Energy Investment

I’ve spent the past week traveling across the Pacific Northwest and central Canada. I’ve been calling it my “2008 Energy & Geology Tour.”

Within the past eight days, I’ve driven from Washington through Idaho and into Montana. Then I traveled across Alberta and Saskatchewan, and down into North Dakota. I’m astonished at how much of the trip involves driving past energy projects of one sort or another.

Visiting Grand Coulee Dam

On a big scale, I toured the Grand Coulee Dam in central Washington. This massive structure is the product of decades of vision and many years of hard work. In 1933, President Roosevelt dusted off a Hoover-era plan to build the dam. Congress would not buy into it during the early years of the Great Depression. FDR was more persuasive.

The bulk of the dam was completed in 1942, just in time to provide electricity to the U.S. economy as America entered World War II. Grand Coulee provided the electricity that made a difference to the U.S. aluminum industry. It powered the Boeing factories that built aircraft for World War II. And it electrified the machinery at Hanford, Wash., that produced the plutonium for the atom bomb.

So it goes to show that big energy projects matter. At some point, you have to quit thinking about doing something and just plain do something. Build it. You have to start blasting and pouring concrete.

And I mean a lot of concrete. Grand Coulee is three times the size of the Great Pyramid at Giza, Egypt. Just the spillway is twice the height of Niagara Falls. The dam contains over 24 million tons of concrete, and over 12 million tons of steel reinforcement. That’s the weight in steel of about 240 standard battleships from the prewar era. So Grand Coulee was no small national effort.

Grand Coulee is rated at 6,809 megawatts of power output. Today, it provides “demand” power to the North American grid, literally from San Diego to southern Alaska and as far east as Chicago. If you live west of the Mississippi and have ever flipped on a light switch on the hottest day of the year, then you have drawn power from Grand Coulee.

Energy Is “Burning Up the Roads”

As I’ve driven across Canada and down into North Dakota, I’ve been seeing energy everywhere.

The farms are well tended, and the agricultural productivity is awe-inspiring. There are wind farms up, and going up, on many a hillside. Power lines crisscross the landscape. There are dams and impoundments on many of the rivers. And the trains of the Canadian Pacific Railway are rolling in both directions, hauling grain, ag products, coal, phosphate and so much else.

In Saskatchewan and North Dakota, the big story is the Bakken Shale formation. I’ve seen over a dozen working rigs and dozens of brand-new oil wells. The pump jacks are still in the break-in period. Heck, the paint on some of them is still drying.

It’s a mixture of old and new. There are old farm buildings, and all of the traditional agricultural effort of the region. Right next to the buildings, you might see a new oil well. And in the distance, there might be a wind farm going up.

The highways are crowded with working trucks. Trucks are hauling pipe and equipment to well sites. The motels are crowded with oil field workers. In some small towns, real estate prices and rents are actually rising. People around here have seen nothing like it in many years.

Or if the trucks are not hauling drilling equipment, they are hauling agricultural products. Or there is farm equipment driving down the roads from one area to another. It’s all just plain busy.

At the customs station at Noonan, N.D., the U.S. agent told me that the traffic in energy-related commerce is just burning up the roads in both directions. There are simply not enough skilled workers. Some companies are poaching staff from others.

At the same time, I can almost feel the slowdown that is afflicting the North American energy sector. Costs for everything have risen too far, too fast. Now the whole sector is starting to feel the pinch.

Couple the rising costs with a serious difficulty in obtaining financing. The banks have cut back on lending, even to the best of energy projects. It’s not for lack of investment merit of the energy projects. It’s because the banks are struggling with their own solvency.

So the mess in the financial sector has infected the rest of the economy. Just when the U.S. and Canada need to be investing in energy projects, the financial system is letting us down.

It reminds me of what I heard from an old rancher a long time ago “Out here in the prairies, we farmers work hard and raise the cows. Back East on Wall Street, they milk us farmers.”

I’ll be out in the field for the next few days, looking at other points of energy and geological interest. All of this travel helps my perspective in coming up with better advice for my Whiskey readers.

Until we meet again…
Byron W. King
August 7, 2008

P.S.: While there is no shortage of energy projects taking place, some are simply more exciting than others. It’s rewarding to see the wind farms and crisscrossing power lines across the country, but one project that may revolutionize energy as we know it needs your investment now more than ever. And of course, this could be such an Earth changing breakthrough that your investment could wind up being the best one you ever make.