coal.

And during the first six months of 2012, 165 power generators came on line with a total capacity of 8,098 megawatts (MW), but only one was a coal-fired plant. At 800 MW, it’s less than 10% of total capacity added. The remaining 90% were gas-fired generators and renewables, including solar and landfill gas, which tend to be small—hence the large number of generators.

Coal plants are shut down at a stunning pace. In 2012, a total of 9 gigawatts (GW) of coal-fired capacity will be retired, the largest one-year exodus in the history of the US! In 2015, a new record: 10 GW. Between 2012 and 2016, 175 coal-fired generators with a total capacity of 27 GW will get axed—8.5% of the total coal-fired capacity.

Each wave is comprised of the oldest and most inefficient units. At the same time, the few coal-fired generators coming on line are much more efficient and burn significantly less coal than the capacity they’re replacing. A double whammy for coal demand.

And here is where the hapless retirees are:

The reason: cost. More precisely, variable operating cost, an important factor in deciding which power generators to operate to satisfy a given demand. Generators with the lowest variable operating costs are dispatched first. Older inefficient coal plants are more expensive to operate than new coal plants—and more expensive than NGCC plants, even if the price of natural gas were higher. But there are other costs as well, such as complying with the Mercury and Air Toxics Standards. Smaller, older, inefficient units are not worth upgrading. And natural gas, being a cleaner-burning fuel, doesn’t have these issues.

Coal-fired plants are geezers: they were built during the halcyon days of King Coal before 1980. Back in 2010, 73% of the capacity was over 30 years old, while most gas-fired capacity was less than 10 years old.

Coal is a commodity whose demand in the US is being strangled powerplant by powerplant, and at an accelerating rate. Even a surge in the price of natural gas—and there will be one—will only fiddle with the numbers at the margins. A dire situation for coal in the US market. Read... Natural Gas And The Brutal Dethroning of King Coal.

And in another hemisphere, there is a country that is desperately trying to stave off a collapse by imposing ever more bizarre trade barriers and capital restrictions. Read.... Argentina's Creeping State Control, by stilettos-on-the-ground economist Bianca Fernet.

Wolf Richter   www.testosteronepit.com

The Eurozone wasn’t supposed to be a house of cards. And as long as there was “confidence” that it would work, it worked: the financial markets offered cheap no-questions-asked loans to the most profligate governments, and even tiny countries like Cyprus were able to suck up and disperse in record time phenomenal amounts of money. The elites got immensely rich, and even other members of society were able to pick up some crumbs. But all that remains from this drunken frenzy are mountains of decomposing debt—and a cacophony of discord, shouting matches about defaults, and visions of impossibility. Former taboos are violated, sacred cows are slaughtered, and the euro has been tossed on the chopping block.

There was billionaire Frank Stronach who’d announced he’d start an anti-euro political party in Austria. While the European Union should guarantee peace and the free movement of goods, people, services, and capital, he said, it could only function “if every country has its own currency.” He called the ESM, the not yet existing bailout fund that is supposed to save the Eurozone but is still hung up in the German Constitutional Court, “insolvency procrastination.” And he exhorted Austrians to ditch the euro [read.... The Euro Revolt Spreads To Austria].

Austrian Foreign Minister Michael Spindelegger (ÖVP) would take the opposite tack. Worried about exports—half the jobs in Austria depended on them—he’d rather not get rid of the euro. Instead, “We need possibilities to kick someone out of the monetary union,” he said, particularly “countries that don’t stick to their commitments.” And he jabbed at Greece because it had lied about its numbers in order to be allowed into the Eurozone.

Alas, being able to kick a country out would require treaty changes, which would take five years, Spindelegger said. But he’d already started discussions with other foreign ministers. While many of them supported treaty changes, unanimity of all 27 EU countries would be required, he said, possibly aware of his illusions.

He immediately caught heat from stalwarts in the coalition government. Some called it “populist”—as opposed to elitist, perhaps. Chancellor Werner Faymann was worried about “the negative consequences of a breakup of the Eurozone”—even he used breakup of the Eurozone, a concept now as common as the currency itself, though for top politicians, it had been an unmentionable not long ago. And in Germany, the discussion had already come to a boil [read... German Bailout Rebellion: “We Have Euro-Anarchy”].

In Finland, Foreign Minister Erkki Tuomioja poured gasoline on the fire: “We have to face openly the possibility of a euro-break up,” he said. “Our officials, like everybody else, and like every general staff, have some sort of operational plan for any eventuality.” The only handicap? “A Eurozone break-up would cost more in the short-run or medium-run than managing the crisis.” So it was just a matter of when to recognize the costs incurred in prior years: publicizing them now or sweeping them under the rug via the bailout funds that Stronach had correctly called “insolvency procrastination.”

