The Power and the Money

Environmental disasters are hard to stop, even in the Netherlands

The rash of earthquakes afflicting Oklahoma is old news. The cause appears to be backwash from fracking operations being pumped into old abandoned oil and gas wells. Lubricated rocks slip, and thus earthquakes where none were before. 

But now Groningen, in the Netherlands, is suffering from quakes! I am kind of embarrassed to learn about this now, since I was only recently in Groningen. (Disclosure: I am a Dutch citizen, passport and everything. Yes, I am also a U.S.A. veteran and short and olive-skinned and Spanish-speaking. ¿Tienes algún problema con eso? Daar heb ik geen moeite mee.) 

For those on the wrong side of the paywall: these quakes appear to be due to the rapid depletion of the Groningen gasfield to the east of the city. A 3.6 earthquake in 2012 wrecked thousands of homes (as you might imagine, Dutch houses are not built for tremors); on January 8th of this year another 3.4 did likewise. From the Financial Times:

Gert-Jan Veldink was at home when a 3.4-magnitude earthquake struck the northern tip of the Netherlands last month. First came the tremors, then the chimney broke and floor-to-ceiling cracks appeared in the hallway. Later, an engineer confirmed his 200-year-old farmhouse was filled with carbon monoxide from a damaged gas pipe. “The quake hit our house with all its force,” says Mr Veldink, an academic from the small town of Kiel-Windeweer, near Groningen, the regional capital. “If there’s another earthquake the same as before then the roof will collapse.”

Labor Party politicians estimate the number of houses that need rebuilding at around 90,000. The fields are operated by NAM, a 50-50 joint venture between Royal Dutch Shell and ExxonMobil. NAM has paid out about 80,000 claims, although their value is unknown.

The field has been in operation since 1959, but number of quakes started rising around the turn of the century. For an amazing visualization, click here.

Since 2013, production has fallen precipitously, but the number and intensity of the quakes has remained steady. The implication is that the ground has already been weakened; the number of quakes will fall slowly even if production stops immediately. Of course, if production doesn’t stop, then the quakes will get worse ...

Why does the government let production continue? The industry is highly taxed, with the Dutch state taking 80% of revenues. But that amounts to only 0.8% of total public revenue, down from 5% in 2013. In addition, the Dutch state is highly centralized and subsoil resources are not owned by the surface title-holder, so there is not much of a local lobby pushing for more production the way there would be in most of the United States. 

Which leaves three reasons to keep production going, albeit at a capped level. First, there are legitimate worries that lowering production caps would lead to big variations in monthly production, since NAM would want to sell more in the winter when prices are high. That could lead pressure to fluctuate, making earthquakes worse.

Of course, a total shutdown would solve that problem, but that brings us to the other two problems: 

1. The Netherlands still relies on natural gas for heat and light. Shutting Groningen, at least in the short term, means more imports from Russia. Nobody likes Russia. In fact, Dutch politicians dislike Russia so much that they see votes in lying about their knowledge of Russian “plans to expand the country’s borders and create a ‘Great Russia’ that would include Belarus, Ukraine, the Baltic countries and possibly Kazakhstan.”
2. Lobbying and legal issues. Even with the high government take, NAM makes a lot of money from the gas fields. They will not take it lying down.

So there you have it. Conventional gas production is causing earthquakes in the Netherlands. But even as wind power gets cheaper and more reliable, nobody can quite figure out how to shut it down.

Puerto Rico is not following the Tennessee Plan, but it may work regardless

In 1790, North Carolina ceded its western territories to the federal government in payment for the federal assumption of its revolutionary debts. In March 1796, the Southwest Territory unilaterally declared that it was now a state. The legislature elected two senators and organized a popular vote for two representatives. The delegation showed up in Washington and demanded to be seated. After a few months of confusion, Congress passed a joint resolution admitting the Southwest Territory as the State of Tennessee. Congress seated the two senators, who had been constitutionally selected by the legislature, but insisted on a new election for the House of Representatives. 

