Monday, February 10, 2014

The Natural Gas Revolution

Firstly, anti-fracking grievances are broader and deeper than water contamination, well integrity and greenhouse gases. They also encompass land use issues, health and safety concerns, issues of economic development, cultural integrity, political legitimacy and planetary responsibilities. 

Secondly – and crucially – companies have lost public trust by discounting the legitimacy of grievances, prioritising trade secrets over transparency and engaging governments rather than communities. 

This particular industry has underestimated the sophistication, reach and influence of the anti-fracking movement. It is not simply ‘NIMBy-ism’ masquerading as environmentalism, but a diverse coalition of ideological and vested interests unlikely to be swayed by industry-funded studies or glossy public relations campaigns like the document below that was placed in everyone's postal box in Broome this week. 

This APPEA publication and community distribution of this brochure is an indication that the industry is very concerned that Broome and the surrounding communities are not going to be that easily convinced that fracking is  safe. 

The recent Buru Energy's community information afternoon was a specific public relations technique to analyse and research all the relevant factors of concern held by the community about fracking. It was not about informing the community about their intentions, providing the community with the truth or building relationships. It was purely for themselves to gain an understanding of the various constituencies and the key factors that are influencing our community's perceptions and knowledge levels. 

It was also an evaluation of  their proposed in-house strategies and tactics that they believe will feed into the overall success of their fracking is safe sales pitch. APPEA's booklet The Natural Gas Revolution is their response to Buru’s Energy’s public relations campaign. 

A lot of money was spent on this old method of publication, most of which ended up in the bins outside the post office along with all the other junk mail. People do not trust these shining pieces of paper anymore, they do not buy into it. They see it clearly for what it is, a cheap (but expensive looking) con job.  

A notable feature of the any movement in this day and age is the extensive use of online social media to disseminate information, organise and mobilise. Many of the co-ordinating groups at the centre of various national anti-fracking, CSG and Coal movements originated as forum groups, petitions or blogs, professionalising over time as attention and resources flowed into the anti-fracking movement. The extensive use of free or low-cost online platforms – including Google Calendars, Google Maps, youTube, Twitter and Facebook – has both facilitated grassroots participation and helped level the information playing field vis-à-vis the gas industry. 

The Buru gurus will have to do better than that because Broome and the surrounding communities are no longer receptive to these cheap tactics. Woodside and the Department of State Development kicked that innocence and naivety out of us long ago.


  1. Well said - and BURU ENERGY stamped all over our childrens achievement awards from BSHS with $20 Target gift cards attatched.

  2. Buru Provides Drilling Updates at Ungani 3 Well in EP 391 in WA

    by Buru Energy Ltd.

    Press Release
    Monday, February 10, 2014

    Buru Energy Limited, an Australian oil and gas exploration and production firm, provided Monday the following update on drilling operations at the Ungani 3 well in exploration permit (EP) 391 in Western Australia as at 06:00hrs, Feb. 10 (AWST).

    Since the last report 9.625 inch casing has been run and successfully cemented to a measured depth of 7,024 feet (2,141 meters) in accordance with the well plan.

    The Crusader rig is currently preparing to drill ahead in 8.5 inch hole. The forward plan for the well is to drill a total of 98-164 feet (30-50 meters) of Ungani Dolomite section, and depending on results at that point, to undertake a barefoot drill stem test to obtain data on reservoir properties and formation pressures.

    The well will then be drilled to the planned total depth of 7,677 feet (2,340 meters) measured depth (MD).

    From the limited data available to date, the Ungani 3 well is interpreted to have penetrated the top of the Ungani Dolomite at a measured depth of 7.011 feet (2,137 meters), 226 feet (69 meters) above the oil/water contact identified in the Ungani 1 & 2 wells and 52 feet (16 meters) above the previous highest reservoir penetration in the Ungani field.

    Similar hydrocarbon indications to those seen in the previous wells have also been observed.

    Subject to the evaluation of all of the data obtained, it is planned to complete and suspend the well as a future oil producer.