Like Stronach, Tuomioja wanted to preserve the EU, and dumping the euro would make it “function better,” he said. He confirmed the scenario that either the south or the north would escape “because this currency straitjacket is causing misery for millions and destroying Europe’s future.” It didn’t help that he called the euro “a total catastrophe.”

Not a day passes by when the concept of a Eurozone breakup doesn’t flare up in public. Each time, it saps confidence in the euro even more, though “confidence” is the only thing that separates that house of cards from collapse. The 21 EU summits to save the Eurozone, the waves of half-hearted dog-and-pony shows, and the alphabet soup of tangled-up and ineffectual bailout measures have all failed to stem the slide. There is nothing to indicate that a magic potion could eventually be found. And the fact that “breakup of the Eurozone” is such a common topic at the top of the political power structure has infused it with a life of its own.

“Default is not necessarily destructive,” said Panayiotis Lafazanis, a Greek politician, as the system in Greece is assuming aspects of financial rigor mortis. Read....  The Greek Bailout Sham Is Getting Gummed Up.

And here’s a veritable chorus of former (and current) central bankers lashing out against central-bank sins and shenanigans, by George Dorgan.

Wolf Richter   www.testosteronepit.com

“That amount of radium found to date cannot be explained by gauges, deck markers, and decontamination activities,” wrote Stephen Woods, an environmental cleanup manager at the California Department of Public Health, about Treasure Island, the rectilinear speck of land in the San Francisco Bay two-and-a-half miles of white caps from our kitchen window. It summed up decades of US Government efforts to bury nuclear sins under layers of ignorance.

The US Government created Treasure Island from fill in 1937 and connected it to Yerba Buena Island, the overgrown rock in the middle of the Bay Bridge. After the Golden Gate International Exposition in 1939/1940, it became a naval base. In 1993, the Navy started the process of cleaning up the island so that the City of San Francisco, which had agreed to buy it for $105 million, would accept it—pending approval by state health officials.

Meanwhile, 2,800 people, oblivious to what was buried on the island, moved into the housing units they rented from the Navy. Developers are scheduled to break ground on a high-rise complex next year. The population could eventually swell to 20,000. Alas, in an excellent piece of reporting, The Bay Citizen, a nonprofit news organization, reveals a homegrown nuclear debacle kept out of public view by decades of deception.

After World War II, Treasure Island became a training center for nuclear decontamination. In a 2006 report on the cleanup, the Navy concluded that the locations of the USS Pandemonium, the mockup of a ship used for decontamination training, were free from radiation, and that a 170-acre area was ready to be transferred to San Francisco. But contractors hired by the Navy kept running into radioactivity of such magnitude that one worker was exposed to the maximum radiation dosage allowed under Nuclear Regulatory Commission guidelines and was sent off the job.

In 2007, the Navy tried to mollify resident with a newsletter that stated that lingering radiation from the discarded glow-in-the-dark buttons handed out during the Golden Gate International Exposition was no worse than that of a smoke detector.

But on December 17, 2010, state public health official Peter Sapunor wrote in an email that “Navy contractors had dug up and hauled off 16,000 cubic yards of contaminated dirt, some with radiation levels 400 times the Environmental Protection Agency’s human exposure limits for topsoil.” And worse, radioactive material in the soil around those excavations exposed children at a Boys & Girls Club and a child development center to contaminated dust.

The Navy’s report wasn’t forthcoming on other issues, according to The Bay Citizen:

For one, the Navy had failed to fully detail what had happened to the remains of the USS Pandemonium, used to train sailors in “Nuclear, Biological and Chemical Warfare,” according to a July 2011 health department review. The Navy contractor recently dumped debris from the two training sites into an undisclosed landfill, the report alleged, then declared the training site clean without testing for radiation. “The Navy has not responded to requests for the location of the landfill,” the review added.

In early 2011, Stephen Woods lambasted the Navy for still using the 2006 report to support its claims that parts of the island had been cleaned: “The large volume of radiological contaminated material, high number of radioactive commodities (individual items or sources), and high levels of radioactive contamination … have raised concerns with CDPH regarding the nature and extent of the radiological contamination present at Treasure Island.”

In June 2011, CDPH issued a notice of violation against the Navy’s chief cleanup contractor “for repeatedly digging, piling, spreading and transporting dirt from sites contaminated with toxic chemicals” without testing them for radioactivity, “potentially spreading radiation beyond its original location.”

Finally, these and many other actions and pressures induced the Navy to hire civilian researchers and do a new historical analysis. The Bay Citizen “obtained” a draft report, dated August 6, 2012. Turns out, Treasure Island was “ground zero for repairing, scrapping, recycling and incinerating material from ships that might have absorbed radiation from atomic bomb tests in the Pacific.”