That was before the 17th Amendment, however. But in 1959, the Alaska Territory tried the same thing. The state organized elections for two senators and a representative, who went to Washington and asked to take their seats. Congress agreed to seat the representatives in 1959, as part of a deal that also admitted (then Republican) Hawaii. 

But such a plan is not a sure shot at success. Did you know that  the District of Columbia has been electing shadow senators since 1990? I discovered this fact on March 13, 2016.

I was stuck at a red light on an exit ramp from Rock Creek Parkway onto Massachusetts Avenue, when I saw that the Chrysler 300M ahead of me had the strangest license plates. They were D.C. plates, but instead of a number there were the words “US SENATOR” in an unusually small font. 

So I took a photo.

To my surprise, the Chrysler dropped behind me and started to tail my car. This went on for about two miles. Annoyed, I pulled onto a side street, stopped the car, and walked over to car now tailing me. I knocked on his window. “You’re following me.” It wasn’t a question. 

The driver, a bearded white man, responded with no hostility in his voice. (That will be hard to believe when you read the words, but it is true.) “You took a picture. Was there something you didn’t like about the car?” 

My voice likely showed some irritation. “I’ve never seen a license plate like that. I took a picture. Are you a Senator I don’t recognize?”

He didn’t answer my question. Instead he said, “I’m sorry, there’ve been incidents.”

“What incidents?” I responded. “What senator do you work for?” But he drove off. 

And that was how I discovered that he was Paul Strauss, one of D.C.’s shadow senators, elected by the people of the District to lobby Congress for statehood. So far, Strauss and his colleague, Mike Brown, have accomplished precisely nothing.

Puerto Rico is now trying what it claims to be the same strategy. Appoint shadow senators and representatives and lobby Congress to have them seated. But:

1. Problem #1 with the plan is that the would-be congresspeople haven’t been elected. So poof, none of the legitimacy that the representatives from Tennessee (and later Alaska) brought to the table. 
2. Problem #2 is that Puerto Rico will be highly Democratic. Despite impressions, that was not true as of September 20, 2016 2017. But now, after the Trump administration decided that it did not care about the island, whatever conservative leanings the electorate might have had have been destroyed. Republican strategists know this. But the Puerto Rican delegation has no plan (a la the paired admission of Alaska and Hawaii) to counterbalance.
3. And problem #3 is that D.C. has been trying the serious version of the strategy for 27 years, to no avail. 

Which means that I should be here saying that this strategy has a snowball’s chance in Hell of succeeding. But I actually think the reverse. In fact, I would bet on statehood happening very fast the next time that Democrats win both houses of Congress and the presidency.

Once upon a time admitting two states (D.C. and P.R.) on a party-line vote would have been seen as a sort of unconscionable gerrymandering. But that time is passing. The norms of American political life have been going out the window for some time, maybe since Robert Bork, certainly since Texas decided to carry out its intercensal redistricting in 2003. (The redistricting violated political norms, but despite all the liberal outrage, it actually made Texas politics fairer and more democratic. Really.)

I do not see the political penalty for the Democrats from shoving through statehood for both jurisdictions at the next chance they get. Plus side: four extra senators. Minus side: some loss of control over the District on the part of Democratic representatives from Maryland.

Which leaves only one reason not to admit either or both the District and Puerto Rico: fear of a voter backlash at the following election.

Is that likely? 

The Jones Act is stupid, but not colonialism

The Merchant Marine Act of 1920 reserves shipping between American ports to American-built vessels with American crews. The reason was to protect the merchant marine from British, Norwegian and (especially) Japanese competition. After all, the U.S. wanted to be sure that it would have a merchant marine in wartime; that meant protecting the industry in peace. The same logic was later applied to airlines.

The problem? Well, the U.S. industry collapsed despite protection. Railroad dieselization and the interstate highways drove down the cost of land transport. The result was the collapse of the merchant marine despite the act. A tiny fleet of 93 Jones-Act-qualified ships schlumps on by having a high-priced lock on transport between the Lower 48 and Alaska, Hawaii, Puerto Rico, and the other insular territories.

