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John Arnold Made a Fortune at Enron. Now He’s Declared War on Bad Science

John Arnold’s tweet, “A new study shows …” are “the four most dangerous words,” is a perfect crystallization of the philanthropist’s skeptical attitude toward a lot of scientific research. Photo: BRENT HUMPHREYS

Brian Nosek had pretty much given up on finding a funder. For two years he had sent out grant proposals for his software project. And for two years they had been rejected again and again—which was, by 2011, discouraging but not all that surprising to the 38-year-old scientist. An associate professor at the University of Virginia, Nosek had made a name for himself in a hot subfield of social psychology, studying people’s unconscious biases. But that’s not what this project was about. At least, not exactly.

Like a number of up-and-coming researchers in his generation, Nosek was troubled by mounting evidence that science itself—through its systems of publication, funding, and advancement—had become biased toward generating a certain kind of finding: novel, attention grabbing, but ultimately unreliable. The incentives to produce positive results were so great, Nosek and others worried, that some scientists were simply locking their inconvenient data away.

The problem even had a name: the file drawer effect. And Nosek’s project was an attempt to head it off at the pass. He and a graduate student were developing an online system that would allow researchers to keep a public log of the experiments they were running, where they could register their hypotheses, methods, workflows, and data as they worked. That way, it would be harder for them to go back and cherry-pick their sexiest data after the fact—and easier for other researchers to come in and replicate the experiment later.

Nosek was so taken with the importance of redoing old experiments that he had also rallied more than 50 like-minded researchers across the country to participate in something he called the Reproducibility Project. The aim was to redo about 50 studies from three prominent psychology journals, to establish an estimate of how often modern psychology turns up false positive results.

It was little wonder, then, that funders didn’t come running to support Nosek: He wasn’t promising novel findings, he was promising to question them. So he ran his projects on a shoestring budget, self-­financing them with his own earnings from corporate speaking engagements on his research about bias.

But in July 2012, Nosek received an email from an institution whose name he didn’t recognize: the Laura and John Arnold Foundation. A Google search told him that the Arnolds were a young billionaire couple in Houston. John, Nosek learned, had made his first millions as a wunderkind natural gas trader at Enron, the infamous energy company, and he’d managed to walk away from Enron’s 2001 collapse with a seven-­figure bonus and no accusations of wrong­doing attached to his name. After that Arnold started his own hedge fund, Centaurus Energy, where he became, in the words of one hedge fund competitor, “the best trader that ever lived, full stop.” Then Arnold had abruptly retired at the ripe age of 38 to focus full time on philanthropy.

As Nosek tells it, John Arnold had read about the Reproducibility Project in The Chronicle of Higher Education and wanted to talk. By the following year, Nosek was cofounding an institution called the Center for Open Science with an initial $5.25 million grant from the Arnold Foundation. More than $10 million more in Arnold Foundation grants have come since. “It completely transformed what we could imagine doing,” Nosek says. Projects that Nosek had once envisioned as modest efforts carried out in his lab were now being conducted on an entirely different scale at the center’s startup-like offices in downtown Charlottesville, with some 70 employees and interns churning out code and poring over research. The skeletal software behind the data-sharing project became a slick cloud-based platform, which has now been used by more than 30,000 researchers.

The Reproducibility Project, meanwhile, swelled to include more than 270 researchers working to reproduce 100 psychology experiments—and in August 2015, Nosek revealed its results. Ultimately his army of volunteers could verify the findings of only about 40 percent of the studies. Media reports declared the field of psychology, if not all of science, to be in a state of crisis. It became one of the biggest science stories of the year.

But as it happens, Nosek is just one of many researchers who have received unsolicited emails from the Arnold Foundation in the past few years—researchers involved in similar rounds of soul-searching and critique in their own fields, who have loosely amounted to a movement to fix science.

John Ioannidis was put in touch with the Arnolds in 2013. A childhood math prodigy turned medical researcher, Ioannidis became a kind of godfather to the science reform crowd in 2005, when he published two devastating papers—one of them titled simply “Why Most Published Research Findings Are False.” Now, with a $6 million initial grant from the Arnold Foundation, Ioannidis and his colleague Steven Goodman are setting out to turn the study of scientific practice—known as meta-research—into a full-fledged field in its own right, with a new research center at Stanford.

British doctor Ben Gold­acre also got an email from the Arnold Foundation in 2013. Famous in England as a sharp-witted scourge of “bad science,” Goldacre spent years building up a case that pharmaceutical companies, by refusing to reveal all their data, have essentially deceived the public into paying for worthless therapies. Now, with multiple grants from the Arnolds, he is leading an effort to build an open, searchable database that will link all publicly available information on every clinical trial in the world.

A number of the Arnolds’ reform efforts have focused on fixing nutrition science. In 2011 the science journalist Gary Taubes received an email from Arnold himself. Having spent more than a decade picking apart nutrition science, Taubes soon found himself cofounding an organization with a substantial grant from the Arnold Foundation, to rebuild the study of obesity from the ground up. And in 2015 the Arnold Foundation paid journalist Nina Teicholz to investigate the scientific review process that informs the US Dietary Guidelines. Just weeks before the federal guidelines were due for an update, Teicholz’s blistering report appeared in the prominent medical journal The BMJ, charging that the government’s panel of scientists had failed to consider evidence that would have done away with long-held worries about eating saturated fat.

And those are just a few of the people who are calling out iffy science with Arnold funding. Laura and John Arnold didn’t start the movement to reform science, but they have done more than anyone else to amplify its capabilities—typically by approaching researchers out of the blue and asking whether they might be able to do more with more money. “The Arnold Foundation has been the Medici of meta-research,” Ioannidis says. All told, the foundation’s Research Integrity initiative has given more than $80 million to science critics and reformers in the past five years alone.

Not surprisingly, researchers who don’t see a crisis in science have started to fight back. In a 2014 tweet, Harvard psychologist Daniel Gilbert referred to researchers who had tried and failed to replicate the findings of a senior lecturer at the University of Cambridge as “shameless little bullies.” After Nosek published the results of his reproducibility initiative, four social scientists, including Gilbert, published a critique of the project, claiming, among other things, that it had failed to accurately replicate many of the original studies. The BMJ investigation, in turn, met with angry denunciations from nutrition experts who had worked on the US Dietary Guidelines; a petition asking the journal to retract Teicholz’s work was signed by more than 180 credentialed professionals. (After an external and internal review, The BMJ published a correction but chose not to retract the investigation.)

The backlash against Teic­holz also furnished one of the few occasions when anyone has raised an eyebrow at the Arnolds’ funding of science critics. On the morning of October 7, 2015, the US House Agriculture Committee convened a hearing on the controversy surrounding the dietary guidelines, fueled by the BMJ article. For two and a half hours, a roomful of testy representatives asked why certain nutrition studies had been privileged over others. But about an hour in, Massachusetts representative Jim McGovern leaned into his microphone. Aiming to defend the science behind the guidelines, McGovern suggested that the doubts that had been cast over America’s nutrition science were being driven by a “former Enron executive.” “I don’t know what Enron knows about dietary guidelines,” McGovern said. But “powerful special interests” are “trying to question science.”

McGovern’s quip about Enron, a company that hasn’t existed in 15 years, was a bit of a potshot. But given the long history of deep-pocketed business interests sowing doubt in research, his underlying question was a fair one: Who is John Arnold, and why is he spending so much money to raise questions about science?

Fortune Magazine once dubbed Arnold “one of the least-known billionaires in the US.” His profile in the public consciousness is almost nonexistent, and he rarely gives interviews. But among hedge funders and energy traders, Arnold is a legend. John D’Agostino, former head of strategy of the New York Mercantile Exchange, says that in Arnold’s heyday, people in the industry would discuss him in “hushed and reverent tones.” In 2006, Centaurus reportedly saw returns of over 300 percent; the next year Arnold became the youngest billionaire in the country. “If Arnold decided he wanted to beat hunger,” D’Agostino says, “I wouldn’t want to bet on hunger.”

For all the swagger of that description, Arnold himself has virtually none. He is universally described as quiet and introspective. At Enron, a company famous for its brash, testosterone-laced cowboy culture, the perennially boyish-looking trader was reportedly so soft-spoken that his colleagues had to gather in close to hear him at restaurants. “People would read into it, and they would say he’s just being cagey,” D’Agostino says. “And then, after a couple of years, people were like, oh, no, he’s actually like that.”