    CNPC: PetroChina Makes Huge Gas Find in Sichuan Basin

    BEIJING, Feb 10 (Reuters) - PetroChina, Asia's largest oil and gas producer, has found 308.2 billion cubic metres of technically recoverable gas in southwest China's Sichuan basin, according to parent CNPC, one of China's largest gas discoveries in more than a decade.

    - See more at:

    1. Buru Energy Identifies Drilling Targets for EP 457 in WA's Canning Basin

      by Rey Resources Ltd.

      Press Release
      Friday, February 14, 2014-

      Rey Resources Limited, an Australian energy resources exploration and development company, disclosed Thursday that the firm has received from Buru Energy Limited, its Joint Venture partner and operator of the Fitzroy Blocks, their initial interpretation of 2D seismic data acquired over the Ungani Trend in EP457 in Western Australia's Canning Basin.

      As announced Nov. 25, 2013 the geophysical survey was completed during November 2013, with a total of 145 line miles (234 line kilometers) acquired over EP457. Processing of seismic data occurred in January 2014. EP457 together with EP458 are referred to as the Fitzroy Blocks.

      Rey holds a 25 percent interest (including a 10 percent free carry to production) in a joint venture on the Fitzroy Blocks along with Buru (37.5 percent and operator) and Diamond Resources (Fitzroy) (37.5 percent) who are a 100 percent subsidiary of Mitsubishi Corporation (MC).

      Initial results have provided several targets analogous to the Ungani discoveries made by Buru/MC approximately 6.2 to 9.3 miles (10 to 15 kilometers) to the northwest (NW) of EP457.

      At least one of these targets will be proposed to the joint venture for drilling later in 2014. Further seismic work will be proposed for other prospects and leads on the Ungani Trend in EP457 and EP458 during 2014.

  3. Worker missing from Chevron shale well blast

    Wednesday, 12 February 2014

    A CHEVRON-operated well targeting gas from the Marcellus shale in southwestern Pennsylvania in the US has exploded – hospitalising one worker while another remains “missing”.

    According to Reuters, the blast at the Lanco 7H well near the West Virginia border occurred at about 6.45am local time yesterday, with the gas-fuelled fire continuing throughout the day.

    Wild Well Control was called in to contain the fire.

    While one worker was taken to hospital for minor injuries, all reports so far indicated that another worker remained missing as night fell.

    "Chevron's primary concern at this point is to contain the fire and ensure the safety of its employees, contractors and the surrounding community," Chevron spokesman Kent Robertson reportedly said via email.

    Pennsylvania Department of Environmental Protection spokesman John Poister told Bloomberg that before the accident the contract workers “were lowering pipe into the well hole” to help connect the gas into their existing system.

    Crews reportedly began fraccing the horizontal well around March 15 last year.


    EPA clarifies regulations for fraccing with diesel

    Wednesday, 12 February 2014

    THE US Environmental Protection Agency has released guidance for wells using diesel as a fracturing fluid to help companies comply with the rules stipulated by the underground injection control permit needed for the practice.

    The guidance is an interpretive memorandum intended to clarify the UIC requirements that apply to hydraulic fracturing using diesel and defines the term “diesel fuel” in a legal sense.

    The guidance is also intended to help those issuing UIC permits but will not be cited as a basis for decision on the issuing of a permit.

    The EPA says the clarification of the issuing of UIC permits for diesel can also be applied to best practices in hydraulic fracturing in general and will be available to states and tribes in the interest of protecting underground drinking water and public health.

    1. Chevron's Pennsylvania Natural Gas Well Still Burning After Blast

      PITTSBURGH, Feb 12 (Reuters) - A fire at a Chevron Corp natural gas well in western Pennsylvania was being left to burn on Wednesday after an explosion early Tuesday left one worker injured and another missing, state officials said. Flames shot from the head of the Lanco 7H well, which is 50 miles south of Pittsburgh in the Marcellus shale region and emergency workers were unable to get near on Wednesday.

