Category Archives: economic impact
Future of Mitsubishi Hitachi plant uncertain after sale to U.S. financial company
ALEX MACPHERSON, SASKATOON STARPHOENIX
Published on: February 18, 2017 | Last Updated: February 18, 2017 5:00 AM CST
Four months after shuttering its Saskatoon-based manufacturing division and laying off most of its employees in the city, Mitsubishi Hitachi Power Systems Canada Ltd. (MHPSC) has sold its sprawling 58th Street East facility — but the plant’s future remains uncertain.
Illinois-based Hilco Global, which specializes in valuing and “monetizing” assets in more than 60 countries, paid an undisclosed price for the 21-acre complex, which was listed for $19.95 million, and now has several options, according to its executive vice president.
“If we can find a going concern company that wants to buy it and run it, that looks at the facility and feels like they can turn it into something … we’ll sell it,” Gary Epstein said in an interview from the company’s Northbrook, Illinois offices.
“We’re also looking for various ways to monetize this asset now, and that could frankly be a few different things,” Epstein added, noting the property could be divided and sold in pieces, or it could be emptied of its industrial equipment and sold as land.
Hilco Global is working in tandem on the project with the Melville, New York-based Prestige Equipment Corp.
MHPSC opened its Saskatoon plant in 1988 and spent the next 28 years developing and manufacturing equipment for the power, energy and industrial sectors. Last summer, it announced plans to shutter one of its divisions, at the cost of around 150 jobs, as it restructures.
The company laid off the employees and moved its 40-person power division to a different location in the city late last year, leading North Saskatoon Business Association executive director Keith Moen to bemoan the “terrible loss of jobs.”
Although the plant’s equipment is extremely specialized, the space could eventually house one or more local or regional companies working in several different sectors, according to CBRE Ltd. vice president Michael Bratvold, who brokered the sale to Hilco Global.
“We’ve got a tremendously skilled workforce (in Saskatoon),” Bratvold said. “Having access to those workers that were there, I think it’s a great asset for anyone coming in but it’s also important for the city to find a place for those workers.”
Moen said Thursday that while the best-case scenario is for skilled jobs to remain in Saskatoon, which would help with the city’s current economic situation, economic development of any kind at the site would be beneficial.
A return to optimism in mining puts Canada at a crossroads
February 16, 2017
The Canadian Mining Association
To download a copy of Facts & Figures 2016, go HERE
Action needed for Canada to capitalize on potential rebound
Cautious optimism is returning to the global mining industry, which could spur mining companies to make new and significant investments. However, a new report from the Mining Association of Canada (MAC) shows evidence of declining Canadian competitiveness and the prospect for major exploration and mining investments to flow offshore.
“Very simply, Canada is not as attractive as it used to be for mineral investment, and competition for those dollars is growing globally. The recent elimination of federal mining tax incentives, regulatory delays and uncertainty, combined with major infrastructure deficits in northern Canada are all contributing factors that can explain Canada’s declining attractiveness. The time is now to put the right policy pieces in place to better compete for those investments and regain our leadership in mining,” stated Pierre Gratton, President and CEO, MAC.
MAC’s Facts & Figures 2016 report notes several indicators that reveal that Canada is not as competitive as it once was. Foreign direct investment into Canada’s mining sector dropped by more than 50 percent year-over-year in 2015. This is disproportionate to Canadian mining direct investment abroad, which only experienced a 6 percent decline. This imbalance indicates that companies are investing in project development, but may be less interested in doing so in Canada. Canada also no longer attracts the single-largest share of total global mineral exploration spending, having conceded first place to Australia in 2015. Further, no new mining projects entered the federal environmental assessment stage in 2016. If these trends continue, there will be fewer discoveries made and fewer projects that become operational mines in Canada.