This is perverse on multiple levels. First, it forces more U.S. domestic cargo onto the roads. The European Union has no Jones Act equivalent and moves 40% of its domestic freight via coastal shipping (page 22); the U.S. would likely move more considering how close our population centers are to the water. 

Second, it advantages foreign producers in the insular markets. It is cheaper to import from Europe than from the mainland United States.

Finally, it really does screw over exporters from the insular possessions. It is way easier to build up a supply chain when you are in the same country, but the Jones Act cripples Hawaiians and Puerto Rican firms that might want to plug themselves in. 

So we are in the worst of all worlds: high shipping costs but no serious domestic industry. (At least airline protectionism got us a lot of airliners.) Ironically, Malcolm McLean used Puerto Rico to test out containerization back in the day, but now there are no modern container vessels shipping between U.S. ports. One might claim that Puerto Rico is screwed because it is a territory instead of a state ... but Alaska and Hawaii are equally screwed, whereas the U.S. Virgin Islands has somehow wrangled a permanent exception.

So the Jones Act is stupid, but not, as Carlos Yu has pointed out, colonialism. Nor is it the biggest problem right now: supplies are reaching Puerto Rican ports but cannot be distributed due to lack of ground transport. 

What is stupid and colonialism is the refusal by the Trump administration to waive the act in the face of Hurricane Maria, despite such waivers being routine in other disasters. Such disasters include hurricanes which just hit Texas and Florida. Even if the Jones Act is only a marginal contribution to the suffering on the island, the different treatment is unconscionable.

Bad news in tragedy avoided: building codes and the Mexican earthquake

Four days ago, I worried that the smaller force of the recent quake meant that we could not be sure that better building standards were the reason fewer buildings collapsed. There was some pushback in comments, noting that the epicenter was much closer to Mexico City in 2017 than in 1985. There was also some pushback on Twitter making a similar point. The Twitter exchange ended with Leticia Arroyo-Abad presciently saying that we could tell nothing from the size the quake because “it would depend on how different frequencies affect different structures.”

And she is absolutely right. The New York Times now reports that the closer distance of the 2017 quake meant that the shaking was far less damaging to buildings above six stories in height. Moreover, a 2016 study showed that many new buildings did not meet the minimum requirements of the building code. 

This photograph was taken in the same neighborhood as the new high rise mentioned in the NYT article, the one which collapsed. (More details here.) We know people who live in new buildings in that neighborhood. They dodged a bullet. There should have been no bullet to dodge, even in a 7.1 quake. That makes me angry. 

 

The jury is still out, but evidence is piling up that repeat of the 1985 quake would have killed far more people than the one Mexico City just experienced. The heads of bureaucrats and politicians in CDMX need to roll. The Line 12 saga shows that Mexico can have such a reckoning ... and once we are over counting our blessings and celebrating the heroism of the citizenry, this reckoning should be big. 

For a small fee in America: Hurricane Maria and Puerto Rico’s debt burden

Hurricane Maria has devastated Puerto Rico. The worst part is the power system: as of right now, all generation assets are offline. All of them. The Puerto Rico Electric Power Authority (PREPA) says it is going to resume normal functioning on Monday, but nobody knows what that means. The (outdated and expensive) power plants appear to have survived the storm, but the main transmission cables are out. (You can get DOE updates here.) That is why power barges, while useful, won’t solve the problem until the transmission network is back up: the distribution network cannot move the power to the load centers. Besides which, there are not a lot of power barges sitting around ready to go.

Unless the Trump administration allocates an entirely-unexpected sum of money, Puerto Rico is going to need to borrow massive amounts for reconstruction. (In a past America, the GOP might think $10 billion in emergency aid enough to cement Republican control over the island for a generation. We no longer live in that America.) 

The hurricane is going to permanently damage Puerto Rico’s ability to repay. Work by Leah Boustan (Princeton), Matthew Kahn (USC), Paul Rhode (Michigan) and Maria Lucia Yangua (UCLA), using a century of data, shows that natural disasters increase out-migration and permanently raise poverty rates. The latter, of course, is because wealthier people are more likely to move out. Puerto Rico, according to their estimates, will lose around 4 percentage points more of its population over the next decade than it would have otherwise; roughly 140,000 people and the associated economic activity.