      The fire could continue indefinitely as gas flows up the well from underground, said John Poister, spokesman for the Pennsylvania Department of Environmental Protection.

      "There's a large amount of gas in the well, and it could burn, if we just sat there and watched it, for months or years," Poister said. Chevron said it did not know how long the fire would continue.

      Putting the flames out will probably involve some sort of smothering, possibly with foam or chemicals, Poister said. Wild Well Control, an organization specialized in fighting well fires, remains at the scene to devise a method of extinguishing the blaze.

      No homes or structures were threatened by the blaze, and the DEP will perform air quality tests to check for pollution.

      The fire is extremely hot, but isolated to the well pad, a space Poister said was half the size of a football field. Nineteen workers were on the well pad at the time of the explosion.

      The workers were preparing to run tubing down the well at the time of the incident, Chevron said, and no drilling or hydraulic fracturing taking place.

    2. Feds Approve More Fracking Off California Coast

      LOS ANGELES (AP) — The federal government has approved three new fracking jobs off the shores of California as state coastal regulators voiced concerns about potential environmental impacts.

      The work in the Santa Barbara Channel, site of a 1969 oil platform blowout, has not yet begun and it was not immediately clear when it would.


      The environmental impacts of fracking and other well stimulation techniques "are not well understood. To date, little data has been collected," said Alison Dettmer, a commission deputy director.

      The agency launched an investigation into the extent of offshore fracking after The Associated Press last year documented at least a dozen instances of companies using the technique since the 1990s in federal waters.

      Dettmer provided an update to commissioners at a hearing in Pismo Beach, a beach city 175 miles northwest of Los Angeles. Opponents held signs with a red "X'' over the word "Fracking." The government oversees fracking that occurs more than three miles off the coast, but it has not distinguished the practice from regular drilling in the permit process.

      The state coastal commission can have a say regarding fracking jobs in federal waters if it determines the work presents a threat to water quality closer to shore.

      Through the Freedom of Information Act, the AP found the Bureau of Safety and Environmental Enforcement, or BSEE, the federal agency in charge of offshore drilling, approved a new project last March.

      The bureau on Wednesday confirmed that it greenlighted three other fracking plans by the company DCOR LLC last year on an oil platform about nine miles offshore. While new oil leases have been prohibited since the 1980s, companies can still drill from about two dozen grandfathered-in platforms.

      DCOR did not respond to a message seeking comment. Citing concerns about ocean discharges, Dettmer urged the state coastal panel to take a closer look at applications that propose fracking.

      Technological advances "''may lead to pressure to open up new areas to leasing for oil and gas in state and federal waters," said Dettmer, adding that the complex geology has so far discouraged extensive development.

      After pressure from state lawmakers and residents, the Environmental Protection Agency recently required oil companies planning offshore fracks to report chemicals released into the sea.

      While commission staffers think it's a promising first step, they want their own review. The oil industry has insisted the practice is safe. In a letter submitted to the commission before the hearing, the California Independent Petroleum Association said offshore fracking and other well stimulation techniques have occurred for decades without environmental harm.

      Similarly, BSEE reviews every application for safety and ensures that measures are in place to protect workers and the environment, agency spokeswoman Julia Hagan said in an email.

      Fracking has also occurred closer to shore, mostly in the Southern California port city of Long Beach. Unlike fracking in federal waters — where some of the wastewater can be legally dumped overboard — state law bars overboard discharge and most waste fluids are reinjected underground.

      Despite calls by environmentalists to ban fracking, the coastal commission said it lacks the power to do so. Brian Segee, a staff attorney at the Environmental Defense Center, questioned why the commission was playing catch-up. "For the industry to come up here and say this has been happening for decades, or 'we've known all along' ... Why did the commission not know?" he said.

  4. On the anniversary of the "Sorry" speech.........

    WA Government accused of failing Aboriginal people with three strikes housing policy

    The State Government has once again defended its three-strikes housing policy after it was accused of failing Aboriginal people.

    Yesterday Labor Senator Sue Lines told Federal Parliament that WA has a shameful record on public housing and about 2,000 Aboriginal children are homeless as a result of the three-strikes policy.