“The policy landscape in Canada is full of uncertainty as we await the outcomes of major government decisions. The federal government is reviewing federal environmental legislation, is implementing a pan-Canadian climate change policy, and is working to address long-standing transportation and infrastructure issues. These are all necessary and positive steps, but they must result in boosting Canada’s attractiveness as a place to do business. At risk is a key sector of our economy, and one that leads the world in sustainable mining practices,” stated Gratton.
MAC’s report also revealed the mining industry remained a strong contributor to the Canadian economy despite the downturn in 2015. The industry directly employed more than 370,000 people across Canada and remained the largest private sector employer of Aboriginal people on a proportional basis. An additional 190,000 worked indirectly in mining, with more than 3,700 companies supplying goods and services to the Canadian mining industry. In 2015, the mining industry accounted for $56 billion of Canada’s GDP and minerals and metals accounted for 19% of Canadian goods exports.
Policies that improve Canada’s mining competitiveness:
1) Improve the federal project review process – the process should be effective and timely, from pre-environmental assessment (EA) to post-EA permitting, with meaningful consultation with Aboriginal communities.
2) Invest in critical infrastructure in remote and northern regions – introduce strategic tax measures and ensure the new Canada Infrastructure Bank has a strong economic development focus for northern Canada.
3) Improve access to trade – ensure trade policies provide access to new and important markets, including China, and improve Canada’s transportation network to more efficiently move mineral and metal products to market.
4) Address climate change while protecting Canadian businesses – adopt policies that lead to meaningful greenhouse gas emissions while protecting emissions intensive and trade-exposed industries (EITI), like the mining industry. Failing to protect EITI sectors will result in “carbon leakage”—the shifting of production and the associated economic benefits from countries that are taking action on climate to those that are not.
5) Help expedite industry innovation – The Canada Mining Innovation Council is seeking a $50 million investment for the Towards Zero Waste Mining innovation strategy from the Government of Canada to accelerate the adoption of disruptive technologies that will support the transition to a lower carbon future.
To download a copy of Facts & Figures 2016, go HERE
The Mining Association of Canada is the national organization for the Canadian mining industry. Its members account for most of Canada’s production of base and precious metals, uranium, diamonds, metallurgical coal, mined oil sands and industrial minerals and are actively engaged in mineral exploration, mining, smelting, refining and semi-fabrication. Please visit www.mining.ca.
Canada losing ground as mining investment destination
Feb 16, 2017
Source: MAC’s Facts & Figures 2016.
While optimism is slowly but steadily returning to the global mining industry, Canada doesn’t seem to be in a good position to benefit from the increasing number of companies ready to make new and significant investments.
At least that is the conclusion from a report released Thursday by the Mining Association of Canada (MAC), which also warns of the possibility of seeing major exploration and mining investments flow offshore.
“Very simply, Canada is not as attractive as it used to be for mineral investment, and competition for those dollars is growing globally,” MAC President and CEO Pierre Gratton said.
Elimination of federal mining tax incentives, regulatory delays, uncertainty and major infrastructure deficits in northern Canada are all contributing to the country’s declining appeal.
The recent elimination of federal mining tax incentives, regulatory delays and uncertainty, combined with major infrastructure deficits in northern Canada are all contributing factors that can explain Canada’s declining attractiveness, Gratton noted.
The report also highlights the policy areas that Canada needs to pay attention to in order to seize future growth opportunities and re-gain its leadership in mining.
Some of the figures included in the report are quite telling. In 2015, foreign direct investment into Canada’s mining industry dropped by more than 50% from the previous year. In contrast, the country’s resources sector direct investment abroad only experienced a 6% decline.
According the industry body, such imbalance proves that Canada no longer attracts the single-largest share of total global mineral exploration spending, a top place it lost to Australia in 2015. Further, MAC says, no new mining projects entered the federal environmental assessment stage in 2016.
If these trends continue, the association warns, there will be fewer discoveries made and fewer projects to become operational mines in Canada.
Despite the challenges, the sector remains a key contributor to the Canadian economy, employing more than 370,000 people across the country and being the largest private sector employer of Aboriginal people on a proportional basis.