Arnold is still quiet. “Usually the division of labor in most of our work is that I talk,” Laura Arnold says in a phone interview. By all accounts, Laura, who attended Harvard College and Yale Law School and worked as an oil executive, has been equally influential in setting the direction for the foundation. But when I visit the Arnold Foundation’s Houston headquarters in June, Laura has been called away on a family emergency, leaving John to do the talking. Arnold is 5’10”, trim, and blandly handsome, his unusually youthful appearance now somewhat concealed by a salt-and-pepper beard.

Arnold grew up in Dallas. His mother was an accountant (she would later help manage the books at his hedge fund). His father, who died when Arnold was 18, was a lawyer. By kindergarten, Arnold’s talent for math was apparent. “I think I was just born with a natural gift for seeing numbers in a special way,” he says. Gregg Fleisher, who taught him calculus in high school, recalls an occasion when Arnold instantly solved a math puzzle that had been known to stump PhDs. But he also stood out for his skepticism. “He questioned everything,” Fleisher says.

By the time he was 14, Arnold was running his first company, selling collectible sports cards across state lines. Those were the early days of the internet, and he managed to gain access to an online bulletin board intended only for card dealers. The listings let him see that the same cards were sold at different prices in different parts of the country—which presented an opportunity for arbitrage. “Hockey cards didn’t have much of a market in Texas,” he tells me. “I would buy up all the premium hockey cards and send them to Canada or upstate New York.” He called the company Blue Chip Cards. Arnold estimates that he made $50,000 before he finished high school.

Arnold graduated from Vanderbilt University in 1995, taking only three years to finish his degree. He started working at Enron four days later. A year after that, at age 22, he was overseeing Enron’s Texas natural gas trading desk, one of the company’s core businesses.

Arnold’s work at Enron—seeking to capitalize on seasonal price differences in natural gas—wasn’t all that different from what he’d done as a teenager selling sports cards. In Hedge Hogs, a 2013 book about hedge fund traders, Jeff Shankman, another star trader at Enron, is quoted describing Arnold as “the most thoughtful, deliberate, and inquisitive person” he worked with on the gas floor. But Shankman recognized that he and Arnold were different in one key respect: Arnold had a greater appetite for risk, a quality that seemed at odds with his quiet demeanor. On some days at Enron, Arnold would trade more than a billion dollars’ worth of gas contracts. In 2001, even as Enron was collapsing amid an accounting scandal that covered up billions in debt, he was reported to have earned $750 million for the company. A former executive at Salomon Brothers later told The New York Times that there were very few incidents in the history of Wall Street comparable to Arnold’s success that year.

As Enron neared bankruptcy, executives scrambled to hold its operation together, offering bonuses to keep traders on board. Arnold was given $8 million, the biggest payout of all, just days before Enron filed for bankruptcy. He started Centaurus the next year, bringing along a small group of former Enron traders, who worked out of a single large room.

Arnold says he wasn’t sure if he could match the success he’d enjoyed as a futures trader at Enron. As a pipeline company, Enron had a direct view onto many of the factors that influence gas prices. Now he’d have to rely purely on his prowess with data. By law, natural gas pipelines had to make much of their information public, and around the time Centaurus was forming, more of that information began to appear online. “A lot of people didn’t know it was out there,” Arnold says. “People who did, didn’t know how to clean it up and analyze it as well as we did.”

It wasn’t long before Arnold had the answer to his doubts. In 2006, Centaurus reportedly generated a 317 percent return overall, after taking the opposite side of a risky bet that another hedge fund, Amaranth, had made on fluctuations in natural gas prices. Amaranth, which was gambling with money from large pension funds, suffered a $6 billion loss and collapsed. By 2009, Centaurus was managing over $5 billion and had more than 70 employees. In its first seven years, according to Fortune, the fund never returned less than 50 percent.

But Arnold had to come down to earth eventually. In 2010, Centaurus experienced its first annual loss. And though the fund bounced back the next year, tighter regulations on trading and a far less volatile market—thanks to a growing supply of natural gas from shale rock—made it unlikely that Arnold would again see the astonishing returns of only a few years earlier. And so, at age 38, Arnold walked away from it all. He announced that he was closing Centaurus in a letter to investors: “After 17 years as an energy trader, I feel that it is time to pursue other interests.”

Arnold tells me that he had lost some of his passion for trading. At the time, his net worth was estimated to be around $3 billion. In 2010 the Arnolds had signed the Giving Pledge, promising to give away at least half their wealth—and he wanted to be as strategic about that goal as he had once been about trading. Arnold has said that the first phase of his life was “100 percent trying to make money” and that it’s now “100 percent trying to do good.” As The Wall Street Journal noted, in “US history, there may have never been a self-made individual with so much money who devoted himself to philanthropy at such a young age.”

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A Big Test for Big Batteries

The Aliso Canyon gas storage facility above the Porter Ranch section of Los Angeles, the site of a major gas leak in 2015. Credit Coley Brown for The New York Times

ESCONDIDO, Calif. — In Southern California in the fall of 2015, a giant natural gas leak not only caused one of the worst environmental disasters in the nation’s history, it also knocked out a critical fuel source for regional power plants.

Energy regulators needed a quick fix.

But rather than sticking with gas, they turned to a technology more closely associated with flashlights: batteries. They freed up the utilities to start installing batteries — and lots of them.

It is a solution that’s audacious and risky. The idea is that the batteries can store electricity during daylight hours (when the state’s many solar panels are flooding the grid with power), then release it as demand peaks (early evening, when people get home). In effect, the rechargeable batteries are like an on-demand power plant, and, in theory, able to replace an actual plant.

Utilities have been studying batteries nationwide. But none have moved ahead with the gusto of those in Southern California.

This idea has far-reaching potential. But the challenge of storing electricity has vexed engineers, researchers, policy makers and entrepreneurs for centuries. Even as countless technologies have raced ahead, batteries haven’t yet fulfilled their promise.

And the most powerful new designs come with their own risks, such as fire or explosion if poorly made or maintained. It’s the same problem that forced Samsung to recall 2.5 million Galaxy Note 7 smartphones in September because of fire risk.

After racing for months, engineers here in California have brought three energy-storage sites close to completion to begin serving the Southern California electric grid within the next month. They are made up of thousands of oversize versions of the lithium-ion batteries now widely used in smartphones, laptop computers and other digital devices.

One of the installations, at a San Diego Gas & Electric operations center surrounded by industrial parks in Escondido, Calif., 30 miles north of San Diego, will be the largest of its kind in the world, developers say. It represents the most crucial test yet of an energy-storage technology that many experts see as fundamental to a clean-energy future.

Here, about 130 miles southeast of Aliso Canyon, the site of the immense gas leak in 2015 — the global-warming equivalent of operating about 1.7 million cars over the course of a year — 19,000 battery modules the size of a kitchen drawer are being wired together in racks. They will operate out of two dozen beige, 640-square-foot trailers.

Batteries being wired in Escondido, Calif. Credit Coley Brown for The New York Times

Made by Samsung, the batteries are meant to store enough energy to serve as a backup in cases of fuel shortages. They are also designed to absorb low-cost energy, particularly solar power, during the day and feed it back to the grid after dusk. They in effect can fill in for the decades-old gas-fired plants that might lack the fuel to fully operate because of the disastrous leak.

“California is giving batteries the opportunity to show what they can do,” said Andrés Gluski, chief executive of AES, which is installing the storage systems.

AES is installing a smaller array for the electric utility in El Cajon, a suburb east of San Diego. And separately Tesla, the company perhaps better known for its electric cars, has built an array for a different utility on the grid, Southern California Edison, near Chino, Calif.

The stakes are high for both energy storage companies. If their projects struggle or fail, it could jeopardize not only the stability of Southern California’s grid but also interest in the technology over all.

After a smaller, but pioneering battery project at a wind farm on Oahu in Hawaii went up in flames in 2012, investment in battery storage all but dried up for a few years. That installation, which used 12,000 lead-acid batteries to help even out fluctuations in the power flow, caught fire three times in its first 18 months of operation. The storage developer, Xtreme, eventually went bankrupt. The wind farm turned to a different technology to smooth its output.

Keeping a close eye on the Southern California battery efforts is Susan Kennedy, who helped shepherd California’s energy policy for more than a decade as a state utility regulator and high-level operative for two governors — Gray Davis, a Democrat, and Arnold Schwarzenegger, a Republican. She now runs an energy storage start-up, one not involved in the battery-building response to the Aliso Canyon gas leak.