    But the State's Aboriginal Affairs Minister Peter Collier says there are support services which help families at risk of eviction.

    "We employ Aboriginal liaison officers and we offer programs to those that are having problems meeting the three simple rules, but [they] are not compulsory," he said.

    "So Aboriginal people can gain advice and support through liaison officers to ensure they know exactly what they need to do to ensure that they remain tenants in public housing."

    Mr Collier says Senator Lines is ill-informed.

    "And I think she needs to spend a little bit more time with the Aboriginal Community," he said.

    "Now we've been proactive in all areas, particularly in the last 18 months, we've created a cabinet sub-committee so you have a coordination of all the major departments of government working collectively to provide positive outcomes for Aboriginal people."

    But the Director of the Aboriginal Advocacy Group DayDawn says she agrees with the comments by Senator Lines.

    Mary McComish says the three-strikes policy is creating hundreds of homeless children.

    "Once the family has been evicted, very little happens after that, they kind of go off the radar, and whether the children go to relatives who already live in over-crowded houses or are homeless themselves or whether they go on the streets. No one seems to know or care what happens to those children," she said.


    Meanwhile in Broome foreigners with high paying mining jobs living without kids in 3 bedroom Homeswest houses get away with it - and local families with kids earning a fraction too much are kicked out on the streets !

  5. Nitrogen - this is what Water Corp claim is leaking from the Clementson St. ponds into Roebuck Bay.


    Clive Palmer's nickel refinery pumped toxic waste into Great Barrier Reef park

    Company discharged nitrogen into world heritage area on several occasions despite being forbidden from doing so

    A nickel refinery owned by Clive Palmer has released toxic wastewater into the Great Barrier Reef marine park on several occasions despite being forbidden from doing so, government documents have revealed.

    The Queensland Nickel refinery, located at Yabulu, 20km north of Townsville, made unauthorised discharges of nitrogen-laden water into the world heritage area in 2009 and then again in 2011. The latter incident pumped 516 tonnes of nitrogen into the marine park.

    Documents obtained under freedom of information by the North Queensland Conservation Council show the state government considered there to be “ongoing problems with capacity of the water management system” at Yabulu.

    Concerns that heavy rain may cause pools of toxic wastewater to overflow into the surrounding environment led Queensland Nickel to request the water be pumped into the Great Barrier Reef park in March 2009 and then in January 2010.

    These requests were rejected by the park authority, which demanded the outflow pipe be removed within two years. But the discharges occurred anyway. Despite this, no civil or criminal proceedings were taken against the company.

    In June 2012, Queensland Nickel said it intended to discharge wastewater into the park continuously for at least three months, even though the water was understood to have nitrogen levels “at least 100 times the allowed maximum level as well as heavy metals and other contaminants”.

    The park authority said the contaminated water exceeded guidelines for ammonia and several other metals. In a briefing, it said this discharge on to the reef “would be similar to the daily discharge of treated sewage from a city of seven million people”.

    Internal government emails indicate Queensland Nickel’s displeasure with the park authority’s stance, with the agency considered “obstructionist”.

    According to a marine park authority briefing, the company had “threatened a compensation claim of $6.4bn should the GBRMPA intend to exert authority over the company’s operations”.

    The mining magnate and MP Clive Palmer purchased the refinery from BHP in 2009, with the contentious outflow pipe placed 2km offshore before the declaration of the Great Barrier Reef as a world heritage area in 1981.

    The refinery produces about 30,000 tonnes of nickel and 1,500 tonnes of cobalt a year and employs about 1,000 people. Palmer has federal approval to increase these amounts substantially and the government documents show that Queensland Nickel queried whether this approval exempted the company from marine park authority regulations.

    Speaking at the National Press Club on Wednesday, Palmer said his business had an “excellent” environmental track record.

    “We didn’t breach any environmental laws, there was no action taken against us over that particular thing you’re talking about,” he told a questioner. “It wasn’t true. It was found that that wasn’t true, we didn’t breach any environmental laws and that’s just a furphy. It’s another beat-up.