In 2015, the mining industry accounted for $56 billion of Canada’s GDP and minerals and metals accounted for 19% of Canadian goods exports.
Clear signs of recovery for oil service companies: Yager
If your definition of success is a return to 2014, you’ll be disappointed. But if you’re still in business after the past two years, this is a measurable and meaningful improvement for the part of the industry that’s chasing rigs.
By David Yager
Feb. 15, 2017, 2:56 p.m.
The most frequently referenced barometer of oil service prosperity is the number of active drilling rigs. But this is only part of the story. There are multiple ways to measure progress or success.
The oil service recovery currently underway is not evenly distributed or positive for all participants. But after two years of contraction and misery, the outlook has improved sufficiently to justify optimism for most.
On January 20, JWN’s Rig Locator reported 340 rigs moving or making hole. This is the highest number in nearly two years since Feb. 10, 2015. Utilization is reported to be over 52 per cent, but that’s because the available rig fleet has shrunk to 653 from over 800.
At an average cost of $5 million per machine, nearly $750-million worth of drilling iron from two years ago is parked or obsolete. That’s a huge price for contractors to absorb for a modest mathematical increase in rig utilization.
Service rig utilization is a broader measure because activities involving production workovers and abandonments, not just new well completions. The Canadian Association of Oilwell Drilling Contractors reported in November that 32 per cent of the 1,003 available service rigs were working, the highest rate in 2016 and the past year. In the dark days of early 2016, when wells went down, operators often couldn’t justify spending the cash to fix them.
That all changed with higher oil prices in mid-2016.
Oil prices are higher, but many don’t appreciate how much. On January 20, the Petroleum Services Association of Canada and GMP FirstEnergy commodity pricing report had synthetic crude at C$71.92 and Edmonton mixed sweet at C$65.92. Western Canadian Select, the perpetually depressed blend of bitumen, synthetic and condensate (mixed for easier transportation), fetched C$52.18.
Noteworthy is all three averaged more than $30/bbl higher than a year ago. For an industry producing 4.5 million bbls/d of these three crude types plus natural gas liquids (which have enjoyed a similar increase), this is $135 million/day more than a year ago. These are big numbers.
The ARC Energy Research Institute, a unit of ARC Financial, publishes a weekly macroeconomic report on the upstream petroleum industry. On January 16, ARC estimated 2017 revenue from all oil and gas production could be $110 billion, a whopping $32 billion (or 41 per cent) higher than 2016. Higher oil prices are aided by natural gas being expected to benefit from a 50 per cent boost this year. Revenue from existing production remains the number one source of cash flow for reinvestment. This explains why most operators have announced increased spending.
ARC estimates after-tax cash flow to more than double in 2017 to $45 billion from only $20 billion last year. This supports an estimated 40 per cent increase in capital spending on conventional oil gas from last year, to $28.8 billion compared to only $20.5 billion. While this is still lower than historical levels, the estimate does not anticipate improvements from capital inflows from new equity issues. As for debt, oil companies will be dedicating a meaningful portion of their improved financial fortunes to balance sheet repair.
If your definition of success is a return to 2014, you’ll be disappointed. But if you’re still in business after the past two years, this is a measurable and meaningful improvement for the part of the industry that’s chasing rigs.
The recovery is not even. ARC estimates oilsands investment will decline yet again to only $13.2 billion this year, the lowest level since 2009. It was $16.2 billion last year and $22.9 billion in 2015. For major processing projects, the $8.5-million North West Redwater Sturgeon Refinery construction is winding down. The workforce has been reduced by 2,000 in the past year and further reductions will follow. Start-up is anticipated for the latter half of the year. Two new projects totaling $7 billion from Pembina Pipeline and Inter Pipeline to build plastic feedstock plants have been announced, but they aren’t going to materially move the employment and trades needle for most of 2017.