“The moment one fails,” Ms. Kennedy said of the big bet on batteries, “they won’t build any more.”

As soon as AES’s chief executive, Mr. Gluski, learned last June that San Diego Gas & Electric had awarded AES the big battery contract, he leapt out of his chair and interrupted a meeting in his board room at the company’s headquarters in Arlington, Va. As employees watched in astonishment, he barreled down two flights of stairs, grabbed a mallet and, with a ceremonial flourish, banged a gong that one of his executives kept on hand for big news.

Mr. Gluski had not had much occasion to celebrate since he had taken the AES reins five years earlier. The company was struggling with debt and trying to coax profits from far-flung fossil-fuel projects around the developing world that are buffeted by instability in politics, currency and commodity prices.

His first steps included an austerity program in which he gave up many of his own executive perks: No more country-club membership. No more corporate Audi A8, with driver. But the more far-reaching part of his plan would be AES’s battery division, which was then fledgling. The unit had roots in two midlevel executives who had been speculating about a Jetsons-like future over beers.

One of the energy-storage installations, at a San Diego Gas & Electric operations center surrounded by industrial parks in Escondido, Calif., 30 miles north of San Diego, will be the largest of its kind in the world, developers say. Credit Coley Brown for The New York Times

Those two men, John Zahurancik, a science fiction fan, and Chris Shelton, a former physics teacher, had started talking about batteries a decade ago, before electric cars became fashionable or even feasible. In 2006, Mr. Shelton had come across a professor’s paper that predicted a future dominated by electric cars that, when parked, could be connected to the power grid so their batteries could act as storage devices to help balance electricity demand.

He and Mr. Zahurancik bounced the idea off some AES colleagues, who said it was at least theoretically feasible. So the two continued their bull sessions but decided that stationary battery arrays may make more sense than relying on electric cars.

At the time, lithium-based batteries, the standard in consumer products, were widely in use in the transportation and power tool industries, but no one had paired them with the technology necessary to serve the power grid.

Earlier grid-scale experiments with lead-acid and other types of batteries worked only for a year or two before conking out. A different technology, “flow batteries,” which use chemicals dissolved in liquids in tanks, were considered even more experimental.

But lithium packs more energy per weight than other metals, offering the promise of greater energy density and longevity. The trick would be to figure out how to harness all that power, which creates heat, while avoiding the fires such batteries have caused in any number of vehicles and gadgets, including Teslas, HP computers, hoverboards and, most recently, Samsung Galaxy Note 7s.

The two hit upon a design and persuaded executives to begin a pilot project in 2008. That eventually led to the first commercial lithium-ion battery on a grid. Mr. Zahurancik, who owns the gong, is now president of AES Energy Storage. Mr. Shelton is now the company’s vice president and chief technology officer.

AES does not actually make its batteries but buys them, along with other equipment, from manufacturers like Samsung, LG Chem and Panasonic. It designs and assembles the arrays, stacking the boxy batteries into racks inside locker-like containers.

In Escondido, where local radio stations still carry public service announcements about the natural-gas shortage, the AES battery packs are being installed at a critical spot on the regional electrical grid: the place where the giant wires from power plants and wind and solar arrays connect to the network of local wires.

The batteries are intended to relieve the pressure on the system. Mainly, they will serve as a kind of sponge, soaking up excess or low-cost solar energy during the day and then squeezing it back into the grid in the evening, when demand surges as the sun sets. There is enough capacity in the containers full of batteries to power about 20,000 homes for four hours.

The idea is that they help the utility lessen its dependence on the type of natural gas plants known as “peakers,” which can turn on and off quickly to meet sudden peaks of demand but are generally used only for short periods and at great expense. And peakers, by burning fossil fuel, are also at odds with California’s green-energy goals.

Workers at a battery storage facility in Escondido. Credit Coley Brown for The New York Times

The project is also being watched closely by advocates for renewable energy. The reason: If utility-scale battery installations work as designed, they would help wind or solar generators to act more like conventional power plants by working steadily even when the sun isn’t shining or the wind isn’t blowing.

“Energy storage is really the tool to do renewables integration for a utility infrastructure company like us,” said Josh Gerber, advanced technology integration manager of SDG&E, as workers smoothed the thigh-high concrete pads that support the containers at the Escondido site. “Without it, you have more risk that the variability of renewables is going to cause reliability problems.”

Under the contract, AES is responsible for making sure the batteries perform for 10 years, after which SDG&E will take over. One potential downside is that if the batteries are fully charged and discharged each day, they could degrade more quickly.

The executives involved expressed confidence in the design and reliability, despite Samsung’s recent smartphone problems. Not only are these batteries a different configuration than the smartphone units, executives said, but the larger footprint allows for the inclusion of sophisticated monitoring as well as industrial safety and cooling and ventilation equipment.

The project, along with the smaller array AES has installed in El Cajon, could provide the proof-of-concept leap Mr. Gluski has been striving for.

AES has a deal for an even bigger installation in a $1 billion project in Long Beach with Southern California Edison that is not part of the Aliso Canyon remediation effort; it is projected to go online by the end of 2020. The electric company plans to use batteries as part of a plan to replace an aging gas plant along the San Gabriel River.

Long term, Mr. Gluski plans to shift the company’s power-generation portfolio — still heavily based on coal and natural gas — toward more renewable energy. He sees the storage systems as vital components in turning solar and wind energy into a dominant power source in the parts of Latin America, Asia and Africa where AES is active.

Whatever progress it has made, AES still has its share of problems, with $20 billion in debt and a stock price less than one-fifth the value that it had at the start of the century. It faces wary, if not outright skeptical, treatment by Wall Street utility analysts and energy experts, who say the technology AES is peddling on such a large scale in California remains untested and financially risky.

“The problem comes if there is a hiccup with the battery storage business in California,” said Charles Fishman, a utilities analyst at Morningstar. “You don’t have the deep-pocket parent that can push money to it and keep it out of trouble.”

Despite all the battery activity in California, executives around the utility industry remain cautious. “The reason we don’t have widespread batteries on our system is because it is not cost-effective for us,” said Alice Jackson, vice president for strategic revenue initiatives at Xcel, a giant electricity and gas utility serving eight Western and Midwestern states.

One of many battery-system components that, it is hoped, will help California bolster its power grid. Credit Coley Brown for The New York Times

Xcel has been testing batteries about as long as AES, but almost exclusively in small pilots. “It’s fair to say we don’t have long-range experience with this technology to say that it is perfect, or a nirvana,” Ms. Jackson said. “It’s something we’ll observe as California goes through its experience.”

California’s latest experiment with batteries is but the latest bout in the state’s long struggle to match its energy needs with its environmental sensibilities.

In the early 2000s, after market deregulation and Enron’s notorious manipulation of gas supplies led to blackouts and financial instability among the power companies, state officials decided to lessen reliance on natural gas by encouraging the development of wind and solar.

Under Mr. Schwarzenegger, who was governor until 2011, officials pushed through a raft of overlapping regulations that created a boom in renewables, especially solar. But that upended the traditional patterns of supply and demand, making the overall energy system technically and economically difficult to manage.

Batteries were the logical solution. But the technology wasn’t fully developed and was still too expensive. In order for companies to make the necessary investments, they needed a signal that there would be a big enough market for their products.

So in 2010, the state approved one of the first energy-storage mandates, ultimately requiring utilities to install some form of storage equipment in their territories. That set off a flurry of new investment and innovation and, after the sudden closure of the San Onofre nuclear plant on the coast in northwest San Diego County in 2012 when a steam generator tube sprung a leak, new contracts for battery installations.

But the Aliso Canyon accident, which began on Oct. 23, 2015, when the Southern California Gas Company first detected the leak, put that process on fast-forward. The noxious-smelling gas and intermittent oily mist that spewed forth over almost four months traveled into the surrounding neighborhoods on the strong winds that sweep down from the Santa Susana Mountains. At the same time, it forced the battery strategy into its most high-profile test yet.

Now it’s showtime, and the pressure to succeed is high all around. For AES, it could signify an important step for a long-troubled conventional-energy relic that is seeking to revitalize itself as a powerhouse in battery storage and other advanced technologies.

For clean-energy advocates — including residents of the Porter Ranch section of Los Angeles, so picture-perfect that Steven Spielberg chose it as the setting for the 1982 movie “E.T.,” but where many still complain of the rashes, headaches and other debilitating symptoms that drove thousands from their homes during the leak — it could be a powerful weapon in the fight to keep the gas depot closed.