    “The Queensland Department of the Environment just renewed our licence for another three years and that’s the truth of the matter. But I’m sure that Campbell Newman will have a go at me because I object to people being thrown in solitary confinement for 22 hours when they haven’t committed a crime.”


    Palmer has previously warned of a catastrophic “disaster” if the contaminated water ponds, known as tailings ponds, overflow owing to heavy rainfall.

  6. Mining projects: Greg Hunt set to grant himself retrospective legal immunity

    Environment minister faces potential claims he failed to consider advice before approving projects such as Abbot Point dredging

    Environment minister Greg Hunt is set to grant himself retrospective legal immunity against potential claims that he failed to consider environmental advice before approving key mining projects.

    A Senate inquiry has cleared the way for a bill to pass the upper house preventing legal challenges to environmental approvals issued by Hunt before 31 December last year, on the grounds the minister ignored expert advice on risks to threatened species.

    Decisions granted immunity include controversial approvals in Queensland of dredging at Abbot Point, an LNG export facility at Curtis Island and a coalmine in the Galilee Basin.

    In June 2013, the federal court overturned an approval by the then environment minister Tony Burke of an iron ore mine in Tasmania’s Tarkine forest.

    The court ruled that Burke had failed to give regard to “approved conservation advice” about the impact of the mine on the forest’s threatened Tasmanian devil population, bringing work on the mine to a brief but expensive halt.

    The Environment Department said the substance of threats to the Tasmanian devil was covered in its briefings to Burke, even if the official conservation advice did not pass his desk.

    Hunt told the lower house the bill was necessary to provide certainty for the mining industry, facing numerous legal appeals by environmentalists against previously approved projects.

    “There could potentially be more [approvals overturned] based on technicalities. These could cause endless delay without there being any substantive basis for the claims of improper decision making,” he said.

    But the Law Council of Australia said there were no “clear and compelling reasons” for the bill to grant retrospective legal immunity, and that it “casts doubt on the integrity” of the way environmental protections are implemented.

    Greens senator Larissa Waters said the bill “sends the message to the public that the environment minister doesn’t have to make science-based decisions”.

    She said the bill took away the community’s right “to challenge past decisions that might have been incorrectly made”.

    The bill passed in the lower house with Labor’s support. The Senate is expected to debate it in the next sitting week, beginning 3 March.

  7. Shell Australia Orders Three ISVs for Prelude FLNG

    Shell Australia has awarded a major contract for the design, construction and operation of three Infield Support Vessels (ISVs), which will create approximately 80 local jobs and support its Prelude FLNG Project, located 475km north-north east of Broome, in Western Australia.

    KT Maritime Services Australia (Joint Venture partnership of KOTUG and Teekay) will supply three 42 metre-long, 100-tonne bollard-pull Rotortugs to assist in product offloading during the operations phase of the project. The ISVs will operate out of the Port of Broome on a rotation.

    “This is a very significant contract when it comes to the ongoing operation of Prelude FLNG, and our key priorities in awarding the contract were finding a partner who could deliver the vessels and services safely, and secure good local employment and training outcomes,” said Shell Australia Country Chair, Andrew Smith.

    “This contract is an example of the long term benefits of Prelude FLNG. During the operations and maintenance phase we expect to spend at least $200 million per year on local content, this is a very positive level of investment into the Australian economy.”

    David Parmeter, Director, KT Maritime said “To be part of Shell’s first deployment of Floating LNG technology is an important milestone for our business, and we look forward to supporting the Prelude FLNG development throughout its operations.”

    “This joint partnership combines the technical innovation and expertise of KOTUG, with Teekay’s experience as a marine operator in Australia.”

    KT Maritime Director Mr Ard-Jan Kooren said “We are proud to be working with Shell Australia in pioneering FLNG technology, and look forward to changing the game together over the decades ahead.”