The oilpatch is not yet firing on all cylinders. The macroeconomic uncertainty ranges from Donald Trump to pipelines to carbon taxes. Activity may never return to the go-go years of 2012 through 2014.
But it is much better than 2016.
Thu Feb 16, 2017 | 8:50am EST
Exclusive: India may cut potash subsidy in potential blow to demand
By Rajendra Jadhav | MUMBAI
An Indian ministry has proposed slashing potash subsidies by 17 percent in the next financial year to reduce the fiscal deficit, officials said, a move that would hit demand in one of the world’s largest importers of the fertilizer.
Although global prices have been falling, a reduction in government support in India – which alongside China is the world’s biggest bulk potash importer – will make potash relatively expensive for the companies that import it.
Some officials at those companies said that were the proposal to be adopted, they would seek lower prices when negotiating annual contracts with global suppliers and also raise retail prices charged to farmers, dampening demand.
Global producers including Uralkali, Potash Corp of Saskatchewan, Agrium Inc, Mosaic, K+S, Arab Potash and Israel Chemicals have been hoping for robust demand to help counter weak prices.
Asian import prices have fallen around 10 percent in the last 12 months.
India’s fertilizer ministry has proposed fixing the potash subsidy at 7,669 rupees ($114.61) a tonne for the 2017/18 fiscal year beginning in April, down from 9,280 rupees per tonne this year, said a senior government official.
He did not wish to be identified, because he was not authorized to talk to the media.
Prime Minister Narendra Modi’s cabinet has to decide on the proposal, said the official, who is directly involved in the decision making process.
If India were to import 4 million tonnes of potash in 2017/18, the savings from the proposed subsidy cut would equate to almost $100 million.
Two other industry officials confirmed the plan.
The Ministry of Chemicals and Fertilisers spokesman declined to comment on the proposed changes.
NOT SO ROSY OUTLOOK
India relies on imports to meet its annual potash demand of about 4 million tonnes, but higher prices are expected to limit how much its 263 million thrifty farmers use.
India buys potash from global miners in annual contracts that the south Asian country usually signs before the start of the fiscal year.
Contracts signed by India and China are considered benchmarks globally, and are closely watched by other potash buyers such as Malaysia and Indonesia.
“The subsidy reduction will weigh on the new contract negotiations. We cannot offer higher prices in new contracts due to the proposed subsidy reduction,” said an official who takes part in the negotiation process with overseas miners.
Leading producer Potash Corp last month expressed hopes for a pick-up in demand from India in 2017, while Agrium earlier this month forecast a 5 percent rise in global potash shipments this year.
Some industry officials in India say the demand outlook is not so rosy, and doubted imports of the crop nutrient would exceed 4 million tonnes if the subsidy cut went through.
Last year suppliers had to sell potash to India at $227 per tonne, down from $332 previously and the lowest in a decade, after India delayed purchases due to sluggish demand.
That allowed importing companies to reduce retail prices, but that could be reversed in 2017/18.
“If the subsidy goes down, then we have no choice but to raise retail prices,” said an official with a state-run fertilizer company. The official declined to be named.
In his budget for the 2017/18 fiscal year, Finance Minister Arun Jaitley in fact kept the overall fertilizer subsidy unchanged at 700 billion rupees.
But fertilizer importers said that almost half of the amount would be spent on settling arrears accumulated from 2016/17, necessitating savings.
(Editing by Mike Collett-White and Mayank Bhardwaj)
Tepco invokes ‘Act of God’ clause on Cameco deal, but it seems more like a Hail Mary
Drew Hasselback | February 14, 2017 1:37 PM ET
Charlton Heston as Moses in The Ten CommandmentsThink twice before blaming God for something that might not be God’s fault
Tokyo Electric Power’s move to pull the plug on an agreement with Canadian uranium miner Cameco Corp. is the latest example of a company arguably stretching the traditional use of a force majeure or “Act of God” clause to suspend a contract.