But the pressure may be highest for the Southern California utilities, their reputations still blackened by waves of forced electricity cuts that followed the Enron debacle. No one wants to contemplate a repeat of that chapter, when blackouts affected factories and even some hospitals.

“When the power goes out, people die,” said Ms. Kennedy, the former state official. “Failure is not an option here on any level.”

Correction: January 14, 2017
An earlier version of this article misstated the location of AES headquarters. It is in Arlington, Va., not Alexandria.

Correction: January 16, 2017
An earlier version of this article misstated the status of an array near Chino, Calif., for the utility Southern California Edison. It has already been built by Tesla.

Posted on Categories News

As Rains Soak California, Farmers Test How To Store Water Underground

Helen Dahlke, a scientist from the University of California, Davis, stands in an almond orchard outside Modesto that's being deliberately flooded. This experiment is examining how flooding farmland in the winter can help replenish the state's depleted aquifers. Joe Proudman/Joe Proudman / Courtesy of UC Davis
Helen Dahlke, a scientist from the University of California, Davis, stands in an almond orchard outside Modesto that’s being deliberately flooded. This experiment is examining how flooding farmland in the winter can help replenish the state’s depleted aquifers.
Joe Proudman/Joe Proudman / Courtesy of UC Davis

Six years ago, Don Cameron, the general manager of Terranova Ranch, southwest of Fresno, Calif., did something that seemed kind of crazy.

He went out to a nearby river, which was running high because of recent rains, and he opened an irrigation gate. Water rushed down a canal and flooded hundreds of acres of vineyards — even though it was wintertime. The vineyards were quiet. Nothing was growing.

“We started in February, and we flooded grapes continuously, for the most part, until May,” Cameron says.

Cameron was doing this because for years, he and his neighbors have been digging wells and pumping water out of the ground to irrigate their crops. That groundwater supply has been running low. “I became really concerned about it,” Cameron says.

So his idea was pretty simple: Flood his fields and let gravity do the rest. Water would seep into the ground all the way to the aquifer.

Don Cameron, general manager of Terranova Ranch, flooded his grapevines with floodwaters from a branch of King's River, southwest of Fresno, Calif. Courtesy of Don Cameron
Don Cameron, general manager of Terranova Ranch, flooded his grapevines with floodwaters from a branch of King’s River, southwest of Fresno, Calif.
Courtesy of Don Cameron

The idea worked. Over four months, Cameron was able to flood his fields with a large amount of water — equivalent to water three feet deep across 1,000 acres. It all went into the ground, and it didn’t harm his grapes.

These days, Cameron’s unconventional idea has become a hot new trend in California’s water management circles — especially this week, with rivers flooding all over the state.

“This is going to be the future for California,” Cameron says. “If we don’t store the water during flood periods, we’re not going to make it through the droughts.”

Helen Dahlke, a groundwater hydrologist at the University of California, Davis, is working with a half-dozen farmers who are ready to flood their fields this year. “We have test sites set up on almonds, pistachios and alfalfa, just to test how those crops tolerate water that we put on in the winter,” she says.

There are two big reasons for these experiments.

The first is simply that California’s aquifers are depleted. It got really bad during the recent drought, when farmers couldn’t get much water from the state’s surface reservoirs. They pumped so much groundwater that many wells ran dry. The water table in some areas dropped by 10, 20, or even 100 feet. Aquifers are especially depleted in the southern part of California’s Central Valley, south of Fresno. Flooding fields could help the aquifers recover.

The second reason to put water underground is climate change.

California has always counted on snow, piling up in the Sierra Nevada mountains, to act as a giant water reservoir. Water is released gradually as the snow melts.

But because of a warming climate, California now is getting less snow in winter, and more rain. The trend is expected to intensify. But heavy rain isn’t as useful because it quickly outstrips the capacity of the state’s reservoirs and just runs into the ocean. Meanwhile, the state gets very little rain during the summer, when crops need water.

“We really have to find new ways of storing and capturing rainfall in the winter, when it’s available,” says Dahlke.

There’s no better place to store water than underground. Over the years, California’s farmers have extracted twice as much water from the state’s aquifers as the total storage capacity of the state’s dams and man-made lakes. In theory, farmers could replace that water.

Peter Gleick, a water expert and co-founder of the Pacific Institute, says that after winter storms, there is enough water available to recharge those groundwater aquifers.

The hard part, he says, will be getting the state’s farmers and irrigation managers to go along with the plan. Because it will require flooding hundreds of thousands — and possibly millions — of acres.

“I’m cautiously optimistic that we can do this,” he says. But it’s going to require a different way of thinking. It’s going to require a lot of farmers and owners of ag land to be willing to flood land when the water’s available.”

And Gleick says, even if this large-scale flooding can be accomplished, it won’t be enough, by itself, to protect groundwater supplies. It will have to be accompanied by strict limits on how much water farmers can pump from aquifers. Groundwater — which until recently was almost completely unregulated — will have to be managed so that water is there when farmers really need it, when the rains don’t fall.

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California storms add 350 billion gallons to parched reservoirs

A riverfront property in Guerneville, Calif., sits in waters up to its first floor windows Monday, Jan. 9, 2017, after the Russian River crested above flood stage following Sunday's big storm. (Karl Mondon/Bay Area News Group)
A riverfront property in Guerneville, Calif., sits in waters up to its first floor windows Monday, Jan. 9, 2017, after the Russian River crested above flood stage following Sunday’s big storm. (Karl Mondon/Bay Area News Group)

The powerful storms that soaked Northern California over the past week did more than trigger power outages, mudslides and flash floods.

They sent roughly 350 billion gallons of water pouring into California’s biggest reservoirs — boosting their storage to levels not seen in years, forcing dam operators to release water to reduce flood risks and all but ending the five-year drought across much of Northern California, even though it remains in the south, experts said Monday.

“California is a dry state and probably always will be in most years, but we certainly don’t have a statewide drought right now,” said Jay Lund, a professor of engineering and director of the Center for Watershed Sciences at UC Davis.

“We have to be careful about crying wolf here,” he said. “You have to maintain credibility with the public when there are critically dry years, so you have to call it like it is when conditions improve.”

On Monday much of the state began drying out from the weekend drenching that caused at least three fatalities and triggered flooding in Morgan Hill, Sonoma County, Yosemite and parts of the Sacramento Valley, even as forecasters said another storm system was coming in Tuesday.

That new storm system should bring 1 to 2 inches of rain around much of the Bay Area, and up to 6 inches in the Santa Cruz Mountains and Big Sur, with more rain in the North Bay, tapering off Wednesday.

“It’s not going to be as heavy,” National Weather Service forecaster Steve Anderson said. “But even though the amount of rainfall will be less, the impact will still be there.”

Despite concerns that the weekend storm’s warmer temperatures would significantly deplete the Sierra Nevada snowpack, it grew significantly. Last Monday, it was 70 percent of historic average. This Monday, it had grown to a staggering 126 percent for this time of the year.

In fact, since Oct. 1, more precipitation has fallen across the key watersheds of Northern California — eight areas from Lake Tahoe to Mount Shasta that feed many of the state’s largest reservoirs — so far this winter than any time since 1922, according to state totals.

In a typical year, that “Northern Sierra eight-station index” receives 50 inches of precipitation. As of Monday it was already at 40 inches — 199 percent of the historic average for this date — and running slightly above 1982-83 and 1997-98, both of which were marked by severe El Niño flooding.

The rain and snow could shut off, as happened three years ago in January, although the reservoirs now are so full in many areas there wouldn’t be water shortages for several years.

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Officially, California’s drought won’t end until Gov. Jerry Brown rescinds or revises the emergency drought declaration he signed in January 2014.

Lund, of UC Davis, said that because other parts of the state — particularly Santa Barbara and other parts of Southern California — are still well short of rain and suffering from low reservoir levels, Brown should issue an updated drought declaration that reflects the regional differences.

That is one of the options he is considering, said Nancy Vogel, a spokeswoman for the state Natural Resources Agency. But a decision may not be made until the end of the winter snow and rain season, she said.

“It’s early and the precipitation patterns could dry up at any time,” she said. “We’ll see where we are in March or April.”

Rain from Sunday’s storm fell in sheets at time, flooded roads and storm drains, and toppled trees. It fell most forcefully in the Big Sur area of Monterey County, dumping more than 12 1/2 inches over a 72-hour period. More than 9 3/4 inches fell in the Lexington Hills in Santa Clara County and more than 6 inches soaked areas of San Mateo County.