That said, the hurricane is also likely to reduce Puerto Rico’s current debt burden. Title III of the Oversight Act (aka “PROMESA”) created a bankruptcy-like procedure for Puerto Rico. Under that procedure, judges and the Oversight Board have a lot of leeway. They will take into account that the island now needs more money and has less ability to repay.

What really needs to happen now is a fast resolution so that Puerto Rico can go back to the capital markets. Investors have short memories; the island will be able to borrow the $10 billion it needs for full recovery. But the existing debt needs to be written down. My worry is not that the debt won’t be written down enough, it is that it won’t be written down fast enough to speed hurricane recovery. 

The hurricane has made it a little bit more likely that the courts will quickly write down debts. PREPA bond prices here; graphed below. They are falling. Puerto Rican general obligation bonds, which are much less likely to be restructured, are not falling; think of them as a control. 

Privatizing PREPA could speed recovery by opening access to the capital markets. But there are two problems. First, in order to unlock the full value from a sale ($3½ billion is credible), you need to restructure the debts first. Second, in order to insure that the new enterprise gets the system in shape fast, you need enforceable performance targets. Many governments have screwed up power privatizations on both counts, so color me skeptical, although in this case the hurricane has likely left no alternative save more time with the lights out. 

In short, the debt burden is going to slow Puerto Rico’s recovery from the hurricane and slow it a lot. But at the same time, the hurricane is also going to speed resolution of Puerto Rico’s debt crisis. Note that these things are not contradictory; better for everyone had the hurricane never happened. For a small fee, indeed.

Good news in tragedy

Mexico City seems to have come through this earthquake much better than it did in 1985. Earlier, I worried that the reason might be that the quake was far smaller on the Richter scale; Dwight Dyer, in comments, pointed out that the epicenter was also much closer to Mexico City and the shaking was likely comparable. 

Is there any way to know if the tightening of building codes helped make Mexico more resilient? After all, it is not like the country stopped suffering from corruption in ‘85. 

One good sign is that it seems that no public schools collapsed during the quake; only 16 experienced major damage. The horror in the southern suburb of Villa Coapa happened when a private school fell in; subject to the new codes but not under the direct control of the federal government. The reason that the performance of the public school matters is that they were all supposed to be retrofitted after the 1985 quake. Their relatively good performance does not mean that the new codes were properly implemented ... but any public school failures would have been a damning condemnation.

Mexico has a lot to be proud of in how it has responded to the disaster. It also may have much to be proud of in how it prepared.

You take hope where you find it. 

El terremoto

I do not have much to say about the quake, save that it is horrifying, and that fortunately it seems (we hope) that no one we know has been hurt, although several have been terrified. There are some places where you can help. One place is below, managed by the sister of a good friend:

Ayuda para el terremoto en México https://t.co/yTwMHsew6t via @youcaring

— Marusia Musacchio (@tintachina88) September 20, 2017

I suppose I have a few more things to say. The first, for those of you who don’t know Mexico City’s geography, the worst damage has been in the center of the city. The reason is that the city was built on a lakebed: when the earth shakes, the ground liquifies. The most horrifying damage in ‘85 came about when high rises around the Alameda or in Tlatelolco came crashing down. The Metro stopped working. 412 buildings collapsed. 

The geographic scope of the damage seems similar, but so far only 47 buildings appear to collapsed, far less than in 1985. That said, this quake was an order of magnitude less on the Richter scale. So while I would like to believe that the better results are due to better building codes, I am sure that this is true. 

There has not been much looting or rioting, but two forms of criminal activity have been reported. The first seems to have been a spate of carjackings aimed at cars stuck in traffic, particularly out around Santa Fe. There have also been scattered reports of people entering homes disguised as rescue workers and robbing the inhabitants. I will predict that these reports turn out to scattered exceptions, both because the authorities seem to be responding to them with alacrity and because social disorder generally tends to decrease in disasters, as long as the authorities avoid general food and water shortages. 

Godspeed, Mexico City. You are loved. Please give above if you can.