Tokyo Electric Power Co. Holdings Inc. argues that it has been unable to operate its nuclear power plants in Japan because of government regulations enacted after the 2011 Fukushima nuclear disaster. The accident was caused by an earthquake and resulting tsunami. Centuries of legal tradition should easily place those natural disasters within anyone’s definition of Acts of God.
You probably can’t say that for government-made regulation, though Tepco’s obvious point is there wouldn’t be regulation but for those preceding Acts of God. Maybe it is legally possible to say those natural disasters started a chain reaction of unforeseeable events, including more government regulation. It depends on the wording of the force majeure clause in the contract between Tepco and Cameco.
For now at least, Cameco won’t disclose the wording used in the clause. “It does contain provisions when force majeure and other defences can be taken advantage of, but I don’t think we’ll get into any more detail right now,” said Sean Quinn, senior vice-president and chief legal officer of Cameco, during a conference call earlier this month. “We don’t think this is a situation that falls into any of the categories that would excuse Tepco.”
A force majeure clause is supposed to absolve a party from executing on an agreement due to circumstances beyond the control of the parties.
A typical clause covers Acts of God. I am a proud alumni of the Sunday School at Zion Lutheran Church in Dashwood, Ont. Pastor Mellecke took us through quite a catalog of God’s wrath – things like floods, pestilence, storms, famines, and earthquakes. But you probably don’t need bible school training to know an Act of God when you see it. For a quick primer, watch Charlton Heston’s Moses open a few cans of biblical whoop-ass in Cecil B. DeMille’s 1956 classic, The Ten Commandments.
Over the years, lawyers have decided the Old Testament alone doesn’t cover enough contract risk. They’ve added several man-made events to force majeure clauses, such as labour disputes, wars, and blackouts.
Here’s the legal problem. If an event isn’t already built into a force majeur list, it can be very difficult to argue that a court or arbitrator should read it in. Commodity prices, market conditions and changes to government policy are examples of risks that can be reasonably foreseen by business people. If those risks should allow a party to cease or suspend execution of the agreement, the parties need to include them in the deal, either as part of the force majeure clause or in some other termination provision.
This doesn’t always happen.
Donald Trump, whom you might have heard of, once argued in court that he should be able to delay monthly payments on a real estate loan because the financial crisis of 2008-2009 was an “Act of God.” The case was settled out of court in 2010.
In a Canadian example, a company called Univar Canada Ltd. tried to invoke force majeure to get out of an agreement to supply Domtar Inc. with caustic soda at a fixed price. Market conditions changed and the price shot above the contract price. Univar claimed force majeure, but a B.C. judge disagreed in 2011.
For its part, Cameco has publicly said the Tepco dispute is likely more about the prices written into the contract than Acts of God or government regulation. We likely won’t know until the dispute is resolved.
The contract first requires Cameco and Tepco to engage in a 90-day “good faith” negotiation period.
According to a 2014 Supreme Court of Canada case called Bhasin v. Hrynew, “good faith” requires parties to perform their contractual obligations honestly. In other words, Cameco and Tepco can’t cross their fingers and fake their way through negotiations. And there’s little reason to expect anything less. Tepco holds a five per cent stake in Cameco’s Cigar Lake mine in Saskatchewan and has continued to contribute its share to capital costs.
If good faith talks can’t resolve the dispute, the contract calls for binding arbitration. The parties would take the dispute to a private court, where an arbitrator would interpret the contract behind closed doors. Cameco says it won a force majeure contract dispute in 2014, though confidentiality terms prevent it from providing further details.
Things do happen that make it impossible to execute on deals, but not every one of those things is an Act of God.
Trudeau, Trump vow to tighten energy ties, starting with Keystone
OTTAWA — The Globe and Mail
Published Monday, Feb. 13, 2017 6:31PM EST
Last updated Tuesday, Feb. 14, 2017 7:17AM EST
After meeting with Prime Minister Justin Trudeau, U.S. President Donald Trump signalled his desire to strengthen the bilateral-trading relationship, as the two leaders committed to improved energy trade and singled out the Keystone XL pipeline as an important infrastructure project.