A vehicle drives through standing water along Gate 5 Road in Sausalito, Calif., on Tuesday, Jan. 10, 2017. (Robert Tong/Marin Independent Journal)
A vehicle drives through standing water along Gate 5 Road in Sausalito, Calif., on Tuesday, Jan. 10, 2017. (Robert Tong/Marin Independent Journal)

In Contra Costa County, 4 1/2 inches of rain fell atop Mount Diablo, and 3 1/4 inches fell in Orinda. San Francisco and parts of Oakland saw 2 1/2 inches of rain. Only 1.03 inches fell at Mineta San Jose International Airport, but that still set a record for Jan. 8.

More importantly, the recent storms have sent reservoirs swelling.

The 154 largest reservoirs tracked by the state Department of Water Resources added 1.1 million acre feet of water from Jan. 1 to Monday, boosting their capacity to 97 percent of historic average, said Maury Roos, longtime state hydrologist.

“It’s excellent news,” said Roos. “I don’t make the decision on the official drought, but from the Bay Area north we are in good shape for this time of the season.”

Specifically, Loch Lomond, the main reservoir serving Santa Cruz, filled to capacity. All seven reservoirs that serve the Marin Municipal Water District were 100 percent full. Pardee Reservoir, the main reservoir that provides water to 1.3 million people in Alameda and Contra Costa County, spilled on Monday.

Lexington Reservoir, near Los Gatos, has gone up 31 feet since New Year’s Day, surging to 93 percent full from 42 percent full a week ago.

Perhaps most dramatic was San Luis Reservoir, California’s fifth largest, located between Gilroy and Los Banos. Sitting at 10 percent full in August, it now is 66 percent full, having risen 134 feet. At current rates, it may fill to the top for the first time since 2011, said Roger George of Fresno, a professional guide who leads fishing trips for striped bass there.

“Back in August, it was scary. I was beginning to wonder if we were going to have a die-off of the fish,” he said. “Now it looks like an ocean.”

Similarly, the state’s second-largest reservoir, Oroville in Butte County, has risen 35 feet since New Year’s Day. It added 250,000 acre-feet of water over the weekend, enough for 1.3 million people’s needs for a year. It now stands at 64 percent full, or 102 percent of historic average.

On Monday, officials at Yosemite National Park announced they would reopen Yosemite Valley Tuesday morning. The park suffered some damage when the Merced River jumped its banks, but the flood levels were only two or three feet above flood stage, less than had been earlier feared.

The storm unleashed mud and rock slides throughout the Santa Cruz Mountains early Monday, halting traffic during the morning commute on Highway 17. A slide just north of Scotts Valley shut down northbound lanes and traffic was detoured onto the southbound side.

In Gilroy, two people were rescued Sunday night from the second story of their home after water surrounding the residence rose to about four feet. The San Jose Fire Department’s Urban Search and Rescue team had to use a boat to help the people out of the home, according to Cal Fire spokeswoman Pam Temmermand.

At least three people were killed in the weekend storm, including 57-year-old Jarnail Singh, whom police said lost control of a white cab he was driving and crashed into an estuary near the Oakland International Airport on Sunday morning.

An unidentified motorist also died in a crash on Interstate 880 in Fremont.

A San Ramon woman died Saturday after a tree fell on her at a golf course in San Ramon. Deborah McKeown, 56, was taking a walk when high winds knocked over a tree that landed on her. McKeown, a freelance writer for the Bay Area News Group who wrote under the pseudonym Kathleen Ford, was taken to a hospital from the Canyon Lakes Golf Course on Bollinger Canyon Way.

Staff writers Patrick May, Rick Hurd and Eric Kurhi contributed to this report.

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How a Low-Carbon Economy Increases Cybersecurity Risks

WSJ Energy Expert Jason Bordoff explains the risks inherent in a more interconnected, electrified, and digitalized energy grid. PHOTO: ISTOCK PHOTO
WSJ Energy Expert Jason Bordoff explains the risks inherent in a more interconnected, electrified, and digitalized energy grid. PHOTO: ISTOCK PHOTO

Since the 1973 Arab Oil Embargo, America’s reliance on imported oil has always been the primary energy security concern. Every president since Nixon has promised “energy independence,” and the goal of reducing oil imports has dominated the energy policy agenda. Transitioning to a low-carbon economy that moves off oil is thus not only necessary to address climate change, but also brings many energy security benefits. Around the world, renewable energy that is locally generated reduces the energy-security risks of fossil fuels that are globally traded.

Yet the transition to a low-carbon economy may bring new and different energy security risks of its own that have so far received relatively little attention. Among the most important is the threat from cybersecurity, as a low-carbon economy becomes more electrified and interconnected.

Electricity is vital to nearly every aspect of our daily life and the economy. Electricity is needed to produce food and purify water. Our financial and telecommunications systems do not function without it. It is key to transportation, energy production, hospitals and emergency services. Reliable electric power is also essential to our homeland security and national defense.

Moving away from fossil fuels is likely to require large-scale electrification, and then the generation of yet more electricity from low-carbon energy sources. The International Energy Agency predicts that the share of electricity in final global energy consumption will increase from 18% in 2014 to as high as 28% in the agency’s low-carbon scenario by 2050. Decarbonization of transportation very likely means more electric vehicles, which are falling in cost, growing rapidly in sales each month, and may even become mandated in many urban areas. Transitioning away from fossil fuels for heating in the residential and industrial sectors also means more electrification.

Along with increased electrification, the digital age also means that our electric devices—from household appliances to electric vehicles to increasingly ubiquitous smart sensors—are more and more interconnected through smart grids and the “Internet of Things.” Nearly 50 billion devices are projected to be connected to the internet by 2020, twice as many as last year, according to an FTC report from January 2015. The economywide benefits of greater interconnectedness are enormous: A recent McKinsey report estimates that digitization of services and physical assets like cars and buildings could add more than $2.2 trillion to the annual GDP of the U.S. by 2025. And increased efficiency and renewable capacity can be achieved through new connected devices and sensors.

But an increasingly interconnected, digital and electrified energy system also poses vast new physical and cybersecurity risks that the next administration must prioritize in its new energy security agenda. A more digitalized electricity system is vulnerable to malicious attacks. Ukraine experienced this firsthand when a coordinated cyberattack targeting regional electricity distribution companies in December 2015 left 225,000 customers in the dark for hours. Incidents of cyberattack aimed at the grid in the U.S. are on the rise.Reported incidents rose 20% in 2015 from the year prior, with the energy sector the second largest target. Speaking of critical infrastructure like power generation, the head of U.S. Cyber Command told Congress “it is only a matter of when, not if, we are going to see something dramatic.”

While smart-grid systems promise energy efficiency gains to both consumers and grid operators as each gain greater control over the energy in homes and businesses, low regulatory oversight and a lack of clear security standards for new devices leaves this digitally connected energy system vulnerable. Last month’s internet outage, triggered by a hack on internet-connected devices like cellphone cameras and baby monitors, was a potent reminder of the risks from billions of connected devices with little or no cybersecurity protections.

Consider the risks presented by electrification and digitalization of the transport sector. In a world of electric vehicles, the consequences of electricity outages would be far more severe, as electricity is more difficult to store than gasoline or oil. Moreover, concerns about car-hacking—both electric and nonelectric models—are real. In the second example, hackers took control of a car’s steering wheel and accelerator from a laptop. Imagine the dire consequences in self-driving cars, which have more possible ways into the cars’ networks. Or the potential for malicious code to be installed and later activated in our vehicles. Will stringent safeguards exist in other countries like China that have ambitious plans to manufacture and export cheap electric vehicles?

Grid-connected renewable energy sources, such as utility-scale solar and wind power plants, and distributed energy resources, such as rooftop solar systems, are also vulnerable to cybersecurity risks. To be sure, distributed generation—combined with energy storage—can increase grid resiliency, especially during hurricanes and other weather-related power outages. But as long as these systems are connected to the grid (or a virtual power plant), they present new risks in the form of thousands of potential backdoors for hackers to the electricity grid.

Smart grids, which use intelligent gadgets and two-way communications between electric devices and the grid, are also potential soft targets for cyberattacks—and have received too little attention to date from local utilities. Without proper safety measures, these tools for improving energy efficiency can be used by malicious hackers to shut down entire electricity networks.