  8. The Vampire Squid Strikes Again: The Mega Banks' Most Devious Scam Yet

    Banks are no longer just financing heavy industry. They are actually buying it up and inventing bigger, bolder and scarier scams than ever


    Call it the loophole that destroyed the world. It's 1999, the tail end of the Clinton years. While the rest of America obsesses over Monica Lewinsky, Columbine and Mark McGwire's biceps, Congress is feverishly crafting what could yet prove to be one of the most transformative laws in the history of our economy – a law that would make possible a broader concentration of financial and industrial power than we've seen in more than a century.

    But the crazy thing is, nobody at the time quite knew it. Most observers on the Hill thought the Financial Services Modernization Act of 1999 – also known as the Gramm-Leach-Bliley Act – was just the latest and boldest in a long line of deregulatory handouts to Wall Street that had begun in the Reagan years.

    Wall Street had spent much of that era arguing that America's banks needed to become bigger and badder, in order to compete globally with the German and Japanese-style financial giants, which were supposedly about to swallow up all the world's banking business. So through legislative lackeys like red-faced Republican deregulatory enthusiast Phil Gramm, bank lobbyists were pushing a new law designed to wipe out 60-plus years of bedrock financial regulation. The key was repealing – or "modifying," as bill proponents put it – the famed Glass-Steagall Act separating bankers and brokers, which had been passed in 1933 to prevent conflicts of interest within the finance sector that had led to the Great Depression. Now, commercial banks would be allowed to merge with investment banks and insurance companies, creating financial megafirms potentially far more powerful than had ever existed in America.

    All of this was big enough news in itself. But it would take half a generation – till now, basically – to understand the most explosive part of the bill, which additionally legalized new forms of monopoly, allowing banks to merge with heavy industry. A tiny provision in the bill also permitted commercial banks to delve into any activity that is "complementary to a financial activity and does not pose a substantial risk to the safety or soundness of depository institutions or the financial system generally."

    Complementary to a financial activity. What the hell did that mean?


    ........banks aren't just buying stuff, they're buying whole industrial processes. They're buying oil that's still in the ground, the tankers that move it across the sea, the refineries that turn it into fuel, and the pipelines that bring it to your home. Then, just for kicks, they're also betting on the timing and efficiency of these same industrial processes in the financial markets – buying and selling oil stocks on the stock exchange, oil futures on the futures market, swaps on the swaps market, etc.

    Allowing one company to control the supply of crucial physical commodities, and also trade in the financial products that might be related to those markets, is an open invitation to commit mass manipulation. It's something akin to letting casino owners who take book on NFL games during the week also coach all the teams on Sundays.


    In just the past few years we've seen an explosion of scandals – from the multitrillion-dollar Libor saga (major international banks gaming world interest rates), to the more recent foreign-currency-exchange fiasco (many of the same banks suspected of rigging prices in the $5.3-trillion-a-day currency markets), to lesser scandals involving manipulation of interest-rate swaps, and gold and silver prices.


    And last summer, The New York Times described how Goldman Sachs was caught systematically delaying the delivery of metals out of a network of warehouses it owned in order to jack up rents and artificially boost prices.

  9. The Vampire Squid Strikes Again: The Mega Banks' Most Devious Scam Yet


    The irony was incredible. After fucking up so badly that the government had to give them federal bank charters and bottomless wells of free cash to save their necks, the feds gave Goldman Sachs and Morgan Stanley hall passes to become cross-species monopolistic powers with almost limitless reach into any sectors of the economy.


    The sudden turning on of this huge faucet of free money seems to have been a factor in an ensuing commodities shopping spree undertaken by all three firms. Morgan Stanley, for instance, claimed to have just $2.5 billion in commodity assets in March 2009. By September 2011, those holdings had nearly quadrupled, to $10.3 billion.

    Goldman and Chase – along with Glencore and Trafigura, a pair of giant Swiss-based conglomerates that were offshoots of a firm founded by notorious deceased commodities trader and known market manipulator Marc Rich – all made notably coincidental purchases of metals-warehousing companies in 2010.