Mr. Trudeau visited Washington on Monday with a cadre of cabinet ministers and several female business executives who participated in a roundtable on women entrepreneurs and business leaders. At every opportunity, the Canadians stressed the highly integrated nature of the two economies and the need for an open border.
In their joint statement, Mr. Trump and Mr. Trudeau noted that U.S.-Canadian energy and the environment are “inextricably linked” and that they are committed to “further improving our ties” in those areas.
“We have built the world’s largest energy trading relationship,” the statement said. “We share the goals of energy security, a robust and secure energy grid, and a strong and resilient energy infrastructure that contributes to energy efficiency in both countries. …
“As the process continues for the Keystone XL pipeline, we remain committed to moving forward on energy-infrastructure projects that will create jobs while respecting the environment,” it added. Neither Mr. Trump nor Mr. Trudeau mentioned climate-change policies, though their statement did speak of co-operating on “clean energy.”
Like other exporters, Canadian oil and gas producers have worried about protectionist rhetoric employed by Mr. Trump, and a border adjustment proposal in Congress that could effectively place an import tax on goods entering the U.S. market.
In a joint news conference, Mr. Trump indicated that Canada is not the target when he complains about the unfairness of the North American free-trade agreement and that he is aiming for a “stronger trading relationship between the United States and Canada.”
However, he did suggest there would be some “tweaking” of the deal as it relates to Canada-U.S. trade, and he did not address the threat of a border adjustment levy or Buy America policies that can discriminate against Canadian exporters. When Mr. Trump revived the Keystone XL project last month, he also said he wanted American steel to be used for the pipeline and directed his Commerce Secretary nominee Wilbur Ross to prepare a plan to maximize the use of U.S.-sourced steel in all pipeline projects.
After having the project rejected by former president Barack Obama, TransCanada Corp. has re-applied for approval of the Keystone XL line, which would deliver Alberta oil sands crude to refineries in the U.S. Gulf Coast. The President ordered the review to be expedited.
The Alberta-based companies fear they could face new market-access problems in what is currently virtually their sole export market. Several analysts have warned of a dire impact on the oil and gas sector if the proposed border adjustment levy was enacted.
“Such fears were wildly overblown in the first place, at least from the oil-industry perspective,” said Robert Johnston, president of Eurasia Group, a political-risk firm in Washington. Eurasia Group has argued that the U.S. government was unlikely to impose any measures that would drive up energy costs or impede imports from Canada.
Still, the industry welcomed Mr. Trump’s reassuring statements, said Terry Abel, executive vice-president of the Canadian Association of Petroleum Producers. “They tend to echo the long history we’ve had with a very strong, mutually beneficial trade relationship,” he said.
Mr. Trudeau had one key message for the President: that liberalized, crossborder U.S. trade benefits American middle-class workers as much as it does Canadian. One statistic was used to tell that story: that Canada is the most important export market for 35 states. It is a figure that was repeated by Mr. Trump at the news conference and even by CNN anchors covering the visit.
“Millions of good middle-class jobs on both sides of the border depend on this partnership,” Mr. Trudeau said.
In addition to oil and gas producers, manufacturers worry about maintaining their access to the American market, and whether they’ll be hit by new Republican protectionism – arising from the White House or Congress.
“It’s early days but [the meeting] was very encouraging,” said Dennis Darby, president of the Canadian Manufacturers & Exporters Association. He said the two sides appeared to make progress in a some specific areas, including expedited customs clearings for goods moving across the border, and harmonizing regulations.
“We’ll have our work cut out for us [in beating back protectionist measures] but this is a way better start than many predicted,” he said.
When it comes to provincial Government debt in relation to the provinces’ GDP – Saskatchewan is doing great according to the “The Cost of Government Debt in Canada, 2017” released by the Fraser Institute on January 19, 2017.