Transitioning away from fossil fuels more quickly must be a priority to address the urgent challenge of climate change. And that means a more rapid shift to an electrified and digitalized energy system. While that shift reduces energy security risks we have faced for decades, it also presents many new ones as well that the incoming administration must address with greater urgency through cybersecurity standards and regulations for the new technologies and devices that will power the clean energy economy.

Jason Bordoff (@JasonBordoff), a former energy adviser to President Obama, is a professor of professional practice in international and public affairs and founding director of the Center on Global Energy Policy at Columbia University.

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Can Carbon Capture Technology Prosper Under Trump?

Carbon capture equipment at the Petra Nova plant southwest of Houston. Credit Michael Stravato for The New York Times
Carbon capture equipment at the Petra Nova plant southwest of Houston. Credit Michael Stravato for The New York Times

THOMPSONS, Tex. — Can one of the most promising — and troubled — technologies for fighting global warming survive during the administration of Donald J. Trump?

The technology, carbon capture, involves pulling carbon dioxide out of smokestacks and industrial processes before the climate-altering gas can make its way into the atmosphere. Mr. Trump’s denial of the overwhelming scientific evidence supporting climate change, a view shared by many of his cabinet nominees, might appear to doom any such environmental initiatives.

But the new Petra Nova plant about to start running here, about 30 miles southwest of Houston, is a bright spot for the technology’s supporters. It is being completed essentially on time and within its budget, unlike many previous such projects. When it fires up, the plant, which is attached to one of the power company NRG’s hulking coal-burning units, will draw 90 percent of the CO2 from the emissions produced by 240 megawatts of generated power. That is a fraction of the roughly 3,700 megawatts produced at this gargantuan plant, the largest in the Lone Star State. Still, it is enough to capture 1.6 million tons of carbon dioxide each year — equivalent to the greenhouse gas produced by driving 3.5 billion miles, or the CO2 from generating electricity for 214,338 homes.

From a tower hundreds of feet above the Petra Nova operation, the carbon capture system looks like a fever dream of an Erector set fanatic, with mazes of pipes and gleaming tanks set off from the main plant’s skyscraping smokestacks and busy coal conveyors. Petra Nova uses the most common technology for carbon capture. The exhaust stream, pushed down a snaking conduit to the Petra Nova equipment, is exposed to a solution of chemicals known as amines, which bond with the carbon dioxide. That solution is pumped to a regenerator, or stripper, which heats the amine and releases the CO2.

The gas is drawn off and compressed for further use, and the amine solution is then cycled back through the system to absorb more CO2.

Coal is unloaded at the NRG power plant in Thompson, Tex., where a carbon capture system will soon be operating. Credit Michael Stravato for The New York Times
Coal is unloaded at the NRG power plant in Thompson, Tex., where a carbon capture system will soon be operating. Credit Michael Stravato for The New York Times

Petra Nova, a billion-dollar joint venture of NRG and JX Nippon Oil and Gas Exploration, will not just grab the CO2, it will use it, pushing compressed CO2 through a new pipeline 81 miles to an oil field. The gas will be injected into wells, a technique known as enhanced oil recovery, that should increase production to 15,000 barrels a day from about 300 barrels a day. And since NRG owns a quarter of the oil recovery project, what comes out of the ground will help pay for the carbon capture operation.

The plant, which has received $190 million from the federal government, can be economically viable if the price of oil is about $50 a barrel, said David Knox, an NRG spokesman. The company expects to declare the plant operational in January, Mr. Knox said. Aware of problems with carbon capture projects around the country and of the risks of hubris, he said: “We’re not going to declare victory before it’s time.”

If the price of oil stabilizes or rises, and if tax breaks for developing the technology continue and markets for carbon storage develop, he said, utilities might ask, “why would I not want to put a carbon capture system on my plant?”

But developing large-scale carbon capture has been neither straightforward nor easy. So far, problems have bedeviled major projects, often costing far more than projected and taking longer to complete. The federal government has canceled projects like Future Gen, which was granted more than $1 billion by the Obama administration.

Carbon capture systems are not just expensive to build; they tend to be power-hungry, and make the plant less efficient over all — a problem known as “parasitic load.” The Petra Nova carbon capture process gets its energy from a separate power plant constructed for the purpose, which NRG says makes the system more efficient than it would otherwise be, and frees up all of the capacity of the main power plant to sell all of the electricity it produces. The company estimates that the next plant it builds could cost 20 percent less, thanks to lessons learned this time around.

If Petra Nova succeeds, it means a boost for carbon capture. Despite carbon capture’s problems, its supporters, including the Intergovernmental Panel on Climate Change and the International Energy Agency, call the technology, known as carbon capture sequestration, crucial for meeting emissions standards that can prevent the worst effects of climate change.

“If you don’t have C.C.S., the chance of success goes down, and the cost of success goes up,” said Julio Friedmann, an expert at the Lawrence Livermore Laboratories in California and a former Energy Department official. “If you do have C.C.S., the chance of success goes up and the cost of success goes down.”

Carbon capture is proving itself, said David Mohler, the deputy assistant secretary for clean coal and carbon management at the federal Energy Department.

Developing technologies often involves delay and cost overruns initially, he said. “You cannot engineer all the bugs out from inside a cubicle — you really have to do this stuff in the real world,” he said.

Driving down costs, he noted, is what engineers and businesses do through research, development and production. He cited the plummeting cost of initially expensive technologies like solar power. “We do figure things out as we go,” he said.

What the Trump administration will do with carbon capture is, at this point, anyone’s guess. “The technology only makes sense in a world where you are seeking to avoid putting CO2 into the atmosphere,” said Mark Brownstein, a vice president for the climate and energy program at the Environmental Defense Fund.

But some supporters of the technology see reasons for hope.

“I actually think it’s a moment of optimism,” said Senator Heidi Heitkamp of North Dakota, who met with Mr. Trump last month as a potential agriculture secretary. Ms. Heitkamp co-sponsored legislation with another Democrat, Senator Sheldon Whitehouse of Rhode Island, to expand and extend tax breaks for carbon capture projects. “What I saw with the president-elect was a laserlike focus on jobs,” she said. “I think he was intrigued” about the economic opportunity that carbon capture could provide to keep coal power generation in the national mix, she added.

A crane hauls a 70-ton turbine in La Porte, Tex. A consortium of companies aims to produce electric power efficiently by driving the turbine with superheated carbon dioxide. Credit Michael Stravato for The New York Times
A crane hauls a 70-ton turbine in La Porte, Tex. A consortium of companies aims to produce electric power efficiently by driving the turbine with superheated carbon dioxide. Credit Michael Stravato for The New York Times

One of the pillars of Mr. Trump’s campaign was his intention to revive the fortunes of the coal industry through support of so-called clean coal. And while the exact meaning of the much-used phrase is open to interpretation, it generally includes not just technologies that remove soot and smog-causing pollutants, but also carbon dioxide.

Ms. Heitkamp said that businesses, too, were likely to continue development of carbon capture technology, since they planned their plant investments on a curve of decades and are loath to change course because of a single election. “The decision they are making is not, what does the political outlook look like today? What’s it look like over the life of this plant?”

Although she concedes that a full-scale revival of coal’s fortunes is unlikely, carbon capture could be a way to extend the life of current facilities while keeping the nation’s energy mix diverse.

Jeff Erikson, general manager at the Global C.C.S. Institute, which promotes the technology, said he did not expect to see a great number of new coal plants on the way. “I wouldn’t say carbon capture is going to rescue the coal industry,” he said, but pointed out that there is great potential for applying carbon capture to diverse natural gas plants and to industrial applications. Captured carbon can be used not just for oil production but a widening range of industrial processes, or can even be pumped into the ground.

One of the most innovative approaches to carbon capture is being tried 50 miles east of the Petra Nova plant, in La Porte, Tex., where a consortium of companies is trying an entirely new approach to low-carbon power generation.

In a $140 million, 50 megawatt demonstration project, the company, Net Power, will use superheated carbon dioxide in much the same way that conventional power plants use steam to drive turbines. This system, invented by a British engineer, Rodney Allam, eliminates the inefficiency inherent in heating water into steam and cooling it again. The power plant produces a stream of very pure, pressurized carbon dioxide that is ready for pipelines without much of the additional processing that conventional carbon capture systems require.

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US Earth scientists plan for uncertain future under Trump

Former Texas governor Rick Perry is Donald Trump's choice to lead the US Department of Energy.
Former Texas governor Rick Perry is Donald Trump’s choice to lead the US Department of Energy.

Concerned by president-elect’s choice of advisers, researchers take steps to defend their fields.