More evidence that Trump caused the peso to fall

First, pray for Miami. I have a love-hate relationship with that city, even deeper than my love-hate with Texas. I would not want to live in that entire metro, not in Miami-Dade, not in Fort Lauderdale, not in Palm Beach. But my family is there along with seven million other people. They have not evacuated. But my brother is sheltering the families of two of his daughters at his house outside the flood zone; the third is an R.N. and she is on call, along with her police officer husband. 

Second, allow me to present some evidence that Donald Trump was indeed responsible for most of the weakness in the Mexican peso since he arrived on the political scene in mid-2015. The Mexican peso has strengthened over the past year. When we were there this summer, the peso rose above 5½¢ and stayed there. It had plunged below 5¢ after the election. This was good for Mexicans who wanted to buy imported goods, and I have to admit that Mexico City is still very inexpensive, but still. 

The rise means that the peso is all the way back to its level of January 2016, before Donald Trump began winning any primaries. It is not quite back up to the 6¢ level of June 2015, when Trump rode down that escalator. That is probably due to residual uncertainty regarding the NAFTA negotiations: markets are partially pricing in the chance that the negotiations will fail, thereby exposing Mexican producers to WTO tariffs when exporting to the United States. 

And so, a prediction. If NAFTA comes out intact from the negotiations, then the real exchange rate of the peso will return back to the level it had back in 2015. 

Do note that candidate Trump could move the market with his words; President Trump much less so. Bets are being hedged, but nobody believes that White House words carry any information anymore. 

Godspeed to Houston and some urban policy questions about the flood

I like Houston. I always have. It is a hideous city, way too car-dependent, and has a climate designed to get me to hate it. But I have friends there and I like Texans. I really like Texans. Which is weird, when you think about it. I am from Brooklyn, and somebody just released a (sadly terrible, I can report) movie in which Texas quite literally invades Brooklyn.

Please help, either with your money or your time.

Remember, Texans are American, sometimes despite themselves. I have two very good friends in Houston and many others in greater Austin. One them told me, to my honest shock, that his kids have to say a pledge of allegiance to the State of Texas at school every day. Really, they do, although ironically that only dates back to 2003. Honor the Texas flag; I pledge allegiance to thee, Texas, one state under God, one and indivisible. Should I ever wind up moving to Houston (which I would do if my wife were not utterly opposed) I have to admit that I would insist that my children not say the Texas pledge. 

The U.S. is a republic worth allegiance. Any given state, not so much. Plus, America might be better off if Texas were split up. 

Self-referential intro over, there are two important policy questions about this storm.

The first, of course, is how much it is due to global warming. Right now, it appears as if the flooding has exceeded the 500-year-watermark. 

That implies the storm was unlikely. But it does not tell us how much less unlikely such storms have become as temperatures have risen. Heavy precipitation is up in the United States, but that is circumstantial evidence. What do climate scientists have to say?

The second is whether urban policies have contributed to the disaster. As Market Urbanism has pointed out, there is some very stupid commentary trying to link the disaster to Houston’s lack of zoning. That is dumb. Inasmuch as zoning has anything to do with anything, the lack thereof has allowed for taller structures to be built, which right now is saving lives and property.

But even though Houston is unzoned, American and Texan policies contribute to sprawl and the paving over of open space that might have otherwise absorbed rainfall. For example:

1. Minimum parking requirements;
2. State subsidies for roads and sewer hookups;
3. Property taxes that tax land values and structures at equal rates, discouraging intensive use of land.

And that in addition to the problem that floodplains are a classic example of a public good. Leaving the land open reduces the impact of floods on developed land, but the owner bears the cost while other property owners reap the benefits.

That said, what I do not know is how much policies have contributed to sprawl. Nor do I know how much sprawl has contributed to the damage from flooding. Sure, both have made the storm worse, but significantly worse? I do not know. But if such storms are becoming more common, then there is a lot riding on the answer to those questions.

Does anyone have any evidence?

But for now, while I wait for the internet to point me in the direction of answers (hah) Godspeed to the people of East Texas on their path through this storm. Again, please help, with money or time.