Column area 2 of the below reveals that our debt-gdp ratio is growing the smallest amongst the provinces (meaning less debt per dollar we generate), and that our ratio is the second smallest amongst the provinces.
The Cost of Government Debt in Canada, 2017
— Published on January 19, 2017
Budget deficits and increasing debt are key fiscal issues as the federal and provincial governments prepare to release their budgets this year. Combined federal and provincial net debt has increased from $833 billion in 2007/08 to a projected $1.4 trillion in 2016/17. This combined debt equals 67.5% of the Canadian economy or $37,476 for every man, woman, and child living in Canada.
Debt accumulation has costs. One major consequence is that governments must make interest payments on their debt similar to households which must pay interest on borrowing related to mortgages, vehicles, or credit card spending. Spending on interest payments consumes government revenues and leaves less money available for other important priorities such as spending on health care and education or tax relief.
Canadian governments (including local governments) collectively spent $62.8 billion on interest payments in 2015/16. That works out to 8.1% of their total revenue that year and $1,752 for each Canadian or $7,009 for a family of four. The total amount spent on interest payments is approximately equal to Canada’s total spending on public primary and secondary education ($63.9 billion, as of 2013/14, the last year for which we have finalized data).
Mon Feb 13, 2017 | 3:41pm EST
Trump says will be ‘tweaking’ outstanding trade relationship with Canada
President Donald Trump said on Monday the United States will be “tweaking” its trade relationship with Canada, unlike its trade ties with Mexico where it faces a more severe situation.
“We have a very outstanding trade relationship with Canada. We’ll be tweaking it,” Trump said at a joint news conference with Canadian Prime Minister Justin Trudeau at the White House.
“It’s a much less severe situation than what’s taking place on the southern border. On the southern border, for many, many years the transaction was not fair to the United States.”
(Reporting by Andrea Hopkins; Writing by Washington Newsroom)
DAVID ROSE: How can we trust global warming scientists if they keep twisting the truth
By David Rose for The Mail on Sunday
PUBLISHED: 02:21 GMT, 12 February 2017 | UPDATED: 09:59 GMT, 12 February 2017
They were duped – and so were we. That was the conclusion of last week’s damning revelation that world leaders signed the Paris Agreement on climate change under the sway of unverified and questionable data.
A landmark scientific paper –the one that caused a sensation by claiming there has been NO slowdown in global warming since 2000 – was critically flawed. And thanks to the bravery of a whistleblower, we now know that for a fact.
The response has been extraordinary, with The Mail on Sunday’s disclosures reverberating around the world. There have been nearly 150,000 Facebook ‘shares’ since last Sunday, an astonishing number for a technically detailed piece, and extensive coverage in media at home and abroad.
The Paris Agreement, a landmark scientific paper –the one that caused a sensation by claiming there has been NO slowdown in global warming since 2000 – was critically flawed
It has even triggered an inquiry by Congress. Lamar Smith, the Texas Republican who chairs the House of Representatives’ science committee, is renewing demands for documents about the controversial paper, which was produced by America’s National Oceanic and Atmospheric Administration (NOAA), the world’s leading source of climate data.
In his view, the whistleblower had shown that ‘NOAA cheated and got caught’. No wonder Smith and many others are concerned: the revelations go to the very heart of the climate change industry and the scientific claims we are told we can trust.
Remember, the 2015 Paris Agreement imposes gigantic burdens and its effects are felt on every household in the country. Emissions pledges made by David Cameron will cost British consumers a staggering £319 billion by 2030 – almost three times the annual budget for the NHS in England.
That is not the end of it. Taxpayers also face an additional hefty contribution to an annual £80 billion in ‘climate aid’ from advanced countries to the developing world. That is on top of our already gargantuan aid budget. Green levies and taxes already cost the average household more than £150 a year.