Incoming US president Donald Trump’s government is beginning to take shape, and Earth scientists are getting nervous.

Trump’s latest Cabinet appointments include former Texas governor Rick Perry, a climate sceptic, for energy secretary, and ExxonMobil chief executive Rex Tillerson for secretary of state — a position that would make him the United States’ lead emissary on climate change. The pair helps to fill out a roster of advisers with strong ties to industry and a distaste for government regulation. Trump’s transition team also asked the Department of Energy (DOE) for the names of employees who had worked on climate-change issues, further unsettling researchers.

“It feels like a war on science, and on climate science in particular,” says Alan Robock, a climatologist at Rutgers University in New Brunswick, New Jersey. “That’s very upsetting.”

Scientists won a small battle on 14 December, when Trump’s team disavowed the memorandum it sent to the DOE seeking information on climate-change programmes. The request sparked widespread outrage and drew a rebuke from the department after it was leaked on 9 December. At the Fall Meeting of the American Geophysical Union (AGU) last week in San Francisco, California, some researchers billed the episode as a blueprint for how they might defend their interests after Trump takes office on 20 January.

“There is power, even with an administration that never admits a mistake, in bringing things to light,” says Andrew Rosenberg, who heads the Center for Science and Democracy at the Union of Concerned Scientists in Cambridge, Massachusetts.

Other researchers are copying government climate-data sets, to preserve them in case the Trump administration and the Republican-controlled Congress follow through on proposals to cut back Earth-science research at NASA or otherwise restrict studies of global warming. One rescue effort had archived 11 of 91 data sets on its list for preservation as of 16 December; these include a global temperature record maintained by NASA and palaeoclimate archives held by the National Oceanic and Atmospheric Administration (NOAA).

Marcia McNutt, president of the US National Academy of Sciences, says that private foundations have expressed interest in “funding up to the order of billions of dollars” for climate-change research if the Trump administration reduces support for such work. But McNutt — who directed the US Geological Survey (USGS) from 2009 to 2013 — is not ready to give up on government science. “I don’t want that to be an excuse for the government to pull away — to say private philanthropy can do this, the government doesn’t need to fund it,” she told journalists at the AGU meeting.

The road ahead for scientists looks tough. Perry dealt with energy issues as governor of Texas, but he lacks experience with key areas of the DOE portfolio, says John Deutch, a chemist at the Massachusetts Institute of Technology in Cambridge. Deutch, who leads the department’s advisory board, says that Trump should identify a deputy energy secretary who understands the agency’s programmes on basic science, nuclear weapons and national security.

And Perry is not the only climate sceptic poised to join Trump’s inner circle. Trump’s pick to lead the US Environmental Protection Agency is Oklahoma attorney-general Scott Pruitt, who has sued the federal government to overturn greenhouse-gas and air-quality rules.

The president-elect has not announced whom he would like to run NASA, NOAA or the USGS, among other science agencies. McNutt says that the National Academies of Science, Engineering, and Medicine have provided his transition team with a list of potential candidates, but none of those people has been contacted by Trump staff.

Some scientists argue that even if policies to fight climate change are weakened or struck down under Trump, his latest nominations hint that there may be ways to promote clean energy. Tillerson has said that a carbon tax is the best way to address global warming. And although Perry is a strong proponent of fossil fuels, Texas’s wind-power production grew significantly during his governorship.

“Those are places to insert a progressive agenda into an otherwise kind of ugly and cloudy landscape,” says Daniel Kammen, an energy researcher at the University of California, Berkeley.

McNutt advises scientists to stay clear-eyed as they confront whatever challenges the Trump administration brings. “I see so many people in this country freaked out,” she says. “That is exactly what those who want to disrupt science are hoping to achieve.”

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America’s Largest Pension Fund: A 7.5% Annual Return Is No Longer Realistic

The offices of the California Public Employees' Retirement System in Sacramento, Calif. PHOTO: BLOOMBERG NEWS
The offices of the California Public Employees’ Retirement System in Sacramento, Calif. PHOTO: BLOOMBERG NEWS

A reduction in Calpers’s investment target would be first since 2012

Top officers of the largest U.S. pension fund want to lower their investment targets, a move that would trigger more pain for cash-strapped cities across California and set an increasingly cautious tone for those who manage retirement assets around the country.

Chief Investment Officer Ted Eliopoulos and two other executives with the California Public Employees’ Retirement System plan to propose next Tuesday that their board abandon a long-held goal of 7.5% annually, according to system spokesman Brad Pacheco. Reductions to 7.25% and 7% have been studied, according to new documents posted Tuesday.

The last time the fund known by its acronym Calpers lowered its investment expectation was in 2012 when the rate dropped to 7.5% from 7.75%.

The more cautious stance from Calpers’ investment staff comes just 13 months after the fund agreed to a plan that would slowly scale back its target by as much as a quarter percentage point annually—and only in years of positive investment performance. Now Mr. Eliopoulos and other officials are concerned that plan may not be fast enough because of a mounting cash crunch and declining estimates of future earnings from stocks and bonds.

The fund had an estimated 68% of the assets needed to pay for all future obligations as of June 30.

“There’s no doubt Calpers needs to start aligning its rate of return expectations with reality,” California Gov. Jerry Brown said in a statement provided to the Journal.

A reduction in Calpers’ return target to 7% or 7.25% would have real-life consequences for taxpayers and cities. It would likely trigger a painful increase in yearly pension bills for the towns, counties and school districts that participate in California’s state pension plan. Any loss in expected investment earnings must be made up with significantly higher annual contributions from public employers as well as the state.

If the assumed rate of return fell to 7%, the state and school districts participating in Calpers would have to pay at least $15 billion more over the next 20 years, said spokeswoman Amy Morgan. That number doesn’t include cities and local agencies.

Lowering the assumed rate of return by just a quarter of a percentage point would likely increase annual Calpers payments made by one town, Costa Mesa, Calif., by up to $8 million, said former Mayor Steve Mensinger, who left office Tuesday after losing a bid for another term. That would likely mean budget cuts for Costa Mesa, which already spends more than 20% of its $120 million operating budget on pensions, according to Mr. Mensinger.

A Costa Mesa spokesman said “we will be closely monitoring” what Calpers’ board does and “will be analyzing their proposal when it is provided to us.”

A drop in Calpers’ rate of return assumptions could also put pressure on other funds to be more aggressive about their reductions and concede that investment gains alone won’t be enough to fund hundreds of billions in liabilities. Because of its size, Calpers typically acts as a bellwether for the rest of the pension world. It manages nearly $300 billion in assets for 1.8 million workers and retirees.

“If they [Calpers board members] go to 7% it will be really hard for those plans around the country that are at 7.75 or 8 not to come down as well,” said actuary and economist Jeremy Gold.
Pensions have long been criticized for using unrealistic investment assumptions, which proved costly during the last financial crisis. More than two-thirds of state retirement systems have trimmed their assumptions since 2008, according to an analysis of 127 plans by the National Association of State Retirement Administrators. The average target of 7.56% is the lowest since at least 1989. The peak was 8.1% in 2001.

The Illinois Teachers Retirement System in August dropped its target rate to 7% from 7.5%, the third drop in four years, and the fund’s executive director has said the rate will likely be reduced further next year. The $184 billion New York State and Local Retirement System lowered its assumed rate from 7.5% to 7% in 2015.

Some say pensions’ return expectations are still too optimistic despite the recent reductions. Many corporations already use a more conservative rate for their pension funds, and a recent report from McKinsey Global Institute predicts an end to the robust returns of the past three decades.

Calpers did revise its return expectations last year but decided against a dramatic one-time cut. Instead the board agreed to lower the rate gradually over decades, making incremental reductions only during high-return years.

That approach would insulate local governments against burdensome year-to-year increases. But doubts about that approach emerged after the investment staff began to develop new estimates for returns over the next decade.

At a November board meeting Mr. Eliopoulos said “our forecasts have been lowered quite materially over the course of this last year” and outside adviser Wilshire Associates told the board the fund’s 10-year return would drop to 6.21%.

Andrew Junkin, president of Wilshire Consulting, warned the board that the fund needs to start collecting more contributions from cities because of a mounting cash crunch. In the 2014-15 fiscal year, Calpers paid out more in retirement benefits—by $5 billion—than the $13 billion the fund received in contributions.

“The returns over that 30-year-window don’t matter if you go out of business in year eight,” Mr. Junkin said.