    The presence of these Marc Rich entities is particularly noteworthy. According to famed Forbes reporter Paul Klebnikov, who was assassinated in 2004 after years of reports on Russian corruption, Rich made a fortune in the early Nineties striking crooked deals with the Soviet bosses who controlled the U.S.S.R.'s supplies of raw materials – in particular commodities like zinc and aluminum. These deals helped create a fledgling class of profiteers among the bosses of the crumbling Soviet empire, a class that would go on years later to help push Russia out of its communist past into its kleptocratic present.

    "He'd strike a deal with the local party boss, or the director of a state-owned company," Klebnikov said back in 2001. "He'd say, 'OK, you will sell me the [commodity] at five to 10 percent of the world-market price . . . and in return, I will deposit some of the profit I make by reselling it 10 times higher on the world market, and put the kickback in a Swiss bank account.'"


    ......under Barack Obama, and two Rich-created firms, along with two banks that have been major donors to the Democratic Party, all made moves to buy up metals warehouses. In near simultaneous fashion, Goldman, Chase, Glencore and Trafigura bought companies that control warehouses all over the world for the LME, or London Metals Exchange. The LME is a privately owned exchange for world metals trading. It's the world's primary hub for determining metals prices and also for trading metals-based futures, options, swaps and other instruments.

    "If they were just interested in collecting rent for metals storage, they'd have bought all kinds of warehouses," says Manal Mehta, the founder of Sunesis Capital, a hedge fund that has done extensive research on the banks' forays into the commodities markets. "But they seemed to focus on these official LME facilities."


    If you're wondering why the LME would permit a seemingly blatant violation of its own rules, a good place to start would be to look at who owned the LME at the time. Although it eventual­ly sold itself to a Hong Kong company in 2012, in 2010 the LME was owned by a consortium of banks and financial companies. The two largest shareholders? Goldman and JPMorgan Chase.

    Humorously, another was Koch Metals (2.32 percent), a commodities concern that's part of the Koch brothers' empire. The Kochs have been caught up in their own commodity-manipulation schemes, including an episode in 2008, in which they rented out huge tankers and used them to store excess oil offshore essentially as floating warehouses, taking cheap oil out of available supply and thereby helping to drive up energy prices. Additionally, some banks have been accused of similar oil-hoarding schemes.

  10. The Vampire Squid Strikes Again: The Mega Banks' Most Devious Scam Yet


    As detailed by New York Times reporter David Kocieniewski last July, Goldman had bought into these warehouses and soon began pointlessly shuttling stocks of aluminum from one warehouse to another. It was a "merry-go-round of metal," as one former forklift operator called it, a scheme of delays apparently designed to drive up prices of the metal used to make the stuff we all buy – like beer cans, flashlights and car parts.

    When Goldman bought Metro in February 2010, the average delivery time for an aluminum order was six weeks. Under Goldman ownership, Metro's delivery times soon ballooned by a factor of 10, to an average of 16 months, leading in part to the explosive growth of a surcharge called the Midwest premium, which represented not the cost of aluminum itself but the cost of its storage and delivery, a thing easily manipulated when you control the supply. So despite the fact that the overall LME price of aluminum fell during this time, the Midwest premium conspicuously surged in the other direction. In 2008, it represented about three percent of the LME price of aluminum. By 2013, it was a whopping 15 percent of the benchmark (it has since spiked to 25 percent).

    "In layman's terms, they were artificially jacking up the shipping and handling costs," says Mehta.


    The result of all this was a bottlenecking of aluminum supplies. A crucial industrial material that was plentiful and even in oversupply was now stuck in the speculative merry-go-round of the bank finance trade.

    Every time you bought a can of soda in 2011 and 2012, you paid a little tax thanks to firms like Goldman. Mehta, whose fund has a financial stake in the issue, insists there's an irony here that should infuriate everyone. "Banks used taxpayer-backed subsidies," he says, "to drive up prices for the very same taxpayers that bailed them out in the first place."