After many decades of suppressing this information, it is now finally seeping to the surface, thanks to the Navy’s reluctant glasnost, worried state health officials, and investigative reporters at the The Bay Citizen. A bit late for the families who’ve lived on the island for years, and for some of the clean-up workers who weren’t always aware of what exactly they were dealing with.

Here is a harbinger of things to come: California Sales Tax Revenues Nosedive By 33.5%, by hard-hitting Chriss Street.

And this came Friday evening..... Moody’s Warns Of Mass California Municipal Bankruptcies, also by Chriss Street.

Wolf Richter   www.testosteronepit.com

It’s been tough for natural gas drillers. The boom in horizontal drilling and hydraulic fracturing that gave access to enormous gas-rich shale formations around the nation led to record production. Prices crashed. Drilling activity collapsed: rig count, down 45% from last year, hit the lowest level since July 1999. Producers are writing down their natural gas assets by the billions of dollars. Some will get wiped out. The price of natural gas has been below production costs for years, and the damage is now huge [read.... Natural Gas: Where Endless Money Went to Die].

On the other side, power generators have switched from coal to natural gas—with devastating impact on king coal. Coal has long been the dominant fuel for power generation. But April 2012, for the first time in the history of EIA data, power generation from coal-fired and natural gas-fired plants reached parity, each contributing 32% to total electricity generation.

The large fluctuations are a function, in part, of the seasonality of overall power demand. In April, demand was low due to mild spring weather. The price of natural gas dropped to a 10-year low, and power companies laughed all the way to the bank. In May, power production started to rise as air conditioners got cranked up—a trend that will hold for the summer.

But the graph shows something far more important: a narrowing of the gap between coal and gas-fired power generation. It’s not just the low price of natural gas that did it—but a new power generation technology and yes, the usual suspect, Congress.

Gas turbines are an old technology. Most of the energy is wasted as exhaust heat. They’re inefficient, compared to coal-fired steam turbines. But they have an advantage: they can be brought on line quickly to cover peak loads. So coal and gas have been used in parallel: coal to produce low-cost base power and gas to produce more expensive peak power during periods of high demand (daytime, summer).

Gas didn't pose a threat to king coal ... until the arrival in the 1990s of the natural gas combined-cycle (NGCC) turbine: like the classic turbine, it drives a generator, but instead of blowing the “waste” heat out the exhaust, it uses the energy to generate steam that, as in a coal plant, drives a steam turbine that powers another generator. Like their old-fashioned brethren, NGCC plants can be brought on line quickly, but when used for base power, their efficiency can exceed 60%—much higher than that of a coal plant.

A game changer. With natural gas prices as low as they’ve been over the past years, operating costs for power generators have plunged. It doesn’t hurt that NGCC plants have lower capital costs than coal plants—$600 to $700 per kW versus $1,400 to $2,000 kW—relatively short construction times, and environmental benefits. The long-term shift to natural gas looks like this:

 (The data is annual, not monthly; so 2012, with data through April, isn’t comparable to the first graph.)

The gray areas in the graph indicate periods of extraordinary changes. Low oil prices in the 1960s caused and uptick in use of petroleum for power generation ... until the two oil shocks in the 1970s knocked it into a long decline towards the inconsequential.

The winner of the oil shocks was coal, producing at its peak in the late 1980s nearly 80% of all power: truly king coal. And it was Congress that did it! In 1978, in reaction to the oil price shocks, it passed the Powerplant and Industrial Fuels Act (PIFUA) that clamped down on the construction of oil and gas-fired plants and promoted the construction of coal plants. But by 1990, a new world had dawned: PIFUA was buried, natural gas markets were deregulated, and power generators were freer to substitute one fuel for another, based on economic considerations.

Just then, the efficient NGCC plants arrived on the scene! Result: a phenomenal ascent of natural gas in power generation, not only for peak power but also for base power, led by a construction boom of NGCC plants. Between 2000 and 2010, natural gas generating capacity jumped by 96%:

The loser was coal. An ugly slide that accelerated over the last few years. Higher natural gas prices—a certainty, given that they’re currently below production costs—will have some impact on the speed of the progression of natural gas. In the short term, power generators switch between fuels to take advantage of lower costs here and there. But as more gas-fired plants have come on line, and as the oldest, most inefficient coal plants are being retired, the shift to natural gas has become structural—pushing up demand inexorably.

Alas, the price of natural gas doesn’t flow like a tranquil river but has violent ups and downs with sporadic and vicious spikes. Read.... The Coming Spike In The Price Of Natural Gas.

And here is a harbinger of other things to come: California Sales Tax Revenues Nosedive By 33.5%, by hard-hitting Chriss Street.