On Tuesday Mr. Eliopoulos, Chief Financial Officer Cheryl Eason and Acting Chief Actuary Scott Terando said in documents released by Calpers that achieving 7.5% annual returns “will be a significant challenge” over the next decade.

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Congress approves water bill seen as a threat to Delta fish

A boat passes Webb Tract as it makes its way through the Sacramento San-Joaquin River Delta near Isleton, Calif., Wednesday, Feb. 28, 2001. (AP Photo/Rich Pedroncelli)
A boat passes Webb Tract as it makes its way through the Sacramento San-Joaquin River Delta near Isleton, Calif., Wednesday, Feb. 28, 2001. (AP Photo/Rich Pedroncelli)

WASHINGTON (AP) — Congress has approved a wide-ranging bill to authorize water projects across the country, including $170 million to address lead in Flint, Michigan’s drinking water and $558 million to provide relief to drought-stricken California.

The Senate approved the $10 billion bill, 78-21, early Saturday, despite complaints from some Democrats that the drought measure was a giveaway to California farmers and businesses. The vote sends the bill to President Barack Obama.

The extended drought has devastated California’s abundant farmland and forced families to cut back on water consumption. In the past two years, 35,000 people have lost jobs, 1 million acres of farm land have gone fallow and 2,400 private water wells have gone dry, while more than 100 million trees on federal land have died.

Sen. Barbara Boxer, D-Calif., was one of the bill’s key authors, but found herself urging senators to vote no because of a last-minute rider that Boxer said puts the interests of big farms over the fishing industry.

Boxer, the senior Democrat on the Senate environment panel, is retiring after 24 years in the Senate and said she never imagined she’d end her career trying to scuttle her own bill.

“It’s bizarre,” she said, before launching into a full-throated attack on a provision brokered by two powerful Californians: Republican House Majority Leader Kevin McCarthy and Democratic Sen. Dianne Feinstein. Boxer called the measure the “Midnight Rider” and said it undermines endangered species protections for threatened salmon and other fish and will severely damage the fishing industry in three states — California, Oregon and Washington.

“It’s a beautiful bill — vote no,” said Boxer, who boasted that the measure included no fewer than 26 provisions to help California.

Feinstein, who has worked on the drought measure for more than a year, said the bill will increase water deliveries to farms and businesses devastated by the years-long drought, which she said has cost the state’s economy nearly $5 billion over the past two years.

Feinstein disputed Boxer’s claim that the bill would have a negative effect on fish and the environment. The measure merely requires state and federal agencies to use the best available science to control water flows to protect fish while ensuring water deliveries to the San Joaquin Valley and southern California, she said.

“After three years and dozens of versions of legislation, I think this is the best we can do,” Feinstein said.

The water-projects bill also includes language authorizing aid for Flint and other cities afflicted by lead in water, although money for the bill was included in a short-term spending bill given final approval late Friday.

Flint’s drinking water became tainted when the city switched from the Detroit water system and began drawing from the Flint River in April 2014 to save money. The impoverished city was under state control at the time.

Regulators failed to ensure the water was treated properly and lead from aging pipes leached into the water supply.

“It’s past time for Congress to put partisan politics aside and help the people of Flint, who are still without access to clean, safe drinking water from their taps,” said Sen. Gary Peters, D-Mich.

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Exxon Touts Carbon Tax to Oil Industry

Exxon’s official position has long been the same—a carbon tax is the best way to address the risks of warming temperatures—but it has done little to actively advocate for that goal in recent years. PHOTO: REUTERS
Exxon’s official position has long been the same—a carbon tax is the best way to address the risks of warming temperatures—but it has done little to actively advocate for that goal in recent years. PHOTO: REUTERS

World’s largest publicly owned oil company faces pressure to show concern about climate change

Exxon Mobil Corp. is ramping up its lobbying of other energy companies to support a carbon tax, marking a shift in the oil giant’s approach to climate change as the industry faces growing pressure to address the politically charged issue.

Exxon’s official position has long been the same—a carbon tax is the best way to address the risks of warming temperatures—but it has done little to actively advocate for that goal in recent years. Lately, Exxon has been making the case with its U.S. counterparts to support a carbon tax, arguing that the industry must not oppose all climate policies, according to people familiar with Exxon’s thinking.

Top Exxon officials have been more vocal about their support for a carbon tax and have met with Capitol Hill offices about related legislation, according to the company’s recent lobby disclosure forms.

For the past six months, Exxon has been asserting its position more in meetings within trade associations, including the American Petroleum Institute and American Fuel and Petrochemical Manufacturers, according to multiple reports from people who have attended meetings with Exxon officials.

“Of the policy options being considered by governments, we believe a revenue-neutral carbon tax is the best,” Suzanne McCarron, the company’s vice president of public and government affairs, wrote in May in the Dallas Morning News.

A straightforward carbon tax that is revenue-neutral—meaning other taxes should be lowered to offset the impact—is far preferable to the patchwork of current and potential regulations on the state, federal and international levels, according to Exxon spokesman Alan Jeffers.
Mr. Jeffers said Exxon’s position hasn’t changed and pointed to a recent House vote on a resolution condemning a carbon tax and the global climate deal in Paris agreed to last December as reasons for the increased debate within the industry.

A carbon tax would put a price on each ton of carbon emitted. Where in the production and consumption process the tax would be levied depends on individual proposals.

“Previously Exxon’s positioning on a carbon tax had been passive—‘Hey, we’re not loving it, but we’re not going to get in the way of it,’ ” said Michael McKenna, president of the energy lobbying firm MWR Strategies, whose clients include oil and refining companies, but not Exxon. “In just the last six months, there’s been an uptick in how they are asserting themselves in meetings about how to address this issue.”

Exxon, the world’s largest publicly owned oil company, arguably faces more pressure than other firms to show concern about climate change. At least two Democratic state attorneys general are investigating whether the oil giant has conspired to cover up what it knows about the impact of global warming.

The U.S. Virgin Islands attorney general agreed to withdraw its subpoena, according to a legal filing Wednesday. Exxon is challenging these investigations and has described them as politically motivated attacks that violate its constitutional rights.

In actively pushing for a carbon tax behind the scenes, Exxon becomes the first major American energy company to move closer to the positions of European energy firms, including Royal Dutch Shell PLC and BP PLC, which have publicly advocated for a price on carbon.

Congress has made it clear it is unlikely to consider a carbon tax soon, especially under Republican control. But some in the energy industry believe a serious debate on additional climate measures isn’t far off, especially if Democrat Hillary Clinton wins the White House in November.

The House vote in early June to condemn a carbon tax accentuated a widening rift within the industry over how, or whether, to engage on climate policy. The split is pitting smaller companies, especially domestic refiners, against multinational and European firms.

One senior U.S. oil executive said Exxon, like some other oil and gas companies, could also have a financial motive for supporting a carbon tax. Such a tax would make coal more expensive compared with natural gas. Exxon, beyond its oil business, is the U.S.’s largest natural-gas producer.

Mr. Jeffers, the Exxon spokesman, said his company has invested in gas in anticipation of climate policies that make coal more expensive.

Few, if any, U.S. companies other than Exxon have called for a carbon tax, and many oppose any plan designed to cut emissions. Chevron Corp. CEO John Watson, for example, is one of several outspoken opponents of a carbon tax.

Exxon’s shift is unfolding against the backdrop of a landmark deal to cut greenhouse gas emissions struck by roughly 200 nations last December in Paris. Energy companies are also facing increasing pressure from federal regulators, and their own shareholders, to disclose potential business risks from the global efforts to reduce greenhouse gas emissions. Exxon shareholders in May narrowly voted down a resolution calling for a stress test to determine the risk that efforts to curb climate change pose to its business.

Exxon first publicly supported a carbon tax in 2009, presenting it as preferable to cap-and-trade, a market-based system for controlling carbon emissions that the Democratic-controlled Congress then appeared ready to enact. Cap-and-trade died in the Senate, the Republicans later captured Congress, and President Barack Obama has since pursued regulations to cut carbon emissions instead.

Some advocates of strong climate policy are skeptical Exxon’s shift signals a deeper change. “We’ve seen so little movement out of any of their lobbying front groups,” said Sen. Sheldon Whitehouse (D., R.I.), who introduced a bill last summer to impose a carbon tax. The measure hasn’t advanced in the Senate.

Mr. Whitehouse’s staff recently met with Exxon lobbyists, but the senator said, “The meeting was more just an exploratory feeler to see about further conversations.”

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