    The aluminum delays were not just an isolated incident of banks scheming to boost rent revenue. Recently, evidence has surfaced that the same kinds of behavior may be going on across the LME. In order for a parcel of metal to be traded on the LME, it has to be what's called "on warrant." If you are the owner of a metal that you no longer want to be traded, you can "cancel the warrant" – essentially taking it out of the system. It's still in the warehouse, but in a kind of administrative limbo.

    When the world LME supply of a metal features high percent­ages of canceled stock, that typically means someone is moving metals around a lot even after they've been put into storage – perhaps in a Goldman-style "merry-go-round," perhaps for some other reason, but historically it has not been something seen often in functioning, healthy metals markets.

    In January 2009, before the American too-big-to-fail banks and the shady Swiss commodities giants bought into all of these warehouses, less than one percent of the total global supply of LME aluminum was "canceled warrant." Today, with world supplies of aluminum about double what they were then, 45.2 percent of the total stock is classified as canceled. In Detroit, where Goldman is supposedly cleaning things up, the percentage is even crazier: 76.9 percent of the aluminum stock has canceled warrants.

    You can see hints of the phenomenon in other LME metals. Five years ago, just 1.3 percent of the LME's copper stocks had canceled warrants. Today, 59 percent of it does. In January 2009, just 2.3 percent of zinc stocks were canceled; it's at 32 percent today.


    Then there's nickel. Thirty-seven percent of the global stock is now classified as canceled. Five years ago, 0.5 percent was.

  11. The Vampire Squid Strikes Again: The Mega Banks' Most Devious Scam Yet


    This leads to the next potentially disastrous aspect of this story: What happens if the Fed suddenly raises interest rates, and the banks, their access to free money cut off, can no longer afford to sit on piles of metal for 16 months at a time?

    "Look at nickel," says Eric Salzman, a financial analyst who has done research on metals manipulation for several law firms. "You could see the price drop 20 to 30 percent in no time. It'd be a classic bursting of a bubble."

    But the potential for wide-scale manipulation and/or new financial disasters is only part of the nightmare that this new merger of banking and industry has created. The other, perhaps even darker problem involves the new existential dangers both to the environment and to the stability of the financial system. Long before Goldman and Chase started buying up metals warehouses, for instance, Morgan Stanley had already bought up a substantial empire of physical businesses – electricity plants in a number of states, a firm that trades in heating oil, jet fuels, fertilizers, asphalt, chemicals, pipelines and a global operator of oil tankers.

    How long before one of these fully loaded monster ships capsizes, and Morgan Stanley becomes the next BP, not only killing a gazillion birds and sea mammals off some unlucky country's shores but also taking the financial system down with them, as lawsuits plunge the company into bankruptcy with Lehman-style repercussions? Morgan Stanley's CEO, James Gorman, even admitted how risky his firm's new acquisitions were last year, when he reportedly told staff that a hypothetical oil spill was "a risk we just can't take."


    Banks in America were never meant to own industries. This principle has been part of our culture practically from the beginning of our history. The original restrictions on banks getting involved with commerce were rooted in the classically American fear of overweening government power – citizens in the early 1800s were concerned about the potential for monopolistic abuses posed by state-sponsored banks.

    Later, however, Americans also found themselves forced to beat back a movement of private monopolies, in particular the great railroad and energy cartels built by robber barons of the Rockefeller type who, by the late 1800s, were on the precipice of swallowing markets whole and dictating to the public the prices of everything from products to labor. It took a long period of upheaval and prolonged fights over new laws like the Sherman and Clayton anti-trust acts before those monopolies were reined in.

    Banks, however, were never really regulated under those laws. Only the Great Depression and years of brutal legislative trench warfare finally brought them to heel under the same kinds of anti-trust concepts that stopped the robber barons, through acts like Glass-Steagall and the Bank Holding Company Act of 1956. Then, with a few throwaway lines in a 1999 law that nobody ever heard of until now, that whole struggle went up in smoke, and here we are, in Hobbes' jungle, waiting for the next fully legal catastrophe to unfold.

    When does the fun part start?


    This story is from the February 27th, 2014 issue of Rolling Stone.