The contentious paper at the heart of this furore – with the less than accessible title of Possible Artifacts Of Data Biases In The Recent Global Surface Warming Hiatus – was published just six months before the Paris conference by the influential journal Science.
It made a sensational claim: that contrary to what scientists have been saying for years, there was no ‘pause’ or ‘slowdown’ in global warming in the early 21st Century.
Indeed, this ‘Pausebuster’ paper as it has become known, claimed the rate of warming was even higher than before, making ‘urgent action’ imperative.
An official report from the European Science Advisory Council stated that the paper had ‘refined the corrections in temperature records’ and shown the warming rate after 2000 was higher than for 1950-99
There can be no doubting the impact of this document. It sat prominently in the scientific briefings handed out to international negotiators, including EU and UK diplomats.
An official report from the European Science Advisory Council stated that the paper had ‘refined the corrections in temperature records’ and shown the warming rate after 2000 was higher than for 1950-99.
So, flawed as it was, the Pausebuster paper unquestionably helped persuade world leaders to sign an agreement that imposes massive emissions cuts on developed countries.
No wonder, then, that our revelations were met with fury by green propagandists. Some claimed the MoS had published ‘fake news’. One scientist accused me of becoming the ‘David Irving of climate change denial’ – a reference to the infamous Holocaust denier.
Yet perhaps more damaging is the claim from some in the green lobby that our disclosures are small beer. In fact, their importance cannot be overstated. They strike at the heart of climate science because they question the integrity of the global climate datasets on which pretty much everything else depends.
The whistleblower is a man called Dr John Bates, who until last year was one of two NOAA ‘principal scientists’ working on climate issues. And as he explained to the MoS, one key concern is the reliability of new data on sea temperatures issued in 2015 at the same time as the Pausebuster paper.
It turns out that when NOAA compiled what is known as the ‘version 4’ dataset, it took reliable readings from buoys but then ‘adjusted’ them upwards – using readings from seawater intakes on ships that act as weather stations.
They did this even though readings from the ships have long been known to be too hot.
No one, to be clear, has ‘tampered’ with the figures. But according to Bates, the way those figures were chosen exaggerated global warming.
And without this new dataset there would have been no Pausebuster paper. If, as previous sea water evidence has shown, there really has been a pause in global warming, then it calls into question the received wisdom about its true scale.
Then there is the matter of timing. Documents obtained by this newspaper show that NOAA, ignoring protests by Dr Bates, held back publication of the version 4 sea dataset several months after it was ready – to intensify the impact of the Pausebuster paper. It also meant more sceptical voices had no chance to examine the figures.
Our revelations showed there was another problem with the Pausebuster paper – it used an untested experimental version of the dataset recording temperatures on land, which had not been properly archived and made accessible to other scientists.
We cannot allow such a vital issue for our future to be mired in half truths and deceptions.
This was a fundamental breach of mandatory rules under NOAA’s Climate Data Records programme, which Bates had devised. Is it sharp practice? Certainly it carries the stench of ‘Climategate’ in 2009, when leaked emails showed scientists colluding to hide data and weaknesses in their arguments.
It is important to acknowledge the MoS did make one error: the caption on a graph, showing the difference between NOAA’s sea data records and the UK Met Office’s, did not make clear that they used different baselines. We corrected this immediately on our website.
The only ‘fake news’ in our revelations is the claim that they don’t matter.
In truth, they are hugely damaging, for they suggest an agreement made by figures such as Barack Obama and David Cameron rested in part on research that had not been published with integrity.
This is an age where many have come to question the role of experts. Restoring trust demands transparency.
In climate science, this means being open about the fact there are still critical uncertainties: not about the basic proposition that the world is warming, thanks in part to humans, but about the speed at which this is happening; and when it is likely, left unchecked, to become truly dangerous.
Al Gore famously said: ‘The science is settled.’ It is not.
We cannot allow such a vital issue for our future to be mired in half truths and deceptions.