This “news” is striking, even for Politico

Politico reports that President Trump “has come through on three big asks” for California. That was an interesting headline! So I read the story. And it turns out that the “three big asks” are disaster declarations. 

Think about that. It is newsworthy that President Trump didn’t set what’s left of his presidency on fire out of pure spite. And make no bones about it: denying disaster assistance to a state experiencing natural disasters would sink his presidency right quick. Not to mention the shot-in-the-arm it would give to that fundamentally ridiculous secession movement. 

Yet it was and remains plausible that he would do such a thing. What a goddamned time we live in.

Mad Max is bullshit, people; disasters do in fact bring us together

 We have some unfinished posts fisking the World War Three novel Ghost Fleet. We are not fans of the book. And now one of the authors, August Cole, has posted this. 

“This” is a paean to Tom Clancy wargame in which there is a smallpox outbreak in New York City, after which society collapses and warlords take over. Or something. You can watch a trailer. 

Now, to be fair, Cole has nothing to say about whether a smallpox outbreak in New York would suddenly cause civilization to collapse into dog-eat-dog violence. He just thinks it’s useful to depict scenes of mass human suffering in video games because it will better prepare future soldiers for urban operations: 

“But scavenging in the confines of the New York subway system or winding up in a shootout with a local gang reinforces that your own worst enemy is all too familiar: fellow humans. The game lays bare how the odds are stacked against the survivors of such a calamity, and how even functional complex urban environments teeter and sway between chaos and order each day. Just as the novel World War Z by Atlantic Council senior fellow Max Brooks presents this uncomfortable truth through the premise of a zombie outbreak, this video game does so with close-quarters anarchy caused by catastrophic bio-terrorism ... The Division will appeal more broadly to gamers, given its formulaic progression of acquiring skills, weapons, and powers, which big studio games must incorporate in order to entice millions of players. That is also one of its strengths and perhaps greatest forms of utility in the defense realm: broad appeal. Megacity operations, be it relief or combat, will no longer be an abstract concept to young corporals or privates — or their commanding officers.”

I would like to point out here that there is remarkably little evidence that looting and unrest spike in disaster situations. The first paper of which I am aware pointed that out in 1968. A 2004 paper from the CDC reinforced the argument, showing that most looting involved necessary supplies rather than egregious attacks on other people or their property. “In contrast, researchers have found — at least in the immediate aftermath of disasters — that community resilience and unity, strengthening of social ties, selfhelp, heightened initiative, altruism, and prosocial behavior more often prevail. In short, when things are at their worst, disaster-stricken communities tend to rise to the occasion.”

This issue came up again in 2010, when preliminary reports of widespread disorder after the Chilean earthquake proved unfounded. The looting that did occur was easily controlled. No roving gangs taking over whole neighborhoods; for some numbers, we are talking about an increase in armed robberies from 52 in 2009 to 102 in the year of the earthquake. No houses were hit. It was not Mad Max. 

And again in the Philippines in 2013. Same general story.

In other words, I think our military would be very ill served if it were to promote training tools that gave soldiers the impression that organized violent gangs were going to be their main problem in post-disaster situations. 

Chile is a great country

 I have many reasons to like Chile to the point of taking out dual citizenship. Democratic government, great climate, good music, nice roads, and a flag that reminds me of what is still my favorite country on the planet. (You know, the one that got the silver in men’s and women’s hockey.) And to all that you can add a sensible response to looting after a natural disaster.

Matt Yglesias got this wrong. Here is the correct story:

“A day earlier in Concepción, the police fired water cannons and tear gas to disperse hundreds of people who forced their way into shuttered shops. But law enforcement authorities, heeding the cries of residents that they lacked food and water, eventually settled on a system that allowed staples to be taken but not televisions and other electronic goods. Ms. Bachelet later announced that the government had reached a deal with supermarket chains to give away food to needy residents.”

The issue he raised is a real one, but Chile should not be impugned, when in fact the government is responding with alacrity and good sense. ¡Felicidades! ¡Viva Chile!  Take it back, Matt! Chile awaits an apology.